Wafer Fab Equipment Spending to Top $100B This Year: Applied CEO
The semiconductor industry “clearly has a long way to go before supply catches up with demand,” said Applied Materials CEO Gary Dickerson on an earnings call Wednesday for fiscal Q1 ended Jan. 30. The company supplies semiconductor production equipment to chipmakers and is a good bellwether of semiconductor industry health.
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Applied's Q1 equipment orders were an all-time high, beating its previous record by half a billion dollars, said Dickerson. “Like many in the industry, the biggest challenge we face today is the availability of certain silicon components that go into subsystems within our products. We are working closely with our suppliers to find solutions and eliminate bottlenecks.” The company's "average tool" contains about 5,000 "discrete parts," some with "many subcomponents," said Chief Financial Officer Bob Halliday.
Wafer fab equipment spending in 2021 “was limited by supply, with some unmet demand pushing into 2022,” said Dickerson. Revenue in Applied’s semiconductor systems segment from fiscal Q2 ended late April to the end of fiscal Q1 in January was up 43% from the same year-earlier period, he said. “We think this is a good approximation for industry growth in calendar 2021,” putting wafer fab equipment spending in the “mid-$80 billion range,” he said.
Demand for wafer fab equipment “is very strong and continues to grow,” with industry spending possibly reaching $100 billion in calendar 2022,” said Dickerson. “Since we are already close to being sold out for the year, we also have a positive growth outlook for 2023.” Applied estimates foundry and logic customers comprised more than 60% of total wafer fab equipment investments last year, “and will remain at these levels or increase as a percentage of the mix over the next several years,” he said.
Digital transformation “is already reshaping the global economy,” driving the unprecedented demand for semiconductors, but “it will take decades to fully play out around the world,” said Dickerson. “The foundation of this multitrillion-dollar inflection is advanced silicon.”
Nine of the top 10 “most valuable companies in the world either design or build chips,” and eight of those nine “are now designing their own customized silicon in-house,” said Dickerson. “This is a great example of the fundamental role silicon plays in driving the system level, power, performance and cost improvements that will unlock the full potential of digital transformation and the metaverse.”
Current supply constraints “mean that we can't fully realize the strength in our business,” said Dickerson. CFO Halliday estimates order backlogs in Applied’s semiconductor systems segment increased by more than $1.3 billion in fiscal Q1 to a record $8 billion. “The backlog includes a rich mix of products that are highly enabling to our customers' road maps,” said Halliday. “What this tells us is that in an unconstrained environment, we would have produced substantially higher revenue and demonstrated a healthy share gain in calendar 2021.”