Industry needs 40 new fabs for '04 IC boom, says VLSI

Industry needs 40 new fabs for '04 IC boom, says VLSI
By Mark LaPedus , Semiconductor Business News
July 2, 2003 (12:56 p.m. EST)
URL: http://www.eetimes.com/story/OEG20030702S0028

SAN JOSE, Calif. -- The semiconductor business will require at least 40 new or retrofitted wafer fabs to keep up with the anticipated recovery and new demand boom cycle in 2004, according to an industry expert at VLSI Research Inc.

If the market does not respond to the capacity requirements, the semiconductor industry faces a new round of chip shortages in the market in 2004, warned G. Dan Hutcheson, president of VLSI Research.

But given the lack of fab investments in recent times, it's unlikely the market will be able to respond to the anticipated IC demand. The market will require “40 new fabs or retrofitted fabs to process wafers,” he said. “There are a few new fabs out there, but it's going to be a scramble.”

There's more good and bad news for an industry that expects the worst. “We're entering into a huge upgrade cycle,” he said. “What we're seeing are huge shortages coming. I think we could [see shortages] in early 2004,” he tol d SBN.

While the IC industry is pointing towards a slow, modest recovery in 2003, the market is expected to regain its lost footing in 2004, following a severe downturn over the last two years.

Hutcheson projects that the IC industry will grow 22.5 percent in 2004 over 2003. Based on its latest findings, VLSI Research projects the IC market will grow 9.3% to $131.8 billion in 2003 over 2002, according to the San Jose-based market research firm (see May 16 story ).

At present, there are some positive signs in the market, as average selling prices (ASPs) were up but unit volumes were sluggish in May. Demand for DRAMs and microprocessors are picking up, with possible shortages emerging for select memories. But the market for wireless chips has paused, following the overall slowdown in Asia, due in part to SARS, according to analysts (see July 1 story ).

Fab capacity remains a question mark. At present, there appears to be enough capacity, although chip makers are scrambling to build new and advanced fabs to meet the possible upturn.

About 36 wafer fab projects are likely to get underway in the next 12 months, according market research company Strategic Marketing Associates (SMA). The fab projects include expansions, upgrades, additional fab lines and new construction. Another 24 fabs are due to begin production during the same period (see May 5 story ).