Record Capex Leads to Fab Equipment Increase of 28% in 2011
Exciting Times Ahead — and Is the 450 mm Era Beginning?
By Christian Gregor Dieseldorff, SEMI Industry Research and Statistics, San Jose, California (March 1, 2011).
Exciting times loom ahead for the industry: 2011 promises record spending levels; there are inklings that the 450 mm era is beginning to take shape; feature sizes will break into 20nm-class; and fabs are showing up in unlikely places. Some companies have surpassed their record investments in 2010 to set new spending records in 2011.
SEMI’s internal analysis of semiconductor manufacturers’ capital expenditure (capex) announcements used to update the fab database predicts that total semiconductor capex will grow between 15 and 20% in 2011. While this is not the highest spending level on record, a significant portion of this aggressive spending is promising to result in record investments in new and used fab equipment. Table 1 compares investments on fab equipment and construction, and how those rates compare to the record high levels set in 2007.
Table 1: Front End Fab Spending over Time
Source: SEMI World Fab Database Reports (February 25, 2011)
In the latest edition of the World Fab Forecast published on February 25, 2011, SEMI has updated data on over 200 facilities, including LED fabs. Using a thorough bottoms-up approach (tracking all projects fab by fab), the data reveal a 28% increase year-over-year (YoY) for fab equipment spending in 2011. In 2012, spending rates currently show a decline of 4%.
Spending on construction projects is expected to decline by about 13% in 2011, a trend which will continue into 2012 with a 9% decline forecasted.
Some Companies: Record Spending in 2011
Some companies will spend dizzying amounts in 2011, reaching historic record levels. For example, TSMC increased capex from a record $5.9 billion in 2010 to another record high of $7.8 billion in 2011. Intel increased capex from $5.2 billion in 2010 to $9.0 billion in 2011. Globalfoundries doubled its 2010 capex from $2.7 billion to $5.4 billion in 2011. Samsung increased total capex (including R&D) by 18%, from a record in 2010 to another record in 2011. However, while Samsung intends to spend more on LCD, OLED and R&D, but their investment for semiconductors actually will decline by 14% for the year. Other companies have increased their capital expenditures for this year (although not to record levels), including Hynix, Micron, SMIC, Toshiba, ST Microelectronics, and Infineon.
Times have changed and the balance of industry segments has shifted. For the first time, equipment spending levels for foundries are approaching investment levels of memory. Memory has historically been the highest spending segment in the industry. Chart 1 compares 2011 with the previous record year (2007) showing the shift between industry segments.
Chart 1: Comparing Fab Equipment Spending for 2007 and 2011 by Industry Segment
Source: SEMI World Fab Database Reports (February 25, 2011)
In 2011, fab equipment spending for foundries is expected to reach the highest level in history. Foundries are expected to continue to spend at accelerated levels in 2012. Memory companies will spend much less aggressively in 2011 than in 2006 and 2007, with equipment spending approaching 2008 levels. A large segment of the pie is spending on MPU/Logic, mainly driven by Intel, whose MPU investments will reach record levels in 2011.
Capacity Growth: “Steady as She Goes” — but Slower than in the Past
SEMI’s World Fab Forecast predicts steady growth in capacity, about 9% for 2011 and 7% for 2012 (without Discretes). See Chart 2.
Chart 2: Worldwide Installed Capacity
Consistent with aggressive spending levels, foundries will have the strongest increase in capacity in 2011, followed by MPU/Logic (combined), and Memory. Foundries are also expected to lead capacity growth in 2012. Although these growth rates are encouraging, they are much lower than levels experienced between 2004 and 2007. Prior to the economic downturn, capacity growth from 2004 to 2007 ranged from 14 to 23% per year.
Making predictions more than two years out for is very challenging in this industry due to the influence of macroeconomic fluctuations. SEMI’s World Fab Forecast lists 45 future fabs that will begin production from 2012 to 2016. Extrapolating from these data, annual capacity growth rates in 2013 and 2014 is expected to hover around 7%. Most spending is directed towards upgrading existing facilities, as companies try to avoid overcapacity and oversupply.
Construction Projects: How Tight is “Fab-tight?”
While there is record spending on Fab equipment, few new facilities are on the horizon. Ironically, some few projects are cropping up in unlikely places, such as Abu Dhabi and Siberia. Comparing new construction projects over the past 10 years to the coming two years, we see a rapid slow down, especially for new 300 mm fabs. See chart 3.
