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$: SEMI Korea Members Day SEMI Market Outlook – Fab ... Market Outlo… · Global semiconductor units are down 6% YoY; sales are down 14% YoY\爀䴀攀洀漀爀礀䄀匀倀猀愀爀攀$
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SEMI Korea Members DaySEMI Market Outlook – Fab Investment, 300mm, Equipment and Materials Markets

Clark Tseng, Director, SEMI August 27 2019

2Copyright © 2019 SEMI®. All Rights Reserved

Outline

• 2019 Year-to-Date Trend & Industry Headwinds

• Fab Investment Outlook

• 300mm Fab Outlook

• Equipment and Materials Markets

• Trade War & New Asia Supply Chain

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Year-to-Date Trend & Industry Headwinds

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Presenter

Presentation Notes

Global semiconductor units are down 6% YoY; sales are down 14% YoY Memory ASPs are well below 2018 levels; Logic ASPs are above 2018 levels ASPs improved for Memory devices in May but declined for Logic and Other

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Hyperscale Fabless Capex

Alibaba Amazon Apple Baidu Facebook Google MSF Tencent

Copyright © VLSI Research Inc. All rights reserved.

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Weak Cloud Capex in 1H19

Presenter

Presentation Notes

Top 8 hyperscale spenders 1H19/1H18: decline 9.5% 1H19/2H18: decline 15.6%

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Inventory Level Remains a Concern

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Copyright © VLSI Research Inc. All rights reserved.

IC Inventories

Total Inventory OEM IC Inventory Die Bank Inventory Total Inventory to Billings

Presenter

Presentation Notes

Total IC inv. July (5% YoY); April 11% YoY Die bank inv. Remain high July 17% YoY, April 19% YoY


Headwinds Continue into 2H 2019• Industry headwinds: Excess inventory, Weak demand, Trade tension (Huawei incident)• Weaker than expected market demand in 1H19 and too little supply adjustment worsen the inventory

situation • Industry inventory digestion/correction will continue into the second half. It may not come back to the

seasonal level until the end of 2019• High-end smartphone demand at risk in 2H19: Huawei on the U.S. entity list; cautious procurement• PC demand was affected by CPU shortage. The situation will be eased some into 2H19. • Auto and Industrial demand also lukewarm• Memory demand remain challenging in 2H19

• Korea DRAM export continued to decline in July 2019 (-48.7% YoY and 12.8% MoM)• Mobile DRAM demand soft for both Apple and Chinese OEMs• Server DRAM demand visibility low, though customer inventory is normalizing• DRAM ASP may see further mid-teen% decline in 3Q19; pricing pressure will continue into 4Q19

though to a lesser degree • Other major risks in 2019: escalation of trade tensions between U.S. and China; Japan-Korea export

restriction

Presenter

Presentation Notes

demand for servers in the recent months has been weaker than expected, smartphone replacement cycles are getting longer Intel revise down 2019 sales forecast as China decelerate inventory and capacity digestion by data centers is more pronounced than initially expected and that economic headwinds in China have increased.


Year-to-Date Equipment Trends

$Billion2019 YTD

(June)2018 YTD

(June)Year/Year

%Europe 1.41 2.46 -43%Japan 2.93 4.41 -34%

North America 3.38 2.61 29%Korea 5.42 11.12 -51%

Taiwan 7.01 4.45 57%China 5.64 6.43 -12%

Rest of the World 1.18 2.24 -47%Total 26.97 33.73 -20%

Year-to-Date Device Trends

$Billion2019 YTD (June)

2018 YTD (June)

Year/Year %

Americas 35.81 49.30 -27%Europe 20.08 21.80 -8%Japan 17.44 19.82 -12%China 68.19 76.74 -11%

Asia Pacific/ All Other 54.47 61.58 -11.5%

Total 196.00 229.24 -14.5%

2019 Year-to-Date Trends

Source: WSTS Blue Books

Source: SEMI/SEAJ Worldwide Semiconductor Equipment Market Statistics Report, July 2019

Presenter

Presentation Notes

The table on the left hand side shows you…. the overall equipment billing saw a 20% decline YoY. EU, JP, Korea, ROW witnessed sharp declines compared to the same period in 2018. Taiwan and NA on the other hand had a very strong momentum driven leading foundry and CPU investment. Overall chip sales also had a 14% decline YoY with Americas saw the biggest drop of 27%. This is the combination of memory pricing and weaker than expected hyperscale memory demand in US.

