Nikon Corp Executive Vice President Kenji Enya struggled earlier this year to justify his company's optimistic outlook for sales of chipmaking equipment.
"Our estimates are based on what we hear from our customers," Enya told reporters at a news conference in May.
"It's just too difficult to predict." Enya may now find it even harder standing by his sales forecasts for Nikon, a maker of equipment that prints circuitry onto silicon wafers that are then cut into chips. An industry group said yesterday sales of Japanese-made chipmaking equipment may fall 25 percent this year as chipmakers cut spending.
Tokyo-based Nikon said two months ago it expects sales of chip equipment to rise 1.7 percent to ?235 billion (US$1.9 billion) this year. Investors aren't buying it, especially since chipmakers such as Toshiba Corp are cutting investment and rival ASM Lithography Holding NV says equipment sales may fall by more than a third this year.
"Nobody really believes" Nikon will reach its sales target, said Joji Maki, who helps oversee US$4 billion in assets at Baring Asset Management (Japan) Ltd, adding Nikon will probably cut its earnings forecast.
Analysts also believe Nikon is more likely to reduce its earnings forecast than its peers, including Tokyo Electron Ltd and Advantest Corp, which have more modest estimates.
"It's obvious that Nikon will have the same tough time as its peers," said Hiroki Matsushita, an analyst at Okasan Securities Co, who rates Nikon "neutral minus." Reinforcing that notion, the Semiconductor Industry Association this week said worldwide semiconductor sales fell 20 percent in May compared with the year earlier because makers of computers and communications gear have stockpiled chips and aren't ordering more.
Worldwide chip sales are expected to decline 21 percent this year, down from a record of nearly US$200 billion last year, IDC said in a recent report.
Chipmakers are adjusting accordingly. Toshiba, Japan's biggest chipmaker, is cutting planned investment at its chip business by 29 percent this year because of insufficient demand for mobile phone and computer chips. Micron Technology Inc, the biggest US maker of memory chips, plans US$1 billion on capital spending in the year ending August 2002, down from US$1.8 billion this fiscal year.
That's bad news for equipment makers like Nikon. The company's sales of steppers, the machines that print chip circuitry, account for 47 percent of revenue. Moreover, Nikon relies on orders from customers like Texas Instruments Inc and NEC Corp seeking to fill plants that can cost as much as US$3 billion for the most advanced technology. Still, Nikon is sticking to its expectations.
"We do get comments from analysts and the media that our stepper sales estimate is optimistic, but we don't plan to revise our forecast," Nikon spokesman Yasuhiro Katagiri said.
Nikon's shares have fallen 31 percent since the company announced its estimate for the year, underperforming peers such as Applied Materials Inc, Tokyo Electron Ltd and ASM. The three companies dropped 15 percent, 24 percent and 20 percent respectively in the same period.
Nikon, which also made the cameras used on the Apollo 13 rocket and other satellites to capture pictures of the surface of the moon, expects group net income to fall by half to 10 billion yen in the year ending March 2002.
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