Earnings Call: Q3 2021

Jan 28, 2021

Thank you for attending the earnings conference call of Adventus Corporation for Fiscal 2023rd Quarter Ended December 31, 2020. Participants from Adventist are: Yoshiaki Yoshida, 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 the Q3, followed by a presentation on the fiscal 2020 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 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 Show results to be materially different from those expressed or implied. Without further ado, CFO, Fujita. Good afternoon, ladies and gentlemen. This is Fujita speaking. I will go over the results for the Q3. Please turn to Slide 4. First of all, we would like to express profound gratitude to our suppliers, Other business partners and employees who all continue to support Adventist's business amidst the second wave and a 3rd wave of the COVID-nineteen pandemic. Business results for the October December period exceeded our prediction made in October. SOC Semiconductor demand from the high performance computing or HPC and smartphone sectors was strong and our business environment improved faster than was expected 3 months ago. Supported by these trends, The 3rd quarter SoC tester orders as well as overall orders reached new quarterly records. Sales and profits also exceeded expectations. Orders, sales and profits will be explained in detail in the following slides. Next slide, please. The 3rd quarter orders by segment. 1st, semiconductor and component test systems, up 49.3 percent quarter on quarter at 66,800,000,000 yen SoC tester orders reached 54,200,000,000 yen an increase of 18,400,000,000 yen from the previous quarter. Display driver ICs or DDI principally drove the orders. Against the background of the increasing adoption of OLEDs in 5 gs smartphones and the increasing incorporation of touch sensors into DDI. Demand for application processors for 5 gs smartphones also grew more than expected, helping to eliminate the surplus of testers in the supply affected by the U. S.-China trade friction and generating new investments. Orders of the memory testers by Chinese players increased by 3,600,000,000 yen from the previous quarter. Next, Echatronics Systems, up 29.8 percent quarter on quarter at 11,800,000,000 yen EUV related demand drove Higher nanotechnology product orders. Services, support and others, up 61.8% quarter on quarter at €16,500,000,000 In addition to a seasonal increase in annual maintenance contract renewals, system level test related orders increased. Next slide. This slide is about Q3 sales by segment. Semiconductor and Component Test System sales increased by 9.8 percent quarter on quarter to 52,300,000,000 yen Sales breakdowns are 39,300,000,000 yen for SoC testers and 13,000,000,000 yen for memory testers. Smartphone related products, especially DDI and image sensors were the driving force behind the increase in SoC Testa sales. Sales of memory testas decreased due to a decline in orders in Q2. Mechatronics System sales decreased 15.4 percent quarter on quarter to 9,700,000,000 yen Sales of test handlers and device interfaces fell in line with the decline in sales of memory testers. Sales of services, support and others declined by 11.0 percent quarter on quarter to 16,300,000,000 yen. Q3 sales of system level test products decreased in reaction to stronger momentum in the first half, but remained in line with our expectations. Please turn to the next page. Q3 orders by region is shown by the graph on the left. In Taiwan and China, smartphone related SoC orders in Q2. The graph on the right shows Q3 sales by region. In China, Sales of SoC testers for DDI and other applications expanded. In Americas, system level test sales cooled off. Please turn to the next page. This slide is about profit. Gross margin was 51.5%. In our sales mix, highly profitable products decreased from that of the previous quarter And some Q3 system level test sales were offset by costs associated with the launch of new products, resulting in the gross margin decline. We expect gross margin to improve in Q4. SG and A, including total other income and expenses, was JPY 24,900,000,000 SG and A expenses were flat quarter on quarter. Operating income was 15,300,000,000 yen And operating margin was 19.5%. Please turn to the next page. This is about R and D and other expenses in Q3. R and D expenses was 10,400,000,000 yen R and D to sales ratio was 13.4%. CapEx was 3,400,000,000 yen Depreciation and amortization was 3,100,000,000 yen As for cash flow in Q3, Free cash flow was 700,000,000 yen Operating cash flow did not grow in Q3 because sales concentrated near the end of the quarter. Please turn to the next page. This is balance sheet. Total assets was 3602,700,000,000 yen Cash and cash equivalents were 100 and 11,500,000,000 yen down 7,500,000,000 yen From the end of the previous quarter, equity attributable to owners of the parent was 238,700,000,000 yen And its ratio was up 0.6 points from the end of the previous quarter to 65.8%. The share buyback announced in July was completed in October 30. A total of 2,490,000 shares were acquired at a total cost of 13,100,000,000 yen This is Yoshida speaking. I will present the fiscal 2020 outlook. Please turn to Slide 12. First, semiconductor tester market trends. 