fab investments

The SEMI Market Intelligence Team (MIT) recently shared insights on the record-breaking wafer fab investments tracked in the latest SEMI World Fab Forecast report during a podcast with 3D InCites.

China’s semiconductor sector has exploded to become one of the largest in the world and match the region’s prominence as the biggest consumer of chips. From 2015 to 2020 alone, revenue of China’s integrated circuit (IC) industry expanded at a rapid clip of 20% CAGR (RMB) to $128 billion.

Korea is on track to top all other regions in fab investment, spending $63 billion between 2017 and 2020, with powerhouses Samsung Electronics Co. and SK Hynix leading the way, according to latest World Fab Forecast Report by SEMI. Samsung Electronics increased fab investments $770 million to $12 billion this year, and SK Hynix upped its spending a significant $2.8 billion to $7.25 billion in 2018.Korea's investment companies anticipate continued growth for both companies in the second half of 2018.Under this halo of extraordinary investment, nearly 380 SEMI Korea members and industry analysts gathered for 2018 SEMI Korea Members Day on September 13 to share insights on semiconductor market trends and new technologies that could help members bolster their competitiveness. Following are key takeaways from the event. Korea semiconductor market to grow 16% in 2018That’s according to IDC Korea VP Kim Soo-kyung, who noted that data center, memory and Internet of Things (IoT) are becoming key growth drivers for the semiconductor industry. He encouraged semiconductor companies to closely track development of automotive technology and the industry semiconductor market, both key growth areas. SEMI Korea president H.D. Cho opens SEMI Korea Members Day 2018 Continuing fab investment will lead to oversupply, but display will shineMarket entry by Chinese companies will also spur the oversupply, said Jeong Won-Seok, an analyst at HI Investment Corp. He noted that the oversupply will force Korea into stiffer competition with other regions. However, with OLED used for a wide variety of devices and the display industry seeing rapid growth, the sector will remain ripe for growth among Korean companies.Interconnecting various applications is a big semiconductor industry trendThe need for these interconnections will stand out in the mobility and high-performance computing (HPC) markets, said Park Sung-Soon, principal research fellow at Amkor Technology Korea, who addressed trends in packaging technology. He also emphasized interconnection cost efficiency as key to maximizing competitiveness.Smart Manufacturing is driving mass customizationAs semiconductor industry growth continues, production methods are shifting from ‘mass production’ to ‘mass customization,’ increasing the importance of Smart Manufacturing in driving greater production efficiency, noted BISTel VP Jeon Kyeong-Sik. Building a Smart Manufacturing platform to support large-scale production of specialized database and artificial intelligence (AI) chips will boost production efficiency, reduce costs and improve risk management. Virtual simulation will be a key enabling technology. SEMI analyst Clark Tseng presenting at SEMI Korea Members Day 2018 Surge in data volume and technology advances to drive long-term semiconductor industry growthThese key industry drivers will continue to power fab investment growth, with spending focused on 3D NAND, DRAM, and foundry, said Clark Tseng, director of Industry Research and Statistics at SEMI. China alone will see eye-watering growth with the region’s investments in domestic companies surging 46% from 2018 to 2019 and fab investment by Chinese domestic companies outpacing spending by foreign companies in China, Tseng predicted. SEMI membership rises with industry growthCulminating the event, SEMI Korea president H.D. Cho said, "With the growth of the semiconductor market, the number of SEMI members is gradually increasing, and we will help member companies grow with various activities such as Korea Members Day.”Jaegwan Shim is a marketing specialist at SEMI Korea.

