The customer's capital plan is the supplier's forecast

An equipment supplier does not have to forecast chip demand on its own. Its customers do much of that work for it, in public, every time they set a capital budget.

Reading the budgets

Foundries and memory makers announce spending plans because investors demand them. Those plans are, in effect, the supplier's order intake a year or more ahead. Lithography sits near the start of every new fab's equipment list, so it sees the effect of a budget before most of the supply chain.

The plans move, of course. But they move in public, and the direction of revision is often more informative than the level.

What I'm watching

• Capital budgets from the largest foundries, and whether they are revised up or down mid-year
• New fab announcements that have actually broken ground
• The supplier's bookings against those plans

Where I stand

Long. The customers' own capital plans point to steady demand for the tools at the start of the chain.

What would change my mind

Mid-year budget cuts from more than one large customer. Revisions tend to come in clusters, and a cluster of cuts reaches this supplier's order book first.