Wafer Fab construction increases in 2003, 2004.

According to the Quarterly Spot Report on Semiconductor Fab Projects released from Strategic Marketing Associates (SMA, Santa Cruz, CA, www.scfab.com), the improving economy and growth in chip sales are boosting wafer fab construction activity. The value of new fab projects started in the first three quarters of 2003 is $13 billion, more than in all of 2002. The report lists 37 upgrades or new fab projects that could start or restart construction in the next four quarters. In addition, 17 new fabs are expected to come online in the next year.

The report expects eight new fabs to start to restart construction by the ned of 2003 alone. Only one of these will be a 200 mm fab, valued at $1.3 billion. The others will all be 300 mm, whose total value when fully ramped will be $12.7 billion, an increase of 53% over last year. Most new construction will be 300 mm, as all the dynamic random access memory (DRAM) fabs continue migrating to 300 mm. Many of today's 300 mm foundry fabs are less than half equipped; they will also add capacity to meet growing demand.

"We expect even stronger new fab activity in 2004 as DRAM companies maintain their 300 mm momentum and foundries begin to fill in empty spaces left from bringing new fabs online at the beginning of the last downturn," said George Burns, president of SMA, a market research firm specializing in fab information. "In fact, there could be so much new foundry production added in the next two years that overcapacity could result."

Burns sees growth in new fab activity and capital spending at restrained levels this year, but picking up strongly in 2004. The report's ongoing capital spending survey indicates chip makers will increase spending by 11% this year to $31 billion, up from $28 billion last year. But the forecast is for an increase of 23% in 2004 to almost $40 billion.