Earnings Call: Q1 2022

Jul 28, 2021

Thank you for attending the earnings conference call of Advantis Corporation for fiscal 2021 First Quarter ended June 30, 2021. Participants from Adventist are Yoshiaki Yoshida, President and CEO Matsushiji Fujita, CFO Kimiya Sakamoto, Executive Vice President of Sales Group and Yasuo Miyashi, Executive Vice President of Corporate Planning and Stakeholder Relations. First, CFO, Tito, will go over the financial results for the Q1, followed by a presentation on the fiscal 2021 outlook by CEO, Yoshida. We will then take your questions. The entire conference call is scheduled for an hour. Materials are available from TD Net as well as the company website. Before we start, a cautionary statement. This presentation contains forward looking statements that are based on Adventist's current expectations, estimates and projections. Forward looking statements are subject to known and unknown risks, uncertainties and other factors that may cause Adventist's actual results to be materially different from those expressed or implied. Without further ado, CFO, Fujita. Good afternoon. Fujita speaking. I will go over the Q1 results. Please turn to Slide 4. First, the business environment in the Q1. The acceleration of digitalization as a result of the COVID-nineteen pandemic has boosted demand for semiconductors used in data centers, PCs and AI applications. In addition, competition among 5 gs smartphone manufacturers has accelerated demand growth for related semiconductors and higher functionality requirements. Moreover, as final demand recovers amid the lifting of COVID-nineteen related restrictions, semiconductor shortages have become palpable in diverse sectors, including the automotive sector. In response, players throughout the semiconductor market are now aggressively investing in production capacity enhancements and advanced technology. Amidst these circumstances, Adventist has endeavored to capture the expanding demand for semiconductor test from every angle by leveraging our broad product portfolio, which is one of our strengths as a solutions provider. We have put the greatest emphasis on stable procurement of parts amidst tight semiconductor and electronic component supply conditions to ensure our ability to meet the ongoing robust demand. But procurement bottlenecks throughout our supply chain are increasing parts delivery time, which is also affecting lead time on our products. Following the surge in the tester demand environment, our customers have been moving to secure products in advance in anticipation of longer product lead time. These trends helped to boost orders received in the Q1 to a level far exceeding the record highs in the previous quarter. We also achieved record high quarterly results in terms of sales and operating income. Quarterly income decreased quarter on quarter due to the onetime impact of having posted deferred tax assets in the Q4 of the previous fiscal year. Next slide. As for the Q1, orders by segment, semiconductor and component test systems were up 58.7 percent quarter on quarter at €116,200,000,000 Orders for SoC testers increased by JPY 49,400,000,000 quarter on quarter@97,500,000,000 Amidst overall strong growth, outstanding vigor was seen in orders for testers for high end SoCs, especially application processors or APUs, which are core smartphone components and devices for high performance computing or HPC. Memory tester orders were JPY 118,700,000,000 down JPY 6,400,000,000 quarter on quarter. While orders for DRAM testers increased, orders for flash memory testers declined in reaction to large orders in the Q4. Orders for Mechatronic systems were up 11.8 percent quarter on quarter at JPY 14,000,000,000 with growth in orders for EUV related Nanotechnology Products. Orders for services, support and others were up 24.8% quarter on quarter at €31,000,000,000 While annual maintenance contract renewals decreased due to seasonality, orders for system level test or SLT products increased mainly on the mainstreaming of high spec SSDs and the strength Moving on to the Q1 sales by segment. Semiconductor and Component Test Systems increased by 3.3% quarter on quarter at JPY 67,300,000,000 coming from SoC tester sales of JPY 50,200,000,000 and memory tester sales of EUR 17,100,000,000 In both categories, strong sales were maintained from the 4th quarter. Mechatronics Systems were up 15.8 percent quarter on quarter at EUR 11,500,000,000 sales were strong for all of device interfaces, test handlers and nanotechnology products. Services, support and others were up 13.2% quarter on quarter at JPY 18,400,000,000 our SLT business contributed steadily to sales on the momentum of continuing high orders. Next slide. Orders by region. In the Q1, customers showed strong motivation to invest in every region. Notably, in Taiwan and China, orders for testers for high end SoCs, mainly smartphone and HPC related devices increased significantly. In other regions, Southeast Asia saw strong orders for testers for devices used in PCs, servers, automotive applications and industrial equipment. As for the Q1 sales by region, in Taiwan and China, smartphone related sales increased. Percentage of net sales to overseas customers reached 97%, the highest level ever as investment appetite increased in our main overseas sales territories. Next slide. Operating income and others for the Q1. Gross profit margin was 56.4%, which represented a quarter on quarter improvement due to an increase in sales and a more favorable sales mix. SG and A, including all other income and expenses, totaled €28,600,000,000 an increase of JPY 4,700,000,000 quarter on quarter. Please note that in the Q4 of the previous fiscal year, a profit of approximately JPY 5,600,000,000 from the revision of the pension system at the German subsidiary was recorded as other income. Excluding the impact of this onetime gain, net SG and A expenses decreased slightly on quarter. Operating income was €26,100,000,000 and operating margin was 26.9%. Next slide. 