Q1 FY2018 Earnings Release Conference Q&A

The company has retained its CY2017 outlook for DRAM, but inquiries that DRAM manufacturers have received from their customers are increasing and it looks like the supply is insufficient. How does the increase in your inquiries look?

We understand these market conditions, and they have already been factored into our outlook. However, even though this has been factored in, inquiries are moving in an upward direction.

Your company has increased its WFE*1 market forecast for CY2017 because of growth in 3D NAND. Did this increase occur because customers are expanding their capacity in order to compensate for the low yield of 3D NAND? Or has the demand increased for equipment to improve yields?

We consider this to be an investment aimed at responding to the increase in demand for 3D NAND. The demand for 3D NAND is robust and we believe that business opportunities for semiconductor production equipment manufacturers and semiconductor manufacturers will continue to be strong.

What is the company's view concerning the WFE market in CY2018?

We plan to closely examine the market forecast for CY2018, but at this point the outlook is that investment will continue to be positive. We expect memory to have reasonable growth and believe that logic will increase as well. In our Medium term Management Plan, we assume that the CY2019 WFE market scale will be USD 42.0-45.0 billion and expect that it will increase to that level.

Your company expects its etch market share to increase in CY2017, but in which applications is the market share growing?

Our share is increasing in patterning for a Korean DRAM customer and in slit processing for 3D NAND.

Your company has announced that it will double the production capacity of its factory for etch systems. Will the number of chambers per system be increased or will the number of systems be increased without changing the number of chambers? What about future improvements in value added in etch systems?

We will increase the numbers of systems without increasing the number of chambers per system. Demand for 3D NAND is very strong, and this has led us to the decision to double production capacity. Regarding improving value added for etch systems, especially for 3D NAND, as the number of layers and the aspect ratio increases, we believe that it is important to improve both the etching rate and the etch profile.

The order volume and order backlogs for EUV (extreme ultra-violet) have increased for a lithography equipment manufacturer. From the perspective of the company, which has a high share in the coater/developer market, what kind of schedule do you have for introducing EUV?

The timing of sales can be slightly later than for the lithography equipment manufacturer due to differences in recognition methods, but because the share of our coater/developers in EUV is extremely high, we believe that we are proceeding on just about the same schedule as the plans of the lithography equipment manufacturer.

EUV will be introduced for DRAM and logic/foundry, but the ways of using it vary depending on differences such as in the number of masks. How is your company going to support each of these different applications? Furthermore, will the number of coater/developer systems sold by the company be larger for logic/foundry due to its higher number of masks?

We are thoroughly fulfilling our responsibility to support all applications. The largest business opportunity for us is in coater/developers, and we can support these systems with one model type. We customize functions to support each application and perform customizations for each customer, and we are increasing value in aspects such as utilization rates and productivity. We expect to achieve reasonable unit sales volume for both applications.

To what extent can the value added for coater/developers for EUV be improved over the current level?

We have no comment regarding specific figures, but we expect the value added for coater/developers to be extremely high. We are proceeding with development of an approach that improves productivity and the control of defects.

What is the market forecast for and impact on your company of fan-out wafer level packaging?

Fan-out wafer level packaging and 3D IC devices are one approach to technological innovation, and we view them as contributing to the development of the semiconductor industry. Customers are using our test systems and coater/developers, and we are expecting business opportunities.

What are the business opportunities for your company in increasing FPD investment in 10.5-generation and small and medium-sized OLED?

Regarding the 10.5/11.0-generation, we have achieved positive results with our first customer, and while delivery to the second customer has not occurred yet, we were able to grow the business with a market share as high as we had planned. In the areas of 10.5-generation and OLED, where investment will expand in the future, we believe that having acquired the business as the first mover to establish the technology is a significant advantage. Regarding the 6th generation, since its release, all customers including OLED customers have adopted PICP™*2 etch systems, which excel at low power consumption, process uniformity, and reduced damage. For OLED TVs as well, we foresee business opportunities with the inkjet method, not just in the current IGZO*3. For large displays, the inkjet method is attractive because it consumes less power than the evaporation method and also has high definition.

Regarding the inkjet method, what is the status of development by customers?

Both Tokyo Electron and our customers are observing closely the outlook for market expansion and the timing of mass production. We are developing mass production equipment so that it will be ready at the right time.

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

PICP™: A plasma source that produces extremely uniform high-density plasma on panel substrate

IGZO: Oxide semiconductor that consists of indium, gallium and zinc

The above content is a summary of question and answers session.