Capital spending in the worldwide semiconductor equipment is expected to increase 5.5 percent in 2014 as the industry begins to recover from the recent economic downturn, according to a report from IT research firm Garter.
Total spending will follow a generally increasing pattern in all sectors through 2018, while capital equipment spending in the market is projected to total $37.5 billion this year.
The capital spending forecast estimates total capital spending from all forms of semiconductor manufacturers, including foundries and back-end assembly and test services companies. Capital spending represents the total amount spent by the industry for equipment and new facilities.
Gartner predicts that 2014 semiconductor capital spending will increase 5.5 percent, followed by 10 percent growth in 2015. The next cyclical decline is expected to be a slight drop of 3.3 percent in 2016, followed by a return to growth in 2017 and 2018.
The report projected logic spending would remain the key driver of capital spending throughout the forecast period, but due to the anticipated softening of mobile markets it will grow less than memory.
Memory will provide most of the growth in capital spending through 2018, with NAND Flash being the primary impetus, the report said.
Spending by the top five semiconductor manufacturers exceeds 64 percent of total projected 2014 spending, with the top 10 accounting for 78 percent of the total.
"While capital spending outperformed wafer fab equipment (WFE) spending in 2013, the reverse will hold for 2014," Bob Johnson, research vice president at Gartner, said in a statement. "Total capital spending will grow by 5.5 percent, while WFE will increase 13 percent as manufacturers pull back on new fab construction and concentrate in ramping new capacity instead."
The top three companies--Intel, TSMC and Samsung--continued to account for more than half of total spending.
"Momentum from exceptionally strong fourth-quarter 2013 sales is carried forward into the first quarter, then is expected to bounce around a flat trend line through the remainder of 2014," Johnson continued. "In the longer-term profile, growth continues through 2015, dips slightly in 2016 and increases through 2018."
Although demand from smartphones and media tablets is producing leading-edge demand for logic production, it is not enough to bring total utilization up to desired levels, the report noted.
Gartner said it expects utilization rates to climb upward again in 2014, as demand for chip production returns, and overall utilization rates will return to normal levels through 2014, providing continued impetus for capital investment.