By Christian Gregor Dieseldorff, Industry Research & Statistics, SEMI (September 8, 2014)

The general consensus for the semiconductor industry is for this year’s positive trend to continue into 2015 as both revenue growth and unit shipment growth are expected to be in the mid- to high- single digit range. SEMI just published the World Fab Forecast report at the end of August, listing major investments for 216 facilities in 2014 and over 200 projects in 2015.  The report predicts growth of 21% for Front End fab equipment spending in 2014 (including new, used, and in-house), for total spending of US$34.9 billion, with current scenarios ranging from 19% to 24%.

Front end fab equipment spending is projected to grow another 20% in 2015 to $42 billion.  According to the SEMI World Fab Forecast data, this means that 2015 spending could mark a historical record high, surpassing the previous peak years of 2007 ($39 billion) and 2011 ($40 billion).

About 90% of all equipment spending is for 300mm fabs, and, interestingly, the report also shows increased fab equipment spending for 200mm facilities, growing by 10% in 2014.  Equipment spending for wafer sizes less than 200mm is also expected to grow by a healthy 12% in 2015 which includes LEDs and MEMS fabs.

According to the World Fab Forecast, the five regions spending the most in 2014 will be Taiwan ($9.7 billion), Americas ($7.8 billion), Korea ($6.8 billion), China ($4.6 billion), and Japan ($1.9 billion). In 2015, the same regions will lead: Taiwan ($12 billion), Korea ($8 billion), Americas ($7.9 billion), China ($5 billion), and Japan ($4.2 billion). Spending in Europe is expected to nearly double to $3.8 billion.

Seven companies are expected to spend $2 billion or more in 2014, representing almost 80% of all fab equipment spending for Front End facilities. A similar pattern will prevail in 2015.

Worldwide installed capacity falls below 3% mark

Figure 1 illustrates fab equipment spending since 2003 and the change of installed capacity (excluding Discretes and LEDs).

As Figure 1 illustrates, before the last economic downturn, most equipment spending was for adding new capacity. The World Fab Forecast report shows that in 2010 and 2011, fab equipment spending growth rates increased dramatically, but installed capacity grew by only 7% in both years. Then in 2012 and 2013, growth for installed capacity sagged even further with only 2% and even less growth. Previously, growth rates less than 2% have been observed only during severe economic downturns (2001 and 2009).

Industry segments, such as foundries, see continuous capacity expansion, though other segments show much lower growth — thus pulling down the total global growth rate for installed capacity to below the 3% mark. Although spending on equipment, some leading-edge product segments experience a loss of fab capacity and, looking closer at this phenomenon, two major trends are observed.

First, coming out of the 2009 downturn, SEMI reports that companies are spending much more on upgrading existing fabs.  From 2005-2008, yearly average spending on upgrading technology was about $6 billion compared to the period of 2011-2015 when the yearly average increased to $14 billion for upgrading existing fabs.  Second, leading-edge fabs experience a loss of capacity when transitioning to leading-edge technology. This is largely observed with nodes below 30/28nm with the increasing complexity and process steps resulting in a -8% to -15% reduction in capacity for fabs.

In addition to foundries, the World Fab Forecast report captures capacities across all industry segments as well as System LSI, Analog, Power, MEMS, LED, Memory and Logic/MPUs. The Logic/MPU sector is also expected to see some positive capacity expansion for 2014 and 2015. Flash capacity is expected to increase by 4% in 2014. Although we see more DRAM capacity coming online, DRAM is now slowly coming out of declining territory with -3% in 2014 and reaching close to zero by end of 2015.

More DRAM capacity?

Over the past three to four years, some major players (such as Samsung, Micron, and SK Hynix) have switched fabs from DRAM to System LSI or Flash.  In addition, other companies stopped DRAM production of some fabs completely, contributing to declining DRAM capacity. Equipment spending levels for DRAM fabs in 2012 and 2013 were near the $4 billion mark annually and are described by some industry observers as being at “maintenance level.”  Increased spending is expected for DRAM in 2014 and 2015, yet although more capacity is being added — the rates are still negative until the end of 2015.  See Figure 2.

Figure 2: Fab equipment spending is compared to the change rate of capacity for DRAM.

As discussed above, SEMI reports that leading-edge DRAM fabs undergo a double-digit capacity loss when upgraded due to an increase in processing steps and complexity. Since the end of last year, Samsung is in the process of adding additional DRAM capacity with two new lines — Line 16 (ramping up this year) and its new Line 17 (the first new DRAM fab ramped since the last economic downturn). In addition SK Hynix is ramping up its M14 DRAM line in 2016. We expect the impact to overall DRAM capacity expansion to occur in 2015 when this fab begins to ramp up. Even if this fab ramps to about half of its potential, the change rate for installed DRAM capacity would still not be positive by end of next year.

Over $6 billion for Fab construction projects

The SEMI World Fab Forecast also provides detailed data about fab construction projects underway. Construction spending is expected to total $6.7 billion in 2014 and over $5 billion in 2015.  Leading regions in spending for 2014 will be Taiwan, Americas, and Korea.  In 2015, the highest spending will be seen in Europe/Mideast, followed by Taiwan and Japan.

Only five companies show strong spending numbers for new fabs or refurbishing existing fabs. Their combined fab construction spending accounts for 88% of all worldwide fab construction spending for Front End facilities.

In 2014, the SEMI report shows 16 new fab construction projects (six alone for 300mm) and 10 fab construction project in 2015 (four for 300mm). Most construction spending in 2014 is for Foundries ($3.1 billion) followed by Memory ($2.5 billion) and Logic. In 2015, Memory will have most spending with ($2.3 billion) closely followed by Foundries ($2.2 billion).

The report lists currently 1150 facilities with 68 future facilities with various probabilities which have started or will start volume production in 2014 or later. See Figure 3.

Figure 3: Count of known facilities (Volume fabs to R&D) in the World Fab Forecast report with various probabilities which are expected to start production in 2014 to 2020.

As it looks right now, SEMI reports that the outlook is positive for 2014 for the chip-making industry compared to the previous few years and the outlook for 2015 also remains healthy.  However, given the current investment trends for spending at the advanced technology nodes and the decline in construction related activity, we continue to expect worldwide capacity expansion to remain in the low-single digits in the next three to five years.

SEMI World Fab Forecast Report

The SEMI World Fab Forecast uses a bottom-up approach methodology, providing high-level summaries and graphs, and in-depth analyses of capital expenditures, capacities, technology and products by fab. Additionally, the database provides forecasts for the next 18 months by quarter. These tools are invaluable for understanding how the semiconductor manufacturing will look in 2014 and 2015, and learning more about capex for construction projects, fab equipping, technology levels, and products.

The SEMI Worldwide Semiconductor Equipment Market Subscription (WWSEMS) data tracks only new equipment for fabs and test and assembly and packaging houses.  The SEMI World Fab Forecast and its related Fab Database reports track any equipment needed to ramp fabs, upgrade technology nodes, and expand or change wafer size, including new equipment, used equipment, or in-house equipment. Also check out the Opto/LED Fab Forecast. Learn more about the SEMI fab databases at: www.semi.org/MarketInfo/FabDatabase and www.youtube.com/user/SEMImktstats