While driving advances in HBM, foundry, and advanced packaging, AI generative applications also boosted the demand and sales of semiconductor equipment.

Recently, Japanese semiconductor equipment giant DISCO announced that its non-consolidated (individual) shipments for April to June 2024 amounted to JPY 85.7 billion, marking a 50.8% year-on-year increase. The quarterly (individual) shipment surpassed the JPY 78.5 billion from January to March 2024, setting a new record high.

DISCO pointed out that the demand for precision processing equipment related to generative AI remains solid; for consumable-type precision processing tools, the demand remains high, align with the operation rates of customers’ equipment.

Semiconductor equipment refers to specialized equipment used in the production of various types of integrated circuits and discrete semiconductor devices, encompassing various products mainly categorized into front-end process equipment and back-end process equipment.

Front-end process equipment is used in the wafer manufacturing process involving products such as lithography machines, etching equipment, thin film deposition equipment, and CMP equipment.

Back-end process equipment is mainly used in the packaging and testing processes of semiconductor products to ensure product quality and reliability. Representative products include dicing equipment, packaging equipment, testing equipment, and wafer dicing saws, which are used to cut wafers into individual chips for subsequent packaging and testing. DISCO is a leading manufacturer in this segment.

Japanese semiconductor equipment holds a significant position globally, gathering numerous renowned companies such as Tokyo Electron, Advantest, Hitachi High-Tech, Nikon, and DISCO.

With the AI boom, the industry believes that sales of Japanese semiconductor equipment will continue to climb up. The Semiconductor Equipment Association of Japan (SEAJ) forecasts that Japan’s semiconductor equipment sales is expected to exceed JPY 4 trillion for the first time in 2024, representing a 15% annual increase, which is projected to surpass JPY 5 trillion by 2026.

This growth is primarily benefited from the increasing demand for AI-driven GPU and HBM. In May 2024, Japanese semiconductor equipment sales surged by 27% YoY, continuing to grow and setting new monthly records.

China’s semiconductor equipment market is also enjoying robust growth driven by favorable factors like AI. Recently, data jointly released by the Semiconductor Equipment and Materials International (SEMI) and SEAJ indicated that in the first quarter of 2024, global semiconductor equipment sales totaled USD 26.4 billion, down 2% YoY and 6% QoQ, which was dragged down by the sluggish demand in some markets.

Despite the headwind globally, China’s sales reached USD 12.52 billion in the first quarter, up by 113% YoY, maintaining its position as the world’s largest semiconductor equipment market for the fourth consecutive quarter.

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(Photo credit: TEL)

On March 25, the Semiconductor Equipment Association of Japan (SEAJ) disclosed its latest statistics.

The data revealed that in February 2024, the sales of Japanese semiconductor equipment (3-month moving average, including exports) reached JPY 317.418 billion, representing a growth of 7.8% compared to the same month last year. This also marked a second back-to-back month of growth, achieving the largest increase in 10 months (9.8% growth since April 2023).

Moreover, monthly sales crossed the 300 billion-yen threshold for the fourth consecutive month, hitting a new high over the 10 months (JPY 336.162 billion since April 2023).

Compared to the previous month, Japanese semiconductor equipment sales rose by 0.8%, marking the fourth consecutive month of monthly growth. In the cumulative period from January to February 2024, its sales stood at JPY 6,322.93 billion (+6.4% YoY), setting a new record high in the same period of previous years.

Semiconductor equipment manufacturers from Japan include Tokyo Electron (TEL), Advantest, Screen, Kokusai Electric, Hitachi High-Tech, Nikon, and Canon, etc.

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(Photo credit: SEAJ Official Website)

Fueled by the rising demand for generative AI, global semiconductor testing equipment giant Advantest has revised upward its fiscal projections for the year spanning from April 2023 to March 2024. Advantest witnessed a significant surge in sales in the last quarter (October-December 2023), particularly in the Taiwan market.

In a press release issued on January 31, Advantest attributed the revision to the increasing demand for testing equipment driven by the surge in generative AI requirements. Consequently, the company raised its consolidated revenue target for the fiscal year from the initial forecast of JPY 470 billion to JPY 480 billion (a year-on-year decrease of 14.3%).

Similarly, the consolidated operating income target was adjusted upward from JPY 80 billion to JPY 85 billion (a year-on-year decrease of 49.3%), and the consolidated net income target was raised from JPY 60 billion to JPY 64.5 billion (a year-on-year decrease of 50.5%).

Advantest also released its financial results for the last quarter (October-December 2023) net sales decreased by 3.4% year-on-year to JPY 133.2 billion, consolidated operating income decreased significantly by 34.9% to JPY 26.8 billion, and consolidated net income decreased by 26.0% to JPY 21.2 billion.

