Several key players in Japan’s semiconductor supply chain sector, including Tokyo Electron, Towa, Advantest, and Screen Holdings, have faced declines in share value recently. The setbacks are attributed to underperformance in the March quarter, high valuations, and sell-offs. Despite this, the sector shows potential for recovery, driven by strong demand for chipmaking equipment and materials amid global capital investments in servers.
Shares of several Japanese semiconductor supply chain companies have experienced declines in recent months, despite a general uptick in AI and main chipmaker stocks. Tokyo Electron, a chipmaking equipment manufacturer, saw its share value drop by 10% since early April. Similarly, Towa’s shares decreased by a tenth since last Thursday, and Advantest, which manufactures machines for testing and measuring chips, fell by a quarter from a March high. Screen Holdings, which produces wafer cleaning and etching materials, also reported a decrease in share value.
The declines are attributed to high earnings expectations and subsequent sell-offs after companies underperformed in the March quarter, as well as steep valuations. For instance, Advantest’s stock price rose to 48 times forward earnings before the sell-off, significantly higher than global peers.
Despite these setbacks, there is potential for recovery. The demand for chipmaking equipment, semiconductor materials, and testing devices is expected to remain strong due to increasing capital investments in servers worldwide. Companies involved in producing silicon wafers, photoresist materials, and chemicals used in chip manufacturing maintain healthy margins and face limited rivalry, which could provide stability against market fluctuations.
Overall, the long-term outlook for Japan’s chip supply chain sector appears robust, bolstered by their critical role in the global semiconductor industry.
