Koreans Stalk Goose
The Koreans aren’t called ‘The Italians of Asia’ for nothing. If anyone was going to get over-excited by shortages in semiconductor supply, it was likely to be the Koreans. Right on cue, Hynix said yesterday it would increase capex 130% next year – a rise from $1 billion to $2.3 billion.
If this provokes a surge in capex spending across the semiconductor industry it would be wholly typical and wholly depressing.
That’s because the memory sector is beginning to look very attractive to the chip manufacturers.
DRAM at Micron and Samsung is on allocation, in some product areas, such as DDRI and DDRII, the Arrow lead-time forecast expects prices to go up and lead-times to lengthen. Fab utilisation at both Samsung and Micron is rated ‘High’.
The NAND situation also looks very promising for the semiconductor industry. The lead-times on NAND from Intel are 16 weeks and lengthening; Micron’s lead times are 8 weeks. SanDisk and STEC Flash NAND cards are actually on allocation. NAND prices have doubled since last year.
So here’s this lovely goose, eager to lay lots of golden eggs, and the industry kills it by over-investing in new capacity, over-supplying the market, depressing prices and offering themselves up as a punch-bag for the OEMs.
There’s one thing which may save the industry from folly – the inability of the equipment industry to supply the latest scanners. Hynix’s capex is to be spent on upgraded equipment. That means the latest equipment.
Although ASML had a billion dollars worth of inventory a couple of months ago, that will disappear like dew when exposed to over-heating capex.
Back in the summer, Malcolm Penn, CEO of Future Horizons, was saying: ”I don’t know how the capital equipment people will react when one day they get a phone-call saying: ‘Instead of cutting our capex by another 50% this quarter, we’ve increased it by 300%’ – and it will all happen in one quarter.”