Japan Reports/Notes

Research evidence excerpt

Japan Reports/Notes

process increases along with

DRAM technological advances. We estimate an FY2025–28 operating profit CAGR of 24%, assuming the

company captures DRAM demand and benefits from solid investment by major foundry customers.

Tokyo Electron (8035) (Overweight), Japan

Raising earnings estimates: We expect sharp profit growth on price increases, market growth(Mio

Shikanai)

We revise our earnings estimates to reflect recent developments. We maintain our Overweight rating and

significantly raise our end-December 2026 price target from ¥51,000 to ¥85,000. Our global team has raised

their WFE market growth outlook, and we also assume a market share recovery for Tokyo Electron centered

on dry etchers (its share fell 4ppts YoY in CY2025). We expect faster growth for the company than for the

overall market as its business mix by application and equipment type gives it a relative advantage in the

WFE market excluding China. Furthermore, while yen-denominated sales were an earnings headwind in a

weak-yen environment, we expect strong FY2025–28 operating profit CAGR of 36%, driven by progress on

pricing measures, including a strengthening of the surcharge system and price increases aimed at

improving margins.

Semiconductor/SPE sector

Raising our 2026–27 WFE market forecasts (Mio Shikanai)

We raise our wafer fab equipment (WFE) market growth forecasts for CY2026 from 21% to 28% YoY and for

CY2027 from 18% to 29%. We newly estimate a 16% YoY increase in CY2028. Driven by rising and

broadening AI-related demand, cloud services providers (CSPs) are further accelerating their investments.

We expect total investment by the top four US CSPs to increase 80% YoY in 2026 and 50% in 2027 (see a

reportby Samik Chatterjee et al.).