Executive Briefings

Capital Equipment for Semiconductor Industry May See Slower Growth

The midterm outlook for the capital-equipment industry is positive, but companies need to prepare for the slowdown of Moore's law.

The semiconductor market has grown by 4.6 percent annually over the past decade, with revenues rising from $213bn in 2004 to $336bn in 2014. This increase results from greater demand, primarily in the mobile segment, that is fueled by "shrink" - the ongoing decrease in the size of electronic components on silicon realized through continued process-node progression. Shrink enables both improved performance and reduced costs for end users.

Notably, one group of players has received limited benefits from the semiconductor industry's gains: the capital-equipment companies that supply chip makers with machines for deposition, etching, lithography, metrology, assembly and testing, and other steps in the manufacturing process. Their revenues were volatile and only rose from $37bn in 2004 to $38bn in 2014 - an increase of 0.1 percent annually. This is in contrast to the period from 1997 through 2004, when growth was 5.6 percent annually. While the semiconductor industry also saw lower growth over the past decade, its decline from preceding years was not as great. The steadily increasing growth discrepancy between chip makers and their suppliers is apparent when we make revenue comparisons. Revenues for equipment players were equal to about 18 percent of semiconductor-industry revenues in 1997; that figure fell to 11 percent in 2014.

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The semiconductor market has grown by 4.6 percent annually over the past decade, with revenues rising from $213bn in 2004 to $336bn in 2014. This increase results from greater demand, primarily in the mobile segment, that is fueled by "shrink" - the ongoing decrease in the size of electronic components on silicon realized through continued process-node progression. Shrink enables both improved performance and reduced costs for end users.

Notably, one group of players has received limited benefits from the semiconductor industry's gains: the capital-equipment companies that supply chip makers with machines for deposition, etching, lithography, metrology, assembly and testing, and other steps in the manufacturing process. Their revenues were volatile and only rose from $37bn in 2004 to $38bn in 2014 - an increase of 0.1 percent annually. This is in contrast to the period from 1997 through 2004, when growth was 5.6 percent annually. While the semiconductor industry also saw lower growth over the past decade, its decline from preceding years was not as great. The steadily increasing growth discrepancy between chip makers and their suppliers is apparent when we make revenue comparisons. Revenues for equipment players were equal to about 18 percent of semiconductor-industry revenues in 1997; that figure fell to 11 percent in 2014.

Read Full Article