6 months ago, we warned that surplus test Capacity generated by the tightening of U. S. Regulations on a major Chinese player could significantly reduce demand for testers. However, test demand for HPC has continued to be strong. North American smartphone related test demand has been higher than expected And competition for market share among Chinese smartphone makers has hastened the elimination of surplus testers from the supply chain. Reflecting these market changes, we have raised our calendar year 2020 SoC tester market estimate to approximately $2,800,000,000 With regard to surplus testers, OSAT investment is now at normal levels. The SoC tester market is expected to continue growing in calendar year 2021 amid demand ranging broadly across various sectors, including 5 gs smartphones and HPC, where an increasing number of products use advanced process semiconductors and DDI products, which are gaining functionality. Based on our own performance, we estimate that the calendar year 2020 memory tester market came in at about $1,100,000,000 Calendar year 2021 is to see further expansion of tester demand due to process shrinks, greater device density, higher device speeds and broader bandwidths. We continue to pay close attention to the impact of the COVID-nineteen pandemic and will respond swiftly to market changes whilst driving to maintain and expand our market share. Slide 13, fiscal 2020 forecast. Based on our results through the 3rd quarter And our forecast for the Q4, we have again revised our full year forecast. Our orders forecast has been raised by 50,000,000,000 yen and our sales forecast has been raised by 30,000,000,000 yen compared to our October forecast, respectively. This would represent record high orders and sales with sales in the 300,000,000,000 yen range. Our operating income and net income forecasts have been raised by 14,500,000,000 yen 19,000,000,000 yen respectively, compared to our October forecast. In addition, our 4th quarter quarterly net income forecast takes into account the recording of deferred tax assets in anticipation of future tax reduction effects. Until now, Adventist's effective tax rate has been low due to the tax reduction effect of using a loss carryforward accounting adjustment. But the balance of the losses that were carried over is expected to be consumed this year. Thus, our effective tax rate from the next fiscal year onwards is expected to be in the mid-twenty percent range. Our full year forecast is based on exchange rate assumptions of 106 yen to the dollar and 122 yen to the euro. Our gross profit margin for the full year is forecast to be about 54%, unchanged from October. Due to the revision of our European subsidiaries pension plan, a liquidation profit of approximately €25,000,000 has been incorporated into our operating income forecast for the Q4. While it's not shown in the slide, based on these forecasts, year end dividend is currently forecast to be 57 yen per share. Added with interim dividend of yen Dividend for the year is forecast to be yen 95 13 yen higher than for fiscal 2019. Starting with slide 14, forecast by business segment. Our full year sales forecast for SoC testers has been raised by 23,000,000,000 yen from our October forecast at 140,000,000,000 yen In addition to firm test demand for HPC, smartphone related Investment is currently vibrant and this favorable environment is expected to continue in the 4th quarter. On top of the ongoing boom in smartphone and HPC related demand, there are expectations for the recovery of test demand across broader areas, including DDIs and analog ICs in calendar year 2021. We are building out our supply system in preparation for future expansion of SoC tester demand. Page 15 is about Memory Tester's outlook. Memory Tester sales are trending above the previous fiscal year's level, supported by growth in demand for server memory linked to data center investment. We have also revised this forecast upward by 4,000,000,000 yen in light of confirmed investments by Chinese memory companies In the second half, as explained in our market outlook, the industry is seeking to deliver further miniaturization, Greater density, higher frequency speed and broader bandwidth. In addition, memory makers are currently positive about increasing production, And we expect strong inquiries for both DRAM and NAND testers in Q4. Page 16 is about mechatronics services, support and others business outlook. For mechatronics related business, we forecast Sales of 40,000,000,000 yen for the current fiscal year. This forecast has been revised upward by 2,000,000,000 In line with the upward revision of our memory tester sales forecast and services support and others, system level test products Formed better than expected. Taking this into account, we have raised this segment sales forecast to JPY 64,500,000,000, an increase of 1,500,000,000 yen compared to our October forecast. This is due to an increase and demand for SoC related system level test products with increased investment in data centers and smartphone performance gains. Let me move on to the next page, Page 17 for summary. In calendar year 2020, The spread of the COVID-nineteen pandemic depressed the world economy from the beginning of the year, but at the same time, Associated lifestyle changes have boosted demand for semiconductors. The semiconductor tester market has Standard due to work from home related demand, active investment in data centers and continuous improvements in the Performance of semiconductors for smartphones and other products. The problem of surplus SoC tester capacity, which was a concern in the summer due to the intensifying conflict between United States and China, was resolved sooner than we expected As intense competition among smartphone makers accelerated the