Renesas Electronics Corp

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Thank you very much, ladies and gentlemen, for taking your precious time to attend Lunasus Electronics' fourth quarter of fiscal 2021 results presentation. Today, simultaneous translation is available. If you look at the globe button on the screen, at the bottom of the screen, please select your language from that button. For today's presentation, we have the CEO of the company, Mr. Hidetoshi Shibata, our CFO, Mr. Shuhei Shinkai, and the head of our automotive solution business unit, Mr. Takeshi Kataoka, and other staff are also present. From now on, Our CEO, Mr. Shibata, will say a few words, and after that, our CFO, Mr. Shinkai, will give you an explanation regarding the results for the fourth quarter, and then after that, we'll take questions from the participants. We expect to finish the whole session in about 60 minutes. The presentation materials to be used for today's meeting are posted on the IR website of Lunasat Electronics. Please turn on your microphone, Mr. Shibata and Billigan. Once again, hello, this is Shibata, CEO of the company. Last year, we had a fire. And to summarize that, and also the progress of our mid to long-term business and strategy, is what we explained in the progress update, which is held biannually, and that is the next session is scheduled for next month. So for today, we would like to focus on the full year results for fiscal 2021, which ended in December 2021. Now, many of you, I believe, have already seen the presentation. On a non-GAAP basis, revenue was slightly below 1 trillion yen and operating profit was slightly over 300 billion yen. So that was the number for last fiscal year. And the demand continues to be strong and robust. And we see that sign continuing. And for fiscal 2022, in the first quarter, quite a favourable And the steady expansion is projected for the first quarter and the numbers are already presented there. So with that, on an ongoing basis, the situation remains not really bad at all for us. And all those questions that we have been receiving from you regarding at which point we'll see an inflection of demand, we will continue to carefully keep an eye on that And if we see any signs of changes, we will be ready to take actions as necessary. That's going to be the plan for this year. So the detailed numbers will be explained by Mr. Shinkai, our CFO. So please bear with us. Shinkai-san, please, the floor is yours. All right. I am Shinkai, the CFO. I would now like to begin the fourth quarter and the four-year results presentation for the fiscal year ended December 2021. Based on the material posted on our IR website, please go on to page four of the presentation. For the fourth quarter, if you look at the middle dark column in the middle of the table, revenue was 314.4 billion yen. Growth margin was 54.3%. Operating profit margin was 98.7 billion, and the profit margin was 31.4 billion yen. And the profit added to the owners of Perim was 80.9 billion, and Evita was 119.4 billion yen. As for the comparison with the forecast, if you look at the third column from – if you look at the far right column, I think you can refer to that, and I'll give you some explanation later. And also for the full year, numbers are presented on the next dark column, third from the right. And also – Celino's acquisition, which was just completed in the end of the fourth quarter, that's not included in the PL. Only the BES that is consolidated for fiscal 2021. That's the accounting treatment for that acquisition. The next page, please. This is the revenue trend on a quarterly basis. The fourth quarter is represented on the far right. Overall, the revenues or the we achieved an increase of 61.4% year-on-year and 21.7% on a quarter-on-quarter basis. If we exclude dialogue on a year-on-year basis, 34% and 8.0% on a Q-on-Q. And as for automotive and industrial infrastructure and IoT business, the numbers are presented already here. And if we exclude the dialogue contribution, Automotive year-on-year was a 37% increase. And Q&Q, 8.1%. And industrial IoT and infrastructure year-on-year, 38.9%. And on a Q&Q, 9.1% increase. Now moving to page six. The fourth quarter, operating margin, gross margin, operating margin, and the revenues are summarized here. We have presented it together with the segment results, the company total on the far right. Let me begin with that. The box on the upper right shows the changes from the forecast. As for revenue, there was a 5.5%. In terms of the median level, there was an increase of 11 billion yen. The Forex impact was about 40%, and also the remainder came from the changes from the automotive and in the industrial infrastructure and IoT business. For automotive, if the Forex impact is excluded, there was a slight underperformance compared to the forecast because there was some adjustment from the customer demand towards the end of the year. As for industrial infrastructure and IoT, there was a significant increase compared to the forecast. PC and mobile related demands and also the former Dialogue products, there was a strong demand for them. So we were able to front load and ship those products that were completed before in advance. And there will be some adjustments in the quarter, this current quarter. And as for the gross margin, 1.3% increase compared to the forecast. And the product mix, as well as the production recovery, were the major driver behind this improvement. And 80% was the contribution for this. And also for the operating expenses, there was a decrease compared to the forecast. R&D, SDNA, on the same proportion, made a reduction compared to the forecast. We achieved a reduction compared to the forecast. And on a quarter-and-quarter basis, bottom right, In terms of the gross margin, there was a reduction of 0.9 percentage point, and this is mainly due to the consolidation of dialogue. That impact accounts for the bulk of this. And also, if you look at the segment that results on the right-hand side, as for the revenues, the breakdown was already provided to you earlier. As for the gross margin and also operating margin, for industrial infrastructure and IoT, Q&Q, if you look at the numbers for Q&Q, you see that there are some changes there, and that's mostly due to the consolidation impact from dialogue. Page 7, please. This is the in-house inventory trends. On the far right, if you look at that company total, the DOI overall, on a Q&Q basis, we achieved a reduction, but if you look at the left-hand side, there was a slight increase in automotive and a reduction in industrial and infrastructure IoT business. So overall, in terms of actual amount, there was an increase, and this is due mainly to the PPA impact from dialogue and the addition of Celeno. If you exclude those impacts, there are three major impacts because of the front-loading of some inventory, including both work-in-progress as well as finished goods, and also for the back end production increasing than forecast and also for finished goods. For automotive, as I mentioned earlier, the timing difference. Because of the timing, there are some back orders. That was the impact. So therefore, both for work in progress and also for finished goods, as we mentioned in the last, compared to the last presentation, there was a slight increase in the inventory level that we hold in-house. And this is the sales channel inventory. The far right shows, again, the company total. And just for your information, for the channel inventory, the dialogue portion is not included here. And we'll try to include the numbers after completing the integration in the first half of this year. The company total, WOI, on a Q and Q basis, achieved a reduction. And if you look at the segment results on the left-hand side, automotive, compared to the initial assumption, there was a slight increase. This is due to the OEM production adjustments. As for industrial infrastructure and IoT, there was a reduction compared to our initial expectation due to the decrease in inventory and also the changes in demand. Those were the two factors behind this decrease in WI. If you look at the actual amount, the inventory may look as though this is flat or slight increase, but In some transactions, in some trade flows, because of SHIB and debit in the actual amount, there seems to be a slight increase. And SHIB and debit introduction will be continued on an incessant basis going forward. So if you look at the actual amount, there might be some times where we see a slight increase in the inventory actual amount. Now moving on to the next page. which is about the utilization rate for the front end on an input basis. Fourth quarter utilization rate was almost came in in line with our expectation at 84%. On a Q&Q, there was a slight decrease due to the number of actual days of operation.

