Q3 2025 Tokyo Electron Ltd Earnings Call
Joining us today, despite your busy schedule.
I am yet to the IR department, serving as the moderator for today's session.
I'd like to introduce today's attendees.
So she key callout, a representative director President and CEO.
Thank you very much.
He does she kawamoto.
Senior Vice President General Manager Division, Obviously finance Division I am kawamoto. Thank you very much for joining us today.
Before starting the presentation, let me explain the flow of today's session.
First of all cover motto and calleja will make presentations.
After that until seven P. M. Japan time will have a question answer session. We'll entertain questions from the audience. This meeting uses two channel of Webex Ford simultaneous interpretation between Japanese and English as we explained our email you are kindly requested to use up some PC or mobile.
Terminals, if you plan to ask questions, but if you are not going to ask questions. You can use telephones since this but confidence is intended for institutional investors and analyst leap would appreciate your understanding that we received questions only from institutional investors and analysts will pose the old deal condensed.
Of this conference in Japanese and English on the website within a couple of days it will be appreciated. If you could also visit our web site now Mr. Kawamoto will present, the consolidated financial summary comment to someplace.
Kawamoto: Once again, good afternoon, I am Kawamoto Finance Division I would like to present, the consolidated financial summary of the third quarter of fiscal year ending March 2025.
This slide shows the quarterly financial summary.
Kawamoto: I will mean to you referred to the figures in the Blue box.
Kawamoto: The third quarterly generated net sales of $654 5 billion yen 15, 5% increase from the previous quarter.
Kawamoto: This was the second highest quarterly net sales.
Kawamoto: Gross profit was $311 7 billion yen 19, 9% increase from the previous quarter gross profit margin was 47, 6% one seven percentage point increase due to the rise of net sales.
Kawamoto: Operating income was $199 6 billion yen 34, 7% increase from the previous quarter.
Kawamoto: Operating profit margin was 35% raised by full 0.3 percentage point from the previous quarter due to the increase of gross profit margin that I mentioned before.
Kawamoto: Income before income taxes increased by 33% to 200.1 billion yen.
Kawamoto: Net income attributable to owners of parent, but it's $157 2 billion yen 33, 6% increase from the previous quarter.
Kawamoto: Capital expenditures in the third quarter were 50.2 billion yen.
Kawamoto: Maybe focusing on evaluation to us with development, we keep investing for future growth.
Kawamoto: This is a graphic representation of the financial summary, as shown on the favorite slide.
Kawamoto: No logical basis, just for your reference.
Kawamoto: This slide shows net sales by region.
Kawamoto: As for the net sales competition, the third quarter proportion of Taiwan, and Korea Rose by 5.0, and three four percentage points, respectively quarter over quarter.
Kawamoto: Proportion of China fluctuated in the low 40% level as in the second quarter.
Kawamoto: This shows SPE, new equipment sales by application.
Kawamoto: In the third quarter from the bottom of this chart sales to non memory customers accounted for 57% non volatile memory accounted for 8% and DRAM accounted for 35%.
Kawamoto: Sales to DRAM customers increased and its propulsion rose by nine percentage points from the previous quarter.
Kawamoto: This slide shows the field solution sales.
Kawamoto: In the third quarter I forget solutions sales were $141 5 billion yen growing by one 9 billion yen sales of parts and services Rose alone was improvement of utilization rate in the customer's fab.
Kawamoto: [noise] modification sales were also strong.
Kawamoto: This slide shows the balance sheet.
Kawamoto: Total assets on the top or two trillion in $501 9 billion yen cash and cash equivalent to a $295 5 billion yen declining by 230.0 billion yen from the pay this quarter due to the dividend payment to shareholders share repurchase stock.
Kawamoto: Payment and so on.
Kawamoto: Notes and accounts receivable as well $510 9 billion yen, increasing by $139 2 billion quarter over quarter, partly because sales were concentrated in November and December due to recovery of investment among our major customers.
Inventory is about 765.0 beta union, increasing by $22 7 billion quarter over quarter investment and other assets was $389 6 billion yen, increasing by $3 1 billion from the previous quarter.
Kawamoto: For the diabetes and its assets shown on direct insight liability is about 703 8 billion decreasing by 15 6 billion from the previous quarter.
Kawamoto: Net assets were $103 $798 1 billion yen declining by point 2 billion quarter over quarter.
Kawamoto: Equity ratio was 71, 2%.
Kawamoto: This slide shows the cash flow the cash outflow from operating activities in the third quarter was 15 point did a billion yen because of such factors are stringent increase of notes in accounts receivable and interim tax payment that I said before.
Kawamoto: Sure.
Kawamoto: The cash outflow from investing activities was 49.0 billion yen due to acquisition of fixed assets media, including evaluation tools for development cash outflow from financing activities was $117 1 billion yen, primarily because of dividend payment and share repurchase as described in the balance sheet.
Kawamoto: <unk>.
Kawamoto: As a result free cash outflow was $64 1 billion yen.
Kawamoto: Free cash flow is expected to improve to pose significant positive figures in the fourth quarter.
Kawamoto: Finally, I will present the status of share repurchase.
Kawamoto: As of December 31st 2024, we acquired 2 million in 2000, and 4200 shares spending of $46 9 billion yen in total.
Kawamoto: As presented in the timely disclosure on February the third this share repurchase program was completed in January 2025.
Kawamoto: This concludes my presentation of the consolidated financial summary of the third quarter of fiscal year ending March 2025.
Kawamoto: Now we'd like to move on color I will give you business environment and financial estimates.
Kawamoto: Sky Someplace.
Kawamoto: Once again.
Kawamoto: Good.
Kawamoto: Afternoon, everybody I'm co Ie, I will present business environment and financial estimates.
