What is TEL's perspective on those who voice concern about adjustment in the WFE* market? And what is the outlook for the WFE market in CY2019? Looking at TEL's sales guidance for the memory segment, it seems there will be a slight downturn in the second half of FY2019.
The WFE market overall is entering a phase of further growth. Through conversations with our customers, we hear that there may be a little adjustment in investment, but this will be short-term lasting about one quarter, not over the long-term. We also have a positive view on the memory segment for CY2019. We will speak about the detailed outlook during the briefing on our medium-term management plan, which will take place in May.
Can we consider the announcement of the new production buildings to mean that the WFE market will exceed $60B by CY2019 or CY2020?
We decided to construct the new production buildings having taken into account a comprehensive range of factors such as boosting market share and market growth, etc. We plan to announce the outlook for specific market size during the briefing on the medium-term management plan in May, but the fact that we decided to build the new production buildings does give some indication.
The difference in calendar year and fiscal year notwithstanding, TEL's forecast that sales for the second half will increase relative to the first half for FY2019 is bullish compared to the forecasts of US competitors . In the second half, will DRAM customers’ investment in new plants and new lines continue?
We believe there will be on-going investment in new lines and new equipment.
Your competitors in Japan and overseas are projecting sales increase that is equivalent to or greater than TEL's forecast 22% increase from SPE for FY2019. Should we expect higher performance considering TEL's improvement in market share and the company's product mix?
The standards we use to recognize sales are based on completed installations, unlike other companies that base sales on shipments made; therefore factors such as differences in the timing of sales accounting make it difficult to draw simple comparisons. However, we believe that our performance will not be outdone by that of our competitors thanks to steady growth in DRAM, which showed particularly strong results last year.
Calculating from the graph on Page 23 of the Presentation Materials, TEL's sales to logic foundries will increase 30% in FY2019. To which generations of logic chip will this increase in investment apply? Furthermore, will investment in logic foundries continue to recover moving forward?
We forecast an increase in sales due to several factors such as the supplementation of shortfalls in production capacity and investment in several future generations of logic chips. We expect this will also be the case next year.
Calculating from Page 23 of the Presentation Materials, it looks as though in CY2018 TEL's market share in DRAM and NAND will improve. Is this due to improvements in customer mix? Or is it due to improvements in product mix as a result of market expansion?
We will increase our share in the memory segment this year with the acquisition of 3D NAND slit processes in etch, the acquisition of 3D NAND processes in batch cleaning, and the acquisition of a new process in single wafer cleaning.
Looking at the 25% increase in SPE new equipment sales for FY2019 by different types of equipment, which will be more than 25% and which will be less?
In terms of market environment, this year DRAM will be the growth driver, but there has not been a great deal of change in market share between our DRAM products and the other products. Therefore, the percentage of total sales accounted for by each type of equipment will not change a great deal from the percentages in FY2018.
What are the actual results for CY2017 and the forecasts for CY2018 and CY2019 for investment by emerging semiconductor manufacturers in China?
There are no changes to previous forecasts mentioned. While there may be some discrepancies in schedule due to customers' start-up situations, the investment plans themselves have not changed.
Which was the main contributor to the rise in market share for etch systems in CY2017 (up +3 points YoY): 3D NAND slit processing or DRAM? What do you think your share in etch systems will be this year?
A major contribution was due to the fact that applications acquired in DRAM were converted into sales as a result of customers’ investment in mass production. In 3D NAND slit processing, our newly acquired second customer is starting to invest as of this year, so we can expect this to contribute to next year's market share.
A Japanese competitor has announced the acquisition of a leading customer in the cleaning process. How will this affect your company?
We have not identified any loss in market share to our competitors in terms of the cleaning processes acquired by TEL. And while we expect our competitors to be actively making approaches to customers, we will continue to consider ourselves to be the challenger when doing business and refuse to rest on our laurels.
What sorts of impact will the introduction of EUV have on demand for coater/developers and etch systems over the next 2-3 years?
Although there are still some technical issues with EUV, we have great hopes for it. We believe that technological innovation will increase demand not just for high-performance coater/developers but for all TEL's equipment, which will increase our business opportunities. We hope to see EUV spread as early as possible.
What are the estimates for FPD profitability in FY2019?
We do not publish profit margin forecasts by segment, but sales volumes have been expanding and there are no major changes in product mix, so you can expect to see profit margins continue as they have been.
Both cash on hand and sales are rising. Previously you said that you needed 250 billion yen cash on hand, so what is the current level?
The WFE market is embarking on a growth phase that is one step up, and we expect that SPE will have various opportunities for growth moving forward. Our top priority for cash on hand is to use it for growth investments, and we are hoping to consider various possibilities such as M&A and the acquisition of/collaboration in technology. Our policies for shareholder returns and share buybacks remain unchanged, and we will look at executing share buybacks in a flexible manner.
Investors are hoping for sustainable growth in TEL. I would like to ask about how you aim to be a global company on one hand, while abolishing the position of CFO on the other. Why do you think that taking the organizational structure that was under the CFO and placing it directly under the CEO will speed up the management process? Is the current structure the best from a governance perspective? What opinions were raised in favor of/against this at the Board of Directors?
Until FY2017 there was no such position as CFO at TEL. In FY2018 the position of CFO was newly introduced; however, we have revised this to what is now the best organizational structure, having considered short-, medium- and long-term growth while taking account of TEL’s corporate culture. Our Corporate Strategic Planning Dept. and Accounting Dept. work closely together under the CEO, forming a single think-tank and a system that can make management decisions. Moreover, we still have close communications with Mr. Hori since his resignation and he will continue to play an active part in improving our corporate value. There is still the potential for us to reinstate the position of CFO in the future to respond flexibly to changes.
* WFE (Wafer fab equipment): The semiconductor production process is divided into front-end production, in which circuits are formed on wafers and inspected, and back-end production, in which wafers are cut into chips, assembled and inspected again. Wafer fab equipment refers to the production equipment used in front-end production and in wafer-level packaging production
* The above content is a summary of question and answers session.