Semi Equipment Industry: China or Bust?

From SEMI, see…

Stunning growth for fab equipment spending – four years in a row

“SEMI’s World Fab Forecast data point to an improbable eye-watering fourth consecutive year of fab equipment spending growth to the tune of 5 percent.”

There’s the continued growth even as a normal cycle would see deceleration by now, but also declining rate of change we have noted previously.

semi

The improbability of the cycle’s length has been due to Samsung’s “immense” investments made due to strong memory prices and…

“China investments are on the rise, with new projects underway.”

Or more to the point…

“SEMI predicts Samsung will lead the pack in fab equipment spending in both 2018 and 2019, even though it will invest less each year than in 2017. By contrast, China will dramatically increase its year-over-year (YOY) fab equipment spending for the next two years – by 57 percent in 2018 and 60 percent in 2019 – to support fab projects from both overseas and domestic companies. The China spending surge will thrust it past Korea as the top spending region in 2019.”

It’s really just another version of the old China story. Remember the story in the 2003-2007 time frame? Commodities were going to the moon due to “China demand”.

Now, China is actually building these Fabs to be equipped with the products made by AMAT, LRCX, etc. But isn’t this the same China that over-built real estate to the tune of those famed ghost cities we’ve seen creepy pictures of? So, just sayin’…

So Semi Equipment growth is intact but its rate is moderating. Growth continues apace as China has the Fabs are built and needing to be equipped. Ultimately though, it’s all dependent upon consumer cycles and demand for 3D NAND and DRAM.

Personally, I am continuing to keep an eye on this segment for early cyclical signs. If only Larry were Semiconductor focused. He could pump the sector and give us a clear signal.

But for now, we are looking at moderating growth and perhaps no real deceleration until 2020. But let’s also keep in mind the thing about projections; namely their definition: (noun) An estimate or forecast of a future situation or trend based on a study of present ones.

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