Is the upturn here at last?

Chip makers are building fabs, and that's just one positive sign


SANTA CRUZ, Calif.—Samsung is doing it. So is Micron Technologies. The same goes for Powerchip and Elpida.

In fact, several chip and microelectronics manufacturers are building fabs, and that's just one sign that things are looking up for a couple of industries that have been reeling in a downturn that never seems to let up.

Other indications that there are better days ahead are reports from IC Insights (Scottsdale, Ariz.) and the Semiconductor Industry Association (SIA; San Jose, Calif.), which say the integrated circuit (IC) marketing is building steam and the top 10 suppliers are seeing increased revenue after two years of suffering sales.

In a recent Quick Vote poll, 54 percent of respondents said the semiconductor industry is on the brink of an upturn, while 33 percent believe the market is unpredictable at best. Thirteen percent of those responding to the poll still think the semiconductor industry is facing even rockier roads ahead.

“We are at the beginning of a new up-tick in capital spending and new fab activity,” claims George Burns, president of Strategic Marketing Associates, a research firm specializing in fab information.

“If you look at the capacity utilization of some of the foundries, TSMC and UMC, they are very high, some at 100 percent,” Burns adds. “Companies were really reluctant to invest in new equipment and build new fabs. They had done that in early 2002 when the storm of the downturn continued to hit, but now they have confidence that there is a real underpinning to the boom.”

According to The Quarterly Spot Report, penned by Strategic Marketing Associates, the value of new fab projects so far this year is $13 billion—more than in all of 2002. The report lists 37 upgrades or new fab projects that could start or restart construction in the next four quarters. In addition, 17 new fabs are expected to come on line in the next four quarters.

Eight fabs will start or resume construction this year, with only one project slated as a 200-mm fab. The other seven will be 300-mm DRAM facilities and have a total value of $12.7 billion when fully ramped—a 53 percent increase over last year.

Along with Micron Technology Inc.'s new plant in Manassas, Va., South Korea-based Samsung Electronic Co. Ltd. recently broke ground on a facility where it will manufacture seventh-generation TFT-LCD display panels as part of an agreement with Japan's Sony Corp. Samsung expects to spend $17 billion on four TFT-LCD lines with annual output exceeding $8 billion.

Powerchip Semiconductor Corp., the Hsinchu, Taiwan-based joint venture between Hitachi and NEC, plans to build an 8-inch wafer plant in China and also intends to double spending to as much as $881 million next year to increase the output of its most advanced wafers. The company plans to produce 35,000 12-inch wafers a month, up from 15,000.

Continually strong demand for electronics has led chip manufacturers to expect to record one of their best performances ever in 2004. Global chip revenue is predicted to rise 19.4 percent to $194.6 billion next year, based on SIA estimates. The trade group has revised its June sales forecast of a 16.8 percent growth, following strong demand for electronics gear, cellular phones and computers, as well as increased use of chips in the products.

That demand has led to a recovery in the IC market, which is picking up steam thanks to worldwide semiconductor sales of $14.4 billion in September—up 6.5 percent from $13.6 billion in August.


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