SK Hynix

After logging record shipments in the first quarter of 2021, the silicon wafer industry may need to start greenfield projects as soon as this year to boost capacity over the next two years as market demand and average selling prices continue to improve.

Back in 2012, China ranked fifth among seven regions worldwide in IC wafer capacity but surged past the Americas and Japan in 2018 and 2019 to claim the number three position (figure 1). That’s a big deal given that ICs account for the largest share of wafer capacity excluding discrete, opto, MEMS and sensors.China’s IC wafer capacity growth accelerated to tune of 14% in 2019 and 21% in 2020 and is expected to grow at least 17% this year, as we report in the latest update of the World Fab Forecast, published December 3rd by SEMI. Of all regions, Taiwan boasts the second strongest growth rate over the same period at 3% to 4%.Figure 1: Total IC installed wafer capacity for top five regions The report shows that from 2019 through the end of 2021 China will have increased wafer capacity for memory by 95%, foundry by 47% and analog by 29%. Foundry will represent the largest portion of those gains, reaching 2 million wpm (200mm equivalents). Memory will follow at about 1.5 million wpm and then analog at over 120,000 wpm.But Chinese companies aren’t pulling off this feat singlehandedly. Many international companies are contributing to the wafer capacity increases in China (figure 2). Figure 2: IC wafer capacity in China by company origin The share of capacity contributed by Chinese-owned companies and international companies has changed little since 2012, though Chinese-owned companies saw a slight dip in their slice of the pie from 60% to 57%From 2019 through 2021, Chinese-owned companies will add almost 60% capacity for foundries, the most of all sectors. Companies including SMIC, Hua Hong Semiconductor, Nexchip, XMC and Hua Li Microelectronics are driving the increases.During the same period, Chinese-owned companies will ramp up memory capacity from basically zero to 300,000 wpm. Companies such as Yangtze Memory Technology and ChangXin Memory Technologies (CXMT), also known as Innotron, are powering the quick rise with aggressive ramps of 3D NAND and DRAM capacity.Among international-owned companies, TSMC and UMC are driving the largest share of foundry growth, while Samsung, SK Hynix and Intel are powering gains in memory capacity.More information is available in the World Fab Forecast report. The report currently collects information for fab equipment and construction investment, capacities, technologies and product types for over 280 fabs and lines in China alone, including 40 facilities that either began operation in 2020 or will from 2021 through 2024.Christian G. Dieseldorff is senior principal analyst in the Industry Research and Analysis group at SEMI in Milpitas, California.

The silicon wafer market got off to a rough start in 2019 with major silicon wafer manufacturers’ sales weakening in the first quarter of the year following a sharper memory market downturn than expected. Earnings forecasts for the rest of the year have been revised down.

Despite recent global economic uncertainties and a downbeat memory market outlook for the second half of 2019, new 300mm fab construction in Korea is still going strong.

When will the memory market likely show signs of bottoming out? Following is an analysis of the current memory climate using the Memory Inventory Cycle Index introduced in this SEMI two-part article series in October 2018.

