Spurred by a slowdown in the memory sector, the 2019 downturn marks the end of a three-year growth run for fab equipment spending.
Over the past two years, memory accounted for an annual share of about 55 per cent of all equipment, a proportion expected to drop to as low as 45 per cent in 2019 but rebound to 55 per cent in 2020. With memory representing an outsize share of total spending, any fluctuations in the memory market impacts overall equipment spending. Figure 1 illustrates the sudden historical and forecast changes for each half year starting with the second half of 2018.
A review of fab equipment spending by half year shows that high inventory levels and weakening demand led to a bigger-than-expected decline in DRAM and NAND (3D NAND) in the latter part of 2018, driving down memory spending 14 per cent. The downward trend is expected to continue into the first half of 2019, with memory spending dropping 36 per cent, though memory spending could rebound 35 per cent in the second half of the year.
Despite the comeback in the second half of 2019, the report points to a 30 per cent plunge in overall memory spending for the year after reaching record highs in 2018.
Foundry is the second largest sector after memory for fab equipment spending. Over the past two years, the annual share ranged from 25 per cent to 30 per cent per year. In 2019 and 2020, SEMI expects the yearly share to hold steady at about 30 per cent.
And while foundries typically fluctuate less than the memory sector in equipment spending, they are not immune to shifts in the market. For example, following the decline of memory, foundry equipment spending fell by 13 per cent in the second half of 2018 from the first half of the year.