Advantest Corp Ord

We'd like to take the first question from Ms. Shikanai from JPMorgan Securities.

Thank you very much.

This is Miya Shukana from JPMorgan. First of all, congratulations on a very strong learning. I had a question around the SoC tester market. How has your view of the SoC tester market changed with your prior outlook in terms of which applications are coming on demand? Is it the GPU, ASIC, or is it CPU? And how should we think about the relative contribution from higher chip volumes, longer test times, and increase in test insertions? I guess it's a bit early, but are you thinking about the sustainability of the demand until next year?

Thank you very much. It's my pleasure. First of all, congratulations on your wonderful achievement. I would like to talk about the outlook of the SOC tester market. What kind of applications are supporting this? Please tell us about the composition of GPU, ASIC, and CPU. Also, I would like to ask you about the future situation regarding the increase in test time and the increase in insertion related to chips. Also, I would like to ask you about the future outlook on demand.

This is Doug. Thanks Shukanai-san for the question. To answer on the SOC market, we're seeing very strong demand across all of those areas, GPU, custom ASIC, and CPU. And I would say most of the increase in the SOC TAM that we just announced is coming from more inference applications. And so that's what's really driving that change more than anything, in particular with the CPU business. We do see that to be sustainable throughout this year and into next year. As to kind of test content, I think we're continuing to see additional test content increases through test times and additional insertions in particular for the accelerator market where 3D packaging is driving more complex devices. So that's going to continue to be a big driver for us, but a lot of the unit volume increase on the inferencing side and CPU side is driving some of the additional market TAM increases.

Mr. Shikanai, thank you for your question. First of all, you have said that the demand for the SOC market is understaffed. GPU, custom ASIC, CPU, all of these are contributing to the growth of the SOC market. However, what has been further strengthened in terms of the outlook on TAM is that we have changed our outlook on TAM, taking into account the fact that the application theory is very powerful. In particular, we think that there is a big change around the CPU. This trend is believed to be sustainable. We expect this trend to continue this year and next year as well. Regarding the test contents, as mentioned, we expect the number of test contents and items to increase. We also expect the number of test times and insertions to increase. Especially in the accelerator market, including 3D packaging,

Thank you. Just a quick follow-up. How does CPU testing compare with GPU to ASIC in terms of test time and intensity?

Yeah, the test time, particularly for the package test on CPU, is going to be quite a bit lower than what we'd see on the accelerator just because the complexities of an accelerator in a 3D package. At the wafer sort level, if you're testing a monolithic chip, they're relatively similar. You may see actually a little bit higher on the CPU. But in the back end, the final test package, definitely it's higher. I'm not at liberty to give you clear numbers on that, but it's fair to say that the accelerator side on the final test is higher.

I can't tell you the details about the test time, but the accelerator is more complex, focusing on the 3D package, so the accelerator tends to have a longer test time than the CPU package test. Especially at the warehouse sound level, if it's a monolithic chip, it's about the same. The CPU is a little higher, but at the final package level, the accelerator has a higher test time. I can't tell you how high it is right now.

Thank you very much, Ms. Ikanai.

Next question is from Mr. Yamamoto of Mizuho Securities. Go ahead, please.

I'm Yamamoto from Mizuho Shokken. Nice to meet you. I'm sorry for asking a similar question. Looking at the tester market on page 12, especially the SOC, the midpoint is 9.1 billion dollars, and this time it's 11 billion dollars, so it's almost 2 billion. Asics, CPUs, and GPUs. How much information is being corrected? Also, the price of the SOC testers sold by the company in March of 2027 is 2,500 billion yen. Can you comment on how ASIC, CPU, and GPU will improve?

This is Yamamoto from Mizuho Securities. I'm sorry for the very similar questions. I have a question for page 12. This is regarding the test on market outlook for SOC. So now, as for midpoint, you have revised your projection from 9.1 billion to 11 billion, 2 billion increase. So I'd like to know the breakdown of $2 billion among ASIC, CPU, and GPU. How much impact will each one of three applications have and how much after revision is made? Also for the SOC tester cells, again, you have revised the cells projection. So I want to know the breakdown for ASIC, CPU, and GPU for that after revision.

