WFE Upcycle Strengthened, Market Size Expected to Rise to US$259 Billion in 2028
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WFE Upcycle Strengthened, Market Size Expected to Rise to US$259 Billion in 2028
Bernstein expects global wafer fab equipment spending to grow by about 75% over two years, raised target prices for AMAT, LRCX, and KLAC, and prefers AMAT, ASML, and equipment vendors with high memory exposure.
- Global WFE forecasts for 2027 and 2028 were raised to US$204 billion and US$259 billion, respectively, corresponding to year-on-year growth of about 33% and 27%.
- The forecast increase is mainly driven by DRAM and logic/foundry investment outside China, while the China market is also expected to accelerate meaningfully in 2027–2028.
- The preference order for U.S. equipment stocks is AMAT, LRCX, and KLAC, all maintained at Outperform.
- ASML is the top pick in Europe, with USD-denominated revenue expected to grow at a CAGR of about 34% from 2025 to 2028, and both EUV and DUV expected to grow strongly.
- For Chinese equipment stocks, Outperform ratings are maintained on AMEC, NAURA, and Piotech, with the near-term preference order being NAURA, AMEC, and Piotech.
Report interpretation
Overview
The report comprehensively raises global wafer fab equipment spending forecasts for 2026–2028 and reinforces the view of an upcycle in semiconductor equipment. Growth sources have expanded from a single application to DRAM, NAND, advanced logic, foundry, and advanced packaging, while covering both China and markets outside China. Accordingly, Bernstein raised earnings models and target prices for U.S. semiconductor equipment companies and remains constructive on major equipment suppliers in Europe, Japan, and China.
Core views
The core view is that the equipment investment cycle still has a long duration, and the market may be underestimating the strength of orders and spending in 2027. Memory is the main incremental driver of the forecast upgrade, especially DRAM; advanced logic, GAA, HBM, NAND upgrades, and advanced packaging also constitute structural drivers. In China, imports in 2026 are weighed down by DUV shortages, but revenue of domestic vendors is expected to grow 41%, after which memory, advanced logic, and mature-node capacity expansion are expected to drive accelerating WFE demand. By region, AMAT is the top pick in the United States, ASML in Europe, Kokusai and Tokyo Electron are preferred in Japan, and NAURA, AMEC, and Piotech are preferred in China.
Analysis framework
The report uses a WFE forecasting framework split by application and region, modeling DRAM, NAND, and logic/foundry separately and distinguishing between China and demand outside China; it combines equipment company guidance, channel checks, capacity expansion plans, equipment delivery cycles, and market share changes to update company revenue and earnings forecasts, then derives target prices using valuation methods such as forward P/E multiples.
Methodology notes
Forecast wafer fab equipment spending by application and region
Capital expenditure for DRAM, NAND, and logic/foundry is estimated separately, with China and markets outside China split out to identify the sources of forecast revisions in each year.
Validate expectations for orders, capacity, and revenue growth
The latest guidance from equipment vendors is compared with channel information on capacity expansion in China memory, advanced logic, and mature nodes to assess gaps versus market expectations and room for subsequent upward revisions.
Map WFE changes to revenue, margins, and EPS
Revenue and EPS forecasts are adjusted based on each company’s product exposure and market share in leading-edge logic, memory, packaging, lithography, and process control.
Calculate target price using target P/E and forward EPS
For example, ASML is valued using a 40x target P/E multiplied by forward EPS, while the valuation premiums of AMAT, LRCX, and KLAC relative to the SOX and SPX are also compared.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- AMATTop pick among U.S. semiconductor equipment names, rated Outperform, target price US$675.
- Strengths
- High exposure to leading-edge logic, DRAM, and advanced packaging; services business and capital returns provide additional support; valuation is slightly lower than peers.
- Weaknesses
- Current valuation remains above historical and major index levels, making it highly dependent on the realization of strong industry growth.
- Comparison
- Ranked ahead of LRCX and KLAC in the report’s preference order, and this round saw the largest earnings model adjustment.
- Risks
- WFE spending falls short of expectations, China business weakens, or high valuation declines.
- LRCXRated Outperform, target price US$385.
