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Summary: Veeco is a niche semiconductor equipment supplier with process-critical tools across deposition, annealing, and epitaxy (MOCVD/CVD), with growing exposure to advanced memory, power semis (SiC/GaN), and photonics. The pending Axcelis merger (ion implantation) would materially expand the combined addressable market, diversify end-markets, and increase scale in R&D and service—while raising exposure to geopolitical and export-control risk via higher China-linked revenue.
Semiconductor Manufacturing Equipment
Semiconductor technology has been at the center of technological innovation in the past decades, driving forward not only information technology, but also aerospace, biotech, etc.
It has been growing in several stages, each marked by a greater use of computing and digital technology, with the latest marked by the rise of AI.
The industry grew into a complex ecosystem of specialized companies, each fulfilling a specific step in the process of making a finished semiconductor product. For example, a fabless chip designer like Nvidia (NVDA-2.84%) will make the concept of a chip, but the actual production will be handled by a foundry like TSMC (TSM-1.64%).
Another category is the semiconductor equipment manufacturers, which make the machines that make the chips, memory, diodes, etc.
Because semiconductor manufacturing is such an exact science, foundries want only the best tools available. And because it is such a complex endeavor, this can only be achieved by a handful of very specialized suppliers.
As a result, an ecosystem of specialized suppliers emerged, with each task in the process of making a chip being achieved by ultra-specialized companies.
This gives these suppliers great pricing power and a strong economic moat. Companies like TSMC will stick to their established suppliers or risk disrupting their operations.
It also creates a positive flywheel where existing sales generate money for more R&D, which in turn guarantees that any potential new competitor would struggle to achieve the same technical results.
So, with semiconductors becoming a strategic asset, it can make sense to invest in equipment suppliers, as they will benefit from chip foundries’ build-up, no matter which chip maker (TSMC, Nvidia, Intel, etc.) ultimately benefits the most from growing semiconductor demand.
One semiconductor equipment company has been moving recently, with new machines for advanced semiconductor and a major merger to be concluded in 2026: Veeco.
Veeco was incorporated in 1945 to commercialize a device able to detect helium leaks. From this origin, it progressively evolved into a supplier of equipment and sensors used for the manufacturing of semiconductors.
In 1994, the company did its IPO, when its yearly sales were a mere $40M. It then did a series of acquisitions, notably of Ion Tech (1999 – optical coating), Applied EPI (2001 – Molecular Beam Epitaxy), and Emcore (2003 – Metal Organic Chemical Vapor Deposition / MOCVD).
The acquisition restarted in the 2010s, with Solid State Equipment in 2014 (solvent-based wet etch), Ultratech in 2017 (advanced packaging lithography, laser spike annealing, and 3D wafer inspection technology), and Epiluvac AB in 2023 (silicon carbide for EVs).
In 2025, the company announced the merger with Axcelis, where Axcelis shareholders are expected to own about 58%, and Veeco shareholders about 42% (see below for more details).
Veeco Business Overview
Veeco machines are used in producing advanced EUV chip making, 5G antennas, hard drives, LIDAR, LEDs, power electronics for EVs, etc.
So the company is not so much directly involved in making chips as associated with the laser, wafers, and other materials that are then incorporated into other equipment that makes chips (like for EUV) or for other types of semiconductors, be it LEDs, hard drives, power supply, etc.
Through its acquisitions as well as the ongoing merger with Axcelis, Veeco is present at almost every step of semiconductor manufacturing.
Chart: Where Veeco + Axcelis Sits in the Chipmaking Flow
This compact view maps each core technology to the primary end-markets and why it matters to the investment thesis.
The largest growth is expected from the direct semiconductor manufacturing segment, with by far ion beam deposition the technology expected to grow the most in relative terms.
These projections match the overall trend of the past years, with strong revenue growth driven by the expansion of the semiconductor manufacturing segment.
Most of the company’s business is done in Asia (APAC + China), which is not surprising considering the central role the region plays in the manufacturing of semiconductors, while Western firms are often more preeminent in the roles of design or IP development.
This level of sophistication over the annealing process is becoming vital for the most advanced forms of chips and memory, with nanosecond lasers the highest current standard, undergoing testing at the world’s most advanced foundries. Nanosecond laser annealing is also precise enough to allow for 3D devices.
“Our LSA platform is engineered to meet the rigorous demands of advanced DRAM and HBM production by providing higher productivity and superior performance.
This evaluation shipment underscores our commitment to enabling cutting-edge memory technologies, while providing an opportunity to expand our footprint in the memory market with this major customer.”
Currently, semiconductor technology uses methods like Physical Vapor Deposition (PVD) that generate non-uniform grains of crystals (at the microscopic level), leading to higher resistivity, itself resulting in less efficient computing and higher energy consumption.
“Driven by demand for artificial intelligence, machine learning, high-performance computing, and data-driven workflows, the semiconductor industry is continuously looking at roadmap-enabling technologies.
This new deposition system is the first of its kind for the Semi industry, and in particular for memory device production, that provides roadmap-accelerating capability for the industry.”
