Thank you for joining today's Advantest Corporation's financial briefing for the second quarter of FY 2022, taking time out of your very busy schedule. Let me introduce today's participants from the company. Representative Director, President, and CEO, Yoshida. Director, Senior Executive Officer, CFO, and CCO. Executive Vice President, Corporate Administrative Group, Fujita. Senior Executive Officer, CCRO, Executive Vice President, Sales Group, Sakamoto. Senior Executive Officer, Co-CSO, Executive Vice President, Corporate Planning and Stakeholder Relations Group, Mihashi. I shall serve as a moderator for today's sessions, Kobayashi, IR, Corporate Planning and Stakeholder Relations Group. First, Fujita will present financial result for the second quarter of FY 2022, followed by Yoshida's presentation on business outlook for FY 2022. After that, we will take your questions. The meeting is scheduled to end at 5:00 P.M. Today's presentation materials are available on TDnet and our website.
Please download the presentation material separately if you are attending via telephone line. Prior to the presentations, we would like to remind you a few points. In this presentation, we may state forward-looking statement based on our current forecast, which are subject to risks and uncertainties. Please be aware that actual results may differ from our forecast. Now Fujita will start the presentation.
This is Fujita. I will explain the financial results for FY 2022 second quarter. Please turn to page four of the presentation material. Second quarter sales set a record high on a quarterly basis, exceeding the record set in the previous quarter. Operating income before income taxes, and net income grew dramatically year-on-year, but declined quarter-on-quarter due to higher SG&A expenses. Advantest business environment grew increasingly uncertain due to concerns about global recession and signs of a slowdown in the semiconductor market. Sales of testers for high performance semiconductors were strong in the second quarter, driving sales results in line with our plan. Details of these achievements will be explained in the following slides. Please turn to the next page five. This is the second quarter sales by segment. First, Semiconductor and Component Test Systems.
Sales were JPY 98.8 billion, a slight increase from the previous quarter. SoC tester sales were JPY 79.8 billion. While tester demand for smartphones and other consumer electronics decreased, tester demand for high performance computing, HPC, and AI related semiconductor development and production continued. Memory tester sales were JPY 19.0 billion, with the customers' long-term strategic capital investment plans supporting demand on a similar high level to the previous quarter. Mechatronics Systems was JPY 12.8 billion, -17.5% quarter-on-quarter. Sales of nanotechnology products decreased quarter-on-quarter. Service support and others, JPY 27.3 billion, +11.8% quarter-on-quarter. Maintenance and system-level test, SLT, sales were stable, supported by high demand for semiconductor testers. Please turn to page six. This shows the second quarter sales by region. China is shown in yellow.
Sales grew led by SoC testers. Taiwan? Orange. Sales of testers for smartphone related applications slowed down. Advantest percentage of sales to overseas customers remained high at 97.0%. Please turn to page seven. This shows the second quarter sales, gross profit, and operating income. Gross margin was 57.5%. Despite the impact of rising parts procurement costs, our sales mix remained favorable and gross profit margin stayed high. SG&A, including all other income and expenses, was JPY 36.8 billion. SG&A expenses increased quarter-on-quarter due to increased hiring and development related expenses. Operating income was JPY 43.1 billion. Operating margin was 31.1%. As in the previous quarter, we maintained an operating margin of over 30%.
Please turn to page eight. Second quarter R&D expenses and others. As for the R&D expenses, JPY 14.8 billion. CapEx, JPY 5.3 billion. Depreciation and amortization, JPY 5.0 billion. As for the cash flow, in terms of free cash flow, JPY 33.7 billion. Operating cash flow reached the high figure of JPY 42.4 billion. On the other hand, regarding investment cash flow, the acquisition of CREA in August and other factors resulted in expenditures of JPY 8.7 billion, bringing free cash flow to JPY 33.7 billion.
Please turn to page nine on financial positions. Total assets were JPY 567.3 billion. Cash and cash equivalents were JPY 114.9 billion. Inventories were JPY 133.2 billion.