Yeah, that's a good question. The upward change is mostly, as Doug said in the beginning of the call, due to the growth in inferencing and the compute segments. I think it's too complex, in my opinion, to divide it up. Thank you very much. We can also safely say that the custom ASIC market, the compute market, as some of the leaders in the industry have been saying, are going to be significantly larger than the GPU market. So right now, I would say GPU market is still the largest. But as the time goes, we will see that the other markets are as large, if not significantly larger.

Thank you very much for your question. As I mentioned at the beginning, the main driver of this information correction is the application of AI theory and the application related to computing. In the three segments of your question, Thank you very much. On the other hand, it is said that it will become a bigger leader than GPU in the future. At the moment, GPU is the biggest contributor, but if we go a little further, it will be the same level of driver until it is more than GPU.

Hi, this is Doug. Yamamoto-san, let me add just one comment, which is for us, since our 93K platform is so prolific and being used across the industry, across all of the different compute applications, It really doesn't matter where that growth comes from because we're positioned with the 93K so that, you know, in fact, the configurations are very similar in some cases with our digital instruments and our power supplies. And so oftentimes, as Sanjit mentioned, our customers will purchase capacity and they'll be able to configure those for whatever type of application. So that's a strength that we have right now with that platform is the usability across all of those different high performance compute subsegments.

Mr. Yamamoto, I would like to talk a little more about DAG. As you know, our V93000 is a platform, and it is used for all kinds of applications, including computing applications. Therefore, considering the current position in the market of V93000, it does not greatly affect where it will grow. The configuration is very similar, so there is no big difference in where it will come out. Customers buy the capacity and decide where to use it for the configuration itself. I think that's how the platform is used. Of course, HPC and other such departments are growing, but I don't think that such a way of expression will be the biggest growth.

Excuse me, I have a follow-up question. The amount of chips in the information correction is increasing. What kind of tests are being done by the Adventists? I think there was a lot of attention to it, so I wonder if the test insertion or the test time Could you tell us more about the number of chips rather than the sudden surprise?

So I have one additional question. Is that because of the drastic increase of the number of chips, which drove the upward revision? Because I think advanced people knew a lot about what sort of tests will be conducted by customers. So I don't think there is no surprise. I don't think there is any surprise in terms of testing session or test time. So I wonder, this kind of upward revision is driven by the number of chips. Is my understanding correct?

I think so. I think there are a lot more customers now doing custom ASICs. Most of the hyperscalers, as you know, have some type of a strategy of doing chips in-house. Those chips are obviously, in addition to the GPUs that we have seen in the past, We've also seen significant increase in the compute market and the server space. So obviously that's additional. One segment that we have not talked about before that we didn't use to split is Thank you very much. Thank you very much. Thank you for joining us.

Yes, I think you're right. Custom ASIC users are often hyperscalers, so they make chips internally and make chips in-house. In the past, the main thing was GPUs, but in addition to that, the computer market and server space have been added to a large extent. There is also another segment that we have not talked about before, which is the networking segment. We talked about this before, but this also has a very large market share, and we expect a great growth. Therefore, the answer to your question is yes, and I think that one of the major reasons for the increase in the amount of chips is that the amount of chips is increasing. From now on, our company Thank you very much, Yamamoto-san. Now we'd like to take the question from Mr. Nakamura from Goldman Sachs.

Thank you very much. I wanted to ask you about the production capacity expansion plans. You mentioned that you're accelerating the efforts right now, but could you clarify whether you're accelerating your capacity expansion plans even compared to your commentary you made back in April? I think at that time you mentioned for SOC testers, you're expanding it to roughly 5,000 units by the end of March 27, and then to 10,000 units by either end of 28 or early 29. So just wanted to understand what your capacity expansion plans are as of now.

Thank you very much. I would like to ask about the plan to expand the production capacity. You said that the pace of the expansion of the production capacity is accelerating. When is the expansion accelerating? Last time, it was announced in April, but is it accelerating again compared to that? As a number, how about the number of 5,000 units by the end of March of the 27th SOC tester, and 10,000 units by the 29th or 28th?

