(Bloomberg) – Tokyo Electron’s market value rose by more than $12 billion to a record high on Tuesday after the company raised its full-year outlook due to strong sales in China.
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The semiconductor manufacturing equipment maker rose 13% in Tokyo on Tuesday, giving it a valuation of 15.9 trillion yen ($106 billion), its highest closing price ever. This comes after the company upwardly revised its annual operating profit forecast through March to 445 billion yen, an 11% increase. The figure beat analysts’ expectations and comes on the back of the December quarter, when China accounted for 46.9% of sales.
With U.S. trade restrictions making it difficult to obtain chips suitable for artificial intelligence development, Chinese semiconductor venture companies are buying up legacy equipment and demand is rapidly increasing.
Tokyo Electron also said it expects investment from DRAM manufacturers to recover this year. Shares of two of its customers, South Korea’s Samsung Electronics and SK Hynix, rose on optimism about the outlook given rising AI-driven demand.
“We’ve entered a frenzy where we’re buying anything high-tech,” said Amir Anvarzadeh of Asymmetric Advisors. Tokyo Electron’s surge comes after chip designer Arm Holdings’ market value nearly doubled after better-than-expected earnings, and a related spike in parent company SoftBank Group’s stock price. Ta. “But given that China has been Tokyo Electron’s largest single engine, you can see there is a huge risk that has been ignored.”
The company itself is more optimistic, with one executive predicting strong sales in China will continue for the next year or two.
“We expect strong demand from China to continue or even strengthen,” Deputy General Manager Hiroshi Kawamoto said at an earnings conference last week. China produces only a fraction of the chips it needs, and Kawamoto sees the country investing aggressively to reduce its dependence on foreign sources. “We expect this momentum to continue until 2025.”
–With assistance from Vlad Savov.
(Updated to add closing stock price and market valuation. Previous version corrected attribution of Tokyo Electron executive quote in final paragraph.)
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