Semiconductor equipment, the only bright spot?

In the first half of 2023, global semiconductors are in a downward cycle, and the performance of the entire semiconductor industry is relatively dismal. The revenue of semiconductor giants Intel, Samsung, and TSMC in the first quarter is not optimistic. Semiconductor equipment may be regarded as the only bright landscape in the multi-industry chain of the entire semiconductor market. In the first quarter, the performance of basically domestic and foreign equipment manufacturers achieved varying degrees of growth. However, for semiconductor equipment suppliers, they still face the unfavorable factor of macroeconomic slowdown in the short term, and international semiconductor equipment suppliers are also adversely affected by the export ban. So, how do semiconductor equipment manufacturers view the future situation?

What is the revenue situation of international semiconductor equipment giants?

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ASML's first-quarter results beat expectations as demand for its products outpaced production capacity. Net sales in the first quarter of 2023 were 6.7 billion euros and net income was 2 billion euros, up from 6.43 billion euros in the last quarter of 2022 and 3.5 billion euros in the same quarter last year. Net bookings for the quarter were €3.8 billion, of which €1.6 billion related to extreme ultraviolet lithography (EUV) machines for advanced silicon process nodes. ASML said it expects net sales in the current second quarter to be between 6.5 billion euros and 7 billion euros.

 

Lam Research mainly produces equipment for semiconductor deposition, etching and cleaning. Lam delivered solid results in the quarter ended March 26, 2023, including record foundry-related revenue, and its memory installed base grew nearly 40% compared to the previous down cycle. Revenue for the quarter was US$3.87 billion, a decrease of 26.7% compared to the previous quarter. Gross profit margin was US$1.606 billion, accounting for 41.5% of revenue, operating expenses were US$663 million, operating income accounted for 24.4% of revenue, and net income was US$814 million.

 

Revenue declined in the quarter in part because its memory customers reduced fab utilization, slowed technology transitions and reduced investments in capacity additions to limit bit output and normalize their own inventories. From a regional perspective, revenue from China and South Korea both accounted for 22%, Taiwan 18%, the United States 16%, Japan 10%, and Europe 8%. Lam Research has closed two of its sites in Oregon, U.S., due to declining demand. Silicon Valley Business Journal reported that Lam usually closes for two weeks a year, but added a third week this month.

KLA Corp's revenue for the third quarter ended March 31 rose 6.3% to $2.43 billion, beating estimates of $2.38 billion. Revenue from foundries accounts for 86%, and revenue from the storage field accounts for 14%. According to Refinitiv data, KLA forecast revenue for this quarter to be between US$2.13 billion and US$2.38 billion, while analysts estimated US$2.17 billion. This comes as chipmakers plan to expand production and build new factories in Europe and the United States. KLA makes tools used to inspect the silicon wafer discs used to make semiconductors for defects.

 

ASM International NV (ASM) also had a good first quarter, with revenue up 40% to €710 million. said Benjamin Loh, President and CEO of ASM. “Revenue exceeded previous guidance of €660-700 million as some systems were delivered in Q1 rather than Q2 at customer request, and on the back of a large order backlog at the end of Q4. Gross margin increased to 51% due to an exceptionally strong product mix. First-quarter orders were still healthy at €647 million, but were down 6% year-over-year at constant exchange rates, reflecting softer market conditions at the end of the quarter. We expect second quarter revenue to be between 650 million and 690 million euros. But following expected growth in the first half, sales in the second half will be down 10% or more from the first half.

 

Another Dutch semiconductor equipment company, BE Semiconductor Industries NV (Besi), mainly develops leading assembly processes and equipment for lead frame, substrate and wafer-level packaging applications. Demand from Chinese customers, which accounted for about 27% of the company's total revenue, remained weak last quarter, the company said on Wednesday. Compared to the previous quarter, order volume fell 21% due to lower demand from mainstream computing and hybrid bonding applications.

 

Domestic equipment manufacturers’ revenue and profits have increased significantly

 

The performance of domestic semiconductor equipment manufacturers listed in the first quarter of 2023 is also relatively impressive. Basically all semiconductor equipment suppliers have achieved significant growth in revenue and profits. In recent years, facing the industry background of export control, the trend of anti-globalization is forcing the domestic industrial chain to accelerate the growth. Thanks to the efforts of my country's semiconductor equipment companies, semiconductor equipment has continuously passed the production line verification of major wafer factories and entered the commercial supply stage.

 

Northern Huachuang expects operating income in the first quarter to be 3.6 billion to 4 billion yuan, a year-on-year increase of 68.56%-87.29%; net profit attributable to the parent company is 560 million yuan-620 million yuan, a year-on-year increase of 171.24%-200.30%. Northern Huachuang said that compared with the same period last year, the company's market share of semiconductor equipment has continued to increase, and the electronic components business has developed stably, enabling the company's total operating income and net profit attributable to shareholders of listed companies to achieve year-on-year growth.

