Asia-Pacific region is going gangbusters again, says SEMI analyst
By Bill McIlvaine
Semiconductor Business News
(02/18/00, 09:54:19 AM EDT)
BURLINGTON, Mass. -- It's Asia rising again, this time with South Korea as well as Taiwan pulling the team.
The Asian economic crisis that helped drag the semiconductor industry into its worst recession just a couple of years ago is now a memory. No region in the world is moving faster to add capacity, increase capital spending, and grab worldwide market share, according to statistics presented by Dick Greene, principal analyst for Semiconductor Equipment and Materials International, at a SEMI New England breakfast forum here Wednesday.
Greene's forecasts, which were garnered from numerous trade associations, market research firms, and industry organizations, consistently point to higher growth in the Asia-Pacific region: Taiwan, South Korea, the Philippines, Singapore, Hong Kong, Malaysia, and Indonesia. Even Japan (which usually is counted as a separate entity) is finally showing signs of life, he said.
China is expected to have the highest growth in gross domestic product (GDP), estimated at 7.6% in 2000, according to the Far East Economic Review. South Korea is in second place, at 7.0%.
The Semiconductor Industry Association, in its 2000 forecast, singled out the Asia-Pacific region as the fastest growing semiconductor market, with the rapidly expanding economy in China a major factor (see Feb. 7 story ). "China is a consumer more than a producer at this point, but it is a huge consumer and there is production activity coming along," according to Greene. He characterized the Chinese economy as "puttering along" because of inflation but the sheer size of the economy still makes it a strong performer.
"Korea is getting its act together," said Greene, referring to the government's forcing better management on the country's chaebols through mergers or divestitures of business units, and the push into non-memory markets. The DRAM price plunge cost Korean chip makers billions in losses, and it is now considered imperative that Korea not rely so heavily on memory production (see Feb. 16 story ).
Greene noted the trend of Asia-Pacific growth over the past four years, primarily at Japan's expense. In 1995, Asia-Pacific accounted for 19% of the world market in semiconductors and Japan 27%. In 1999, Asia-Pacific rose to 25% of the market while Japan slipped to 22%.
Likewise, in IC production revenues, Asia-Pacific was a relatively minuscule 9% compared to Japan's 40% in 1995. Now, however, Asia-Pacific accounts for 14% of production revenue worldwide while Japan is just 26%. During that time, only North America grew more, from 43% to 51%.
Japan's share of the electronic systems pie is falling, from 15% of an $848 billion market in 1999 to 12% of a $1.27 trillion market by 2004, said Greene, citing statistics compiled by IC Insights of Scottsdale, Ariz.
Taiwan, of course, is the powerhouse that is changing the Asia-Pacific picture and the global semiconductor business as well. Taiwan's forecast is for 5.5% growth in GDP this year, and "there are no problems in Taiwan at this point," remarked Greene
As home to the greatest concentration of foundries, Taiwan is setting the pace for semiconductor equipment spending. Applied Materials Inc., the equipment giant, in its most recent quarter, reported that 26% of its new orders came from Taiwan. That was part of a record high of $2.36 billion in new orders for the Santa Clara, Calif., company, said Joseph R. Bronson, senior vice president and chief financial officer, during a briefing on the quarterly results (see Feb. 16 story ).
"Taiwan exceeded our expectations, and so did Japan," Bronson added. Japan accounted for 12% of Applied's orders in the quarter.
In capital equipment spending, the Asia-Pacific region has "real plans to be a power. They are spending a lot relative to the size of their global production," said Greene. Taiwan is now buying 18% of the world's semiconductor fabrication equipment, he said, having overtaken South Korea. Asia-Pacific is now 37% of the world market compared with 27% in 1995.
In the capacity wars, Asia-Pacific is outstripping everybody. According to Greene, 66% of all the planned capacity addition (8-inch wafer equivalents) in the world between now and 2002 is in the Asia-Pacific region. By 2002, he predicted, Asia-Pacific is going to account for 40% to 45% of the world's semiconductor capacity.
The region is expected to add more than 410,000 wafer equivalents in 1999 -- more than four times Europe's capacity additions and far beyond North America's barely 50,000.
Greene actually expects North America to pull ahead of Asia-Pacific in 2001, as several new fabs come on line. But then it will fall way behind again, as Asia-Pacific adds another nearly 400,000 wafer equivalents in 2002.
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