Advantest Corp Ord

Thank you very much for joining Adventist Corporation's financial briefing for fiscal 2024, despite the busy schedule. I'd like to introduce attendees on our site today. Mr. Douglas Raffiever, Representative Director, Senior Executive Officer, and Group CEO. Mr. Tsukui, Representative Director, Senior Executive Officer, President, and Group COO. Mr. Natahara, Senior Executive Officer, CCRO, and Executive Vice President of Sales Group. Ms. Takada, commencing in April, Ms. Takada joins ADVANTIS as Senior Executive Officer and CFO. And I am Oike of IR Department Corporate Strategy Group, serving as a moderator of today's session. In this financial briefing, Mr. Refiever will first report the financial summary. After that, Mr. Kada will report financial results for fiscal year 2024. And then Mr. Refiever will present the third midterm management plan progress and fiscal year 2025 outlook before entertaining questions from the audience. We plan to close this session at 5.30 p.m. Japan time. In today's financial briefing, we will use English-Japanese simultaneous interpretation. If you prefer to hear the original audio of both Japanese and English, you don't need to change the setting. Please join us with the default setting. If you prefer the Japanese language channel, you are kindly requested to click the globe icon on the lower left of the WebEx screen and select Japanese in the menu of My Interpretation Language. If you slide the ball of balance to the right-hand interpreter, you will hear interpretation into Japanese when the original language is English. The today's presentation materials are posted on TDNet and our website. The audience joining us through a telephone line is kindly requested to download the materials. Before we begin, we'd like to remind you that today's briefing contains forward-looking statements, although which are subject to risks and uncertainties that may cause our actual result to be different from those in such forward-looking statements. Firstly, Mr. Refiba will present a brief summary, including fiscal 24 results and fiscal 25 outlook. Doug, please go ahead.

Hello, everyone. I'm happy to welcome you all to our call. Let me start by providing an overview of today's presentation. Our FY 2024 sales, operating income, and net income all posted record highs on a full year basis. Really great performance. Tester demand for AI-related high-performance semiconductors continued to perform strongly throughout the fiscal year due to increasing complexity of semiconductors. In order to meet such strong demand, we executed timely procurement and enhanced supply capabilities, which were achieved through long-term agreements and diversification of our supply chain for core parts. These are the main factors that contributed to our very strong results. We expect high level of tester demand to continue in FY 2025, driven by AI-related SOC semiconductors. And at this time, we do not see any major direct impact from tariffs. We are actively monitoring developments which could potentially weigh on our business outlook for FY 25. Now, I will hand over to our new CFO, Hisako Takata, who joined Advantis on April 1st. Takata-san has an outstanding track record of achievements in her career in investment banks and operating companies. We are delighted to welcome her to our company. Mahashi-san did a great, great job and will now be able to focus on his role as Chief Strategy Officer. Takata-san, please go ahead.

