STAMFORD, CT -- Market research firm Gartner today raised its forecast for worldwide semiconductor capital spending, but said the outlook for 2016 remains "bleak."

The firm now projects spending to decline 2% in 2016, to $62.8 billion. That's up from its previous quarterly estimates of a 4.7% drop.

"While the first quarter 2016 forecast has improved from a projected decline of 4.7% in the previous quarter's forecast, the 2% decline in the market for 2016 is still bleak," said David Christensen, senior research analyst at Gartner. "Excess inventory and weak demand for PCs, tablets, and mobile products continue to plague the semiconductor industry, resulting in a slow growth rate that began in late 2015 and is continuing into 2016."

Looking forward, the market is expected to return to growth in 2017. Increased demand for 10nm and 3D NAND process development in memory and logic/foundry will drive overall spending to grow 4.4% in 2017.

Table 1. Worldwide Semiconductor Capital Spending and Equipment Spending Forecast, 2015-2018

Source: Gartner, May 2016. In US$ millions

"The slowdown in the devices market has driven semiconductor producers to be conservative with their capital spending plans," said Christensen. "This year, leading semiconductor manufacturers are responding to anticipated weak demand from semiconductors and preparing for new growth in leading-edge technologies in 2017."

In addition, the aggressive pursuit of semiconductor manufacturing capability by the Chinese government is an issue that cannot be ignored by the semiconductor manufacturing industry. In the last year, there has been consolidation and merger and acquisition activity with specific offers from various Chinese-based entities, indicating the aggressiveness of the Chinese. This will dramatically affect the competitive landscape of global semiconductor manufacturing in the next few years, as China is now a major market for semiconductor usage and manufacturing.

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