Regarding inventories, while parts procurement challenges continue, we are building sufficient inventory assets to meet solid customer demand. Goodwill and intangible assets were JPY 104.4 billion. Goodwill and intangible assets increased due to exchange rate fluctuations and acquisitions of CREA. Equity attributable to owners of the parent were JPY 342.4 billion. Ratio of equity attributable to owners of the parent was 60.4%. Regarding the progress of the share repurchase announced in July, by the end of September, 3.45 million shares of common stock had been acquired for JPY 27.3 billion, equaling 34% of our upper limit of 10 million shares, and 55% of our upper limit of JPY 50 billion. In addition, we canceled 8 million shares of treasury stock on September 9.
Much for the presentations on the result. Thank you.
Well then, I, Yoshida, will present on FY 2022 outlook. Please turn to page 11. Concerns about growing geopolitical risks, higher inflation, and rising interest rates have deepened fears of recession. In addition, uncertainties in the semiconductor market is rising due to factors such as the new U.S. restrictions on chips export to China. In this uncertain global situation, which also affects the semiconductor market, final demand for cornerstone consumer electronics and products such as smartphones, personal computers, and televisions is set to decline further. More semiconductor manufacturers are likely to adjust inventories and revise their plans to invest in semiconductor production equipment. On the other hand, the digitalization macro trend remains firm, supporting demand for chips used in data centers and AI-related products.
Additionally, shortages of automotive semiconductors needed to support electrification and of industrial semiconductors continue, making for patchy demand picture overall. In the tester market, some customers are moving to adjust tester utilization rates and review investment plans due to slowing demand for consumer products. However, we expect that tester demand stemming from higher reliability needs and technological advances in high-performance semiconductors, such as HPC for data centers and high-end memory, will compensate for the decline. In the SoC tester market, our latest overall market outlook anticipates a smaller market than estimated three months ago. On the other hand, we expect our sales to progress according to the plan, and we also expect to grow our market share.
In the memory tester market, amidst worsening memory market conditions, some customers are reconsidering their equipment introduction plans, but others are promoting strategic capital investment plans in anticipation of long-term semiconductor demand growth. On balance, considering these varying investment attitudes, demand is expected to remain firm, and our market size estimate remains unchanged from three months ago. Please turn to page 12. Here is the full year forecast for fiscal 2022. In light of growing uncertainty about the future, our full year consolidated earnings forecast for FY 2022 remains unchanged from the forecast announced in July 2022. We expect sales of JPY 550 billion, operating income of JPY 170 billion, income before income taxes of JPY 174 billion, and net income of JPY 130 billion.
Due to the difficulty of predicting movements in foreign exchange markets, exchange rate assumptions for our second half forecast remains unchanged at $1 to JPY 130 , and EUR 1 to JPY 140 , as previously announced. Our latest forecast for the impact of exchange rate fluctuations on FY 2022 operating income is JPY +1.3 billion per JPY 1 of Yen depreciation versus U.S. dollars, and JPY -0.2 billion per JPY 1 of Yen depreciation versus the Euro. Gross profit margin for the full year will be around 58%, unchanged from our previous forecast, but we expect that operating margin will decline in second half because of increased hiring and future-oriented R&D spending.
Although we are paying close attention to changes in the external environment, such as the new U.S. restrictions on chip exports to China and changes in the macroeconomy, we continue to reinforce our parts procurement capabilities and expect to set new annual record for both sales and profit for the third consecutive year. On pages 13 and 14 are the outlook by the business unit. First, please turn to page 13. We have raised our full year SoC tester sales forecast for FY 2022 by JPY 5.5 billion from our July forecast to JPY 320 billion. Tester demand for applications processors, APU, and display drivers ICs, DDIC, used in consumer electronics such as smartphones and PCs, is declining due to the impact of reduced production plans.
