Earnings Call: Q4 2021

Apr 27, 2021

Thank you for attending the earnings conference call of Adventist Corporation for fiscal 2020 ended March 31, 2021. Participants from Adventist are Yoshio Kiyoshida, President and CEO Atsushi Fujita, CFO Kimiya Sakamoto, Executive Vice President of Sales Group and Yasuo Mihashi, Executive Vice President of Corporate Planning and Stakeholder Relations. First, CFO Fujita will go over the financial results for fiscal 2020, followed by a presentation on the midterm business plan results and fiscal 2021 outlook by CEO, Yoshida. We will then take 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 the company's current expectations, estimates and projections. Forward looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the company's actual results to be materially different from those expressed or implied. Without further ado, CFO, Fujita. Good afternoon. This is Fujita speaking. I will go over the fiscal 2020 results. Please turn to Page 4, Highlights of the fiscal 2020 results. We would like to express our deepest gratitude to all of our business partners, Related parties and employees who continue to support our business in this unprecedented business environment. The COVID-nineteen pandemic created difficulties in all of our lives this past year. In the first half of the fiscal year, Conflict between the U. S. And China had a major impact on our tester business. On the other hand, from the second half of fiscal twenty twenty, Demand related to work from home continued amidst the mainstreaming of remote work, and demand for test equipment grew due to competition among 5 gs smartphone manufacturers. As a result, Adventist was able to achieve record high orders, sales and net income in fiscal 2020. In addition, in fiscal 2020, we achieved Sales of over €300,000,000,000 for the first time in Adventist's history. Therefore, we have revised Our dividend forecast to a year end dividend of 80 yen including a commemorative dividend of 10 yen We were also able to achieve the management metrics of our 3 year midterm management plan. Please turn to Page 5. Summary of results for fiscal 2020. Orders were up 14.9 percent year on year at 330,600,000,000. Sales were up 13.4% at 312,800,000,000 Operating income was up 20.5 percent at 70,700,000,000 yen And net income was up 30.4 percent at 69,800,000,000 yen Due to higher orders in fiscal 2020, our backlog increased by 17,800,000,000 yen from the previous fiscal year at 108,800,000,000 yen Tax expenses include the effect of posting deferred tax Assets likely to be realized during a certain fixed period in the future of approximately 10,000,000,000 yen Thus, net income was greater than income before taxes. Our year end dividend forecast is 18 including a commemorative dividend of 10 yen With interim dividend of 38 yen our annual dividend forecast is JPY 118. Total shareholder return ratio consisting of total share repurchases and total dividends divided by net income is 52%. ROE was 27.3%. Please turn to Page 6. Orders results for fiscal 2020. Full year orders by segment and region were as you see on this page. In fiscal 2020, demand related To high performance computing, HPC continued to be strong amidst the mainstreaming of remote work. In addition, smartphone performance gains drove a transition to higher functionality display driver ICs, DDIs and CMOS image sensors, CISs, which has greatly increased Test demand for these types of devices. This also contributed to the increase in orders. Orders for memory testers also increased mainly related to data centers and game consoles. By region, China was the largest source of orders in fiscal 2020. Demand for both SoC testers and memory testers grew in China amidst increased investment by local semiconductor manufacturers, encouraged by the Chinese government's push for domestic production of semiconductors. On the other hand, in Taiwan, which was our largest source of orders last year. Orders declined as customers are temporarily cautious about investing Due to the intensifying U. S.-China conflict, memory related orders from South Korea increased. Please turn to Page 7, sales results for fiscal 2020. The consolidated or the consolidation effect of advantaged acquisition of Eisai in the Services, Support and Other segment and the strong performance of system level test business overall brought about a significant increase in sales. By region, China was the largest source of sales as well as orders. Please turn to Page 8. Summary of results for the Q4 of fiscal 2020. Due to the smartphone performance gains and recent global store shortage of semiconductors, Orders and sales increased more than expected, boosting quarterly orders and sales to record highs. Operating income in the 4th quarter includes a gain of approximately 5,600,000,000 yen from the revision of the pension system at the German subsidiary. As mentioned earlier, tax expenses for the Q4 include the effect of posting deferred tax assets of approximately 10,000,000,000 yen. Next Page 9, please. FY 2020, the 4th quarter in orders by segment. 