Thank you for the introduction. I'm Hisako Takahara. It is my pleasure to be here in FI 2024. Amid strong tester investments from customers for AI-related applications, we have been striving to enhance our procurement of materials and product supply capabilities. The depreciation of the yen against US dollar also served as a tailwind, resulting in record high sales. In terms of profitability, in addition to the increase in sales, the improvement in the product mix has led to record high operating profit and net profit. Full-year sales exceeded the guidance issued in January 2025 by approximately JPY 40 billion, mainly due to greater than expected delivery of products to customers, particularly C testers. Core operating income that excludes one of items was 249.7 billion yen, and the core operating income margin was 32%, both of which significantly exceeded our guidance. when including the one-time items such as an impairment loss, outbidding margin, and net profit default below guidance. But with these write-downs, the company goes into FY25 with a very clean balance sheet. Also noteworthy is the effective tax rate, which rose to approximately 28%, higher than expected due to impairment losses, which are not deductible for tax purposes. Combining our year-end dividend forecast of JPY 20 yen and the interim dividend of 19 yen already paid out, our annual dividend forecast is 39 yen. This slide shows our annual sales trend comparison by segment and by region. By business segment, HPC slash AI-related applications drove the SOC testers. With regards to memory testers, sales grew for high-performance DRAM, particularly HBM. On the other hand, demand for semiconductors for applications other than AI has remained soft throughout the fiscal year. By region, there was a notable growth in sales to Taiwan. This is mainly due to strengthened quality assurance requirements for high-end associate semiconductors from several U.S. fabulous companies, resulting in increased sales to the related foundries and OSATs. For high-performance DRAM applications, sales to Korea increased. Sales to China accounted for approximately 22% of total sales. Next, I will give a summary of the quarter results. Our fourth quarter results are shown on this slide. Details of performance will be explained in the subsequent slides. Our fourth quarter sales results reached a record high on a quarterly basis. I will now explain the breakdown of each segment. I will start with semiconductor and test component test systems. Please take a look at the right-hand side of this page. SOC tester sales were 148.8 billion yen, an increase of JPY 35.8 billion yen Q&Q amidst the continued robust demand for HPC AI-related tester demand. We achieved significantly higher sales compared to the previous quarter. Memory tester sales were 35.1 billion yen, a decrease of 19.5 billion yen due to the progress in product delivery in the previous quarter. Next, mechatronic systems. Sales of device interface products decreased in tandem with lower sales of memory testers. Lastly, service support and others. In addition to the stable booking of service sales, system level test sales for high-end SoC applications increased. This slide shows Q4 sales by SHIP-2 region. For Taiwan, sales increased significantly quarter and quarter, primarily driven by SOC testers. For South Korea, sales of memory testers and related device interfaces as well as SOC testers declined. Next, I will explain Quarterly sales, growth, profit, and operating income. Growth margin increased by approximately 5% quarter and quarter as a result of product mix improvement. SG&A, including the total of other income and expenses, has increased by 25.6 Japanese billion yen quarter-and-quarter, and the operating income margin was 27.6%. This is mainly due to the breaking of impairment loss by approximately 24.1 billion yen for a portion of goodwill and intangible assets of other expenses. This impairment loss is related to SI's socket business, which we acquired in FY 2019. Softness in sales for a major customer and delays in expanding sales to new customers were taken into consideration for the booking of this impairment loss. With this impairment loss, the value of goodwill and intangible assets related to the acquisition of SI have been reduced to zero. Next, earned expenses and cash flow. In the, you can see the R&D capital expansion and depreciation. On this slide, we executed investment and development initiatives to grow our business further. On the right-hand side, you can see our cash flow status. In the fourth quarter, there were cash outflows due to our investment in TechnoPro, FormFactor, and Micronics Japan. On the other hand, amidst high levels of sales and profits, operating cash flow and free cash flow increased significantly. Operating cash flow and free cash flow for FY24-24 reached a record high as did sales and profits. Finally, balance sheet for the period ended March 31, 2025. Cash and cash equivalents were 262.5 billion yen and inventory assets were 209.7 billion yen as of the end of March. We will continue to work on cash allocation and balance sheet management while optimally balancing growth investment and capital efficiency. This concludes my presentation. Now I will hand over to Doug.

Thank you.