Kawamoto: Let me start with the business environment.
Kawamoto: We believe wf he might get landed last year calendar 2024 at $110 billion in sites exceeding the original expectation by about $10 billion, because leading edge technology investment to AI servers was very active and delivery to Chinese customers about.
Kawamoto: <unk> for it.
Kawamoto: Cut into 2025, Wi Fi market sizes expect expect it to be comparable with last year around $110 billion due to the port for delivery and low in investment to automotive semiconductors, and power semiconductors as well as a mature node investment by emerge.
Kawamoto: And Chinese IC vendors.
Kawamoto: The current forecast is slightly lower than that of three months ago very strong demand for AI semiconductor keeps growing and along with technology variation driven by advanced logic and H B M. W. P market size will continuously achieve record high level.
Kawamoto: Also in 2026.
Kawamoto: Calendar 'twenty 'twenty six growth of AI dated investment will drive that would've he market J P. U AC four AI server or shifts to the three nanometer node from the current four nanometer note.
Kawamoto: H B M to be used will evolve from the current eight they are settings to 12, and 16 layers stacking, while proceeding with device skating.
Kawamoto: In addition, full swing introduction of AI to the etch site, such as smartphone MPC will start which will trigger demand growth for two nanometer logic and D. D. All five.
Kawamoto: Due to these drivers the W. At F E market is expected to show a double digit growth.
Kawamoto: For AI applications cutting edge semiconductor technologies I essential towards yogurt ization of semiconductor devices, featuring large capacity at a high speed high reliability and lower power consumption technology innovation is moving forward supported by two primary drivers. There one is device scaling which is well known.
Kawamoto: Six jobs performance enhancement semiconductor and the other is new driver heterogeneous integration along with evaluation of set technologies S. G. A a backside P. D N high stacking memories and test processes, our business opportunities will expand further more.
Kawamoto: This shows business progress in the third quarter of fiscal year ending March 2025.
Kawamoto: Regarding the financial performance as the Mr. Cola motto presented earlier net sales profit and all other indicators achieved our guidance.
Kawamoto: Our sales growth rate on the colander year basis record at 26% significantly outperforming the market growth.
In addition to expansion of Chinese market AI related investment to drive the market growth towards full implementation to be investment for high volume production, leading edge semiconductors, we are receiving increasing number of inquiries for advanced logic DRAM for H B M application and advanced packaging.
Kawamoto: <unk>, which pushes up the proportion of our nuclear that sells this trend is expected to raise.
Kawamoto: Full year net sales and profit to the record high.
Kawamoto: In this ongoing court each quarter, we are steadily winning P O ours with a higher value added strategic products for cryogenic.
Kawamoto: Edging, which attract attention in the market one NAND customer has decided to adopt it for their high volume manufacturing like wide variation is steadily in progress are multiple customers four episodes. One the single wafer film deposition system, We announced in July 2024, we have one P O ours for logic box that P. D M.
Kawamoto: High volume manufacturing from all major customers episode, one was highly valued because of its lower context resistance achieved by high interface controllability and its superior productivity.
Kawamoto: In December 'twenty 'twenty, four we did east that two new models shown in this slide there.
They feature enhanced productivity and environmental performance and expect it to contribute to our some expansion.
Kawamoto: We are on track towards the achievement of the midterm management plan, winning P O ours and introducing new products.
Kawamoto: As shown here our company has a broad range of product portfolio to support device scaling, which is well known intrinsic nature of the semiconductor evolution. In addition to product for wafer process, where we'll actually beautiful light solutions for advanced packaging, which will become increasingly important in the future.
Kawamoto: The I R. A day event to be held on February 26, the head of each business unit will present, our future growth strategy, we would really appreciate your participation.
Kawamoto: In the growing double every market, where we'll post a number one share in each for that group to further enhance our corporate values.
Kawamoto: He ended up at a F E market, which will grow in the future. Our dry etch business is expected to grow drastically as the number of etching processes will increase along with technology innovation and our share is growing.
In order to capture such growth opportunity as much as possible, we have decided to construct a new production building in Tokyo electron miyagi.
Kawamoto: Based on this smart it production initiative to realize next generation manufacturing concept than your production building will adapt automation the logistic function and manufacturing process. We will aim to increase labor productivity by four times double space efficiency and reduce.
Kawamoto: <unk> lead time by a factor of three compared with the current condition.
Kawamoto: Next I will present, the financial estimates for fiscal 2025.
Kawamoto: Three months ago, we revised the financial estimate upward by 100 billion yen or I couldn't estimate remains unchanged fiscal 'twenty 25 fifth full year net sales estimate out to train 400 billion yen, which represent 31% positive growth.
Kawamoto: Over a year, we expect to soon.
Our fault perform market growth. The details are shown at the stable net sales gross profit gross profit margin operating income net income and EPS are planned to hit record high.
Kawamoto: This slide shows S be new equipment sales forecast.
Kawamoto: Given by progress in the third quarter net sales in the second half of this fiscal year I expect it to achieve all time high of 985.0 billion yen.
Kawamoto: This shows our planned for R&D expenses and Capex.
Kawamoto: If it's got 20 or 25, we expect R&D expenses of 254 billion yen Capex of 170 billion yen and depreciation of 63 billion yen.
Kawamoto: This slide shows dividend focused in fiscal 'twenty or 'twenty five the full year dividend per share is expected to be 571 yen, surpassing the record posted in fiscal year ended March 2023.
Kawamoto: This is my last slide showing total return amount over the past few years.
Kawamoto: The total return amount in this fiscal year totaling dividend per share and additional share repurchase that I presented earlier is expected to be $413 3 billion yen, establishing a new record surpassing the record in the previous fiscal year ended March 22, and two four by more than one hub.
