Bernstein’s China semicap outlook: Revised up logic but revised down DRAM

Investing.com -- Bernstein adjusted its China WFE (wafer fabrication equipment) industry model in a note this week, raising its outlook for logic/foundry WFE while lowering projections for DRAM WFE, largely due to export control restrictions introduced by the U.S. in early 2025.

The firm revised 2024 WFE demand to $45 billion from $43 billion, citing stronger-than-expected imports in the second half of the year. 

“The WFE imports in 2H24 continue to be stronger than expected, and it ended up at 38bn compared to our previous expected 36bn,” Bernstein noted. 

They state that the increase was driven primarily by non-U.S. vendors, as Chinese firms sought to mitigate risks from geopolitical tensions.

For 2025, Bernstein remains cautious on overall WFE demand, slightly increasing its forecast from $35 billion to $36 billion. 

The firm now expects a smaller decline in logic/foundry WFE, supported by capacity expansions at SMIC and HuaHong. 

“Recent comments from SMIC and HuaHong both show that they are accelerating capacity expansion for matured logic, supported by stronger China-for-China demand,” Bernstein stated. However, advanced logic WFE is said to remain constrained by ongoing export restrictions.

DRAM WFE, on the other hand, is expected to weaken significantly due to recent U.S. restrictions. 

“In January 2025, US updated their export control rules to tighten the equipment restriction. As a result, Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX) were reported to have pulled their engineers back from CXMT fabs,” Bernstein highlighted. 

The restrictions are expected to limit new equipment sales, causing a short-term impact on DRAM WFE spending.

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Looking ahead to 2026, Bernstein projects China’s WFE demand to remain flat at $36 billion while domestic substitution accelerates, with self-sufficiency expected to reach 36%. The firm rates NAURA, AMEC, and Piotech as Outperform, citing their leadership in China’s semiconductor manufacturing shift.

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