Tokyo Electron Ltd. has all the prospects of reaping from the new move announced by the Indian government to make the domestic semiconductor manufacturing industry flourish. Toshiki Kawai, CEO of the Japanese semiconductor equipment major, has said he plans to set up a team of chip engineers in India, whom the company will employ locally and train here by about 2026. The engineers will be tasked with rendering technical services to Tata Electronics Pvt.
The Modi government is aggressively marketing India to global electronics companies and chipmakers, which is a developing economy seeking to close the technology gap with more developed economies. Among these companies, notable ones are Apple Inc., which is increasing production capacity in India, and Tata Group has invested significantly with similar investment by other firms to set up semiconductor fabrication plants. To sponsor these efforts, the Indian government has offered numerous incentives, which is quite a direct indication that the site would need high-tech equipment and skills by heavyweights like Tokyo Electron.
Financially, Tokyo Electron’s stocks witnessed an impressive 6% gain in Friday’s trading, though it traded ex-dividend, meaning it cannot receive nor give its next dividend. The company will seek to raise the worldwide workforce by 10,000 new recruits over the next five years as demand for semiconductor manufacturing capabilities increases around the world. Tokyo Electron equipment becomes very essential to the major players in the global village where Taiwan Semiconductor Manufacturing Co, Samsung Electronics, SK Hynix, and Intel Corp among many more require equipment all around the globe. More to that, the company expects a record fiscal year ending March regarding revenues and operating profits driven by increases in overall demand for chips, particularly for those sectors comprised within the folds of artificial intelligence and autonomous vehicles.
Yet geopolitical tensions still shadow the landscape of semiconductors. The U.S. has leaned on Japan to tighten export controls on advanced chipmaking equipment heading to China. Kawai said despite those pressures, demand for chipmaking machinery worldwide remains strong. “The importance of semiconductors does not change,” he said. “There will always be investment somewhere.”
Tokyo Electron agreed to help train Tata Electronics’ employees, as well as upgrade its research and development capacity. The Indian government has already cleared more than $15 billion in semiconductor investments, including a $2.75 billion Micron Technology assembly facility and a partnership with Tower Semiconductor for a $10 billion fabrication plant.
While sales to China comprised around 50% of Tokyo Electron’s revenue in the last quarter, Kawai said that would cut into 25%-30%, while repeating that growth in India will supplement rather than replace the Chinese market. The company has also taken strides toward receiving certifications of advanced manufacturing processes critical for semiconductor production in pursuit of improving competitiveness against Applied Materials and other competitors. He
concluded that while the specific scope of direct application for these chips was AI, far more room for expansion existed within the semiconductor industry.
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