Electronics market could possibly attain the highest level since the Lehman Shock

Although there was no explosive growth just as at the beginning of the 1990’s, during the past year or two in the Japanese electronics gas and equipment markets the demand for specialty gas and gas related equipment for shipment to East Asia and North America has remained strong. What lies behind this is the continuous capital investment being undertaken as well as the fact that the operational ratios of the plants producing semiconductors, LCD panels, MEMS, and all types of electronic components are good.

On December 2 of last year SEMI undertook a year end forecasting regarding semiconductor fabrication devices. For 2014 the market is forecasted to amount to $37.97 billion, up by 19.3%, and for 2015 $43.68 billion, up by 15.2%. If these figures are realized, they will be the second highest since 2000.

The driving force behind the capital investment is Taiwan.

In 2013 capital investment in Taiwan amounted to $10.57 billion, the only instance of an investment to break the $10 billion level under the economic slump. Although there was a slight decrease in 2014, the figure did reach $9.63 billion, while for 2015 it is forecasted to reach the very high level of $12.34 billion.

In 2013 capital investment in Korea fell to $5.22 billion, but the forecast calls for a recovery to $6.41 billion in 2014 and $8 billion in 2015. However the previous impetus had been lost. For Japan, in 2013 capital investment totaled $3.38 billion, and although it is forecasted that investments should not stick out much, reaching $4.14 billion for 2014, and 4.41 billion for 2015, steady investment is being maintained.

Up to about 4 or 5 years ago, the companies which engaged in major capital investment were limited to the Billion Dollar Club (companies investing over a billion dollars a year) composed of Intel, Samsung Electronics, and Taiwan Semiconductor Manufacturing (TSMC). Even now this setup has not broken down, but the Korean firm SK Hynix, the Taiwanese firms UMC and Powerchip Technology, as well as the Japanese firms Toshiba, Sony, and Micron Japan (the former Elpida Memory) have been expanding their operations.

The main manufacturing centers for LCDs too for use in large color TVs have moved over to Taiwan and China. Regarding the small and medium size types for use in smartphones, Korean firms such as Samsung Electronics and LG Display and Japanese firms such as Sharp, and Japan Display excel in terms of quality and are putting up a hard fight.

In 2015 capital investment by 7 semiconductor fabrication companies got close to \6 trillion

Specifically, we attempt to make a lineup of capital investment related to electronics gas planned for 2015. During the past several years TSMC had engaged in the largest amount of capital investment anywhere in the world. With an investment of around $11.5-12 billion, it is maintaining a level of investment in excess of $10 billion for the third consecutive year. Samsung Electronics too, which has given the feeling of holding investment down a bit, has announced an investment of about $133.7 billion, its highest investment ever. Intel is investing $11 billion, aiming at moving from CPU reliance over to the foundry area. The Toshiba plant in Yokkaichi is investing \500 billion in NAND type flash memory, with the aim of recapturing market share from Samsung Electronics.

In addition to the above, SK hynix is investing $3.8 billion, the Micron Japan plant in Higashihiroshima \80 billion, and the Sony Semiconductor plant in Nagasaki \26 billion. UMC, which made a large investment last year, has as of this time not yet revealed its investment for 2015 but to some extent if it does not resist the huge amount of investment made by TSMC, it will be snowed under. On Semiconductor has revealed that it would expand its plant in Niigata, but the amount for this is unclear. Just the 7 companies which have announced investment are investing close to about \6 trillion.

Although exceeding the amount forecasted by SEMI, this is because it includes the construction of plants, and clean rooms, installation of facilities, all kinds of gas supply piping, systems for supplying pure water and chemical solutions, safety and maintenance systems, and environmental systems. Also included are all types of installation work and engineering related to these. Just because of this the range of effects given to the gas market as a result of these investments is wide indeed.

What is focused on here is that the operational ratios of production of the semiconductor producers transferred to overseas companies have all recovered.

The Micron Japan plant in Higashihiroshima, the Texas Instruments Japan (the former Spansion) plant in Aizu, and the On Semiconductor (the former Sanyo Semiconductor) plant in Niigata, along with the plants of Panasonic Semiconductor, which had merged with Tower Jazz, in Arai, Uozu, and Tonami all have high operational ratios.
As for LCDs, in Japan devices mainly for the small and medium size ones are being replaced or brought in, although the scale is not very large. China is continuing to construct factories to produce large LCDs. Furthermore, Murata Manufacturing which is strong in ceramic condensers is actively engaged in making capital investment regarding all types of sensors and MEMS.

The operational ratios of the production lines in East Asia continue to be going strong

The demand for gas is very firm in all of East Asia. As nitrogen has been changed entirely to on-site production, the volume cannot be discerned. However, the operational ratios of the on-site facilities in Japan too are not low. Liquid nitrogen too for backup use is increasing.

What is showing a distinct growth is specialty gas. In China, the production of the Samsung Electronics plant in Xian, and the SK Hynix plant in Suzhou have gone into full swing, while some plants producing large size LCDs have gone into operation. Because of this, the demand for specialty gas in China has very rapidly increased and it has changed the situation where in the past a balance in supply and demand could be achieved just by being aware of 4 areas such as Japan, Korea and Taiwan, along with the US. Now, supplier has to consider allocating the gas to China.

A typical gas is nitrogen trifluoride (NF3). This magazine has dealt with this gas on numerous occasions, but the growing shortage is now becoming very serious indeed. It goes without saying that the most important reason for this is obviously the expansion of the demand. World demand is viewed to achieve 20,000 tons in 2015, 2 years faster than forecasted. Annual production capacity is considered to be 20,000 tons but with the worsening of profitability, it is not easy for producers to increase NF3 production. A battle has even arisen in which producers of semiconductors and LCDs are struggling to get hold of sources. Taiwanese producers of LCDs are being forced to adjust production due to a shortage of NF3.

The only source in existence for high purity hydrogen chloride is the Japanese company Toagosei. Last year there was also a mishap at the company so that supply and demand continues to be in a tight situation. Korean semiconductor producers have even been sounding out Japanese chemical companies on the part of regarding production. At these companies, however, people are just shaking their heads because it costs too much to produce NF3.

While the necessity of a demand for semiconductor integrated circuits as well as LCDs and electronic components is now ever rising, producers of gas and gas related equipment are gradually coping with investments which are becoming larger in size and of more concentrated. It is also not being forgotten, however, that a danger lurks that a change could occur in a unilateral, intensive move.

06 Mar. 2015

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