2012 was a challenging year for a long list of reasons: weakness in PC demand, DRAM and overall memory price deterioration, semiconductor inventory rationalization, continued global macroeconomic uncertainty from lower global GDP growth, a slowdown in China, the Eurozone debt crisis and recession, Japan's recession, and the impact of the "fiscal cliff." In 2013, analysts see renewed vigor for chip sales.
Fab equipment spending shrinks back to flat
Christian Gregor Dieseldorff,
director, SEMI Industry Research & Statistics, San Jose, CA USA
Despite difficult times, growing demand for mobile devices (such as tablets and phones) inspires an improved outlook for chip sales in 2013. Various forecasts range from 4% to 16% revenue growth for 2013 (average of forecasts 7%). As observed in the past, chip sales and capex typically ride the same roller coaster; however, 2013 appears to be another year of uncertainty. While chip sales may rise in 2013, expectations for equipment range from timid 5% growth down to double-digit decreases — definitely not the same roller coaster.
The largest spenders on fab equipment are Samsung, TSMC and Intel. As of mid-December 2012, some of these companies still have not made any official announcement about 2013 capex plans.
The SEMI Consensus Forecast and the SEMI World Fab Forecast, with data collected from two different methodologies, point to the same conclusion. The year-end Consensus Forecast for wafer processing predicts 0% growth (flat) for 2013. Meanwhile, the World Fab Forecast report for Front End Fabs (published November 2012) also shows 0% growth (flat) for 2013 and total fab equipment spending hovering at US$ 32.4 billion (including Discretes and LEDs, used equipment and in-house equipment). The projected number of facilities equipping will drop, from 212 in 2012 to 182 in 2013. Fab equipment spending saw a drastic dip in 2H12 and, accounting for seasonal weakness and near-term uncertainty, will be even lower in 1Q13. Examining equipment spending by product type, System LSI is expected to lag in 2013. Spending for Flash declined rapidly in 2H12 (by over 40%) but is expected to pick up by 2H13. The foundry sector is also expected to increase in 2013, led by major player TSMC, as well as Samsung, Globalfoundries and UMC.
While fab construction spending slowed in 2012, at -15%, SEMI data projects an increase of 3.7% in 2013 (from $5.6 billion in 2012 to $5.8 billion in 2013). The World Fab Forecast tracks 34 fab construction projects for 2013 (down from 51 in 2012). An additional 10 new construction projects (with various probabilities) may start in 2013. The largest increase for construction spending in 2013 is expected to be for dedicated foundries and Flash-related facilities.
In 2012, many device manufacturers stopped adding new capacity due to declining average selling prices and high inventories. This is most pronounced in the Flash sector, as seen with Sandisk since the beginning of 2012, and both Samsung and Toshiba starting 3Q12.
Breaking down the industry by product type, capacity growth for System LSI is expected to decrease in 2013. Flash capacity additions dragged in 2H12. But more activity is expected for Flash by mid-2013, with nearly 6% growth. The data also point to a rapid increase of installed capacity for new technology nodes, not only for 28nm but also from 24nm to 18nm and first ramps for 17nm to 13nm in 2013.
If the global economy and GDP begin to improve, and chip sales actually do increase in the higher single-digit range, equipment spending is expected to ride the same roller coaster, going even higher for 2013.
The beginning of the next ic industry upturn
President, IC Insights
The expectations for global economic growth consistently deteriorated throughout 2012, with worldwide GDP eventually growing by only 2.6% last year. It should be noted that 2.5% or less worldwide GDP growth is typically considered a global recession. IC Insights' forecast for 2013 worldwide GDP growth is 3.2%. Although this figure is higher than the 2.6% increase logged in 2012, it would still be 0.3 points below the 3.5% long-term average annual global GDP growth rate.
One of the primary reasons for weak 2012 worldwide GDP growth was the negative growth registered by the Eurozone and U.K. economies. Unfortunately, the Eurozone is not expected to display a strong rebound in 2013, with 0.0% growth forecast for the Eurozone economy this year.
