News Article
U.S. semiconductor equipment suppliers to benefit from weak dollar in 2007
A U.S. economic slowdown coupled with excess equipment purchases in 2006 should swing the semiconductor equipment market into negative territory for 2007, according to the report "The Global Market for Equipment and Materials for IC Manufacturing," recently published by The Information Network.
A U.S. economic slowdown coupled with excess equipment purchases in 2006 should swing the semiconductor equipment market into negative territory for 2007, according to the report "The Global Market for Equipment and Materials for IC Manufacturing," recently published by The Information Network. Our leading indicators are pointing to a weakening performance for at least the next six months in the U.S. for a variety of reasons such as the sharp weakening in the U.S. housing market, volatile energy prices, and weakness of the dollar and its impact on interest rates. Despite concerns about inflation in the U.S., a weakening U.S. economy could force the Fed to lower interest rates in the spring. That would weaken the dollar further, which has dropped 8-10% in 2006, half of it in the past month. Conversely, strong economies in Europe could force the European Central Bank to raise eurozone interest rates to 3.5 per cent, further weakening the dollar. A falling dollar will of course make U.S. made goods cheaper abroad. Benefiting from a weak dollar are exports of U.S.-made semiconductor equipment sold to Asia and Europe. Only 19% of Applied Materials new orders for Q4, for example, came from North America. Similarly, only 15% of Lam Research's latest quarterly earnings came from North America. A falling dollar will help semiconductor manufactures, particularly Intel, which leads the Dow components with 85% non-domestic revenue. Nevertheless, 2007 will be a down year for the semiconductor equipment market, dropping nearly 4% from inflated 2006 revenues. "2007 will be another year of ‘robbing Peter to pay Paul'", noted Dr. Robert Castellano, president of The Information Network. "For the third time this decade, too much money was spent by chip manufacturers to meet their production needs and the excess capacity will carry into next year when all that excess equipment gets up and running in the fabs."
