Forecasts for capital spending in the microchip industry have been tailing off toward the end of the year due to declines in projected sales of mobile devices like smartphone and tablet computers, which is hard to believe by many due to recent stellar sales of the latest Apple iPhone. Nonetheless, mobile DRAM memory bit demand is set to pass 400 million gigabits (Gb) in the last quarter of 2013, up 35.5 percent on quarter and over 70 percent on the year, according to a report by Digitimes Research yesterday. DRAM bit demand for smartphones will rise to 334 million Gb in the fourth quarter of 2013, up 39.1 percent sequentially and 92.1 percent on the year. In contrast, the same firm predicts tablets will increase 41.9 percent on the quarter and 40.5 percent compared to last year up to 65.8 million Gb, but these growth estimates are not enough to boost semiconductor equipment spending this year.
Market research firm Gartner projects semiconductor capital spending, driven increasingly by mobile devices over PCs, will be reduced by 6.8 percent this year to $54.8 billion; however, it is expected to increase by 14.1 and 13.8 percent, respectively, in 2014 and 2015. What’s more, microchip manufacturing equipment spending is predicted to fall even more by 8.5 percent, to $34.63 billion, while equipment specifically for chip-making plants will be reduced by 9.1 percent to $26.95 billion. The SEMI World Fab Forecast indicates that capital expenditure for semiconductor fab equipment spending will rise to $39.8 billion in 2014, which will be a record and be considered a golden year for the industry. The SEMI data shows a promising forecast for plant construction projects, including 3D NAND flash memory by Toshiba and Samsung and 14nm processor chip capacity by Intel for mobile devices and PCs, predicting a 25 percent spending increase in 2013 to over $7 billion and followed by a drop of 16 percent in 2014 to about $5.9 billion. Plant construction is not perfectly aligned with equipment spending in general; since, typically the facilities are equipped with chip processing tools the year after construction is essentially complete.
Gartner has trimmed billion dollars off 2013 semiconductor capital spending versus its June report due to a reduction in wafer fab spending associated with lower investment in equipment for 28nm chip production following a softening in the high-end mobile device market offering increasing functionality and increased battery life. The reduced investment observed in recent months is expected to continue for the rest of the year although spending for the production of memory chips like DRAM and NAND flash has helped offset declines.
Remarkably, only three companies including Intel, TSMC, and Samsung generate more than half of the chip capital equipment spending on an annual basis, and the top ten semiconductor manufacturing companies comprise 76 percent of the market. Just as chip manufacturing becomes more consolidated overall, semiconductor equipment makers are following in those footsteps.
Several major deals have occurred in recent years such as the acquisition of Varian Semiconductor by Applied Materials and the merger of Novellus and LAM Research. More recently, Applied Materials announced on Tuesday an agreement to acquire rival Tokyo Electron Ltd. (TEL) in a stock deal valued at around $9.3 billion. This merger, which has been approved by the boards of both companies, unites the world’s second and third largest fab tool vendors with a combined market capitalization of approximately $29 billion. The deal strengthens the positions of the companies collectively in dealing with exploding costs associated with new technology changes for more power efficient, next-generation electronic devices such as: 3D NAND flash memory, 450mm silicon wafer production, high-mobility FinFETs, and 3D chip stacking.
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