Advantest Corp Ord

for taking the time today to participate in the Adventist Corporation financial briefing for the first quarter of fiscal year 2023. Let me introduce the attendees of our company. Yoshiaki Yoshida, Representative Director, President and Group CEO. Thank you. Yasuo Mihashi, senior executive officer, CFO and CSO, executive vice president, corporate strategy group. Makoto Nakahara, Senior Executive Officer, CCRO, Executive Vice President, Sales Group. I'm Kobayashi from the Investor Relations Department of the Corporate Strategy Division and I'll be the moderator for today's session. Today, Mr. Mihashi will first represent financial results for the first quarter of fiscal year 2023, followed by Mr. Yoshida's presentation on business outlook for fiscal year 2023. Then we will take your questions. The session is scheduled to end at 17. Today's presentation materials are available on TDNet and our website. If you are attending via telephone, please download the presentation materials separately. Prior to the briefing, we would like to remind you of the following. In this presentation, we may state forward-looking statements based on our current expectations, which are subject to risks and uncertainties. We would like to remind everyone that actual results may differ from the forecast. Now, Mr. Mihashi will give an explanation.

This is Mihashi. From my side, I would like to explain the financial results for the first quarter of fiscal year 2023. Please turn to page 4 of the presentation material. This is the summary of results for the first quarter of fiscal year 2023. Business environment in the first quarter was challenging as we had predicted in April. As recessionary concerns continue to intensify from the previous year, end demand remains sluggish with a slowdown in data center investments combined with demand weakness in major consumer applications such as smartphones and PCs. In the semiconductor market as a whole, there was a growing sense of deceleration as semiconductor manufacturers continued to adjust inventories and control capex in areas such as memory semiconductors for major consumer applications. With the semiconductor market weakening, demand also fell in our business. as investment by customers, which continued over the past three years, has caused excess capacity in some of our customers' supply chains. As a result, both sales and profits fell significantly in the first quarter year over year as well as quarter over quarter. Details of the results will be explained in turn in the following pages. Please turn to page 5. These are the sales by segment in the first quarter of fiscal year 2023. Sales in the first quarter fell substantially compared to the previous quarter, which recorded historical high quarterly sales. Semiconductor and component test systems, ¥70.5 billion, minus 36.3% quarter-on-quarter. SoC tester sales were ¥61.1 billion, a decrease of ¥25.7 billion quarter-on-quarter. Sales for application processors and chips for high-performance computing decreased. Memory tester sales were ¥9.4 billion, a decrease of ¥14.5 billion quarter on quarter. Sales for both DRAM and non-volatile memory testers decreased amid weak memory semiconductor market. In the mechatronics systems business, The results were 8.5 billion yen down by 51.3% quarter on quarter. Sales of device interface products and test handlers decreased in tandem with lower sales of testers. Sales of SCM metrology products also decreased as product deliveries to customers progressed in the previous quarter. In services and others, the results were ¥22.2 billion plus 16.4% quarter on quarter. Sales increased quarter on quarter in the system level test business. Please turn to page 6, which shows the sales by region in the first quarter. In the first quarter, all regions saw its sales decrease quarter on quarter. In South Korea, sales of memory testers and related device interfaces fell sharply. In China and Taiwan, sales decreased in SOC testers and memory testers, respectively. Please turn to page 7. In the first quarter of fiscal year 2023, the slide shows the sales gross profit and operating income. Gross profit margin was 50.3%. In addition to a significant decline in sales, the gross margin fell due to a deteriorating mix, mainly due to a lower sales composition of testers for high-end SOCs. The gross profit margin is expected to improve from the second quarter onwards, with the first quarter being the bottom. SG&A, including all other income and expenses, was 36.7 billion yen. Operating income was 14.3 billion yen. Operating margin was 14.1%. Next is R&D, capex, and depreciation and amortization for the first quarter. R&D was 14.9 billion yen, capex 5.6 billion yen, DNA 6 billion yen. Regarding the cash flow of the first quarter, operating cash flow was negative in the first quarter due to an increase in inventories as well as an outflow associated with corporate tax, bonus payments, and other items. In addition, free cash flow was a negative 17.2 billion yen due to expenditure in investment cash flow such as the acquisition of Shimpu. Please turn to page 9. This is the balance sheet for period ending June 30, 2023. Total assets, 607.7 billion yen. Cash and cash equivalents, 78.9 billion yen. Trade and other receivables, 66 billion yen. Trade in other receivables decreased compared to the previous quarter as progress was made in the collection of receivables in the first quarter. Inventories were 190.2 billion yen. Inventories have increased quarter on quarter. This is because of an increase in the arrival of long lead time components which were procured strategically in anticipation of mid and long term sales. while there are some requests from customers to push out deliveries of our products against the backdrop of a slow recovery in demand for consumer application. In response to changing market conditions, we will promote measures to improve our ability to keep up with customer requirements and strengthen our inventory management. Goodwill and intangible assets were 105.9 billion yen. Short-term borrowings, 34.5 billion yen. Additional borrowing was carried out, taking into account the seasonal expenditure in the first quarter. Equity attributable to owners of the parent, 383.6 billion yen. Ratio of equity attributable to owners of the parent was 63.1%. This concludes my explanation.

