By Christian Gregor Dieseldorff, SEMI Industry Research & Statistics Group
SEMI’s World Fab Forecast report, published in November, predicts that fab equipment spending will decline about -9 percent (to US$32.5 billion) in 2013 (including new, used and in-house manufactured equipment). Setting aside the used 300mm equipment GlobalFoundries acquired from Promos at the beginning of 2013 (NT$20-30 billion), fab equipment spending sinks further, to -11 percent in 2013. The previous World Fab Forecast in August predicted an annual decline of just -1 percent (-3 percent without the used Promos 300mm equipment).
Fab equipment spending slowed in the third quarter much more than anticipated. The fourth quarter is also expected to be slower than previously thought, but will remain the strongest quarter of 2013. See figure 1.
2011 Still Record Year but 2014 Closing in
After two years of decline, the 2014 wafer fab equipment market is expected to grow over 30 percent. Taiwan will be the strongest spending region with over US$9 billion, while Korea and the Americas will each spend at least US$6 billion each, and China and Japan will each spend around US$4 billion.
A growth rate of over 30% brings 2014 close to 2011 spending for wafer fab equipment. Comparing the actual spending numbers for 2014 and 2011, spending in 2014 is expected to be slightly below 2011 levels, about US$39.7 billion for 2011 compared to US$39.5 billion projected for 2014.
Fab Equipment Spending Patterns: Predicting the Next Slow Down?
The industry has displayed a predictable pattern for most of the past 15 years with regards to fab equipment spending: following two years of negative growth, there have been typically two subsequent years of positive growth. See figure 2.
According to the SEMI World Fab Forecast, in 2012 and 2013 the fab equipment market contracted, while the next two years, 2014 and 2015, are expected to be positive. The same scenario occurred from 2008 to 2011. After 2005, just a single year of a small decline, 2006 and 2007 showed growth. The same scenario occurred from 2001 to 2004. This pattern is not new and has been observed by many analysts. However, over these 15 years, the industry has never experienced three consecutive years of growth or three years of decline according to SEMI database tracking. At this point, the pattern points to expected growth in 2015, between 8 and 12 percent. If the pattern holds, another decline will occur in 2016.
2013 — a Maverick Year
Semiconductor revenue growth is usually followed by more equipment spending, with revenue and capex typically riding the same rollercoaster. This is not the case for 2013 as semiconductor revenues are expected to grow — although by single digits — equipment spending will not. See figure 3.
As demonstrated by the above chart, positive semiconductor revenue growth led to positive growth for fab equipment spending (except in 2005), while negative revenue years led to contractions in fab equipment spending. Industry consensus points to about 6 percent semiconductor revenue growth in 2013, though fab equipment spending will contract. With the expected growth in semiconductor revenues for 2014, SEMI’s World Fab Forecast data support much stronger growth for fab equipment spending in 2014. The drop in 2013 may be explained by delays in ramping next generation products and a slower pace of new capacity addition.
Fab Construction Projects Strong in 2013 but Slowing
Across the industry, there are 40 major construction projects on-going in 2013, and 28 are predicted for 2014. Construction spending growth for 2013 is about 40 percent (US$7.5 billion). By 2014, this will drop by -15 percent (US$6.4 billion). The largest construction projects already underway or expected to start soon are Samsung S3 (Line 17), Flash Alliance Fab 5 phase 2, possibly Globalfoundries Fab 8.2, Intel D1X module 2, and TSMC with four facilities. The World Fab Forecast report shows details per fab by quarter.
SEMI’s data support strong equipment spending in both 2014 and 2015, while construction spending is expected to decline in both years, and new capacity additions remain below 4 percent in 2014 and most likely in 2015 as well.
The SEMI World Fab Forecast lists about 1,150 facilities. Since the last fab database publication at the end August 2013 SEMI has made 301 updates to 257 facilities (includiing Opto/LED fabs) in the database. The latest edition of the World Fab Forecast lists 1,149 facilities (including 250 Opto/LED facilities), with 67 facilities with various probabilities starting production this year and in the near future.Learn more about the SEMI fab databases at: www.semi.org/MarketInfo/FabDatabase and www.youtube.com/user/SEMImktstats