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Japan-Update

Disco, Tokyo Seimitsu profit seen making softer landing

Higher chip demand seen limiting declines

Inside a Disco plant.

TOKYO -- Chipmaking equipment maker Disco's group operating profit will likely take less of a hit than previously expected for the year ending in March, while an earnings slide at rival Tokyo Seimitsu seems to be slowing.

Disco is seen logging around 27.5 billion yen ($239 million) in black ink for fiscal 2016 -- 10% less than a year earlier, but around 2 billion yen more than forecast. Sales are seen exceeding the company's estimate of 123 billion yen, which would mark a 4% decline.

The Japanese manufacturer is among the world's top providers of dicing saws, which cut silicon into the wafers from which semiconductors are made. As smartphones grow more advanced and mobile data transmission increases, demand for chips in both devices and the servers used in new data centers is on the rise. This has helped boost Disco's shipments of dicers and dicing blades, which need to be replaced every so often, above anticipated levels this fiscal year.

Every 1-yen appreciation in the Japanese currency against the dollar crimps Disco's operating profit by 500 million yen over the course of a year. The impact for fiscal 2016 is poised to top 5 billion yen. Were the strong Japanese currency taken out of the equation, profit would likely climb, despite around 1.5 billion yen more in research and development spending this fiscal year than last. Revenue would grow as well.

Higher chip demand is also helping mitigate Tokyo Seimitsu's earnings decline. Group operating profit at the maker of chip-testing devices apparently dipped 3% on the year to 9.5 billion yen for the nine months through December -- an improvement from the April-September half, when profit slid 14%.

Sales for the nine months apparently came in somewhat higher than the 52.3 billion yen logged a year earlier. This compared to a 2% drop in the first half. Higher sales of testing devices outweighed a slump in contour measuring instruments for autoparts.

For the year ending in March, Tokyo Seimitsu forecasts a roughly 2% dip in operating profit to 13 billion yen. But orders for chip testers have apparently remained brisk since the beginning of the year, while the yen is weaker than the 103 to the dollar envisioned for the October-March half, raising the possibility of a profit increase.

Disco and Tokyo Seimitsu are set to release nine-month earnings on Feb. 6 and Feb. 14, respectively.

(Nikkei)

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