KOKUSAI ELECTRIC CORPORATION

Business Details

The Group consists of a single segment, the Semiconductor Production Equipment Business. Its core products are equipment for front-end "film deposition" processes (LP-CVD/ALD) and "thermal treatment" processes, and it holds the No.1 global share in batch ALD sales as well as the No.1 global share in single wafer treatment equipment. Major customers are CXMT Corporation (20.4% of sales), Samsung Electronics (13.3%), and TSMC (12.9%). Revenue is composed of two pillars: the equipment business and the high-margin service business (parts sales, maintenance, and modification).

Recent Overview

Revenue and profit declined as China DRAM-related investment cooled, and the inventory valuation method was changed

In the cumulative third quarter of FY2026 (ending March 2026) (April to December 2025), while sales of NAND-related equipment and DRAM-related upgrade modifications grew, revenue declined to ¥173,058 million (down 0.9% year on year) and operating profit declined to ¥32,519 million (down 18.1% year on year), reflecting a slowdown in DRAM-related capital investment in China, which had been active in the prior period. Changes in product mix and upfront investments such as R&D also weighed on profit. Additionally, due to a significant increase in inventory that had passed a certain period since final receipt as a result of planned advance ordering amid supply chain disruptions, the Company changed its estimation method for inventory valuation write-downs of standing stock items (eliminating classification based on "elapsed time since final receipt"), resulting in a decrease in cost of sales of ¥1,837 million and a corresponding increase in operating profit for the cumulative period. By region, sales to Korea increased significantly from ¥25,408 million to ¥38,283 million, while sales to China decreased from ¥83,027 million to ¥73,226 million. There is no change to the full-year earnings forecast, and the Company expects a recovery in performance in FY2027 (ending March 2027) driven by generative AI-related demand.

Key Products

Growth Drivers

• Acceleration of capital investment in advanced DRAM and Logic/Foundry driven by expanding server demand for data centers amid the spread of generative AI
• Growth in NAND-related equipment sales and DRAM-related upgrade modifications (performance improvement of existing equipment)
• Competitive advantage from the No.1 global share in batch ALD and single wafer treatment equipment, and expanded sales of high value-added products
• Recurring revenue growth in the service business (parts sales, maintenance, modification) accompanying expansion of the installed base
• Strengthened development and proposal capabilities through expansion of the demo evaluation area in Korea, establishment of the Yokohama Technology Center, and a new demo center in the U.S. (scheduled for completion in September 2026)
• Expansion of batch ALD and treatment technology into the Logic/Foundry and DRAM fields, and strengthened efforts in power devices and mature node fields
• Further expansion of generative AI-related demand in FY2027 (ending March 2027) and achievement of growth exceeding market growth

Risks

• High dependence on revenue from China (¥73,226 million in cumulative Q3 FY2026 (ending March 2026), approximately 42.3% of total) and risk of impact from export regulations and stronger tariff policies
• Risk of revenue fluctuation due to volatility in the semiconductor capital investment cycle (delayed recovery in demand for NAND and consumer electronics)
• Risk of declining profit margins due to changes in product mix (such as a rising proportion of upgrade modifications) and increased upfront investment in R&D
• Prolonged geopolitical risks (Europe, Middle East) and uncertainty over U.S.-China trade friction and tariff policies in various countries
• Risk of prolonged material lead times and increased inventory due to supply chain disruptions (inventory levels remain elevated even after the accounting estimate change)
• Risk of revenue concentration in specific customers (CXMT Corporation 20.4%, Samsung Electronics 13.3%, TSMC 12.9%)
• Risk of uneven regional demand fluctuation, as seen in the significant decline in revenue from the U.S. (from ¥11,247 million in the same period prior year to ¥4,648 million in the current period)