Renesas Electronics Corp

Good morning, everyone. If you like to listen to this session in English, please click the interpretation icon at the bottom of the screen and select English channel. Please select a language by clicking on the translation icon at the bottom of the screen. Now, please turn on the video, speakers. In today's presentation, we have the CEO and CEO of Shibata Hidetoshi, the executive director and CFO of Shinkai Shuhei, and other staff members. Now, I'd like to introduce Mr. Shibata, and then I'd like to introduce Mr. Kiketsu from the third quarter. Next, we'll have a Q&A session. The total time of the session is scheduled to be 60 minutes. The materials used in today's session are the same as those on our website. Mr. Shibata, please turn on your microphone.

Good morning, everyone. I'm Shibata. Today, I caught a cold, and I think it's hard to hear because of my hoarse voice. I'm sorry. The temperature has dropped considerably. The school event and the autumn event are all over the place, and my body is full of wind, so I caught a cold. Everyone, please be careful. I think many of you have already seen the third quarter, but in a sense, I think it was a landing as expected. I think you remember, but there may be upsides, but I said last time that we will run carefully, but it is almost as it is. The sales from us are as planned at the beginning. On the other hand, the sales from the channel touched a little on the upside side, and the channel stock fell slightly, which is the result of the third quarter. Therefore, if it remains as it is, it will not go up, so I think it would be nice to be able to expand the channel stock a little for this fourth quarter. As a whole, from the end of the channel, I would say that it is almost a flattish feeling. I think it's about that kind of feeling. There are some specific customers' production and inventory adjustments, so I think it will go down a little. On the other hand, the 28nm mic and the generation 4 SoC, of course, are continuing to stand up smoothly, but they are still small, and as for the 28nm mic, As I mentioned earlier, it was mainly adjusted by specific factors in China, and I don't think it's going to grow so much. I think it's going to grow steadily. On the other hand, I would like to point out that in terms of 4Q, the outlook is much better than the previous one. I'm sorry, I'm a little flustered, but I think it's good. Of course, there are some drawbacks as a whole, but as a whole, we are expecting a strong recovery. In the fourth quarter after the third quarter, the AI infrastructure has continued to be in a very strong state. We are working hard on the production side. We are thinking that we will try our best to make and sell in a way that does not cause any damage to consumers. Also, regarding the IoT field of consumer mobile that represents consumers, there is nothing strange about this, but we are seeing a decrease in the seasonality of the third quarter going up and the fourth quarter going down. However, there is also some share gain here, So I think it's a good trend for the entire IIoT. As for automotive, there is still a lot of inconsistencies, especially with Nexperia. We will drive carefully while looking closely at our and the channel's stock. In particular, regarding the management of the channel stock, It was a long time ago, about five years ago, and there was a situation where it wasn't good, so based on that, we will continue to be careful, so I would be grateful if you could take a look at this and give it a high rating. Then, today, until the last budget announcement, It's been over a year since we acquired Altium, so we've heard a lot of questions about what's going on, so I'd like to talk a little bit about it today. From now on, I'd like to make the story a little more fulfilling step by step, so I'd appreciate it if you could allow me to touch on it today. Please show me the slides of the office. This is a story of Altium alone, but so far, as planned, the cost synergy and organic growth have been going well without any deviations from the plan. The above two meanings are written on the left. As for the sales synergy, this is of course a matter of time, In other words, the meaning of the word enterprise is that it starts with a little push towards a large customer that leads the world. Right now, we are focusing on the middle part. If we buy Altium and keep it stand-alone, we won't be able to do anything. So we are making a big change. I've already announced this from Altium, and if you look at the website, I think you can get a sense of it. Until now, it was a company that provided products for PCB designer software and Octopart, but now it is in the process of making a major change to a company that provides platforms. At the same time, We wanted to accelerate the expansion of the user base, and we started promoting our efforts for that. And one of the big pillars of why it's called Renesas is our platform, which is known as the Renesas 365. We are currently developing it. In the first half of this year, we held a trade show called Embedded World. I put the demo in the video, but based on that, we are currently preparing to launch it within the year. In the future, as you can see on the right, the Renaissance 365 that I just mentioned is scheduled to be launched within the year. By the way, this is not something that will surprise you so much at the time of launch. It's not going to be a great thing. It's not going to be a great thing. It's not going to be a great thing. From there, we are planning to go through the process of constantly repeating upgrades, like Windows 95, where Windows took a big take-off, so I hope you can see it with a good sense of expectation. Regarding the progress of Altium and digitalization as a whole, as I mentioned earlier, we are currently in the process of making a big change, so I think it's a bit hasty to decide all the KPIs here and then change them later, so we're setting up the KPIs a little carefully right now, so if things go well, we'll be able to talk about how to trace things like this by the time of the next continuous calculation. Also, we are planning to report progress on the overall progress of the capital market day next year, which is a major milestone. We are planning to report progress on the overall progress of the capital market day next year, which is a major milestone. We are planning to report progress on the overall progress of the capital market day next year, which is a major milestone. We are planning to report progress on the overall progress of the capital market day next year, which is a major milestone. We are planning to report progress on the overall progress of the capital market day next year, which is a major milestone. We are planning to report progress on the overall progress of the capital market day next year, which is a major milestone. We are planning to report progress on the overall progress of the capital market day next year, which is a major milestone. We are planning to report progress on the overall progress of the capital market day next year, which is a major milestone.

