Tokyo Electron has cut its full-year earnings forecast, citing weaker demand from logic chip producers and reduced spending on chipmaking equipment in China.

It now expects operating income of 570 billion yen (US$3.7 billion) for the fiscal year ending March, down from a previous estimate of 727 billion yen (US$4.9 billion).

Shares fell 18% after the announcement, the largest drop in nearly a year.

The company reported a 12.7% decline in June quarter operating income to 144.69 billion yen (US$981.6 million), missing analyst forecasts.

It blamed the outlook cut on canceled investment plans by some advanced logic chip makers and a slower-than-expected recovery in PC and smartphone demand.

However, demand for equipment to produce advanced chips remains strong, with expectations for increased spending on GPU manufacturing tools in 2026.

🔗 Source: Japan Times

🧠 Food for thought

1️⃣ Equipment suppliers face uneven fortunes as chip market segments diverge

While Tokyo Electron struggles with canceled orders, its main competitor Applied Materials reported strong Q2 2025 results with $7.10 billion in revenue, representing a 7% year-over-year increase 1.

This divergence highlights how different market positioning affects equipment suppliers during industry transitions.

Applied Materials benefits from AI-driven demand, with CEO Gary Dickerson stating that AI computing has become the “dominant driver of semiconductor innovation” and anticipating AI-related revenue could exceed 35% of total sales by 2027 1.

Meanwhile, Tokyo Electron appears more exposed to the struggling logic chip segment, where some customers have lost the “ability to invest” entirely, as the company noted.

The contrast demonstrates how equipment suppliers’ customer mix and technology focus can lead to different outcomes within the same industry cycle.

2️⃣ AI infrastructure growth masks weakness in traditional consumer electronics

Tokyo Electron’s outlook cut reflects a broader market reality where AI demand drives overall semiconductor growth while traditional segments stagnate.