2014 Semiconductor Capital Spending Forecast

14 Jul

The recovery of the entire semiconductor industry has prompted global semiconductor manufacturing giants such as Samsung, Intel, TSMC, and UMC to raise their capital expenditures and to intensify their technological migration efforts. The IC packaging and testing manufacturing companies, including ASE Group and SPIL, soon followed suit, making similar efforts to increase their 2014 capital spending. As Taiwan’s semiconductor industry currently has one of the world’s largest vertical supply chains, its contributions to the global market has become increasingly critical. In the coming periods, competition in the semiconductor industry is projected to intensify as more and more first tier manufacturers migrate towards the 10nm manufacturing process.

TSMC is currently believed to be one of the top tiered manufacturers that can effectively handle the pressures of the semiconductor market. When speaking at a recent shareholder’s meeting on June 24, 2014, the Taiwanese company’s CEO, Morris Chang, indicated that his company is not at all worried about the threats posed by Samsung or Intel, and insisted that when it comes to maintaining superior manufacturing technology, production management, and customer relations, no rivals have shown a better commitment or performance than TSMC. With its capacity utilization rate currently projected to reach maximum levels during the second half of the year, many believe it would only be matter of time before the company’s  total capital investments are boosted significantly.

Based on the inside details revealed by Chang during the shareholder’s meeting, TSMC is already making respectable progress with its 10nm manufacturing technology, and will likely start completing its client product designs and trial productions by the end of 2015. The official mass production of the company’s 10nm products is currently not expected to take place until 2016. In an effort to accelerate its 10nm procress migration, TSMC is said to have implemented a special kind of work scheme known as “Night Owl” which encourages 300-400 of its R&D personnel, engineers, and developers to work extra hours, and arranges their work shifts in such a way that enables the company’s research centers to operate 24 hours a day. The ultimate purpose behind the work scheme, TSMC pointed out, is to enable the company to surpass Intel as quickly as possible within the next two years. When asked to address the company’s technology progress and outlook, Chang confidently asserted that “our 10nm technology will be our most efficient and effective since our 16nm FinFet and 3rd generation FinFet technologies were introduced.”

World’s three largest semiconductor manufacturers expected to account for half of the entire industry’s spending

Like TSMC, more and more of the industry’s first tier semiconductor manufacturers are beginning to increase capital spending as a means to enhance research capability, manufacturing efficiency, and production scale. IC Insights, a market research firm, has predicted recently that the combined capital spending of Samsung, Intel, and TSMC will amount to more than 51.8% of the entire semiconductor industry’s spending in 2014. Intel’s annual capital expenditure is currently estimated at 11 billion USD, a 4% increase from 2013, while TSMC’s is predicted to be around 9.75 billion USD, a 0.5% YoY increase. Compared to last year, UMC is projected to increase its capital spending by around 9%. Samsung will again remain on top of the spenders’ list this year with total capital spending of 11.5 billion USD, a 0.1% YoY decrease.

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table and data credit: IC insight

Race towards 1xnm technology picks up among top tier companies, but not expected to impact orders of second or third tier manufacturers

The increased competition among the first tier manufacturers migrating towards the 1xnm process, while anticipated to stimulate overall demand for advanced semiconductor components, is not likely to impact the sales momentum of manufacturers using the less sophisticated and advanced manufacturing equipment; According to market insiders, this is due mainly to the rising consumer demand for the low-end to mid-end mobile computing devices, which many market analysts predict would grow significantly this year, and to the increased opportunities in the semiconductor market resulting from the growth of the Internet of Things (IoT). The increasing orders for controllers, sensors, power management ICs, MEMs, and memory chips based on the older manufacturing processes are all expected to benefit the first tier and second tier manufacturers significantly.

 

 

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