Asian Foundries to Lead Capital Expenditure Recovery in Second Half

Bookmark and Share

Asian Foundries to Lead Capital Expenditure Recovery in Second Half

By Clark Tseng, senior manager, market analyst, SEMI Taiwan Industry Research and Statistics

This year we witnessed sharp decline in front-end fab equipment spending, a 26% decline from Q4 2008 to Q1 2009 to $3.2B worldwide, according to SEMI World Fab Forecast report. However, the report shows spending bottoming out in the second quarter of 2009. Also, we are starting to see signs of improvement from the entire supply chain.

In June, TSMC took the lead in announcing an increase of their 2009 capex guidance back to 2008 levels of $1.9 billion (a 26% increase from previous guidance). In their Q2 2009 earnings conference, the company raised their 2009 capex plan to $2.3 billion which exceeds 2008 expenditures. The investment is expected to focus mainly on 40/45 nm and below technology node production capabilities.

Going into Q3 2009, leading foundries in Asia report a strong rebound in their Q2 2009 results both from revenue and fab utilization points of view. They also expect to see sequential growth in Q3 2009. Chartered Semiconductor, for instance, sees strong demand this year for their 65nm and below technologies and has decided to raise their capital spending by 33% to $500 million mainly for their Fab 7 capacity. UMC, on the other hand, has also increased their 2009 capex plan from below $400 to $500 million as a result of rising demand for advanced process technologies.

Major Foundries: 2009 Capital Expenditure Plan


2009 Capex Plan in April

2009 Capex Plan in July


$1.5 billion

$2.3 billion


$400 million

$500 million


$375 million

$500 million

Turning to the memory sector, which is expected to be one of the driving forces of semiconductor equipment market in 2010, signs of (spending) recovery exist after nearly two years of contraction. Capacity and spending cutbacks were the recent trend for all memory makers. Fortunately, this has gradually eased the supply glut of DRAM and NAND flash, and consequently, memory chip pricing has stabilized since Q1 2009.

Samsung and Hynix in Korea have revised their investment plan for the second half of 2009. Seeing sustainable pricing and improved demand from major PC OEMs, both companies plan to accelerate their technology upgrade schedule to catch the momentum and to better fulfill the demand. Samsung, for example, intends to raise its capex for its semiconductor division in Q2 2009 to stay ahead of the competition. Hynix, on the other hand, also plans to raise its capacity both for NAND and DRAM in the second half and is expected to complete 44nm DRAM and 32nm NAND product development by year end. This implies faster than expected investment on leading-edge technology nodes.

For Taiwan DRAM makers, while the consolidation is still unclear and maybe is late to the market, Nanya and Inotera (a joint venture between Nanya and Micron) are poised for a comeback with a big investment plan to migrate to 54 nm DRAM production capability. Their spending is scheduled to start this year and the majority of the investment will fall into 2010.

Looking at the back-end industry, there is a strong pickup in terms of utilization from Q2 2009 onward, which trends with the strong demand from the upstream foundry players. Leading test and packaging companies in Taiwan have also revised their capex plan this year seeing strong demand for advanced technology nodes and certain applications, especially for wafer bumping and wafer level chip scale packaging (WLCSP).

In another view, the SEMI North American book-to-bill report has showed steady improvement on ratio for five consecutive months since January 2009. The most recent data shows some improvement in bookings off of the lowest levels recorded in the book-to-bill report. Even though current spending will mainly focus on technology upgrades rather than capacity (wafer start), there is an expectation that equipment spending will continue to improve, off of extreme lows, in the second half of 2009 and into 2010.

This year is about big fluctuation along the semiconductor supply chain. We saw a heavy slump in the first quarter across the industry and then a strong rebound from foundries in Q2 2009 which is abnormal in terms of seasonal pattern. Entering into the second half of the year, the industry is starting to show signs of healthier growth. However, we are cautiously optimistic on prospects that improvement will continue into 2010.

Portions of this article were derived from the World Fab Forecast. This database is an essential business tool for any company keeping track of the semiconductor front-end fabs. Additional information regarding this report and other market research reports can be found at

August 3, 2009