Yeah, thank you, Nakamura-san. This is Doug. Yeah, as you mentioned, we had stated at 10,092 case per year by the end of 2028, early 29. And, you know, we're pulling that in, not prepared yet to say how much we're pulling that in with a new date. It's something that we're working on right now internally. What keeps happening is there's more wafer starts, more advanced packaging capacity being put in place. And so every time we think we've got locked in on where we need to be on the scaling side, we have to go back and look again as more capacity comes online. The good news is Our production systems are set up to allow us to scale like that. And so between our supply chain and long-term agreements we have with component suppliers and our relationship with our contract manufacturer, they can react quickly to our needs. In fact, our contract manufacturer is putting a second factory in Southeast Asia to help support The scaling that we're asking them to do for us. So that's a long answer to a short, really a short question, which is, you know, we'll have to get back to you. We're scrubbing the information now and I expect next quarter to have a more clear date for when we'll bring in that production expansion.

Thank you, Mr. Nakamura. I'm Douglas.

I've been considering how we can accelerate this further. Why are we doing such a study? What's going on? It means that the wafer starts are happening over and over again.

And if you think you've decided on a production capacity plan, you'll get an order from the Advance Package again. That's why we're repeatedly reviewing the production capacity plan. Good news is that we are able to scale up the design of our production system. Therefore, we are able to respond flexibly to this kind of demand. However, the partners who cooperate with us, such as the supply chain, long-term contracts, and the relationship with the contract manufacturer are very good, so we respond very well to our urgent needs. Some contract manufacturers are responding to our needs by expanding our second factory in Southeast Asia. So, it was a very long answer to a short question, but I would like to talk a little more specifically about the more specific numbers at the time of the next quarter announcement.

Thank you very much. This is a follow up. In terms of the 5000 unit mark, are you approaching that number already? I think you used to say by the end of March 27. Is that being within right now as well? And also, could you also touch upon your capacity expansion plans on the memory testers as well? Thank you.

Thank you very much. I have two more questions. Until the end of March in 2027, will the number of 5,000 units be almost complete? And please tell us about the plan for the memory tester.

Yeah, for 5K, it's safe to assume that we're going to blow right through that level at this point in time. So that our supply chain people have worked hard enough and have been able to find the capacity for us to be able to deliver at that level. And so we're on to the next step, which is that 10K level. As far as the memory goes, we also have expansion plans that are highly correlated to what we're doing on the 93k side. There's not as many testers in the memory side as the 93k, but there's similar growth rates. And so there's lots of programs within the company right now to to expand on the memory side. There is additional challenges there because we do more in-house production. And so there's things that we're looking at within our supply chain on the memory side to allow us to keep the pace with the SOC testers.

Thank you very much. There is also a plan to expand the production capacity of memory testers. This production plan has a high correlation with V93000. Of course, the number of testers is not as large as V93000, but it is a pace that expands production at the same pace. I understand. Thank you very much. Congratulations.

Thank you very much, Nakamura-san. Next question is from Mr. Shibano of City Group Global Market Japan.

My name is Shibano from Citigroup Shoken. I would like to ask a question about the margin. I think that the first shunt is a very high interest rate, but from the perspective of the current trend, it can be seen that the rest of the gap is a slightly conservative premise. At this point, I would like you to tell us if there are any unfavorable movements in terms of margin pressure or product mix after the second quarter, or in terms of margin pressure or product mix. I think the demand continues to be very strong, but if we need even greater growth in the top line next year, please let me know if there is pressure on the margin or if it is absorbable. This is a high-level way of thinking, so please let me know.

So I have a question regarding margin. On the first quarter, you recorded very high margin. But when I look at full-year projection, even remaining nine months, I think you have got a conservative outlook in terms of margin. So second quarter and onward, the second half of this I wonder, there might be some margin pressure or some product mix, some concerns. Are there any unfavorable factors in terms of margin pressure or product mix? And second issue is actually demand is rather strong. So when it comes to next year, I wonder whether the significant increase of top line might be necessary. If that's the case, do you expect also the margin pressure next year? Or do you think that sort of thing can be absolvable?

Thank you, Shimano-san. This is Doug. On the margin question, I think the company is hitting on little cylinders right now. The product mix was favorable. I think we've had favorable exchange rates as well. and then as our volumes go higher and we've been able to really deploy our platform strategy, it's really yielding big economies of scale for us as well. The headwinds right now obviously are some inflationary things on our bill of materials. Of course, at the top of the list is memory and the memory pricing is a headwind for us as well as everybody. And so that's why I think we have to be conservative because we are subject to the pricing environment on the memory. And our testers do use a lot, a lot, a lot of DRAM. And so that's the biggest reason I think that we're still not ready to project a consistent level of margins like we have this quarter for the rest of the year. Also, I think I would just note that we had some reversal of inventory obsolescence that was helpful to our margins in this particular quarter, and that's not something we would necessarily see as a consistent quarter-to-quarter basis. So going into next year, still I think we're going to be facing some significant pricing pressure on memory. And we are working on certain areas where we can pass some of that along. It's really case by case, application by application, customer by customer. That's a very sensitive topic, but I think there's going to be something we can do there. But hopefully that answers the majority of the, you had a lot of questions in your question.