- Strengths
- Benefits from GAA, HBM, advanced packaging, and NAND upgrades, with strong execution capability.
- Weaknesses
- Valuation is relatively high, and some earnings forecasts had already been raised during the results period, leaving relatively limited incremental upside this time.
- Comparison
- Ranks second in the preference order for U.S. equipment stocks, with better memory, especially NAND, exposure than some peers.
- Risks
- NAND recovery slower than expected, declining revenue from Chinese customers, and contraction in valuation premium.
- KLACRated Outperform, target price US$250.
- Strengths
- Solid competitive position in process control, high leading-edge logic exposure, relatively low risk from China domestic substitution, and strong capital allocation discipline.
- Weaknesses
- Longer delivery cycles may cause near-term growth to lag AMAT and LRCX.
- Comparison
- Ranks lower in near-term growth, but as cleanroom space comes online, post-2027 growth potential is strong.
- Risks
- Delivery cycle delays, postponement of cleanroom construction, and relatively high valuation.
- ASMLTop pick in European semiconductor equipment, rated Outperform, euro target price €2,500.
- Strengths
- Unique competitive advantage in EUV, and benefits from rising lithography intensity in DRAM and advanced logic; DUV demand also has upside potential.
- Weaknesses
- Company guidance indicates that China’s revenue contribution will fall to about 20%, putting pressure on the near-term regional revenue mix.
- Comparison
- The report expects its revenue CAGR from 2025 to 2028 to be about 34%, with EUV growth significantly outpacing the overall equipment market.
- Risks
- Export restrictions, declining China revenue, capacity expansion falling short of expectations, and high valuation.
- Kokusai / Tokyo Electron / ScreenThe preference order among Japanese equipment stocks is Kokusai, Tokyo Electron, and Screen.
- Strengths
- Kokusai and Tokyo Electron are sensitive to memory capex and can directly benefit from raised DRAM and NAND investment.
- Weaknesses
- Screen lacks a clear driver from rising cleaning intensity and faces global and Chinese competitors; Tokyo Electron and Screen previously saw share losses in China.
- Comparison
- Kokusai and Tokyo Electron are both rated Outperform, while Screen is rated Market-Perform.
- Risks
- China localization, market share decline, price competition, and falling China revenue contribution.
- NAURA / AMEC / PiotechAll three maintain Outperform ratings, with the near-term preference order being NAURA, AMEC, and Piotech.
- Strengths
- Benefit from China WFE expansion, equipment localization, and share gains; NAURA has the broadest product portfolio, AMEC has high technology recognition, and Piotech continues to expand in deposition and hybrid bonding.
- Weaknesses
- The market prices listed in the report are all above the corresponding target prices, indicating clear valuation pressure.
- Comparison
- NAURA’s approximately 40% exposure to advanced logic makes it a key beneficiary of advanced logic capacity expansion.
- Risks
- Order upward revisions fail to materialize, capacity expansion delays, valuation correction, and intensified competition among domestic equipment vendors.
- Global Semiconductor Equipment IndustryThe industry as a whole is in a WFE upcycle, with growth expectations for 2027–2028 significantly revised upward.
- Strengths
- Demand spans memory, logic, foundry, AI, advanced packaging, and multiple regions, providing a broad growth base.
- Weaknesses
- Industry valuations are generally elevated, and the market has already partially priced in strong growth expectations.
- Comparison
- DRAM and NAND are expected to grow faster than logic/foundry, making equipment vendors with higher memory exposure relatively greater beneficiaries.
- Risks
- Reversal of the capex cycle, trade restrictions, equipment delivery bottlenecks, and end demand falling short of expectations.
Key data
- 2027 Global WFEUS$204 billion, up about 33% year-on-yearThe previous forecast was US$175 billion, up about 18% year-on-year.
- 2028 Global WFEUS$259 billion, up about 27% year-on-yearThe previous forecast was US$198 billion, up about 13% year-on-year.
- Two-Year WFE GrowthAbout 75%The title and executive summary calculate this based on US$148 billion in 2026 rising to US$259 billion in 2028. The main text also mentions US$154 billion for 2026, indicating a difference in basis in the source excerpts.