I'd like to update the progress on the left side of the previous page. It's been a year since the first quarter, and we'll talk about the progress so far. On the right side, you can see the cost synergy. In the first place, the cost synergy is the initial cost cut right after the closing, and then the cost increase from there. We are thinking of a two-stage structure that uses the resources of Renesas to absorb them. The cost reduction in the first stage was completed by the end of the first quarter of this year. The second point is organic growth. As you can see on the chart on the left, the annual recurring revenue is shown to show the overall growth. This is a indicator that shows the continuous revenue of a part of the annual contract or subscription that occurs from the service. Compared to the third quarter of 2020, which was just a year ago, it has grown by 15% with Yaw Buyer. This means that it has grown steadily at almost the same pace as before. The sales synergy started with a cross-sell for enterprise. Finally, I would like to talk about the transition to a platform company. In addition to the development of Renaissance365 as a line-up, I would like to talk about the revenue recognition standard announced in the first half of the fiscal year. The transformation of the business model to a platform company shows that the recognition standard has been changed from this period. That's all for the progress update on Altium. From now on, we will use the usual slides to talk about the third half-time calculation. Please go to page 6. This is the summary of the settlement. Please refer to the dark blue line in the middle for the third quarter. The sales revenue is 33.42 billion yen, the total profit is 57.6%, the operating profit is 1,032 billion yen, the operating profit is 30.9%, the total profit is 882 billion yen, EBITDA is 1,225 billion yen, the exchange rate is 146 yen, the euro is 170 yen. Please refer to the three rows on the right for the expected cost. I will explain it on the page later. This is the non-GAAP framework, but I will explain the GAAP framework later. Next slide, please. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales revenue, net profit, and operating profit. This is a summary of the third quarter's sales Automobiles landed in line as expected. Originally, we were planning to export to the upside of sell-through, but the sell-through was improved and the export landed as expected. Industrial infrastructure IoT has also increased in cost. Here, digital power for AI and digital power for server and TC, as well as the memory interface, have been the center of attention. Next, the net profit and loss ratio was 1.1% above the expected value. It was mainly due to the improvement of MIX and the price movement. The improvement of MIX was also seen in the above slide of sales, but it was sold with a relatively high gross margin of memory interface and so on. Regarding the range of motion, we will talk about it later, but the range of motion of input has increased slightly. By reviewing the import schedule, the number of imports in the third quarter has increased. In terms of operating profit, there is a large gap in the expected cost of 3.9% points. In addition to the improvement in sales and profit-making, the reduction in operating costs has contributed significantly to the improvement. In terms of actual costs, the operating costs of R&D, SG, and OPEX have decreased by 6.3 billion yen. Half of it was due to the deterioration of the research and development cost, and the other half was due to the reduction in cost. The effect was not as expected. Therefore, the deterioration of the research and development cost I think it will have a significant impact. I will talk about it in the fourth half of the year, but if you look at it on the average of the fourth quarter, I think it will be a more realistic operating profit rate. Please refer to the box at the bottom right for the supply and demand. The sales revenue increased by 2.9%, and the number of cars and industrial