Advantest noted that the demand for testing equipment for high-performance DRAM, such as HBM used in the generative AI sector, is on the rise. Therefore, the company has raised its sales forecast for memory testing equipment for the current fiscal year by JPY 5 billion to JPY 81 billion.

“In order to fulfill all the demand increase in the market we need to make further efforts,” stated by Advantest CEO Yoshiaki Yoshida stated during the financial results briefing held on January 31st.

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(Photo credit: Advantest’s Facebook)

SEMICON Japan, commenced on the 13th, with key participants including Rapidus, tasked with revitalizing advanced semiconductor manufacturing in Japan, major equipment manufacturers Advantest, Japanese material giants Kyocera, Sekisui Chemical, and the Semiconductor Equipment Association of Japan (SEAJ).

The event featured grand exhibits and keynote speeches from top executives of Intel, Applied Materials, and Sony, drawing global participation from semiconductor industry stakeholders.

This year, SEMICON Japan centered its theme around “Accelerate the Future. Shape the Next Era,” conveying the vision of advancing society into a new stage with semiconductors that boast higher performance, lower costs, and increased production volumes, contributing to sustainable development.

Also, spurred by the development of generative AI, many exhibitors this year showcased AI, high-speed computing, and high-performance technologies, highlighting a range of technology for artificial intelligence applications and 3D chip packaging.

Advantest, for instance, exhibited its latest equipment developed for the testing of AI and HPC chips, while Rapidus, currently engaged in the development of 2-nanometer technology, presented developments in small chips and other advanced technologies to event attendees.

Despite challenges such as a surge in semiconductor inventory and sluggish end demand causing the industry’s downward cycle this year, Ajit Manocha, President and CEO of SEMI, states that the semiconductor market is cyclical, foreseeing a turning point toward recovery in 2024 and anticipating increased demand for production capacity, new fab constructions, and advanced technologies and solutions in 2025. With this growth, a robust recovery is expected.

On another front, the Japanese government is steadfast in revitalizing the semiconductor industry, making the Japanese market a global focal point. This commitment has once again drawn exhibitors and participants from around the world to SEMICON Japan this year, with organizers expecting attendance to surpass last year, reaching 70,000 participants.

Undaunted by deadlocked US-Sino relations, the great pandemic of 2020, and the US Department of Commerce’s ban on Huawei’s use of software and equipment produced by US manufacturers in the same year, China’s packaging and testing industry has, instead, used these factors as stimulus get back on track. Faced with these three major challenges, the Chinese government has responded with policies such as domestically producing both equipment and semiconductors, allowing China’s packaging and testing industry to buck the trends set in 2020. According to TrendForce statistics, industry revenue in 2020 reached US$7.02 billion and approximately US$9.53 billion in 2021.

A brief summary of China’s packaging and testing industry in recent years is as follows: the US-Sino trade war has been raging since 2018 and, due to tariff issues and the gradual rise in personnel salaries, terminal manufacturers whom had already established plants or subsidiaries in China were forced to gradually relocate relevant factories to SE Asia and India in order to avoid growing overhead costs, moreover impacting the revenue performance of China’s packaging and testing industry. As of June 2019, the tariff issue remained unresolved due to dubious US.-Sino relations but this issue could no longer impede the revenue recovery momentum of China’s packaging and testing industry.

Packaging and testing and localized equipment skirts bans and a moderate threshold for technology research and development attracts overseas manufacturers

After the U.S. Department of Commerce imposed export control bans on Huawei, HiSilicon, and SMIC, the market mostly predicted that China’s packaging and testing industry would be hit next but this did not happen. According to TrendForce, the primary reason for this is that the nature of current back-end packaging and testing technology is relatively crude compared to front-end wafer manufacturing and, considering Chinese government’s recent policy of localizing equipment and the degree of substitutability of non-US equipment manufacturers, even if the U.S. Department of Commerce proposes further bans against the industry, its effects will be limited.

In response to the US-Sino trade conflict, the Chinese government has proposed relevant measures such as semiconductor autonomy which has driven a gradual mainstreaming of domestic equipment production plans. In addition, national funds have been continuously injected into semiconductor equipment manufacturers, even though the level of technological development at this stage remains inferior to major manufacturers in Europe, the United States, and Japan. However, for those with modest requirements for back-end process conditions, testing, and testing equipment, China’s domestic packaging and testing equipment does have a certain proportion and scale.

For example, relevant companies such as Hangzhou Changchuan and Shanghai Raintree have invested in the automatic optical inspection instruments (AOI) and testing equipment that are required in the latter stage of packaging and testing. On the other hand, due to the relatively low threshold for research and development of back-end packaging and testing equipment, many international companies such as Japan’s Advantest and Singapore’s Besi have also set up shops in China. Chinese packaging and testing and their equipment manufacturers are essentially unaffected by relevant export bans, so the industry can still anticipate technological and revenue performance in the next few years.

（Image credit: Pixabay）