[Stock-Analysis] Tokyo Electron (8035 TYO): The Forgotten Semiconductor Behemoth

Disclaimer: The information in this article represents my opinions and should not be construed as individualized investment advice and are subject to change.

Semiconductors have gone from obscurity to something on everyone’s mind in just a couple of months. Ever since the beginning of the Covid 19-pandemic, whole industries have stopped working because of a shortage in them, and companies like Taiwan Semiconductor Manufacturing Company (TSMC) and ASLM have seen their share prices rising to the skies due to their importance in the field.

However, one company we have not heard much about is Tokyo Electron (TEL). Virtually every semiconductor in the world passes through one of Tokyo Electron's systems. Despite this, the company is still not that well-known among investors.

TL;DR

• The semiconductor market size is expected to exceed about $1 trillion by 2030, more than doubling the level in 2020, providing a huge tailwind to Tokyo Electron.

• The Japanese Yen is currently very weak, which is making shares of Japanese companies more affordable, and making companies that export equipment like Tokyo Electron more competitive.

• Shares are trading at a very reasonable valuation, despite the company guiding for significant growth for its fiscal 2023 (April 1, 2022- March 31, 2023) with net sales expected to increase by ~17%.

What is Tokyo Electron and why is it so interesting?

Click the image to find out more on what exactly Tokyo Electron does, and why it’s so crucial to the semiconductor industry

Tokyo Electron (TEL) is mainly engaged in the manufacture and sale of electronic products for industrial uses. The Company operates in two segments:

• The Semiconductor Manufacturing Equipment segment is engaged in the provision of wafer probers and other semiconductor manufacturing equipment.

• The Flat Panel Display (FPD) Manufacturing Equipment segment consists of coater developer for flat panel display manufacturing, etching and ashing equipment.

• The Company is also engaged in the management of facilities, logistics, as well as insurance business (less than 5% of its revenue)

TEL has a history of significant growth, starting as a distributor of other companies' products, then becoming a manufacturer itself, and developing more advanced technology and products until it became one of the most important companies in the global semiconductor production equipment market.

Tokyo Electron Investor Presentation

The company today competes with the likes of Applied Materials (AMAT) and Lam Research (LRCX) in the global semiconductor production equipment market, but not as much with ASML (ASML), which specializes in Lithography.

TEL's strength lies in its broad equipment portfolio covering four sequential processes that are critical for semiconductor manufacturing: deposition, Coater/Developer, etch, and cleaning.

Its products in these areas rank either first or second in global market share. In fact, Tokyo Electron's Coater/Developer for EUV lithography has a 100% share of the worldwide market.

To summarize the company and its strength; virtually every semiconductor in the world passes through one of its systems.

Table of Content

0. Konichi-Value Score

1. Profitability

2. Opportunities and Risks

3. Financial soundness

4. Stock-price

5. Dividends & Share-buybacks

6. Conclusion

0. Konichi-Value Score

🤩 = Amazing

🙂 = Good

😑 = Acceptable

😖= Bad