Morgan Stanley: Semiconductor Capital Equipment&gt

Morgan Stanley: Semiconductor Capital Equipment

> Total WFE Acceleration: Wafer Fab Equipment (WFE) revenue is projected to grow dramatically, breaking out from $117.0bn in 2025 to $154.6bn in 2026e (+32%), $201.9bn in 2027e (+31%), and ultimately reaching $227.3bn by 2028e (+13%).

> Capital Intensity Shift: WFE is consuming a much larger slice of total semiconductor industry capital expenditure. WFE as a percentage of total capex rises from 54% in 2025 to 65% by 2028e, showing that hardware and tooling complexity are outstripping physical facility costs.

> Foundry/Logic Dominance: Foundry/Logic remains the absolute largest segment, growing steadily from $75.3bn in 2025 to $133.7bn by 2028e. Its growth peaks in 2027e at +28% y/y before normalizing to +17% in 2028e.

> The Memory Cycle Peak (2026–2027): Memory WFE experiences an enormous surge, growing +56% in 2026e ($64.3bn) and another +35% in 2027e ($86.4bn). However, it hits a sharp deceleration wall in 2028e, growing just +7% ($92.2bn), indicating that the bulk of the capacity build-out happens in the next 24 months.

> DRAM Leads the Charge: DRAM accounts for the vast majority of memory spend (70% to 76% of total memory WFE from 2024 to 2028e), growing by 56% in 2026e and 28% in 2027e, before slowing to a crawl (+3%) in 2028e.

> NAND's Delayed Catch-Up: NAND spending is back-half loaded. While DRAM flattens out by 2028e (+3%), NAND continues to grow at +17% in 2028e ($28.1bn) following strong 2026e (+56%) and 2027e (+54%) cycles.

> China’s Share Retrenches: China dominated global WFE market share, peaking at 41% of total global spend in 2024 ($42.5bn). While absolute dollar spending in China continues to grow through 2028e ($68.2bn), its global market share structurally drops and stabilizes at 29% to 30% between 2027e and 2028e.

> The Memory Threat: They question whether the industry can digest over $110bn in combined DRAM and NAND WFE by 2028 without inducing severe bit oversupply issues.

> The ASML Supply Wall: They doubt ASML can physically build and deliver the roughly 130 Extreme Ultraviolet (EUV) lithography systems required to support that kind of equipment spend.

> The Next-Gen Foundry Mirage: The hyper-cycle relies on new logic players like Rapidus and TeraFab successfully contributing over $10bn in equipment spending, which remains an unproven execution risk.

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