infrastructure increased by 9.9%. The net profit-saving ratio increased by 0.8%, and the mix improvement has been improved, and the cost-benefit ratio has been slightly increased. As for the operating profit, it increased by 2.9% with 949 points. The cause is the loss of sales, as I mentioned earlier. Next slide, please. Oh, sorry. Here it is. Excuse me. This is for each segment. As for cars, if you refer to the lowest operating profit rate, the operating profit rate is greatly improved at 949. This is a reflection of the loss of one-off performance in the second half of the year, and the specific damage costs and so on. This is a reflection of the loss of one-off performance in the second half of year, I don't know if it's true, but in terms of performance, well, in terms of how it works, it's a 3rd quarter. If you look at it in total, it's 29.5% in terms of sales performance for automobiles up to the third quarter, but that's roughly I think it is close to the current state. There is nothing special about the industrial infrastructure IoT, so I would like to move on to the next page. Let's look at the sales revenue. The overall revenue was 3.2% in the year-on-year, and 2.9% in the year-on-year. As you can see in the description, it is different for each segment. Let's move on to the next page. This is a trend of various numbers. There is nothing special about this one, so please go to the next page. Let's talk about the stock. We have organized the increase and decrease of QONQ. First of all, it is our own stock. In the third quarter, QONQ increased the stock and DOI as expected. In the third quarter, DOI increased to 111 days. As for the fourth quarter, we expect it to increase by 949. We are planning to build a large bank focusing on internal affairs. On the other hand, we would like to build a large bank for AI and DC, but we are not able to do so. As for the finished product, we are planning to make a small production for the end of the year to support the delivery of the year-end products. Next, let's look at the bottom right of the channel stock. In the third quarter, the stock of both WOI and Zyko decreased in real-time. In the second quarter, it was 8.9 weeks, and at the end of the third quarter, it decreased by 8.1 weeks. All of this resulted in a decrease in the channel stock due to sell-through. In the fourth quarter, we expect to see a decline overall. Automobiles will be shipped like sales through, and the stock will be doubled. Industrial infrastructure IoT will be shipped like sales through, but for AI and DC, for data centers, sales through will continue to be high, and as a result, the channel stock will decrease. In Shibata's comment earlier, I mentioned that the channel stock is expanding, but looking at Q49, the third quarter and the fourth quarter, the sell-through is roughly flat, and the sell-in is increasing. In that sense, we are saying that the channel stock is decreasing. Next page, please. Regarding the operating rate of each process, as I mentioned earlier, the third quarter From a 50% down view, the input-based efficiency increased slightly to 50%. However, this was due to the fact that we reviewed the operating schedule at the end of the year and forwarded the input to the third quarter from the fourth quarter. In that sense, we expect to see a decline due to the recoil in the fourth quarter. There is nothing specific about the investment in equipment. Next page, please. Let's look at the forecast for the fourth quarter. Please refer to the blue line in the middle of the fourth quarter. The average sales revenue is 3.4 billion yen. The total sales profit is 57.0%. The operating profit is 27.5%. As a prerequisite, the dollar is 150 yen. The Q4Q is 3 yen. The euro is 175 yen. Similarly, the Q4Q is 5 yen. In terms of revenue, 34.5 billion yen in the central region is 16.2% in the year-on-year, and 1.7% in the Q4-Q. However, the Q4-Q's increase is due to the fact that there are many devices that are based on the Q4-Q, and the revenue is B. It's a Q&Q of