Tokyo Electron Unsp/Adr

It's time for us to start Tokyo Electoral Financial Announcement for the third quarter of fiscal year ending March 2025. Thank you very much for joining us today despite your busy schedule. I am Yatsuda of IR department serving as a moderator for today's session. I'd like to introduce today's attendees. Toshiki Kawai, representative director, president and CEO. Thank you very much. Hiroshi Kawamoto, Senior Vice President, General Manager, Division Office of Finance Division. I am Kawamoto. Thank you very much for joining us today. Before starting the presentations, let me explain the flow of today's session. First of all, Kawamoto and Kawaii will make presentations. After that, until 7 p.m. Japan time, we'll have a question-answer session where we entertain questions from the audience. This meeting uses two channels of Webex for simultaneous interpretation between Japanese and English. As we explained in our email, you are kindly requested to use apps on PC or mobile phones. if you plan to ask questions. But if you are not going to ask questions, you can use telephones. Since this conference is intended for institutional investors and analysts, we would appreciate your understanding that we receive questions only from institutional investors and non-analysts. We will post the audio contents of this conference in Japanese and English on our website within a couple of days. It will be appreciated if you could also visit our website. Now, Mr. Kawamoto will present the Consolidated Financial Summary. Kawamoto-san, please. Once again, good afternoon. I am Kawamoto, Finance Division. I'd like to present the Consolidated Financial Summary of the third quarter of fiscal year ending March 2025. This slide shows the quarterly financial summary. I will mainly refer to the figures in the blue box. In the third quarter, we generated net sales of 654.5 billion yen, 15.5% increase from the previous quarter. This was the second highest quarterly net sales. Gross profit was 311.7 billion yen, 19.9% increase from the previous quarter. Gross profit margin was 47.6%, 1.7 percentage point increase due to the rise of net sales. Operating income was 199.6 billion yen, 34.7% increase from the previous quarter. Operating profit margin was 30.5%, raised by 4.3% from the previous quarter due to the increase of gross profit margin that I mentioned before. Income before income taxes increased by 30.3% to 200.1 billion yen. Net income attributable to owners or parent was 157.2 billion yen, 33.6% increase from the previous quarter. Capital expenditures in the third quarter were 50.2 billion yen. mainly focusing on evaluation tools with development, we keep investing for future growth. This is a graphic representation of the financial summary shown on the previous slide on chronological basis just for your reference. This slide shows net sales by region. As for the net sales composition in the third quarter, proportion of Taiwan and Korea rose by 5.0 and 3.4 percentage points respectively quarter over quarter. Proportion of China fluctuated in the low 40% level as in the second quarter. This shows SPE new equipment sales by application. In the third quarter, from the bottom of this chart, sales to non-memory customer accounted for 57%, non-voltaic memory accounted for 8%, and DRAM accounted for 35%. Sales to DRAM customers increased, and its proportion rose by 9 percentage points from the previous quarter. This slide shows the field solution sales. In the third quarter, fiat solution sales were 141.5 billion yen, growing by 1.9 billion yen. Sales of parts and services rose, along with improvement of utilization rate in the customer's FAF. Modification sales were also strong. This slide shows the balance sheet. Total assets on the top are 2,501.9 billion yen. Cash and cash equivalents were 295.5 billion yen, declining by 230.0 billion yen from the previous quarter due to the dividend payment to shareholders, share repurchase, tax payment, and so on. Notes and accounts receivables were 510.9 billion yen, increasing by 139.2 billion yen quarter over quarter, partly because sales were concentrated in November and December due to recovery of investment among our major customers. Inventories were 765.0 billion yen, increasing by 22.7 billion yen quarter over quarter. Investment and other assets were 389.6 billion yen, increasing by 3.1 billion yen from the previous quarter. For the liabilities and net assets shown on the right-hand side, liabilities were 703.8 billion yen, decreasing by 15.6 billion yen from the previous quarter. Net assets were 1,798.1 billion yen, declining by 0.2 billion yen quarter over quarter. Equity ratio was 71.2%. This slide shows the cash flow. The cash outflow from operating activities in the third quarter was 15.0 billion yen because of such factors as transient increase of notes and accounts receivable and interim tax payment that I said before. The cash outflow from investing activities was 49.0 billion yen due to acquisition of fixed assets, mainly including evaluation tools for development. Cash outflow from financing activities was 117.1 billion yen primarily because of dividend payment and shared repurchase as described in the balance sheet. As a result, free cash outflow was 64.1 billion yen. Free cash flow is expected to improve to both significant positive figures in the fourth quarter. Finally, I will present the status of share repurchase. As of December 31, 2024, we acquired 2,024,200 shares, spending 46.9 billion yen in total. As