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May 11, 2017 6:00 am JST

Semiconductor sector surging on IoT, smartphones

Orders for chipmaking machines return to pre-financial-crisis levels

TOKYO -- The semiconductor industry is riding a wave of demand for memory chips thanks to the "internet of things" technology and ever-evolving smartphones.  The momentum is so strong that three of Japan's six major chipmaking equipment manufacturers expect record pretax profits in the current year ending March 2018.

Tokyo Electron projects a 37% pretax profit jump this fiscal year to 216 billion yen ($1.89 billion). The company posted its first record profit in nine years for fiscal 2016. The market for semiconductors and chipmaking equipment will continue to expand, President Toshiki Kawai said at the company's earnings event April 28.

Peers Disco and Screen Holdings also expect pretax profit to reach record heights in the year ending next March. Japanese companies received more than 180 billion yen in orders for chipmaking equipment in both February and March, according to data from the Semiconductor Equipment Association of Japan. The amount is close to the 195.5 billion yen tally for February 2007, before the 2008 financial crisis.

Orders are also pouring in at foreign manufacturers. U.S.-based global leader Applied Materials won a record $4.2 billion worth of orders in the three months through January. Dutch company ASML Holding, the world's No. 2 player, saw January-March sales soar 45% to 1.9 billion euros ($2.06 billion).

Robust demand for NAND flash memory chips has been the biggest driver. With video watching on smartphones increasingly common, and the internet of things technology progressing, data storage needs are on the rise. And the shift from hard-disk drives to solid-state drives, in which flash memory chips are the core component, has sharply increased demand for those chips. Furthermore, new data centers, each housing thousands of high-performance servers, are being built one after another. And smartphones are advancing fast, demanding larger memory capacities.

The big three semiconductor makers -- South Korea's Samsung Electronics, Taiwan Semiconductor Manufacturing Co., and Intel of the U.S. -- are each spending the equivalent of some 1 trillion yen annually on capital investment.

Some experts argue that the so-called silicon cycle, where booms and busts come and go every few years, is a thing of the past. Tetsuya Wadaki, an analyst at Nomura Securities, subscribes to the idea, explaining that the semiconductor industry is caught in a "supercycle" in which demand for chips keeps increasing.

(Nikkei)

http://asia.nikkei.com/Business/Companies/Semiconductor-sector-surging-on-IoT-smartphones