Morgan Stanley's Outlook on Wafer Fab Equipment Market
Morgan Stanley expects the wafer fab equipment (WFE) market to decline by 6% year-over-year in 2025. This anticipated decline is attributed to the industry undergoing a transitional period characterized by capacity digestion and uneven demand within the semiconductor market.
Performance of Chinese vs. Western Semiconductor Companies
Chinese semiconductor companies are projected to outperform their Western counterparts. Morgan Stanley forecasts a 32% revenue increase for local firms including CXMT, Yangtze Memory Tech, Semiconductor Manufacturing International Corp, and Hua Hong. Conversely, Western suppliers may witness a 24% revenue decline following an inventory pull-forward in 2024. This trend is expected to raise Chinese firms’ market share to 25% by 2025.
Foundry and Logic Market Pressures
The foundry and logic market is also facing challenges, with a combined capital expenditure from leading players Taiwan Semiconductor Manufacturing Co Ltd, Intel Corporation, and Samsung anticipated to decrease by 2%. Morgan Stanley has expressed concerns regarding the foundry ambitions of Intel and Samsung, suggesting a cautious outlook on their long-term strategies.
Brokerage Preferences
The brokerage firm favors Chinese localization plays, upgrading Naura and AMEC to "overweight" ratings. In contrast, Applied Materials has been downgraded to "underweight" due to its exposure to weaker spending areas. Morgan Stanley maintained "equal-weight" ratings on ASML, KLA, and Lasertec, citing short-term visibility for TSMC but highlighting long-term uncertainties within the leading-edge logic segment.
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