Thanks to artificial intelligence, Japan’s tech industry has had a better-than-expected earnings season, with chipmakers and equipment suppliers raising their expectations as demand for data centers soars.
Most companies included in the MSCI Japan Information Technology Index report, with more than three-quarters beating analyst expectations, making it one of the best performing companies in the broader MSCI Japan index. Overall index profits rose 35%, with Advantest Inc. among the biggest contributors, according to data compiled by Bloomberg.
While a wave of positive guidance from major suppliers and new government support are fueling Japan’s chip resurgence, the earnings season also highlighted widening disparities in the global chip industry. AI-driven demand continues to boost profits even as suppliers to the auto industry continue to struggle.
Tokyo Electron has revised its full-year operating profit forecast upward, and analysts predict that strong demand for chip manufacturing equipment will continue into next year due to vigorous capital investment by chip makers. Berenberg analyst Tammy Chiu also improved her outlook for 2026, noting that she expects the company’s spending on wafer fabrication equipment to reach a record high as investment in DRAM and NAND accelerates.
Bloomberg Intelligence analysts Masahiro Wakasugi and Takumi Okano said they expect the increasing complexity of chips to also boost demand for the company’s equipment. Demand from customers for DRAM and NAND chips, including SK Hynix and Samsung Electronics, is expected to increase next year as data center capacity expands, they added. The company controls about 90% of the market for photoresist coatings and chip wafer development tools.
Advantest has raised its full-year operating profit forecast to 374 billion yen, an increase of 25%. The increased use of high-bandwidth memory chips maintains strong demand for the company’s high-end chip test equipment. Nvidia’s global supplier share of the $1.9 billion memory chip test market rose 7 percentage points to 63% in its latest fiscal year from the previous year, according to an April statement.
Advantest CEO Douglas Lefever said in an earnings call that the company’s mid-term guidance increases reflect “solid AI-related demand, increased supply capacity, and market share growth.”
Kazuyoshi Saito, a senior analyst at Iwai Cosmo Securities, said Advantest’s management seems confident that next fiscal year’s sales will exceed 1 trillion yen, pointing to a positive atmosphere.
The widespread lift from AI extends beyond AI-specific high-bandwidth memory chips to mainstream DRAM and NAND, stimulating demand for related materials and equipment. Demand for AI GPUs remains strong and could grow even stronger into 2026, BI’s Wakasugi said in an interview.
“The era of AI has arrived,” Tokyo Electron CEO Toshiki Kawai said at a financial results conference, adding that strong demand for AI servers and innovation in the chips essential to AI servers “will strongly drive continued and dramatic growth in investment in cutting-edge semiconductors, with double-digit growth expected to continue into next year and beyond.”
Advantest shares soared 22% after announcing record profits, while Tokyo Electron rose 8.9%. In both cases, full-year forecasts were boosted.
Government support and sustained AI investments are increasing optimism across the country’s technology sector. According to the Ministry of Economy, Trade and Industry, Japan has allocated about 5.7 trillion yen to revitalize the chip industry from 2021 onwards. Lawmakers are aiming to secure about 1 trillion yen a year to continue support for chip and AI development.
Yasuyuki Fukuda, chief portfolio manager of Nomura Asset Management’s Japan Information Electronics Equity Fund, said AI stocks are not in a bubble and have room for further upside. The market is “just entering its second act.”
In contrast, demand for automotive and industrial semiconductors has not yet recovered.
Shares of Renesas Electronics fell as much as 8%, their steepest decline in four months, after the company reported a slow recovery and increased competition from cheaper power chips. ROHM also forecast full-year operating income of 5 billion yen, but this fell short after analysts suggested a loss in the second half of the year, less than half of the forecast. Resonac Holdings posted its first quarterly operating loss since 2023 due to a decline in demand due to the slump in the automobile market.
ROHM President Katsumi Higashi said in a press conference last Friday that the company expects auto-related revenue from customers to decline in the final quarter of the fiscal year. Mr. Higashi said that he expects the automobile-related market to recover next fiscal year.
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