Capital expenditures play the critical role in determining the condition of the semiconductor industry. Gartner Group, one of the leading IT market forecast firms, expects the following:

Bob Johnson, one of the Gartner analysts who made the forecast, said the capex decline for 2008 will be the highest for the chip industry since 2002, when overall expenditures decreased by 35 percent after shrinking by 30 percent in 2001. "The chip industry's capital intensity has been reset from around 20 percent of revenues in late 1990s and early 2000s to about 15 percent going forward," Gartner said. It added that this event will have a significant impact on the IC equipment companies' future profitability. The projection calls for global IC capital spending to be roughly $33.5 billion in 2008 and $30.5 billion in 2009. Capex will suffer from a CARG of -2.1 percent from 2007 until 2012, based on the forecast. "The industry will not match 2007 capex of $44.7 billion until the end of the forecast period in 2012," Gartner noted.