Japan semiconductor and technical materials sector Report Interpretation

Overview

This Japan equity-research compendium combines a semiconductor-cycle dashboard, supply-chain maps and company financial forecasts for Japanese semiconductor equipment and technical-materials companies. Its central analytical case is that AI infrastructure investment, advanced packaging and memory demand support a multi-year expansion in relevant equipment and material spending, although company-level ratings remain selective.

Core views

The report starts with the semiconductor investment cycle. Global semiconductor shipments rose from $627.635bn in 2024 to $791.694bn in 2025, a 26.1% year-on-year increase, while the equipment ratio fell to 15.3% from 18.9% in 2024. J.P. Morgan then frames the next phase around data-center investment: combined capex by Alphabet, Meta, Amazon, Microsoft, Oracle, Alibaba, Tencent and Baidu is projected to rise from $437.56bn in 2025 to $864.96bn in 2026, $1,408.86bn in 2027 and $1,684.01bn in 2028. This spending outlook is used as the demand foundation for AI chips, memory, advanced packaging and semiconductor production equipment. AI-server and packaging demand are a principal transmission channel. J.P. Morgan forecasts total data-center AI-chip volumes to increase from 10.320mn units in 2025 to 15.895mn in 2026, 25.631mn in 2027 and 31.173mn in 2028, a 45% CAGR from 2025 to 2028. Total AI-server shipments are projected to grow from 1.820mn to 2.900mn, 4.657mn and 5.670mn units over the same years. ASIC chip volumes are forecast to expand at a 60% 2025-28 CAGR, while high-end GPU server shipments rise from 1.216mn in 2025 to 3.041mn in 2028. The report pairs these forecasts with CoWoS capacity expansion, semiconductor roadmaps and advanced-packaging complexity, arguing that multilayering, miniaturization, chiplets and known-good-die requirements broaden demand for process control, inspection, packaging materials and back-end equipment. Memory is another major thread. The report tracks DRAM supply, demand, DDR5 penetration, NAND application demand, wafer output and process migration. Kioxia is presented as a key beneficiary of the NAND recovery: J.P. Morgan forecasts revenue of ¥10,240.2bn in FY3/27, ¥14,108.7bn in FY3/28 and ¥18,298.1bn in FY3/29, versus ¥2,337.6bn in FY3/26. Operating profit is projected at ¥8,002.1bn, ¥11,241.0bn and ¥14,562.3bn, respectively. Its company-wide analysis assigns approximately 58% of FY24 sales to SSD & Storage and 29% to Smart Devices, and forecasts FY24-28 sales growth of 81% overall, 118% for SSD & Storage and 52% for Smart Devices. The equipment outlook is expressed through company-level sales, order and margin forecasts. For Tokyo Electron, J.P. Morgan forecasts revenue of ¥3,419.4bn in FY3/27, ¥4,420.0bn in FY3/28 and ¥5,157.0bn in FY3/29, with operating profit rising to ¥1,059.4bn, ¥1,502.0bn and ¥1,809.0bn. For Advantest, FY3/27 sales and operating profit are forecast at ¥1,753.3bn and ¥928.0bn, followed by ¥2,486.5bn and ¥1,367.3bn in FY3/28. SCREEN Holdings is forecast to reach sales of ¥733.2bn and operating profit of ¥161.7bn in FY3/27, then ¥906.1bn and ¥218.7bn in FY3/28. Disco is also forecast to grow, with sales rising from ¥436.9bn in FY3/26 to ¥556.3bn in FY3/27 and ¥684.0bn in FY3/28, although its current rating is Neutral. The technical-materials portion extends the semiconductor thesis into X-ray metrology, substrate glass, sputtering targets, semiconductor chemicals and packaging materials. Rigaku's outlook is tied to the increasing use of X-ray metrology where optical or CD measurement has been mainstream; J.P. Morgan forecasts FY12/27 sales of ¥121.8bn and operating profit of ¥23.8bn. Nittobo is linked to glass cloth for high-performance substrates and is forecast to increase FY3/27 sales to ¥149.4bn and operating income to ¥33.2bn. JX Advanced Metals is analyzed through semiconductor materials, ICT materials and metals and recycling; J.P. Morgan forecasts FY3/27 sales of ¥1,021.1bn and operating profit of ¥258.9bn. Beyond semiconductors, the report covers glass and cement companies using segment forecasts, commodity-price assumptions and pricing history. It forecasts AGC revenue of ¥2,243.0bn and operating income of ¥143.0bn in FY12/27, while Nippon Sheet Glass is expected to recover to ¥928.0bn of FY3/27 sales and ¥32.0bn of operating profit. The Japan cement section documents repeated price-increase negotiations since 2000 and includes estimated further increases, including ¥3,000 per tonne from April 2027, supporting the sector analysis for Taiheiyo Cement and Sumitomo Osaka Cement. Valuation tables compare Japanese semiconductor-related companies with global SPE/process-control and international semiconductor peers using forecast sales and EPS growth, forward P/E, EV/EBITDA, P/B, ROE, dividend yield, free-cash-flow yield and operating margin. Ratings are differentiated rather than a single sector call: the report assigns Overweight to several companies leveraged to AI, memory, equipment or advanced materials, while retaining Neutral ratings on companies where its current relative-return view is less favorable and an Underweight rating on Nikon.

