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Why Eteris will likely solidify AMAT’s presence in the WFE space

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Huge growth expected in WFE market

Tokyo Electron expects steady growth in the WFE (wafer fab equipment) market. Technological inflection points—like 3D NAND, FinFET, multi patterning, and other new processes—are creating opportunities for business expansion. The opportunities are fueled by technologically-driven demand. In turn, the innovations are fueling the WFE market.

As the following chart shows, the global WFE market is expected to grow 15% to $32 billion in 2014. It’s expected to increase to $35 billion next year and $37 billion in 2016.

If Applied Materials posts good results, it will benefit ETFs—like the Technology Select Sector SPDR (XLK) and the VanEck Vectors Semiconductor ETF (SMH)—that have significant exposure to Applied Materials.

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Transition towards technology will spur spending in WFE space

Applied Materials (AMAT) estimated that WFE spending will increase 10%–20% in fiscal year 2014. It forecasts that WFE spending in 2015 will be even larger. It will be driven by TSMC (TSM) and Samsung’s (SSNLF) transition to FinFET. More customers are investing in 3D NAND technology. Also, DRAM (dynamic random-access memory) spending increased. It will likely serve as catalyst to WFE spending.

Eteris will give WFE higher R&D allocation

The technology ecosystem is changing from 300-millimeter wafers to 450-millimeter wafers. The Eteris formation—through the merger of Applied Materials and Tokyo Electron—could lead to efficient R&D (research and development) investment in this space. The 450-millimeter wafers are in the development phase. It could be be seven or eight years before they’re put into production in chip factories.

According to VLSIresearch, after the merger, Eteris will likely command about one-third of the market share in front-end WFE.

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