Soaring Fab Construction Fuels Overcapacity

Strategic Marketing Associates (SMA) forecasts 35 new wafer fabs will begin to ramp the industry’s monthly capacity to a new high next year. As most of the new fabs that began construction about two years continue to come online in 2007, they will be joined by 8 of the 11 fabs that just began construction in the June quarter.

Collectively, all of the new fabs coming online in 2007 will have the capacity to produce up to the equivalent of 2 million 200mm (8-inch) wafers. Representing about 17% of the industry’s current total capacity, this major increase brings with it exciting growth opportunities as well as the risk of overcapacity, especially in the memory arena.

According to SMA, the fully equipped value of the 35 new fabs is expected to reach $56 billion over the next two to three years as the new fabs continue purchasing equipment to support their respective ramps to full capacity. Up to 60% of the newly added capacity is expected to be allocated for memory, specifically DRAM as well as non-volatile Flash, which has become the ubiquitous memory of choice for digital cameras and an increasing number of consumer electronics products.

Source: Strategic Marketing Associates (pdf)