presented in the timely disclosure on February 3, this share repurchase program was completed in January 2025. This concludes my presentation of the Consolidated Financial Summary of the third quarter of fiscal year ending March 2025. Now we'd like to move on. Kawaii will give you business environment and financial estimates. Kawaii-san, please. Once again, good afternoon everybody. I'm Kawaii. I will present business environment and financial estimates. Let me start with the business environment. We believe WFE market landed last year, calendar 2024, at $110 billion in size, exceeding the original expectation by about $10 billion because leading-edge technology investment to AI service was very active and delivery to Chinese customers were pulled forward. Currently, the 2025 WFE market size is expected to be comparable with last year, around $110 billion, due to the port delivery and low in investment to automotive semiconductors and power semiconductors, as well as in mature node investment by emerging Chinese IC vendors. Though current forecast is slightly lower than that of three months ago, very strong demand for AI semiconductor keeps growing, and along with technology evolution driven by advanced logic and HBM, WFP market size will continuously achieve record high level. Also in 2026, calendar 2026, growth of AI-related investment will drive WFP market. GPU ASIC for AI server will shift to the 3-nanometer node from the current 4-nanometer node. HBM to be used will evolve from the current 8-layer stackings to 12- and 16-layer stacking while proceeding with device scaling. In addition, fourth-wing introduction of AI to the edge site such as smartphone and PC will start, which will trigger demand growth for 2nm logic and DDR5. Due to these drivers, the WFE market is expected to show a double-digit growth. For AI applications, cutting-edge semiconductor technologies are essential. Toward the realization of semiconductor devices featuring large capacity, auto high speed, high reliability, and low power consumption, technology innovation is moving forward. supported by two primary drivers. The one is device scaling, which is well-known intrinsic nature of performance enhancement semiconductor, and the other is new driver heterogeneous integration. Along with evolution of such technologies as GAA backside PDN, high stacking memories and test processes, our business opportunities will expand further more. This shows business progress in the third quarter of fiscal year ending March 2025. Regarding the financial performance, as Mr. Kawamoto presented earlier, net sales, profit, and all other indicators achieved our guidance. Our sales growth rate on the calendar year basis recorded 26%, significantly outperforming the market growth. In addition to expansion of Chinese market, AI-related investment drive the market growth. Toward full implementation of investment for high-volume production leading edge semiconductors, we are receiving increasing number of inquiries for advanced logic, DRAM for HBM application, and advanced packaging, which pushes up the proportion of our new product sales. This trend is expected to raise our full year net sales and profit to the record high. In this ongoing quarter, we are steadily winning PORs with our high-value-added strategic products for cryogenic diseases. etching which attract attention in the market one non-customer has decided to adopt it for their high volume manufacturing line while variation is steadily in progress of multiple customers for episode one the single welfare film deposition system we announced in july 2024 we have from pors for logic backside pdm high volume manufacturing from all major customers Episode 1 was highly valued because of its lower contact resistance achieved by high interface controllability and its superior productivity. In December 2024, we released the two new models shown in this slide. They feature enhanced productivity and environmental performance and expected to contribute to our sum expansion. We are on track toward the achievement of the mid-term management plan, winning PORs and introducing new products. As shown here, our company has a broad range of product portfolio to support device scaling, which is well-known intrinsic nature of semiconductor evolution. In addition to product for welfare process, we will actively apply solutions for advanced packaging, which will become increasingly important in the future. In the IR Day event to be held on February 26, the head of each business unit will present our future growth strategy. We would really appreciate your participation. In the growing WFE market, we will pursue number one share in each product group to further enhance our corporate value. In the WFE market, which will grow in the future, our dry etcher business is expected to grow drastically as the number of etching processes will increase along with technology innovation and our share is growing. In order to capture such growth opportunity as much as possible, we have decided to construct a new production building in Tokyo Electro Miyagi. Based on this smart production initiative to realize next-generation manufacturing concept, the new production building will adapt automation of logistic function and manufacturing process. We will aim to increase labor productivity by four times, double space efficiency, and reduce production lead time by a factor of three compared with the current condition. Next, I will present the financial estimates for fiscal 2025. Three months