On the other hand, tester demand for devices used in data centers and AI-related products is subtly increasing due to the adoption of advanced processes for manufacturing high-performance semiconductors. In addition, the increase in semiconductor production accompanying quicker and wider adoption of electric vehicles is also expected to drive tester demand. We have lowered our full year sales forecast for memory testers for FY 2022 by JPY 1.5 billion from our July forecast to JPY 69 billion. In the memory semiconductor market, there are signs that some of our customers are revising their aggressive investment stances due to the trend of inventory adjustment and revised capital investment plans. However, we expect that tester demand from customers who continue to actively invest in anticipation of long-term growth in high-end memory semiconductors will remain firm regardless of the present fluctuations.
Please turn to slide 14. Our full year Mechatronics-related business sales forecast for FY 2022 is JPY 50.5 billion. Although we have slightly lowered our forecast from July, we expect continued high demand for device interface products, while demand for some metrology will be supported by the wider adoption of EUV lithography and increased demand for masks for mature processes, maintaining an overall high level of demand for the segment. We have also slightly lowered our services and other sales forecast from July to JPY 110.5 billion. Higher demand for device reliability is driving the adoption of system-level test for an increased number of product types, and spurring growth and demand for high-precision consumables. Demand for maintenance services is also increasing due to steady growth in our installed base. Please turn to slide 15. This is our summary.
Since the beginning of the fiscal year, semiconductor market trends have changed rapidly. Uncertainty about the future of the global economy has increased further, as has uncertainty in the semiconductor market due to factors such as the new U.S. restrictions on chip exports to China announced this month. Tester demand for our cornerstone consumer electronics will be affected to some extent by production plan revisions triggered by semiconductor inventory adjustments, which are expected to lead to lower tester utilization rates and may cause customers to revise their capital investment plans. In light of the growing uncertainty about the future, we have not changed our previously announced full year earnings forecast for FY 2022.
However, demand driven by the reinforcement of test capabilities amidst semiconductor performance gains and demand for customers planning strategic capital investments in anticipation of the long-term expansion of semiconductor demand is expected to compensate for the present decline in demand for certain applications.
Due to ongoing difficulties with parts procurement, our product supply is still unable to keep up with customer demand. We expect to achieve our plan for the fiscal year through measures such as reallocating capacity from some customers whose demand has decreased to other customers. This is the end of the explanation for the financial results for FY 2022, Q2, and FY 2022 outlook. Although uncertainty is growing in our business environment, finally, in the following slide, I would like to explain briefly about how we perceive tester demand, how we maintain a competitive advantage in the market, and how we are providing value to our customers.
Now please turn to slide 16. Semiconductors are becoming part of our social infrastructure. More new applications, such as the Metaverse, are expected to appear.
Unlike the market environment for front-end process equipment, the semiconductor tester market has a wide range of customers, including fabless and OSAT. Additionally, more new players are entering the semiconductor market, such as U.S. hyperscalers. Now, these are different from front-end process equipment manufacturers. We believe these people can become our new customers. In response to the dramatic increase in the amount of data being processed, semiconductors need to achieve higher functionality through improvements in circuit integration, such as miniaturization and the adoption of advanced packages. At the same time, there is a need to improve energy efficiency, such as by lowering power consumption to reduce the burden on the environment. In our view, the quest for innovation in the semiconductor market is leading to increases in semiconductor production, increases in test volume due to technological evolutions, and customers' investment based on their long-term perspective.
In response to these structural changes in the semiconductor and semiconductor tester markets, we contribute to the expansion of our customers' profits by leveraging our accumulated strengths and assets to offer value in both hardware and software. Our product portfolio that supports a wide range of applications is the source of our continued competitive advantage. Test used to be regarded as a manufacturing cost, but customers now see it as not merely guaranteeing semiconductor performance and quality, but also as a process that can boost their competitiveness through faster time to market, time to quality, and time to volume. We have been looking at the very high demand for the past 18 months. We know lead time is becoming longer, and so therefore, business negotiations with customers have already shifted out to 2024 and beyond.
