According to Counterpoint Research statistics, in the first quarter of 2024, the revenue of the top 5 global semiconductor equipment manufacturers decreased by 9% year-on-year, mainly due to the reduction or delay in customers' investment in the most advanced process technology production lines. However, fortunately, the strong global market demand for DRAM, coupled with the strong demand for semiconductor equipment in the Chinese mainland market, largely offset the revenue decline caused by the low investment in advanced process technology production lines.
Let's take a look at the specific data provided by Counterpoint Research.
The revenue of ASML and Tokyo Electron (TEL) decreased by 21% and 14% year-on-year, respectively. Compared with 2023, the revenue of Applied Materials (AMAT), Lam Research, and KLA showed a low single-digit decline. Compared with the previous quarter, ASML's revenue decreased by 26%, KLA decreased by 5%, Applied Materials and Lam Research were flat month-on-month, and Tokyo Electron grew by 18%, thanks to the strong demand for DRAM and NAND.
In the first quarter of 2024, the revenue of these five major semiconductor equipment manufacturers from the Chinese mainland increased by 116% year-on-year.
In the first quarter of 2024, the revenue from memory manufacturing equipment of these five manufacturers increased by 33% year-on-year, while the revenue from foundries decreased by 29% year-on-year.
The decline in revenue of these five manufacturers is largely due to the reduced investment in advanced process production lines below 5nm by foundries represented by TSMC and Samsung. These production lines require various advanced equipment, and the lack of these major items will result in a significant loss of revenue for these semiconductor equipment giants.
Taking Samsung as an example, in order to catch up with TSMC, the company has always invested heavily in the construction of advanced process production lines. However, the sluggish market conditions in the past year, coupled with the company's inability to improve the yield of advanced processes, has delayed the construction progress of some advanced production lines.
Taking the new factory in the United States as an example, in May 2022, Samsung announced the construction of a new wafer factory in Taylor, Texas, with an investment of $17 billion. Later, as the equipment procurement phase began, the investment increased to $25 billion. Currently, Samsung has raised the investment to $44 billion.Such large-scale investments require adjustments when the market is sluggish. According to ETnews, recently, Samsung has postponed the equipment procurement for the new wafer fab in Taylor City, and will make a final decision in the third quarter.
In Taylor City, Samsung will build two wafer fabs, one for developing 4nm to 2nm process technologies, and the other for developing and manufacturing 3D high-bandwidth memory and 2.5D packaging products.
It is worth noting that the U.S. Department of Commerce announced that it has signed a preliminary memorandum of terms (PMT) with Samsung, which will provide about $6.4 billion in direct grants under the "CHIPS Act." However, Samsung did not receive loans and guarantees under the "CHIPS Act," while Intel and TSMC received loans of $11 billion and $5.5 billion, respectively.
01
Memory and the Mainland China market are the hopes.
Let's take a look at the specific revenue situation of these major semiconductor equipment companies.
In the first quarter, Applied Materials achieved revenue of $6.71 billion, a sequential decline of 0.2%, and a year-on-year increase of 0%, with a gross margin of 47.9% and a net profit of $2.02 billion. The revenue from Mainland China accounted for 45%, and it is expected that the proportion of Mainland China will drop to around 30% in the regular level for the whole year. Looking forward to the global semiconductor equipment market in 2024-2025, the company believes that HBM and GAA-FET are the core driving forces for the future of the semiconductor equipment market.
ASML achieved revenue of €5.29 billion, a year-on-year decline of 22%, a sequential decline of 27%, and a gross margin of 51.0%. In the first quarter, the new order amount was €3.6 billion, a sequential decline of 61%, of which, the new EUV order was €660 million, a sequential decline of 88.2%. By product, the revenue share of EUV, ArFi, KrF, ArF Dry, and i-line equipment was 46%, 39%, 8%, 3%, and 1%, respectively. The company believes that AI-related demand will continue to grow, DDR5 and HBM will drive the growth of memory demand, logic chip customers are still digesting new capacity, Mainland China maintains strong growth, ASML said that it can continue to maintain the installed equipment for Chinese customers.
Lam Research achieved revenue of $3.79 billion, a year-on-year decline of 1.96%, and a sequential increase of 0.94%, with a gross margin of 48.7%. By region, Mainland China accounted for 42% of total revenue, South Korea accounted for 24%, Japan accounted for 9%, Taiwan accounted for 9%, the United States accounted for 6%, Southeast Asia accounted for 5%, Europe accounted for 5%, and the proportion of Mainland China continued to increase. The shipment of Chinese customers has driven the proportion of wafer foundry to increase, and the proportion of DRAM has declined compared to the previous quarter. Lam judged that driven by HBM investment and the continuous investment of Chinese customers, the demand for DRAM will maintain a strong growth momentum.TEL achieved revenue of 1,830.5 billion yen, a year-on-year decrease of 17.7%, and operating net profit of 456.2 billion yen, exceeding the company's previous guidance of 445 billion yen. The company's first-quarter revenue increased by 18% compared to the previous quarter, and operating profit increased by 9.6%. The revenue share from Mainland China reached a historical high of 47.4%.