1st, Semiconductor and Component Test Systems, 73,200,000,000 yen up 9.5 percent Q o Q. Orders from associated test sales decreased by JPY6,100,000,000 to JPY48,100,000,000. There was a decline in reaction to the 3rd quarter when orders for DDR testers were especially Strong, but growth in analog semiconductor demand helped to support total orders at high level. Demand for memory test results for the both DRAM and flash memory increased, boosting orders by JPY 12,500,000,000 Q on Q on to JPY 25,100,000,000. In the first and the second quarters, demand adjustments resulting from the spread of the COVID-nineteen pandemic And the conflict between the U. S. And China impacted orders. But in the Q3 and Q4, the business environment improved And tester demand also recovered sharply. Mechatronics Systems, 12,600,000,000 yen up 5.5 percent QoQ. Services and Support and Others, JPY 24,900,000,000, up 50.4 percent Q o Q. In addition to seasonal increases in annual maintenance contracts, Orders from the system level hotel test products were also strong. Next Page 10, please. This shows the sales and buying segment for FY 2020 in Q4. First, Semiconductor and the Component Test Systems, JPY 65,100,000,000, up 24.8 percent Q o Q. Sales breakdown, SoC test test, 49,000,000,000 yen memory test test, 16,100,000,000 yen Sales of SoC net test has increased not only for the mobile related products such as DDI devices, but also for automotive, Industrial Equipment and Consumer Related Analog Semiconductors. Sales of memory testers for both DRAM and Flash memory increased similarly to orders. Mechatronics Systems, JPY 9,900,000,000 flat QoQ, services and support and others, JPY 16,300,000,000, flat QoQ. Next, please look at Page 11. FY 2020 in the 4th quarter in orders by sales by region. South Korean orders for memory testers increased for both DRAM and nonvolatile memory. China DDI related orders, which grew in the 3rd quarter, failed in reduction in the 4th quarter, but orders for SoC and testers for other applications were strong. Orders for memory and testers also increased. Taiwan, DDI related orders decreased here too, but orders increased overall due to the recovery of orders for application, processors and APU and an increase in annual maintenance contracts in our services business. FY 2020 Q4 sales by region, China and Taiwan, our DDI related backlogs, which increased in the 3rd quarter, continued to be converted into sales. Next on Page 12, please. This shows an operating income and others. Gross margin being 53.5%. Gross Profit margin improved due to higher ratio of profitable products in our sales mix compared to the previous quarter. SG and A, including total other income and expenses, was JPY 24,000,000,000. In the Q4, we recorded a profit of approximately JPY 5,600,000,000 from the revision of the pension system at our German Subsidiary, actual expenses after deducting this sum increased due to normal costs incurred at the end of the fiscal year. Operating income of JPY 24,500,000,000. Operating margin being 27.1%. As for FY2024 in operating income, up 20 0.5 percent year on year, JPY 70,700,000,000 FY 'twenty operating income includes a total of approximately JPY JPY 8,100,000,000 in onetime gains, including the above mentioned profit recorded in the 4th quarter from the revision of the pension system at Our German subsidiary and the gain on the transfer of our probe card business recorded in the 2nd quarter. Excluding other income and expenses related to these onetime gains, our core operating income margin was 20% for FY 'twenty. While our sales increased, our operating profit margin actually decreased. The reason for this was that gross profit margin declined due to the deterioration of our smartphone related business triggered by the conflict between the United States and China. In addition, We have a strategically increase in our future oriented R and D investments. Next Page 13. This shows the FY 2020 in the 4th quarter in R and D expenses and others. First, R and D expenses, JPY 11,700,000,000 and R and D to sales ratio became 12.9 percent CapEx, JPY 4,500,000,000 depreciation and amortization, JPY 3,300,000,000. As the Q4 was the last quarter of the fiscal year, R and D expenses and the capital investments were high. FY 2020 Q4 cash flow. Free cash flow became 35,600,000,000 yen. The collection of receivables progressed in the 4th quarter. Operating cash flow increased significantly. Next, Page 14. Balance sheet numbers. Total assets being JPY 422,600,000,000. Cash and cash equivalents, JPY 149,200,000,000, up JPY 21,500,000,000 from the end of the previous fiscal year. Equity attributable to owners of the parent, JPY 280,400,000,000 And its ratio actually became 66.3%, up 1.2 points from the end of the previous fiscal year. In FY 'twenty, advantaged repurchased 2,490,000 shares for a total of JPY 13,100,000,000 was the chief purpose of improving the capital efficiency. But nevertheless, equity and cash holdings Both increased at the end of fiscal year and due to the better than expected business performance. We will continue to work on balance sheet management while considering the optimum balance between gross investments and capital efficiency. That's all from me. Thank you indeed for your kind attention. This is Yoshida speaking. I will report on the results of the midterm business plan as well as present the fiscal 2021 outlook. Please turn to Page 16. Review of the mid long term management policy. In April 2018, we set out our goals and principles for the medium to long term in our grand design, a 10 year medium to long term management policy starting from fiscal 2018. We also formulated a mid term management plan for the first 3 years of this period. And the whole group has been