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TSMC guides significant CapEx reductions for 2008 and beyond |
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Oct 29, 2007 at 10:26 AM |
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 The largest pure-play semiconductor foundry TSMC sparked renewed uncertainty about the overall capital spending projections of major chip manufacturers and rival foundries in 2008 when executives guided during its third quarter conference call with financial analysts that capital spending would be significantly reduced in 2008 compared to 2007.
Historically, TSMC has spent more than double its rivals and many other chip manufacturers on capital equipment as it grew and maintained the largest share in the foundry market.
However, Lora Ho, TSMC’s Chief Financial Officer, outlined that CapEx for 2007 would come in at the lower end of the guided range of $2.6 billion rather than at the higher range of $2.8 billion.
The majority of capital spending in 2007 was focused on the capacity ramps at TSMC’s two 300mm facilities, Fab 12 & Fab 14. The fact that a previously unaccounted for $82 million of the revised budget would in fact be allocated for the purchase of the used 200mm equipment from Atmel further lowered previous 300mm equipment spending expectations.
In his prepared remarks, Rick Tsai, Chief Executive Officer and President of TSMC said:
“Essentially, what we have done is to improve our CapEx productivity in 2007. We will be able to lessen the need for CapEx in 2008. As a result, our current expectation for the CapEx in 2008 will be significantly lower than the CapEx in 2007. We believe this capital investment will allow us to support the business growth in 2008,” noted Tsai.
Tsai was reluctant to be drawn on the specifics surrounding the ‘significantly lower’ CapEx as the spending levels have yet to be finalized. He also baulked at suggestions from financial analysts that the figure could be as much as a 50 percent reduction!
Tsai explained that the company had been focused on a range of tool productivity programs during the year that had seen productivity levels increase between 5 and 10 percent. Particular emphasis had been placed in key bottleneck areas such as lithography, noted Tsai.
Importantly, Tsai believed that the 9 percent year-over-year capacity increase could be maintained in 2008 and onwards with a lower CapEx level due to the productivity gains.
Tsai also noted that capital expenditure in 2008 will be concentrated on 65nm and 45nm ramps, indicating that technology buys at the 45nm node will run in sequence with capacity buys for 65nm and some half-node migration with the 55nm node.
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