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January 12, 2016updated 31 Aug 2016 10:29am

Sluggish electronics demand to hurt semiconductor market in 2016

News: Capital spending on chip production is expected to decline 4.7% this year.

By CBR Staff Writer

A new report from Gartner says semiconductor companies are cutting back on capital spending this year following a small drop in sales during 2015.

Capital spending is estimated to decline 4.7% this year to $59.4bn. Gartner had earlier predicted that semiconductor capital spending would increase by 3.3% in 2016.

Investment on wafer-level manufacturing equipment is expected to fall 2.4%, but the lithography sector is predicted to increase by 1.4%.

The etch, clean and planarization equipment markets are anticipated to decline by 2.9%, while a slight improvement is expected in the deposition equipment segment.

The research firm however predicts relatively strong growth in semiconductor capital spending from 2017 through to 2018.

Gartner senior research analyst David Christensen said: "The 2016 outlook for the semiconductor manufacturing equipment market reflects a bleaker outlook for end-user electronics demand and the world economic environment.

"Capital investment policies of leading semiconductor vendors have remained cautious against the background of sluggish electronics demand.

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"However, the long-term outlook shows a return to growth, although the wafer-level manufacturing equipment market is expected to enter a gentle down cycle in 2016 due to the loss of the supply and demand balance in the DRAM market."

Gartner has recently reported that worldwide semiconductor revenue dropped 1.9% to $333.7bn in 2015, from $340.3bn in 2014.

Intel saw its revenue decline to $51.7bn in 2015, a 1.2% drop, due to falling PC shipments. The company finished the year with 15.5% share of the semiconductor market.

Samsung stood at second place with 11.6% market share, followed by SK Hynix, Qualcomm and Micron Technology.

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