working to achieve its targets. On Page 17, you can see the results of the midterm management plan. As shown on the right hand side of the slide, we achieved results greatly in excess of the management metrics set forth as our base scenario 3 years ago. 2 main factors contributed to this accomplishment. Firstly, Adventist gained market share faster than originally expected amidst the semiconductor and semiconductor to market expansion spurred by the digital transformation. Thanks to our steady focus On cultivating and reinforcing our customer base and our solution oriented product strategy, We were able to grow sales rapidly in the smartphone related HPC and memory markets where advantaged has always been strong and where tester demand has been expanding. In calendar year 2017, our overall market share was 36%. But over the period of the midterm management Plan, it grew to approximately 50% on average. The second factor is the business expansion we carried out in line with the vision of our Grand Design. Specifically, our SLT business boosted by 2 mergers and acquisitions grew more than expected on the back of semiconductor performance improvements and rapidly contributed to the sales and profits. We plan to deliver next month a more detailed report on the results of our midterm management plan over the past 3 years and also announced our new midterm management plan starting in fiscal 2021. Please turn to Page 18. Trends in the semiconductor tester market. Our research shows that in calendar year 2020, the tester market grew significantly in comparison to calendar year 2019 with the SoC tester market totaling about $3,000,000,000 and memory tester market reaching about $1,200,000,000 Regarding our overall market share, We captured over 50% of the market in calendar year 2018 and calendar year 2019. But in calendar year 2020, that fell to 43%. The structure of the tester market is such that the investment trends of a few major customers caused significant market share fluctuations. In calendar year 2020, 1 North American industry player where our competitor has a high share, drove large scale tester investments. While conversely, Adventist was affected by the demand adjustments resulting from the U. S.-China conflict. As a result, our market share of the SoC tester market fell 17 points year on year to around 38%. In memory testers, we maintained our existing high market share at 5.6%, up 1 point year on year. We have raised our outlook for SoC testers In calendar year 2021, to incorporate expectations for higher growth, principally led by leading edge devices for 5 gs smartphones and HPC, whose production volumes are increasing and display driver ICs, which are becoming more highly functional. Demand for analog semiconductors For automotive and other applications, it's also increasing and the market may grow further on an overall basis. We can expect our SoC tester market share to recover in calendar year 2021 amidst predicted growth in 5 gs and HPC, PC, which are among our areas of strength. Considering that calendar year 2020 was a year of investments in the memory tester market, we do not expect it to grow as strongly in calendar year 2021 as the SoC tester market. But the development of technologies in areas such as advanced nodes and higher speeds should continue to promote tester demand growth, creating opportunities for market share gains in this sector as well. Please turn to Page 19. Fiscal 2021 forecast. Enrenter's forecast for fiscal 2021 calls for orders of 350,000,000,000 yen sales of 350,000,000,000 yen operating income of 85,000,000,000 yen income before taxes of 85,000,000,000 yen and net income of €64,000,000,000 Gross profit margin for the full year expected to be approximately 55% due to product mix improvements. During our previous midterm management plan, Adventist's effective tax rate was low due to the tax reduction effect of using a loss carryforward accounting adjustment, but the balance of those losses was consumed last fiscal year. Therefore, our effective tax rate for fiscal 2021 is expected to be approximately 25%. As a result, we expect that in fiscal 2020, sales To increase year on year, well, profit to decrease. However, considering that in fiscal 2020, we recorded The approximately €10,000,000,000 gain from posting deferred tax assets and the gain associated with revision of the pension system at the German subsidiary profits are actually expected to increase in fiscal 2021 as well. Assumed exchange rates are JPY 105 to the U. S. Dollar and JPY 130 to the euro. Now Page 20, please. Upwork for each segment. Semiconductor and Component Test Systems, F521 full year SoC and test sales forecast is 169,000,000,000. Customers are currently making active test investments in smartphone related fields, And this favorable environment is expected to continue in the Q1. In calendar year 2021, Production of leading edge SoC and semiconductors such as APU and HPC devices will increasingly migrate to advanced nodes. It is expected that Tesla demand will continue to increase throughout the year due to the increasing complexity of the semiconductors and the difficulty of manufacturing them. In addition, in the Automotive, Industrial Machinery and Consumer segments, The increasing complexity and sophistication of testing necessitated by higher pixel count CIS devices and the adoption of organic Please, we'll continue to drive tester demand. Our