(Bloomberg) — Nikon Corp. is facing strong demand for older semiconductor-making equipment in China, which is mobilizing resources to build its own chip supply chain.
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Nikon President Muneaki Tokunari said the Japanese precision equipment maker is seeing a surge in inquiries in China for its lithography equipment, which it plans to retrofit with a decades-old manufacturing process. The NSR-2205iL1, which goes on sale this summer, addresses a market for mature chip technology, and Nikon expects to sell more than 10 of the equipment a year, said Tokunari, who also serves as chief operating officer and chief financial officer.
China is seeing a surge in start-ups making simpler semiconductors like those that control power in cars, gadgets and appliances, as the United States and allies including Japan restrict sales of cutting-edge equipment used to make advanced chips that enable artificial intelligence. Established know-how is less restricted.
“In China, our older machines are being used to make so-called legacy chips, and we’re getting a surprising number of inquiries for our newer models,” Decheng said in an interview, adding that the company’s tools are also available on the second-hand market. Spurred by a national effort to bolster its chip industry, he said, China’s manufacturing capabilities “wouldn’t surprise me if they’re pretty accomplished in five to 10 years.”
Until a few years ago, Nikon relied heavily on U.S.-based Intel Corp. for sales, which accounted for 80 percent of its semiconductor-related sales. Now, other companies account for the majority of sales, and the company is diversifying its customer base in China, Taiwan and Japan, said the 64-year-old executive.
But there are headwinds. The Biden administration has told Japan and the Netherlands it will consider invoking the U.S. Foreign Direct Product rule if they don’t further tighten export controls on semiconductor manufacturing equipment. Restrictions on technology will probably get tougher, Tokunari said. Nikon wants export rules that are fair to all players in the market, he said.
Nikon is currently making strong sales in China for its new argon fluoride lithography tools, which it launched earlier this year in compliance with export controls, he said.The Netherlands has restricted sales of extreme ultraviolet lithography tools from industry giant ASML Holdings AG, which are used to make cutting-edge chips such as Nvidia Inc.’s graphics processors, but orders for such equipment remain strong.
Nikon is aiming to increase operating profit from its precision machinery division, which includes lithography equipment, by 66 percent to 25 billion yen ($160 million) in the two years to March 2026. The company wants to invest some of the profit in expanding its customer base in areas such as digital manufacturing. The company’s metal 3D printers have attracted interest from U.S. defense and aerospace companies, Tokunari said.
As Japan ramps up its defense spending, more Japanese companies are expanding into military products. Nikon last year bought German 3D printer specialist SLM Solutions Group and opened a factory in California. Nikon subsidiary Nikon Advanced Manufacturing appointed former U.S. Joint Chiefs of Staff Chairman Mike Mullen as a strategic adviser last month.
Nikon also signed a contract with NASA to co-develop a handheld camera for use on the lunar south pole.
London-based activist investor Silchester International Investors said earlier this year that it would buy a 5% stake in the Japanese camera maker and potentially push for higher dividends, share buybacks and other capital changes, a move that sent Nikon’s shares soaring by the most in more than a decade.
“Part of my job is to ask investors for patience, while at the same time urging my colleagues to hurry up and make the product sooner than planned,” Tokunari said.
–With assistance from Sherry Ahn and Debby Wu.
(Updated with executive comments from interviews)
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