restructuring of the supply chain, the full scale of 5 gs is yet to come and we can expect steady growth in the future. Based on our Q3 results, which exceeded our prediction and a brighter Q4 outlook, we have raised our full year orders forecast by 50,000,000,000 yen and our sales forecast by 30,000,000,000 yen Both orders and sales reached the 300 1000000000 yen range for the first time in our history. Achievement of all the numerical targets set on the Current midterm management plan is now in sight. It seems that it will take some time before the COVID-nineteen pandemic comes to an end, And it is difficult to predict when the global economy will recover, but we expect that robust semiconductor The demand and aggressive device performance improvements will continue, and we predict that demand for both SoC and memory testers will continue to Grow in 2021. We are currently formulating our next midterm management plan to be launched next fiscal year, but we expect that Its first year will be a good start for us. There's still a considerable risk that the COVID-nineteen pandemic will lead to lockdowns or affect Factory operations. This may impact our component procurement and production systems to meet increasing customer demand. We will take careful measures to ensure an uninterrupted supply of products and services to our customers as we continue to care the health of our group employees. This is the last page, Page 18. For your reference, we have listed some examples of our ESG initiatives and external evaluation since August. We are aware that continuously increasing burden on the health care workers worldwide to fight against the COVID-nineteen pandemic, Advantest Group Companies in each region have dominated those medical organizations in order to support their lifesaving activities. Lastly, I'd like to express our deepest gratitude to the health care workers who are working so hard every day and suppliers who support our manufacturing system in this pandemic. Also, despite the business environment changed rapidly in 2020, We could adapt to changes and achieve good performance results. We owe this to our employees who diligently carry out their duties by collaborating with global sites. I'd like to express our gratitude to them and their families for their support. That is all from me. We will now take questions. First questioner is Mr. Wataki from Nomura Securities. Thank you. Wataki from Nomura Securities. Thank you for the very strong and encouraging earnings presentation. My first question, high-tech stock prices are plummeting very rapidly. The reason being a comment from a certain semiconductor manufacturing devices manufacturer that it is sensing a pause in inquiries. Do you share that same observation? As far as smartphones are concerned, true, there is an obvious overproduction. So I suspect there will be a pause eventually. So what is your take on this matter? First, It's hard to define what that company means by a pause. As far as Adventist is concerned, As you know, in July, there was a situation, which was referred to by some people as Adventist Shock. The strong Q3 that we experienced was driven by an upward trend starting in October, December being the highest during the Q3. Would this trend discontinue in the 4th quarter? Actually, we expect orders to remain strong. So rather than a pause, we feel that strong business is continuing. Having said that, I think it is true that the COVID-nineteen situation is accelerating the drive for digital transformation. When this acceleration becomes excessive, there naturally will be a correction. But that is not likely over a near term like 3 months or 6 months from now, but a bit farther than that, partly in light of stimulus packages implemented in different parts of the world. I see. Thank you. My second question. At the last earnings call, you said that your share visavismartphone manufacturers that are increasing production is smaller than your share within manufacturers that no longer can produce smartphones, such as Huawei or HiSilicon And that due to such competitive factors, your earnings momentum lags behind your competitors. Now you have made an upward revision to your full year guidance this time around. Is that due to market factor or shifts in particular market shares? It's really not a shift in our particular market shares. The way the major U. S. Smartphone company operates In terms of investment is that investment activities will be completed more or less by summer. Our market share remains high even with that completion. This is probably because of fairly strong demand continuing elsewhere. So on a customer by customer basis, I think the market share situation remains almost the same. As for supplying into the Chinese market, Our market share is fairly high. In terms of smartphone demand in China and other markets, we are maintaining our share pretty well. I doubt there was a sudden shift in our market share of individual customers. I see. So I take it that display driver ICs and image sensors that were mentioned earlier are supporting your market share, correct? Yes. As far as for display driver ICs, we have much large market share. So the expansion of the market itself is one factor That makes our orders appear strong. But the way we see it, the overall business is strong, including non DDI products such as application processors and CMOS image sensors. I see. That's very clear. Thank you. That's all from me. Thank you. The next questioner is Mr. Nakamura from Goldman Sachs Japan. Thank you. Nakamura