In Japan, There Are Some Winners From the Global Chip Shortage

As the global chips shortage disrupts industries from home electronics to autos, a few small Japanese suppliers are stepping in to meeting the ballooning demand.

People staying at home during the pandemic is fueling increased purchases of laptops, smartphones and games, which in turn has led to a shortage of semiconductors used in other industries. Large automakers have been forced to cut production; globally, the sector could lose $60 billion in sales in 2021 as a result, according to IHS Markit.

“Chip suppliers are doing well because orders of automotive and large household appliance chips are expanding,” said Shoichi Arisawa, an analyst at Iwai Cosmo Securities Co. In addition, the auto sector is embarking on a long-term shift to add more high-performance chips for 5G wireless and autonomous driving systems.

In Japan, suppliers for the back-end manufacturing of chips, such as Towa Corp., will see orders pick up in the second half of the upcoming fiscal year, which is October or later, Arisawa said. The following suppliers are seen as the most likely beneficiaries:

Towa

Towa makes semiconductor molding machines, including packaging, integrated-circuit inspection units and plastic molds. The Kyoto-based company is among the world’s top providers of molding technology. It uses resin transfer methods to seal chips, and the technology is applied for automotive electronic devices, including electronic control units for engines.

In fiscal 2020, 87% of Towa’s revenue came from semiconductor manufacturing. The company’s operating profit reached 1.2 billion yen ($11 million) in the quarter that ended December, and it increased its profit forecast for the fiscal year. Shares rose 78% last year.

Lasertec

Lasertec Corp. develops tools to inspect and measure semiconductor photomasks, which are used to transfer circuitry patterns onto wafers. The company is also the world’s only maker of testing machines needed to verify chip designs for extreme ultraviolet (EUV) lithography.

Lasertec started out in 1960 to develop X-ray television systems. The Yokohama-based company has overseas offices in the U.S., Germany, Korea, Taiwan, China and Singapore, with sales in Asian excluding Japan making up 65% of revenue.

Lasertec is poised to play a key role in EUV lithography, used by Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. to develop and make Apple Inc.’s chips for iPhones, Bloomberg Intelligence analyst Masahiro Wakasugi said in a report last month.

In the first half of fiscal 2021, Lasertec’s sales, profit and orders touched a record, with EUV-related products fueling deliveries. The company also boosted its operating profit forecast for the full year in February to 20 billion yen. Shares rose 118% last year.

Advantest

Advantest Corp. makes semiconductor testing devices and electronic measuring instruments. Its automated testing equipment, which verifies the quality of chips, comprised more than half of the global share in 2019.

The company’s net sales have expanded to 276 billion yen in fiscal 2020 from 162 billion yen in 2016. It’s aiming for 300 billion yen to 400 billion yen in sales by 2027, with a 22% operating margin, by expanding its businesses beyond chip production testing equipment. Sales in Asia excluding Japan make up about 86% of its revenue.

The company boosted its operating profit outlook in January to 67 billion yen, topping analysts’ estimates. In fiscal year 2020, the semiconductor segment made up more than 70% of the company’s revenue. Shares rose 25% last year.

Rorze

Rorze Corp. develops and sells automation systems for the production of semiconductors and flat-panel displays, such as circuit board conveyors and wafer handlers. Its main products are robots that transfer wafers and reticles, including systems that have low particle generation, in order to support manufacturing lines with minimal contamination.

Chip automation products make up more than half of Rorze’s sales. The company’s operating profit was 2.7 billion yen in the quarter that ended November. The company completed the construction of a new office and factory in South Korea in February and its stock jumped 53% last year.

©2021 Bloomberg L.P.

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