Tokyo Electron Ltd. raised its profit outlook for the year after Chinese chipmakers moved up deliveries ahead of a possible crackdown on exports of Japanese production equipment.
(Bloomberg) — Tokyo Electron Ltd. raised its profit outlook for the year after Chinese chipmakers moved up deliveries ahead of a possible crackdown on exports of Japanese production equipment.
The Tokyo-based supplier to Taiwan Semiconductor Manufacturing Co. and Intel Corp. lifted its forecast for the year to March above expectations to ¥580 billion ($4.4 billion). A number of companies in China are speeding up deliveries and investment plans, fearful of not being able to secure equipment as international trade walls rise, Tokyo Electron executives said on an earnings call Thursday.
The company, which competes against Applied Materials Inc., had slashed forecasts in November in the wake of US sanctions on advanced chip-related exports. There was a dip in the December quarter, as US chip gear makers were unable to ship to Chinese customers and production was challenged, but the feared cratering in demand did not materialize, said Hiroshi Kawamoto, Tokyo Electron’s general manager of finance.
“The equipment industry has entered a new stage for further growth,” Kawamoto said. “We expect a recovery from the second half of 2023 and continued growth from 2024, thanks to rising demand from areas like virtual reality, as well as government support for investments.”
The company is closely watched for its reaction to the recent news that Japan and the Netherlands have agreed to join the US in imposing strict export controls on advanced semiconductor technology and products to China. Tokyo Electron is one of a handful of indispensable suppliers to the global chipmaking industry, providing machinery to fabricate the latest generation of chips.
Washington has stepped up its campaign to curb China’s access to technology that may aid or improve its military capabilities, issuing in October sweeping restrictions on US-connected exports or staff heading to the Asian nation. To make those sanctions work, the Biden administration has sought and secured the collaboration of international partners.
Tokyo Electron, which also announced a 3-for-1 stock split, reported ¥114.8 billion operating profit for the December quarter, above average analyst estimates of ¥102 billion. Demand for semiconductor production equipment was stronger than expected, thanks to orders from foundry makers, the company said. It now sees net sales of semiconductor production equipment of ¥2.12 trillion for the full year, up from a previous forecast of ¥2.05 trillion.
“China will remain an important market for Tokyo Electron,” Kawamoto said, adding that the company has no plans to shrink operations in a country it sees as a large market for automotive power chips. “We do not just deal in cutting-edge equipment.”
Tokyo Electron and fellow Japanese semiconductor industry players Renesas Electronics Corp., Nikon Corp. and Sumco Corp. each have a significant proportion of their sales going directly to China, with even more of their business dependent on the market via sales by their customers. All four reported earnings on Thursday.
Read more: Renesas Plans $380 Million Buyback as Profit Beats Estimates
Silicon wafer maker Sumco said demand from automotive and industrial-use customers remains strong, however the weak smartphone market is likely to yield lower wafer orders in 2023 before recovering in 2024. The ongoing inventory adjustments that have hit the memory-chipmaking industry hard in recent months are likely to continue for the time being, CEO Mayuki Hashimoto said.
Dutch equipment maker ASML Holding NV said at the end of January that the sanctions won’t have a material impact on its 2023 earnings, despite China perennially being one of the biggest importers of chips and chip technology.
Two Japanese chip suppliers that reported their December-quarter results earlier, Advantest Corp. and Screen Holdings Co., gave solid numbers that were in line with market expectations. Yokohama-based Lasertec Corp. saw its shares drop after trimming its order outlook, though it too gave a positive signal for a recovery, saying “demand for advanced equipment is not waning” and that orders postponed should come back in or beyond the next fiscal year.
(Updates with details from earnings call)
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