China's GDP growth rate dropped to only 7.7% in 2012 with a modest rebound to 8.1% growth forecast for 2013. While many developed countries would welcome 7% or higher GDP growth rates, for China, this figure is significantly below the 10% and greater annual GDP increases logged from 2002-2009. In an attempt to address its economic "slowdown," the Chinese government was quick to inject stimulus into its economy starting in the second half of 2012 by aggressively lowering interest rates as well as enacting $156 billion in construction project programs. While this stimulus was too late to have a significant positive effect on its 2012 GDP growth, China's GDP is likely to get at least a modest boost from this activity in 2013.
While the correlation between worldwide GDP growth and IC industry growth has historically been good, IC Insights believes that the correlation in 2013 will be very good, as it was in 2012. Using a worldwide GDP forecast of 3.2%, the most likely range for worldwide IC market growth in 2013 is 3-7%.
The election-year cycle is one reason why IC Insights has identified 2013 as a possible slow growth year in the worldwide economy and IC industry. Over the past 10 post-U.S.-election years, worldwide GDP growth averaged 3.1% with worldwide IC industry growth averaging only 4%. Moreover, worldwide IC industry growth exceeded 8% in only three of these 10 post-U.S.-election years (1973, 1977, and 1993), and only once since the late 1970s.
IC Insights believes that the IC industry cycles are becoming increasingly tied to the health of the worldwide economy. While poor IC market growth has occurred during periods of strong worldwide economic growth, primarily due to IC industry overcapacity and the resulting IC price declines, it is rare to have strong IC market growth without at least a "good" worldwide economy to support it. Thus, over the next five years, annual global IC market growth rates are expected to closely mirror the performance of worldwide GDP growth.
Overall, the IC industry is set to emerge from a difficult 5-year period of minimal growth. From 2007-2012, the IC market grew at an average annual rate of 2.1%. In IC Insights' opinion, the "bottom" of the current cycle in the worldwide economy and IC industry was reached in 2012 and 2013 will mark the beginning of the next cyclical upturn—one in which the IC market CAGR will more than triple to 7.4% in the 2012-2017 time period.
Healthy revenue growth in 103, but capex outlook cloudy
Director of Technology Research, Semico Research
In February 2012, Semico forecast 2012 semiconductor capex to reach $59.8 billion. In December 2012, that forecast was virtually unchanged at $59.9 billion, down 5.6% from 2011. After two years of double-digit growth (98% in 2010 and 26.2% in 2011), the semiconductor industry needed to back off and regroup. Most concerning is that the gap between the big spenders and the small has expanded. The top ten spenders for 2012 made up 81% of the total; this figure is up from the 76% of the total in 2011. Overall, the top ten combined spent $48.2 billion, which is only 0.3% up from 2011. Meanwhile, the rest of the companies went from spending $15.3 billion in 2011 to $11.7 billion in 2012, a decline of 24%. Some of the decline can be attributed to companies like SanDisk, which, along with its partner Toshiba, delayed fab expansion projects until 2013. Other companies like ST and TI made capacity improvements over the past few years, so spending in 2012 was mainly for maintenance.
In December 2012, most companies have still not announced capex plans for the following year. This year is no different. However, a handful of companies have given some indication of what they might spend next year. For example, TSMC is forecasting 2013 capex to be slightly up compared to 2012. Most of the other companies that have given a hint of 2013's capex have indicated flat to down spending compared to 2012. These companies include GLOBALFOUNDRIES, Avago, Fairchild, Micron, ON Semiconductor, SMIC, Spansion, and STMicroelectronics. GLOBALFOUNDRIES announced its "Vision 2015" initiative to expand 300mm capacity in Singapore, but no budget was announced for the project.
That being said, there are several construction projects that may give some indication of spending in 2013. Samsung is retrofitting its Austin fab to switch from NAND to logic production, with mass production beginning in the second half of next year. This is a $4 billion project spread out over 2012-2013. Intel's D1X and Fab 42 construction will wrap up in 2013; the company will also begin production at 14nm by the end of this year. Samsung, TSMC, and GLOBALFOUNDRIES are also working on the 14nm and 20/22nm nodes. UMC has Fab 12A Phases 5 and 6 under construction, with production schedule to begin in 2014. SanDisk and Toshiba will probably increase their spending to complete the ramp of Fab 5, which they said would be complete by the end of 2013.
Based on current indications, capital spending would seem to be flat in 2013. However, Semico predicts healthy revenue growth this year, which may encourage more spending, particularly in the second half of the year. This may bring total capex for 2013 into the positive range.