Kawamoto: <unk> billion yen.
Kawamoto: This concludes my presentation. Thank you very much for your kind attention.
Kawamoto: Now we will have a question answer session until seven P. M. Japan time, you can ask questions either in Japanese or English, but our speakers on the Japanese tunnel. Please allow us to take all your questions only in Japanese if you ask a question in Japanese.
Kawamoto: Click the raise hand button on the Webex for details. Please refer to the instructions at that Judy amputation email I will call a name of the person who asked the question one by one our Secretariat will contexture intervals. So please check the webex chat box.
Kawamoto: When asking a question you are kindly requested to mute your microphone for yourself. When you are question is answered by our attendees. Please hit the race and button once again to remove raise hand signals.
Kawamoto: Four questions in English. Please use the webex chat box and give your affiliation name them question in text and send it to our Secretariat well will refrain from answering questions. If your name and affiliations or not given on the Japanese channel Wherewith translate your English question, and we will read it out in Japanese and speakers.
Kawamoto: This will answer in Japanese and English channel. The question and answer will be simultaneously interpreted into English and a real time basis as we'd like to take questions from as many participants as possible. We will take one question per person. If time allows however will take additional questions.
Kawamoto: So the first question is from.
Kawamoto: You should have some from she let's say securities Japan. Thank you very much I am Yoshida from CLSA Securities.
Kawamoto: On page 13, there were free market forecast I have a question so 2024.
Kawamoto: Result in 25 forecast by application do we have any growth rate idea could you share that with us b piece and that's growing wake in China, especially for 2025, what is your view on that and Wi Fi market.
Kawamoto: Walk us this updated for your next fiscal year, you may have modeled flat expectation any positive factors in could you. Let me know your idea for next fiscal year. Thank you very much.
Carl I: Thank you very much this is Carl I, let me answer to your question.
Carl I: First of all for next year.
Carl I: Focus by application that have you asked for DRAM.
Carl I: Plus 10% to 20%.
Carl I: Increase.
Carl I: For NAND by and large the propulsion of NAND is about 10% in the market.
Carl I: I think the figure will be doubled compared with a figure in 'twenty 'twenty four for logic, 10% to 20%.
Carl I: Decline is expected.
The leading edge logic advanced logic remains flat, however that China will show some negative.
Carl I: Trend. Therefore, a DRAM is expected to increase our memories are expected to increase while logic.
Carl I: And slow ship domain slots, but the negative is expected for China market.
Carl I: So by and large the market is expected to be flat DRAM growth is driven by H B M. <unk>.
Followed by.
Carl I: D D R five for AI.
For next year.
Carl I: A I save the GPU and ASIC for Air server are now shifting to three nanometer node.
Carl I: H AI device for two nanometer investment.
Carl I: We'll start next year.
Speaker Change: H B M.
Speaker Change: So number of layers will being piece, increasing and father device skating is also expected for H B M. P C in smartphones.
Speaker Change: H AI and Windows 10 service support will be complete at the end of this year, therefore edge AI high end penetration will be.
Speaker Change: Expanding where.
Speaker Change: Semiconductor content gets higher.
Speaker Change: So that's catching area.
Speaker Change: <unk> is expected to grow. Furthermore.
Speaker Change: When you look at fiscal year, we can see the sort of trend from <unk>.
Speaker Change: January to March period in fiscal year already.
Speaker Change: We are now in scrutinizing ourselves at this moment.
Speaker Change: Maybe double digit growth in calendar 2026 gets slightly be incorporated in fiscal year, 2020 six so that we can further increase worry grow. Furthermore.
Speaker Change: And we are now scrutinizing details, maybe we can share the idea with you in the next quarterly financial announcement, So Sheila 2025 W. P market, how do you like to see China in calendar 2025.
Speaker Change: We will expect the decline in Chinese market for non memory areas tend to 20 per cent decline as expected in China.
Speaker Change: So leading edge that is no different from previous year, no memory, 10% to 20% decline as expected.
Speaker Change: Mainly due to the <unk>.
Speaker Change: Chinese customers.
Speaker Change: Especially the emerging Chinese chipmakers.
Speaker Change: Well suspend their investment.
Speaker Change: I think you can see a more accurate figures. So yes, yes. It is and do you have any figures for that.
Speaker Change: As I said earlier.
Speaker Change: So according to our up market focus actually we think the market is flat while memory in pieces, where all logic will decline. So the entire market remained flat, but memory increase can offset the decline in Chinese market. That's all we can see the entire market. Thank you very much.
Speaker Change: She does so thank you very much for your question next question is from.
Speaker Change: Mr Nakamura of Goldman Sachs, Japan.
Speaker Change: I'm Gonna assemblies.
Speaker Change: Thank you very much just a snack armada.
Speaker Change: I have a question regarding the progress of financial performance the third quarter looks very good in terms of financial performance, but your full year.
Speaker Change: Yeah focus remains.
Speaker Change: Unchanged that means it looks like the performance of finance will be going down from the third quarter to the fourth quarter are there any risk left as visible.
Speaker Change: That's my question in addition for calendar 2025 and beyond.
Speaker Change: So in order for you to outperform the market there might be some drivers you talked about several.
Speaker Change: P O Eiffel manufactured in Croatia, and film deposition systems for those two systems.
Speaker Change: How much contribution do you expect.
Speaker Change: At which timing could you share your idea please.
Speaker Change: Thank you very much for your question. So let me give you some fears.
Speaker Change: I think you have do some calculation based on our figures.
Speaker Change: So after the financial settlement you may see some upward revision to some extent, but this is our current focus that we have.