As a part of enriching our power semiconductor test solution lineup, we have already begun offering our major customers products from CREA, which we acquired in August. In the evolving semiconductor value chain, we will add customer value through test at key points throughout the whole semiconductor development and manufacturing process. Please turn to slide 17. We have issued our Integrated Annual Report 2022. We published this last weekend. I would like to introduce some of the highlights. In the 2022 edition, we deliver an enhanced progress, a progress report on our second midterm management plan, as well as fuller descriptions of Advantest's strength that lead to non-financial capital value creation, and a conversation with outside directors that sheds new light on our corporate governance. I hope you'll be able to look at this report through our website. Thank you for your attention.
Thank you very much. We will now move on to the Q&A session. From CLSA, Mr. Yoshida, the floor is yours.
Thank you very much. In the second half, your sales and operating profit remained unchanged from the previous forecast. Why is this based on your forecast of the Q3 and Q4? Next year, what kind of business environment do you expect? Do you have any updates? Please share that with us.
Thank you. Yoshida will take that question.
In Q3 and Q4, I think sales will be generated 50/50. I say that because the supply chain has been stabilized to a certain extent, but parts procurement remains a challenge, and we don't have.
Production level at the point where it should be. We see that the sales will remain pretty much the same in Q3 and Q4. We have procured some parts, and we have maximized our production level accordingly. I think in the third quarter and fourth quarter, this situation will continue. In Q4, if the procurement situation improves, probably we can build on the current figure, but right now I think it would remain 50/50. Second question, in 2023, what is our outlook? I'm sure you share this understanding that the state of the world economy is unforeseeable. In addition, as I mentioned earlier, the restriction on exports to China by the U.S. is an additional factor that can impact the market, and the market side is hard to predict.
As I mentioned in July, our outlook remains from -15% to +10%. This is the range that we gave you. Based on the current weak state of the world economy, maybe this positive side is shrinking. However, this -15% may be too pessimistic. We are not that pessimistic. We have some order backlogs and therefore maybe slight decrease, slightly on the negative side or slightly on the positive side would be our forecast right now. The current visibility remains low. That's my honest feeling. That is my answer to the first question.
Thank you very much. I have a follow-up question. You mentioned the restriction on exports to China. In Q2, sales increased, which in the Chinese market. The U.S. restriction will be tightened. What kind of impact could this have? Do you have any concrete figures that you can share with us? Thank you.
Regarding this restriction, this was announced on the seventh of October. There are many restrictions announced, but I think those that are related to our products are limited. We are not using U.S. technology. We are developing our products in Japan and Europe, and we are producing in Japan or in other parts of Asia. These apply to our core products. Therefore, we're not using U.S. developed technology. Well, this portion remains very small, so I think the impact will be limited at the moment. However, going forward, this move of the U.S. to tighten the restrictions, maybe there could be additional actions taken, or maybe China would react to this in a different way.
I think the current situation is quite unstable, and therefore, from our point of view, we need to collect as much information as possible and prepare and plan so that we can take actions if needed. That is what we are trying to do right now. We don't have any calculations regarding how much impact this could cause, but if the restriction level remains as is, I think the impact will be limited. However, if additional restrictions may apply, then this impact could change. Thank you.
Thank you very much.
Next question from Goldman Sachs. Mr. Nakamura, the floor is yours.
My first question is regarding the tester market perspective. In 2022, you have made a downward revision. I would like to know the background. What kind of applications did you have in mind when coming up with this outlook? Your sales figures remain the same, so that means your share would increase as a result. I would like to know why.
Mr. Nakamura, you said that we made a downward revision. You are asking a question about this in particular?
Yes. For the tester tab 2022, SoC tester. This has been revised downwards, page 11. I would like to ask you a question regarding this point. What is this based on?
You are right. Regarding SoC, from August, $350 million , downward revision was made. It is because our competitors also made downward revisions regarding their sales. Regarding our procurement, we had some upside prospects, but, that was not the case, so we had to bring the figures down. Midpoint has gone down.
Regarding still for this, since last year, we have been expecting that this would go up around 55%, more or less. This was the market share, SoC. In terms of SoC, memories are stronger, but because of the depreciated yen, when we calculate it by dollars, then this would come down. The share, market share will remain flat, 50%, roughly speaking. This is what we predict.
