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This edition of Japan 2+2 looks at two more parts of Japan’s market. FANUC and a robotics-focused ETF are two ways to follow the “physical AI” theme, meaning AI put to work in machines and factories, along with the recovery in factory investment. Tokyo Electron and a broad technology ETF are two ways to look at Japan’s role in the global chip-equipment cycle.
In this edition:
FANUC Corp (TSE: 6954)
WHY IT IS IN FOCUS
A global leader in factory-automation controls (CNC), industrial robots and robomachines. Orders are now growing about twice as fast as sales. The stock is still recovering from a 19% one-day drop on 3 Aug, even though the company raised guidance that day.
WHAT TO MONITOR
- Whether orders hold up: Q1 orders were ¥281.9bn (+36.9%), and management said it can’t predict whether that level will continue
- FA orders up 63.8%: real demand, or customers ordering early because component lead times are long?
- China (30% of sales, +30% YoY): EV and data-centre demand
- Rising component costs and US tariffs against the 23.2% operating margin
- FX: Q1 averaged ¥159.49/USD, versus ¥144.59 a year earlier
BULL CONSIDERATIONS
Q1 FY26 sales were ¥231.0bn (+17.7%) and net income ¥51.0bn (+34.7%); EPS rose to ¥54.63 from ¥40.56
All four segments grew: Robot ¥96.1bn (+18.7%), FA ¥57.4bn (+15.5%), Robomachine ¥41.7bn (+22.8%), Service ¥35.9bn (+13.0%)
Operating margin rose 1.6 points to 23.2%; gross margin rose to 39.4% from 39.0%
Full-year net income guidance was raised from ¥184.9bn to ¥198bn (+18.9%), and sales guidance of ¥948.1bn would be a record
BEAR CONSIDERATIONS
- The upgraded profit forecast only roughly matched what analysts expected, so it wasn’t a real surprise
- Some Q1 orders may be early ordering that won’t repeat in later quarters
- Part of the margin gain came from the weaker yen and would reverse if the yen strengthens
- China at 30% of sales makes the company sensitive to China’s investment cycle
KEY DATA
SHARE PRICE / MARKET CAP ¥6,186 · ~¥5.8trn Close on 5 Oct 2026; equity ratio of 89.7%. | Q1 FY26 (APR-JUN) ¥231.0bn, +17.7% Operating profit ¥53.5bn (+26.1%); net income ¥51.0bn (+34.7%). | FY3/27 GUIDANCE ¥198bn NI, +18.9% Sales ¥948.1bn (+10.5%), a record; operating profit ¥218bn (+18.6%). |
ORDERS ¥281.9bn, +36.9% Orders are running ahead of sales; FA orders +63.8%. | LAST REPORTED YEAR ¥857.8bn sales FY3/26 actual; the base for this year’s +10.5% guidance. | NEXT CATALYST H1 results, late Oct 2026 Watch whether orders stay ahead of sales. |
Tokyo Electron Ltd (TSE: 8035)
WHY IT IS IN FOCUS
Japan’s largest maker of wafer-fab equipment, the machines used to make chips. Q1 sales and gross profit were records, and management raised its forecast for the global chip-equipment market through 2027 because of AI-driven demand. A 5-for-1 share split took effect on 1 Oct and cut the minimum 100-share purchase to about ¥1.27m.
WHAT TO MONITOR
- Chip-equipment market forecasts: $150bn+ for CY2026 and $190bn+ for CY2027
- Equipment sales mix: DRAM 32%, non-volatile memory 11% (+32% QoQ), other chips 57%
- China at 30.4% of sales (+3.6 points QoQ), which carries export-control risk
- Progress toward the 50% gross-margin target as price increases take effect in Q4
- First full-year guidance, due with Q2 results
BULL CONSIDERATIONS
- Q1 FY3/27 sales were ¥732.3bn (+33.3%), operating income ¥211.4bn (+46.1%) and net income ¥164.3bn (+39.5%)
- Quarterly sales have climbed from ¥549.5bn to ¥630.0bn, ¥552.0bn, ¥711.8bn and now ¥732.3bn
- Operating margin rose to 28.9% from 26.3%; annualised ROE was 30.7%
- H1 guidance was raised to ¥1.62trn sales (+37.3%) and ¥458bn operating income (+51.1%), both records
BEAR CONSIDERATIONS
- Net income fell 23.3% QoQ because the previous quarter included a one-off gain from selling shareholdings
- Q1 alone delivered 45.2% of the H1 sales guidance, so a lot of good news is already in the forecast
- About 30% of sales go to China, which is exposed to geopolitics and export controls
- Capex fell 24.4% YoY to ¥39.9bn, so watch whether capacity keeps up with demand
KEY DATA
SHARE PRICE / MARKET CAP ¥12,080 · ¥27.4trn 2 Oct 2026; about US$174bn after the 5-for-1 split. | Q1 FY3/27 (APR-JUN) ¥732.3bn, +33.3% Operating income ¥211.4bn (+46.1%); gross margin 46.8%. | H1 FY3/27 GUIDANCE ¥1.62trn sales, +37.3% Net income ¥349bn; EPS ¥767.51 before the split, about ¥153.5 after. |
SHAREHOLDER RETURNS Interim DPS ¥384 (record) About ¥76.8 after the split; payout policy of 50%. | BALANCE SHEET / CASH Equity ratio 71.7% Q1 free cash flow ¥80.5bn; cash ¥409.6bn. | NEXT CATALYST Q2 results, with the first full-year guidance Watch the Q2 new-equipment sales target of over ¥700bn. |
Global X Japan Robotics & AI ETF (TSE: 2638)
WHY IT IS IN FOCUS
A diversified route to Japan’s factory-automation and robotics leaders, positioned around the physical AI theme.
