Japan News: Optimistic again, supply sector ups projections, adds capacity

By Paula Doe, Contributing Editor

With the economy looking up and some chipmakers talking about ramping production, Japan’s semiconductor supply chain is suddenly looking downright optimistic as well. Japan’s GDP growth is now running at a surprisingly healthy 3.3% annual rate. Economists are cheered by the sweeping reelection of prime minister Junichiro Koizumi – with his plan to push economic reform, starting with privatizing Japan Post and its $3 billion in subsidized savings accounts – and the Japanese stock market is finally heading up again.

Companies are upping their projections for the next six months, reporting respectable growth and margins for the last six months, and investing in new capacity to make more industry bread-and-butter basics, from silicon wafers to mass flow controllers.

Most sector suppliers reporting so far have upped their guidance for the rest of the Japanese fiscal year through March 2006. Tokyo Electron now says its net income will be 22% higher on 7% stronger revenues than originally projected for the year. Still, that means only 2% growth in sales from the year before, and a 29% drop in net income to about 7% of sales. The company will increase its R&D spending by about 10% to some $425 million (48 billion yen), or about 7% of sales.

Despite the 27% plunge in its first-half sales, Advantest says its business is recovering so strongly that full-year revenues and profits will return to last year’s levels. Company officials note the strategy of moving beyond the traditional memory test sector to target the much larger nonmemory tester business is finally paying off, as sales of nonmemory testers surpassed the memory business for the first time this period.

Shin-Etsu Chemical reports demand for 200mm wafers has been picking up, and should contribute to higher profits in the next six months, pushing its operating profits on its electronic materials business up 19% for the year.

JSR is also upping its earnings projection by about 3%, to a 12% overall year-on-year increase in income on 10% sales growth, largely from strong sales of high-margin semiconductor materials. Komatsu Electronic Metals now projects slightly stronger-than-expected 11% sales growth, driven by its subsidiary in Taiwan, although higher depreciation from recent plant investments will mean a 3% decline in net income. Tosoh and Hoya also reported improved earnings on strong sales of target materials, photomask blanks, and glass disk substrates. Package supplier Shinko Electric Industries’ revenues are slipping on declining lead frame sales, but it’s still forecasting a 23% improvement in profits for the year on stronger sales of higher-margin BGA substrates.

Canon expects 5% sequential improvement in its sales of semiconductor and LCD equipment in the December quarter, after the 27% year-on-year drop in the September quarter, for about 9% growth for the calendar year for its semiconductor equipment and other related businesses.

Shin-Etsu, SUMCO step up 300mm ramp

Growing confidence is translating directly into increased investment in capacity for some materials and subsystem suppliers. Shin-Etsu Chemical president Chihiro Kanegawa told the Nikkei Kinyu Shimbun that the company was stepping up the ramp of its 300mm wafer capacity, and was now planning to expand from its current capacity of 400,000 up to 500,000 wafers/month and likely to even higher levels by next fall. It will add facilities in both Japan and the US, adding further pilot processing capability to the ingot growing capability in the US as it moves toward fully integrated production. The company says it will invest a total of some $1.1-$1.3 billion (130-150 billion yen) this year, or ~12%-14% of its projected $9.5 billion total sales, although that includes major expansion of the big chemical company’s vinyl chloride resin facilities in the US. Next year, it plans to spend another $1.4-$1.8 billion (160-200 billion yen). It has said it planned to reach capacity of 700,000 300mm wafers/month by 2007.

Not to be left behind, SUMCO says it, too, will accelerate its ramp in 300mm capacity by about six months, spending some $1.1 billion (130 billion yen) this year to ramp to targets of 600,000 wafers/month by 2008 and 700,000 by 2009, from about 350,000 currently, according to the Nihon Keizai Shimbun. That’s a much more ambitious plan for SUMCO, however, as its total revenues for the year through January 2005 were only some $1.7 billion (193 billion yen). Some forecasts estimate the company’s Nov. 17 stock listing could raise somewhere around $1.2 billion.

Meanwhile, Horiba STEC is opening a new $13 million (1.5 billion yen) plant in Kumamoto that triples its capacity to make mass flow controllers and chemical concentration meters. Shinko Electric has upped its planned investment by 50% to some $175 million (19.8 billion yen) for expanding its capacity to make BGA substrates by March 2006. Hamada Heavy Industries will invest $18 million (2 billion yen) to increase its capacity to reclaim test and monitor wafers by 15%, to some $135 million (5.2 billion yen) output a year. And TDK says it now has capacity to make 500 units/month of its new model load port for FOUPs, according to various newspaper reports. – P.D.


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