Please turn to page 10.

This is the order trend. Here, looking at the order backlog based on the client, we have been showing you the quarterly trend. And as we have been communicating to date, for the long-term orders, we are trying to take on those long-term orders. And except for dialogue, those are completed in the third quarter. And for the dialogue portion, we are completing those transactions in Q4. So going forward, the order backlog will be coming down Also, on the right-hand side, you can see the total order and the order backlog. On the far right, you can see two bars. The bar on the left, the gray portion is a fixed order, which is equivalent to the bar graph on the left. And then we have not received the order, but based on the contract, we have some orders that's been committed by the clients. That's represented by the commitment bar. And on top of that, we have orders that happens in the fiscal year. So on top of that, we have the orders in FY22. On the right-hand side, you can see the total. So it shows the total demand. And most of that will be the revenue for this fiscal year. And on the other hand, if you look at the bottom, you can see that there will be some order backlog at the end of FY22. So part of this will still be on our books as order backlog at the end of this fiscal year. And so what this means is that when we work on the long-term orders that we started to do from last year, if we do not take those actions, the order backlog of our graph will be coming down in the future. So that is our projection. Please turn to page 11. This is EBTA and free cash flow. In Q4, EBTA was 119.4 billion yen. For the full year, it was 375.4 billion yen. On the right-hand side, you can see the free cash flow. The opening cash flow was 111.2 billion yen. Free cash flow was 95.3 billion yen. Free cash flow for the full year was 259.1 billion yen. Next page, please. So this is the forecast for the first quarter of FY22. Please look at the dark blue column in the middle. For revenue, the forecast midpoint is 336 billion yen. Q and Q is the column that's two columns on the far right. We're expecting 6.9% growth Q and Q. And as for growth margin, we're looking at 55.5% Q and Q. The improvement will be 1.2 percentage point. And for OP, we're expecting a 34.5% margin on Q1Q. That's an improvement of 3.1 percentage point. Next page, please. This is the revenue and demand forecast for Q1 and FY22. As for the forecast for sell-in, we have the Q1Q and the year-on-year. The numbers that coincide with the previous slide, Q2 is 6.9% for ODO. It's a double digit plus, so it will be in mid-teens. On the other hand, for industrial infrastructure IoT, it's a single plus, so it's a low single digit. As I communicated earlier, some of the orders have been pushed forward to the previous quarter, so there will be a rebound. And for the sell-through forecast, we see similar trend for industrial infrastructure, IoT, QOQ basis. It will be an increase of single digit due to the rebound. And for the other segment, we are expecting an increase in double digit. Next page, please. This is the breakdown of revenue for Dialog. The gray portion is the legacy business that's in effect have been sold, licensed PMIC business. As scheduled, in Q4, it was completed. Next, I would like to highlight a few pages in the appendix, placed on page 19. This is a balance sheet. As I said at the outset, with the acquisition of Sereno, It is reflected in the balance sheet. It's about 35 billion impact, which is included in this goodwill. And for Dialog's PPA, in Q1 of this year, we will complete that. And at that point, the PPA will be reflected for Dialog. And for Celeno, it will be completed in Q2. And thereafter, it will be reflected. Page 21, please. And this is a reconciliation between gap and non-gap. So from this time, we have changed the categories so it's easy to see. We have the recurring items and the non-recurring items. Now for the non-recurring items, we have the net effect of fire impact and others. Next page, please. And so this is visualized in the graph. So in the middle, you can see dialogue and serenity related This will be reflected in Q1 Q2 respectively after we complete the integration process. Next, on page 24, this says the status of a CapEx. For Q1, on a decision-making basis, we're looking at roughly 40 billion yen as CapEx plan. And out of that, the I like the blue bar, or it's actually half of that. That is for ramp-up investment. And we'll be utilizing the subsidy from METI. And that will conclude my presentation. Thank you very much.

Thank you very much.

