2014 CapEx: Memory Is Leading The Way

The semiconductor industry is expensive. Billions of dollars are spent every year to keep the fabs running, build new fabs, and push the process technology to greater and greater heights. Billions more will be spent to make 450mm production a reality. In January 2013, Semico predicted that, based on initial indications from some companies, total CapEx would be flat this year. Based on current data through the third quarter and expectations for Q4, we are keeping our CapEx forecast flat at -0.05%, down this year to $55.6 billion from from $55.7 billion in 2012. In 2014, our initial estimate is that CapEx will grow 1.7%.

This outlook is based on Semico’s semiconductor forecast and early indications from a few key companies, which are tepid at best. The only real growth in spending is expected to come from the memory manufacturers.

This graph highlights the top five spenders for 2013-2014. Samsung leads the 2013 list with $11.9 billion, and probably will lead again next year. Intel has reduced its CapEx a couple times this year, and should end up just under $11 billion. TSMC probably will increase its spending slightly next year, after increasing it 17% this year.

GlobalFoundries is expected to increase spending next year as it finishes construction of the Technology Development Center in Malta and possibly begin construction of Fab 8.2 in New York late next year. Hynix rounds out the top five at about $3 billion in spending this year. Together these five will make up 70% of the total forecasted spending for 2014, down slightly from 72% this year.

Due to conservative capacity additions for memory over the last few years and the consolidation of DRAM manufacturers, the industry has experienced DRAM shortages in 2013. Average selling prices have increased and are expected to be up 45% for the year. DRAM revenues are expected to increase 38% this year. NAND prices have stabilized. Although companies continue to focus on density transitions and manufacturing efficiency improvements, Semico believes that memory manufacturers will purchase more equipment to increase capacity and to continue to facilitize 3D NAND lines.

For Micron, the Elpida acquisition is complete. The company will have a higher capital spend going forward as it will be covering Elpida and Rexchip, as well. Micron has several projects going on right now, including moving NOR production to Singapore and Virginia, transitioning from DRAM to NAND in Singapore, ramping 25nm DRAM at Elpida, and ramping 15nm NAND production. Micron’s spending will increase 32% in 2014. Micron has started sampling HMC (Hybrid Memory Cube) products but is not expected to be in volume production until late 2014 or beyond.

Recovering from the fire at Hynix’s Wuxi fab will mean a certain increase in CapEx for 2013, although the company is keeping mum on the exact amount of increase. Hynix’s NAND capacity is down 25% to 30% from its normal level, as the company was using NAND equipment to run DRAM. The company plans to have 3D NAND samples ready in early 2014, with mass production beginning late in the year.

Toshiba and SanDisk expect to increase spending in 2014 compared to 2013 as they continue to roll out the 1Ynm transition. Production at the 1Z node is expected to begin late in 2014, with pilot production of its 3D NAND product, Bit-Cost Scalable (BiCS) NAND, in 2015 and volume production the following year.

Samsung is the only major memory manufacturer likely to spend less on CapEx in 2014, as it will ramp its new China NAND fab to mass production in the first half. 3D NAND mass production has started in Korea, while the China fab will also be able to produce 3D VNAND.

Overall, Semico expects to see continued conservative DRAM capacity investment as the top three companies try to maintain better control over supply/demand dynamics. There will continue to be increased investment in NAND capacity; however; over the next few years the adoption of 3D NAND structures is expected to slow the escalating expenditures on advanced lithography.

This is an excerpt from an article in our monthly newsletter, the IPI report. For the full article, contact Rick Vogelei at [email protected] to subscribe.