Purse strings were wide open this year as worldwide semiconductor capex is on track to surge 34% — its strongest percentage gain since a 41% increase in 2017 — to $152 billion, according to IC Insights. The $152 billion in outlays this year would represent a new record-high annual amount of spending, surpassing the previous high mark of $113.1 billion set just last year.
The foundry segment is forecast to represent 35% of all semiconductor capital spending in 2021, easily the largest portion of capex spending among the major product/segment categories. Foundry has accounted for the largest share of semiconductor capex each year since 2014 with two exceptions—2017 and 2018 when capex spending for DRAM and flash memory surged. Spending by foundries has become very important (and necessary) as industry demand continues to rise for ICs fabricated using advanced process technology nodes.
TSMC, the world’s largest foundry, is forecast to account for 57% of the $53.0 billion in foundry spending this year. IC Insights reports Samsung is also making significant investments in its foundry operations. Samsung has been able to match the technology roadmap of TSMC and continues its effort to lure more leading-edge fabless logic suppliers away from its pure-play foundry rival.
On the other hand, SMIC was being counted on by the Chinese government to supply a much greater portion of semiconductors to the China market, IC Insights noted. But SMIC’s inclusion on the U.S. blacklist has severely curtailed its ability to carry out those plans. SMIC’s capex spending is forecast to drop 25% this year to $4.3 billion, accounting for only 8% of total foundry outlays in 2021.
For 2021, all of the product segments are forecast to register strong double-digit increases in capital outlays with the foundry and MPU/MCU segments expected to log the largest year-over-year spending increases at 42% followed by analog/other (41%) and logic (40%).
Semiconductor demand has significantly outstripped supply for all of 2021. Overall manufacturing capacity has also been constrained. This week, the Institute for Supply Management (ISM) released its manufacturing-industry forecast for 2022. U.S. manufacturers expect to increase their capex by 7.7 percent. That’s a significant improvement over 1% capex growth in 2021. Production has struggled all year to meet demand and has been stymied by materials shortages, a lack of workers, logistics disruptions and a host of other occurrences.
There are no expectations that chip consumption will decline in the future but it’s worth noting that following 2017, a severe components glut cost chip makers about $13 billion in write-downs and write-offs in 2000-2001. The early 2000s saw numerous fabs shuttered.
Chip-making technology has since dramatically evolved and the supply chain is taking steps to avoid a similar excess, which was driven by the dot.com boom. Forecast-sharing has (reportedly) improved and the Covid pandemic has driven the industry toward digital communication and real-time data analytics. Customers are being asked to commit to longer-term no-cancel no-return (NCNR) orders to guarantee supply in the future. If supply chain fundamentals shift, $150 billion will be well-spent.
For more information regarding IC Insights research, please contact Bill McClean, President at IC Insights. Phone: +1-480-348-1133 email: firstname.lastname@example.org.