According to a Money DJ report, Japan’s semiconductor manufacturing equipment sales continued to surge, with August sales jumping 20%, marking five consecutive months of double-digit growth and reaching the fifth-highest level on record. Sales for the January-August period hit an all-time high.

Citing data from the Semiconductor Equipment Association of Japan (SEAJ) released on the 25th, Money DJ reported that Japan’s chip equipment sales in August 2024 (three-month moving average, including exports) reached ¥351.06 billion, a 22% year-on-year increase. This marks the eighth consecutive month of growth and the fifth straight month of double-digit gains. Monthly sales surpassed ¥300 billion for the tenth consecutive month, the fifth-highest since records began in 1986.

The top four figures were ¥400.9 billion in May 2024, ¥389.1 billion in April 2024, ¥380.9 billion in September 2022, and ¥365.6 billion in March 2024.

For the January-August 2024 period, Japan’s chip equipment sales totaled ¥2.831 trillion, up 17.3% year-on-year, surpassing the ¥2.482 trillion recorded in 2022 and setting a new historical high.

Japan’s global market share in semiconductor equipment sales stands at 30%, second only to the U.S.

(Photo credit: TEL)

This year, global semiconductor manufacturing equipment sales are expected to grow and set a new historical record. It is estimated that next year will see even more robust growth, with an anticipated increase of 17%.

According to the forecast report from the International Semiconductor Industry Association (SEMI) released on July 10th, it’s indicated that global chip equipment sales in 2024 are estimated to increase by 3.4% year-over-year to USD 109 billion, surpassing the USD 107.4 billion record set in 2022. Furthermore, 2025 is projected to show even stronger growth, with sales expected to surge to USD 128 billion, breaking the record set in 2024.

“The growth in total semiconductor manufacturing equipment sales already underway this year is forecast to be followed by a robust expansion of roughly 17% in 2025,” said Ajit Manocha, SEMI president and CEO. “The global semiconductor industry is demonstrating its strong fundamentals and growth potential supporting the diverse range of disruptive applications emerging from the Artificial Intelligence wave.”

SEMI noted that due to continued strong equipment investment in China and increased investment in DRAM and HBM driven by AI computing, global sales of wafer fab equipment (WFE) in 2024 are estimated to grow by 2.8% year-over-year to USD 98 billion.

This is a significant upward revision from the previous estimate of USD 93 billion made in December and surpasses the USD 96 billion recorded in 2023, setting a new historical high. With the increased demand for advanced logic and memory applications, global WFE sales in 2025 are projected to increase by 14.7% year-over-year to USD 113 billion.

SEMI further stated that until 2025, China, Taiwan, and South Korea are expected to remain the top three countries in chip equipment investment. Due to continued growth in China’s equipment procurement, China is expected to maintain its leading position throughout the forecast period (up to 2025). Equipment shipments to the Chinese market in 2024 are estimated to exceed USD 35 billion, setting a new historical high, solidifying China’s unshakable lead. However, due to large-scale investments in China over the three-year period ending in 2024, it is anticipated that investments will decrease in 2025.

Chip equipment giant Tokyo Electron (TEL) announced in a press release on May 10 that starting in the second half of this year, the demand for DDR5 and HBM will increase, driving a projected recovery in investments in the most advanced DRAM.

As a result, the global market size for front-end chip manufacturing equipment in 2024 is projected to grow by 5% year-on-year to approximately 100 billion USD, matching the current historical high recorded in 2022 (around USD 100 billion). Additionally, with continued growth in AI servers and a recovery in demand for PCs and smartphones, the WFE market is anticipated to see a double-digit increase (over 10%) in 2025 compared to 2024.

In a financial report press release on May 9, semiconductor equipment company Screen Holdings stated that due to investments in mature processes in China and investments in the most advanced processes in Taiwan, the WFE market is expected to grow in 2024, with an estimated annual increase of about 5%.

Per a report by Nikkei on July 5th, SEAJ’s forecast report indicates that for the 2024 fiscal year (April 2024 to March 2025), the sales of Japanese-made chip equipment (including sales by Japanese companies both domestically and overseas) have been increased to JPY 4.2522 trillion, marking a significant increase of 15.0% compared to the 2023 fiscal year.

This will be the first time annual sales break the 4 trillion yen mark, setting a new historical record. The main drivers are the widespread adoption of AI, leading to extremely strong demand for GPUs used in AI servers, and the continued surge in demand for HBM used in conjunction with these GPUs.

According to TrendForce’s compilation and analysis of various industry data and the recent financial reports of major representative companies, it appears that China’s local equipment industry can cover the various stages required in semiconductor manufacturing processes (excluding lithography machines).

Overall, locally produced equipment in China shows relatively high localization rates in processes such as photoresist stripping, cleaning, and etching. In recent years, there has been significant progress in processes like CMP, thermal processing, and deposition. However, in equipment related to measurement, coating and developing, lithography, and ion implantation, the Chinese equipment manufacturers still face challenges.

As per SEMI data, the semiconductor equipment market, including wafer processing, fab facilities, and mask/reticle equipment, is projected to decline by 3.7% to USD 90.6 billion in 2023. Looking ahead, semiconductor manufacturing equipment is expected to rebound in 2024, driven by both front-end and back-end market demands. Sales are forecasted to reach a new high of USD 124 billion in 2025.