Thank you. A follow-up question. You talked about the order backlog at the moment, and you showed some outlook into next year. What is your delivery time right now? And pushout and cancellation, do you hear anything about these movements compared to previous cycles? What is the current situation? Thank you.
Sakamoto will take that question.
Regarding the orders, we have not disclosed specific figures, so we cannot answer that.
As I mentioned earlier, there is a certain amount. This is related to the high performance of semiconductors, and the testing demand has gone up. In mid-term and long-term prospect, the market is expanding. Therefore, lots of our customers would like to expand on their capacity. There is a high testing demand which remains to continue. Because of this, we have lots of orders, and we are being very busy as a result. That's my answer. Regarding cancellations, partially related to smartphones and PCs, these are consumer products. Our customers who are manufacturing these products asked us whether cancellation or delivery postponement is possible. However, even if such cancellations happen, the parts that would have been required for the production could be allocated to other clients. We are being very flexible.
150 billion sales guidance can be maintained. That's our thinking. Thank you very much. You asked the question about lead time as well. Sorry. It's long still. nine to 12 months currently. A long lead time continues. That is the current situation.
Thanks for the follow-up. That means no major change from three months ago.
Yes, because the parts procurement situation has not improved, lead time has not improved drastically either. Thank you very much.
Thank you.
Next question. BofA Securities, Mr. Hirakawa.
Thank you very much. Can you hear me?
Yes, we can.
Thank you for the opportunity. I have a question regarding the system level. Many applications include smartphones for your products. But in Q2 and your year-round forecast, you don't see any dip in demand. Of course, smartphones have demand for tests, testing, and I would like to know how this is expected to shift.
Hirakawa-san, thank you for your question. This is Mihashi. System level related question on smartphones and applications. Regarding this, the smartphone volume in general has decreased. Our SLTs and services and consumables, of course, there are impacts. However, semiconductors are evolving, and we are providing more reliability. This is happening in parallel. Most currently, the demand has slowed slightly. However, with our customers, we are talking about technological improvements and ILT quality assurance, so we are in continuous business discussions with our customers. Regarding consumables currently, and this does not apply only to smartphones, but all consumer products like PCs, for example, and sockets, the volume for that has slowed down currently.
That said, towards next year, many companies in this space will be putting in new processors. In the next quarter and the quarter after that, I think the demand will improve.
Thank you. As a follow-up. Outside of smartphones, what kind of demands are you seeing and into next year too, for the system level related products?
In terms of volume, it's different from smartphones, but EV in automotive industry, the quality assurance factor has become very much highlighted. Given that current situation, next year, automotive and HPC application business is expected to steadily increase. Servers, that means. Hirakawa-san, can you hear me?
Thank you very much. I'm good.
Thank you.
Thank you. Moving on to the next question. Mitsubishi UFJ Morgan Stanley, Hasegawa-san, over to you.
Well, I read the integrated report, and it was a very good publication. Let me confirm about the forecast for next year. Well, there has been some decline in the consumer product, judging from the current situations. Next year, you said the range shall be slight decline or slight increase. HPC growth or along with the high performance needs, is the testing time being prolonged? Compared to three months ago, the current situation seems to be worsening, but on the other hand, you do have a very strong demand outlook or the order seems to be robust. Could you once again explain, your view on the next fiscal year is my question.
This is Yoshida speaking. Order may be softening.
I'm sure that you are assuming the softening of the order. However, we no longer disclose the order, so I won't be sharing with you the specific numbers. However, in Q1 and Q2, order is at the higher level compared to the sales. Compared to March this year, we have higher order backlogs. What does this mean? In the past one year, we have not fulfilling the demand coming from our customers. This situation is still continuing. In the second half as well as toward the next year, there may be some softening of the demand. However, because of the high level of order backlog as well as the service revenue, as well as the revenues from the consumables compared to the sales in 2022, will there be decline of 15%, 20% or 30%? That chance is very low.
