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Chipmakers Will Reduce Capital Spending in 2012

Capital expenditures by semiconductor companies will drop 16 percent in 2012, but will rebound in 2013 and beyond.
Capital spending by semiconductor companies will decline of 16 percent in 2012 after growing 16 percent in 2011, according to market research firm IC Insights.

Capital expenditures by chip companies will total $61.7 billion in 2011 up from $53 billion in 2010, when spending had increased 106 percent from the previous year, the Scottsdale Ariz.,-based researcher reported.

However, sluggish semiconductor demand along with a weak economy will result in capital expenditures by semiconductor companies falling to $52 billion in 2012.

Spending will rebound in 2013, growing 8 percent to $56.1 billion and will grow through 2015 when capital expenditures by chipmakers will total $71.2 billion, according to IC Insights.

Capital expenditures are used to build new fabs and equip them or to upgrade equipment at existing facilities. Increases in capital spending result in more fab capacity.

In recent years, chipmakers in Taiwan have boosted capital spending and increased their wafer capacity. In fact Taiwan in 2011 now accounts for 21 percent of the total worldwide wafer capacity. Japan holds 19.7 percent of the world’s wafer capacity, while the Americas region has 14.7 percent.

Much of capital spending has been for equipment that uses 300 mm wafers. The 12-inch wafers are used for production of DRAMs, NAND flash memories, microprocessors, application specific integrated circuits and image sensors, said Trevor Yancey, vice president, technology for IC Insights. Texas Instruments has started using 300 mm wafers to fabricate analog and mixed-signal ICs.

However, 150 mm and 200 mm wafers are still widely used for less-complex chips, according to Yancey.

“One hundred fifty millimeter wafers are used mostly for the production of low complexity and/or tiny devices,” said Yancey. Examples include 8-bit microcontrollers, general-purpose logic devices, analog and mixed-signal devices that use mature process technologies, power management devices, low-complexity ASICs and ASSPs, sensors and discretes.

150 mm fabs are now fully depreciated, helping them “remain cost-effective to operate for these types of devices,” Yancey added.

Yancey noted that 200 mm wafers are usually used for the production of special-purpose logic products such as ASICs or application specific standard products, microcontrollers, digital signal processors, core logic chipsets, and many other chips.