Despite falling prices for memory chips, companies spend big time!

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Despite falling prices for memory chips, companies spend big time!
Companies gamble on increase in demand for DRAM and Flash

Article by Christian Gregor Dieseldorff, Senior Analyst, Lara Chamness Senior Market Analyst, SEMI, Industry Research & Statistics, San Jose, California, August 1, 2007

The recently published suite of Fab Database reports reveal that despite falling prices in Flash and DRAM, some companies continue to invest in additional capacity.

Spot prices for DRAM and Flash experienced steep declines beginning late 2006. Recent data by DRAMeXchange show that the commodity DRAM market fell by about 25 percent in the second quarter of 2007 relative to the first quarter of the year. Facing such severe price pressure, you would expect that device manufacturers would cut expenditures. Some have, but others continue to spend.

Most of these companies are investing in 300 mm and memory (DRAM and Flash), expecting a significant increase in demand for DRAM and Flash. Qimonda, for example, is banking on a strong DRAM market, anticipating 55 to 65 percent DRAM bit growth in 2007. They plan to invest 2 billion Euros in a 300 mm wafer fab in Singapore and have entered into a Joint Venture (JV) agreement with SanDisk to develop and manufacture Flash-DRAM multichip packaging products. Construction of the shell for this fab in Singapore should be completed by end of 2008.

Another example is ProMOS, which will double its fab spending from about $800-900M in 2006 to about $1.7-$1.8 M in 2007 (see the SEMI Worldwide Fab Database Reports for detail for how this investment is being allotted). Rexchip, the JV between Powerchip and Elpida which formed in December 2006, has announced huge investments, with almost $2B planned in 2007. Their fab in Taichung, Taiwan, is expected to reach 30,000 wpm in 3Q 2007. Several, other companies are planning on spending over $2B each in 2007, these include: Samsung, Hynix, Toshiba, Intel and Micron. Samsung alone will spend over $4.5B to equip fabs and about $700M in fab construction projects.

Battered AMD got lucky with their Dresden fabs located in the state of Saxony, Germany. The European Union (EU) granted additional incentives for the semiconductor industry in Saxony and earmarked $361M to support AMD’s upgrade plans (in the amount for $3 billion).

Even foundries have retained their ambitious capex plans for 2007. TSMC intends to spend about $2.7B, Chartered will spend $800M, UMC plans to spend about $1.1B and SMIC has announced a capital budget of $720M this year. This $720 number is misleading because some of SMIC’s operations are subsidized by the Chinese government. For example, SMIC is set to manage the 12,000 wpm fab in Wuhan Xinxin, which will be completely funded by the government; expenditures associated with this venture will not appear in SMIC’s capex announcements.

How do these examples affect the industry worldwide?

Spending on fab construction projects

Although spending on fab construction projects reached record levels in 2006, spending is expected to decline in 2007, to -1.6 percent, year over year. However, expenditures are expected to increase 40 percent to reach to record levels of $10B in 2008.

For the current year, Taiwan and Japan will account for the largest share of worldwide construction spending at 30 percent and 20 percent respectively, followed by China with over 16 percent (Figure 1).

In 2008, South Korea is expected to have the largest growth. Southeast Asia is expected to make big leaps next year, driven mainly by Micron’s Tech Semiconductor and IM Flash, Qimonda and Chartered.

Figure 1

Spending on fabs equipping

We expect 5 percent growth in spending on fabs equipping in 2007, and another 5 percent increase in 2008.

In 2007, Taiwan is expected to account for over 24 percent of fab equipment spending, followed closely by Japan at almost 22 percent. South Korea is expected to represent about 17 percent of worldwide spending for fab equipment.

It is expected that only ten companies will be responsible for about 70 percent (or $25 billion) of fab equipment spending in 2007. The largest 5 spenders responsible for equipping fabs in 2007 are Samsung, Hynix, Toshiba, Intel and Micron, with their joint ventures. These companies will continue to lead in 2008.


We expect a 17 percent increase in worldwide fab capacity in 2007 and about 11 percent in 2008. Worldwide, Japan will represent the largest portion of capacity at about 24 percent, followed by Taiwan with about 18 percent, the Americas and South Korea.

Southeast Asia is expected to make big gains in 2008, mainly in Singapore, with new fab projects such as IM Flash JV, Tech Semiconductor, Qimonda and Chartered. Once these fab projects are in volume production they will boost this region’s worldwide share in capacity.

Memory products will comprise about 38 percent of all worldwide capacity this year and 40 percent in 2008. More than half of this memory capacity comes from just 4 companies (with their JVs): Samsung, Hynix, Toshiba and Micron.

300 mm Trends

Worldwide 300 mm capacity will double from about 3 million wafers per month at the beginning of 2007 to over 6 million wafers per month by the end of 2008 (200 mm equivalents), Figure 2.

In 2007, sixteen 300 mm volume fabs are coming online and in 2008 nine 300mm volume fabs. This includes any conversions from 200mm to 300mm such as AMD’s Fab 30 in Dresden or Tech Semiconductor in Singapore.

Figure 2

Companies build fewer 300 mm fabs, but larger fabs. At the beginning of 2006, we counted forty 300 mm fabs providing about 2 million wafers per month (in 200 mm equivalents). By the end of 2007 we expect sixty four 300 mm fabs providing 5 million wafers per month (200 mm equivalents). By the end of 2008 only seventy three 300 mm fabs will provide over 6.2 million wafers per month. This means that in the two years of 2007 and 2008 25 volume fabs will come online.

About 3 years ago, typical 300 mm fabs could produce 30,000 wpm; now, “Megafabs” capable of producing 100,000 to 210,000 wpm, or over one million wafers per year with shorter ramp times, are being constructed.

The semiconductor manufacturing market is being driven by 300 mm and memory (DRAM and Flash). Despite falling prices for memory devices, companies are continuing add substantial amounts of capacity. It remains to be seen how much capacity is required to satisfy the predicted increase in demand. Need to know more? The SEMI Worldwide Fab Database Reports provide ideal tools to monitor capacity trends from the bottom up, which enables thorough analysis of the industry on a fab by fab basis, by company, by region or the industry as a whole. Can you afford not to have this level of insight?


FabFutures contains over 200 records and features details listed by company and by fab in over 34 categories in which major expenditures are taking place. The report is in an easy to use Excel format and lists by quarter cost of construction and equipment spending by fab, the capacities, geometries and wafer sizes, key milestone dates and more.

Need a listing of all fabs worldwide?

The Fab Capacity Report lists fab details for 3 years, including the next 6 quarters for over 1,000 fabs worldwide. This report is in an easy to use Excel format and lists by quarter and by fab capital expenditure for fabs constructing and equipping, capacities, geometries, product types, and wafer sizes and more.

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