Analysis framework

J.P. Morgan moves from top-down semiconductor shipments, cloud capex and end-market assumptions to AI-server, CoWoS, DRAM and NAND demand forecasts. It then maps semiconductor production and packaging supply chains to relevant Japanese companies, compares operating forecasts with consensus, and uses forecast valuation multiples and return metrics to support differentiated company ratings.

Methodology notes

• Industry AnalysisSupply-demand framework

  Semiconductor, DRAM, NAND, AI-server and semiconductor-equipment supply-demand tracking

  The report connects cloud capex and end-market demand forecasts with memory, chip, packaging and equipment requirements to assess where growth occurs in the supply chain.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Semiconductor and advanced-packaging supply-chain mapping

  The report identifies production steps, equipment types and material inputs, showing how AI and chip-complexity demand can pass through to Japanese suppliers.

• Valuation methodsP/E and PEG Valuation

  Forward P/E comparison across Japanese and global semiconductor-related companies

  Forward P/E is presented alongside growth, profitability and other valuation measures to compare listed companies.

Asset mapping & comparison

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

• KIOXIA Holdings (285A)

  Covered memory supplier positioned for NAND and SSD/storage demand.

  Strengths

  J.P. Morgan forecasts rapid sales and profit expansion through FY3/29, led by SSD & Storage.

  Comparison

  NAND market-share and bit-shipment trends are compared with Samsung, SK hynix, Micron, SanDisk and YMTC.

• Tokyo Electron (8035)

  Covered semiconductor production-equipment supplier benefiting from foundry, logic and memory equipment demand.

  Strengths

  J.P. Morgan forecasts FY3/27 revenue of ¥3,419.4bn and operating profit of ¥1,059.4bn.

  Comparison

  Compared with global SPE/process-control peers in valuation tables.

• Advantest (6857)

  Covered semiconductor-test-equipment supplier linked to AI, memory and SoC testing.

  Strengths

  J.P. Morgan forecasts FY3/27 operating profit of ¥928.0bn and a 53% operating margin.

  Comparison

  The report separates memory testers, SoC testers, services and related systems.

• SCREEN Holdings (7735)

  Covered semiconductor-equipment supplier with SPE exposure.

  Strengths

  J.P. Morgan forecasts FY3/27 SPE sales of ¥610.5bn and operating income of ¥163.1bn.

  Comparison

  Sales are analyzed by foundry, logic, memory, imaging and power-device applications.

• Disco (6146)

  Covered back-end processing-equipment supplier.

  Strengths

  J.P. Morgan forecasts sales rising to ¥556.3bn in FY3/27 and ¥684.0bn in FY3/28.

  Weaknesses

  Current rating is Neutral.

  Comparison

  The report explains blade, laser, stealth dicing and plasma-dicing technologies.

• Rigaku Holdings (268A)

  Covered X-ray and semiconductor process-control supplier.

  Strengths

  The report identifies expanding X-ray-metrology applications as semiconductor structures become more complex.

  Comparison

  The business is divided into multipurpose analytical instruments, semiconductor process-control instruments, and components and services.

Key data

• CSP capex$864.96bn in 2026E; $1,408.86bn in 2027EUp from $437.56bn in 2025A; the report's core AI-infrastructure demand input.
• Total AI-server shipments2.900mn in 2026E; 4.657mn in 2027E; 5.670mn in 2028EVersus 1.820mn in 2025; 46% CAGR for 2025-28.
• Data-center AI-chip volumes15.895mn in 2026E; 25.631mn in 2027E; 31.173mn in 2028E45% CAGR from 2025 to 2028.
• Kioxia FY3/27 revenue¥10,240.2bnJ.P. Morgan estimate, up 338.1% year on year.
• Tokyo Electron FY3/27 revenue and operating profit¥3,419.4bn and ¥1,059.4bnJ.P. Morgan estimates; revenue growth of 39.9% and operating-profit growth of 69.5%.
• Advantest FY3/27 revenue and operating profit¥1,753.3bn and ¥928.0bnJ.P. Morgan estimates; revenue growth of 55.4% and operating-profit growth of 85.9%.

Impact & implications

The report argues that AI infrastructure spending should lift demand across memory, advanced packaging, semiconductor equipment, testing, process control and selected technical materials. Its ratings indicate that exposure alone is not sufficient: J.P. Morgan distinguishes between companies it rates Overweight, Neutral and Underweight based on its company-specific forecast and valuation work.