Chip capex to jump 20%.


Although there was a slight pause in the upward trajectory in 1Q17, 2Q17 set a new record for quarterly spending outlays.

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Moreover, 1H17 semiconductor industry spending was 48% greater than in 1H16.

IC Insights believes that whether industry-wide capital spending in the second half of 2017 can match the first half of the year is greatly dependent upon the level of Samsung’s 2H17 spending outlays.

Not only has Samsung Semiconductor been on a tear with regard to its semiconductor sales, surging into the number one ranking in 2Q17, but the company has also been on a tremendous capital spending spree for its semiconductor division this year.

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Samsung spent a whopping $11.0 billion in capital outlays for its semiconductor group in 1H17, more than 3x greater than the company spent in 1H16 and only $300 million less than the company spent in all of 2016!

In fact, Samsung’s capital expenditures in 1H17 represented 25% of the total semiconductor industry capital spending and 28% of the outlays in 2Q17.

While the company has publicly reported that it spent $11.0 billion in capital outlays for its semiconductor division in 1H17 (a $22.0 billion annual run-rate), Samsung has been very secretive about revealing its full-year 2017 budget for its semiconductor group (it might be afraid of shocking the industry with such a big number!).

In 2012, the year of Samsung’s previous first half spending surge before 1H17, the company cut its second half capital outlays by more than 50%, from $8.5 billion in 1H12 to $3.7 billion in 2H12. Will the company follow the same pattern in 2017?

At this point, it is impossible to tell. IC Insights believes that Samsung’s full-year 2017 capital expenditures could range from $15.0 billion to $22.0 billion!

If Samsung spends $22.0 billion in capital outlays this year, total semiconductor industry capital spending could reach $85.4 billion, which would represent a 27% increase over the $67.3 billion the industry spent in 2016.

It is interesting to note that two of the major spenders, TSMC and Intel, are expected to move in opposite directions with regard to their 2H17 capital spending plans. TSMC spent about $6.8 billion in capital outlays in 1H17.

If it sticks to its $10.0 billion budget this year, which it reiterated in its second quarter results, it would only spend about $3.2 billion in 2H17, less than half its outlays in 1H17.

In contrast, Intel spent only about $4.7 billion in 1H17, leaving the company to spend about $7.3 billion in 2H17 in order to reach its stated full-year 2017 spending budget of $12.0 billion.



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