ago, we revised the financial estimate upward by ¥100 billion. Our current estimate remains unchanged. Fiscal 2025 full-year net sales estimate of ¥2,400 billion, which represents 31% positive growth year-over-year. We expect to significantly outperform market growth. The details are shown as stable. Net sales, gross profit, gross profit margin, operating income, net income, and EPS are planned to hit record high. This slide shows SP new equipment sales forecast. Driven by progress in the third quarter, net sales in the second half of this fiscal year are expected to achieve all-time high of 985.0 billion yen. This shows our plan for R&D expenses and capex. In fiscal 2025, we expect R&D expenses of 254 billion yen, capex of 170 billion yen, and depreciation of 63 billion yen. This slide shows dividend-focused. In fiscal 2025, the full-year dividend per share is expected to be 571 yen, surpassing the record posted in fiscal year ended March 2023. This is my last slide showing total return amount over the past few years. The total return amount in this fiscal year totaling the dividend per share and additional share repurchase that I presented earlier is expected to be 413.3 billion yen, establishing a new record, surpassing the record in the previous fiscal year ended March 2024 by more than 100 billion yen. This concludes my presentation. Thank you very much for your kind attention. Now we will have question and answer session until 7 p.m. Japan time. You can ask questions either in Japanese or English, but our speakers are on the Japanese channel. Please allow us to take audio questions only in Japanese. If you ask a question in Japanese, please click 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 the person who asked the question one by one, Our Secretariat will contact you in advance, so please check the Webex chat box. When asking a question, you are kindly requested to unmute your microphone for yourself. When your question is answered by our attendees, please hit the raise hand button once again to remove raise hand signal. For questions in English, please use the WebEx chat box and give your affiliation name and 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 we will read it out in Japanese and 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 questions from as many participants as possible, we will take one question per person. If time allows, however, we'll take additional questions. So the first question is from . Yoshida-san from CLSA Securities Japan. Thank you very much. I am Yoshida from CLSA Securities. On page 13, WFE market focused, I have a question. So 2024, result and 25 forecast by application. Do you have any growth rate idea? Could you share that with us, please? And that growing rate in China, especially for 2025, what is your view on that? And every market forecast is updated for your next fiscal year. You may have more than flat expectation. Any positive factors? And could you let me know your idea for next fiscal year? Thank you very much. Thank you very much. This is Kawai. Let me answer to your question. First of all, for next year, focused by application that you asked, for DRAM, plus 10% to 20% increase. For NAND, by and large, the proportion of NAND is about 10% in the market. I think the figure will be doubled compared with the figure in 2024. For logic, 10% to 20% decline is expected. The leading-edge logic, advanced logic, remains flat. However, China will show some negative effects. trend. Therefore, DRAM is expected to increase, or memory is expected to increase, while logic, the high-end logic remains flat, but the negative is expected for China market. So by launch, the market is expected to be flat. DRAM growth is driven by HBM, followed by DDR5 for AI. For next year, AI server, the GPU and ASIC for AI server are now shifting to three nanometer node. Each AI device for two nanometer investment will start next year. HBM, so number of layers will be increasing, and further device scaling is also expected for HBM. PC and smartphones, HAI and Windows 10 service support will be completed the end of this year. Therefore, HAI high-end penetration will be expanding where semiconductor contents gets higher. So that cutting area is expected to grow further more. When you look at fiscal year, we can see the sort of trend from January to March period in fiscal year already. We are now scrutinizing ourselves at this moment. Maybe double-digit growth in calendar 2026 can slightly be incorporated in fiscal year 2026 so that we can further increase or grow furthermore. And we are now scrutinizing details. Maybe we can share that idea with you in the next quarterly financial announcement. So, CY 2025 WFG market, how do you like to see China in calendar 2025? we will expect the decline in Chinese market. For non-memory areas, 10% to 20% decline is expected in China. For leading age, there is no difference from previous year, but non-memory, 10% to 20% decline is expected. Mainly due to the Chinese customers, especially the emerging Chinese chip makers, will suspend their investment. I think you can see more accurate figures. So, Yatsura-san, do you have any figures for that? As Kawai said earlier, So according to our market focus, actually we think the market is flat while memory increases, while logic will decline. So the entire market remains flat, but memory increase can offset the decline in Chinese market. That's how we can see the entire market. Thank you very much. Nishida-san, thank you very much for your