Here’s how semiconductor capex will fall in 2023 and remain lower

Market news | July 4, 2023

By Peter Clarke

wafer capex semiconductor Materials & processes

Semiconductor capital expenditure is set to fall 14 percent in 2023 compared with the previous year, according to market research firm Semiconductor Intelligence. Capex is also expected to be remain relatively low for the next couple of years after that.

This is a reaction to the boom-bust nature of the semiconductor industry. Semiconductor capex increased by 35 percent in 2021 and 15 percent in 2022, according to past figures from IC Insights. This has resulted in over capacity coinciding with a slump in demand.

In 2023 the biggest cuts will be made by memory companies with a 19 percent cut on average and 50 percent at SK Hynix and 42 percent at Micron Technology. Samsung, which only increased capex by 5 percent in 2022, will hold at about the same level in 2023.

Semiconductor capex by major spending types (US$ billions). Source: Semiconductor Intelligence.

Foundries will decrease capex by 11 percent in 2023, led by TSMC with a 12 percent cut and among the major integrated device manufacturers (IDMs), Intel plans a 19 percent cut. Texas Instruments, STMicroelectronics and Infineon Technologies will buck the trend by increasing capex in 2023.

Capex to remain low

Because the semiconductor market is also contracting, capex is likely to remain at an historically high 32 percent of semiconductor revenue which will start to fall once the market enters a growth cycle.

However, 2023 is set to be a year of chip market weakness. Semiconductor Intelligence predicts the chip market will fall by 15 percent. ” Major semiconductor downturns tend to scare companies into slower capex,” said Semiconductor Intelligence.

This usually persists for a couple of years beyond the chip market bottom indicating that 2024 and 2025 could be low spending years and possible delays to a number of major wafer fab projects around the world.