Asian Companies Expected to Lead 2020 Semi Capex

Article By : Alan Patterson

Most Chinese companies might be forced to cut capex spending, but TSMC is moving ahead on its plans for an Arizona fab...

Samsung and other Asian companies are expected to lead semiconductor industry spending on capex (capital expenditures) this year, which in total will grow by about 8% to $87.2 billion, according to IC Insights.

Chipmakers generally brushed off the global coronavirus pandemic as a relatively short-term disruption and continued with spending plans that will ultimately affect their capacity and technology roadmaps for many years to come.

As in past years, Asian semiconductor companies are leading growth in capital expenditures, but Samsung stands out among them for its growth in spending sustained over a number of years. Samsung’s expected 24% capex increase in 2020 may help widen the gap between itself and Chinese competitors such as Yangtze Memory Technologies Co. (YMTC), according to IC Insights President Bill McClean in an email he provided to EE Times.

“Samsung’s level of spending over the past four years has been nothing short of incredible. I believe that they are attempting to put so much distance between themselves and the Chinese memory startups that it will be basically impossible for them to catch up,” McClean said.

The increased spending by companies in Asia coupled with slowing spending by US chipmakers has prompted an initiative by the American government to revive investment in the U.S. on concerns that the nation is losing a competitive advantage in an industry that’s critical for the economy and national security.

For 2021, IC Insights expects similar mid-single-digit growth. One thing that will hold back growth in capex next year is the U.S. restrictions on sales of chipmaking equipment to China. For example, in its third-quarter 2020 conference call, Shanghai-based Semiconductor Manufacturing International Corp. (SMIC) announced an $800 million reduction in its capex spending plans for this year primarily due to the restrictions.

“It can be assumed that other Chinese companies will face similar challenges next year,” McClean said. “We believe that in at least the short term (i.e., 2021), the restrictions on equipment exports to China will continue under the Biden Administration. Over the longer term, it is expected that U.S./China relations will be less confrontational than they are now but not to a great extent.”

Of the top-three capex spenders — Samsung, Taiwan Semiconductor Manufacturing Co. (TSMC) and Intel — the American giant is the only company expected to cut capex. It’s been widely speculated that Intel may soon start outsourcing some of its production to foundries such as TSMC or Samsung.

Earlier this month, TSMC’s board approved an initial $3.5 billion for its planned chip fabrication plant in the U.S. state of Arizona. That’s about a quarter of the $12 billion total earmarked for the project, slated to open in 2024.

The Arizona plant is expected to have a capacity of 240K 300mm silicon wafers per year when it opens, or about 1.4% of TSMC’s total capacity at about 17.7 million 300mm wafers per year, according to IC Insights.

That capacity suggests that the scale of the Arizona project is more about appeasing the U.S. government than it is about creating a significant offshore production base, IC Insights said.

It may be some time before the Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act helps boost capex for U.S. chip companies.

At least initially, the CHIPS act would support U.S. IC manufacturing though investment tax credits. Yet, with trillions of dollars going to help support the U.S. economy during the covid pandemic, funds may be more difficult to come by over the next few years to funnel into the CHIPS act, according to IC Insights.

“This is a program that is probably about 10 years late from having a huge impact, but any additional funding will help the U.S. players that currently have production fabs (e.g., ON Semiconductor, Analog Devices, TI, GlobalFoundries, etc.),” McClean said.

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