Semiconductor Equipment - Berenberg Bank

Semiconductor Equipment
Technology Hardware
Key debates
Will the semiconductor space remain as cyclical as before?
We believe the semiconductor cycle is going to remain cyclical, but less
volatile compared to history. Over the past decade, we have seen cycle peaks in
2000, 2007 and 2011, followed by a capacity digestion period, ie trough cycles in
2002 and 2009, driven by different market trends. Memory was the main driver for
the 2000 and 2008 cycle peak, and logic/foundry drove the peak cycle with
memory in 2011.
Figure 4: Semiconductor capex to remain flattish for the next two years
USD mn
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
35%
30%
25%
20%
15%
10%
5%
0%
Semi capex $mn Semi equipment revenue $mn Semi capex/semi revenue %
Source: Gartner data, Berenberg estimates
The 2000 cycle was driven by 1) strong PC demand, 2) increased DRAM content
per PC, 3) increased capacity for 0.13 micron, 0.18 micron and 300mm.
In 2007, the cycle was driven by 1) Apple’s Nano/Shuffle products and other
portable media players, which led NAND demand, 2) a DRAM demand increase
due to increased adoption of 64-bit processors, Microsoft Vista and the Sony
PlayStation 3 (PS3) launch, 3) an increased mobile phone DRAM demand, and 4)
DRAM, Logic and NAND moving to smaller nodes.
The 2011 cycle was influenced by 1) smartphone/tablet demand offset by PC
demand, 2) leading-edge chip increases (logic: 28nm; NAND: 20nm; DRAM:
30nm) as the consumer electronics market grew.
We believe future cycles will be less volatile: In the future, we believe the
semiconductor capex trend will be less cyclical compared to previous cycles for the
following reasons.
1) Memory-makers become more conservative in their spending: The
previous three peak cycles were driven by memory. Memory-makers have
tended to double their capex in the peak years (ie 2000, 2004-2007, 2010) and
cut capex by half in the following one/two years. Following the 2012 memory
price slump, memory-makers became more cautious and are now ramping up
addition capacity slower than before. Therefore we believe the cycle volatility
caused by memory spending will be significantly reduced.
2) Foundry/logic spending is likely to remain strong: Intel, Samsung
(excluding memory) and Taiwan Semiconductor Manufacturing Company
(TSMC) (which together account for 78% total foundry/logic capex) are
heavily exposed to the consumer electronic markets, and the competition in
the market is further intensified by the war between Apple, Samsung,
Qualcomm, Intel and ARM. We believe that these companies have no choice
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