This is Yoshida speaking. From my side, I would like to share the FY 2023 outlook. Please turn to page 11 of the materials. This is the business environment as well as semiconductor tester market trends. Business environment remains highly uncertain with recessionary concerns due to inflation and rising interest rates, as well as risks around geopolitical factors and pronounced exchange rate fluctuations. Although there are potential signs of an upturn in investment for high-end semiconductors, driven by applications such as generative AI, production adjustment for semiconductors for areas such as consumer electronics applications is expected to continue for the time being. For the calendar year 2023 SOC tester market, we will revise down our market size estimate to 3.2 billion to 3.5 billion US dollars. While tester demand for automotive and industrial equipment is expected to be resilient, demand for testers for consumer applications such as smartphones is expected to be affected by continued weakness for the time being. For the calendar year 2023 memory tester market, we maintain our regional market size estimate of 0.9 billion to 1.1 billion US dollars as improving tester demand for high-performance memory is being offset by demand pushouts from worsening memory market conditions for consumer applications. While test volumes for high-performance semiconductors are increasing, the recovery in tester demand is likely to be milder than originally expected due to excess capacity in customers' supply chains. Please turn to page 12. This is FY 2023 forecast. In light of the first quarter results and the outlook going forward, we are maintaining the full-year consolidated focus announced in April. However, exchange rate assumptions from the second quarter onward are 1 USD to 135 JPY and 1 EUR to 150 JPY. Our forecast calls for sales of 480 billion yen, operating income of 105 billion yen, income before tax of 103.5 billion yen, and net income of 78 billion yen. Reduction adjustments by customers are expected to continue for the time being, and sales in the first half is expected to decrease HOH. However, we expect sales to gradually shift to an upward trend from the first half. We expect full year gross profit margin to be approximately 55%. We forecast a decline from the previous fiscal year primarily due to changes in product mix. Our latest forecast for the impact of exchange rate fluctuations on FY23 operating income is a plus 1.1 billion yen per 1 yen of JPY depreciation versus USD, and minus 0.3 billion yen per 1 yen of JPY depreciation versus EUR. Regarding the tightening of restrictions on the export controls of semiconductor-producing equipment to China by the United States and its allies, the direct impact on our FY2023 earnings is currently expected to be limited, but we will continue to closely monitor the situation. Please turn to page 13. This slide talks about the FI2023 Semiconductor and Component Test System's outlook. Our full year FI2023 SoC tester sales forecast is 268 billion yen. The forecast has been raised by 3 billion yen from the April forecast as the assumed exchange rate for the US dollar has been revised towards a weaker yen. Despite relative firmness of demand for automotive and industrial applications, we expect sales to decline year-on-year due to a decrease in demand for advanced processor applications against a backdrop of sluggish demand for smartphones. For the memory tester business, we are maintaining a full-year sales forecast at 70 billion yen. In high-performance memory applications such as DDR5 and HBM, customer investment in anticipation of long-term demand growth is expected to increase year-on-year. However, the impact of the worsening market conditions for memory semiconductors in the consumer applications is substantial, therefore sales are expected to decline. Please turn to page 14. This page is on FI2023 mechatronics service support and other business outlook. We have lowered our full-year FI2023 mechatronics system sales forecast by 3 billion yen from our April forecast to 42 billion Japanese yen. Sales of device interface products and test handlers are expected to decline. In step with the slowdown in tester investment. We are maintaining our full-year FY23 services support and other sales are focused at 100 billion yen. We expect a solid demand for maintenance services due to the steady growth of our installed base. In our system-level tester business, we expect sales to be flat year-on-year, although it is impacted by sluggish market conditions in consumer applications.