Thank you for your question about Douglas Merge. Certainly, this year, the product mix was very good. Also, we were able to get very good liquids because the leather was also very good for us. Also, the volume is very high. But for us, if this situation continues, I think there will be a headwind. The biggest headwind is the pressure on BOMs due to the influence of the inflation. In particular, memory is one of the most important factors, but the rise in the price of memory is a big headwind. From now on, we will think about how we can reduce the price of memory, and many more. As you all know, our testers produce a large number of DLAMs. This is one of the major reasons why we have established a very conservative mindset. As far as the first trial period is concerned, there have been very good results due to several factors. It is unclear whether the situation will remain the same for the rest of the second half of the year or not. Also, regarding the stock market, Q1, the first half of the year, was in the direction of raising the interest rate. However, it is unclear whether this will continue in the future. Also, as you mentioned last year, I think that the price and the pressure of pricing will continue to be very big in terms of memory. Thank you very much.

Thank you, Shibano-san. Next we would like to- Next we would like- Next we would like to-

I think it's because of the spread of agentic AI or something like that. I don't think it has much to do with it, but is it because of the expectation of physical AI? Or is it because of the expectation that something like AGI will come out of Stargate? I would be happy if you could tell me a lot about the development process and the situation of the cutting-edge AI around here.

So my name is Wadaki from SPI Securities, and I'd like to ask Doug-san about the recent AI developments. What's going on in the world of AI right now? I think you know a lot because you're related to the leading-edge AI situation of the world. I know that your AI testers have geared up really another notch, and so bet you're up to speed.

So what's going on there? Why is AI testers becoming so busy? Is it because of the agentic AI? Is it physical AI? Or is it kind of like the HAI coming from Stargate or... There's various trends, but what really do you think is driving this big trend of AI?

Thank you, Uedaki-san. I see mostly the agentic AI right now driving a significant structural change in the business. I know that we as a company are deploying the use of agents in a lot of what we're doing for our development and on behalf of our customers. And as I talk with and other executives in the industry, they're doing the same thing. And the level of efficiency gains that our companies are getting through the use of agentic AI is really staggering. And I think a lot of people on the outside of kind of businesses and companies don't always realize what's going on in the back offices and the development R&D areas of the companies. and that's where the big bang for the buck is happening, I would say, is the use of the agentic level where it can call upon all kinds of different software tools and on its own, in a headless fashion, develop solutions. And so for me, that's what's really happening. I don't think that we're at the physical AI yet, it's coming. But I think there's going to be a wave of physical AI applications at the edge that are coming. We're seeing some of those. But I still believe that has got a little bit of time before it becomes mainstream. When it does, the volumes will be extremely high and will make a lot of the data center pale in comparison. So really agentic level now and into the future physical AI.

Thank you very much. I would like to talk about agentic AI and physical AI. One of the things that drives the trend of AI right now is agentic AI. This is a trend that is leading to structural changes in corporate business. We also use agentic AI, and we use agents in place of developers and customers. This is what I'm talking about with other executives in the industry, but we all agree that if you use agentic AI to make the company more efficient, you'll get surprising results. I've heard that it's very efficient and the productivity will improve. Well, for people who are outside of the world of companies, it may not be easy to understand, but now, in the back office of companies and R&D sites, agentic AI is showing explosive power, and I think it's going to be a dollar box from now on. Thank you for watching.

Do you have any expectations for the future?

So just to follow up on a question of this trend here. So regarding AI, there's just billions and billions of dollars of investment made in this whole area. But do you think these surprising concepts like AGI and ASCI will really come true in the future? What do you believe, Dak-san?

