Tokyo Electron Misses Order Estimate on Chip Supply Glut

Tokyo Electron Ltd. (8035)’s second-quarter orders fell more than the 20 percent drop estimated by the Japanese semiconductor-equipment maker because of excess chip inventories, Chairman Tetsuro Higashi said.

Orders in the three months ended Sept. 30 were “a bit lower than planned,” Higashi said in an interview today in Kyoto. Companies boosted chip inventories in the April-June period, anticipating that Japan’s March 11 earthquake would disrupt production, and that reduced orders the following quarter, he said.

Tokyo Electron fell to the lowest level in a month in Tokyo trading. The order slump may continue at the world’s second- largest semiconductor-equipment maker as chipmakers cut worldwide capital-equipment investment an estimated 19 percent next year, according to a Sept. 30 report by research company Gartner Inc. Companies including Texas Instruments Inc. (TXN) and Intersil Corp. (ISIL) have cut order forecasts in the past month, citing weak demand.

“Demand for chips may start to rise around April,” Higashi said. He predicted demand will rise by as much as 5 percent next year as new personal computer models including those using Intel Corp. chips go on sale.

Tokyo Electron shares fell 3.1 percent to 3,450 yen at the 3 p.m. close on the Tokyo Stock Exchange, extending their decline this year to 33 percent, compared with a 16 percent drop in Japan’s benchmark Nikkei 225 Stock Average.

Industry spending on chip production capacity will total $35.2 billion next year, compared with an estimated $43.5 billion in 2011, as slowing economic growth causes sales to drop, Stamford, Connecticut-based Gartner said.

The decline is steeper than a 2.6 percent reduction Gartner predicted in June. Investment cutbacks have already started and will last until mid-2012, it said.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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