From the revenue situation of these four manufacturers, it can be seen that the memory market and the Mainland China market are the growth parts of their revenue, and the increase is significant.
Next, let's introduce the market situation and capital expenditure of the memory market.
Looking at the market size of semiconductor devices, the memory chip market has more intense cyclical fluctuations, and the market share of memory chips is highly concentrated. Compared with logic chips, it belongs to a more homogeneous commodity, and its capital expenditure and capacity construction are mainly carried out around the price cycle.
Since the second half of 2022, affected by factors such as demand slowdown, supply increase, and intensified price competition, the price of memory chips has plummeted. Data from TrendForce shows that the average price of DRAM fell by 31.4% in the third quarter of 2022, and the decline expanded to 34.4% in the fourth quarter. In the first quarter of 2023, the average price decline narrowed to 13%-18%, and the decline continued to narrow in the second and third quarters, at 10%-15% and 0-5% respectively. Since 2023, with leading manufacturers such as Samsung, Micron, SK Hynix, Western Digital, and Kioxia implementing production reduction strategies, the supply-demand relationship has gradually recovered, and the trend of price recovery is obvious. In the first quarter of 2024, the contract price of DRAM increased by 20%, and the contract price of NAND Flash increased by 23%-28%. It is expected that the quarterly increase in DRAM contract price in the second quarter of this year can reach 13%-18%, and the quarterly increase in NAND Flash contract price is about 15%-20%.
Looking forward to the whole year of 2024, AI demand will drive the growth of capital expenditure in advanced process technology in the second half of the year. Lam has raised the revenue expectation of the global semiconductor front-end equipment in 2024 from $85-90 billion to $90-95 billion. Among them, the demand for DDR5 and HBM will remain strong, and the demand for NAND Flash is expected to recover in the second half of the year.
In summary, the capital expenditure related to memory chips in the whole year of 2024 will continue to grow.
02
The attractiveness of the Chinese marketLet's take a look at the reasons why the mainland Chinese market has a strong appeal to major semiconductor equipment manufacturers.
The continuous improvement of domestic chip capacity in China is fundamental.
On June 17, the National Bureau of Statistics released data showing that in May, China's economy continued to rebound and improve, with overall stable operation. The data shows that the industrial and information technology sector has contributed new impetus to the stable operation of the national economy, with the main indicators rising.
The added value of the equipment manufacturing industry increased by 7.5%, and the added value of the high-tech manufacturing industry increased by 10.0%, with growth rates 1.9 and 4.4 percentage points faster than the total industrial scale above, respectively. The output of integrated circuits increased by 17.3% year-on-year.
In the first half of the year, the utilization rate of capacity of major wafer factories in mainland China has been significantly improved, and many manufacturers have reached full production. Morgan Stanley (Morgan) said that the utilization rate of the Huaneng Semiconductor wafer factory's capacity has reached 100%.
SMIC mentioned that the utilization rate of capacity in the first quarter was 80.8%, an increase of 4% month-on-month, and the willingness of customers to stock up has increased. A total of 1.79 million 8-inch equivalent wafers were shipped, an increase of 7% month-on-month. The company revealed that in the second quarter, the international consumer product market has partially recovered, such as low-power Bluetooth, MCU and other products have started to replenish orders. Thanks to the sports year of 2024, the sales of TV and set-top box related products have increased significantly, which is much higher than last year.
According to TechInsights' forecast, in the next five years, the semiconductor capacity in mainland China will grow by 40%.
TechInsights' survey data shows that the total silicon wafer capacity in mainland China is expected to increase from 310 million square inches in 2018 to 631 million square inches in 2024, and 875 million square inches in 2029, with the output value growing from $11 billion in 2018 to nearly $30 billion in 2023. At present, the expansion of capacity is mainly focused on 12-inch wafer factories, while 6-inch and 8-inch wafer factories only account for a small part.
Such a strong capacity also requires a huge demand for wafer factory capacity and related equipment. Many domestic wafer factories in China are increasing capital expenditure to purchase more chip manufacturing and packaging and testing equipment.
Since the beginning of 2024, the expansion of mature processes in mainland China has maintained a strong momentum. SMIC said that its capital expenditure in 2024 is the same as in 2023. Huaneng is promoting the production of the second factory in Wuxi, entering a period of high capital expenditure, guiding about $2.5 billion in 2024, a year-on-year increase of 176%. In comparison, the capital expenditure plans of foundries such as GF and World Advanced are more conservative, with year-on-year decreases of 60.8% and 46.1% respectively in 2024.In the first quarter of 2024, driven by the strong demand for mature process technology equipment in mainland China, the combined revenue of overseas semiconductor equipment companies and domestic semiconductor equipment companies in China reached a high proportion of 47% globally, up from 23% in the first quarter of 2023.
