Industry explainer · U.S. view · Semiconductors · Capex · Export controls

Semiconductor Equipment Industry Explained: The U.S. View

Before a chip can be designed into a phone or an AI server, someone has to build the factory, and much of the cost of a factory is the equipment inside it. The United States is strong here: several of the largest makers of deposition, etch, inspection and process-control tools are American, while lithography is led by Europe and many other tools come from Japan. Equipment demand follows chipmakers' capital spending, so it is driven by the AI boom at one remove. SEMI's July 2026 forecast puts total equipment sales at a record $165.9 billion in 2026, up 23.2%, rising to $229.5 billion by 2028. Memory is the fastest-growing segment because of high-bandwidth memory: DRAM equipment spending is forecast to jump 39% to $38.8 billion. Politics shapes who can buy. U.S. export controls restrict sales of advanced tools to China, and China's share of U.S. suppliers' revenue is falling: Applied Materials said China was about 28% of its sales in its fiscal third quarter of 2026, down from about 35% a year earlier, even as total revenue rose 25% to $9.12 billion.

中文版（中国视角）：一文看懂半导体设备与材料产业链 →

Record: SEMI expects chip equipment sales of $165.9B in 2026, up 23.2%
Memory: SEMI expects DRAM equipment spending to rise 39% to $38.8B in 2026
China share: Applied Materials: China about 28% of fiscal Q3 2026 sales, down from 35%

IN ONE LINETool makers sell the picks and shovels; export rules decide to whom.

How the chain works

Equipment makers in the U.S., Europe and Japan sell tools to foundries and logic makers, memory makers, and test and packaging lines. China, Taiwan and Korea are the largest markets; U.S. export controls limit what can be sold to China.Swipe sideways on a phone to see the full chart.

Where the equipment money goes in 2026 (SEMI forecast)

	2026 spending	Growth	Driver
Foundry and logic	$78.0 billion	Up 18.9%	2nm gate-all-around, AI processors
DRAM	$38.8 billion	Up 39.0%	High-bandwidth memory
NAND	$13.9 billion	Up 30.7%	Layer migration, AI storage
Test	$15.3 billion	Up 31.0%	AI and HBM devices
Assembly and packaging	$6.7 billion	Up 9.6%	Advanced packaging

Equipment follows chipmakers' capex

Chipmakers buy equipment when they add capacity or move to a new process. That makes tool makers a leveraged play on chip demand: when TSMC, memory makers and others raise spending, equipment orders rise, and when they cut, orders fall faster.

In 2026 spending is rising across the board. SEMI's mid-year forecast, published July 15, 2026, puts wafer fab equipment at $143.9 billion, up 23.1% from a record $116.9 billion in 2025, and expects it to reach about $200 billion by 2028. It lists AI infrastructure, the move to 2nm, HBM and NAND layer migration, and advanced packaging as the main drivers.

Memory and packaging lead growth

High-bandwidth memory uses much more wafer capacity per bit than ordinary DRAM, so memory makers need more tools to keep up. SEMI expects DRAM equipment spending to rise 39.0% to $38.8 billion in 2026 and NAND 30.7% to $13.9 billion.

Back-end tools are growing too: SEMI forecasts test equipment up 31.0% to $15.3 billion in 2026, after a 55.3% jump in 2025, and assembly and packaging equipment up 9.6% to $6.7 billion, reflecting the complexity of AI chips and HBM stacks.

China: big buyer, restricted market

SEMI says China, Taiwan and Korea will remain the top three equipment markets through 2028, with China still in the lead but growing more slowly in 2026 after heavy recent investment.

U.S. export controls limit sales of advanced tools to Chinese chipmakers. Applied Materials reported fiscal third-quarter 2026 revenue of $9.12 billion, up 25% year on year, with China at about 28% of sales, down from about 35% a year earlier. AI-driven demand elsewhere has more than offset the decline so far.

How the U.S. view differs from the China view

The Chinese version of this page is about building domestic tool makers to replace foreign equipment cut off by export controls, and about China's huge purchases of tools that are still allowed.

From the U.S. side, equipment is both a strong industry and a policy weapon. U.S. firms gain from the global AI build-out, but export controls cap sales to their largest single market, and Chinese domestic tool makers are working to replace them.

2025–2026: AI demand outweighs China limits

Wafer fab equipment spending reached a record $116.9 billion in 2025, and SEMI raised its 2026 forecast to $143.9 billion, citing AI, 2nm, HBM and packaging.

At the same time, China's share of U.S. tool makers' sales shrank: Applied Materials' China share fell from about 35% to about 28% in a year.

Total revenue still grew 25% at Applied Materials. Strong spending by Taiwan and Korea on AI logic and memory filled the gap left by restricted China sales.

What this shows

Equipment demand is a lever on chipmakers' capital spending.
HBM and packaging are the fastest-growing equipment markets.
Export controls reshape where tools go, not yet how many are sold.

Common misreadings

MythExport controls have collapsed U.S. tool makers' sales.

RealityApplied Materials' fiscal Q3 2026 revenue rose 25% even as China's share fell.

MythEquipment demand is all about logic chips.

RealitySEMI expects DRAM equipment spending to rise 39% in 2026, faster than logic.

MythPackaging is a low-tech step.

RealitySEMI expects test equipment up 31% and packaging tools up 9.6% in 2026 for AI chips.

MythChina has stopped buying equipment.

RealitySEMI says China remains the largest equipment market through 2028.

Capex, controls and competition: scenarios

Scenario	Main effect	How it passes through
Chipmakers raise capex further	Equipment orders	Higher sales and backlogs
Memory prices peak	DRAM capex	Memory tool orders slow
Export controls tighten	Sales to China	Lower China share, possible revenue hit
Chinese tool makers improve	Competition in China	Share loss for foreign suppliers
New U.S. and Japan fabs	Regional demand	More orders outside China
AI budgets fall	Leading-edge capex	Sharp drop in orders

Supply and demand by segment

Segment	Supply rigidity	Concentration	New demand	Policy role	What to watch
Lithography	Very high	Extreme (Europe)	Yes	Very high (export controls)	Shipments
Deposition and etch	High	High (U.S., Japan)	Yes	Very high	Orders, China share
Inspection and process control	High	Very high (U.S.)	Yes	Very high	New node ramps
Test and packaging tools	Medium	Medium	Yes (AI, HBM)	Medium	Back-end capex

Supply rigidity: how long new capacity takes and whether money can speed it up. Concentration: whether output sits in a few countries or companies. The more rigid and concentrated, the more prone to shortages.

How to track it

Indicator	What it tells you	Where to find it
Equipment sales forecasts and billings	Industry demand	SEMI, free summaries
Chipmakers' capex guidance	Future orders	TSMC, Micron and others' results, free
Tool makers' China share	Export control impact	Applied Materials, Lam Research, KLA results, free
Export control rules	Policy changes	U.S. Commerce Department BIS, free
Foundry and packaging	Main customers	U.S. view: foundry and packaging

Sources

Last updated 2026-10-18.

This page explains the structure and supply-demand logic of an industry for educational purposes. It does not refer to any specific security and is not investment advice. Figures are dated and sourced; they may have changed since, so check the latest official data.