By Lara Chamness, senior market analyst manager, SEMI
Semiconductor Market Trends
2013 was a record year in terms of semiconductor device revenues; the industry finally exceeded the long elusive $300 billion mark, registering almost 5 percent growth according to the SIA. While 2013 was a growth year for the chip industry, it was the second consecutive year of declining revenues for both semiconductor equipment and materials; the 2013 semiconductor equipment and materials markets contracted 14 percent and 3 percent, respectively.
Source: SIA, SEMI, SEMI/SEAJ
When looking at revenue trends, it is important to consider the impact of the weakened Yen on total revenues. The Table shows the impact of the weakened Yen on Semiconductor Equipment Association of Japan’s (SEAJ) book-to-bill data. If the data were kept in Yen, the 2013 market for Japan-based suppliers would be down 14 percent. However, when the Yen are converted to dollars the 2013 equipment market for Japan-based suppliers declined almost 30 percent. Since Japan-headquartered suppliers represent a significant portion of the equipment market, this has the effect of dragging down the global equipment market. Given the importance of Japanese suppliers to the materials market, the weakened Yen also contributed significantly to the decline of semiconductor materials revenues in 2013. For a more detailed discussion of the impact on the semiconductor equipment and materials market please refer to Dan Tracy’s article in the March SEMI Global Update.
Weakening Yen Impact on Japan Supplier Annual Billings
Worldwide sales of semiconductor manufacturing equipment totaled $31.6 billion in 2013, representing a year-over-year decrease of 14 percent and spending on par with 2005 levels. Looking at equipment sales by major equipment category, 2013 saw contractions in all major categories, Wafer Processing equipment contracted 11 percent, while Assembly and Packaging and Test equipment contracted 26 and 24 percent, respectively. The Other Front-end segment (Other Front End includes Wafer Manufacturing, Mask/Reticle, and Fab Facilities equipment) contracted 34 percent.
TSMC continued with its aggressive investments in 2013, resulting in the Taiwan market increasing 11 percent to maintain the top spot ($10.6 billion) in equipment spending. The only other region to experience year-over-year growth was China spurred by investments by SK Hynix, Samsung, and SMIC, with an increase of 30 percent. North America surpassed South Korea to claim the second spot, device makers reduced their spending in Korea last year. Japan remained in the fourth top spot, just above China, with $3.4 billion in equipment sales. Equipment sales to Europe decreased 25 percent in 2013. Investments in the Rest of World region remained relatively flat when compared to 2012. Rest of World region aggregates Singapore, Malaysia, Philippines, other areas of Southeast Asia and smaller global markets.
The global semiconductor materials market, which includes both fab and packaging materials, contracted 3 percent in 2013 totaling $43.5 billion. Even with the decrease, the semiconductor materials market has been larger than the equipment for the past six years.
Taiwan maintained the top spot for the fourth year in a row, followed by Japan, South Korea, Rest of World, and China. Driving the materials market in Taiwan are advanced packaging operations and foundries. While Japan still claims the largest installed fab capacity globally and has a tradition in domestic-based packaging, many companies in Japan have rapidly adopted a fab lite strategy and have consolidated their fab and packaging plants. South Korea passed Rest of World (primarily SE Asia) as the third largest market for semiconductor materials given the dramatic increase in advanced fab capacity in the region in recent years. Looking at the materials market by wafer fab and packaging materials, both segments contracted 3 percent.
Most analysts predict mid- to high single-digit growth for the semiconductor device market for the year. Initial monthly data for silicon shipments and semiconductor equipment are proving to be encouraging. Given growth expectations for the device market, it is projected that the semiconductor materials market will increase 2 percent this year. Given two consecutive years of double-digit decline, the outlook for semiconductor equipment is much more optimistic with current expectations positive with spending potentially growing 20 percent or more
2013 was another disappointing year for equipment and materials suppliers as device manufacturers finally exceed revenues of $300 billion. Anemic sales, downward price pressure, combined with a weakened Yen proved to be a significant challenge on the semiconductor supply chain. 2014 is promising to be better for the entire market with device, materials and equipment markets are all anticipated to increase for the year.