Tokyo Electron reaches new high after China demand increases

(Bloomberg) — Shares of Tokyo Electron Ltd. hit a record high after the company raised its guidance for the year on the back of sales to China.

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The chipmaking gear maker’s sales rose as much as 12% in Tokyo on Tuesday, its biggest intraday rise in nearly four years. It came as the company raised its operating income forecast for the year to March by 11% to ¥445 billion ($3 billion). This beat analysts’ estimates and came after the December quarter where China accounted for 46.9% of sales.

Demand to buy old equipment from Chinese semiconductor enterprises is rising as US trade sanctions prevent them from getting the best chips for tasks like artificial intelligence development.

Tokyo Electron also said it expects DRAM makers’ investment to increase again this year. Share prices of two of its clients, South Korea’s Samsung Electronics Co and SK Hynix Inc, rose on optimism about their prospects given growing AI-driven demand.

“We have entered a frenzy phase of buying anything technical,” said Amir Anvarzadeh of Asymmetric Advisors. Tokyo Electron’s surge followed a doubling in the market value of chip designer Arm Holdings Plc after better-than-expected earnings and a related surge in parent SoftBank Group Corp’s stock. “However, given that China has been the largest single engine for Tokyo Electron, we see major risks that have been overlooked.”

The company itself has a more optimistic outlook, with one executive predicting continued strong sales in China for the next year or two.

“We expect the strong demand from China to continue or strengthen,” Deputy General Manager Hiroshi Kawamoto said on an earnings call last week. China makes only a small percentage of the chips it needs, and Kawamoto sees the country…

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