FTXL - Semiconductor Equipment Manufacturers Driving The Digital Revolution
2023-07-24 23:50:00 ET
Summary
- The semiconductor industry, a cornerstone of modern digital technology, is heavily reliant on semiconductor equipment manufacturing.
- The success of semiconductor equipment manufacturers like ASML is essential to the continuation of Moore's law.
- The importance of semiconductor equipment manufacturing companies to the sector and the broader digital world cannot be overstated.
Semiconductor equipment manufacturers, with their cutting-edge technology and continual growth, are pivotal to semiconductor advancement.
The semiconductor industry, a cornerstone of modern digital technology, is heavily reliant on semiconductor equipment manufacturing. These companies provide the machinery that enables the creation of integrated devices, often housed within fabrication facilities or ‘fabs’. The diverse range of equipment includes wafer manufacturing and processing, mask/reticle equipment, thermal processing equipment, inspection measurement, as well as assembly and packaging equipment.
These manufacturers are important due to their large contribution to industry growth. Global semiconductor equipment billings have recently reached an industry record of $107.6 billion in 2022, demonstrating a 9% growth year-over-year in Q1 2023 1 . This growth is driven by demand for more advanced and efficient integrated circuits, with companies like ASML leading the charge.
ASML (ASML), a Dutch-based company, is renowned for producing machines that are essential in creating the world's most advanced chips. ASML's sales rose on average over 19% annually from 2020 through 2022 2 . Despite economic uncertainties and chip export restrictions, ASML forecasts a promising jump in revenue for 2023.
ASML system sales revenue worldwide 2017-2022, by technology
Source: ASML. Data as of February 2023.
Intel ( INTC ) and Taiwan Semiconductor Manufacturing Co. (TSM) are just two of the many companies that purchase ASML's machines to manufacture the chips found in end products such as laptops and smartphones. Even with fluctuating consumer demand, these companies remain confident in the value and necessity of ASML's offerings, with no cancellations of orders reported.
ASML has a unique position as the sole producer of the extreme ultraviolet (EUV) lithography machine, a critical tool for making the most advanced chips globally. These chips find their way into products like Apple's iPhones and have significant implications for military and advanced artificial intelligence applications.
Two additional prominent players in the equipment space are Applied Materials ( AMAT ) and Lam Research Corp. (LRCX). They are known for their advanced technology and expertise and play a vital role in the semiconductor equipment manufacturing industry. Applied Materials offers a wide range of equipment, including wafer fabrication systems and inspection systems, while Lam Research Corp. specializes in wafer fabrication equipment and services. Both companies have seen over a 20% increase in sales on average over the last three years.
The success of semiconductor equipment manufacturers like ASML is essential to the continuation of Moore's law. This law, proposed by Intel executive David House, suggests that the number of transistors on integrated circuits doubles about every two years, leading to a doubling in chip performance. It's the innovation and continual improvement of manufacturing equipment that allows this trend to persist, enabling increasingly powerful and efficient devices.
Source: CircuitBread.
Overall, the importance of semiconductor equipment manufacturing companies to the sector and the broader digital world cannot be overstated. The contributions of companies like ASML enable the ongoing march of digital progress, pushing the limits of what's possible in technology.
Important Disclosures
1 Semis.org.
2 FactSet.
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Semiconductor Equipment Manufacturers Driving The Digital Revolution