By Mark LaPedus, SemiMD senior editor
Heading into 2012, most predicated that semiconductor capital spending would be down this year amid sluggish IC demand.
Suddenly, capital spending is on the rise — at least at two chip rivals. In a move that surprised analysts, Intel Corp. last week raised its semiconductor capital spending to $12.5 billion for 2012. And now, despite the uncertainties in the market, Samsung Electronics Co. Ltd. has raised its capital spending for 2012.
In 2012, Samsung’s capital expenditures are forecast to amount to 25 trillion won ($22.3 billion), in which 15 trillion won ($13.39 billion) will be invested in the semiconductor business. Some 6.6 trillion won ($5.9 billion) will be allocated for investment in the display panel segment. Last year, Samsung executed a total of 23 trillion won ($20.5 billion) in investments, including 13 trillion won ($11.6 million) for semiconductor business and 6.4 trillion won ($5.7 billion) for the display segment.
“A lot of the capex (for Samsung in 2012) is going towards expanding the Exynos application processor dual-core capacity,” said Vijay Rakesh, an analyst with Sterne Agee, in a report. “On the memory side, most of the capex will be for technology transitions and shrinks” and not for new fabs.
Exynos is the brand name for Samsung’s application processor line. Samsung will increase “production of its own dual-core Exynos 5520 mobile application processor, which has a (ARM) Cortex A15 CPU,” Rakesh said. The 5520 is currently at the 32nm node, but it will start at 28nm later this year.
Samsung plans to expand its logic fab in Austin, Texas, issuing its first overseas bonds since 1997, according to a report by Bloomberg news service. Samsung plans to borrow about $1 billion to expand production at the Austin Main Fab, part of an overall plan to double capital investments in its overall logic IC operation to more than $7 billion.
Samsung also plans to build a fab in China. As reported, the company — and little-known Win Semiconductors Corp. — gained ground in the rankings in the foundry business in 2011, according to IC Insights Inc.
Christian Gregor Dieseldorff, a research director at SEMI, said Samsung has “allocated much more spending for System LSI/Foundry-business, more than ever seen before.” Samsung will increase its installed capacity for System LSI and foundry by more than 30 percent in 2012, from ~530,000 wafers per month (in 200 mm equivalents) at end of 2011 to ~700,000 by the end of this year.
Meanwhile, Samsung also announced revenues of 47.3 trillion won ($42.2 billion) on a consolidated basis for the fourth quarter ended Dec. 31, 2011, a 13-percent increase year-on-year. For the quarter, the company posted consolidated operating profit of 5.3 trillion won ($4.7 billion), representing a 79-percent increase year-on-year.
In its earnings guidance disclosed on Jan. 6, Samsung estimated fourth-quarter consolidated revenues would reach approximately 47 trillion won ($41.96 billion) with consolidated operating profit of approximately 5.2 trillion won ($4.6 billion).
“Samsung sees steady NAND demand in 2012,” Rakesh said. “The company sees 2012 NAND bit growth of 75 percent year-over-year similar to SanDisk’s commentary of ‘less than 77 percent year-over-year.’ ”
Much of Samsung’s NAND capacity will be at 20nm and below exiting 2012, he said. “Samsung sees 2012 DRAM industry bit growth of only 30 percent, versus 50 percent in 2011,” he added.
Much of Samsung’s chip sales are tied to Apple. But Apple and Samsung have been on a competitive collision course in the cellular phone and table PC markets. The companies also are embroiled in a bitter legal battle over cell-phone patents. Still, Apple will exclusively use Samsung as its foundry for the next-generation A6 processor — and not Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) — as previously expected.
In any case, Samsung and Apple also had a robust year in cell phones. After losing market leadership in the third quarter, Apple returned to the No. 1 rank in global smartphone shipments in the fourth quarter, according to IHS iSuppli. Meanwhile, based on strong sales of its broad line of smartphone products, Samsung has become the world’s largest smartphone brand for the entire year of 2011, marking the first time the South Korean electronics giant has held this distinction, according to the firm.
Apple in the fourth quarter of 2011 shipped 37 million smartphones worldwide, up 117 percent from 17 million in the second quarter. Apple’s strong performance allowed it to slightly exceed Samsung’s total of 36 million.
Apple in the fourth quarter took the top spot in the market, displacing Samsung, which dropped to second place. Previously in the third quarter, Samsung had usurped Apple to take over the No. 1 rank, which Apple had attained for the first time in the second quarter.
“Apple’s introduction of the 4S in the fourth quarter unleashed tremendous pent-up demand for the iPhone as consumers awaited the arrival of the latest model,” said Wayne Lam, senior analyst of wireless communications at IHS. “This caused the company’s smartphone shipments to surge, allowing it to retake market leadership by a slight margin. However, Apple and Samsung continue to run neck and neck in global smartphone shipments, setting up a tight battle for leadership that will continue throughout 2012.”
Samsung for the entire year of 2011 shipped 95 million smartphones, up an explosive 278 percent from 25 million in 2010. This industry-leading growth allowed it to pass both Apple and previous market leader Nokia to take the No. 1 rank for the entire year of 2011.
“Samsung advanced in 2011 because of its strategy of offering a complete line of smartphone products, spanning a variety of price points, features and operating systems,” Lam said. “This enabled Samsung to move past perennial market leader Nokia and to slightly exceed Apple’s total for the year.”
For its part, Apple posted the second-best performance of all smartphone brands for the entire year of 2011, with its shipments nearly doubling to 93 million units, up from 47 million in 2010. The market share battle between Apple and Samsung reflects the competition between the two leading smartphone operating systems and ecosystems: Apple’s iOS and Google’s Android.