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Upturn Seen In Semi Equipment Biz

New forecasts look up, but challenges loom.

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Business continues to get better in the semiconductor equipment sector.

VLSI Research, for one, has raised its forecast in the arena. But there is still some uncertainty amid mixed growth for semiconductors, trade wars and other factors.

After a downturn in 2019, the semiconductor equipment market expected an upturn in 2020. Then, the Covid-19 pandemic struck. Suddenly, a large percentage of countries implemented various measures to mitigate the outbreak, such as stay-at-home orders, business closures, among others. Economic turmoil and job losses soon followed.

At the time, the equipment business was headed towards another downturn. By April, though, business was on the upswing. “Everybody was reporting strong business,” said Risto Puhakka, president of VLSI Research.

Nonetheless, VLSI Research has raised its equipment forecast. In the last forecast, the overall semiconductor equipment was projected to grow by 8% in 2020 over 2019, according to VLSI Research. In 2019, the business fell by 8.1%, according to the firm.

Here’s the new and latest forecast from VLSI Research:
*The wafer process equipment market is projected to reach $58.8 billion in 2020, up 10.6% over 2019.
*The test and related equipment markets are projected to reach $6.1 billion in 2020, up 9.9% over 2019.
*The assembly equipment market is projected to reach $3.1 billion in 2020, up 4.5% over 2019.
*If you add service to the mix, the total semiconductor equipment market is expected to hit $85 billion in 2020, up 10.3%.

“We’ve upgraded our equipment forecast into the double-digit range. Business, in general, looks really good,” Puhakka said. “The interesting thing is that several companies, mainly Applied, Lam and TEL, see business going very strongly. Their projections for the rest of the year are really strong. And if you look at this, we actually assume a pretty substantial drop in the fourth quarter. There is actually upside on this forecast, if the fourth quarter turns out better.”

There are other dynamics at play. Previously, the growth was mainly driven by an upgrade cycle for extreme ultraviolet (EUV) lithography.

“We see deposition and etch really booming. There’s been a lot of capacity put in place in EUV. That will be a little bit calmer for the time being. There’s a little shift there. This upgrade forecast is driven by etch and deposition,” Puhakka said.

In 2021, meanwhile, the market is expected to slightly cool off. The semiconductor equipment segment is expected to grow by 5% in 2021.

Others are also seeing strong growth. “We forecast a +5% year-over-year wafer fab equipment (WFE) growth this year to $50 billion, primarily driven by continued strength in foundry demand ($18.5 billion; +9% year-over-year), a slight recovery in memory of +6% year-over-year, and flat but elevated logic spending of approximately $13 billion,” said Krish Sankar, an analyst at Cowen, in a research note.

“Following 5% year-over-year growth this year to $50 billion, we forecast calendar 2021 WFE to grow +10% year-over-year to $55 billion, primarily driven by a recovery in memory spending. We expect logic spending to remain robust at approximately $13 billion or flat year-over-year. Foundry WFE may decline slightly to $17 billion as the market digests three years of continuous growth,” Sankar said.

Still, the big uncertainty is China. China’s domestic WFE market could reach $7.5 billion in 2020, up 25% over 2019, according to Cowen. This is below consensus, which was $10 billion.

The Trump administration is considering whether to add China’s SMIC to a trade blacklist, according to reports. “So in the worst case scenario, if the semicap companies cannot ship to domestic Chinese manufacturers, there is a roughly 15% cut to next year estimates,” Sankar added.



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