1st quarter R and D expenses and others. R and D expenses were €11,800,000,000 and R and D to sales ratio was 12.1%. CapEx was EUR 2,600,000,000 and depreciation and amortization totaled EUR 3,400,000,000 As for the Q1 cash flow, free cash flow was positive €11,500,000,000 Next slide. Balance sheet for the period ending June 30. Total assets were EUR 428,200,000,000 of which cash and cash equivalents were JPY 145,100,000,000 Equity attributable to owners of the parent was 285,000,000,000. Equity ratio was 66.6%, up 0.3 points from the end of the previous fiscal year. That's all from me on the Q1 financial results. Thank you for your attention. This is Yoshida speaking to present the fiscal 2021 outlook. Please turn to Slide 12. Outlook of semiconductor test to market trends for 2021. As explained at the briefing session on our new 2nd midterm management plan held in May. Adventist is in the midst of the situation where we can benefit from growth of the semiconductor and semiconductor test markets in the medium to long term, driven by the progress of the digital revolution and the push for energy efficiency improvement. In 2021, demand for semiconductors will grow along with increasing final demand and higher end product functionality, driving aggressive investments in major regions targeting higher semiconductor performance and production capacity enhancements to solve the semiconductor supply shortage. In the SoC tester market, the production ramp up of new APU and HPC products as well as increasing device complexity associated with miniaturization should support higher tester utilization at customer sites for the time being. We anticipate further increases in investments to expand test capacity, 90 for high end SoCs. At this time, The calendar year 'twenty one SoC tester market size is expected to be US3.8 billion dollars In the memory test market, the bus evaluation in terms of miniaturization, Multi layering and higher speeds and bandwidth helped by digital revolution has been driving the tester demand continuously since last year. As a result of slightly adjusting our market size outlook based on the latest customer trends, The calendar year 'twenty one memory test market sites is currently expected to be $1,400,000,000 As our customers have been moving to secure products early in anticipation of longer product lead times, it's now more difficult to estimate the market size than in the past. If the market trends as expected, it will grow more than 20% for the 2nd year in a row. Page 13 shows fiscal year 2021 forecast. Based on our Q1 results as well as future outlook. We have raised our full year forecast to 400,000,000,000 yen in orders, JPY 385,000,000,000 in sales, JPY 100,000,000,000 in operating income, JPY 100,000,000,000 in income before income taxes and JPY 75,000,000,000 in net income. In this forecast, If it is achieved, orders and sales will reach record highs. Operating income will reach the 100,000,000,000 level for the first time setting a new record in 24 years. Regarding future orders, Although we anticipate some fall offs in response to the sharp increase in orders in the Q1, orders should continue to stay at a high level in the Q2 and beyond. Orders are harder to forecast than in the past. We will be prepared for a potential for further upside depending on the economic situation. In terms of sales, in addition to the recent increase in backlog. We anticipate a high level of orders in the future. So solid sales are expected to continue in each quarter of fiscal year 2021. We plan to increase sales by 23% compared to the previous fiscal year. We are not significantly concerned about production capacity, but the shortage of semiconductors and parts has become a major issue across various industries. We will endeavor to secure all necessary parts to avoid lost opportunity due to supply chain bottlenecks. Gross profit margin is expected to be around 55% for the full year. Concern about the impact of rising parts prices has been voiced, but we don't think this will be a significant factor. The forecast is based on exchange rate assumptions of yen to the U. S. Dollar and yen 135 to the euro for the 9 months from Q2 of this year. Exchange rate sensitivities in terms of FY 'twenty one operating income is plus 1,000,000,000 yen per 1 yen depreciation against the U. S. Dollar and minus 150,000,000 yen power and yen depreciation against the euro. Please turn to Page 14 for FY 2021 outlook by segment. I will start with Semiconductor and Component Test Systems. In view of the present favorable business environment, including record high quarterly orders for Q1 and expected high level orders going forward. Our full year FY 'twenty one sales forecast for SoC testers has been raised by JPY 25,000,000,000 