Advantest Corp Ord

Thank you very much for taking your time to attend FI2023 Q2 Earnings Call for Advantis today. I would like to introduce our attendees today. This is Yoshida, the representative director and president, group CEO.

Thank you, Kim.

This is Douglas Lafeeva, Representative Director, Corporate Vice President and Group COO. And this is Mihachi, Senior Executive Officer, CFO and CSO, Executive Vice President of Corporate Strategy Group. And Nakahara, Senior Executive Officer and CCRO, Executive Vice President of Sales Group. I'm Kobayashi from the Investor Relations Department of the Corporate Strategy Headquarters. I'll be the moderator for today. So today, we'll begin with FI2023 Q2 Financial Results by Mihashi, followed by FI2023 Business Outlook by Yoshida. After that, we'll take any questions you may have. The scheduled end time is 1700. And please note that today's financial results briefing will be streamed with simultaneous Japanese-English interpretation. If you'd like to use the Japanese audio channel, click on the globe icon at the bottom left of the Webex screen. And there will be a menu called My Interpretation Language, so please select Japanese. And also, if you move the slide bar on the balance menu below to interpreter on the far right, you can listen to the Japanese interpretation while English is being spoken. If you want original audio in both Japanese and English, there is no need to change the settings. Please use the default settings. Today's presentation materials are posted on TDNet and our website. If you are participating via phone line, please download them separately. Also, only Japanese materials will be projected on the screen at today's briefing session. If you need to view the English materials, please download the English versions separately. Prior to the briefing session, we have some information to share. The following explanation may include future outlooks based on current expectations, but all of these involve risks and uncertainties. Please note that accurate results may differ from the forecasts. Now I'd like to pass the floor over to Mihashi. Thank you.

Now I would like to share with you the financial results for FY2023 second quarter. Please look at page four in your materials. The second quarter sales and profit, as you can see on the screen, exceeded those of the first quarter. Although the yen's depreciation against the US dollar also boosted our performance, the business environment remained challenging, as in the previous quarter, as customers continued to curb investment, especially in smartphone-related applications. Growth profit margin fell below the previous quarter's level due to deteriorating product mix. Operating income margin was higher than the previous quarter, partly due to the impact of yen depreciation. Regarding the interim dividend, the Board of Directors today, October 31st, approved 65 yen per share, the same as the forecast as of July. 65 yen is the dividend amount per share before the 4-for-1 share split as of October 1st. Details will be explained sequentially in the following pages from page 10 onwards. Please go to page 5. Sales by segment. Semiconductor and component test systems. SOC tester sales were 62.5 billion yen, an increase of 1.3 billion yen quarter on quarter. Sales for semiconductors mainly related to mature processes such as for automotive industrial equipment increased. On the other hand, sales for application processors, which have been weak, decreased. Although sales for high-performance computing semiconductors where demand is solid also decreased, deliveries of new tester equipment continue to be moderate while excess capacity in customer supply chain is being digested. Memory tester sales were 18.7 billion yen, an increase of 9.4 billion yen quarter-on-quarter. Although sales for non-volatile memory continue to be weak, as in the previous quarter, sales for high-performance DRAM, including generative AI, increased markedly. Mechatronic systems. Sales of device interface products and test handlers increased. increased quarter on quarter in tandem with an increase in tester sales sales of sem metrology products also increased service support and others skills were on par with the previous quarter please go to the next page page eight six sales by region as you can see for south korea sales of memory testers grew substantially with Mark Rotheror D. Ram. In addition, SOC's tester sales were solid. Next, I will be about China. Sales increased in SOC testers and memory testers respectively due to delivery of testers for a variety of semiconductors. As for Taiwan, the orange-colored bar area Sales decreased mainly for high-end SOC due to continuation of excess tester capacity related to smartphones. Testers, as I mentioned, testers that had been configured to test smartphones are now being converted to test HPC. As such, we expect Taiwan sales to increase along with an improvement of utilization ratio going forward. Next page, please. This will be sales, gross profit, and operating income. At the time of the first quarter results announcement in July, we had expected gross profit margin will show improvement in the second quarter and beyond, with the first quarter being the bottom. However, sales for high-end SOC did not pick up as much as expected, resulting in a deteriorated sales products mix. In addition, higher parts procurement costs resulted in a lower gross profit margin than in the previous quarter. SG&A was 37 billion yen on par with the last quarter. This includes other income of approximately 3.2 billion yen. This is mainly due to a settlement of a dispute with a counterparty. As a result, OPERATING INCOME WAS 21 BILLION YEN AS YOU SEE HERE. NEXT PAGE, PLEASE. THIS IS REGARDING BUSINESS AND CASH FLOW. RND, CAPEX AND DEPRECIATION WERE LARGELY IN LINE WITH EXPECTATIONS. As for the cash flow, in the first quarter, there was an investment cash outflow due to acquisition of shampoo. In the second quarter, free cash flow increased by 16.8 billion yen quarter on quarter. Please go to the next page. This is the consolidated financial position. Trade and other receivables increased by 12.6 billion yen from the 12.6 billion yen from the previous quarter due to an increase in sales. Inventories are at the similar level as in the previous quarter, despite the incoming delivery of strategically procured long lead time parts. We are currently working to establish a delivery system to meet customers' delivery deadlines. In order to monetize inventories as quick as possible, we will make further efforts to strengthen inventory management.

