Wafer fab equipment (WFE) spending continued its upward trajectory in 2025, underscoring the semiconductor industry's shift toward AI-led growth and advanced manufacturing.

Global WFE vendor revenue rose 12% year over year to $143 billion in 2025, driven by large-scale AI infrastructure build-outs. Demand surged for leading-edge logic, high-bandwidth memory (HBM), and advanced packaging tools.

According to Counterpoint Research's Wafer Fab Equipment Tracker, the top five manufacturers posted a combined 14% revenue increase to $114 billion, supported by double-digit growth in both systems and services.

2026 Outlook: Upcycle Intact Despite Risks

The WFE outlook remains structurally strong, with revenues projected to grow about 11% year over year in 2026. Growth is expected to skew toward the second half, led by lithography, etch, deposition, process control, and advanced packaging.

However, risks persist. Export controls, infrastructure bottlenecks, and the complexity of the 2nm transition could weigh on timing and execution. Meanwhile, trailing-edge segments such as IoT, automotive, and power sensors are likely to remain flat.

Foundry and Memory Drive Growth

Foundry-logic remained the primary engine, with revenue rising 8% year over year and accounting for 65% of net system sales in 2025. AI-driven demand pushed advanced node adoption, with sub-5nm shipments exceeding 50%.

Memory rebounded strongly, with revenue up 16% year over year. Growth was fueled by rising demand for AI-optimized DRAM and NAND, particularly HBM. A sharp sequential increase in late 2025 signals continued capacity expansion as suppliers prepare for next-generation memory transitions, including HBM4.

Geographic and Structural Shifts

China's share of WFE revenue among the top five manufacturers declined to 32% in 2025, reflecting export controls and shifting regional investments. Growth was offset by capacity expansion in other global hubs.

Over the past decade, WFE spending has grown at a 14% CAGR, marking a shift from capacity-driven to technology-driven capital expenditure. Increasing complexity at advanced nodes and packaging is raising tool intensity per chip.

Analyst View: A New ‘WFE Intensity' Cycle

Counterpoint analyst Ashwath Rao said, "The traditional model of evenly distributed WFE spending is giving way to a new reality." He added that AI-driven complexity and the 2nm transition are structurally increasing equipment demand across logic and memory.

He noted this trend benefits ASML Holding N.V. (NASDAQ:ASML), Applied Materials, Inc. (NASDAQ:AMAT), Tokyo Electron Limited, Lam Research Corporation (NASDAQ:LRCX), KLA Corporation (NASDAQ:KLAC), Advantest Corporation, and Teradyne, Inc. (NASDAQ:TER).

Rao added that surging HBM demand from Samsung Electronics Co., Ltd. (OTC:SSNLF), SK Hynix Inc. and Micron Technology, Inc. (NASDAQ:MU) is shifting value toward foundries such as Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and packaging leaders including ASE Technology Holding Co., Ltd. (NYSE:ASX) and Amkor Technology, Inc. (NASDAQ:AMKR).

Analyst William Li noted, "Given ongoing capacity constraints at Taiwan Semiconductor, AI customers are actively securing additional capacity through long-term partnerships with OSAT vendors. As a result, industry capacity for advanced packaging could expand by roughly 80% YoY in 2026."

Rao added, "We are moving into a cycle dominated by leading-edge foundry, DRAM/HBM, and advanced packaging. This is driving a higher WFE intensity cycle that will persist through the second half of the decade."

Image via Shutterstock