Tokyo Electron ups net profit outlook to $2.28bn on China, AI demand

Nikkei Asia ^

[FarCenter]

TOKYO -- Semiconductor equipment maker Tokyo Electron upgraded its consolidated net profit forecast for the year ending March to 340 billion yen ($2.28 billion), a 33 billion yen increase, on Friday as its earnings are lifted by strong China sales and AI-related demand.

"The self-sufficiency rate of China's semiconductor industry is still low, and active investment will continue in the future," Hiroshi Kawamoto, Tokyo Electron senior vice president, said at an online briefing.

The upgraded forecast for consolidated net profit is still a 28% decline, but it is also 8% higher than the QUICK Consensus average market estimate. The annual dividend is projected at 367 yen, up 27 yen from the previous forecast.

Tokyo Electron now projects total sales of 1.83 trillion yen, down 17% from the previous year, and operating income of 445 billion yen, down 28%. But those figures are upgrades of 100 billion yen and 44 billion yen, respectively, from the previous forecast.

In response to U.S.-led export restrictions on cutting-edge chips, China is investing in less advanced products that are not subject to the regulations in order to increase its self-sufficiency.

The company's earnings benefited from demand linked to stronger-than-expected investment in China for chip fields outside the cutting edge. The country represented 47% of Tokyo Electron's sales in the October-December period, up from over 20% the previous year and the highest level ever.

Consolidated sales in October-December slipped 1% year-on-year, but net profit rose 19%, the first profit increase in five quarters. The company's China sales are believed to carry high profitability.

The outlook for the global front-end wafer fab equipment market was also raised. Sales in the field are forecast around $100 billion for 2024, matching a record high set in 2022, with double-digit growth expected in 2025. The previous forecast was a combined $200 billion in 2024 and 2025.

The updated market outlook reflects anticipated continued demand in China this year and a strong uptick in artificial intelligence-related demand in 2025. The 2025 AI server market forecast was also raised to $16 billion from $8 billion.