The company also produces ion beam sputtering machines (IBS, similar to IBD) and ion beam etch, which can draw patterns or remove layers of semiconductor materials.
MOCVD
One of the company’s main technologies is MOCVD (Metal-Organic Chemical Vapour Deposition), a technique that deposits ultra-thin, single-crystal layers onto semiconductor wafers. This is notably used for producing solar cells, LEDs, laser diodes, and transistors.
Gallium Nitride (GaN) is going to be the largest growth factor in this sector, as it is used in electric motor drives, EV fast chargers, 5G stations, data center supplies, and LiDAR.
Another important segment, and potentially the largest one in the long term, is photonics, which uses light instead of electrons to perform computing and transfer data. As silicon technology is slowly reaching its limits, photonics will play an increasingly large role in advanced computing and AI technologies.
Added to Veeco’s roster with the acquisition of Epiluvac in 2023, this technology uses chemical vapor deposition (CVD) systems to modify silicon carbide (epitaxy, or the growth of thin crystal layers), a material used for its remarkable resistance to high electrical power levels, making it a major material for EVs and electrification applications.
CVD for silicon carbide is a technology similar to MOCVD, which made it a good match for Veeco’s expertise.
“We see this acquisition as a great complement to our metal-organic chemical vapor deposition (MOCVD) epitaxy product line.
This acquisition accelerates our penetration into the emerging, high-growth SiC equipment market by reducing our time to market.”
The company’s equipment are supporting the shift to 200mm (8-inch) SiC wafers, which the industry is adopting to limit costs and respond to growing demand. It also ensures rapid cleaning and maintenance (under 5 hours) to ensure high uptime for SiC production.
Veeco + Axcelis Merger
This merger, which should be finalized in early 2026, will radically transform the company. Axcelis Technologies is another leading provider of technology to the semiconductor industry, with a specialization in ion implantation systems. It adds ions to semiconductor material to optimize and control precisely its electrical properties.
The combined company will generate $1.7B in revenues, have a 44% gross margin, and spend $230M in R&D yearly. Both companies had a solid growth profile of their own, with the combined revenues up 18% CAGR between 2019 and 2024.
This will also make Veeco + Axcelis the 4th largest U.S. wafer fabrication equipment supplier at a time when the USA is very actively relocating its semiconductor manufacturing industry out of Asia, making it a strategic company for the US government.
“This combination marks a transformational milestone for both Axcelis and Veeco, establishing a new leader in semiconductor capital equipment with complementary technologies, a diversified portfolio and an expanded addressable market opportunity.”
However, the resulting entity will also be much more heavily exposed to China than Veeco was, so shareholders should be aware of potential risks in case of escalating trade tensions between the USA and China.
More importantly, the 2 companies’ technologies and client bases are complementary, reducing the risks of merger inefficiency, almost doubling the merged entity’s addressable market. It should also help share some R&D efforts, thanks to both companies’ technologies, ultimately dealing with the same atomic-level complexity on similar materials.
The merger should provide an opportunity for synergy and extra growth, thanks to multiple possibilities for cross-sales, combining service & aftermarket offers, and a much wider reach to more segments of the industry (memory, both mature and advanced foundries, etc.).
Veeco has long been a leader in many technological niches that are each essential to the semiconductor industry, with not only chips & memory making, but also solar panels and diodes & LEDs dependent on Veeco’s equipment for their production.
The company has been expanding throughout the 2020s with acquisitions in silicon carbide and a more refined version of its machines, giving it a comfortable lead over its competitors. Crystal deposition and epitaxy technologies could also be deployed for the production of advanced 2D materials like graphene or borophene, opening new markets to Veeco.
The merger with Axcelis will change the profile of the company, with ion implantation almost as large a market as all of Veeco’s technological niches combined.
In the context of further consolidation of the semiconductor industry, and a risk of mounting competition from Chinese firms in the long term, this merger should provide Veeco’s shareholders with the scale and industry connections to endure and keep growth steady.
It is also likely that cross-sales and combined R&D will improve the company’s efficiency in all its segments, further consolidating its leading position.
As a result, Veeco’s merger with Axcelis will be a good “pick and shovels” type of stock for investors interested in exposure to the semiconductor industry, with a strong presence in emerging growth segments like gallium nitride, silicon carbide, and 3D chips, and long-term optionality in graphene production.
Investor Takeaway: Veeco + Axcelis is a “picks-and-shovels” semiconductor equipment consolidation bet. The bull case is scale + complementary process steps (implant + deposition/anneal/epi) enabling cross-sell and higher recurring service mix; the bear case is cyclicality, customer concentration, and export-control shocks. If the merger closes on schedule, the combined company’s narrative shifts from “specialized niche supplier” to “mid-tier U.S. wafer fab equipment platform,” with a clearer line of sight to AI-driven capex cycles—at the cost of higher geopolitical sensitivity.
Jonathan is a former biochemist researcher who worked in genetic analysis and clinical trials. He is now a stock analyst and finance writer with a focus on innovation, market cycles and geopolitics in his publication 'The Eurasian Century".
