Q4 FY2021 Earnings Release Conference Q&A
Investment levels in all applications saw a marked increase. In addition to robust logic/foundry investments, memory investments are also accelerating. With respect to DRAM, as demand and supply are currently tight due in part to adjustments in investments over the past 2 years, we are now seeing investment pulled forward in addition to seeing additional investments be made. Investments for 3D NAND are also expected to increase compared to 3 months ago.
Demand from both memory and logic/foundry customers is high, and we expect that the WFE market size for CY2022 will be at least as large as the size in CY2021. Furthermore, semiconductors have grown even more crucial in light of efforts to achieve a “digital x green” society, which aims to realize both technological advancements and pro-environmental initiatives, and we believe that aggressive investments
will continue in CY2023 and beyond, and that we will still be seeing Big Years ahead.
A major factor is the effect of decreases in the fixed cost ratio brought about by the increase in SPE sales. Furthermore, we expect that this sales increase will also help our efforts to increase productivity bear fruit, thereby contributing to increase in gross profit margin.
Compared to logic/foundry, memory investments have a higher investment ratio for the leading-edge equipment which is the primary focus of our business. Furthermore, 3D NAND investments in particular have a higher proportion of investment for the etch and deposition equipment in which our company excels.
We don't believe there are any concerns. With respect to our production capabilities, since CY2017, the Miyagi Plant has built its logistics building and expanded its production lines. As for the Tohoku and Yamanashi Plants, they began operating their new production buildings in CY2020, increasing their production capabilities by 50 to 100% over those in the past.
Furthermore, the supply chain has also been enhanced. As we have been sharing information via our production update briefings, our partner companies have production capabilities, and parts/components and material supplying capabilities sufficient to meet the rising market demand.
We do not believe the new standard will significantly impact net sales or profit in full year FY2022. We plan to disclose our financial results under both the old and new standard at the FY2022 Q1 earnings release.
The main cause is an increase in R&D expenses, and is also due in part to increases in internal IT infrastructure expenses. We would like to refrain from providing a detailed breakdown.
Our SAM*2 is growing as expected, and our business activities are proceeding smoothly, but the market outside of our SAM such as EUV scanners, or investment for mature generations where we have low exposure, are growing faster than we originally anticipated. Therefore, we believe we will need to reconsider the WFE market size anticipated when we developed the financial model for our medium-term management plan, and at present we would like to refrain from making any comments about our WFE share outlook.
The fact that we are in sight of achieving a 43.5% gross profit margin in FY2022 is a significant step forward. However, our indexes for measuring achievement of our financial model are net sales, operating margin and ROE, and we recognize that it is the operating margin that needs to increase. In order to create next generation products with high added value, our plan is to continue making aggressive investments in R&D, but we believe it is possible to achieve our target operating margin by further growing net sales and reducing our SG&A expenses ratio.
We see a number of challenges ahead, and each one is both an issue and a positive opportunity for us. FY2024 is the target year of our medium-term management plan, but we are engaging in efforts meant to help us achieve growth that will carry us further beyond FY2024.
Regarding the use of cash on hand, investment in future growth is our foremost priority. We do not rule out the possibility of M&As. If we can expect market growth and solid return on investment, and can confirm that an M&A will be beneficial to all of our stakeholders, including our shareholders and our customers, then M&As are certainly an option. Our policy of flexibly considering implementing share buybacks remains unchanged.
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.
SAM: Served available market
The above content is a summary of question and answers session.