SAN JOSE -- The current slowdown in chip production will be tied to the depth and length of the US financial crisis, an industry researcher asserts in the latest issue of the SEMI newsletter.

And while more fabs should come online next year, plans could be postponed if the economy fails to improve, says George Burns of Strategic Marketing Associates.

The number of new fabs dropped this year to 20, from 33 a year ago, and the investment in those facilities fell 65% to $15 billion. That figure is forecast to double to $30 billion, says Burns, but might be flat should the situation remain sour.

Moreover, the economic slog will hamper chip sales for the rest of 2007. Burns says equipment sales to memory manufacturers, which make up 50% of semiconductor equipment sales, should pick up by the second quarter of next year, leading to an uptick in sales the following quarter. But it's unlikely to be enough to drive overall equipment spending higher.

While chip sales were good for the first half, Burns finds it unlikely the situation will hold. The timing could hurt, as the third quarter is traditionally the strongest for chip sales. "Chip sales growth will inevitably fall below average for the remainder of this year, at least," Burns writes.

Equipment sales, which have slumped over the past four quarters, including a 26% nosedive in the June quarter, will rise or fall based on chip sales. And the situation is murkier than in years past, Burns says. "Because the entire global economy is involved, today's level of uncertainty is higher than it has been in years, if not decades. Still, with a little bit of luck, the fabs planned for next year will actually come online and the industry will began another cycle of growth."

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