ASML, the world's leading semiconductor lithography equipment maker, recently raised its full-year revenue outlook. Peter Wennink, president of ASML, said it expects revenue growth of 35 percent this year, up 5 percentage points from its previous forecast of 30 percent, as logic and memory chip makers ramp up capacity to support digital infrastructure and demand for the company's products is strong.
The boom in semiconductor equipment is largely based on the global market's desperate demand for chip capacity. The world Semiconductor Trade Statistics Association (WSTS) released a forecast report showing that due to the strong demand for memory, the global semiconductor sales rose sharply this year, is estimated to increase 19.7% year on year to 527.223 billion US dollars, far higher than the December 2020 forecast of 469.404 billion US dollars (an increase of 8.4% year). That would be the first double-digit annual increase since 2018, and would set a record for annual sales well above 2018's $468.7 billion.
WSTS said it expects global semiconductor sales to rise 8.8 percent annually to $573.44 billion in 2022, continuing to set a new record, as the current strong demand for semiconductors looks hard to find for a sharp weakening.
Obviously, this is very positive semiconductor equipment market.
First, fabs are in full swing
There is a shortage of chip capacity and a significant increase in the number of fabs, both IDM and Foundry, with strong demand for semiconductor equipment.
Global semiconductor manufacturers will start building 19 new fabs by the end of this year and another 10 in 2022, according to SEMI. Spending on equipment for the 29 fabs is expected to exceed $140bn over the next few years.
In terms of regional distribution, China and Taiwan each have eight fabs, followed by the Americas with six, Europe and the Middle East with three, and Japan and South Korea with two each. The new plants will consist of 22 12-inch wafers, including 15 in 2021 and seven starting in 2022.
The other seven fabs are 4-inch, 6-inch and 8-inch fabs.
Of the 29 fabs, 15 are contract factories capable of producing 30,000 to 220,000 wafers per month (about 8 inches), and four memory plants capable of producing 100,000 to 400,000 wafers per month (8 inches).
While the number of fabs expected to open next year is 10, subsequent announcements of new projects by chip makers cannot be ruled out, making 29 a relatively conservative number, SEMI said.
Second, to drive the growth of semiconductor equipment market
The boom in the construction of fabs has directly driven the growth of the semiconductor equipment market. As mentioned earlier, at least 29 new fabs will be built over the next two years, with equipment spending expected to exceed $140 billion. New plants typically take at least two years to get to the installation stage, so most chipmakers that started building new plants this year won't start operations until as early as 2023, though some could start operations as early as the first half of 2022.
Semiconductor equipment investment is expected to remain above $3 billion through 2022, with foundry foundry accounting for more than half of total spending, followed by discrete/power devices (21%), analog ics (15%), and MEMS and sensors (7%).
According to preliminary statistics released by The Japan Semiconductor Manufacturing Equipment Association (SEAJ), the sales volume of Semiconductor manufacturing equipment in Japan (3-month moving average) in June 2021 surged by nearly 40% (38.3%) from the same period last year, marking the sixth consecutive month of growth and the fourth consecutive month of double-digit growth. The monthly sales were the third highest since 2005, when data are available for comparison (only 305.4 million yen in May 2021 and 282 million yen in April 2021). From January to June 2021, sales of Japanese-made semiconductor equipment increased 27.5 percent compared to the same period last year.
Japanese semiconductor equipment sales are expected to grow 22.5% yoy in 2021 (April 2021 to March 2022) due to aggressive investment in logic/founds and expected high levels of overall memory investment, SEAJ said in its forecast released on July 1. To 2.920 trillion yen, far better than the 2.5 trillion yen forecast in January 2021 and set a new record for the second year in a row.
Among Japanese semiconductor equipment manufacturers, 59 percent said they have experienced a shortage of parts in the past year due to lagging production by existing suppliers. In addition, more than 70 percent of manufacturers said they had faced problems such as procurement delivery time, price and quality. Companies facing a shortage of parts are seeking new suppliers, including those that have not produced parts for semiconductor devices.
In the semiconductor equipment consumption market, Taiwan demand is the most prosperous. As about 80% of TSMC's capital expenditure this year will be spent on advanced processes, the necessary EUV equipment supply chain below 7nm will benefit, including EUV lithography machine manufacturer ASML, EUV mask box supplier Jiadeng, EUV equipment module OEM Fanxuan and Tongjun, and the material supply chain jingding, Ruiyun, There are vacuum service solution manufacturer Riyang can also enjoy business opportunities. In addition, about 10 percent of TSMC's 2021 capex will be spent on advanced containment and optical masks, which amounts to about $3 billion. It is understood that TSMC zhunan new plant is expected to mass production from the end of this year to the first half of next year, automatic machinery and equipment vendors Wanrun, semiconductor wet process equipment factory Hongsu, Xin Yun will be divided into large orders.
