Quality Thesis

The semiconductor capital equipment (“semi cap”) sector is the backbone of the global technology industry. Without it, there would be no smartphones, cloud computing, AI chips, or electric vehicles. For investors, understanding the semi cap landscape is essential to gaining exposure to one of the most crucial and resilient pillars of the modern economy.

This guide dives deep into the world of semi cap equipment, covering key players, industry dynamics, and what to consider when investing in this space.

Understanding the Semiconductor Manufacturing Process

The journey of a semiconductor chip from design to a final product involves a multitude of complex and sequential steps within highly controlled environments known as fabrication plants or fabs. This process can be broadly divided into three main phases: design, fabrication, and testing. The fabrication phase, which is the focus of the semiconductor capital equipment sector, begins with a bare silicon wafer, typically 200 or 300 millimeters in diameter.  

The fabrication of a chip involves depositing layers of various materials, including conductors, semiconductors, and insulators, onto these wafers. This deposition process is interspersed with numerous other steps that create circuit patterns, remove portions of the film layers, and perform functions like heat treatment, measurement, and inspection. Lithography is a critical step where special lights are shone through a photomask to transfer intricate designs onto the wafer. Following lithography, etching is used to selectively remove material from the wafer to create the desired patterns. Throughout these front-end processes, metrology and inspection equipment plays a vital role in identifying and removing defects, ensuring the quality and yield of usable chips.  

Once the wafer fabrication is complete, the back-end processes begin, which include assembly and packaging of the individual chips cut from the wafer. Finally, testing equipment is used to assess the functionality and reliability of the semiconductor devices at various stages of the manufacturing process. Other essential equipment includes cleaning equipment to maintain the purity of the wafers and wafer handling systems for the automated movement of wafers between different processing stations. The increasing complexity of chip designs and the continuous drive for miniaturization necessitate ongoing advancements in all these equipment categories.

Key Publicly Listed Players Across Segments

Front-End Equipment (Wafer fabrication)

• ASML Holding (ASML) – The only provider of EUV lithography systems, crucial for advanced logic chips.
• Applied Materials (AMAT) – Market leader in deposition and etch.
• Lam Research (LRCX) – Specializes in dry etch and deposition tools.
• Tokyo Electron (TEL) – Strong across deposition, coater/developer, and etch.
• KLA Corporation (KLAC) – Dominates yield management, inspection, and metrology.
• SCREEN Holdings – Wafer cleaning systems.
• Hitachi High-Tech (HICTF) – Metrology and analysis.
• Canon (CANOF) and Nikon – Steppers and lithography.
• ASM International (ASMI) – ALD and epitaxy tools.
• ACM Research (ACMR) – Wet cleaning and stress relief tools.
• Axcelis Technologies (ACLS) – Ion implantation systems.
• Mattson Technology – Etch and strip tools.
• Aixtron SE – MOCVD equipment for compound semiconductors.

Back-End Equipment (Assembly, test, packaging)

• Advantest – Automated test equipment (ATE).
• Teradyne – ATE for SoCs, memory, and wireless devices.
• Kulicke & Soffa Industries (KLIC) – Wire bonding and advanced packaging.
• BE Semiconductor Industries N.V. (BESI) – Die attach and packaging tools.
• Cohu Inc. – Test and inspection.
• FormFactor – Probe cards and test.
• Amkor Technology (AMKR) – Advanced packaging services.

Subsystems and Components

• VAT Group (VAT) – Vacuum valves and modules.
• INFICON – Vacuum instrumentation and process monitoring.
• Advanced Energy (AEIS) – Power delivery systems.
• MKS Instruments (MKSI) – Process control, RF power, and vacuum subsystems.
• Comet Holding (COTN) – RF power and X-ray inspection.
• Ultra Clean Holdings (UCTT) – Subsystems and outsourced manufacturing.
• Ichor Holdings (ICHR) – Fluid delivery subsystems.
• Veeco Instruments (VECO) – Thin film process equipment.
• Photronics Inc (PLAB) – Photomasks for lithography.
• Nova Ltd (NVMI) – Metrology solutions.
• Camtek Ltd (CAMT) – Optical inspection.
• Onto Innovation (ONTO) – Inspection and metrology.
• AEHR Test Systems (AEHR) – Burn-in and reliability test.

Emerging and Niche Technology Providers

• Intest Corp (INTT) – Test and thermal systems.
• Amtech Systems (ASYS) – Thermal processing and polishing.
• Ambarella Inc (AMBA) – Edge AI processors for vision-based systems.
• DAQO New Energy Corp (DQ) – Polysilicon supplier (upstream but tech-relevant).
• AXT Inc (AXTI) – Compound semiconductor substrates.
• Atomera Inc (ATOM) – Materials innovation for transistor scaling.
• Smartkem Inc (SMTK) – Organic semiconductor materials.
• Indie Semiconductor Inc (INDI) – Automotive semiconductors.
• Trio-Tech International (TRT) – Test equipment.

Key Considerations for Investors in Semiconductor Capital Equipment

The semiconductor capital equipment sector is driven by several powerful trends. The proliferation of AI across various applications, from data centers to edge devices, is creating an insatiable demand for advanced, high-performance chips. This surge in demand necessitates the use of cutting-edge manufacturing equipment capable of producing these complex semiconductors. Similarly, the automotive industry’s rapid transition towards electric vehicles and the development of autonomous driving technologies require increasingly sophisticated semiconductor content, further fueling the need for advanced manufacturing tools. The expansion of 5G networks and the growing number of Internet of Things (IoT) devices also contribute significantly to the demand for semiconductors and, consequently, the equipment used to produce them.  

Chip manufacturers, including industry giants like TSMC, Intel, and Samsung, are making substantial capital investments to expand their production capacities and upgrade their facilities with the latest technologies. This increased capital expenditure directly benefits semiconductor equipment suppliers, as these chipmakers require their advanced machinery to manufacture next-generation semiconductors. Government initiatives, such as the CHIPS Act in the United States, are also playing a crucial role by providing incentives for domestic semiconductor manufacturing, thereby boosting the demand for capital equipment within specific regions.  

Conclusion

The semiconductor capital equipment sector is a vital and dynamic area within the technology industry, offering significant growth potential for investors. The increasing demand for semiconductors across a wide range of applications, coupled with continuous technological advancements and substantial investments by chip manufacturers, creates a compelling long-term outlook for this sector. By categorizing publicly listed companies based on their primary field of application, this guide aims to provide investors with a clearer understanding of the diverse opportunities available. However, it is crucial for investors to acknowledge and carefully consider the inherent cyclicality of the industry, as well as the potential impacts of geopolitical factors and supply chain challenges. This analysis is intended for informational purposes only and does not constitute financial advice. Investors are strongly encouraged to conduct their own in-depth research and due diligence before making any investment decisions in this complex and rapidly evolving market.