Tokyo Electron Prepares to Enter India as PM Modi Courts Chipmakers

Japan's leading chip equipment manufacturer plans to hire and train engineers locally around 2026. "Local engineering strength will be the growth engine of our India business," said Chief Executive Officer Toshiki Kawai at an IDSA organized dinner at the Indian Habitat Centre in New Delhi on Sunday.

The engineers would first offer technical services to Tata Electronics Pvt. Initially, robotics will play an increasingly bigger role in the industry, but Kawai said local teams will be supported by Japan both in person and remotely. Kawai wouldn't say how many employees might be needed for the expansion.

India is exerting strong efforts to get international electronics firms and chipmakers to set up businesses within the country. In the policy moves of the Modi government, this is one of the areas targeted toward bridging the technological gap with advanced economies. Apple Inc. has substantially increased the number of iPhones manufactured and sold in India, while Tata Group and many other groups are investing the highest possible amount in semiconductor manufacturing plants. The companies will rely on tools and know-how from firms such as Tokyo Electron, and the government has also been handing out incentives.

The company’s stock, trading on Friday without the entitlement to its upcoming dividend, saw a roughly 6% rise, reflecting the adjustment for the dividend payout. 

Tokyo Electron plans to expand to 10,000 employees globally in the next five years, responding to the increasing popularity of countries building the domestic capabilities of chip production. Customers include top chip buyers from around the world, such as Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co., SK Hynix Inc., and Intel Corp. All signs are that this is going to be the company's highest revenue- and operating-profit year for the business year ending in March. The company also believes that by 2030, the demand for semiconductors is going to double in markets driven by artificial intelligence, autonomous vehicles, and the shift toward energy-efficient and decarbonized technologies.

Kawai insisted that tightening export controls on advanced chipmaking tools to China would in any case not affect the global market's demand for chip manufacturing equipment, despite US pressure to get Japan to do so. The United States has tried to limit Tokyo Electron's servicing of its equipment in China and proposed the foreign direct product rule, by which Washington would take control of sales of any products that used US technology, regardless of where they were produced.

Kawai said geopolitical tensions won't suppress the overall demand for chipmaking machinery. "There will always be investment opportunities in different regions," he added. End.

Last week, Tokyo Electron said it would partner with Tata Electronics to train local engineers in chip-making technology and also give research and development support. The government has so far cleared semiconductor-related investments totaling over $15 billion in the country, which include US-based Micron Technology Inc.'s plan to set up a $2.75 billion assembly plant. In addition, Israel's Tower Semiconductor Ltd. is said to be in talks with Gautam Adani for a $10 billion fabrication facility in western India.

While sales to China soared to make up almost 50% of Tokyo Electron's revenue in the June quarter, the company said it sees this decline to below 40% in the second half of the fiscal year and settle eventually at 25% to 30%, while overall equipment sales will increase. "India won't replace China," Kawai said, "but will contribute to additional growth."

Tokyo Electron, one of the biggest silicon-processing equipment makers-which includes developers, patterners, and cleaners-is aiming for market-share growth. It is a competitive force with Applied Materials Inc., and it is one of the companies certified to enter mass production using the cryogenic etching technology. The technique will speed up processing of stacked NAND memory. It received certification also for conductor etching in DRAM production and for cleaning tools for advanced logic chips.

Shares have been choppy following an all-time high in April. They are up about 7% year to date, showing the back-and-forth sentiment of investors about AI. "It's overemphasized on AI," Kawai said. "There's a lot more room for growth in other areas too".