Written by: Rita
On August 23, Goldman Sachs released a global report on the semiconductor capital equipment industry, raising its forecasts for front-end wafer fabrication equipment (WFE) spending for 2026, 2027, and 2028 to $150 billion, $218 billion, and $281 billion, respectively—representing increases of 6%, 17%, and 35% compared to prior estimates. The revised three-year year-over-year growth rates are 36%, 45%, and 29%, up from the previous expectations of 28%, 32%, and 12%.
Goldman Sachs believes that this round of upgrades is primarily driven by short-term demand for DRAM and advanced-node foundry services, with NAND and logic/other (including Terafab) set to take over in the medium term. The simultaneous expansion of the storage and logic segments is shifting the equipment industry’s demand base from a single-driver structure to a multi-driven one.
DRAM equipment spending is accelerating, and capacity constraints are expected to persist through 2028.
DRAM was the segment with the largest upward revision. Goldman Sachs raised its WFE forecasts for 2026 to 2028 from $46 billion, $67 billion, and $74 billion to $48 billion, $72 billion, and $97 billion, respectively, increasing the year-over-year growth rates from 45%, 45%, and 10% to 50%, 50%, and 35%. Capital expenditure forecasts for Samsung and SK Hynix were raised by 22% and 19%, respectively.
HBM4 is the direct driver behind the significant upward revision in DRAM capital expenditures. Compared to HBM3, HBM4 employs a more advanced packaging architecture, demanding higher via density, finer micro-bump pitch, and enhanced thermal management capabilities. This means that investment in etching, deposition, and inspection equipment per 10,000 wafers per month will increase substantially. Goldman Sachs expects that, even with DRAM capital expenditures remaining high, industry capacity constraints will persist until 2028, and equipment suppliers will enjoy extended order visibility.
Foundry and logic capacity expand in tandem, with Terafab contributing incremental capacity.
In the contract manufacturing sector, Goldman Sachs raised its WFE forecasts for 2026 to 2028 from $52 billion, $68 billion, and $78 billion to $58 billion, $84 billion, and $109 billion, respectively, with year-over-year growth rates increasing from 30%, 30%, and 16% to 45%, 45%, and 30%. TSMC's annual capital expenditure outlook was raised by $8 billion, primarily driven by increased intensity in N2 process development and strong customer demand.
N2 is TSMC’s first mass-production node to adopt a gate-all-around (GAA) transistor architecture. Compared to N3, N2 has higher process complexity, significantly increasing demand for equipment such as EUV lithography, atomic layer deposition, and selective etching. Goldman Sachs expects N2 volumes to continue ramping over the next several quarters, driving procurement across the entire equipment supply chain. Equipment intensity for advanced-node foundry manufacturing is significantly higher than for mature nodes, with each node transition requiring greater equipment investment per unit of capacity.
The upward revision for WFE in logic and other segments is also significant. The forecast for 2026 to 2028 has been raised from $32 billion, $35 billion, and $37 billion to $34 billion, $47 billion, and $53 billion, with year-over-year growth rates increasing from 5%, 9%, and 6% to 11%, 40%, and 12%. The incremental demand primarily stems from stronger-than-expected demand from Intel and the recovery of the mature node and analog markets.
Terafab is an important new variable in this forecast. Goldman Sachs has included SpaceX’s and Tesla’s committed approximately $16.8 billion in initial equipment spending for Terafab within the logic/other category of its WFE forecast. The initial equipment procurement for Terafab covers all major categories—including lithography, etching, deposition, and inspection—closely overlapping with the equipment demands of logic chip foundry. Terafab accounts for the majority of the growth in the logic/other segment. Goldman Sachs believes the impact of Terafab is still in its early stages, and this category has further upside potential as subsequent phases are implemented.
Regarding NAND, Goldman Sachs has maintained its forecasts for 2026, 2027, and 2028 at $11 billion, $15 billion, and $22 billion, respectively, lowering the 2027 estimate from $17 billion to $15 billion primarily due to adjustments in capital expenditure timing by some manufacturers. Goldman Sachs expects near-term NAND equipment spending to be driven mainly by technology upgrades, with the tight supply situation continuing through 2027.
Equipment suppliers benefit comprehensively from the upward revision of WFE.
Goldman Sachs is bullish on global semiconductor equipment stocks. Key recommendations include Applied Materials, Lam Research, ASML, Tokyo Electron, ASMI, BESI, Lasertec, and Ebara.
DRAM capacity expansion is driving demand for etching and deposition equipment, with Applied Materials and Lam Research as the primary beneficiaries. HBM4 demands extremely high precision in TSV etching and copper filling deposition, and both companies possess leading technologies in these process steps, with clear order visibility.
The ramp-up of N2 process manufacturing is driving demand for lithography equipment. Demand for ASML’s EUV and DUV lithography systems continues to rise. The N2 process requires approximately 20% more EUV layers than N3, and each layer demands higher exposure doses, directly increasing lithography equipment consumption. Lasertec, a inspection equipment provider, also benefits from expansion in both DRAM and logic segments. In advanced packaging test equipment, BESI and Ebara benefit from increased complexity in HBM packaging.
Goldman Sachs has raised not only its numbers but also its assessment of the industry cycle. DRAM, foundry, NAND, and logic segments are expanding in sync, with Terafab beginning to contribute incremental growth. The foundation for equipment industry growth is shifting from a single structural recovery to multiple drivers. Equipment suppliers are experiencing rising order visibility and improving profit margins.
Disclaimer
This article is a compilation and interpretation by Chaoxiang Research of a third-party brokerage research report (Goldman Sachs, August 23, 2026), combined with publicly available market information. The ratings, price targets, earnings forecasts, and related judgments cited herein reflect the views of the brokerage’s analysts and represent only the position of their respective institution; they do not reflect the views of Chaoxiang Research nor constitute any investment advice.
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