Earnings Call: Q3 2020

Jan 29, 2020

Good afternoon. Thank you very much for joining us in this fiscal year 2019 3rd quarter financial briefing conference call of Advantes Corporation. Today's participants are Yoshiyaki Yoshida, president and CEO at Tsushi Fujida, CFO Kimiya Sacamoto, Managing Executive Officer, Executive Vice President, sales group and myself, Esushi Miyashi, from the Corporate Relations Group. We will first have At Tsushi Fujita to brief you on the financial results fiscal year 2019 third quarter to be followed by presentation by President Yoshaki Yoshida on fiscal year 2019 outlook. We will then take your questions. Materials used are available from the TDNet and our company website. In relation to the earnings briefing, we have made timely disclosure on revisions on earnings forecast for this fiscal year, and the year end dividend forecast. We also issued a press release on the completion of the new business acquisition this morning. We would appreciate it if you could access and review them through our website. Before we start a cautionary statement with regard to forward looking statements. 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 by such forward looking statements. We will now begin our briefing. Good afternoon. This is Fujida speaking. I will brief you on the 3rd quarter financial results. Please turn to slide 4. Looking back on the business environment in the third quarter. Given the uncertainty in the global economy, prolonged trade friction between the U. S. And China and stagnation in the semiconductor market We expected orders for the 3rd quarter to decline quarter to quarter on quarter. However, Towards the end of 2019, inquiries for memory and storage related testers came in earlier than expected, and system level test related inquiries received under the umbrella of our services, support, and other segment grew much more than a 14,600,000,000 gain over the 2nd quarter. Supported by this increase in orders, memory tester sales grew. Boosting sales in the third quarter to 69,900,000,000 yen and operating income to 14,200,000,000 yen. Both of which were higher than we expected 3 months ago. Details of orders, sales and profits will be explained on the next and subsequent slides. Please turn to the next slide. Looking at the third quarter orders by segment, For semiconductor and component test systems, orders totaled 47,400,000,000 yen up 10.1 percent quarter on quarter. SoC testers accounted for 31,500,000,000 yen and memory testers 15,900,000,000 yen. ASSC tester orders decrease slightly from the 2nd quarter, but aggressive orders for the testers for next generation advanced SFCs used in 5G smartphones continued in the third quarter, just as in the first half. In memory testers, earlier than expected inquiries for LP DDR5 testers used for memory to be installed in flagship 5 G smartphone models and rebounding investment in Flash Memory resulted in better results than expected 3 months ago. For mechatronics systems, orders totaled 9,600,000,000, up 41.6% quarter on quarter. Thanks to greater than expected growth of memory gesture orders. Orders for this segment were also higher than expected. For services, support, and others, orders totaled 15,900,000,000, up 88.9% quarter on quarter. In addition to a seasonal increase in annual maintenance contracts, orders related to system level test for both SSDs and SOCs exceeded expectations, leading to results significantly higher than initially expected. Next slide please. This slide shows FY 2019 third quarter sales by segment. Semiconductor and component test systems declined 5.2 percent quarter on quarter to 1,000,000,000 yen. So see tester sales were 37,900,000,000 as with orders. 3rd quarter saw a high number of customers moving toward mass production of SoC products in preparation for full scale sales of 5G Smartphones. Memory tester sales were 11,400,000,000. Sales to Chinese and Taiwanese memory manufacturers were strong. Macrotronix systems were up 8.0 percent quarteronquarterto10.1000000000. Services, support and others were 10,500,000,000 and the sales were flat quarter on quarter. Next page please. This slide is about FY 2019 third quarter orders by region. Please look at the graph on the left. South Korea is indicated by pink. Continuing the trend of recent quarters, smartphone related SOC orders were strong memory tester orders for Moli's luggage were also up, thanks to orders for LPDDR5 volume production testers. Taiwan is in orange. Orders for testers for volume production of advanced SSCs for 5 g smartphones continued at a high level. Yellow is China, local semiconductor companies in China continue their active investment in both SoC testers and memory testers. The graph on the right shows sales by region. For South Korea, sales of memory testers declined due to accelerated customer investment in the second quarter. For Taiwan and China, sales continued to be robust in both regions with strong SOC testers and increased demand for memory testers. Next page, please. This page is about operating income in the 3rd quarter. Gross margin was 56.4%, Our product mix was slightly worse than the 2nd quarter, but we were able to maintain a gross margin of above 55% SG and A was 1,000,000,000. Since the first quarter, We have been actively increasing our employee headcount as an investment for future growth compared to the first half costs have increased slightly. Operating