Oh, wow. That's really putting me on the spot, Wadaki-san. Yeah, I think ultimately that's where we will get to, but I tend to think that's out pretty far in time. There's so many use cases just in front of us to utilize AI to do really wonderful things. And that's where I personally, I hope that the world will start focusing on all the beneficial things of AI and not get caught up in a lot of the misuses of it. and so that's you know Advantest has an obligation in the position we're at now to make sure that we're pushing the applications that are doing very very good things whether it be medical research or agricultural things or or even you know I was talking about the the fires and the use of drones for for putting out fires and and seeing what they're going through in Europe right now even as well as in the United States Those are the kind of things I think that the world needs to focus on rather than get caught up in the singularity concepts and things of that nature. Because I think those are out there. They're probably going to come eventually, but it might be far after you and I are around. So I gave you a philosophical answer to a philosophical question, Muraki-san.

Mr. Wadaki, you asked me a very big question, and I feel a little bit of tension, but I will do my best to answer it. As you said, I personally think that it will take a long time for a huge concept to be realized, but the road to that is still in progress. I think it's a very philosophical question, so if you answer it philosophically, as a sentiment, the world is coming to a singularity by AI, and what will happen next? There is also such a pessimistic way of thinking, but the way of thinking that the world will move in the wrong direction due to AI's misuse or improper use I hope that AI will not be a hindrance to the evolution of AI. Because I believe that AI will be a very useful application if it is used for very good things in the world. It can be used in various fields, from medical research to agricultural fields, and even in the field of fire extinguishing activities in the field of fire. Thank you very much, Mr. Wadaki. Next question is from Mr. Yoshida of CLLX Securities.

Thank you. Congratulations on the strong results. My question is similar to the prior ones, but I would also like to clarify about SoC testers. I think there is a structural SoC tester demand growth driven by CPUs for Infra-AI, which is shifting from Intel to fabulous designed ones. creating additional third-party tester TAM taking shares from Intel's in-house testers. So you have just answered a kind of vague comment about the impact by device types to the SoC tester TAM growth, but I guess CPU's contribution is the biggest one for the upper revision of this year TAM outlook, and this impact will get bigger towards the next year considering the increase in fabulous design CPUs going forward. Do you agree with this view?

Thank you very much. I would also like to say that I am very surprised by the results. My question is similar to the previous question, but I would like to ask about the SOC testers. I think that this demand will be a big factor in the future for CPUs, but I think that Intel and Fabless will appear in the future. I think that third-party testers, such as the enhanced testers that Intel is making, will also come into play. What kind of impact will it have on the TAM value of SoC? From what you said earlier, CPU is the biggest impact. I think you think it will have the biggest impact on the TAM this year, but how will this situation change next year? I would like you to tell us from the perspective of CPU powerlessness.

Yeah, this is Sanjeev. So I wouldn't discount the size of custom ASIC market. I think it's definitely what you said is definitely correct that CPU and server market is growing rapidly and obviously we are benefiting from that greatly. But I would say that the custom ASIC market and also the networking market They're also growing at similar paces. So again, repeating my comment, I think we're fortunate that we have dominant position in all of these segments. So to some degree, we don't really care because as Doug mentioned, the configurations, the customers, the systems are very, very similar to each other. If you really want to divide it up, yes, compute is growing very fast, but let's not discount custom ASIC. I think that market is definitely understated, and it's very large for us.

Thank you very much. As for me, I would like to say that the market of custom engineering is very large. Certainly, the market of CPUs and servers is growing at a very fast pace. It is certain that our company is taking great advantage of this. However, as I mentioned earlier, we are growing at a pace similar to that of the CPU and server market, both in the market of custom execs and in the market of networking. As I mentioned earlier, we have secured good positions in all segments. As Doug said, from the point of view of configuration, customer, and system, all of these things are very similar. As far as we are concerned, we know that the market for computing is very large and strong, but we can see that there is a very big merit to custom ASIC as well. I think we can achieve great growth from here.

Let me add Yoshida-san, this is Doug. On the CPU side, if it's X86 or ARM-based, or if it's Fabless, or if it's IDM, we are positioned every single place with our 93K system. And so we have full coverage of all of the CPU accounts globally. So we feel very, very good about our position there. And the market share swapping that might happen between these companies, again, is not really relevant since we have a de facto standard in the 93K across the entire CPU industry.

I would like to add one more thing from DAG. In the field of CPUs, whether it is ARM-based, or hubless, or provided by IBM, the number of CPUs is 93,000. In that sense, we are global in terms of full coverage for CPU customers. Therefore, we are in a very strong position. If we take advantage of the defacto standards of 93,000 in the market, I don't think the market share will be a big problem. That's the current situation for CPUs. Thank you.