Thank you, Takata-san. Now let me give you an update of our midterm plan. In the third midterm management plan, we have defined and executed four strategies to expand the value we provide to stakeholders over the mid to long term while maintaining the strong position we have built. We believe that in the first year we have a good start, both in terms of financial performance and in the execution of these strategies. In the next two slides, you can see the summary of our first year's progress. First, in our core market, key growth opportunities arise from increasing production volumes and advancing performance of semiconductors and growing semiconductor complexity. In FY 2024, we succeeded in preserving majority share in the semiconductor tester market by expanding products with strong customer appeal that address changes in technology in our test trends, as well as through key customer regional strategies. I will give market share details later in the presentation. In FY 2024, we launched several new key test solutions, such as a new power supply for HPC applications and several new memory test systems to address next-generation memory devices. We are also aggressively implementing R&D investment and marketing initiatives, addressing the future developments in semiconductor technology. With regard to our strategy of expanding adjacently and developing new businesses, as shown on slide page 15, we were able to make progress in our automation of test initiatives. With the launch of Psyconic, a groundbreaking automated silicon validation solution, we will continue to expand our business opportunities. Furthermore, we have established successful partnerships with three probe card manufacturers necessary to develop a high performance test solution. In order to strengthen our test engineering service capability, we acquired Sound Engineering, a company based in the Netherlands. Continuing on, in FY 2024, we have reinforced our capabilities to respond to robust test demand by enhancing our supply chain management. This has resulted in our record high sales booking. In order to drive our operational excellence initiatives, we are also working towards proactive execution through IT investments, and improving employee engagement to strengthen our human capital. Lastly, let me touch on the enhancement of our sustainability initiatives. Advance has long-term management goals to expand the value we provide to stakeholders in a well-balanced and multifaceted manner. In FI 2024, we renewed our basic policy and action plan on sustainability and established new midterm KPIs. This page is from our midterm management plan presentation and illustrates Advantest's holistic view of the backend test flow. Due to increasing device complexity and the associated test challenges, we continue to add the necessary pieces to drive automation of tests through the distributed backend test flow while maintaining the ATE test cells as our core. Again, this is something we showed in our midterm management plan last year and remains a focus for the company. Now for some remarks on our midterm plan financial progress. As this slide shows, results for the first year of our third midterm plan exceeded target figures for all management metrics, which are set as three-year averages for the duration of the management plan. As the increasing test content for AI devices has significantly boosted the demand for testing, we have gradually enhanced our product supply capabilities, resulting in a substantial increase in sales of associated products. Although the underlying trend towards increasing semiconductor complexity remains intact, we do perceive that external uncertainties surrounding our business environment are growing and the situation remains unpredictable. We plan on updating our MTP3 financial targets and model in October, which would be halfway through the midterm plan. Especially with the current geopolitical environment and concentration in HPC, we felt it best to wait another six months to get more clarity for the second half of our three-year plan. Next, let's take a look at our ATE market share. As for the calendar year 2024, the semiconductor test market size is estimated to reach approximately 4.1 US dollars for SOC testers and 1.9 billion US dollars for memory testers, totaling around 6 billion US dollars. This exceeds the recent market size peak of approximately 5.6 million US dollars recorded in 2021. For calendar year 2024, we estimate that the target market size grew by about 36% year over year. While semiconductors such as automotive and industrial equipment remained soft, demand for AI-related semiconductors, including HPC devices for data centers and high-performance DRAM, have driven the growth in semiconductor markets. The test demand for AI-related high-performance semiconductors also contributed to the expanding test market significantly. Amidst the market expansion, Advanta's overall market share estimate is approximately 58%. In the SOC market, we estimate that our market share was down by about three percentage points. While we continue to maintain strong share in the high-end SOC market, which is our main focus, the growing presence of local suppliers, especially from China in the low-end market, has weighed on our overall share. On the other hand, in the memory test market, we have security market share exceeding 60%, maintaining our competitive edge with industry-leading customers in the rapidly growing high-performance semiconductor sector. As we look into 2025, the semiconductor market is expected to continue to be driven mainly by AI related demand. In addition to the growth of semiconductor unit volume, increasing device complexity, including the adoption of advanced packaging, is driving increased test content. On the other hand, the business environment is increasingly uncertain due to ongoing geopolitical risks and the risk of rapid exchange rate fluctuations. For calendar 2025, under such a business environment, we will maintain our January outlook that the market size for the semiconductor market desk will expand for two consecutive years. While recovery of tester demand for automotive and industrial equipment is expected to take more time, we do expect AI-related tester demand to remain at a high level. So now let me give you our FY25 forecast. As shown on this slide, our FY25 forecast is as follows. Sales of 755 billion Japanese yen, operating income of 242 billion Japanese yen, income before tax of 240 billion Japanese yen, net income of 179 billion Japanese yen, and a basic earnings per share of 243.96 Japanese yen. The exchange rate assumption are Japanese yen of 140 for the U.S. dollar and 155 yen to the euro. The latest forecast for the impact of exchange rate fluctuations on our operating profit for FY25 is an increase of 1.9 billion Japanese yen for every one Japanese yen depreciation against the U.S. dollar and a decrease of 0.3 million Japanese yen against the euro. On a constant currency basis, our FY 2025 sales are estimated to grow slightly year over year. We expect high level of demand to be continued in FY 2025, driven by AI-related SOC semiconductors. The gross profit margin for the full year is expected to be around 58%, a high level as in FY 2024, and we expect solid EPS growth. Next, I'll explain the details of the sales forecast, but first I wanted to share this slide. It shows the trend in our annual sales alongside our core market size, which now not only includes existing ATE market, but also other markets such as SLT, consumables, and data infrastructure, which we have expanded into. In order to present comparable sales growth, we have applied an exchange rate of 140 Japanese yen per dollar to convert annual sales from FY21 through FY24. So stripping the exchange rate impact, you can see that FY25 sales are expected to increase compared to the previous fiscal year. Meanwhile, our core market is also expected to grow further driven by rising demand as a result of the increasing complexity of semiconductors among other factors. In other words, we remain on a growth trajectory. Now let's look at our different business segments, starting with semiconductor and component test systems. SOC sales are expected to be comparable to the last fiscal year, sustaining a high level. While recovery in tester demand for automotive industrial equipment is expected to take more time, AI-related tester demand remains elevated against a background of increasing complexity and growing production volume of semiconductors. Also, FY 2025 is a major HPC transition year for traditional players and also for ASIC and cloud service providers as they are bringing up several new devices that will translate to sales in 2026. On the memory side, our FY 2025 memory sales are expected to remain elevated, particularly for AI-related high-performance DRAM. We also expect demand for the next generation memory to come along. Next, in our mechatronics system sales, similar to testers, we anticipate continued high demand, particularly centered around device interfacing products, despite limited visibility to device transitions. In our last segment of service support and others, we expect to generate steady sales growth. For our support services, firm demand is likely due to the steady growth of our install base. In the SLT business, sales are expected to be flat year over year, although smartphone demands remain uncertain. Here in SLT, we are continuing our efforts to expand mid- to long-term sales. growth in areas such as hpc the increasing complexity of semiconductors and high reliable reliability requirements are driving up demand for slt burn-in and high quality device interfaces next i want to mention about production capacity Over the last few years, we have reached the point where we can fully meet all customer demand through measures such as timely materials procurement and capacity expansion. As we look ahead in anticipation for a continued rise in complexity and the resulting increase in demand over the mid to long term, we will work on expanding our production capacity even further. Through the transformation of our supply chain capabilities, we ensure the growth and reliance of our business while simultaneously supporting the timely launch of high-performance semiconductors, thereby providing great value to our stakeholders in the medium to long term. Lastly, I'd like to address our shareholder returns. Our shareholder return policy aims for a cumulative total return ratio of 50% or more over the three years of the third midterm management plan. Having conducted a share repurchase last fiscal year, we will again plan to enhance shareholder returns and capital efficiency through a repurchase program of up to 70 billion Japanese yen. Under this program, the total number of shares to be repurchased will be up to 19 million over a five-month period from May to September 2025. Please note that the EPS forecast for FY 2025 shown on page 19 on this slide does not reflect the impact of this share or purchase program. Okay, so this concludes. Back to you, Junko-san.