Please turn to page 15. So now that I have explained the business outlook for the current fiscal year, I would like to summarize our business opportunities and our competitive advantage in the mid and long term, which will be brought about by generative AI, which has been a hot topic over the past six months or so. This slide illustrates the emerging opportunities based on our grant design chart. The implementation of generative AI technologies such as ChatGPT in society has only just begun. The trend towards larger-scale and high-performance semiconductors including high-end SoCs with high computing power and high-end memory such as ATBM will continue. Also, the technical hurdle of improving yields is higher and more thorough testing is required. We believe that the increase in production of such semiconductors will increase demand for testers over the mid and long term, leading to growth in our core business. In addition, demand for more diverse functionality not only for servers but also on the end application side is manifesting itself in the growing number of new players entering semiconductor design. The increase in the number of devices being developed will also drive tester demand. Heterogeneous integration through the use of advanced packaging technology is also progressing to achieve even higher performance. We have been strengthening our system-level test technology. Therefore, we are able to contribute to improving the quality of semiconductors in a variety of test processes, including SOC and memory tests, as well as system-level tests. Furthermore, we believe that in the future, generative AI technology is likely to change the very process of semiconductor development and manufacturing. We hope to provide new solutions through our advanced cloud solutions to initiatives that utilize various types of data and make the most of them in development and manufacturing. Please turn to page 16. I will now summarize our advantages regarding the emerging opportunities mentioned in the previous page. Firstly, we already have a range of test platforms for testing high-performance semiconductors such as SoC and memory as well as system-level test solutions. Secondly, we have built up a strong customer base across the supply chain, ranging from fabless, foundries, and offsets that are already using these platforms. Emerging players value this strong customer base and have started working with us in anticipation of our solutions. Finally, generative AI also has the potential to significantly change operation processes in the semiconductor supply chain. We expect that utilization of various data in the development, manufacturing, and testing of semiconductors will have a direct impact on competitiveness. We will provide our customers with a data platform around which they can link other data with test data, which is an essential part of the semiconductor manufacturing business. Furthermore, applications that utilize this data will be developed as advanced test cloud solutions. We believe that collaborative development with our customers will be the key, and we are actively investing in this area, including the recruitment of talent with knowledge of the entire semiconductor process. Please turn to page 17. This is the summary. Business environment remains highly uncertain. The semiconductor tester market is currently undergoing a correction phase with excess tester capacity due to the slow recovery of the global economy. Digestion of such excess capacity is taking time. Despite an upturn in test demand for high-performance semiconductors, the recovery in tester demand has been slower than anticipated at the beginning of the fiscal year. Also, demand for testers for automotive and high-performance semiconductor is expected to be firm. It is still not strong enough to compensate for the decline in smartphones and PCs. Therefore, we will maintain our forecast of a decline in sales and profits for fiscal year 2023. While the business environment is weakening, We will be agile in responding to changes in the environment and will strive to meet our full-year guidance. At the same time, we will implement key measures to prepare for future waves of demand in the mid and long term. Although the implementation of generative AI in society has only just begun, we expect to see an increase in testing demand for high-performance semiconductors related to generative AI from next year onwards. We will implement measures from a mid and long-term perspective to maximize the uptake of related business opportunities. Moreover, to further increase the speed of management decision-making, we aim to build a stronger and more robust management foundation by reviewing the executive structure and improving business processes. Please turn to page 18. So topics on ESG and external evaluation. Finally, we would like to present our ESG and external evaluation topics for the current fiscal year. Enhancement of ESG initiatives is one of the five strategies of our grant design. So we have five strategies and this is one of them. This slide shows the most recent main achievements. We have been awarded the first place for the fourth consecutive year in the customer satisfaction survey of semiconductor production equipment suppliers by an external evaluation. We are honored to be recognized in such high regard by our global customers and grateful to know that our partnering efforts are valued. We feel that it is a tribute to the power of our committed employees. By enhancement of ESG initiatives, we aim to develop our business while contributing to the development of the semiconductor industry and the sustainable development of society and meeting the expectation of our stakeholders. This concludes my presentation.

