Tokyo Electron Unsp/Adr

Now it's time for us to start Tokyo Electoral Financial Announcement of the first quarter of the fiscal year ending on March 31st, 2024. Thank you very much for joining us today despite your very busy schedule. I am Yatsuda of IR department acting as a moderator of today's session. I'd like to introduce today's attendees. Mr. Toshiki Kawai, representative director, president and CEO. I am Kawai, nice to meet you everybody. Next, Mr. Hiroshi Kawamoto, senior vice president, general manager in charge of finance division. I am Kawamoto, nice to meet you. Prior to the presentations, let me explain the flow of today's conference. First of all, Mr. Kawamoto and Mr. Kawai will make presentations. After that, until 6.30 Japan time, we will have a question and answer session where we take questions from the audience. This meeting uses two channels of WebEx for the simultaneous interpretation between Japanese and English. As we explained in our email, you are kindly requested to use apps on PCs or mobile terminals if you plan to ask questions. But if you are not going to ask questions, you can use telephone. In addition, since this conference is intended for institutional investors and analysts, we'd like to appreciate your understanding that we receive questions only from institutional investors and analysts. We will post the audio contents. of this conference in Japanese and English on our website within a couple of days. It would be appreciated if you could also visit our website. Now Mr. Kawamoto will present the consolidated financial summary. Mr. Kawamoto, please. Once again, I am Kawamoto. Now I would like to present the consolidated financial summary of the first quarter of this fiscal year. First of all, I'd like to present quarterly financial summary. The blue portion represents the results of the first quarter. In the first quarter, we generated sales of 391.7 billion yen, 29.8% decline from the previous quarter due to the drop of the customers' WFE spending. Along with the decline of the net sales, gross profit was 162.3 billion yen, 35.5% decrease from the previous quarter, and operating income was 82.4 billion yen, 46.0% drop from the previous quarter. Net income attributable to owners of parent was 64.3 billion yen, 45.8% decline from the previous quarter. R&D expenses shown on the bottom were 43.6 billion yen increasing from the previous quarter as we continue R&D investment for the future growth. Capital expenditures were 39.3 billion yen increasing by 49.2% from the previous quarter as we are constructing a development building in Miyagi and purchased the valuation tools in order to prepare for the future business expansion. This is a graphic representation of the financial summary shown on the previous page. I hope you like it. This slide shows net sales by region for the first quarter. This is the competition of company-wide net sales by region as we have switched to a single segment disclosure from this fiscal year. As you can see, proportion of sales to China rose to 39.3% due to active WFE spending to mature nodes in this region. This slide shows SPE new equipment sales by application. In the first quarter, on the right-hand side, from the bottom of this chart, sales to logic customers accounted for 70%, non-volatile memory accounted for 14%, and DRAM accounted for 16%. Compared with the previous quarter, the proportions of logic and non-volatile memory had declined, while the proportion of DRAM increased. This slide shows few solution sales. In the first quarter, sales amounted to 100.2 billion yen. The sales declined from the previous quarter, which is attributed to the decrease of modifications due to the decline of the customer's WFE investment. On the other hand, parts and service sales remained strong since the utilization ratio of the customer's FAF was maintained. This slide shows the balance sheet. Total assets were 2,179.0 billion yen. Cash-in-cash equivalent was 401.0 billion yen, decreasing by 72.0 billion yen from the previous quarter due to dividend payment, tax payment, and share repurchase. Notes and accounts receivable trade and contract assets worth 368.8 billion yen decreasing by 96.0 billion yen due to progress of collection. Inventories were 716.5 billion yen increasing by 64.3 billion yen due to procurement to get us ready for future. Other current assets were 65.0 billion yen, decreasing by 85.7 billion yen due to refund of consumption tax. For liabilities and net sales shown on the right-hand side, liabilities were 639.9 billion yen, decreasing by 72.0 billion yen. This is primarily attributed to the decrease of tax payment and accrued employees' bonuses. Net sales were 1,539.0 billion yen, decreasing by 60.4 billion yen from the end of previous year due to dividend payment and share repurchase. The equity ratio was 69.9%, just for your information. This slide shows the cash flow. The cash flow from operating activities were 125.7 billion yen. The cash flow from investing activities was minus 36.8 billion yen. Cash flow from financing activities was minus 164.1 billion yen, primarily due to the dividend payment and share repurchase. As a