In light of ASML’s disappointing 2025 forecast, the Dutch chip-making equipment titan, Tokyo Electron has disclosed concerns about a potential slowdown in demand, particularly from China, compounded by the looming threat of stricter U.S. export restrictions.
A recent report from Nikkei indicates that the Japanese semiconductor equipment manufacturer is bracing for a decline in China’s share of its sales, projecting it to decrease to the 30% range in the latter half of the fiscal year, down from a robust 41% in the second quarter, which ended on September 30th. This anticipated shift reflects a notable easing in the investment surges previously seen from Chinese chipmakers.
Japanese Semiconductor Equipment Providers Warn of Slowing Demand from China
Addressing the potential risks, Tokyo Electron’s Senior Vice President Hiroshi Kawamoto remarked, “We are accounting for all possible risks, including the potential for heightened U.S. export controls targeting China,” as reported by Nikkei.
Despite grappling with these impending challenges, Tokyo Electron announced impressive financial results for the quarter ended September 30th. The company’s operating income for the July-September quarter soared 54% year-over-year, reaching an impressive 148 billion yen, a surge propelled by burgeoning investments in both artificial intelligence (AI) and traditional chip manufacturing in China.
In agreement with Tokyo Electron, other prominent chip equipment makers in Japan echoed similar sentiments regarding market conditions. “Demand is slowing even for older-generation technologies, and we are seeing signs that investments are being delayed,” commented Fumiyuki Kanai, president of Kokusai Electric, as cited by Nikkei.
Screen Holdings’ president Toshio Hiroe highlighted that as Chinese customers initiate a ramp-up phase for their equipment, a temporary slowdown in subsequent investments is expected, further adding to the cautious outlook.
During the April-September period, it is reported that China represented around 45% of chipmaking equipment sales for both Tokyo Electron and Screen Holdings.
FY2025 Forecast Upgraded Again Thanks to Strong AI Demand
Regarding fiscal year 2025 sales, Tokyo Electron has adjusted its projections upward, expecting a 31% increase to reach a substantial 2.4 trillion yen—100 billion yen above earlier estimates. Alongside the revised forecast, the company also declared plans for a notable dividend increase and a stock buyback initiative up to 70 billion yen.
The company anticipates significant double-digit growth for FY2025, primarily driven by an expanding demand for DRAM. Conversely, investments in NAND are anticipated to resume following necessary inventory adjustments. Furthermore, momentum from advanced logic and foundries is expected to counterbalance any sagging interest in investment for mature nodes.
According to Tokyo Electron President Toshiki Kawai, as reported by Nikkei, despite China’s easing investment climate for chipmakers, the company is optimistic about sustained investments in AI servers, alongside healthy demand for AI-enhanced personal computers and smartphones.
(Photo credit: Tokyo Electron)
Please note that this article cites information from Nikkei and Tokyo Electron.
**Interview with Hiroshi Kawamoto, Senior Vice President of Tokyo Electron**
**Editor:** Thank you for joining us today, Hiroshi. Given ASML’s recent forecast for 2025 and your company’s latest concerns regarding demand, particularly from China, can you elaborate on the factors influencing this shift?
**Kawamoto:** Thank you for having me. The primary concern for us is the anticipated slowdown in demand from China, which historically has been a significant market for our products. We’re projecting that China’s share of our sales could drop to around 30% in the latter half of the fiscal year, down from 41% in Q2. This is largely due to a cooling in investments from Chinese chipmakers, a trend we are closely monitoring.
**Editor:** It seems the geopolitical climate is also playing a role. How do U.S. export restrictions factor into your outlook?
**Kawamoto:** Absolutely. The potential for heightened U.S. export controls aimed at China is a major risk we are factoring into our projections. These restrictions could significantly impact our ability to do business in China and constrain demand for our equipment.
**Editor:** Your recent financial results were quite impressive, with a 54% increase in operating income. What are the key drivers behind this success, considering the current market challenges?
**Kawamoto:** Despite the looming challenges, our strong financial performance is attributed to robust investments in artificial intelligence and traditional chip manufacturing within China. These areas are currently thriving, and we are benefiting from the ongoing demands in these sectors before the anticipated pullback in investments takes hold.
**Editor:** Other companies, like Kokusai Electric, have voiced similar concerns regarding demand. Are there any signs of a broader trend within the semiconductor equipment industry?
**Kawamoto:** Yes, we’re seeing that echoed across the industry. Many of our peers are noting a slowdown in demand even for older-generation technologies and are witnessing delays in investments. This sentiment underlines a cautious approach that many stakeholders are taking in the current economic scenario.
**Editor:** Lastly, what steps is Tokyo Electron taking to mitigate the risks posed by these market dynamics?
**Kawamoto:** We are continuously analyzing the evolving market landscape and adjusting our strategies accordingly. This involves diversifying our client base and exploring opportunities in emerging markets. Furthermore, we are actively engaging with our customers to understand their needs and timelines to better align our offerings.
**Editor:** Thank you for your insights, Hiroshi. It sounds like Tokyo Electron is navigating a complex landscape effectively, and we appreciate your time today.
**Kawamoto:** Thank you for having me.
