SAN FRANCISCO—Aggressive 2012 capital spending plans revealed this week by Intel Corp. and Samsung Electronics Co. Ltd. signal that the two largest chip firms see an opportunity to distance themselves from competitors and are ready to spend heavily to do it, according to a report by market research firm IC Insights Inc.
Based on the capital expenditure forecasts revealed this week, Intel and Samsung together are expected to account for about half of total semiconductor capital expenditures this year, IC Insights said.
"It is apparent that for Samsung, Intel, and TSMC, the time has come to put the hammer down and position themselves as the strongest and most dominant IC suppliers in the industry," IC Insights said in an excerpt from the 2012 edition of the firm's McClean report. IC Insights said the three firms are becoming more dominant in their areas of specialization and that smaller competitors may soon find it extremely challenging to remain competitive in developing new products or competing on a cost basis.
"Weaker suppliers will be forced out of the business and a higher percentage of capex spending will be in the hands of the fewer remaining players," IC Insights said.
Since 2009, Intel, Samsung and TSMC have boosted capital spending significantly, IC Insights noted. In 2010, TSMC doubled its capital spending compared to 2009, while Samsung tripled its semiconductor capex spending, IC Insights said. In 2011, Intel doubled its capex compared to 2010, IC Insights said.
Collectively, the planned capex spending of Intel, Samsung and TSMC is forecast to be $30.7 billion in 2012, nearly 3 times as much as the group spent in downturn-plagued year of 2009, IC Insights said.
Samsung said it would spend about $6.5 billion in capital expenditures to support its logic ICs, more than it is planning to spend on memory capex—$5.7 billion—for the first time. IC Insights noted that Samsung currently does lucrative business as the foundry for Apple Inc.'s A4 and A5 applications processors. While reports have been circulating that Apple is looking to transfer all or some of this business to TSMC, IC Insights noted that Samsung does not want to lose it.
"Samsung is demonstrating that it has the means to provide all the process and manufacturing muscle needed when Apple considers a foundry partner to build its next-generation processors," IC Insights said in the report.
Besides serving as a foundry partner for Apple, Samsung is aggressively ramping its in-house application processor business as demand increases for its smartphones, tablet PCs, and other mobile/media related devices, IC insights said.
Intel's planned capex of between $12.1 billion and $12.9 billion is a marked increase from 2011 capex of about $10.8 billion. But put in the context of Intel's growth—the company's $54 billion in 2011 sales were up 24 percent from 2010—the increase in spending is justified, IC Insights said. The market research firm noted that Intel was nearing completion of three fabs—in Chandler, Ariz., Hillsboro, Ore. and Ireland—and would soon be equipping them and ramping production. Several of Intel's existing fabs will also begin production of 22-nm processors in the second half of 2012, IC Insights said.
IC Insights also noted that Intel is making a concerted effort to expand its processor presence in the market for smartphones and media devices. The company’s Ultrabook initiative has piqued consumer interest and is likely to create additional demand for the company’s processors in the second half of 2012, IC Insights said.
Spending is a great sign unless it leads to the next capacity bubble. Although it seems to make sense to expand in an upturn, history tends to show that investing in the downturn pays off better in the long run. TSMC invested more in 2009 and 2010 during the downturn.
It occurs to me that with all this competitive landscape changing before our eyes that Sumsung might want to acquire AMD. They do use Intel X86 silicon and plan to continue to do so for some time at least. Besides rolling their own for internal consumption they could also pull in some pretty change from the X86 merchant market.
Interesting to see the negative 18% from TSMC. I wonder if there is any correlation between this chnage and their current 28nm process problems - http://www.eetimes.com/electronics-news/4234961/TSMC-manufacturing-process-in-trouble.
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