question. Next question is from... Mr. Nakamura of Goldman Sachs Japan. Nakamura-san, please. Thank you very much. This is Nakamura. I have a question regarding the progress of financial performance. The third quarter looks very good in terms of financial performance, but your fourth year focus remain unchanged. That means it looks like the performance of finance will be going down from the third quarter to the fourth quarter. Are there any risk factors visible? That's my question. In addition, for calendar 2025 and beyond, So in order for you to outperform W market, there might be some drivers. You talked about several POR for manufacturing, cryo-HR, and film deposition systems. For those two systems, how much contribution do you expect? At which timing? Could you share your idea, please? Yes. Thank you very much for your question. So let me give you some figures. I think you have do some calculation based on our figures. So after the financial settlement, you may see some upward revision to some extent, but this is a current focus that we have. At this stage, we don't have any factors for decline. That's not what we meant. There is no need to change things precisely. So you should watch the big trend and the timing of delivery for each month. We will look at those figures. And we don't have any major factor which forces us to change our financial estimates. But for inquiries, from April, inquiries may be pulled forward to March. So that's what we can report to you today. Also, for next year, we do have our growth plan. That's for the specific figures. Maybe in the next... financial announcement, we can give you more details. So one thing I can highlight today is last year, WFE market, $100 billion in size, and Tokyo Electron growth, positive 26%. So on fiscal year basis, more than 30% growth is expected. So because of AI in our company, the AI investment, help us to improve our financial performance. That's the position we are in. Advanced logic, DRAM for HPM applications, advanced packaging, inquiries in those three areas are increasing, and next fiscal year, those three are the major drivers, and we expect a lot for further increase. For example, for DRAM, Capacitor etching. Supercritical dry. Logic GAA gas chemical etching. And contact deposition. So these are the area that TEL has a core competence. And we have acquired some PORs and that would help us to make good financial results. And we are very dominant position for advanced logic and HBM bonda, our share is 60 to 70%. So that's also the reason why we can outperform the market growth. So in particular, for testing and packaging processes, the probers, and bonder and debonder. Also, the firm deposition, quota, and cleaning are also part of this area. For testing and packaging equipment in total, sales is doubled this fiscal year from 100 billion to 200 billion yen. So this kind of investment will continue or to be accelerated furthermore next fiscal year. Therefore, we can expect the growth next year. Specific figures or money basis, we are now scrutinizing figures. This is the big framework of our estimate for the future. Your question, that contribution of POR, This time we talked about non-channel haul. The investment for this is only for pilot line for this year. So the contribution to next fiscal year sales is not so big. Another area, logic, backside PDN. Customer for the first time are fixing their PORs. Therefore, maybe the investment for mass production line should be next year and beyond. Nakamura-san, thank you very much for your question. Next question is from Wadaki-san of Morgan Stanley MFFC Research Japan. I am Wadaki from Morgan Stanley. Can you hear me? So I have one question regarding China. This fiscal year, so what is the proportion of China market sales, and what is the decline you expect for next fiscal year? I think there is a decline for next fiscal year, but actually China market sales, brings you huge money, and if that proportion of China goes down, I wonder, you may have some difficulties further increasing your sales. What do you think about that? For the first half of this year, the China market accounted for the high 40% level, but in the second half of this fiscal year, China market proportion is the high 30%. Therefore, 40% plus is the condition for this year. Next fiscal year, the midpoint of 30% level is the proportion of China market China sales. So for profitability, high value added leading edge products are pursued by our company. Also, productivity should be high so that we can provide high value to the customers. We are proposing those things to our customers. So GPM has been increasing steadily right now just for this fiscal year. When you compare the first half and second half of this year, although China's proportion goes down, when you look at gross profit margin, there is no change. Rather, gross profit margin increases. can be increased. So along this trend, by country, how can I put it? Along with the China proportion changes, the impact of the gross profit margin, we don't have so much concern. Yes. It's very clear. Thank you very much for your answer. That's all from me. Thank you very much. Madaki-san, thank you very much for your question. Next question is from Hirakawa-san from B of A. Hirakawa-san, could you unmute your microphone, please? For WFE, we got a very detailed forecast. So CY2026, you said double digit growth is expected. I think 2026 is far away, but which application will contribute to the double digit growth? And are there any visible