Top 5 wafer fab equipment leaders surge 20% in 2Q 2025

The top five wafer fab equipment (WFE) manufacturers’ revenue grew by 20% year-on-year (YoY) in the second quarter (2Q 2025), driven by strong momentum in leading-edge processes, strong HBM and advanced packaging demand, and investments in mature nodes by domestic Chinese customers.

Foundry and memory revenue of the top five WFE manufacturers increased by 20% YoY in 2Q 2025, with foundry accounting for 66% of net system sales and memory 34%. However, on a sequential basis, memory revenue declined 13% due to lagging equipment sales from memory fabs, both in DRAM and NAND, on account of weakening growth in consumer-driven markets such as PCs and smartphones.

In 1H 2025, double-digit growth across both systems and service helped ASML, Lam Research and KLA to increase revenues by 35%, 29% and 26% YoY, respectively. Strong service revenue propelled a 12% increase in Tokyo Electron’s net revenue, while Applied Materials’ revenue increased 7% YoY.

For the first half of 2025, net revenue grew by 21% YoY due to increased leading-edge investments and strong HBM demand, with systems revenue increasing 22%YoY. Service revenue grew 20% YoY on customer upgrades, automation and increasing use of equipment intelligence solutions to boost fab productivity.

Looking ahead, tool makers will prioritize market diversification to reduce the impact of trade controls and uncertainties around tariffs in 2H 2025. We expect WFE revenue to grow 10% YoY in 2025, with the top five WFE manufacturers’ revenue outperforming the overall WFE market, helped by key technology inflections across foundry/logic, DRAM and NAND.

Multiple tool launches in etch, deposition and lithography, and process control will support customer roadmaps across foundry/logic, memory and NAND, in addition to advanced packaging, transition from FinFET to GAAFET and the ramp-up of GAAFET, to drive revenue growth in 2H 2025. We expect the momentum to continue in 2026 to drive double-digit growth.

The US decision to delay or soften tariff increases on semiconductor equipment exports to China offers short-term relief to tool makers, preserving some demand. However, long-term strategic decoupling and policy risks remain a concern.

Two key trends for WFE manufacturers over the last two years have been – increased strategic priority for diversification and expansion of global footprint to reduce impact from tariff and export control headwinds, and accelerating shipments for advanced packaging solutions to drive revenue growth.

1. Diversification

With tariffs still under review by the US government, WFE tool makers have already invested significantly to make sure facilities are located close to customers and the supply chain to help minimize the tariff impact on revenue growth. Direct earnings impact in the near term may be modest, but this positions tool makers well for long-term growth in the global semiconductor ecosystem.

As tool makers mitigate China exposure, growth in India becomes strategically important, potentially contributing more meaningfully to tool makers’ global revenue mix.

India’s semiconductor growth: Entry point for WFE manufacturers’ portfolios

India’s semiconductor ecosystem is accelerating rapidly, with investments worth over $10 billion already announced for developing fabs and OSATs. The country’s government has approved 10 fabs, including foundry and OSAT/ATMP, with around $10 billion in subsidies through the India Semiconductor Mission (ISM) 1.0.

Impact:

• Near term (1–2 years): Validation, pilot projects, and early equipment deliveries through R&D centers will start adding modest incremental revenue, primarily through engineering, R&D collaboration and initial sales.
• Medium to long term (3–5 years): With faster ramp-up of multiple facilities and local ecosystem maturity, tool makers will see materially positive revenue contribution regionally, both from equipment sales and recurring services.

Source: Counterpoint Research

2) Advanced packaging: New growth engine for tool makers

Advanced packaging has become a strategic priority for the semiconductor industry as a slowdown in traditional scaling has pushed the industry to look “beyond the die” and toward the package to keep performance gains coming. Further, it has emerged as the new frontier for performance, power and integration, transforming packaging from a backend step into a strategic enabler of system-level innovation for the industry, resulting in yield improvement, cost optimization and faster time-to-market.

Advanced packaging is a strategic driver of Moore’s Law extension, enabling “More than Moore” innovation by unlocking system performance and architectural diversity. It is becoming the next competitive battleground for foundries, IDMs and OSATs.

Top WFE Tool Makers’ Growing Footprint in India

Source: Counterpoint Research

India’s foundry and OSAT development acceleration will trigger spurt in tool shipments:

As Indian OSATs and foundries embrace differentiated solutions and end markets to compete globally, tool and equipment suppliers stand to benefit from a multi-phase revenue opportunity, starting with high-value capex sales and followed by long-term service and upgrade contracts. Further, the expansion of Indian OSATs into advanced packaging will be a strategic inflection point that can significantly increase tool shipments and revenue growth for tool makers.

As India transitions from basic assembly/testing toward high-value fan-out, 2.5D/3D and chiplet-based packaging, all these equipment companies can leverage their tool portfolios, process expertise and ecosystem relationships to grow their footprint. This will elevate India from a low-margin backend assembler to a strategic packaging hub with toolmakers being key enablers.

Senior Analyst Ashwath Rao said, “As diversification beyond China gathers momentum, driven by the impact of export control and tariff headwinds in China on revenue forecasts, tool makers are actively expanding in regions like India. Tool makers will play a critical role in accelerating India’s semiconductor manufacturing and the OSAT sector’s greenfield facility ramp-ups, with opportunities to demonstrate and qualify tools in pilot lines.”

Rao added, “In the long term, greenfield expansion will translate into revenue growth for tool suppliers through new system shipments, high-margin software subscriptions, upgrades, and recurring revenue from maintenance and parts. Additionally, as tool makers scale R&D centers in India to support global operations, proximity to customers and integration with local supply chains will not only enhance responsiveness but also drive long-term, sustainable revenue growth.”

On the Indian manufacturing ecosystem, Senior Analyst Prachir Singh said, “India’s expanding electronics manufacturing ecosystem will be a key driver for the semiconductor industry, as the government focuses on increasing local value addition. Various production-linked incentive schemes, along with the recently launched Electronics Component Manufacturing Scheme (ECMS), will act as enablers to accelerate electronics and semiconductor manufacturing. With a huge local market and ambitions of becoming a global export hub, India’s electronics manufacturing industry is expected to experience rapid growth and increasing participation from local companies.”

Conclusion

With multiple fabs and OSATs opening across India, the country is emerging as a strong alternative to offset long-term revenue declines from China. While the impact may not be immediate, India’s semiconductor momentum presents a compelling medium-to-long-term opportunity for tool makers, many of whom are already expanding R&D operations in the country to support global innovation.

About the Author

Ashwath Rao has more than 20 years working experience in industry, research and academics. Ashwath had an opportunity to work with Intel Technology. Ashwath’s major coverage in Counterpoint is semiconductors and component research. Ashwath holds a Doctoral Degree, specializing in Microelectronics from Indian Institute of Information Technology, Master of Science (VLSI) from Manipal University and a Bachelor of Engineering (Electronics & Communication) from Mangaluru University.