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2019 Semiconductors Forecasts – Downward Revision

Jan-19, 2.0%

Jan-19, 5.6%

Dec-19, 2.9%

Nov-18, 2.6%

Dec-18, -1.4%

Dec-18, 2.6%

May-19, -12.0%

May-19, -12.8%

Jun-19, -12.5%

Jun-19, -12.1%

Jun-19, -9.7%

July-19, -9.6%

-15% -10% -5% 0% 5% 10%

IC Insights-IC

Cowan LRA

IHS Markit

WSTS

VLSI Research

Gartner

Mid-Year Initial

Initial Forecast Average = 2.4%Mid-Year Average = -11.5%

Source: August 2019, SEMI

Presenter

Presentation Notes

In light of weaker than expected year-to–date data points and broad-based weakness led by memory, various research companies have revised down their forecast for 2019.


2020 Semiconductor Forecasts – Positive Outlook

WSTS (Jun-19),5.4%

IC Insights IC (Aug-19), 6.0%

UBS (Jun-19), 6.8%

VLSI Research (Jan-19), 7.0%

Cowan (Jun-19), 8.7%

Gartner (Apr-19), 11.7%

0% 2% 4% 6% 8% 10% 12% 14%

Source: August 2019, SEMI2020 Forecast Average = 7.6%

Presenter

Presentation Notes

For 2020, the industry is still expecting a healthy recovery of 7% to 8% growth next year. The key assumption would be normalization of inventory level as well as the stabilization of memory pricing.

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Fab Investment Outlook

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Fab Investment – Deep Correction in 2019

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Source: Prelim. World Fab Forecast Report, August 2019, SEMI

Front-end Fab Equipment Spending, 2010-2020

Memory & China

• 2019 investment correction is deeper than previously expected

• 2019 will see spending correction by ~20% due to near-term demand weakness and excess inventory throughout the supply chain

• 2020 recovery may be smaller than previously anticipated with close to 10% increase supported by memory capex and China projects

Presenter

Presentation Notes

We had a three years consecutive growth from 2016 to 2018. Both 2017 and 2018 were record year. We knew there will be a correction in 2019 approaching the end of 2018.

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Fab Investment by Region Strong Taiwan Investment, Sharp Decline in Korea

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Japan Korea SE Asia Taiwan

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Fab Equipment Spending by Region

2013 2014 2015 2016 2017 2018 2019 2020

YoY Change

2018 to 2019 (%)

2019 to 2020 (%)

Taiwan +30% -4%

America +7% -20%

China -10% 30%

Europe -15% 35%

SEA/ROW -33% 14%

Japan -42% 19%

Korea -45% 2%


Memory Capex Trend – Correction in 2019, Expect Recovery in 2020

• Memory capex to decline over 40% in 2019 for both DRAMand NAND

• Majority of the capacity additions plan has been pushed out into 2020

• Technology migration schedule may be affected by lower capex

• Both DRAM and NAND Flash are expected to see some recovery in 2020

• NAND spending shall come back earlier than DRAM


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Memory Capex Trend

DRAM NAND Flash DRAM YoY (%) NAND Flash YoY (%)

US$ BillionChange %

Presenter

Presentation Notes

Huawei building inventory in 1H19 may skew the real demand


Foundry and Logic Capex Trend –Strength from Leading edge Investment

• Foundry and logic investments are strong in 2019 driven by advanced technology

• Leading edge investment continues to be driven by 7nm/10nm ramp and EUV insertions

• Some upside potential for 2020 investment from 5nm

• Mature technology investment stable driven by new 28nm capacity built in China as well as 200mm investment

• Return of Crypto demand? (too early, too little) *Legacy technologies refer to 32nm and above processes in 2014-2016 and 22nm and above from 2017-2020.


