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Capex to scale back due to economy
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Friday, October 22, 2010
A research firm has cut its capital spending forecast for 2011 amid a sudden slowdown in DRAMs. Capital spending for foundries will fall, as TSMC has reportedly pushed out its ramp for a new fab.
As reported, the DRAM market has hit the wall due to slowing demand. In a new report, Jagadish Iyer, an analyst with Arete Research LLC, made the following observations about the DRAM market going into 2011:
''As we enter '11, we see the DRAM industry headed for turmoil at least early in the year given: a)
the recent announcement by Rexchip that it is postponing its plans for its proposed R2 DRAM fab in
Taiwan (JV between Powerchip and Elpida, online by mid-'11); b) the continued yield struggles at
Nanya and Inotera at the 5xnm node despite Micron’s handholding, thereby limiting their '11
capex; and c) the plan by Elpida to leapfrog to 4xnm in 1H11, bypassing 5xnm node, which we view
as a formidable challenge.
''Though we are bullish on Samsung's capex plans (45 percent of overall memory capex) for '11 as it plans to gain market share and ramp its hybrid fab Line 16, we see capex headwinds in '11 from other players,'' he said.
''Given this change, our revised '11 capex and (wafer front-end equipment) estimates are $43.9 billion (-7 percent year-over-year, previously $50.6 billion) and $25 billion (-15 percent year-over-year, previously $32 billion), respectively,'' said Iyer in the report.
''Consensus still suggests double-digit revenue growth for the sector in '11, but we think this is too optimistic,'' Iyer said. ''Instead, we see double-digit declines in '11 sector spending, and expect a further 15 percent cut to consensus revenue estimates.''
Who's to blame? The memory market. ''Our view going into '10 was that memory capex was going to double this year,'' the analyst said. ''Since the beginning of the year, we have seen '10 consensus revenues surge
15-20 percent. However, as we look to '11, fundamentals are again being shaped by memory–with DRAM
prices now on the slide, we think overall memory spend will disappoint in '11 (falling in the double digits)
even with a booming NAND market, where spend is being boosted by three new factory ramps (which
will take time to come online).''
Also blame it on the smaller players. ''Tier 2 memory players are the main weak spot as we believe they
are faced with the formidable challenge of lowering their costs by balancing their capex requirements
in a declining DRAM price environment, which can impact not only their top lines but also their margins,'' the analyst said.
''Further yield challenges add another dimension to the cost and profitability as is the case with Inotera
and Nanya, which have struggled as they migrated their process flows from trench to stack-based
DRAM process technology despite Micron's assistance,'' he said.
Foundry is also a weak spot. ''We expect overall foundry spending in '11 to be down 14 percent year-over-year to $11.1 billion (previously $12.9 billion),'' the analyst said. ''We believe TSMC's
spend may get lowered to $4.1 billion for semiconductor equipment with an additional $500 million planned
for solar and LED activity.Our checks suggest TSMC's initial plans for equipping Fab 15 have been moved
from 1H11 to late 3Q11.''
By: DocMemory
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