Semi equipment can potentially outperform again. Semi equipment companies have
been underperforming commodity tech (memory, analog, wafer, substrate, etc.) recently
as the latter has a price hike theme. However, we believe this is changing as 1. Commodity
tech rally inevitably leads to high capex and capacity expansion and hence equipment,
2. Equipment companies can raise prices too, especially with high demand or capacity
constraint.
Signs of a price hike are emerging. The Japanese equipment makers are mostly pricing
in yen, which has depreciated ~30% against USD in the past 3 years. They are in a good
position to adjust prices against that backdrop. The willingness to do so has been lacking,
but recently comments from Tokyo Electron and Screen suggests a potential change in
strategy. Separately, news suggest that such negotiations are already underway, with SK
Hynix getting requests of a 3-4% price hike.
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