“Easy does it” ─ Fabs trim spending plans

By Christian G. Dieseldorff, Industry Research & Statistics Group, SEMI

Semiconductor capital expenditures (without fabless and backend) are expected to slow in rate, but continue to grow by 5.8 percent in 2015 (over US$66 billion) and 2.5 percent in 2016 (over $68 billion), according to the May update of the SEMI World Fab Forecast report. A significant part of this capex is fab equipment spending.

Fab equipment spending is forecast to depart from the typical historic trend over the past 15 years of two years of spending growth followed by one year of decline.  Departing from the norm, equipment spending could grow every year for three years in a row: 2014, 2015, and 2016 (see Table 1).

Table 1: Fab Equipment Spending by Wafer Size

Table 1: Fab Equipment Spending by Wafer Size

At the end of May 2015, SEMI published its latest update to the World Fab Forecast report, reporting on more than 200 facilities with equipment spending in 2015, and more than 175 facilities projected to spend in 2016.

The report shows a large increase in spending for DRAM, more than 45 percent in 2015. Also, spending for 3D NAND is expected to increase by more than 60 percent in 2015 and more than 70 percent in 2016. The foundry sector is forecast to show 10 percent higher fab equipment spending in 2015, but may experience a decline in 2016.  Even with this slowdown, the foundry sector is expected to be the second largest in equipment spending, surpassed only by spending in the memory sector.

A weak first quarter of 2015 is dropping spending for the first half of 2015, but a stronger second half of 2015 is expected. Intel and TSMC reduced their capital expenditure plans for 2015, while other companies, especially memory, are expected to increase their spending.

The SEMI data details how this varies by company and fab.  For example, the report predicts increased fab equipment spending in 2015 by TSMC and Samsung. Samsung is the “wild card” on the table, with new fabs in Hwaseong, Line 17 and S3.  The World Fab Forecast report shows how Samsung is likely to ramp these fabs into 2016. In addition, Samsung is currently ramping a large fab in China for 3D NAND (VNAND) production.   Overall, the data show that Samsung is will likely spend a bit more for memory in 2015 and much more in 2016.  After two years of declining spending for System LSI, Samsung is forecast to show an increase in 2015, and especially for 2016.

Figure 1 depicts fab equipment spending by region for 2015.

Figure 1: Fab Equipment Spending in 2015 by Region; SEMI World Fab Forecast Report (May 2015).

Figure 1: Fab Equipment Spending in 2015 by Region; SEMI World Fab Forecast Report (May 2015).

In 2015, fab equipment spending by Taiwan and Korea together are expected to make up over 51 percent of worldwide spending, according to the SEMI report.  In 2011, Taiwan and Korea accounted for just 41 percent, and the highest spending region was the Americas, with 22 percent (now just 16 percent).  China’s fab spending is still dominated by non-Chinese companies such as SK Hynix and Samsung, but the impact of Samsung’s 3D NAND project in Xian is significant. China’s share for fab spending grew from 9 percent in 2011 to a projected 11 percent in 2015; because of Samsung’s fab in Xian, the share will grow to 13 percent in 2016.

Table 2 shows the share of the top two companies drive a region for fab equipment spending:

Table 2: Share of Fab Equipment Spending of Top Two Companies per Region

Table 2: Share of Fab Equipment Spending of Top Two Companies per Region

Over time, fab equipment spending has also shifted by technology node.  See Figure 2, where nodes have been grouped by size:

Figure 2: Fab Equipment Spending by Nodes (Grouped)

Figure 2: Fab Equipment Spending by Nodes (Grouped)

In 2011, most fab equipment spending was for nodes between 25nm to 49nm (accounting for $24 billion) while nodes with 24nm or smaller drove spending less than $7 billion. By 2015, spending flipped, with nodes equal or under 24nm accounting for $27 billion while spending on nodes between 25nm to 49nm dropped to $8 billion.  The SEMI World Fab data also predict more spending on nodes between 38nm to 79nm, due to increases in the 3DNAND sector in 2015 and accelerating in 2016 (not shown in the chart).

When is the next contraction?

As noted above, over the past 15 years the industry has never achieved three consecutive years of positive growth rates for spending.  2016 may be the year which deviates from this historic cycle pattern.  A developing hypothesis is that with more consolidation, fewer players compete for market positions, resulting in a more controlled spending environment with much lower volatility.

Learn more about the SEMI fab databases at: www.semi.org/MarketInfo/FabDatabase.

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