Summary of the Semiconductor Equipment Market in 2020

Latest update time：2021-09-01 18:06

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The downstream wafer fabs are fully loaded, and the entire industry chain is booming. TSMC announced that it achieved revenue of NT$126.7 billion in January 2021, a year-on-year increase of 22.2%. According to TSMC's chief financial officer, TSMC expects its capital expenditure target to reach US$250-280 billion in 2021. According to SEMI statistics, North American equipment suppliers shipped US$3.04 billion in January, a year-on-year increase of nearly 30%. According to DigiTimes, TSMC's 28nm process was fully loaded in the fourth quarter of this year, which has not been seen for many years.

In 2020 , the revenue of the major global semiconductor equipment industry grew strongly by 20% , and the industry revenue is expected to grow by 39% year-on-year in the first quarter of 2021. We counted 8 global semiconductor equipment leaders, and their total revenue in the fourth quarter increased by 3.9% month-on-month and 16.6% year-on-year . The industry's average gross profit margin was 48.3%, up 1.7 percentage points from the third quarter; the industry's cumulative revenue in 2020 increased by 20% year-on-year, while it fell by 7% year-on-year in 2019. According to the median data of the revenue guidance of each company, the revenue of the semiconductor equipment industry in the first quarter of 2021 is still expected to increase by 8% month-on-month and 39% year-on-year, and the single-quarter revenue scale is expected to set a new record.

In the fourth quarter , the equipment revenue contributed by Memory customers increased by 45% year-on-year , with a significant upward trend. According to statistics from the top six semiconductor equipment companies, in the fourth quarter, the equipment revenue contributed by Memory customers was US$5.8 billion, accounting for 42%, and the quarterly revenue increased by 45% year-on-year. The equipment revenue contributed by Memory customers for the whole year was US$21 billion, an increase of 18% year-on-year. In contrast, in the fourth quarter, the equipment revenue contributed by Foundry & Logic customers was US$7.9 billion, accounting for 58%, and the quarterly revenue decreased by 2% year-on-year. The equipment revenue contributed by Foundry & Logic customers for the whole year was US$28.3 billion, an increase of 20% year-on-year.

In 2020 , the semiconductor equipment market demand in mainland China accounted for 27% of the world's total , ranking first. According to statistics from the top six semiconductor equipment companies, in the fourth quarter, mainland China contributed 25% of the global semiconductor equipment industry revenue, which is the same as Taiwan's 25% but higher than South Korea's 23%. From a full-year perspective in 2020, mainland China's semiconductor equipment market demand accounted for 27% of the world's total, followed by Taiwan and South Korea, accounting for 23% and 22% respectively.

New products such as etching, measurement, and CVD are emerging in an endless stream, and the industry competition landscape is further concentrated. In 2020, the revenue of leading semiconductor equipment companies generally grew rapidly. Lam Research's revenue was US$11.9 billion, a year-on-year increase of 25%, Applied Materials' revenue was US$18.2 billion, a year-on-year increase of 21%, ASML's revenue was 14 billion euros, a year-on-year increase of 21%, and TEL's revenue was US$12 billion, a year-on-year increase of 18%, all faster than SEMI's expected industry growth rate of 15% in 2020. Specifically for products, Applied Materials' PVD equipment revenue in fiscal 2020 increased by 42%, etching equipment sales revenue increased by 30%, and measurement equipment business revenue increased by 46% year-on-year. The revenue of these three categories of products all hit record highs .

The development prospects of the semiconductor equipment industry in the next two years are generally optimistic. Lam Research estimates that the global WFE market size in 2021 will be 65-70 billion US dollars, supported by factors including the migration of 3D Nand to higher layers, strong DRAM capital expenditures, and continued capital expenditure increases in Foundry/Logic. The reason for the over-expectation is the digitalization of the global economy, coupled with increased capital density. Technologies such as AI, HPC, IoT, and 5G will support the semiconductor industry's upward trend for many years to come.

Highly recommented

The global semiconductor equipment industry is on an upward trend, and ASML, Lam Research, AMAT and others are generally optimistic about industry growth and order expectations in 2021.

Recommended A-share semiconductor equipment portfolio: China Micro Semiconductor, North Huachuang, Huafeng Measurement & Control, Wanye Enterprise, Changchuan Technology, Jingce Electronics, and Xinyuan Micro, and pay attention to Jingsheng Electromechanical and ACM Semiconductor in the US stock market.

KEY RISKS TO RATING

The progress of customers' wafer fab projects is lower than expected, the process verification of new products takes a long time and has high risks, and the localization of components is slow.

1. The semiconductor equipment industry is booming and the demand for equipment is strong

TSMC's monthly revenue remains high

TSMC achieved revenue of NT$126.749 billion in January 2021, an increase of 8.0% month-on-month and 22.2% year-on-year.

North American semiconductor equipment manufacturers' shipments grew steadily in January

North American semiconductor equipment manufacturers' shipment value rose to US$3.04 billion in January, up 13.4% month-on-month and nearly 30% year-on-year.

Advanced process remains the long-term driving factor of the equipment industry

TSMC's advanced process revenue accounts for more than half. In the fourth quarter, 5nm node revenue accounted for 20%, 7nm node revenue accounted for 29%, and 16-5nm advanced process revenue accounted for 62%.

TSMC expects capital expenditures to be between $25 billion and $28 billion in 2021. According to TSMC's advanced process planning, most of the capital expenditures are expected to be used for advanced process capacity construction, with a small portion used for advanced packaging and special processes.

2. In the fourth quarter, the revenue of some global semiconductor equipment leaders increased by 4% month-on-month and 17% year-on-year.

International equipment leader's equipment delivery and revenue recognition recovered rapidly in the fourth quarter

We counted eight global listed semiconductor equipment companies, and their revenue in the fourth quarter was US$20.358 billion, a month-on-month increase of 3.9% and a year-on-year increase of 16.6%.

Device revenue contributed by Memory customers increased 45% year-on-year in the fourth quarter

In the fourth quarter of this year, Memory customers contributed $5.824 billion in equipment revenue, a year-on-year increase of 45%, accounting for about 42%. Compared with the lowest level of 33% in the fourth quarter of last year, it is still on the rise.

Among them, 72% of ASML's fourth-quarter revenue came from Logic/Foundry customers and 28% came from Memory customers. Compared with the third quarter, the proportion of Memory customers rebounded, while the demand from Logic/Foundry customers remained strong.

Memory customers contributed 56% of Lam Research's revenue in the fourth quarter, a slight increase from 52% in the fourth quarter of 2019.

3. Semiconductor equipment continued to expand in mainland China in the fourth quarter

According to data from AMAT, ASML, KLA, Lam, DNS, TEL and others, semiconductor equipment sales revenue from mainland China in the fourth quarter was US$4.181 billion, accounting for 25%, a decrease of 5 percentage points from the third quarter, the same as Taiwan (25%), and higher than South Korea (23%).

In the fourth quarter, ASML's lithography machine sales revenue from mainland China was US$422 million, accounting for 12%, a decrease of US$293 million from the previous quarter.

In the fourth quarter, Lam's sales revenue in mainland China reached US$1.21 billion, a record high, accounting for 35% of its revenue.

In the fourth quarter, AMAT's sales revenue in mainland China reached US$1.383 billion, accounting for 27% of its revenue.

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