That's how I feel. Now, with the slowing down of the global economy and the situations may be dramatically changing for the auto industry as well. Take for example, there may be some excess semiconductor for the automobile. If such situations will prevail, the things may start to change. However, for now, from the auto device manufacturers, the things are still escalating. By responding to those demand, we believe that we will be able to maintain a high level of demand. As I mentioned in the final page of the material, the new customers are entering with new devices. That is happening for sure. In fiscal 2023, starting from the second half of 2023, there will be the additions of the new types of demand. From those perspective, I don't think we should be that pessimistic.
That is how I view at the moment. This concludes my response.
Thank you. If that will be the case, now flip side of the picture, not just for next year, however, in 2023, 2024, there may be slight recovery of the market, or you acquire CREA, and should there be the growth of the new business, how about the supply capability? Do you need to be concerned about your supply capability?
Supply capability on a global basis, resilience of the supply chain, is becoming an issue. From the end of the previous year, in order to increase the supply capability, there are key parts, which is in the shortage, whereby we will not be able to produce testers, and we are implementing various measures.
Mainly our customers who are manufacturing semiconductors, those suppliers, we are closely cooperating with those suppliers, and we are strengthening our procurement team. On a global basis, and not just the semiconductors, however, raw materials used to produce consumables. If there are any weakness in the supply chain, we try to strengthen them so that we can respond when the production increase. As I have explained in the midterm plan toward 2030, semiconductor market will hit $1 trillion. With that outlook, our production capacity have to be enhanced. Based on such view, we are taking various measures as a part of the long-term measures. With the availability of the parts, our production capacity or the sales can further go up. However, it is important to implement measures so that we will be able to procure parts.
That is what is needed for us to increase our production capacity. That is what we are currently strengthening. Understood.
Thank you. I have one more follow-up question. Advantest Cloud Service. You have to wait before it starts contributing to the revenue. Anything that you will be able to share at the moment?
In 2020, PDF Solutions, which is a software company, it's a public company in the United States, we partnered with that company so that the platform that we can provide to the customers is something that we are working with that American company. The software to be utilized on that platform starts to be produced by ourselves and which is already delivered to the customers, and some are already generating revenue. However, the sales level is still slow in view of the total sales.
We are making the upfront investment, so the business is still generating deficit. However, our cutting-edge customers, from the test data, the device is to be tested, and in view of the entire process, inclusive of the front-end processes, there are various devices being involved. We would like to connect the different pieces of data to conduct some analytics, so as to improve the quality as well as the yield. This movement is already underway. That is something that we have already discussing with some of our customers, so that is what, you know, the major progress that we have made. On top of that, inclusive of various experts, we are trying to secure the talent on a global basis. Soon, we can provide to you the topics related to this, either in 2023 or you may have to wait until 2024.
The new service, the new type of support is something that I hope the day will come so that we can start to introduce about these new services. It is not that we are de-emphasizing on this, however, we are placing much emphasis on these new services. Please wait.
Thank you. You are making a steady progress in line with what you are aiming to achieve?
Yes. As well as. Well, there's limit to what we will be able to do just by ourselves, by developing the software ourselves. There are some outside software development companies that shall be involved in the ecosystem. In other words, we would like to increase the numbers of the partner companies so that we can increase the numbers of the applications that will be utilized on our platform. That is another thing that we are working on.
Thank you so much from myself.
Thank you very much. From Daiwa Securities, can we ask Mr. Sugiura to ask your question?
Yes. I want to ask about your outlook to the tester market next year. You earlier talked about your performance for the next fiscal year. When you look at the tester market, what is your perspective? Can you share your view with us? You'd said that I believe you have large order backlog, and so I do believe there must be something that you can see. That's what I would like to be shared. For example, SoC, HPC, and industrial equipment or anything on the consumer side. What do you see? DRAM, NAND, even for these memories, what kind of market change do you perceive or do you expect? Can you share your view with us to the extent you can?