result, the free cash flow was 88.8 billion yen, shown in the line chart. Finally, I will present updates of the share repurchase. As of July 31, 2023, total number of shares purchased amounted to 3,069,200 shares. The total cost of share repurchase was about 60.9 billion yen. As you can see on the bottom, we will continue share repurchase up to 120 billion yen till December 31, 2023. So far, we have purchased about half of the maximum amount. This was all about the consolidated financial summary of the first quarter of fiscal year ending in March 2024. Now let's move on. Mr. Kawai will give you the presentation regarding business environment and financial estimates. Mr. Kawai, please. Good afternoon. Thank you very much for joining us today. Once again, I am Kawai. I will report business environment and financial estimates. Let me start with the current business environment. The four-year forecast of WFE market size in 2023 is about $70 to $75 billion. In terms of market size, there have been no changes from the previous financial announcement in May. However, there have been slight changes in its breakdown. Specifically, in leading-edge logic and foundry, there are some signs of delayed investment, while Chinese customers are accelerating their investment in mature nodes. Though recovery timing may be shifted slightly depending on the macroeconomic dynamics, WFE market is expected to recover and grow to around $200 billion in total of two years of 2024 and 2025. One of the drivers of this recovery, as shown in the chart, is server foos. Annual growth rate is 8%. In addition, there are business opportunities in leading H-CPU, DRAM, and NAND, as well as GPU for generative AI and HBM. We can also expect recovery of demand for PCs and smartphones after the adjustment following COVID-19 pandemic. Continuous steady growth is expected in power semiconductors for EV and diversified semiconductors supporting digital economy, namely in the magic market. This shows business progress in the first quarter of fiscal 2024. Regarding the financial performance, as Mr. Kawamoto presented, both net sales and profit stayed on track. We also made steady progress in critical development projects and product toward achievement of the medium-term management plan. In particular, for hard etching, which is one of our strategic processes, we succeeded in innovative technology development targeting 3D NAND channel hole applications. This is an important technology contributing to our future net sales and profit, and our customers highly value this technology. and bonders used in the advanced packaging. We received orders for bonders to be installed in the high-volume manufacturing lines of HBM for generative AI application. New bonder development and evaluation have been also in progress for 3D NAND and advanced logic. Next, I will present the financial estimates for fiscal 2024. The financial estimates remain unchanged from the previous announcement in May. As reported earlier, in calendar 2023, minus 25 to 30% growth from calendar 2022 is expected in WFE market. Our financial performance will be affected by this WFE market trend, but we are planning record high R&D investment of 200 billion yen in order to be prepared for WFE market growth in 2024 and 2025 and our business recovery by stepping up our R&D activities. This slide shows the SPE new equipment sales forecast in this fiscal year. As shown here, we expect to generate 580 billion yen in the first half and 690 billion yen in the second half of this fiscal year. The diagram on the right shows a quarterly breakdown on the sales focus for the first half of this fiscal year. Though there have been some changes in the timing of customers' WFP investment, there will be no major change in logic memory composition. This shows our plan for R&D expenses and capex. This plan again remains unchanged. FY2024, both R&D expenses and capex are expected to hit record high. As I said earlier, we are planning R&D expenses of 200 billion yen and capex of 124 billion yen. Depreciation is expected to be 57 billion yen. Last month, construction of a new development building in Yamanashi was completed as planned. This new building was built for the purpose of developing film deposition systems, gas chemical etching systems, patterning technologies, and process integration to address expanding market and fulfill increasingly diversified leading edge technology needs where we'll continue active R&D and capital investment. This slide shows the dividend forecast. This also remains unchanged. Based on the financial estimate of this fiscal year and payout ratio of 50%, the full-year dividend per share is expected to be 320 yen. This shows total return amount over the past few years. As Mr. Kawamoto described earlier, as of July 31st, we purchased 3,069,200 shares worth of about 60.9 billion yen. If we are able to accomplish share repurchase as planned, total return amount in this fiscal year, including dividend payment based on payout ratio of 50%, is expected to be 270.3 billion yen. We will make continuous efforts to enhance shareholders' value. This concludes my presentation. Thank you very