TOKYO, Oct 25 (Reuters) - Shares of Kokusai Electric traded 15% above their initial public offering (IPO) price in the chip equipment maker's stock market debut on Wednesday in the largest Tokyo listing in five years.

Shares opened at 2,116 yen as investors grabbed shares following the rare IPO of a key chip tool manufacturer.

Kokusai raised $724.4 million after pricing its shares at 1,840 yen, providing a partial exit for private equity firm KKR, which has cut its stake to 47.7% from 73.2% without overallotment.

Chip tool makers have been suffering from a downturn in the market for electronics such as smartphones and PCs, with early euphoria over advances in generative artificial intelligence also cooling.

Kokusai is exposed to slumping demand for memory chips but that market is expected to rebound with the tool maker also able to expand in other segments, said Kazuyoshi Saito, an analyst at Iwai Cosmo Securities.

KKR agreed to buy Hitachi's electronic equipment unit in 2017 in a deal valuing the business at 257 billion yen ($1.72 billion) as the conglomerate streamlined operations.

The private equity group then spun off Kokusai, which manufactures machines for depositing thin films on silicon wafers, the following year.

KKR sought to sell Kokusai to competitor Applied Materials in 2019, but the $3.5 billion deal was terminated after failing to obtain regulatory approval in China.

Applied Materials has built a 15% shareholding in the company over the last three years. ($1 = 149.8500 yen)

(Reporting by Sam Nussey and Miho Uranaka; Editing by Chang-Ran Kim and Sonali Paul)