Increased Fab Spending in 2010 but Stagnant Capacity
By Christian Gregor Dieseldorff, SEMI Industry Research and Statistics (August 28, 2009)
SEMIs World Fab Forecast predicts 64% growth in fab spending for 2010 to reach $24 billion. A large portion (about $14 billion) is expected to comes from a handful of companies, the "Fantastic Six," that have announced ambitious investment plans.
During this unprecedented downturn, it is truly fantastic when companies plan large investments during a recession year. SEMI research indicates that six companies are expected to invest large amounts of money over the next two years while battling economic challenges.
- TSMC: It is exciting to see a company increasing its Capex plan not once, but twice, following the steep declines that marked the onset of the current recession. TSMC first expanded its 2009 Capex plans in May, to $1.9 billion from $1.5 billion, and then announced a second increase at the end of July to $2.3 billion. TSMCs Capex is also projected to be above $2B in 2010 as demand for semiconductors continues picks up and as the global economy moves out of recession.
- GlobalFoundries: GlobalFoundries partner, Advanced Technology Investment Company (ATIC) from Dubai, invested $2.1 billion to purchase its stake in the foundry. ATIC has committed additional equity funding of $3.6 billion and up to $6 billion over the next five years to fund the expansion of GlobalFoundries. The foundrys Capex is expected to be about $600 million to $700 million in 2009, and may reach over $1 billion for each of the next two years.
- Toshiba: In June 2009, Toshiba began to raise $3 billion in global stock offerings to invest in its factories. This represents Japans largest stock offering by a non-financial company in the past eight years. Toshiba continues to focus on NAND Flash, having expanded their partnership with IBM Alliances and renewed the NAND patent pact with Samsung. Toshibas total Capex plan is 1100 billion yen (about $11.5 billion) from fiscal year (FY) 2009 to 2011. The planned Capex for semiconductors for FY2009 is about $940 billion. About $4.7 billion will be spent in FY10 and FY11, or in calendar years, about $2 billion in 2010 and likely higher than that in 2011.
- Samsung: Samsungs latest move is to convert a 200mm line in Austin to a 300 mm Back End of Line (BEOL) line, supporting the existing 300mm Front End of Line (FEOL). The president of Samsung Austin, Y.B. Koh, wants to get "manufacturing back to the bare walls." SEMIs World Fab Forecast estimates Samsungs combined 2010 Capex at about $4 - $5 billion, mainly for upgrades and the two lines (Austin 1 and Austin 2) in Texas and for Line 15 and Line 16 in Korea.
- Intel: In April 2009, Intel announced that it would spend $7 billion over the next couple of years to upgrade existing facilities for 32nm technology production. SEMIs World Fab Forecast projects that about $3 - $4 billion of this will be spent in 2009 and the remainder in 2010.
- Inotera: Inotera, the joint venture between NanYa and Micron, announced a $1.6 billion project to convert all their fabs from 70nm trench to 50nm stack capacitor technology, using immersion lithography tools. Inotera has a strong financial backbone with Formosa Plastic, the parent company of NanYa. Equipping of the fabs is expected to start by the end of this year and extend well into the next, which may contribute about $1 billion to fab spending in 2010.
With the Fantastic Six upping their investments, total fab spending (including construction and equipping wafer facilities) is expected to increase by 64% in 2010 to $24 billion. The Fantastic Six will contribute more than half of the total spending. The increase of 64% appears high but we need to consider that this increase is against historic lows in 2009. Differences of only $500 million in spending will change the growth rate by almost 4%.
Comparing 2010 spending numbers against 2008 (see Table 1), growth rates would appear negative. In fact, total fab spending (construction plus equipping) in 2010 will remain at its lowest levels since 2003, when about $22 billion was spent.
Equipping Fabs: Any equipment related expenses for Front End Facilities including using new or used equipment for wafer processing, mask/reticle and any other supporting equipment.
Examining the change of total fab spending (construction and equipping) quarter over quarter, double-digit growth rates are anticipated for the second half of 2009, and growth rates ranging from 8% to 15% going forward into 2010 (See Figure 1).
In 2010, the region spending the most on construction projects will be the Americas. For equipping facilities, the Americas also lead, followed by Taiwan and Korea.
Over 32 companies are likely to contribute to total fab spending in 2009 of $14 billion to $15 billion. In 2010, this number is expected to increase to over 40 companies contributing to about $24 billion. Together, the Fantastic Six will spend roughly the same amount in 2010 ($14 billion) as total worldwide spending in 2009 ($14-$15 billion).
The Fantastic Six account about 30% of the worldwide share of combined installed fab capacity. Most of the 2009 and 2010 investments will go to upgrade fabs rather than invest in new fab capacity. GlobalFoundries capacity is rather small compared to the other five, but it is just beginning to ramp up new volume capacity and prepare a new fab.
The economic downturn, however, has taken its toll on worldwide capacity. Along with the lethargic spending in 2009, a lot of capacity was also taken off line. According to the SEMI World Fab Forecast data, about 31 fab closures are expected by the end of 2009, with another 16 likely to close in 2010.
The average fab utilization rate reported for the industry dropped in 1Q09 to about 56% (with a range of 30% - 70 % reported by individual companies). Although a few companies (such as TSMC) are now running some fabs at 100% utilization, the overall utilization rate is still expected to lag at 70% to 80% by the end of 2009.
Figure 2 shows installed capacity by device type: Memory, Foundry, Logic/Analog and others.
Memory accounts for the largest portion of installed capacity, and it has increased at double-digit growth rates (20% - 50%) every year from 2002 to 2007 with the ramp of 300mm fabs. However, 2008 memory capacity increase slowed to about 8% growth, with the growth rate in 2009 being negative, about -5% to -6%. Installed memory capacity is forecasted to increase by about 4% - 5% in 2010, but is still very low compared to historical rates. Total installed capacity for memory will be about -1% lower when comparing projected capacity in 2010 with 2008,
According to various sources, the demand for total NAND Market is expected to increase from about 7 - 15 billion gigabyte (GB) in 2009 about 30 - 50 billion GB in 2011/2012 It remains questionable if the industry can meet the demand with these small additions to installed capacity. Three of the Fantastic Six - Toshiba, Samsung and Intel (with IM Flash) - manufacture flash memory and will invest some for capacity. But will it come in time to meet demand? It typically takes about 1 to 1 1/2years from groundbreaking of a fab until volume production ramp begins, so investments in new fabs in 2010 may not materialize any new capacity until 2011 or 2012.
In summary, the SEMI World Fab Forecast predicts a growth rate of about 64% in 2010 for total fab spending. We hope that various economic stimulus plans and improving gross domestic products will continue to contribute to a better outlook for 2010, inciting at least one other company to join the Fantastic Six. Then we can talk about the "Super Seven."
The World Fab Forecast tracks planned projects resulting in any change of installed capacity.
SEMI World Fab Forecast 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 by quarter. These tools are invaluable for understanding how 2009 and 2010 will look, and learning more about capex for construction projects, fab equipping, technology level, and products.
The difference between the SEMI Worldwide Semiconductor Equipment Market Subscription (WWSEMS) data and the World Fab Forecast and its related Fab Database reports is that the fab database reports track any equipment needed to ramp the fab, upgrade, expand or change its wafer size regardless if it is new equipment, used equipment, or transferred equipment, while WWSEMS tracks only new equipment.