much for your kind attention. Now we will have question and answer session until 6.30 Japan time. You can ask questions either in Japanese or English, but our speakers are available on the Japanese channel. Please allow us to take audio questions only in Japanese. If you ask a question in Japanese, please press the raise hand button on the WebEx. For details, please refer to the instructions attached to the invitation email. I will call the name of a person who asked a question one by one. Our Secretariat will contact you in advance, so please check the WebEx chat box. For questions in English, please use the WebEx chat box and enter your affiliation and name as well as your question in text and send it to our Secretariat. We will refrain from answering questions if your name and affiliations are not given. On the Japanese channel, we will translate your English question, and I will read it out in Japanese, and the speakers will answer in Japanese. On the English channel, the question and answer will be simultaneously interpreted into English on the real-time basis. As we'd like to take as many questions as possible, we will take one question per person. If time allows, we will take additional questions. So the first question is, From CLSA Securities Shopper, Mr. Yoshida. Mr. Yoshida, please. I am Yoshida from CLSA Securities. Can you hear me? Yes, we can hear you. Thank you very much. For WFE forecast, I have a question regarding forecast for the free market 2024 and 2025. You said $200 billion. In the previous meeting, 2024 should be the same level of 2022. That's what you said. But if you divide into two years, 2024 and 2025, what happens to 2024? What about the changes in your focus for 2024, if possible? from this year to 2024 and from 2024 to 2025. So I'd like you to give us some application drivers to fuel the growth of the market. So let me answer to your question. So recently, the macroeconomy dynamics have been So, as I said in my presentation earlier, leading-edge logic foundry business has been in the adjustment. It takes a bit long time for customers. They're far off. startup timing is shifted by six months. That sort of plan is also announced by the customers. When you think about this kind of trend, I think at WFE market in 2025 will be higher. So maybe plan has been shifted by three months or six months in some customers. So I'm sure you can see the very rapid recovery. However, the recovery is more drastic in 2025 than 2024. The primary driver should be servers. As I said in my presentation earlier, in this year, 2023, toward the second half of this year, to 2027, the number of servers will be increased by 8% on the GAGR basis. This will be the primary driver of the growth of the market, and PCs and smartphone demand will be recovering. Inflation is easing, and also there are some replacement purchase of the products which were purchased in COVID-19. So company also invest in the IT. And Windows 10 support will come to the end. And that will trigger the demand increase. And various applications will be emerging. For semiconductor innovation, we can see various emerging applications. So you can see new functions in the smartphone or PCs to be developed in the future. And also, so-called magic market, powered semiconductors, related EV, and commodity chips, taking care of various products, all those devices will have a very solid growth. Thank you very much. Excuse me. For semiconductor applications, for example, For 2024, the leading edge logic should be the leader in recovery, and 2025, in addition to the expansion of leading logic, memory will be also increasing. So how do you view the growth in 2024 and 2025 for logic and memory? So let me answer to your question on behalf of IR department. For this fiscal year, memory adjustments have a great impact, especially NAND flash adjustments are rather influential. However, from the viewpoint of Tokyo Electron, the memory is expected to recover from 2024. DRAM recover first and followed by NAND. For the time being, Things are rather dynamic, so we cannot tell when the memory start recovering in 2024. We shouldn't say anything which might mislead the market, but for 2025, we do have the great expectations. Thank you very much. That's all from me. Thank you very much, Mr. Yoshida, for your question. Next question is from Mr. Nakamura of Goldman Sachs, Japan. Can you hear me? Yes, I am Nakamura. As generative AI is expected high in the stock market, so could you let me know the business opportunities for your company triggered by the generative AI? You talked about the HBM for the DRAM. Could you just show us your prospect for generative AI in terms of a business expansion? So the leading edge area devices for servers and PCs and smartphones. That accounts for about 70%. So far, when you look at the server, AI server proportion is about 8% at this moment in terms of unit, but 2% annual increase is expected for AI. That's how I view the future market growth. The materials that I use in my presentation, there is some information there. The orange portion, 2025. Over here, WFE 5 billion portion should be affected. The logic related and GPU and