from Goldman Sachs Japan. I have two questions. One is on the outlook of the SoC tester market. You have made an upward revision to the 2020 outlook. As always, can you give us the breakdown by 3 application areas? I'm particularly interested in what specific areas are expected to grow over the last 3 months of the fiscal year. You did mention driver ICs and others, but can you touch upon the qualitative aspect as well? Sakamoto will take that question. As was mentioned earlier, we raised the order forecast by 50,000,000,000 yen of which 30,000,000,000 yen is in the 3rd quarter and 20,000,000,000 yen in the 4th quarter. In the 3rd quarter, SoC testers accounted for 80% of that upside. So the majority was SoC testers driven by DDIs. And of the yen 20,000,000,000 in the 4th quarter, SoC accounts for 50%. Under these circumstances, we increased the forecast of the size of total addressable market TAM with increase in 5 gs and smartphone related amounting to $100,000,000 Mr. Nakamura, I take it that you are interested in the segment breakdown of SoC testers, correct? Yes, that is correct. Then it's computer communication 70% Automotive, Industrial and Consumer 30% and display drivers a few percent. That will be the market breakdown. I see. So is it fair to say that the market outlook has been revised upward by $100,000,000 most of which comes from upward revision for the display driver ICs. And accordingly, the upward revision in your order forecast for the 3rd and 4th quarters is also attributable to driver ICs, am I correct? This is Sakamoto speaking. Let me clarify. $100,000,000 revision for TAM is in relation to HPC and AI related. The increase in the 3rd quarter orders that was mentioned earlier was largely driven by display driver ICs. IC. Thank you. My next question is on the outlook for the 2021 for SoC testers and memory respectively. You have shared your outlook. Can you describe where you expect growth in terms of application areas? Also, I think from 2020 to 2021, we can expect a recovery in your market share in SoC testers. So can you give us your sense on that? For 2021, the driver will be HPC with continued progress in investment in advanced node processors. We also expect CIS to grow significantly on a calendar year basis. In terms of growth rate, DDI growth is expected to be very large. Since we command a high market share here, we want to make sure we capture that growth in our business. As for memory testers, as was mentioned by CEO, Yoshida, We expect a similar level as in 2020 at minimum with a possible increase of around $200,000,000 So we expect growth primarily driven by DRAM and NAND front end process testers. I see. On SoC, earlier you said that at the backdrop of the current Order growth is the market share competition amongst smartphone manufacturers. So with that in mind, Do you feel that there will be a further growth in 2021? Or has part of that expected growth already materialized? Order levels are very high for the 3rd and 4th quarters. There could be some ups and downs on a quarterly basis, of course, But our conversation with our customers does not indicate or suggest any signs of slowdown. So we expect the strong trend to be sustained. I see. Thank you. Thank you. The next questioner is Mr. Hirakawa from BofA Securities Japan. Thank you. Hirakawa from BofA Securities. I have a couple of questions. First is on the gross margin. You said the gross margin in the 3rd quarter stayed low at 51.5% due to unfavorable SoC product mix. What factors give you the confidence in recovery in the 4th quarter? More specifically, can you give us the assumptions for the Q4 gross margin? Is it that product mix It does not change much between the 3rd and 4th quarters, but as new system level test products that in the Q3 will no longer be a factor in the Q4 and that is going to make a difference, which is the case? That's my first question. This is Fujita speaking. In the full year guidance, we are reflecting the cost of sales assumption in the 4th quarter forecast. As you have correctly described, those with better profitability in terms of cost is to account for larger proportion of sales. And as such, we expect a recovery in the 4th quarter over the Q3. I hesitate to ask the specifics, but while those with better profitability is to account for a larger proportion, New system level testing products mentioned as low profitability items, would that be the biggest factor? Or is it that even among SoC testers, the proportion of low profitability items is going to go down, while high profitability For application processors are going to go up. One of the reasons for deterioration in Cost of sales rates in the Q3 was that cost of system level test products were assumed with some cost accrual taking place in advance in the Q3. So in the absence of that in the Q4, We expect an improvement. The impact of the improvement in system level test is not that significant. Overall, I think you can safely assume that the improvement in product mix is making a difference in gross margin. I see. Thank you. My next question. What is your current view on system level test market size calendar year 2020 versus calendar year 2021. This is Mihashi speaking. We are frequently asked about the SLT market size, to which our response Always is, it's hard to define and therefore we can't answer clearly. I apologize for asking the same question over and over. Honestly, there is really nothing that we can say at the current moment As to the size of the SLT market. Let me rephrase the question. In