Specialty and advanced packaging gain share in semiconductor wafer fab equipment market

The specialty and advanced packaging segments are gaining market share in the wafer processing equipment, hereafter referred to as Wafer Fab Equipment (WFE) sector, driven by the steady adoption of smaller manufacturing nodes and investments in chiplet as well as high-bandwidth memory (HBM) applications.

Global WFE revenue declined during the first and second quarters of 2023, as the memory market became oversupplied with inventory and manufacturers held off on purchasing equipment. But revenues moved higher in the second half, leaving the market in a much better state than expected and flat overall year on year.

Owing to the memory downturn, equipment vendors have diversified their application mix to legacy logic, specialty and packaging. Specialty equipment took a 12% share of the WFE market in 2023, up from 11% in 2022 and 10% the previous year, and could expand to 15% by 2029, according to Taguhi Yeghoyan, Senior Technology and Market Analyst, Semiconductor Equipment at Yole Group. Advanced packaging equipment has reached a 5% share, up from 3% in recent years, and could increase to 8% by 2029.

WFE demand is expected to largely remain stable in 2024, which the industry considers a transition year before it begins to recover in 2025. WFE equipment revenue will increase in the low single digit range this year and rise at a compound annual growth rate (CAGR) of 4.1% from 2024 to 2029 to around $130 billion, Yole Group forecasts.

Wafer production will boost sales of deposition, etching, and metrology and inspection (M&I) equipment, with large investments in epiwafer production worldwide and silicon in China.

Today’s viewpoint is integrated into the Wafer Fab Equipment Market Monitor (Q1 2024 edition coming soon), a comprehensive quarterly analysis conducted by Yole Group’s Semiconductor Manufacturing Equipment team. The team engages daily with industry leaders to explore semiconductor industry dynamics. Market Monitors are a key component of Yole Group’s extensive analytical offerings, encompassing market shifts, technological advancements, and strategic insights. Explore the complete range of Yole Group’s products HERE.

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The logic and mature semiconductor industries generate the highest demand for wafer fabrication equipment. Advanced logic chipmakers require many of the latest tools from all process technologies to implement extreme ultraviolet (EUV) lithography – for which there is a limited number of suppliers.

Memory production ramped up between 2020 and 2022 but the cyclical downturn in semiconductor demand meant that customers no longer needed to make purchases and the industry entered 2023 with excess inventory. Chipmakers cut their capital expenditure (CapEx) budgets and stopped purchasing the equipment. NAND and DRAM device revenues declined by -77% and -20% year on year, respectively.

As NAND storage and DRAM processing require deep etching, a lack of memory demand has translated into lower demand for etching systems. The share of etching and cleaning technology in the overall WFE market has declined from around 27% in early 2022 to around 19% in the first half of 2024. This could turn slightly higher by the first quarter of 2025 as demand recovers.

Sales of deposition equipment for memory chips have also come under pressure, but the segment remains stable overall with a 27% share of revenues as the equipment has more diversified application mix.

Revenues for ion implantation equipment used for logic, memory and power applications saw a slight decline in 2023, although the market found support from ongoing demand for power devices, in particular SiC, remaining at a 2-3% share of the overall market.

As semiconductor manufacturers strive to improve their yield for advanced chips, the use of more advanced metrology and inspection equipment is growing, increasing market share YoY.

Looking ahead, Yole Group forecasts that memory CapEx will increase, mainly due to DRAM and HBM-related investments.

Wafer patterning equipment sales are expected to remain at the same level, despite the US ban on equipment exports to China being enlarged to include some of the Argon Fluoride immersion (ArFi) technology. Meanwhile, sales of non-patterning equipment types such as deposition and etch are set to increase, boosted by demand for specialty devices such as silicon carbide (SiC) power applications.

Last year marked a reshuffle in the primary destinations for WFE shipments, with China’s share rising above 30%, at more than $35 billion. China’s market share has been rising steadily since 2016, as chipmakers gear up for domestic production. Equipment demand over the coming years is expected to come principally from China, where CapEx will remain at elevated levels.

As the world’s dominant memory manufacturer, South Korea is expected to see a slight rebound in imports in 2024, after a significant decline in 2023, with a rebound to follow in 2025.

Taiwan, the dominant processor manufacturer, similarly saw a decline in shipments caused by delays in high-stake WFE for manufacturing nodes below 5nm. However, the country’s imports are expected to rebound in second half of 2024 and later, in 2025.

Japan’s WFE imports are stable as the country invests in specialty device fabrication despite a decrease in memory CapEx. In the coming years, Japan’s planned investments in gate-all-around (GAA) field effect transistor production are likely to increase its share of imports as it installs increased capacity.

Other Asian countries, such as Vietnam, Malaysia, Singapore, and India, are becoming more attractive markets for supply chain diversification. They are all likely to see an increase in their share of imports over the coming years.

Imports of specialty WFE into the Europe, Middle East and Africa (EMEA) region are growing steadily thanks to investment in specialty devices and future international investment in advanced logic and packaging.

And in the US, import levels have been relatively stable, as the country has a good device production mix. Yet they are expected to grow in 2024 in line with international and domestic investments in new manufacturing facilities, which will all require new equipment installations.

Securing orders from suppliers will be key. Given the difficulty in creating advanced systems, chipmakers tend to continue purchasing them during market downturns as they are essential to their operations. Lead times are longer than during pre-COVID time and they are keen to avoid any issues in obtaining equipment when needed – particularly as the market rebounds. Availability of the precision optics produced for these systems is still limited.

Stay tuned as Yole Group continues to track the wafer fabrication equipment market!

Taguhi Yeghoyan, PhD is Senior Technology & Market Analyst, Semiconductor Equipment at Yole Group.

Taguhi’s mission is to daily follow the semiconductor industry and its evolution. Based on her expertise in this field, especially on the semiconductor supply chain (processes, materials, equipment, and related applications), Taguhi produces technology & market products and is engaged in relevant custom projects.

Prior to Yole Group, she worked in world-class European research centers and laboratories, including imec (Belgium), LMI (Lyon, France) and LTM at CEA Leti (Grenoble, France). All along her past experiences, Taguhi has authored or co-authored two patents and more than ten papers.

She has graduated from Wroclaw University of Technology (Poland) and University of Lyon (France). Taguhi also completed her PhD in material science from the University of Lyon (France).

Source: www.yolegroup.com