Using its “baseline” assumptions shown in the soon-to-be-released April Update to the 2020 edition of The McClean Report—A Complete Analysis and Forecast of the Integrated Circuit Industry (MR20), IC Insights is not lowering its current -3% 2020 semiconductor industry capital spending forecast (Figure 1) due to the Covid-19 outbreak.
Although essentially all of the risk to the current -3% semiconductor industry capital spending forecast for this year is to the downside, it is assumed that most spending will proceed as planned since the vast majority of the outlays are directed at long term goals of process technology advancements and/or additions to wafer start capacity. However, if the Covid-19 outbreak is not contained in the first half of this year, significant cuts to current capital spending budgets will likely occur.
It should be noted that the capital expenditure decline this year is expected to be primarily due to spending cutbacks from the big three memory suppliers—Samsung, SK Hynix, and Micron. Combined spending from these three giant memory companies was $39.7 billion in 2019 and is forecast to be $33.6 billion this year, a sharp decline of 15%. In contrast, the other semiconductor manufacturers had combined outlays of $62.6 billion in 2019 and are expected to spend $65.4 billion in 2020, a 4% increase.
In 2019, the foundry segment, driven by a surge in spending by TSMC, registered the largest percentage increase in capital spending with a 17% jump. For 2020, the foundry segment is once again expected to show the largest growth for spending with an 8% increase.
Except in 2018, foundry has led or tied for the largest amount of capex by product type each year since 2015. In 2020, the foundry segment is forecast to once again account for the largest percentage of semiconductor industry capital expenditures (29%). It should be noted that TSMC essentially accounted for all of last year’s increase in foundry capital expenditures, raising its 2019 outlays by about $4.5 billion as compared to 2018. For 2020, TSMC’s increase in spending is expected to be more moderate at $563 million. In contrast, China-based SMIC is planning to raise its outlays this year by about $1.1 billion.