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IC Insights is in the process of completing its forecast and analysis of the IC industry and will present its new findings in The McClean Report 2019, which will be published later this month.  Among the semiconductor industry data included in the new 400+ page report is an in-depth analysis of the IC foundry market and its suppliers.

With the recent rise of the fabless IC companies in China, the demand for foundry services has also risen in that country.  In total, pure-play foundry sales in China jumped by 30% in 2017 to $7.6 billion, triple the 9% increase for the total pure-play foundry market that year.  Moreover, in 2018, pure-play foundry sales to China surged by an amazing 41%, over 8x the 5% increase for the total pure-play foundry market last year.

As a result of a 41% increase in the China pure-play foundry market last year, China’s total share of the 2018 pure-play foundry market jumped by five percentage points to 19% as compared to 2017, exceeding the share held by the rest of the Asia-Pacific region (Figure 1).  Overall, China was responsible for essentially all of the total pure-play foundry market increase in 2018!

All of the major pure-play foundries registered double-digit sales increases to China last year, but the biggest increase by far came from pure-play foundry giant TSMC.  Following a 44% jump in 2017, TSMC’s sales into China surged by another 61% in 2018 to $6.0 billion.  The China market was responsible for essentially all of TSMC’s sales increase last year with China’s share of the company’s sales doubling from 9% in 2016 to 18% in 2018.

A great deal of TSMC’s sales surge into China in 2018 was driven by increased demand for custom devices going into the cryptocurrency market.  While TSMC enjoyed a great ramp up in sales for its cryptocurrency business through 2Q18, the company encountered a slowdown for this business in the second half of last year, which was apparent in its slower sales to China in 3Q18 and 4Q18.  The 2018 plunge in the price of Bitcoins (from over $15K per Bitcoin in January of 2018 to less than $4K in December of 2018) and other cryptocurrencies lowered the demand for these ICs.

Figure 1

With China’s share of the pure-play foundry market quickly growing (going from representing 11% of the total pure-play foundry market in 2015 to a 19% share in 2018) it comes as no surprise that many of the pure-play foundries are planning to locate or expand IC production in Mainland China.  Notably, each of the top seven pure-play foundries has plans for increasing China-based wafer fabrication production, including the five non-Chinese foundries of TSMC, GlobalFoundries, UMC, Powerchip, and TowerJazz

Total fab equipment spending in 2019 is projected to drop 8 percent, a sharp reversal from the previously forecast increase of 7 percent as fab investment growth has been revised downward for 2018 to 10 percent from the 14 percent predicted in August, according to the latest edition of the World Fab Forecast Report published by SEMI.

Entering 2018, the semiconductor industry was expected to show a rare fourth consecutive year of equipment investment growth in 2019. But the SEMI World Fab Forecast Report, tracking more than 400 fabs and lines with major investment projects, forecast in August a slowdown in the second half of 2018 and into the first half of 2019. Now, with recent industry developments, a steeper downturn in fab equipment is expected (Figure 1).

Figure 1

The report shows overall spending down 13 percent in the second half of 2018 and 16 percent in the first half of 2019 with a strong increase in fab equipment spending expected in the second half of 2019.

Plunging memory prices and a sudden shift in companies’ strategies in response to trade tensions are driving rapid drops in capital expenditures, especially among leading-edge memory manufacturers, some fabs in China, and some projects for mature nodes such as 28nm. Industry sectors expecting record-breaking growth in 2019, such as memory and China, are now leading the decline.

Following a sharp fall in NAND flash pricing earlier this year, DRAM prices in the fourth quarter of 2018 began to soften, seemingly ending the two-year DRAM boom. Inventory corrections and CPU shortages continue, prompting predictions of even steeper price declines.

Memory makers have quickly responded to changing market conditions by adjusting capital expenditures (capex), and tool orders have been put on hold. DRAM spending may see an even deeper correction in 2019 while NAND flash-related investment could also suffer a double-digit decline next year.

A review of spending by industry sector reveals that, while memory capital expenditures were expected to grow by 3 percent in 2019, they are now forecast to drop by 19 percent year-over-year (YOY). DRAM is hit the hardest with a fall of 23 percent, while 3D NAND will contract 13 percent in 2019.

China and Korea are suffering the largest drops in spending since the August report.

