Bernstein: Japanese Semiconductor Equipment Entering a Systematic Price Hike Cycle
Miles Bennett
Bernstein reports that Tokyo Electron, Screen, and other Japanese equipment makers have moved into active price-hike negotiations — SK Hynix has already received requests for 3%–4% increases. This means → three years of yen depreciation (~30% vs. the dollar) are now being passed through to downstream customers.
Why are Japanese equipment makers raising prices now?
The core driver is currency: Tokyo Electron, Screen, and Kokusai all price in yen, which has fallen roughly 30% against the dollar over three years.
This means → the same machine generates far less cost coverage in yen terms, forcing vendors to pass the gap to customers.
Bernstein notes that these firms had little appetite for proactive price hikes until recently — that stance has now clearly shifted, with negotiations moving from intent to substance.
What is Tokyo Electron's three-stage roadmap?
Stage 1: charge premiums on rush-delivery requests — historically provided at no extra cost.
Stage 2: negotiate surcharges for inflation, raw-material, and labor-cost increases.
Stage 3: command higher pricing on new products via technology upgrades. In plain terms = moving from "settling old debts" to "pricing new value," each step deeper than the last.
If all three stages land, Tokyo Electron targets gross margin above 50% and operating margin of 35% — versus consensus estimates of just 48% and 30% for FY2029/3.
Will Screen and Kokusai follow?
Screen's strategy closely mirrors Tokyo Electron's, in two steps: the first targets inflation-related cost pass-throughs, which Bernstein says customers have already accepted; the second negotiates around added value in new products.
Screen's long-term operating-margin target is 30%, above the 27% consensus for FY2028/3.
Kokusai, also yen-denominated, is expected to follow a similar playbook. This reflects a collective repricing consensus forming among yen-based front-end equipment makers.
What about back-end names like DISCO and Advantest?
DISCO, Lasertec, and Advantest price in a mix of dollars and yen, so the currency hit is inherently smaller.
They have also already achieved significant margin expansion, leaving limited marginal upside from additional price hikes.
Bernstein concludes: Japanese front-end equipment makers should outperform back-end peers in the near term. In plain terms = the names that haven't repriced yet have more room to catch up.
What drives ASML and Besi's upside?
Unlike the Japanese vendors recouping currency losses, ASML and Besi derive pricing power primarily from product upgrades.
ASML's next-generation EUV tools — machines that etch chip circuits with extreme-ultraviolet light — could see average selling prices rise roughly 60%, pushing EUV product gross margins well above 60%, per Bernstein's estimates.
In a tight-supply environment, charging higher premiums for rush deliveries is also viable. Bernstein rates both ASML and Besi "outperform," with targets of €1,700 and €280 respectively.
Can equipment stocks reverse their underperformance?
Over the past two months, semiconductor equipment stocks gained roughly 30% — seemingly strong, but lagging analog-chip name Renesas (+83%), copper-clad-laminate maker Ibiden (+126%), and silicon-wafer firm Sumco (+95%).
Bernstein argues that a systemic repricing cycle should drive valuation recovery for the equipment sector.
The key variable: whether pricing intent translates into sustained margin improvement — that depends on how quickly downstream negotiations actually close.
Content is for reference only, not financial advice.