Expect slow recovery in 2020 to pave the way to a record next year
Global fab equipment spending promises to crawl out of a gloomy 2019 and see a modest recovery this year before a sharp uptick drives record investments in 2021 in a vivid display of the decades-old cyclicality playing out in the semiconductor industry.
Typically – and reliably – fab investments fall into negative territory after two years of growth, though a few periods have bucked that trend with longer stretches of growth, such as the three years from 2016 to 2018 and even a span of four years in the mid-1990s.
When it comes to magnitude, few jumps in average equipment spending can match the leap from US$35 billion over the years 2011 to 2016 to US$59 billion from 2017 to 2021. See figure 1.
Figure 1: Fab equipment spending over time
Over the near term at least, look for no big bounds in average fab equipment spending, according to the latest update of the SEMI World Fab Forecast report. The forecast shows a slow recovery in 2020 – 3% year-over-year (YoY) growth to US$57.8 billion – owing in large part to an 18% expected slump in the first half of 2020 from the second half of 2019. The picture should brighten in the second half of this year as a recovery starts to take hold.
The Coronavirus (COVID-19) outbreak has eroded fab equipment spending in China in 2020, prompting downward revisions to the World Fab Forecast report published in November 2019. Despite continuing headwinds from the virus, China equipment spending will grow about 5% YoY to over US$12 billion this year and surge 22% YoY, or US$15 billion, in 2021. Investments by Samsung, SK Hynix, SMIC and YMTC will drive the growth.
Powered by TSMC and Micron investments, Taiwan will be the top region in spending in 2020 with nearly US$14 billion in equipment investments but drop to third in 2021 with over US$13 billion in spending, a 5% decline.
In 2020, Korea will rank second in fab equipment spending on the strength of investments by Samsung and SK Hynix, logging 31% growth, to US$13 billion, before jumping to the top with a 26% advance, to US$17 billion, in 2021.
Southeast Asia (mainly Singapore) will also register robust growth of 33% YoY, to US$2.2 billion, in 2020 and 26% in 2021.
Of all regions, Europe/Mideast will show the strongest equipment spending growth with a surge of more than 50%, to US$3.7 billion, in 2020 and match that gain in 2021 on the back of investments by Intel, STMicroelectronics and Infineon.
In Japan, fab equipment spending growth will be negligible at almost 2 percent in 2020 and bump up to nearly 4% in 2021, with investments by Kioxia/Western Digital, Sony and Micron leading the way.
Lagging the pack, the Americas will spend less in 2020 than in 2019, with fab equipment investments plunging 24% to US$6.2 billion, and extend the downturn with a 4% decline in 2021.
Rebound from 2019 – Rising investments for leading-edge foundry and logic, image sensors and NAND
In its examination of fab equipment spending (YoY) by product segment, the World Fab Forecast report shows the following:
- 3D NAND – Increasing 12% in 2020 to about US$10 billion and jumping over 40% in 2021
- DRAM – Declining 3% in 2020 to about US$11 billion and rebounding by more than 40% in 2021
- Foundry – Rising 3% to US$22.6 billion in 2020 with a 7% drop in 2021 with foundry remaining the second-largest product segment
- Power and Opto – Power shows a growth rate of almost 70%, to US$2.8 billion, in 2020 and 31% in 2021. Opto (mainly image sensors) is expected to log 110% growth in 2020, to US$2.7 billion, and drop 19% in 2021.
Power and Opto are the largest growth sectors, though smaller in total spending than memory and foundry.
Of the 369 fabs/lines the World Fab Forecast tracks in equipping mode, 32 new fabs/lines are expected to begin equipping in 2020 and another 15 in 2021, contributing about US$7 billion in 2020 and almost US$25 billion in 2021 to total spending, respectively. Nearly half of the 32 new fabs/lines are for Power-related facilities.
The latest update of the World Fab Forecast report, published in late February 2020, covers quarterly spending for construction and equipment from 2019 to 2021. The report lists 1,339 fabs and lines and 111 facilities (including low probability) expected to start volume production in 2020 or later. The forecast also provides quarterly totals for capacities, technology nodes, 3D layers, product types and wafer sizes.
Learn more about SEMI fab databases.
Christian G. Dieseldorff is senior principal, Semiconductors, in Industry Research and Statistics at SEMI.