China fab spending falls

Projections for equipment spending in China in 2019 have been revised from US$17 billion in August to US$12 billion, with multiple factors at play including a slowing memory market, trade tensions, and delays in some project timelines.

SK Hynix is expected to slow DRAM expansion in 2019. GLOBALFOUNDRIES reconsidered its plan for the Chengdu fab, delaying the ramp. SMIC and UMC are slowing spending. The Fujian Jinhua DRAM project has been put on hold.

Korea fab spending down

In August, SEMI forecast that Korea fab equipment spending would decline by 8 percent, to US$17 billion, in 2019 – a projection that has now been slashed to US$12 billion, a drop of 35 percent YoY. Samsung began to reduce equipment investments in the fourth quarter of 2018, and the spending cuts are expected to continue into the first half of 2019. Samsung’s largest projects to be hit are P1 (slowdown) and the ramp of P2 Phase 1 (delayed). Adjustments to the S3 schedule are also expected.

Not all memory makers cut capital expenditures

While SEMI’s detailed, fab-level data show that some memory makers will scale back capital expenditures for 2019, one company stands out. Micron will increase capex for FY19 to US$10.5 billion, up about 28 percent, or $8.2 billion, from FY18. Micron plans to expand and upgrade facilities, invest less in NAND in FY19 than in FY18, and anticipates no new wafer starts.

Outlook still upbeat for mature technologies

In other sectors, especially for non-leading-edge and specialty technologies, some fabs are still increasing investments (Figure 2).

Figure 2

Opto – especially CMOS image sensors – shows strong growth, surging 33 percent to US$3.8 billion in 2019. Micro (MPU, MCU and DSP) is expected to grow more than 40 percent in 2019 to US$4.8 billion. Analog and mixed signal investments also show strong growth – 19 percent – in 2019, bringing spending to US$660 million. The foundry sector, the second largest product segment in total investments at US$13 billion, shows a 10 percent rise in 2019.

The recent three-year boom in the semiconductor market was chiefly driven by the memory sector (e.g. DRAM and 3D NAND flash). One company, Samsung, invested at unprecedented levels, lifting the entire industry. Other memory makers rode the wave of the boom cycle by boosting investments. And China’s profile rose with its huge investments. The industry was poised for four consecutive years of revenue growth – a streak not seen since the 1990s.

Now the industry faces well-known threats of inventory correction and the trade war. Both phenomena could slow growth significantly and if both unfold in full force in tandem, the impact could be serious. The data in SEMI’s latest publication of the World Fab Forecast show that the four-year growth streak will not materialize.

Since its August 2018 publication, more than 260 updates have been made to the World Fab Forecast. The report now includes more than 1,280 records of current and 115 future front-end semiconductor facilities from high-volume production to research and development. The report covers data and predictions through 2019, including milestones, detailed investments by quarter, product types, technology nodes and capacities down to fab and project level.

The SEMI World Fab Forecast examines capital expenditure plans of individual front-end device manufacturers, while the SEMI bi-annual Semiconductor Equipment Sales Forecast is based on year-to-date data collected from equipment manufacturers and modeled off of announced capital expenditure plans of both front-end and back-end equipment manufacturers.

Panel FO-WLP is in production at Powertech Technology, Inc. (PTI) for MediaTek’s power management integrated circuit (PMIC) for smartphone applications. The Samsung Galaxy watch uses the fan-out panel level process (FOPLP) developed by Samsung Electro-Mechanics (SEMCO) to package the application processor and PMIC. Future applications under consideration for panel production include application processors, memory and RF modules. TechSearch International, Inc. details these applications and analyzes monthly panel requirements and planned capacity. Supplier plans are discussed and consortia activities are highlighted.

One of the major market trends in wearable electronics is the shift to smartwatches, which have surpassed shipment numbers for wristbands. Package trends for wearable electronic products are analyzed, including Apple’s new smartwatch using TSMC’s InFO and Samsung’s Galaxy using FOPLP. The latest trends in augmented reality (AR) and virtual reality (VR) headsets are discussed. A detailed analysis of the change in packages from the previous generation HTC Vive VR system is presented.

A detailed analysis of the OSAT financials is provided with regional growth documented. Board and substrate material requirements for 5G applications are presented.

The latest Advanced Packaging Update is a 45-page report with full references and an accompanying set of 46 PowerPoint slides.