terms of TAM or in terms of the market that you are looking at, do you have any thoughts On what the market size is going forward? Please hold on. We are seeing increasing opportunities to talk with our customers. So the size is growing. The market size is growing, obviously. However, making growth a reality requires iterative conversations with each Individually, so we are unlikely to see major growth. But our impression Is that demand in 2021 will be on par with that of 2020 or slightly higher? I see. Thank you. That's all from me. Thank you. The next questioner is Mr. Sugiura from Daiwa Securities. Thank you. Tsujira from Daiwa Securities. I have two questions. First is, I'm sorry to say, again, on SoC tester market outlook. For 2021, you are showing a range, the lower limit being flat year on year. Previously, when we asked for your qualitative comment, I believe your response had a more bullish tone. So this time around, what kind of risks Do you have in mind in predicting a flat market growth? First, let me point out the fact that The business significantly grew from 2019 to 2020 despite we did not expect such growth. Investment by major U. S. Smartphone companies contributed this growth and this increased TAM. As for 2021, our assumption is, while investment from such major U. S. Smartphone companies will slow down, But overall market will grow due to increasing demand for other testers. This means there is a chance for us To recover our market share in 2021, which decreased in calendar year 2020, In that sense, our SoC test test can be expected to grow higher than the growth of PAM. Thank you for your clear explanation. My second question is about building up your production capabilities Plained in the presentation, I suppose you mentioned this on SoC test test and I need to ask a follow-up question about it. Can I assume your production system is already getting tight? And as you're going to build up your production system, Are there any additional expenses expected for next fiscal year, including CapEx? I appreciate your comments on it. First of all, we have both outsourcing and in house production for SoC testes. And in the 3rd wave of COVID-nineteen, for instance, in Malaysia, a strict regulation was imposed at the beginning of this year. Therefore, we are considering to prepare proper production system as our BCP Our business continuity planning, so that we do not have to depend solely on outsourcing partners, But this does not require CapEx. Regarding production in Japan, now All are saying that semiconductors are in shortage. And in our case, testers need Components such as semiconductors and other electronics products. And it is True that supply of those components is getting more and more tight. Under such a circumstance, Orders are increasing significantly and we need fine tuned management to fulfill all of these orders and minimize risks of delayed delivery to our customers. Such potential risks are contained by our daily efforts. However, if COVID-nineteen situation gets worsened or any bottlenecks generated in the global supply chain, We assume there is a risk this affects other areas. In that sense, We will secure system to supply properly. As I said before, our idea is not to Panda owned factories for production, rather we will manage outsourcing partners properly And we do not consider additional capital investment here. CapEx investment has increased slightly for this year, But this does not mean to build new factories. This is to be used for other facilities to develop new customers or to own our testers in our facilities. Therefore, we do not estimate much CapEx for production increase. Thank you. That is all. Thank you. Next, Mr. Yoshida from CLSA, please. Thank you. Can you hear me? Yes. My first question is about your outlook on orders. Based on my calculation with the revised full year forecast, it seems Q4 order will decrease from Q3. Could you tell us what direction you expect about orders by product type? Also according to the earlier explanation, Q3 performance got better towards the end and the good performance still continues. And if that is the case, I assume you take some potential risks into consideration in this decline in Q4. I want to know about it as well. Thank you for your question. Q4 order is estimated to be nearly 90,000,000,000 yen And this is less than Q3, but we consider this is still at high level. The quarter on quarter difference is due to the decrease in DDI related orders following the extremely high demand for DDI in Q3. Do you mean demand for DDI is expected to decrease slightly in Q4? Yes, the decrease Is in reaction to the high demand for DDI in Q3. And other areas are expected to have flat growth basically, correct? Yes, we estimate flat growth for Computer Communications, Automotive and Industrial Machinery. I have a follow-up question about Automotive and Industrial Machinery. It seems Automotive Does not have much orders at this moment, but are there any new inquiries? Earlier, you did not mention much about recovery in automotive when you talk About SoC tester market outlook. Can you tell me your outlook in this area? A lot of news are going on about automotive business and testing utilization rates among our automotive customers have risen sharply. And we are receiving new inquiries. Having said that, in quarter on quarter comparison, Its growth is still limited compared to HPC and smartphone related businesses. Still for 2021, customers are increasing inquiries in consideration of production growth And