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Tokyo Electron to build $170m chip equipment plant in Japan

Chipmaking equipment maker Tokyo Electron said it will spend roughly 22 billion yen ($167 million) to build a production facility in northeast Japan in anticipation of renewed demand from the semiconductor industry.

The site will be located in Oshu, a city in Iwate prefecture. Manufacturing subsidiary Tokyo Electron Technology Solutions has sealed an agreement with Oshu on the location of the facility.

This will be the company’s seventh production facility in Oshu. The sixth plant that went into operation in 2020 is now in “a state of full production,” according to Sadao Sasaki, president of the subsidiary.

The addition is expected to expand the company’s production capacity for turning out chipmaking devices by 50% when construction is completed in the fall of 2025. Further improvements in production efficiency are seen raising capacity by as much as double the original scale.

The plant will have two floors, with the total area covering 57,000 square meters. The first floor will house a logistic center for streamlining production. By warehousing components manufactured by outside contractors, the new plant will be able to shorten production lead time. The second floor will be dedicated to making wafer deposition machines.

The semiconductor market is currently undergoing a correction. But the rise of layered semiconductors has added steps to the wafer deposition process, with more advances being made in production technology.

“Growth is continuing, and we anticipate higher demand in fiscal 2024,” said Sasaki. Space remains to build other production facilities, so further expansion is on the table.

Around 900 people will work in the new production facility, including those from partner companies and about 450 new hires.

Tokyo Electron has been aggressive with capital expenditures ahead of expected long-term growth in the semiconductor market. The company has major production centers in Miyagi, Yamanashi and Kumamoto prefectures, helping to gear up for expanded output.

The medium-term business plan released in June of last year called for the company to boost “investment into production capacity in anticipation of market growth.”

Along with expanding capacity, Tokyo Electron is focusing on developing next-generation production equipment for making advanced semiconductors. The company plans to spend at least 1 trillion yen in research and development over five years through March 2027, representing a 70% jump from the previous five-year period.

The semiconductor market has seen an overall rise due to the spread of high-speed 5G communications and the adoption of the Internet of Things. Global industry SEMI estimates that a record $108.5 billion worth of chipmaking equipment was sold last year.

This year is expected to be slower due to inventory corrections and other factors, but the market is poised to gain steam again in 2024.

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