TechSearch International, Inc., founded in 1987, is a market research leader specializing in technology trends in microelectronics packaging and assembly. Multi- and single-client services encompass technology licensing, strategic planning, and market and technology analysis. TechSearch International professionals have an extensive network of more than 18,000 contacts in North America, Asia, and Europe. For more information, contact TechSearch at tel: 512-372-8887 or see www.techsearchinc.com. Follow us on twitter @Jan_TechSearch

By Walt Custer

Global growth by electronic sector

Now that most companies in our sector analyses have reported their calendar third quarter 2018 financial results, we have final or 3Q’18/2Q’17 growth estimates for the world electronic supply chain (Chart 1). We estimate electronic equipment grew 6.7% on a U.S. dollar-denominated basis.

Source: Custer Consulting Group based on consolidated financial reports of public companies

Electronic equipment growth has peaked for this current business cycle (Chart 2), dropping from +11.1% in the second quarter to 6.7% in the third quarter. Most of the supply chain is responding to this slowing.

Semiconductors, SEMI equipment an Taiwan chip foundries

While the most recent growth rates in Charts 1 & 2 are for the third quarter, October and November growth is included in Chart 3.  Foundry growth was +4.6% in November, world semiconductor shipments eased to +12.7% in October and SEMI capital equipment slipped to +10% also in October. The days of the +30% growth rates are behind us for this current business cycle!

Sources: SIA; SEMI; financial reports of Taiwan listed foundry companies

Global semiconductor growth outlook for 2019

The World Semiconductor Trade Statistics Organization in conjunction with the SIA just updated the chip shipment forecasts for 2018 and 2019 (Chart 4). World semiconductor shipments were estimated to have climbed 15.9% (in U.S. dollars) in 2018 but are predicted to slow to a +2.6% rate in 2019.

Source: www.wsts.org, www.semiconductors.org

Looking forward

The Global Manufacturing PMI (Chart 5) leveled out in November but remained well below its December 2017 high.  This translates to a slower but still positive world expansion in the short term. By region (Chart 6), U.S. growth remains robust, Japan picked up, Europe continues to decelerate, China is near zero growth and Taiwan and South Korea are contracting.

Source: www.markiteconomics.com

ll eyes are on the global economy, Brexit, trade wars and bizarre political wrangling. 2019 could be a very volatile year!

Walt Custer of Custer Consulting Group is an analyst focused on the global electronics industry.

Releasing its Year-End Total Equipment Forecast at the annual SEMICON Japan exposition, SEMI, the global industry association representing the electronics manufacturing supply chain, today reported that worldwide sales of new semiconductor manufacturing equipment are projected to increase 9.7 percent to $62.1 billion in 2018, exceeding the historic high of $56.6 billion set last year. The equipment market is expected to contract 4.0 percent in 2019 but grow 20.7 percent to reach $71.9 billion, an all-time high.

The SEMI Year-end Forecast predicts wafer processing equipment will rise 10.2 percent in 2018 to $50.2 billion. The other front-end segment – consisting of fab facilities equipment, wafer manufacturing, and mask/reticle equipment – is expected to increase 0.9 percent to $2.5 billion this year. The assembly and packaging equipment segment is projected to grow 1.9 percent to $4.0 billion in 2018, while semiconductor test equipment is forecast to increase 15.6 percent to $5.4 billion this year.

In 2018, South Korea will remain the largest equipment market for the second year in a row. China will rise in the rankings to claim the second spot for the first time, dislodging Taiwan, which will fall to the third position. All regions tracked except Taiwan, North America, and Korea will experience growth. China will lead in growth with 55.7 percent, followed by Japan at 32.5 percent, Rest of World (primarily Southeast Asia) at 23.7 percent, and Europe at 14.2 percent.

For 2019, SEMI forecasts that South Korea, China, and Taiwan will remain the top three markets, with all three regions maintaining their relative rankings. Equipment sales in South Korea is forecast to reach $13.2 billion, in China $12.5 billion, and in Taiwan $11.81 billion. Japan, Taiwan and North America are the only regions expected to experience growth next year. The growth picture is much more optimistic in 2020, with all regional markets expected to increase in 2020, with the market increasing the most in Korea, followed by China, and Rest of World.

