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Semicon tool market to remain strong as PV slumps

12 Jul 2011

Demand for semiconductor wafer processing equipment will dip only slightly in 2012, while PV tool spending will crash by half, say analysts.

Two of the most important markets for industrial lasers and systems will diverge wildly in 2012, as a sharp decline in photovoltaic (PV) equipment spending contrasts with continued solid demand from semiconductor manufacturers.

That is according to two just-released forecasts of tool demand published by the Semiconductor Equipment and Materials International (SEMI) industry organization, and the market analyst company Solarbuzz.

Booming demand for industrial laser sources and systems over the past year has been fuelled in no small way by rapid growth in spending by both semiconductor device and solar cell manufacturers, helping to produce record-breaking financial results at companies such as Newport and Coherent, among others. Indeed, Newport’s planned acquisition of Ophir Optronics is motivated in part by Newport’s desire to be less dependent on the boom-and-bust cycle of the semiconductor industry.

The good news for laser companies, and vendors of other optical technologies used in key semiconductor processes such as lithography and inspection is that spending on wafer processing and test equipment should remain very robust in 2012, at levels only exceeded by the record-setting boom year of 2000.

2012 semicon spending “to remain at high levels”
SEMI president Stan Myers, announcing the organization’s forecast at the key Semicon West event being held in San Francisco this week, said that semiconductor equipment manufacturers would see a 12% increase in spending for 2011 overall, following the phenomenal recovery year of 2011, in which there was triple-digit growth. He added: “We expect worldwide equipment sales to remain at high levels in 2012.”

According to the SEMI forecast, sales of wafer processing equipment – by far the most dominant sector within all chip production – will show 18.8% growth in 2011, reaching $35.1 billion. Next year will witness a decline, but much less than many anticipating a typical “bust” period may have feared. SEMI’s market forecast team suggests a 2% fall in wafer processing equipment to $34.4 billion, with slight rises in spending on both test and assembly/packaging tools.

Geographically, North America will see the biggest boom in 2011, with equipment spending up 61% overall at $9.25 billion. And although next year will witness a decline of nearly 11% in North America, SEMI says that the European market will grow another 8% in 2012 to provide a market worth nearly $4 billion.

PV equipment boom to collapse
Meanwhile, Solarbuzz is now predicting that the huge build-up of inventory in the PV supply chain over the first half of this year will force a collapse in equipment spending during 2012. Finlay Colville, who covers the PV equipment market for the analyst company, predicts that total spending will reach $14.2 billion this year – setting a new record after huge capacity expansions by a large number of both traditional silicon and thin-film solar cell manufacturers.

But with price pressure and excess supply expected to force many out of the market over the coming months, spending on equipment will crash 47% to $7.6 billion in 2012, Colville predicts.

“Strong double-digit bookings and revenue growth through 2010 created a misleading picture for PV equipment suppliers,” Colville says. “This was caused in part by aggressive expansion plans of second-tier c-Si [cell and module] manufacturers, and by the quantity of new thin-film fabs that were financed through the recent investment cycle.”

“An artificial peak in equipment spending was created during 2010 and 2011, providing a short-term pull on equipment that was out-of-sync with the long-term requirements of the industry,” he added.

That decline in spending is already becoming apparent, with Colville’s figures showing that equipment spending of $3.6 billion in the second quarter of 2011 showed the first sequential fall since mid-2009. The analyst expects that suppliers to second-tier c-Si cell and module producers will be hit hardest as demand and spending drops quickly in the coming months.

Excess capacity
The recent investment in manufacturing across the PV landscape means that the industry will have an aggregated production capacity of 51 GW this year, rising to 66 GW in 2012 as build-outs and upgrades are completed. However, declining subsidies and financial strife in Europe will mean that cell and module demand will be nowhere near that level.

In fact, Colville believes that top-tier cell manufacturers account for just about half of that overall capacity, and that this will be more than sufficient to meet a global demand likely to be around 20 GW. That will leave many of the 300 manufacturers not ranked as top-tier vendors attempting to sell into the market with very little chance of success.

As a result, spending by second- and third-tier PV manufacturers will slump 60% next year. “Tool suppliers will increasingly focus on securing preferred-supplier status with top-tier manufacturers,” Colville concluded. “Competition will intensify ahead of the next spending upturn, as suppliers from adjacent market segments (for example semiconductor and display) exploit the opportunity to enter the PV equipment supply chain.”

• The latest Solarbuzz PV Equipment Quarterly and the mid-year edition of SEMI’s Capital Equipment Forecast are both available now.

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