2.6.25
New tools sales to DRAM customers rose by almost 70% sequentially, to $1.16B. This is the first time quarterly revenue from the DRAM segment was over $1B since the fourth calendar quarter of 2021, which was about the end of the last DRAM upturn. DRAM WFE sales from Tel had a plateau of three quarters above $900M in DRAM revenue from Q3 of 2021 to Q1 of 2022 before falling by half in the second quarter of 2022. NAND system sales from Tel showed surprising strength this quarter. They were up more than 3x from the prior quarter, from $80M to $266M. This is close to the level of sales to NAND customers that were seen as the last upturn in spending was ending, almost two years ago. Tel doesn’t break out customer segment by country, so I can’t tell directly if this is sales to Chinese customers. Their total sales into China were up about 15% sequentially. Unless the mix shifted heavily to YMTC within those sales, the traditional NAND makers were behind the higher NAND WFE in this quarter. Management said in last quarter’s release that sales to China, which had trended down in that period, would continue to decline. In the first quarter since this prediction, that has not come to pass. Total sales to Chinese customers, in both absolute terms and as a percent of total, were up.
Total industry WFE sales in calendar 2024 were around $110B, exceeding their initial forecast by 10%. Higher deliveries to Chinese customers as well as demand for equipment to serve the AI segment were behind this. The company is forecasting industry-wide WFE in 2025 to be flat to 2024 levels, at $110B. They are projecting a lull in automotive and power semiconductor investment, as well as a slowing of investment from emerging Chinese manufacturers. On the positive side, leading-edge logic and HBM demand will be strong. Indirectly (they give guidance for system sales in the current fiscal half) Tel provides guidance on tool sales by segment for next quarter. In this case, that is for FQ4 of ’25. They have DRAM down 15% sequentially but NAND will be up almost 50%. That would have NAND equipment sales from Tel up almost 5x in two quarters. That is off a really low base, but it is quite surprising because the NAND market is not healthy now and is trending worse.
The company is forecasting 2026 WFE growth to be in the double digits. I appreciate management sharing their longer-term view with us, but a prediction a year out in semiconductors is almost a guess.
This paragraph is commentary on the management call with analysts. Total calendar year 2024 sales industry-wide included the pull in of some deliveries to China, ahead of sanctions. In CY2025, WFE market (I think this means industry-wide, not just Tel) sales into DRAM will be up 10-20%. NAND is expected to nearly double, but off a low base and still only making up 10% of the total WFE market. The NAND investment will be in technology node migration to reduce cost. WFE sales to China will decline in CY25 relative to the prior year. Sales to China were in the high 40% range for Tel in the first half of their FY-25 (about May to October of 2024). They will be in the high 30% range in F2H-25 (November of 2024 to April of 2025) and then the mid-30% range for FY26 (May 2025 to April 2026).
– S. Hughes (short MU)