J P M O R G A N Asia Pacific Equity Research 27 November 2025 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. Semiconductor/SPE sector WFE demand remains high; CoPoS, HBM-TCB, and other back-end technologies noteworthy In this report, we raise our wafer fab ...

Summary of Semiconductor Capital Equipment Conference Call Industry Overview - The conference call focused on the **Semiconductor Capital Equipment** industry, particularly in **North America**. - The **2026 Wafer Fabrication Equipment (WFE)** market forecast has been revised from a growth of **5%** to **10%**, with the new forecast set at **$128 billion** compared to the previous **$122 billion** [1][4]. Key Companies Discussed 1. **Applied Materials Inc. (AMAT)** - Upgraded to **Overweight (OW)** with a new price target of **$209** from **$172**. - CY26 EPS forecast raised from **$9.58** to **$10.45**. - AMAT is expected to benefit significantly from DRAM growth, with a **3:1 bull:bear skew** in its favor [3][24][28]. 2. **Lam Research Corp (LAM)** - Upgraded to **Equal-weight (EW)** with a new price target of **$125** from **$92**. - CY26 EPS forecast increased from **$5.12** to **$5.43**. - Despite a positive outlook, LAM is expected to underperform WFE growth slightly [3][25][35]. 3. **KLA Corp (KLA)** - Downgraded to **Equal-weight (EW)** with a new price target of **$1,093** from **$928**. - CY26 EPS forecast raised from **$37.11** to **$39.03**. - KLA's valuation is at a **30% premium** compared to AMAT and LAM, making further premium expansion difficult [3][26][40]. Core Insights - **Memory Market Dynamics**: - The **memory WFE** forecast has been adjusted, with DRAM expected to reach **$34.9 billion** in 2026, reflecting an **18%** increase year-over-year, and NAND projected at **$13.8 billion**, a **35%** increase [9][13]. - Improved pricing conditions in both DRAM and NAND have been noted, with significant orders from hyperscalers driving demand [10][11]. - **Investment Trends**: - There is a shift in capital expenditure (capex) priorities towards DRAM, which may delay NAND capex improvements [2][17]. - The overall sentiment in the semiconductor capital equipment sector is cautiously optimistic, with risks skewed to the upside if major players like Intel and Samsung accelerate their foundry investments [2][11]. Additional Important Points - **Market Forecasts**: - The WFE revenue is expected to grow from **$117.171 billion** in 2025 to **$128.304 billion** in 2026, with a projected growth rate of **10%** [6]. - The semiconductor revenue is forecasted to increase from **$736.304 billion** in 2025 to **$809.193 billion** in 2026 [6]. - **Regional Insights**: - North America is projected to contribute **$12.830 billion** to the WFE market in 2026, maintaining a steady growth trajectory [8]. - **Valuation Metrics**: - AMAT currently trades at **18x CY26 MSe**, while LAM and KLA trade at **23x** and **27x**, respectively, indicating a valuation discount for AMAT that is expected to narrow as DRAM growth accelerates [28][32]. This summary encapsulates the key points discussed during the conference call, highlighting the revised forecasts, company-specific insights, and broader industry trends.