Signs of Increasing Investments in Fabs
By Christian Gregor Dieseldorff, SEMI Industry Research and Statistics, San Jose, California (May 25, 2009)
SEMI announces the release of its latest issue of the World Fab Forecast.
It’s no surprise that 2009 is an awful year for fab investment activity. Spending on fab construction projects has declined quarterly since 2008 and, on a year-over-year basis, is expected to fall by 56% in 2009. At less than $2 billion, fab construction spending in 2009 will be at the lowest level in the past ten years. Spending on equipping facilities (R&Ds, pilot and volume fabs) is expected to decline by 50% in 2009.
When Will Conditions Improve?
The latest data from SEMI’s World Fab Forecast, taken quarter by quarter, shows some increase in investment for both fab construction projects and fab equipping in the 2nd half of 2009, with the trend continuing into 2010. For 2010, investments in fab construction projects are expected to nearly double and spending on equipping fabs may increase by about 90%, year over year, off the extremely low levels expected this year.
Figure 1 illustrates history and forecasts for total investments for fab construction projects and equipping fabs, by region, on a quarterly basis. China, Europe/Mideast and Japan show lowest level of construction spending since ten years. Construction spending in South Korea has almost stopped and is at a bare minimum in Southeast Asia. Only in the Americas is investment increasing, with total quarterly spending surging to the $1B mark, mainly due to Intel.
Figure 1 Quarterly Fab Investment Trends by Region
Intel announced a total investment of $7B over the next two years, as they upgrade fabs to 32nm. In 2008, Intel was the third largest spender for fabs equipping, and is now expected to jump to the top spending position for both 2009 and 2010, surpassing Samsung and Flash Alliance, the top two spenders in 2008.
When Globalfoundries launched at the beginning of 2009, it committed to spend a minimum of $3.6B and up to $6.0B over the next five years from Advanced Technology Investment Company (ATIC), which holds over a 65% stake of Globalfoundries. These funds will equip their facilities in Dresden, Germany, and in upstate New York. The Luther Forest fab in Malta, New York is expected to begin construction by mid-2009, with an investment of about $4B.
The way companies spend money is affecting the fab investment landscape in 2009 and 2010. Figure 2 illustrates the difference between the 2007-2008 and the 2009-2010 timeframes in terms of which companies dominate total investment in fabs. Comparing top spenders in the Europe/Mideast region, Intel’s leading position shifts dramatically as Globalfoundries (AMD/ATIC) pushes into the lead.
Figure 2 2007/2008 vs. 2009/2010 Spending in Europe/Middle East Region
Figure 3 illustrates how the spending landscape changes for the Americas. Although Intel spent more than any other company in 2007-2008, it will now spend more than all the other companies combined in 2009-2010.
Figure 3 2007/2008 vs. 2009/2010 Spending in Americas Region
Other regions (such as Taiwan) are experiencing similar shift in terms of ranking top spenders. As most of the Memory makers reduce their spending, the share of other companies, such as TSMC, in total spending increases. In China, the share of Hynix-Numonyx JV in 2007-2008 was 46% and is expected to decline to about 12% in 2009-2010.
Some Fabs Closing, a Few Operations
Figure 4 illustrates historical data, since 1995, of the number of facilities beginning operations and those being closed each year. The chart includes projections for 2009 and 2010.
Since 1999, the industry went through three severe periods of fab closures. The first was in 1999 with over 40 fab closures. The second and worst to date was in 2002, following the Dot.com Bubble burst, with almost 60 fab closures.
The third period began in 2008. About 19 facilities closed in 2008 and we expect about 35 facilities to close in 2009. Fab closures, however, seem to slowdown in 2010 with only about 14 facilities projected to close.
Remarkably, there are still fabs beginning operations in 2009, with up to nine facilities beginning operations. Overall the trend of new facilities beginning operations has slowed down since 1995. This may be explained because most new fabs are 300 mm Megafabs for Memory production: fewer though larger fabs are being built. (The World Fab Forecast shows which companies are closing fabs and which are beginning operations.)
