SoftBank, Tokyo Electron Earnings Likely to See Boost From AI Chip Demand

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(Bloomberg) — Tokyo Electron Ltd. and Lasertec Corp. will report earnings on the heels of chip titans SK Hynix Inc. and Samsung Electronics Co., which benefited from robust demand for high-bandwidth memory chips used in artificial intelligence.

Operating profit at Tokyo Electron, Japan’s largest chip-equipment maker, probably grew at the fastest pace in almost two years. 

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While the Biden administration prepares unilateral restrictions on China’s access to AI memory chips and equipment, manufacturers from US allies, including Japan, South Korea and the Netherlands, would be excluded from the new rules. The exemption may boost Tokyo Electron’s sales to Chinese customers by an annualized 5% to 15% over the long term, according to Bloomberg Intelligence calculations.

SoftBank Group Corp. probably remained profitable in the first quarter thanks to demand for AI products. The contribution from its chip designer Arm Holdings Plc might be muted after deduction of share-option expenses, BI added.

In China, pricing challenges and soft demand for consumer electronics probably led to an operating loss at Semiconductor Manufacturing International Corp. The long-term outlook for its chip-foundry business remains resilient, supported by Beijing’s push for chip self-sufficiency.

Highlights to look out for:

Saturday: State Bank of India’s (SBIN IN) quarterly profit should contract slightly on higher provisioning for seasonal strains in its agricultural loan book. With the credit-deposit ratio becoming the decider of which banks can expand their loan books, SBI is well-placed with a ratio of 75%, while its private sector peers grapple with much higher ratios, Nomura said. 

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Tuesday: Sembcorp Industries’ (SCI SP) ability to sign more long-term power purchase agreements with data centers should provide stable revenue streams, UOB KayHian said. 

Wednesday: Sony’s (6758 JP) first-quarter operating profit probably grew 8.2%, spurred by streaming demand in the the music business and gaming software sales, while Play Station 5 hardware unit sales slowed. The firm is expected to achieve its full-year operating profit guidance of 1.275 trillion yen ($8.5 billion), BI said.

• SoftBank Group (9984 JP) could see more unstable earnings in the future with riskier investments, as increasing exposure to hardware and energy-related infrastructure might prove costly, BI said. First-quarter earnings were likely supported by contributions from Arm and SoftBank Corp., though volatile performance at its Vision Fund might have offset that.
• Lasertec’s (6920 JP) fourth-quarter operating profit likely slid 49%, with chip-related product sales dropping 50%, consensus shows. The firm’s orders will likely increase from the second half of 2024, Jefferies said.
• DBS Group’s (DBS SP) second-quarter earnings should beat estimates, with net income coming in 5% ahead of consensus, according to Citi. Wealth fees should also surprise on the upside, it added. A move to acquire a Malaysian bank is a possibility, given the impending Singapore-Johor specialized economic zone.
• Cathay Pacific (293 HK) probably recorded a sequential drop in first-half operating profit amid declining passenger yields, BI said. The carrier also had higher staff costs, as it seeks to increase its workforce by a fifth this year.

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Thursday: Tokyo Electron’s (8035 JP) first-quarter operating profit likely jumped 54% as demand for chipmaking equipment recovered. DRAM tool sales were helped by AI and demand from Chinese customers likely remained solid, BI said. The firm is expected to maintain its operating profit target for the current fiscal year.

• SMIC (981 HK) likely saw second-quarter adjusted net income slip 76% even as revenue rose, estimates show. The firm suffered continued pricing challenges with soft demand for consumer electronics and mature-node chips, which dragged average selling prices, said BI.
• Kweichow Moutai’s (600519 CH) quarterly growth was probably slowed by sluggish consumer spending in China, according to BI. The liquor firm’s senior management emphasized to investors its commitment to stable wholesale average selling prices and a high dividend payout, Citi analysts said, citing a group meeting earlier last month.

Friday: Rakuten Group (4755 JP) is expected to post a narrower operating loss, supported by overall higher contributions from its internet services and fintech segments, according to consensus. Rakuten’s mobile segment sales may rise 11% year on year, while remaining in the red at the operating level, Jefferies said in a report.

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