August 1, 2017 4:27 am JST
Japan Market Pulse

Fears of tech slump emerge

Big players are shunned even after strong earnings

HIROFUMI TAKEUCHI, Nikkei staff writer

TOKYO -- Japanese chipmaking equipment manufacturers and others supplying the tech sector are losing steam of late after driving the Tokyo market earlier this year, as investors fear that stock prices and profits may be peaking.

The Nikkei Stock Average has been treading water around the 20,000 mark, slipping 34.66 points Monday to close at 19,925.18.

Fanuc Chairman and CEO Yoshiharu Inaba sent shockwaves during a conference call Friday when he said a drop in information technology-related orders will be "unavoidable." The industrial robot maker raised its net profit forecast to a 3% increase for the year ending March 2018, a turnabout from a prior projection of a decline. Still, its stock slid more than 3% on Monday.

What scared investors was a pause in demand for the Robodrill, a Fanuc machine that is used in smartphone manufacturing. Moreover, with automobile output slowing globally, "orders for automobile-related robots will be affected in the medium term," predicted Yoshinao Ibara at Morgan Stanley MUFG Securities.

Market pros do not necessarily expect orders to tumble. But "operating profit will likely peak out compared with the April-June quarter," said another analyst at a major brokerage. Fanuc's earnings "brought investors who were full of hopes back to reality," said a researcher at an asset management company affiliated with a regional bank.

Chip-related stocks, which had been propelling the market, are soft as well. Tokyo Electron said Thursday that April-June net profit more than tripled on the year. But investors gave the chipmaking equipment manufacturer the cold shoulder, as it failed to upgrade its full-year forecast as they had expected. The stock declined 7% the next day.

Considering the growing demand tied to smartphones and data centers, chip prices were thought to have begun an upswing lasting longer than a cyclical trend. But such optimism is being shaken now. "Investors are starting to sense a change in the tides," said Masayuki Kubota of Rakuten Securities' Economic Research Institute.

"We can't deny that a peak in the silicon cycle may be approaching," said Masashi Maruyama at SMBC Nikko Securities. Chip sales in Asia are showing signs of plateauing after a surge that began last summer, he said.

Trends in the semiconductor market are affecting those beyond chipmaking equipment producers. Shin-Etsu Chemical, the top supplier of silicon wafers, a chip material, fell 2% the day after releasing a forecast of a record full-year net profit. South Korean chipmakers Samsung Electronics and SK Hynix also suffered sharp slides after posting robust quarterly results.

Unnecessary pessimism is uncalled for, but concerns about what the future holds even for strong performers are justified. Declines of tech stocks, many of them at current high prices, weigh heavily on the broader market.

FANUC Corp.

Japan

Market(Ticker): TKS(6954)
Sector:
Industry:
Producer Manufacturing
Industrial Machinery
Market cap(USD): 40,048.8M
Shares: 204.05M

Tokyo Electron Ltd.

Japan

Market(Ticker): TKS(8035)
Sector:
Industry:
Electronic Technology
Electronic Production Equipment
Market cap(USD): 22,938.6M
Shares: 165.21M
Asia300

Samsung Electronics Co., Ltd.

South Korea

Market(Ticker): KRX(005930)
Sector:
Industry:
Electronic Technology
Telecommunications Equipment
Market cap(USD): 297,879M
Shares: 148.18M
Asia300

SK hynix, Inc.

South Korea

Market(Ticker): KRX(000660)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 42,735.5M
Shares: 728.00M

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