Kokusai Electric: Japanese listing arrives in time for chip boom  

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Japan’s Kokusai Electric has timed its initial public offering well. 

Artificial intelligence is driving stock markets. Related companies are outperforming. Kokusai manufactures machines used for part of the chipmaking process. It plans to offer ¥111.2bn ($750mn) worth of shares at an indicative price of ¥1,890 each, giving it a market value of ¥435.5bn. That would make it Japan’s largest initial public offering in five years.

Some caution is needed. A fizzle in the initial pop of Arm and Instacart in the US has levelled excitement about tech IPOs.

The bigger problem is weakening short-term demand for chips and chipmaking gear. Taiwan Semiconductor Manufacturing Company is reported to have told its suppliers to delay the delivery of equipment as global demand remains subdued. TSMC is also pushing back the start of mass production at its Arizona plant due to a shortage of skilled labour, which could mean lower orders.

The good news is that investor sentiment in Japan is strong. The local equity market hit the highest levels in more than three decades this year. That has been especially good for companies new to the market. New listings in Japan have been the best performers in the region this year.

Shares of Asian chip gear peers such as Tokyo Electron are up more than 60 per cent in the year to date. It helps that Kokusai will be valued at a discount when measured against global peers including US-based Applied Materials, which bid to acquire Kokusai in 2019. This plan fell through owing to hurdles from Chinese antitrust authorities.

Longer term, Kokusai could benefit from official interest in boosting Japan’s chip sector. Under a new economic security law, semiconductors have been identified as critical to daily lives and the economy. Subsidies of $2.8bn are expected to be handed out to related companies. Add this to momentum in the local equity market and the prospects for Kokusai’s market debut are positive.