Japanese suppliers of chipmaking equipment components have not seen major gains from the AI-driven surge in demand for Nvidia chips, according to Marumae CEO Toshikazu Maeda.

Marumae, based in Kagoshima and supplying parts to Tokyo Electron, operates in a market for vacuum parts used in chip tools, which is valued at less than 100 billion yen (US$680 million) in domestic sales.

Maeda said the sector remains fragmented, making it hard for small companies to negotiate higher prices, despite large clients such as Tokyo Electron and Applied Materials reporting higher margins.

Maeda noted that Japanese chip tool firms face competition from both domestic rivals – some of whom also serve other industries – and potential foreign buyers seeking local expertise.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Japan’s semiconductor ecosystem has shifted from chip dominance to supply chain fragmentation

Japan’s current struggle in chip equipment components contrasts sharply with its former semiconductor dominance, revealing how global technology value chains have evolved.

In the 1980s, Japanese companies like NEC, Toshiba, and Hitachi controlled 80% of the global DRAM market by 1987, up from just 25% market share in the early 1980s 2. This dominance sparked trade tensions and led to the 1986 U.S.-Japan Semiconductor Trade Agreement 2.

Today, Japanese companies occupy a very different position, focusing on highly specialized but fragmented component supply. Dozens of small firms compete in a domestic market worth just $680 million 1. While their vacuum chambers and precision parts remain essential for chip production, these suppliers lack the market power their predecessors once wielded.

The shift illustrates how technological leadership can migrate within supply chains over decades, leaving former leaders in peripheral roles even when demand for their expertise remains critical.

2️⃣ Extreme market fragmentation prevents suppliers from capturing value despite booming end markets

The Japanese vacuum parts sector demonstrates how fragmentation can trap suppliers in low-margin businesses even when their customers achieve record profits.

While chip equipment giants Tokyo Electron and Applied Materials maintain operating margins around 30%, their Japanese component suppliers struggle with margins below 10% 1. Marumae, with an estimated 7% market share in Japan’s vacuum chamber market, represents one of the larger players in this fragmented space 1.

The company’s president notes that consolidation efforts have stalled because “nobody is selling,” with many competitors being family-owned businesses backed by regional banks 1. This ownership structure creates structural barriers to the market consolidation that could give suppliers more negotiating power.

The situation reflects a broader challenge in specialized B2B markets where fragmentation prevents suppliers from demanding better prices, even when their components are essential to their customers’ success in high-growth sectors like AI infrastructure.