SEMI forecasts 18% drop in chip-making equipment sales

Sales of chips and chip-making equipment are down; some economists blame trade tensions. (Getty Images)

More dismal economic news for the electronics industry emerged Wednesday, with a forecast of an 18.4 % decline in 2019 in global sales of semiconductor manufacturing equipment.

That mid-year forecast by SEMI came just a week after another trade group, the Semiconductor Industry Association, said global semiconductor sales dropped for the fifth straight month in May. Chip sales declined by 28% in the Americas in May over a year earlier.

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Much of the downturn has been blamed on global trade tensions, exemplified by U.S. and China disagreements over tariffs and a trade imbalance. OEMs have broadly put off investments of DRAM and NAND, partly due to flattening of smartphone sales.

SEMI said the projected drop of 18.4% in manufacturing equipment will bring sales down to $52.7 billion for all of 2019, below last year’s historic high of $64.5 billion. SEMI represents 2,100 companies in the electronics manufacturing and design supply chain.

Wafer processing equipment sales will fall 19.1% in 2019 to $42.2 billion, SEMI said. Fab facilities equipment and related front-end equipment will fall 4.6% to $2.6 billion, while the biggest decline of 22.6% will hit the assembly and packaging equipment area, bringing sales down to $3.1 billion. Test equipment sales will decrease 16.4% to $4.7 billion, SEMI said.

All regions of the globe will contract in 2019 except Taiwan and North America, SEMI said.

Despite the gloomy forecast for 2019, an equipment market recovery is expected in 2020 because of improved spending on memory and new projects in China, SEMI added. Equipment sales will surge 46% to $9 billion Japan alone next  year. China, Korea and Taiwan are expected to be the top three markets in 2020.

“More upside is likely if the macroeconomy improves and trade tensions subside in 2020,” SEMI said.