That's all for me.

Thank you. From my side, I would like to talk about the 2023 outlook. Please turn to page 11. The current business environment is characterized by a slow recovery of the global economy, including the economic slowdown in China. In addition, business environment remains highly uncertain due to factors such as expansion of geopolitical risks, rising prices of natural resources and other commodities, and the risk of sharp exchange rate fluctuations. In the semiconductor market, despite resilient and stable demand in certain areas such as automotive and industrial equipment, data center investment has slowed in addition to a decline in semiconductor demand in smartphones and other major consumer electronics applications, leading to continued capital investment restraints at related semiconductor manufacturers. For the calendar year 2023 SOC tester market, we adjust our SOC test market size estimate range to between 3.3 billion US dollars and 3.4 billion dollars. We raised the lower end of the range compared to our estimate three months ago. As tester for automotive industrial equipment and DDIC, showed steady delivery progress while lowering the apparent of the range as we trimmed the potential for upside. As for the capacity ramped up during COVID-19, we believe it'll still take some time before it is used up. For the calendar year 2023 memory tester market, we adjust our estimate range to between US $1 billion to US $1.1 billion by raising the lower end of the range. While signs of demand recovery for non-volatile memory remain uncertain, test demand for high-performance memory is growing as customers' investment appetite is increasing due to plans to increase production and strengthen quality assurance. For high-performance semiconductors such as those for HPC and AI, The efforts to increase assembly capacity is going into full swing, leading to an expectation for an increase in production volume from 2024 onward. There is also a strong trend toward increasing test volume driven by the demand for higher performance in order to add value to semiconductors and for higher reliability. This trend is currently utilizing excess capacity in our customers' supply chains But we are also seeing our customers materialize their investment plans towards 2024 to 2025 based on medium-term plans for demand growth. Please turn to page 12. This is a financial year 2023 forecast. In light of the first half results and the outlook going forward, we are revising down 4-year consolidated forecasts. Sales forecast is revised down to 470 billion yen, which is 10 billion yen below the July forecast. Recovery of sales of testers for high-end SoC is expected to take longer than originally anticipated due to the delay in recovery of demand for semiconductors for smartphones and other major consumer electronic devices. Cross-profit margin forecast, which was originally projected at around 55%, has been revised down to around 50% due to lower sales, a deteriorating product mix, and higher material procurement costs. Operating a margin is revised down to a level below 20%, although we are working to reduce non-essential costs. Exchange rates assumptions for the second half of the fiscal year are 145 yen for the U.S. dollar and 155 yen for the euro, respectively to reflect yen depreciation. Our latest forecast for the impact of exchange rate fluctuations on FY 2023 operating income is a plus 0.9 billion yen per 1 yen of Japanese depreciation versus US dollar and minus 0.3 billion yen per money in of Japanese yen depreciation versus the euro. Due to the exchange expected a decrease in sales from US dollar-based transactions, we have lowered our estimate of the impact for the US dollar by 0.2 billion yen from July. Regarding the tightening restrictions on the export controls of semiconductor production 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. outlook by segment. First, FY2023 semiconductor and component test systems outlook for the FY2023 SOC test sales forecast is 248 billion yen, which is 20 billion yen lower compared to the July forecast. For mature processor products, customers' investment is expected to trend solidly for applications such as DDIC in addition to automotive and industrial. On the other hand, demand for advanced or processed products is expected to fall more than expected against the backdrop of weak demand for smartphones and other factors. As a result, SOC test sales for the current fiscal year are expected to decrease significantly year-on-year. Memory test sales forecast for the full year is raised by 6 billion yen from the July forecast to 76 billion yen. In high performance memory applications such as DDR5 and HBM, including those related to generative AI, a substantial increase in tester investment from customers can be expected going forward, as they set to increase production capacity against a backdrop for medium-term demand growth and high reliability requirements.