inquiries coming in? Could you let me know your feeling about calendar 2026? Thank you. So when you look at the big framework, DRAM remains strong. HBM and DDR5. HBM is for AI servers and for each AI device, including PC and smartphones. DDR5 is expected high next year for Logic. is expected to grow further more next year and onward. So GPU and ASIC, three nanonode devices is one thing, and for HAI, two nanometer node devices. So two nanonode, there is one customer, but toward next year, multiple customers, I expected to start investment to the 2nm node. Therefore, for DRAM, Rather than this year, you can see more sales for DRAM more than this year, next year, and logic is expected to further grow. For NAND, compared to last year, this year NAND is doubled. That's what I said. Next year, I think this kind of trend will continue next year. As for the proportion of none, it's about 10% next year as well. But when you think about those issues, by taking account of those factors, we said double desert growth is expected. Especially emerging customers in China are now setting up tools. And for mass production, they try to confirm their capability to start the mass production. So proportion of China is about the midpoint of 30% level. That remains unchanged. But volume-wise, I think the China volume will keep growing as well. Thank you very much. Thank you very much for your question. Next question is from Shimamoto-san from Okasan Securities. I am Shimamoto from Okasan Securities. Can you hear me? Yes. Thank you very much. Now my question is about next fiscal year sales. I want to understand your view on So the current fiscal year, you drastically outperform WFE market because of the China investment is pulled forward. So if my idea is not correct, please let me know if my assumption is correct. So next year, when China declines a little bit, next fiscal year, your sales might underperform WFE market. How do you think about this kind of potential risk for next fiscal year? Yes, about your question. So we have outperformed the WFE market, partly because of the port forward sales in China, but also the advanced logic, HBM, and advanced DRAM. As I said earlier, they are the major drivers for us. to outperform the WFE market. So we were ready to address those two factors. That's how we analyze the situation. From that viewpoint, for next fiscal year, we can meet the market expectations. That's how we view next year. We are now scrutinizing data figures. I'm sorry for that. We can share the information in next financial announcement meeting. Thank you very much. I have one follow-up question for Advanced Logic. So advanced logic. So this year and last year, when you compare those two years, I think advanced logic remains fraught. The customer in Taiwan did a very huge investment, but is it correct if I understand advanced logic remains fraught from last year to this year? Or did you receive any put forward inquiries for advanced logic as well? For advanced logic, the big customer will continue their investment However, I say the advanced logic remains front, maybe because of the drastic drop of the North America customer. Is that correct understanding? Well, at present... We are now trying to factor in the investment plan of all customers. As you know, many I see vendors are making financial announcement. So we incorporate those factors. So Taiwan investment gets larger for the advanced area. For memory, this year, And next year, as far as Tokyo Electron is concerned, for memory, like HBM or DDR5, our products have been adopted by a customer. This is one of the drivers of our growth. The room is expected to grow significantly. There is a way to think calendar year or fiscal year, but everything, we are now winning POR steadily. This will help us to further improve our performance in next fiscal year. Thank you very much. Mr. Shimamoto, thank you very much for your question. Next question is from Yoshioka-san from Nomura Securities. Thank you very much. I am Yoshioka from Nomura Securities. Thank you very much. So I have a question regarding China. The inquiries from China or your focus for 2025, compared with three months ago, have there been any changes? There are some trend of getting stronger because your Japanese competitors said that it might be very similar investment level for next year as this year. So are there any changes in China trend? And I have one additional question. The impact of regulations in December last year, American government issued the export control. And the end of January, public comment started from the Métis Japan. So I wonder what sort of impact does it have on your customers demand? Thank you for your question. Needless to say, We have the broad product portfolio. Therefore, the American government regulations and additional public comment, as you mentioned earlier, we are being affected by those factors to some extent. It's inevitable. As I said before, we need to closely watch those impacts. So now we should be very careful and alert to monitor what's going on. And based on that observation, we can expect some regulations to come. And if there is no big difference between our expectation and actual regulations, And our plan for growth is not significantly affected over the past three months. The only minor impact is detected for our growth plan and our performance. Thank you very much. I have one follow-up question. So compared with three months ago, are there any demands coming from China, which is port forward? For some tools, we