July 10, 2015 Medium-term Management Plan Briefing Q&A
I think that forming an alliance with major domestic suppliers would be very tough in terms of antitrust regulations. As we have reached a technological inflection point, we intend to always consider the potential for technology investment and M&A.
In the sense of implementing share buybacks with reasonable timing and scale, we stated that we would consider conducting them flexibly. We are currently in the process of implementing the ¥120 billion share buyback that we previously announced.
As we will increase profitability under the Medium-term Management Plan, we believe it is important to synchronize the level of shareholder returns with the level of profit to some degree. We are very confident that we can obtain sufficient funds for growth investment even if we make more attractive returns. What we give the greatest priority to in terms of the way we use cash is growth investment. As regards cash on hand, we intend to maintain a level of roughly ¥250 billion.
We will allocate more R&D funding than before to the semiconductor production equipment business. Previously, we invested about ¥15 billion in development common to the entire company, excluding business units, but we will inject this into such areas as etching systems, cleaning systems, and ALD (atomic layer deposition) systems.
Going forward, technology needs for existing equipment will increase further and improving equipment operating time will become important. By developing service contracts, that include service and parts, we will grow this business. In the IoT era, we expect business to increase not only due to investment in leading-edge technology but also due to demand for used equipment, modifications and services.
Previously, we had a strong stance on responding steadily to customers’ needs based on a market-in approach, but from here on we will also incorporate product-out to propose patterning solutions through the sharing of technology that straddles business units.
As half of our shareholders are foreign investors, the question of what kind of relation to adopt between the tax rate and returns is an important matter to consider, but we believe it is also important to increase returns in Japan, where we generate a great deal of added value. We intend to respond appropriately from the two perspectives. In addition, we have rejuvenated the organization by appointing Mr. Kawai as COO and Mr. Hori as Senior Vice President at the executive level. As regards technologies, we have learned strong proposal capabilities and the stance of emphasizing profit and added value in an integrated manner from development to field solutions. Furthermore, we have also been inspired by the speed of global expansion and by high efficiency. The fact that we have established goals at the global level represents a great harvest.
Both products contributed. As both the RLSA microwave system and the parallel plate system are being increasingly adopted by major customers, I believe our market share will continue to grow. Our market share for conductor etching systems was 7% in 2014, but we are projecting a level of around 20% in 2018. We expect to achieve roughly a 10% increase in sales of both etching systems combined in five years.
We have focused on single wafer wet cleaning and dry cleaning. Technologies to prevent fine pattern collapse and prevent copper corrosion have become a standardized need in applications other than 3D NAND as well, which has led to the expansion of market share. In the case of dry cleaning as well, demand has broadened from oxide film to metal.
In the past, I think the WFE market was worth $30 billion in the fiscal year ended March 2012 but our companywide operating margin at the time was only about 10%. Currently, Tokyo Electron Device Ltd. is outside the scope of consolidation, but I feel that even so, an operating margin of 20% is a challenging target.
We are assuming market share of around 15%. We aim to expand market share for cleaning systems, etching systems and ALD systems, and I believe we will be able to achieve at least a 10% increase in sales in five years. The market is fluid but we will aim for earning power at the global level by managing changes in market share for each business unit. In the case of the FPD production equipment business, there are three potential areas for development--larger displays, high definition, and OLED--and I believe these will lead to growth. In the long term, we will consider this business while looking at the way in which OLED penetrates the market.