Earlier this year, we discussed the rebound of CAPEX after the 2009 lull (here, here and here), due to the financial crisis. These investments were also among the variables contributing to this summer's shortages (cf. this Commentary post and this recent Quarterly post for two examples), primarily due to the fact that investments were geared to next generation architectures and new fabs rather than increased capacity and/or lines at existing facilities.
Beyond the questions of next generation architecture are also the critical questions for many economies, what geographic locations are benefitting from these investments? There is no geo-economic location that would not benefit greatly from billion dollar manufacturing investments with thousands of high-tech jobs. So, where and why are the new facilities popping up where they are?
Last week, Paul Otellini, CEO of Intel, was in Ho Chi Minh City, Vietnam, the site of a new assembly and testing facility that was almost a year delayed due to contractor problems. The focus of the plant is chipsets for laptops and mobile devices, as reported here by EETimes Asia. With roughly 38% of the global end-market demand for mobile devices in Asia as reported here, the location of this facility is well-placed and marks the first of its size for Vietnam. Additionally, Intel opened a new 300mm, US $2.5 billion fab in Dalian, China. This marks an important strategic move by Intel, as Otellini was quoted by ElectroIQ here, "This manufacturing facility helps deliver on our vision to contribute to sustainable growth in China while giving us better proximity to serve our customers in Asia."
Otellini was also in Taiwan to discuss progress on the WiMAX MOU and Intel's strategy in this area with its Intel Innovation Center in Taiwan, according to DigiTimes on 10/29/10. TSMC has reiterated that their investments in new lines and facilities underscore their ability to withstand Intel's recent, and more aggressive moves, as cited in DigiTimes on 11/2/10. Much of the speculation around who is gaining or loosing what market share upstream is directly related to the strategic plays these companies have made in investing at particular architectures. Intel recently signed an agreement for 22-nm chips with Achronix Semi, who favored Intel over their traditional partner, TSMC, who opted to skip 22-nm nodes and go directly to 20-nm (cf. WSJ.com here and DigiTimes11/2/10). This is actually part of a more interesting and important strategic shift by Intel as it expands its markets, as well discussed in this article by ars technical here, but beyond the scope of this Commentary.
In the US, Intel has reiterated plans for the Hillsboro, Oregon new R&D wafer fab, as well as upgrades to other US facilities totaling US $6 to $8 billion, as reported here by FT.com, recently.
How will these investments and strategic market plays work out? That is one of the more critical questions pertaining to the semiconductor supply chain as we move into 2011 - a topic we will continue to explore with you in the weeks and quarter to come. Regionalization plays are coming to the fore, hand in hand with critical node decisions and strategic shifts, such as the one recently seen played by Intel. There is much to watch as we close out 2010.