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Thread: Samsung CAPEX Spending Keeps Pressure on Competition!

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    Samsung CAPEX Spending Keeps Pressure on Competition!

    Samsung's two-year capex spending of $46.8 billion nearly matches the combined two-year capex spending of $48.4 set by Intel and TSMC.

    IC Insights revised its outlook for total semiconductor industry capital spending and presented its forecast of semiconductor capex spending for individual companies in its November Update to The McClean Report 2018, which was released earlier this month.

    Samsung is expected to have the largest capex budget of any IC supplier again in 2018. After spending $24.2 billion for semiconductor capex in 2017, IC Insights forecasts that Samsung’s spending will edge slightly downward, but remain at a very strong level of $22.6 billion in 2018 (Figure 1). If it comes in at this amount, Samsung’s two-year semiconductor capital spending will be an astounding $46.8 billion.



    Figure 1

    As seen in Figure 1, Samsung’s semiconductor capital outlays from 2010, the first year the company spent more than $10 billion in semiconductor capex, through 2016 averaged $12.0 billion per year. However, after spending $11.3 billion in 2016, the company more than doubled its 2017 capex budget. The fact that Samsung’s continued its strong capex spending in 2018 is just as impressive.

    IC Insights believes that Samsung’s massive spending outlays in 2017 and 2018 will have repercussions far into the future. One effect that has already begun is a period of overcapacity in the 3D NAND flash market. This overcapacity situation is due not only to Samsung’s huge spending for 3D NAND flash, but also from spending by competitors (e.g., SK Hynix, Micron, Toshiba, Intel, etc.) that attempt to keep pace in this market segment.

    With the DRAM and NAND flash memory markets showing strong growth through the first three quarters of 2018, SK Hynix ramped up its capital spending this year. In 1Q18, SK Hynix said that it intended to increase its capex spending by “at least 30%” this year. In the November Update, IC Insights forecasts that SK Hynix will see a 58% surge in its semi capex spending. The increased spending by SK Hynix this year is focused primarily on bringing new capacity online at two of its large memory fabs—M15, a 3D NAND flash fab in Cheongju, South Korea, and the expansion of its huge DRAM fab in Wuxi, China. The Cheongju fab is being pushed to open before the end of this year. The Wuxi fab is also targeted to open by the end of this year, a few months earlier than its original start date of early 2019.

    Overall, IC Insights’ now forecasts total semiconductor industry capital spending will climb 15% to $107.1 billion this year, the first time that annual industry capex is expected to top $100.0 billion. Following the industry-wide growth this year, semiconductor capex is expected to decline 12% in 2019 (Figure 2).



    Figure 2

    Given that the current softness in the memory market is expected to extend into at least the first half of next year, the combined capital spending by the three largest memory suppliers—Samsung, SK Hynix, and Micron—is forecast to drop from $45.4 billion in 2018 to $37.5 billion in 2019, a decline of 17%.

    In total, the top five spenders, which are expected to represent 66% of total outlays this year, are forecast to cut their capital spending by 14% in 2019 with the remaining semiconductor industry companies registering a 7% decline.


    Report Details: The McClean Report 2019
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    Dan, do you have any thoughts on when China will become serious competition in semis and at what levels? Below is an article for reference on some Chinese strategies.

    Don't Believe Beijing: China Really Does Rival The U.S.

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    Quote Originally Posted by Arthur Hanson View Post
    Dan, do you have any thoughts on when China will become serious competition in semis and at what levels? Below is an article for reference on some Chinese strategies.

    Don't Believe Beijing: China Really Does Rival The U.S.

    Having worked inside Asia including China for most of my career I should write a book about all of the changes I have seen. Asia did quite well reproducing "TSMC like" processes up until 28nm. I remember at 40nm you could take a TSMC design (GDS) and move it to UMC, SMIC, and Chartered very easily. QCOM was famous for doing this as were others. Some companies, however, like NVIDIA, Altera, Xilinx, were loyal to one foundry.

    That all changed at 28nm when TSMC chose a different gate implementation (gate first vs gate last) and the process gap widened. TSMC followed Intel using gate last technology while the other fabs (UMC, SMIC, GF, and Samsung) used gate first. Gate last won as did TSMC and Intel. Intel then moved to FinFIT at 22nm with TSMC folowing at 16nm and Samsung at 14nm. The other foundries (UMC, SMIC, GF) failed at FinFET and the rest as they say is history.

    Moving forward it is a VERY expensive race that only a chosen few can afford. Intel has high margin CPU business to fund process development. Even so Intel has stumbled at 10nm. Samsung has the very profitable memory business and TSMC has Apple and the rest of the fabless semiconductor companies behind it.

    China on the other hand has tried many different approaches to semiconductor manufacturing. SMIC is backed by the Chinese Government but in my experience having non semiconductor people in the mix makes decision making much more difficult, especially when they are politicians! Imagine the horror of those board meetings.

    China has also entered into multiple JDAs with Intel, TSMC, GF, etc... to get semiconductor manufacturing in China. They have also hired away key semiconductor people from around the world for China based companies and have the legal troubles that follow that type of behavior.

    Bottom line: China will become a serious threat to the semiconductor business in the next few years. It is certainly taking longer than we all imagined but it will happen for local supply. Remember, China consumes more than half of the semiconductors produced so satisfying local demand is a big deal. And with the pressures of the China Government to "buy China" the local chips don't have to be the best, they just need to be good enough, absolutely.

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