Just a quick follow-up. Could you also please share your views on the current outlook of your market share at the SoC and memory tester for this year, and if you have next year as well? Thank you so much.

I have an additional question. Can you tell us about the market share situation of SOC testers and memory testers this year and next year?

Yeah, so we will, the numbers we share next year, April next year. But I can speak at least qualitatively on some trends. On the SOC side, we reported for 2025 that we had a 66% share. And I think it's safe to assume that we're continuing a trajectory upward. Thank you for joining us. So we see the gap really widening in the SOC market. And so that's some qualitative looking at the SOC market. On the memory side, it's a busier area. There's more There are some areas such as NAND where we have not been a traditional incumbent and NAND is growing, as you may know. There are some transitions with device speeds and bandwidths right now also. So there's some insertions that we haven't necessarily captured. On the memory side, I would say this year may represent a little bit of a downturn for the company, but we see that more than recovering as we go into the next year where our roadmaps are well aligned with devices. And so we are very, very confident in the future around our memory market share. But you'll see a little bit of a dip potentially in memory while we still grow on the SOC side. And for us, the SOC market is such a larger market than the memory. So when we have growth in the SOC, that's generally an aggregate positive for the company.

The specific number of market shares will be introduced in April of next year, so I hope you will understand what we can answer at this point. First of all, regarding SOC, in 2025, it will be 66%. Thank you very much. Thank you very much. Thank you for your time. There may be a downturn, but I think we will see another recovery next year. We have great confidence in our presence in the future memory market, but there may be a slight downturn until then. On the other hand, I would like to remind you that the SOC is continuing to rise. Overall, our business is bigger than the memory market, and the SOC market is always bigger, so if you look at the whole picture, you can say that the positive trend continues.

So, Yoshiro-san, I just want to add one thing on the memory side. I think when we look at our future and the reason we are confident is we are going to be releasing a couple of key products. And what's really amazing is that we already have customer commitments for those products. and I think those products are really game changers and what's also interesting is that the memory market we expect also to grow significantly next few years as the new fabs come online. So, yes, it's absolutely correct that we have some challenges this year due to the transition to new products. But I think the feedback from customers says that we are very well positioned for the future. And any share loss that we will have this year, we are very confident that we will recover that loss over the next few years.

I would like to talk about memory. I would like to talk about why we are so confident about the future of memory. We are planning to release some key products in the field of memory testing. We have already received a commitment from our customers regarding this new product. There are actually several of these new products, but I think this will be able to achieve something like a game changer. The memory market itself will also see great growth in the future. In other words, several new FABs will be operating in the future, so I think the future will be bright. Thank you. I'm looking forward. Yoshida-sama, arigatou gozaimashita.

Thank you very much Mr. Yoshida.

So the next question is from Mr. Yoshioka from Nomura Securities.

Thank you for having me. I'd like to talk about SOC testers and tell you about the colors of each region. While the sales of Q1 SOC testers are expanding, if you look at the 7 pages, you can see that the sales for Taiwan are decreasing. Q1 SOC testers' sales are increasing, I think they are very active in their semiconductor development. I want to look at this page, page 7, and ask you to give us more color on the bi-region SOC testers' sales. You did very well on Q1, which were the main drivers. If you could just explain bi-region as much as you could, but some of my interests would be regarding Taiwan and China.

For Taiwan, how about if we take SOC testers alone? Is that also growing as well, pushing the demand? And how about China, where they're nationally very much focused on developing their own semiconductors? Is your business to China also growing?

I think for our Ship 2 region, the reason that Taiwan is so large is because that's where most of the U.S. Fabless SOC business is landing, and so that's why that. has consistently been the largest part of our business. So again, this is where we're shipping to, but the business is really being driven out of U.S. Fabulous Companies. There is some memory in Taiwan as well. We don't necessarily disclose the breakout by region between our SOC and memory. The same goes for China. China is about 19% of our total sales, and that is both SOC and memory. It's pretty consistent with our overall ratio of SOC to memory in China. So this past quarter, I think we were 80, 85% SOC, 15% on memory. You can apply that to most of both China as well as overall distribution. But Taiwan for sure is a majority SOC.

