Following on from IC Insights, insight into thinking quarterly instead of yearly for evaluating the improving semiconductor industry market conditions, the research firm believes that capital spending will start to improve in the second quarter and continue to improve through the rest of the year. IC Insights believes that the turning point will coincide with a firming of IC ASPs beginning in 2Q09, due to the production cutbacks over taking affect over the last 6-months.
According to IC Insights, capital spending as a percent of semiconductor sales reached a record low of 17% in 2008 and will decline further in 2009 to approximately 12%, forcing a rise in IC ASPs through 2010 and on through 2012. In turn this will lead to a 15% increase in spending in 2010 and a 35% increase in capital spending in 2011.
Indeed, the market research firm believes that level could be conservative should global economic conditions, industry consolidation and other factors come more into play.
However, Bill McClean, President of IC Insights noted in a recent report that;
‘Total semiconductor industry capital spending in 2013 is expected to reach $47.0 billion. However, as will be shown later, $47.0 billion of capital expenditures are forecast to represent only 13% of total semiconductor sales in 2013. When using the $47.0 billion capital spending figure forecast for 2013, the 1999-2013 average annual increase in semiconductor capital spending is 2.5%. In comparison, the 1999-2013 average annual increase in the semiconductor market is forecast to be 5.9%... Capital spending as a percent of semiconductor sales is expected to continue slowly declining in the future.’
McClean hinted that the new ‘age of conservatism’ by IC manufacturers would mean that capital spending would not spring-back as strongly as previous periods when the industry experienced two years of sequential spending declines, which would have seen increases in spending of 59%.
Importantly, the spending by the major foundries such as TSMC, UMC, SMIC and Chartered Semiconductor is below the required levels, according to IC Insights.
‘Fab-lite IDMs, fabless companies, and pure-play foundries are on a collision course! Just when many large existing and future fab-lite companies are planning to off-load large amounts of capacity to pure-play foundries, the large pure-play foundries (and there are only four) are planning to turn conservative on capital expenditure outlays and, subsequently, capacity additions. This may end up being another case where fab-lite IDMs and fabless companies each plan on using over 50% of the pure-play foundries’ capacity. Unfortunately, there will always be only 100% of capacity available!’