Now we'd like to move on to the Q&A session. The moderator will first like to explain how to raise questions. If you have a question during the Q&A session, please select the raise hand button on your screen. So please select the raise hand icon on your screen. From those who raised their hand, we would like to call your name and company name in the order. When your name is called by the moderator, you'll be able to ask the question. So please unmute yourself and begin your question. Now, in the interest of time, we will like to limit the number of questions to two questions per one questioner. All right, so the first question from Citi Group Securities, Ms. Fujiwara-san, please unmute yourself and begin your question. Hello, this is Fujiwara from Citi Group Securities. Can you hear me? Yes, we hear you. All right, so two questions. So please allow me to ask them. One point of confirmation at the outset. On page 10 of the presentation, on the right-hand side, you have the total demand on this slide. The fixed portion is about 1.2 trillion, according to what I see here. And on top of that, you have the commitment and also the orders coming in in 2022, which appears to look like 2 trillion yen in total. And there's a backlog of about 500 billion yen, according to what I see here. So, according to your view, I think, as total revenue, 1.3 trillion yen, is that your projection, basically? Is that what is implied? Shown in here, the actual direction is okay, but 1.5 trillion yen appears to be too bullish. But that basic direction is correct. Okay. So let me dive down into that 1.5 trillion yen. Let's say that hypothetically that 1.5 trillion yen is correct. Then this 1.5 trillion yen, if you wanted to sell that, do you have the capacity available to sustain that sales? also if 1.5 trillion yen um if you wanted to do that if you exclude the consolidation impact of dialogue um i think 30 uh mid 30 some percentage increase was already achieved in 2021 so and then in 2022 excluding dialogue i think um 10 or y or y increase i think is projected or planned for fiscal 2022 and i think that is a high level um by internal international comparison so Practically, do you think that is possible? Can you give us a direction about that? All right. So in order to avoid misunderstanding, 1.5 trillion yen I think is too bullish. So I think that is too much. So I don't think we can expect that. So 1.5 trillion yen, if you talk about the supply based on that, then I don't think that is feasible for us and that is not our plan either. And as a basic direction, since last year, And for this year as well, on a continual basis, we are expecting a significantly large growth. And that is true. And the supply to our company for that portion, according to what we can already see today, I think we have by and large secured those supply for us. What I mean by by and large is that, roughly speaking, there are two points here. Although the size is not that significant yet, foundry and OSAT, and some raw materials, those suppliers, mainly, when we think about them, on an ongoing basis, the supply increase or allocation increase are still being requested, and some portion of that is included in these numbers, and also, And also, this continues to be the trend for the last two to three years. Omicron and the COVID-19 impact still remains, and we still have that impact here and there. So what is happening? And we don't have any certainty as to when and where the supply could be suspended. So those are the two factors. So 1.5 trillion yen, I think, is too much. But on a comparison with last year, I think we can see expect a steady growth on a continual basis, and the materials and the supply for that, and the capacity to achieve that in-house as well as outsourcing, the capacity for that, I think by and large have been secured. That's what I wanted to say here. That's all for me. Thank you. Okay, thank you very much. So one follow-up question on that. So you said that you are continuously requesting some allocation increase. to some partners, but the guidance for first quarter, if you look at the full year of ESCO 2022, I think this is the, I think the lowest level. So should we continue, should we expect a sequential increase over the quarters, coming quarters? The annual guidance is not provided this time around. So I don't want to repeat this interaction. I think it's difficult for me to repeat this interaction. But as of this point, how should I put it? We are not, expecting significant volatility. So a favorable sequential curve is projected. That's what I'm saying. Thank you. Thank you very much for that. I understood.