from the April forecast to JPY 194,000,000,000. In APUs, HPC, etcetera, advancing semiconductor complexity through materialization is currently driving tested demand higher. This trend is expected to continue for the time being. We are seeing active capacity expansion to solve the semiconductor shortage, mainly for automotive and for memory testers has been raised to 69,000,000,000 yen, an increase of 1,000,000,000 yen from the April forecast. As digital revolution accelerates, demand for NAND and DDR4 and five testers is expected to remain stable. In these circumstances, we expect sales to increase, mainly for DRAM high speed testers, where advantaged has a competitive advantage. Page 15, please. Our Mechatronics related business is closely linked to our memory tester business. Demand for test sales is expected to grow as demand for memory testers remains strong. In addition, Demand for nanotechnology products is strengthening amid the wider adoption of the EUV technology. We therefore have revised up our sales forecast for FY 'twenty one by 6,000,000,000 yen to 48,000,000,000 yen In services, support and others, we have raised our sales forecast by 3,000,000,000 yen to 74,000,000,000 yen. This is based on the increase in demand for our system level test products and growth in our field services business linked to our growing installed base. Page 16, please. For share repurchase. As part of our shareholder return policy, under the 2nd midterm management plan, we announced to aim for a total annual return ratio of 50% or more, including share buyback. Based on today's upward revision of the earnings forecast, we will acquire JPY 70,000,000,000 of our own stock to enhance shareholder return and improve capital efficiency. The acquisition will be executed during the 8 months period from August 2021 to March 2022 and a total of up to 10,000,000 shares will be acquired, which is equivalent to 5.1 percent of the outstanding shares, excluding treasury stock. Page 17 shows a summary. Digital revolution accelerated by COVID-nineteen pandemic has greatly boosted semiconductor demand with customers making active investments in capacity expansion and the semiconductor performance in key regions. We have raised our full year orders forecast by JPY 50,000,000,000 and the full year sales forecast by JPY 35,000,000,000 increase in Q1 orders and the company's future market outlook. We aim to exceed 100,000,000,000 yen in operating income, which would be a record high. The shortage of semiconductors, The rollout of new APU and HPC devices and the increasing complexity of these devices are all expected to support high tester utilization at custom sites for the time being. We foresee that the strong demand for testers will continue. Given our expectations for further cash flow improvement, thanks to favorable business performance, we will buy back shares to enhance shareholder return and improve capital efficiency. Due to strong demand, Our second midterm management plan launched this year is off to a good start. We aim to achieve the targets of the plan while being fully aware of the risks, such as difficulty in parts procurement due to supply chain bottleneck, decrease in demand due to delays in global economic recovery and the potential impact of the U. S.-China conflict and economic security policies on the semiconductor industry. This concludes my presentation. Thank you. We will now take questions. The first questioner is Mr. Wataki from Nomura Securities. Thank you. Wataki from Nomura Securities. Thank you, and congratulations on your presentation on spectacular financial results. I have a couple of questions. I believe there are many business opportunities being presented today, including system level test chiplets, China moved towards low power consumption service to name a few. I think the tester market itself is undergoing structural change. Can you comment on this structural change? Which driver do you think is most significant for Adventist? Thank you, Mr. Waraki. This is Mihashi speaking. Thank you for your continued support. You said structural change. Specifically what particular aspect do you have in mind? Well, there are several reports on this increase in system level tests on chiplets and also in relation to move towards lower power consumption of servers, Intel is losing its market share, while accelerators are growing and there is a China factor. From these perspectives, I think there are several very strong tailwinds blowing in favor of Adventist. Are you finding anything that are different from the past? I would be interested to hear your view, Mr. Miyashi. Thank you for that clarification. As you have correctly described, the advancement of various technologies continue to drive the semiconductor industry. For sure, as we've been saying for some time, there are no shrinkage, particularly double patterning in recent years and also going forward, high NA, high resolution is to drive the advancement of scanners. Increased complexity of the semiconductor production techniques is good news for the testers, which are needed to ensure semiconductor quality. So going forward, we should continue to expect the technology advancement to be tailwinds in favor of our business. While we don't see a big change, we expect this pattern to be repeated in the future. Moreover, advances in chiplets and other devices with 3 d structures that