Q2 FY2021 Earnings Release Conference Q&A
In our Q1 earnings release conference, I said that CY2021 was going to be a big year. We have to keep an eye on things like COVID-19 infections and geopolitical risks, but we still believe the WFE market for CY2021 will exceed the record high of CY2020. And, we expect it to grow even more in CY2022. So, we are expecting CY2021 and CY2022 to be big years.
The three points we have to pay attention to with respect to WFE market growth beyond CY2021 are; the DRAM demand/supply balance, timing of 10 nm, 7 nm, and 5 nm MPU and GPU releases, and investments trend for data center and 5G mobile. We see the current DRAM demand/supply balance improving in Q1 of CY2021. We can also expect strong demand for 10 nm, 7 nm, and 5 nm MPUs and GPUs.
The timing of investments by our customers may vary somewhat due to the impact of things like COVID-19 infections and geopolitical risks, so it’s difficult, at this point in time, to give quantitative answers about the scale of the WFE market in CY2021. However, in the medium-term, there is no change in our outlook that the scale of the WFE market will grow to between $65 to $70B by CY2023, as we stated in our Medium-term Management Plan.
We believe that CY2021 will see increased investments in logic/foundry investments for 5G infrastructure, and in DRAM investments for data centers. We believe that DRAM investments will gradually recover beginning in the latter half of Q1 of CY2021.
Although we are also expecting investments from our local Chinese customers in CY2021, we would like to refrain from providing quantitative answers at this time since we will have to keep an eye on the impacts of geopolitical risks. However, the aggressive implementation of ICT around the world has made semiconductors more important than ever so investment will continue elsewhere. We believe that, in order to meet this demand, it's important for us to continue to be a world leader in terms of our capacity for technological innovation.
The main reasons were; good progress in equipment delivery and installation, and the fact that some of our customers accelerated their investments for 5G infrastructure.
Our earnings forecast incorporates various risks we are aware of at the present time. I will refrain from providing detailed answers about sales to specific customers because it is possible to infer customer investment plans from such answers.
The financial model in the Medium-term Management Plan includes three scenarios. The main scenario targets net sales of 2 trillion yen and an operating margin of 30%. To achieve this, we are not just looking at the current figures, we are actively investing in production facilities and R&D with aim of medium- to long-term growth. We believe that as the sales increase going forward, our fixed cost ratio will decline and improve our profit margin. Our plan for achieving our goals is progressing steadily.
Sales in Q4, which comes at the end of the second half, tend to be higher than Q3 sales because we manage our sales plans on a half-year-basis.
We have made no changes to our plan to increase our share in patterning processes, including deposition and cleaning with a focus on etch. As the number of layers in 3D NAND increases, higher levels of technologies, such as high etch rates and high profile controllability in HARC*2 processes, will be required. Our customers are currently investing in the mass production of 128-layer 3D NAND. We are aiming to increase our market share in next-generation products and beyond.
We always face competition in every product category. It is good for both customers and the industry when manufacturers work hard to compete. With the goal of becoming the number one, indispensable supplier to our customers, we will strive to meet their needs by quickly capturing future technological needs, and by concentrating our resources on high value-added areas.
Semiconductors are required to deliver high-performance in the form of large storage capacity, high processing speed, power efficiency, and high reliability, which require various new technologies. The market will grow as long as technological innovation continues. We will continue to work hard to compete with other manufacturers in that market.
Our Sapporo office has long been our software development base. There are a lot of skilled software engineers in Hokkaido, which makes Sapporo a good place for recruiting talent.
Going forward, in addition to improving equipment performance for scaling to 5 nm or less in logic/foundries and to more than 200 layers in 3D NAND, digitalization will also be required to analyze and assess data obtained from sensors mounted on equipment. Furthermore, digitalization is also important from the perspective of SDGs because it contributes to the development of low power devices, improvements in device production yields, and enhancements in equipment up times. We will accelerate development in this area by improving the environment at the Sapporo office, which is responsible for that development.
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.
HARC (High Aspect Ratio Contact) process: A process for forming deep holes or trenches that requires advanced processing technology
The above content is a summary of question and answers session.