The following results are in terms of market size in billions of U.S. dollars:

The Equipment Market Data Subscription (EMDS) from SEMI provides comprehensive market data for the global semiconductor equipment market. A subscription includes three reports:

  • Monthly SEMI Billings Report, an early perspective of the trends in the equipment market
  • Monthly Worldwide Semiconductor Equipment Market Statistics (SEMS), a detailed report of semiconductor equipment bookings and billings for seven regions and over 22 market segments
  • SEMI Mid-Year Forecast, an outlook for the semiconductor equipment market

Ever-growing data generation driven by mobile devices, the cloud, the IoT , and big data, as well as novel AI applications, all part of the megatrends, requires continuous advancements in memory technologies. Emerging NVM takes benefit of this dynamic ecosystem.

After more than 15 years in development, PCM, one of the emerging NVM technologies, has finally taken off thanks to the strong involvement of two leading companies, Micron and Intel, announces Yole Développement (Yole). The growth mainly arises from stand-alone applications. “Although momentum is building around emerging NVM for embedded applications, stand-alone memories will be the dominant market, which will be mainly driven by SCM enterprise and client applications,” comments Simone Bertolazzi, PhD, Technology & Market Analyst at Yole.

The market research and strategy consulting company Yole proposes today a technology & market survey dedicated to the emerging non-volatile memory technologies and markets, Emerging Non-Volatile Memory.

Yole and its partners System Plus Consulting and Knowmade, deeply investigate the memory business. The Group set up this year valuable memory services and reports to deliver world class research, data and insight. The emerging NVM report is part of them.

“With our memory activities including a dedicated webcasts program covering DRAM & NAND and emerging NVM, Yole Group of Companies provides valuable expertise and knowledge to its clients and allow them to understand the evolution of this competitive industry,” asserts Emilie Jolivet, Director, Semiconductor & Software from Yole.

The emerging NVM report is a comprehensive analysis of the semiconductor memory ecosystem with the following technologies (STT-) MRAM, RRAM and PCM, plus an introduction to standard memory, flash NAND, DRAM, NVDIMMs. It provides a deep understanding of the NVM applications and details the related market forecasts until 2023. NVM technologies are well described with the companies involved. In this new report, Yole’s Semiconductor & Software team highlights the competitive landscape with supply chain, market positioning and market shares analysis.
What is the status of the emerging NVM business? Yole Group of Companies invite you to enter in the memory world.

Since its latest edition, Yole’s analysts point out today market evolution and technical innovations. According to Yann de Charentenay, Senior Technology & Market Analyst at Yole, DRAM scaling will continue in the next five years, though at slower pace. NAND density will keep increasing thanks to continuous advancements in 3D integration approaches. And emerging NVM will not replace NAND and DRAM but they will rather complement them in “combined” memory solutions. In addition, SCM will be the main emerging NVM market and will be dominated by 3DXPoint for the next 5 years.
From a technology point of view, (STT-) MRAM is gaining momentum for embedded MCU applications since all big foundries are getting involved in this area. Stand-alone RRAM will try to catch market share to PCM on SCM applications. And emerging NVM sales will grow by more than one order of magnitude in the next three years, thanks to SCM applications.

In parallel, Yole’s team identified an increased foundry involvement in (STT-) MRAM and RRAM market segment. Key players such as GlobalFoundries, TSMC, UMC, SMIC and Samsung Foundry Services develop a strong expertise with related capabilities to offer attractive services. This trend is showing a growing foundries’ interest in memory business. As an example, the leading semiconductor company, TSMC announced possible acquisition of a memory company. Moreover, analysts point out the growing number of players including Chinese companies.

In the stand-alone business, emerging NVMs will not replace DRAM and NAND but will be used in combination with them inside memory modules, e.g. SSDs, DIMMs, and NVDIMMs. In 2023, PCM will maintain its lead in the stand-alone memory market thanks to the increasing adoption of 3D XPoint as an enterprise and client SCM. It is worth noting that Samsung and Toshiba took a different strategic path by developing 3D NAND-based SCM solutions such as Z-NAND (Samsung) and XL-Flash (Toshiba, showcased in August 2018). However, these technologies will be used in enterprise SSDs and will not compete with DDR4-compatible Optane DIMMs, which we expect will represent more than 50% of overall 3D XPoint sales.