First of all, I would like to talk about Taiwan. The proportion of Taiwan is of course quite high. I think it will continue to be the highest region in the future. Taiwan is our export destination, but most of the business that drives this business is U.S. and North American Fabless. There are also memories in Taiwan's sales. Separating SOC and memory and putting out local numbers is a bit of a hindrance. I can't tell you this, but there are also memories in Taiwan. China also has both SOC and memory. Businesses for China have a total sales of 19%, but if I were to tell you a little about the ratio of SOC and memory, In Q1, SOC vs. memory is 85% vs. 15%, so I think it's good to say that this kind of practice applies to China as well. Most of Taiwan is SOC.

Thank you very much. As a follow-up, Q1, the proportion of Chinese English speakers was 19%, but do you think the proportion of Chinese speakers will increase in the future? Please tell us how it will change when you divide it into China and other countries.

Thank you very much. It'll be great if you can just give us more color on how you see that 19% China sales proposal will change going forward. Think it will expand?

You know, it's been pretty consistent around 20%. There are new factories being built in China, a lot of them. I think those will likely come online in the 2028 timeframe. So there is potential for, I guess, into 28, maybe 29, where we'll see some expansion of the China businesses associated with that scaling of factories. But until then, I would guess, just estimate that we would stay in that 20% or lower of overall sales.

Thank you very much. The proportion of business in China is 20% or more in the past. There is a plan to have many new factories in China, but I think there will be one in 2028 or the year after that. At that time, our business for China may be expanding in 2028 or 2029 due to the phenomenon that a new factory is being built. Thank you very much, Mr. Yoshioka, for your question. Next question is from Mr. Hanaya of SMBC Nikko Securities. Go ahead, please.

Hello, my name is Hanae Koshoki from S&BC. I would like to ask you a question about how to think about production capacity and sales. You commented that you are accelerating production capacity, but basically you want to have a buffer for production capacity. I think it was done based on your thoughts. However, this time, the information collection is also done on a fairly large scale, and I think it is more than the expected expansion pace of demand, but is it a perception that the buffer is popular? If that happens, if it is not popular, I think the risk of giving a chance to competition will also increase. In addition, if you can achieve this sales SOC with the information correction of this sales, is it possible to achieve it in the form of having a buffer, or is it possible to sell it while accelerating the current ability? I'm sorry, I'm sorry.

So this is Hanaya from SMN PC Securities. I have a question regarding capacity and sales. I'd like to understand the concept of those two things. You said in your presentation you are accelerating the capacity enhancement in your work. And do you think, I think you always think about the buffer in the capacity when you try to build up the capacity. This time you have revised your outlook drastically. And do you think that includes the buffer as well? I think the demand has been expanding more than your expectations. So I wonder if this kind of revision may include the buffer or not include it. Or if you cannot have buffer, you may lose your share or you may give the opportunity for your peers and competitors. So I think your upward revision of sales is rather drastic, and I think you can achieve the projected sales for SOC with buffer or without buffer. What is your outlook?

Yeah, thank you, Hanaya-san. This is a really good question. And the short answer is we always have to have buffer. So when we start to impede from the demand side on our buffer, that triggers us to expand further. And right now, what we look at very closely is what are the supply constraints in the semiconductor industry. For accelerators, for example, it's in the advanced packaging area. So as the foundries and OSATs add packaging capacity, we then have to expand our capacity. and not just on a one-to-one ratio because we have the test content generation to generation increasing. So we can't just scale at a unit volume level. We have to scale at a unit volume plus the additional test content generation to generation. and so that's how we model our capacity for our testers and definitely we have to have buffer because what happens is there's unknowns in particular around test times so oftentimes our customers don't know what the test times and test insertions are going to look at until they've taped out the device and gone through a characterization cycle and so there's A lot of unknowns and we have to be prepared to be able to supply against those unknowns. So we always will build in buffer into our production capacity planning and make sure we stay above that kind of danger zone. We never want to be the critical path for our customers businesses.

