The demand for semiconductor equipment is largely driven by the additional tools required for chipmakers to migrate to leading-edge nodes
Chipmakers are, according to Research and Markets, holding on to their existing orders. There are no indications, for now, that they plan to make cancellations. In addition, the firm believes KLA’s tool is required for foundry and logic chips, rather than memory chips, for which demand is more volatile. We therefore do not expect significant order cancellations for KLA’s tools.
The demand for semiconductor equipment is largely driven by the additional tools required for chipmakers to migrate to leading-edge nodes. For KLA, this is especially the case because its tool is required in foundry and logic chip manufacturing processes. Foundry and logic players are, compared to memory chip manufacturers, more committed to shrinkage.
In addition, its tool is crucial for developing new processes. With capacity-driven capex slowing down, semiconductor equipment demand may prove resilient if chipmakers migrate more aggressively to the leading edge nodes.
China has been actively expanding its semiconductor capacity and manufacturing facilities. Its foundry and logic chip vendors are at least a few generations behind the leaders in the market. However, China remains committed to making progress on its semiconductor roadmap.
In our view, KLA’s tool will be used more intensively when the chipmakers are at R&D stages compared to the manufacturing phase. China currently spends about $5 billion on wafer fab equipment so it could help to offset a potential capex cut from large chip manufacturers.
Previously, a report by Valuates Reports, had noted that the global Semiconductor Manufacturing Equipment market is projected to reach USD 53200 Million by 2027, from USD 39510 Million in 2020, at a CAGR of 3.9 per cent during the forecast period 2021-2027.
North America, as per the report, dominates the semiconductor manufacturing equipment market. The increasing demand for hybrid and electric vehicles in the North American region has, in turn, increased the demand for semiconductors. The presence of well-known manufacturers has only added to the region’s prominence in the semiconductor manufacturing equipment industry.
