Semiconductor Equipment - Berenberg Bank

Tokyo Electron Ltd
Technology Hardware
3) Our FY 2017 revenue estimate for TEL (see Figure 9) is ¥662bn (27% lower
than the TEL bull-case scenario), comprising SPE revenue of ¥450bn (ie after
applying the 11% share to TEL’s 2017 $40bn WFE estimate), FPD/PV
revenue of ¥101bn (in line with 2007 peak levels, and includes solar revenue
of ¥32bn), and components revenue of ¥111bn (in line with the 2007 peak).
Our operating margin estimate for FY 2017 is 15% (TEL’s estimate: 19%),
including a ¥30bn cost saving compared to the 2012’ ¥146bn level.
4) TEL is aiming to gain share in the etching and cleaning markets, although so is
AMAT (which plans to gain a 2-4% WFE share by 2016) and LAM (which is
looking to gain by 3-5% in etching and by 5-10% in the cleaning market). In
our opinion, with neither an established market position nor experience of
these growing markets, TEL is in a weaker position than AMAT and LAM to
gain share.
Yen depreciation – limited impact
The yen has depreciated by 30% against the US dollar since 2012. However, we
believe the impact on TEL has been limited. From an operational/cost
perspective, its operations are not heavily exposed to FX movements. TEL’s sales
contracts are mostly denominated in yen and it hedges its foreign-currency
exposures. Its main manufacturing plants are all based in Japan. Therefore the
impact on its operations/cost base is limited.
From a competitiveness perspective, the depreciation in the yen makes TEL’s
prices more competitive compared to its US peers AMAT’s and LAM’s. However,
we do not expect TEL to benefit much from this, as we do not believe chipmakers
will switch vendors purely because of lower prices. From our conversations
with industry specialists, chip-makers care more about equipment performance,
reliability and support services than price.
Even if chip-makers did switch due to lower prices, TEL’s gain could still be very
limited as it only competes with US competitors in some of its end-markets and
other Japan-based competitors such as Hitachi and Dainippon have the same
advantage.
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