Beyond the Machine Sale: Who Captures the Next Wave of Equipment Spending?

Selling a machine is a single transaction. Supporting it is a relationship that can last for many years. Once a tool is running in a customer’s fab, it needs maintenance, spare parts and, often, upgrades that raise its output or extend it to new processes.

That distinction shapes the economics of equipment suppliers. Revenue from new systems follows the chip industry’s investment cycle closely. Revenue from the installed base tends to follow how intensively fabs use the tools they already own. This article looks at both, and at the competitive changes that could redistribute them.

Three ways equipment demand can grow

The first route is capacity. When chipmakers build new fabs or expand existing ones, they buy more tools. This is the most visible driver and the most cyclical.

The second route is intensity. Some technology transitions require more steps per wafer, or more demanding steps, without any increase in wafer output. That does not mean every category gains. A transition can raise demand for deposition and etch while leaving another process largely unchanged.

The third route is the installed base: services, spare parts, upgrades and eventually replacement. It grows as the population of tools in the field grows.

Process complexity, in the vendor’s words

Applied Materials’ April 2026 Master Class presentation sets out the case for intensity. Citing TechInsights, it describes 2025 wafer-fab equipment of $115 billion by technology and states that materials engineering accounts for about half of it; on the same slide, lithography together with track and mask writing accounts for 28% and process control for 15%. The slide’s classification excludes $4.2 billion of ‘Other WFE’, so its percentages are not directly comparable with the 2024 Gartner mix used in our companion article.

The presentation links several transitions to rising materials-engineering intensity: gate-all-around transistors, in which the gate wraps around stacked channels; backside power delivery, which moves power wiring beneath the transistors; advanced DRAM and high-bandwidth memory (HBM); and advanced packaging. These are Applied Materials’ expectations about its own markets. They are useful as a map of where a large supplier sees opportunity, but they are not independent forecasts.

Different transitions, different exposures

Each transition touches different processes. Stacked transistor structures and vertical memory architectures demand more precise deposition and deeper, more selective etch. Tighter tolerances raise the value of inspection and measurement. Advanced packaging brings wafer-processing techniques into the assembly stage.

The matrix describes potential exposure in qualitative terms. Exposure is a starting point for analysis, not a conclusion. Whether a supplier benefits depends on whether its tools are chosen, how well it executes, what competitors offer and what investors already expect.

The economics after delivery

After a tool is installed, revenue can come from several sources: routine maintenance and service contracts, spare parts and consumable components, productivity upgrades that raise throughput, process upgrades that let an existing tool run newer recipes and, where suppliers offer it, software and monitoring.

Morningstar estimates that services represented roughly 25% of combined revenue across the six equipment companies it covers. That is an aggregate for its coverage. Individual companies report their own figures and definitions, and the share differs between them.

An installed base can support recurring demand because the tools keep running. It is not immune to the cycle. When fabs cut utilization, they may defer parts and upgrades, and only part of service revenue is governed by multi-year contracts. Describing services as subscriptions would overstate their stability.

China: different competitive pressure by process

Georgetown’s Center for Security and Emerging Technology (CSET), in an analysis published on 15 September 2026, estimates Chinese suppliers’ share of global sales within selected 2025 equipment categories: 12.6% in CMP, 10.2% in its combined etch-and-clean category, 9.8% in deposition and approximately 0.2% in lithography.

Two cautions apply. These are Chinese suppliers’ shares within each category, not each category’s share of the total market. And Chinese suppliers’ market share is a different measure from Chinese customers’ spending, which has been a large source of demand for foreign suppliers too.

The figures suggest a question rather than an answer: where might incumbent suppliers face more local competition? On these numbers, the pressure is most visible in CMP, etch, cleaning and deposition, and minimal in lithography. Share gains alone do not prove technological parity; much of this competition may be at mature process nodes.

What investors should monitor

Seven indicators help separate durable advantage from the cycle:

1. Customer capital-expenditure plans, and whether actual spending matches them. 2. Orders, backlog and revenue recognition, where companies disclose them. 3. The mix between new equipment and services, and how fast services grow. 4. Gross-margin changes and the causes companies give for them. 5. Customer concentration and geographic exposure, including China. 6. Adoption of new products at leading customers, and execution on delivery. 7. Competitive shifts within each process category.

A large market share is not automatically an attractive investment. The price paid, the point in the cycle and the risks to that share all determine the return.

Conclusion

Equipment suppliers sell into a market whose size swings with chipmakers’ investment budgets, but their economics extend well beyond each sale. Process complexity can raise intensity in specific categories, and a growing installed base can add a steadier stream of service and upgrade revenue.

The analysis would strengthen if company disclosures show service revenue growing through a downturn, if new transitions translate into reported orders, and if local competition in China remains concentrated in mature categories. It would weaken if services prove as cyclical as new systems, if vendor expectations about intensity are not borne out, or if Chinese suppliers extend their gains to leading-edge tools.