Tracking Chip Companies' High-Tech Spend

Another indication of the improving conditions for both the semiconductor and equipment companies is how much the chip companies are willing to spend on state-of-the-art equipment to make their newest products.

The largest sector in the semiconductor equipment market is lithography, and revenue for 2008 reached $5.4 billion, according to our analysis. Advanced immersion 193nm tools that are capable of making the most advanced circuits today can cost tens of millions of dollars each.

The market leader, ASML(ASML Quote), announced in the second quarter that the average selling price for its new systems was 31.1 million euros, or roughly $45 million. ASML noted it sold four new immersion systems. Looking deeper, ASML noted in its 6-K to the SEC that "in Q2 2009, ASML's net sales of EUR 277 million included 4 new and 6 used systems."

That means the average selling price (ASP) of an immersion system is $45 million. Interestingly, our calculations show that the ASP was $42 million in 2008. While the dollar price is exchange-related, clearly ASML has not reduced prices in 2009 and chip companies are willing to pay the price!

What about capex for 2010? The table below shows our estimates of capex for the top chip spenders. With improved outlook for the economy and industry, clearly 2010 is projected to be big.

Capex for the Top Chip Spenders Capex CY 2009 CY 2010 Intel $4.7 B $4.9 B Samsung $4.5 B $4.5 B TSMC $2.3 B $2.3 B Toshiba $900 M $2.1 B GlobalFoundries $690 M $1.1 B Inotera $350 M $1.1 B Source: The Information Network