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Semiconductor Industry Capital Expenditure Grows against the Trend during Covid-19

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The latest report from IC Insights pointed out that China's foundry manufacturer Semiconductor Manufacturing International (SMIC) ranks first in semiconductor capital expenditures, followed closely by Taiwan Semiconductor Manufacturing Company (TSMC).

The shift of IC process towards 7nm and 5nm nodes and the continuous mass production of Chinese memory manufacturers are the main thrust of semiconductor capital expenditures in 2020. Among them, the capital expenditure of the foundry industry accounted for 34% of the overall semiconductor infrastructure investment in the past 12 months.

The latest report of the market research organization IC Insights pointed out that the Chinese foundry maker Semiconductor Manufacturing International (SMIC) is the number one semiconductor capital expenditure company, followed by Taiwan Semiconductor Manufacturing Co. (TSMC). In the third quarter of 2020, the overall capital expenditure of foundry industry grew by 38%, reaching 36.3 billion US dollars. And just two years ago, the capital expenditure of foundry industry dropped sharply, reaching a decline of 16% in one year.

The shrinking of the semiconductor process is the main reason for the recent surge in manufacturing equipment expenditures. According to statistics published by the International Semiconductor Industry Association (SEMI), the amount of semiconductor equipment orders increased by 30% in the third quarter of 2020. South Korea and China’s chip makers are big spenders, while orders for semiconductor manufacturing equipment in North America have experienced a 45% annual decline at the same time.

IC Insights estimates that overall semiconductor capital expenditures in 2020 will grow 6% compared to last year, reaching US$108 billion. "Due to its focus on leading the provision of 7/5 nanometer process technology, TSMC almost contributed to the overall growth of the foundry industry's capital expenditures for the entire year of 2019." The agency estimates that TSMC's capital expenditures will occupy the overall foundry industry in 2020. The growth of capital expenditures by 20%, while SMIC’s contribution is 39%.

SEMI predicted in September that China's foundry industry will jump into the world's largest fab equipment buyer for the first time, mainly SMIC and other memory companies.

Worldwide Capital Spending by Product Type

In terms of chip types, the investment in logic chip manufacturing increased by 6% compared with the same period last year, while the manufacturing expenditure of other types of chips declined or remained flat. The largest decline in capital expenditure was in memory manufacturing including DRAM and SRAM, with a decline of 13%, while capital expenditure on analog and related components declined by 10%.

Spending on manufacturing equipment for flash memory and non-volatile memory was flat this quarter at US$22.7 billion. IC Insights estimates that the increase in investment in 3D NAND manufacturing is the main expenditure in this area. And flash memory manufacturing expenditure is expected to exceed the stagnant DRAM industry by 37%.

IC Insights emphasized that the semiconductor industry remains resilient during the Covid-19 epidemic. According to the agency’s tracking of 33 chip areas, 22 of them are not only still alive, but also prosperous. The main force comes from the epidemic that has accelerated the transfer of global digital platforms.

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