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Chipmaking device suppliers focusing on service ops

Five of six Japanese players boosted bottom lines in October-December

TOKYO -- Japanese producers of semiconductor-manufacturing equipment are focusing on after-sales service to create a sustainable source of earnings in an otherwise volatile market.

Screen Holdings and Disco have upgraded earnings projections for the fiscal year ending March 31. Five of six industry players showed year-on-year improvement in net income for the October-December quarter.

"The value of orders reached a quarterly record in October through December of 2016," Screen President Eiji Kakiuchi said.

Disco also racked up its highest-ever sales volume that period for replaceable blades, such as those for cutting wafers. The blades account for about 30% of group sales. Amid the rise of such innovations as 3-D chips, semiconductor production has become an even more sophisticated process. "We provide fine-tuning of blade edges and such for individual clients, and the rate of adoption of our products has increased," Disco Chairman Hitoshi Mizorogi said.

Tokyo Electron, the largest Japanese producer of chipmaking equipment, is also growing its service business. This fiscal year's sales in the segment are largely expected to surpass the record of roughly 185 billion yen ($1.65 billion) logged last fiscal year. Sales from the service business have jumped more than 70% over five years to account for a quarter of all sales. Offerings to monitor the working status of already-sold machinery, as well as customization and resale services, have performed particularly well, according to President Toshiki Kawai.

Hitachi Kokusai Electric targets fiscal 2018 sales besting this fiscal year's projections by about 10%. Hitachi High-Technologies established a customer support division last April.

These companies are pouring resources into services amid the spread of the internet of things. The output of semiconductors has expanded, pushing chipmakers to effectively utilize existing equipment and consumables.

Orders for chipmaking systems themselves are also brisk. December saw the three-month average of Japanese-equipment orders approach the most recent peak recorded in the first half of 2007, shows data from the Semiconductor Equipment Association of Japan. Thanks to the growing adoption of chips in the internet of things and similar applications, "the phase of expanding orders will continue," said Tetsuya Wadaki of Nomura Securities.

But "there is a chance that the briskness in memory [chips] will hit a lull in 2017" in the equipment sector, Advantest President Yoshiaki Yoshida warned. The halcyon days of 2007 were followed by the global financial crisis, when orders tanked. Manufacturers are increasingly looking to beef up services ahead of a cyclical downturn in equipment sales.

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