Please turn to page 14. mechatronics and services support and others. We have raised the full-year forecast for FI23 mechatronic system sales by 6 billion yen from the July forecast. Sales of device interface products and test handlers are expected to increase in conjunction with an increase in the full-year sales forecast for memory testers. We have cut our full year FY23 services support and other sales forecast by 2 billion yen. For maintenance services, solid demand is expected due to the steady growth of the installed base. System-level test business is expected to see an year-on-year decline in sales due to the impact of customers' investment trends affected by the sluggish semiconductor market conditions. Please turn to page 15. So we have been talking about the business forecast for this fiscal year compared to three months ago. demand recovery is lower than expected compared to three months ago, and ramp up is delayed. At the same time, in the past three months, we also saw concrete progress in our business opportunities arising from generative AI. There are two axes when it comes to factors which drive tester demand. One is enhancement of testing in response to technological changes, such as increased semiconductor complexity and greater quality assurance. The other is increase in semiconductor production volume. And that's what we are trying to show in one slide. As semiconductor technology evolves, Demand for testing is increasing in response to the adoption of advanced technologies such as the migration to 3 nanometer processes and other miniaturization advances which require more testing time to address new failure models and the increased importance of testing to enhance quality assurance for advanced packages that are stacked and mounted at the dial level. In terms of semiconductor production volume growth, major semiconductor foundries are expected to gradually increase their advanced package assembly capacity from calendar year 2024 onwards. In addition, customers that are developing and mass-producing high-performance memory such as HPM are working to increase their production capacity in response to mid-term demand growth and high reliability requirements. Concrete discussions with customers about their plans for future tester demand growth are ever-increasing. In addition, there is concrete progress for projects by several new players working on the design of semiconductors with diverse functions, from servers to end applications related to generative AI. The progress of those multiple projects is expected to increase demand for testers over the medium term starting in 2024. Please turn to page 16. So we've explained this several times in the past. We have drawn the ground design, as you see on this slide. for AI-related semiconductors with the diffusion of advanced packages. Test insertions in various stages to enhance quality of semiconductors is becoming important. These include wafer testing in a front-end process, package testing after packaging, and system-level testing.

Furthermore,

for our customers to improve the yield of semiconductors, it is important to pursue quality improvement by utilizing our extensive testing expertise accumulated over the years in a series of processes from design to manufacturing. In the future, We believe it is highly likely that generative AI technology will change the very process of semiconductor development and manufacturing for customers. We will contribute to our customers' time to market, time to volume, and time to quality by providing new solutions through Advanced Cloud Solutions for their efforts to utilize various data and utilize them in their development and manufacturing. Please turn to page 17. Here's the summary. We have lowered our full-year sales forecast by 10 billion yen from the July forecast of 480 billion to 470 billion yen. Customers continue to curb capital investment due to the slower recovery of smartphone-related demand and digestion of excess tester capacity is likely to take longer than what we expected back in July. As mentioned earlier, there has been steady progress of business opportunities arising from narrative AI. As such, our view remains intact for tested demand growth over the medium term. Against this backdrop, we will sustain R&D investment to address future technologies. However, In the current fiscal year, the business environment has remained sluggish longer than expected. We'll strengthen our ability to respond to demand fluctuation by establishing a delivery system to meet customers' delivery deadlines through advancement of supply chain management. Furthermore, in light of soaring parts procurement costs, we'll execute actions to improve gross margin by reviewing sales prices and implementing COGS reduction activities. As well as to set up a commensurate cost reductions by reducing a non essential costs. Cutting down head counts part of this is already done and the reviewing business processes. Additionally. We will focus on measures to improve profitability over medium-long term by strengthening efforts to improve company-wide operational efficiency through active utilization of DX and other initiatives. Let me move on to the last page, 18, other topics. We have published the Integrated Annual Report 2023 as well as the Sustainability Data Book 2023 on October 20th. I hope you can refer to them for your reference. Also, we are planning to conduct the IR technical briefing again this year on November 29th to facilitate deeper understanding of our business. I hope you can participate in this meeting. That is all. This concludes my presentation.