Speaker Change: At this stage, we don't have any factors for decline that's not what we meant.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: There is no there is no need to change things precisely so you should watch the big trend and the timing of delivery for each month.
Speaker Change: We all look at those fears.
Speaker Change: And.
Speaker Change: We don't have any major factor, which forces us to change our financial estimates.
Speaker Change: But for inquiries from April.
Speaker Change: We can quite as maybe a pud for it too much.
Speaker Change: So that's what we can report to you today in also.
Speaker Change: Phone towards next year, we have we do have our growth plan.
Speaker Change: As for the specific figures.
Speaker Change: Maybe in the next.
Speaker Change: Financial announcement, we can give you more details. So one thing I can highlight today is asked here.
Speaker Change: Wi Fi market.
Speaker Change: $100 billion in size and Tokyo electron.
Speaker Change: Gross positive 26%.
Speaker Change: So on a fiscal year basis.
Speaker Change: More than 30% growth is expected.
Speaker Change: So because of AI in our company.
Speaker Change: The AI investment.
Speaker Change: Help us to improve our financial performance that's.
Speaker Change: The position we are in advanced logic DRAM for H B M applications advanced packaging inquiries in those three areas are increasing and next fiscal year. Those three are the major drivers and we expect a loss for father increase the example for DRAM.
Speaker Change: Capacitor itching.
Speaker Change: [noise] supercritical dry.
Speaker Change: Logic G a a gust chemical etching and context for.
Speaker Change: The petition.
Speaker Change: So these are the area that tell has a core competence.
Speaker Change: We have.
Speaker Change: Acquire some P O ours and that would help us to make good financial.
Speaker Change: Results and we are a very dominant position for provost for advanced logic, and H B M. Banda our share is 60% to 70%.
Speaker Change: So that's also the reason why we can outperform the market.
Speaker Change: Gross.
Speaker Change: So in particular for testing and packaging processes, the probe Iris and.
Speaker Change: And wonder and the Bonder also the film deposition quota and cleaning also part of this area for testing and packaging equipment in thawed out cells is doubled their Cisco here about the film 100 billion to 200 billion yen. So this kind of investment will continue.
Speaker Change: Or to be accelerated Furthermore, nyx Cisco here therefore.
Speaker Change: Yes.
Speaker Change: We can expect.
Speaker Change: The growth next year.
Specific figures or money basis, we are now scrutinizing figures. This is they are big framework of our estimate for the future.
Speaker Change: Your question that contribution a P O R.
Speaker Change: This time, we've talked about not channel hole the investment for this.
Speaker Change: It's only for pilot line for this year.
Speaker Change: So the contribution to next fiscal year sales is not so big in that area those are expects IPD and <unk>.
Speaker Change: Customer for the first time on fixing their P. O ours. Therefore, it may be the investment for mass production line should be next year and beyond.
Speaker Change: I'm Gonna Sun. Thank you very much for your question.
Speaker Change: Next question is from.
Speaker Change: Yeah.
Speaker Change: What are some of Morgan Stanley and if if she said Chapin IMI that came from Morgan Stanley can you hear me.
Speaker Change: So I have one question regarding China this fiscal year.
Speaker Change: So what is the proportion of China market itself and what is the decline you expect for next if fiscal year I think that is a decline for next fiscal year, but actually China market, bringing C accused money and if that proportion of China and go Stan I Wonder you maybe have some difficult. It is further increasing yourselves what do you think about that.
Speaker Change: For the first half of this year, the China market accounted for the high 40% level, but in the second half of this fiscal year, China market propulsion is the high 30%.
Speaker Change: Level, therefore, a 40% plus is the condition for this year next fiscal year, the midpoint of 30% level is the proportion of China market China sales.
Speaker Change: So for profitability I value added leading edge products pursued.
Speaker Change: By our company.
Speaker Change: What's the productivity should be high so that we can provide high value to their customers. We are proposing those things to our customers. So G. P M.
Speaker Change: Has been increasing steadily.
Speaker Change: Right now just for this fiscal year when you compare the first half and second half this year, although China proportion goes down when you look at gross profit margin.
Speaker Change: There is no change whether gross profit margin.
Speaker Change: Can be increased.
Speaker Change: So along this trend.
Speaker Change: By country.
How can I put it there along with the China propulsion changes.
Speaker Change: The impact of the gross profit margin.
Speaker Change: We don't have so much concern.
Speaker Change: Yes.
Speaker Change: That's very clear. Thank you very much for your answer that's all for me. Thank you very much with axon. Thank you very much for your question.
Speaker Change: Next question is from here at garrison from Bofa.
Speaker Change: Some because you're on mute on microphone. Please therefore W. F E.
We got a very detailed forecast.
Speaker Change: So Sheila 2026, you said double digit growth is expected I think 2026, it's far away, but which application will contribute to the double digit growth and are there any visible inquiries coming in because you. Let me know your feeling about calendar 2026.
Speaker Change: Thank you.
Speaker Change: So when you look at the Big framework DRAM It remained strong.
Speaker Change: H B M.
Speaker Change: And D D R. Five.
Speaker Change: H B M is for AI servers.
Speaker Change: And for edge AI devices.
Speaker Change: Including PC and smartphones.
Speaker Change: DDR five is expected high next year for logic.
Speaker Change: Is expected to grow further more next year and onward.
Speaker Change: So GPU in a sick three nano node devices is one thing and for H AI two nanometer node devices.
Speaker Change: So two nano note.
Speaker Change: There is one customer but towards next year.
Speaker Change: Multiple customers.
Speaker Change: I expect it to start investment 32 nanometer node therefore.
Speaker Change: For DRAM.
Speaker Change: Rather than this year.
