Despite Cooldown Concerns, Money Pours into Chip Production

Last month, Gary Dickerson, chief executive officer of Applied Materials and former chief operating officer of KLA-Tencor, admitted that some customers were holding off spending to find out whether they needed more chip production to meet demand. That acknowledgement, from the world’s largest maker of machinery used to manufacture chips and displays, touched off concerns that the semiconductor industry is cooling down.

Despite the mounting concerns, manufacturers are ramping up investments in chip factories, according to a report from SEMI. New factories will require more than $220 billion of manufacturing tools from 2017 to 2020. Over that period, 78 new factories and production lines have or will begin construction. Equipment spending is expected to increase around 14 percent to $62.8 billion this year and 7.5 percent to an all-time high of $67.5 billion next year.

Equipping a new manufacturing plant typically takes 12 to 18 months, though it could take two years or longer depending on factors including the product type, company and geographic region. Around half of the projected $220 billion will be invested from 2017 to 2020, with less than 10 percent invested over the first two years and another 40 percent over the last two. The remainder will be expended after 2020, according to SEMI.

Spending varies by region. South Korea is expected to lead in fab equipment investments with $63 billion, around a billion dollars more than second-place China. Taiwan is expected to occupy the third position with $40 billion, followed by Japan with $22 billion and the Americas with $15 billion. Around 60 percent of the factories will focus on memory chips, particularly 3D NAND, while a third will be doled out by the foundry business.

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