TOKYO (Reuters) - Tokyo Electron Ltd (>> Tokyo Electron Ltd) shares plunged 15 percent on Tuesday as the scrapping of a $10 billion (7 billion pound) takeover by Applied Materials Inc (>> Applied Materials, Inc.) left the Japanese firm searching for a new growth strategy amid soaring R&D costs for the chip-production equipment industry.

The abandonment of the plan after 18 months of talks due to U.S. antitrust concerns dashed hopes of large cost savings and technological development with sector leader Applied Materials - that Tokyo Electron management and investors alike had been counting on.

Tokyo Electron, the world's No. 3 maker of chip-making equipment, boasts a robust business with a solid client base that should see it do well enough as long as global demand for semiconductors holds up, analysts say.

But it will likely have to deal with research and development costs on its own, given that the unexpected hardline stance from U.S. regulators that had helped kill this deal is expected to wipe out hopes for other potential mergers between major players in the industry.

"If you don't see more consolidation, the players who are standing will have to do it on their own, and they may have to go to their clients and ask for some money," said Claudio Aritomi, an analyst at Macquarie Capital Securities.

Rival chip equipment maker ASML tapped clients to fund development in 2012 when it signed up major customers such as Intel Corp (>> Intel Corporation) and Samsung Electronics (>> Samsung Electronics Co Ltd) to bankroll research into next generation technology in exchange for shares.

Tokyo Electron's stock tumbled to end at a six-month low, although the 15 percent decline would have been much worse without the Japanese firm's simultaneous announcement that it planned to buy back up to $1 billion or 8.6 percent of its outstanding stock.

The broader Tokyo market <.TOPX> finished 0.5 percent higher.

The planner merger, which would have created a company with a market value of more than $38 billion, had been expected to stand up to regulatory scrutiny as there is little overlap in the firms' product line-up.

Tokyo Electron President Tetsuro Higashi, who has been friends with Applied Materials CEO Gary Dickerson for 30 years, said the firms were surprised that regulators looked not just at existing products but also some products that were still under development.

"I can't understand why they were the target of antitrust law, and I don't know how this should be interpreted in the future," he said at a news conference on Monday.

The company also said that after swinging to a profit from a loss in the financial year just ended, it now expects to net income this business year to climb 10 percent to 79 billion yen ($665 million), a seven-year high.

(Reporting by Chang-Ran Kim and Hideyuki Sano; Editing by Edwina Gibbs)

By Thomas Wilson