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Leading-edge vs. Legacy* Investment

Advanced Legacy Legacy YoY (%) Advanced YoY (%)

US$ BillionChange %

Presenter

Presentation Notes

Huawei building inventory in 1H19 may skew the real demand


Product Type Change (%) 2018 to 2020

3D NAND 20%

Opto (Logic/Opto, CIS, Sensor) 19%

Discrete/Power 14%

Foundry 11%

MEMS 10%

Micro (MPU, MCU, DSP) 5%

DRAM <3%

Analog 0% (flat)

Fab Capacity by Product Types – 3D NAND and Opto See Strong Momentum

Excludes EPI which has over 30% growthData from 4Q18 to 4Q20

Presenter

Presentation Notes

2018: 20m

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300mm Fab Outlook


300mm Fab Construction by Region

Source, SEMI August 2019


300mm Equipment Spending Forecast



300mm Equipment Spending by Region


23Copyright © 2019 SEMI®. All Rights Reserved 23

300mm Fab Spending by Segments



300mm Fab Capacity by


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Equipment and Materials Forecasts


Total Equipment Revenue vs. Total Material Revenue Trends

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Source: Equipment: SEMI/SEAJMaterials: Rose and Associates 1987-1999, SEMI 2000-present

200 mm ramp

“IrrationalExuberance”

300 mm ramp


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Presenter

Presentation Notes

Let’s start with quarterly trend


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Presenter

Presentation Notes

China rebound in 2Q19

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SEMI® 2019 Mid-year Total Equipment ForecastBy Market Region

Source: SEMI Equipment Market Data Subscription, July 2019

New equipment, includes wafer fab, test, and A&P. Totals may not add due to rounding

• 2019 will be a down year due to memory correction and market volatility

• Taiwan and North America are expected to see some growth in 2019

• Taiwan will be the largest equipment market in 2019

• China could become the largest equipment market in 2020

2016 2017 2018 2019F 2020FKorea 7.69 17.95 17.71 9.22 11.75China 6.46 8.23 13.11 11.69 14.50Taiwan 12.23 11.49 10.17 12.31 11.55Japan 4.63 6.49 9.47 6.14 8.98North America 4.49 5.59 5.83 6.32 5.19SEA/ROW 3.55 3.2 4.04 3.22 3.47Europe 2.18 3.67 4.22 3.79 3.35

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Presenter

Presentation Notes

13% decline in 2019 Close to 20% increase in 2020. Moderate growth in Europe expected (+4% in 2019)

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SEMI ® 2019 Mid-Year Total Equipment ForecastBy Equipment Segment

2017 and 2018 surpassed the previous records, except for Test

Previous Records:Total (2000) = $47.7B

WFE (2011) = $34.3B

Other (2007) = $2.2B

A&P (2010) = $3.9B

Test (2000) = $9.2B

Source: Equipment Market Data Subscription, July 2019, SEMI

New equipment, includes wafer fab, test, and A&P. Totals may not add due to rounding

2016 2017 2018 2019F 2020FOther FE 1.80 2.52 2.75 2.64 2.78Test 3.70 4.71 5.63 4.71 4.95Assembly & Pack. 3.01 3.88 3.95 3.06 3.22Wafer Process 32.73 45.52 52.19 42.23 47.84

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Silicon Shipments Trends by Diameter

300mm Equivalents

Presenter

Presentation Notes

Long term price contracts are holding steady There are requests for price reductions for short term contracts but SUMCO is holding firm on pricing as they are prioritizing pricing instead of chasing volume Demand AV is driving growth but conventional auto has plateaued; have entered into a correctio phase for industrial and consumer applications; Do see demand for high-end smart phones but that is being offset by a soft demand in data centers; expect demand to improve 2H19 and into 2020 In the medium term, demand will be driven by increased data management created by AI and next generation 5G Wafer supply shortages seen in 2021 and after, mainly for advanced high precision wafers


• Record shipments in 2018• Near-term supply growth is slowing down• 2019: Weak demand in 1H19; Inventory

correction will continue into 2H19; Expect stabilization in early 2020

• Long-term contracts intact though near-term flexibility in purchase commitments are allowed

• Contract prices are stable while spot prices are facing more pressure in 2H19. High exposure to to spot market would hurt near term revenue and margins

• 200mm pricing environment a tad better than 300mm. 150mm is comparatively weaker.

