by James Montgomery, News Editor
November 6, 2006 – The value of new fab construction will hit an all-time high of $59 billion in 2006, followed by another record next year in the value of fabs coming online to volume production, according to Strategic Marketing Associates (SMA).
Thirty-six new fab projects will have began this year, with a total value of $59 billion once fully equipped (25 of those fabs will be 300mm), with about $44 billion of that spread across Japan, Taiwan, and China, noted SMA president George Burns. SMA counts new fab activity as fabs starting construction, as well as empty shell build-outs (e.g., Micron’s Lehi, UT facility has been empty for a decade) and 200mm-300mm conversion projects (e.g. Micron and Renesas).
Fab construction has clearly revved up in the past few years, but Burns noted that chipmakers always want to have some activity going even if times are bad. So, they may bring in a few pieces of equipment to qualify processes and maintain a low level of capacity, and when demand recovers they can quickly ramp the extra capacity.
Memory fab activity has likewise peaked, accounting for an eye-popping 64% of all new fab construction in 2006, and at least 40% since 2003, Burns noted. Flash fab activity is still relatively new, but the big push over the next four quarters will be for DRAM expansion — exploding from “only” 165,000 wafers/month (200mm equivalent) capacity additions in 2006, to a fully ramped addition of ~800,000 wafers/month in 2007, although the actual number will be less than that. Burns noted that DRAM and flash memory capacity is expected to grow 40% and 53% next year, respectively — and at this rate, by the end of 2007 more than 2 million wafers (200mm wafer equivalent) in DRAM monthly capacity will have been added since 2001-2007.
Foundries have been active too. TSMC, SMIC, and Hua Hong Electronics also have been pouring funds into new facilities, nearly tripling the value of new foundry fabs starting construction this year to $11 billion. As a result, new foundry wafer capacity coming online will increase 12% next year, Burns said.
With all the activity among chipmakers, foundries, and DRAM firms, capital spending should round out 2006 with a healthy 15% increase to around $54 billion, according to Burns, who noted that nearly half of that will come from Asia-Pacific firms, and by 2010 those companies will be outspending the G8 chipmakers.
The heavy investments in new fabs this year will translate into similar record-breaking values for fabs coming online in 2007, Burns told WaferNEWS — roughly three-quarters of that $59 billion should translate into volume production, given a general window of 12-18 months from construction to volume ramp, according to Burns. Twenty of the 36 fabs expected to ramp to volume production over the next four quarters will be for 300mm output.
For suppliers handicapping who the top fab tool purchasers will be in 2007, there’s Samsung (Line 11, a 300mm conversion), Inotera (Fab 2), Hynix (Fab 6), Nanya (Fab 3), and PowerChip, Promos, and Winbond — almost all of which are at projecting at least 50,000 wafer starts/month. “There’s a tremendous amount of Taiwanese capacity coming online next year,” Burns said. “They all have plans to ramp those fabs rather quickly — they’re not planning to hold back on the gas.”
Burns also projects a high number of fab construction projects in 2007, thus generating more big numbers for the value of fabs ramping production in 2008. At the top of the list for fab projects slated for 2007 is the Toshiba/SanDisk “Flash Alliance” Fab 5, with Samsung also having stated intentions for a wide range of fab activity in the next several years (e.g. Fab 23). Other likely additions include UMC (phase 2 at Fab 12B), SMIC (300mm/Beijing), AMD (Luther Forest/New York) and IBM (phase 2, Fab 323 annex). Less certain are potential new projects from STMicro (“they’ve been dithering about Fab M6 in Catania [Italy] for years,” said Burns); Texas Instruments expanding its facilities in Richardson, TX; maybe Taiwan’s PowerChip again; and India’s SemIndia project, which due to a recently unveiled year-long R&D partnership with IMEC could finally be close to reality.
Burns also noted that several fabs in China are prepping for another round of investments — Grace Semiconductor could start a third phase of expansion, and SMIC has built up a good roster of customers, he said. “The Chinese leapt forward in 2002-2003, and have been treading water ever since in terms of spending,” Burns said. “But they’re ready again now.” — J.M.