Let's take a look at the tendering situation for semiconductor equipment by domestic wafer fabs in the first quarter of this year.
Especially in March, there was a significant month-on-month increase in semiconductor equipment tendering.
According to the data from the procurement website, in March 2024, there were a total of 127 tenders for wafer production lines in the statistical sample, mainly focusing on tenders from production lines such as Huahong Semiconductor, JiTa Semiconductor, and SMIC. The tendered equipment mainly includes categories such as metrology, etching, and CVD equipment. From January to March, there were a total of 166 tenders for wafer production lines in the statistical sample, among which Huahong Semiconductor, JiTa Semiconductor, and YanDong Technology had the top three tender volumes. Overall, the tendering of equipment is mainly focused on metrology, etching, and CVD equipment.
In March 2024, JiTa Semiconductor tendered 15 items, mainly including PVD, testers, furnaces, and CVD equipment. From January to March 2024, JiTa Semiconductor tendered a total of 22 items, mainly including infrastructure projects, PVD, and tester equipment.
In March 2024, Huahong Semiconductor tendered 100 items, mainly including metrology, etching, and cleaning equipment. From January to March 2024, Huahong Semiconductor tendered a total of 104 items, mainly including metrology, etching, and cleaning equipment.
In March 2024, YanDong Technology tendered 3 items, mainly including etching and diffusion equipment. From January to March 2024, YanDong Technology tendered a total of 19 items, mainly including inspection, photoresist coating, thinning, and lithography equipment.
In March 2024, SMIC tendered 8 infrastructure projects. From January to March 2024, SMIC tendered a total of 12 infrastructure projects.
In terms of winning bids, according to the data from the procurement website, in March 2024, a total of 108 pieces of equipment were won in the wafer production lines in the statistical sample, mainly gas-liquid systems, inspection, stripping, metrology equipment, with a domestic equipment winning ratio of about 86%, among which, the domestic winning ratio of gas-liquid systems, inspection, stripping, photoresist coating, and annealing equipment was significant. From January to March 2024, a total of 542 pieces of equipment were won in the wafer production lines in the statistical sample, mainly gas-liquid systems, diffusion, and probe station equipment, with a domestic equipment winning ratio of about 35%, among which, the domestic winning ratio of stripping, gas-liquid systems, and inspection equipment was relatively high.Conclusion
Amid the global semiconductor equipment market downturn, the robust demand from the Chinese mainland market has significantly boosted the performance of major equipment manufacturers. At the same time, there are some discordant voices that have had a negative impact on both the supply and demand sides.
On June 19, at the regular press conference of the Chinese Ministry of Foreign Affairs, a reporter asked for China's comments on a senior U.S. official's visit to Japan and the Netherlands to demand new restrictions on China's semiconductor industry, including limiting China's ability to manufacture high-end memory chips needed for artificial intelligence chips. Spokesperson Lin Jian stated that China firmly opposes the U.S. approach of engaging in bloc confrontation and even extending it to the economic and technological fields, coercing other countries to suppress China's semiconductor industry. The essence of the U.S. actions is to maintain its own hegemony, deprive China of its legitimate right to development, and monopolize the high end of the value chain by artificially disrupting the stability of the global industrial chain. Such behavior severely hinders the development of the global semiconductor industry and will ultimately backfire.
The above-mentioned restrictions are aimed at preventing Japanese and Dutch semiconductor equipment manufacturers from selling related equipment to Chinese mainland wafer fabs. However, in reality, these manufacturers are thriving in the Chinese mainland market.
Taking Japan as an example, from January to March of this year, the proportion of semiconductor equipment exports to China has exceeded 50% for three consecutive quarters. From January to March, the export value of related equipment to China reached 521.2 billion yen, an increase of 82% year-on-year, reaching the highest level since comparable data began in 2007.
Data from the General Administration of Customs of China shows that as of April 2024, the import value of semiconductor equipment has been around 4 billion U.S. dollars, continuing to be higher than the same period last year.
Kazuma Kishikawa from Nomura Research Institute in Japan pointed out that Chinese wafer fabs unable to introduce advanced process equipment are turning to produce mature process chips, which has led to an increase in Japanese semiconductor equipment exports.As the water rises, the ship floats higher. The huge demand for semiconductor equipment is also driving the acceleration of development for Chinese domestic equipment manufacturers. In the first quarter of 2024, the revenue of Chinese domestic semiconductor equipment manufacturers increased by 39% year-on-year. In terms of front-end equipment, manufacturers represented by North Microelectronics have made breakthroughs in etching, thin film deposition, cleaning, and furnace equipment. In terms of back-end equipment, Changchuan Technology and Huafeng Measurement and Control continue to advance towards the high-end SoC testing machine field.
Comment