Huajin Securities: Process miniaturization combined with 3D trend, the etching equipment market space continues to expand

Huajin Securities released a research report stating that with the continuous reduction of linewidth and the development of 3D integrated circuits, etching equipment has become the largest equipment type in the integrated circuit procurement. SEMI data shows that the global etching equipment market size is approximately $21.044 billion, accounting for 22% of the total market size of wafer manufacturing equipment. Gartner predicts that from 2018 to 2025, there will be 74 new wafer fab projects in mainland China, ranking first in the world. The clear trend of downstream expansion, coupled with the urgent need for domestication of the entire semiconductor industry chain, provides a good opportunity for the development of domestic etching equipment. In addition, the multi-dimensional upgrade of device structures stimulates demand. Benefiting from the process miniaturization and 3D trends, etching equipment has become the largest semiconductor equipment. With the continuous reduction of linewidth and the development of 3D integrated circuits, etching equipment has become the largest equipment type in integrated circuit procurement. SEMI data shows that the global etching equipment market size is approximately $21.044 billion, accounting for 22% of the total market size of wafer manufacturing equipment. Due to the complex etching process and high technological barriers, the global etching equipment market has a high concentration; data from China Industrial Research Institute shows that the CR3 of global etching equipment exceeded 90% in 2021. CCP benefits from the 3D development trend, and process miniaturization drives the growth of ICP demand. Dry etching is the mainstream etching technology, which can be divided into two categories: capacitively coupled plasma etching (CCP) and inductively coupled plasma etching (ICP). CCP is suitable for etching hard dielectric materials and hole/groove structures, mainly driven by the development of 3D NAND and other 3D structures. ICP is suitable for etching low-hardness or thin materials and for excavating shallow grooves, therefore, the continuous reduction of linewidth is the main driving force for ICP demand. Advanced Micro-Fabrication Equipment Inc. China and NAURA Technology Group are leading domestic etching equipment companies, occupying leading positions in CCP and ICP areas, respectively. The clear trend of downstream expansion and the multi-dimensional upgrade of device structures stimulate demand. According to SEMI data, mainland China has become the largest semiconductor equipment market globally for four consecutive years. Gartner predicts that from 2018 to 2025, there will be 74 new wafer fab projects in mainland China, ranking first in the world. The clear trend of downstream expansion, coupled with the urgent need for domestication of the entire semiconductor industry chain, provides a good opportunity for the development of domestic etching equipment. The multi-dimensional upgrade of device structures synchronously stimulates demand. 1) 3D NAND/DRAM: CCP etching equipment is commonly used for the manufacturing of high aspect ratio structures. 2) Logic: GAA transistor manufacturing requires accurate and highly selective SiGe isotropic etching; the adoption of multiple exposure technology through etching equipment has become a key means for breakthroughs in lithography limits in China. 3) Interconnect: TSV construction is required for structures like HBM and backside power distribution architecture; deep etching is a key process for TSV, with Bosch etching as the preferred technology, typically using ICP etching equipment. Recommended targets to watch: Lam Research Corporation (LRCX.US), Tokyo Electron, and Applied Materials (AMAT.US) are three global leading semiconductor equipment companies that have diversified their product lines in etching, thin film deposition, etc. Therefore, Huajin Securities believes that companies at the forefront of platform construction have a competitive advantage. NAURA Technology Group (002371.SZ) is committed to building a platform-based semiconductor equipment company, with layouts in etching/thin film deposition/cleaning/heat treatment in four major application areas. ICP has broken through the technical nodes of 12 inches, and CCP covers key processes for logic/storage/power. Advanced Micro-Fabrication Equipment Inc. China (688012.SH) is the leading domestic etching equipment company, with CCP equipment and ICP equipment application coverage reaching 94% and 95%, respectively. The company also has layouts in thin film deposition and other equipment, continually advancing its platform-based construction. Risks: macroeconomic and industry volatility risks, significant fluctuations in downstream customer capital expenditures and operational risks due to the industry's cyclical nature, risks of downstream customer expansion falling short of expectations, intensified market competition risks, risks of insufficient research and development leading to technological lag or substitution, risks of deviation in research and development direction, etc.