Market researcher IC Insights said Monday that semiconductor capex will end up being flat this year compared to 2004, and in 2006 will be flat to slightly down compared to this year.

An updated survey of 2005 spending budgets for 46 chipmakers suggests that capital spending this year will be flat compared to the $45.7 billion spent in 2004. The market researcher''s mid-year update budget survey had suggested that capex would drop 1 percent this year.

The outlook for next year has also improved, IC Insights said; in its mid-year update it had forecast that capex would drop 9 percent year over year in 2006.

After sharp swings in quarterly expenditures during the first half of 2005, semiconductor capital spending trends appear to be moderating and holding relatively steady in the final six months of this year, the Scottsdale, Ariz.-based market research firm said. In the first half of 2005, industry capital spending sequentially grew 12 percent in Q1 on a sequential quarterly basis, but then plunged 19 percent in Q2, IC Insights said.

Planned outlays now show capital spending sequentially declining 3 percent in Q3 and down another 2 percent in Q2 of this year, resulting in a flat year for total expenditures, the market researcher said.
 
IC Insights estimates that capital spending as a percentage of semiconductor industry sales will be only 19 percent in Q3 and Q4 of this year, down significantly from 25 percent in Q1. If worldwide semiconductor revenues grows 5 percent to 10 percent next year, and chipmakers keep their spending ratio near 19 percent, a flat-to-slightly down spending environment will prevail in 2006, the market researcher stated.
 
It is forecasting a 15 percent increase in capital spending by North American device makers in 2005 compared to 2004, based on its survey of global chipmakers. Korean semiconductor manufacturers, meanwhile, are planning to increase capital spending by 19 percent this year.

In contrast, chipmakers in Japan, Europe and Taiwan are cutting capital spending by 7 percent, 18 percent and 2 percent, respectively, according to IC Insights. Planned outlays for worldwide semiconductor capital spending now stand at $45.8 billion in 2005, the market researcher said.