we have a confidence for the year. In that sense, do you mean it is possible that orders for automotive application becomes Stronger, although it was not mentioned in the earlier explanation. Yes, 2021 will be surely stronger than 2020. I see. Here's my second question. I hear an MPU manufacturer It's considering to outsource production to foundries. I think this company was once your customer, But switched to in house made customized test test. Do you think it is possible to get back Your business with the company as a result of their outsourcing to foundries? We refrain from commenting on an individual company, So we cannot make any comments. To be honest, we do not have enough information to comment at this moment. Do you think if you can have business with the company, it could benefit HPC Business more than your current estimate? We have no idea. We don't know anything about the business flow, for instance, where they are going to perform testing. So we are not positioned to comment on it. Okay. That is all. Thank you. Thank you. Next, Mr. Hasegawa from Mitsubishi UFJ Morgan Stanley. Please. I am Hasegawa from Mitsubishi UFJ Morgan Stanley. First, let me clarify your production system. In your integrated annual report, it is said DX is the key. Can you elaborate more on this? And considering a substantial order backlog at present, is your production system is working properly enough to address such Backlog, I appreciate if you explain about it. This is my first question. Regarding our production system, We said we forecast over JPY 80,000,000,000 sales for Q4. And if you quadruple the number, It will be 320,000,000,000 yen We believe our current production system is good enough to support such sales under ordinary circumstances. However, we have concerns explained today related to COVID-nineteen. And we are not certain about how much impact is expected by the virus such as lockdown or component procurement failures as a result of production suspension at Factories due to a sudden surge of infection in a certain country, but we think we are okay If there are no such major supply chain disruptions, but in reality, we face the situation that the factory in Malaysia, which supplies SoC testers for us, suspended its operations for about a week at the beginning of this year. Therefore, we are building a new production system in a German subsidiary so that it can take over the operations in other countries if required. This is our BCP. Also, the production system in Japan is well established to address any situations for products made in Japan As long as we have enough component supply, therefore, we are sure that we can address product sales over JPY 80,000,000,000 even at present. Can I assume that capacity as well as production efficiency are improving substantially? Production efficiency of which location? Mainly for domestic operations. Are you asking if it is worsening due to COVID-nineteen? No. I mean in terms of advances of manufacturing, you mentioned various strategies in the integrated annual report. So my question is, if you're improving not only operations, but also productivity at your domestic In terms of progress on DX initiatives, production cost and sales costs have not changed much. So it is difficult to say we have improved the efficiency. I think you know, If you have visited our factory before that we have not introduced many advanced machines, But we started initiatives last year to improve production efficiency by using robots and various data. Although it is not achieved in the current midterm management plan, we expect the factory production system will be much advanced in the next midterm management plan. So my answer is our production efficiency is not worsened even with higher production volume and we are making efforts to improve the efficiency. Okay. I am clear. Let me ask my second question. I'm sorry to ask the same question every time, but what is the progress in data analysis solution business? I appreciate any updates on it as long as you can disclose. I am Mihashi. You mean The business you are collaborating with PDF. Based on the development with PDF Solutions announced earlier, We'll prepare cloud environment, which is the foundation to expand data in the future And put internal tools on it to start service deployment. With the current devices such as the ones with 5 nanometer process node. Data to be taken from semiconductor production process for analysis by customers have already exceeded 1 petabyte. That is the data volume expected And some obstacles still exist in various silos from semiconductor processing to device testing. We are trying to connect all of these silos to improve productivity by effective use of all data. And we are still in the preparation to build this framework. When the partnership was announced, I think I heard you already had started working for a customer. Are you facing more obstacles than you originally thought in this progress? We are making progress in activities with the specific customer, But we do not set the goal of this initiative in those activities. We are still a company mainly focused on Hardware business, so we are trying to figure out what we can do as we discuss with various customers To know how we should drive data, improve production efficiency or productivity, which are issues for customers And add value to improve time to cash. I'm clear. Thank you. Thank you very much. This is the end of the conference call. Thank you very much for your participation And please make sure you disconnect.