device sales, but it's a mobile and IoT segment-related seasonal decline. It's a pre-investment in the industry where we can see a strong AI and GC direction, as well as a bottom-out industry. The sales revenue is 50%. At 7.0%, we saw a minus of 59 basis points with Q4Q and a slight drop. The main factor is the increase in MIX. The operating profit rate is 27.5% and a minus of 338 basis points with Q4Q. The main factor is the increase in OPEX at Q4Q. The shift from Q3 to Q4, which I mentioned earlier, In addition, the focus on the end of the year and the cost increase of the cover assets will contribute about 1 in 3, and the OPEX will increase by 1.1 billion yen with QMQ. The operating profit rate is 27.5%, which is 29.2% on average in the short term, and 27.7% on average in the short term. From there, we have improved by about 150 basis points. This is due to the improvement in the progress of the top line and the effect of cost reduction. If you look at the bottom right of this table, you can see that we have added the volatility of the exchange rate. The volatility of the exchange rate is quite high, and we have added how it will look like if the exchange rate is converted to 100 yen. To summarize, each dollar and euro has an impact on the sales and business profits when they fluctuate by one yen. When the dollar fluctuates by one yen, it has a 17-billion-yen impact on the sales and revenue of the fourth quarter and a 7-billion-yen impact on the business profits. Based on this value, if we convert it to USD 100 yen and EUR 120 yen, we can see that the market share of the fourth quarter is 27.5% to 22.3%. And for the year-round, 28.5% to 23.0%. Next, let's take a look at the gap in the appendix. Page 19, please. The net profit is 1,063 billion yen. The valuation of Ulf Speed is in the form of other financial funds, which is 4.45 billion yen. Next page, please. I will explain the structure and how to think about it. As you can see on the left, at the time of the reinstatement support contract before Chapter 11, we agreed to exchange the reinstatement that we originally had for the transfer fund, the normal stock market, and the new stock market. And the continuation of Chapter 11 was completed at the end of September. We evaluate these assets at the end of the quarter, but they are basically equity-based assets, so the valuation depends on the global speed of the stock value. As you can see in the middle, in the second half of the year, we estimated that the market value would be $16.6 billion. This was the basis for the reconstruction plan. Accordingly, we estimated that our assets would be $5.75 billion. In the third half of the year, After the continuation of the chapter 1, the capital stock price was updated, and the total number of shares after the complete contract was increased to the share price after the contract was completed. The share price at the end of September was 28.6 dollars, and the share price at the end of September was 27.1 billion dollars. Accordingly, the amount we can calculate is 8.74 billion dollars, which is 13.1 billion yen in Japan yen. The difference is 4.45 billion yen as a form of the valuation. This is the financial impact up to the third quarter, and we have summarized what will happen in the future on the bottom right. At the moment, CFIUS has not been approved, and it has not been approved by the normal stocks and new stocks. The stock-based ones will be approved after CFIUS is approved. Currently, the stock-based and new stocks have the same economic value as CFIUS. On the other hand, CIFIAS is expected to get the approval in the process. However, due to the closure of the U.S. government agency, the schedule has been extended. After the approval of CIFIAS and the acquisition of a stock, and the transfer of shares, and the acquisition of a new stock, it will be about 30% of the stock. However, by limiting some of the stockholders' rights, we are now proceeding with the policy of eliminating them from the financial impact caused by the use-and-use link.

