Semi capex up 11.4% this year and 8.8% next year

Samsung Xian Fab

Worldwide semiconductor capital spending is projected to total $64.5 billion in 2014, an increase of 11.4% from 2013 spending of $57.8 billion, according to Gartner, and will grow another 8.8% to top $70 billion next year.

Capital equipment spending will increase 17.1% in 2014, driven by strong average selling prices (ASPs) and increased demand for consumer products.

“While capital spending outperformed equipment spending in 2013, the reverse will hold true for 2014,” says Gartner’s David Christensen, “capital spending will grow 11.4% in 2014 – result of Samsung increasing its announced spending plans to $14 billion. Equipment spending will increase 17.1%, as manufacturers pull back on new fab construction and concentrate on ramping up new capacity instead.”

In recent years, the equipment industry has consolidated, as major vendors have acquired complementary and competitive companies. As equipment advancements lead to higher development costs, the trend is expected to continue.

Foundries will continue to outspend the logic IDMs in 2014. Foundry spending is expected to increase by 4.5% in contrast with the 0.3% decrease in total logic spending. However, the longer-term outlook for total foundry spending shows a flat profile, as predicted mobility market saturation will dampen the need for new foundry capacity and creates an environment where existing capacity is upgraded to the latest node.

The memory capex outlook remains strong for 2014 with a 40% increase anticipated in the current forecast, compared with a 25% increase in the previous quarter’s forecast. Memory manufacturers are currently enjoying a strong pricing environment, which sets the stage for renewed spending growth.

The current DRAM undersupply will continue through 2015, moving back into an oversupply in 2016 as new wafer capacity is added to the market.

Samsung has announced that it will be using one floor of its newly completed S3 fab in Suwon, South Korea, for DRAM production.

In late December 2013, Hynix announced that it would invest $1.7 billion at its Icheon, South Korea, complex to build a new fab shell and clean room.

This means both Korean vendors are bringing on new DRAM wafer capacity, pushing bit supply growth to 36% in 2016.

This combined with the mild demand growth in the same period moves the market into oversupply.

david manners

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