Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Key Players in AI Technology
We have updated our view on semiconductor equipment makers ASM International and BE Semiconductor. Both firms have significant exposure to leading-edge semiconductors and are leaders in their respective segments.
Why it matters: ASM ASM and Besi BESI are key players in atomic layer deposition and advanced packaging equipment, respectively. We expect these technologies will become increasingly important as the semiconductor roadmap evolves over the next decade, serving as key enablers for advanced chips and supporting above-average growth for both firms.
- As semiconductor transistors adopt new 3D structures, demand for atomic layer deposition will increase, resulting in a long-term tailwind for ASM. Although ALD is still a small part of the overall deposition market, it’s the fastest growing area, with ASM enjoying more than 50% market share.
- As the limits of transistor scaling are reached, advanced packaging is gaining importance as a key enabler of Moore’s Law. Besi remains highly selective with its investments, purposely focusing on equipment for leading-edge semiconductors, where differentiation and margins are higher.
The bottom line: We upgrade ASM’s and Besi’s moats to wide from narrow, supported by switching costs and intangible assets. We also raise our fair value estimates to EUR 635 for ASM and EUR 135 for Besi as we extend our stage-two period to 10 years. Both companies offer more than 40% upside at this point.
- We forecast a 13% revenue CAGR for ASM and 15% for Besi in the next decade, with artificial intelligence as the main growth driver. We expect Besi’s growth will be more cyclical than ASM’s.
Big picture: We maintain our Exemplary Capital Allocation Rating for both firms. ASM and Besi remain highly focused on niche, differentiated revenue pools rather than chasing broader markets at lower margins. Given the high technical requirements of manufacturing advanced semiconductors, we welcome their strategic focus.
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