3Q FY2008 Financial Announcement Meeting Q&A
When we budgeted for the current fiscal year, we allocated the same amount of SG&A expenses to the third and fourth quarters, respectively, but since those expenses for the third quarter were lower than initially projected, the profit margin for the quarter swung upward. SG&A expenses usually tend to grow during the fourth quarter, resulting in a lower profit margin.
If we achieve sales of 900 billion yen for the entire year as we publicly announced, we believe that the operating margin will improve from 17.8% (as announced) to around 18.5%.
In the January-March period, we expect that both orders for semiconductor production equipment and for FPD production equipment will decline by 20 to 30% compared to the October-December period. We cannot comment on orders for the April-June period in quantitative terms, but the key point is the condition of the memory chip market. Overall, we believe that orders will increase, albeit gradually, in the April-June period as compared to the January-March period.
In terms of investments for memory, we expect that NAND flash memory and DRAM will each account for about 50% of the total, as the percentage of the former will rise while that of the latter will fall. We expect that there will be no major change in the value of investments by foundries.
Taiwanese DRAM manufacturers are sensitive and highly responsive to the business climate. Some of them intend to make investment decisions after they form a clear view of market conditions, so their plans may be curtailed. Plans for NAND flash memory remain at the initial level and there is currently no request for a delay of the delivery schedule.
The capital investment environment for semiconductors is gradually worsening, but since a silicon cycle is inevitable in our industry, we hope that capital investments will soon bottom out and start to recover. Recently, we have received requests from some manufacturers to delay delivery schedule, but no orders have been cancelled. In terms of FPD capital investments, orders are recovering rapidly. Equipment ordered during the October-December period will be delivered in the autumn of 2008 or thereafter. However, not all of the orders will contribute to sales in the next fiscal year because some sales are expected to be posted during the fiscal year ending March 2010.
We receive requests for lower prices all the time, not only when market conditions worsen. As semiconductors spread to BRIC economies in the years to come, cost reductions are indispensable. TEL will increase the productivity of each equipment and improve its overall cost performance, rather than reduce prices, and by doing so we will meet customer needs for higher productivity. In fact, the prices of equipment, which supports miniaturization to reduce chip cost, are on the rise.
On a quarterly basis, we will experience difficulties during the April-June and July-September periods, but we will not fall into the red. We believe that the situation will improve during the second half of the next fiscal year.
The policy for the next fiscal year is to curb fixed costs as much as possible and allocate existing resources to our medium-term growth plan. Investments in research and development are needed to create new businesses in the medium run, and at the moment we do not intend to reduce these investments.
We expect that the capacity of semiconductors mounted on image processing equipment will increase in the future.