The Week In Review: Manufacturing

CapEx woes; foundry and chip rankings; inside the G6; KLA-Tencor’s tools.

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It could be a long year for the equipment industry. First, Intel reduced its 2015 capital expenditure budget to $8.7 billion, plus or minus $500 million. This is down from the previous mid-point guidance of $10.1 billion.

As a result of Intel’s announcement, Pacific Crest Securities cut its worldwide 2015 semiconductor CapEx forecast. The new CapEx forecast is now $62.5 billion in 2015. This is up 4% year-over-year, compared to the previous estimate of up 5%.

Intel cut its capital spending for various reasons. “Intel noted that the capex reduction is being driven by equipment reuse at the 14nm node and ‘alignment of capacity with demand,’ given that it now expects the PC market to decline by mid-single digits rather than remain relatively flat this year,” said Weston Twigg, an analyst with Pacific-Crest Securities, in a report. “Intel is planning to bring down its 22nm capacity due to lower demand, and roll it forward to 14nm. It also noted that improving yields and utilization at 14nm are providing better capital efficiency. Intel characterized this as being ‘an unusually low level of capex relative to the size of the business,’ largely based on higher-than-expected equipment reuse.”

Then, TSMC this week cut its CapEx forecast by $1 billion to $10.5 billion to $11 billion for 2015. TSMC is cutting its CapEx for similar reasons, but there is a silver lining here. “However, (TSMC) spent only $1.5 billion in C1Q15 which means that the next three quarters will register an astounding record spend of $3 billion to $3.17 billion per quarter. Great times to look forward to for the semiconductor capital equipment sector,” said Srini Sundararajan, an analyst with Summit Research Partners.

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The worldwide semiconductor foundry market grew 16.1% in 2014 to achieve $46.9 billion in revenue, according to Gartner. Among the top players, the leader, TSMC, gained market share to reach 53.7%, up from 49.8% in 2013. Returning to the No. 2 position, UMC had $4.62 billion revenue in 2014, representing 9.9% of the foundry market share. The No. 3 position went to GlobalFoundries with $4.4 billion revenue, representing 9.4% of the market.

Worldwide semiconductor revenue totaled $340.3 billion in 2014, a 7.9% increase from 2013 revenue of $315.4 billion, according to Gartner. Intel retained the No. 1 market share position for the 23rd consecutive year by capturing 15.4% of the market, which was down slightly on the previous year. Samsung was in second place again.

Samsung recently rolled out its new Galaxy S6 edge and Galaxy S6s line of mobile products. There has been much speculation what’s inside, as well as who won, or lost, the chip business. As it turns out, Samsung is building a lot of its own chips for the S6 models. In fact, there are 10 different models of these systems worldwide. The previous “Pacific” GS5 system had Intel’s baseband and RF transceiver, as well as Qualcomm’s application processor. On the S6, all of these chips were “replaced by Samsung’s proprietary parts,” according to FBR and Chipworks. “On AT&T’s Web site, the service provider listed its GS6 model as containing a Samsung Exynos 7420 processor with a Shannon 333 modem (Samsung’s proprietary baseband processor). AT&T’s prior GS5 was powered by Qualcomm’s Snapdragon platform. While we still expect the Verizon and Sprint GS6 versions to sport Qualcomm modems (both build on legacy CDMA networks), we believe this change signals Samsung’s clear intent to utilize proprietary baseband whenever and wherever possible.”

Samsung Electronics has started mass production of the industry’s first NVMe PCIe solid state drive (SSD), which has an M.2 form factor for use in PCs and workstations.

KLA-Tencor has rolled out two new systems that support advanced semiconductor packaging technologies: CIRCL-AP and ICOS T830. The CIRCL-AP enables all-surface wafer defect inspection, review and metrology at high throughput. The ICOS T830 provides fully automated optical inspection of integrated circuit packages, leveraging high sensitivity with 2D and 3D measurements to determine final package quality for a wide range of device types and sizes.

Glow Energy Public Co. Ltd. (Glow), an independent power producer in Thailand, has placed an order with Applied Materials for two superconducting fault current limiters (SCFCL).

Wacker Chemie is examining a number of strategic options with regard to the present ownership structure of Siltronic AG, its silicon wafer subsidiary. This includes an IPO at Siltronic.

Is SandDisk in trouble? The company is cutting jobs amid poor results. And SanDisk, along with its 3D NAND partner, Toshiba, are late to the 3D NAND party. There are also rumors that SanDisk is on the block.

Is AMD in trouble? After poor results, AMD is exiting the dense server systems business, formerly SeaMicro. AMD recorded $75 million of special charges in Q1 2015 primarily related to impairment of previously acquired intangible assets.

Worldwide PC shipments totaled 71.7 million units in the first quarter of 2015, a 5.2% decline from the first quarter of 2014, according to preliminary results by Gartner.