Since 2021, 5G, the Internet of Things, big data, artificial intelligence and other fields have developed rapidly. The global semiconductor industry is facing huge demand for expansion of advanced manufacturing capacity, bringing huge market space for the semiconductor equipment industry. However, the advanced semiconductor equipment manufacturers, which should continue to prosper and develop, have been worried this year.
According to SEMI data, the size of the global semiconductor equipment market will decrease by 16% annually to 91.2 billion US dollars in 2023, with Chinese Mainland, Taiwan, China and South Korea in the top three. Among them, the wafer factory equipment market will decrease by 17% to 78.84 billion dollars annually, the packaging equipment market will decrease by 13% to 5.29 billion dollars annually, and the test equipment market will decrease by 7% to 7.07 billion dollars annually. In the front equipment segment, the logical process equipment market will decrease by 9% compared with 2022, the DRAM equipment market will significantly decrease by 25% to US $10.8 billion, and the NAND Flash equipment market will also decline by 36% to US $12.2 billion.
The decline of the market has cast a shadow on the performance of global semiconductor manufacturing equipment manufacturers.
01
The performance of global semiconductor equipment manufacturers has significantly declined
According to the Nihon Keizai Shimbun, the performance growth of global semiconductor equipment manufacturers has slowed significantly. Among the 9 major manufacturers, 8 companies will have a year-on-year decline or growth slowdown in their revenue from January to March 2023 (some companies from February to April). The reason is that the poor condition of the semiconductor market leads to the stagnation of demand, and the export restrictions imposed by the United States on China also have a certain impact.
According to the data released recently by American Applied Materials Corporation, it is estimated that the revenue from February to April 2023 will be 6 billion to 6.8 billion US dollars, a decrease of 4% to 9% over the same period last year.
During the period from October to December 2022 (AMAT from November to January of the next year), five of the nine major manufacturers, such as Pan Forest Group and Edelwin, ensured the final profit. However, from the revenue forecast of each company from January to March of this year (AMAT from February to April), there is an obvious trend of growth slowdown. The revenue of six companies, including Fanlin Group and Tokyo Electronics, may decrease compared with the same period last year. The profit growth rate of Adesto and SCREEN holdings, which are expected to make profits, will be the lowest in two years.
According to the prediction of SEMI, the world semiconductor equipment market size will break the record with US $108.5 billion in 2022, but the first negative growth in four years will occur in 2023.
02
Reasons for performance pressure
On the one hand, semiconductor manufacturers have reduced investment. Affected by the weakening demand for smart phones and other terminals and the economic slowdown, semiconductor users have begun to compress the excessive inventory accumulated in recent years, and the construction plan has also been put on hold or postponed. The semiconductor market is deteriorating rapidly. In particular, the equipment investment of major memory manufacturers that have been greatly affected has plummeted in 2023. For example, Meguiar stated that it will significantly reduce its capital expenditure, reducing its capital expenditure plan for fiscal year 2023 from $12 billion in fiscal year 2022 to $8 billion, and reducing spending on chip equipment by up to 50%; SK Hynix turned to cancel the equipment purchase order completely in the fourth quarter after it requested to delay delivery when the semiconductor market was depressed in the second quarter of last year.
On the other hand, the export restrictions imposed by the United States on China have become a heavy burden. Since the US Department of Commerce’s Bureau of Industry and Security released the new export control regulations for China’s advanced computing, semiconductor manufacturing and supercomputer fields in October last year, the amount of semiconductor manufacturing equipment purchased by the mainland has dropped by 27% year-on-year, hitting the lowest point in nearly two years. Six of the world’s top ten semiconductor equipment manufacturers have stepped up to warn.
Application materials: It is estimated that the revenue loss in China will be as high as US $2.5 billion in 2023, but if the US government accelerates the issuance of licenses required for supply, the impact may be reduced to US $1.5 billion to US $2 billion.
ASML: The first major customer of ASML in 21 is Chinese chip manufacturers, which have contributed more than US $29 billion to ASML. ASML also said that Chinese customers may have difficulty obtaining other parts they need. If the tool orders from China slow down, it may be sold elsewhere.
Fanlin Group: China accounts for about 30% of the sales of Fanlin, and its revenue is expected to decrease by US $2 billion to US $2.5 billion in 2023. “This year, sales from mainland China may decrease by nearly half, and if it weren’t for the impact of the new regulations, this year’s revenue figure would be much higher.”.
Kelei: In the third quarter of 2022, Kelei’s revenue was 2.724 billion US dollars, with the largest contribution from the Chinese market, accounting for 31% of the revenue. Kelei Group said that it was pessimistic about the business prospects in Chinese Mainland, and estimated that the global revenue loss in 2023 would be 600 million to 900 million dollars.
Tokyo Electronics: About a quarter of the company’s revenue comes from the mainland, and the overall reduction of the annual performance amount reached 250 billion yen, about half of which is due to the impact of the new regulations of the United States, and the equipment exported to the mainland is subject to corresponding restrictions.
