PALO ALTO, U.S./TOKYO -- Spending this year on chipmaking equipment worldwide will fall greater than previously projected by a global industry group as concern about the world economy, fueled by China-U.S. trade friction, dampens investment in data centers.
SEMI, whose members include Applied Materials of the U.S. and Japan-based Tokyo Electron, said Tuesday it now expects sales to fall 18% this year to $52.7 billion, the first decline in four years. The organization initially projected an 8% decline to $59.6 billion. Its forecasts are watched closely as barometers of the digital economy.
The drop-off reflects uncertainty among the chipmakers that buy fab equipment. The demand for smartphones and data center servers that drove the industry's rise in recent years is receding, and memory chip prices are trending downward.
Lower investment in chip-heavy data centers in particular is expected to be a drag. Capital spending by so-called hyperscale operators -- companies with massive computing networks, such as Apple, Google and IBM -- fell on the year in the January-March quarter, U.S.-based Synergy Research Group says.
SEMI also cited American sanctions against Huawei Technologies, the world's third-largest semiconductor buyer by value, as a factor. Though restrictions against doing business with the Chinese telecommunications equipment maker have been relaxed, it remains difficult to predict how chip demand will be affected.
SEMI expects chipmaking equipment sales to rebound 12% next year to $58.8 billion with the spread of fifth-generation wireless technology. But whether the trade tensions and the Huawei situation will be resolved by then remains to be seen.
Japan's recent tightening of controls on exports of chipmaking materials to South Korea complicates matters further. If the curbs affect production at memory market leader Samsung, sales of fabrication equipment could suffer another blow, though SEMI at this point expects the measures to have little impact.