Now we will begin the Q&A session. Please submit your questions as follows. Click the Participants icon on your web screen. Then click the Raise Hand button. When the moderator calls on you, an unmute button will appear. Please unmute yourself before speaking. State your company name and your own name before asking your question. After you have asked your question, please mute yourself again and lower your hand. Now, to allow as many participants as possible to ask questions, we ask that each person limit themselves to one question. If time permits, we will accept additional questions until the scheduled end time. Please speak slowly and concisely. This session is distributed with simultaneous Japanese-English interpretation. We also ask that you refrain from questions about specific individual companies. Questions may be asked in either Japanese or English. With that, let's begin the Q&A session. Morgan Stanley, MEFG Securities. Muraki-san, please go ahead. Congratulations on a very strong performance. In March and April, I've spoken with investors about questions and discussions. I've spoken with more than 100 investors about your company, and it seems that the greatest interest from investors about your company has to do with high-end servers' yield issue, which is causing, quote-unquote, special demand, and investors are afraid that this, quote-unquote, special demand may level off from July onward. If possible, I'd like to know if the yield related special demand for high end servers would that come off? Are you concerned? Can you quantify, give any quantitative suggestion? Maybe you could give the split between the first half and second half revenue split. And if revenue is not going to go down, maybe you can give some supporting evidence for how demand can be supported despite the concerns about the special demand. Thank you. Thank you for your questions. So I believe that there were two parts to your question. One is special demand, whether your guidance includes the special demand. And you would also secondly like to know the split between the first half and second half sales.