have received requests for the port forward deliveries. So now public comment is being started already. So we don't think any request being pulled forward under the current regulations. Thank you very much for your answer. That was very clear. Yoshioka-san, thank you very much for your question. We have about 15 minutes to go. But actually, we received quite a few questions. So could you limit your question to one? Next question is from Kamizaki-sama from Tokai Tokyo Intelligence Laboratory. I am Kamizaki from Tokai Tokyo Intelligence Laboratory. So I have the cryo-etching. I have a question for cryo-etching. You want one POR from one company. I think there are some potential customers, more. And how many more PORs do you expect for cryogenic etching? And I think there are several channel whole processes. And how much PORs have you obtained so far? So calendar year 2027, $2 billion market size was expected. Are there any changes for your focus for 2027? Do you have any comments, if any, regarding the competitions? Are there any different between your product and your competitions? So... Let me answer to your question as much as possible. For one customer, we want the high volume production POR from one customer. So main portion is the investment for next year. We can see drastic contribution next year. other NAND customers, they are evaluating the technology as planned. I think we are able to demonstrate the benefits and advantages of our product to the customers. In our company, the H rate is rather high. On top of that, we do have the coating process, and we are trying to improve productivity, including combining coating and etch rate, and coating itself. As far as productivity is concerned, there are some positive or negative impacts for coating, but when we have more stacking layers, and if there are more etching processes, we can get the advantage of high throughput of our technology. So the technology for the future, I think we can provide high value to the customers. The benefit of coating, the cost of consumables, COC, operating cost, the customer can enjoy some benefits. So edge rate, the profile, and operating cost or COC. These are the area that we try to provide customers with the high values with our technology. Now we have one customer which adapted our technology. We are going to increase the number of customers who adopted for mass production. Let me answer to you about the mass market size, 2 billion next year. That's our expectation and there have been no changes But customers try to improve investment efficiency, so there might be some decline. But as far as we are concerned at present, we haven't changed our focus. Two billion dollars. Mr. Kamisaki, thank you very much for your question. Next question is from Mr. Yamamoto of Mizuho Securities. I am Yamamoto from Mizuho Securities. Can you hear me? Yes. Yes. On page 16, you talked about new production building in Miyagi. I misheard, but Kawashima said the time is to be reduced by a factor of three. If that's true, so tells etching cost goes down, how much reduction you can enjoy for cost? Do you have any idea for that? Now we are scrutinizing that sort of information. Production lead time. That's the lead time in our factory. That's what we mean by production lead time. We can reduce it by a factor of three. That's our target for lead time reduction. So production capability or capability FY2029 This year is fiscal 2025. By 2020, production capability should be increased by 1.8 times and capacity should be tripled for the future. And labour efficiency increased by four times, double the space efficiency and reduce the production lead time by a factor of three. So high efficient production line will be established in Miyagi new production building. By doing this, maybe we try to increase the automation of our production line through the commonization of the parts and the standardization of the parts. Also, chamber-to-chamber matching can be improved when we have higher automation rate in our factory. Then, on-site process Mondays can be reduced, and incident can be reduced. Also, post-shipment costs can be reduced. So, we can enjoy quite a few benefits. And we are now studying how much numerical benefits we can enjoy quantitatively. So these are the factors for us to reduce the cost furthermore. So more than 1,000 people will be working there, according to our current plan. On the other hand, automation rate will be increased furthermore. So the market grows, and that will help us to hire more people. However, the cost per tool or fixed cost per tool can be reduced. That's the concept of the new production building. The quantitative cost reduction is being now studied. So I'm sorry, I cannot give you any specific answer for quantitative value. Kawai-san talked about the drastic change. The construction is to be completed summer 2027. You have only two years to go. So this kind of drastic change is just attributed to the difference in by including suppliers, are you going to change many things, including suppliers? I'm sure you have reformed a lot. Is that kind of extension of the previous practices, or do you try to increase some disruptive changes, which is totally different than what you have done so far? So our measure idea is, as you know, the semiconductor market is reaching $1 trillion. And according to IBS, $1.3 trillion is the size of market in the future. Year 2050, 2050, quantum... Computing or 6G, 7G communications will be introduced and industry 5.0, society 5.0 will be emerging. We