you mentioned will encourage manufacturers not only to thoroughly test individual chips on ATE, but additionally to perform SLTs to ensure the quality of the device once the multiple chips have been integrated. This will also serve as a tailwind for the test demand growth. The advancement in semiconductors overall, including functions, low power consumption, these serve as very strong tailwind. I see. Thank you. My second question is on China. Shipment of semiconductor manufacturing equipment to China is extremely strong. At the same time, some say this is demand being boosted in anticipation of sanctions being imposed on China. How much is the real demand versus artificial demand, do you think? On the other hand, some suspect that there actually would be no sanctions. What is your view on the current state of the China market? And what is your outlook? Our sales in the Chinese markets are growing mainly in memory testers for the Chinese companies, of course. But when it comes to SoC testers, sales are not necessarily originating from Chinese companies alone, but rather original orders coming from U. S. Fabless companies and elsewhere. So there is a mixture in terms of where the orders originate. What is currently active in our China business is not only 1 or 2 testers being supplied to fabless companies, but also larger orders consisting of products that cover the global supply chain, not just from within China. Therefore, we do not consider this to be a purely China risk. Going forward, While there, of course, is concern over national economic security, it's unlikely that the U. S. Could completely be independent of the Chinese supply chain. I don't think that will be easy. So in that sense, while there is a risk, I doubt either party would embark on the economic sanctions that will kill their respective business. That is our current view. But of course, we remain vigilant because politics are unpredictable. I see. Thank you. A follow-up question. You alluded to artificial demand, and I was wondering if that was mostly attributable to China. But now I take it that, that is not the case and that artificial demand is more global in nature. Am I correct? I wouldn't call it artificial demand. It's real demand. It's just that customers have no choice but to place orders way in advance since testers are not readily available given that delivery time is getting longer. It used to be orders replaced 3 to 4 months in advance, but now they're getting longer. So it's not like double ordering is taking place as some people suspect. I see. Very clear. Thank you very much. Thank you. Next questioner is Mr. Damian Thong of Macquarie Capital Securities. Damian Tong of Macquarie Capital Securities. Thank you and congratulations on your very strong Q1 results. I have two questions. First is on test time. Currently, centering on high end SoC testing, demand and production is growing. Compared to the past, how much is test time increasing today? That is for this year and what about next year? I believe the test time is a factor that is driving demand for your business? And that is the reason why I'm asking this question. My second question is on your forecast for the 2nd quarter sales, which you expect to decline quarter on quarter. What is the reason for that? Orders for April to June were rather strong, some of which are to translate into sales in the second quarter? Or are you expecting sales to realize later in the October, December or January, March quarters. Are you expecting the lead time to be getting longer? This is Sakamoto speaking. Your question is on test time. As was mentioned earlier, with further node shrinkage. Devices become more complex and test intensity goes up and test time goes up. It's hard to say quantitatively as there are various different devices and we cannot say how much percent increase per different types of devices. But basically, with increased complexity, test time tends to get longer, and we expect that trend to continue. Your second question on our 2nd quarter sales forecast. Yes, I'm asking for the reason for this slightly conservative forecast. As CEO Yoshida briefly explained earlier, we're not concerned about their production capacity at all. But procurement of semiconductors and electronic components is becoming more challenging. And we are factoring in possible impact from that. Orders in the Q1 were strong. Conventionally with delivery time of 3 to 4 months. Orders in the Q1 were to translate into sales in the Q2. That used to be the cycle. But with the delivery time becoming longer, With that in mind, we are projecting the 2nd quarter sales as you see there. This is Yoshida speaking. Should Parts and Materials procurement proceed smoothly, it's highly likely that the actual sales could exceed the forecast. But we are factoring in some uncertainties and thus a conservative forecast. I see. What is the delivery time right now? Currently around 6 months. I see. So it's getting rather long. And I have a follow-up question. The new product that you announced this year, the scale test system. What's the impact? How do orders look like? Yes, adoption by our key customers is proceeding very smoothly. For engineering to mass production purposes. So going forward, we expect it to make contribution to SoC Tester Business. Next questioner is Mr. Yoshida from CLSA Securities. Yoshida from CLSA Securities. I hope you