The wafer fab equipment, or WFE, market is expected to increase in 2026 following a record-setting 2025, according to Morgan Stanley.
The 2026 growth will be driven by dynamic random-access memory, or DRAM, along with leading-edge logic and China. The financial firm expects the WFE market to total $117B in 2025, which is a 14% year-over-year gain propelled by logic and NAND. They project 2026 to climb by another 5% to reach $122B.
“Initially, we anticipated 2025 to be a digestion year with declines in China and DRAM following record WFE in 2024, but shipments have exceeded expectations for both end-markets,” said Morgan Stanley analysts, led by Shane Brett, in a detailed report on semiconductor capital equipment. “We model Lam Research (NASDAQ:LRCX) (+35%), KLA (NASDAQ:KLAC) (+17%) and ASML (NASDAQ:ASML) (+16%) to outperform WFE, with LAM’s outperformance driven by NAND & China, KLA by DRAM, and ASML by foundry logic.”
Morgan Stanley expects DRAM and TSMC (NYSE:TSM) to help produce a record high in 2026.
“Our views on the growth drivers into 2026 are: 1) DRAM: We model 10% y/y growth as leading-edge greenfield should accelerate driven by Samsung (OTCPK:SSNLF) and Hynix. 2) TSMC: WFE mix of capex normalizing back to 80% could drive equipment upside on a flat $40bn headline capex. 3) Leading-edge logic: Intel (INTC) and Samsung reaccelerating foundry investment is the biggest upside risk to our forecast,” according to the investment firm.