With the DRAM makers tighten their belt as a consequence of oversupply and depressing ASP, equipment makers are banking their hope more on foundry and the upcoming solar segments this year. CEO of Lam Research,Steve Newberry, believed that the demand for wafer fab equipment from foundries could rebound sharply in the first half of this year (Ref). However, the signals on foundry capex are quite murky at this point of time. There are some tell-tale signs indicating that foundries are beginning to expand their fab capacity. Two days ago, China’s SMIC announced that it would build 200- and 300-mm fabs at Shenzhen for the Shenzhen municipal government (Ref). The groundbreaking for the new fabs will start as early as in the first half of 2008. More surprising to me is that the upcoming 300-mm fab is going to deploy 45-nm CMOS technology licensed recently from IBM (Ref). Yesterday, Singapore’s Chartered Semiconductor Manufacturing appeared to plan for fab capacity expansion by announcing a $190 million loan from banks to purchase ASML scanners (Ref). On the other hand, the top two foundries in the world, TSMC and UMC respectively, have allegedly announced more than 20% capex reduction from their 2007 capex (Ref).

Another possible bright spot for equipment makers that have diversified to solar industry is the emerging market of solar segment. Despite risk of oversupply, strong demand of solar panels is expected to continue this year (Ref).

When searching the web for video, I am pleasantly surprised to find Chartered Semiconductor 2007 Dinner and Dance video on youtube. I post the video to share with my friends at Chartered Semiconductor.

2008 is expected to be tough and challenging year for the semiconductor industry. In the face of stiff competitions under weak market sentiment, we expect to see more M&As and spin-offs in this difficult coming year, particularly in the areas of equipment, memories, testing and foundries. In the semiconductor industry, size does matter a great deal. Consolidation will result in economy of scale, higher efficiency, lower operating cost and higher market power. This will help in fending off competitions. From various sources, I have listed out the possible M&As and spin-offs in 2008 for the semiconductor industry (Ref1, Ref2, Ref3):

• AMIS has agreed to be acquired by ON Semiconductor.
• STMicro will complete its acquisition of Genesis Microchip.
• Applied and Canon may form a joint venture in lithography.
• TEL and Novellus may merge to compete with Applied Material.
• Following SEZ, clean tool makers such as Akrion, FSI are takeover targets.
• KLA-Tencor may acquire Nanometrics
• Teradyne has agreed to buy Nextest. It may also buy over Credence to further increase its market share in the tester segment.
• In the struggle to compete with Taiwan foundries, Chartered and SMIC may merge to become the dominant number 2 in foundry. Another possible scenario is the merging of SMIC and Hua Hong NEC to become the dominant number 3 in foundry(Ref).
• Chartered or Silterra may buy over HNS.
• Qimonda and Micron may combine their DRAM memory. Memory industry is really in an entangled relationship now with STMicro and Intel joint ventured in a new NOR Flash company, Numonyx, while Intel and Micron joint ventured in a NAND Flash company, IMFlash. The relationships will be only get more complicated as more memory companies joint venture or consolidate.
• There is a possibility that IBM may finally spin out its semiconductor unit.
• Following Sony, a number of Japanese IDMs, NEC Electronics, Renesas, Sanyo, may also migrate to the fabless model as the cost/risk of building 45nm and 32nm fabs are exorbitantly high.

We will wait and see which one of above consolidations realize at the end of the year.