Chip equipment makers have been hit in recent days and weeks by the intensification of export controls to China and by order delays as manufacturers are experiencing troubles in building their new fabs. Most notably, Taiwan Semiconductor (TSMC)’s $40 billion Arizona plant is running behind schedule. Accordingly, Dutch equipment giant ASML delivered this morning a weaker than expected order book.
While these issues obviously represent short-term headwinds, the long-term trajectory of semi manufacturing capex and equipment demand remains intact and largely driven by powerful chip production reshoring trends. Indeed, as Taiwan currently produces more than 60% of the world’s electronic chips, including over 90% of the most advanced ones, the West has taken two major initiatives to confront the growing risk of instability in the global supply chain of electronic chips in the event of a military conflict on the Asian island.
First, the CHIPS Act, adopted in August 2022 by Washington, allocated $52 billion to bolster American companies in expanding domestic chip manufacturing facilities. Second, the European Union is also gearing up for a major technological revolution with the enforcement of the European Chips Act at the end of September. This legislation, aimed at doubling EU’s global market share to 20% by 2030, is supported by substantial policy-driven investments totaling over €43 billion until 2030, which is expected to be matched by substantial long-term private investments.
Notably, Intel has already stated it intends to invest $88 billion in Ireland, Poland, and Germany, while TSMC, GlobalFoundries, and STMicroelectronics are also actively participating in this endeavor.
Overall, the number of chip production facilities is set to surge in the US and EU over the next couple of years, with 35 fabs under construction in the West according to Z2Data for a total capex in the hundreds of billions. This should largely more than offset export restrictions to China.
As this transition largely relies on investment in cutting-edge production facilities, it’s sparking a new wave of innovation and competition in the chip equipment industry.
Canon recently made the headlines by announcing a technological breakthrough that could well disrupt the industry. This technology, called nanoimprint, physically presses the circuit design onto the wafer instead of printing it with the traditional (photo)lithographic method. Nanoimprint, known for decades, remained stuck in R&D labs as it was suffering from several technical issues making its commercial use difficult. Apparently, these problems were just solved by Canon which claims that its solution could eventually reach a resolution of 2nm, a scale at which only ASML is able to provide adequate equipment by using the complex and costly EUV (Extreme Ultraviolet) technology. If these claims are true, then a second player in the “wafer printing” would be more than welcome by the whole semiconductor industry that is overly dependent on ASML.
Among other advances, ion implantation technology, which has long served as a pivotal process enhancing the functionality of conventional materials like silicon (Si), is now gradually expanding to next-generation materials such as gallium nitride (GaN) and silicon carbide (SiC) in specialized applications. Ion implantation, often referred to as ‘doping’, is a sophisticated technique for precisely modifying materials. It involves introducing specific atoms, such as phosphorus and boron, into a material by carefully controlling their entry. When the material is heated, these introduced atoms seamlessly replace some of the existing ones, allowing for the creation of precise areas within the material that possess distinct electrical conductivity properties.
In the case of SiC, the unique density and hardness of the material pose considerable challenges in achieving precise dopant injection, placement, and activation, all critical for maintaining optimal performance and power efficiency.
As solar inverters, data centers, 5G power supplies, power devices in electric vehicles and other emerging industrial sectors are increasingly hungry for doped GaN and SiC, which significantly reduce energy consumption and amplify the speed and strength of devices, original equipment manufacturers (OEMs) like Axcelis Technologies and Applied Materials look strategically positioned to harness the increasing demand stemming from these fast-growing markets.
Finally, the shift towards chips’ 3D architectures, in which layers of chips are stacked to improve their capacity while maintaining the same footprint, is ongoing and should put under the spotlight Atomic Layer Deposition (ALD), a selective/precise form of deposition (the process of depositing a particular material onto a wafer). Currently, ALD is mainly used to manufacture 3D-NAND memory chips but the switch of DRAM memory towards a 3D-structure and the upcoming transition to Gate All Around transistors in logic will significantly boost the use of this technology in the coming years. Kokusai Electric has a specific focus on batch ALD and a 70% market share, making the company a potential attractive investment opportunity when it goes public in Japan in coming days.