2Q FY2016 Earnings Release Conference Q&A

Orders for all applications were in line with estimates.

They should be roughly equivalent to orders in the October to December quarter but are likely to increase slightly. We expect logic orders to increase.

The market outlook for the current year has not changed, but logic and foundry order inquiries are increasing. As for the wafer fab equipment (WFE) market in CY2016, we expect it to be equivalent to CY2015 or slightly higher. The investment outlook of logic and foundry customers has improved, and investment in 3D NAND and new memory devices can also be expected.

As part of measures aimed at achieving the Medium term Management Plan, we have increased R&D expenses and sales promotion-related expenses for priority areas.

With the aim of bolstering our product competitiveness, we have increased R&D expenses and sales promotion-related expenses.

It is important to carry out multilayer etching at high speed and with high precision, and we are focusing on HARC (deep hole) processing, which is our strong point. Good evaluation results have begun to emerge in the development of 3D NAND for the generation after next, when the number of layers will increase, and we expect results to appear from around 2017. The more the number of layers increases, the more we can make use of our strengths, so we believe we will be able to achieve our medium term targets.

We are preparing an operational structure to enable margins to increase uniformly from next year. We cannot disclose the details yet, but we are considering six new projects.

We expect both businesses to show a similar degree of growth. Regarding used equipment/modification, demand for 200mm wafer-related equipment will increase because of the Internet of Things (IoT), and as there is a shortage of inventory only in the case of used equipment, there is also a trend toward addressing issues with new equipment. As for comprehensive parts and service contracts, there will also be requirements for high-value-added service that contributes to the improvement of customers' yields and a rise in their productivity.

As there are various forms of service agreements depending on the customer, such as agreements per equipment or factory, it is difficult to calculate matters such as the contract ratio in general. However, we will show customers the benefits of comprehensive contracts, which will lead to our sales growth. TELeMetrics is a service that we have begun to newly provide, and at present there are about 40 customer plants worldwide that have been remotely connected with Tokyo Electron. From here on, we will grow this business aggressively.

We do not think this will have an immediate impact on our company. As the combination of the two companies will take place in the future, we cannot comment on this at present.