Revelations from Asia equipent buying trends
02/01/1999
Revelations from Asian equipment buying trends
John Schuler, SEMI Market Statistics Department, Mountain View, California
Data gathered recently from SEMI members provide a perspective of regional reactions by semiconductor manufacturers in Asia to the current economic crisis. These data also reveal a possible scenario in these countries when recovery ensues.
In this period of transition for the semiconductor industry, company executives need a chart and compass to navigate around the threats posed by recent economic events, the pending transition to 300-mm wafers, and continued linewidth shrinks. The Semiconductor Equipment and Materials International (SEMI) market statistics program, which is based on data from members, serves as a chart, and the recently completed consensus forecast serves as a compass, pointing to future trends.
The big economic event of last year was the impact of the Asian financial crisis as an exogenous effect on the entire industry. Looking at the SEMI market statistics data on total worldwide equipment orders, orders and shipments were steadily ramping up from mid-1996 to late 1997. In September 1997, total worldwide orders measured as the rate of shipments/month peaked at
$3 billion; stalled at this level until November and the onset of the financial crisis; and then began the painful slide down to $1.5 billion/month by September 1998. (All monetary values in this article are in US dollars.)
The dramatic increase in fab productivity has compounded the negative effect of the Asian financial crisis. Technologists have pushed fab yields to percentages in the high nineties, while at the same time reducing device geometries. Basic economics tells us that prices fall as production ramps, thus putting a squeeze on profit margins and a crimp in new fab building.
The equipment sector has also been affected by the large up-front development costs of new 300-mm tools, with slow sales to date. Published data show that 300-mm fab building has been pushed out to 2001 and beyond. The reaction in the equipment sector has been to incorporate the new technologies in robotics, automation, and machine-control developed for 300-mm into a new generation of "smart" 200-mm tools. This has further improved existing fab efficiencies and productivity and has pushed the need for 300-mm fab construction further into the future.
With the help of the SEMI market statistics data program and the recently completed consensus forecast of almost 100 of the top equipment manufacturers, let us look at recent history in the equipment market and make some short-term predictions about Asian regional markets out to 2000 and beyond.
Total Asian equipment market
As Fig. 1 shows, while the total Asian market for semiconductor manufacturing equipment (including Japan) was almost flat at about $5 billion from 1990 to 1993, data show the strong growth of the ROW sector (i.e., Taiwan, Korea and other Southeast Asian countries). In only seven years, the total ROW market rose tenfold - from $0.8 billion in 1990 to $8.6 billion in 1997 - in the process almost gaining parity with the Japanese market in 1996 and exceeding it a year later. In contrast to Japan, ROW growth continued into 1997, then dropped about 20% in 1998 due to the Asian financial crisis. Results of the SEMI consensus forecast completed late in 1998 indicate flat to slow growth in the Asian region from 1998 through 1999, with accelerating growth out to year 2001, particularly in ROW countries.
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Figure 1. Total Asian semiconductor equipment market - actual data through 1997, a three-calendar-quarters estimate for 1998, and SEMI`s consensus forecast for 1999 through 2001. (Source: SEMI SEAJ executive market data service)
Regional trends
The worldwide market for semiconductor manufacturing equipment bottomed out in 4Q96. With strong orders from Japan at the end of the 1Q97, there was steady growth until the Asian financial crisis kicked in during 4Q97. Bookings and billings data of this period are of interest in understanding the differences in strategy of the major players in Asia as the effect of the financial crisis plays out (Fig. 2):
Korean manufacturers were the first to react to the Asian financial crisis; their bookings peaked in August 1997 at $280 million. Following the decline in Korea to $200 million in September 1997, there was a second peak of orders in November 1997 at $310 million. Then Korean semiconductor manufacturers turned off the spending stream with a vengeance in 1Q98, and bookings dropped to below $50 million/month in March 1998, a level not seen since late 1995. Korean spending then rose strongly during the next four months, peaking at $125 million in July 1998 as the Koreans invested in submicron-fab enhancements. In addition, the Samsung "megafab" joint venture in Austin, TX, received additional funding of $250 million. The latest data from Korea show bookings have declined to slightly less than $100 million in September 1998.
