Fab spending
With many chip fabs (industry parlance for factory) running at about half capacity during a good part of the past two years, spending on materials and equipment to make chips was shut down rather abruptly. While worldwide chips sales fell $48 billion, or 18 percent, over the past two years, the semiconductor equipment industry declined 46 percent in 2009 after falling 30 percent in 2008.
Not all chipmakers stopped making investment plans during the two year industry downturn. Christian Dieseldorff, of SEMI, the global semiconductor industry association of material and equipment manufacturers, points out that six companies that he dubs the “Fantastic Six” stayed active planning large investments that will come to fruition over the next two years. Two of the “Fantastic Six” have a significant presence in the Portland-Southwest Washington area, Intel and TSMC, parent of Camas-based WaferTech.
“Fantastic Six” investment plans coupled with fab utilization rates that started to climb in the second half of 2009 are much needed good news for chip equipment makers as we start a new year. Total fab spending is expected to increase to $24 billion in 2010, with the “Fantastic Six” expected to contribute more than half of the total spending, according to Dieseldorff, who points out that while an increase of 53 percent appears high, the increase is being measured against historic low spending in 2009. Even with $24 billion in spending, mainly earmarked for fab upgrades rather than capacity increases, it barely gets the chip equipment makers back to 2003 levels. With most 2010 spending on upgrades and little or no growth in capacity, coupled with an estimated 31 fab closures in 2009, there is some doubt if the chip industry can meet the 10 percent to 20 percent increase in demand in 2010 being forecast by various market research firms. The regions leading the way for construction and equipment spending is the Americas, followed by Taiwan and Korea.
Netbooks popularity
According to Bryan Lewis, Research Vice President at Gartner, personal computers are the single largest electronics application driving the semiconductor rebound in 2010, followed closely by mobile handsets. Computers sold with Windows 7, Microsoft’s new operating system that started shipping last October, had a positive impact on fourth quarter shipments. This momentum is expected to continue into 2010 as the economy recovers and IT spending increases after remaining stagnant the past 2 years. There also appears to be a major shift away from desktop PCs as more computer buyers opt for smaller and more portable PCs such as notebooks and the increasingly popular netbooks, which were introduced in late 2007. Netbooks, which will only account for about 11 percent of all PC shipments in 2010, is a rapidly evolving category of small, light and inexpensive laptop computers suited for general computing, e-mailing and accessing Web-based applications. They are optimized for low weight and low cost and since their introduction have grown in features and capabilities, making them on par with many heavier and more expensive notebook computers. Market acceptance of these small computers is such that Intel developed a specific processor chip called the Atom, optimized to run on these small computers, with other chip manufacturers following suit.