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Week In Review: Manufacturing, Test

Tariffs; China fab tool biz; KLA-Orbotech update.

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Tariffs
The United States and China are in the midst of a trade war. New data shows that tariffs on imported Chinese products now cost the technology industry an additional $1 billion per month, according to the Consumer Technology Association (CTA).

Nearly 70% of tariffs paid by the hi-tech industry come from the $200 billion product list enacted Sep. 24. Tariffs on CTA-identified tech products jumped to $1.3 billion in October, which is seven times the amount from the same month a year ago. The industry has also paid $122 million more on 5G-related imports alone in October, compared to $65,000 a year ago, according to the trade group.

“President Trump made the right decision to pause the tariff rate at 10%, while the administration negotiates with China,” said Sage Chandler, CTA vice president for international trade. “But the cost of current tariffs remains an issue, and the uncertainty of potentially more tariffs combined with export controls is a real threat to our industry and to maintaining U.S. global leadership on 5G innovation. The tech industry – responsible for 10% of U.S. GDP and more than 15 million American jobs – has already been dealt an enormous blow by tariffs this year.

“It’s almost inevitable that an economic slowdown will occur if these tariffs continue – just look what the tariffs’ damage and uncertainty have done to stock markets,” said Chandler. “To lessen the impact of an economic downturn, it’s critical that the Trump Administration negotiates with China with the mindset of ending tariffs and addressing the concerns of forced tech transfers and IP theft.”

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Market research
As reported, 2019 is expected to be a mixed picture for semiconductor equipment. SEMI sees a slowdown for leading-edge fab investments in 2019, but the outlook remains bright for mature technologies.

The wild card is China. At one time, the China market was supposed to grow in terms of fab equipment spending. Now, the outlook for equipment is gloomy in China. “Projections for equipment spending in China in 2019 have been revised from US$17 billion in August to US$12 billion, with multiple factors at play including a slowing memory market, trade tensions, and delays in some project timelines,” said Christian Dieseldorff, an analyst with SEMI, in a blog. “SK Hynix is expected to slow DRAM expansion in 2019. GlobalFoundries reconsidered its plan for the Chengdu fab, delaying the ramp. SMIC and UMC are slowing spending. The Fujian Hua DRAM project has been put on hold.”

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Worldwide GDP is forecast to reach 3.5% in 2019. But the growth in the global economy is expected to slow in 2019 from 2018. “Ten economic forecasts released in the last two months show the percentage point change in world GDP from 2018 to 2019 ranging from minus 0.1 points to minus 0.4 points,” according to Semiconductor Intelligence.

Here’s a different forecast: Global economic growth will edge down to 3.0% in 2019, from a rate of 3.2% in 2018, according to IHS Markit. “Policy mistakes remain the biggest threats to global growth in 2019 and beyond,” said IHS Markit Chief Economist Nariman Behravesh. “Simmering trade conflicts are dangerous, not because they have done damage so far – they haven’t – but because they could easily escalate. At the same time, the sell-off in equity and commodity markets, on top of the gradual removal of stimuli by some central banks, means that financial conditions worldwide are tightening. The good news is that the probability of a single policy event seriously hurting global growth in 2019 is still relatively low.”

Fab tools and materials
In a move to expand into new markets, KLA-Tencor last year entered into a definitive agreement to acquire Orbotech for $3.4 billion. That deal is still pending, but there appears to be some progress on the regulations front. This week, KLA-Tencor said that it continues to have advanced discussions with the State Administration for Market Regulation of the People’s Republic of China (SAMR) regarding clearance of the proposed deal with Orbotech. The goal is to obtain clearance in 2019.

SEMI recognizes women who work in the global microelectronics industry. In the fourth quarter of 2018, the Spotlight on SEMI Women recognized Ellie Yieh from Applied Materials. Yieh, who joined Applied in 1989, is responsible for the company’s Maydan Technology Center.

Tokyo Electron Ltd. (TEL) has announced that its corporate governance guidelines have been revised.

In a video, Jack Bedder, a director at Roskill, talks about the recent price increases on vanadium. The material is used for steel as well as vanadium redox flow batteries.

Chipmakers and OEMs
The Israeli government approved a $185.5 million grant to Intel, according to a report. Intel plans to expand its fab in Kiryat Gat, which is ramping up its 10nm technology.

Daimler is investing in battery cells for electric cars. The total investment is worth 20 billion euros. Dieter Zetsche, chairman of Daimler and head of Mercedes-Benz, said: “Our electric offensive continues to gain momentum. After investing billions of euros in the development of the electric fleet and the expansion of our global battery network, we are now taking the next step: With the purchase of battery cells for more than 20 billion euros, we are systematically pushing forward with the transformation into the electric future of our company. We plan a total of 130 electrified variants at Mercedes-Benz Cars by 2022. In addition, we will have electric vans, buses and trucks.”



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