Upstream production capacity is shrinking, and sales of multiple semiconductor equipment manufacturers may decline this quarter

Source: Mantianxin

    According to a report by Nikkei Asia, seven of the nine major chip manufacturing equipment manufacturers are likely to experience a sales decline this quarter due to customers tightening capacity investments in the semiconductor market downturn. Despite the bleak outlook, the stock prices of chip equipment manufacturers have been rising, reflecting investors‘ confidence in generating AI and the market bottoming out and rebounding.

    Applied Materials announced last Thursday that sales for the May to July quarter may range from $5.75 billion to $6.55 billion, with analysts expecting $5.97 billion. It is expected that sales will decrease by 12% to slightly increase. This will be the first decline in Applied Materials since the financial quarter of August October 2019.

    Overall, analysts expect sales to decline in 7 out of 9 companies in the second quarter (or from May to July), including Pan Forest in the United States and Tokyo Electronics in Japan.

    The slowdown in investment by chip manufacturers is the main reason for the sluggish profits. Memory chip manufacturers are particularly affected by the decline in demand for smartphones and servers, as well as the sharp drop in prices. Gary Dixon, CEO of Applied Materials, stated in a earnings conference call last Thursday that "memory spending is at its lowest level in more than a decade, measured as a percentage of the total equipment in the wafer factory. Looking at the cutting-edge OEM situation, we have also seen customers reduce their spending plans for this year

    Faced with a slowing market, Tokyo Electronics has lowered its outlook for the global wafer fab equipment market this year from the previously expected 20% decline to a 25% to 30% decline.

    On the other hand, the demand for non advanced products such as automobiles and industrial applications has been stronger than expected, and Tokyo Electronics expects the share of sales in China to be slightly higher than 30% in this fiscal year and 24% in 2022 fiscal year.

    Compared to the first half of the year, all nine companies expect demand to increase in the second half of the year. However, given that investments from TSMC and Samsung Electronics may be lower than originally planned, the timing of market recovery is difficult to determine.

    Despite the difficult business environment, their stock prices have been improving since around October 2022 as investors expect demand to bottom out and rebound. The price has increased by 10% to 30% in the past month. Compared to the end of 2021, before a significant pullback in semiconductor related stocks, the stock prices of backend equipment manufacturers such as Japanese semiconductor equipment manufacturer DISCO and Japanese testing equipment supplier Advantest rose 59% and 28% respectively.

    Yasuo Imanaka from Lotte Securities Economics Research Institute said, "Given the positive factors such as the arrival of artificial intelligence generation, it may drive future growth

    Kazuyoshi Saito, senior analyst at Iwai Cosmo Securities, a Japanese securities firm, said that the expectation that "DISCO will expand the shipment of power semiconductors for electric vehicles, while Adventure will increase the supply of image processing chips for generating artificial intelligence" has driven up prices.