Figure 4 Annual Count of Fabs Closing or Starting Operations
In these days when most companies are laying off and closing fabs, it is good to learn of companies that are actually hiring. While TSMC announced hiring hundreds of new engineers for speedy 40nm ramp (that it is re-hiring employees previously laid off), CEITEC of Brazil is hiring new employees. CEITEC SA is a RFID and Analog company in Brazil managing the lone 200mm fab south of the Rio Grande. This fab experienced a long phase of equipping, and is finally able to offer products targeting niche markets in the RFID and Analog sector. Their design facility was inaugurated in March 2009, and the 50k wafers per year fab is already producing its first products.
Several new fabs are expected to begin construction in 2009: three in Europe/Mideast (including Russia) and two in the Americas. Only one of the new facilities will be a high volume fab (Globalfoundries). In 2010, about seven facilities are expected to begin construction; of these, five are considered high-volume fabs. (For details on which companies are beginning what type of fab, check out the World Fab Database reports that SEMI just published.)
Low Utilization Rates but High Installed Capacity
Total installed capacity typically changes only when the product mix changes or when equipment is being removed (such as when fabs are closed).
Worldwide installed capacity for 2009 will decline by about 3% to 15 million wafers per month (200mm equivalents), mainly due to fabs being closed. However, data from the World Fab Forecast show that total installed capacity for 2010 could increase by about 6%, to over 16M wafers per month.
Memory and Logic fabs are expected to take the biggest hit in 2009 with a capacity decline of 5-7% each of installed capacity due to closing fabs.
Installed capacity for foundries remains steady at 3.2M wafers per month in 2009. It is expected to increase by over 9% in 2010. Considering that utilization rates for foundries decreased in 4Q08 to 56% and to 35% in 1Q09, there is a lot of idle installed capacity available, so companies will be cautious in planning capacity investments.
Looking ahead, almost all foundries have announced that utilization rates will increase, from the 30-40% range in 1Q09 to 60-75% in 2Q09, while some 300mm foundry fabs are reportedly running fully loaded this month. For example, Vanguard International (VIS) expects to see positive gross margin in 2Q09 with fab utilization rates climbing to 60% in 2Q09 from 33% in 1Q09. UMC’s utilization rate in 1Q09 was 30%, but is expected it to reach 75% in 2Q09. SMIC, with the help from local demand, expects to be profitable in 4Q09.
Summary: Positive Signs
Companies and industry observers are looking for positive changes in the global economy. The Wall Street Journal reports consumer confidence is increasing from March’s 26.9 to April’s 39.2 (based on April 28 2009 market data). The Present Situation index rose only a little from 21.9 to 23.7, but the Expectations index climbed from 30.2 to 49.5, as respondents were a bit more optimistic about business conditions. Stock indexes such as DOW Jones, DAX, NIKKEI and TOPIX show slow but increasing values in May 2009.
In the semiconductor market, spot and contract prices for 16 GB NAND are increasing again (from their lowest level in December 2008). Although demand forecast for 2009 has slowed down, demand forecast for the overall NAND Market looks good, showing an increase from below 10 Billion GB in 2009 to over 30 Billion GB in 2011 and over 60 Billion GB in 2012.
The recent released World Fab Forecast and FabFutures show that signs of increasing activities are already happening and more are anticipated so the industry can begin to move forward again to invest in both new technology and new capacity.
SEMI’s World Fab Forecast tracks money spent on Front End semiconductor facilities that are equipping, which includes volume fabs, R&Ds and Pilot fabs, fab construction projects, investments for capacity, and investments for technology and product upgrades.
SEMI World Fab Forecast report provides high-level summaries and graphs; in-depth analyses of capital expenditure, capacity, technology and products, down to the detail of each fab; and forecasts for the next 18 months by quarter. These tools are invaluable for understanding how 2009 and 2010 will look, and learning more about capex for construction projects, fab equipping, technology level, and products.
The difference between the SEMI Worldwide Semiconductor Equipment Market Subscription (WWSEMS) data and the World Fab Forecast and its related Fab Database reports is that the fab database reports track any equipment needed to ramp the fab, upgrade, expand or change its wafer size regardless if it is new equipment, used equipment, or transferred equipment, while WWSEMS tracks only new equipment.
Please visit www.semi.org/fabs for additional information on these reports.
June 1, 2009