HBM. So there are some business opportunities in those three devices. Logic, GMP, and HBM. Did I answer to your question? Did I answer to your question? Mr. Nakamura? Can you hear me? Can you hear us? Sorry, I was not able to unmute myself. Thank you very much for your answer. So for your systems, which system will be positively affected by degenerative AI? So customers are now increasing the utilization of the existing systems. So front line, we can observe the demands. So after the adjustment of the inventory, the front end demand can be expected to grow further more. In most recent days, the bonding process is rather significant. So bonders. The inquiries are bonders. Inquiries for bonders. Well, we take orders for bonders right now rather than inquiry. Thank you very much. That's very clear. Bonders. Mr. Nakamura, thank you very much for your question. So next question is from Mr. Shimamoto of Okasan Securities. Mr. Shimamoto, please. Hello. Yes, we can hear you. Thank you. I have a question regarding China market. The sales proportion to China is increasing, and you said also that China customers are rather strong in the mature nodes. So how do you view the continuity of the investment to the mature node, especially in 2024 and 2025? The China elements are incorporated into your expected recovery in 2024 and 2025. Rather than leading-edge nodes, but for IoT-related devices, so volatility is much less in this area. Especially the Chinese customers' proportion is rather significant, and continuously the amount increases. is expected to grow little by little. That's how we view the China market. Thank you. Thank you very much. I have one question. You said there are some acceleration in the Chinese customers' investment, although this leading-edge logic foundering, the investment has been declined. So Chinese customers are now shifting to the matured node in the first quarter from the leading-edge node. Is that correct? Yes. So there are various restrictions, regulations. So for customers in China... Some of the American tools are now restricted or regulated. So now diversified semiconductors will be necessary for the digital economy. Therefore, the China customers can have a very good strategy for the further growth, capitalizing on the market trend. Therefore, very active investment is going on, and you can see increasing number of new customers in China. So this trend will not be temporary. I'm sure this trend will remain unchanged. You can see the continual active investment in China. Thank you very much for your answer. Mr. Shimamoto, thank you very much for your question. Next question is from Mr. Yasui of UBS Securities. Mr. Yasui, please. I am Yasui from UBS Securities. I have one question. So year 2025, generative AI demand, you said $5 billion. Thank you very much for the figure. And I have a question regarding this. So I have two specific questions. The first question is, when you say $5 billion, by chance, actually we did some calculation. We came up with a very similar figure, $5 billion. In our company, NVIDIA, capacity was estimated based on the HBM. We came up with the estimate of 5 billion. But how did you arrive at the estimate of 5 billion? Could you let us know about your factors? And also, so we would like... Maybe you say $200 billion, so $100 billion per year driven by the generative AI. $5 billion is too small to achieve $100 billion. So maybe in order for generative AI to achieve $10 billion or $15 billion, sort of thing is necessary. The law applies, or are there any expecting promising applications? So the quantitative analysis is not so easy for us. So number of servers, AI proportion in the market, and we also come up with proportion of generative AI in the total AI. So these are the factors we are looking at when we do the estimates. As I said earlier, the annual growth rate of AI server Right now, maybe AI server proportion is expected to grow by 2% every year. For example, 8% in 2023, 16% in 2027. So that will be doubled from 2023 to 2027. So we are trying to collect information as much as possible, and we try to get communication. And based on the factors, we came up with the estimates. And our competitors, They also conduct analysis. The AI server proportion increased by 1%. Then WFE is supposed to increase by 1 to $1.5 billion. That's how our competitors view. So that sort of estimates are now in good line with our analysis. Semiconductor evolution. will be accelerated through the implementation of generative AI. So semiconductor demand is expanding because of the generative AI, or on the other hand, the innovation of semiconductor will prompt the further expansion of generative AI and other applications, leading edge applications. Therefore, not only generative AI, but in other areas, there should be very high potential in the leading edge applications. I hope my answer was satisfactory. So this is how we view the future trend of the market. So you are just focusing AI server. So PC or smartphones incorporate, rather than PC or smartphone incorporate AI, but you are just focusing on AI server when you came up with the focus of 5 billion. Yes, we are focusing on AI server. Thank you very much, Mr. Yassi, for your question. Next question is from Mr. Ishino, Tokai Tokyo Research Center. Mr. Isshino, please. I'm Isshino from Tokyo Tokai Research Center. Can you hear me? Yes, we can hear you. Thank you. So Nakamura-san and Yasui-san asked a very similar question that I wanted to ask. When it comes to generative AI, you said AI server accounts for 8% in this fiscal year. According to our estimate, it says only 2%. 