Can Canon give a hand to Japan's semiconductor equipment industry?

While Japanese manufacturers continue to lose market share in the front - end semiconductor manufacturing equipment market, Canon is thriving. Its Nanoimprint Lithography (NIL) technology is expected to bring about a paradigm shift in the optical lithography process.

In 2022, there was a special COVID - 19 boom, but this boom ended in 2023, giving way to a semiconductor recession. This led to a decline in the shipment value of many front - end process equipment, including dry etching equipment, inspection equipment, and CVD equipment. However, in 2024, the market recovered from the recession, and the shipment value of most equipment began to increase. At this time, the inspection equipment was calculated as the sum of appearance inspection equipment and defect inspection equipment, and the cleaning equipment was calculated as the sum of single - wafer type and batch type, and a chart was created (Figure 1).

Next, we summarized the company shares, European and American shares, and the market size in 2024 of various front - end process equipment on a single slide (Figure 2). From this figure, the following facts can be inferred.

First, the market share of each front - end process equipment is mainly occupied by manufacturers from Europe, the United States, and Japan, but the rise of Chinese manufacturers is particularly significant. Among them, Naura Technology Group (6%) and ACM Research (6%) are continuously increasing their shares in the dry etching equipment field, and Naura Technology Group (12%) is continuously increasing its share in the PVD equipment field.

Second, there are four types of equipment with a market size exceeding $10 billion, all of which are occupied by European and American manufacturers. Among them, the lithography equipment is worth $24.4 billion, with ASML accounting for 94.1%; the dry etching equipment is worth $17.1 billion, with Lam Research and Applied Materials accounting for 58.9%; the visual inspection equipment is worth $14.3 billion, with KLA and Applied Materials accounting for 69.6%; and the CVD equipment is worth $11.5 billion, with Applied Materials and Lam Research accounting for 62.3%.

Third, Japan occupies the main share in fields such as coating and developing equipment (94.5%), heat treatment equipment such as vertical diffusion furnaces (82.2%), single - wafer cleaning equipment (63.5%), batch cleaning equipment (73.5%), mask inspection equipment (50%), and CD - SEM (65.5%). However, the market size of these equipment is relatively small.

Figure 1: Trend of shipment value of various front - end process equipment. Source: Data from Morgan Stanley Securities, compiled according to the author's research 

Figure 2: Shares and market size of front - end process equipment manufacturers in Europe, the United States, and Japan (2024). Source: Data from Morgan Stanley Securities, compiled according to the author's research 

In short, the front - end equipment market is mainly dominated by Europe, the United States, and Japan. The huge market exceeding $10 billion is mainly dominated by European and American manufacturers. Meanwhile, Japan occupies the majority share in six types of equipment, but the market size of these equipment is not large. So, what exactly is the overall regional share of front - end equipment?

Japan's regional market share of front - end equipment continues to decline

I first realized this critical situation on July 11, 2022. Since then, I have been closely monitoring the development of the situation, but the situation has been getting worse.

Figure 3 shows the trend of the regional market share of all front - end equipment as of 2024. From the figure, it can be seen that until around 2010, Japan was still competing with the United States for the first place. However, since 2011, Japan's market share has declined sharply. By 2023, it was surpassed by Europe and dropped to the third place. By 2024, the gap with Europe will further widen.

Figure 3: Global front - end processing equipment market and regional shares. Source: Data from Morgan Stanley Securities, compiled according to the author's research 

As of 2024, the market share by region will be 44.3% for the United States, 29.2% for Europe, 21.7% for Japan, 3.4% for China, and 1.4% for South Korea. It should be noted that the shipment value of domestic front - end process equipment in China is not always accurate, and the actual share may be higher than 3.4%. If so, Japan will not only widen the gap with the United States and Europe but may also face rapid catch - up from China.

So, why did Japan's market share decline sharply after 2011? To find out the reason, we compared the market shares of various front - end process equipment from 2011 to 2021 - 2024 (Figure 4). The results showed that only the market share of mask inspection equipment increased significantly, while the market shares of almost all other equipment declined. In other words, the decline in Japan's overall market share is not due to a specific equipment category but to the decline in the market shares of most front - end process equipment since 2011.

Figure 4: Market share of various front - end process equipment in Japan (2011 → 2021 - 2024). Source: Data from Morgan Stanley Securities, compiled according to the author's research 

This is an extremely tricky problem because the overall market share is declining. Even if the market share of some equipment (such as the mask inspection system) increases, it is not enough to make up for the overall decline.

As the author, I can say this: "I hope that Japanese equipment manufacturers such as Tokyo Electron, Screen, EBARA, KOKUSAI, Canon, Nikon, Hitachi High - Technologies, Lasertec, and Tokyo Seimitsu will do their best to restore and expand their market shares in their respective fields." In such an environment, it is obvious that Canon is doing very well in the lithography equipment field, which will be discussed in detail in the next section.