Now we would like to move on to the Q&A session. From Mitsubishi UFJ Morgan Stanley Securities, Mr. Wadaki, please. This is Wadaki speaking. Thank you for this opportunity. So please allow me to ask a question. I fully understood this year's situation, but there were a lot of positive topics towards the next fiscal year, and I think there is higher probability of recovery, as you were mentioning before. If possible, can you please give us some more colour on the rationale of your take on the development going forward? Yes. In fiscal year 2024, we mentioned in the spring that we are expecting the situation to recover to the fiscal year 2022 level. Of course, this is about the future, so we cannot be certain 100%. However, we have a very slow mobile PC related situation today. And we are not thinking that the situation will remain sluggish forever. But instead, we believe this will recover eventually. And the timing to recover is expected to be later than we had expected. But in our fiscal year, in fiscal year 2024, we believe that we will see signs of recovery. And we talked about the excess in the supply chain, but we believe that utilization is going to increase. And on the customer's side, we are already hearing that their utilization is picking up. In addition, the memory market is having a very difficult situation. A lot of our customers are generating loss. But at the same time, we are also hearing about positive topics about investments. This is triggered by the generative AI and a lot of customers have high expectation on further development. Given such circumstances, despite the fall this year, I believe we will eventually face a curve of growth. As we mentioned in the spring, we believe that fiscal year 2024 will or is likely to recover to the level of 2022. However, depending on the world economy situation or the situation in China or the geopolitical factors around the world, we may face risk factors. We will continue to be cautious as we move forward. Also, A lot of customers, when generative AI is more implemented in the society, they are interested in knowing what will be the speed or pace of implementation. Foundry and Fabless companies in the US are talking about annual growth rate of close to 50%, and they're expecting that to continue up to 2027. Based on that information, we can expect rapid growth in demand. However, we still don't have a concrete visibility. I am sorry that I cannot give you a clear answer, but we do see such possibility from our viewpoint. Thank you. Then let me ask a follow-up question. Regarding generative AI, you mentioned about memory, but what about processors, GPU, ASIC? What is your outlook? I think market share is one important question. You are strong, but competitors will definitely try to catch up. So in the business related to generative AEI, what is your outlook for the next fiscal year, also including the competitive landscape? Then I would like to respond. This is Nakahara speaking. processors related to generative AI. As you may know, we recognize that we have a meaningful market share today. But it is difficult to build such position in a short period of time. We need to spend a long time to build relationships with the important customers. For example, in GPU, we have a relationship with a world-leading company. That engagement started from 10 years ago. And in the market, engineering support has been continued. And based on that experience, We also expand our relationships to global customers in the AI area. We have built such foundation over a long period of time, which includes a relationship of trust, which is not likely to collapse in a short time. Such fabulous customers are partnered with foundries and OSATs. And we have a collaborative relationship that we have built over many years. So we are willing to maintain that. And we are willing to offer new solutions so that we can maintain strong market position. Thank you very much.