Thank you for the question.

Next question is from Hirokawa-san from BOA Securities. Please unmute yourself and ask your question. This is Hirakawa from BOVA Securities. Thank you for this opportunity to ask my question. My first question is, last year, they want to assess auto semiconductor sales increase by 35%, and it was over 30%. And I think the increase in the content for vehicle and also fulfilling the inventory, how would you break down that growth? There is a concern that there's too much semiconductors out in the market. So that's the background of my question. And on top of that, going forward, we'll look at the auto production and also the automotive semiconductor growth. And also, what kind of gap should we expect between the two, given the contents per vehicle increasing? So that's my first question. Well, we have Mr. Kataoka. So I will ask him to take that question later. But before that, let me offer you a few words. Looking at the content vertical increasing, if I make a very conservative or solid comment, I guess we will not see a major change in the number. But intuitively, looking at the recent divisive trend, the content's impact is getting bigger than before. So that's my first-hand impression. So I think this is coming from two factors. One is that I think you are also getting this impression, and this may be a consensus, but recently, if you look at entry-class vehicles, the ADAS equipment is very robust compared to before. So what's installed is actually as good as for the premium luxury cars. So that's one impact. And also the second fact is the shift to EV, as you all know. So we're seeing that impact. So that's one major impact. And the second fact that I'd like to highlight is looking at the US OEMs. They have been quite vocal and open about this, but there's been a lot of constraint on supply. So manufacturing and sales, in a way, they have to prioritize what they want to do. So they have been quite selective. And our clients are client-based. I think it's prioritizing the vehicles that are higher in price. So the electronic contents and the semiconductor contents, that's higher. in these premium cars, and I think the OEMs are increasing the production of those high-end cars. So in that sense, compared to the previous trend, looking at the most recent trend, the semiconductor contents for vehicle growth is becoming greater. So that's my another impression. I'll go ahead over to Mr. Kataoka for the details. Yes, I'm Kataoka from the Automotive Solution Business Unit. Last year, we have seen various data points And looking at the production increase, that was about 3% last year. And the content growth, we have various data points, but it is considered to have grown by 8 to 15%. Some are saying it's 20%, so it's a wide range. But as Mr. Shibata mentioned earlier, there is a constraint on the auto production. So the OEMs are shifting their focus on the high value added cars, which means that they are using more semiconductors. And I think the contents growth may exceed that 8 to 15% that I just said. So in sum, the production and growth and the contents growth put together, we may see a growth of around 20% or more. But as you pointed out, our growth is at 35%. So where this is coming from is that on top of what we're seeing in the market, the inventory at the OEM and 201, it's at historical low last year. And even today, that's been the case. As I think they're building up on the inventory level. So that is the delta we're seeing. But clearly, Our inventory level is building up for sure, so we are paying close attention to that. Both OEMs and tier 1s, we are closely coordinating with them to monitor the situation. But if you just look at the OEMs, the inventory of finished goods is at historical low, and that's what we can see from the general data. And for this year, the production units, again, there are various data points, but What we have on hand, some data points suggest more than 10% growth. In the contents growth, as last year, that will be strong. So in sum, altogether, we can expect a high growth. But having said that, the oil production volume will be impacted by semiconductors or other components. So if the oil production does not grow by over 10%, as I said, then in total, there could be some adversity. So that's something that we need to closely monitor going forward.