Proportion of shipment value and shipment volume of lithography equipment

Figure 5 shows the market share of each company in the lithography equipment market, which is the largest in the front - end process equipment market, worth $24.4 billion. As of 1995, Japanese companies collectively accounted for 77.6% of the market share, with Nikon accounting for 48.9%, Canon accounting for 28.7%, and ASML accounting for 15.9%.

Figure 5: Shipment value of lithography equipment and shares of each company (as of 2024). Source: Data from Morgan Stanley Securities, compiled according to the author's research 

However, the market shares of Nikon and Canon declined rapidly, while ASML's share expanded rapidly. In 2006, ASML's market share exceeded 60%, in 2010 it exceeded 80%, and in 2021 it reached 95%, and has since remained at a high level of around 95%. As of 2024, the market shares of Japanese manufacturers are still small, with ASML accounting for 94.1%, Nikon for 2.5%, and Canon for 3.4%.

So far, we have learned about the market share based on shipment value. Next, we will learn about the shipment volume and the shares of each company (Figure 6). The annual shipment volume of lithography equipment remained at around 300 units until around 2017, but then began to increase. In 2023, it reached 681 units, and in 2024 it reached 682 units, more than twice that of the early 2010s.

Figure 6: Shipment volume and market share of lithography equipment of each company (as of 2024). Source: Data from Morgan Stanley Securities, compiled according to the author's research 

In terms of shipment volume share, ASML's share has basically remained stable above 60%. Meanwhile, Nikon's share declined sharply from 23.7% in 2011 and will drop to 4.7% by 2024. In contrast, Canon's share increased steadily from 14.5% in 2011 and will reach 32.7% by 2024. Therefore, while Nikon's shipment volume is sluggish, Canon's market share has approached more than half of ASML's.

So, what type of lithography equipment is Canon good at?

Shipment volume of various types of lithography equipment of each company

Figure 7: Shipment volume of various types of lithography equipment of each company (2023, 2024). Source: Data from Morgan Stanley Securities, compiled according to the author's research 

Figure 7 shows the shipment volume of various types of lithography equipment of each company in 2023 and 2024.

First, the most advanced lithography equipment, Extreme Ultraviolet (EUV) lithography equipment, which costs about 30.8 billion yen per unit, is only supplied by ASML. In 2023, 53 units were shipped, and in 2024, 44 units were shipped. The prices of various lithography equipment are calculated based on the shipment volume and amount of ASML.

For the ArF immersion printer, which costs about 12.1 billion yen per unit, ASML shipped 125 units in 2023, and Nikon shipped 9 units. In 2024, ASML shipped 129 units, and Nikon shipped 4 units.

For the ArF dry laser, which costs about 5.1 billion yen per unit, ASML shipped 32 units in 2023, and Nikon shipped 10 units; in 2024, ASML shipped 29 units, and Nikon shipped 7 units.

In 2023, ASML shipped 184 units of KrF, Nikon shipped 2 units, and Canon shipped 56 units, with each unit priced at about 2.1 billion yen. In 2024, ASML shipped 129 units, Nikon remained at 3 units, and Canon shipped 51 units, roughly the same as the previous year.

For the i - line printer, which costs about 1.1 billion yen per unit, ASML shipped 55 units in 2023, Nikon shipped 24 units, and Canon shipped 131 units, far outperforming ASML. In 2024, ASML's shipment volume decreased to 44 units, and Nikon's decreased to 18 units, while Canon's shipment volume increased to 182 units, an increase of more than 50 units compared to the previous year.

As can be seen from the above, in terms of each model, ASML maintains an overwhelming advantage in EUV and ArF immersion/dry, but there is an obvious decline in KrF, while Canon has a strong position in the i - line.

Next, let's look at the shipment share of each company for various types of lithography equipment.

Proportion of shipment volume of various types of lithography equipment of each company

Figure 8 shows the proportion of shipment volume of various types of lithography equipment in 2023 and 2024. As for EUV, currently only ASML has the ability to manufacture it, so ASML's share will be 100% in both 2023 and 2024.

Figure 8: Proportion of shipment volume of various types of lithography equipment of each company (2023, 2024) 

For the ArF immersion lithography machine, ASML's market share was 93.3% in 2023, and Nikon's was 6.7%. By 2024, ASML's market share will be 97.0%, and Nikon's will be 3.0%. ASML still maintains an overwhelming advantage.

In the ArF dry aspect, ASML accounted for 76.2% in 2023, and Nikon accounted for 23.8%. By 2024, ASML's share will reach 80.6%, and Nikon's will be 19.4%. That is to say, compared with ArF immersion, Nikon has a certain presence.

For KrF, ASML accounted for 76.0% in 2023, Nikon accounted for 0.8%, and Canon accounted for 23.1%. In 2024, ASML will decline slightly to 70.5%, and Nikon and Canon will increase slightly, accounting for 1.6% and 27.9% respectively.

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