Japan Chip Equipment Maker Kokusai Expands In China

Japanese chip equipment maker Kokusai Electric expands support staff in China as it sees surging demand from low-end chip makers next year

Japanese chip manufacturing equipment maker Kokusai Electric has said it plans to expand its support staff in China ahead of an expected surge in demand next year from the world’s biggest semiconductor market.

Shares in Kokusai have risen 66 percent since its IPO in October and chief executive Fumiyuki Kanai told Bloomberg he wants to extend on the rally.

US private equity firm KKR acquired the company from HItachi in 2018 and brought in Kanai at that time.

As the US has steadily tightened export controls targeting China’s advanced chip industry, “countless” smaller-scale firms have sprung up targeting the market for lower-end or “legacy” chips that are essential in internet-of-things, smartphones and personal computers, Kokusai chief executive Fumiyuki Kanai told Bloomberg.

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Image credit: Pexels

Supply chain shift

He said said demand from Chinese companies has already surged to make up more than 40 percent of Kokusai’s revenue today, up from about 30 percent in the past, and that he expects the figure to rise to just under 50 percent in the coming months.

Kanai said he sees a sustained investment in lower-end chip production capacity in China, across areas including memory, logic and power chips at 28 nanometre and larger production processes.

“Aggressive support” is being provided for such ventures by the Chinese government, Kanai said.

Such 28nm processes are well outside the range being targeted by US sanctions.

After-sales staff

For comparison, Huawei caused concern for US authorities with its launch earlier this year of the flagship Mate 60 smartphone using a cutting-edge 7nm chip manufacturing process from contract manufacturer SMIC.

The US Department of Commerce is currently investigating whether Huawei and SMIC broke US export rules.

Taiwan Semiconductor Manufacturing Co (TSMC), which makes most of the world’s most advanced chips, is currently using a 3nm process and plans to start 2nm mass production in 2025.

Kanai said Kokusai is planning to expand its after-sale staff and has no plans to carry out production or research in China.

“We will increase personnel to cover the local demand,” he said.

Japan chip expansion

Kokusai’s film-deposition tools, used in fabricating multi-layer chips, are currently mostly sold to NAND flash memory makers, but Kanai said the firm is planning to diversify outside the slumping market and may make acquisitions to expand into adjacent areas.

Japan has been building up its domestic chip industry since US sanctions began targeting Chinese chip manufacturing over the past two years, and recently passed an extra budget that included about 2 trillion yen ($13.6bn, £11bn) in funding for chip investment and manufacturing, including support for a third Taiwan Semiconductor Manufacturing Co (TSMC) factory in Japan that is to focus on making high-end AI chips.

The funding is also expected to support chip foundry venture Rapidus, which intends to manufacture high-end chips in Japan’s northern island of Hokkaido.