SEMI Releases latest update to World Fab Forecast with adjusted semiconductor revenue consensus for second-half 2018 and 2019 Global semiconductor revenue in 2018 is now expected to reach $473.8 billion and clock a growth rate of 15 percent, a significant upward revision from the 7.5 percent expansion (to $442.9 billion) forecast at the start of the year by six research and investment forecasts tracked by SEMI Industry Research and Statistics (SEMI IR S). Data center growth will remain robust in the coming quarters, fueling demand for memory devices. In addition, cloud computing will continue to spur strong CPU, GPU, networking, ASIC, and DRAM and NAND demand through 2019, driving a consensus 3.63 percent year-to-year growth to reach the semiconductor revenue of $491 billion in 2019. Fab equipment spending (new and used) for 2018 is expected to increase by 14 percent to a record high of $63 billion, according to the last data from the SEMI World Fab Forecast, published by SEMI IR S. For 2019, fab equipment spending (new and used) is expected to increase 8 percent to another record of just under $68 billion. Memory continues to be the biggest swing factor in fab spending in 2018 and is expected to lead growth into 2020. 3D NAND will see the most capacity added in 2018 and 2019 with growth of 41 percent in 2018 and 27 percent in 2019, according to the SEMI World Fab Forecast. DRAM investment will see even stronger growth in 2018 and 2019 driven by new capacity addition as well as the continued technology shrink towards 1y/1z nm. For the first half of 2018, global spending for semiconductor fab equipment continues its growth momentum from 2017. Though we expect some softness in the second half of 2018, the outlook for 2019 remains robust with a fourth consecutive year of growth – the first such run since the 1990s. This prolonged growth cycle has been propelled by memory and will be extended by significant investment in China in 2019. Although a potential slowdown in 2020 is a concern, the overall outlook for semiconductor demand remains solid due to broad-based growth trends in data center, artificial intelligence (AI)/machine learning (ML), automotive, and industrial segments. Following are other SEMI forecasts for fab spending. Installed Capacity 3D NAND will see the most capacity added in both 2018 and 2019 with growth of 41 percent in 2018 and 27 percent in 2019. Foundry capacity growth is steady at 3 percent in 2018 and 6 percent in 2019, driven by both leading-edge and trailing-edge capacity buildup. 200mm fab capacity will increase 4 percent in 2018 and 3 percent in 2019, fueled by demand for MCU, sensors, PMIC, MOSFET and Driver IC. New Facilities / Construction Spending In 2018, there are 72 construction projects with investments totaling $15 billion, a year-over-year increase of 23 percent. Construction spending will reach all-time highs with China continuing its lead at US$7 billion in 2018, shattering its own record of $6.3 billion investment in 2017. Most construction spending in 2018 will be for Memory (just under $9 billion), primarily for 3D NAND followed by DRAM. Foundry will log second place in construction spending at just under $5 billion. Fab Equipment Spending Fab equipment spending (new and used) for 2018 is expected to jump 14 percent to a record high of US$63 billion, flat from the forecast issued in June 2018. Equipment spending (new and used) for 2019 is expected to increase 8 percent to another record of just under US$68 billion, a downward adjustment from +9 percent published in June 2018. We believe equipment spending will remain healthy, driven by solid, broad-based demand and predictable technology investments on top of constructive SEMICAP equipment fundamentals. Activity Report The August report features 1,265 records including about 300 Opto- and LED-related facilities. We have made 223 changes related to 216 fabs/lines. The modifications include the addition of new records, changes to existing records, the deletion of records since the February 2018 World Fab Forecast report. We are tracking 103 future facilities/lines with various probabilities that will start volume production in 2018 or later. Download a sample report Not a subscriber? Please review SEMI fab databases listed below. Our databases deliver the latest forecast and a complete analysis of front-end fabs and foundries worldwide. They are ideal resources to empower your market research. Eugenia Liu is a Senior Product Marketing Manager at SEMI.

Can it be that no more new semiconductor fabs are being built in the U.S.?The last new volume fab known is Micron’s Building 60 in Utah, according to the SEMI World Fab Forecast report published in February 2018. The catch is Building 60 is not a new or greenfield facility but rather an existing structure being retooled for 3D NAND. Fab equipment spending for this fab is expected to be high in 2018.Then there is Fab 42 from Intel. Construction started in 2011 before it was shelved. It is expected to begin equipping by end of this year, with equipment spending expected to be high next year.Other fabs built many years ago are still ramping such as Globalfoundries Fab 8 phase 3 (TDC) and D1X (module 1 and module 2). D1X is a research and development pilot, not a high-volume fab. And Globalfoundries’ plans for a second fab in Malta have been pushed out.Samsung in Austin has space for more modules, but there is no indication they will ever be added.The SEMI World Fab Forecast shows five smaller facilities either planned or under construction, but these have little impact in this U.S. fab construction trend.And that’s basically it! No more volume fabs!If we divide fab equipment spending into two categories – investment in new capacity versus upgrades – we see a declining trend for fabs adding capacity. See chart below. (Compare 2005-2011 with 2017-2019). If we look at 2017, 2018 and 2019, Globalfoundries, Intel, and Micron are the big investors in new capacity.This year 60 percent of all fabs are expected to invest in equipment to add capacity, but just one or two volume fabs (Micron and Globalfoundries) account for the bulk of this growth. Same story for 2019, with two volume fabs (Intel and Globalfoundries) representing the lion’s share of the growth. Strike the Intel and Globalfoundries fabs from the equation, and investments in additional capacity would fall below upgrade spending levels.Once these fabs have reached full capacity, additional equipment investments will significantly lag spending increases for upgrades, signaling the end of new fabs in the U.S.