Yes, thank you. Thank you for the question. This is Doug. So, first of all, certainly, there's always going to be certain devices that go through different yield profiles and that will definitely affect the amount of test capacity needed. But generally speaking, there's no anomalies that we see currently right now that would affect the overall demand for test capacity. Most of the demand that we see is a continuous demand leading from the AI HPC devices that are either currently at a peak ramp or transitioning to the next generation devices. And that's both on the traditional GPU players as well as the upcoming custom ASIC and CSP players. So generally, we are not seeing anything that's a one-time yield effect. In fact, we're seeing more complexity leading to more test content, either in test times or additional insertions. As far as the first half versus the second half guidance, usually we don't have as much visibility into the second half just because most of the visibility we have is six months out. But we do see a stronger first half right now as we stand at this point in the year.

Thank you.

So it's not that you're seeing, so you're going to see a little bit of a decline in the second half compared to the first half. Can you quantify that level? Kind of a decline. Nakahara will take that question. So as Doug just explained, There might be in comparison first and half, the first half is going to be a little bit higher and it won't be a huge gap. And with regards to the gap, as Doug just explained, For the second half, we don't have full visibility. There might be some uncertainty, so we can't have a full read-through for the second half. But when it comes to generation upgrades or diverse transitions, I am informed of strong demand. It's just that there's some uncertainty, which is why we expect a bit of a moderation in the second half, but we don't see a big gap.

A lot of it's visibility-driven, and there is a chance that our customers want to put test capacity in towards the latter part of our fiscal year in preparation for next-generation device ramps. So that's an area where things can fluctuate either from our fourth quarter into the first quarter of 2026. It just depends on the timing of the ramp.

Thank you very much.

Thank you very much. Next question, please. Goldman Sachs, Nakamura-san, please go ahead.

Thank you, my question. My question is for fiscal March 26. Looks like even on a constant currency basis, your revenue is only slightly up. But in terms of your calendar 25 TAM outlook, you are still expecting a healthy growth. So I just wanted to understand what kind of assumption you have made into your revenue guidance for March 26. Is it mainly concerned on perhaps lower market share or lower test times? Or you mentioned increasingly invisible sort of environment for the macro environment. So are you being conservative, especially into the second half of the fiscal year? Thank you.

Yeah, thank you, Nakamura-san. Yeah, I think the assumptions are that even at the midpoint, if you look at our SOC numbers and the account for foreign exchange changes, we do intend to pick up some market share. On the memory side, the expectation is to remain relatively flat. As to the point about conservatism, I think everybody right now, including us, are kind of watching the macroeconomy and trying to judge what effects it may have down the road. And so we are taking a cautious approach, particularly beyond what we can see in the first half.

Thank you. That's very clear. Just a quick follow-up. Is your physical March 26th guidance based on the midpoint of the calendar 25 test or TAM? And also, you know, you mentioned the visibility is very low, but are you seeing any changes in the customer behavior after the announcement of the U.S. tariffs and the and increasing macro uncertainty.