8% is rather a big proportion of AI. So I have a question. So if there is a demand of 8%, you can see better recovery. So LAM research, you talked about LAM research. I wonder, the 8% is a bit too high, according to my understanding. I'd like to get some justification, but no explosive growth of the memory demand. So HBM3 or HBM4, in your company, your process tools, what are the most effective? promising equipment of your company, which is prompted by the HBM. So you said 8% and 2%. There is a big difference between the two focused. So what you are focusing on is AI-related servers. So we're just focusing on all AI servers. That's why we say 8%. But when you just focus on generative AI, the percentage drop to 1%. So difference in our understanding should be whether we are looking at total AI servers or we are just focusing on generative AI only. So that could be the reason for the difference in our estimates. When you just focus on generative AI year 2023, it accounts for only 1% among all the servers. If we just focus on generative AI servers, there are only 200,000 units, so the proportion should be 1.4%. And HBM is expected to grow further more. So memory, I think you are very strong in memory area. So as for your products, which are more promising for the HBM application? So the HBM is part of DRAM. So front-end process tools, all of them do have the opportunity for HBM quota developer, specifically, or cleaning system, etching system, film deposition system, all of them do have the opportunity triggered by HBM. As of today, the customer's utilization rate has to do some merging for further increase. Therefore, the existing machines may not be able to cover the a process of bonding for HBM. So that's where we receive a lot of inquiry, the bonding for HBM. In the previous memory, we did have very strong product portfolio. We should maintain that. But for the new opportunities, now bonders are expected to grow farther, triggered by HBM. Thank you very much. Mr. Ishino, thank you very much for your question. Next question is from Mr. Yamamoto from Mizuho Securities. I am Yamamoto. Thank you very much. Page 14. I have a question regarding cryogenic etcher. So your competitor, the etcher manufacturer, you said when they use the gas, then achieve the temperature of minus 60 degrees centigrade rather than the minus 40 degrees centigrade and also double the etching rate. Is that what you mean? Or even if they change the gas, your competitor is not able to catch up with stealth technology because of the patent that you have. Could you let us know the story, please? Let me answer to your question. As for the cryogenic etching and low temperature etching, in terms of hardware, those two are totally different. The design for cryogenic etching, or assembly for that, hardware composition, all of those things are very difficult, totally different from the low temperature etching. So we need to have delicate design for cryogenic etching. So under the cryogenic conditions, gas flexibility gets very high, therefore, The gas chemistry, which cannot be achieved by the normal gas low temperature etching, can be achieved by crowning. cryogenic and cryogenic etching. So we need to come, we are not able to achieve the cryogenic etching if we have the appropriate design. So the conventional low temperature etching has very limited options. So only by changing the gas, they are not able to achieve minus 60 degrees. When you say low temperature, normal one, that is up to minus 40 degrees centigrade. Thank you very much, that's very clear. Mr. Yamamoto, thank you very much for your question. Next question is from Mr. Hirakawa of V of A Securities. Mr. Hirakawa, please. I have a question again for Generative AI 2025, WFE basis, $5 billion. That's what you said for the Generative AI. And you are now receiving orders for bonders. So what is the proportion of bonders out of $5 billion? And could you also let us know the condition of your competitors in this area? Rather than in 2025, up until the middle of next year, when you look at that near-term future, for bonders to visit billion-yen businesses expected. That's the current condition of our business. Thank you very much. In that area, your company, Tokyo Electron, is in the dominant position. Is that correct understanding? Yes, we expect we can achieve very high market share. Thank you very much. Mr. Hirakawa, thank you very much for your question. The next question is from Mr. Yoshioka of Nomura Securities. Mr. Yoshioka, please. I am Yoshioka from Nomura Securities. Thank you. Thank you very much. I have a question regarding most recent, this quarter's plan of Taekyo Electron. So at the end of last fiscal year, the first