Silicon Trends and Outlook

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Source: July 2019, SEMI Silicon Manufacturers Group

Presenter

Presentation Notes

Worldwide silicon wafer area shipments in 2018 increased by 8 percent against 2017 shipments, while worldwide silicon revenues rose by 31 percent over 2017 levels area shipments in 2018 totaled 12,732 million square inches (MSI), up from the previous market high of 11,810 million square inches shipped during 2017. Revenues totaled $11.38 billion, 31 percent higher from the $8.71 billion posted in 2017. Actually aggregate ASP for silicon increased in both 4Q2018 (2.5%) and 1Q2019 (2.5%). Aggregate ASP is at its highest level since 4Q2012 ($0.94 per sq in)

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Source: IHS Markit Semiconductor Silicon Demand Forecast Tool, Q2 2019

• Smartphone and PC/Server drive most of 300mm demand at 55%

• Other (consumer & wired) applications drive most of 200mm and 150mm demand

• Automotive & Industrial applications drive ~45% of 200mm and 150mm demand

• Overall, the market weakens with inventory headwinds to the end of year; added risk for Phones & Servers, but EV still growing strongly

Presenter

Presentation Notes

“Other” drove 32% of the 200mm market in 2018, Smartphones 19%, PC/servers only 5%; industrial 25%, Automotive 18%

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Worldwide Wafer Fab Materials ForecastActual Forecast

2016US$ B

2017US$ B

2018US$ B

2019FUS$ B

2020US$ B

Silicon Wafers1 $7.65 $9.25 $12.10 $11.92 $12.36

Photomasks2 3.32 3.75 4.04 4.14 4.29

Photoresist 1.45 1.60 1.73 1.68 1.74

Photoresist Ancillaries3 1.91 2.11 2.28 2.22 2.30

Wet Chemicals4 1.59 1.88 2.16 2.20 2.35

Gases 3.63 3.87 4.27 4.20 4.37Sputter Targets4 0.67 0.74 0.78 0.77 0.79 CMP Slurry & Pads4 1.67 1.85 2.18 2.17 2.35

Other/New Materials5 2.96 3.14 3.28 3.34 3.43

Total $24.84 $28. 32.79 32.65 33.98

Y-o-Y % Growth 4% 13% 16% 0% 4%

Totals may not add due to rounding Source: Materials Market Data Subscription, May 2019, SEMI

36

Annual Trends Snapshot

2018 2019F 2020F 2018Y/Y %

2019 Y/Y %

2020Y/Y %

Device (WSTS) $469 B $412 B $424 B 14% -12% 5.4%

Equipment (SEAJ/SEMI; SEMI Forecast) $64 B $53 B $59 14% -18% 12%

Total Materials (SEMI) $52 B $52 B $54 B 11% 0% 3%

Wafer Fab Materials $33 B $33 B $34 B 16% 0% 4%

Packaging Materials $20 B $20 B $20 B 3% 0% 2%

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Trade Wars & New Asia Supply Chain


The Shift of Electronics Production

•Overall U.S. imports of electronic equipment were $58.8 billion in 1Q 2019, down $2 billion or 3.4% from 1Q 2018.

• Imports from China were down $3.7 billion, or 11%. Imports from Mexico held steady at $10.9 billion.

•Vietnam has emerged as the third largest source of U.S. electronics imports, with $4.4 billion in 1Q 2019, up $2.2 billion or 95% from a year ago.

Source: SC-IQ

Presenter

Presentation Notes

US Section 301 Taiwan export to US in 1H19 grew 17.4% YoY, while Section 301 related export grew 23.5%.


