WFE to the Moon (Still), Semicon West and OCP Insights

Ben Bajarin (0:05)

Hello, everyone, welcome to another episode of The Circuit, I am Ben Bajarin.

Jay Goldberg (0:11)

Greetings programs, I am Jay Goldberg.

Ben Bajarin (0:14)

Well, this was a double event week, combined with some juicy earnings, and a lot of busyness on both of our parts. This week had Semicon West in San Francisco, and OCP in San Jose, which next year Semicon West is going back to Arizona, and OCP is going to San Francisco to be in the...

Jay Goldberg (0:44)

On different weeks.

Ben Bajarin (0:46)

Thankfully, different weeks. Thank you.

Yes, yes. So we can all be insane in now multiple weeks instead of one giant insane week.

Jay Goldberg (0:57)

There were also three analyst days, or three analyst days-ish buried in there too. Like it was an impossible week.

Ben Bajarin (1:07)

Impossible week is an understatement. But we were there. So we're going to lump this into a couple categories.

We're going to talk about SemiCat slash Wafer Equipment, which kind of will combine ASML, earnings, TSMC, conversations we had at Applied Materials and their Investors Day. And then we'll talk about OCP on the back of that and the major themes that we saw. So, you know, one thing that stood out to me, and I've sort of been saying this fairly frequently for, in fact, we've titled multiple episodes this, but I do find the SemiCat part of this cycle very interesting because when you listen to those making the goods or building the clean room, you hear a very interesting side of the story. You hear them talking about what's going on in new equipment, where innovation is needed, where that wasn't necessarily the innovation pipe for tooling and machining before. We'll just say in the kind of monolithic designing a mobile and a laptop type chip, that as we push radical limits and try to develop these giant AI accelerators and all of the things, including much larger and getting larger networking ASICs. So let's not forget that networking ASICs are going to have a whole lot of advanced packaging on them and be bigger, not just GPU XPUs. You hear this interesting theme from SemiCAP saying, we're seeing the challenges in scaling this industry to meet the demands of those who want to use our fabs as fabless, or use our tools in a fab semiconductor. And are investing like no real cycle we've seen before. And that obviously manifests itself in commentary from ASML, in commentary from TSMC, and really in this commentary from Applied Materials, where you could see the underlaying, I guess, where this new foundation emerging for the semiconductor industry, who will be able to build very different types of silicon as we scale clean room space and we see innovation in these tools that we haven't seen before. And I just find that kind of like an interesting, regardless of what goes on in the market and people's emotions about finances, that the semiconductor industry is laying a foundation for a very different shape of capabilities of silicon on the back of SemiCap. And for all things considered, I find that an interesting observation and not really one we've seen in some time. Perhaps the only historical precedent is when we were chasing Moore's Law regularly and doing no shrinks on an 18-month basis.

Material and testing and lithography was a big part of that. And now it's like it's back in full force and everybody's talking about having to go and innovate, solve problems, and even do new machines that they didn't have to think about before.

Jay Goldberg (4:31)

I'm trying to refrain from talking about the market because there's a lot of bad news in the markets this week. And your point is that that won't matter because there's so many interesting things going on in Semiconductor land right now. And I think that's a fair point. I think there is... Like SemiCap is to me a lot of fun because there's so much innovation and there's so much nerdy technical detail there. And, you know, ask a SemiCap toolmaker how they lay, you know, individual atoms of some molecule down one by one, or not one by one, but evenly.

It gets to some really interesting conversations. So there's a lot of cool stuff happening in SemiCap technology.

There wasn't a lot of news, I felt, out of Semicon event. There wasn't, I don't know if people break news at conferences anymore, but there wasn't a lot of news. But what little I was able to see of it, it was pretty fascinating. There's a lot of really interesting things taking place.

Ben Bajarin (5:37)

Yeah. Yeah, I think the underlying theme in general was, you know, the industry is gearing up for growth, right? Depending on whose numbers you believe, it will cross 300 billion in total TAM somewhere around 29, 30, 31-ish. I mean, I seriously doubt it takes longer than 2030, but that's most people's lines, which is again, which is a structural changing of this industry where that kind of tooling is being invested now in a whole lot of new clean room space. But like I said, I think this came from Applied, and not that ASML is in all of the pockets that someone like Applied is, but even their commentary was the same in terms of their need to ramp and build and bring on as many new equipment as possible because their customers are basically lining out the door for ASML machines through the end of the decade. It is just a structural change in SemiCap. And I just think there, I pointed it out, but I think there's a lot of implications to that observation that haven't been wrestled with around the shape of the semiconductor industry just being drastically different going forward than really anything that we've seen before on the back of all of this new innovation we're seeing and how these things are made and tested, and how wafer yields are done, advancements in wiring, like all of these things that the industry didn't really have to do before. They kind of did. I'm not saying like they didn't want to innovate. It's just these are different problems.