Thank you. Yeah, the guidance is essentially at that at that midpoint. So I think, you know, the number should you can kind of back calculate from our our numbers in the slides and in the midpoint as to customer behavior right now. No, we're not really seeing any behavioral changes. from our large customers with respect to tariff and trade concerns. And we've listened closely to other earnings calls recently from our customers and peers. And I think that's a message that's being consistently sent from those companies. And we see the The same thing, no real effect from tariffs as of yet, especially directly. There's very, very small levels. The concern would be if there's any kind of macro level effects indirectly that would come through, you know, global, de-global recession. But even there, the HPC AI area seems to be not fully immune, but somewhat protected from some of these geopolitical systems.

Thank you very much.

Thank you, Nakamura-san. Next, CLSA Yoshida-san. Please go ahead.

Thank you for taking my question. So it sounds like you're communicating with your customers very closely. Could you please share your insights on the SOC and memory tester market size towards the calendar 2026, if you have, as well as the supplemental information such as the test intensity outlook and opportunities in new test solutions such as die-level testing? Thank you.

Thank you, Yoshida-san. I'll try. We don't guide on the 26. The only thing I'll say is that we're optimistic about 26 for a couple reasons. One is there's going to be a next generation HPC devices from traditional players. In addition to that, The cloud service providers and their custom ASIC partners are releasing lots of devices during this year that we expect to ramp in 26. And so I think that's going to be an additive piece to the overall TAM. And then the associated DRAM, particularly in the HPM, that corresponds to those devices should ramp. gives some kind of an uplift. So I can't give any numbers except to say that, you know, we're fairly optimistic about 26 at this point. Test intensity, you know, is a difficult one. I've been trying to get people not to talk about test intensity so much more test dollars just because the ASPs of the semiconductors can have sharp upticks and that can throw the test intensity percentages out of whack sometimes, but from a test content perspective, we still see a really nice growth trajectory in that respect. Additional product lines like our dye level prober we think are going to be also additive to our overall business, both from a overall standalone standpoint, but also more importantly, from the strategic ability to address the test challenges that are going to be required for advanced 3D packaging. So those things go together along with our tester and our service environment and important part of the company strategy.

Thank you. Just for the brief clarification, you said that 2026 is quite optimistic. Is that meaning the year can be another growth year as a total market and also for your company as well?

We hope so. For sure, we hope so. I should say that even on the 25 midpoint, there was really a lot of internal discussion around this, which was we were – without some of the macro effects going on right now in the world with tariffs especially – You know, things with the test content increasing were trending us up towards the higher end of that, TAM. But given the uncertainties that kind of offset that, and so we felt more comfortable keeping the midpoint. So honestly, we felt like 25 is also, you know, a potential nice year. But, you know, we don't know what the future holds with respect to the macro environment right now.

Thank you. Thank you very much. That's very helpful.

Yoshida-sama, arigatou.

Yoshida-san, thank you very much. Next, Makori, Damien, please go ahead.

on your engagements with your customers and you talk about, you know, your, that your benefit from launching new products from your customers. Can you maybe speak a little bit about the pipeline of especially ASIC products? Like, can you characterize, for instance, how many more customers or how many more design starts would you be exposed to, ASIC designs you'd be exposed to, and how you see that trending in the next couple of years?

Yeah, thank you, Damien. Junko-san told me to speak more slowly, so I'm sorry for everyone. So I'll go a little slower. I can't talk about individual company devices or releases. You know, the only thing I can say is there's a very robust list of devices that are being brought out from our hyperscale customers either by themselves or with their custom ASIC partners. I will also say that the amount of custom ASIC providers has also expanded. So there's new players in that market as well. And as a company, we're very well positioned both at you know, the hyperscale community as well as those existing custom ASIC and new players in the custom ASIC market.

Thank you. Would it be possible for you to maybe indicate your confidence as to whether you can increase your market share when those devices are launched? Obviously, your SoC tester market share is heavily anchored to, I think, a big GPU customer. But with the ASIC side, will your market share tend to go higher?