I have another follow-up question.

You say that you are closely monitoring the inventory level. How about the backlog? How about the client's inventory level? Are they at a healthy level? Can you share to the extent possible How closely are you watching those inventory levels? Can you help assure me with the inventory level that you're monitoring at the client base? Akatoka-san, would you like to answer? Well, let me... Okay, I'll take the question. This is Shibata. We don't see a surprising level and a micro level different companies when we talk to them. And based on the discussion and also where we can get the actual figures, we are monitoring the trend. And also we are also watching the micro data points. In particular, the trend of the inventory level is something that we are closely monitoring. As I tried to say, if the absolute value of the amount of inventory is high or low, but compared to the previous level, we're trying to see where we are today in the cycle also reflecting the financial data. So when we take a comprehensive macro view, we can see if the current level is okay or if it is alarming. So that's how we're trying to view the trend. So I will be repeating myself, but last year, about two-thirds of the revenue or increase in revenue I think was okay, but one-third of the revenue growth Regardless of if it was intentional or not, I think it was built up in the inventory. So that is my view. On the other hand, for this year, looking at the oil production compared to last year, the projection by many is that it's going to grow quite significantly compared to last year. So if everything goes smoothly, then we should not see the situation as a major concern. So looking at the production plants and also the third period is the production plants versus those plants. If we see underperformance in the actual numbers, then we may have to rethink our strategy. Thank you.

