What is your outlook for the WFE*1 market in CY2023?
Our forecast is that CY2022 has the potential to grow by nearly 20% year-on-year, and, at present, we expect to see positive growth in CY2023 as well.
As for CY2023 WFE investments by application, in light of further progress in the digital shift of society, robust investments in both leading-edge and mature generations of logic/foundry will continue. We expect that memory including both DRAM and NAND will maintain the same scale of investment as CY2022. As for DRAM, we will need to observe the extent of DDR5-oriented investments that will be made.
You indicated that robust investments for both leading-edge and mature generations of logic/foundry will continue into CY2023, but what considerations allow you to make this forecast?
We forecast our CY2023 market based on inquiries for our equipment and customer investment plans. Furthermore, we have communications with our customers utilizing the medium- to long-term technical roadmap we have developed, that also serve as valuable sources of information in our market forecasting efforts.
What proportion of investments in the WFE market for CY2021 were made by local Chinese customers? And what will that same proportion look like in CY2022?
In CY2021, roughly 25% of investments in the total WFE market were made in China, and roughly 80% of those investments were made by local Chinese customers. We expect the same will hold true for CY2022.
What factors contributed to TEL’s current high performance compared to your industry peers?
The first factor is that TEL has worked to establish proactive procurement and production capabilities in anticipation of rapid growth in the WFE market. This has allowed us to thoroughly respond to expansions in demand. Another factor is our steady penetration in strategic products for the key areas of etch, deposition and cleaning, which has expanded our market share. Specific examples include new POR acquisitions in NAND Slit in etch processes, and adoption of cleaning systems using supercritical dry technology, which prevent pattern collapse, for mass-production.
Your forecasts indicate that net sales for Q4 FY2022 are expected to remain at the same level as Q3 FY2022. In the past, Q4 net sales have been seasonally higher than those for Q3. Why are things different this fiscal year? Is it due to the fact that component procurement risks have been incorporated into forecasts for Q4 FY2022?
Thanks to advancements in efforts to level procurement and production, as well as the application of the new revenue recognition standards, we are starting to see mitigation in the seasonalities of the past. We develop our financial estimates based on considerations of these conditions and on component procurement risks, among other factors.
Regarding your new equipment sales forecast by application for the second half of FY2022, sales for NAND have been revised downward by about 40 billion yen compared to your forecast three months ago. What brought about this change?
The downward revision was due to adjustments to the timing for NAND investments by certain customers, which led us to forecast that sales recording would be slightly delayed.
Your industry peers have been affected by tight component procurement conditions. Has TEL been affected?
Thanks to our execution of proactive procurements and production in anticipation of growth in the market, we have been able to address increases in demand. However, recently it has become more difficult to procure various different types of components, not just semiconductors. To address this, our Corporate Production Division, which we established in September of 2021, began full operation and implemented various thorough responses, which include selecting substitute parts and standardizing components. We also continue activities such as holding production update briefings every half-year at each of TEL's plants, and sharing demand forecasts with our suppliers.
Has the equipment delivery lead time grown longer?
There are two different types of lead time: the lead time between order receipt and sales recording, and the production lead time between the start of equipment production and the completion. There has been a tendency for the former type to grow as orders are being received from customers earlier than has been the case in the past. But thanks to our proactive component procurement strategy, the latter type of lead time has not grown longer.
You mentioned that the WFE market is expected to grow by about 20% in CY2022. Will your current production capabilities be able to keep up with additional increases in demand?
Currently, TEL’s plants are operating at nearly 100% utilization rate. However, it is possible for us to further expand our production capabilities in response to additional growths in demand. We are also planning enhancements to plant space and production personnel that look ahead several years into the future.
With respect to modification sales in field solutions, you indicated that there was a QoQ decrease for Q3 FY2022. Does this mean that demand for modifications has weakened? Furthermore, increases in the installed base would suggest that sales for parts will increase as well. Are there any concerns regarding parts procurement?
Modifications sales fluctuate quarter to quarter. For the medium to long term, demand for modifications, upgrades and relocations will continue to grow, driven by increases in the installed base and demand for mature generation equipment.
As for parts, in order to address increased demand, we are sharing information regarding demand forecasts with suppliers as appropriate. In addition, we are increasing TEL's inventory of parts to avoid a bottleneck in parts procurement.
TEL appears to be maintaining high profitability even for sales of mature generations. How does TEL achieve differentiation?
In both leading-edge and mature generations, equipment that can provide high added value with respect to perspectives like productivity, equipment uptime and yield is the equipment that gets selected. TEL strives to achieve differentiation by providing the best products and the best service for all generations.
Specifically, in Q3 FY2022, we released Tactras™ UDEMAE™, a 300 mm etch system for power devices. This product utilizes process libraries built up in 200 mm systems for 300 mm systems, and is also equipped with functions that suppress particle generation in the wafer bevel areas, an ability that is critical to the manufacturing of power devices. We believe these products are providing significant added value in mature generations.
With respect to Backside PDN*2, which is expected to see application in the future, what degree of equipment investment for this technology can we expect to see in CY2023 and CY2024?
As we anticipate that Backside PDN will start to see use in generations following 3 nm, equipment investments in CY2023 and CY2024 will be limited. We expect that investments will pick up in CY2025 onward.
Business opportunities for TEL include depositions of low resistance metal, a new material, as well as wafer bonding.
*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.
*2 Backside PDN (Power delivery network): Structures that arrange power delivery networks on the backside of silicon wafers
* The above content is a summary of questions and answers session.