Amid uncertainties in the Chinese market and reduced spending by automotive chip and power semiconductor manufacturers, Japanese semiconductor equipment makers have revised their sales forecast for fiscal year 2025 (April 2025 - March 2026). Nevertheless, demand for advanced process chips, especially those needed for artificial intelligence (AI), is anticipated to lead to a 5% year-over-year sales growth in 2025.
According to reports from Bloomberg and Nikkei, the Japan Semiconductor Equipment Association (SEAJ) released its forecast on January 16, predicting that total revenue for 2025 would reach approximately JPY4.66 trillion (approx. US$30 billion), reflecting a 5% year-over-year growth, albeit slightly below the previous forecast of 4.68 trillion yen made in July 2024. The outlook remains relatively subdued.
In contrast, the association expects a 20% year-over-year growth for the fiscal year 2024 and heavyweight customer TSMC's expectation of as much as a 40% growth in capital spending.
source: SEAJ
Rising Demand from TSMC and AI Chips
TSMC, a key customer for semiconductor equipment manufacturers, has projected capital expenditures of US$29.8 billion for 2024, with plans to increase this figure to between US$38 billion and US$42 billion in 2025, reflecting a significant year-on-year growth of 27.5% to 41%.
Concerns over China
The SEAJ noted that, following a surge in investments by Chinese chip manufacturers in 2024, these companies are now expected to focus more on increasing usage rates rather than purchasing new equipment. In addition, there are concerns regarding a potential slowdown in investments in automotive and power semiconductors in 2025.
AI to Drive Future Growth
However, the association remains optimistic, noting that the expanding demand for AI chips, coupled with the need for high-performance, low-power, and high-capacity technologies, is expected to spur advancements in technologies such as Gate-All-Around (GAA), Backside PDN (power delivery network), and high-stacked memory. These innovations are expected to drive increased investments in advanced equipment, positioning the sector for overall positive growth.
2026 Forecast and Sustained Growth in AI Semiconductor Demand
Looking ahead to 2026, despite export restrictions limiting shipments of Japan's advanced semiconductor equipment, particularly to China, and US efforts to curb the export of AI technologies to China, the SEAJ projects that revenue from Japanese semiconductor equipment manufacturers will still see a 10% year-on-year increase.
In addition to AI servers, the expanding use of AI in smart devices is anticipated to boost investment in semiconductors for PCs and smartphones.
The SEAJ emphasized that demand for AI-related semiconductors is expected to continue expanding across all sectors, with this trend likely to persist over the medium to long term.