ASML.US may enter the hybrid bonding market to challenge BE Semiconductor Industries (BESIY.US) leading position. Bank of America downgraded BESIY.US to “Neutral” and nearly halved its target price.

According to Golden Ten Data APP, Bank of America believes that the current stock price of Dutch semiconductor equipment manufacturer BE Semiconductor Industries (BESIY.US) has not yet fully reflected the potential competitive threat from ASML (ASML.US). The bank downgraded BE Semiconductor Industries’ rating from "Buy" to "Neutral" and lowered its target price by nearly half. As a result, the stock fell by more than 6% on Tuesday.

BE Semiconductor Industries currently holds a leading position in the Hybrid Bonding equipment market. Hybrid Bonding is an emerging advanced packaging technology that enables direct connection between two chip surfaces, eliminating traditional metal bumps and thereby improving chip interconnect density and heat dissipation efficiency. With rising demand for advanced packaging technologies driven by AI chips and high bandwidth memory products, this technology has become a key pillar for the company’s future growth prospects.

Bernstein analysts estimate that by 2028, about three-quarters of hybrid bonding equipment shipped worldwide may come from BE Semiconductor Industries. The company itself holds high expectations for this market. In an optimistic scenario, it expects the number of hybrid bonding devices shipped to exceed 2,000 units by 2030, while by the end of 2025, its cumulative order volume will only surpass 150 units.

However, Bank of America analysts led by Didier Scemama point out that BE Semiconductor Industries’ leading position faces new uncertainties, the most noteworthy of which is that ASML has publicly expressed its intention to enter the hybrid bonding market.

Bank of America states that companies like ASML may enter BE Semiconductor Industries’ most important growth market. Combined with the possibility that BE Semiconductor Industries may have to increase R&D spending in the future, these risks have not yet been fully reflected in the stock price. Before ASML’s specific plans become more clear, this factor may continue to weigh on BE Semiconductor Industries’ valuation. Nevertheless, Bank of America has not currently assumed that ASML will ultimately capture a large market share.

Last year, ASML delivered its first advanced packaging product. In April this year, ASML CEO Christophe Fouquet stated during an earnings call that the company would continue to explore ways to support customers using hybrid bonding technology.

Bank of America believes that ASML’s potential advantage relates to the technical bottlenecks currently facing hybrid bonding. One major issue hindering the large-scale adoption of this technology is low production yields; manufacturers still find it difficult to produce a sufficient and stable quantity of qualified chips. As multiple logic or memory chips are stacked, precision requirements for the equipment also rise. ASML’s accumulated technical capabilities in high-precision, high-speed lithography could create opportunities for its entry into this market.

BE Semiconductor Industries’ stock price has been under significant pressure recently. As investors worry that memory chip makers may delay adopting hybrid bonding technology and other factors, the stock has fallen by about one-third cumulatively in the third quarter, making it the worst-performing component in the STOXX 600 Index over the same period. Still, even after a sharp correction, BE Semiconductor Industries has gained around 45% so far this year.