Speaker Change: You can see more sales for DRAM more than this year next year and logic is expected to further grow.
Speaker Change: For NAND compared with last year. This year NAND is doubled that's why I say next year I think this kind of trend will continue next year.
Speaker Change: As for the proportion of NAND is about 10% next year as well, but when you think about those issues by taking account of those factors, we said double digit growth as expected.
Speaker Change: Especially emerging customers in China are now studying up.
Speaker Change: Tools.
Speaker Change: And for mass production data to confirm their capability to start the mass.
Speaker Change: Mass production, so proportion of China.
Speaker Change: Is about the midpoint of 30% level that remains unchanged, but he volume wise.
Speaker Change: I think that China volume will keep growing as well.
Speaker Change: Thank you very much.
Speaker Change: Iraq Awesome. Thank you very much for your question next question is from Humana.
<unk> from <unk> Securities.
Speaker Change: I am Shimada motto Firmed walk us on Securities can you hear me yes.
Speaker Change: Thank you very much.
Speaker Change: Now my question is about next fiscal year sales I want to understand your in your view.
Speaker Change: So the current fiscal year.
Speaker Change: You drastically outperformed Wi Fi market because F C.
Speaker Change: China investment is poured for it.
Speaker Change: So if my idea is not correct. Please let me know if my assumption is correct.
Speaker Change: So next year, when China declines a little bit next fiscal year yourselves might.
Speaker Change: Mike.
Speaker Change: <unk> performed WP market, how do you think about this kind of potential risk for next fiscal year.
Speaker Change: Yes.
Speaker Change: Your question. So we are we have outperformed the Wi Fi market, because partly because of the port for the sales.
Speaker Change: Sales in China, but also the advanced logic, H B M and advanced DRAM.
Speaker Change: As I said earlier they are the major drivers for us.
Speaker Change: To outperform the Wi Fi market.
Speaker Change: So.
Speaker Change: We were ready to address those two factors.
Speaker Change: That's how we analyze the situation.
Speaker Change: From that viewpoint.
Speaker Change: For next fiscal year, we can to meet the market expectations.
Speaker Change: That's how we view next year.
Speaker Change: We are now scrutinizing detail figures I'm sorry for that.
Speaker Change: We can share that information in next financial announcement meeting.
Speaker Change: Thank you very much I have one follow up question for advanced logic.
Speaker Change: So advanced logic. So this year and last year when you compare those two years I think advanced logic remains threat.
Speaker Change: That customer in Taiwan did a very huge investment, but you that is.
Speaker Change: Is it correct if I understand advanced logic women flipped from last year to this year or did you receive any pud Ford inquiries for advanced logic as well for advanced logic, the big customer will continue their investment.
However, I say its the advanced logic remains front, maybe because of the drastic drop of the North America customer is that correct understanding.
Speaker Change: Well.
Speaker Change: Our present.
Speaker Change: Yeah.
Speaker Change: We are now trying to factor in the investment plan of all customers as you know many IC vendors are making financial announcement. So we incorporate those factors so Taiwan investment gets larger for the advanced area.
Speaker Change: For memory.
Speaker Change: This year.
Speaker Change: And next year.
Speaker Change: As further still good exterran is concerned.
Speaker Change: For memory.
Speaker Change: H B M. A D D R. Five.
Speaker Change: Our products have been adopted by a customer. This is one of the driver of our growth.
Speaker Change: DRAM is expected to grow significantly.
Speaker Change: There is a way to think it should calendar year or fiscal year, but everything we are now winning P O our steady this.
Speaker Change: It will help us to further improve our performance in Mexico are.
Speaker Change: Thank you very much.
Speaker Change: Mr. Shimon with those thank you very much for your question next question is from.
Yoshioka: Yoshioka song from Nomura Securities.
Yoshioka: Thank you very much I am yoshioka from Nomura Securities. Thank you very much.
Speaker Change: So I have a question regarding China.
Yoshioka: The inquiries from China.
Yoshioka: Or your forecast for 2025, compared with three months ago.
Yoshioka: Have there been any changes.
Yoshioka: There are some.
Yoshioka: Trend of getting stronger because your Japanese competitor set that it might be very similar investment level for next year as this year. So are there any changes in China trend.
Yoshioka: And I have one additional question steamed the impact of regulations in December last year American government issue the export control.
Yoshioka: And the end of January public comment started.
Yoshioka: From the May Tee.
Yoshioka: Japan.
Yoshioka: So I wonder what sort of impact does it have on your customers demand.
Speaker Change: Thank you for your question.
Yoshioka: Needless to say.
Yoshioka: We have the broad product portfolio.
Yoshioka: Therefore, the American government regulations.
Yoshioka: And.
Yoshioka: Additional public comment as he mentioned earlier.
Yoshioka: We.
Yoshioka: Are being affected by those factors to some extent is inevitable.
Yoshioka: As I said before we need to closely watch those impacts.
Yoshioka: So now we should be very careful and alert to monitor what's going wrong.
Yoshioka: And based on that observation, we can expect some.
Yoshioka: Regulations to come.
Yoshioka: And if there is no big difference between our expectation and actual regulations.
Yoshioka: And our plan for growth is not significantly affected over the past three months.
Yoshioka: The only minor impact.
Yoshioka: Is it exited.
Yoshioka: For our growth plan and our performance.
Speaker Change: Thank you very much I have one follow up question.
Yoshioka: So compared with three months ago.
Speaker Change: Are there any.
Yoshioka: Demands coming from China.
Yoshioka: She is port for it.
Yoshioka: For some tools, we have received the request for the port for it deliveries.
Yoshioka: So now publicly comment is being started already so we don't think any.
Yoshioka: Request being poured for it under the current regulations.