Thank you very much. The next question, please. CLSA Yoshida-san, please. Thank you very much. I am Yoshida of CLSA. Thank you. This time around, in the first half of the year, there was a guidance. So going forward about the future guidance, I'd like to ask some questions. In the second quarter, the sales compared with the first quarter, 10% recovery is expected towards the second half of the year. Almost a 25% recovery or growth is expected half over half. So in the third quarter and the fourth quarter, What is your outlook about these quarters? And at the same time, traditionally speaking, in the last time you talked about excess test, which would take 6 to 9 months to be resolved and digested, but 3 months later now, what is your assessment? How much longer do you think this will take? Thank you very much. This is once again Nakahara speaking. So as you rightly pointed out, according to page 12, sales-wise in the second half of the year, we will have more growth. And that is because we have a logic tester market. But in this market, for the past few years, we have enjoyed a high level of sales. Working with OSAT customers and so on, we've installed so much base. So some years ago, we were strong in smartphone space. So we've built a strong installment base. And currently looking at the smartphone and PC situation, unfortunately, the utilization has come down to a great deal. And then there's been some improvement taking place. So situations vary depending on which OSAT customer you're talking about, but some of them have recovered to a great deal. So utilization improvement has been happening, and especially against this backdrop, of course, new testers are needed. Unless they are installed, we cannot provide support to customers. So towards the second half of the year, little by little, utilization improvement is expected and we want to introduce some more new systems and we will change the configuration of our testers. Such a business compared with the first half of the year will grow in the second half. At the same time, memory-wise, AI, generative AI-related business, and high-end memory, to be more specific, HVM, and measurement of business or measurement of demand is now rising, and we witnessed this firsthand. So memory high-end device, and measurement demand increase and also the utilization improvement. So these two aspects will improve our performance. Regarding the third quarter and the fourth quarter, if you try to look at them separately, fourth quarter will be higher than the third quarter. So starting in the first quarter, growth that tends to happen as time goes by. That is our assumption. Thank you very much. If that's the case in the fourth quarter, it'll be higher than the last year. I think it will be about the same. It is in line with the performance of last year. So I'd like to ask one follow-up question. So earlier you talked about the tester market, and then next year in Next year, the level will be about the same as FY22, and the generative AI will contribute. If possible, this generative AI, how much impact will this create on the tester market? And if it's possible, could you talk about SOC and memory as well as SLT markets? So if you have any ideas about these different spaces, could you please share your assessments with us? Thank you. Mihashi-san, please. Yoshida-san, did you ask about how much market size we expect? Yes, that's right. In relation to generative AI, SLT, memory, and so on, how much market size do you expect? Well, that's a conundrum. That's a very difficult question. Well, if it's difficult for next year, maybe you can talk about longer-term horizons. But as was mentioned by Yoshida-san earlier, so Taiwan's major foundries, By or until 2027, the growth is expected to be 50% for generative AI. There was an announcement as such. So in terms of the size, over the past few years, smartphones have been the driver for the technology in terms of applications, and they have been driving our business over the past five years. Likewise, about the same size can be generated through HKC or HPC. So currently smartphone demand is weakish. But at the same time, smartphones, because of the technology evolution, will become even more complicated. So for the time being, the tougher condition is likely to continue. But after FY2024, we believe that there will be some signs of recovery. At the same time, when we combine all these growth and recovery after 2024, I believe that we can enjoy a strong demand. I'm afraid that this wasn't a very clear-cut answer, how much SLT, how much SOC, and so on. I cannot convey sort of clear quantitative opportunity sizes, but along with application processor, the size of an opportunity is about the same that is for ai only rather than hpc this is a more of the overall picture for the hpc including ai but regarding ai server as a grosser driver this will be a stronger driver in this category and i believe that yoshida-san hasn't and you yourself have understanding about this thank you thank you very much

So next question, Mr. Nakamura of Goldman Sachs.

Yes, thank you. So regarding the annual forecast, no change? But three months ago, as you moved toward the second half, so you have taken into account the mobile-related business recovery, and now the demand is very weak in the consumer electronics. So what about your forecast for mobile-related demand compared with three months ago? Thank you for your question. So smartphone related business. Well, there are forecast by different research companies, but it may go below 1.2 billion. So compared with 1.3 or 1.4 billion, it's much less. And sales of smartphones are not growing as we expected three months ago. So the utilization at OSAT has not yet fully improved. It will take some time. So this is what I can tell you since LPO. So improvement and all set. That will still need some time, so we have to wait until the end of this year or early next year. Does that answer your question? Yes, thank you. I have a follow-up question. Your annual forecast has not changed. SOC tester market forecast for FY23, you have made an upward revision. Can you discuss the background of your decision to keep your forecast unchanged? Well, for one thing, we have changed the FX assumption. So in practice, in terms of quantity, we have taken account the lower quantity. So one thing I can tell you is the FX impact. And as for memory market, which I mentioned earlier, the recovery of this market will compensate for the weak performance of SOC. That is our expectation. So SOC weak performance could be compensated to some degree by the memory business and locally. display drivers, CMOS imaging sensors. So as for these devices, overall situation is weak. but we can expect demand in some areas. So we can see some stronger demand. So smartphone demand will be weaker, but that could be compensated by other growing areas. So we may see smaller quantities, but considering the FX impact, we think we can keep the initial target. I see. Thank you for your detailed explanation.

