March 12, 2010 – Checks into key chipmakers in Korea and Taiwan suggest current demand for equipment is still on the rise, with planned capex increases imminent and capacities set to increase into 2011, according to one industry analyst.
Comments back in late January from Samsung and TSMC had quelled fears among some analysts that demand would peak in 1H10 and slip back in 2H10. Samsung in particular was seen "locking up" tools, particularly immersion lithography, not just to fill a need but to extend market lead-times and possibly prevent timely delivery to competitors, according to CJ Muse from Barclays Capital — a move that would impact both DRAM and NAND flash players alike, forcing "catch-up spending from others in memory that should sustain memory capex growth well into 2011."
Now, FBR Research’s Mehdi Hosseini says Samsung will indeed increase its overall 2010 capex budget from expected $6B to at least $6.8B, spurred by not only a bullish outlook for PCs, but also "the inability of competitors to add additional capacity (above and beyond shrink)," he writes. Of that new total, around $6B will go to Samsung’s memory operations (70/30 mix DRAM/NAND flash). Business for this surge should start arriving at tool suppliers in 2Q10, he says, with actual cash outflow timed to be more backloaded into 2H10.
Also preparing to raise its profile, Hosseini reports, is fellow Korean memory firm Hynix, which could increase its DRAM capacity once a CEO transition is finalized, perhaps by mid-year. "There is an increased possibility that it could start planning the addition of new lines on the second floor of the M11 fab in Korea, where it could add 40k (wpm) of additional DRAM capacity in the first phase and 40k (wpm) in the second phase," he says. Total spending for this new 80,000 wpm expansion would be $2.5B-$3.9B, vs. early-year projections of $2B; look for bookings in 2H10 and actual spending timed for 2011.
In Taiwan, chip companies are expected to open up their wallets as well. "Taiwan memory players, such as Inotera, Nanya, and PowerChip, are also planning to increase bookings, though from a small base in CY09," he writes. Equipment industry contacts tell him the island’s key chip companies (including foundries) are poised to spend nearly $11B in 2010 — up 88% from 2009 — and 2011 is looking "flat to up" — for memory, that translates to $3.5B capex in 2010, increasing to perhaps $4.0B in 2011. (For perspective, he adds that Taiwan memory spending peaked at $5B in 2006 and $7.3B in 2007.)
FBR’s 2010 capex breakdown by geography:
– Korea-based semiconductor manufacturers should increase spending 65% this year to $9B. In 2011, Hosseini projects another 10%-15% increase, to account for roughly 22% of total industry capex.
– Taiwan chip companies (including foundries) will increase spending by 88% to nearly $11B in 2010; and 2011 is looking "flat to up," maybe +10%, Hosseini writes.
FBR’s 2010 capex breakdown by device type:
– Memory capex: $16B in 2010, up 56% vs. 2009 (peak was $30B in 2007), DRAM/NAND mix 75/25. Capex for every 1k wpm of additional capacity: DRAM ~$35M (44/38nm) to $40M (28nm); NAND flash $23M-$25M (≤30nm). 2011 capex projected to rise 25%.
An important point to note: up until now, capex spending, even the increases seen recently, has been nearly exclusively for "shrinks" and not capacity, Hosseini notes. Meanwhile, a great deal of 200mm wafer capacity has been decommissioned in the past 1-2 years. Gains in bit capacity at this point, he asserts, won’t be enough to meet bit demand growth — seen as 50%+ for DRAM (25%-30% for added content, 15%-20% for growth in PC unit shipments) and 88%+ for NAND. So, look for shortages to continue into 2H10, particularly for DRAM.
So who’s leading the demand so far in 2010? In 1Q10 it was Hynix (DRAM/NAND), Toshiba (NAND), Chartered/GlobalFoundry, and Inotera (DRAM). For 2Q10, look for top spenders to include Samsung (DRAM), Toshiba again, Micron (DRAM/NAND), Nanya (DRAM), Elpida (DRAM), and PowerChip/Rexchip DRAM). Into 2H10 will come spending from top foundries TSMC and UMC, followed by GlobalFoundries later in 2H10 for its new "Fab 8" in New York.