Japanese Magnetic Technology Holding Company Invests in China

Japanese media reported that against the backdrop of China-U.S. trade friction, Japan's Ferrotec Holdings Corporation, a producer of semiconductor materials and equipment components, has chosen to continue high-level equipment investment targeting the Chinese market.

According to a July 8 report on the website of Nihon Keizai Shimbun, He Xianhan (phonetic translation), a senior executive at Ferrotec Holdings, expressed confidence in the prospects of the company's China business during a recent earnings briefing.

The report noted that this confidence is reflected in the company's equipment investment plan. Ferrotec plans to increase its equipment investment for fiscal year 2019 by 30% year-on-year to 48 billion yen (approximately 3 billion RMB), setting a record for a single year. Of this, 96% is directed toward investments in China.

Ferrotec continues its investment in China because the company believes that domestic semiconductor production within China will accelerate. Ferrotec is particularly focused on the "traditional semiconductor" (non-cutting-edge semiconductor) sector. Traditional semiconductors refer to lower-cost chips that are about three generations behind the most advanced semiconductors and are used in widely adopted products such as home appliances. They are also utilized in facial recognition chips, and demand is expected to grow.

The report suggests that compared to the most advanced semiconductors, traditional semiconductors are less likely to be targeted by U.S. restrictions, making it highly probable that China will expand production in this area.

According to the report, several Chinese semiconductor manufacturers are currently advancing plans to build traditional semiconductor factories. If Chinese-made semiconductor manufacturing equipment is adopted, it will drive demand for equipment components such as quartz and ceramic products produced by Ferrotec.

Additionally, Ferrotec is expected to see expanded demand for wafer and equipment component cleaning. Component cleaning requires specialized technologies such as metal contamination countermeasures, and the company already holds a 60% market share in China for such services.

Yoshito Hasegawa of Mitsubishi UFJ Morgan Stanley Securities stated, "In the 200mm wafer field, Ferrotec has a technological advantage over local manufacturers and has already established a sales network." In its medium-term management plan through fiscal year 2021, Ferrotec aims to increase consolidated sales by 40% compared to fiscal year 2018, reaching a scale of over 125 billion yen.

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