japan's Chip Industry Thrives Amid U.S.-China Trade Restrictions

22 Feb, 2024

japan's Chip Industry Thrives Amid U.S.-China Trade Restrictions

Japan's semiconductor equipment manufacturers are experiencing a surge in demand from China, partly due to trade restrictions imposed by Washington and Beijing's efforts to bolster the local chip industry.

"In China, there's a need to secure older-generation chip tools in bulk, as advanced chips cannot be imported," explained Masato Goto, president of Screen Semiconductor Solutions, a key supplier of machines for cleaning chip wafers to eliminate tiny particles, some as small as 0.1 micrometer.

Sales to China for Screen Holdings' unit are projected to rise to 44% in the current fiscal year, up from 19% in the previous year. These sales primarily serve the automotive and consumer electronics sectors, which mainly utilize older chip technology at the 45 nanometer or 28 nanometer node level.

Despite lower profitability compared to advanced chip-making machines, older generation machines still yield satisfactory profits due to broader market segments.

While adhering to government restrictions, Japanese machine manufacturers underscore the importance of the Chinese market. Tokyo Electron, for instance, reported its highest-ever share of sales from China, driven by investments by Chinese chipmakers aiming to enhance self-sufficiency.

Chinese investments in legacy products and talent training reflect efforts to strengthen domestic production capabilities, with the ultimate goal of advancing chip technology. However, uncertainties persist, including potential new restrictions from Washington and the volatile nature of the Chinese market, prompting cautious optimism among Japanese companies about their future prospects in China.