Tokyo Electron’s Outlook Disappoints in Bad Sign for Chip Sector

(Bloomberg) -- Tokyo Electron Ltd., one of the world’s largest suppliers of chipmaking equipment, projected earnings well below analysts’ estimates in another negative signal for the global semiconductor sector.

Most Read from Bloomberg

• A 32-Year-Old Nears Billionaire Status by Using AI to Broker Japan Mergers

• Michael Burry Doubles Alibaba Stake in Big Bet on China Tech

• Turkey Latest: Erdogan Says Unclear If Vote Will Go to Runoff

• Chicago’s Empty Office Towers Threaten Its Future as a Major Financial Hub

• Turkey Set for Runoff as Erdogan Falls Just Short of Victory

The Japanese company forecast operating income of ¥393 billion ($2.9 billion) for the year ending March 2024, lagging the ¥446.7 billion average estimate. That disappointing outlook came after it reported a smaller-than-expected 9.4% profit slide for the March quarter of 2023.

Chip suppliers are grappling with myriad uncertainties as the US imposes sanctions on China, the world’s largest semiconductor market, to try and contain the Asian country’s technological and geopolitical ambitions. Tokyo Electron has been closely watched for indications of demand after Japan and the Netherlands agreed to join the US in imposing strict export restrictions on advanced semiconductor technology and products to China.

More broadly, chipmakers are struggling with volatile demand as recessionary fears weigh on global spending for smartphones, computers and other electronics. Taiwan Semiconductor Manufacturing Co., one of Tokyo Electron’s largest customers, warned in April that demand from the mobile and PC industries remains “soft” for now, though the market was stabilizing and likely to improve in the second half. It’s sticking with earlier plans to spend as much as $36 billion upgrading and expanding capacity in 2023.

Tokyo Electron, one of a handful of indispensable suppliers to the chipmaking industry, got about 23% of its revenue from China in the December quarter. The company is predicting 1.7 trillion yen of net sales this fiscal year, also falling short of estimates.

Most Read from Bloomberg Businessweek

• Eric Adams Is Starving New York City’s Universal Pre-K Program

• AI Lets Microsoft Target Google and Google Target Amazon

• China’s $220 Billion Biotech Initiative Is Struggling to Take Off

• The Plot to Steal the Other Secret Inside a Can of Coca-Cola

• The Green Energy Transition Has a Chilean Copper Problem

©2023 Bloomberg L.P.