Chipmakers raise capex to $60 billion as pricing power spreads upstream

Global semiconductor pricing power is spreading upstream from memory to equipment and materials, with TSMC lifting 2026 capex to $60-64 billion and equipment makers raising margin targets as demand beats forecasts.

JPMorgan analysts said in an Aug. 17 note that the Q2 earnings season delivered an unusually clear bullish signal, with demand strength exceeding expectations from three months ago and price increases extending from memory chips into semiconductor equipment and materials.

TSMC raised its calendar 2026 capital spending plan about 15 percent to $60-64 billion, up 52 percent year over year at the midpoint, with 70-80 percent earmarked for advanced process technologies. Intel lifted its plan to $20 billion, up 11 percent, with equipment spending set to surge 40 percent. SK Hynix announced 40 trillion won (about $28 billion), up 45 percent, pulling forward its M15X production ramp.

The capex surge and pricing power suggest the semiconductor equipment industry's earnings elasticity is being systematically underestimated, JPMorgan said. Tokyo Electron expects gross margins to reach 50 percent by early fiscal 2027 from 47 percent in April-June, while Lam Research targets 55 percent from 52 percent. Applied Materials' semiconductor systems gross margin already exceeds 55 percent.

Equipment makers have sharply revised their wafer-fab equipment (WFE) market forecasts. Tokyo Electron now sees at least $150 billion in 2026 and $190 billion in 2027, up from a prior $150-170 billion range. Lam Research and KLA both raised their 2026 outlooks to the low end of the $150 billion range, while SCREEN Holdings projects at least $140 billion, up more than 20 percent year over year. Lam also lifted its estimate of AI-driven WFE demand to $9-10 billion per $100 billion of AI investment, from $8 billion.

The broader market confirms the trend. Global WFE spending is projected to reach $135.2 billion in 2026, up 16.9 percent from $115.7 billion in 2025, with 300mm DRAM equipment spending rising 29 percent to $37 billion and 3D NAND investment up 28 percent to $14 billion, according to industry data. ASML ended 2025 with a €38.8 billion backlog, with memory orders exceeding logic orders in the fourth quarter.

Memory Long-Term Agreements Lock In an 80% Profit Floor

Memory makers are locking in future profits through long-term agreements with prepayments. Samsung has finalized five LTAs with data-center customers, with five more in final negotiation, using five-year rolling contracts. SK Hynix has signed 10 contracts on five-year terms with prepayments. SanDisk has signed eight contracts, three with U.S. hyperscale cloud providers, averaging four years and covering 50 percent of its fiscal 2027 bit demand and about two-thirds of fiscal 2028 demand.

The most striking detail: SanDisk management said even at the floor price of its variable pricing structure, gross margins can still reach about 80 percent. That means even under the most pessimistic pricing scenario, memory makers' profitability remains strongly supported, JPMorgan said.

Intel's Asset-Light Path Back Into Memory

Intel is attempting to re-enter memory through an asset-light model of architecture definition plus packaging foundry, rather than heavy DRAM manufacturing. CEO Lip-Bu Tan has hired former SK Hynix CEO Lee Seok-hee as executive vice president of foundry operations, overseeing advanced packaging and system integration. Lee led SK Hynix's $9 billion acquisition of Intel's NAND business in 2020 and helped build its HBM franchise to roughly 60 percent market share.

Intel plans to use EMIB and Foveros packaging for deep HBM collaboration with SK Hynix, and is partnering with SoftBank's SAIMEMORY on ZAM diagonal stacking memory targeting volume production around 2030 at 60 percent of HBM's production cost. But Intel lacks DRAM die manufacturing, making it dependent on external procurement, and its ZAM architecture trails Samsung's zHBM, expected between 2028 and 2029.

For investors, the equipment names offer the cleanest exposure. ASML provides the clearest visibility through its €38.8 billion backlog, while Applied Materials and Lam Research offer greater leverage to the memory recovery through deposition and etch, though both carry higher China risk. The principal cyclical risk remains eventual memory overinvestment, but current spending is concentrated on infrastructure and process migration, suggesting the industry has not yet reached that stage.

This article is for informational purposes only and does not constitute investment advice.