Fab Equipment Spending To Rise

By Christian Gregor Dieseldorff
Fab equipment spending will grow two percent year-over-year (US$ 32.5 billion) for 2013 and 23 to 27 percent in 2014 ($41 billion) according to the May edition of the SEMI World Fab Forecast. Fab construction spending, which can be a strong indicator for future equipment spending, is expected to grow 6.5 percent ($6.6 billion) in 2013, followed by a decline of 18 percent ($5.4 billion) in 2014. The new World Fab Forecast report covers fab information on over 1,100 facilities, including such details as capacities, technology nodes, product types, and spending for construction and equipment for any cleanroom wafer facility by quarter. Reported spending reported includes new, used and in-house equipment for volume fabs to R&D, for product types such as IC facilities, Discretes, and LEDs.

Fab Equipment Spending Growth Reaches into Positive Territory
The 2nd half of 2013 is expected to be much stronger with a 32 percent growth rate or $18.5 billion compared to 1st half of 2013 ($13.9 billion). The equipment spending increase in the second half is attributed to growing semiconductor demand and improving average selling price for chips. 2014 is expected to have 23 to 27 percent growth of $41 billion year-over-year (YoY), which would be an all-time record.

Looking at product types, the largest amounts of spending on fab equipment in 2013 will come from the foundry sector, which increases by about 21 percent. This is driven mainly by capex increases by TSMC. The memory sector is also expected to have an increase of only one percent, which is still impressive after a 35 percent decline in the previous year. The MPU sector is expected to grow by about five percent. A double-digit increase in the Analog sector in 2013 will still translate into low absolute dollar amounts, compared to the other sectors mentioned. (See Figure 1)

Figure 1: Fab Equipment Spending by Product Type over Time (Foundries include System LSI)

2014 is expected to be a growth year for fab equipment spending for almost all major product segments. For example, spending for Memory is expected to increase over 40 percent, but spending amounts are not expected to exceed what was seen in 2010 or 2011. MPU is expected to increase by over 50 percent, driven mainly by the ramp of 14nm facilities. The foundry sector is still expected to have the highest spending for fab equipment on 2014, but growth rate may slow to about 15 percent.

Construction Projects: Indicator for more Future Equipment Spending
Typically construction spending is a good indicator for more equipment spending in the future, because any fab built will need to be equipped. Figure 2 is taken directly from the World Fab Forecast report. See Figure 2.

Figure 2: Fab Construction Spending by Region over Time

Fab construction spending in 2013 has improved to almost 15 percent growth YoY growth ($6.6 billion) with 38 known construction projects. Last year (2012), the number of projects was higher, but the total dollar amount much less with $5.8 billion. This year fewer but much larger projects are under way.

2014 shows a decline of about 18 percent ($5.4 billion) in construction spending with only 21 construction projects expected to be on-going. However, these construction projects include large fabs and some are 450mm-ready. If only a couple of new fabs start construction soon, fab construction spending will improve a lot for 2014.

Top spenders for fab construction in 2013 are TSMC and Samsung, who plan to spend between $1.5 and $2 billion each, followed by Intel, Globalfoundries and UMC. Details in the World Fab Forecast report may hint at some surprises.

Fab Forecast: Cautious but more Optimistic
Compared to other published forecasts in the industry, the SEMI World Fab Forecast shows the same trends for fab equipment in 2014; however, SEMI’s projections about 2013 differ. Two prior fab database reports predicted 0 percent growth in equipment spending, but SEMI now expects two percent growth YoY. Capital expenditure for semiconductor companies is expected to grow three percent in 2013 and 12 percent for 2014. Demand keeps increasing such as media tables and smart phones, ASP for chips are expected to improve and many revenue predictions for 2013 are in the strong single digits. Overall, the scenario remains cautious but more optimistic than in prior forecasts. Learn more at SEMICON West.