SAN FRANCISCO—Sales of semiconductor manufacturing equipment grew 13 percent last year and are projected to grow further in each of the next two years in what would mark the first three-year period of consecutive growth for fab tools since the mid-1990s, according to the SEMI trade group.
Much of the growth in fab tool spending in 2016 and particularly anticipated growth in 2017 and 2018 is being driven by a projected boom in semiconductor fab building in China. Of the 62 front end fabs scheduled to begin operation globally between 2017 and 2020, 26 are in China, according to a fab-building tracking report issued by SEMI last year.
China’s fab building boom has begun in support of the country’s stated goal of beefing up its nascent domestic semiconductor industry to feed its massive internal electronics market. The Chinese government has said it will pump $161 billion over the next decade into building its domestic chip industry. International semiconductor powerhouses including Intel, Globalfoundries and TSMC are all building or expanding fabs in China, and a number of domestic Chinese firms are planning fabs, notably Tsinghua Unigroup Ltd., which has announced plans to spend $54 billion on two huge memory chip fabs in China.
Chip equipment sales rose to $41.24 billion last year, up from $36.53 billion in 2015, according to SEMI, which represents chip equipment and materials suppliers worldwide. The organization is projecting that spending on fab tools will rise to an all-time high of more than $46 billion this year and grow further to nearly $50 billion in 2018.
If the forecast is accurate, it would mark the first period of three consecutive or more years of growth for semiconductor equipment since the five-year expansion of 1993 to 1997, according to Christian Dieseldorff, director of industry research and analysis at SEMI.
Of the $41.24 billion spent on fab tools globally last year, $6.46 billion was in China, an increase of 32 percent over 2015, SEMI said. The organization estimates that China's fab tool spending will rise to about $6.7 billion in 2017. In 2018, when SEMI expects 49 total fabs in China—including 14 newly constructed fabs—to be buying equipment, the organization projects that China's equipment spending will rise to about $10 billion.
Bill McClean, president of market research firm IC Insights Inc., told EE Times that both his firm and SEMI expect a “China bubble” of semiconductor equipment spending over the next couple years. “The only real difference may be that we see more of the spending happening in 2018 than 2017,” McClean said in an email exchange. “Other than that, I think our opinion is close to theirs.”
Next page: Taiwan Still No. 1 Market for Equipment
IC Insights said earlier this month it expects total capital spending by semiconductor companies to increase by about 6 percent this year to an estimated $73.2 billion, with the vast majority coming from the top 11 spenders.
According to a report issued by SEMI this week, global equipment sales were boosted by strong increases in buying not only in China, but also in Taiwan and the Southeast Asia regions, as well as a moderate increase in Europe. This offset contraction in spending in Japan and North America of 16 percent and 12 percent, respectively, according to the organization.
Taiwan, with $12.23 billion in total sales, ranked as the largest market for new equipment spending for the fifth year in a row, SEMI said. South Korea, with $7.69 billion in tool spending, was the second largest market for the second straight year, according to the trade group.
In growing by 32 percent, China's semiconductor equipment market surpassed both Japan and North America to become the third-largest market for fab tools globally, SEMI said. Japan and North America fell to fourth and fifth place, respectively, according to the trade organization.
But China is not the only place on the globe where SEMI is predicting that equipment spending will rise in the next two years. The organization expects spending in Europe to increase by 47 percent and spending in South Korea to increase by 45 percent this year. It forecasts that equipment spending in Japan will rise by 28 percent and in the Americas by 21 percent in 2017.
The market for wafer processing equipment increased by 14 percent in 2016, while the total test equipment market increased by 11 percent and the packaging and assembly equipment segment grew by 20 percent, according to SEMI.
SEMI also reported that total equipment bookings in 2016 were 24 percent higher than 2015.
McClean said IC Insights’ estimates do not always square perfectly with SEMI’s. For example, he said, SEMI estimates that fab equipment spending was up 13 percent in 2016, while IC Insights said total capital expenditures increased by just 4 percent. IC Insights is forecasting capital spending increases in 2017 and 2018 of 7 percent and 10 percent, respectively, while SEMI forecasts that equipment sales will rise 15 percent in 2017 and 8 percent in 2018, McClean noted.
—Dylan McGrath covers the semiconductor industry and business news for EE Times.