Q1 semiconductor equipment manufacturer financial report, GAA and HBM become the largest growth points

ASML: Serious year-on-year decline, but expected to recover in the second half of the year

In the recently released ASML Q1 financial report, both Q1 sales and net profit showed a significant decline, with net sales decreasing by 21.6% year-on-year to 5.29 billion euros, lower than market expectations but still within the guidance performance range given last year; Net profit decreased by 37.4% year-on-year to 1.22 billion euros, exceeding the expected 1.02 billion euros. Its guidance performance for the second quarter was between 5.7 billion and 6.2 billion euros, which was also lower than market expectations.
As early as last year's Q4 summary, ASML stated that 2024 will be a transitional year for it, with its main goal being to maintain revenue similar to 2023. Nevertheless, the performance in the first quarter has brought considerable pressure to achieve this goal. However, ASML CEO Peter Wennink also explained that their outlook for the whole year remains unchanged. As the industry recovers from the downturn, it is expected that the performance in the second half of the year will be stronger than in the first half.
In the sales of lithography systems, the proportion of EUV has further increased from 40% in Q4 last year to 46%. ASML believes that the issue of low NA EUV sales and high NA EUV penetration is simply a matter of customer choice. They continue to use the dual exposure of low NA machines to increase the sales of such systems, and may also choose a high NA machine. But ASML also pointed out that all EUV customers are already investing in high NA, and their order volume for high NA machines has seen double-digit growth.
In addition, at the financial report meeting, ASML mentioned that the possibility of using multi exposure technology to achieve 7nm is already obvious, and they believe that using multi exposure to achieve 5nm is also feasible. But the premise is to make a trade-off, and using this technology to achieve large-scale production is very difficult, especially in terms of yield and cost. They even used Intel, one of ASML's main customers, as an example, stating that Intel encountered many difficulties in entering processes within 10nm without using EUV.

Application materials: Beyond expectations, GAA will become a growth factor

According to the Q1 2024 financial report released by Applied Materials, its revenue for this quarter reached $6.71 billion, almost unchanged year-on-year. However, this performance still exceeded market expectations, and the gross profit margin slightly increased, reaching 47.8%. In the first quarter of 2024, the proportion of semiconductor equipment systems used for logic and other purposes was 62%, compared to 77% in Q1 of last year. The proportion of systems used for storage (DRAM and flash) has increased from 23% in the same period last year to 34%. This shows signs of a recovery in the storage market.
In the advanced logic market, many wafer foundries have begun their mass production transformation from FinFET to GAA. Thanks to the nearly 50% market share of Applied Materials in GAA, backplane power supply, and advanced packaging related equipment, this transformation will contribute extremely high revenue growth to Applied Materials. GAA related businesses are expected to contribute $1.5 billion in 2024, and this figure may double again next year.
In the storage device market, Applied Materials indicates that in 2023, its market share in DRAM devices has increased by 10 points compared to 10 years ago, and the revenue of DRAM related devices is higher than that of both competitors combined. The biggest growth driver is still HBM, and the application materials have also maintained a stable position as the top equipment in the HBM process. Last year, HBM only accounted for about 5% of the entire DRAM market production, but Applied Materials is expected to achieve a compound annual growth rate of 50% in the coming years.
According to the application materials, the die size used in HBM is more than twice that of standard DRAM, so achieving the same production requires at least twice the production capacity. In addition, the additional packaging steps required for HBM die stacking have further expanded the market for application materials, and the revenue of HBM packaging related equipment is expected to show about four times growth this year.
As for the NAND market, Applied Materials stated that they have seen improvements in inventory and prices, as well as a recovery in utilization rates. Like HBM, the evolution of storage technologies such as node transitions and increased layers will also drive an increase in spending on NAND related equipment.

Fanlin Group: Steady Start, HBM Equipment Grows Three Times

Fanlin Group also recently announced its revenue for the first quarter, with a month on month increase of 0.9% to $3.79 billion, a gross profit of $1.801 billion, and a gross profit margin of 47.5%. For the second quarter of this year, Fanlin Group is expected to achieve a revenue of 3.8 ± 3 billion US dollars.
Tim Archer, President and CEO of Fanlin Group, stated that with stable revenue in the first quarter, Fanlin Group has ushered in a strong start to 2024. In response to the performance and speed requirements required for the transformation of artificial intelligence, Panlin is consolidating its leadership position while preparing for major opportunities in the future.
In the revenue share of the system, the revenue share of the storage system composed of DRAM and NVM is 44%, which is the same as the revenue share of the wafer foundry system. Fan Lin said that the demand for DRAM related semiconductor equipment was strong thanks to the growth of HBM demand and the continuous investment from the Chinese Mainland market. In terms of equipment delivery related to HBM, Fanlin expects to see a growth of more than three times in 2024.
In NVM related businesses, Fanlin stated that spending on NAND equipment has been in a weak phase from December to 2018. As supply and demand gradually normalize this year, customers have started preparing for NAND equipment expenses in 2025, which also depends on the growing demand for enterprise level SSDs driven by AI. More advanced AI applications require faster, more efficient, and higher density NAND storage devices. Currently, HDD accounts for 80% of the enterprise storage market, and there is significant room for growth.
As for the expenditure on advanced process nodes in wafer foundries and logic systems, for example, the revenue for GAA node equipment is expected to exceed $1 billion for the first time this year. However, in addition to the market in Chinese Mainland, the growth from advanced processes was affected by the decline in expenditure on some mature process nodes.
In terms of regional share, Chinese Mainland is still the largest revenue source of Lam Research, accounting for 42%, higher than 40% in the previous quarter. Next is South Korea, accounting for 24%. Fan Lin said that equipment expenditure from Chinese Mainland exceeded expectations, but they still believed that the proportion of revenue from China would decrease in the second half of the year.
The promulgation of chip laws in various countries and regions, for semiconductor equipment with longer delivery times, Panlin Group believes that these are more like investment activities for the next three years, but also affirms the positive impact that such policies may have on its performance in the future. Another encouraging news is that Fanlin Group has also seen an increase in wafer fab capacity utilization, mainly reflected in double-digit month on month growth in spare parts revenue.