FY 'twenty one full year memory tester sales forecast is JPY 68,000,000,000. As explained in our market outlook, Memory and customers are making technology investments in areas such as advanced nodes, greater density and higher speeds and bandwidth. In addition, they are positive about increasing production volumes, and we anticipate strong inquiries For both DRAM and NAND attache to be provided by advancement. Page 21, please. Mechatronics Services and Support and Others. In our Mechatronics related business, ADAMT Jason anticipates a continued and high level of demand for the interface products in line with the performance of our memory test plug business. We forecast FY 'twenty one full year on sales of 42,000,000,000 yen. For Online Services and Other Business, Our FY 'twenty one full year sales forecast is 71,000,000,000 yen. We anticipate a steady growth in our system level test business and steadily increasing demand for the services and maintenance. Page 22, please. Lastly, now I would like to touch upon Our key measures for FY 2021. Our corporate mission is to enable leading edge technologies. The source of our future profit is the development of solutions that appeal to the customers by offering them Close support for the development of the advanced semiconductor technologies with the cutting edge test technology. In the future, production volumes of high performance, highly reliable semiconductors will continue to grow. Our R and D and sales activities will continue to focus upon delivering semiconductor and attached tests that optimally support this trend as well as a system level test solutions. Calendar year 2021 is likely to be a good year both the semiconductor market and the semiconductor Tesla market. On the other hand, it is Crucial to keep an eye out for macro risks such as changes in the world economy and supply chain and market disruption triggered by economic nationalism. We take a forward looking approach to parts, procurement and production. And we'll also take measures to prevent risks from manifesting. Both development and production are driven by the strength of employees. So this year, we will focus on the human resources initiatives As part of our ESG management, naturally, on the governance, which is the basis of corporate growth, will also be further enhanced. Finally, our 3 year midterm margin plan that runs from FY 'eighteen FY 'twenty ended successfully and positioned us to make a strong start on our next midterm management plan, which will cover in the next 3 years. Today, we explained our financial results for FY 2020 and our outlook for FY 2021, But we plan to hold a briefing session next month to announce the new plan. In this session, we will also touch upon the revision of our capital policy and shareholder return policy. This concludes my explanation. Thank you indeed for your kind attention. We will now take questions. First, Mr. Waraki from Nomura Securities. Thank you. Waragi from Nomura Securities. Thank you for the strong encouraging earnings report. I have two questions. First, clearly, you are doing amazingly well, bright outlook, feels like a deja vu. So can you show us an evidence that gives us confidence that this time it's going to be different, that this business will remain strong. In front and semiconductor equipment market, there are such factors as announcements by some of the major players for investments. What about in the tester business tester market? This is Sakamoto speaking. You asked For some evidence that this strong momentum is sustainable. Well, overall, Demand from 5 gs smartphone related and HCP, we believe, will continue to grow throughout the year. Furthermore, in the second half of the fiscal year, our major customers are expected to start the production of semiconductor devices at the most advanced nodes. And therefore, we expect big demand for testers. So During the first half, 5 gs smartphone related demand. And in the second half, high performance computing, HPC PC and other would further boost demand. That's our current projection. Therefore, We believe that the SoC tester market will continue to see strong demand. As for memory testers, as was mentioned in the presentation, node shrinkage And production capacity expansion on the part of the customers should continue. So there is capacity buy. And there are industry trends such as speed and density gains driven by DRAM node shrinkage and the multilayering in NAND flash memories and the start of full scale mass production In DDR5, LD DDR5 DRAM, there's capacity buy and technology buy. The combination of the 2 should continue throughout the fiscal year. So the tester demand for both SoC and memory testers, We believe we'll remain strong. I have a follow-up question. How far into the future are your production slots booked? You're asking about our production system? Yes, your production slots. How far into the future are they booked? Well, our lead time is 3 months, 3 months between an order is placed and production. So our production slots are fully booked for the next 3 months. Our production floors are kept very busy. I see. Thank you. My second question. For the last several years, you have enjoyed some unique growth drivers. Last year, System level test and before that DRAM tester replacement demand, anything similar for this fiscal year? For example, high speed flash memory, Image sensor tester, new burn in tester, any such