 

Jingsheng Electromechanical’s operating income in the first quarter was 3.5996 billion yuan, a year-on-year increase of 84.37%; net profit was 887 million yuan, a year-on-year increase of 100.43%. Focusing on the dual-engine sustainable development strategy of "advanced materials, advanced equipment", the company actively implements the marketing and service of advanced equipment, accelerates the expansion and quality improvement of advanced materials business such as quartz crucibles and diamond wires, and achieves operational success. Performance increased significantly year-on-year.

 

In the first quarter, the company achieved operating income of 1.223 billion yuan, a year-on-year increase of 28.86%; net profit attributable to the parent company was 275 million yuan, a year-on-year increase of 134.98%. The company's etching equipment continues to gain recognition from more customers at home and abroad, and its market share continues to increase. In the internationally advanced 5-nanometer chip production line and the next generation of more advanced production lines, the company's CCP etching equipment has achieved multiple batch sales, and more than 200 reaction stages are in qualified operation on the production line. The company's ICP etching equipment continues to be approved for more etching applications, rapidly expanding the market and continuing to receive volume orders from leading customers. Revenue from etching equipment in this period was 814 million yuan, an increase of approximately 13.94% over the same period last year, and the gross profit margin reached 47.29%; the company's MOCVD equipment continues to maintain absolute dominance in the blue-green LED production line in the new generation of Mini-LED industrialization. Leading position, MOCVD equipment revenue in this period was 167 million yuan, an increase of approximately 300.48% over the same period last year, and the gross profit margin reached 40.09%.

 

Zhichun Technology stated that various businesses deployed by the company have gradually entered the harvest period, bringing about growth in revenue and profits. In the first quarter of 2023, the company achieved revenue of 780 million yuan, a year-on-year increase of 43.15%; net profit attributable to shareholders of listed companies was 72.78 million yuan, a year-on-year increase of 186.28%.

 

Shengmei Semiconductor's revenue in the first quarter of 2023 was 616 million yuan, a year-on-year increase of 74.09%; the net profit attributable to shareholders of listed companies was 131 million yuan, compared with a profit of 4.3112 million yuan in the same period last year, a year-on-year increase of 2937.19%. Among them, the main reason for the revenue growth is that benefiting from the increasing demand for equipment in the domestic semiconductor downstream industry and the competitive advantages of the company's products, new customer expansion and new market development have achieved remarkable results, new products have been recognized by customers, the order volume has continued to grow, and the company's operating Revenue growth remains high.

 

Huahai Qingke's revenue in the first quarter of 2023 was approximately 616 million yuan, a year-on-year increase of 76%; the net profit attributable to shareholders of listed companies was approximately 194 million yuan, a year-on-year increase of 112%. The main reason for the revenue growth is that the company's CMP products, as one of the key process equipment for integrated circuit front-end manufacturing, have gained recognition from more customers and achieved multiple batch sales, with their market share continuing to increase; at the same time, as the company's CMP products The market share continues to expand, and the scale of business such as wafer regeneration, key consumables and maintenance services is gradually increasing.

 

Tuojing Technology's operating income in the first quarter of 2023 was 402 million yuan, an increase of 295 million yuan from the same period last year, mainly due to the continued growth of sales orders. The net profit attributable to shareholders of the listed company was 53.718 million yuan, turning a loss into a profit.

 

Changchuan Technology's operating income in the first quarter of 2023 was 320 million yuan, a year-on-year decrease of 40.48%; the net profit attributable to shareholders of the listed company decreased by 57.23 million yuan, turning from profit to loss. Changchuan Technology stated that this was mainly due to the decrease in sales in the current period. It is reported that Changchuan Technology mainly produces packaging and testing equipment, and the current packaging and testing market is not good.

 

Xinyuan Micro's revenue in the first quarter of 2023 was 288 million yuan, a year-on-year increase of 56.89%, and the net profit attributable to the parent company was 65.9774 million yuan, a year-on-year increase of 103.55%. Xinyuan Micro said that the revenue growth was mainly due to the continued prosperity of the semiconductor equipment industry and the continued growth of the company's revenue scale; while the net profit growth was mainly due to the increase in the company's sales revenue and the increase in tax rebates for embedded software products during the reporting period. .

 

Semiconductor giants’ views and actions on the future market

 

First of all, in the short term, there is a unanimous consensus that market demand is weak and continues to be sluggish. In particular, equipment investment in the storage market will drop sharply in 2023. SK Hynix's equipment investment will decrease by more than 50% compared with last year, and Micron Technology will decrease by about 40%. According to SEMI forecasts, the global semiconductor equipment market size will decrease by 16% to US$91.2 billion in 2023.

