日本半导体：小盘股的大思考（1）：东京精密

Japan Semi: Big Thinking on Small Caps (1): Tokyo Seimitsu This report is the first of a series of reports on Japan semi small cap companies, which wedon’t cover but occupy unique positions in the supply chain and potentially benefit from thetechnology shifts. Investors may find them interesting as the small caps generally trade atlower multiples than large caps, but the growth profile is not necessarily inferior.We startwith Tokyo Seimitsu (7729.JP, not covered). David Dai, CFA+852 2918 5704 Juho Hwang+852 2123 2632 Tokyo Seimitsu is an SPE company that manufactures backend equipment andbenefits from the advanced packaging trend. Tokyo Seimitsu makes mainly probers(60% of FY25/3 SPE sales), grinders (30%) and dicers (10%), competing with TokyoElectron (Outperform) and Disco (Outperform) and working with Advantest (Market-Perform). And like many other backend peers, their earnings power is increasinglyleveraged to AI / HPC-driven demand in two of the most capacity-constrained parts of thesemiconductor value chain, namely HBM and CoWoS — with their probers for HBM / logictesting, and grinding for advanced packaging. Jack Lin+852 2123 2683 We note 4 growth drivers to the company performance, and believe growth couldaccelerate due to1. HBM probersfrom mainly ASP upside as HBM generation migratesand require much greater heat control features2. AI Logic probersas CoWoS expands toOSATs where Tokyo Seimitsu has greater market share, and die-level probing takes off3.Grinderfor CoWoS + WMCMas capacity expands, and in the longer term, 4.Grinder forNAND hybrid bondingadoption including multi-bonding (or cell-to-cell bonding). We see a significant disparity between market expectations and where the industryis headed.Sell-side consensus sees only 10.7% top-line growth (or 12.1% SPE growth)in FY27/3, similar to company guidance. However, in a hypothetical scenario where HPCrevenue doubles, its revenue could grow 28%. Tokyo Seimitsu is trading at 25.1x NTM P/Evs. larger Japan SPE peers trading at 36.4x on average. BERNSTEIN TICKER TABLE INVESTMENT IMPLICATIONS We rate Disco (TP=¥70,800) and Tokyo Electron (TP=¥49,900) Outperform, and Advantest (TP=¥26,000) Market-Perform. DETAILS OVERVIEW Tokyo Seimitsu is a semiconductor equipment maker focusing on Semiconductor Production Equipment (SPE) and MetrologyEquipment. In FY2025/3 (fiscal year ended March 2025), the company reported total sales (Exhibit 1) of ¥150.5bn — a newrecord peak — with SPE generating ¥113.5bn (approximately 75% of group sales) and Metrology generating ¥37.1bn (25% ofgroup sales). Operating profit (Exhibit 2) followed a similar split: SPE OP was ¥24.3bn vs. Metrology OP ¥5.4bn, implying SPEcontributed roughly 82% of group operating profit. For FY2026/3, the company guided SPE sales of ¥122.0bn vs. Metrology¥37.0bn, broadly maintaining this ~76%/24% split. We don’t view metrology as the main growth driver of the company, and wewill focus on its SPE business for the scope of the report. SPE SEGMENT In terms of products, Tokyo Seimitsu SPE includes probers (60% of SPE revenue), grinders (30%), and dicers (10%) (Exhibit 4). Probers Probers (Exhibit 3) perform electrical testing of semiconductor wafers — they physically contact the wafer dies with probe cardsand interface with testers. There is essentially a 1-to-1 relationship between a prober and a tester (e.g., Advantest or Teradyne),meaning prober demand tracks tester investment with a lag corresponding to the lead time differential (probers have ~3-monthlead time vs. testers which can be 6-12 months). The wafer prober market (Exhibit 5) is effectively aduopoly between Tokyo Seimitsu with 31% and Tokyo Electron(Outperform) with 34%,alongside other smaller players accounting for the remainder. The competitive split variessignificantly by customer type: •Memory(HBM / DRAM): We estimate that TS has at least 50:50 with TEL at Hynix and Micron; TS believes it may have70-80% share in HBM probing, though precise data is unavailable. Samsung predominantly uses SEMES (internal), meaningboth TS and TEL have minimal exposure there. •Logic / Foundry: We believe TEL has a higher share at TSMC and major IDMs (TEL's unified spec relationship favors it) andTS has higher share at OSAT customers due to its customization capability. In terms of exposure to different applications, we estimate the company’s memory exposure to be around 30%, and non-memory (logic / electronic components / power) to be around 30%, with HPC / AI portion constituting c. 25-30% of SPE salesfor FY26/3. EXHIBIT 4:Tokyo Seimitsu SPE segment sales breakdownEXHIBIT 5:2015-2024: Historical prober market share. Grinders Tokyo Seimitsu has 12% of the grinder market of $704bn, as of CY2024 (Exhibit 6). Tokyo Seimitsu operates four distinctgrinder product lines, each serving a different market niche with differentiated competitive dynamics: •Polish Grinder: For backside thinning for packaging (CoWoS / Hybrid bonding), and we believe