This year’s shaky economy has tripped up a some semiconductor companies, although plenty of them apparently feel excited enough that they are spending hundreds of billions of dollars on new chip manufacturing plants.

In its latest World Fab Forecast report, industry association SEMI said that the global semiconductor industry is projected to spend more than $500 billion on 84 fabs by 2024. More than half of those began construction this year or last.

In 2023 alone, semiconductor companies are building a record 33 fabs, 10 more than plants that began construction last year and nearly double the projects started in 2020 and 2019, according to the report.

Ajut Manocha, president and CEO of SEMI, said the new report “reflects the increasing strategic importance of semiconductors to countries and a wide array of industries worldwide.”

The semiconductor lockdown

The world seemed to wake up to the importance of semiconductors after the COVID-19 pandemic in 2020 prompted a global chip shortage that has seemed unlike any other, at least in recent history.

This awakening included the realization that with most of the world’s chip production concentrated in Asia, local disruptions could reverberate throughout the global supply chain. At the same time, several countries, including the United States, China, India, Germany, and Japan, have realized the importance of domestic chip-making capabilities and capacities for economic and military purposes.

These countries are now spending a great deal of government money to help companies build out new fabs, which some chipmakers have said is vital despite most of them doing pretty well for themselves up until the last few months. Manocha said government subsidies are a significant driver behind the massive investments in fabs being made by chipmakers across the world.

“The report underscores the significant impact of government incentives in expanding production capacity and strengthening supply chains,” he said.

In the US alone, the 2022 CHIPS and Science Act’s $52 billion in subsidies for chip manufacturing, plus the $24 billion in tax credits for chip production, have already prompted companies to invest nearly $200 billion in manufacturing projects across 16 states. This is according to the Semiconductor Industry Association, America’s No. 1 cheerleader for chip subsidies.

While North America is expected to see the construction of a total of 18 fabs within the 2021-2023 time frame, China is set to outdo its Western rival by two, making it the country with the most planned projects in this period, according to SEMI. The important asterisk here is that all 20 of these Middle Kingdom manufacturing plants are for mature chip technologies since China is cut off from accessing a great deal of the equipment and tools necessary to produce advanced chips, thanks to US sanctions.

It was reported earlier this week that China’s government plans to support new fabs with a package that could amount to more than 1 trillion yuan ($143 billion), likely to consist of subsidies and tax credits.

As for fab construction projects starting elsewhere in the 2021-2023 time frame:

  • Europe and Middle Eastern countries are expected to have 17 new fab projects, a record for the region that was sparked by the European Chips Act.
  • Taiwan is set to have 14 new facilities enter construction while Japan and Southeast Asian countries are expected to begin six new plants each. South Korea is projected to start on three large facilities.

All this new construction has prompted another record in the industry. SEMI projected this week that chip manufacturers will spend a new high of $108.5 billion on chip-making equipment this year, a 5.9 percent increase from the previous year.

Let’s just hope we’ll truly have a need for all these factories when they go up in the next several years. We do suspect it will be helpful to have more fabs distributed throughout the world. ®


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