Growth, investment, spending – these are the words we see increasingly popping up in analysts' reports on the present and future outlooks for the semiconductor industry. What bodes well is that the investment in both research and front-end fab equipment is proof positive that not only do analysts' models portend of continued positive trends, but companies are willing to put significant investment (CAPEX allocations) into the same line of thinking.
SIA July growth data
Growth has been uneven globally, which ought to come as little surprise given world events. North America and Europe are, unsurprisingly, the laggards these days in terms of rebound of sales and revenue while Asia, including Japan, are showing growth, according to the latest research from SIA. More specifically, SIA underscores that the global macroeconomic situation is still having the greatest influence on semiconductor and electronics growth, both overall and on regional bases. Their latest data, which finalizes July 2012 results, reveal the following breakdown for the 0.2% growth month-over-month (on a three month moving average (3MMA)):
Semiconductor sales in July 2012 increased compared to July 2011 in Japan (4.2 percent) and Asia Pacific (1.4 percent), but were significantly lower in Europe (-10.0 percent) and the Americas (-10.4 percent). On a sequential monthly basis, sales increased in Japan (5.4 percent) and Asia Pacific (0.3 percent), remained flat in Europe, and declined in the Americas (-3.9 percent). Japan had its strongest month-over-month growth since September 2009 and largest year-over-year increase since January 2011.
SEMI's front-end fab growth
Looking to 2013 forecasts, SEMI this week released results of their World Fab Forecast database, indicating an increase in total fab spending of "[…] 16.7 percent in 2013 to reach a new record high of [US]$42.7 billion. The estimate includes new equipment, used equipment, or in-house equipment but excludes test assembly and packaging equipment."
This finding represents an important point for projecting the continued and future growth for the semiconductor and electronics industry. The continued increase in spending, now reaching beyond the 2012 investments primarily seen in the Americas, to the 2013 investments in Asia (primarily in Taiwan, China, and Korea), based on SEMI's findings. Because of the completion of the 2010-2012 fab construction projects in the Americas, it is anticipated that 2013 will actually show a significant decrease from roughly US$3 billion to the US$500 million range. However, rather than a retraction or negative indicator, this likely data point should be understood as the completion of projects over any other interpretation.
IC Insights R&D strong 2012
Rounding out this week's important industry numbers and trends is the release of IC Insights' research on R&D investment showing a worldwide increase of 10%, a record-level US$53.4 billion, in 2012 by semiconductor companies. As IC Insights notes:
The increase will lift R&D spending by chip companies to 16.2% of total semiconductor sales in 2012, which are now forecast to rise 3% to [US]$329.8 billion from revenues of [US]$321.4 billion in 2011.
A dozen semiconductor companies spent more than $1.0 billion each on R&D in 2011 for the first time ever, based on the Mid-Year Update's analysis of data taken from IC Insights' Strategic Reviews online database of IC suppliers.
While this increase in spending is part of a longer trend of rising R&D investment, likely due to the rising costs of increasingly complex IC designs and fabrication processes, the high level of increased R&D investment (in the 20% range averaged across the leading companies investing in this type of research) does support the continued support of improving current technology while looking forward to next generation architectures and designs.
Semi growth to continue and diversify
Given the strength of new growth from maturing market sectors, such as the significant increases seen in automotive semi, and more recently the upcoming opportunities in medical electronics, to name but two market sectors, there is little wonder why our industry's growth is certain. Despite the obvious impediments to more stable and strong growth because of the troubles in the mature economies' economic situations, the overall view and vision of our industry is nothing but positive. Investment is strong and growing, opportunities for new growth and competition are manifold, and the various waves of commoditization within market sectors for increased adoption of electronic components into their solutions is without question.