have a lot of expectations. Robotics will be implemented. I mean, though some consensus, semiconductor market is expected to grow drastically. So what is important for Tokyo Electron is pursuing growth rather than bloating. And we should improve the efficiency in our operations. So manufacturing digital transformation with AI and robotics, this is the concept that we should work on as a leader in this industry. Tokyo Electron alone cannot come up with high-efficient factory lines. Therefore, we need to make supply chain-wide effort to establish high-efficiency manufacturing line So that supplier cluster, FAB cluster, we have quite a few partners located very close to our factories. They have their own operation centers very close to Tokyo Electronics Factory. So this is a supply chain-wide effort to work on the smart manufacturing. And I hope the production building in Miyagi can present some model case. That's the backdrop of the decision made this time. So to your question, my answer is yes. I expect a lot. Thank you very much for your question. Yamamoto-san, thank you very much for your question. Next question is text in English. Let me read it out. This is a question from Gump Investment Management. Mr. Ernest Glanzman, the question is, historically operating margins have not exceeded 30% on the sustained basis. Under what circumstances could they possibly rise toward 40%? If not, what factors would prevent them from reaching such a level? Please provide argument to support both possibilities. Thank you very much for your question. In our midterm management plan, 35% or more OPM is our target toward FY2027 by working on the midterm management plan. 40% is mentioned in this question. That means we should further increase the OPM by 5% on top of the 30% or more target. Our target mid-term target is just a target. This is not the goal. So we should pursue further higher OPM to promote the growth, and we should invest more under the high profit margin. So 5% more than 35% for one thing, Tokyo Electron is a manufacturer. Therefore, we should provide high-value added next-generation products on a continuous basis to satisfy customers' demands, the gross profit margin, has been growing by 7% over the past few years. So we provide value to the customer by machine from the viewpoint of the GPM or marginal profit ratio. So 2% to 3% enhancement is to be achieved for GPM or GPM. NPR, marginal profit ratio. And I said manufacturing DX with AI and robotics. That's what I said earlier. And also the business innovation by introducing AI and digital capability. So under those trends, we are now working on the business innovation project by incorporating IT unit. So we should reduce fixed cost ratio against sales. but so that we can pursue the further efficiency. Now we have more growth and we can increase further share. At the same time we should reduce fixed cost per sales and we should pursue higher GPM and marginal profit ratio by several percentage point. So this is how we can add 5% more to the OPM target of 35% or more in our mid-term management plan. So you talked about 40%. That's a very specific question we received. Therefore, I just gave you our way of thinking to answer your question. So our company, first of all, you must achieve our mid-term management plan. At the same time, we are now studying the possible plan beyond the mid-term management plan for further growth. Mr. Glanzman, thank you very much for your question. Next question is also in English. Let me read it out. So this is a question from from Bailey Gifford. The question is as follows. What is your view on dry versus wet cleaning in wafers? How much will the industry move toward dry cleaning? So let me answer to your question. So by and large, the wet etching market is rather big. Partially, for critical processes, dry cleaning is also introduced. So our products, for example, aerosol-based, the physical cleaning, this is not liquid. So aerosol is used in our technology. But compared with wet cleaning, dry cleaning market is rather small. right now. So pattern collapse prevention, the supercritical dry technology is also advantageous. We have very high technology and high market share. So by combining those technologies, we want to increase our sales and share for wet cleaning. Thank you very much. That's all from us. Thank you very much for your question. Next question is from Yasui-san from UBS Securities. Yasui-san, please. I am Yasui from . My question might sound strange. So the other day, SoftBank announces the Crystal Intelligence AI, that is AI agent of OpenAI used. And SoftBank is going to promote the sales of the software using AI. I think you have quite a few engineers. So software innovation is to be advanced drastically this year. Process using AI, there are many possibilities for that, but the company-wide introduction of AI for the total optimization. So have you started discussing the possibility to introduce AI on the company-wide basis, or are you just thinking about AI? So what is the stage of the introduction of AI in your company? Do you have any midterm plans? This year, I attended CESS in the United States in January. So AI evolution, AI acceleration. It is true that there is amazing situation going on now. Various applications will be emerging and in many areas efficiency can be enhanced by introducing AI. That's what we expect. In our company, every year in January, we hold internal technology forum where the engineers from different sites, including Japan, United