Japan was a month later responding to the Asian financial crisis. From peak bookings of $750 million in September 1997, bookings dropped by half to the $375 million level, where the bookings rate remained for four months. By June, Japanese semiconductor manufacturers decided they were unable to sustain this level of spending; bookings declined again to just under $200 million in September 1998. Almost every year, Japanese spending for chipmaking equipment has shown a sharp peak in March, the start of the new fiscal year for Japanese companies. Interestingly, spending beginning in March 1998 remained flat. There was, however, a peak in ROW bookings during 2Q98 that possibly can be attributed to Japan - the transfer of Japanese production to ROW countries and the resulting spending at the end of their fiscal years.
Spending by Taiwanese semiconductor manufacturers peaked in November 1997 at $570 million/month - a month later than the Japanese and two months later than the Koreans. Following a steep decline in the 4Q97 to $350 million in January 1998, spending declined in steps to what looks like the low point, at about $125 million in September 1998.
Equipment categories
Slicing Asian equipment market data obtained from SEMI`s consensus forecast by regions - US, Japan, Europe, and ROW, the latter predominantly Taiwan and Korea - it is instructive to look at changes in equipment spending from 1993 through an estimate for 1998 (Fig. 3). (Facilities construction, wafer manufacturing, and fab automation equipment categories are not included in this article. Combined, the estimate is that these will amount to just under $2 billion in 1998.)
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Figure 2. Recent Asian semiconductor equipment booking rates by region; data points are three-month averages of shipping rates/month. (Source: SEMI SEAJ executive market data service)
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Figure 3. Markets for equipment categories by region for 1993 and 1998, estimated; a) wafer processing, b) test; c) lithography, and d) assembly and packaging. (Source: SEMI SEAJ executive market data service)
The data show a dramatic increase in ROW share, for the most part at the expense of the Japanese market, with some erosion of the share representing European semiconductor manufacturers. In 1993, the ROW region was behind US and Japanese markets, except for assembly and packaging equipment, where it led. Five years later, ROW is in firm second place in all sectors and has an expanding 53% share in assembly and packaging. Europe gave up two percentage points of market by 1998, but gained two in assembly and packaging (to 10%), as some assembly and packaging was shifted to low-wage areas in Eastern Europe.
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For lithography equipment, we estimate that the ROW region will achieve near-parity with the US in 1998. If this sector is taken as a precursor of advanced fab operations, it indicates that ROW countries, Korea and Taiwan in particular, intend to stake out a big section of chipmaking in 2000 and beyond. The same scenario can be reasoned out of the data for test equipment; spending on test systems indicates high clock speeds and increased pin counts that come with advanced ICs. Estimates for 1998 show the ROW region rising, with 28% of the test equipment market. Indeed, the SEMI consensus forecast to 2001 (see table) indicates that ROW semiconductor manufacturers will account for more than a third of the test equipment market in the immediate future.
Conclusion
The picture we see today indicates that ROW countries are making a concerted effort to be major players in the semiconductor industry in the next century. In the next decade, we expect to see Korean and Taiwanese chipmakers fighting for the chance to challenge the number two position of the Japanese semiconductor industry, and collectively the entire Asian region challenging the US for the number one position.
JOHN SCHULER received a BSc, MBA, and an MSc in cybernetics. Before joining SEMI, he was a senior equipment engineer at AMD. He has edited and published seven books on marketing strategy. Schuler is manager for semiconductor and FPD equipment programs in the market statistics department of SEMI. 805 E. Middlefield Rd., Mountain View, CA 94043; ph 650/940-6921, fax 650/967-5375, e-mail [email protected].