SCOTTSDALE, AZ – Semiconductor industry capital spending is expected to be down 15% year-over-year in 2019 and 5% in 2020, after growth of 11% in 2018, said IC Insights.

Five of the past six semiconductor industry capex downturns have lasted two years before recovering, the research firm added. In every case between 1983 and 2010 where spending declined, a surge in spending of at least 45% occurred two years later.

The second-year increases in spending after the cutbacks were typically stronger than the first year after a downturn, since most semiconductor producers acted very conservatively coming out of the slowdown and waited until they had logged four to six quarters of good operating results before significantly increasing their capital spending again.

This is expected to be the case for 2020, with most semiconductor producers likely to be conservative with their spending budgets for next year, given the poor semiconductor market expected in 2019, said IC Insights.  

The firm believes Micron’s attitude toward next year’s capital spending outlook will be representative of the industry in general. Micron said, “For fiscal 2020, we plan for capex to be meaningfully lower than fiscal 2019.”

The streak of ≥45% capital spending growth two years after spending cutbacks ended in 2015, with capital spending registering a 1% decline.  Moreover, only a 4% increase occurred 2016.  Although capital spending jumped by 41% in 2017 (four years after the 2012-2013 downturn in spending), IC Insights believes the relatively muted cyclical behavior of the capex growth rates since 2013, compared to past cycles, is another indication of a maturing semiconductor industry.

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