topics, for example, comparable to last year's system level test system that will be drastically impacting the business outlook. In terms of new products like system level test, new items that would greatly contribute to our operating results are not being planned over a short term. However, with the advancements And progress of technology devices become more complex and testing time increases and test items will increase. So as devices become more complicated, There will be more test requirements, and we believe that momentum would continue. Well, maybe not necessarily new products, any other factors that will boost the demand this year. This is Yoshida speaking. In response to advanced node of 5 nanometers or smaller processors Processes. Last year, we unveiled a new tester, exascale test system, and we We expect the demand for that to grow significantly this year. And also for CMOS image sensors, display driver ICs for which we have received orders be delivered to our customers. Lots of shipments have yet to be made, so we have so many things to sell. Orders are strong and the lead time is getting longer. That is what is happening today. And with longer lead time, maybe some orders are being placed Earlier, there is a bit of that concern, but looking at the current situation, that doesn't seem to be necessarily the case. We believe that the orders are being placed on more solid real demand. Currently, the demand is strong, but the lead time is about 3 months, 4 months to 5 months. So if you ask whether we have a clear visibility into the next year, Well, that's hard to say. I see. Very helpful. Thank you. Thank you, Mr. Waragi. The next questioner is from CLSA Securities, Mr. Yoshida. Yoshida from CLSA. My first question is on the tester market outlook, Page 18. You raised both the actual for 2020 and estimate for 2021. So what Part of SoC tester and memory tester markets did you raise from the previous estimate? I would appreciate it if you could comment on both the actual and the estimate. And as for SoC tester market, you commented that there is a possibility of further growth. In what application areas do you see upside potential? This is Sakamoto speaking. First, for Calendar year 2021, SoC tester market estimated at $3,400,000,000 and memory tester market, dollars 1,300,000,000 Regarding SoC tester market, we expect growth in relation to an increase in devices adopting the leading edge processes, computing and communication related devices, as mentioned earlier. And we expect growth in analog semiconductor business, including automotive applications as well. And with performance gains and functionality gains as smartphones, Higher performance DDI Display Driver IC is expected to grow. So those three factors combined should bring about the growth of the market at $3,400,000,000 As for memory tester market, the growth of $100,000,000 is expected. Not much difference in terms of direction from what we estimated back in January. But both for DRAM and nonvolatile memory, as mentioned earlier, we expect demand to grow due to development of technologies in such Areas as advanced nodes, greater density and higher speeds and bandwidths. Do I understand correctly that your comment is compared to last year's actual, correct? So how about compared to the previous estimate or forecast made in January, Would the storyline be the same? Yes. In terms of SoC tester market, We set $3,000,000,000 in January and we raised that estimate by about $400,000,000 for the reasons that I just mentioned. So you're expecting growth in all of those three areas, correct? Yes. And you said that there is a further upside potential for the SoC tester market. And what applications specifically? I believe there will be investments in HPC in the second half of the fiscal year. So this would be the upside factor, am I correct? Yes, that is correct. I see. Thank you. My second question, The system level test. What percentage of orders and sales of services, support and others came from the system level test in fiscal 2020. And what about the forecast for fiscal 2021? Thank you. This is Mihashi speaking. For fiscal 2020, system level test accounted for 50% of Orders and sales, 50% of orders and 50% of sales. For fiscal 2021, the current projection is, again, both 50% of orders and sales. For orders, you are not disclosing by segments. But If you focus only on system level test, what will be the overall direction? What do you mean? Orders for system level test for this fiscal year, what will be the general direction? With the evolution of the semiconductors in terms of need for quality assurance, The industry has grown even more deeply involved in SLT. In terms of applications, from application processors to HPC to Automotives, The application areas covered are becoming broader. And with that, we believe the Orders and sales numbers will increase year on year. I see. Thank you. Thank you, Mr. Yoshida. Next, Mr. Nakamura from Goldman Sachs. Thank you. I have two questions. First, on order trends in the April June quarter onward. Full year forecast guidance of JPY 350,000,000,000 for both orders and sales. So on quarterly basis, That translates into €80,000,000,000 or higher range, I think. Orders were strong for the October December and January March quarter. So what is the current direction of order situation? That's my first question. Yes. This is Sakamoto. In regard to the orders, as I