SCREEN's Clean-Room Boom: Record Orders, Upward Guide, and the Case for Memory Sector Momentum
A Soft Quarter, But a Raised Guide
SCREEN Holdings' first quarter looked like a stumble at first glance — consolidated net sales fell 10.3% year over year to ¥121.7 billion, and operating income dropped 41% to ¥14.3 billion. But CFO Ishimura was quick to frame it as business as usual: "All in all, sales and profits both decreased year-on-year. However, this is within our expectation, so there's no particular things happened." The real story was the full-year outlook. President Goto noted that "we have received record high order, and full year forecast was guided upward." The company lifted its sales forecast from ¥725 billion to ¥743 billion, operating income from ¥150 billion to ¥156.5 billion, and net income from ¥110 billion to ¥115 billion — the upward revision comes as big growth in AI demand flows through the order book. The annual dividend was also raised from ¥175 to ¥183, a record high.
The Memory Supercycle Is Real
The driving force is a genuine memory shortage. Goto explained: "As you know, DRAM and HBM, the advanced products, is in shortage now. The CapEx into DRAM will drive the recovery in the memory market. Not only the advanced HBM, but the existing DDR is also in shortage." This is not just a one-quarter phenomenon; WFE growth is expected around 20% in both calendar 2026 and 2027, with memory (DRAM and NAND) and leading-edge logic/foundry leading the way. The company's own data centers dependency is rising — post-sales, the recurring revenue stream, is set to exceed ¥100 billion for the first time, supported by higher utilization at customer fabs.
The lead time for equipment, of course, differs depending on the type of model, but currently maybe 4.2 months on average. Four to five months on average.
This capacity tightness is part of the opportunity. Goto noted that memory makers are asking for accelerated delivery, and the company is expanding production across Nagaoka, Kyoto, and Hikone. But he also cautioned: "If the demand goes up to JPY 30 billion in a short period of time, we have to solve the issues of the supply chain others..." — a realistic bridge between ambition and execution.
China, the Delayed Project, and the Race for Equipment
China's sales mix dropped to 27% in Q1 from 41% a year ago, but management insists the market there is growing, not shrinking. Goto's answer to a direct question was blunt: "China is growing. Please understand it this way." The urgency is palpable — "They're trying to get the equipment as soon as possible, and they're fiercely competing over that." This ties to a delayed project (likely a memory fab clean-room order) that has been pushed into Q2. Goto gave high confidence: "Probability is higher than 90%... about half of the expected sales is already shipped." That shipment visibility is the foundation of the upward guidance.
The China market narrative has evolved from a fear of decline to a story of AI-infrastructure-led demand. This is a notable shift from prior quarters — in July 2025, Hiroe had said "the ratio of business to China will gradually settle down... roughly in the mid-30% range." Now the tone is more optimistic, with AI devices and data centers driving high-function chip demand in China.
Post-Sales and Advanced Packaging: The Inflection
SCREEN's equity story is increasingly about recurring revenue and advanced packaging. Post sales are expected to cross the ¥100 billion threshold this year for the first time, a milestone that underscores the stickiness of its installed base. Meanwhile, the integration of advanced packaging into the FT segment (formerly display) is opening a second growth vector. In Q&A, Goto hinted at panel-level packaging (PLP): "Next fiscal year, as you know, mass production is not happening yet, but evaluation phase is starting. Compared to this fiscal year, probably it's going to be double." This mirrors the global theme of advanced packaging as the next bottleneck for AI compute.
The company is also exploiting pricing power. Goto explained: "We are not making negotiation because we are in a strong position, but we are now improving performance of the equipment, and those are evaluated, and those are reflected in the price." He added that raw material cost increases are being passed through, with customer acceptance because "their raw material is increasing." This is a classic tight-market dynamic that should help margins despite product mix shifts.
Strategically, SCREEN is positioning for the next cycle. It joined Applied Materials' EPIC Center as an innovation partner — a move that deepens ties to a key ecosystem partner. On the digital printing side, a collaboration with Chiyoda Gravure for flexible packaging is moving to full-scale production, but the core semiconductor story remains the driver.
In summary, SCREEN's quarter was a classic "beat on guidance, not on results" event. The market is rewarding the upward revision and the dividend hike, but the real signal is the durability of the memory and AI capex cycle. The company's record orders, high shipment visibility, and capacity expansion all point to a multi-year uptrend. The key risk remains the concentration in China and the potential for a demand air-pocket once the delayed project books — but for now, the trajectory is up.