half and second half, you said you're going to increase the sales in the first half of this year for the bottom out. But in reality, when I look at your plan, the third quarter, sorry, second quarter sales will be higher than the first quarter. So that means the first quarter should be kind of bottom according to your plan presented today. My question is about for the second half of this fiscal year, for logic and DRAM, the sales are expected to grow very strongly, especially for DRAM. That's your forecast. So I want to understand the confidence level. For example, based on the older backlog, do you have the higher probability to achieve that level of the sales for the second half of this year, or are there any potential risks to achieve the planned sales of the second half of this year? As of today, There have been no changes in our announcement to the market. Therefore, this is most likely a high probability. And that's the reason why we didn't change our forecast. When you look at the details, as I said in the beginning, there have been some changes in breakdown. So some of the leading edge technology, because of the dynamics of the macroeconomy, they may have some delay in recovery by one quarter for Logic Foundry customers. When I look at their announcement, that sort of delay is expected. However, on the other hand, as someone asked earlier, the matured node devices that we do have the inquiries from China, mainly from Chinese customers, and that inquiries are increasing. And for that, we can have the highly likely good business in that area. Probability is rather high, and we now see very tangible business for the mature node for the customers in China. So as for the current plan, I think the confidence level is very high. So that's what we have announced this time. Mr. Yoshioka, are you happy? I'm sorry. Thank you very much. That was very clear. Thank you very much for your answer. So there have been some changes in breakdown or contents. But the confidence level is rather high. Mr. Yoshioka, thank you very much for your question. Next question is from Mr. Nakano-myo of Jefferies Japan Limited. I am Nakano-myo from Jefferies Japan. Thank you very much. So my question is rather close to Mr. Kurihagawa's question for HBM, for Bonder. business, if it's possible, could you let us know advantage of your product compared with your competitions? Probably your competitions do have some alliance strategy. Your competitors do have some alliance strategy, but could you just let us know your advantage as for the bonding technology? So our competitor, actually there is one competitor in Europe. We are very confident of having good performance in terms of accuracy of bonding. I think that's where our customers like and appreciate. Not only bonding accuracy, throughput, productivity should be one of the factors. We have been enhancing, and these are the areas that our customers appreciate. So your major customers are investing in HBM, and your share is rather high in those customers working on HBM. The market itself is not so big yet. But in the future, the HBM market is expected to grow more and more, so we want to increase our sales in this area. For Bonder, CMOS image sensor, we did have experience in that application. And also we do have a good relationship with the major leading memory customers and they are evaluating our products. So for leading customers in HBM, they really appreciate the high accuracy of bonding, and that's the reason why we are receiving orders from those leading customers. My last question, for bonder, by taking orders for bonders, you can get the orders for the surrounding processes. Is that what you expect for the future? So I don't know there is any direct impact or not, but not only bonding technology, but I think there are new changes. After bonding process, etching might be necessary, or sacking should be also necessary. And we do have the broad product portfolio. So if customer come up with a new product, needs or demand, I think we can provide the appropriate solution to those emerging customer needs. So we can make a comprehensive proposal and there is a great business opportunities over there. Thank you very much. I talked about alliance earlier. So your competitor etching manufacturer does not have bonder technology. So they have some alliance with the European competitor of yours. But compared with that, you can take care of those two things by yourselves. Is that correct? Yes. We can provide the multiple technologies last year. in Semicon Japan, and this year in Semicon West in San Francisco, we introduced our technology so that it's a kind of fusion between the front end and back end. In the case of Tokyo Electron, we can make a proposal for the fusion between the front end and back end. and so-served available market. We'd like to show our value to our customers through the fusion of front-end and back-end technologies. Mr. Nakano-Miyo, thank you very much for your question. Next question is from Mr. Hanaya, SMBC Nikko Securities. Mr. Hanaya, please. I am Hanaya. Can you hear me? Yes. Thank you very much. So cryogenic etching, you said 400 layers is a target of