January 23, 2012 — Intel had a record 2011, and plans high semiconductor capital expeditures in 2012 ($12.5 billion). Samsung plans a record spend in 2012 ($12.2 billion for semiconductor capex). There is, and will be, wide and growing separation between these two companies and their competition, says IC Insights.

For Samsung, Intel (NASDAQ:INTC), and TSMC (NYSE:TSM), the time has come to "put the hammer down" and position themselves as the strongest and most dominant IC suppliers in the industry. Also read: Intel pushes Samsung back for 2011 semiconductor market lead

Both Intel and Samsung will more than double the 2012 capex spending of foundry TSMC ($6.0 billion in 2012 capex). These 3 companies will account for about half of the total semiconductor capex spending in 2012: $30.7 billion between them, nearly 3x as much as they spent collectively in 2009. SEMI predicts semiconductor fab equipment spending will be $35 billion in 2012, according to preliminary data from the SEMI World Fab Forecast report.

In fact, the disparity is getting so large that these three are likely to become completely dominant in their areas of specialization, if they are not already there. Smaller competitors will soon find it extremely challenging (impossible, in many cases) to remain competitive against these powerhouse companies when it comes to developing new products or competing on a cost basis. Weaker suppliers will be forced out of the business and a higher percentage of capex spending will be in the hands of the fewer remaining players.

This isn’t neccessarily a new trend: In 2010, TSMC doubled its capex from 2009, and Samsung tripled their number. In 2011, Intel doubled its capex year-over-year.

Figure 1. Top 3 semiconductor capex spenders 2009-2012F. SOURCE: IC Insights, Company Reports.

Samsung is significantly boosting spending for logic ICs. Approximately $6.5 billion of Samsung’s 2012 capex budget is dedicated to logic ICs. Samsung is Apple’s foundry partner for the A4 and A5 application processors used in iPad tablet computers, iPhones, and iPod touch devices, and doesn’t want to lose this lucrative business. Samsung is also aggressively ramping its in-house application processor business as demand increases for its smartphones, tablet PCs, and other mobile/media related devices. The remaining $5.7 billion of Samsung’s capex budget will be spent on memory IC fab, likely focused on boosting NAND flash memory capacity.

Intel’s capex was $10.8 billion in 2011 and is forecast to be $12.5 billion in 2012, which, put against the context of how much Intel’s business has grown, is justified, says the company. Intel is nearing completion of, and will soon be equipping and ramping production at, three new wafer fabs in Chandler, AZ; Hillsboro, OR; and Ireland. The company plans to begin 14nm production in Chandler when that fab opens in 2013. The new Hillsboro facility will focus on process development using 450mm wafers when it begins operations in 2013. Meanwhile, several fabs will begin 22nm production of x86 processors in the second half of 2012.

Intel too is making a concerted effort to expand its processor presence for smartphones and media devices. Intel’s Ultrabook initiative has piqued consumer interest and is likely to create additional demand for the company’s processors in the second half of 2012. Also read: Intel’s CES keynote: Highlights from Otellini’s talk and Intel Press Briefing and Keynote at CES 2012

A thorough overview and specific details of capital expenditures by company and geographic region is just part of the information included in the 2012 edition of The McClean Report. View http://www.icinsights.com/services/mcclean-report/ for more information.