Thank you very much for that. Now the next question is from Daiwa Securities. Sugiura-san, please. Begin your question after unmuting yourself. Hello, this is Sugiura from Daiwa Securities. Thank you for appointing me. I have a question regarding the demand first. 2022, ABU and IIBU. For market growth, which is expected to achieve a higher rate of growth? In Q1, I believe, IIBU's because of the reaction of the shipment that was made in advance. I think the growth rate for the Q1 is lower with IIBU, but on a four-year basis for automotive versus IIBU, which can expect a higher rate of growth. And if possible, can you also comment on the demand trend by application? And also... due to this product portfolio. Is there any element where you can achieve a higher growth than the market average? Can you comment on that as well? As regarding the revenue growth, I think AABU is expected to achieve a higher rate of growth compared to IIBU for this year. For IIBU, mainly, as a strategy, intentionally, all those efforts for diversification. I think those will skillfully and successfully kick in, and I think that is already manifesting itself. And on the other hand, because we have diversified to some extent already, those cloud data center applications, which can achieve a high rate of growth, compared against those portfolio that we have a high bet on, I think, relatively speaking, the growth rate will be smaller because that's a necessity, and that's inevitable. When it comes to automotive, we are expecting a huge rate of growth this year after those years of performance. Of course, the details will be added by Kataoka-san later if there's anything else that he can comment on. But for applications, ADAS... EV-related applications are expected to achieve a high rate of growth, according to our projection. But in our case, especially the third-generation SLC, as well as 40-nano MCU, because of the DINs that we have acquired in the past, at last, are now being deployed. So I think that is manifesting itself in terms of huge sales growth. Of course, it's very difficult to define properly what SOC is, but I think compared to market average and compared to our competitors, I think this is an area where we are seeing a larger rate of growth, higher rate of growth. That's all for myself, but Kataoka-san, do you have anything to add? Yes, for automotive. electrification, as well as XEV electrification, as well as ATAS and Gateway. Those applications are going to increase in number, and this is going to be a standard feature for all cars, which used to be an optional choice in the past, but MCUs and SLC in our case is therefore expected to increase significantly, in some cases triple or three double compared to last year, because In total, I think we can expect a significant growth for those applications going forward. That's all for me. Thank you. My second question. On page 10 of the presentation, I have a question as well for this page. Regarding the backlog, the backlog growth, Q1, Q2, and Q3, that remains very high, but in the Q4, the growth rate has slowed down quite significantly. So for your order efforts, your long-term efforts. I think that this has had a positive effect on the fourth quarter, but your long-term efforts for order-taking, how did this translate into the backlog level? And I just wanted to know if this changes, if the slowdown is a trend change or not. Well, thank you very much for asking that question. This is a matter that I I think it is very important that you understand. So that's the reason why we drafted this graph here. But one step before that, I would like to mention that each company are taking different measures in this area. Like a U.S. company, a particular U.S. company, they have already included some fixed orders for next year already in this year's number. And European companies do not do any effort like that at all. What we have done is that for the full year of this year, all those orders for this year, those were, we tried to finalize them and fix them first and foremost. So we are not talking about next year basically at all. So last year, in the middle of the last year, since the middle of last year, we thought that we have to fix these orders. Otherwise, we won't be able to catch up with the supply and many different plans. So for the demand for fiscal 2022, we requested customers to fix those orders. Those requests were given to customers accordingly. All those gray portion here, except for some little portion, which is a mixture of some many things, but basically those are the orders to be delivered in fiscal 2022 and nothing beyond that are basically included. So We started this effort in the middle of last year and it started to increase significantly in the early part. But then in the fourth quarter, the fiscal 2022 orders were already secured and already issued. So therefore, as Mr. Shinkai mentioned, our activity to secure our orders is already finished. And then as we have informed you the last time, the dialogue efforts was somewhat belated. So therefore, those are not included here. So flatting out here, was a natural outcome as a result of our planned efforts. Therefore, this gray portion is expected to come down going forward. This is what we wanted to convey to you, and that's the reason why we prepared this diagram. And at the risk of repeating myself, beyond this, outside of this framework, in writing, the non-cancellable orders have been agreed to, and that accounts for a sizable portion, which is represented by the commitments in the middle section there. But the reason why we have done this is because based on the request of customers, they wanted to use a conventional EDI system for order placement. So for the orders beyond that for the future, they didn't like that kind of operation. Some customers resisted that idea. So for those customers, we said, it's okay. So we admitted that. So outside of that system, we decided to agree on the order taking and order placement. So when the deadline becomes closer on the EDI system, the orders are going to come in and those are already committed. But in terms of our system, it is not recognized as orders yet. And the top section here, the orders in fiscal 2022, those are from new customers and long-tail customers and due to other reasons. Those are not really finalized yet as an intentional decision. So that was decided by our side, rather. So for those customers, though, just like before, a certain lead time will be set for taking those orders, just like before. So those middle portion commitments, in total, those numbers are already fixed. And as we move forward, this will translate into and be blended into the grade portion. And then at the top of that, the total amount of that is already not fixed, and that's the reason why this is expressed in gradation colors. That's the rationale behind this graph. So, therefore, as time goes on, the gray bar will come down in terms of the size, and therefore, To offset that slightly, the commitment portion and the orders in fiscal 2022 will blend in to the gray portion. And for that portion, the amount will come down. And then on the right-hand side, the dark blue part, that will be translated into the revenues that is represented by the dark blue part. Now, as for the orders from fiscal 2023 onwards, although we have received some questions already, because the overall market is still difficult to make a proper forecast. So we would like to spend some more time. So towards the middle of this year, we will have to consider whether to repeat the same practice or give more flexibility, shorten the timeframe or extend the lead time. I think we will have to decide on the most appropriate selection and respond to customers. I hope this answered your question. Thank you. I have a follow-up question on that. On the other hand, the production lead time is getting longer, and also the demand and supply for semiconductor remains to be very tight. So therefore, shortening the lead time, I think, in practicality is very difficult, according to my view. So if that is the case, then certainly the fixed orders will translate into revenues and then that will be delivered. But once the new orders for fiscal 2023 kicks in, I think the backlog coming down was difficult to understand. I think the backlog will not come down that much. So can you comment on that part as well? Right, towards the middle of the year, it depends on the efforts that we conduct and undertake towards the middle of the year. Are we going to repeat the same process and the efforts as last year? Then the gray bar may go up. Okay, understood. Thank you. Then the lead time itself, I don't think we have seen a significant extension of the lead time in my perception. So the semiconductor device, manufacturing lead time or after taking the orders towards the shipment, until the shipment, that lead time, because the demand is so strong, it's getting longer, of course. But when it comes to the semiconductor production equipment, after order placement and until that is delivered to us, that lead time is also getting longer and longer. That is true. But when it comes to capacity, production capacity, such as raw material foundry and all such, The production capacity, how to allocate those capacity, actually each company for the allocation beyond next year is not really finalized. I think most of the companies have not finalized the allocation plan at all. In our case, rather, towards the middle of this year, we are going to finalize the allocation plan. We received that kind of... proposal. Of course, some major companies, I think, are talking about the second half of this year. So that means there are flexibility for us and room for us to make changes. So we can wait until then. So we will attract and then decide on the options for next fiscal year and beyond. Thank you.

