SEMI: DRAM capital expenditures will drop 23% next year

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The Semiconductor Equipment and Materials International (SEMI) pointed out today (18th) that the global wafer fab equipment investment amount this year (2018) will be revised down from the 14% growth predicted in August to a 10% growth, and the investment amount next year (2019) will be revised down from the original forecast of 7% growth to a decline of 8%. The decline in memory prices and the impact of the US-China trade war have caused companies to change their investment plans, which are the two main reasons for the rapid decline in wafer fab capital investment.

SEMI released the "Global Fab Forecast Report" pointing out that at the beginning of 2018, it was originally estimated that the global semiconductor fab equipment market would continue its rare four-year continuous growth until next year. However, in August this year, after SEMI comprehensively collected and analyzed the major investment plans of more than 400 fabs around the world, it was estimated that the amount of fab investment will show a downward trend from the second half of this year to the first half of next year; however, in view of the recent market situation, the decline may be more severe than originally expected; it is estimated that the sales amount of wafer equipment in the second half of this year and the first half of next year will decline by 13 and 16 percentage points respectively, and a turnaround is not expected until the second half of next year.

According to SEMI Taiwan President Cao Shih-lun, falling memory prices and changes in corporate investment plans caused by the U.S.-China trade war are the two main reasons for the rapid decline in fab capital investment. Among them, the capital expenditure cuts of advanced memory manufacturers, Chinese fabs, and mature process companies with 28 nanometers or above have the greatest impact on the global semiconductor equipment market.

In the memory sector, SEMI further pointed out that after the rapid decline in NAND flash memory prices at the beginning of this year, dynamic random access memory (DRAM) prices also began to loosen in the fourth quarter, and the two-year DRAM boom is likely to end. Inventory adjustments and insufficient production of central processing units (CPUs) will lead to more drastic price declines. In order to quickly respond to market conditions, memory manufacturers have reduced capital expenditures and postponed shipments of equipment that have already been ordered. It is expected that NAND flash memory-related investments will even decline by double digits.

SEMI also revised its previous forecast of 3% growth in memory capital expenditures, predicting that overall memory capital expenditures will decline by 19% next year, with DRAM declining the most, by 23%, and 3D NAND declining by 13%. SEMI also pointed out that in terms of regions, China and South Korea are the two regions with the largest declines in wafer fab equipment investment.

However, SEMI also said that although most memory factories plan to reduce capital investment, Micron is an exception. Micron is expected to invest about US$10.5 billion next year, an increase of about 28% from this year's investment of US$8.2 billion. This investment will mainly be used to expand and upgrade existing factory facilities.

Industry insiders analyzed that the overall global semiconductor market has taken a sharp turn for the worse since the peak in the third quarter of this year. Samsung's most profitable memory demand has also been affected, and it has urgently cut capital expenditures since the third quarter, with a 27% reduction in memory. It is also likely to continue its conservative capital expenditure mentality next year. Taiwan-based DRAM giant Nanya Technology also announced that this year's capital expenditure will be reduced from the original 24 billion yuan to 21 billion yuan, a drop of more than 10%.

Semiconductor equipment manufacturers emphasized that in addition to Samsung and Nanya, SK Hynix and Micron's DRAM production growth has also slowed down. These manufacturers are the main buyers of semiconductor equipment in the past two years. Judging from the actions of reducing capital expenditures, each manufacturer seems to be worried that the US-China trade war will interfere with market buying, and by reducing capital expenditures, they are slowing down the decline of DRAM and NAND Flash.

TSMC also lowered its capital expenditure for this year to US$10 billion to US$10.5 billion, a decrease of about 10% from the original plan of US$11.5 billion to US$12 billion. However, TSMC also stated at the Supply Chain Management Forum that capital expenditure in the next few years will still be between US$10 billion and US$12 billion.

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