We would now like to go into the Q&A session. We will take your questions in the following way. On the WebEx screen, there's a participant icon, and when you click it, you will see a raise your hand button, so please click that. When you are designated by the MC, you will see the unmute selection button, so please unmute and speak. Please name your company and your name, and then ask your question. Furthermore, we would like to take as many questions as possible. Therefore, we like to limit the questions to one. If there is a time, Left at the end, we will receive your questions till the scheduled time to end this session. We are streaming with Japanese and English simultaneous interpretation, so we kindly ask you to ask your questions at a moderate speed and in a concise manner. And we kindly ask you to refrain from asking questions related to individual companies. We will accept questions in both Japanese and English. Now we would like to open the floor for questions.

Yes, then, Ms. Yoshida from CLSA Securities.

Mr. Yoshida, please go ahead.

Hello.

Hello. Please go ahead. This time, FY23, where the product mix changed, that had an impact towards the downward trend of the profit. But the SOC tester and memory tester is a market outlook towards FY2024. And if possible, to think about the product mix, I would like to receive your comment, including the breakdown of it as well. And also for memory, towards HBM, if we just extract that part, this year and next year is a way of thinking also if you can share that will be appreciated in charge of sales would like to answer that question as we have explained previously this fiscal year in terms of profit we are struggling What we have an outlook for the next year's market situation is that the high-performance device is probably going to lead the market. That is because, as mentioned in the presentation as well, the generative AI-related device that we are focusing on, this is a high-performance and it is a large-size logic device, and that requires a... high-performance memory, HBM, and the generative AI HBM number per generative AI is going to increase. So it is a challenging and difficult device. However, for us, in terms of product mix on the memory side and also on the SOC side, we believe the situation is going to work in the positive direction for us, so we have high expectations towards this. Does this answer your questions? By the way, regarding market size, from this year's perspective, is it going to increase? If you have a certain image, can you share that as well? This is Yoshida speaking. As of July or even before that, FY2023 is the bottom year, and we believe that that was going to recover towards 2024. And for that, we were expecting to recover to the level of FY2022. However, this time, FY2023 degree of recovery is under what we have expected is about six to nine months behind what we have expected. Therefore, whether we're going to immediately recover in the new fiscal year or not in the calendar basis, I think that is going to be in the latter half of the year. Of course, we haven't given up, but the number up to 2022 to come, for the numbers to recover to that level, we do have the sense of crisis. Maybe that is going to be difficult. And the size-wise, up to FY 2022, maybe we will not reach that as we have had expectations originally, but we believe that we will recover in a gradual pace. Thank you very much.

Thank you very much. The next question, please. Mitsubishi UFJ, Morgan Stanley, Watahiki-san, please. Wadaki-san, please. Wadaki of Mitsubishi UFJ, thank you very much. This time around, looking at the results, the gross profit has been a major reduction, 20 billion yen and a 5% reduction.

How much impact is coming from the product mix change?

