[News] Chipmaking Tool Giants TEL, KLA Flag Weak China Demand in 2025 Amid Trade Tensions

Global semiconductor equipment giants Tokyo Electron (TEL) and KLA have recently announced their financial forecasts, with declining revenue contributions from China emerging as a key concern. According to MoneyDJ, chipmakers are scaling back equipment investment plans, prompting Japan-based TEL to lower its earnings outlook for the current fiscal year.

On July 31, TEL released its earnings report, revising its consolidated operating profit forecast for FY2026 (April 2025 to March 2026) from JPY 727 billion (a year-over-year increase of 4.3%) to JPY 570 billion (a year-over-year decrease of 18.3%).

As noted by MoneyDJ, TEL stated that while growth in AI servers remains robust, several advanced logic chipmakers have delayed investments, and capital spending from emerging Chinese semiconductor firms has fallen short of expectations—factors that contributed to the downward revision.

On the subject of Trump-era tariffs, the company added that semiconductor equipment is currently not subject to U.S. import tariffs. TEL’s limited sales in the U.S. market would further minimize any potential impact should tariffs be imposed, MoneyDJ indicates.

In terms of regional performance for Q1 FY2026, TEL’s revenue from China dropped 23% year-over-year to JPY 212.1 billion, representing 38.6% of total sales, down from 49.9% a year earlier. Revenue from North America fell 26% to JPY 43.4 billion, accounting for 7.9% of the total, compared to 10.6% in the same period last year.

KLA Warns of Weakening China Demand in 2025

Meanwhile, according to Chinese media outlet ijiwei, KLA reported USD 3.18 billion in revenue for Q4 FY2025 (April to June), exceeding analysts’ expectations of USD 3.08 billion.

Citing Reuters, ijiwei notes that KLA’s key customer TSMC is expanding its U.S. production footprint, which could further drive demand for KLA’s equipment. In the fiscal year ending June 30, 2024, TSMC contributed over 10% of KLA’s total revenue.

KLA said that for FY2025, it maintains its original projection of mid-single-digit growth in the wafer fab equipment (WFE) market. However, the company warned that overall demand from China is expected to decline this year.

China remains a critical market for semiconductor equipment firms. As ijiwei highlights, it was KLA’s largest revenue contributor in Q4 FY2025, accounting for 30% of total sales. Notably, according to KLA’s press release, China’s share in KLA’s revenue plunged from 44% in Q4 FY2024 to 30% in Q4 FY2025—a sharp 14-percentage-point decline.

In addition, Reuters notes that rising trade tensions between the U.S. and China, along with tighter export controls, could restrict American chipmakers’ access to the Chinese market. This, in turn, may also weigh on KLA’s outlook, according to the report.

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(Photo credit: TEL)