Micron, one of the top three memory semiconductor companies, reported solid results for the fourth quarter of fiscal 2018 (June to August) to extend a multi-quarter string of strong growth. However, the company’s mediocre guidance for the current quarter has raised concerns that memory demand will start to slow.To shed light on this super memory cycle, which began in the second half of 2016, this article examines correlations among the top three memory suppliers’ sales revenue, quarterly inventory levels, World Semiconductor Trade Statistics (WSTS) market data, and memory fab equipment investments reported by SEMI.The Memory Inventory Cycle Index, which is based on financial data reported by Samsung, SK Hynix and Micron, is the difference between the year-over-year growth rates of sales (or shipments) and inventories. The index explains business cycle fluctuations such as expansions and contractions, trending up in expansions and declining in contractions. Figure 1 shows both historical Micron sales (blue dotted line) and the quarterly Memory Inventory Cycle Index (black solid line). To minimize seasonal fluctuations, both were calculated based on a four-quarter moving average of sales and inventories. Figure 1. Memory Inventory Cycle Index Compared to Memory Sales* Remarks1) Memory Inventory Cycle Index = YoY growth rate of memory sales revenues - YoY growth rate of memory total inventoris value on a four quarters moving average.2) Calculated memory sales and inventoris are based on Samsung, SK Hynix, and Micron public announcements.3) South Korea Won were converted to US$ based on the quaterly average value released by FRED.4) Companies’ sales data were calculated based on 4-quarter moving average.5) Company data complied by SEMI. As shown in Figure 1, the Memory Inventory Cycle Index has been declining since peaking in the fourth quarter of 2017, mirroring the previous two contractions – in 2010 and 2014 – in which memory sales slowed or stagnated after four quarters of the index decline. Accordingly, if this relationship holds between the Memory Inventory Cycle Index and sales, Micron’s sales will slow in the coming quarters and is consistent with Micron’s guidance for the current quarter. Moreover, the index suggests that the sum of three companies’ sales (the solid red line) will exhibit a similar trend of decreased growth in the coming quarters, which will impact the annual growth rate of global memory sales.WSTS recently increased its 2018 forecast for memory sales to 30.5%, up from 26.5% projected in June of this year. However, the 3-month moving average of memory sales shows that memory sales already increased by 48% YoY in the first half of the year, which means growth is expected to be lower in the second half of the year. Other signs pointing to a weaker end to the year include front-end equipment investments by the top three memory suppliers. SEMI is modeling an annual increase of only one percent for the year for these suppliers, with spending down 23% in the second half relative to the first half of the year.Figure 2 shows the historical trend of the Memory Inventory Cycle Index, the YoY growth rate of memory sales, and YoY memory fab equipment investments. The Memory Inventory Cycle Index increased faster than memory sales and fab equipment investments in the past two cycles. In the most recent memory cycle, these three indexes are moving in tandem, each peaking in the fourth quarter of 2017. Figure 2. Memory Inventory Cycle Index, Memory Sales and Memory Fab Equipment Investments* Remarks1) Both sales and memory fab equipment investments data were calculated based on 4-quarter moving average to minimize seasonal fluctuation.2) All data are from SEMI, except memory sales (WSTS) While overall memory sales continue to be strong this year, memory ASPs have shown signs of weakening right after the inventory index peak. NAND flash ASPs have been trending downward since the first quarter of 2018. With the recent inventory correction and short-term CPU shortage, DRAM ASPs are expected to soften in the fourth quarter of 2018. The looming memory market slowdown has memory makers adjusting their capacity expansion plans for the rest of this year. Some new capacity additions, especially for DRAM, have been pushed out to 2019. The memory inventory cycle index has to some extent foretold the slowdown of the memory market. In the second and final part of this article, we will discuss the correlation between the Memory Inventory Cycle Index and China’s semiconductor sales and Purchasing Managers Index. We will also look at the increasing level of memory inventory in the past few quarters and its composition including Work-in-Progress and Finished goods. Clark Tseng is director and Sungho Yoon is senior market research analyst in Industry Research and Statistics at SEMI. SEMI World Fab ForecastFor the latest worldwide memory fabs forecast including company details, please see the SEMI World Fab Forecast. The report includes quarter-to-quarter fab data from planning to production for both DRAM and NAND Flash companies.