States, make presentation on their technology innovation. And we share the technology innovation idea within group. That's the purpose of the internal technology forum in January. And we select the champion in this forum. So IT utilize idea or development using IT or material selection by using IT. Those ideas are coming out one after another. And the volume of IT proposal is really huge. And I think IT has a huge potential. And now we have more and more sites. And from the viewpoint of the governance and security enhancement, and in order to ensure the compliance to various regulations, we must make the best use of AI. AI might detect things which might be overlooked by the people. So AI spreads furthermore. I'm sorry, my answer is rather obstructive, but AI. We must work on AI actively, and we want to do investment for that end. And one of the way of thinking is, as a part of our business innovation project, The DX project, we have incorporated IT unit in our digital transformation activities within the business innovation project. Mr. Yasui, thank you very much for your question. We have two more questions. So I want to receive those two questions before closing today's session. Now we have from Macaulay Capital Securities. I am Nami Anton from McCurry. Capital question. One question. This fiscal year, now you can see drastic increase, and what is your expectation for next fiscal year? In particular, you talked about utilization rate is going up. and parts and consumable sales will be increasing. Do you think this continue next fiscal year? WFE market remains flat. That's your focus for next year. But field solution, how do you see the prospect of the field solution sales in next year? First of all, let me answer to your question. And Yatsura-san, please add, if any. As you just said, the utilization rate has been improving. for ddr4 which is not sold a lot now the ddr4 inventory is expected to reduce at the end of this year and also non-inventory is expected to be declined so it is true that customers Fav utilization rate goes up. So we can have a huge expectation for field solution business. And for on-device AI is another trend emerging now. An investment for on-device AI is also expected. So based on fiscal year, field solution business is expected to grow. Yes, essentially have any addition for field solution sales. So you can see increasing trend. So by quarter, we don't have any announcement, but part service sales. has been increasing over the past four quarters consecutively because of the utilization rate increase of the customers. And our install base is increased by 4,000 to 6,000 units every year. So these factors help us to further increase the sales of fuel solution. Thank you very much. Thank you very much. Damien-san, thank you very much for your question. The last question. Hanaya-san from SMBC Nikko Securities. I am Hanaya from SMBC Nikko Securities. I'll try to make my question briefly. So for NAND, calendar year 2025, that is doubled, so your focus remain unchanged from three months ago. I think it's a kind of surprise, because why? investment is necessary for them, I want to ask you. So now there are some vendors who said reducing the manufacturing volume, and some other companies may reduce manufacturing. The absolute volume gets smaller, but why do they need investment? So because they are reducing the manufacturing volume, so the supply demand recovery might come earlier, but I think maybe we can see some fluctuation in 2026 NAND market. Is that correct or not something? So let me answer to your question. For this year, The customer investment, as for growth rate, is to be almost doubled, according to our forecast. As for the condensed, the green field, we don't expect any green field investment. So this year's investment is the brown field investment. investment for the purpose of migration. Why customers want to invest more? To reduce cost, according to our understanding. Through migration, they try to reduce unit price. This is how customers can improve their profit margin. This is the idea the customer must have, according to our understanding. It's a bit early for us to say something decisive for next year. We don't have so much declining forecast. I think the current investment level will continue. That's our tentative assumption for next year. Thank you very much. Thank you very much for your questions. As for image, the cutting-edge area, non-customer, for this rather than this year, next year the investment will increase for cutting-edge non-customers. The other areas, as Yasasan said now, the almost flat areas, for non-investment. So now it's time for us to close today's financial conference. Before closing, however, I'd like to make one announcement. As we informed you in the second quarter finance announcement, and also Kawai-san said earlier, we will hold IR Day event from 3.30 p.m. to 6 p.m. on February 26, Wednesday, 2025. In this event, we plan to present our business opportunities expanding along with the growth of WF and test assembly tool market and new products and technology that we work on to embrace opportunities as much as possible. So we'd like very much appreciate your participation in this event. We will inform you of the details of this event later. Finally, we'd like to continue to improve our IR activities based on your precious feedback, so we appreciate your kind cooperation in filling out the questionnaire before you exit the WebEx. Thank you very much for joining us despite your busy schedule today.