Japan Semiconductor Equipment Demand Revives; NAND Investment Outlook Optimistic

Overview

This report is based on meeting minutes held by Morgan Stanley in Tokyo, evaluating the semiconductor capital equipment industry. Overall, institutions are optimistic about equipment investment prospects in the NAND sector and anticipate acceleration in 2027. However, they maintain a more cautious stance regarding Intel's capital expenditure and pricing strategy. Meanwhile, Japanese vendors such as Ebara, Kioxia, and Lasertec have demonstrated strong order momentum and market competitiveness.

Core views

Institutions believe that demand in the current semiconductor equipment industry is strong, especially in the NAND sector, with significant equipment investment growth expected in 2027. Kioxia has already announced its capital expenditure plan, though growth may be limited in the short term due to manufacturer capital discipline. Additionally, Tokyo Electron (TOKYO ELECTRON) has shown confidence in pricing, but its gross margin levels are lower than AMAT and LAM, leading institutions to consider its pricing strategy somewhat unique. Ebara has shown a strong momentum of market share growth in the CMP sector, particularly in metal polishing, where its layout in advanced packaging and backlight power applications provides it with advantages. Renesas faces capacity tightness at mature nodes, while Intel's capital expenditure has not yet shown a clear increase, indicating that orders beyond process control remain under observation.

Analysis framework

The institutions first assessed overall industry trends by analyzing global semiconductor equipment market demand and client feedback. Subsequently, they conducted in-depth analysis of specific companies such as Kioxia, Ebara, Lasertec, and Renesas, combining their order status, capital expenditure plans, and market positioning to evaluate their future equipment investment potential. Based on this, the institutions performed a special assessment of NAND equipment investment prospects and Intel's capital expenditure, arriving at an overall conclusion. This analytical path from macro to micro and from industry to enterprise helps comprehensively capture market dynamics and potential opportunities.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply and Demand Framework

  Supply and Demand Framework

  Assessing market trends and investment opportunities by analyzing equipment demand and supply conditions.

• Industry/Industrial Analysis FrameworkUpstream-Midstream-Downstream Transmission in Industry Chain

  Upstream-Midstream-Downstream Transmission in Industry Chain

  Analyzing driving factors of industry development through relationships and interactions between upstream and downstream enterprises.

• Company Fundamentals and Financial FrameworkFree cash flow analysis

  Free Cash Flow Analysis

  Evaluating a company's capital expenditure capability and operational health by analyzing its free cash flow status.

Asset mapping & comparison

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

• Tokyo Electron (TEL)

  Benefited from increased NAND equipment investment and customer Expedite requests

  Strengths

  Received customer Expedite requests in memory business; actively expanding supply chain

  Weaknesses

  Gross margin lower than AMAT and LAM

  Comparison

  Pricing strategy is more unique compared to AMAT and LAM

  Risks

  Pricing pressure may affect profitability

• Ebara

  Benefited from expansion of market share in CMP field

  Strengths

  Rapid growth in metal polishing, closely related to advanced packaging and backlight power applications

  Weaknesses

  Facing challenges in competition with Chinese vendors

  Comparison

  Market share in logic segments has risen compared to AMAT

  Risks

  If customer orders continue to advance, it could lead to overcapacity

• Kioxia

  Benefited from increased NAND equipment investment

  Strengths

  Possesses cleanroom availability and 74% JunQOPM

  Weaknesses

  Capital expenditure growth limited in the short term

  Comparison

  Capital expenditure plan is more forward-looking compared to other vendors

  Risks

  Slow contract locking rhythm may cause missed price advantages

• Lasertec

  Benefited from launch of ACTIS A2OO HiT product

  Strengths

  Products prepared in advance; positive customer feedback

  Weaknesses

  Long customer evaluation cycles

  Comparison

  Significant improvements in high-end tool segment

  Risks

  If customer satisfaction falls short of expectations, it may affect subsequent orders

• Renesas

  Benefited from capacity tightness at mature nodes

  Strengths

  Strong demand at mature nodes; obtained price increases during customer negotiations

  Weaknesses

  Capacity tightness at advanced nodes

  Comparison

  Performs better at mature nodes compared to other vendors

  Risks

  Insufficient advanced node capacity may affect long-term growth

Key data

• Kioxia FY3/27 Capex Guide45 billion yenMostly used for equipment investment
• Ebara MarQ Orders114.6 billion yenYear-over-year increase of 67%
• Tokyo Electron Gross Margin Target50%Increase from current mid-40% level
• Renesas 210k Wafers55%Capacity utilization rate

Impact & implications

For NAND equipment manufacturers, 2027 will be a key year, and equipment investment is expected to grow significantly as cleanroom availability and profitability improve. For Intel, its capital expenditure still needs to wait for substantial increases in customer purchases, and its performance in equipment procurement will directly impact its competitiveness in the semiconductor manufacturing sector. Additionally, the leading advantages of Japanese vendors in specific niche areas will bring them greater market share and profit margins.

Risks

• NAND equipment investment growth may fall short of expectations
• Intel capital expenditure has not shown significant increase
• Japanese vendors face fierce competition in international markets
• Equipment manufacturers' profitability under pressure from pricing

What to watch

• Execution of Kioxia's capital expenditure plan
• Order changes for Intel outside process control
• Ebara's order trends and capacity utilization
• Changes in Tokyo Electron's gross margin