Excess 200mm capacity could threaten next upturn

The IC industry faces a glut of 200mm fab capacity, which could threaten the dynamics of the next semiconductor upturn, according to an analyst.

"Based on historic trends as well as our checks with industry contacts, 200mm capacity is not likely to be taken off line with any degree of rapidity despite the rapid migration to 300mm manufacturing," said Cristina Osmena, an analyst with investment banking firm Jefferies & Co. Inc.

"While this may benefit chipmakers able to establish volume 300mm manufacturing capability ahead of their competition, for the industry as a whole, this will lead to excess 200mm capacity," Osmena said in a report. "Epidemic overcapacity in 200mm may threaten the robustness of the next upturn."

In total, Jefferies & Co. on Thursday (Feb. 3) said that aggregate capital spending budgets should increase 1 percent to $44 billion in 2005, up from its previous estimate of a decline of 2 percent.

"In recent weeks, capital spending increases for 2005 have been announced by Intel, Samsung, TSMC, amd, infineon, hynix, and Chartered Semiconductor," Osmena said. "In addition, the Taiwanese DRAM manufacturers - Powerchip, ProMos, and Winbond - plan to spend more on capacity this year than last."

Most of the capital-spending announcements are targeted for new and costly 300mm fabs, but 200mm plants are still in the picture.

"Intel, in fact, continues to show 200mm on its roadmap until 2009. For companies such as Texas Instruments, with a wide breadth of technology needs, 200mm capacity will be used to manufacture chips that are not on the leading edge," she said.

"Most important to the argument against 200mm obsolescence is that recently added 200-mm capacity is extendable down to 90nm. Last year, 200mm capacity was added by Micron, SMIC, TSMC, Chartered, ST Microelectronics, Toshiba and IBM, among others," she said. "While 300mm 90nm capacity should ultimately offer a better cost advantage and extendibility down to 65nm and below, this 200mm capacity may serve as overflow capacity once leading edge chip demand becomes robust enough to fill up 300mm fabs."

- Mark LaPedus

Silicon Strategies