Japan-based semiconductor equipment manufacturer Tokyo Electron Limited (TEL) is expected to generate around 40% of its annual revenue, estimated at JPY 700 billion (US$5 billion), from the Chinese market by the conclusion of the fiscal year in March 2024.
Hiroshi Kawamoto, TEL's General Manager of the finance unit, anticipates that the revenue from the Chinese market in March 2025 will likely match or exceed that of the same period in 2024.
This projection aligns with the anticipated surge in demand for semiconductor front-end processing equipment, particularly in the second or third quarter of 2024, as observed in the conditions of memory manufacturers and wafer fabrication businesses.
While TEL has not disclosed the specific revenue derived from the Chinese market, financial estimates reported by Nikkei suggest that TEL's consolidated revenue by the end of March 2024 will be approximately JPY 1.73 trillion, with an estimated annual revenue from China of about JPY 700 billion. In the fiscal year 2022, China contributed around 20% to TEL's total revenue. However, from July to September 2023, this figure surged to 43%, surpassing the 40% mark for the first time.
The heightened proportion of revenue from China is attributed to the country's shift towards developing mature process chips in response to US export controls on advanced semiconductor technology. This has led to increased demand for related equipment. Additionally, global market conditions for memory and a slowdown in equipment investments have contributed to the relatively higher proportion of revenue from China.
Despite challenges posed by export controls to China, the Financial Times's recent report has suggested TEL has successfully mitigated the impact by expanding sales of less advanced products to China's chip industry. According to Junko Takagi, Head of Investor Relations at TEL, the impact of the US and Japanese export restrictions was less severe than expected. Takagi also highlighted the notable increase in demand for less-advanced semiconductor equipment in response to prevailing circumstances.
The memory market is showing signs of improvement, particularly in DRAM. For example, in November 2023, the contract price for DDR4-type 8Gb DRAM was around US$1.65 per piece, marking an 11% monthly increase, the first since June 2021. Furthermore, TLC-type 256Gb NAND Flash had a contract price of approximately US$1.85 per piece in the fourth quarter of 2023, with a 12% quarterly increase, the first since the third quarter of 2021.
Kawamoto predicts the market conditions will recover as the DRAM inventory adjustment concludes. The demand for server DRAM related to generative AI will expedite the DRAM recovery pace and increase demand for related bonding equipment. By the end of March 2024, the estimated annual sales for such equipment are expected to reach JPY 10 billion.
Regarding the NAND market, a formal recovery is expected in the second half of 2024. Although the utilization rate of wafer fabrication plants has not yet rebounded due to the ongoing downturn in the smartphone market, there are emerging signs of improvement in the memory market. With an anticipated rise in the utilization rate of wafer fabrication plants, Kawamoto estimates that the demand for semiconductor front-end processing equipment will significantly increase in the second or third quarter of 2024. If GPU demand emerges, it will contribute more to the revenue than bonding equipment for DRAM.
