The company, whose vacuum technology is used in clean rooms for manufacturing semiconductors and other products, makes about a quarter of its sales from its Vacuum Technique unit, which it has built through a series of acquisitions starting in 2014.

Vacuum Technique's high exposure to the cyclical semiconductor industry, which accounts for the majority of its business, has made some investors fear the unit could be nearing the peak of the cycle.

Its first-quarter performance increased those worries.

But Geert Follens, the head of the unit, said demand from semiconductor clients was firm, while his unit was gaining market share in industrial vacuum and seeing strong growth from lithium-ion battery makers, who also require clean rooms.

"I am confident that for this year Vacuum Technique will have double-digit growth," Follens said in a telephone interview, citing lithium-ion batteries as 'an enormous growth area'.

"Sometimes when I visit customers, if I see how old and how dirty and how unintelligent some vacuum installations are, then this (industrial vacuum) market has an enormous potential," Follens said.

The vacuum unit's rapid growth in recent years has been underpinned by an exponential rise in the volume of data in the world, which drives demand for microchips to process it.

China's heavy spending to build up its semiconductor industry is also playing into the hands of Atlas Copco.

The business area competes with German firms Pfeiffer Vacuum and Busch, and its client list includes Samsung and TSMC, as well as Dutch group ASML, to whom it supplies vacuum products for its market-leading EUV extreme ultraviolet lithography systems.

Vacuum Technique, which had sales of 20 billion Swedish crowns (1.7 billion pounds) in 2017, is a relatively new business for Atlas Copco, a 145-year old maker of compressors and industrial tools.

Built on the 2014 acquisition of Britain's Edwards Group, it has also grown through further large takeovers such as the 2016 purchase of industrial vacuum firm Leybold from Switzerland's OC Oerlikon.

Vacuum Technique is looking for acquisitions, Follens said, but noted that the multiples of many potential targets looked "scary" and said the company was conservative on deals.

"It has to fit in what we do, and it takes a bit of time to find that ideal combination. And you are only as good as your last acquisition."

While the vacuum unit's organic growth has raised eyebrows, its margin improvement has also been steep, rising to 25.3 percent in 2017 from 18.2 percent in 2014, and Follens said the barriers to entry into the industry were high.

"You basically take all the substances that are used in your customers process, and you have to get that in the right temperature in the right condition through your vacuum pump. And you then have to abate that to give it back to the atmosphere," he said.

"That makes it more difficult to enter into that market".

(Reporting by Johannes Hellstrom; Editing by Adrian Croft)

By Johannes Hellstrom