All right.

Thank you very much.

Thank you for the question.

The next question is from Nikkei. Please unmute yourself and ask a question. Hello, this is Nikkei. Can you hear me? Yes, we can hear you. Thank you for this opportunity. My first question is looking at the bottom profit, I think there was a change in the accounting period, and I think you have renewed the previous record high. I think there were some changes in the market, but in achieving your record high profit, how would you assess the reform that you have conducted to achieve this? And based on that, for this year, what is going to be the focus of your strategy? Are there any initiatives that you are prioritizing and focusing on for this year? Well, it's hard to say one thing has contributed to this, but I may be blowing my own horn, but we have come up with products that are more needed by the clients. So to a certain extent, we were able to offer it at an appropriate value and price. So that sales strategy is starting to make progress and bear fruit. So I think that's one contribution that we were able to enjoy. And it's difficult to express this, but I think the biggest thing and something that really reflected into our result was How should I put this? So even if I say something really nice and rosy, it's difficult to foresee what's going to happen in the future. And with those uncertainties, we have to have multiple scenarios on our hand. And in accordance with the changes in the projection in the market, we have to decide if we are going to go to the right path or the left path. or we are going to step on the brake or accelerate. And I think compared to before, we have been able to make the decisions very quickly and have been able to execute those decisions. So I think that's one big factor that helped us. In the market where demand is very strong, like we are seeing right now, the products with high demand, and we have taken initiatives to increase the product where the demand is strong. And also, when the demand comes off, we take the opposite initiative. Also, from wrapping up the production and also procuring raw material, allocation negotiation with the OSAT and foundry for securing the allocation, all of those corporate activities have been conducted based on the changes in the projection in the market. And I think we have been able to move with agility much better than before. And what we are going to focus on this year to answer that question, looking at just this single year, like I have received a lot of questions and I have referred to slide 10 to answer that. And for the demand, I believe we have done what we need to do to a certain extent. And for executing the delivery to the customers, we know what we need to do. So it's just executing those plans. So in that sense, for this year, are we going to switch our gears so that from a mid-term perspective, or in September last year, We updated the target, but we want to try to upgrade that to the next level or the level thereafter so that we can achieve a leap. So we want to prepare ourselves to be able to achieve such big leap in the future. So that will be a token acquisition or investment, and I will continue to explore those opportunities. And also regarding production capacity, we will reconsider if what we're doing right now is the right strategy. We will continue to review and revisit the strategies in place. And also, looking at a business model, we will look at where the source of the value proposition is coming from. Is it okay for us to continue as an extension of the existing business, or should we dig deeper to take necessary actions to enhance our value proposition? That is also something that we will continue to contemplate on. And as I always communicate with the analysts, soon we're having behind the competitors, but we would also like to take action in regards to shareholder return. So those are going to be the focus for this year. And to the extent possible, from a near-sighted strategy, I want to have a longer-term perspective to refine our long-term strategy. Thank you very much. I have another question. Looking at the Q4 that just ended, for IABU, I think there was a growth where it was front-loaded by Dialog. But looking at Q1 for IABU, looking at the different applications, would there be any change in the trend? What is going to be the driver? Can you elaborate on that? Looking at the sequential trend, I wonder how relevant that communication is, and I always question myself on that point. But as I commented earlier, some of the positive factors like catching up with the production, and if we eat the future demand, and then the negative impact appears in the following quarter. So it's like a mixed picture. So I wonder if it makes sense for me to talk about the sequential trend, but looking at the long-term trend, this year, the strong area is for industrials, particularly for factory automation. So something that's easy for you to image in those kinds of sectors, I think this has started to become strong from last year, and I think that this will continue to show strength. And also, for PC, mobile computing, slightly lagging behind that. The supply is starting to catch up. This year, the printer demand I think will be quite high for this year. Versus that, for PC mobile computing, compared to last year, I think we will see a significant slowdown. But as we discussed in the last result presentation, the rate of slowdown is becoming more moderate. So it's going to be a moderate growth is what I see. And also on the same note, for home electronics like the AC, I thought that there will be some weakness, but at this point, it has not weakened as we had anticipated. So PC, home electronics, for those, there will be some slowdown, but it will be slightly stronger, so the slowdown will be more moderate. And where we can see some bullishness is cloud data center. So some of the NPU vendors for the platform upgrade, it will be subject to the upgrade, but already for DDR5 compatible product has been seeing risk growth in this year and also next year as well. I think there will be another growth to another level. So the strength is coming from FA and also cloud and data center. So those are the sectors which are quite strong in demand for PC and consumers. There will be some slowdown, but compared to before, relatively speaking, it will be quite strong. So that's the view I see in front of us. Thank you.