Yeah, we expect our market share to go higher as those devices come out. We're very well positioned with our 93K platform at nearly all of those accounts.

Thank you very much.

Damian, thank you. Next, UBS. Yasui-san, please go ahead.

uh thank you very much for taking it's overlapping the previous uh the question from uh uh once again the customer is saying could you elaborate uh the growth plate for this year you have like a assumption cam for this year's associated market gpgpu or custom magic which one contribute more to the growth this year. And if you can manage to describe like 26, 27, like a long-term trajectory, it's kind of tough to estimate, but in terms of SOC tester, which is going to be the higher driver for the SOC market? Thank you very much. This is the first question.

um okay so for for 25 and i think that's an easy answer that'll be you know more the traditional um market for us um and as i said before um there's a lot of new devices in the in the custom basic world that are being brought out that we expect to ramp into 2026. As for the split between the quote-unquote traditional and the custom ASIC, we can't yet speculate. We do think the custom ASIC area is going to be very large for us. I think there's a lot of discussion around whether for the inferencing, if the traditional players will be displaced by the specific workloads of the custom ASIC. And we're under the assumption that with the growth that both are going to coexist. And we're very fortunate that we are well positioned both in that traditional in that newcomer space. But I apologize, I can't speculate a split between traditional GPU and custom ASIC at this point. Maybe next year I could give a better review.

But at least custom ASIC demand is going to grow this year, at least.

Yes, a little bit this year, but the larger ramps are most likely going to happen in 2026. And, you know, I can point you to just the companies in that custom ASIC who have cited the serviceable market requirements. for them, and you can kind of back-calculate the level of test requirements that they'll need, and it's fairly large when you run that calculation. Thank you very much.

And then the second question is related to GP margin. In the March quarter, 60% is very high. Is it sustainable if your demand for SOC testers is remaining at the level of

like 148 to the 150 billion each level or is that a like a special item was included uh in the march quarter thank you um you know it's it's a blend i mean our soc testers always have a higher gross margin so that was a higher mix in the fourth quarter we also had upgrades um that we were able to install and upgrades are always And so there was some uplift from that. We, you know, sustaining 60% probably is going to be difficult and it'll fluctuate, you know, quarter by quarter based on the product mix. I don't want to call that the high because, you know, we were always working on increasing our margins. But we had some kind of like alignment of things that happened in the fourth quarter that really helped us on the gross profit side. Thank you very much.

Yasui-sama, arigatou gozaimashita.

Yasui-sama, thank you. Next, B of A, Hirakawa-san, please go ahead.

One question for, yeah, kind of near-term visibility. You mentioned that you have good visibility in the first half, March 26th, and the second half is not that much. But in the first half, do you see any skewer in demand in SOC and memory testers either in the June quarter or September quarter? Or are you expecting the similar quarters in June quarter and September quarter? That is my question.

I'll try to answer and then maybe I'll ask Mac to help me. But pretty much the demand is consistent. And so it's a matter of planning out our production cycle with a long-term forecast that our customers give us. So we work closely with them to make sure we're managing our production capacity with their demand. And so that leads to less lumpiness because we're working together to keep that as a consistent volume. And so I think that's kind of at a high level. I don't know, Mac, maybe add some.

I wonder which language I should use.

You can speak Japanese.

Well, I'll speak in English, I mean, in Japanese. As Doug just explained, in the first quarter, in the second quarter, we expect an almost a plastic trend. Firstly, because in the first quarter, We already have a good level of bookings and a good pipeline, and given those statuses, we can see that it'll be even or flat. And as for the second half, we don't have full clarity yet. And FY24, we saw sequential increase quarter by quarter in the fiscal 24 by Q4. You know, we had good capacity in place, and so we didn't struggle too much with shipment and delivery. So in the first and second quarter, we expect a flattish trend. Thank you very much. Thank you. Next. Please go ahead. Can you hear me?