And what about the impact from the material sourcing? And three months ago, we didn't have clarity on that. Was that the case? Thank you very much for your question. We made our announcement back in July, and this time around, updated it, 25 billion gain reduction in gross profit. And what is the background to that? What sort of factors led to the generation of gross profit? That was your question, as I understand, based upon our exercise estimates. As we discussed in the briefing presentation, SOC test sales was down by 20 billion. Memory sales are compensating by 6.6 billion. So this full-actor mix impact is approximately 35% in terms of gross profit margin. And on top of that, the sales itself has come down. And because of that, profitability or margin has declined by 25%. And FX impact, operational cost impact is about 10%. And our processing cost has increased. And it's about 25%. That is the breakdown of the impact You're talking about operating income. I'm talking about operating income, though I was saying gross profit. My apologies. Gross profit of 5% decline has happened this time. So could you talk about the breakdown of that? If you could wait a moment. So the reason why a gross profit has come down by 5%, I cannot discuss numbers. In principle, since the sales came down and also product mix, as I mentioned earlier, 20 billion yen for SOC tester, reduction and memory tester was up by 6 billion. So highly profitable 93,000 sales was down by 20 billion. And memory, dear pre-processing facilities and equipment, sales has been made, but there has been a deterioration of profitability. That is why the gross profit margin was down from 55% to 50%. So the gross profit number has changed so much. I believe that's because of the material cost and processing cost and so on. But why couldn't you grasp this three months back when you made the previous announcement. So in fact, the beginning 135 E.M. was the assumption, but it became 145 E.M. And because of the FX situation and looking at the U.S. interest rate this time around, our planned rate has become 145 yen. So now yen is a weakening. And because of our processing cost has been partially impacted, that is for sure. Currency sensitivity, I believe it is unnatural that the gross profit comes down because of the yen weakening. So because of the yen depreciation, improvement is happening, but we have a processing cost in the operating income. We talked about 25% impact. And this is also impacting the gross profit margin. Well, more than that, I thought that the sales should go up even more. So there is currency sensitivity working positively for you because of the yen depreciation. So I wonder why this is happening around gross profit. This is Yoshida speaking. Well, of course, cost itself has been going up. More than we had expected, the impact is larger than what we had anticipated. So our time is limited, so I don't want to take up too much of your time. You could respond to this question later on. But gross profit, when it comes to that, maybe there is some impact as the currency exchange perhaps parts cost increase and so on. So I wonder if you could elaborate on this. In that sense, wait a moment. So I will contact you later. I am Kobayashi from AYA. Part of the sales. A breakdown of details that cannot be disclosed on a foreign currency is OC, especially V93,000. The sales has been high, but the ratio of that has come down. And what about yen-denominated sales as far as the parts that are consigned? Some of the parts are sourced in a foreign currency or dollar, so that's impacted us. Okay, thank you very much. In the interest of time, I will finish my question and I'd appreciate your explanation later on. Thank you.

Next question. Hirakawa-san from BLV Securities.

Thank you very much.

This is Hirakawa from BOVA Securities. Thank you for asking the questions. So having heard your presentation about the HBM, the new business opportunities in that area, currently, I want to know what your market share is in the business and gross margin. So if this business grows, what would be the impact on the overall gross margin? And within memory test of business, currently how much of that is coming from this new business and what is expected for next year? So, we'll have Doug to answer this question.

Okay, thank you for the question. As far as HBM goes, we can't disclose our market share exactly, but I think it's fair to say that we're in a very good position and we've worked very hard at this market for a long time to establish this position. As we go into next year, we're going to continue to see very large growth in HBM, and we should benefit from our market position as there's other entrants into HBM. From a gross profit standpoint, we also expect to have improved margins as we continue to improve our marginal profit levels and other actions we're taking.

Let me ask you a follow-up question about the gross margin. I have a concern. Like mentioned earlier, in the front-end process, the welfare testing won't be coming in, right? So from the margin perspective, it may not be that strong. I'm concerned about it. That's not true. So this is still being a high-value added process. So overall, gross margin level, you can sustain high-level gross margin, is that correct or not?

Yeah, I'll say for sure the wafer test margins also are usually squeezed more than the final test, but our actions for margin improvement should cross both the wafer sort as well as the final test. And as these stacks become larger, as we go into HPM3 and beyond, there's going to be even additional yield requirements in order to have a final yield level that is acceptable for the end stack.

Thank you very much. And let me also elaborate. Well, HPM major manufacturers, we are positioned in a good, well, we have a very good position. I think you may already know this. And they are doubling or tripling the capacity into next year. So that's what they have. So that's what they're planning. So a large amount of volume is expected from next year beyond. So such a mass production impact will benefit us as well. So to improve margin, as a manufacturer, we have been brushing up a way of improving margin so we can benefit from that to improve the margin. So we will see a substantial improvement in margin profitability from the current level. That's all for me. Thank you very much. Thank you.

