End of a Drought? 2009 capex Spending Up with More than Fifty 300 mm Projects
By Christian Gregor Dieseldorff, SEMI Industry Research and Statistics
Spending on Fabs Equipping
The August 2008 edition of the World Fab Forecast shows a decline in spending, by 20%, for fabs equipping with a rebound of over +20% in spending expected in 2009.
The report lists 53 fab equipping projects and up to 21 fab construction projects in 2009. In 2008, 300mm projects make up about 90% of all that fabs equipping, while about 69% of all equipment spending is for 65 nm and below technology nodes. The report also shows quarter-by-quarter spending for specific technology nodes through 2009. Spending on fabs equipping in 2008 is expected to decline about 16% for Foundries, and by almost 22% each for Memory and Logic fabs. However, 2009 numbers show robust recovery in all three industry segments.
The World Fab Forecast reports Company details, down to the level of each fab, and support regional trends and forecasts (see chart below).
Taiwan, which has the sharpest spending drop in 2008 (-37%) though it will experience the strongest rebound in 2009, with an estimated year-over-year (YoY) growth of 94%. Only Southeast (SE) Asia and South Korea show similar trends, from strongly negative growth rates in 2008 to strongly positive growth rates, in the range of 30%, for 2009.
Over most of the past decade, Japan has spent the largest share of money on fabs equipping. This will change in 2009: spending in Taiwan (1st place) and in S. Korea (2nd place) will bump Japan down to third. By 2009, the share in total spending throughout the Asia Pacific region (excluding Japan) will rise to over 67% (from 50% in 2006).
In 2008, only four companies spent over $1.5B. But in 2009, the World Fab Forecast predicts twice as many will spend at that level.
Spending on Fab Construction Projects
Dramatic changes in spending on fab construction projects are occurring. Many projects have been delayed during 2008 (with a decline in construction spending of -38% from 2007), but 2009 will show over 50% growth in construction spending when many of the pushed out projects begin.
The report shows nine volume fabs starting construction in 2008 and 22 volume fabs will start construction in 2009. While only four companies are expected to spend over $400M on construction spending in 2008, the reports shows almost twice as many companies will spend that much in 2009.
Taiwan is expected to expand its share from 27% of worldwide construction spending to almost 40% next year. In contrast, Japan’s share in construction spending has dropped from 23% in 2007 to 11% in both 2008 and 2009.
The World Fab Forecast predicts construction spending for foundries to stay steady at 25% of overall construction spending in 2008 and 2009. Memory’s share of construction spending, however, will increase from 55% in 2008 to over 60% in 2009.
Capacity Trends and Forecast
Overall annual capacity in 2008 is expected to be about 16 million wafers (in 200mm equivalents = EQs), a growth rate of just 9% compared to 17% capacity growth in 2007. In 2009, capacity is expected to grow about 10%.
Memory makes up the largest share of total semiconductor fab capacity with a 40% share in 2008, followed by Foundries with over 20%, and Logic with 15%. In 2009, Memory will slightly increase its share to 42%, while Foundries and Logic are forecasted to remain at about the same levels.
Overall 300mm capacity, in equivalent wafers, surpassed the 200mm capacity by mid-2008. 300mm capacity will increase its share of total capacity as 200mm capacity slowly declines in 2009.
Most capacity is on-line in Japan followed by S. Korea, Taiwan and the Americas.
The reports also lists capacity by individual company and by individual fab. Comparing 2009 to 2008, the top six companies (in terms of fab capacity) have increased their share to 36% (from 33%). Each of these six companies maintain capacities of over 400K wafers per month (EQs).
Is this the End of a Drought?
The semiconductor industry is highly competitive, leading to predictable cyclical changes. A period of slow investment has to correct itself in the next period to come. In times of drought, a time when companies make no profit and even lose money, many companies reduce their spending and increase utilization of equipment they already have.
Increasing utilization rates is only a short-term solution for keeping up with demand. Companies who thirst to stay competitive and to keep or increase market share need to invest. If they underinvested in one period, they need to rehydrate the next period.
The company which is able to introduce its product first makes the most money. By the time competitors catch up, the market is over-saturated, leading to declining ASP. The industry has learned some hard lessons. We don’t see the exuberant spending that we saw around 2000, as many (not all) companies are responding to market changes much faster (especially foundries).
Having drunk their fill in past days, some still hope for flush days to come: the next killer application or something which brings back the good old times. This makes us also more dependent on the consumer than ever before. Because the industry depends increasingly on the consumer, it is now more affected by macro-economic situations, such as oil prices, rising living costs, and mortgage crises.
In dry times like these, only the biggest and strongest companies, with extra reserves, can keep going (see Samsung and Intel). Other companies form joint ventures and alliances.
We will see relief from this drought in 2009, but if we are not able to manage exuberant spending and over supply, another drought will follow. Early market indicators function as our industry’s weather report, as we are ever more involved in the global marketplace.
SEMI has improved upon its existing Fab Capacity report by adding categories formerly found only in the World Fab Watch. The renamed report is now World Fab Forecast. This report provides 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. These tools are invaluable for understanding how 2009 will look, and learning more about capex for construction projects, fab equipping, technology level, and products.
Please visit www.semi.org/fabs for additional information on these reports.
August 30, 2008