Earnings Release

Briefing on Financial Estimates of FY2021 Q&A

  • TEL expects the CY2020 WFE*1 market to grow by about 10% year-on-year, but the industry association SEMI expects it to contract by about 4%, and DRAM and logic/foundry investments are expected to decline. What is the reason for this discrepancy?

    Regarding our WFE outlook, there is a high degree of certainty for the first half of the year because customer investments are already known. In the second half of the year, we expect there will be no major change in customer investment, with a rebound of delayed investment caused by COVID-19 in the first half and increased demand for semiconductors for ICT (information and communication technology). We have been communicating with the management of our customers and been informed of their investment plans, and our forecasts also take those plans into consideration.

  • Please tell us your views on memory investment in CY2020. Memory manufacturers have announced that, from the start of the year, they have reduced their planned capital investment for this year relative to last year. Their plans remain unchanged amidst the uncertainty of growth in memory bit demand due to the effects of COVID-19. Meanwhile, TEL expects memory investment in CY2020 to increase year-on-year. Please explain this discrepancy.

    COVID-19 has caused a surge in data traffic and increased demand for semiconductors for data centers and PCs. Moreover, our customers are making anticipatory investments for 5G mobile, which is expected to see growing demand. Based on these factors, we are seeing strong demand for equipment at present and believe that memory investment will increase in CY2020.

  • Investors are concerned that the memory inventory at PC manufacturers and data centers will reach a high level, and that there will be a softening in demand and a drop in memory prices beginning in the second half of CY2020, which in turn will result in a drop in capital investment at memory manufacturers. What is TEL’s perspective on these concerns?

    We do not share these concerns.

  • What are the current and medium- to long-term implications of the U.S. further restricting exports to China?

    Although we cannot comment on the impact on individual customers, we thoroughly investigated the various effects known at present, including the effects of COVID-19, and we announced that the WFE market would grow by about 10% in CY2020. In the Q3FY2020 earnings release conference, we stated that we felt comfortable with our competitor’s outlook of a WFE market growth rate in the high teens in CY2020. The difference in our forecast on growth rate reflects our incorporation of several additional factors.
    In addition to IoT, AI and 5G, ICT is being widely implemented as we work towards a new normal, and semiconductors have taken on additional importance, with a need for higher performance. Capital investments can be expected to continue to take place somewhere in the world and the WFE market to continue to grow. We believe it is important that we continue to be a world leader in terms of our capacity for technological innovation.

  • Have there been any cancellations of already-placed orders or delays in customer investment due to the U.S.’s strengthening of its restrictions on exports to China?

    There has been nothing of note along these lines.

  • Have there been any changes in investment trends at Chinese local manufacturers due to the strengthening of U.S. restrictions on exports to China? Has investment increased since the beginning of CY2020?

    We do not foresee any significant changes in the investment plans of our Chinese local customers this year. We will continue to keep an eye on such effects next year and beyond.

  • Which type of investment is larger among Chinese local manufacturers: logic/foundry or memory?

    Memory investment is larger.

  • COVID-19 has caused data traffic to grow by 30-40%, and it is expected to continue growing in the future. What is the impact of this trend on semiconductor investment?

    Although COVID-19 has somewhat suppressed the “movement of people,” it has increased the “movement of data.” In addition, as ICT is widely implemented in the future as we work towards a new normal, data traffic can be expected to see even stronger growth and demand for semiconductors will increase further.
    The semiconductor market in CY2019 was around 412 billion USD in size, and the market is expected to grow to around 1 trillion USD by CY2030. Amidst this rapid growth, there is a need for high reliability, high speed, low power consumption, and a range of other technologies. The proliferation of machine-to-machine applications, such as autonomous driving, will drive further innovation. In this context, the semiconductor market will continue to grow driven by increased demand and technological innovation, and so too will the WFE market supporting it.

  • In the FY2021 financial estimates, year-on-year growth in sales is expected to outperform the market. Why is that?

    We plan to grow sales in three areas: Etch, film deposition and cleaning. These are areas in which we can draw on our strong technological capabilities and that are expected to see continual technological innovation and market growth. In the Field Solutions (FS) business, sales for the full year topped 300 billion yen for the first time last fiscal year, and we have high expectations for this fiscal year as well.

  • I would like to ask about profit margins in the FY2021 financial estimates. Operating income rises at 15.9% year-on-year, compared with a 13.5% increase in sales year-on-year. Considering TEL's marginal profits, do you think the operating income could be increased further?

    We expect to make record R&D investment, which will affect the operating profit margin. As the WFE market is expected to grow further, we will continue proactive growth investment to maximize capture of future growth potential. We plan to invest 400 billion yen in R&D over a three-year period. This year marks the second year of that plan, and we are continuing to make steady progress.

*1 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


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