Thank you. Let us move on to the next question. Yes, Sui Son from UBS Securities. Please go ahead. We can hear you. Thank you. My first question, well, the first point of my question is two years ago, orders were disclosed and it was 700 billion yen and the sales were 400 billion yen. It was more than your capacity. And in last fiscal year, lead time was nine months to 12 months. I think it was longer than usual, if I remember your comments correctly. And based on that information, I think sales in the first quarter could have been higher, inclusive of the lead time. Can I assume that there are no bottleneck issues in your supply chain today? Well, regarding the components bottleneck, they are almost being resolved. We still have some in some parts related to semiconductors, but the major bottlenecks have been resolved to a certain extent. Therefore, the lead time today would be, well, we used to be 12 months last year, but it has been reduced to six months or slightly over six months. I think it's fair to say so. However, the sales in the first quarter is seemingly weak. That is because among our received orders, Because of customer's reasons, some of them have been requested to be pushed out to later in the year. That is the reason. I hope you understand. I see. I understood. And here's my follow-up question. I would like to ask about data centers and HPC related opportunities. You mentioned that you are having more customers and the GPU, the largest player, is drawing a lot of attention. So what about other than GPU? In the briefing session in May, You talked about how the development is over and some hyperscalers are moving on to production. So is there any customer development other than GPU that you have high expectation on? To the extent possible, I would appreciate some more color on customer development. Thank you. Yes, then. I will respond. Among the hyperscalers, if they are implementing AI on their servers, their chip alone will not suffice. For example, GPU, HBM, these need to exist in order to realize mass production. Therefore, even among the GPU customers, they have intention to sell, but they're not being able to produce sufficient quantity, including OSAPs and foundries. When the capacity as a whole increases, then we will have more volume production. And among the hyperscalers, There may be trial production and before they move on to the actual mass production, there are many more things that they need to test. That is why we believe it takes some more time to reach a mass production phase. Among the hyperscalers, not only servers, some of them are also looking at mobile applications That means the development in the mobile area as a whole would have an impact. So we do not think it is yet the time to see tangible impact. But I have an impression that such trial is expanding. But demand for volume mass production will come only in fiscal year 2024. That's what we target at. Thank you.

Thank you very much. The next question, please. POV security, the Hirakawa-san, please. POV Hirakawa. So in the first quarter, the financial results, the sales is down by 35 billion year on year, but SG&A increased by 3 billion. That is because 1 billion in R&D. Plus, I understood because of the guidance at the beginning of the year, but what are the other factors that have increased? And also from the second quarter onwards, what is the level of SG and A should I anticipate if you have any guidance about this? Please share that with us. Thank you. Thank you very much, Hiroko-san, for your question. This is Mihashi speaking. For SG&A increase, you asked about development cost is understood, but what about the other areas that are rising? That's your question, correct? Yes, that's right. Okay, so first and foremost, in the long term, along with the business growth, we have to make R&D investment. And aside from that, we also have a personnel cost or labor cost rising that is leading to cost increase. That is one aspect. Other than that, we have 7,000 plus employees. And we have more overseas personnel, and once the foreign exchange rises, the cost also increases. So these are two key factors here. Thank you. Thank you very much. My follow-up question would be is that from the second contour onwards, just because the sales goes up, it doesn't mean that the fixed cost has to go up proportionately. So two, three, four quarters, what will happen? What is your expectation? In this quarter, including application processors, the top line has been struggling in the market, but we are able to achieve 480 billion yen. That is what we are trying to do. And then still we have to maintain our margin of profitability. So we would like to control the SG&A so that at least it will be a flat. Okay, thank you. Thank you very much. That's all for my question. Let me follow up on that. As we've been saying from 2024 onwards, once the market rebounds, we believe that the market will recover. Then we will need investment. So that is mainly investment in people or talents for future growth. our investment in key talents needs to be continued. But we also have to protect our margin as well, so we have to reduce costs when we can. So we try to control other expenses properly so that we can make future-oriented investment in development as well as talents. That is our feeling and aspiration. Thank you. Thank you very much. Thank you.

