Flash and DRAM spice up the industry

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How Flash and DRAM are spicing up the industry
And boldly we go from a fade 2007 into a spicy 2008

by, Christian Gregor Dieseldorff, Senior Analyst, SEMI, San Jose, California, June 1, 2007

Recently released updates of semiconductor fab reports by SEMI reveal that after a strong growth of about 25 percent in 2006 in total spending for equipping fabs, a modest growth of about 3 percent is expected for 2007 based on current CAPEX plans (See Figure 2). The growth for spending on fab construction projects is estimated to be about 4 percent–5 percent this year. A strong recovery, however, of both spending for fabs equipping and constructing is anticipated in 2008 (See Figure 1).

This year over 30 major fab construction projects are taking place globally with over $8 billion spent expected to be spent on construction projects. Most of these fabs are being constructed in 2007 and will begin production sometime in 2008. Total construction spending is expected to hit the $10 billion mark in 2008 (See Figure 1)

Figure 1: Capital Expenditure for Construction Projects in Fabs by Quarter

Source: SEMI Wafer fab reports April 2007

In addition to the fabs under construction, another 30 fabs will start volume production in 2007 worldwide. Looking further out to next year, 16 fabs will start volume production in the first three quarters of 2008. Though fewer in number than fabs beginning production in 2007, many of these fabs will have larger capacities, with most of fabs being built to make Memory devices.

With the number of new fabs coming on-line this year, a total of about 23 million 8-inch equivalent wafers of new capacity are expected to be added globally, which represents about a 16 percent increase from the previous year. Samsung is leading in terms of capacity followed by Hynix, TSMC, Toshiba, Intel and Micron. The two fastest growing segments are for memory-type (DRAM and Flash) fabs and, of course, 300 mm fabs. Capacity of all memory-type fabs will increase 33 percent from 2006 compared to a 51 percent increase from 2005 to 2006. The total capacity of all 300 mm fabs is expected to increase by over 50 percent in 2007 from 2006.

Although South Korea and Taiwan are leading in terms of added capacity in 2007, Japan still holds most of the worldwide capacity with about 24 percent followed by Taiwan, the Americas and South Korea.

The first quarter of 2007 shows a positive growth for spending by the fabs equipping. We expect this quarterly growth to turn negative until the end of 2007 and start to recover in the first quarter of 2008. The positive first quarter growth on fabs equipping is driven by companies such as Samsung which spent 41 percent of the planned yearly capital expenditure in the first quarter. Hynix spent 35 percent.

In the two-year timeframe of the report (4Q 2006 to 3Q 2008), over 85 percent of the spending by the fabs equipping will be spent on equipping 300 mm fabs (See Figure 2).

Figure 2: Capital Expenditure for Fabs Equipping in All Fabs by Region

Source: SEMI Wafer fab reports April 2007

For 2007, most of the spending on fabs equipping is in Asia-Pacific (excluding Japan), which accounts for over $20 billion or 53 percent of the market. Taiwan and Japan are leading head-to-head with about 20 percent each of all spending on fab equipping followed by the U.S. and South Korea with about 18 percent each.

Although Southeast Asia is one of the smaller regions in terms of spending on fabs, it will receive new momentum in new fab investments lead by IM Flash, Chartered, Tech Semiconductor and Qimonda. All of these fabs are located in Singapore and will push that regional market from about $1.8 billion of equipment being installed in 2007 to about $3 billion in 2008.

In the U.S., spending on equipping fabs is expected to be about $7 billion this year, with the largest spenders being Intel, IM Flash, Qimonda, IBM and Micron for their respective 300 mm fabs. About $500 to $600 million will be spent on construction projects in major fabs this year, with most of that attributed to the 300 mm fab by Samsung in Austin, Texas, which is planned to be one of their DRAM dedicated fabs. This year, the fabs in the U.S. will add a total of 10 percent more capacity compared to the previous year and that means that the region will hold about 17 percent of all worldwide capacity. The majority of this new capacity will be for memory device production

Pressured by increasing costs for R&D and manufacturing, and a highly competitive market for leading edge technologies, changes have been stimulated in the memory market in the form of spin-off companies, alliances and joint ventures.

Just recently, Intel and ST Microelectronics announced that they will combine their forces for Flash (mainly NOR but also NAND). This is viewed as a move to gain market share from Samsung and Spansion in the NOR Flash market. The Intel-ST JV will be an independent company that has, according to company spokespersons, benefits comparable to other existing joint ventures such as product focus and cost structure, making the JV more flexible and competitive. The JV was formed to create more profit for shareholders and we believe this could eventually lead to an IPO in the future.

In addition Intel has another flash alliance with Micron called IM Flash. On top of all this, Hynix and ST Microelectronics have a Flash joint venture with Hynix-ST JV in Wuxi, China. And in March of this year Hynix and SanDisk announced a manufacturing joint venture. Meanwhile, Renesas is pulling out from the Flash business, as Qimonda has. Qimonda focuses only on DRAMs, betting on a prosperous future in application areas like server farms.
It would be interesting to see how things play out as some companies are focusing on flash memory (such as IM Flash), some on DRAM technology (such as Qimonda), and others on both technologies (such as Samsung who maintains both DRAM and Flash fabs).

Despite recent falling prices we see Flash to be spicing up the semiconductor industry and to be one of the driving forces behind recent developments that will stimulate a strong 2008. As we boldly go forward, it will be interesting to see how all this plays out over the next couple of years. How much “spice” can we take, and who has the stomach for it?

the Next 6 Quarters’ lists fab details of 2 years: for the past 2 quarters and the next 6 quarters for more than 200 fabs 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.

Get a listing of all fabs worldwide with the ‘Fab Capacity Report’:

The ‘Fab Capacity Report’ lists fab details of 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 capacities, geometries and wafer sizes and more.

Please visit www.semi.org/fabs for additional information on these reports.