Tokyo Electron Lifts Outlook After China Chip Growth Quickens
(Bloomberg) -- Tokyo Electron Ltd. raised its full-year earnings and revenue targets after demand from China for its chipmaking equipment quickened in the September quarter.
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The Tokyo firm said sales to China made up almost half of its quarterly revenue of ¥428 billion yen ($2.8 billion), which came in higher than the average analyst estimate of ¥416 billion. It lifted its full-year sales outlook to ¥1.73 trillion, from ¥1.7 trillion. It also raised its projections for net income and gross margins.
Tokyo Electron is a key link in the semiconductor supply chain, holding a roughly 90% share of the market for tools that can perform photoresist coating and developing, and is one of the early indicators of chipmakers’ appetite for expansion. Its biggest customers include Samsung Electronics Co., Taiwan Semiconductor Manufacturing Co. and Intel Corp.
Its business in China in the September quarter was a record 43% of sales, up from a little over 20% in the fiscal year ended March. It was the first time the figure exceeded 40% of sales, according to Hiroshi Kawamoto, general manager of the company’s finance unit. A pause in investment among big chipmakers contributed to that percentage, he said.
“Chinese investment on mature-node chips, such as power semiconductors and automotive chips, is strong,” Kawamoto said on a call after earnings on Friday. “Chinese market sentiment is very robust, and we expect that will continue for awhile,” he said, adding that DRAM investment is gradually recovering as well.
Read more: US, Europe Growing Alarmed by China’s Rush Into Legacy Chips
The company, which competes with California-based suppliers Applied Materials Inc. and Lam Research Corp., nudged up its guidance for the year to March to an operating income of ¥401 billion, closer to consensus estimates. A near-60% decline in quarterly operating profit was also in line with the average of analyst estimates after chipmakers struggling with extra inventory reined in spending and delayed chip tool deliveries.
“The NAND market environment is not very good,” Kawamoto said. Tokyo Electron is pushing back its forecast for a global chip recovery by about three to six months, even though it still expects a surge in demand for AI-training chips will start to translate into sales from next year, he added. The company had previously said it expected a sector-wide rebound at the beginning of 2024.
--With assistance from Ville Heiskanen.
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