Expecting to emerge from an era of severe price erosion, DRAM manufacturers next year will far outpace the rest of the semiconductor industry in capital investments.
Although the majority of DRAM suppliers continue to report large losses, capital expenditure budgets in 2003 will show a 25% increase over this year's levels. That compares with a relatively anemic 4% increase for the rest of the chip industry, according to Nam Kim, an analyst at market research firm iSuppli Corp., El Segundo, Calif.
DRAM vendors' investments in new capacity could account for as much as a quarter of all semiconductor capital outlays next year, said Steve Pelayo, an analyst at Morgan Stanley & Co. in San Francisco. Observers were quick to note, however, that if the rosy market forecast doesn't pan out, chipmakers will have to move fast to scale back their investment plans.
Samsung Electronics Co. Ltd. is leading the DRAM spending spree by raising its capex next year by $600 million, to $2.5 billion--although an unspecified percentage of that will be allocated to other products, such as NAND flash.
Similarly, Infineon Technologies A.G. told analysts last month it will raise its capital expenditures next year by 55%, to about $1 billion. Although this includes investment for non-DRAM products, James Covello, an analyst at Goldman Sachs & Co., New York, said much of the spending will be directed at DRAM, in particular 300mm-wafer fab capacity. Infineon has a joint venture with Nanya Technology Corp. of Taiwan to build a 300mm DRAM fab to supplement its 300mm facility in Dresden, Germany.
"We believe Infineon's announcement of strong capital spending in 2003 is simply evidence that the company intends to compete against Samsung for market share in the 300mm space and must spend in order to do so," Covello said.
Peter Bauer, executive vice president and chief marketing officer at Infineon in Munich, Germany, added that the company has a fab shell in Richmond, Va., it could equip with 300mm equipment if the market picks up strongly.
Micron Technology Inc., Boise, Idaho, plans a more modest 11% capex increase next year, but will still spend about $1 billion, a spokesman said. Most of that is earmarked to complete the transition to a 0.13-micron production process and begin the move to 0.11-micron linewidths.
Japan's Elpida Memory Inc. is considering a 50% capital expenditure jump in 2003, to $600 million, as the company builds out its first 300mm fab in Hiroshima, a spokeswoman said.
Ken Hurley, president of Nanya Technology Corp. USA, San Jose, said the company will invest heavily in its fab partnership with Infineon but has set no final figure.
Much of the projected spending boom is designed to offset a paucity of capacity and technology investments in the last several years. The Semiconductor Industry Association predicts a DRAM revenue increase in 2003 of 35%, to $20 billion, and a 43% jump in 2004, to $29 billion.
Infineon's Bauer said DRAM demand has been improving all year. "We actually grew in unit shipments all through the downturn," he said. "The bit growth was over 40% in the last fiscal year compared to a year ago."