CES 2026 New Chips Make a Splash! How Will the Big Leap Reshape the Manufacturing Ecosystem?

The chip layouts of companies like NVIDIA and AMD at the CES conference, along with TSMC's tight 2nm production capacity, have widely benefited chip equipment manufacturers from $Applied Materials(AMAT)$   to $Tokyo Electron (8035.JP)$ . 

$Taiwan Semiconductor Manufacturing(TSM)$   , the largest customer of equipment manufacturers, provided guidance on October 16, 2025, for its 2025 capital expenditure at $40-42 billion, up from the previous range of $38-42 billion, raising the lower limit by $2 billion. TSMC has not yet provided guidance for 2026 capital expenditure, but the market generally expects it to be between $45-50 billion, setting a new record.

Chip Manufacturing Equipment: The Overlooked Long-term, High-growth Track

Gartner data shows that in the semiconductor equipment industry, multiple segments have annual revenues exceeding $10 billion. Among them, Lithography, Deposition, and Etching are the three largest equipment areas, with annual revenues exceeding $20 billion each. Wafer inspection and process control rank fourth.

To explain in simple terms:

Deposition: Adding material, applying a layer of needed material to the silicon wafer.

Etching: Removing material, eliminating excess material to create circuit patterns.

Who are the players in the chip equipment field?

$Applied Materials (AMAT.US)$ : Comprehensive product range. Offers deposition, etching, ion implantation, and polishing, but mainly focuses on deposition equipment.

$Lam Research (LRCX.US)$ : Specializes in etching technology, with about half the market share in related products. It has a relatively higher business proportion in the memory chip market, as memory chips require high aspect ratio hole etching. Historically, Lam has seen nearly half of its revenue come from memory customers, a much higher proportion than its peers (about 20-30%), so its performance is highly correlated with the memory industry's prosperity.

$KLA Corp (KLAC.US)$: Focuses on inspection, with a market share of 55-60%, dominating both the memory chip and GPU/CPU chip markets.

The Significance of 2nm for Semiconductor Equipment

At the CES conference, AMD's MI455 chip and Intel's Panther Lake chip both use 2nm technology.

1. 2nm technology significantly increases the number and difficulty of thin film deposition and selective etching. This means fabs will purchase more deposition and etching equipment in the 2nm era.

2. Similarly, for inspection equipment, when the process enters below 7nm, the value brought by each unit increase in yield control investment far exceeds its cost; advanced processes use full inspection rather than sampling methods. This trend will ensure KLA achieves considerable growth in the 2nm era.

Examining the Chip Equipment Industry's Business Model from a Financial Perspective: Asset-Light Equipment Industry vs. Asset-Heavy Foundry Industry

As seen in the chart below, the semiconductor equipment industry has surprisingly high ROE, with the three sample companies KLAC, LRCX, and AMAT even higher than TSMC.

Taking KLA (KLAC), which has the highest ROE, as an example, its high-margin business is more "light," with R&D and sales accounting for a high proportion of its cost structure. KLA's fixed assets accounted for only 7.9% of total assets in Q3 2025, with its assets mainly consisting of cash, accounts receivable, patents, and other light assets.

In contrast, TSMC's costs are dominated by depreciation and raw materials. Its assets are mainly heavy assets like fabs and lithography machines. In Q3 2025, fixed assets accounted for over 45%, with annual depreciation exceeding tens of billions of dollars, and a large amount of assets are fabs under construction. High depreciation directly reduces asset profitability. Therefore, the effective asset utilization rate differs greatly between the equipment track and the foundry track.

In terms of gross margin and net profit margin, KLA has the highest profit margins, reflecting the high-value characteristics of the inspection equipment field. Lam Research's profit margins are second.

The chart is a comprehensive landscape of companies benefiting from the 2nm industry chain.

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