This Year’s Global Semiconductor Equipment Investment Also Declines

Source: IC Insights

[Asia Economy Reporter Changhwan Lee] It is forecasted that the global semiconductor equipment investment scale will contract this year. The biggest reason is the reduced equipment investment by Korean companies such as Samsung Electronics and SK Hynix, who are concerned about the oversupply of memory semiconductors. The impact of the novel coronavirus disease (COVID-19) has also increased the possibility of further cuts in semiconductor equipment investment plans in the second half of the year.

According to the US semiconductor market research firm IC Insights on the 17th, the global semiconductor equipment investment scale this year is expected to be $99 billion, down about 3% from the previous year. Global semiconductor equipment investment, which peaked at $105.9 billion in 2018, is projected to shrink for two consecutive years, last year and this year.

This year's contraction is analyzed to be due to memory semiconductor companies reducing investments compared to last year, fearing a sharp price drop caused by semiconductor oversupply. In particular, the equipment investment scale of the three companies dominating the global memory semiconductor market?Samsung Electronics, SK Hynix, and Micron?is expected to decrease by 15%, from $39.7 billion last year to $33.6 billion this year.

Due to the oversupply of memory semiconductors last year, prices of major memory semiconductors such as DRAM and NAND flash fell significantly. Accordingly, the performance of Samsung Electronics and SK Hynix also declined sharply. To resolve the oversupply, some production adjustments were made, and equipment investment is interpreted to be proceeding accordingly.

The possibility that the semiconductor market scale will shrink this year due to the impact of COVID-19 was also cited as a factor reducing semiconductor equipment investment. IC Insights noted that, so far, COVID-19 has not had a significant impact on semiconductor equipment investment plans, but raised the possibility that the situation could worsen in the second half of the year.

IC Insights recently forecasted that the global semiconductor market size this year will be $345.8 billion, down 4% from the previous year. The firm had initially projected an 8% growth in the semiconductor market in January, then lowered it to 3% last month, and has now further downgraded the outlook this month. It diagnosed that demand reduction is inevitable as COVID-19, which started in China, spreads to major semiconductor-consuming countries such as the US and Europe.

IC Insights explained, "So far, semiconductor companies seem to be executing the equipment investments planned last year as is," but added, "If COVID-19 is not contained in the second half, a significant reduction in equipment investment will be inevitable."

While memory semiconductor equipment investment is expected to decrease, non-memory semiconductor equipment investment is predicted to increase. Non-memory semiconductor equipment investment is expected to rise 4% this year to $65.4 billion. Foundry (semiconductor contract manufacturing) companies are expected to lead the increase in equipment investment.

In particular, Taiwan's TSMC, the world's number one foundry company, plans to increase its investment scale by 8% this year. Accordingly, investment in the foundry sector is expected to account for 29% of the total semiconductor industry investment scale.

An industry insider said, "Overall, equipment investment by Korean companies such as Samsung Electronics and SK Hynix is likely to decrease compared to last year," adding, "However, the scale of increase or decrease is fluid depending on the COVID-19 situation in the second half of the year."

This content was produced with the assistance of AI translation services.