Outlook for Semiconductors and Electronic Components in 2024 (6): Semiconductor Equipment/Materials/EDA Sector

The content shared in the previous issue focused on the review and outlook of the semiconductor manufacturing sector . The content summary of this issue of China's exportsmi net will focus on the review of the semiconductor equipment/materials/EDA sector in 2023 and the outlook for 2024. The following will be elaborated on from the aspects of wafer manufacturing equipment, packaging and testing equipment and materials, semiconductor manufacturing materials, and EDA design tools. The specific content is as follows:

Semiconductor equipment/materials/EDA sector review and outlook

Wafer manufacturing equipment: Demand for domestic equipment procurement is expected to grow significantly in 2024

Review of 2023 and Outlook for 2024: SEMI predicts that global semiconductor equipment sales are expected to reach US$100 billion in 2023, a decrease of approximately 6.1% from 2022; of which, global wafer manufacturing equipment sales in 2023 are US$90.6 billion, a decrease from 2022 About 3.7%. On the one hand, affected by the downward semiconductor cycle, wafer fabs around the world, especially storage plants, have reduced capital expenditures in 2023; on the other hand, wafer fabs in mainland China are actively purchasing equipment and machines to partially compensate.Analystsbelieve that as the global semiconductor cycle gradually recovers in 2024, global demand for semiconductor equipment and wafer manufacturing equipment is expected to grow.SEMI predicts that global semiconductor equipment sales are expected to reach US$105.31 billion in 2024, a year-on-year increase of 4%; of which, wafer manufacturing equipment sales are expected to reach US$93.16 billion, a year-on-year increase of 3%; among which storage customers will be an important driver, with year-on-year growth expected Breaking through 10%.

Figure 1 : 2022-2025E global semiconductor equipment market split ; Figure 2 : 2022-2025E global wafer manufacturing equipment market split

►Capital expenditure of overseas wafer fabs: Due to high investment in advanced processes and advanced packaging, analysts predict that TSMC is expected to continue to maintain capital expenditures of around US$30 billion in 2024. Global logic fab capital expenditures in 2024 are expected to be basically the same as in 2023; Samsung, SK Hynix is actively expanding HBM production capacity, driving demand for related process machines. CICC predicts that global storage plant capital expenditures in 2024 may increase to a certain extent compared with 2023. Driven by AIGC, CoWoS and HBM production capacity have become the key bottlenecks of current high-performance GPUs and the focus of fab expansion. It is expected that the demand growth rate for their related equipment will be significantly higher than the overall equipment demand growth rate. Orders from Camtek, Shibaura, Optima and other manufacturers, Performance growth will be higher than the industry as a whole.

►Domestic wafer fab capital expenditure: Analysis predicts that the capital expenditure of Yangtze Memory and Changxin Memory in 2024 is expected to increase significantly compared with 2023. At the same time, SMIC and Huahong Group are expected to maintain high capital expenditure close to that in 2023. Mainland China in 2024 The capital expenditure of wafer fabs will increase significantly compared with 2023, and the localization rate of equipment is expected to further increase. CICC expressed its optimism about the order and performance growth of domestic semiconductor equipment manufacturers in 2024, especially those with a high proportion of storage customers . We recommend China Micro, Northern Huachuang, Tuojing Technology, Shengmei Shanghai, Huahai Qingke, Xinyuan Micro, Zhongke Feichai-U, Jingce Electronics; it is recommended to pay attention to Saiteng shares.

Packaging and testing equipment and materials: The process of supporting advanced packaging industry and localization of traditional equipment is accelerating

Looking back on 2023: The packaging and testing equipment and materials sector is mainly affected by the utilization rate of packaging and testing capacity. The overall revenue scale and contract liabilities have declined significantly in the past few quarters. Among them, revenue still declined significantly year-on-year, but the amount of contract liabilities has basically stabilized. Analysts believe that with the gradual increase in capacity utilization of packaging and testing plants, as well as the research and development of new downstream chip products and technological breakthroughs, orders from domestic equipment manufacturers are expected to gradually recover.

Looking forward to 2024: Domestic equipment and material manufacturers are expected to accelerate the localization process of advanced packaging and traditional equipment.It can be seen that major domestic chip design, wafer manufacturing and packaging and testing leaders are involved in HBM and advanced packaging industries, so the requirements for high-end packaging equipment are rapidly increasing. In this process, domestic front-end equipment used previous technology accumulation to quickly enter the fields of exposure, electroplating, CMP, etching, deposition, cleaning, quality inspection, etc., but in the fields of bonding, temporary bonding, thinning, cutting, etc. The technical level of domestic equipment still needs to be improved. At the same time, domestic equipment in traditional fields such as flip chip, molding, and ATE is also expected to gradually increase the localization rate.

