SEMI, an organization representing chipmakers and producers of semiconductor production tools, published this week that sales of wafer processing equipment has surged to an all-time record of $71.19 billion for 2020. In the lead-up to the current chip crunch, equipment sales to South Korea and China noticeably spiked, with fabs in the former buying 61% more gear than in 2019, while China has risen to become the largest fab tool customer of all of the nations.
Overall, sales of fab equipment surged 19% from $59.75 billion in 2019 to $71.19 billion in 2020, according to SEMI. The substantial increase was driven by several factors. First and foremost, the world now consumes more chips than ever, and that consumption will only grow over time. Secondly, the competition between TSMC and Samsung Semiconductor (which has Foundry and Memory divisions) is escalating and both companies are spending more money on semiconductor equipment. Thirdly, next-generation lithography equipment (both DUV and EUV) is getting more expensive, so are other tools used in clean rooms. And finally, China is intensifying its domestic semiconductor efforts amid the trade war with the U.S.
| Annual Billings by Region in $U.S. Billions with Year-Over-Year Change Rates | ||||||
| Region | 2020 | 2019 | Change | |||
| China | 18.72 | 13.45 | 39% | |||
| Taiwan | 17.15 | 17.12 | 0.2% | |||
| South Korea | 16.08 | 9.97 | 61% | |||
| Japan | 7.58 | 6.27 | 21% | |||
| North America | 6.53 | 8.15 | -20% | |||
| Europe | 2.64 | 2.28 | 16% | |||
| ROW | 2.48 | 2.52 | -1% | |||
| Total | 71.19 | 59.75 | 19% | |||
Chinese companies increased their spending on wafer processing equipment by 39% year-over-year in 2020 to $18.72 billion, an all-time record for the country. Various companies, both domestic and foreign, are ramping up production of logic and memory chips in China, so the surge was something expected.
Taiwanese manufacturers bought semiconductor tools worth $17.15 billion last year, which was flat with 2019. Now that UMC (which is the world's third largest contract maker of chips) is focused on specialty and mature processes, it no longer has to buy leading-edge equipment. By contrast, TSMC's purchases of new tools offset declines at UMC, but on the country level shipments of semi tools were flat year-over-year. Meanwhile, this is going to change in 2021 as TSMC plans to radically increase its spending on new fabs up to $28 billion in 2020 and intends to invest $100 billion in new plants and R&D over the next three years.
South Korean companies increased their annual spending on semiconductor equipment to $16.08 billion last year, a whopping 61% year-over-year jump. Samsung Semiconductor, which has foundry services for logic, DRAM, and NAND flash memory, has been setting records with its CapEx budgets in the recent years. Its rival SK Hynix has also been increasing procurement of wafer processing equipment. As a result, in 2020 South Korean companies spent about the same amount of money on fab tools as Japan, North America, and Europe combined.
And though Japan is no longer a microelectronics mecca, but Japanese companies still spent $7.58 billion on fab tools last year, up 21% from 2019. A significant share of that expenditure likely belongs to Kioxia and Western Digital that constantly buy new equipment for their 3D NAND operations, and there are a number of other companies in Japan that produce more specialized semiconductors.
Meanwhile, tool purchases by American fabs actually dropped by 20% versus the previous year, sinking to $6.53 billion for 2020. The US is still the runaway leader for chip design, so the drop serves to widen the gap between how much is designed in the country versus how little is fabbed there. Overall it looks like the tables are going to turn in the coming years as Intel, Samsung Foundry, and TSMC begin to equip their new fabs in the USA; but for now, fab tool shipments are down significantly.
Finally, European fabs increased their purchases of new tools by 16% last year, totaling $2.64 billion invested in new equipment. As Intel brings its 7 nm fabrication process to Ireland in the coming quarters, the company will increase its spending in Europe, so fab tool sales there should see at least a temporary spike in the future.
In fact, tool sales are likely to spike everywhere for 2021 and beyond. While SEMI doesn't directly publish any outlooks for future sales, it's clear that the ongoing chip crunch has set the stage for a surge of additional equipment sales, as fabs are overwhelmed with orders despite already operating at full capacity. So, already fully booked for quarters to come, the need for new fab tools will only be increasing.
Source: SEMI
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