The growth in the equipment market is closely tied to the extensive expansion of foundries. It is reported that approximately 70%-80% of the capital expenditure for fab expansion is allocated to the purchase of semiconductor equipment.

According to statistics from TrendForce, China currently operates 44 fabs (25 of which are 12-inch fabs, 4 are 6-inch fabs, and 15 are 8-inch fabs/lines).

Additionally, there are 22 fabs under construction (15 of which are 12-inch fabs, and 8 are 8-inch fabs). Furthermore, companies including SMIC, Nexchip, and Silan Micro are planning to construct 10 additional fabs (9 of which are 12-inch fabs, and 1 is an 8-inch fab). Overall, China is expected to establish 32 large-scale fabs focused entirely on mature processes by the end of 2024.

Per TrendForce’s data, from 2023 to 2027, the global mature process (28nm and above) and advanced process (16nm and below) capacities are expected to maintain a ratio of approximately 7:3.

Due to policies promoting localization and subsidies, China has shown the most proactive expansion progress. It is estimated that the proportion of mature process capacity in China will increase from 29% in this year to 33% by 2027, with SMIC, Hua Hong Group, and Nexchip being the most active in expanding production.

Despite rapid development in China’s equipment industry in recent years, Chinese semiconductor manufacturers still have room to catch up compared to international giants like Applied Materials, Tokyo Electron, Lam Research, ASML, and KLA Corporation, which boast billion-dollar scales and diverse high-end product lines.

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The world’s top five semiconductor equipment manufacturers have released their latest financial reports, signaling a surge in demand for advanced manufacturing equipment and positive signs of industry recovery.

The US has continuously thwarted efforts by equipment suppliers to export advanced machinery to China—citing national security concerns—mid its ongoing tech conflict. How have companies like Applied Materials, ASML, TEL, Lam Research, and KLA been impacted by the US’s stringent export controls on China?

Applied Materials

Applied Materials reported US$6.71B in 1Q24 earnings—marking a less than 1% decline in revenue. The Chinese market, doubling its revenue to $3B last quarter, emerged as a bright spot, jumping from a 17% share a year ago to 45%.

This surge is primarily due to China’s urgent push to build capacity for internet devices, telecommunications, automotive, power, and sensors. Despite not expecting to maintain the current growth rate, Applied Materials believes the continued demand for more chips will drive market development.

ASML

ASML, seen as a weathervane for the industry, reported 4Q23 net sales of €7.2B, up from €6.7B in Q3. With annual sales reaching €27.6B in 2023 and a 26.3% sales share in China, ASML has surpassed South Korea to become its second-largest market.

However, ASML warns that geopolitical tensions and potential US export control expansions to China remain operational risks. The company estimates that US and Dutch export controls could reduce its sales of mid-range DUV equipment to China by about 10–15% this year.

TEL

TEL posted 3Q24 revenues of ¥463.6B, with China accounting for 46.9% of its revenue, a 42.8% QoQ increase. TEL expects continued strong demand from China, noting that the country produces only a small portion of the chips it needs and will actively invest to reduce reliance on foreign technology. This momentum is expected to continue into 2025.

Lam Research

Lam Research saw a 7.9% QoQ increase in 2Q24 revenue to $3.76B, with the share of revenue from the Chinese market decreasing from 48% to 40%. With the semiconductor industry expected to grow robustly in the coming years, driven by innovations like AI, Lam Research is poised to benefit.

The company expects equipment expenditures by DRAM manufacturers to grow due to increased HBM production and process transitions, while NAND manufacturers’ expenditures will strengthen with technological upgrades.

KLA

KLA reported a 16.7% YoY decrease in 2Q24 revenue to $2.487B, with China remaining its largest revenue contributor, though its share dropped from 43% in Q1 to 41%. KLA estimates a mid-point revenue of $2.3B for this quarter.

The demand for wafer fabrication equipment is expected to reach the higher end of the $80B range in 2024, with the second half of the year anticipated to outperform the first.

(Photo credit: iStock)

The inclusion of certain Chinese semiconductor companies on the US Commerce Department’s Entity List in the past few years has created repercussions throughout industries and markets, with the semiconductor industry coming under heavy scrutiny by both China and the US. After SMIC was hit with a string of sanctions last year, including the EAR and the NS-CCMC List, recent rumors of further US actions on China are now once again making the rounds on social media platforms.

In particular, there have been rumors saying that the US has prohibited TSMC and UMC from importing 28nm process technology equipment into China for their fabs there. Conversely, some industry insiders from China point out that, although the US did not impose such prohibition, the export approval process for the aforementioned equipment has been conspicuously lengthy.

In reality, the Department of Commerce has levied procurement restrictions on SMIC specifically, while foundries unspecified on the Entity List have not been explicitly barred from importing semiconductor equipment for use in their China-based fabs. Although some are noting that the approval processes for semiconductor equipment exported to fabs located in China have been unusually lengthy recently, these processes are not specifically aimed at equipment for the 28nm process technology.

Instead, they apply to all semiconductor equipment exported from the US to China. It should also be noted that the approval processes for some exported equipment are currently progressing well, and foundries have already taken the extended lead times into account, according to TrendForce’s latest investigations. Hence, the lengthy approval processes have not been observed to have any negative impact on the semiconductor industry at the moment.

（Cover image source: ASML）