Thank you very much for your question. When we think about the production capacity and the situation, we always have to create a situation where there is a buffer. Looking at the demand size from now on, if there is no buffer, I think it will be difficult to grow further. In the semiconductor industry, we are in a situation where there is a shortage of materials due to accelerators, advanced packaging, and center packaging. In this context, Fundream and OSAT are actively increasing the capacity of the packaging. As a result, we have to increase our production capacity, but at that time, the capacity of the packaging customers and There is no such thing as a one-to-one ratio of production capacity and situation. The reason is that there is a factor called test content. As we move from one generation to the next generation, the test content will also rise. Therefore, it is not just a matter of adding this much in unit volume and quantity, but it is also a matter of how much test content will increase as another factor. We use these models to model the capacity of our testers. Also, what we see as a business is that there is a problem that we can't really understand the test time in various ways. Even for customers, there is a situation where they don't know exactly what the test time will be or what level of test insertion will be until they actually tape it out or at the stage of characteristic evaluation. Thank you very much. Thank you very much.

Thank you very much. Now we would like to take the last question.

And the last question from Ms. Tamura from Morgan Stanley MUFG Research Japan, please.

Thanks for taking my question. I'm curious about the visibility Adventest shares for the customers. How long will the demand discussion with the customers be extending? It's historically been, I think, six months. But how much visibility does Adventest have specifically into 2026 and beyond? And what's driving this unprecedented visibility, if that is the case?

Thank you very much. I would like to ask you how far you can see the demand as of now. You mentioned the lead time of six months in the past, but I think you are seeing an increase in demand without precedent. How do you see the demand as of now, in the 26th year? How far do you see it?

Yeah, hi, Tim Nerson, this is Doug. Yeah, historically, we were never given really much more than a six-month forecast. But just because of the scale now in the industry and because of the constraints in advanced packaging or wafer starts, it's much easier for us to see out, I would say, about 18 months. and so we have conversations with our close partners for 18-month visibility so that we can do the planning. And obviously that helps us because we can scale our capacity plans when we have that kind of a lead time. Six months is not enough for us to trigger supply chain scaling. You know, again, the short answer is in a lot of cases now we're seeing 18 months, and that's because the industry has realized that they need to give their supply chain that kind of heads up. And we learned the hard way, you know, in the past that six months can lead to some constraints. And we all work together now collectively to try to get, you know, at least an 18-month forecast.

Thank you very much. Thank you very much. Thank you very much. I've been in a difficult situation, and I've learned that if you have a six-month restriction while having a hard time, you can't expand your production capacity well. Compared to that, it is very helpful that I can cooperate with my partners and see 18 months ahead.

Thanks for your answer. Just a quick follow-up from the previous answers. You mentioned that you expect accelerating the capacity expansion going forward. You mentioned pulling in the 10K capacity target by 2028. Should we assume that there should be some upside to the 10K numbers in 2028? The target numbers.

Yes, please let me ask you one more follow-up. Previously, there was a follow-up to a question from another person. There was a talk that the plan to expand production capacity has been accelerated by re-finding. It was also mentioned that we are now heading towards the number of 10,000, but that means that by 2028, there will be 10,000 units. Are you aiming for a number that is more upside than 10,000 by 2028?

Yeah, thank you. Yeah, I think step by step, but you're likely to see us look at the next step beyond 10K. So right now we're focused with pulling that in in the near term, but in the midterm, I think it's highly likely that we'll do another step on the capacity expansion. Just to give people an idea, though, around 2020, we were producing maybe 1,000 93Ks, and those were smaller configurations. If you use that configuration for our 10K, it's about the equivalent of 20,000 of the 2020 size configuration. So we've done 20X in seven years, eight years. And so I don't know that there's been that level of expansion for anything in our industry. So it's really quite an achievement for us to get to that 10K, but we have high confidence that we can take that next step function. It may be 15, it may be higher, but we'll try to clarify that in the coming quarters. We're just not ready to do that yet.

Thank you very much. The expansion of production capacity is really a step-by-step process. I would like to expand it step by step, one step at a time, but if I answer your question, I'm sure the next step will be over 10,000. In the short term, as I mentioned earlier, we are saying that the plan is ahead of 10,000, but in the medium term, it is likely that the number will be higher than the number of 10,000. Looking back, in 2020, the production capacity of the V9300 was 1,000 units per year, but the configuration at that time was a smaller configuration, so if we compare it to the current configuration and think about it, the production capacity has increased by 20 times in 7 or 8 years. That's impossible, yes. Thank you. Tamara-sama, arigatou gozaimashita. Thank you, Ms. Tamara.

So although we have received further more questions, we would now like to conclude this session.

Thank you all very much for taking time to join our financial briefing despite your busy schedules today.