Tokyo Electron Yamanashi factory visit confirms competitiveness in R&D and high-end equipment

Overview

This report is based on Goldman Sachs' visit to Tokyo Electron Technology Solutions' Fuji and Hosaka sites in Yamanashi Prefecture. The Hosaka site mainly develops deposition systems and gas chemical etching systems, while the Fuji site develops and manufactures testing systems (probers) and also manufactures gas chemical etching systems. The report argues that equipment development at both sites is closely aligned with customer needs, supporting Tokyo Electron's high level of competitiveness.

Core views

The core view is that Tokyo Electron is maintaining solid competitiveness by strengthening its R&D capabilities. Gas chemical etching is expanding in advanced logic and, because it uses gas rather than plasma or liquids, offers advantages in process stability and low particle counts. In probers, higher testing demand from advanced logic and HBM is shifting temperature control from a previously cost-driven focus toward a source of added value and profitability through technological differentiation.

Analysis framework

The report combines on-site factory visits, management/company explanations, product and technology observation, and a valuation framework, with a focus on assessing Tokyo Electron's competitiveness in R&D facilities, process integration, gas chemical etching, prober temperature control, and capacity responsiveness.

Methodology notes

• Field researchFactory visit

  Visit to the Fuji and Hosaka sites in Yamanashi

  By visiting the two production and R&D sites, the report observed the R&D facilities, product division of labor, and customer-demand-oriented development process.

• Valuation methodsEV/EBITDA relative valuation

  12-month target price calculation

  The ¥57,000 target price is based on FY3/27-28E EBITDA estimates, the global SPE industry average 18x EV/EBITDA, and a 15% industry-relative premium.

• Stock attribute analysisGS Factor Profile

  Growth, financial return, valuation multiple, and composite factors

  Goldman Sachs' factor framework compares stocks versus the market and peers across growth, financial return, valuation multiples, and composite indicators.

• M&A scenarioM&A Rank

  Acquisition probability score

  Goldman Sachs uses an M&A rank from 1 to 3 to assess the likelihood that a covered company becomes an acquisition target; this disclosure is a methodological note rather than the report's core investment conclusion.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Tokyo Electron (8035.T)

  Core coverage company

  Strengths

  Enhanced R&D facilities, customer-needs-oriented development, process stability and low particle counts in gas chemical etching, and differentiated prober temperature-control technology.

  Weaknesses

  The company's presence in probers for HBM applications had previously been limited, and it is still developing solutions for testing individual HBM chips after dicing.

  Comparison

  In probers, the report believes technological differentiation is more important than before; in advanced logic applications, fabless companies still retain the right to choose prober suppliers.

  Risks

  Prolonged inventory adjustment in the semiconductor industry, further tightening of export restrictions, and higher interest rates could压低 valuation multiples.

Key data

• Target price¥57,00012-month target price based on FY3/27-28E EBITDA and global SPE industry EV/EBITDA valuation.
• RatingBuyThe report explicitly describes Tokyo Electron as Buy rated.
• Disclosed price¥49,830Tokyo Electron price appearing in company-specific regulatory disclosure.
• Implied valuation multiple18x EV/EBITDA with a 15% relative premiumImplied FY3/27E P/E is 37x and P/B is 12x.
• Gas chemical etching market outlookCFET node market expected to expand to about 1.5 times current sizeThe company expects the transition from GAA to CFET to expand the market.
• Number of R&D toolsMore than 100 setsThe Hosaka site currently operates more than 100 development tools.
• New R&D buildingBuilding No. 7, completed in June 2023The first new development building at the Hosaka site in 25 years.

Impact & implications

The report is moderately positive for Tokyo Electron: stronger R&D and process integration capabilities should help reinforce competitiveness in semiconductor front-end equipment; rising demand in higher value-added areas such as gas chemical etching and probers is likely to improve product mix and profitability. For the semiconductor equipment chain, advanced logic, GAA/CFET, 3D-DRAM, and HBM testing demand are the next incremental growth areas.

Risks

• A prolonged inventory adjustment period in the semiconductor industry.
• Further tightening of export restrictions.
• Higher interest rates or other factors putting pressure on valuation multiples.
• HBM-related prober solutions are still under development, and commercialization progress needs to be monitored.

What to watch

• The adoption pace of gas chemical etching equipment during the transition from GAA to CFET nodes.
• Demand expansion for gas chemical etching in advanced logic and 3D-DRAM.
• Order and share changes for probers in advanced logic, OSAT, and HBM testing.
• Whether Tokyo Electron can use partner companies and internal production lines to respond to further increases in prober demand.
• Changes in global SPE industry valuation multiples and the interest-rate environment.