In March this year, the media reported that Samsung urgently approached UMC to discuss the production capacity of the Nanke Plant. After two months of talks, the two sides finally made a final decision, with Samsung as the leader, taking over about half of the production capacity of the Nanke Plant. In addition, UMC also negotiated a contract with other customers, including Mediatek, Lianyong and Ruiyu, to contract the production capacity of 27,500 pieces per month of Nanke plant for the next 6 years in the form of advance deposit. Umc will use this fund to purchase equipment needed for the expansion of 28nm process of Nanke P6 plant.
Second, China semiconductor equipment market potential stocks
The Chinese mainland has a strong consumption capacity for semiconductor equipment, so major semiconductor equipment manufacturers are eyeing the pie. However, on the supply side, China's local equipment manufacturers have relatively little influence in the global market, and it is difficult to form pressure on international large manufacturers.
However, with the aggravation of trade barriers, the stubborn growth of local equipment manufacturers and the strong support of the government, local equipment manufacturers have more room for trial and error and growth, and the order volume in the past two years has increased significantly. Statistics show that a number of local semiconductor equipment enterprises won a large single, in the fourth quarter of 2020, domestic equipment enterprises won 82 sets, an increase of 100% year on year, order cycle 2~3 quarters, revenue confirmation in 2021, a number of equipment domestic market share significantly increased by more than 10%.
The revenue of domestic semiconductor equipment enterprises has broken through the inflection point of 700 million ~1 billion (statistics of domestic and foreign equipment enterprises, the revenue of 700 million ~1 billion is the inflection point range). According to this trend, the localization rate of Chinese semiconductor equipment is expected to continue to improve in 2021, and China is expected to occupy a place in the highly competitive international semiconductor equipment market.
In The Chinese market, dielectric etching machine is the most advantageous semiconductor equipment in China. At present, among the mainstream equipment in China, the localization rate of degumming equipment, etching equipment, heat treatment equipment and cleaning equipment has reached more than 20%. Among them, the largest market is etching equipment, representing manufacturers for Micro, NaAC, and Yitang semiconductor.
According to Yin Zhiyao, founder of China Micro Semiconductor, in the field of etching equipment, the future domestic production rate is expected to reach 50%. This is because the rate of domestication of etching machines is the highest among domestic core equipment (wafer processing), and its proportion is increasing year by year. According to SEMI, the rate of domestication of etching equipment in China is expected to reach 20% by 2020.
Smic semiconductor has obvious advantages in the field of CCP etching. In terms of logical integrated circuit manufacturing, SMIC is the only domestic equipment manufacturer to enter TSMC advanced process production line. In 2017, SMIC etching equipment entered TSMC 7nm production line, and 5nm process is cooperating. At the same time, the company's etching equipment into the Yangtze Storage, Huahong Hongli and other domestic wafer manufacturers. In 3D NAND manufacturing, THE COMPANY's CCP device technology can be used for mass production of 64-layer chips. It is reported that the company is developing 96-layer and more advanced etching equipment and processes according to the needs of memory manufacturers.
In terms of physical film deposition (PVD), NaURA has the largest variety of film deposition equipment. Its 28nm hard mask PVD has achieved mass production, while copper interconnect PVD, 14nm hard mask PVD, Al PVD, LPCVD and ALD(atomic deposition) equipment have entered the production line verification stage. In April 2020, NaURA announced that its Theory ISSN302D 12-inch silicon nitride deposition equipment entered the domestic IC manufacturing leading enterprise. The delivery of the equipment means that the domestic vertical LPCVD equipment in the field of advanced IC manufacturing applications to achieve significant progress.
In terms of cleaning equipment, among the single wafer wet equipment manufacturers in China, The spatial alternating phase shift (SAPS) Megabyte acoustic cleaning equipment and the sequential cavitation oscillation control (TEBO) Megabyte acoustic cleaning equipment exclusively developed by Semmei Semiconductor have successfully entered the integrated circuit production lines in Korea and China. Naura cleaning equipment has also successfully entered the SMIC production line. According to the statistics of China International Tendering Website, among the more than 200 sets of cleaning equipment purchased by Yangtze Storage, Wuxi Huahong and Shanghai Huali Phase II project, the suppliers ranked by the number of winning bids are Deanshi, Semmei, Lam, TEL and NaURA chuang, accounting for 48%, 20.5%, 20%, 6% and 1% respectively.
In terms of polishing machine (CMP), the main research and development units in China include tianjin Huahai Qingke and 45 Institute of China Electric Power Technology Co., LTD. Huahai Qingke's polishing machine has been tried out on SMIC international production line.
Third, Investing in China is more valuable
In a recent research note, CFRA analyst Angelo Zino pointed out that semiconductor manufacturing equipment is expensive and difficult to develop, so foreign semiconductor equipment makers could benefit from China's policy. Companies including Applied Materials, KLA and Europe's ASML are expected to devote more resources to the Chinese mainland market.
The index of semiconductor stocks has surged more than 30 percent in the past few months, with upstream semiconductor equipment and materials companies in particular outperforming the broader market's 5 percent decline and far outperforming the 15 percent drop in Hong Kong technology stocks.
In the coming years, more and more traders investing in China are expected to turn to high-tech companies, represented by semiconductor equipment and materials, because of the bright prospects in these sectors, both at the market and policy level.