Overseas semiconductor earnings indicate further strengthening demand, with equipment and materials prices rising

Overview

The report summarizes April–June 2026 earnings information across the overseas semiconductor supply chain, focusing on chipmaker capital expenditure, semiconductor equipment suppliers' WFE market and pricing outlooks, InP substrate capacity expansion, and long-term supply agreements by memory manufacturers. The core conclusion is that demand has strengthened further versus three months ago, while equipment and materials suppliers' price-increase progress has improved the earnings outlook for Japanese semiconductor and technology materials companies.

Core views

Front-end equipment remains the primary driver of capital expenditure, although back-end equipment demand is also growing steadily. AI infrastructure is increasing semiconductor investment intensity, and equipment suppliers are broadly more optimistic about the WFE market in 2026–2027. Tight supply-demand conditions and value-based pricing support higher equipment and materials prices; the InP substrate expansion cycle and long-term agreements improve medium-term visibility for optical-communications materials and the memory supply chain.

Analysis framework

Based on April–June earnings discussions with overseas semiconductor manufacturers, equipment suppliers, materials suppliers, and memory companies, the analysis compares changes in capital expenditure, WFE market size, capacity expansion, gross margins, and long-term supply agreements.

Methodology notes

• Industry cycle trackingCapital expenditure–equipment demand transmission

  Assess front-end and back-end equipment demand through changes in chipmaker capital expenditure

  Raised or sustained high capital expenditure by TSMC, Intel, and South Korean memory manufacturers provides leading indicators for equipment and materials demand.

• Profitability analysisValue-based pricing and gross margins

  Improve gross margins through price increases and product-mix upgrades

  Price increases, value-based pricing, and the introduction of higher-value products disclosed by equipment suppliers are important variables for assessing margin improvement.

• Supply-demand analysisCapacity constraints and long-term agreements

  Measure supply-demand tightness and revenue visibility through substrate supply and long-term agreements

  Constrained InP substrate supply, along with prepayment and term arrangements in long-term memory agreements, may reduce uncertainty around supply and pricing.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Tokyo Electron (8035)

  Wafer fab equipment supplier

  Strengths

  Raised its WFE market expectations and expects to achieve an approximately 50% gross margin at the beginning of FY2027 through measures including price increases.

  Weaknesses

  Performance is highly sensitive to global fab capital expenditure and equipment delivery schedules.

  Comparison

  Consistent with other global equipment suppliers in raising the medium-term WFE demand outlook.

  Risks

  Customer capital expenditure cuts, supply-chain bottlenecks, and price competition.

• SCREEN Holdings (7735)

  Semiconductor equipment supplier

  Strengths

  Raised its 2026 WFE growth outlook to more than 20% year on year, primarily driven by memory-chip demand.

  Weaknesses

  Memory-cycle volatility may amplify order uncertainty.

  Comparison

  The direction of improving demand is consistent with Tokyo Electron and U.S. equipment suppliers.

  Risks

  Delayed investment by memory manufacturers and downward revisions to demand forecasts.

• JX Advanced Metals (5016)

  InP substrate materials supplier

  Strengths

  Plans substantial capacity expansion to address strong demand and benefits from InP substrate supply constraints.

  Weaknesses

  Capacity expansion involves technology, yield, and customer qualification cycles.

  Comparison

  Occupies a key bottleneck position in the optical-communications materials supply chain.

  Risks

  Capacity expansion execution falling short of expectations, alternative technologies, or demand changes.

• KIOXIA Holdings (285A)

  Memory-chip manufacturer

  Strengths

  Industry long-term agreements and shareholder-return expectations may drive a valuation rerating.

  Weaknesses

  The report believes that it will still take time for the credibility of long-term agreements to improve.

  Comparison

  Benefits alongside Samsung, SK hynix, and SanDisk from improving memory supply-demand conditions.

  Risks

  Memory-price volatility, long-term agreement terms, and demand realization risks.

Key data

• TSMC 2026 capital expenditureUS$60 billion–US$64 billionRaised by approximately 15% from the previous US$52 billion–US$56 billion plan; based on the midpoint, representing approximately 52% year-on-year growth.
• Intel 2026 capital expenditureUS$20 billionRaised from approximately US$18 billion; equipment capital expenditure is expected to grow 40% year on year.
• SK hynix 2026 capital expenditureKRW 40 trillionUp 45% year on year.
• Tokyo Electron WFE market outlookAt least US$150 billion in 2026; at least US$190 billion in 2027The company indicated that the forecast still has further upside potential.
• Lam Research WFE demand intensityUS$9 billion–US$10 billion of WFE demand for every US$100 billion of AI investmentThe previous estimate was approximately US$8 billion.
• JX Advanced Metals InP substrate capacity planExpand by 7–10 times by 2030First expand 3-inch substrate capacity, then increase 4-inch and 6-inch capacity.
• SanDisk long-term agreement coverageApproximately 50% of bit demand in FY2027; approximately two-thirds in FY2028Eight agreements have been signed, with an average term of four years and a maximum of five years.

Impact & implications

Raised demand expectations and equipment suppliers' price increases benefit orders and margins for equipment, inspection, and materials companies. Japanese semiconductor equipment and materials companies benefit from global fab expansion and investment in advanced process technologies; however, the industry's delivery still depends on execution of customer capital expenditure, capacity ramp-ups, and the pace at which supply bottlenecks ease.

Risks

• A weakening global macro environment or end demand could cause fabs to cut capital expenditure.
• AI infrastructure investment growth may fall below expectations, weakening the rationale for raised equipment demand forecasts.
• Semiconductor equipment and materials price increases may not be passed through smoothly, resulting in weaker-than-expected gross-margin improvement.
• InP substrate capacity expansion faces technology, yield, equipment, and qualification risks.
• Prepayment, pricing, and performance arrangements in long-term memory agreements may fail to effectively reduce price volatility.
• Geopolitical factors, trade restrictions, and regional supply-chain disruptions.

What to watch

• Subsequent capital expenditure guidance from chip manufacturers and the investment pace in advanced process technologies and advanced packaging.
• Updates from Tokyo Electron, Lam Research, KLA, and SCREEN on the 2027 WFE market.
• Changes in equipment suppliers' gross margins, price-increase execution, and the share of higher-value products.
• InP substrate capacity expansion by JX Advanced Metals and other suppliers, 6-inch substrate yields, and customer qualification progress.
• The number, duration, prepayments, and demand coverage ratios of long-term agreements from Samsung, SK hynix, SanDisk, and other manufacturers.
• WFE demand in the Chinese market and changes in global memory supply and demand.