Tokyo Electron Ltd. has reaffirmed its annual outlook and revealed plans to build a new ¥104 billion ($681 million) plant, signalling the company’s expectation for sustained artificial intelligence (AI) spending. The announcement came alongside better-than-expected earnings, reflecting strong demand for its chip manufacturing equipment.
Tokyo Electron, a key supplier to global chipmakers like Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics, reported an operating profit of ¥199.6 billion for the December quarter, a 51% increase from the previous year. This performance exceeded analysts’ expectations, with analysts forecasting ¥174 billion. The company’s growth is driven by sales of machines used to process silicon wafers, which are ultimately turned into memory or logic chips—critical components for AI development.
Despite this strong showing, Tokyo Electron did not revise its outlook, unlike its competitor Advantest Corp., which raised its forecast the previous week. The chip equipment market has seen mixed signals: while Dutch lithography supplier ASML Holding NV reported high order numbers, companies like Arm Holdings Plc and Advanced Micro Devices Inc. have issued cautious forecasts, raising concerns about the long-term sustainability of high spending in the sector.
The planned expansion, with a new facility in Miyagi Prefecture in northeast Japan, is a clear indication that Tokyo Electron expects continued demand from major customers such as Samsung, TSMC, and SK Hynix Inc. These companies are expected to keep investing in cutting-edge semiconductor technologies to meet growing AI server demands. CEO Toshiki Kawai pointed out that much of the anticipated investment in 2025 will come from high-bandwidth memory makers and logic chip manufacturers racing to meet the needs of AI development.
However, Tokyo Electron also noted a potential slowdown in chip equipment purchases from Chinese customers, particularly from new entrants in the chipmaking industry. The company expects China’s contribution to its sales to drop to the mid-thirties percentage range for the fiscal year starting in April, down from over 40% in the current fiscal year. Kawai acknowledged the impact of U.S. export restrictions on chip technologies and other geopolitical factors on the company’s performance in China.
In the AI space, Chinese startup DeepSeek’s development of a low-cost and open-source AI model has raised concerns that it could increase price competition in the tech sector, potentially reducing revenue for companies like Nvidia Corp. However, some industry leaders argue that cheaper AI models could encourage more new entrants into the market, ultimately supporting long-term demand for AI infrastructure.
Tokyo Electron remains cautious in assessing the impact of DeepSeek’s model on the market. Finance Division Officer Hiroshi Kawamoto commented that if lower-cost AI leads to an expansion of the market, it could be a positive development, although it is still too early to draw definitive conclusions.
