June 17, 2011
With semiconductor capital spending on track to increase 10.2% over 2010 to $44.8 billion this year, the market is posed for a decline in late 2012. This, in turn, is expected to lead to a decrease in semiconductor prices in 2013, according to Gartner.
Semiconductor capital revenue--basically investment in manufacturing capability--is expected to slow over the next two years, gaining only 8.6% in 2012 and 1% in 2013. This is due to an oversupply of semiconductor supplies at foundry manufacturers, as well as a looming oversupply of semiconductors in the market and in foundries, forecast Gartner. Intel will be the top capital expenditure spender in 2011, followed by Samsung and TSMC, which each declined one spot. Global Foundries will move up to the fourth spot, as it aggressively ramps its project capacity. Hynix will maintain its position within the top five. Overall, the top five players will account for more than 50% of capital purchases this year. "Historically and moving into the future, the semiconductor industry is very cyclical," said Peter Middleton, analyst for Gartner, in an interview. "When there's a boom in demand, semiconductor manufacturing facilities go all out, which tends to produce the cheapest unit costs. Booms come to an end and tend to produce a cyclical downturn, and we project that will continue into 2013." The current boom cycle of the semiconductor market is being driven by aggressive foundry spending, integrated device manufacturer (IDM) logic capacity, and memory companies gearing up for double patterning, or producing chips at the 32-nm scale. In 2009, global semiconductor revenue fell by 10.5% from 2008, but rebounded in 2010, according to Gartner. Yet, beginning next year, semiconductor capital equipment spending will decline by 2.6%. In late 2013, the beginning of the next cyclical decline should begin as the impact of oversupply takes its toll. This is expected to drive down prices for semiconductors. The Japanese earthquake and subsequent tsunami did little to disrupt the manufacturing and supply chain of the worldwide semiconductor market, due primarily to a reserve supply of semiconductors, Middleton said. However, the country may struggle with long-term semiconductor demands as it readjusts its power needs away from nuclear power. "I think long term, (Japan) has to take a look at how they can fill in the loss of some of their nuclear capabilities," Middleton said. "We mention this because the electronic industry is dependent on stable electrical power to the extent the electrical policy could shape production." Worldwide wafer fab equipment revenue is expected to grow this year by 11.7%, which is being driven by Intel, foundry companies, and continuing investments in NAND flash. Intel announced a partnership earlier this year with Micron Technology called IM Flash Technologies, which is shrinking the size of NAND flash memory to 20 nanometers, which will make it possible to boost storage in smartphones and tablets while taking up less space on circuit boards. IM expects to begin mass production in the second half of this year. IT teams areas are packing more information on fewer devices, delivering faster throughput while using less space and power, and managing the needs of more applications with fewer people. Our new report shows how smart CIOs will accelerate this trend by adopting new multipurpose arrays and converged networks. Download our report here. (Free registration required.)
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