Next question, Mr. Yamamoto of Mizuho Securities.

Thank you. So regarding high-end SoC, I have a question on the test time. So processor for AI chip If you compare this with the application processor for smartphone, so if you compare a chip performance, the processor for AI, the test time for that is 50 times longer or 100 times longer. So which is the more correct understanding or assumption? Well, test time comparison, so it's really hard to tell you exactly how many times. First of all, there is AI chip and application processor for smartphones if you compare them. So it's up to the generation of the processors. And generative AI, which we are expecting a lot, it will be very advanced. So more transistors to be used, and there will be an advanced package. So some APUs are available in the market, but if you compare them with advanced GPU for using AI, I think the lead time should be longer, but it's really hard to quantify. It also has to do with the trade secret of our customers. So I'm afraid we are not able to get into too much specific details. So with the same process, at any rate, the difference, not 10 times or 20 times, but can I assume 50 times difference or 100 times different? Is that the fair assumption, Yamamoto-san? As you may know, that semiconductor testing, so it's not a single process. So it's not the simple completion of wafer testing. So there are mission critical testing and there are testing with different parameters. So, well, The test time for a single insertion, as you heard from Mr. Yoshida, this has to do with the confidential information of our customers, so we cannot make any comments. However, very high-end AI processor is used in a data server, and considering the mission criticality, So the quality-related features and functionality-related features, that will lead to the longer test time, I suppose. I understand. Sorry for very difficult questions. That's all. Thank you.

Thank you. We are reaching the end of the briefing session. Next one is going to be the final question. Mr. Shibano from Citigroup Securities. We can hear you, Mr. Shibano. Thank you. So regarding this year's plan, I would like to clarify some things earlier in the Q&A session. Yoshida-san mentioned that the sales in the fourth quarter will be at similar level as the previous fourth quarter, and the sales level will gradually improve. Previous year fourth quarter was relatively high, and based on that results, So in the first quarter, it was 1,127 and growing to 1,200 and then 1,400 to 1,500. Is that the pace that you were implying? Is that correct? Is that a fair assumption? And is there anything to add? Well, the outlook for the third and the fourth quarter cannot be shared with you at this moment yet. However, as we mentioned earlier, memory related investments are expected to appear in the second half in large amount. And if you imagine our customers, this fiscal year, we are having rather difficult investment criteria And a lot of opportunities will be using the budget for the next fiscal year because of such situation. January through March next year, we are expecting relatively large sales. And it would depend on the world economy situation. But regarding HPM or AI related opportunities, in january third march uh quarter uh we have an impression that things will um kick off pretty rapidly that's why we are expecting uh an improvement from third quarter to fourth quarter i see thank you i have one follow-up question regarding inventory when we look at previous year end of june I can see that the inventory level is rising, if possible. Finished goods inventory and there are components, longer lead time components. If you can talk about impacts from those two factors respectively, it will be helpful. Thank you. Of course, we have to refrain from describing exact numbers, but inventory of finished goods, the level has not changed that much. I did mention that some deliveries have been pushed out, but proportion of that in the entire inventory is quite limited. Rather, longer lead time items that we placed an order in the previous first half with a lead time of over 360 days. A lot of them are arriving recently. We are looking at our sales trend and we believe we need to negotiate accordingly. So we will be taking actions on the inventory control. But in terms of an answer to your question, Semiconductor related components are arriving with longer lead time and that is the major reason. Thank you. We have received many more questions. However, we have reached the end of this session. This concludes the financial briefing for the first quarter of fiscal year 2023 for Advantest. Thank you very much for your attendance.