Bernstein Names Advantest, Kokusai Top Japan Chip Picks Ahead of Q3 Earnings

Bernstein has outlined its top stock picks in the Japanese semiconductor sector ahead of the September-quarter earnings season, highlighting Advantest and Kokusai Electric as key long positions. The investment firm cautioned, however, that while AI-driven demand remains strong, market reactions to the upcoming results may not be as positive as some investors anticipate.

Top Picks and Positive Outlooks

In a note to clients, Bernstein detailed its most favorable positions, expecting strong performance and upward guidance revisions from several equipment and materials suppliers.

• Advantest (7735): The firm is "positioning long" into the report, expecting the company to raise its full-year operating profit guidance to ¥900 billion. Bernstein noted that commentary on CPU and CPO testing market share will likely be a key driver for the stock.
• Kokusai Electric (6525): Identified as the second primary long call, Kokusai is likely to raise its guidance, according to Bernstein, on the back of strong orders from both Chinese and non-Chinese memory customers.
• Hoya (7741): Named as Bernstein's "preferred non-equipment name," analysts anticipate solid results and guidance that points to an acceleration in its mask blanks and HDD substrates businesses.

Bernstein also expects Lasertec (6920) to raise its order guidance for its ACTIS A200 HiT product, but cautioned that investor expectations are already "high and risky," setting a steep bar for a positive surprise.

Potential Misses and Cautious Stances

Conversely, the analysis pointed to potential underperformance for other major players in the sector. Bernstein's data-driven work suggests some companies may fall short of consensus expectations.

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Screen Holdings (7735) faces the "biggest expected miss" of the group, according to the note, which points to a clear shortfall against consensus in its semiconductor equipment segment. For Tokyo Electron (8035), analysts noted the company is tracking behind consensus, but stated the "real event is guidance," suggesting it could still beat full-year operating profit expectations of about ¥1 trillion.

Bernstein maintained a Market-Perform rating on silicon wafer manufacturer Sumco (3436), citing a lack of near-term catalysts to drive profit upside. The firm expects its third-quarter revenue to land modestly below consensus.

Broader Sector Context

These calls come after recent earnings from industry bellwethers TSMC and ASML confirmed continued strength in demand fueled by artificial intelligence. However, Bernstein's analysis suggests this tailwind may not lift all Japanese chip stocks equally, warranting a selective approach from investors.

Other names highlighted in the report include Renesas (6723), where Bernstein expects a modest revenue beat and guidance for sequential growth, supported by AI server demand and auto restocking. For Ibiden (4062), the focus is on a likely lift to next year's guidance and potential announcements of new factory expansions.