Chip Makers to Raise Spending in 2010, SEMI Says

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Spending on plants and equipment used to make semiconductors will likely rise 64 percent next year, with more than half of all spending coming from six chip makers. But 2010 spending will remain far below 2008 levels, an industry group said.

Total spending on semiconductor plants -- called fabs -- and chip-making equipment next year will be US$24.4 billion, up from $14.9 billion this year, Semiconductor Materials and Equipment International (SEMI) said in a report. However, 2010 spending will be 20 percent lower than 2008, when chip makers spent $30.9 billion, it said.

"In fact, total fab spending (construction plus equipping) in 2010 will remain at its lowest levels since 2003, when about $22 billion was spent," the report said.

More than half of all new spending on plants and equipment, or about $14 billion, will come from six chip makers, which SEMI's dubbed the "Fantastic Six": Taiwan Semiconductor Manufacturing Co. (TSMC), GlobalFoundries, Toshiba, Samsung Electronics, Intel, and Inotera Memories, a joint venture between memory makers Nanya Technology and Micron Technology.

Of this amount, most of the spending will come from Intel and Samsung. Samsung is expected to spend $4 billion to $5 billion next year upgrading production lines in Texas and South Korea, SEMI said. Intel will likely spend $3 billion to $4 billion next year as it upgrades its plants to produce chips using a 32-nanometer manufacturing process, it said.

Heavy investments can give chip makers an edge over rivals. New technologies allow companies to produce more chips on a silicon wafer by shrinking the size of transistors and memory cells. These chips can also be faster and consume less power than chips made using older technologies. As a result, products made using the latest and most advanced technology often command a premium, giving a boost to the bottom line of top chip makers.

Together, the six companies identified by SEMI represent about 30 percent of the world's total chip manufacturing capacity. But instead of expanding capacity, most of these companies are focused on upgrading their production lines with more advanced technology, it said.

In total, 10 chip makers are expected to spend more than $100 million each next year on plants and equipment, SEMI said.

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