Shortages loom after 8-inch fabs hit 99 percent usage capacity
By J. Robert Lineback
Semiconductor Business News
(06/05/00, 5:46 p.m. EST)
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SAN JOSE, Calif. ? The tight squeeze on production capacity experienced by the semiconductor industry will become much tighter this summer, according to industry analysts.
Eight-inch wafer fabs producing mainstream MOS semiconductors around the world were operating at an astonishing 99 percent of their capacity at the end of the first quarter, according to the latest industry data. Chip analysts are now warning that a severe shortage of production capacity will likely hit the industry in the next couple of months.
"That number [99 percent capacity utilization] really jumps out, but the other number that jumped out at me was the increase in wafer starts with processes less than 0.3-micron [feature sizes]," said analyst Bill McClean, president of IC Insights Inc. (Scottsdale, Ariz.).
McClean was referring to the new Semiconductor International Capacity Statistics (known as SICAS), which show weekly wafer starts for 0.3-micron and finer processes at 566,200 six-inch equivalent wafers in the first quarter. That level of production was a 22.3 percent increase over the fourth quarter of 1999, when semiconductor fabs were producing leading-edge ICs at a run rate of 462,800 six-inch equivalent wafers per week. In the third quarter of 1999, fabs were producing 358,300 six-inch equivalent wafers in 0.3-micron and finer processes.
"The less-than-0.3-micron capacity jumped 100,000 wafers a week in the first quarter compared to the fourth quarter, which was more than 100,000 higher than the third quarter," McClean said. "The first quarter capacity for processes less than 0.3 micron was almost double what it was in the same period last year."
McClean believes the fast ramp of processes with 0.3-micron and finer line widths was possible partly because of empty fabs and available manufacturing space that was put in place during the last industry downturn. But now the industry has "pretty much filled out all of the existing space, and there's not a lot of room left [for rapid expansion]," McClean said. Consequently, he and other analysts expect average selling prices to begin to rise in the third quarter as shortages of ICs spread.
The new wafer fab capacity statistics were released last week by the Semiconductor Industry Association (San Jose, Calif.), which last week reported record chip revenues of $15.2 billion for April. The SIA said April sales growth had surpassed expectations because of strong demand for devices in PCs, cellular phones, consumer electronics, and systems used in electronic-commerce over the Internet.
The SICAS capacity report, produced by an industry group in Vessem, Netherlands, shows total IC production in wafer fabs growing 17.2 percent to 1,959,400 six-inch equivalent wafer starts per week in the first quarter compared to 1,672,100 in the same period last year. IC wafer starts were up a strong 9.1 percent in the first quarter vs. 1,796,000 per week in the fourth quarter.
Bipolar chip production was up just 4.3 percent to 310,000 five-inch equivalent wafers in the first quarter vs. 297,300 in the first quarter of 1999, according to the new SICAS report. MOS integrated circuit production was up 19 percent to 1,744,300 six-inch equivalent wafers vs. 1,465,800 in the first quarter of 1999.
Bipolar fabs were running at 88.4 percent of their capacity in the first quarter of 2000 compared to 89.2 percent in the fourth quarter of 1999, said the report. In the first quarter of 1999, bipolar fabs were at a capacity utilization just 74.4 percent, the report said.
The report said MOS fabs with 8-inch wafer diameters were nearly tapped out in the first quarter at 99 percent capacity utilization ? the highest on record, according to many long-time observers. In the first quarter of 1999, capacity utilization of 8-inch MOS fabs was at 92.7 percent, and at the low point in the last downturn (in the third quarter of 1998) it was at 86.9 percent, according to the SICAS report.
"The jump in capacity utilization and unit volume has put a lot of production on the market fairly rapidly," said McClean. "So far, the upturn has been unit volume driven." With chip makers able to tap existing fabs space, new capacity has come on line quickly in the past year, but that will change as companies wait to complete new facilities, he said.
"Until this point, average selling prices are up about 1 percent since the start of the year while unit volumes are up in the 20 percent range," McClean said. "But now we are looking at ASPs kicking in at higher growth rates as demand increases faster than companies can bring new production online."
For that reason, McClean has increased his outlook for semiconductor sales growth in 2000 to 32 percent from a previous forecast of 23 percent. IC Insights expects chip sales to reach $172.2 billion in 2000 from $130.2 billion in 1999. Unit volumes are expected to grow by 24 percent in 2000 over last year.
When the year is over, McClean expects to see average selling prices to increase 7-to-8 percent over last year. "The second quarter is the 'lull' before the storm. Purchasing people [buying semiconductors] should be locking in favorable pricing now because it will all be over in the next six to eight weeks," he said
Motorola unveils SmartMOS power process
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.....Motorola's smart power technology is already used for power management functions in cell phones and pagers. Behrooz Abdi, general manager of Motorola's RF/IF Division, said, "The new process will integrate complex audio processing functions with power devices on the same substrate ? another step toward reducing the cost, size and current drain in today's portable devices."
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