RRAM was expected to be the first stand-alone technology to compete with 3D XPoint, but it has suffered repeated delays due to technical challenges. We presume that RRAM could return in the race for SCM after 2020, and possibly start competing with NAND for mass storage applications. STT-MRAM, thanks to its high speed and high endurance, is promising for enterprise storage SCM. However, its success will be much lower compared to stand-alone PCM due to higher costs, greater fabrication complexity, and challenging scalability.

Compared to stand alone, the embedded emerging NVM market is relatively small, representing ~3% of the emerging NVM market in 2017. The market is dominated today by RRAM, since only a few RRAM based MCUs are available on the market. However, all top foundries are now getting ready with 28/22nm technology processes for STTMRAM whereas RRAM adoption has been delayed by approximately two years by SMIC and UMC.

Therefore, we expect that STT-MRAM will be the first to take-off in the coming years and will lead the embedded emerging NVM market, especially MCUs, which represent the most important embedded segment. Emerging memory will first replace eFlash, which is facing major scaling challenges due to rising fabrication complexity/costs for technology nodes ≤ 28nm. The adoption of STT-MRAM as an embedded cache memory (SRAM or eDRAM) in high-end processors and mobile application processors (AP) will occur later due to more strict scalability requirements (≤ 14nm).

AI on the edge is the most innovative application for embedded emerging NVM. Crossbar recently demonstrated various AI applications, i.e. face recognition, through the use of RRAM chips. We expect that such RRAM-based AI devices will enter the market after 2021.

Yole Group of Companies leverage decades of industry experience while partnering with its clients to make sure they are consistently well-informed on this dynamic memory market. These years were indeed impressive, not only in terms of revenues, but also in pricing and capital expenditure. Mike Howard, VP of DRAM & Memory Research and Walt Coon, VP of NAND & Memory Research at Yole describe in a dedicated interview published last week, the memory ecosystem and its players, highlighting the latest technology advancements and the future evolutions of the market: click Memory business: what’s next?.

IC Insights revised its outlook for total semiconductor industry capital spending and presented its forecast of semiconductor capex spending for individual companies in its November Update to The McClean Report 2018, which was released earlier this month.

Samsung is expected to have the largest capex budget of any IC supplier again in 2018.  After spending $24.2 billion for semiconductor capex in 2017, IC Insights forecasts that Samsung’s spending will edge slightly downward, but remain at a very strong level of $22.6 billion in 2018 (Figure 1).  If it comes in at this amount, Samsung’s two-year semiconductor capital spending will be an astounding $46.8 billion.

Figure 1

As seen in Figure 1, Samsung’s semiconductor capital outlays from 2010, the first year the company spent more than $10 billion in semiconductor capex, through 2016 averaged $12.0 billion per year. However, after spending $11.3 billion in 2016, the company more than doubled its 2017 capex budget. The fact that Samsung’s continued its strong capex spending in 2018 is just as impressive.

IC Insights believes that Samsung’s massive spending outlays in 2017 and 2018 will have repercussions far into the future.  One effect that has already begun is a period of overcapacity in the 3D NAND flash market.  This overcapacity situation is due not only to Samsung’s huge spending for 3D NAND flash, but also from spending by competitors (e.g., SK Hynix, Micron, Toshiba, Intel, etc.) that attempt to keep pace in this market segment.

With the DRAM and NAND flash memory markets showing strong growth through the first three quarters of 2018, SK Hynix ramped up its capital spending this year.  In 1Q18, SK Hynix said that it intended to increase its capex spending by “at least 30%” this year. In the November Update, IC Insights forecasts that SK Hynix will see a 58% surge in its semi capex spending.  The increased spending by SK Hynix this year is focused primarily on bringing new capacity online at two of its large memory fabs—M15, a 3D NAND flash fab in Cheongju, South Korea, and the expansion of its huge DRAM fab in Wuxi, China. The Cheongju fab is being pushed to open before the end of this year.  The Wuxi fab is also targeted to open by the end of this year, a few months earlier than its original start date of early 2019.

Overall, IC Insights’ now forecasts total semiconductor industry capital spending will climb 15% to $107.1 billion this year, the first time that annual industry capex is expected to top $100.0 billion. Following the industry-wide growth this year, semiconductor capex is expected to decline 12% in 2019 (Figure 2).

