Current Expansion is Unlike the Last
-- Semiconductor International, 11/1/2000
A recent report by IC Insights (Phoenix) indicates that the current upturn in the semiconductor market is behaving differently than the last. During the semiconductor sales surge of 1993-1995, growth was reflected mostly in increased average selling price (ASP) of the chips (especially DRAMs), with only a moderate increase in devices shipped. Current growth - between the first half of 1999 and the first half of 2000 - is primarily due to accelerated demand for integrated circuit units (34%) with more modest increases in ASP (6%).On the capital spending side, the research firm estimates that the Top 10 spenders will double their expenditures this year relative to 1999, with combined spending coming in at around $30B. The firm estimates total industry spending at $57B. IC Insights provides more details on these key trends in its September 2000 update to The McClean Report.
The scale between ASP and unit increases began to tip in July 2000, reflecting a balancing between semiconductor supply and demand. The report compared July 2000 to July 1999 ASP and unit growth with the growth reported in the 1H2000/1H1999 period. July ASPs grew by 11%, relative to 6% in 1H2000, while unit growth rate slowed from 34% to 30%. Following this trend, IC Insights estimates the ASP growth will outstrip unit growth in the second half of this year.
The report also identified significant changes among the Top 10 semiconductor companies (Table). Hyundai (Seoul, Korea) advanced in ranking from 15 to 9, following its acquisition of LG Semicon in mid-1999; STMicroelectronics (Geneva) advanced two positions from 9 to 7; Samsung (Seoul, Korea) moved up in ranking from 6 to 5;and Philips (Nijmegen, Netherlands) dropped out of the Top 10 despite its acquisition of VLSI Technology in May 1999.
| Table. Leaders in Semiconductor Revenues and Capital Spending | |||||||
| Sales rank 1H2000 | Sales rank 1999 | Capital Spending Rank 2000 | Company | 1H2000 Semi Sales ($B) | 1H2000/1H1999 Semi Sales Increase (%) | 2000 Estimated Capital Spending ($B) | 2000/1999 Spending Change (%) |
| 1 | 1 | 1 | Intel | 14.0 | 17 | 6.0 | 82 |
| 2 | 2 | 9 | NEC | 5.0 | 21 | 2.0 | 49 |
| 3 | 3 | 16 | Toshiba | 4.8 | 37 | 1.2 | 41 |
| 4 | 4 | 5 | Texas Instruments | 4.7 | 26 | 2.7 | 125 |
| 5 | 6 | 3 | Samsung | 3.9 | 48 | 3.1 | 72 |
| 6 | 5 | 7 | Motorola | 3.9 | 25 | 2.3 | 49 |
| 7 | 9 | 4 | ST Microelectronics | 3.6 | 55 | 3.0 | 123 |
| 8 | 7 | 10 | Hitachi | 3.4 | 39 | 2.0 | 47 |
| 9 | 15 | 13 | Hyundai | 3.4 | 232 | 1.5 | 213 |
| 10 | 8 | 12 | Infineon | 3.2 | 36 | 1.7 | 86 |
| 11 | 10 | 8 | Philips | 2.9 | 36 | 2.0 | 202 |
| 19 | 21 | 2 | TSMC | 2.0 | 102 | 4.7 | 154 |
| 21 | 23 | 6 | UMC | 1.4 | 50 | 2.4 | 40 |
| - | - | - | Top 10 Total | 50.0 | 34 | 30.1 | 94 |
Though it may seem logical to expect the Top 10 semiconductor spenders to be the same companies bringing in the top revenues, perusal of this ranking (Table) reveals some notable exceptions. Hsinchu, Taiwan-based TSMC and UMC are the No. 2 and No. 6 spenders, respectively, while neither is in the Top 10 for sales. TSMC is boosting its spending by 154% in 2000 relative to 1999. Other markedly high increases in spending come from San Jose-based Atmel (a planned 470% increase); Hyundai, which plans a 213% increase; and Philips, with a 202% planned increase. Though Toshiba ranked No. 3 in revenues for the first half of 2000, it is ranked No. 16 in planned spending for the year. Lucent Technologies plans the smallest increase in spending this year at 14%.
Fab capacity tracking by the Semiconductor Industry Association (SIA) and IC Insights indicates capacity for processing 9 million 200 mm-equivalent wafers will be added in 2000. According to IC Insights, capital spending will be limited by the semiconductor equipment manufacturers' ability to fill orders later this year, which will be reflected in a decreasing book-to-bill ratio in subsequent months.
Of course, ongoing investment by device manufacturers through 2000 and 2001 will depend on market conditions. The timing of 300 mm fab building is particularly important because these very expensive production lines must be utilized to ensure decent return on investment. In general, the analysts at IC Insights expect that semiconductor demand will remain strong (and will sustain higher ASPs) through mid-2001 and possibly into early 2002. For the immediate future, computer and telecom segments remain strong. Like some other analysts, IC Insights pegs the next downturn at early or mid-2002.
-Laura Peters