Co-author: Sungho Yoon, Senior Market Research Analyst at SEMIChip makers continue to struggle to secure more silicon wafers to meet market demand as production capacity has reportedly fallen short of their needs, particularly in the 300mm wafer segment – a trend that has led to record-low DOI(1) (Days of Inventory) levels since the second half of 2017.The DOI level has shown no significant improvement since August 2017, as depicted in figure 1(2). Unlike the inventory rebound in 2007, the current inventory trough shows no signs of significant recovery soon.Figure 1 - Silicon Wafers Days of InventorySource: Processed data extracted from data reported by METI (Ministry of Economy, Trade, and Industry) Japan.The boom-and-bust cycles typical of the semiconductor industry are driven by large capital spending increases, followed by cutbacks. The industry has seen a number of these cycles since 2000. However, before 2017, the particularly low level of wafer inventory we now see had never lasted longer than six months.There are three major reasons for the persistently low levels.First, on the silicon wafer demand side, fab equipment investments reached a record high in 2017, driven by large-scale memory fab investments by Samsung and SK Hynix in Korea that accounted for 32 percent of global total investments. Additionally, Korea’s year-over-year (YoY) equipment billing growth rate saw a sharp increase of 135 percent in 2017, as shown in figure 2.Figure 2 - Equipment Billings in KoreaSource: SEMI/SEAJ WWSEMSWhat’s more, the 12-month moving average of equipment billings in China has trended upward since the Made in China 2025 plan was released in 2015, a marked difference from past equipment investment trends in China that followed typical up-and-down industry cycles, as represented in figure 3.Figure 3 - Equipment Billings in ChinaSource: SEMI/SEAJ WWSEMSKorea’s soaring investments in memory and China’s massive, ongoing government investments to beef up fab production are key drivers of the stubbornly low wafer inventory levels throughout 2017 and, now, into 2018.The second reason is the time lag between investments by silicon wafer manufacturers and chip makers. Spikes in wafer processing equipment spending have preceded tops in wafer manufacturing equipment investments since the 2008 financial crisis, as shown in figure 4. Prior to 2008, silicon wafer manufacturing investments preceded or tracked chip manufacturing investments, minimizing periods of tight wafer suppler.Silicon wafer inventory surged during the financial crisis, triggering a steep drop in silicon wafer pricing. The fallout is that wafer manufactures have been hesitant to expand manufacturing facilities without first securing chip makers’ commitments to new fab investments or capacity expansions of their existing fabs. Finally, wafer supply failed to keep pace with demand in 2017, and inventory levels continue to lag chip makers’ expectations.Figure 4 - YoY growth rate of wafer manufacturing and wafer processing equipment Source: SEMI/SEAJ WWSEMSThe third reason is technical: Memory demand is growing across all end applications, but rising technical challenges that reduce yield and output tend to restrict memory bit supply growth. The upshot is that, in the absence of technology breakthroughs, memory makers need more cleanroom space in order to fulfill market demand for memory bits. The investments needed to build additional cleanroom space further accelerates wafer demand.When will the industry wafer inventory conundrum improve? That depends on how fast memory device makers expand capacity despite tenaciously low wafer inventories and how, in turn, wafer manufacturers cope with the current acceleration of fab investments by device makers through expanding wafer manufacturing capacity.Low wafer inventory levels could potentially hamper growth for semiconductor equipment market as it would be difficult for device makers to expand fab capacity without securing stable wafer supply chain in advance.(1) Days in inventory is calculated as the number of days in the period divided by the inventory turnover(2) Value of estimated relative DOI was removed in the left axis and DOI data was calculated based on 3MMA (3-month moving average). Dan Tracy is senior director and Sungho Yoon is senior research analyst in Industry Research and Statistics at SEMI.