Morgan Stanley revised upward its outlook for the semiconductor production equipment sector, citing stronger-than-expected demand for DRAM and advanced logic applications. The bank now expects wafer fabrication equipment (WFE) growth of nearly 60% year-over-year in 2026, up from prior estimates, while 2027 DRAM-specific WFE growth is projected at just under 30%.
The April-June earnings season provided few positive surprises for the broader industry, though Japanese equipment makers showed mixed reactions. Advantest stood out as a clear outperformer, raising its full-year guidance and signaling plans to expand capacity. Morgan Stanley maintained Advantest as its top pick, noting the company’s results point to upside beyond current forecasts. An updated capacity expansion plan is expected during the July-September or October-December reporting periods.
Disco, Lasertec, and JEOL reported guidance in line with Morgan Stanley’s expectations, yet their shares declined after earnings as market expectations had already priced in strong performance. The bank favored Tokyo Electron, whose shares have recovered only modestly following a July pullback, with upside seen in second-half sales and profit as WFE demand strengthens.
The improved outlook reflects accelerating DRAM investment, supported by major semiconductor manufacturers’ robust capital expenditure plans in foundry and logic segments. Morgan Stanley’s revised forecasts align with industry signals that 2027 DRAM growth will outpace other applications, reinforcing the sector’s demand trajectory.
