Q4 FY2023 Earnings Release Conference Q&A
We reduced the forecast for two reasons. The first is the fact that advanced logic/foundry investment plans are being revised. The second is that, as the memory manufacturers have announced, investments are being reduced. NAND inventory adjustments in particular have had a major impact.
Furthermore, as we announced our forecast at a later time than other companies, we have been able to incorporate the changes in customers’ investment plans to our WFE forecast, but we basically think that there are no major differences between us and other SPE manufacturers when it comes to our views of the WFE market.
We think that approximately 40% of the WFE market overall, including memory, for CY2023, will be comprised of mature nodes. For your information, in terms of CY2022, we anticipated that roughly 30% would be comprised of mature nodes.
Though this will depend on macroeconomic conditions and the rate of inventory consumption across the market as a whole, we expect that the WFE market will be at a similar level to CY2022 in CY2024.
We believe that the "MAGIC*²" field, which features limited volatility, will lead recovery in the WFE market, and see steady growth.
Furthermore, new CPUs will promote the replacement of servers in CY2024 through CY2025, and this will accelerate the implementation of DDR5. Additionally, PC inventories are decreasing steadily partially due to PC replacement demands brought about by OS transitions. We can also expect smartphone demand to recover as macroeconomic conditions recover. It is our expectation that these background factors will lead to increased shipments of high-end devices.
About 26% of our sales in FY2022 came from China, but this decreased to about 24% in FY2023. For FY2024, we expect that sales in China will exceed 30%. This is due to the fact that there are many mature node customers in China, and that we expect this area will grow.
Compared to the 44.6% gross profit margin from the previous year, at this point we expect that the gross profit margin for the full year of FY2024 will decrease by 1 point to 43.6%. This is due to the 23.0% decrease of sales in FY 2024 from the previous year. We are working to ensure that we catch up to the gross profit margin levels we saw in FY2023.
A major driving force will be mature nodes for the “MAGIC” field including IoT devices. This market is growing on a global scale, not just in China. In order to intensify our activities for this market, we newly established DSS BU*³.
This is due to the increase in TEL's market share, and the gradual recovery of the DRAM market conditions. Our sales forecast is based on customers' investment plans, which suggest that sales will slowly increase from the first half. Our four DRAM customers will be increasing their investments at different times, but they appear to be steadily bottoming out overall. It has been about a year since DRAM-oriented adjustments began in the first half of FY2023, and we expect investments will recover slowly.
Acquisitions of PORs*⁴ are progresssing as expected, and we believe we can increase our market share. We are making good progress not just toward meeting our goals for FY2025, but also for the Medium-term Management Plan.
Although we expect to see somewhat of an upturn in light of recoveries in market conditions, we will need to pay close attention to macroeconomic conditions such as inflation and relative increase of interest rates, and the progress of inventory adjustments for memory, particularly in NAND. As we anticipate some adjustments to logic/foundry for high-end devices depending on macroeconomic trends, our current view on recovery may shift by about one quarter in either direction. However, the sales forecast for SPE new equipment described in the presentation is based on comprehensive decisions, and we believe we can achieve our plans.
We have built up our inventory strategically, and believe the levels are appropriate. Although it is true that inventory turnover ratio has degraded, we will be ready to promptly respond to recovery in demand during the second half.
Concerning field solutions, parts sales have been trending extremely high in recent years. However, as utilization rates of customers' fabs have been decreasing recently, we are looking at things more conservatively. As for FY2024, we expect that parts and services sales growth will level off.
There are multiple applications for cleaning systems. Among them, we are growing our market share in supercritical drying, and in SPM*⁵ cleaning which boasts a particularly large market, contributing to the strong performance. For SPM cleaning, we have achieved differentiation by combining the technologies of TEL Manufacturing and Engineering of America (TMEA*⁶) and Tokyo Electron Kyushu.
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. WFE refers to the production equipment used in front-end production and in wafer-level packaging production.
MAGIC (Metaverse, Autonomous mobility, Green energy, IoT & Information, Communications): A concept TEL has created to further expand business opportunities
DSS BU: Diverse Systems and Solutions Business Unit
POR (Process of Record): Certification of the adoption of equipment in customers' semiconductor production processes
SPM: Sulfuric acid-hydrogen Peroxide Mixture
TMEA: TEL acquired FSI International Inc. in 2012. In 2020 TEL FSI, Inc. was merged with TEL Epion Inc., and the company name changed to TEL Manufacturing and Engineering of America, Inc.
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