Chipmakers to spend record $109b on fab machines this year

Factories hope to buy their way out of shortages – with Taiwan leading the pack

If you've been ripping your hair out about the ongoing semiconductor shortage, you should know that chip manufacturers are at least trying to spend their way out of the problem at record levels.

Chipmakers across the world are expected to increase spending on equipment for front-end manufacturing plants by 20 percent to an all-time high of $109 billion in 2022, according to the latest World Fab Forecast report from semiconductor industry group SEMI.

To help illustrate how much money semiconductor companies are spending on fab equipment, consider the fact that they only handed over $55 billion for new kit in 2019, which means that the estimated investments this year represent a roughly 2x increase from three years ago.

And while this would mark a third consecutive year of growth in global fab equipment spending, SEMI expects investment growth in 2023 to level off. Even then, chipmakers doling out $109 billion for two years in a row is still a tremendous amount of spending.   

"The global semiconductor equipment industry remains on track to cross the $100 billion threshold for the first time as shown in our latest update of the World Fab Forecast," said Ajit Manocha, president and CEO of SEMI. "This historic milestone puts an exclamation point on the current run of unprecedented industry growth."

This ongoing spending is expected to translate into chip manufacturers increasing production capacity by eight percent in 2022 after growing seven percent the previous year, according to SEMI. Capacity is expected to further expand by six percent in 2023.

A graph from SEMI showing that semiconductor fab equipment spending is expected to grow to $109 billion in 2022.

Wow, that's a lot of money ... SEMI's graph showing increase in fab machine spending. Click to enlarge.

Chip foundries, such as TSMC, Samsung and Globalfoundries, are thought to make up roughly 53 percent of fab equipment manufacturing in 2022 and 2023. Memory chip manufacturers, such as Micron and SK Hynix, are projected to come in second, comprising 33 percent in 2022 and 34 percent in 2023. SEMI estimated that the foundry and memory sectors will also represent the largest capacity increases this year.

With foundries set to lead spending, it should come as no surprise that Taiwan is expected to top the charts of investments in fab equipment this year, given that the island nation, with foundries like TSMC, controls 48 percent of the advnced foundry market. Semi estimated that Taiwan will increase fab kit spending by 52 percent to $34 billion, accounting for 31 percent of total investments expected this year.

In second place for projected fab equipment spending this year is South Korea, home to companies like Samsung, the world's second-largest foundry business, and memory vendor SK Hynix. The country is expected to increase investments this year by 7 percent to $25.5 billion, which would make up 23 percent of total spending in 2022.

Here is how much spending is expected in other regions in 2022:

  • China spending to decline 14 percent to $17 billion, representing 16 percent of total spending
  • Europe/Middle East to increase 176 percent to $9.3 billion, or about 9 percent of total spending
  • Americas to rise 19 percent $8.2 billion, representing 8 percent of total spending

SEMI did note that the Americas are projected to increase spending by 13 percent to $9.3 billion in 2023 while Taiwan, Korea and Southeast Asia are expected to make "record-high" investments the same year.

The investment plans by chipmakers are remarkable, given that kit makers have warned of severe delays in delivering their equipment. But there are concerns that the industry's continued expansion could lead to factories pumping out too many chips in only a couple of years.  

"Longer term, the new fabs and investment announcements will add significant capacity and could increase the risk of overcapacity beyond 2023," IDC research Nina Turner recently said. ®

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