Semiconductor Equipment - Berenberg Bank

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Semiconductor Equipment Technology Hardware Figure 18: DRAM capex/revenue versus bit growth trend DRAM 100% 80% 60% 40% 20% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 DRAM Capex/revenue Bit growth Source: Gartner data Historically, DRAM capital intensity was positively correlated to bit growth (see Figure 18). As discussed above, we expect DRAM bit growth to grow at a moderate 30% rate compared with its historical level of 70%. The spending pattern (capex/sales) of the DRAM industry is therefore likely to undergo structural change from the previous 40-60% level to 19-25%. We estimate that DRAM capex will remain flat or slightly down in 2013 even if the ASP improves, as DRAM-makers are likely to spend conservatively for the time being. We may start to see a small capex uptick in 2014/2015 because: 1) DRAMmakers may begin to spend more as they see sustainable profitability; and 2) most DRAM-makers plan to start or expand their 2Ynm (25/24/23nm) output in 2014, followed by 2Znm production in 2015. We could even see substantially higher capex growth if DRAM-makers start to upgrade current fab to facilitate EUV tools in 2014/2015, as the EUV tools are much bigger and heavier than previous lithography tools. Foundry and logic – the main spenders keep spending Foundry and logic capex grew at c22% from 2007-2012, versus total capex which was down by c1% during the same period. The strong capex growth was linked to the consumer electronics boom that began in 2009/2010. We expect the consumer electronic market to maintain solid growth over the next few years, driven by the intensified competition between vendors and form factor innovations. Logic players such as Intel and Samsung, are exposed to the trend because they manufacture the chips they use in own devices, while TSMC, the Samsung foundry, Globalfoundries and other foundries are exposed because they receive manufacturing orders from fabless players such as Apple, Qualcomm, Nvidia, Broadcom and Mediatek (see Figures 19 and 20). 18
Semiconductor Equipment Technology Hardware Figure 19: Foundry revenue components $mn 30,000 Foundry revenue by customer type 25,000 20,000 15,000 10,000 5,000 - 2007 2008 2009 2010 2011 2012 Fabless IDM Other Source: Gartner data Figure 20: Foundry grow with fabless Foundry revenue growth 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% 2007 2,008 2,009 2,010 2,011 2,012 Fabless Total Foundry revenue Source: Gartner data Apple, Samsung, Intel and other device vendors have been competing for market share by delivering end-products with higher specifications, lower power consumption, smaller form factors and lower price points. These ultimately require the use of chips which are manufactured with leading edge technology. As a result, Intel, Samsung, TSMC, Globalfoundries and others will be under pressure to maintain their current spending to adhere to their aggressive shrinkage roadmap. Due to the greater capital intensity required to develop leading-edge technology, we believe that there will be fewer players that can afford, and are willing, to invest in such advances. We estimate that 90% of foundry and logic capex will come from Samsung, TSMC, Intel and Globalfoundries in 2016, compared with 66% in 2007 and 50% in 1999 (see Figure 21). Due to their large exposure to the consumer electronics market, and the intensified competition within that market, we believe these companies have no choice but to keep spending. 19
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