This picture taken on May 1, 2024 shows professors and students looking at a Minimal Fab, a small-scale semiconductor factory that does not require a clean room, at Tokyo University in Tokyo. (Photo by Yuichi YAMAZAKI / AFP) (Photo by YUICHI YAMAZAKI/AFP via Getty Images)
Yuichi Yamazaki | Afp | Getty Images
Japanese semiconductor equipment providers have been counting on China as their largest source of revenue, even as they have got caught in the U.S.-China crossfire.
Japanese semiconductor equipment powerhouse Tokyo Electron with a market cap of nearly $72 billion, saw its share of China revenue jump to 44% in financial year ended March 2024 compared with 23% a year earlier, according to the company’s earnings report.
That share increased to nearly 50% in the first quarter of financial year 2025 compared with 39.3% in the same period last year.
Screen Holdings, meanwhile, generated as much as 43% of its total sales from China in the financial year ended March 2024, up from 19% in financial year 2023. That share rose to 51% in the first quarter of the current financial year from 23% in the same period last year.
The company expects China sales share to be at 41% for the fiscal year ending in March 2025.
The large business of Japanese chip companies in China underscores the challenge that the U.S. ally faces in balancing White House’s demands with its domestic economic interests.
The U.S. is introducing new export-control measures, including for quantum computing and chip-related goods, according to a statement from the Department of Commerce on Friday.
The manufacturing equipment that Japanese companies are supplying to China is expected to be for legacy chips, used in cars rather than smartphones or for training advanced artificial intelligence models.
Bloomberg reported earlier this week that China had threatened to retaliate if Japan further expanded its export controls on equipment sales to China.
Beijing refuted that report and said it was “committed to keeping the global industrial and supply chain secure and stable,” Mao Ning, China’s Foreign Ministry spokeswoman said at a regular press briefing Monday, adding that its export control measures have been “just, reasonable and non-discriminatory.”
When Japan first introduced export controls to limit sales of chip equipment to China in June last year, China’s Ministry of Commerce called it an “abuse of export control” and “serious violation of WTO’s mandated duties,” according to a CNBC translation of the ministry’s statement in Mandarin.
China has been under increasing pressure from the the U.S. and allies that have sought to cut the country’s access to the most advanced chips.
China has not been able to secure chip-making equipment from Dutch firm ASML, which is the only supplier of tools capable of making some of the more advanced chips. The country’s government has blocked the equipment’s exports to China.
But analysts expect that China will soon be able to produce the majority of chips it needs for most applications.
China has ramped up its purchases of chip-making equipment since the second quarter of 2023, according to industry body SEMI, which said in a Thursday report that China purchased about $25 billion worth of chip equipment in the first half of 2024, more than the combined total of the U.S., South Korea, Taiwan and Japan combined.
—CNBC’s Evelyn Cheng and Arjun Kharpal contributed to this report.
