Recovery allows chipmakers to invest

Semiconductor factories hum at nearly full capacity, equipment makers will profit as their sales are expected to grow 39 percent next year Taiwan's chipmakers plan to spend much more money on new equipment next year as the industry's recovery moves into full swing, industry watchers said yesterday."Next year we expect capital expenditure at the big three -- Taiwan Semiconductor Manufacturing Co (TSMC), United Microelectronics Corp (UMC) and Singapore's Chartered Semiconductor Manufacturing Ltd -- to grow by more than 50 percent," said Rick Hsu, an analyst at Nomura Securities in Taipei.On Wednesday, Semiconductor Equipment and Materials International (SEMI) said in a report that equipment makers would see a "robust recovery" next year, with sales of new manufacturing, testing and assembly equipment rising 39 percent to US$29.6 billion after increasing an estimated 8 percent this year following a serious slump in 2001.The sales increases are expected to continue into 2005 with 18 percent growth to US$35 billion, but then drop 6.6 percent in 2006 as chipmakers make use of the equipment they have bought, the report said."Recovery in the global semiconductor market, coupled with increased capacity utilization, the introduction of new technologies, and improving sales of electronics support the view that 2004 and 2005 should be strong years for the capital equipment market," Stanley Myers, president and CEO of SEMI, said at a conference in Japan on Wednesday.The aggregate capital expenditure for the world's top three made-to-order chip makers is expected to be US$3.9 billion this year.That represents an increase of 50 percent from this year's figure of US$2.6 billion, which includes a plant operated in Singapore by UMC, Hsu said.As the foundries hum at almost full capacity, pressure is on to expand production."Customers are pushing the foundries to add capacity," Hsu said. TSMC's production lines are running at full capacity, with UMC running at around 90 percent of full capacity. Customers are "still hungry for more," he added.TSMC announced Tuesday that it would spend US$1.4 billion to expand its most advanced facilities, on top of the US$1.2 billion it already plans to spend next year.This year the company is expected to spend US$1.65 billion on new equipment and facilities, compared to just over US$1 billion at UMC. UMC announced at the end of October that it plans to build a new plant in Japan next year.ING Securities Ltd's senior industry analyst said that SEMI's report was in line with his company's forecasts for next year."SEMI's numbers look very reasonable," Chris Hsieh said yesterday.Foundries may have to wait a long time to get the new equipment they order as suppliers were burnt badly in 2001, when orders for new equipment fell by 38 percent, according to US-based research firm Gartner Dataquest."Some of the more advanced lithography machines have a very long lead time as equipment makers have no inventory after the last downturn," Hsieh said."Some are hesitant to hold inventory," he said.Hsieh dismissed concerns that TSMC may lose orders if it cannot expand its production facilities quickly enough to meet demand."I am currently not that concerned about TSMC as they are running pretty advanced technologies, some of which are unique to TSMC," Hsieh said."Customers will find it difficult to find a new source for these processes," Hsieh said.The news comes as the Semiconductor Industry Association (SIA) trumpeted a full recovery in the semiconductor market on Monday, saying that worldwide chip sales have risen 16.4 percent this year to date, with October showing the strongest gain since 1990.SIA predicted last month that the industry will grow 19.4 percent next year, while Gartner Dataquest has called for a more optimistic 21.4 percent. Source: Taipei Times