The memory rollercoaster will drive spending on semiconductor capital equipment back up in 2020, the SEMI trade group projects in its latest report.
In our World Fab Forecast, we predict global fab equipment spending will decline 14% to $53 billion in 2019 and recover with 27% growth to $67 billion in 2020, setting a new record. Spurred by a slowdown in the memory sector, the 2019 downturn marks the end of a three-year growth run for fab equipment spending.
Over the past two years, memory accounted for an annual share of about 55% of all equipment, a proportion expected to drop to as low as 45% in 2019, rebound to 55% in 2020. With memory representing an outsize share of total spending, any hiccup in the memory market impacts overall equipment spending.
A look at fab equipment spending by half year (below) shows that high inventory levels and weakening demand led to a bigger-than-expected decline in DRAM and NAND in the latter part of 2018, driving down memory spending 14%. The downward trend is expected to continue into the first half of 2019, with memory spending dropping 36%, though memory spending could rebound 35% in the second half of the year.
Despite the comeback in the second half of 2019, the report points to a 30% plunge in overall memory spending for the year after reaching record highs in 2018.
Foundry is the second largest sector after memory for fab equipment spending. Over the past two years, its annual share ranged from 25-30% per year. In 2019 and 2020, we expect the yearly share to hold steady at about 30%.
Foundries typically fluctuate less than the memory sector in equipment spending, but they are not immune to shifts in the market. For example, following the decline of memory, foundry equipment spending fell by 13% in the second half of 2018 from the first half of the year.
Our report indicates the sector won’t follow the marked decline of memory in the first half of 2019. Instead, foundry spending is expected to remain flat in the first half of the year, then follow the memory rebound with an increase to 35% growth in the second half of 2019. That upswing will bring year-over-year (YoY) growth in total fab spending for foundry to 10% in 2019.
While investment across many other segments will decline in 2019, fab equipment spending for MPUs is expected to jump by at least 20% in 2019. The opto-electronics segment (mainly image sensors) is expected to see similar growth at 22% in 2019.
The overall surge in 2020 will be mainly driven by a YoY recovery in investments for memory devices (48%) and foundry (18%), followed by strong growth for power-related components (26%), and analog (35%).
The outlook for both memory and foundry fabs is promising. Of the 96 future fabs/lines scheduled to begin production in 2019 or later, 30 are for memory facilities/lines and 32 fabs are for foundries.
SEMI’s report details fab spending, capacities, and technology geometries by quarter and by product type across 1,300 front-end fabs listed in the SEMI fab databases. Since its most recent publication in November 2018, 23 new facilities/lines have been added to the report.
–Christian G. Dieseldorff is a senior principal analyst in the industry research & statistics group at the SEMI trade association.