The Semiconductor Equipment Market Is Quite Healthy, And No, Revenues Didn't Fall

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Includes: ACLS, AMAT, ASMIY, ASML, KLAC, LRCX
by: Robert Castellano

Summary

Gartner reported the semiconductor equipment industry dropped 1 percent in 2015.

Those statements don't accurately reflect the current state of the semiconductor equipment industry.

In real terms, the semiconductor equipment industry increased at least 3 percent and probably 5 percent.

For the second time in three years, a strong U.S. dollar has distorted the actual growth in semiconductor equipment, reflected in shifted market shares and impressions that the semiconductor equipment market shrank when in fact it grew. I pointed this phenomenon out in previous articles in Seeking Alpha, and now present an update to reflect the 2015 market. See here.

Gartner noted that worldwide semiconductor wafer-level manufacturing equipment revenue totaled $33.6 billion in 2015, a 1 percent decline from 2014. See here

The table below shows that of the top 10 suppliers, three were headquartered in the U.S., with revenues in U.S. dollars. However, the other seven companies were foreign-based, and the U.S. dollar appreciated 14.5% against the yen and 19.8% against the euro in 2015. Unfortunately for these companies, it is standard practice that revenues generated in the country of origin are converted to U.S. dollars to calculate market size and market share.

x

Rank 2014

Vendor

2015

Revenue

2015 Market Share (%)

2014

Revenue

2014-2015 Growth (%)

1

1

Applied Materials

6,420.2

19.1

6,335.1

1.3

2

4

Lam Research

4,808.3

14.3

3,857.0

24.7

3

2

ASML

4,730.9

14.1

5,634.5

-16.0

4

3

Tokyo Electron

4,325.0

12.9

4,666.7

-7.3

5

5

KLA-Tencor

2,043.2

6.1

2,129.2

-4.0

6

6

Screen Semiconductor Solutions

971.5

2.9

1,128.0

-13.9

7

10

Hitachi High-Technologies

788.3

2.3

937.3

-15.9

8

7

Nikon

724.2

2.2

818.1

-11.5

9

9

Hitachi Kokusai

633.8

1.9

599.3

5.7

10

13

ASM International

582.5

1.7

557.2

4.5

Others

7,576.7

22.5

7,271.2

4.2

Total Market

33,604.3

100

33,933.6

-1.

Source: Gartner

Click to enlarge

What I show in the table below is revenue growth in the country of origin. Thus, Applied Materials (NASDAQ:AMAT), Lam Research (NASDAQ:LRCX) and KLA-Tencor (NASDAQ:KLAC), being U.S. based, maintained their growth reflected in the Gartner table.

However, ASML (NASDAQ:ASML), instead of a revenue shrink in U.S. dollars of 16.0%, actually grew 3.8% in 2015. Tokyo Electron (OTCPK:TOELF) in the No. 4 position shows a 7.3% drop when in fact revenues grew 7.2% in yen. ASM International (OTCQX:ASMIY) in the number 10 position exhibited revenue growth of 24.3% in euro, but growth in U.S. dollars was only 4.5%.

The top 10 companies show a negative growth in revenues of 2.4% for 2015 based on U.S. dollars, but a positive growth of 3.2% when kept in the revenue of the country of origin. Ironically, AMAT, the largest of the semiconductor equipment companies, was one of the weakest in the top 10, losing significant market share - in etch to LRCX and ion implantation to Axcelis (NASDAQ:ACLS).

The Gartner chart shows revenue for the "other" companies outside the top 10. Those companies, representing a market share of 22.5%, increased 4.2% in 2015. As these are a mixture of U.S. and foreign-based companies, I have excluded these revenues in this analysis. However, as there are undoubtedly European and Japanese companies in this "other" category, the 4.2% growth would be significantly more. In a future Seeking Alpha article, I will report on the actual growth of the "other category."

Rank

2015

Vendor

2014

Revenue

2015

Revenue

2015

Market

Share

(%)

2014-

2015

Growth

(%)

($)

2014-

2015

Growth

(%)

Country

Currency

2015

Revenue

In $

Using

Country

Currency

(hypothetical)

Rank

2015

based on Country Currency

1

Applied Materials

6,335.1

6,420.2

19.1

1.3

1.3

6,420.2

1

2

Lam Research

3,857.0

4,808.3

14.3

24.7

24.7

4,808.3

4

3

ASML

5,634.5

4,730.9

14.1

-16.0

3.8

5,848.6

2

4

Tokyo Electron

4,666.7

4,325.0

12.9

-7.3

7.2

5,002.7

3

5

KLA-Tencor

2,129.2

2,043.2

6.1

-4.0

-4.0

2,129.2

5

6

Screen Semiconductor

Solutions

1,128.0

971.5

2.9

-13.9

0.6

1,134.8

6

7

Hitachi High-

Technologies

937.3

788.3

2.3

-15.9

-1.4

924.2

7

8

Nikon

818.1

724.2

2.2

-11.5

3.0

842.6

8

9

Hitachi Kokusai

599.3

633.8

1.9

5.7

19.5

716.2

9

10

ASM International

557.2

582.5

1.7

4.5

24.3

663.1

10

Top 10 growth

26,662.4

26,027.9

-2.4

3.2

27,538.5

Source: The Information Network (with data from Gartner)

Click to enlarge

Equally important is the change in ranking of the top 10 companies. The Gartner table shows that LRCX moved up in revenues from the No. 4 position in 2014 to No. 2 in 2015 based on U.S. dollar revenues. If we rank these top companies based on revenues in country of origin, LRCX drops back to No. 4.

For 2016, the U.S. dollar has been relatively stable against the euro year to date, but has depreciated 5% against the yen. I will keep my readers posted on how these exchange rate conversions impact the semiconductor equipment market and investor information.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.