An economic outlook for the global IC market
Managing Partner, Linx Consulting LLC.
Past contributors to this feature have often noted a correlation between the semiconductor market growth and global GDP. With careful correction this correlation can be used to forecast future IC market trends, although the process is not straightforward.
The consensus forecast for global GDP 2013 is now below trend at 2.6%, only a slight improvement over 2012, and less than the 3.2% seen in 2011. The US approach to solving fiscal Cliff is an excellent example of the difficulty governments are having in developing strategies to address unprecedented economic problems, although political solutions, however imperfect, helps to stabilize expectations, and solidify financial markets. In Europe, mild recession will continue through most of 2013, and Asia (excepting Japan) will likely show the best overall growth rates in the coming 12 months as measures to cool the Chinese economy are relaxed.
These extraordinary conditions in the global economy lead to wide variations in economic forecasts with an upside as high as 3.5% growth, and a pessimistic case as low as 1%. Against this backdrop, meaningful macroeconomic demand-side forecasts are difficult to develop.
Linx has worked with Hilltop Consulting to implement a proven macroeconomic forecasting tool that takes into account the global economic shocks and volatility to develop an Silicon area forecast for the global semiconductor industry. Predictions for 2013 show several notable trends:
- Overall silicon area growth for 2013 should average approximately 6%.
- The first quarter and the second half are likely to show slower growth than the second quarter. This trend is part of a seasonality which has been swamped by economic volatility over the last 3 to 4 years.
- The modest growth forecast for 2013 is predominantly demand driven since inventory levels have not shown a significant spike in 2012.
The overall picture of Si area growth breaks down into the expected performance of device segments and technology nodes. Despite the shift to consumer electronics and mobile platforms we expect growth to be concentrated in CMOS products at ≤ 65nm with a continuing slowing of unit growth and analog and discrete devices. Strongest growth will remain with flash memories, and advanced foundry logic devices targeted at tablets and phones.
In contrast to advanced memory and logic processing, approximately 56% of the Si production continues at design dimensions in excess of 90 nm on wafer sizes of 200 mm or smaller. This market segment is extremely sensitive to economic volatility and has declined somewhat in the last four years. Manufacturers of these devices are often capital constrained and extremely cost sensitive, leading to little process innovation and limited capacity expansion.
On a technology basis, despite tight capital budgets, the introduction of devices at 28 and 22 nm half pitches continues apace, and significant process challenges are driving increased complexity and resultant challenges in patterning, cleaning, and deposition throughout the device manufacturing process. 2012 is forecast to have produced more silicon area at 32 nm than any other node, and the introduction of low 20 nm half pitches and flash has continued to grow startling rates. Significant challenges also exist in the in the advanced device markets due to geometric constraints and physical limits in scaling planar devices. At a time when lithography is unable to scale continuing device shrinks results in added complexity in critical patterning steps and demands the addition of multiple lithography steps to achieve a single pattern level.
Manufacturers of logic and memory alike are working to develop substitute technologies for planar transistors, MIM capacitors and floating gate structures. The broad introduction of metal gate finFETs, new types of storage cells, and three-dimensional memory stacks is still several years away, and this is driving interest in the adoption of three-dimensional packaging technologies such as through silicon vias to continue delivering increasing functionality in a package.
Despite the headwinds of increasing layer counts to compensate for the lack of high resolution lithography, and the need for new deposition technologies needed for novel processes and device architectures, we expect a small group of wafer makers to continue to chase these advanced technologies, while also pushing to implement 450 mm wafers. Few of these technologies will see implementation in 2013, but they will be the focus of headlines as new breakthroughs are made, while the semiconductor industry continues its trend of remarkable success.
Beyond CMOS, steady growth and accelerating change across non-mainstream chip markets
President & CEO, Yole Développement
Sensors and optoelectronics will continue to grow faster than the mainstream semiconductor market. We currently expect 9%-13% growth in these sectors in 2013, accompanied by rapid changes in technology and market structures as well, as the specialty markets become increasingly mature.
MEMS and image sensors will continue to ride the smart phone and tablet wave, while declining LED bulb prices will start to push the technology towards wider adoption. Demand for power electronics will pick up after its 2012 plunge.
