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Applied Materials: Headed Toward a $100B Market, Says Berenberg

The comments on spending for equipment were positive, with management tonight saying the “wafer front-end” equipment market coulee “reach over $100 billion” for 2018 and 2019. It could total $75 billion annually come 2025, she remarks.

There was a bunch of commentary about Chinese chip makers increasing their spend:

In our view, the semi equipment sector is the best way to play China’s semi ambitious [sic], and long term semi content increase thesis because of the stable market share all players have […] This quarter, KLA said the order from native Chinese customers nearly tripped in 2017 from 2016 level, and the momentum is continuing in 2018. Mix wise, Chinese spending in 2017 was 50-50 memory and foundry, and 2018 is more foundry heavy. AMAT stated during the conf call that they believe both domestic and global spending will increase in 2018. In 2018, the domestic players are spending more on foundry/logic market, we believe China’s Huali is ready to buy more equipment and they are likely to spend $1.5bn in this year for ramping up their 28nm capacity. The international players are spending more on memory projects, likely to be Samsung and Intel’s 3D NAND projects in our view.

Qiu notes that investors “still believe the the semi equipment sector remain[s] cycle,” but she’s more confident things will continue past 2019.

She notes all the projects ramping, including Taiwan Semiconductor (TSM) increasing its 10-nanometer production at “27,000 wafer starts per month” at the end of last year to 2017 to 65,000, then starting up 7-nanometer production in Q3 of this year.

"We expect the competition between TSMC and Samsung to remain intense, especially in 2019 when both of them release EUV node,” she writes. "In addition, Intel is increasing its logic spending by $1bn yoy."