This concludes the overall explanation. Thank you very much. Now, we will move on to the質疑応答. Shibata-san, please turn on the video. First, I will explain how to ask a question. If you have any questions, please press the button on the screen. If you raise your hand, please call the company name and name in order. If you have a vision, you will be able to speak, so please unmute your microphone yourself and ask a question. In addition, in terms of time, please ask a question up to two questions per person. First of all, Mr. Takayama from Goldman Sachs, please give us a question. Please say something after the mute.

Thank you very much. First of all, in terms of infrastructure, the memory interface as well as NVIDIA-related PMICs seem to be very strong. For example, what kind of demand-based story is coming to the sound company for next year? Well, it's a story that I can't make now, so if there is a place where there is such an order or a need based on that demand, and the position of the sound company, in the case of the conventional share, the memory interface will go up again when it goes down a little In the case of the NBI, there was an expression of one-third to half, but as planned, I would like to ask if the position of the company has been raised well.

Regarding the memory interface RDM, we continue to have a strong outlook. There is no reason to change that outlook in particular, I continue to see strong investments in shares. Regarding power, I would like to refrain from talking about it to specific customers, but for example, It's a little difficult to make an estimate of a few quarters. The demand itself is very strong. But on the other hand, the number of qualified suppliers is increasing, so I don't think we should be too cautious. However, if we look at it from the point of view of the market, we can see that the market is moving up rather than one-third, so if we look at it from the perspective of the next quarter, we can see that the market will maintain a fairly high share. After that, we don't know until the next quarter, but the demand itself is very strong, so if we execute it properly, we will be able to take it.

Thank you very much. Regarding the memory interface, DRAM memory is very strong these days. What kind of expression do you use here? For example, what kind of steps do you take for 1346 next year? What kind of requests do you have from customers?

Well, it's not that far ahead. For example, if you look at our backlog, it's at the foot of the page now, at the end of September and the end of October. If I were to borrow Mr. Takayama's words, it would be an image of going up the stairs. I think the current situation is that it is going up quite strongly rather than going up by crawling.

I see. Thank you very much. And the second one, please tell me how to see each region in the same way as a car. I think it's in China. Maybe it's a specific customer. How do you see the potential of your customers in Japan and Europe in the future?

To put it bluntly, Japan seems to be strong in terms of its cycle. On the other hand, Europe seems to be weak. China seems to be slowing down more than ever, and I think the reality is that there are still some areas that are rising due to customer base and some areas that are being adjusted. Therefore, I think that the way the numbers move as a whole will change depending on the exposure of the customer, but as a whole, I have the impression that it is a little weak.

In terms of the overall tone this time, the interest rate at the end of the year is low because there is a part of the cost, What message do you have for the next half of the year? Is it a message that you can see? Or is it a message that you can see that you are still in the low end? What kind of message would you like to send?

It's quite difficult. I think it would be good if we could go with a margin of about double the amount. I really understand the background of your question, but I think we really have to step on the accelerator for a long-term investment, so when I think about it, rather than gradually increasing the margin from here, Thank you very much. Thank you very much. Thank you very much.

Thank you very much. Thank you very much. Thank you very much. Thank you very much. Thank you very much.

Thank you very much. Now, I'd like to ask the first question related to the data center. I think that next year will be the year when there will be more custom ASICs compared to the number of GPU customers. As a sound company, can you confirm whether or not more than one-third of the share will be taken in by GPUs at a certain scale? This is the first question.

これまさにグッドクエスチョンでして、どう言ったらいいんだろうな。 イエスはイエスなんですけど、当然そのカスタムになるので、我々の手数の問題というか、 It's a problem with bandwidth, so you can't do everything in the same way, and if you do that, the execution will not work, so I think we'll be choosing sockets one by one and working on them. I'm not going to tell you the actual numbers right now, but the number of custom powers has been in since the 4th level. I think this will grow strongly next year, but each custom platform has several types depending on the hyperscaler. For example, it's not realistic to take 50% or 100%, so we choose some of them and take a larger share rather than one-third. That's it.

In that sense, should we think that the digital power of PMIC is quite different for each customer?

It doesn't mean that they are quite different, but there is a difference in the architecture required by the customer, and the timing of the generation change is also different. Even so, the place where UEFA and backend are actually made is the same, There is a problem with the allocation of capacity, the necessary equipment, and so on. If you look at it end-to-end, it doesn't mean that if you make one, you can deploy it horizontally.

Thank you very much. Second, in the case of automobiles, the gross profit rate in the third quarter is 55%, and it seems to be the highest in the range it has received in the past. Whether this will be higher or whether this high background and sustainability in the third quarter will be felt in this area. That's all.

