After 2005 drop, chip gear sales to rebound in 2006

Global sales of chip production equipment will likely rise 9.1 percent next year after falling this year amid declining orders in nearly all regions, the industry group Semiconductor Equipment and Materials International (SEMI) said Wednesday.

Global chip equipment sales in 2005 are projected to reach $32.95 billion, down from a banner 2004 when the market leaped 67 percent to $37.11 billion, according to SEMI.

But next year, sales of chip making machinery is expected to rise to $35.97 billion, the group said.

The industry trade group characterized this year's decline as cyclical, since it came after a robust 2004. The chip equipment industry follows a boom and bust pattern similar to the chip industry. In boom years, companies tend to overinvest in new production lines, leading to over production and declines in chip prices. This year, the industry had forecast a down year for chips, causing many companies to approach factory investments with more caution.

China posted the largest percentage decline in chip equipment purchases this year, a 54.1 percent drop in purchases to $1.24 billion, according to SEMI. Taiwanese chip makers also ordered less machinery this year, down 24.3 percent to $5.88 billion.

Japan remained the top buyer of semiconductor making equipment. After growing more than 49 percent last year, the Japanese market declined only 2.8 percent to $8.04 billion this year, SEMI said.

South Korea was the only major chip producing country to increase equipment purchases this year, up 27.8 percent to $5.89 billion and good enough to overtake Taiwan as the second largest chip equipment buying economy this year.

North America came in fourth, with $5.79 billion in spending this year, down less than 1 percent compared to last year, while Europe trailed at $3.19 billion, down 7.4 percent from last year.