Chip Gear is Selling Like Hotcakes

The semiconductor equipment sector is for now exhibiting remarkable resilience despite geopolitical concerns over an escalating U.S.-China technology cold war and a pandemic that shows no signs of abating.

Indeed, bullish spending projections may reflect geopolitical uncertainties that will likely cut off Chinese access to advanced manufacturing gear as Beijing vows to catch and surpass western technology rivals.

While monthly billings slipped in June on a monthly basis, the industry group SEMI reported during its annual conference that preliminary June equipment bookings totaling $2.31 billion were nevertheless 14.4 percent higher than June 2019. That total kept the industry group’s three-month moving average heading north throughout the first half of this year.

What’s more, SEMI is forecasting continuing growth through the end of this year and into next despite growing uncertainty over the pandemic and the impact of strict U.S. export controls aimed at keeping advanced IC manufacturing equipment out of the hands of 5G leader Huawei.

Indeed, SEMI’s equipment spending forecast released on July 21 estimates China will continue outspending technology competitors this year and next. The group reckons Chinese companies will invest a whopping $17.3 billion on chip-making gear this year, perhaps building up inventory before the equipment export door is closed.

According to SEMI’s forecast, Chinese projected 2020 equipment spending approaches the stratospheric levels recorded by South Korea in 2018 ($17.7 billion) and Taiwan in 2019 ($17.1 billion).

Following a surprisingly strong 2020, with expenditures expected to hit $63.2 billion, SEMI is forecasting record annual equipment spending next year approaching $70 billion. It expects across-the-board gains in the wafer fab equipment segment, driven by a recovery in both DRAM and NAND memory technologies that could push increase spending by 20 percent over this year.

Meanwhile, accelerating 5G wireless deployments are expected to boost demand for assembly and packaging equipment along with test IC test gear.

SEMI also reported this week that global silicon wafer shipments jumped 8 percent during the second quarter, the highest quarterly total since the beginning of 2019. The steady increased in wafer shipments also reverses quarterly declines through the end of last year.

Meanwhile, strong North American IC equipment billings during June reflect “resilience as the world copes with new realities posed by Covid-19,” said Ajit Manocha, SEMI’s president and CEO.

Risto Puhakka, president of VLSI Research, told our Barbara Jorgensen the IC manufacturing equipment sector has so far weathered the geopolitical storm while the pandemic “has largely become a supply chain hassle.”

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