300mm Investment Drives Cap Spending Growth

Expansion of 300mm fab lines will actually spur capital expenditures to grow by 2 percent this year, according to market research firm Strategic Marketing Associates.

Some 22 new fabs will begin equipping this year, to the tune of nearly $40 billion. While that's up 57 percent from the

"The current level of activity is still only equal to that of 1996. It's really crazy," George Burns, SMA president, said in a statement. "Equipment makers have improved the productivity so much, that chip companies can get away with spending less.

The ratio of capital spending to revenue is only 20 percent this year, compared to 30 percent in 2000," he said.

Korean chipmaker Samsung is the industry's top spender for the second year in a row, followed by Intel, according to the market research firm. Both companies plan to increase their spending substantially this year and each plans to spend more than $5 billion, SMA said.

The industry's largest foundry, TSMC, also plans to increase spending. The bulk of the spending for Samsung and Intel is to build and ramp 300mm production.  The same is true for TSMC and seven other semiconductor companies increasing their capital spending for new 300mm fabs, SMA said. The first wave of 300mm production fabs began equipping on 2000 and 2001; the second wave began in 2003 and 2004 and the third wave is coming this year. 300mm fabs will keep the spending budgets plump on 2005.

 New fab activity will remain strong this year as well and if chip sales remain positive this year and into next year, capital spending, driven by the new 300mm fabs, will continue to grow into 2006, the market research firm concluded.