Semiconductor CapEx Down in 2024, Up Strongly in 2025

The U.S. CHIPS and Science Act provides incentives for semiconductor manufacturing in the United States. As of July 30, 2024, The CHIPS Program Office has announced over $30 billion in grants and over $25 billion in loans, according to the Semiconductor Industry Association (SIA). The awards have been given to fourteen companies; however, five companies have accounted for the vast majority of the funds as shown below. These fab projects are also receiving state and local subsidies. The total investment in these ventures will be over $284 billion. The timing of these projects varies, with some scheduled for completion in 2025. Other fabs will be finished over the next two to seven years. In addition to the companies listed below, Texas Instruments is in the process of applying for CHIPS Act funding for its planned wafer fabs in Sherman, Texas and Lehi, Utah.

What impact will the CHIPS Act awards have on semiconductor capital spending over the next few years? The companies would have certainly built these fabs without the CHIPS money. Companies plan fabs based on their capacity needs to meet their business plans. The CHIPS funds likely had an impact on the location of some of the wafer fabs. TSMC and Samsung may not have located their new fabs in the U.S. without the CHIPS Act money. The CHIPS Act awards may also have moved some of these investments forward a year or two. The effects of the CHIPS Act awards are not likely to be significant in 2024 but will likely boost 2025 CapEx (capital expenditures).

The U.S. is not the only country to subsidize its semiconductor industry. According to Bloomberg, planned semiconductor investments include $46 billion from the European Union (EU), $21 billion from Germany, $142 billion from China, $55 billion (in tax incentives) from South Korea, $25 billion from Japan, $16 billion from Taiwan, and $10 billion from India.

Our Semiconductor Intelligence estimate of total semiconductor CapEx in 2024 is $166 billion, down 2% from 2023. We are projecting an 11% increase in CapEx in 2025 to reach $185 billion, surpassing the all-time high of $182 billion in 2022.

Two of the major memory companies, SK Hynix and Micron Technology, are planning double-digit CapEx increases in 2024, while Samsung is guiding for a slight decrease. SK Hynix and Micron are projecting significant CapEx growth in 2025, with SK Hynix at 75% and Micron at 47%.

The dominant independent foundry company, TSMC, plans a 3% cut in 2024 CapEx and a 10% increase in 2025 based on the mid-point of its guidance. SMIC expects no change in CapEx in 2024 while UMC plans a 10% increase. GlobalFoundries will cut CapEx 61% in 2024 but should increase it significantly in 2025 as it begins construction on its $11.6 billion wafer fab project in Malta, New York.

The largest integrated device manufacturer (IDM), Intel, projects a 2% increase in 2024 CapEx. Texas Instruments is sticking to its plan to spend an average of $5 billion on CapEx over the next few years. STMicroelectronics and Infineon Technologies both plan CapEx cuts in 2024 after strong increases in 2023.

Our forecast of 11% growth in 2025 semiconductor CapEx may be on the conservative side. Just the plans from TSMC, Micron and SK Hynix account for two-thirds of the $19 billion CapEx increase from 2024 to 2025. Samsung, the largest spender, will likely increase its CapEx substantially in 2025 to maintain its memory market share and increase its foundry business, which is second to TSMC. In its June 2024 forecast, SEMI projected a 17% increase in spending on 300mm fab equipment in 2025 after a 6% increase in 2024. WSTS’ June 2024 forecast called for semiconductor market growth of 16% in 2024 and 12.5% in 2025. Our upside projection is a 20% increase in 2025 CapEx.

Semiconductor Intelligence is a consulting firm providing market analysis, market insights and company analysis for anyone involved in the semiconductor industry – manufacturers, designers, foundries, suppliers, users or investors. Please contact me if you would like further information.

Bill Jewell
Semiconductor Intelligence, LLC
billjewell@sc-iq.com