can hear me. My first question is on order forecast, which has been revised upward by JPY 50,000,000,000 by application. Where is the increase coming from? SoC tester were very strong in the Q1. So were those the source? Can you give us the breakdown by application as well? We made upward revision to order forecast by JPY 50,000,000,000 on a full year basis, mostly in relation to SoC testers, almost all in relation to SoC testers. By application, computing and communications account for nearly 70%. Automotive, Industrial Equipment and Consumer Applications over 20% and DDICs a little less than 10%. That's the breakdown. I see. In other words, basically in line with the current product mix, correct? Yes. The breakdown is basically in line with the current makeup. We also made upward revision to the sales forecast for mechatronics systems services, support and others. But in terms of orders, they are not reflected. Right. For orders, SOC account for a large proportion. So in comparison, Eutronics Systems and Services, Support and Others don't have much effect in terms of sales. Most of upward revision to sales is in relation to SoC testers. I see. Thank you. My next question. Chester market outlook is becoming strong for the remainder of the year. What about next year? What is your outlook for the market next year. And if you are projecting any increase or decrease, what are the factors behind? Indeed, we are having discussion to identify the outlook for 2022. For the second half of twenty twenty one, visibility is still very much limited, partly in relation to the delivery time becoming longer. We see signs of change in the pattern. So if I could talk about the second half of this year first, regarding the possible large investments by our major customers in fiscal year 2022. That decision has yet to be made by the customers. And as these decisions become clearer, we will have better accuracy in our guidance for the second half orders. Frankly, the accuracy of the current guidance is not that high. As CEO Yoshida briefly mentioned earlier, there is a possibility of upside to our guidance. So we need to take all that into consideration. But Based on what is currently available, TAM for calendar year 2022 is expected to be similar to or greater than that of calendar year 2021. That is our expectation. So in that sense, fiscal year 2021 with orders of BRL 400,000,000,000 and sales of BRL 385,000,000,000 is going to be a very good year. And we expect this to continue into fiscal 2022. The next questioner is Mr. Hirakawa from BofA Securities. Hirakawa from BFA Securities. I have two questions. First is probably partly the same as Mr. Yoshida's question earlier. As for orders, we expect the JPY 400,000,000,000 level to be sustainable on a constant basis. You raise your forecast for this year from JPY 350,000,000,000 to JPY 400,000,000,000 Of this additional JPY 50,000,000,000 how much is coming from the semiconductor shortages and how much from technology advancement, which is more sustainable. I know it's very difficult to say exactly, but as a general feel, what is the ratio? If it's only semiconductor shortages, I'm afraid it is going to be temporary. That's my first question. As you have correctly indicated, it's really hard to say exactly. But my personal view is that The investments related to node shrinkage continues and there are foundries that have a capability for more advanced process node, although the number is limited. And the high end devices and the mobile related applications, we see migration to more advanced process node. For example, 5 nanometer node this year, 4 nanometer next year, 3 nanometer beyond that. Of course, We don't know if that's exactly going to happen, but that is the current projection. And if that's the case, and as indicated To the very first question, test time is getting longer. And of course, before the next product is launched, there will be an attempt to shorten the time if that could be afforded. But actually, with the adoption of more advanced node, the test time is increasing. So the more complicated the process, the more test items. So instead of time being shortened, the test time is getting longer. As long as this trend continues, the current situation that we find ourselves in, the very strong need for testers, we believe will continue. So we believe order growth to be maintained. Thank you. My second question is about market share. The company has raised its market forecast by US500 $1,000,000 of which US400 $1,000,000 is for SoC and US100 $1,000,000 is for memory. On the other hand, the sales forecast has been raised by 35,000,000,000 yen depending on ForEx. And I believe that the company expects to take 70% or so of the overall market growth. How do you expect your market share to develop in year 2021? Would you please share with us your thoughts on this point? What is the expected trend? That's all. As you said, we have raised the total available market for SoC to $3,800,000,000 from US3.4 billion dollars previously. That's an increase of US400 million dollars The breakdown of the $400,000,000 is about 250,000,000 for Computing and Communications and 150 1,000,000 yen for automotive and other. Based on that, our calculated market share for SoC is about 50%. That's the result of our simulation. Naturally, this will change as the environment changes, but this is our share expectation