Figure 3 : Year-on-year quarterly revenue of the packaging and testing equipment segment ; Figure 4 : Quarterly contract liabilities of the packaging and testing equipment segment

Figure 5 : Quarterly gross profit margin of the packaging and testing equipment sector ; Figure 6 : Quarterly net profit margin of the packaging and testing equipment sector

Figure 7 : Quarterly revenue of the packaging and testing materials sector year-on-year ; Figure 8 : Quarterly gross profit margin of the packaging and testing materials sector

Semiconductor manufacturing materials: Optimistic about the significant increase in demand for advanced packaging materials and localization rate

Review of 2023 and Outlook for 2024: Since the second half of 2022, the global semiconductor cycle has entered a downward channel. Affected by the weakening demand for terminal mobile phones, PCs, servers, etc., the utilization rate of wafer fabs has shown a downward trend, which has also driven the demand for semiconductor materials. In 3Q23, SMIC's capacity utilization rate reached 77.1%, a slight increase from the previous quarter. Analysts believe that the fab utilization rate has shown a weak recovery trend. Among them, because the demand for semiconductor materials has a certain correlation with the utilization rate of wafer fabs, and the shelf life of semiconductor materials is short, it is difficult to hoard inventory on a large scale. Therefore, analysts believe thatas the utilization rate of downstream wafer fabs gradually picks up, the demand for semiconductor materials is expected to increase. 1H24 ushered in a demand inflection point.

At present, the localization rate of overall domestic semiconductor materials is still low. In 2022, the total revenue of domestic overall material companies will be about 15 billion yuan, while the domestic demand for wafer manufacturing materials is about 50-60 billion yuan, and the overall localization rate is about 25%-30%. However, 6- and 8-inch semiconductor materials are the main ones, and the localization rate of 12-inch high-end semiconductor materials is still at a low level. Since 2019, geopolitics has continued to change. CICC has sorted out the overall supply chain of semiconductor materials. Among them, Japanese suppliers account for a relatively high proportion in the fields of silicon wafers, photoresists, targets, etc., all exceeding 50%, while American suppliers account for more than 50% of the total supply chain. Shangze has a higher share in the field of polishing pads. Domestic wafer fabs have begun to gradually replace materials in domestic wafer fabs out of supply chain security considerations. Compared with semiconductor equipment, if domestic wafer fabs are unable to purchase overseas equipment, the expansion of new production capacity may be hindered. However, if Once materials cannot be purchased, the production and manufacturing progress of most existing wafer fabs will be negatively affected. Therefore, analysts believe that domestic substitution of semiconductor materials is expected to continue to accelerate in the future.

Advanced packaging brings packaging material investment opportunities: According to Yole Development, the global advanced packaging market has reached US$30 billion in 2020, and is expected to reach US$47.5 billion in 2026, with a CAGR of 8%, and advanced packaging will exceed the total packaging market in 2026. 50% of the market size. Analysts believe that as Moore's Law slows down and domestic wafer manufacturing processes are limited, the development of the advanced packaging market may accelerate in the future, and it is optimistic that the demand for advanced packaging materials and the localization rate will increase significantly.

At the same time, with the accelerated implementation of advanced packaging methods such as 2.5D and Fanout, analysts believe that related packaging materials are expected to see a greater increase in demand. According to SEMI data, the global semiconductor packaging materials market will reach US$24.8 billion in 2022. Analysts believe that in the future It is expected to benefit from the accelerated industrialization of advanced packaging production capacity in mainland China, and packaging consumables are expected to usher in greater development opportunities. It is recommended to pay attention to: Anji Technology, Dinglong Co., Ltd. (joint coverage by the chemical industry group), Jinhong Gas (joint coverage by the chemical industry group), Walter Gas (joint coverage by the chemical industry group), Yake Technology (joint coverage by the chemical industry group), Xingsen Technology, etc.

Figure 9 : Sorting out equipment and materials in the advanced packaging process

EDA design tools: The semiconductor industry is down, and chip design and wafer manufacturing cost control has a certain negative impact. The industry structure needs to be improved.

Looking back on 2023: The downturn in the semiconductor industry in 2023 has also had a certain negative impact on upstream EDA design tools. Generally speaking, analysts believe that the income of EDA design tools has a low correlation with the overall prosperity of the semiconductor industry, mainly because the charging model of EDA design tools is mainly based on "License". However, if the downturn in the industry leads to slowdown in R&D and layoffs of personnel, it will have a certain negative impact on the revenue of EDA tool companies.

Looking forward to 2024: Analysts believe that entering 2024, the normal expansion and R&D of chip companies and fabs will push the revenue of the EDA design tool industry back on track. At the same time, we see that there are currently a large number of EDA design tool companies in mainland China.In the future, there is expected to be a peak period of industry clearing and mergers and acquisitions, and the market structure is expected to be improved.

Figure 10 : EDA Design Tools Company’s single-quarter revenue ; Figure 11 : EDA Design Tools Company’s single-quarter net profit attributable to the parent company