Yoshioka: Thank you very much for your answers that was very clear yoga. Some thank you very much for your question.
Yoshioka: We have about 15 minutes to go.
Yoshioka: Well actually we received quite a few questions. So could you Oh cause you limit. Your question to one next question is from companies like summer from Tokai, Tokyo intelligence of luxury and Connie Seki from Tokai Tokyo intelligence luxury.
Yoshioka: So I have the cryo Etch, Inc. I have a question for Crown aging you won't lung Peel off of one company I think there are some potential customers more and how many more P was do you expect for cryogenic aging and I think there are several tunnel whole processes.
Yoshioka: And how much P was heavier obtained so far so calendar year 2027, 2 billion U S. Dollars market size was expected are there any changes for your forecast for 2027 do you have any comments if any regarding the competitions are there any different between your product and.
Yoshioka: Your competitions.
Yoshioka: So.
Speaker Change: I, let me answer to your question as much as possible.
Yoshioka: For one customer.
Speaker Change: Are we wrong.
Yoshioka: The high volume production P O R.
Yoshioka: From one customer.
Yoshioka: So main portion is the investment for next year.
Yoshioka: We can see drastic contribution next year.
Yoshioka: Other named customers.
Yoshioka: They are.
Yoshioka: Evaluating.
Yoshioka: The technology as planned.
Yoshioka: I think we are able to demonstrate the benefits and the advantage of our products to the customers.
In our company.
Yoshioka: The etch rate is rather high.
Yoshioka: On top of that.
Yoshioka: We do have the coating process and.
Yoshioka: And we are trying to improve productivity, including combining coating and H right and cooking itself.
Yoshioka: As well as productivity is concerned there are some.
Yoshioka: Positive or negative impacts were quoting but what do we have more stacking layers.
Yoshioka: And with.
Yoshioka: If there are more and more etching processes, we can.
Yoshioka: Get the advantage of high throughput of our technology. So the technology for the future I think we can provide high value to the customers.
Yoshioka: Benefit of coating the cost of consumables COC operating cost.
Yoshioka: The customer can enjoy some benefits.
Yoshioka: So etch rate.
Yoshioka: The profile.
Yoshioka: And operating costs or C. O C. These are the area that we try to provide customers with the high values with our technology now we have one customer which adapt it.
Yoshioka: Technology, we are going to increase the number of customers who adopted for mass production. Let me answer to you about the mass market size 2 billion next year, that's our expectation and there have been no changes.
Speaker Change: But customer try to improve investment efficiency, so that might be some decline, but I felt as we are concerned our present, we haven't changed our forecast $2 billion. Mr. Cammisa Keith. Thank you very much for your question next question is from Mr. Yamamoto of Mizuho Securities.
Yamamoto: I am Yamamoto film Mizuho Securities can you hear me yes.
Yamamoto: On page 16, you talked about new production building EMEA E I misheard, but color since at the time is to be reduced.
Yamamoto: By a factor of three.
Yamamoto: That's true.
Yamamoto: So it tells itching cost goes down.
Yamamoto: How much reduction you can enjoy by court forecast do you have any.
Yamamoto: Idea for that.
Yamamoto: Now we are scrutinizing that sort of inflammation production lead time.
Yamamoto: That's the right time.
Yamamoto: In our factory, that's what we mean by production decline, we can reduce it by a factor of three that's our target for lead time reduction so production capability.
Yamamoto: We're capability if by 2029.
Yamamoto: Yeah.
Yamamoto: This year is fiscal 'twenty or 'twenty five.
Yamamoto: By 2020 production capability should be increased by one eight times.
Yamamoto: And capacity should be tripled for the future and labor.
Yamamoto: Efficiency increased by four times double the space efficiency and reduce the.
Yamamoto: Production lead time by a factor of three.
Yamamoto: So high efficient production line will be established EMEA E new production building.
Yamamoto: By doing this maybe it we tried to increase the automation of our production.
Yamamoto: Production mine through the communization of their parts and it's done that isolation.
Yamamoto: Of their parts.
Yamamoto: What's the chamber to chamber matching can be improved when we have higher automation rate in our factory.
Yamamoto: Then on site close this month.
Yamamoto: Monday's can be reduced.
Yamamoto: And instead, it can be reduced or support shipment costs can be reduced so we can enjoy quite a few benefits.
Yamamoto: And we are now studying how much numerical benefits we can enjoy.
Yamamoto: Quantitatively. So these are the factors for us to reduce the costs further more.
Yamamoto: So more than 1000 people will be working there according to our called on Prem.
Yamamoto: On the other hand automation rate will be increase Furthermore.
Yamamoto: So the market rose and that will help us to hire more people.
Yamamoto: However.
Yamamoto: The cost per tool or fixed cost per tool can.
Yamamoto: Can be reduced.
Yamamoto: That's the concept of the new production building the quantitative cost reduction is being now studied.
Yamamoto: I'm, sorry, I cannot give you any specific answer for quantitative value.
Some folks are vote the drastic change the construction is to be completed summer 2027, you have only two years to go. So this kind of drastic change it's just attribute it to the difference in.
Yamamoto: Assembling by including suppliers I want to change many things, including suppliers I'm sure you have.
Yamamoto: Reformed the law is that kind of a extension of the previous ecstatic.
Yamamoto: Practices or do you.
Yamamoto: Try to increase some destructive changes, which is totally different than what you have done so far.
Yamamoto: So our measure idea is as you know the semiconductor market is reaching one trillion dollars.
Yamamoto: And.
Yamamoto: According to I B S. One three trillion dollar is the size of market in the future Yeah, 2050 2050 quad.
Yamamoto: One tons.
