Venture investors have spent the last decade rewarding software for its margins and speed of scale, and hardware has often been treated as the slower, capital-hungrier cousin. In semiconductor deep tech, that reputation deserves a second look. The same physical characteristics that make hardware harder to build are exactly what make it harder to displace once it’s installed — and that combination of switching costs, defensibility, and recurring revenue is where some of the most durable returns in this industry actually come from. 

Switching costs are built into the floor of the fab 

Once a piece of process equipment is qualified into a production line, ripping it out is expensive, slow and risky — every fab requalification cycle threatens yield stability that took months to achieve. This is the same dynamic behind the world’s largest equipment franchises. ASML’s non-system business — service contracts and field upgrades on machines already sitting in customer fabs — grew 26% to roughly €8.2 billion in 2025, now approaching a quarter of the company’s total revenue, driven almost entirely by the expanding base of systems it has already sold. That revenue exists only because customers can’t easily walk away from tools already embedded in their process flow. 

For a company like SisuSemi, whose ALP technology is applicable at multiple stages of the manufacturing process — not just post-etch, but potentially across several process steps within the same customer fab — each additional installed system compounds this effect. A single qualified tool becomes the foothold for the next one, inside the same account. 

A moat competitors can’t simply fork 

Software differentiation is often a feature release away from being copied. Hardware differentiation is not. SisuSemi’s ALP process is built on a patented approach combining controlled oxidation, ultra-high vacuum processing and precision heating — the kind of physical, materials-science IP that a competitor cannot replicate by hiring a few engineers and shipping a patch. That’s a different competitive position than most software categories offer, and it’s a large part of why strategic acquirers pay premiums for hardware and materials businesses in this space: Entegris’s 6.5 B$ acquisition of CMC Materials — a company supplying the chemical-mechanical planarization materials used between fabrication steps — was explicitly justified as a way to expand “content per wafer” that couldn’t easily be sourced elsewhere. 

The real prize: revenue that grows with the installed base 

The most attractive part of the hardware model isn’t the initial system sale — it’s everything that follows. Applied Materials’ services division generated a record $6.4 billion in fiscal 2025, with more than two-thirds of that revenue now coming from subscriptions rather than one-off spare-parts orders, growing faster than the underlying equipment business itself. That’s the annuity that makes hardware businesses compound: every system sold becomes a long-lived source of maintenance, spares, calibration and paid upgrade revenue for the life of the tool, often a decade or more. For SisuSemi, this points toward a natural second revenue layer beyond the initial ALP system sale — ongoing consumables, process recipe updates and performance upgrades as node requirements tighten. 

AI and remote monitoring turn hardware into a platform 

The next stage of this model is already visible in how incumbents are evolving their service businesses: Applied Materials describes itself as “rapidly adopting AI and digital tools” across its installed base to shift service delivery from reactive repairs toward predictive, remotely diagnosed maintenance. Once a hardware platform is instrumented and network-connected, it stops behaving like a static capital good and starts behaving like a data platform — every additional unit deployed generates operating data that can improve process recipes, predict maintenance needs and justify premium service tiers across the whole fleet. That’s a lever pure-software competitors don’t have access to, because they have no physical footprint generating proprietary process data in the first place. It’s also a natural extension path for SisuSemi as its installed base grows beyond initial pilot deployments. 

Investors are already backing this thesis in semiconductors 

This isn’t a theoretical argument. Hardware-centric deep tech in the chip sector continues to attract large, committed capital: Cerebras Systems, which builds physical wafer-scale AI computing hardware, raised 1.1 B$ on the strength of a hardware architecture competitors can’t simply clone in software. More broadly, semiconductor-sector funding rounds of 100 M$ or more have been rising steadily quarter over quarter through 2025, and the average semiconductor venture deal size sits around 107 M$ — a reflection of how capital-intensive and how differentiated, this category is understood to be relative to software. ACM Research’s rise to roughly 782 M$ in annual revenue in the wafer-cleaning category, built almost entirely on hardware differentiation against much larger incumbents, is a further reminder that new entrants with genuinely better physical performance do get funded, qualified, and scaled in this market. 

The takeaway for investors 

Hardware deep tech asks more of investors up front — longer qualification cycles, more capital to build and demonstrate systems. What it offers in return is a business that’s structurally harder to copy, stickier once installed, and capable of layering recurring service, upgrade and eventually AI-driven monitoring revenue on top of every system sold. For SisuSemi, whose ALP platform can be qualified across multiple steps within the same customer fab, that installed-base flywheel is the core of the long-term investment case — not a side benefit to the initial equipment sale, but the reason the initial sale matters. 

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