Thank you very much. I, Sakamoto, will answer your question. Now, we did earlier hear this from Mr. Yoshida, but we have low visibility into the next year. I would like to speak based on the assumptions that we currently have. First of all, as for the tester market, TAM is what would determine the outlook. In calendar year 2023, at the moment, what we find when we look at our competitor as well as how we're doing, DV is limited. We can't really speak specifically, but compared to calendar year 2023, SoC calendar year 2022, we expect that SoC TAM will grow at a single digit level.
For memory side, for the consumer market, I believe that there is going to be a further decline, and if that is going to be the case, again, compared to year 2022, there is a chance that we will see a decline. However, when we look at our major customers, there seems to be proactive investment based on the assumption that semiconductor market would be growing. We find we do hear from customers about this proactive investment, so we're not expecting a large dip. I think this expresses what kind of a outlook we'd be able to have.
Now, the tester market that we see, this is something that we have already expressed, but then when it comes to production volume, if it is going to be flattish, even if that is going to be the case, high-end device, there's more miniaturization going on, and also for high-end products, there will be more quality required. In other words, the demand for testing will increase. This is something Mr. Yoshida mentioned earlier, but time to market, time to volume, this needs to be captured ahead of the competitors. In other words, our customers want to make sure they'd be able to have their products be launched ahead of the competitors, and it needs to guarantee good quality.
That means the customers' need for doing test to ensure higher quality products ahead of their customers, their competitors, is on the rise, and we are seeing more needs from more customers. This is something that we often say, but with the evolution of semiconductors, the coverage, the need for testers become large. The time required for testing becomes longer. In other words, the technology, the evolution and is increasing. When we see this from the customer's perspective, for example, at the moment, any customers around a smartphone area, we are seeing an overall decline. For example, in tester utilization around OSAT, that itself is on a decline. However, HPC or AI and automotive, which is very strong, applications in these areas, would be able to compensate any drops we're seeing in, for example, OSAT.
In other words, we have a very wide coverage of customer base. We have wide product portfolio. That, even though we're seeing some difference depending on application, we do believe that some of the declines seen in some applications could be well compensated by customers in other applications. Therefore, we're not expecting a large dip. We believe that together with the market growth and with the baseline of increasing tester demand, just like we expressed before, we see that even in 2023, we don't expect a large dip in the tester demand. It will be flattish or perhaps a slight increase. That is something that we foresee when we look at the market environment.
Thank you. My second question is more like a follow-up to my earlier question. You did express about new customers who will be joining in your customer base from next year. When you look at your SoC, you mentioned that single-digit growth can be expected in the market. Your expectation, how much would these new customers be contributing to your own expectation? Also, when you look into next year, like, the largest customer for your competitor, when they go into the next node, I expect there will be more increase in the tester side. That means, is it correct to understand that your share in this tester side is going to stall at some point next year, tentatively?
Thank you. This is Mr. Yoshida. In calendar year 2023 or FY 2023, we have lower visibility, and we're still trying to express our story and it will depend on how much you'll be able to believe or rely on what we say. When we look at our new customer, we certainly would not be able to speak what we're speaking today if we had not been speaking with these customers from before. That does tell you that there is some expectation that we do have in terms of the demand. Now, based on that, how are we looking at the market? We're expecting some growth in SoC, and that of course includes some of the demand expectation that we've been able to aggregate through the conversation with the customers.
Within the customer, there are some that would have strong peers, and if their peers increase their presence, they're naturally that may mean that our share would drop, which is a reversal trend of what we have been seeing for this year. Do we not have any transaction with our peers' customer? I would not say so. For example, even in the smartphone display driver or even for a camera, we are trying to have these transactions on a very multifaceted phase. So it's not that the peers will be able to take away everything. There are some that we still will be able to enjoy our presence. So it's not like a zero or 100 in terms of the share. I hope I answered your question.
Well, thank you very much. Yes, that was a very good reference information for me. Thank you. Thank you very much.
I understand that there are some more questions. However, time has come to end the financial briefing for the second quarter of 2022 for Advantest Corporation. Thank you very much for your participation. Thank you.