Yamamoto: Computing was six G. Seven G communications will be introduced and industry 5.0 Society five points there will be emerging we have let up expectations robotics will be implemented.
Yamamoto: I mean, those suck up some concern says semiconductor market is expected to grow drastically. So what is important for Toyota exterran is pursuing growth rather than bloated.
Yamamoto: We should improve that.
Yamamoto: Efficiency in our operations.
Yamamoto: So manufacturing.
Yamamoto: Take it out of formation with.
Yamamoto: AI and robotics. This is a concept that we should work on as a leader in this industry.
Yamamoto: Tokyo restaurant alone cannot come up as high efficient factory lines. Therefore, we need to make supply chain one wide effort to establish high efficiency manufacturing line.
So that supplier cluster Lafayette cluster.
Yamamoto: We have quite a few partners.
Yamamoto: Located very close to our factories.
Yamamoto: They have their own operation centers very close to polka restaurants factory. So this is a supply chain wide effort to work on the smart manufacturing and I hope the production building EMEA. He come presents a model case, that's the backdrop.
Yamamoto: <unk> of the decision made this time.
Yamamoto: So to your question My answer is yes, I expect a lot. Thank you very much for your question and my motto something you very much for your question. Next question is from is text in English, let me read it out.
Speaker Change: This is a question from gum investment management, Mr. Ernest Zanzibar Plantsman. The question is historically operating margins have not exceeded 30% on a sustained basis under what circumstances could they possibly rise to why 40% if not what factors would prevent them from reaching.
Yamamoto: Such a level please provide argument to support both possibilities.
Yamamoto: Thank you very much for your question.
Yamamoto: You know, Amit German management plant, 35% or more or P. M is our target.
Yamamoto: Toward FY 2027 by working on the midterm management plan, 40% is mentioned in this question.
Yamamoto: That means we should further increase the RPM.
Yamamoto: By 5% in on top of the 30% or more.
Yamamoto: Target target midterm target is just that August is not the goal. So we should pursue further higher or P. M to promote the.
Yamamoto: Growth and we should invest more under the high profit margin.
Yamamoto: So 5% more.
Yamamoto: Then 35% for one thing.
Yamamoto: So Eric Schoen is a manufacturer therefore wish.
Yamamoto: We should.
Yamamoto: Provide high value added next generation products on a continuous basis to satisfy customers' demands the gross profit margin.
Yamamoto: Has been growing.
Yamamoto: By 7% over the past few years.
Yamamoto: So we provide that is their customer by.
Yamamoto: Machine from the viewpoint of the G. P M or marginal profit ratio, so 2% to 3% enhancement is to be achieved for J P. M ore.
Yamamoto: N P R.
Yamamoto: Marginal profit ratio and I said manufacturing Dx with AI and robotics, that's what I said earlier.
Yamamoto: And also the business innovation.
Yamamoto: By introducing AI and digital capability.
Yamamoto: So under those trend.
Yamamoto: We are now working on the.
Yamamoto: Our business innovation project by incorporating I T unit.
Yamamoto: So be sure to reduce fixed cost ratio against sales.
Yamamoto: So that we can pursue their father efficiency now we have more growth and we can increase further share at the same time, we should reduce fixed cost fares cells, and we should pursue higher G. P M and marginal profit ratio by several percentage points. So this is always.
Yamamoto: Can add 5% more to the RPM target of 35% or more in our midterm management plan.
Yamamoto: So you talked about 40%.
Yamamoto: That's very specific question. We received therefore I just gave you our way of thinking to answer your question.
Yamamoto: So our company.
Yamamoto: First of all we must achieve our midterm management plan at the same time, we are now studying the plus possible plan beyond the midterm management plan for further growth Mr. Atlanta, one. Thank you very much for your question. Next question is also in English, let me read it out.
Speaker Change: So this is a question from Paul Chew outperformed Bailey give for it. The question is as follows what is your view on dry versus wet cleaning in wafers, how much old industry moved towards dry cleaning.
Speaker Change: So let me answer to your question.
Speaker Change: So by and large debate itching, Mike It is rather a big partially for critical processes dry cleaning is also introduced.
Speaker Change: So our products for example, Arizona based their physical cleaning this is not liquid.
Speaker Change: So Arizona is used in our technology, but compared with wet cleaning a dry cleaning market is rather small.
Speaker Change: Right now so pattern clubs prevention. This is a critical dry technology is also.
Speaker Change: Advantageous, we have very high technology and high market share.
Speaker Change: So by combining those technologies, we want to increase our sales and share for wet cleaning. Thank you very much that's all from US. Thank you very much for your question.
Speaker Change: Next question is from.
Speaker Change: Yes, Lisa from UBS Securities.
Speaker Change: Simply.
Yeah.
Speaker Change: I am USA from UBS Securities.
Speaker Change: My question might sound strange so the other day, so spinnaker notices the Crystal intelligence AI that is AI agent of open AI used and Softbank is going to promote the sales of the software using AI I think you have quite a few engineers.
Speaker Change: So software innovation.
Jessica Davies: Is to be advanced Jessica Davies here.
Jessica Davies: Christmas using AI there are many possibility for that but the company wide introduction of AI for it. The total optimization. So have you started discussing the possibility to introduce AI on a company wide basis or are you just thinking about AI. So what is the stage of the introduction of the air.
Jessica Davies: And your company do you have any midterm plan.
Jessica Davies: Yeah.
Jessica Davies: This year.
Jessica Davies: I attend it says in the United States in January.
Jessica Davies: So AI is already eight evolution AI acceleration.
Jessica Davies: It is true that.
Jessica Davies: That is amazing situation going on now.
Jessica Davies: Various applications will be emerging and in many areas efficiency can be enhanced by introducing AI. That's what we expect.