SEMI FabView update for calendar year Q3 2018 Global fab construction investment shows continuing strength, with 19 new fab projects expected to begin construction in 2019 and 2020, based on the latest data published in SEMI’s World Fab Forecast. Fab investment is just one indicator of how growing demand in areas such as high-performance computing, data storage, artificial intelligence (AI), cloud computing, and automotive are driving the fourth consecutive year of spending growth in the semiconductor industry. Below are a few highlights* from September’s SEMI FabView: Memory: Not fading Micron plans to invest $3 billion by 2030 in Manassas, Virginia – These investments, driven by strong demand for automotive applications, are contemplated in Micron's long-term model. The production ramp is anticipated to be in the first half of 2020. SK Hynix to build new DRAM fab in Icheon (Gyeonggi Province), Korea – The construction, to be completed by the end of 2020, will adopt 1znm node (probably EUV). Total investment is estimated to exceed $13 billion. Nanya Technology doubles 2018 capex plan – The increase is for additional DRAM capacity and more 20nm DRAM conversion (from 30nm). 200mm and below: Not leading edge, but continues to draw investment Vanguard changes fab investment strategy – Vanguard will focus on 200 mm and has scrapped its plan for 300mm expansion. Murata to invest into 150mm expansion – Murata announced a 5 billion Yen investment (US$44.6 million) in a new fab extension in Vantaa, Finland. Investment, M A in Analog, Logic, Power and Opto Segments Texas Instruments is looking to invest $3.2 billion in new fab construction in 2019 – Texas Instruments is eyeing Richardson, Texas and also considering sites outside Texas. Bosch 300mm fab in Dresden, Germany – Bosch held a groundbreaking ceremony on April 24. Equipment installation is expected in 2H19. Microchip completes acquisition of Microsemi – Microchip closed its $8.45 billion acquisition of Microsemi on May 29. Microsemi has five fabs in the U.S. with a wide range of semiconductor products and system solutions. New fabs in China keep on coming Shanghai Jita Semiconductor/Huada Semiconductor – Shanghai Jita Semiconductor, a subsidiary of Huada Semiconductor and China Electronics Corporation (CEC), announced plans earlier this month to build both 200 mm and 300 mm semiconductor fabs for analog and power semiconductors in Shanghai. The combined fab investment will total $5.18 billion. Hamamatsu Photonics building 200 mm fab – Hamamatsu announced that it is building a new facility Investment of 2.8 billion Yen (US$25 million) to boost opto semiconductor capacity. Production is anticipated to start in late 2019. * Actual FabView updates provide more detail SEMI FabView, a mobile-friendly, interactive version of SEMI’s popular World Fab Forecast, delivers on-demand fab information such as fab spending and capacity for over 1,200 facilities, including over 60 planned facilities worldwide, across a wide range of product segments including Power, GPU, Memory, Foundry, MEMS and Sensors fabs. Fab data include region, start of construction, operation, construction and equipment spending, capacity, wafer sizes, product types and geometries. SEMI FabView subscribers receive forecast model updates through SEMI’s World Fab Database. Click here for a trial if you want to experience SEMI FabView first hand. Christian G. Dieseldorff is senior principal analyst and Eugenia Liu is senior product marketing manager, Industry Research and Statistics, SEMI, Milpitas, California.

Christian G. Dieseldorff, Industry Research Statistics Group, SEMI (June 12, 2018)The semiconductor industry is nearing a third consecutive year of record equipment spending with projected growth of 14 percent (YOY) in 2018 and 9 percent in 2019, a mark that would extend the streak to a historic fourth consecutive growth year, according to the latest update of the World Fab Forecast report published by SEMI. The industry last saw four consecutive years of equipment spending growth in the mid 1990s.Korea and China are leading the growth, with Samsung dominating global spending and ascendant China on a fast, steep rise, surging ahead of all other markets. See figure 1.Figure 1: equipment spending by region (includes new and refurbished)Samsung is expected to reduce equipment investments in 2018. Despite the ebb, the company still accounts for a dominant 70 percent of all investment in Korea. At the same time, SK Hynix is increasing its equipment spending in Korea.China’s equipment spending is forecast to jump a whopping 65 percent in 2018 and 57 percent in 2019. Notably, 58 percent of investments in China in 2018 and 56 percent in 2019 stem from companies with headquarters in other regions such as Intel, SK Hynix, TSMC, Samsung, and GLOBALFOUNDRIES. Domestic, Chinese-owned companies – backed by large government initiatives – are building an impressive number of new fabs that will start equipping in 2018. The companies will double their equipment investments in 2018 and again in 2019.Meanwhile, other regions are also ramping up investments. Japan is beefing up equipment spending by 60 percent in 2018, with the largest increases by Toshiba, Sony, Renesas and Micron.The Europe and Mideastern region will boost investments by 12 percent in 2018, with Intel, GLOBALFOUNDRIES, Infineon and ST Microelectronics as the largest contributors. Southeast Asia will increase investments by more than 30 percent in 2018, although total spending is proportionately smaller than in other regions owing to its size. The main contributors are Micron, Infineon and GLOBALFOUNDRIES, though companies including OSRAM and ams are also increasing investments.The SEMI World Fab Forecast, which also includes information on other companies, covers data and predictions through the end of 2019, including milestones, detailed investments by quarter, product types, technology nodes and capacities down to fab and project level.Learn more about the SEMI fab databases at:www.semi.org/en/MarketInfo/FabDatabase and www.youtube.com/user/SEMImktstats.