Would you like to take the next question? Tokai Tokyo Chosu Center, Mr. Ishino, please go ahead. Mr. Ishino, are you all right? Yes, I can hear you. Thank you very much. Thank you. Regarding the previous question, HBM3, with your existing test where i think the speed is not enough and also other companies have already made the announcement of their road map and according to that it seems that you will have to launch many products And previously, you were saying that the manufacturing sides, HBM manufacturing capacity, in order to respond to that, are you having a sufficient level of manufacturing capacity or not is what I would like to know. Thank you. Nakahara would like to answer that question. Regarding HBM, The HBM or HBM2 or HBM3 that are launched in the market already, recording those devices, the attesters that we are currently holding, the coverage is sufficient with existing products. So they are being used. And as you have pointed out, next year and onwards, HBM will evolve and HBM4, will be coming out, the interface speed will be increasing as well. And in order to respond to that, our testers need to evolve as well. Therefore, within our daily R&D work, we are continuing the work to respond to that. So at the timing that such a tester is required, we are proceeding so that we will be able to respond that in a timely manner. And in regards to the production capacity, probably your question is related to how much is because you know very well how much of the volume is increasing on the HVM side. In advance, in quite a long time perspective, we have received a long-term forecast, and that is because we have a long-term relationship with them. And this year, already, we have increased our manufacturing capacity. However, as we go into next year to get in line with our customer side capacity increase, we are working on to increase our capacity as well. Thank you very much. Thank you very much.

Thank you very much. And next question, please. , please. Thank you very much. About the share, SOC tester, memory tester, for each in the previous explanation, it is something like 55% to 60% this year. And next year, what is your outlook about the share?

Yeah, market share for us, we're forecasting to remain roughly flat year over year. So that's a simple explanation.

So from FY23 through 24, it'll be flat.

Yeah, we expect to remain roughly flat. The market share in ATE fluctuates greatly with respect to single customers in some years. And so we expect year over year to remain at 50% to 55% collectively between SSC and memory. Okay.

Thank you.

Going forward, there will be more applications around generative AI. And as a result, what about the evolution of Azure?

Yes. So we're very well positioned in HPC, high performance compute, specifically in AI. at all of our traditional HPC customers as well as many of the system and hyperscalers and also some of the ASIC providers. So we are very comfortable with our leadership position there. And so you are correct as those applications increase in volume, we expect to continue to do well in that area.

Thank you very much for your response. Thank you.

Next question, Nakano Mio-san from Jefferies Securities.

Can you hear me okay?

Yes. Thank you. It can be a quite simple question, but the HBM was brought up earlier.

Logic Cobbles.

So we first have to see the utilization improvement of the existing tester to see the order recovery for the new orders. Would that be applicable for HPM? Or because of the new construction of factories, so HPM are separate? Are they moving already separately from the existing testers?

Which is it?

Okay, so let me answer that question. So the devices for generative AIs, they're basically the large logic devices and also surrounding HPMs, memory devices. So there are those two groups. And the business models are slightly different between those two groups. As mentioned in the results briefing, And so the excess equipment in the market are not fully utilized at this point yet. SOC tester chips are not growing as much as we expected. Logic device manufacturers are using the OSAT business model foundry, OSAT business model. In 2021 and 22, OSAT had a huge install base with our SoC testers, smartphone application processors. So they built such a huge install base and they saw the drop in utilization. So now with the AI device customers, by making a change in the configuration, they are using these equipments right now. So they haven't got to the full utilization yet at this point. So there's still delay compared to the expectation. But HPM, this is the end business model customers. So they had a plan and they purchased equipment when they need them. So... Ahead of the SOC tester demand, we already see a recovery in demand in HBM. So foundry majors for 2.523D package, I think they have made plans for them. So they're procuring new testers for them.

Okay.