Maybe you need to speak up.

This is Nakano Mia from Jefferies.

Can you hear me? Yes. My question is about PS 5000. In the equity market, investors are talking about replacement demand for PS5000, and the investors think that that has made good contributions to your earnings, but maybe investors are concerned that it may peak out from now onwards. So as for incremental, given the incremental complexity increase, is that going to be a constant trend? And like once PS5000 diffuses among customers, could it peak out? Is that a fair assumption? Because that's what many investors believe. Nakano Mio-san, let me just clarify your question. So with regards to PS5000, In 2024, we launched PS5000. And so you assume that PS5000 has already populated the market. Therefore, going forward, there will not be incremental deliveries or demands of PS5000. And so are you asking us that we expect a peak out as well? Even if PS5000 picks out, will there be an increase in other modules? So how should I think about the overall demand?

The PS5000 is a standard module for the exascale of P93000. So if the PS5000 is already installed fully, whether this is peak art for the demand for PS5000, even the next generation customer's device is lower art.

Yeah, just first to clarify, the PS5000 is our standard digital module that ships with all of our Exascale platforms. So any new mid-level or high-level digital application requires us to ship PS5000s. We always design our digital instruments and power supply instruments so that they have some longevity. And the PS5000 certainly has a long life because of the data rates and the vector memory requirements. within that instrument. So, first of all, there's no need for there to be a technical inflection point in the near term that would create a new digital instrument. But most of our sales are forecasted into the future to be provided by the entire systems, which would be digital instruments, power supplies, sometimes mix signal instruments or RF instruments. So we see it as a benefit to have a common uniform digital instrument with a long lifetime because it lends itself to many different applications. Hopefully that helps, maybe Mac try

Well, let me add a comment or two.

In 2024, although the pace of ramp-up was pretty fast when it comes to launching Exascale and PACE 5000, Well, our customers back then, like Foundries and OSAS, they were suffering from low utilization rate. So there were many new device launches and so we booked sales. But now at customer sites, our systems utilization rate is almost full and as new devices launched at customer sites, which is what we expect. We are not really concerned about slowdown of PS5000. Rather, we expect that high level of utilization is going to encourage them to place new orders. Do you think that in 2026 this trend will still continue? There won't be much change? When it comes to logic devices, if I look at new development and how complexity will continue, I hope that will be the case. But then, you know, the question mark for us is external factors like economic impacts from macro. But when it comes to technology factors, We'll have new modules as well, so we think this trend can be intact. Thank you. Thank you very much. We are almost close to the end of the hour, so we'll take one final question. Tokai Tokyo Intelligence Lab. Kamisaki-san, please go ahead. I'm Kamisaki from Tokyo Tokai Lab. My question has to do with market share. In 24, your market share was 59% and followed by 56% market share in the following year for SOC testers. And you mentioned the reason is emergence of local suppliers. How is your market share in the high-end segment? For memory tester segment, will there be emergence of local suppliers as well?

The question, the first one is whether any other risk in high performance computing area in SOC or competitive environment. The second question is the in-memory tester market segment competition. Are there any risk on the local supplier?

First with regards to logic. As Doug mentioned, it was down by 3 percentage points compared to 23. Well, for us, the corn market is high-end market, and for that segment of the market, we believe we have gained market share. As you may be aware, in China, made in China, ATE is emerging. And the local Chinese suppliers are now targeting the low-end segment, and Chinese customers are now tending to buy local Chinese testers. And so I believe that there is some business that's going to the local players, but that's not a cool market for us. Again, our target is the segment of the market that benefits from rising complexity. With regards to memory testers, Korea and China, there are local players. Maybe just single digit market share each. But similarly, we don't think that a large part of market share is going to them because customers are demanding high-end testers because of the market shifting to a more high-end segment overall. Thank you. That was clear. This is it for me. Kamisaki-san, thank you very much. We have other questions in the queue, but we would like to conclude the session. Thank you very much for joining Adventus FY24 financial briefing despite your busy schedule. Thank you very much.