AI growth brings new tests for semi-test duopoly

Investing.com -- The semiconductor test (semi-test) market has historically played a key role in enabling greater technological complexity, but it is now attracting heightened attention due to its growing exposure to AI infrastructure—namely GPU testing, Custom ASIC testing, and high-bandwidth memory (HBM) testing.

According to JPMorgan, this shift has intensified scrutiny of the competitive positioning between Advantest Corp. (TYO:6857) and Teradyne (NASDAQ:TER), which together dominate what remains largely a duopoly. Together, the companies control more than 85% of the $6 billion semi-test market.

Advantest has emerged as the clear leader in AI Compute testing, benefiting from its exclusive relationship with the primary GPU vendor and strong positioning in GPU and custom ASIC testing.

Its EXA Scale generation of V93000 SoC testers is designed for high-performance AI devices, helping the company expand its market share.

“Advantest is believed to be the sole testing equipment provider for Nvidia (NASDAQ:NVDA) AI GPU projects,” JPMorgan analysts led by Samik Chatterjee said in a Monday report.

Teradyne, meanwhile, is focused on the custom ASIC segment, leveraging its UltraFLEX testers to support parallel test requirements. The company holds about 45% of the custom ASIC market, while Advantest commands the remaining 55%, according to the bank’s estimates.

While Teradyne’s share in GPU testing is limited, it remains competitive in ASIC testing and expects its new Magnum 7H platform to help recover ground in the HBM test market.

“[With] its new HBM test solution that reduces HBM wafer test time by 40%, Teradyne was able to qualify for post-stack die test in mid-2024 and regain some market share,” analysts noted.

HBM testing has become a significant growth area, driven by increasing AI and HPC demand. The market is roughly split between wafer testing and more complex performance testing, with Advantest holding the upper hand in 2024 due to established client relationships.

However, Teradyne has recently gained share and “remains confident in its ability to gain market share within the Memory market as the market returns to growth,” the report states.

While near-term HBM demand is expected to moderate following a strong 2024, long-term drivers remain intact, analysts note.

Successive generations of Nvidia GPUs, such as Rubin and Rubin Ultra, are expected to dramatically increase HBM content—from 288 GB in 2026 to 1024 GB in 2027—supporting renewed growth in test demand as device complexity rises.

But despite the promising outlook, the semi-test segment is shrinking as a share of the broader Wafer Fab Equipment (WFE) market, dropping from 8% in 2014 to around 5% in 2024.

Macroeconomic uncertainty, geopolitical tensions, and growing low-end competition from Chinese vendors also present headwinds.

Still, both Advantest and Teradyne are expected to benefit from the rising complexity of chips and increasing test demands, particularly in AI Compute and memory.

JPMorgan holds an Overweight rating for both stocks.