WHAT TO MONITOR
- FANUC’s order trend: FANUC is about 7.8% of the fund, and its Q1 orders rose 36.9%
- Q2 orders at the other top holdings: SMC, Keyence, Yaskawa, Daifuku
- How the fund performs against semiconductor-focused ETFs
- Price versus iNAV before you place an order
- Distribution at the 24 Dec record date
BULL CONSIDERATIONS
- Top holdings are evenly weighted: Fuji 8.9%, SMC 8.1%, Omron 8.0%, FANUC 7.8%, Keyence 7.8%
- A cleaner way to play China’s factory-investment recovery, which FANUC’s results show spreading (China sales +30%)
- Momentum is building: NAV +22.5% over 6 months and +8.3% over 1 month
- About ¥15bn in AUM supports reasonable liquidity
BEAR CONSIDERATIONS
- Only +26.0% since its June 2021 launch, far behind 2854’s +201% since 2022
- NAV −1.0% over 3 months: the theme has been choppy
- The 0.649% fee is more than double 2854’s 0.3025%
- Very little income: 12-month trailing yield of 0.14%
KEY DATA
FUND SIZE / INCEPTION ¥15.1bn · 21 Jun 2021 NAV ¥285,014 per 100 units at 6 Oct. | TOTAL EXPENSE RATIO 0.649% p.a. 0.59% before tax; record dates 24 Jun and 24 Dec.
| HOLDINGS Top 10 ≈ 77.2% Fuji, SMC, Omron, FANUC, Keyence, Daifuku, Yaskawa, THK, Nabtesco, CyberAgent.
|
FANUC WEIGHT 7.8% FANUC is also one of the fund’s top-five positions
| PERFORMANCE 29.3x PER · 0.56% 1 month +8.3%; 3 months −1.0%; +26.0% since launch.
| NEXT CATALYST Holdings’ H1 results, late Oct to Nov FANUC’s order trend is the best guide for the basket.
|
Global X Japan Tech Top 20 ETF (TSE: 2854)
WHY IT IS IN FOCUS
A low-cost, liquid way to own 20 large Japanese tech companies, with direct exposure to the chip-equipment cycle.
WHAT TO MONITOR
- Tokyo Electron and Advantest Q2 results: together they are about 19% of the fund
- Recruit (13.4%), the largest holding and not a chip company
- Distribution at the 24 Oct record date
- Price close to the top of its 52-week range (¥3,020)
- Bid-ask spread of about 0.34%; use limit orders
BULL CONSIDERATIONS
- NAV +201.2% since its June 2022 launch, +35.7% over 6 months and +10.1% over 3 months
- Its biggest chip holdings are growing fast: TEL’s Q1 operating income was +46.1%, and the chip-equipment market is forecast at $190bn+ for 2027
- Spread beyond chips: technology 63%, communication services 24%, industrials 11%
- Low fee of 0.3025%, about half of most Global X thematic funds
BEAR CONSIDERATIONS
- Top 10 are 77.7% of the fund, so it is less diversified than “20 names” suggests
- About 33.5x earnings, a growth-stock valuation
- 52-week range of ¥1,854–3,020: expect wide swings
- Heavily exposed to the chip-equipment cycle through Advantest and TEL
KEY DATA
| SHARE PRICE / FUND SIZE ¥2,950 · ¥17.5bn AUM and NAV of ¥285,644 per 100 units at 31 Aug 2026. | TOTAL EXPENSE RATIO 0.3025% p.a. 0.275% before tax; record dates 24 Apr and 24 Oct. | HOLDINGS 20 names · top 10 ≈ 77.7%
Recruit 13.4%, Sony 9.8%, Advantest 9.6%, Keyence 9.5%, Tokyo Electron 9.4%. |
PERFORMANCE +201.2% since launch 6 months +35.7%; 3 months +10.1%; 1 month +8.2%. | VALUATION / YIELD ~33.5x P/E · 0.62% Latest distribution ¥900 per 100 units (April 2026). | NEXT CATALYST Distribution at the 24 Oct record date Followed by Q2 results from its largest holdings. |
Japan in Focus
Continue exploring the themes shaping Japan’s markets with Japan in Focus, where you’ll find our latest bi-weekly breakdowns of two stocks and two ETFs, alongside past editions.
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