Chart 3: Count of Volume Fabs Starting Construction
In 2010, 34 new volume fabs began construction; in 2011, only seven have a high probability of being realized; and four more are likely to start in 2012. By way of comparison, over the past five years, at least 20 new volume fabs began construction each year, with LED fabs representing the majority of new construction projects in 2009 and 2010.
Slow Down for LED Fabs
The largest segment for new fabs is the LED industry, with wafer sizes of 2-inch and 4-inch. However, significantly fewer new LED fabs will begin construction in 2011 and 2012. SEMI’s World Fab report lists 24 new LED fabs beginning construction in 2010, but only five new LED fab projects are likely in 2011.
This slowdown may be explained by recognition that in the near-term the industry has added too much capacity, coupled by changes to government subsidies in China. For example, historically local governments in China supported the domestic LED industry with hefty subsidies. Companies received up to 8-10M RMB for each MOCVD reactor. Some of these subsidies will expire this year, and others are expected to change.
Slow Down for New 300 mm Fabs
In 2010, SEMI’s World Fab Forecast counted seven 300 mm volume fabs (excluding R&Ds and pilots) beginning construction. However, in 2011, only Intel’s fab is predicted to start in mid-2011. In 2012, three 300 mm fabs will begin construction: one foundry and two integrated device manufacturers (IDMs); two of which are potential candidates for 450 mm-ready cleanrooms.
The slow down for building new 300 mm fabs may be explained by several factors. Facilities are larger, so capacity ramps can be extended over longer timeframes. Also, existing fabs are being upgraded to the next feature size, while IDMs are outsourcing more products to foundries. The recent economic downturn left the industry reluctant to overbuild capacity again. Finally, some companies may wait for the 450 mm wafer technology to mature, stalling until they can invest in the new era.
Assuming demand does not stagnate, but continues to increase, the “fab-tight” landscape may become a concern. If existing fabs are ramped to full capacity, companies may not be able to meet new demand by upgrading their technologies any more. Lead-times for a new fab are just too long, typically taking 1 to 1 1/2 years from construction start to ramp up to volume production. Any new fab starting after mid-2011 won’t be ready for volume production until the end of 2012 or later, depending on technology node.
The Dawn of the 450 mm Era
For the first time, SEMI’s World Fab Forecast data identify seven facilities (R&Ds, pilots and volume fabs) in the near future that are candidates for 450 mm readiness. The first facilities are expected to come on line in 2013.
Some 450 mm equipment is already available, such as metrology tools, wafer sorters, and cleaners. It remains to be seen if enough mature 450 mm tools will be available to fully equip a high volume fab.
While several key device manufactures are promoting 450 mm, governments are keenly interested in 450 mm as evidenced by the recent European commission’s decision to award Future Horizons Ltd. and Decision SA a one-year joint contract to assess the benefits of a 450 mm semiconductor prototyping line being located in Europe. Government incentives were also a significant supporter of the first 300 mm pilot line in Dresden, SC300.
Fabs in Unlikely Places: the Desert and Siberia
Driven mainly by economic incentives (no income tax and strong government subsidies), the Advanced Technology Investment Company (ATIC) announced it will spend $6-7 billion on a High Tech Center next to the International airport of Abu Dhabi (Masdar city). Although Abu Dhabi will need to build its infrastructure from scratch, the center includes a plan for a 300 mm wafer fab. Production is expected to ramp up in 2014 or 2015.
From the extreme heat of a desert, to the other extreme: Rusnano plans a project to produce telecommunication ICs at a fab in Siberia. Micran, the project name, will be in a technology park in Tomsk, Siberia, which began construction at the end of 2010 according to sources.
SEMI’s World Fab Database is tracking fab projects for you. The World Fab Forecast lists 1,122 facilities, including about 50 future fabs. For 2011, the report is following over 200 equipment projects and 43 construction projects.
SEMI’s World Fab Forecast report uses a bottom-up approach methodology, providing high-level summaries and graphs; in-depth analyses of capital expenditures, capacities, technology and products by fab. Additionally, the database provides forecasts for the next 18 months by quarter. These tools are invaluable for understanding semiconductor manufacturing in 2011 and 2012 will look, and learning more about capex for construction projects, fabs equipping, technology levels, and products.
Learn more about the SEMI fab databases at: http://www.semi.org/MarketInfo/FabDatabase and
SEMI’s Worldwide Semiconductor Equipment Market Subscription (WWSEMS) data tracks only new equipment for fabs and test and assembly and packaging houses. The SEMI World Fab Forecast and its related Fab Database reports track any equipment needed to ramp fabs, upgrade technology nodes, and expand or change wafer size, including new equipment, used equipment, or in-house equipment.
San Jose, California
March 1, 2011