Global and China Semiconductor Equipment Industry Report, 2011-2012

In 2011, the CAPEX of semiconductor industry were about USD65.8 billion, up 14.3% compared with that in 2010, among which, the CAPEX on equipment stood at about USD44 billion, with a year-on-year increase of 8.0%. It’s estimated that, in 2012, the CAPEX on equipment will reach USD38.9 billion, among which, the expenditure on wafer fab equipment will be USD31.3 billion, a decrease compared with that in 2011. A main reason is that the CAPEX on wafer fab equipment in 2010 increased by 127.1% compared with that in 2009 and continued to grow by 13.3% in 2011, therefore, its drop in 2012 is normal.

In 2012, the semiconductor companies CAPEX over USD5 billion will still be Intel, Samsung Electronics and TSMC. Intel invested over USD5 billion to build Fab 42, the world’s first fab engaged in the mass production of 14nm node. In addition, it invested in D1X, a R&D fab for 14nm node process. Intel will continue to lead the semiconductor industry.

Samsung Electronics plans to spend USD13.4 billion, which is the highest CAPEX in the global semiconductor market. 40% of the CAPEX will be invested in DRAM and NAND memory, including the well-known NAND factory in Xi’an, China. About 50% of the CAPEX will be invested in System LSI, mainly including foundry and AP business. Apple A5 is its major foundry product, so will be A6. Both A5 and A6 are very similar to Samsung’s AP, so there is no risk of technology leakage for Apple to choose Samsung as its foundry. In order to get recognition from Apple, Samsung will produce A5 and A6 in the U.S.-based S1 factory, and will invest USD1 billion to expand the capacity of S1 factory.

The 28nm process of TSMC is the world’s most advanced semiconductor production technology except that of Intel, so its clients are willing to order in cash in advance and its orders have been arranged till the end of 2012. TSMC originally planned to invest USD6 billion in 2012, but recently, it announced that it would probably raise CAPEX to USD7 billion to ease the pressure on capacity.

The semiconductor equipment market is highly concentrated, and the share of the largest manufacturer in corresponding sector usually exceeds 50% or even 90%. For example, Applied Material’s market share reaches 93% in the CMP (chemical vapor deposition) sector, and its market share in the PVD (physical vapor deposition or sputtering) sector is 83%. Even the second largest manufacturer may not be able to survive long, so there have been frequent mergers and acquisitions in semiconductor equipment industry. In November 2010, Applied Materials finished the acquisition of Varian Semiconductor Equipment Associates with USD4.9 billion, aiming to strengthen its competitiveness in the field of ion implantation.

At the end of 2011, Lam Research merges Novellus Systems with stock valued about USD3.3 billion. Lam Research occupies 55% of the Etch market, while Novellus holds 80% of the ECD market. The two companies merged to provide customers with a more integrated product line. In April 2011, Japan’s Advantest purchased Singapore’s Verigy, greatly expanding its capability of SoC testing. In October 2011, Teradyne entered wireless product testing market through acquiring LitePoint.

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