OEM/EMS/ODM - Out of China

• Businesses moving supply chains out of China long predates the current trade dispute

• The challenges is to set up component supply chain outside China• For CM, the relocation started with Networking and Servers in 2H 2018,

followed by Notebook and ODMs• Smartphone will be slower (due to complexity of production line)

• Production relocation to Taiwan and Southeast Asia has started since 2H 2018.• New production lines/capacity are expected to come online in 2019• HP (Taiwan, Thailand), Dell (Taiwan, Vietnam and Philippines)• Foxconn (Vietnam or Thailand), Pegatron (Indonesia); Wistron (India)• Inventec (Taiwan, Penang, Mexico); Compal (Vietnam); Quanta (Taiwan)

• The consensus is to move 30% of the production out of China

Presenter

Presentation Notes

Rising labor costs have been driving factory emigration from China since long before Washington’s tariffs Networking related export from Taiwan (1H19) grew 46% YoY, server production are four times higher than 1H18


Trade War Continues or Getting back to the Table?

• Earlier this month• The US announced 10% additional tariffs on about $300 billion of Chinese

exports, ~$135bn to go into effect September 1 and another of ~$165bn to go into effect December 15.

• Computer & electronic products account for 37% of the September 1 list.• The December 15 list contains a greater concentration of consumer goods (71%)

and capital goods (28%), but with higher concentration of tech products (56%)• Over the weekend (August 23/24 2019)

• China will apply new tariffs of between 5% and 10% on $75 billion worth of imported goods from the U.S.; Reinstate 25% tariff on U.S. automobiles and auto parts

• U.S. reply: On Oct. 1, tariffs on $250 billion such products will rise from 25% to 30%.

• Tariffs planned for Sept. 1 on $300 billion worth of Chinese goods will now be 15%, instead of 10%.


Huawei ban

• The extension of U.S.-China trade war• Huawei and affiliates are still on entity list though temporary permit is

granted• Components for Huawei’s mobile phones are allowed to some extent.• Components for mobile infrastructure are on hold.• The escalation could have further impact to multiple industries, e.g.

semiconductor, communication, PC and others. • China cloud capex (recovery) could be affected.


New China Supply Chain• The ban on Huawei has sparked the search of new suppliers to replace U.S.

components. New opportunities emerges as Chinese OEMs start their supply chain diversification

• Korea, Japan and Taiwan companies could benefit from new China (IC) supply chain. However, China fabless companies are better positioned (more activities observed in CPU, GPU, ASIC and RF space)

• On the other hand, China’s own “entity list” could restrict business (sales, investment, procurement and funding) with blacklisted foreign companies.

• China is now determined to set up its own semiconductor ecosystem and supply chain. Fundraising of National IC fund phase 2 is underway

• The trade tension could also affirm the Made in China 2025 policy goals

Presenter

Presentation Notes

消費性IC、MCU晶片為例，由於大陸本地就有不少IC設計公司可以支援，所以這部分的晶片取代商機，台系消費性IC及MCU晶片廠就比較不容易吃到。甚至是匯頂已獨大的光學指紋辨識晶片解決方案，紫光展銳的Wi-Fi晶片平台，瑞芯微及炬力的嵌入式CPU，北京君正的SRAM與DRAM晶片產品線，相關台系晶片廠能夠受惠的程度也不大。但在一些大陸本地IC設計業者暫時無法支援的RF/PA晶片、PC相關晶片及利基類比IC解決方案上，台系晶片供應商似乎成為短期最佳的取代美商選擇。


Summary

• Semiconductor Industry Outlook• Headwind continues into 2H19, rebound expected in 2020• Weakness is memory and trade tensions impacting near term• Longer term prospects are positive as technology innovation advances

• Fab Investment & Equipment Market• Memory weakness continues into 2H 2019 • Foundry and Logic spending robust in 2019/2020 driven by strong

10nm/7nm/5nm build-up• Rebound in 2020 may be smaller than anticipated; though memory

segment and China investment shall recover some

• Materials Market• Wafer pricing under pressure in 2H19 as demand weakens• Fab materials market flat to slightly decline in 2019, +4% in 2020

Presenter

Presentation Notes

Semiconductor industry continue to expand, driven by massive growth of interconnected devices, with surging demand for processing power and storage

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Thank you!

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semi korea members day semi market outlook – fab ... market outlo… · global semiconductor...

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