Japan and the EU Semiconductor: ASML and Japanese SPE — DRAM Shortage Drives Capacity Expansion

ASML and Japan SPE: DRAM shortage fuels capacity rush The DRAM makers are accelerating the pace of capacity expansiondue to the David Dai, CFA brought forward to March 2026, Yongin Y1 fab phases 1-2 to 2027. Samsung is pullingforward P4 phases 2/4 as well as P5. Micron purchased PSMC Tongluo fab in Taiwan, andraised capex guidance to $25bn from $20bn. In addition, DRAM makers are seeking longterm contracts which may include capex support from customers, which should furtherincrease the capacity build out in 2028 and beyond. Based on our estimates, the DRAM capacity build-out acceleratesfrom 145kadditional wafers per month in 2025 to 245k in 2026, and further accelerates to330/435k in 2027/28. During 2026-2028, the top 3 DRAM makers are adding around 1mn monthly wafer capacity for equipment, bringing the industry capacity to 2.58mnwafers per month. Our propietary DRAM capacity build out to WFE model is available here. This brings significant growth to ASML. We estimate that for every 100k greenfieldDRAM capacity requires 6 EUV machines for 1c node, and probably will require 7-8 in 1dnode. Upgrades from 1a to 1c would require 3 EUV machines for every 100k capacity.Based on the capacity additions, we forecast ASML to ship 44 EUV machines to DRAM in 2028, representing 45% of ASML’s EUV shipment. This is more than double from 18 units in 2025, or 34% of ASML’s EUV shipment then. We raise ASML EUV shipment in 2028 from79 to 92 units, and EPS from EUR 45.3 to 50.4.PT is raised to €1,700(from €1,600)based on the same 40x multiple.ASML remains our top pick for the EU Semis sector.There is upside to overall DRAM WFE and hence Japan SPE as well. We estimatethe WFE capex for every 100k wafer capacity of 1c node to be $10bn for greenfieldcapacity, and $5.4bn for upgrades. Based on this, we see 2028 global (ex-China) DRAM WFE to increase to $76bn, up from $30bn in 2025. Note that our house view WFE modelstill has 2028 global ex-China DRAM WFE of $51bn. Based on our now-higher DRAM WFE expectations, we raise Tokyo Electron and Kokusai forecast to reflect the higherDRAM capex outlook, and revise our target price.For TEL, we raise PT to ¥56,800(from¥49,900) with the same 32x P/E; forKokusai, we raise PT to ¥8,620.00(from ¥7,080)with the same 30x P/E.Kokusai is now our top pick in the Japan Semis sector after therecent correction(see pages 7-12 for PT details). BERNSTEIN TICKER TABLE INVESTMENT IMPLICATIONS We rate ASML (TP=€1,700), Tokyo Electron (TP=¥56,800) and Kokusai (TP=¥8,620.00) Outperform. DETAILS WIDENING DRAM SUPPLY AND DEMAND GAP BRINGS UPSIDE TO WFE DRAM capacity expansion and hence capex hike has been one of the major thesis for ASML and WFE (EU Semis: 2026 outlook- Upgrading ASML to Outperform and Top Pick). With the surge of DRAM demand from generative AI, including both HBM and DDR for AI servers, the supply and demand gap widened. DRAM price surged and is projected to go up further (Exhibit 1, Exhibit2). In response, the DRAM makers are accelerating the pace of capacity expansion. We estimate the latest forecast of capacity expansion and see a big upward revision from our previous forecast, in particular in 2027 and 2028. This report details thetrend and upward revision. ...and for servers. Source: DRAMeXchange, Bernstein analysis. ACCELERATING DRAM CLEAN ROOM BUILD-OUT AND EQUIPMENT MOVE-IN DRAM capacity expansion has been one of the major theses for ASML and the broader WFE space. With DRAM prices surgingand the gap between AI-driven supply and demand widening, all three major DRAM makers are now pulling forward their cleanroom and equipment move-in timelines in ways that go beyond prior expectations. We believe that the prevailing trend of longer-term contracts are definitely helping DRAM companies to add more capacity.Samsung’s mentioned transitioning more into 3-5 year LTAs during the recent AGM, and Micron also highlighted their first 5-year strategic customer agreement (SCA) during Q2 earnings. We believe this strong customer demand as well as greater SK Hynix • M15X 2nd clean room.Per Donga, SK Hynix has opened their second clean room at their M15X fab and already begunequipment move-in as of March 2026, pulling in the original May 2026 schedule by 2 months. The first clean room at M15X — with 90kwpm capacity at full utilization — opened in October 2025 and has been loading wafers since February 2026 withfinished products expected as early as 1H 2026. •Yongin Y1 clean rooms.Hynix has also pulled forward the clean room opening of Y1 phases 1-3 significantly, per TheElec.Phase 1/2/3 is now slated to open in ‘27/’27/’28, pulled forward from ‘27/’28/’29. Of which, phase 1 was pulled forwardby 3 months per Donga, to February 2027 from May 2027. Y1 is a six-phase, ~400kwpm capacity fab at full utilization •€6.9bn of EUV scanners announced.Hynix has filed a capex plan which lays out their plan to buy €6.9bn worth of ASML’sEUV scanners over the next two years up to December 2027