this technology, so chronologically maybe that technology will become emerging two to three years from now, is my understanding correct? Right. In general, your understanding is correct. In that sense, For the future, 400 layers should be the future target. And even before 400 layers, little by little, I hope our customers will adopt this technology even before 400 layer era. That's the area we also expect. But in general, what you said is correct. Thank you very much. I have one follow-up question. The American applied material provides not only the tool but also develops the gases. That's what I understand. In your company, as for the approach of design and development, do you also develop not only process tools but also gas so that you can incorporate the area? Do you have such kind of concept for it? So we are not gas supplier. However, we do have a very strong alliance with gas vendors for cryogenic etching, for example. Gas itself, we just selected the gas with very low carbon footprint. Therefore, we can provide the hardware and we also develop the processes, but we have a strong collaboration with gas supplier so that we can select the most favorable or optimal gases. Thank you very much for your answer. That's all from me. Mr. Hanaya, thank you very much for your question. Next question is from Mr. Sugiura of Daiwa Securities. Mr. Sugiura, please. I am Sugiura of Daiwa Securities. Thank you very much. I have a question regarding gross margin. In the first quarter, 41%, a little bit higher than 41%, your plan for the first half of this year is 42.2%. So you have a plan to increase gross profit margin the second half of this year. So for the second half of this year, sales will be increasing. That has a positive impact of gross margin. But the pricing, product mix, what sort of factors do you expect to drive up the gross margin for the second half of this year? Let me answer to your question. In the first quarter, as you pointed out, 41.4% of the gross profit margin was reported, but profitability has been improving and our net sales is not so big. Therefore, the gross profit margin of 41% looks rather weak. However, as we move through the second quarter, you can see some contribution of this profit ultimately as we hope we can achieve the figure that you mentioned earlier. Thank you very much. I have one other question. The second quarter, so the sales should be around 400 billion yen. So sales will be increased from the first to second quarter, but there is not drastic increase. However, do you expect a higher? gross profit margin. So are there any pricing technology or reduction of the raw material cost? Are there any other factors such as product miss? So slightly product mix will be changed. That's one thing. In the second half of this year, those positive factors will be increasing. Therefore, you can see higher improvement of the gross profit margin along with the gradual increase of the gross net sales. Yes, we expect the increase of the net sales. Accordingly, we can see the increase of the gross profit margin as well. Thank you very much. Mr. Sugiura, thank you very much for your question. The next question is from Mr. Dong Jun Han of Point 72. Mr. Dong Jun Han, please. Mr. Long Jun Han of Point 72. I have an additional question regarding the cryogenic etcher. Probably for one tier, 128 layers should be a kind of limitation. And you might be able to address the multi-tiers. But with your cryogenic etcher, you may be able to achieve more than 128 layers for a single tier. And there are some articles talking about the adoption of the major non-players. And I believe your company might start selling this technology this year or early next year. However, now the market itself is rather sluggish. So the market achieves certain volume only in three, four, or five years' time. But in short time, I think we can see some changes in the market share. So could you give us your view regarding market share change in the near term? I think we can have high expectation for this technology. A number of tiers should be reduced while the number of layers is increasing, which is really important. When we can reduce the number of tiers, that will become very big value. We can demonstrate the performance up to until 10 micron. For channel 4 application, the big market is expected. For example, 2023, 0.5 billion is the level, but 2027, 2 billion should be the size of the market. According to expectation, year 2000, 2023, maybe the number of layers should be 200 layers, but by 2027, the number of layers will be increasing to 400. So TAM will be increased by four times. I mean, those circumstances, this development... It's really good to contribute the market share enhancement of our company. Thank you very much. Mr. Han, thank you very much for your question. We'd like to conclude today's conference. Lastly, we'd like to continuously improve our IR activities based on your precious feedback, so we'd appreciate your kind cooperation in filling up the questionnaire before you exit the WebEx. Thank you very much for taking time to join this conference despite your very busy schedule today. Thank you very much.