mentioned this earlier, I would say our lead time now is 3 months. Our customers are also making a short forecast as short as 3 months. That said, yes, we have both visible portion and not so visible portion, particularly in the second half. Comparing in the first half and the second half, orders in the first half is somewhat stronger than the second half. The second half seems to go down a little bit. The same goes to SoC and Attachters. As for memory side, it will be even between the first and second half. As for mechatronics, The second half would go higher than the first half. As for the services and support and others, we believe it will grow big in the second half according to our current plan. Hope this answers your question. Instead of looking at each quarter, I shared my Thought by comparing the first half and second half at high level. Thank you. I understood it well. You told us an SOC Business will decline a little bit in the second half. Why you believe so? Is it because right now, you do not have a good visibility? So you came up with somewhat small number. Or do you have something visible to you as of now? Well, As we discussed this earlier, we do not necessarily have a good visibility for the second half. Here, may I remind you again that for the current fiscal year, We had a good growth in the second half when it comes to the SoC. What I mean to say is that it is still rather difficult To say for sure, unless we get closer to the actual point in time. That said, with growth factors, we can expect to have in the second half. It may well have grown in the second half as we have discussed at this point earlier. Thank you, and I got it. If I may now, I would like to add some. Yes, we had a very strong performance in the 4th Quarter. Generally speaking, in normal years, when we had a good quarter, usually, the following quarter now is going to fall. But looking at the latest situation, there seems to be no sign that the number may fall. So the Q1 may turn out to be quite strong. The question here is how long this will continue. And as for our full year forecast of JPY 350,000,000,000, Since the first half is rather strong so far, we plan to have slightly bigger number for the first half. And as we move into the second half and when we can get to see our customers more clearly, it could be We may have more growth in the second half. Well understood. Thank you, indeed. My second question is about an upward possibility. Appreciate if you could expand on your thought on the second half forecast For SoC Business, you indicate SoC and order will come down in the second half. But if we could So SOC may go up in the second half. Do you believe you have no problem on the quarterly basis in terms of production to meet with the orders and sales to be realized? You told us and currently you do not have a permanent shortage of materials you need to have. So I appreciate if you could expand on those factors. Yes. And talking about our production systems, We do have our own plans as well as what we call EMS both at home and abroad. So we have both in house as well as outsourcing capabilities. As for JPY 90,000,000,000 in sales, we are producing our products without having a much Tight situation. In other words, we are not having an apparent problem of materials sourcing. What should I say now, making our best efforts so that we will not have such a problem? Well, our testers are actually a collection of semiconductors. So if the semiconductor world is having a shortage problem, It may affect our production capacity. But since we are proactively responding to this kind of issue, We have not been faced with a big problem as of now. Just purely talking about our production capacity, We still have enough outsourcing EMS capacity both at home and abroad. We should be able to further grow. We achieved JPY 400,000,000,000 in our grand design or JPY 100,000,000,000 on a quarterly basis. As for that kind of level, we are not Much worried about. I well understood. Thank you, indeed. Thank you, Mr. Nakamura, for your questions. Next, we would like to have Mr. Hirokawa, B of Air and Security. This is Hirokawa, B of Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air and Air. If I may now have two questions. The first question is just a confirmation if I heard you correctly. You told us your backlog is growing. And with this point in your mind, do you believe you may be getting double booking orders from your customers? What would you say that in the current orders, real orders based upon an actual demand? This is my first question. I do understand your question. What you said is right. There is a concern that we may be getting double orders When the real demand is 1, but we may be getting 2 orders. Yes, I do understand your point very well. But in this regard, here, may I remind you that Our customers are also becoming more sophisticated. I do not believe they are becoming so wild and reckless in placing orders when they do not have good business opportunities. ADvantage is not getting any cancellation so far. I do believe the orders we are getting from our customers are coming from Rather sound and healthy demand. Thank you indeed for that clarification. My second question here is about your market share. I do understand there is a gap between the calendar year and the fiscal year basis. But in light of the baseline of 3.4 1,000,000,000 yen for SoC. Your SoC revenue is