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Japan-Update

Tokyo Seimitsu heads for another year of record profit

Japanese chipmaking device maker claims large share of booming market

Tokyo Seimitsu controls 20-30% of the market for dicing machines used to cut wafers.

TOKYO -- Tokyo Seimitsu's operating profit is on track to rise 6% to around 18 billion yen ($168 million) in the upcoming fiscal year through March 2019, which would mark the second straight record year thanks to thriving demand for chipmaking equipment.

The global semiconductor market will grow 9% to $451.2 billion in 2018, according to a report by World Semiconductor Trade Statistics. The demand is driven by video and data storage technology. Similarly, the international market for semiconductor production equipment will jump 7% to $60.1 billion, predicts Semiconductor Equipment and Materials International.

Tokyo Seimitsu has about 20-30% of the global market in semiconductor dicing machines, and orders have climbed steeply in the last few years. Outstanding orders for chipmaking equipment totaled 23.8 billion yen at the end of December 2017, up 75% from a year earlier.

Orders have continued to stream in this year as well. The 4.5 billion yen addition to the Hachioji plant in Tokyo, completed in 2016, has been running at high capacity.

With much of the chipmaking equipment sold to clients in North America and Asia, more than 70% of segment sales are generated abroad. Yet the bulk of the group's overseas transactions are denominated in yen given its strong market position. That minimizes the currency effect on earnings even when the yen appreciates against the dollar.

Sales of precision measuring instruments are surging in Asia, especially China. Automakers in that region are allocating more investments to improve fuel and energy efficiency. Demand is especially strong for measuring equipment for engine and transmission components.

For the current fiscal year through March 31, operating profit is projected to soar 24% to 17 billion yen, which would exceed the record set in fiscal 2000. The influx of orders prompted Tokyo Seimitsu to upgrade its annual profit guidance by 3 billion yen from last May's forecast. Sales are seen surging 12% to 87 billion yen.

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