Thank you. Now, since we are running out of time, We would like to make the next question the last question for today. The questioner will be Yasui-san from UBS Securities. Please begin your question after unmuting your microphone. Hello. I have two questions. The first, your market share seems to have increased according to my simulation, but of course there is an impact of the Naka factory fire, so it may have come down and then So do you have any sense of actual growth in your market share in some of your products? So can you comment on that point first? And my second question is about after the new year, the industry seems to have accepted about the shortage of the semiconductors and therefore the semiconductor market is not likely to collapse. So as a way of your negotiation, When it comes to price negotiation, do you are seeing some favorability in your position? Or what about cancellations? Product mix, I think, are you luring customers towards the products that you are producing? So in terms of your contract negotiation, are there any favorable conditions that are expected for this year in terms of your negotiation with a contract with customers? Well, the background of your question, I believe I have a good understanding on why you came up with that question, but I think it's very difficult for me to comment on them. So how should I put it? Well, in that context, I would say the tailwind is likely to continue this year. That's how I see it.

I'm so sorry.

Can I stop here? All right. Thank you. If I comment on too much, it will come back to me like a boomerang. So the tailwind continues. I wasn't really able to hear your first question. Your market share. All right. Market share. Market share at this point of time. I think we should not be overreacting to that. So I think we should comment on them after the third party numbers become available. But as at this point, those products and areas that we wanted to grow are beginning to show an increase. That's what we sense. Especially, as I mentioned earlier, in the case of automotive products, strategic products, if you will, those are very made clear. And those are, again, at the risk of repeating myself, these are enjoying a strong growth. And I think that those will be reflected in numbers. And in the case of industrial infrastructure and IoT, because we have a wide set of products, it's very difficult to generalize things. But from ourselves who are conducting this business, The original Renesas products, the former Renesas such as MCU and SOC and BMIC, after 2013, we have suffered a reduction in market share constantly. Of course, that was helpless, because we did this intentionally, but from an outside person's point of view, I think it looks as though we have suffered a gradual decline. But in these areas, we have been able to successfully change the trajectory of those market share of those products. I don't want to make any bullish comments and admit a mistake afterwards. So after the third-party numbers become available, which is expected in two to three months, if my comment is supported by those numbers, I think I can make further comments. But at this point, I would like to resume my comments at this juncture. Thank you. All right, thank you very much. With this, we would like to finish the Q&A session. And finally, I would like to ask Mr. Shibata to make a final comment.

Thank you very much for your time today, and thank you for all of your questions. Like you asked, the numbers are growing quite steadily, and some of you may feel that is this going to continue, and is it going to be the right forecast? And on that point, we are continuing to monitor the trend. So should there be any changes in our perspective and interpretation, we will share that as quickly as possible. At this point in time, we are not concerned over this trend. And another point that I'd like to highlight is that making this year the turning point, We want to strive for further growth. Also, we want to transform ourselves to pursue further growth. In March, when we update you the progress on this strategy, at that point, we will not be at that point to say so, but during the course of the year and when we reflect on this year, I'm hoping that we can comment that in the near future, we will be able to try to strive for further growth. But the next month, we will offer you more details on how we are making progress in our midterm plan. So once again, thank you very much for your time today, despite your busy schedule. So with that, we would like to close the result of briefing 024 of FY21. Thank you all for your participation today.