Peter Clarke EE Times (01/22/2010 7:48 AM EST)

LONDON — Global spending on semiconductor manufacturing equipment is expected to rise by 46.8 percent in 2010 compared in 2009, bringing an end to three consecutive years of decline, according to market research company iSuppli Corp. (El Segundo, Calif.).

However, the company did not indicate what it thinks the equipment market was worth in 2009 or what it will be worth in 2010

"After suffering through one of the most significant declines in manufacturing in the history of the chip making business in the first quarter of 2009, semiconductor makers were rewarded with three subsequent quarters of improved factory utilization," said Len Jelinek, director and chief analyst for semiconductor manufacturing at iSuppli, in a statement.

"As a result of conservative management of capacity, most companies ended 2009 with manufacturing levels approaching those of the pre-downturn levels of the third quarter of 2008. With semiconductor revenue set to rise in 2010 due to the arrival of innovative new products and low inventory levels throughout the supply chain, the outlook for chip manufacturing is optimistic."

Amid plunging semiconductor sales and major economic uncertainty, global semiconductor manufacturing capacity began dropping in the fourth quarter of 2008, declining to 71 percent from 87 percent in the third quarter. Utilization fell again in the first quarter of 2009, decreasing to 48 percent. However, with chip makers having cut capacity to adjust to changing market conditions, utilization rebounded smartly in the second quarter, increasing to 69 percent. Utilization in the third rose in the third quarter to reach 80 percent, and held steady at that rate in the fourth quarter.

"Because of the rise in utilization and signs of market recovery, semiconductor manufacturers late in the fourth quarter finally became willing to make decisions that would result in expanding their capacity," Jelinek said. "These decisions will require new equipment purchases, spurring rising sales of semiconductor manufacturing equipment."

The utilization rate is expected to continue to rise and peak at 87 percent in the third quarter of 2010 before declining slightly to 86 percent in the fourth quarter.

The largest year-over-year increase in capital spending in 2010 will be for the manufacturing of memory products. iSuppli anticipates that spending in support of memory manufacturing will increase by 65.5 percent in 2010.

Related links and articles:

Chip inventory to remain lean in Q1, says iSuppli

China semi market expected to rebound in 2010

DRAM rebound to continue in 2010, says iSuppli