Figure 2

Given that the current softness in the memory market is expected to extend into at least the first half of next year, the combined capital spending by the three largest memory suppliers—Samsung, SK Hynix, and Micron—is forecast to drop from $45.4 billion in 2018 to $37.5 billion in 2019, a decline of 17%.

In total, the top five spenders, which are expected to represent 66% of total outlays this year, are forecast to cut their capital spending by 14% in 2019 with the remaining semiconductor industry companies registering a 7% decline.

Mentor, a Siemens business, today announced that DECA Technologies has become the latest member of Mentor’s (outsourced assembly and test) OSAT Alliance – a program to help drive faster adoption of new, high-density advanced packaging (HDAP) technologies like 2.5D IC, 3D IC and fan-out wafer-level packaging (FOWLP) for customer integrated circuit (IC) designs. The Alliance enables mutual customers to better leverage Mentor’s proven HDAP flow to quickly bring to market innovations for internet of things (IoT), automotive, high-speed communications, computing and artificial intelligence (AI). DECA is supporting this objective by making available to Mentor and DECA’s mutual customers a new assembly design kit (ADK) for DECA’s M-Series advanced fan-out wafer-level package (FOWLP) process to be used with Mentor software.

Through the alliance, the two companies are offering a comprehensive tool flow that gives mutual customers the ability to create and evaluate multiple complex IC package assemblies and interconnect scenarios in an easy-to-use, data robust graphical environment prior to and during physical design implementation.

The Mentor flow from DECA Technologies features industry-leading tools:

  • Xpedition® Substrate Integrator – for engineers to evaluate M-Series package and configuration before committing to design; and for DECA configuration of customer designs into selected M-Series package.
  • Xpedition® Package Designer – for engineers to design/layout a single or multi-die M-Series package.
  • Calibre® 3DSTACK – for signoff leveraging the M Series ADK – ensures die or multiple dice and package design conform to M-Series manufacturing rules.

The DECA ADK provides mutual customers with a verified sign-off fabrication rule deck for Calibre 3DSTACK that will enable companies to converge on sign-off faster and with less verification cycles.

“Being part of the Mentor OSAT Alliance has allowed DECA to fast-track the creation of a Mentor-based ADK for our breakthrough M-Seriesä FO-WLP technology,” said Chris Scanlan, senior vice president at DECA Technologies. “Since the Mentor flow includes Calibre, the golden signoff solution for the fabless ecosystem, our customers are able to quickly close any physical verification issues for their entire solution, resulting in faster time to market.”

Mentor continues to spearhead the EDA industry by enabling the entire ecosystem to adopt new technologies via its OpenDoor program and the various alliances that fall under the program. The OSAT Alliance program helps promote the adoption, implementation and growth of HDAP throughout the semiconductor eco-system and design chain, enabling system and fabless semiconductor companies to have a friction-free path to emerging packaging technologies.

“We are pleased that HDAP technology pioneer DECA Technologies has joined the Mentor OSAT Alliance,” said AJ Incorvaia, vice president and general manager of Mentor’s Electronic Board Systems Division. “In doing so, and by providing a fully validated ADK for DECA’s M-Series FOWLP process for Mentor’s proven HDAP tool flow, we have enabled customers to more easily transition from classic chip design to 2.5 and 3D solutions.”

IC Insights’ November Update to the 2018 McClean Report, released later this month, includes a discussion of the forecasted top-25 semiconductor suppliers in 2018 (the top-15 2018 semiconductor suppliers are covered in this research bulletin).  The Update also includes a detailed five-year forecast of the IC market by product type (including dollar volume, unit shipments, and average selling price).

The expected top-15 worldwide semiconductor (IC and O-S-D—optoelectronic, sensor, and discrete) sales ranking for 2018 is shown in Figure 1.  It includes seven suppliers headquartered in the U.S., three in Europe, two each in South Korea and Japan, and one in Taiwan.  After announcing in early April 2018 that it had successfully moved its headquarters location from Singapore to the U.S., IC Insights now classifies Broadcom as a U.S. company.