- 2027–2028 DRAM WFEUS$69 billion / US$96 billionPreviously US$57 billion / US$71 billion, respectively.
- 2027–2028 NAND WFEUS$20 billion / US$29 billionPreviously US$18 billion / US$23 billion, respectively.
- 2027–2028 Logic/Foundry WFEUS$104 billion / US$124 billionPreviously US$89 billion / US$93 billion, respectively.
- China WFE DemandUS$57 billion / US$73 billion / US$101 billion in 2026–2028, respectivelyThe 2026 forecast was cut by US$1.1 billion, while 2027 and 2028 were raised by US$6.3 billion and US$24 billion, respectively.
- 2026 Revenue of Chinese Domestic Equipment VendorsUS$16 billion, up 41% year-on-yearStrong performance by domestic suppliers is expected to support continued growth in China’s WFE market.
- AMAT Target PriceUS$675Previously US$525, with Outperform maintained.
- LRCX Target PriceUS$385Different parts of the report list the previous target price as US$360 or US$365, with Outperform maintained.
- KLAC Target PriceUS$250Previously US$225, with Outperform maintained.
- ASML Target Price€2,500 / US$2,859Outperform and top pick in Europe maintained; the USD target price is converted from the euro target price.
- ASML Revenue GrowthUSD-denominated CAGR of about 34% from 2025 to 2028System sales are expected to approach US$66 billion in 2028, with EUV shipments increasing from 48 units in 2025 to 118 units in 2028.
Impact & implications
Higher WFE forecasts mean there is still room for upward revisions to semiconductor equipment companies’ order, revenue, and earnings expectations, especially benefiting suppliers with higher exposure to DRAM, advanced logic, GAA, HBM, NAND upgrades, lithography, and advanced packaging. Among U.S. equipment stocks, AMAT combines broad exposure to leading-edge logic, DRAM, and packaging with relatively lower valuation, as well as additional support from services and capital returns; LRCX benefits from NAND upgrades and execution capability; KLAC has strong post-2027 growth potential thanks to its leading logic and process control advantages. ASML will benefit from EUV and DUV demand and rising lithography intensity. Chinese equipment vendors benefit from capacity expansion and domestic substitution, but some names have current target prices below the market prices listed in the report, requiring attention to valuation and short-term volatility.
Risks
- Valuations in the semiconductor equipment sector remain elevated, with AMAT, LRCX, and KLAC trading at significant forward P/E premiums relative to the SOX and SPX.
- U.S. export restrictions or DUV supply shortages may continue to weigh on China equipment imports and alter the regional revenue mix of global vendors.
- China equipment localization may cause some international suppliers to continue losing share in the Chinese market.
- WFE forecasts depend on memory, advanced logic, and foundry capacity expansions proceeding as planned; project delays would weaken order and revenue realization.
- Equipment delivery cycles, cleanroom space, and supply chain capacity may cause delays in revenue recognition.
- Chinese equipment stocks have relatively high valuations, and the report’s listed target prices for NAURA, AMEC, and Piotech were below market prices at the time.
- Lasertec faces competitive threats from KLA potentially entering the photochemical inspection field, while Screen faces intensified competition in cleaning equipment and margin downside risk.
- The source excerpts contain differing statements on 2026 WFE size and LRCX’s previous target price, so the basis of the original charts should be checked when using related growth rates.
What to watch
- Whether China WFE imports can rebound in the second half of 2026 after DUV supply improves.
- Whether major equipment companies continue to raise subsequent guidance for 2027 orders, WFE growth, and China revenue.
- The actual implementation pace of DRAM, NAND, advanced logic, and mature-node capacity expansion plans.
- Potential catalysts such as the Kirin 2026 chip, YMTC prospectus, and Huawei superPoD deliveries.
- Whether ASML’s EUV and DUV capacity expansion, shipments, and China DUV demand exceed current forecasts.
- Whether AMAT’s latest results and guidance can validate this round of relatively large earnings forecast and target price increases.
- 2026 order growth guidance from Chinese domestic equipment vendors and 2027 revenue recognition.
- The contribution of cleanroom construction progress and longer equipment delivery cycles to post-2027 growth for companies such as KLAC.