Market Trends of Global Semiconductor Front-end Equipment Industry
Semiconductor Fabrication Plant to be the Largest End-user Industry
- After the design stage, semiconductor chips are manufactured or fabricated in facilities called fabs or foundries. In front-end fabrication, chips are manufactured on circular sheets of silicon or, less commonly, other semiconducting materials called wafers, typically about 8 or 12 inches in diameter.
- Fabrication is a process that turns designs into chips, relying on various SMEs and materials. First, a furnace forms a cylinder of silicon, which is cut into disc-shaped wafers. Semiconductor fabrication facilities (“fabs”) make chips into wafers in two steps: forming transistors and other electrical devices in material layers within the silicon and forming metal interconnects between the electrical devices in insulating layers above the silicon. Together, the electrical devices and interconnects form circuits.
- Firms headquartered in the United States, Taiwan, South Korea, Japan, and China control most of the world’s fab market share and fab capacity, which are also physically located in these countries. Semiconductor product development requires working harmoniously for many businesses (from materials to logistics). The complex process of fabricating semiconductor devices has also increased the development cost. Companies have leveraged different business models to lower expenditures and survive in semiconductors.
- In November 2023, China brought 42 lithography systems worth USD 816.8 million. The Netherlands supplied 16 lithography systems, totaling USD 762.7 million, a tenfold increase from the previous year. Additionally, China imported 21 systems from the Netherlands in October. Japanese companies Canon and Nikon also supplied China with lithography tools. Thus, an upward revision is expected in the demand for front-end equipment in semiconductor fabrication plants.
- The global economy is expected to recover, and the demand for components is expected to rise owing to not only growth in the smartphone, server, notebook computer, TV, and automobile markets next year but also the continued rollout of next-generation networks, including 5G base stations and Wi-Fi 6 technologies.
- According to the European 5G Observatory, as of 2023, Germany had the maximum 5G base stations among European Union (EU) member states, with approximately 90,000 base stations installed. The design and manufacturing of these chips and their research can provide hundreds of thousands of high-paying jobs, making onshoring/re-shoring a popular topic politically. It is why foundries and equipment companies are planning and mapping enormous investments in their backyards. For instance, TEL announced plans to invest more than USD 600 million in equipment manufacturing facilities in Japan.
- IDMs still play a significant role by investing in wafer fabrication capacities. For instance, in June 2023, Intel and the German government announced signing a revised letter of intent for planning a leading-edge wafer fabrication site in Magdeburg with more than EUR 30 billion for two first-of-a-kind European semiconductor facilities. In December 2023, the company reportedly acquired six high-NA EUV lithography machines from ASML, which is scheduled for shipment in 2024, according to South Korean media outlets. This acquisition is expected to be its secret weapon to overtake Samsung and TSMC at the 2nm node.
- In July 2023, Samsung announced it would spend USD 17 billion to build a semiconductor fabrication plant on a 1,200-acre plot of land in Austin, Texas. Owing to the geopolitical tension between China and Taiwan, chipmakers turned to the United States for manufacturing. Due to low taxes and new subsidies, Texas has emerged as a suitable place to do business. Global semiconductor manufacturing equipment companies are expanding facilities in South Korea. The company plans to invest USD 230 billion over the next 20 years in a new domestic production hub, attracting other players and fostering a chip supply system.
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China is Expected to Hold a Significant Market Share
- According to CSET, China holds a noteworthy market share in all major segments besides assembly and packaging tools. However, China faces the greatest challenge in lithography tools, particularly extreme ultraviolet (EUV) photolithography and deep ultraviolet (DUV) photolithography.
- Imprint lithography, e-beam, laser lithography, resist processing equipment, photomask inspection, and repair tools pose significant obstacles. Over the past few years, China has consistently invested in importing advanced lithography equipment to support its chip industry.
- However, with its technological capabilities, the country constantly strives to enhance its self-dependency on front-end equipment and invest significantly to introduce it into the market.
- In December 2023, Shanghai Micro Electronics Equipment Group (SMEE), a Chinese company specializing in lithography tools, unveiled its inaugural machine capable of processing wafers using a cutting-edge 28nm-class process technology. This significant achievement highlights SMEE's dedication to constructing advanced lithography machines. The scanner, known as SSA/800-10W, marks a significant milestone for the company.
- US sanctions have been formulated to impede China's progress in developing the most cutting-edge chips globally as the technological rivalry between the two countries intensifies. SMIC and other chip manufacturers are dedicated to enhancing the nation's autonomy by advancing chip production. SMIC collaborates closely with local tool manufacturers, utilizing its advanced lithography equipment, and seeks external assistance from Huawei to enhance yields in advanced node processes.
- Due to the continuous US sanctions on Chinese technology, the area strives for self-sufficiency. The Chinese government is investing substantially in the research and development of advanced chip technology. It also encourages local manufacturers to shift their focus to higher-node chips with various uses in the economy and emerging industries like electric vehicles (EVs). The growing government initiatives and the increasing investments by local vendors to boost domestic chip production are expected to create a notable demand for the front-end market.
- According to CAAM, in August 2023, China's new energy vehicle sales were approximately 846,000 units, of which 808,000 were passenger electric vehicles and 39,000 were commercial electric vehicles. The sales of passenger battery electric vehicles (BEVs) and passenger plug-in hybrid electric vehicles (PHEVs) were 559,000 and 248,000 units, respectively.
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