In 2Q18, Toshiba completed the $18.0 billion sale of its memory IC business to the Bain Capital-led consortium. Toshiba then repurchased a 40.2% share of the business.  The Bain consortium goes by the name of BCPE Pangea and the group owns 49.9% of Toshiba Memory Corporation (TMC).  Hoya Corp. owns the remaining 9.9% of TMC’s shares.  The new owners have plans for an IPO within three years. Bain has said it plans to support the business in pursing M&A targets, including potentially large deals.

As a result of the sale of Toshiba’s memory business, the 2018 sales results shown in Figure 1 include the combined sales of the remaining semiconductor products at Toshiba (e.g., Discrete devices and System LSIs) and NAND flash sales from Toshiba Memory Corporation.

In total, the top-15 semiconductor companies’ sales are forecast to jump by 18% in 2018 compared to 2017, two points higher than the expected total worldwide semiconductor industry 2018/2017 increase of 16%.  The three largest memory suppliers—Samsung, SK Hynix, and Micron—are each forecast to register greater than 25% year-over-year growth in 2018 with SK Hynix expected to log the highest growth among the top 15 companies with a 41% surge in sales this year.  All of the top-15 companies are expected to have sales of at least $8.0 billion in this year, two companies more than in 2017.  Nine of the top-15 companies are forecast to register double-digit year-over-year growth in 2018.  Moreover, five companies are expected to have ≥20% growth, including four of the big memory suppliers (Samsung, SK Hynix, Micron, and Western Digital/SanDisk) as well as Nvidia.

Figure 1

The largest move upward in the ranking is forecast to come from Western Digital/San Disk, which is expected to move up three spots to the 12th position.  In contrast, NXP is expected to fall two places to 13th with a sales increase of only 1% this year.  However, the worst-performing company in the ranking is forecast to be Qualcomm with a semiconductor revenue decline of 3% this year, the only top-15 company expected to register a drop in sales.

Intel was the number one ranked semiconductor supplier in 1Q17 but lost its lead spot to Samsung in 2Q17. It also fell from the top spot in the full-year 2017 ranking, a position it had held since 1993.  With the strong surge in the DRAM and NAND flash markets over the past year, Samsung is forecast to go from having 7% more total semiconductor sales than Intel in 2017 to having 19% more semiconductor sales than Intel in 2018.

Memory devices are forecast to represent 84% of Samsung’s semiconductor sales in 2018, up three points from 81% in 2017 and up 10 points from 71% just two years earlier in 2016.  Moreover, the company’s non-memory sales in 2018 are expected to be only $13.3 billion, up only 6% from 2017’s non-memory sales level of $12.5 billion. In contrast, Samsung’s memory sales are forecast to be up 31% this year and reach $70.0 billion.

The top-15 ranking includes one pure-play foundry (TSMC) and three fabless companies.  If TSMC were excluded from the top-15 ranking, Taiwan-based MediaTek would have been ranked in the 15th position with forecasted 2018 sales of $7.9 billion, up only 1% from 2017.

IC Insights includes foundries in the top-15 semiconductor supplier ranking since it has always viewed the ranking as a top supplier list, not a marketshare ranking, and realizes that in some cases the semiconductor sales are double counted.  With many of our clients being vendors to the semiconductor industry (supplying equipment, chemicals, gases, etc.), excluding large IC manufacturers like the foundries would leave significant “holes” in the list of top semiconductor suppliers.  Foundries and fabless companies are identified in the Figure.  In the April Update to The McClean Report, marketshare rankings of IC suppliers by product type were presented and foundries were excluded from these listings.

Overall, the top-15 list is provided as a guideline to identify which companies are the leading semiconductor suppliers, whether they are IDMs, fabless companies, or foundries.

SEMI, the global industry association serving the electronics manufacturing supply chain, today voiced support and encouragement for trade discussions between U.S. President Donald Trump and People’s Republic of China President Xi Jinping – talks that are planned for Dec. 1 during the G20 Summit in Argentina. Representing the semiconductor industry end-to-end, from chip design through manufacturing, SEMI expressed hope for a deal and offered principles beneficial to the global microelectronics manufacturing supply chain.

“With SEMI members being key enablers of the more than $2 trillion electronics manufacturing supply chain, SEMI has a clear foundational mission based on free and fair trade, open markets, and support for international laws governing IP, cybersecurity and national security,” said Ajit Manocha, SEMI president and CEO. “Adhering to these principles benefits all SEMI member companies and the global ecosystem of industries and applications enabled by semiconductor manufacturing. I commend our global government leaders for returning to the negotiating table.”

