Fab Spending Heads for 88 Percent Growth in 2010
Memory and Foundry Companies Start Catching Up – and Add More Capacity
By Christian Gregor Dieseldorff and Dan Tracy, SEMI Industry Research and Statistics, San Jose, California (February 25, 2010)
The latest edition of SEMI’s World Fab Forecast reveals that Fab spending, which includes construction and equipping Front-End Facilities, from R&Ds to volume fabs, is expected to increase to over $30B, about 88 percent growth year-over-year (see Table 1).
Since June 2009, SEMI’s World Fab Forecast has consistently predicted spending growth rate of more than 60 percent (%) for 2010. Even when other analysts predicted 20 to 30%, the “ground up” methodology of the World Fab Forecast produced higher estimates for this year. This latest increase in the growth prediction is mainly based on announced increases in capital spending plans by Foundries and Memory companies over the past couple of months.
Also, a number of existing fab projects which were put “on ice” will move forward: for example, TI’s RFAB, TSMC’s Fab 12 Phase 5, and UMC’s Fab 12A P3/4 (former Fab 12B). Other fab projects put “on ice” which may continue are Samsung’s Line 16 and IM Flash in Singapore. SEMI’s World Fab Forecast also reveals plans for new fabs on the horizon (starting groundbreaking), such as TSMC Fab 14 Phase 4, possibly Flash Alliance Fab 5, and a few more.
Even with 88% Increase: It Will Take until 2011 to Catch Up with 2007
Even with this large growth in spending in 2010, it will take a growth rate of 49% in 2011 for fab spending numbers to catch up to 2007 spending (see Table 1 above). Also, 2010 spending plans will, of course, depend on continued recovery in the overall global economy, though the persistently high unemployment rate, the debt crisis, and other factors contribute to uncertainty in any outlook.
The past two years (2008 and 2009) were years of deep, double-digit negative growth, with 2009 showing historic low spending rates. Comparing 2010 spending with 2008, however, spending is currently trending essentially flat. If 2010 is compared to 2007 (the last spending peak), then the lofty-sounding 2010 growth drops into negative double digits (see Table 2 below).
The Rate of Facilities Closing is Going Down
According to our records, 27 volume fabs closed in 2009, including eleven 200 mm fabs and Qimonda’s state-of-the-art 300 mm fabs. Another 21 facilities are expected to close in 2010. So a total of about 48 facilities will be closed in 2009 and 2010. At this point, we expect about four facilities to close in 2011.
Most fabs closed by memory companies were 200 mm fabs, though the majority of fabs closed worldwide were those with wafer sizes below 200mm (see Graph 1). A number of 200 mm fabs remain in production worldwide. Over 190 facilities with 200 mm wafers size are expected to be in operation through the end of 2010, with about one-third for foundries and just about one in ten remaining for Memory.
Graph 1: Count of Facilities Closed and Starting Operations
Installed Capacity Increases at Slow Pace
SEMI’s World Fab Forecast showed declines of –3 to – 4% in installed fab capacity in 2009, the first time capacity declined year-over-year in the history tracked in the SEMI database.
Since mid-2009, foundries have increased their spending and also their installed capacity plans for 2010 (see Graph 2). Spending for Memory went mainly into upgrading existing capacity, but in recent months, additional investments for new installed capacity have been announced. Most of this is for fab projects that began a couple years ago but were put on-hold.
There are more indications that Memory companies will first revive some existing fab projects which were placed on hold, before beginning new ones. So at the moment, only a couple of new fab projects for high-volume fabs are in the horizon for this year, and it may take until 2011 and 2012 before new capacity comes on-line, from these new projects.
Graph 2: Installed Capacity by Product Type without Discretes
In 2009, the industry cut installed capacity at a pace never observed before. Also, many companies introduced severe cost cutting measures, with massive lay-offs and restructuring. At the same time, demand for chips eventually turned the corner and began to increase throughout the year, and Average Selling Prices (ASPs) improved in favor of the device makers in the second half of 2009.
As the global economy continues to recover in 2010, worldwide GDP is expected to turn from shrinking (about –1% in 2009) to growth in 2010 (3 to 4%). As reported elsewhere, government stimulus packages continue to be applied: over 50% of pledged economic stimulus will be spent in 2010, versus just 30% in 2009.
Therefore, there are concerns that capacity, severely curtailed in 2009, will lag behind the new demand. Recent semiconductor industry data shows device shipments have returned to pre-downturn levels. In 2010, capacity is projected to grow 5 to 6% over 2009, though only 2% over 2008.
Top Fab Spenders Will Build Out their Share to about 86% by 2011
Encouraged by improving sales and profits, many companies began to announce increased investments.
Changes are coming fast and between the SEMI November 2009 World Fab Forecast edition and the current reports, significant updates have been incorporated into the database.
In November 2009, six companies nicknamed in an article “The Fantastic Six,” were each expected to invest $1B or more each for fabs equipping for a total of about $14B. In the four months since the article was released, this number has grown to eight companies who will likely spend $1B or more, for combined spending of almost $20B for fabs equipping.
Looking at the Top Ten spenders on fabs since 2007, the share of total spending by these companies will increase to 84% of the market in 2010 and to at least 86% in 2011 (see Graph 3). At first glance, this may be due to consolidations, such as Globalfoundries and Chartered. A second look at the data shows the increase in Top 10 spending share is mainly associated with the same companies— and associated alliances— that led spending in 2007. These companies will also spend more in 2010 and 2011.
Graph 3: Share of Top 10 Spenders in Growth Years 2007, 2010 and 2011 *
* The spending numbers of the Top 10 are consolidated including alliances.
Foundries Double their Spending
In looking at spending by industry device segment, the share of spending by foundries will be much higher in 2010. Compared to 2007, foundries have more than doubled their share for equipping spending, to 33% in 2010, while Memory accounts for 46% of spending in 2010 compared to 65% in 2007 (see Charts 4 and 5 below)
Chart 4 and 5: Share of Equipment Spending by Product Type in 2007 and 2010
In total, the estimate for 2010 Fab spending has increased to $30B (from about $25 B reported in November 2009). This projection is based on recent announcements from a few companies who plan to spend more, such as such as TSMC, Inotera, Hynix, UMC, Intel, Samsung and a new venture between Grace and HHNEC named Hua Li Microelectronics.
The 88% increase in fab spending appears high. However, it comes after a year with unusual, historic low spending. Comparing 2010 to 2008 shows that spending is essentially flat. It will take more than 88% to come back to usual spending levels for 2010. Until then we have to wait for 2011.
SEMI World Fab Forecast report provides from high-level summaries and graphs; in-depth analyses of capital expenditure, capacity, technology and products, down to the detail of each fab; and forecasts for the next 18 months by quarter. These tools are invaluable for understanding how 2010 and 2011 will look, and learning more about capex for construction projects, fab equipping, technology level, and products.
The difference between the SEMI Worldwide Semiconductor Equipment Market Subscription (WWSEMS) data and the World Fab Forecast and its related Fab Database reports is that the fab database reports track any equipment needed to ramp the fab, upgrade technology nodes, expand or change its wafer size whether it is new equipment, used equipment, or in-house equipment, while WWSEMS tracks only new equipment.
Please visit www.semi.org/fabs for additional information on these reports.
San Jose, California
February 25, 2010