under the current environment. So that's 50%. For memory, it is revised up by 100,000,000 yen. Of that, DRAM accounts for 50% and Flash accounts for 50%. Based on that, we expect our market share to be about 50%. That's what we are expecting. Thank you very much. Thank you for your question. The next question comes from Mr. Nakamura of Goldman Sachs. Hello. Thank you very much for the opportunity. I have two questions. The first is about the sales target for fiscal year 2021, which was revised upward. According to the 3 year plan that was released in May, the range was Taking account the business environment for the next 3 years, is the company already in a situation where the target needs to be reversed upward again. Can you share your latest outlook, including market forecast? I do understand that it's difficult to foresee the future at this point. We do not believe that the cyclicality is gone. The business trends of going up and down repeatedly remains still unchanged. We formulated our midterm plan sometime in the latter half of last year towards the first half of this fiscal year. So, there is no doubt that the recent trend is much more upbeat compared with what we had assumed at that time. If the business is strong next year, for example, for fiscal year 2022, it may decline in fiscal year 2023. If that will be the case, I believe that the average for the next few years could be JPY 380,000,000,000. So that's still possible. So that's my first point. Another point is about the upside potential. With the current shortage of semiconductors, there are moves to increase capacity around the world and the plans to expand capacity, not only for 300 millimeter, but also for 200 millimeter. And they are announced one after another all over the world. It would not be surprising if a peak demand for testers come one more time when those new fabs are up and running. Assuming such an upside scenario, it's not surprising if the company outperforms its midterm plan targets. However, our midterm business plan has just begun and we have not yet reached a point where we would revise it upward. That's the current situation. I understand now. Thank you very much. The second question is about the shortage of parts and materials mentioned earlier. If possible, please give us more detail on the shortage of those materials and how much it is actually affecting your production and sales? Also, please comment on the impact of the lockdown in Malaysia, which was started in June and is supposed to be lifted in August or later. So could you give us your comment on this? Let me answer the simple question first. The lockdown in Malaysia has not had a major impact on our production so far. In Penang Island, the situation is not that serious. We are told that the production itself is on schedule. So, we do not think there will be any impact on the production capacity itself. However, as for the shortage, We are running out of inventory for a wide range of parts and materials. For example, in semiconductor manufacturing, there is a shortage of substrates. Some people are wondering how long this is going to last and say that they may last for next 2 to 3 years. That seems to be the situation. Today, it takes many more substrates to make a 3-dimensional semiconductor than in the past. Even though it is suddenly needed many times over, it can easily take 1 or 2 years to build up the capacity. So the situation that we are facing at the moment has never been experienced before. It's not just the parts that are used to make our testers, but a lot of things are happening in upstream and it is becoming a big problem for the entire semiconductor industry. As a result, it's difficult to procure some semiconductors to put on to our testers. This is a matter of whether the chicken comes first or the egg. If we can't make testers, they cannot make semiconductors. And if they cannot make semiconductors, we cannot make testers. In order to avoid such a situation, in the overall industry. CEOs and other top executives of companies are having discussions at the moment to address and continue procurement. Unfortunately, we cannot disclose specific company names though. The next question is from Mr. Hasegawa of Mitsubishi UFJ Morgan Stanley Securities. This is Hasegawa from Mitsubishi UHachi Securities. Let me ask you a quick question. When was the timing of the decision to revise the forecast this time? Earlier, you mentioned that the mid term plan was formulated in the second half of last year to first half of this year. Can you give us some details on when exactly you actually decided to announce the revision? We discussed the figures for the midterm plan until just before the announcement. And there were no major orders as of April. That would require us to revise the figures we had already announced. The major orders started to come at the end of April and continued into May June and also into July. In April, we could not foresee the current order trend. So that was what happened. Orders for the Q4 were quite significant. And therefore, we thought that there will be a fall in the Q1. However, they trended in the opposite direction. This is what actually happened. So that's why we included the April trend when we formulated the midtown plan that we announced in May. And we thought that we could achieve the range of up to JPY 380,000,000,000 on average. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So, in summary, the change in trend in the Q1 was beyond our expectation. Thank you. The revised plan refers to a lead time of 6 months, but I understand that this lead time is the period from the time your company receives an order to the time of delivery. Can you comment on the assumptions for material procurement in this revised plan? While there are many materials and components with longer delivery times, according to the revised results, The second half of the year will be generally flat in terms of the level of sales. I would I'd like to know if you could share any assumptions about the procurement of parts and materials. If we suddenly ask suppliers to double their supply, they will not be able to respond to such a request. Naturally, we procure based on the supply and demand outlook, but we also procure parts with long lead time well in advance. However, orders are increasing rapidly now. So we are asking for delivery as soon as possible, but the suppliers respond to us only with delivery dates they are able to promise with confidence. However, over time, it is possible that the delivery dates will gradually shorten. So in that sense, we will be making efforts to bring forward sales as much as possible compared with what we currently expect based on our procurement plan. Well, that's a possibility with the current shortage of semiconductors all over the world. We do not think we can accelerate the delivery so dramatically, say, 3 months or 2 months. In that sense, You can understand that our current sales plan is within the range of levels that we can stably procure. If that's the case, do you think that the level of 123,800,000,000 yen in the order backlog at the end of the fiscal year can be generally fulfilled, but not 100%. Even if there are 120,000,000,000 yen left at the end of the fiscal year, That doesn't mean that it has to be fulfilled in the next 3 months. Understood. Thank you very much. We don't know if it will end up at €120,000,000,000 or if it will increase any further. It also depends on when the delivery dates are at that point in time. If customers still think that they can increase production, it's possible that the level of the bar on the chart will be higher. I would like to add that there is a considerable possibility that the order book may expand even more. So, it seems that the current tight situation will not be easily resolved anytime soon, but the company will do its best. At the moment, there are very few semiconductor suppliers, I believe, who can confidently say that they will shift the required volume at any given time. Understood. Thank you. The second question is completely different from the first, But I was wondering if you could explain the impact of the partnership with PDF Solutions. It's been about a year now since the investment was made last year. This is Miyahashi. I would like to answer your question. We started our partnership with PDF last year. Since then, we've been conducting activities to implement our cloud environment on the cloud platform. And in such an environment, we are currently rolling out various applications for customers to use. We have even started to operate some of these assets outside of the areas of mass production. However, having said that, in terms of the contribution to sales, we still have to deep dive into the desired customer value proposition. At this point, no significant impact has been generated yet. But 1st and foremost, we'd like to utilize the data to improve the effectiveness of testing or the efficiency of the overall semiconductor manufacturing process. We're continuing to conduct deep dive analysis. Understood. Thank you. How do you evaluate then the results of year 1 in terms of ROIC, ROIC, for the capital the company has invested? Well, for year 1, as mentioned earlier, we spent most of the time building an environment where we could do business using data before we could recover our investment in terms of ROIC. That's how we spent the 1st year. From the beginning, we did not plan to be able to recover our investment in terms of ROIC in a short period of time. That's not the nature of the investment. Regarding data analytics, It is a business that if we don't do, we could put our tester business in jeopardy. So, there was such an implication that we had to protect the tester business. Based on that understanding, the investment was made from a medium term perspective with the intention of building a software centric business ourselves. So we are not planning to recover the investment in a certain number of years in terms of work. If so, is it correct to say that the investment was made in anticipation of the comprehensive impact on the company's business rather than to recover the investment in a certain period of time, such as 3 years. Yes, you are correct. In that sense, we are already seeing an impact. Joint development with customers The directly leased to hardware sales is already underway. And if we consider the sales of testers that have come out of it, we can say that we are already recovering a large part of the investment. However, this impact is not counted as a return on investment in the software business per se. Understood. Thank you. Thank you for your question. With this, We would like to conclude the Q and A session. Thank you very much for your participation in our briefing today.