Investment Rating - The industry investment rating is Attractive [6]. Core Insights - Taiwan has added Huawei and SMIC to its export control list, requiring government permission for Taiwanese firms to conduct business with these companies, marking a significant regulatory shift [3][8]. - The report highlights Disco and Advantest as key players in the back-end semiconductor production equipment (SPE) market, which is less exposed to regulatory risks compared to front-end processes [8][10]. - There is an ongoing trend in China to promote domestic production of SPE, particularly for front-end processes, although the report suggests that China will eventually achieve self-sufficiency in high-performance components [4][9]. Summary by Sections Export Controls and Market Dynamics - Taiwan's Bureau of Foreign Trade updated its entity list, adding major Chinese firms, which may lead to similar actions by other US allies [3]. - The report emphasizes the need to monitor potential export restrictions from US allies on Japanese SPE [8]. Back-End Equipment Focus - The back-end process equipment is simpler and has seen successful localization in China, reducing the impact of export restrictions [9]. - Disco and Advantest are highlighted for their strong market positions and engineering capabilities, which allow them to maintain high market shares in China [10]. Company Ratings and Price Targets - Advantest is rated Overweight with a target price of ¥10,300 based on expected earnings growth [17]. - Disco is also rated Overweight with a target P/E of 25.1x, reflecting its strong growth potential [14].