Recent tariffs and trade tensions, on top of newly imposed and rumored export controls, have complicated the global electronics manufacturing supply chain, forcing many SEMI member companies to rethink their investment strategies. Over the past six months, SEMI has testified that tariffs threaten to undercut the ability of many SEMI members to sell overseas by increasing costs, stifling innovation, and curbing U.S. technological leadership.

SEMI continues to educate U.S. lawmakers, as well as governments worldwide, about the critical importance of free and fair trade, open markets, and respect and enforcement of IP for all players in the global electronics manufacturing supply chain. As part of this initiative, SEMI is providing the 10 Principles for the Global Semiconductor Supply Chain in Modern Trade Agreements below to government officials and encouraging them to include these guidelines in forward-looking agreements.

These core principles outline the primary considerations for balanced trade rules that benefit SEMI members around the world, strengthen innovation and perpetuate the societal benefits of affordable microelectronics – essential components in all advanced communications, computing, transportation, healthcare and consumer electronics.

10 Principles for the Global Semiconductor Supply Chain in Modern Trade Agreements

1. Affirm principles of non-discrimination.

Non-discriminatory treatment is a central tenet of the global trading system. SEMI strongly believes that any trade deal should provide that all products from a party to the deal cannot be put at a competitive disadvantage in any other party’s market. Related, any agreement must be fully compliant with the World Trade Organization’s rules.

2. Maintain strong respect for intellectual property and trade secrets through robust safeguards and significant penalties for violators.

Protection for intellectual property are essential for the semiconductor industry. These standards enable the ability to innovate and grow. SEMI supports robust copyright standards, strong patent protections, and regulations that safeguard industrial design. SEMI also strongly supports rules that preserve trade secrets protection, including establishing criminal procedures and penalties for theft, including by means of cyber theft.

3. Remove tariffs and end technical barriers on semiconductor products.

Parties should eliminate tariffs and technical barriers on semiconductors and all technology products, that rely on electronic chips. Removing tariffs and technical barriers is crucial for businesses, especially for small and medium-sized enterprises, in penetrating new markets. Related, any trade deal should open markets for services providers, ensuring that all face fair and transparent treatment.

4. Simplify and harmonize the customs and trade facilitation processes.

The trade deals should include strong commitments on customs procedures and trade facilitation to ensure that border processing will be quick, transparent, and predictable. The parties should also work to use electronic customs forms to expedite customs processing.

5. Combat any attempts of forced technology transfer.

All trade deals should have clear and firm rules that prohibit countries from requiring companies to transfer their technology, intellectual property, or other proprietary information to persons in their respective territories.

6. Enable the free flow of cross-border data.

In today’s global economy, all industries, including the semiconductor industry, rely on the free flow of data. Countries should refrain from putting in place unjustifiable regulations that limit the free flow of information, which simply serve to curb innovation and impact growth. SEMI supports provisions that enable the movement of data, subject to reasonable safeguards for privacy and other protections.

7. Eliminate forced data localization measures.

Many countries have created laws that require physical infrastructure and data centers in every country they seek to serve, which adds unnecessary costs and burdens. Forward-looking policies should eliminate the use of forced data localization measures.

8. Harmonize global standards to achieve “one standard, one test, accepted everywhere.”

Businesses should not have to face different standards for each market they serve. Global standards, driven by industry, should be market-oriented, and there should be strong commitments on transparency, stakeholder participation and coordination.

9. Create transparent rules for state-owned and -supported enterprises to ensure fair and non-discriminatory treatment.

SEMI supports a trade deal that contains robust commitments to ensure that state-owned and -supported enterprises compete based on performance, quality and price, as opposed to discriminatory regulation, opaque subsidies, favoritism, or other tools that artificially benefit state-backed businesses.

10. Establish protections for companies and individuals that respect privacy while also balancing security.

Any trade deal should have firm consumer protections, including privacy, that enables ease of use, but also does not forgo security. SEMI support efforts to use encryption products in support of this venture and also believes that parties should work to advance efforts on cybersecurity through self-assessment, declaration of conformity, increased cooperation and information sharing, all of which will help prevent cyber-attacks and stop the diffusion of malware.