Q3 FY2020 Earnings Release Conference Q&A

The view that there will be double-digit growth was expressed in the announcements of earnings conference of our competitor in the United States, and our perspective is not so different from this view. Substantial growth can be expected this year.

It is our view that investment in NAND is likely to recover first because progress has been made in inventory adjustment, but the timing of investment depends not only on inventory levels but also on the production capacity of customers. It is our view that it is also possible that DRAM will recover first.

At present, we do not believe there are any major concerns.

I would like to refrain from answering about whether investment will be greater in the first half or the second half because it is related to our financial estimates for next fiscal year. Demand for semiconductors, not only for the latest application processors but also for peripherals, is increasing for 5G, and we expect Chinese customers to invest in the 14 nm generation.

We would like to refrain from making a quantitative statement on the growth rate, but our view is not very far from that of our competitor. We can expect logic foundry investment in the 14 nm generation in CY2020. In memory, investment was mainly for R&D until last year, but investment can be expected to increase from this year due to the start of a capacity increase.

Investment by FPD customers tends to fluctuate more compared to SPE, but we believe that demand for OLED displays will continue to expand. We will provide high value-added products in response to this demand. At present, many customers are evaluating our inkjet printing systems, and we have high expectations for the future.

As we have indicated in our financial estimates of FY2020, we expected sales in the second half to be greater than in the first half. Leveling of sales is difficult because sales depend on customers’ investment plans. Meanwhile, we are improving our supply chain and leveling production in our factories even if demand varies.

We expect the impact on this fiscal year’s results to be minor.

The FS business is going well, and we have achieved 79% of our sales forecast for the full year as of Q3. We are not sure whether actual sales will exceed our sales forecast, but we hope so. The current installed base is over 70,000 units. The pace of growth of the FS business is proportional to the number of units delivered per year, assuming that the factory utilization rate of customers is constant.

Logic foundry sales have increased since our previous forecast, followed by logic sales. It is our view that the decrease in DRAM is because of the delayed progress of production adjustments by customers.

There are no significant changes in the competitive environment. Under the new financial model, the assumed WFE market size and the financial model are not linked, but the scenario of 2 trillion yen in sales, an operating margin of 30%, and ROE of 30% or more assumes that the size of the WFE market is USD 65 to 70 billion. Development of new products with high added value and the acquisition of POR*2 take time, and we are working to achieve these within five years.

Considering future growth, it is our assessment that the decision to our share repurchase was made at the right time. With regard to future share repurchases, we will consider flexibly executing these at the appropriate time and the appropriate scale as we have done in the past. We will appropriately perform balance sheet management because we are committed to ROE of 30% or more in the medium-term management plan. However, we would like to prioritize investment in growth such as R&D expenses and capital investment when using cash on hand. We will also consider M&A if it will lead to the enhancement of medium- to long-term shareholder value.

The new models are equipment with an increased number of chambers for higher productivity and a mid-temperature SPM (sulfuric peroxide mixture) processing system. Promotion of these new models and bevel cleaning equipment is progressing well, especially in the Chinese market, and will contribute to the improvement of future market share.

It depends on the structure of 3D NAND of each customer, but we have produced good results in etch rate and etch performance, and aim to acquire PORs in the next technology node of 12x layers.

We offer equipment for all key processes throughout patterning, including lithography, etch, deposition, and cleaning. We are able to share technology roadmaps spanning several generations with our customers due to our long business history with customers, and the ability to utilize equipment that has been delivered. These strengths will be able to be further leveraged as technology nodes progress.
The size of the semiconductor device market was USD 468.8 billion in CY2018, and the WFE market was 12 percent of this size. It is believed that the size of the device market will reach USD 1 trillion by CY2030, and the WFE market is likely to grow significantly in association with this. I think R&D expenses will increase accordingly, but this will not be a burden because sales are also expected to increase.

We do not believe that the number of etch processes will decrease even as the adoption of EUV progresses. EUV is a positive for TEL’s equipment.

Coaters/developers for EUV need to have higher performance accuracy, and added value is increased. In addition, the spread of EUV will also provide opportunities for capital investment in not only coaters/developers but also other equipment.