Chip Gear Maker Shifting From China Soars 166% in Four Months
(Bloomberg) -- Chip equipment maker J.E.T. Co.’s shares have more than doubled since their September debut in Tokyo, bolstered by expectations that US and Japan initiatives to boost semiconductor prowess will propel sales.
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The little-known supplier to China’s Semiconductor Manufacturing International Corp. and South Korea’s Samsung Electronics Co. is the second-best performer on the Tokyo Stock Exchange’s Standard Market of small-to-mid-sized companies, rising 166% in four months since its initial public offering. On top of a nascent chip recovery that’s lifted the Philadelphia Stock Exchange Semiconductor Index by 28%, J.E.T. is seen to have room to win new customers in its home market and abroad.
The maker of machines that clean silicon wafers in batches is taking steps to lower its reliance on China, where it earns roughly half its revenue. It’s building a ¥3.5 billion ($24 million) factory near its headquarters in Okayama Prefecture, western Japan, to go online in early 2027. In October, it set up a new sales office in Dallas — home to prospective customer Texas Instruments Inc., with a goal to earn sales in the US starting 2025.
The hunt for business in other geographies comes as manufacturers such as Apple Inc. assembler Foxconn build production bases outside China to lower exposure to export curbs, data theft and risk of military conflict due to escalating technological rivalry between the world’s two superpowers.
“We have to expand our scope of markets for future growth,” J.E.T. Chief Executive Officer Masayuki Bouno said in an interview. “Investments are increasing in Western countries and in Japan and we will be targeting markets where the money is headed.”
The IPO is a comeback for a company whose predecessor S.E.S. Co. filed for bankruptcy in 2009. Under ownership by South Korean chip and display equipment maker Zeus Co., the firm of some 300 workers clocked sales growth averaging more than 20% per year through 2022. Zeus now owns 65% of J.E.T., and the limited float has further helped support its shares.
J.E.T., which holds about 10% of a market dominated by far bigger Japanese rivals Tokyo Electron Ltd. and Screen Holdings Co., doesn’t foresee sales from China declining, but expects combined revenue from the US and Japan to make up 25% of sales by 2027, when it forecasts sales of around ¥30 billion, Bouno said. In the nine months to September, the company earned about 39% of its sales in South Korea, with Japan making up less than 1%.
J.E.T. recently won a contract from state-funded chip venture Rapidus Corp. to conduct research and development on cutting-edge chips, and is expected to deliver equipment to the startup’s new factory in Hokkaido, northern Japan.
Rapidus is just one beneficiary of Prime Minister Fumio Kishida’s push to pour billions of dollars in subsidies to help Japan regain its former lead in semiconductors. The country is paying for roughly half the cost of a new Taiwan Semiconductor Manufacturing Co. plant in southwestern Japan, and is in talks to also help pay for a second and third factory. It’s also funding an expansion at Micron Technology Inc.’s Hiroshima factory.
J.E.T. can also help chipmakers diversify from heavyweight gear makers like Tokyo Electron and Screen, whose equipment can take months to deliver. The company may gain “a little bit of share,” Asymmetric Advisors analyst Tim Morse said.
But skeptics see limited room for growth even at home for underdog players like J.E.T.
“They should stick to countries other than Japan in East Asia,” said Mitsushige Akino of Ichiyoshi Asset Management. J.E.T. will need to continue to rely on Chinese demand, he said. “The local market for cleaning devices is already divided up and taken by existing players.”
Rising geopolitical tensions are forcing tech suppliers to find new customers in new geographies, however. China is building its own self-sufficient network of chip equipment makers and chemical suppliers, while the US is taking steps to stem the flow of leading-edge tech from its allies to China.
“Before, everyone moved in concert in what you’d call a global supply chain,” said Lee Jong Woo, CEO of J.E.T. parent company Zeus. “Now, you have to think about creating a local supply chain for each country.”
The South Korean firm plans to gradually reduce its stake in J.E.T. over the long term, Lee said, without elaborating further. Zeus’s stake is expected to eventually fall to less than 50%, Bouno said.
J.E.T. is also exploring an acquisition of another chip tool maker to expand its product lineup and offerings, and it won’t rule out a target with a bigger valuation, Bouno said. Both Tokyo Electron and Screen specialize in a wide swath of equipment used in different stages of processing silicon wafers into semiconductors.
“Japan has extremely powerful manufacturing techniques. But it hasn’t been able to market it very well,” Bouno said. “We all have to think about how we can take these capabilities to the global stage.”
--With assistance from Kurt Schussler.
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