Semiconductor makers globally have continued to expand production at a torrid pace in order to get ahead of the shortage – and despite massive spending, it’s still a work in progress.
Shortages for a number of chips remain a problem, particularly for the auto industry.
Global governments have even gotten involved, with several nations, including the U.S., promoting big tax and other investment incentives for chip makers.
Some industry watchers fear all this new spending will lead to a glut, following the long history of semiconductor cycles, where overbuilding of new production lines has historically led to overproduction and falling prices.
In short, feast leads to famine. A downturn is inevitable. The only question is when.
With Covid-19 still boosting spending on consumer electronics and other devices, and increased emphasis on digitization globally, there are trends in place boosting the industry.
When chip makers might get ahead of themselves is difficult to predict.
Meantime, semiconductor equipment vendors can feast.
Chip makers are forecast to spend record amounts over the next two-years.
The latest forecast update from SEMI, the semiconductor equipment/materials industry association, substantially raised the full year target on wafer fab equipment for 2021 and 2022 – after having already raised the forecast twice this year.
SEMI now predicts fab equipment spending will rise an astonishing 44% this year to a record high US$91.4 billion. The previous forecast in June called for a 30% increase, and in March, the estimate was for 15.5% growth.
To put that 44% growth figure in perspective, the last time the equipment market grew faster was in 2010, with over 150% growth – but that followed a severely depressed 2009, when the global financial crisis slowed spending to a near standstill.
The 44% forecast marks a massive gain for one year, a year in which some chip equipment suppliers have complained of their own problems acquiring the very chips they mean to help produce.
Semiconductors are also needed in chip production equipment.
The spending boom shows no sign of slowing down. SEMI predicts it will continue with a fresh all-time high in 2022, with 8% growth to $98 billion.
The previous record was $71.2 billion in 2020.
What’s more, in March, SEMI had said chip equipment spending would not exceed $80 billion until 2022.
How times change.
The new forecast shows how hard the semiconductor industry is working to catch up with demand.
The biggest spenders this year will be in the chip foundry sector, at $41.5 billion, up 56% over last year, SEMI said. The memory sector will follow at $36 billion.
By region, South Korea will outspend everyone in 2021 and 2022, followed closely by Taiwan and then China.
New fab projects are driving construction spending through the roof as well. New construction will reach a historic high in 2021 at $18 billion, SEMI said, and will be eclipsed in 2022 by a fresh high of $27 billion.
Out of 76 ongoing construction projects this year, there are 22 new fabs with a high probability for volume fabrication, SEMI said.
The semiconductor industry is working overtime to get ahead of the shortage, and policy makers around the world have helped with incentives, tax breaks and other subsidies.
For now, the industry is spending its way out of the problem.
Link:
SEMI https://www.semi.org/en/news-media-press/semi-press-releases/global-fab-equipment-spending-to-reach-new-high-of-nearly-%24100-billion-semi-reports
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