ASMI: In the first nine months of 2012, ASMI’s equipment sales in China accounted for 16% of its total revenue. It is expected that the new regulations of the United States on China will affect more than 40% of its sales in China.
The new US regulations on semiconductor export control to China not only affect the performance of semiconductor equipment manufacturers in Chinese Mainland, but also affect their global market share while depressing the development of China’s semiconductor industry. Especially against the backdrop of the continuous decline in the global semiconductor market and chip manufacturers cutting back on capital expenditure, semiconductor equipment manufacturers are having a difficult time.
It is reported that the three major semiconductor equipment manufacturers in the United States, Applied Materials, Fanlin Group and Kelei, have been transferring non-Chinese employees to Singapore and Malaysia since last October, or trying to increase production capacity in Southeast Asia.
According to the senior management of subsystem suppliers of Fanlin Group and Kelei, the above trend appeared at the end of last year. “In the past few months, customers have asked us to speed up the support of their footholds in Southeast Asia. We have noticed that the number of local staff of customers has increased.”
Panlin Group said that its strategy was to be close to customers geographically, which led it to invest in the whole of Asia, including new technology production facilities in Malaysia, technology centers in South Korea and engineering facilities in India. “Due to adverse macroeconomic conditions, recent trade restrictions on our ability to conduct business in China, and the expected decline in global wafer manufacturing equipment expenditure in 2023, we are taking a series of measures to control costs.”
Ke Lei also said: “Given the current geopolitical pressure, our business in Southeast Asia is increasing.”
The loss of China’s semiconductor market has brought significant losses to the business of semiconductor equipment giants. However, this also gives opportunities for the development of local equipment manufacturers in China.
03
Opportunities for Chinese semiconductor equipment manufacturers?
According to SIA data statistics, the global semiconductor equipment can be roughly divided into 11 categories and more than 50 models. The former equipment is used in the wafer manufacturing process, covering hundreds of processes from wafer to wafer, mainly including eight categories: lithography machine, etching machine, film deposition machine, ion implantation machine, CMP equipment, cleaning machine, former detection equipment and oxidation annealing equipment. The former equipment accounts for 80% to 85% of the entire market, of which the lithography machine, etching machine and film equipment are the three most valuable links, Their respective market size has reached more than 20% of the total amount of the previous equipment; The rear equipment is mainly divided into test equipment and packaging equipment.
At present, the top five semiconductor equipment manufacturers in the world belong to the application manufacturers of the former equipment, including Applied Materials, ASML, Tokyo Electronics, Fanlin Semiconductor, and Kelei. Three of them are platform-type across the fields of etching, film, cleaning, ion implantation, and so on. Under the ban, will there be more opportunities for semiconductor equipment orders to flow to domestic equipment manufacturers?
In 2022, the localization rate of semiconductor equipment of Chinese wafer manufacturers was significantly higher than that in 2021, from 21% to 35%. According to the bidding situation of domestic wafer production lines in 2022, it can also be found that Chinese semiconductor equipment manufacturers won a total of 231 sets of equipment, and the proportion of winning the bid reached about 30%. In the fields of PVD equipment, oxidation equipment and wet corrosion equipment, the proportion of domestic equipment has exceeded 50%, and some even reached about 70%. According to previous data, in 2019, the proportion of domestic semiconductor equipment was only about 7.5%, and now it has increased by about 30%.
In addition to the significant improvement of the equipment winning rate, the performance of China’s semiconductor equipment manufacturers in 2022 will also be more outstanding.
As of February 1, 2023, nearly 100 companies related to the semiconductor industry have released the performance forecast for 2022, and more than half of them have achieved a year-on-year increase in net profit, and most of them are listed semiconductor companies in the equipment and materials category. Among the companies with a growth rate of more than 100%, there are many semiconductor equipment companies, such as Tuojing Technology, Xinyuan Micro, Huahai Qingke, Changchuan Technology, and North Huachuang.
It is reported that the published performance forecasts of 12 semiconductor equipment companies in 2022 have achieved positive growth. In terms of the lower limit of growth, there are 6 companies that have more than doubled, and the lower limit of growth of 9 companies is more than 30%.
In the case of overseas chip giants’ thunderous performance, the performance of domestic semiconductor equipment manufacturers has generally improved and increased against the trend, which undoubtedly injects confidence into the localization of semiconductor equipment under the current situation. It is certain that there will be a larger market flow to domestic semiconductor manufacturers in the future. As domestic manufacturers invest more in the field of semiconductor equipment and some manufacturers enter the global market, the industry competition will further intensify.
Compared with 2022, the market pressure faced by the global chip industry in 2023 is still not easy. The situation of oversupply of chips is difficult to rewrite in the short term. The recovery of the semiconductor equipment industry may also require a long period of inventory adjustment.https://www.stoneitech.com/
