By | Tony Smith 26th October 2004 10:05

Chip capex set to fall in 2005 - analyst

Downturn to segue into slump?

Spending on new chip-making equipment will fall next year - or, at the very best, match 2004's level - according to a new forecast from market watcher IC Insights.

The latest prediction effectively reverses the seven per cent growth the researcher had previously said it expected to see through 2005. Now, says IC Insights, 2005 will see "flat to negative growth".

That compares with Gartner's forecast, made earlier this month, that 2005 capex will grow just 0.4 per cent, down from a July 2004 estimate of 13.4 per cent growth.

Both downward revisions are based on today's slowing demand for chips, which will persuade chip makers they will need less capacity next year. The current slowdown has to an extent pre-empted industry anticipation that demand would start to tail off toward the middle of 2005 in any case.

With 2004 capex expected to come in at 53 per cent above 2003's level, there's clearly going to be less need for new plant and equipment next year given the current trend.

The slowdown will see Q4 sales coming in up to three per cent above Q3's total, IC Insights now believes, down from its previous forecast of 3-5 per cent. ®