 

Semiconductor lithography machine giant ASML issued a warning, saying that "demand signals in different end markets are mixed. Some major customers are further adjusting demand timing. At the same time, we are also seeing other customers absorb this change in demand, especially at more mature nodes." of DUV deep ultraviolet lithography," but Wennink said that overall demand still exceeds the company's production capacity this year, and the current backlog of orders is worth more than 38.9 billion euros. Our focus remains on maximizing system output. ”For 2023 as a whole, ASML expects to continue strong growth, with full-year net sales increasing by more than 25% and gross margins improving slightly relative to 2022.

 

Tim Archer, president and CEO of Lam Research, said on a first-quarter earnings call that memory chip manufacturers' capital expenditures are at "historic lows" in terms of total manufacturing equipment, and their total spending is expected to fall by 50% this year.

 

ASM International NV's view is that wafer fab equipment (WFE) is expected to decline by more than ten percentage points throughout 2023, which is lower than the previous forecast of a decline of more than ten percentage points, but they expect to outperform the WFE market again this year. Memory WFE is expected to decline by a significant double-digit percentage. In the logic/foundry market, spending on advanced nodes is expected to remain at good levels in 2023, but lower than previously expected, especially in the second half of the year, which is partly segmented by older nodes in the logic/foundry market The market was offset by strong market spending.

 

In addition, in terms of export controls, according to recent news from ASML and Lam Research, export controls are not as strict as expected. The two companies said China's demand for electric vehicles and lower-end chips is strong this year, most of which do not require advanced chip manufacturing equipment, and sales to China are expected to increase this year.

 

Lam said it recently learned that government restrictions were not as strict as initially feared. Tim Archer, president and CEO of Lam Research, said, "We have received "clarification" from the U.S. government on export-related regulations, which will allow us to ship certain products that we initially had not anticipated. Let the company sell chip manufacturing equipment worth "several hundred million dollars" to China, with shipments expected in the second half of 2023.

 

ASML said it has received orders of about 39 billion euros, equivalent to two years of shipments. ASML CEO Peter Wennink said at the meeting that Chinese buyers accounted for about 30% of low-end chip manufacturing equipment orders, an increase of about 10% compared with the end of last year. In addition, according to ASML's official website, Chief Financial Officer Roger Dassen said that in the next quarter, the company's sales in China will see a significant rebound. Winnick said that ASML expects to sell about 90 DUV units to China this year, and ASML only needs to apply for an export license.

 

Sino-U.S. tensions have engulfed Japan and the Netherlands over restrictions on exports of advanced chips and chip-making technology to China. Details of what export controls Japan might impose are unclear, but Tokyo Electron's business could be directly affected, with its sales in China currently accounting for more than 20% of its total sales. “As long as we remain number one globally, we should always be able to find business one way or another. This is our position. ”Tokyo Electron Ltd. CEO Kawai said.

 

Tokyo Electron Ltd. said the semiconductor industry will resume exponential growth next year despite lingering inflation and geopolitical uncertainty. Long-term trends such as autonomous driving and Metaverse development will increase demand for data storage and processing capabilities. Kawai said in an interview: "The amount of data the world has to process will increase 10 times by 2030 and 100 times by 2040."”

 

In addition, in terms of future development layout, giants are also making every effort to prepare ammunition for future needs.

 

Lam Research recently used AI to identify a "game-changing development method for accelerating and cutting the cost of chip innovation." The company's researchers apply Bayesian optimization algorithms to "humans first, computers later" strategies in deposition and etching processes. The findings show that when the algorithm works with experienced human engineers, it can cut costs by more than half compared with less experienced engineers.

 

To produce more cutting-edge chips, bonding technology will be deployed in future stacked memory architectures to enable more data to be stored in smaller packages. Foundries are deploying silicon wafer bonding technology, and Tokyo Electron Ltd. said this is where the company believes its machines have an advantage. On April 20, Tokyo Electron Ltd. announced that it will spend approximately 22 billion yen (approximately US$167 million) to build a new factory in northeastern Japan to develop next-generation wafer deposition equipment for manufacturing advanced semiconductors to cope with the new needs of the industry. The company plans to invest at least 1 trillion yen in research and development in the five years to March 2027, a 70% increase from the previous five-year period. Tokyo Electron Ltd. will capture a larger share of the chip manufacturing equipment market in the coming years, its chief executive said.

 

According to Japanese media NEWSWITCH, Japan's DISCO plans to triple the current production capacity of cutting and grinding equipment used to cut semiconductor and electronic component materials in the next ten years. DISCO plans to invest 80 billion yen to build a new factory in Kure City, Hiroshima Prefecture, Japan, and will gradually expand production capacity in three phases while paying attention to market demand trends.

 

The performance of domestic and foreign semiconductor equipment suppliers can be regarded as adding a bit of color to the current gloomy semiconductor market. In the long run, the booming development of emerging industries represented by artificial intelligence, cloud computing, smart cars, and the Internet of Things will create many chip application needs. Equipment is the cornerstone of the development of the semiconductor industry. Under such development needs, domestic semiconductors Equipment manufacturers will usher in huge development opportunities.

 

 

Source: China Ziwang. If there is any mistake or infringement, it will be deleted.

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