Japan's Chip Suppliers Are Gaining From Global Chip Crisis: Report - Taiwan Semiconductor (NYSE:TSM)

A handful of small Japanese suppliers are playing a crucial role in accomplishing demand fulfillment amidst the semiconductor chip crisis, Bloomberg reports.

What Happened: Japanese suppliers for the back-end manufacturing of chips like Towa Corp are estimated to witness an order pick up in the second half of 2021. Towa manufactures semiconductor molding machines, including packaging, integrated-circuit inspection units, and plastic molds. The company uses resin transfer methods to seal chips, and the technology is applied to automotive electronic devices, including electronic control units for engines.

In fiscal 2020, 87% of Towa’s revenue came from semiconductor manufacturing. Shares rose 78% last year.

Lasertec Corp (OTC: LSRCY) develops tools to inspect and measure semiconductor photomasks used to transfer circuitry patterns onto wafers. The company is also the only manufacturer of testing machines to verify chip designs for extreme ultraviolet (EUV) lithography. Its Asian country sales, excluding Japan, made up 65% of total revenue.

Lasertec is reportedly poised to play a key role in EUV lithography, used by TSM and Samsung to develop and manufacture Apple Inc’s (NASDAQ: APPL) chips for iPhones. Its shares rose 118% last year.

Advantest Corp (OTC: ADTTF) (OTC: ATEYY) manufactures semiconductor testing devices and electronic measuring instruments. The company’s automated testing equipment, which verified chip quality, comprised over half of the global share in 2019.

The net sales expanded at a 4-year CAGR of 14% to 276 billion yen in FY20. In FY20, the semiconductor segment contributed over 70% of the company’s revenue, and its shares rose 25% last year.

Rorze Corp develops and sells automation systems to produce semiconductors and flat-panel displays, like circuit board conveyors and wafer handlers. The main products include robots that transfer wafers and reticles, including systems with low particle generation to support manufacturing lines with minimal contamination.

Chip automation products contribute over half of Rorze’s sales. The company completed a new office and factory in South Korea in February, and its stock jumped 53% last year.

Why It Matters: The semiconductor crisis is fueled by the pandemic-induced demand for remote work and entertainment. It led to a production cut in the auto industry, which could jeopardize sales worth $60 billion in 2021.

President Biden already sought $37 billion in Congressional funding to tackle the crisis. The EU pledged over $150 billion to double the global chip market share by 2030.

Based on a Fitch report, Japan’s Toyota Motor Corp (NYSE:TM) and Honda Motor Co Ltd (NYSE:HMC) can cope with the global chip crisis.

Price action: TSM shares are up 4.54% at $119 in the pre-market session on the last check Thursday.

TSMTaiwan Semiconductor Manufacturing Co Ltd

ADTTFADVANTEST CORP ORD by Advantest Corp.

$130.63-25.4%

ATEYYADVANTEST CORP SP/ADR by Advantest Corp.

$180.60-0.41%

HMCHonda Motor Co Ltd