As industry leaders push for increased fab capacity to address persistent chip shortages, global front–end fab equipment spending is expected to increase by 18 percent over the next year, according to SEMI’s latest World Fab Forecast report. The industry group forecasts spending to reach $107 billion in 2022 and expects a growth trajectory well into 2023.

“Global fab equipment spending is forecast to have another healthy year in 2023 and is expected to remain above the $100 billion mark,” said Sanjay Malhotra, vice president of Corporate Marketing and the Market Intelligence Team at SEMI (Figure 1). “We expect global semiconductor capacity to maintain steady growth this year and in 2023.”

SEMI president and CEO Ajit Manocha says the expected increase in fab spending reflects the need to provide additional capacity for a wide range of market segments.

“Crossing the $100 billion mark in spending on global fab equipment for the first time is a historic milestone for the semiconductor industry,” Manocha said. “This significant achievement is a tribute to the relentless drive to add and upgrade capacity to address a diverse range of markets and emerging applications, solidifying expectations for long–term industry growth to enable electronics for the digital world.”

SEMI also reported global semiconductor industry capacity is expected to increase by 8 percent this year, which will edge off to 6 percent in 2023. Meanwhile, increases in capacity across 150 fabs and production lines will account for more than 83 percent of fab equipment spending in 2022, according to SEMI.

Other industry groups have similarly reported that overall fab investments will only continue to grow over the next few years. This seems timely, especially given the fact that industry heavyweights are alluding to continued supply chain disruptions; as evidenced by ASML chief executive Peter Wennink’s warning that chip shortages could continue well into 2024 as a result of critical equipment shortages.

Last month, IC Insights forecasted semiconductor industry capital expenditures (capex) could reach a whopping $190.4 billion by 2022, as previously reported by EE Times. This reflects an 84 percent increase compared to three years ago in pre–pandemic times. GlobalFoundries’ capex, for example, is forecasted to reach $4.5 billion, a 155 percent increase compared to a year ago.

Yet analysts argue recent efforts to increase fab capacity could lead to a bigger problem: capacity glut.

“There is definitely a possibility of an oversupply. Even if the demand kept up, assuming there’s no economic fallout, no industry correction, we could still be heading there, especially if you consider the fact that Intel’s currently trying to build four brand–new fabs, as well as TSMC, Samsung and others,” said Tirias Research founder and principal analyst Jim McGregor.

“If you add up all the capacity that could potentially be coming online, we could overshoot it, and it wouldn’t be the first time. Micron’s Lehi fab sat vacant for over a decade. Intel’s Fab 42, which is now in full production, also sat vacant for over a decade. It happens, and there’s no doubt it could happen again.”

Even then, the consensus seems to be that in the event the U.S. overshoots demand, investments in U.S. fab capacity means less reliance on China for critical semiconductor materials and equipment.

“It’s still going to be important that we have more manufacturing capacity in other regions, especially Europe and North America,” McGregor said. “Think about the fact that we have over 50 percent of our semiconductor manufacturing capacity in regions that are threatened by communist regimes. That’s a scary thought.”

By: DocMemory
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