JPY 169,000,000,000. With a simple math, Your share is going to be 47%, less than 50%. Well, that's in FY 2018, Year and year associated Tesla share was more than 50%, if I'm not wrong. This year now, you seem to have a Competitive edge because they are on a strong demand for advanced technology, thanks to the smartphone processors and HPC applications. With this point in mind, won't you say your forecast here is too conservative? I just would like to know you just wanted to Thank you, Nishitake, our covenants. This is Samihashi. Thank you indeed for your question. You are right. I would say The calendar year and the fiscal year are having a great gap, and it is having an impact on the numbers. Thank you indeed for that clarification. Appreciate it. Thank you, Mr. Hirokovena, for your questions. Next, I would like to have Mr. Yasuen from UBS Securities. Thank you, indeed. This is Yasui of UBS Securities. Can you hear me? Yes. Thank you. I have two questions. You mentioned that in the second half of this year, HPCN customers will make investments in advanced production. I am assuming here you are talking about a chiplet, if I'm not wrong. Several customers will invest into Advanced hardware solutions. Thus, you can expect to have high end package orders. One more thing. I would like to inquire and ask for your gut feeling whether or not you could expect To receive orders from this major U. S. Company, they now have a new management. You have not received orders from this company for some time. How do you feel about it? This is my first question. First, your question about SBC. It is not a chiplet. We are talking about the latest 5 nano devices and its mass production. I see. So you are indicating 5 nano will go up In the second half, when you are talking about HPC growth in the second half. Yes, you are right. Then my second question is about geopolitical risk. You are not talking about this geopolitical fact, it doesn't toward the end of last year. For example, China is now making investment into advanced fields such as artificial intelligence. With these geopolitical situations going on now in Europe and the U. S. And China and for this matter, even Japan may be further Prompted into this semiconductor nationalism. In regard to Japan, of course, we have to see how the Japanese government reaction to the situation. With this geopolitical risk becoming more apparent, I would like to inquire here how it is going to affect your orders? Or what kind of risk What opportunities are you seeing here? Yes. Nowadays, we simply have to be Sensitive enough to geopolitical risk factors. Last year, When U. S. Applied its restrictions against this mention of China is a cell phone company, we find ourselves a bit confused And kind of freaking out in the summertime. Yes, it is true. So in order to avoid such a situation, It is very important on our side to make more efforts to gather information. But if the U. S. And China Or on China and the West are to be divided, then definitely our business will be affected a lot. But it is not just us, but other than U. S. And SP manufacturers and Device manufacturers are going to be affected greatly. Then it is going to be a true tragedy. Of course, we have to be compliant with the laws and regulations. We need to be able to deliver on our products Wherever they are wanting our products, it could be in China or it could be in outside of China. For example, Taiwan or other Asian regions or it could be the United States. Wherever our customers are located, we should be able to deliver our products based upon our most advanced technology development when our customers Needing them. I think that's all I can say. I don't think it is worthwhile for us to dwell upon what may happen in our assumptions. Again, information gathering is going to be quite critical, And it is very important. Well, as of now, China is not saying that, oh, it is the Japanese devices and so we do not need them or It is the American thing, so we do not need them in light of the fact our orders and the sales of pursuant to China are growing. So what I said seems to be right. I think we are needed. Well, in case if the nation has come to a decision to ban our sales into China, of course, we have to And obey this national rule. That's all I can say. I would rather not have an in-depth discussion here and with you how we are going to react Under those circumstances, hope you understand this. Well understood and appreciate your comments. If you look at the demand side, Since China is now trying to make its own semiconductors, this may help you to push up your business opportunities. The same could be applicable now to the U. S. And European regions. How do you feel about it? For that matter, Mr. Fujita showed a slide of orders and sales on the quarterly basis in his presentation today. Yes. As a matter of fact, it is rising. Moving toward the right hand side, I think it clearly indicates China is making its advanced product, and they need to test them. That's for sure. It means China needs our products for this matter, and I believe there is a strong demand for our products currently. And if I may say, China does not have a full capability to make what it needs to have without depending upon other countries. Thank you, indeed. Thank you, Mr. Yasuo, with your questions. With this, I would like to close today's conference call. Thank you indeed for your time and attention.