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(Bloomberg) -- Nikon Corp. is fielding strong demand for its legacy chipmaking machines in China, which is mobilizing resources to build its own semiconductor supply chain.
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Inquiries for the Japanese precision maker’s lithography tools have surged in China, according to Nikon President Muneaki Tokunari. The company is set revamp a lithography machine geared for decades-old manufacturing processes. Its NSR-2205iL1, launching this summer, will serve the market for mature chip technology and Nikon expects to sell more than 10 units of the machine annually, said Tokunari, who’s also chief operating officer and chief financial officer.
New companies are sprouting up in China to make simpler semiconductors such as those that regulate power in cars, electronic devices and appliances. Behind that push are restrictions by the US and its allies, including Japan, on sales of cutting-edge equipment used to make advanced chips that enable artificial intelligence. Fewer restrictions are in place for well-established knowhow.
“Our older machines are being used in China to make so-called legacy chips, and we are getting remarkable levels of inquiries for our new model,” Tokunari said in an interview, adding that the company’s tools are also available on the second-hand market. Spurred by a countrywide effort to shore up its chip industry, China’s manufacturing capabilities are evolving at such a pace that “I wouldn’t be surprised if they are able to do quite a bit in five to ten years,” he said.
Nikon used to rely heavily on Intel Corp. for revenue, with the US firm accounting for 80% of semiconductor-related sales until a few years ago. Now, other companies comprise a majority of such sales, and the company is diversifying its client base in China, Taiwan and Japan, the 64-year-old executive said.
Headwinds exist, however. The Biden administration has told Japan and the Netherlands that it’s considering invoking America’s foreign direct product rule if the two allies do not tighten export controls on chipmaking equipment further. Restrictions on technology will likely become more strict, Tokunari said. Nikon asks for export rules that are fair to all players in the market, he said.
Nikon is now making a strong marketing push in China with its new argon-fluoride lithography machines, released earlier this year in compliance with export controls, he said. The Netherlands has restricted sales of industry leader ASML Holding NV’s extreme ultraviolet lithography machines, used to make cutting-edge chips such as Nvidia Corp.’s graphic processors, although orders of such equipment remain strong.