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Few players join '$1 billion club'

Posted: 27 Jan 2009     Print Version  Bookmark and Share

Keywords:IC downturn  capital spending  NAND market  DRAM 

According to IC Insights, the "$1 billion club" (Rs.5,003.64 crore) for semiconductor capital spending is expected to see only five members in 2009, down from nine players in 2008.

The "$1 billion club" (Rs.5,003.64 crore) is an exclusive group that is projected to spend $1 billion (Rs.5,003.64 crore) or more on capital spending this year. Overall, IC Insights is projecting that capital spending will fall for the second consecutive year, hitting Rs.162,117.90 crore ($32.4 billion) in 2009, down 30 per cent from Rs.230,667.76 crore ($46.1 billion) in 2008. In 2007, capital spending hit Rs.304,721.62 crore ($60.9 billion), the research firm said.

IC Insights said the projected members in the "$1 billion club" (Rs.5,003.64 crore) for 2009 include Samsung Electronics, Intel, Toshiba, Taiwan Semiconductor Manufacturing Co. and Hynix Semiconductor. In 2008, the members were Samsung, Intel, Toshiba, Hynix, Micron, SanDisk, TSMC, Infineon Technologies and Sony.

The list could change amid the crash in capital spending, which is expected to see some new and staggering lows in 2009. When combining the numbers from 2008 and 2009, capital spending is projected to fall by 54 per cent over the two-year period, according to IC Insights.

In comparison to the last downturn, capital spending fell 37 per cent in 2001 and another 29 per cent in 2002—for an aggregate total of a whopping 66 per cent, according to the research firm.

On the bright side, capital spending follows a similar pattern, in which two down years are normally followed by an uptick the next year, said Bill McClean, president of the research firm, during a presentation here.

For example, after a down cycle in 2001 and 2002, capital spending jumped by 14 per cent in 2003 and 52 per cent in 2004, he said. And, after a down year in 2008 and what could be a disastrous campaign in 2009, capital spending is expected to jump 15 per cent in 2010 (Rs.187,136.10 crore ($37.4 billion)) and another 22 per cent in 2011 (Rs.229,166.67 crore ($45.8 billion), he said.

In the overall chip market, IC Insights reiterated its forecast. The overall IC industry is projected to fall by 17 per cent in 2009, according to IC Insights. IC unit shipments are projected to fall by 7 per cent in 2009. In 2008, the IC business fell by 3 per cent to Rs.1,350,482.17 crore ($269.9 billion), but unit shipments were up 4 per cent.

Analysts predict that the market will be grim in first half of 2009. The second half also looks shaky, but for the most part, visibility is poor. During a presentation, McClean stressed that the market should look at the business in a different light. Instead of looking at the market as a whole, "think quarterly," he said.

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