So for logic devices, for generative AIs, exactly as mentioned, this is a cutting-edge processes, cutting-edge packaging needed, 2D, 3D, or chiplets. And those are the packaging method. The testers themselves are SOC testers. are utilized for such advanced technologies. In addition, for the next generation testers, and we have a protocol SK, and we can use them to be more efficient in testing, so we can optimize testing, and we're making those proposals as well. So testers themselves, our SOC testers are able to accommodate those new technologies. In the future, after packaging process, the measurements, taking place after packaging. They're trying to measure the devices stacked with the memory together. Those would be new measuring methodology that we have to discuss and come up with by talking to the customers. The current testing needed at the level insertion pain increase to improve the quality. That's the method they're taking to accommodate. Thank you very much. Also, I wanted to ask about whether it's HPM or whether it's 2.5 or 3D packaging, logic foundries. So some specific new demand can be created. Can you identify them or how big the demand could grow into? Can you tell? It would be difficult to identify. Well, the last question. Sorry, can you repeat your question once again? Sorry. For HBM, I think you already know the plan. The customer will be making investment according to the plan that HBM-driven tester demand. Can you quantify that business opportunity? Let me confirm. So, HPM or high-performance computing related? No, HPM. So, for memory? Yes, the memory is HPM. And the same question for Cobos. If there are new lines being built, any additional... instead of utilizing existing equipment, there could be a demand for new equipment and how big the potential would be. That's what I wanted to ask. For HBM, as you know, The DRAMs, it could be 8 to 16 DRAMs, could be stacked or layers. Then logic surface interface, logic controller, would be implemented at the very bottom to create HBM. The biggest driver for demand would be the capacity for overall HBM would be larger. So the customers, those layered DRAMs, including logic, This whole thing will need to be tested as HBM. So being a huge capacity that makes this time to be larger, this patterns to be also larger, and that time takes longer. So that's why investment into HBM is expected to grow drastically. And the growth for HBM itself, along with the growth of AI service, we expect 30% to 40% per annum growth expected for HBM. Then along with the capacity increase, the necessary testing capacity will be identified. So the amount in yen terms, can you quantify the increase? What do you mean by yen amount? That's a tester market or... So the shipment base is currently... Assuming what we're seeing from order taking, we kind of get rough image what the size would be, but HBM3 to towards HBM4, the capacity is going to be increased from eight pieces up to 16 layers. So we need to consider that. So let me get back to you by looking into them thoroughly. Okay, understand. Thank you very much. Let me add one more thing. So the mobile phones, the testers prepare for those mobile phones and others that could be used for AI. Right now we are in that transition at this point. but the other restraints we see would be at the foundry side if they are really producing the volume that is really needed by the demand the taiwanese foundry saying that for next year beyond they will they have a plan to continue increasing the capacities if that increases the total volume the utilization is going to recover rapidly and that will lead to a new tester demand And it's going to be, we're hoping that could happen in early next year. Thank you very much.

We are running out of schedule time. So the last question from McCourty Capital Securities. Mr. Damien Tong, please go ahead. Can you hear me? This is Damien from Macora Securities. You are examining the numbers. How should we... Your company's SOC is low, but it's a new area. Sorry, the audio is quite bad. The next fiscal year's outlook, what is it? Your question is the system level test businesses. Business outlook, was that your question? Yes. Okay, understood. Damson, would you like to answer?

has been to address a lot of the high volume mobility market. So to that extent, there's still softness for our traditional SLT business. What we do see now is with the growth in HPC and AI, And as those volumes increase, we expect to see more demand for HPC level SLT. And that's something new. It still will be small for the foreseeable future compared against the traditional mobility SLT. But long term, we see that as a growth market. We also see some use in ADAS for SLT. And as that continues to grow, we expect to see some opportunities for SLT in that space as well. But for the next year, roughly, we expect things to be relatively flat until consumer and mobility comes back.

Could I Could you do me a favor and say just the HPC portion of the business will be as large as the mobility now?

Damian-san, I'm sorry to say, but your voice is really breaking. So could you repeat any of your questions again? I'm very sorry.

Is it possible that the AI

So, I think the question is whether HPC market for can grow to the size of mobility eventually. That's right. Thank you. Oh, so. The answer, I believe, is yes. It's just going to take time. One of the key aspects of SLT is that in order to take advantage of automation, you have to have high volumes. and large test times. And so right now as the applications are growing, there's a lot of use of native boards for SLT, but as those volumes cross a threshold, we'll see the use of automation to optimize equipment for SLT. the other factor is as there's things like training model workloads that want to be used to fully do slt that's going to put additional requirements for that insertion to guarantee good yield before those devices get shipped thank you very much i look forward to thank you

Thank you very much.

I believe that we have received more questions, but with this, we would like to conclude today's session. Thank you very much for attending Adventest FY2023 Second Quarter Financial Results Briefing, despite your busy schedules. Thank you.