On the road to recovery: Semiconductor growth expected for the next two years By Christian Gregor Dieseldorff, Industry Research & Statistics, SEMI According to the IMF and predictions by many other market research firms, 2014 and 2015 are expected to be growth years, comparable to or even better than the past few years. After years of decline, even the Europe area will show positive GDP growth in 2014 and 2015, signaling a strengthening recovery. Historically, GDP, semiconductor revenues, and semiconductor capex are correlated. Last year was an exception with revenue up about 6 percent (year-over-year) but capex down -3 percent to -4 percent. Projected revenue is now predicted to be 8 percent for 2014 and 5 percent for 2015. SEMI’s data show that after two years of decline, semiconductor capex (excluding fabless and backend) is expected to grow for two years. While some companies are expected to keep capex steady in 2014, others have increased plans in 2014 with capex expected to increase 8 to 10 percent. With further growth between 6 and 8 percent expected in 2015, the industry may approach records at levels similar to 2007 and 2011. Fab Equipment Spending: 24% in 2014 with Possible Record in 2015 In the May 2014 World Fab Forecast publication, SEMI tracks more than 200 major projects involving equipment spending for new equipment or upgrades, as well as projects to build new facilities or refurbish existing facilities. Between last quarter’s report in February and now, 265 updates have been made to the proprietary SEMI database. SEMI now predicts 24 percent growth (to about US$35.7 billion) for fab equipment spending (new, used, in-house) for Front End facilities in 2014 and 11 percent growth (to about US$39.5 billion) in 2015. In terms of equipment spending, 2015 is on track to surpass all-time record year 2011. See Figure 1. Figure 1 In 2014, the three largest regions for fab equipment spending will be Taiwan with over US$10.3 billion, the Americas with over US$6.8 billion, and Korea with over US$6.3 billion. In 2015, these same regions will lead in spending: Taiwan will spend over US$11 billion, Korea over US$8 billion, and the Americas almost US$7 billion. Although sixth in 2014 for projected fab equipment spending, the Europe/Mideast region will show the strongest rate of growth, about 79 percent compared to the prior year. The same region will continue to grow quickly in 2015, with an increase of about 20 percent. Trade Ratio for Leading-Edge Upgrades Affects Capacity Worldwide installed capacity is very low for both 2014 and 2015 and SEMI data do not suggest that this will change the next four years. Depending upon node transition, product segment, and age of a fab, the trade ratio for space affects capacity in more significant ways. Because of increased complexity at the leading edge nodes, such as more process steps and multiple patterning, fabs experience a decline in capacity as the same fab space produces less. Worldwide, installed capacity grew by less than 2 percent in 2013 and is expected to grow just 2.5 percent in 2014 and 3 percent in 2015. The SEMI data predict that Foundry capacity continues to grow at 8 to10 percent yearly (a steady pace from 2012) and Flash will be up 3 to 4 percent for 2014. Although DRAM equipment spending is expected to grow by 40 percent in 2014 as many fabs are upgrade to leading-edge processes, installed capacity for DRAM is expected to stay flat or even drop by -2 percent. SEMI’s reports also cover capacity changes for other product segments: MPU, Logic, Analog/Mixed signal, Power, Discretes, MEMS, and LED and Opto. According to the SEMI World Fab Forecast, by the end of 2014 there will be 26 volume fabs using technology nodes between 14nm to 16nm, including two with 3D-NAND. By the end of 2015, this is expected to increase to 33 volume fabs with 14nm to 16nm process nodes, including 11 with 3D NAND. Fewer New Fabs but Will They be Enough? Figure 2 According to SEMI, 2013 was an all-time record year for construction projects for semiconductor Front End facilities (new and refurbish existing fabs) with over US$9 billion spent. Although less construction projects will occur during 2014 and 2015, there are still a few significant new fabs being constructed or in planning stages, in regions such as Europe/Mideast, Japan, U.S., and Taiwan. Thirty facilities (including Discretes and LEDs) will begin volume production in 2014 and 2015. Excluding foundries, existing and known, currently planned IC volume fabs will reach full capacity by 2018 according to SEMI data. Considering the diminishing prospect for high-volume 450mm fabs in the immediate future, and that overall capacity is lost when upgrading facilities to leading-edge nodes, the industry must add more 300mm fabs to meet demand. The timeline to build and equip these new complex facilities, about 1.5 years, suggest that new 300mm fab plans will need to start by next year.