Monday, 08 February 2016 14:42

Chip growth slows but competition fierce

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Every computing device needs memory and a central processor. Competition is fierce, growth trends are low, so the main players are spending heavily on new technology to stay ahead.

TrendForce predicts that revenue of the global semiconductor foundry industry will grow by just 2.1% year-on-year in 2016 due to slowing end-user market demand and more low cost competitors.

The competition among major semiconductor manufacturers will intensify and will be won on technological prowess. As such the total capital expenditure of the three leading manufacturers – Intel, TSMC and Samsung – is estimated to increase by 5.4% this year.

US-based Intel is projected to increase its CAPEX by 30% year on year to US$9.5 billion. Taiwan’s TSMC will also reach US$9.5 billion, representing a 17% annual increase. South Korea’s Samsung is going to scale back its CAPEX by 15% to US$11.5 billion.

But it is all about the future and TrendForce says the CAPEX undertaken by these majors during 2016 will be reflected in their 2017 revenue results.

Read on about these three behemoths.

TSMC will concentrate on improving its manufacturing technology as it is the only pure-play foundry (does not compete with its clients). It will allocate about 70% of its 2016 CAPEX on manufacturing-related R&D, with most of this expenditure going towards developing the 10nm process. Investments on the integrated fan-out (InFO) wafer-level packaging will account for 10% of the foundry’s CAPEX. The InFO technology promises thinner, smaller products with improved heat dissipation and of consistent quality.

It also intends to move closer to the enormous market in China and will be spending US$3 billion on building a 12-inch wafer fab in Nanjing. The Nanjing fab is scheduled to be in operation in 2018.

Samsung will give more weight to its semiconductor businesses this year as the outlook on its smartphone business is uncertain impacted by sluggish demand and lack of product differentiation in the market. Its smartphone business suffered an annual revenue decline of 2.6% and an annual net profit loss of 20.6%.

Its semiconductor business had an impressive 20% annual revenue increase for the same year. Memory and large-scale integration (LSI), that make up the two arms of Samsung’s semiconductor business, saw annual revenues grew by 17% and 27.7% respectively.

It will scale up the foundry service market by a more aggressive strategy to get semiconductor orders. Samsung’s 2016 CAPEX is estimated at US$11.5 billion, out of which US$3.5 billion will be allocated to the LSI unit. The company maintains the same level of capital investment on its LSI unit as last year.

Intel plans to retain its manufacturing leadership and expand its memory business. It is currently the leader in the 14/16nm manufacturing but needs to get that to 10nm technology to stay ahead of TSMC and Samsung. The share of R&D in Intel’s 2016 CAPEX has been increased to about US$8 billion as the U.S. chip maker strives to maintain its edge in the manufacturing technology.

Intel has been very active in the data centre market introducing 3D-NAND and 3D XPoint technologies that it jointly developed with Micron. Intel also announced that its logic IC fab in Dalian, China, is going to be converted into a NAND Flash plant at a cost of US$2.5 billion. The chip maker will allocate about US$1.5 billion of its total CAPEX for this year to build on the progress it has made on the memory front.

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Ray Shaw ray@im.com.au  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!

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