By Matt Wickenheiser
Announcements of decreased capex for 2002 were no surprise to most analysts who regard the new year as one for slow recovery, though Intel’s announced cut did fluster a previously upbeat Wall Street.
Intel announced it would spend $5.5 billion in 2002, down from a 2001 capex of $7.3 billion. That was right in the range J.P. Morgan Securities Inc. Analyst Scott Williamson had predicted with a projection of $5.3 to $5.5 billion from the giant chipmaker, reached by doing five- and 10-year historical analyses. Several other research houses had Intel pegged at a similar level.
The Wall Street whisper, however, started speculating Intel’s capex would come in at $6 or $7 billion for 2002, and the chipmaker’s announcement became a negative rather than an on-target, expected total.
“We did not have any expectations for it to come in at $6 billion. The point is, market sentiment was that it would come in at over $6 billion,” Williamson told WaferNews. “When it came out at $5.5 billion, it sent a shock through the capital equipment world, and stocks traded down after-hours 6%-plus, then the next day down 6 to 8%.”
Intel wasn’t the only chipmaker to release capex figures in the last week, and other companies reported a mix of spending drops and jumps for 2002, including:
* Samsung, which reported 2002 capex plans of $2.2 billion, down from $3 billion;
* AMD, which plans for $840 million in 2002 capex, up from $703 million;
* UMC, which is planning on dropping capex down to $700 to $900 million from $1.1 billion;
* Motorola Inc. plans to cut semiconductor capital spending to $200 million in 2002, down from $610 million last year. That’s compared to a 2000 level of $2.4 billion;
* Hitachi, which plans to stand pat at 2001’s $300 million for 2002; and
* Toshiba, which plans to raise capex in 2002 to $450 to $530 million, up from 2001’s $380 million;
* IBM’s capex for 2001 was $5.6 billion, but Big Blue doesn’t release forecasts for the coming year, according to a spokesperson;
* Taiwan Semiconductor Manufacturing Co. announced last fall that it would sharply cut capex in 2002, indicating a drop of at least 20% from the $2.2 billion budgeted for 2001. TSMC is expected to announce 2002 capex plans during fourth-quarter reports, scheduled for Jan. 25.
“Coming out of 2000, everyone had these really large expectations for capital expenditures,” said Semico Research Analyst Joanne Itow. “What happened in 2001 was sobering – they cut back a little bit, but projects were in place. Capex won’t compare to expectations at the second half of 2000, but I think [chipmakers] will slowly see the need to make some capacity and R&D investments by the end of this year.”
In particular, said Itow, companies will be coming out with new electronic products this year that were waiting in the wings requiring new ASICs, microperipherals, etc. That will create a demand for 0.18-micron, 0.15-micron, and 0.13-micron chips. That will drive the recovery, said Itow, and push the need for capital spending to keep up with the technology.
“We see 2002 as a pretty good year, we’re forecasting 19 to 21% growth overall for the semiconductor industry,” she predicted. “Those who continue to make investments in upgrading and advancing process technologies will be winners.”
Because there’s so much capacity from the last build-out, capex will be spent on converting to tighter geometries, rather than building new 300mm fabs that are capacity-oriented, J.P. Morgan Securities’ Williamson said. AMD’s move to increase capex signals such a catch-up move, he added, and a shift to 0.13-micron.
“2002 is going to be characterized as a year of technology migration type of spending, rather than net new incremental capacity spending,” according to Williamson. “That’s a lower dollar spend.”
The sectors that see the most action in a technology migration (at least in this one) include lithography, etch, and deposition, said Williamson.
That low level of capital spending will continue, Williamson explained, until the industry sees some broad-based, sustainable, unit demand improvement and a resultant capacity utilization improvement across the technology nodes. He did predict that capacity spending would pick up at the end in 2002, in an “accelerating fashion.”
Gartner Chief Analyst Klaus-Dieter Rinnen agreed that 1H02 will be essentially flat, adding that, “What you probably will see in the first quarter is it will stay at the 4Q level, with maybe some further cuts or restraints. I anticipate that 4Q01 to 4Q02, you will see some appreciation.”
4Q01 compared to 4Q00 saw a 60% drop in capital spending, said Rinnen. 4Q02, he predicted, will see a 40% increase from 4Q01.
Overall, Gartner is forecasting a drop of capital spending from 2001 to 2002 of about 24% (19% for equipment) worldwide, with the largest regional drop coming from Japan.
VLSI Research VP of Operations Risto Puhakka did have a caveat for capex watchers.
“Capital spending is a little bit of a fickle thing. You can change plans at any time,” warned Puhakka. “I do believe Intel’s plans. They stick to plans, they look at things so far out; they’re very planning-oriented.”
But for TSMC and Asian suppliers, said Puhakka, the market will dictate capex changes.