Strong orders, but how far away is large-scale HBM production?

  • Besi’s chief executive said AI is the main driver of orders and that demand across the semiconductor industry is also improving more broadly; the company has received cumulative demand for more than 215 hybrid bonding tools from 23 customers.
  • Adoption of hybrid bonding in logic-chip mass production continues to advance. By contrast, HBM-related orders are currently mainly for research and development, qualification and pre-production preparations. All three memory manufacturers are developing hybrid bonding for HBM, but the timing of large-scale adoption remains uncertain.
  • According to the company, HBM hybrid bonding tools typically cost around 2 million to 3 million euros each. JPMorgan understands that the latest HBM order disclosed in the third quarter came from a customer that has completed equipment qualification and is moving toward pre-production preparations, driven by demand from a major end customer.

Why does hybrid bonding have an opportunity, and what constrains expansion?

  • The company says that, compared with conventional reflow processes, hybrid bonding can improve performance, reduce power consumption and increase interconnect density, advantages that are becoming increasingly important for data-center applications. Architectures that stack HBM or DRAM directly on logic chips or accelerators also point to long-term application opportunities.
  • Yields and process windows for logic-chip projects are improving. Besi believes it can supply the required equipment when customers move to mass production, but the timing depends on end demand and technical qualification.
  • Customers are also assessing the ability of Besi’s supply chain to support large-scale expansion. As equipment becomes more complex, the company needs to gradually add trained installation, operations and service personnel; support capacity cannot be expanded immediately.

What can TC-Next and the Applied Materials partnership deliver?

  • The TC-Next thermocompression bonding platform has received its first repeat order for HBM stacking, and its customer count has risen to seven. The company believes some applications need hybrid bonding, while others can still use advanced thermocompression bonding; the two technologies can develop in parallel.
  • TC-Next demonstrated a bonding pitch below 10 micrometers at IMEC, compared with a current market standard of approximately 20 micrometers. It also supports a flux-free process, eliminating the subsequent flux-removal step.
  • Applied Materials announced that it would increase its stake in Besi to 20%. The companies’ technologies are complementary: Besi provides bonding equipment, while Applied Materials offers capabilities in materials, wafer and chip preparation, and cleaning. The first EPIC Center project will combine hybrid bonding and thermocompression bonding for a major US customer.

How do expansion and changes in technology paths affect the earnings outlook?

  • Besi said its gross margin remained around 65% despite inflation and unfavorable movements in the US dollar. The company’s guidance for the fourth quarter of 2026 is 63% to 65%, in line with the third quarter; the precise level depends mainly on the product mix.
  • The company is reassessing its roadmap for the next 3 to 5 years in light of delayed HBM hybrid bonding adoption and advances in conventional reflow and thermocompression bonding processes. Management expects to reach a conclusion in early January 2027, including whether the previous long-term revenue framework of 1.5 billion to 1.9 billion euros remains appropriate.
  • Because of delayed adoption, JPMorgan lowered its price target from 342 euros to 275 euros, valuing the stock at 33.5 times its forecast earnings per share for 2028, and maintained its Overweight rating. The bank believes near-term orders and sales may remain strong, but a move in the share price toward the target will still require more favorable news on hybrid bonding adoption.