Samsung leads renewed spend in semiconductor market

Analyst company Gartner predicts that new capital spending by South Korean suppliers will help boost growth in the semiconductor market.

Worldwide capital spending on semiconductors is predicted to grow by 11.4 percent to $64.5bn this year from $57.8bn in 2013, according to analyst firm Gartner.

Furthermore, capital spending on equipment is expected to increase by 17.8 percent in 2014, driven by memory prices holding firm and increasing demand for consumer products.

While capital spending outperformed equipment spending in 2013, the reverse will hold true for 2014 said David Christensen, senior research analyst at Gartner who said total capital spending will grow 11.4 percent in 2014, compared with 7.1 percent in its prior forecast which he said was "a result of Samsung increasing its announced spending plans to $14bn".

Equipment spending will increase 17.1 percent, as manufacturers pull back on new fab construction and concentrate on ramping up new capacity instead, he said.

Overall, Gartner is predicting continuing growth in the market with just a "modest pause" in the equipment market in 2016.

This growth is partly a reaction to a sustained period of consolidation in the semiconductor market as major companies have been acquiring complementary and competitive companies .

Gartner also says that advances in chip-making equipment are driving up development costs which is driving the current spate of consolidation in the industry, a trend that it expects to continue.

"Foundries will continue to outspend the logic integrated device manufacturers in 2014," Gartner said, with foundry spending rising by 4.5 per cent in the year, in contrast with the 0.3 per cent decrease in total logic spending.

Semiconductor capital spending is one indicator of how the broader consumer electronics market is likely to develop over the next few years. For example in the longer-term, total foundry spending will be flat which the analysts put down to "the predicted mobility market saturation".

The outlook for memory capital expenditure will be strong for 2014 with a 40 per cent increase in the current forecast according to Gartner, which compares to a 25 per cent increase in the previous quarter.

Worldwide Semiconductor Manufacturing Equipment Spending Forecast, 2013-2018 ($Millions)

 

2013

2014

2015

2016

2017

2018

Semiconductor Capital Spending ($M)

57,840.27

64,459.27

70,142.89

67,245.25

69,636.55

74,258.82

Growth (%)

-1.5

11.4

8.8

-4.1

3.6

6.6

Capital Equipment ($M)

 33,452.00

39,157.26

43,601.17

 40,420.48

44,218.22

47,400.08

Growth (%)

-11.6

17.1

11.3

-7.3

9.4

7.2

 

Wafer Fab Equipment ($M)

 

27,278.07

 

32,074.60

 

35,500.57

 

33,507.82

 

36,126.71

 

38,393.06

Growth (%)

-8.0

17.6

10.7

-5.6

7.8

6.3

Wafer-Level ManufacturingEquipment ($M)

28,758.10

33,793.29

37,558.82

35,606.12

38,663.41

41,418.46

Growth (%)

 

     -8.5

   17.5

   11.1

  -5.2

  8.6

7.1

Wafer-Level Packaging and

Assembly Equipment ($M)

 

     1,480.02

 

1,718.69

 

2,058.26

 

2,098.30

 

2,536.70

 

3,025.40

Growth (%)

      -17.8

16.1

19.8

1.9

20.9

19.3

 

Die-Level Packaging and Assembly

Equipment ($M)

 

 

     2,868.68

 

 

3,232.37

 

 

3,631.03

 

 

2,846.72

 

 

3,231.03

 

 

3,476.59

Growth (%)

     -25.8

12.7

12.3

-21.6

13.5

7.6

 

Automated Test Equipment ($M)

 

     1,825.22

 

2,131.60

 

2,411.32

 

1,967.64

 

2,323.78

 

2,505.04

Growth (%)

      -27.6

16.8

13.1

-18.4

18.1

7.8

Source: Gartner

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

Samsung is a key supplier, the analysts say, because it 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, SK Hynix announced that it would invest $1.7bn at its Icheon, South Korea, complex to build a new fab shell and clean room.

"This leaves a scenario in which both of the South Korean vendors are bringing on new DRAM wafer capacity, pushing bit supply growth to 36 per cent in 2016," the analysts said, and then predicted that there will be a mild demand growth that will "moves the market into oversupply".

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