We expect the MEMS market to continue its steady double digit growth with an ~9-11% increase to around $12 billion in 2013, driven of course by increasing adoption of the sensors in the expanding smart phone and tablet business. We expect the penetration of accelerometers into mobile phones and tablets will approach 65% by the end of 2013, with magnetometers nearing 54% and gyroscopes flirting with 34%. Growth will begin to transition from discrete sensors to combinations of two sensors in one package with a single ASIC to reduce costs, and to increasingly sophisticated software solutions that translate the sensor data into usable functions. These trends are driving changes in the competitive landscape, with a crowd of new players targeting the key 3-axis gyroscope market, others introducing other new MEMS applications for the mobile market, chipset and software suppliers taking over the sensor management tasks, and a diversification of business models as the industry evolves. Healthy increases in the smart phone applications—and in other consumer products increasingly enabled by these low cost, easy to integrate product—will be somewhat countered by slower growth in mature TV and printer applications.
The smart phone and tablet market is also driving healthy growth in CMOS image sensors. We expect ~11-13% growth to $7.5B in 2013. Backside illumination and 3D wafer-level packaging technologies will continue to rapidly gain market share, and new stacked sensor architectures will likely follow soon. These technological changes are bringing changing business models as well, as IDMs who are not vertically integrated up through the systems level will increasingly turn to outsourcing production to foundries.
In the high brightness LED market, the TV backlighting market has slowed and the solid state lighting market has yet to really take off, but we still expect respectable ~10% growth for packaged LED devices in 2013, as rapidly improving technology, and an excess supply of devices from the backlight side, will drive down LED bulb prices to start to drive wider adoption. We expect LED penetration of the lighting market across all segments (residential, industrial, outdoor and commercial) to reach about 8% of all lamps sold in 2013, to occupy about 2% of all lamp sockets. As in most of these non CMOS chip sectors, however, demand for more die doesn't necessarily translate into demand for more manufacturing equipment. We expect sales of front end equipment in 2013 to recover about 30% from its 2012 dropoff, but not back to peak levels of the boom years. Companies will start adding capacity again in the second half of the year for the ramp up in wafer area needed for the volume lighting market. But some of that capacity will come from stronger producers acquiring struggling suppliers and their underutilized equipment.
We expect recovering demand for discrete power devices to drive ~10% growth in power electronics to some $20 billion in 2013, after what we estimate was a ~20% drop in 2012 as China cut back on its big investments in railroad, solar power and wind power systems. Going forward, green tech demand from hybrid/electric vehicles, wind and PV systems should again help spur sales in 2014-2015, and then support stable 6%-7% long term growth after 2016.
Look for continued consolidation in 2013
President, Infrastructure Advisors
2012 brought a slowdown in consumer spending which has negatively impacted chip unit demand. In fact, chip units have been essentially flat for much of the last two years. However, the good news is that unlike in prior slow periods, average selling prices have maintained a steady level. As a result, the industry sits today with slightly elevated inventories and also with factory utilization levels that are generally about 15 percentage points below normal healthy levels. I look to enter 2013 with continued seasonal slowness, but anticipate that unit volumes and utilization levels will start picking up by the second quarter and throughout the year.
As a result, with utilization rates at the low end of the range, we will not be seeing any significant capacity additions until later in the year. Capital purchases will be primarily for new technology capabilities until unit volumes pick up and in turn drive capacity needs. The Test and Assembly equipment sectors should feel a recovery slightly ahead of their Wafer Fab counterparts since they tend to be more units-driven.
The semiconductor industry and its entire supply chain are certainly maturing and are becoming more dependent than ever on the overall economy. Individual companies either need to have new innovative products to gain market share and drive organic growth, or they need to acquire companies that will take them into new adjacent markets.
In recent years, we have seen consolidation by some of the larger companies in the industry. However, when walking around trade shows such as Semicon West, it is evident just how many small and medium sized companies still exist. For these companies to thrive in a mature market, they need critical mass and now is the time to be looking at strategic alternatives. Such smaller companies with complementary product lines and customers should be looking for merger opportunities. The semiconductor industry is truly global and for example, there are big synergies to be found when bringing together global sales and service operations. Customers prefer working with strong suppliers who will be around to support them for years to come.
Solid State Technology | Volume 56 | Issue 1 | January 2013