The next question is from Mr. Shinkai.

Please go ahead, Mr. Shinkai. In the third half of the year, the increase in the operating rate and the cost-effectiveness of the cost-effectiveness of the cost-effectiveness of the cost-effectiveness of the cost-effectiveness of the cost-effectiveness of the cost-effectiveness Thank you very much.

Thank you very much. Next, Mr. Hirakawa from POVA, please ask a question. Please say a few words after the mute.

Thank you very much. I'm Hirakawa from POVA. First, I would like to know about the progress of organizing the non-core business. In the news, there was a news report on the sale of the timing department, but I would like to know if it can be discussed individually. I'd like you to tell us what kind of work is being done as a non-core business or as a local business, and what kind of work is being done on that.

That's all I have. Thank you, Mr. Shinkai.

Yes, the review of the product portfolio of the business is continuously carried out in a year-round cycle. We focus on that, and then we think about alternatives. So, at the current point of view, we don't see this much as part of the list. We see it as a continuous effort. Thank you very much.

As a follow-up, how much do you think the assets that create value for the synergy are compared to the total assets of the current Nesas?

It's difficult to answer this question in terms of quantity, but I think it's a continuous Thank you very much. The second question is about RTM Unisense 365.

You are now expanding the user base, but what you are doing to expand the user base Also, what kind of expansion pace is there? If there is something that can be done in a small amount. Also, like the Renaissance 365 Windows, it may be a matter of hurrying forward, but I would like you to know about what kind of functions will be launched when it is launched this year. That's all.

The expansion of the user base has only just begun, so there is no such pace yet. The pricing structure has changed considerably due to the change in the cloud. One is to make it easy for small users to use, and the other is to make it easier for small users to use, We will continue to expand our user base as a big pillar of Japan. As for 365, it would be fine if you think that what you showed at Embedded World will become the benchmark. But more than anything else, I think it's hard to understand, but I think it has an effect as a reality. Cloud Enablement. Up until now, we've been offering a variety of tools. For example, the version management that you download from the website is complicated. We've been doing it in a very classic way. From now on, if everything is enabled in the cloud, I think you are probably using it now, but if you are using Microsoft Office 365, you don't have to worry about the version at all, and I think that the necessary bug fixes will be done automatically. In this way, the latest products will always be able to be used seamlessly on the cloud. This is the first step we are thinking about. Therefore, we don't want the functionality to increase drastically. We want to improve the usability of our products to a large extent. In our opinion, we want to work with people like lead, partner, and customer who are not that many. What kind of functionality do you think will be most effective for customers and users? From there, we will look at it together and decide the priority of development. As you can see, when it comes to the cloud, the cycle of updates will change significantly. Thank you very much. Thank you very much.

Next, we have Mr. Okawa from Daiwa Shoken.

Thank you for joining us today. I'm Okawa from Daiwa Shoken. First of all, let me ask you about the rough rate of industrial infrastructure IoT. Although the number of data centers with high productivity has increased, I don't think it's growing that much with Q4Q, so there was a story that the mix of the background here and the four-quarter plan will deteriorate, so I'd like to know a little more about that. It may be either a car or IOT, but would you like to add to this as well?

Then, Mr. Shinkai, please. First of all, I would like to start with the third half. There are various things in the 3G-UFI IoT. In terms of expected cost, the number of memory interfaces for the data center, which is relatively high in the estimated cost, has increased. For example, depending on the data center segment, there are some that are lower than the average, so that's what drives the mix. Among the ones that are growing now, there are not only those that are much higher gross margin than the average, As a result of this, the changes in the margins of industrial infrastructure IoT are being constructed. For example, high-density power, However, the gross margin is not so high than the average, so if it increases, the overall margin will be lowered. Therefore, we can see that the growth of the gross margin is muted. As for the fourth quarter, it is the same reason. There is a reaction that the third quarter was good, but as a result of the growth of relatively low margins, the overall margin was lowered. That's all.

