Author: Rita
Bernstein has significantly raised its forecast for global wafer fab equipment (WFE) spending: 2026 raised from $141B to $148B, 2027 from $175B to $204B, and 2028 from $198B to $259B. A cumulative two-year growth of 75%, further confirming the judgment of an equipment spending upcycle. WFE refers to wafer front-end equipment, the core equipment like lithography, etching, and deposition required for front-end chip manufacturing processes. "Logic chips" in the title refer to computing chips like CPUs, GPUs, ASICs, and their wafer foundry capacity.
The upward revision covers nearly all application areas and regions, but the increment comes more from memory chips in regions outside China and from China's foundry and logic chips. DRAM and NAND are the strongest-growing segments, followed by logic and foundry. Bernstein believes the current equipment spending upcycle is sustainable, and the recent pullback in the semiconductor equipment sector offers an attractive entry opportunity.
WFE Grows 75% in Two Years, DRAM Is the Biggest Driver
Memory chips are the core driver of this cycle. Bernstein forecasts DRAM WFE growth of 53% and 37% in 2027 and 2028, and NAND growth of 58% and 42% for the same period. The upward revision in DRAM capital expenditure comes from both a pull from regions outside China and Chinese DRAM manufacturers, while NAND benefits from technology upgrades and capacity expansion.
Logic and foundry growth is slightly lower, with projected increases of 20% and 19% for 2027 and 2028 respectively, mainly driven by advanced node investments. Intel's IDM spending is slightly revised upward, while the China portion remains stable.
DRAM WFE is projected to reach $69B in 2027 (previous forecast $57B), NAND $20B (previous $18B), and logic/foundry $104B (previous $89B). The growth rates for DRAM and NAND WFE are higher than for logic/foundry, which is uncommon in past cycles.
Regions Outside China Contribute the Largest Increment
The main increment comes from regions outside China. Of the $22.8B upward revision for 2027, DRAM accounts for $10.7B and logic/foundry for $9.8B; of the $36.8B upward revision for 2028, DRAM accounts for $18B and logic/foundry for $15B. The $7B upward revision for 2026 is slower-paced, with foundry contributing $3.4B, DRAM $2.6B, and the remainder from other segments.
Guidance from major equipment suppliers is largely consistent with Bernstein's forecast. Tokyo Electron expects WFE of about $120B in 2026, over $150B in 2027, and over $190B in 2028; Lam Research expects close to $110B in 2026 and entering the low $150B range in 2027; KLA expects the low $120B range in 2026, over $150B in 2027, and over $190B in 2028. These figures differ significantly from Bernstein's forecasts. Bernstein believes equipment company guidance is conservative, and upward revisions are likely as order visibility improves in upcoming earnings seasons.
China's WFE Resilience Exceeds Market Expectations
Bernstein forecasts China's WFE demand for 2026-2028 at $57B, $57.3B, and $101B respectively. The figures for 2026 and 2027 are nearly flat, mainly due to DUV lithography tool shortages hampering imports. In 2028, it jumps to $101B with capacity expansion across all segments.
The 2026 forecast is revised down by $1.1B from the previous one, mainly due to weak imports from DUV tool shortages, but domestic equipment makers are expected to achieve 41% year-on-year growth, reaching $16B in revenue. Forecasts for 2027-2028 are significantly revised up by $6.3B and $24B respectively, with expansion across all Chinese segments—memory, advanced logic, and mature logic—all expanding capacity.
Memory remains the strongest segment, with year-on-year growth rates of 88%, 81%, and 62% for 2026-2028. The surge in advanced logic primarily stems from Huawei's advanced packaging solutions, which stack multiple chips to enhance performance, consuming more wafers. For mature logic, domestic NAND manufacturers outsourcing CMOS production to foundries, AI-driven new demand, and the industrial and automotive upcycle are collectively pushing mature node supply to tighten, prompting foundries to resume aggressive capacity expansion.
Bernstein expects China's WFE imports to recover in the second half of 2026, with annual imports hitting a new high of $41B. Global equipment suppliers' China revenue in 2026 will likely be flat year-on-year, better than the previous expectation of a "year-on-year decline," and may be further revised upward in coming quarters.
ASML, Applied Materials, and Naura Each Have Their Positioning
ASML is Bernstein's top pick in European semiconductor equipment, with projected revenue CAGR of 34% from 2025 to 2028, supported by rising DRAM and advanced logic capital expenditure and increased lithography intensity. Both EUV and DUV will see strong growth, with EUV shipments nearly doubling from 48 units in 2025 to 118 units in 2028. While China revenue share is expected to decline to 20% per company guidance (33% in 2025, 41% in 2024), there is significant upside potential from China's continued demand for DUV systems.
Applied Materials sees the largest target price increase, raised from $525 to $675 (+29%). Lam Research is raised from $360 to $385, KLA from $225 to $250, all three maintaining Outperform ratings. Among Bernstein's US equipment stocks, Applied Materials ranks first due to its largest exposure to advanced logic, DRAM, and packaging, coupled with relatively cheaper valuation; Lam Research has stronger execution and NAND upgrade exposure but higher valuation; KLA's growth this year is slightly slower (due to longer lead times), but it has the largest advanced logic exposure and higher upside potential post-2027.
Among Chinese equipment stocks, Bernstein's ranking is Naura优于 Zhongwei优于拓荆科技(Tuojing Technology), all three maintaining Outperform ratings. Naura benefits the most from its broadest product portfolio (covering deposition, dry etch, thermal, cleaning) and largest advanced logic exposure (~40%), making it the biggest beneficiary during accelerated advanced logic capacity expansion. The recent sector pullback provides an attractive entry opportunity, as the market's underestimation of 2027 demand strength will be gradually corrected in the second half of the year.
Bernstein believes the global semiconductor equipment sector is in one of its strongest upcycles since 2008. The intensity of DRAM and advanced logic capital expenditure is systematically underestimated by the market, the resilience of the China market is misunderstood as unsustainable, and major equipment supplier guidance is conservative. Behind the 75% WFE growth in two years is the structural expansion undergoing across the entire semiconductor manufacturing chain.
Disclaimer
This article is Tide Research's organization and interpretation of a third-party brokerage research report (Bernstein, August 11, 2026), combined with compilation of public market information. The ratings, target prices, profit forecasts, and related judgments cited in the article are the views of that brokerage's analyst, representing only the stance of their institution, and do not represent the views of Tide Research, nor constitute any investment advice.
Markets involve risks; decisions should be independent. This article should not serve as the basis for buying or selling any securities.
