The semiconductor capital expenditures of governments and enterprises are constantly changing.
The "Chips and Science Act" (CHIPS) provides incentives for semiconductor manufacturing in the United States. According to data from the Semiconductor Industry Association (SIA), as of July 30, 2024, the CHIPS program office has announced more than $30 billion in grants and over $25 billion in loans. The awards have been given to 14 companies, with five companies accounting for the vast majority of the funds, as shown in the figure below. These wafer fab projects have also received national and local subsidies, and the total investment of these enterprises will exceed $284 billion. The timelines for these projects vary, with some projects planned to be completed in 2025. Other wafer fabs will be completed within the next 2 to 7 years. In addition to the companies listed below, Texas Instruments (TI) is 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 expenditures in the coming years? These companies would also build these wafer fabs without the CHIPS funding. Companies plan wafer fabs based on their capacity needs to meet their business plans. The CHIPS funds may have influenced the location of some wafer fabs. Without the funding from the CHIPS Act, TSMC and Samsung may not have been able to establish new wafer fabs in the United States. The decision of the CHIPS Act may also have advanced some of these investments by one or two years. The impact of the CHIPS Act awards may not be significant in 2024, but it may increase capital expenditures in 2025.
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The United States is not the only country and region providing subsidies for its semiconductor industry. According to reports, planned semiconductor investments include $46 billion from the European Union (EU), $21 billion from Germany, $142 billion from Mainland China, $55 billion from South Korea (tax incentives), $25 billion from Japan, $16 billion from Taiwan, and $10 billion from India.
Semiconductor Intelligence estimates the total semiconductor capital expenditures for 2024 to be $166 billion, a 2% decrease from 2023. We expect capital expenditures to grow by 11% in 2025, reaching $185 billion, surpassing the historical high of $182 billion set in 2022.Two major memory companies, SK Hynix and Micron Technology, plan to achieve double-digit growth in capital expenditure in 2024, while Samsung guides for a slight decrease. SK Hynix and Micron expect a significant increase in capital expenditure in 2025, with SK Hynix at 75% and Micron at 47%.
The dominant independent foundry, TSMC, plans to cut capital expenditure by 3% in 2024 and increase it by 10% in 2025, according to the midpoint of its guidance. SMIC expects no change in capital expenditure for 2024, while UMC plans a 10% increase. GlobalFoundries will cut capital expenditure by 61% in 2024, but it will significantly increase in 2025 as it starts to build its $11.6 billion fab project in Malta, New York.
The largest IDM, Intel, expects a 2% increase in capital expenditure for 2024. Texas Instruments sticks to its plan to spend an average of $5 billion on capital expenditure over the next few years. STMicroelectronics and Infineon Technologies both plan to cut capital expenditure in 2024 after a significant increase in 2023.
Our forecast for a 11% increase in semiconductor capital expenditure in 2025 may be conservative. The plans of TSMC, Micron, and SK Hynix alone account for two-thirds of the $19 billion increase in capital expenditure from 2024 to 2025. The largest spender, Samsung, may significantly increase capital expenditure in 2025 to maintain its memory market share and expand its foundry business, which is second only to TSMC. In the June 2024 forecast, SEMI expects a 17% increase in spending on 300mm fab equipment in 2025 and a 6% increase in 2024. WSTS's forecast in June 2024 is: the semiconductor market will grow by 16% in 2024 and 12.5% in 2025. Our forecast is for a 20% increase in capital expenditure in 2025.
Global Semiconductor Industry Development Trends in 2024
According to WSTS data, the global semiconductor market size in the first quarter of 2024 is $137.7 billion. The first quarter of 2024 is down 5.7% from the fourth quarter of 2023 and up 15.2% from the same period last year. The first quarter of the year is usually seasonally lower than the fourth quarter of the previous year. However, the 5.7% decline in the first quarter of 2024 is worse than expected.
The performance of major semiconductor companies in the first quarter of 2024 is mixed. The change in revenue from the fourth quarter of 2023 to the first quarter of 2024 ranges from a 23% increase reported by Micron Technology to a 19% decrease reported by STMicroelectronics. Revenue increased sequentially for 5 companies and decreased for 9 companies. Nvidia continues to be the largest semiconductor company, with revenue of $26 billion. The total revenue of the top companies increased by 2%, memory chip manufacturers increased by 12%, and non-memory manufacturers decreased by 2%.
Companies provide different revenue guidance for the second quarter of 2024. Micron expects continued strong demand for memory chips and forecasts a 13% increase in revenue for the second quarter of 2024 compared to the first quarter of 2024. Seven other companies expect an increase in revenue for the second quarter of 2024. Artificial intelligence (AI) is listed as a major growth driver by Nvidia, Samsung, and SK Hynix. NXP Semiconductors expects the second quarter of 2024 to be flat compared to the first quarter of 2024. Three companies expect a decline. Qualcomm and MediaTek see a seasonal decline in smartphones. STMicroelectronics has the lowest revenue guidance, down 7.6% due to excess inventory in the industrial sector. The combined outlook for the second quarter of 2024 from the 12 companies providing guidance is a 3% increase.Recent estimates for the semiconductor market growth rate in 2024 range from 4.9% to 28%. However, forecasts since the release of the WSTS first quarter data in early May have significantly diverged from previous predictions. Predictions released in February and March ranged from 17% by DigiTimes to 28% by UBS. According to the WSTS data for the first quarter of 2024, Future Horizons revised its forecast for 2024 from 16% in January to 4.9% in May. Other May forecasts include 10% from the Cowan LRA model and 12% from TECHCET. Semiconductor Intelligence (SC-IQ) has also revised its expected growth rate for 2024 from 18% in February to 11% in May.
In our April 2024 newsletter, we noted that 2024 should see robust growth in key end markets such as PCs and smartphones. Some markets that have seen growth in recent years, such as automotive and industrial, appear to be weakening. Artificial intelligence is an emerging growth driver. According to data from the International Monetary Fund, the global economy is expected to grow steadily by 3.2% over the next two years. These factors should support healthy growth in the semiconductor market for 2024 and 2025. However, earlier predictions of 20% or higher growth for 2024 are unlikely to prove correct.
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