Thank you very much. I would like to ask you about the industry's outlook on the second point. I think that the products that we are dealing with today are a little different, but I think that there are some people who are talking about the industry carefully, but what kind of outlook do you have on the sound base? Also, when you look at it regionally, is there a difference in recovery? I would like to ask you about the industry.

Yes, well. I wonder how it is. Let's divide it into three parts. One is the traditional world of factory automation. The other is the world of energy management. The other is the world of smart appliances. Energy management seems to be strong. What is this? Rather than the fact that there are nodes depending on the region, there are nodes depending on the region that have strong customers for energy management, but I feel that energy management is probably strong regardless of geography. I feel that white is also quite strong. This is also not so regional, and China is big as a volume, but rather than being local, I feel that it is in the recovery cycle by hitting the bottom. I think the factory automation of the hardware is probably the most mixed view. To be honest, I don't think the Japanese market is that strong. It doesn't seem to be very strong in the world either, but it's already in a very tough state at the moment. I think Japan is heading for a slow recovery. I think Japan is heading for a slow recovery. I think Japan is heading for a slow recovery. I think Japan is heading for a slow recovery. I think Japan is heading for a slow recovery. I see that there is a reaction from the third class to lead to growth, but I don't think it's very strong in terms of quantity. That's all.

Thank you very much. Thank you very much. Thank you very much. Thank you very much. Thank you very much. Thank you very much. Thank you very much. Thank you very much.

Hello, I'm Fujiwara from City Group Shoken. I'd like to ask you two questions. The first question is about the supply problem of Nexperia. I think it's a situation that customers are working hard to organize now. What kind of impact do you expect to have on the fourth quarter? What kind of possibilities do you expect from customers this week?

I would like you to tell me in terms of what you can share.

This is the first point. I will answer from Shinkai. Please. Currently, we are looking at I don't think so. Regarding shipping, I don't think it has a big impact. It's related to the backlog. On the other hand, I think there is a possibility that there will be a slight impact on sell-through. We expect to ship according to sell-through, but if that happens, there is a possibility that there will be an increase in the stock that flows into the channel. However, there is still a lot of inconsistencies in the details, and we are not in the process of looking into it.

That's all. Thank you very much. I'd like to confirm this a little bit. As long as the month of December is not a major short-term adjustment, as planned, will it be an image that if something is affected, it will be adjusted in 1-3?

Yes, that's right. In December, it will affect the stock market, and if that happens, there is a possibility that it will react in March.

I see. Thank you very much. As for the second point, I would like to ask you to tell us about the customer acquisition posture. I think it's a story that the short-term orders have been going on for a long time this year, but the entire industry is relatively in a state where the stock is relatively thin, and it is not easy to see that customers are moving forward in the direction of building stock. How has the customer acquisition behavior changed at the foot of the road? If you have any information you would like to share with us, please let us know in the comments below what direction you would like to see us move toward by 2026. Thank you.

This is a good question. As I just said, I don't see any movement to expand the stock market or prolong the lead time. However, it is possible. Data centers, or rather AI, use a lot of parts. Because the devices are big. Then, it will be a problem for the company. It may be that the lead time will be longer because there is a possibility that it will be difficult to distinguish between the movement of the stock expansion and the initial movement of the company. I'm trying to trace what drives what while keeping a close eye on the communication between customers. At this point, we haven't seen much change that stands out. In the short term, it's a little too much stock, so a little more. That's what's happening with Spotty, but it's not visible as a number. That's all.

I understand. Thank you very much.

That's all. Thank you very much. We are approaching the end of the session, so we will end the session here. Finally, Mr. Shibata, please say a few words.

As a result, there may be a strong influence of AI as a derivative of AI, but the energy relationship is strong. Also, in the field of IoT, there are some places where you can properly share the gain. So, we want to focus on those aspects, especially in order not to make any execution mistakes. There are various inconspicuous factors in the car, so I will continue to continue the attitude so as not to miss the upside while looking carefully. Thank you for your continued support. Thank you very much for today.

Thank you very much for joining us today.