mannerisms

Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.

Huge Capex Raises Questions Over Fablessness.

Huge 2012 capex budgets at Intel, Samsung and TMC will skew the industry to make it extremely challenging, and in some cases impossible, for smaller companies to remain competitive, says IC Insights.

Intel has announced a capex budget of $12.5bn, Samsung a budget of $12bn and TSMC a budget of $6bn. The three companies should account for a third of the industry’s total capex in 2012.

 

Fabless companies which are heading into competition with Intel and Samsung in the wireless market, like Qualcomm, Broadcom and Marvell, may find themselves coming under pressure if Intel and Samsung get significantly ahead of the foundries in process technology.

 

Fablessness may start to look like hopelessness.

 

Samsung, Intel and TSMC have been leading the capex table for some years. “Since 2009, these three companies have boosted capital spending by astounding percentages,” says IC Insights, “in 2010, TSMC doubled its capital spending compared to 2009.  In the same year, Samsung tripled its spending!  In 2011, Intel doubled its capex compared to 2010.”

 

Collectively, the planned capex spending of these three companies is forecast to be $30.7bn in 2012, nearly 3x as much as they spent in 2009.

Samsung is significantly boosting spending for logic ICs.  Approximately $6.5bn of Samsung’s 2012 capex budget is dedicated to logic ICs.  Samsung currently has a lucrative business serving as Apple’s foundry partner for the A4 and A5 application processors used in iPad tablet computers, iPhones, and iPod touch devices.  It does not want to lose this business. 

 

Samsung is demonstrating that it has the means to provide all the process and manufacturing muscle needed when Apple considers a foundry partner to build its next-generation processors.  Besides serving as a foundry partner for Apple, Samsung is aggressively ramping its in-house application processor business as demand increases for its smartphones, tablet PCs, and other mobile/media related devices.

 

The remaining $5.7bn of Samsung’s capex budget will be applied to the production of memory ICs, with a good portion of the funding likely to be used to boost capacity for NAND flash memory.

Intel’s capex was $10.8bn in 2011 and is forecast to be $12.5bn in 2012. Intel is nearing completion of, and will soon be equipping and ramping production at, three new  wafer fabs located in Chandler,  Hillsboro and Leixlip.

 

The company plans to begin 14nm production in Chandler when that fab opens in 2013.  The new Hillsboro facility will focus on process development using 450mm wafers when it begins operations in 2013.  Meanwhile, several fabs will begin 22nm production of x86 processors in the second half of 2012.

TSMC’s $6bn capex is twice as much as the capex of its would-be competitor Globalfoundries.

 

Will process be seen, again, as a key competitive differentiator? And if so, what business model could the fabless and fab-lite adopt to get access to advnaced processes? 

Tags: fabless companies, foundries, ic insights, iphones, process technology

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5 Comments

  1. David Manners
    January 27, 2012 11:57

    Nah (anonymous) capex bubbles have been bursting for as long as there’s been a semi industry.

  2. anonymous
    January 27, 2012 06:16

    What happens eventually if the capex bubble get bursts at some point in time?
    will it take down the entire semi industry?

  3. David Manners
    January 26, 2012 11:42

    There was always another way to go, Martijn – joint fabs. The Japanese got some way to achieving this but it all fell apart on disagreements over which processes to support. But it could have been done, and I bet they now regret not having done it.

  4. martijn
    January 26, 2012 11:38

    Or did you make a point exactly why smaller guys became fabless? Looking at the tremendous capital investment needed to stay competitive in manufacturing, you can either choose to go fabless or bleed money on a fab that’s always at least a generation behind?

  5. CustomGuy
    January 25, 2012 16:28

    Everyone was following the same process run up until leakage put a spanner in the works. Now everyone (well, only 3 really in the game) has gone off piste, yes, process is going to be a key differentiator.
    BTW I think you have just made a very good case for TSMC to increase its wafer prices; its the only way they and the fabless crew are going to stay in contention…
    Rgds,
    CustomGuy.