Analyzing some figures from “5 IC makers join $3B capex club”…..
Taking just the top 4 spenders and UMC -
Samsung made a quantum jump in total capital spending from $3.5B in ’09 to $9.6B in’10 – a 173% increase, It was the top spender in chip capex in ’10 (interestingly it’s ’10 capital spending was not too less than the combined cap spending of the next two entries in the list - Intel and TSMC). It’s ’11 forecast of $9.2B is a 4% dip from its ’10 spending – making it figure at the bottom of the 2011 major spenders ranked by forecasted spending change from the previous year. The absolute forecasted amount for ’11 is, though, still slightly higher than Intel’s $9B. However Samsung is known to outspend its target every year and analysts still predict a %-10% industry capex outlook.
The company is also cutting down on its DRAM spending. While overall semiconductor spending budget change is forecasted as 0% this year, the foundry spending is up (double of ’10) – still at record levels. Another interesting point to note is that in ’10 (a year in which % change in its capital spending from the previous year was a good 173%), Samsung’s capex/sales ratio (~38% with 9.6B capex and $25B sale, as estimated in mid ’10) was not too far off from its long term average of 32%.
Coming to Intel - Intel’s capex spending in ’10 was much less than Samsung for the same year ($5.2B vs. Samsung’s $9.6B) but is forecasted to be a massive one (73%) this year. However as pointed our earlier, the ’11 forecasted absolute amount will be slightly less than Samsung’s. This comes after a year which Intel called a record year and its best year. Major reasons cited for the industry bellwether’s increased capex in ’11 are - 22nm transition and expected increase in demand. Intel is approaching 22nm transition in ’11 and it also sees tremendous growth opportunities this year, especially with Atom based SoCs in smartphones, tablets, smart devices etc. as well as PC& server segments. Plus, it should not be forgotten that Intel is growing from 3 high volume leading edge fabs to 4.
Next the world’s top pure-play foundry – TSMC made major investment in’10 - a 120% ‘09/’10 % change amounting to $5.9B – slightly higher than Intel and much less than Samsung. However, the table indicates only a marginal forecasted ‘11/’10 % change – 7%, absolute sum of $6.3B. Note, though, that this is the highest absolute sum forecasted amongst all foundries.
Besides capacity, TSMC has always focused on being the technology leader amongst all the foundries. Recent news items point to TSMC’s high R&D spending in ’10 (the company’s R&D spending rose by 44% to reach $945M – moving it into the top 10 in R&D spending - and making it the first pure-play foundry to move into the top 10 semiconductor R&D spending club. TSMC hopes to catch a bigger share of the 28nm market this year.
Coming to GlobalFoundries – The y-o-y % changes are quantum (490% - ‘09/’10 and 96% - ‘11/’10) but then look at the starting point in ’09 - $466m which is quite low compared to TSMC and less than UMC’s too for that year – it had a lot of catching up to do. The foundry is in the process of expanding its current facilities (leading edge facility in Dresden/Germany), building the new manufacturing facility in NY and financing another production facility that will be located in Abu Dhabi.
The expansion focus in Dresden facility will be on adding new capacity to support additional growth opportunities for 45/40/28nm technologies as well as initial 22nm development. Target is to scale output to up to 80 thousand wafers/month over the next two years. The company has also been expanding its Fab 7 in Singapore to reach 50 thousand wafers/month across technologies ranging from 65nm to 40nm. GF’s 300mm output will be around 90 thousand wafers/month when all the new expanded facilities become fully operational.
Things are not looking too well for UMC – it started with a slightly higher capex than GF in ’09, spent half of GF’s (‘10/’09 % change) amount in capital in ’10 and is forecasted to keep the same capital spending in ’11. It could not catch up with TSMC especially on the technology front and now looks to be losing out to GF too. On a brighter note, UMC is reported to put CMOS –MEMS devices into volume production in 2011.
All these point to an intensification of competition on the foundry market as well as a rapid expansion of the contract manufacturers. The question is – will the industry see a foundry capacity glut in late 2011??