Jessica Davies: In our company.
Jessica Davies: Every year in January we.
We hold internal technology for them.
Jessica Davies: Where the engineers from different sites, including Japan, United States.
Jessica Davies: <unk> presentation on their technology innovation.
Jessica Davies: And we share the technology innovation idea within group that's the purpose of the internal technology for them in January and we select the champion.
Jessica Davies: In this forum.
Jessica Davies: Okay.
Jessica Davies: So I T.
Jessica Davies: Utilize idea or development, using I T or material selection by using.
Jessica Davies: Those ideas are coming out one after another.
Jessica Davies: And the volume of idea proposal is really huge.
Jessica Davies: And I think it has a huge potential.
Jessica Davies: And now we have more and more sites.
Jessica Davies: And from the viewpoint of the governance.
Jessica Davies: In security enhancement.
Jessica Davies: And in order to ensure the compliance the various regulations, we must make the best use of AI.
Speaker Change: Hey, I might.
Speaker Change: Detect things, which might be overlooked by the people.
Speaker Change: So AI spread Furthermore.
Speaker Change: I'm sorry, my answer is rather obstructive, but.
Speaker Change: A I.
Speaker Change: We are not we must work on AI actively.
Speaker Change: And we got we want to do investment for that.
Speaker Change: And in one of the way of thinking is as a part of our business and that innovation project.
Speaker Change: The Dx project, we have incorporated I T unit in OE.
Speaker Change: Digital transformation activities within the business innovation projects.
So: Mr. So you. Thank you very much for your question, we have two more questions.
So: So I want to receive those two questions before closing today's session now we have some from Macquarie capital Securities.
Danielle: I'm Danielle <unk> from Macquarie Capital question, one question this fiscal year.
Danielle: Now you can see a drastic increase and what is your expectation for next fiscal year. In particular, you talked about utilization rate is going up.
Speaker Change: And parts and consumable sales will be increased inducing. This continue next fiscal year that we have he market remains flat that's the our forecast for next failure, but field solution, how do you see the.
Speaker Change: Prospects of their field solution sales in next year first of all let me answer to your question and gets US one please add if any.
Speaker Change: You just said.
Speaker Change: The utilization rate has been improving.
Speaker Change: For D D R. Four which is not so the law now the DDR for inventory is expected to.
Speaker Change: Reduce at the end of this year.
Speaker Change: And also NAND inventory is expected to be decline.
So it is true there.
Speaker Change: Estimates.
Fab utilization rate goes up so we can have a huge expectation for field solution business and for on their own device.
Speaker Change: <unk> is another trend.
Speaker Change: Emerging now and investment.
Four on device AI is also expected so based on fiscal year field solutions business.
Speaker Change: Is expected to grow.
Speaker Change: Yes, essentially have any addition for field solutions sales.
Speaker Change: So you can see an increasing trend so by quarter, we don't have any announcements by parts service sales.
Speaker Change: Has been increasing over the past four quarters consecutively because of the utilization rate and piece of their customers and our installed base has increased by 4000 to 6000 unit every year. So these factors help us to further increase the sales of fill solution.
Speaker Change: He is very much thank you.
Speaker Change: You very much.
Daniel: Daniel Thank you very much for your question the last question.
Speaker Change: NASA from F N B C Nikko Securities I am hunting from Smbs <unk> Nikko Securities.
Speaker Change: Try to Nick My question briefly so for NAND.
Speaker Change: Calendar year 2025 that is doubled so your focus remained unchanged from three months ago. I think is a kind of supplies because why.
Speaker Change: Investment is necessary for them I want to ask you. So no D. There are some vendors who set.
Speaker Change: Reducing the manufacturing volume and some other companies may reduce manufacturing that the absolute volume get smaller, but why do they need investment.
Speaker Change: So because they are real.
Speaker Change: Using the manufacturing volume so the supply demand recovery might come earlier, but I think maybe we can see some fluctuation in 2026 NAND market is the correct understanding.
Speaker Change: So let me answer to your question.
For this year.
Speaker Change: The customer investment as well growth rate is to be almost doubled according to our forecast is for the conduit. The greenfield we don't expect any greenfield investment. So this year's investment is the brownfield investment for the purpose of migration why customer.
Speaker Change: During this more to reduce costs. According to our understanding through migration did try to reduce.
Speaker Change: Unit price. This is a customer can improve their profit margin. This is the idea that customers must have according to our understanding is a bit early for us to say something they sunset for next year, we don't have so much <expletive>.
Speaker Change: Declining forecast I think the current investment level.
Speaker Change: We'll continue to sell a tentative assumption for next year. Thank you very much. Thank you very much for your questions.
Speaker Change: As for image, the cutting edge area NAND customer.
Speaker Change: For this rather than D. C. At next year, the investment will increase for cutting edge non customers.
Speaker Change: The other areas is yes that sounds that now.
Speaker Change: The threat almost flat.
Speaker Change: For NAND investment. So now it's time for us to close today's financial conference before closing, however, I'd like to make one announcement as swinging for mature in the second quarter finance announcement.
Speaker Change: And also <unk> said earlier, we will hold I our day event from 330 P. M to six P. M. On February 26, Wednesday 2025.
Speaker Change: In this event, we plan to present, our business opportunities expanding alone was the growth of W. F and test assembly to market and new products and technology that we worked on to embrace opportunities as much as possible. So we'd like very much appreciate your participation in this.
Speaker Change: Event, where well informed me of the details of this event later.
Speaker Change: Finally, we'd like to continue to improve our IR activities based on your purchase feedback. So we appreciate your kind corporation in filling out the questionnaire before you exit the webex. Thank you very much for joining us despite your busy schedule today.