Bernstein: Japanese and European Semiconductor Equipment Suppliers Contemplating Price Increases, Sector May See a New Catalyst

June 15 – U.S. Wall Street investment bank Bernstein said in a recent report that semiconductor equipment manufacturers are showing early signs of price hikes, and related stocks are poised to recapture investor attention. Over the past few months, the market has focused more on commodity-type tech stocks, driven by rising price expectations in areas such as storage, analog chips, wafers, and packaging substrates. In contrast, while semiconductor equipment firms stand to benefit from a long-term production expansion cycle, they have lacked a clear near-term price catalyst. But Bernstein argues that price increases in these commodity tech sectors will eventually translate to larger capital expenditures (CapEx), giving equipment makers their own room to raise prices. Japanese equipment producers are at the center of this shift. The report points out that companies like Tokyo Electron and Screen primarily price their products in yen, and the yen has depreciated significantly against the U.S. dollar over the past three years – a key foundation for them to adjust pricing upward. More importantly, manufacturers’ attitudes are evolving: previously, equipment firms were cautious about raising prices, but now they are starting to factor in expedited delivery costs, rising material and labor expenses, and added value from new product models into their pricing calculations. Tokyo Electron aims to lift its gross profit margin above 50% through more aggressive pricing, while targeting an operating profit margin approaching 35%. Screen is implementing a two-stage price hike strategy: first, negotiating inflation-related price adjustments with clients, then seeking higher selling prices tied to new products and extra features. Bernstein expects Kokusai to follow this same trend. This price hike dynamic is particularly favorable for Japanese front-end equipment companies. In contrast, firms like DISCO, Lasertec, and Advantest have already seen substantial profit margin expansion, and since their pricing currencies are more diversified, the incremental impact of any additional price hikes is likely to be more moderate. European equipment leaders are also gaining from product upgrades. The report notes that ASML’s next-generation extreme ultraviolet (EUV) equipment could lead to a significant price increase, while advanced packaging equipment maker Besi will benefit from improving its product mix. In today’s tight supply environment, high-end equipment makers can not only raise prices for new products but may also charge premiums for faster delivery times. Overall, Bernstein’s assessment is that the investment thesis for semiconductor equipment stocks is shifting – from relying solely on customer production expansion to also including price and profit margin improvements as core drivers. As price hikes in sectors like storage and wafers spark a new round of capital expenditure, equipment vendors may soon start reaping the benefits of this cycle. For investors, companies like Tokyo Electron, Screen, Kokusai, and ASML will be key watch names to track whether this upcoming round of price changes comes to fruition.