Samsung huge chip capex for 2017 shows move to defend its memory dominance
Samsung huge chip capex for 2017 shows move to defend its memory dominance
Jessie Shen, DIGITIMES, Taipei [Thursday 16 November 2017]
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After spending US$11.3 billion in semiconductor capex last year, Samsung announced that its 2017 outlays for the semiconductor group are expected to more than double to US$26 billion. The company's US$26 billion in 2017 outlays will be more than Intel and TSMC combined, according to IC Insights.
"In my 37 years of tracking the semiconductor industry, I have never seen such an aggressive ramp of semiconductor capital expenditures," said Bill McClean, president of IC Insights. "The sheer magnitude of Samsung's spending this year is unprecedented in the history of the semiconductor industry."
2010 was the first year Samsung spent more than US$10 billion in capex for the semiconductor segment. After spending US$11.3 billion in 2016, the jump in capex expected for 2017 is simply amazing, IC Insights noted.
Samsung annual IC capex trend. Source: IC Insights
Samsung's semiconductor capex of US$8.6 billion in the fourth quarter of 2017 will represent 33% of the US$26.2 billion in total semiconductor industry capital spending for the quarter, IC Insights anticipated. Meanwhile, the company is expected to account for about 16% of worldwide semiconductor sales in fourth-quarter 2017.
Of Samsung's US$26 billion in semiconductor outlays this year, US$14 billion is expected to be for the company's 3D NAND flash business, such as an enormous ramp in capacity at its Pyeongtaek fab, IC Insights said. Meanwhile, an estimated US$7 billion will be utilized for Samsung's DRAM process migration and additional capacity, while the remaining US$5 billion will be for ramping up its 10nm logic process capacity and other events to enhance its competitiveness in the foundry area.
IC Insights believes that Samsung's massive spending outlays this year will have repercussions far into the future. One of the effects likely to occur is a period of overcapacity in the 3D NAND flash market. This overcapacity situation will not only be due to Samsung's huge spending for 3D NAND flash, but also to its competitors in this market segment (such as SK Hynix, Micron, Toshiba and Intel) responding to the company's spending surge. At some point, Samsung's competitors will need to ramp up their capacity or lose market share.
Samsung's current spending spree is also expected to just about kill any hopes that China-based companies may have of becoming significant players in the 3D NAND flash or DRAM markets, IC Insights said. IC Insights added it has been extremely skeptical about the ability of China-based startups to compete with Samsung, SK Hynix and Micron with regards to 3D NAND and DRAM technology. This year's level of spending by Samsung just about guarantees that without some type of joint venture with a large existing memory suppler, China-based memory startups stand little chance of competing on the same level as today's leading suppliers, according to IC Insights.
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