Tokyo Electron projected that due to U.S. semiconductor sanctions, the revenue share from the Chinese market will fall to 35% this year from half of last year. The company stated it will defend its revenue based on the demand for memory semiconductor manufacturing equipment, including artificial intelligence (AI) semiconductors. This is because the demand for legacy semiconductor process equipment, which had been steadily expanding in China, is also expected to slow down.
According to Tokyo Electron on the 7th, the semiconductor equipment market size last year was $110 billion (about 159 trillion won), exceeding forecasts by about $10 billion due to increased demand for AI servers. Toshiki Kawai, chief executive officer of Tokyo Electron, noted during a recent earnings conference call that "advanced logic semiconductors for data centers and memory semiconductors used in AI smartphones and PCs will drive the advanced semiconductor equipment market." Tokyo Electron is a leading semiconductor equipment corporation in Japan, holding the 4th largest share in the global semiconductor equipment market in terms of revenue.
Global semiconductor equipment corporations, including the Netherlands' ASML, U.S. Lam Research, and Japan's Tokyo Electron, recorded their highest performance due to China's hoarding of advanced semiconductor equipment. However, as U.S. regulations become more stringent, there was a prevailing analysis that their performance would take a hit. These corporations had nearly 50% of their revenue share from the Chinese market until last year, but it is projected to decrease by up to 10 percentage points this year, leading to inevitable performance impacts.
Kang Seong-cheol, a research member of the Korean Semiconductor Display Technology Association, said, "The market for advanced semiconductor equipment has become difficult to sell due to strengthened export regulations, and services for existing supplied equipment have also been suspended," explaining that as demand for legacy semiconductor equipment slows, the rate of localization for equipment in China has risen significantly, meaning that the revenue share of global equipment corporations is bound to decline.
Tokyo Electron expressed confidence that it can offset this with demand for advanced semiconductor equipment triggered by AI. CEO Toshiki acknowledged that the revenue share from the Chinese region will sharply decrease but noted, "We are focused on increasing sales volume of (AI, etc.) advanced semiconductor process equipment to raise the gross profit margin, so Tokyo Electron's revenue will not decrease."
From April to December last year, Tokyo Electron's net profit increased by about 67% compared to the same period last year, reaching 401 billion yen (about 3.8 trillion won), while revenue grew by 38% to 1.7 trillion yen (about 18.2 trillion won). Tokyo Electron related this by stating that "servers used for AI model training acted as a major growth driver," and that they "compensated for the relatively poor demand for general-purpose chips used in existing smartphones and PCs."
Advanced foundry corporations and memory semiconductor corporations, including TSMC, Samsung Electronics, and SK hynix, are focusing on transition investments, including bringing in additional facilities, to respond to the surging demand for advanced semiconductors. TSMC is proceeding with bringing in advanced equipment while launching mass production of Apple M5 chips based on the improved N3P process using a 3nm (nanometer) process. Samsung Electronics and SK hynix are also reportedly planning to begin equipment orders in the first half of the year for mass production of next-generation high-bandwidth memory (HBM) and high-performance DRAM.
An industry official in the semiconductor equipment sector stated, "The demand for advanced semiconductor equipment due to the emergence of the AI market will determine the performance of the semiconductor equipment market in the future," adding that "the demand for advanced equipment from memory semiconductor manufacturers, including logic semiconductors, is continuously expanding, so we are seeking survival strategies focused on this key market."