Earnings Release

1Q FY2016 Earnings Release Conference Q&A

  • SPE orders from the July to September quarter are forecasted to decline compared to the April to June quarter. What is the outlook for the October to December quarter? Also, will the trend for 3D NAND orders continue into the future?

    There should be a gradual increase. While adjustments in logic devices may continue, we expect investment in next-generation, cutting-edge logic devices. For 3D NAND, we expect investment to rise in the second half of the year.

  • Although actual sales for the April to June quarter increased compared to the same period for the previous year, what was the reason for the reduction of approximately 3 billion yen in SG&A expenses?

    This is mainly due to the reduction in expenses related to the business combination with Applied Materials.

  • Is the revision in financial estimates because of Intel’s $1 billion reduction in capital investment plan?

    We incorporated the investment slowdown and the reuse of equipment mainly in logic and foundry into the revision.

  • With the revision to financial estimates, sales growth for this fiscal year is now consistent with market growth. Does this imply that expectations for an increase in market share, such as in 3D NAND, have been dropped?

    While sales forecasts are conservative to a certain degree, we still recognize that this is a good opportunity to increase market share. There are many efforts ongoing and we would like judgments to be made based on the results.

  • What are the assumptions for the gross profit margin in the second half of this fiscal year?

    It is based on an assumption of 36~37%.

  • What do you think about the opinion that we should more seriously examine the WFE market, given the unlikelihood for capital investment to increase in semiconductor manufacturers, and the global sales trend of smartphones?

    In the Medium term Management Plan, we announced a financial model based on market sizes of $30 billion and $37 billion. Traditionally, our operating income margin tends to decline more significantly than U.S. competitors when the market shrinks. In the Medium term Management Plan, we provided a range to the assumed market size as we work towards reinforcing structures to allow us to earn even more profits when the market grows. Although this is not a market forecast, the main scenario in the plan assumes an investment of more than $37 billion in 2019~2020. Considering the future IoT (Internet of Things) era, we can expect blooming investment not just in the conventional smartphone market, but also in servers for data centers. We therefore do not think investment will continue the downward trend.

  • Is it okay to consider $30 billion as the lower limit for the WFE market? What was the view on the macroeconomy when determining the size of the WFE market? Is it appropriate to expect investment in the IoT, given that it is still very vague?

    While it is only recently that SPE manufacturers have assumed a WFE market with a size of between $30 billion to $37 billion, there have been cases where the silicon cycle fluctuated beyond this range. A range of $30 billion to $37 billion is appropriate, given the assumption of plans to reinforce the profit structures. It is probably not easy to think about the IoT using what we have as common knowledge now. It will fundamentally change the methods of communication. Applications will branch out and data volumes will grow explosively.

  • While cutting-edge logic devices have yield issues and there are concerns about future investment, there is a great expectation for 3D NAND investment. What is the view for the WFE market in the coming two years?

    We expect earnest investment in the mass production of 10nm logic and 3D NAND, and the market size of CY2016 may be greater than that of CY2015.

  • Intel has announced a change in the technology cycle for each generation from 2 years to 2.5 years. If the capital investment per generation remains the same, does this mean that annual capital investment will be reduced?

    Even though the cycle has become longer, there is also a growing trend in the capital investment per generation, and therefore the trend is not necessarily downward. In addition, while there is a global trend to reuse equipment, with the expansion in earnings from field solutions businesses, the trend is positive.

  • With the move to shift semiconductor bases to China, what do you think the impact is in the medium term? With vertically integrated manufacturers appearing in China, and capital investment increasing in China, will there be reduced investments in other countries?

    It is clear that China is making a national effort to enter the semiconductor industry. It is not simply increasing production capability, but has started paying attention to technology development as well, and will therefore likely become an important base.

* The above content is a summary of question and answers session.