income was 14,200,000,000 yen. Operating margin was 20.4%. The year on year difference looks large, but this is because of the one time profit of approximately 2 point 5,000,000,000 in the third quarter of FY18. This was due to changes to our pension system and it boosted operating income for the quarter. Next page, please. Next page is about investments and cash flow. R and D expenses were 10,500,000,000 yen to recognize an increase of new hiring. R and D to sales ratio was 14.9 percent. CapEx was 1,800,000,000 yen. Depreciation and amortization were billion. As mentioned earlier, the application of the new IFRS lease accounting standard from this fiscal year and amortization of intangible assets in the system level test business acquired from Astronics in February caused depreciation and amortization to increase year on year. Cash flow is shown on the right graph. Free cash flow was 1,000,000,000. Collection of trade receivables continued to progress since the 2nd quarter to generate a high level of cash flow. Please turn to the next page. This slide shows our financial position As of the end of December 2019, total assets were 329.8000000000 Cash and cash equivalents were 149,800,000,000 yen, up 15,000,000,000 yen from the end of the previous quarter. Equity attributable to owners of the parent was 220,300,000,000 yen ratio of equity attributable to owners of the parent was 66.8percentup0.8point from the end of the previous quarter. That is all for the explanation of the financial results of the third quarter. This is Yoshida speaking. I will go over the fiscal year 2019 outlook. Please turn to slide 12. As usual, I would like to start with the semiconductor test to market trends. As for calendar year 2019 actual on provisional basis, demand for testers for the development and production of high end SoCs mainly for 5G grew more so than we had expected. The SOC tester market expanded year on year. The memory tester market also picked up supported by higher performance memory device and volume production ramp ups by Chinese memory companies to pick up over the outlook as of October. As for calendar year 2020 estimate, given the greater than expected growth of the SoC tester market in calendar year 2019, it is presently expected to be flat in calendar year 2020. But the market's structure is unchanged with semiconductor evolution, driving investments in test capacity enhancement and stimulating further growth. Going back to calendar year 2019 again regarding Adventist market share, We estimate that we maintained a share of more than 50% of the total tester market for the 2nd consecutive year around 55% in SoC and 50% in memory. Looking ahead to calendar year 2020, Our current view is that the SoC tester market will be flat and the memory tester market will grow by slightly more than 20%. Demand for 5G related SoC testers was initially expected to get off to a slow start. In fact, in calendar year 2019 significant demand arrived sooner than expected. Therefore, the calendar year 2020 SoC testure market is now expected to be at the same level in calendar year 2019. The memory tester market is recovering, but a full scale recovery is still some time off. As the DRAM market improves, we expect customer motivation for tester investment to increase. Next slide, Slide 13, fiscal year 2019 forecast Based on our results through the 3rd quarter and our forecast for the 4th quarter, we have revised our earnings forecast for the current fiscal year upward once again. In the 4th quarter, we forecast orders of 1000000000 net sales of 1,000,000,000 and operating income of 1,000,000,000. And quarterly net income of 1,000,000,000. The assumed exchange rates for the 4th quarter are 105 yen to the U. S. Dollar and 120 yen to the euro. The new full year forecast raises orders by 1,000,000,000 and sales by 1,000,000,000 compared to October's forecast. Our full year gross profit margin forecast is approximately 57%. Almost unchanged from our previous forecast. Our operating income forecast is up by 1,000,000,000 and our net income forecast is up by 1,000,000,000 compared to October's forecast, respectively. Our new net income forecast includes the anticipated posting of deferred tax assets that are expected to reduce tax expenses in the future based on the calendar year 2020 market forecast as described earlier slide 14, fiscal year 2019 outlook by segment. First, the SOC tester business. In the SOC tester market, a sense of acceleration of investment in the testers for application processors and baseband processors for 5g Handsets has developed. Our 4th quarter SOC tester sales forecast incorporates the possibility of a rebound slump. However, the fourth quarter demand has increased since 3 months ago. Based on these factors, we are raising our full year SOC tester sales forecast by 12,000,000,000 yen. As the graph shows, This is year 2018, thanks to increased demand for high end SSC testers. As for memory tester business, the memory tester market is recovering as mentioned earlier. Flash memory demand has started to perk up. And inventory adjustments have progressed and test your investment has resumed. DRAM is likely to take a long time to recover fully. But as regards interface test processes, LPDDR5 for smartphones is ramping up faster than expected. Local flash memory and DRAM companies in China are also actively investing. As a result of the above, we have also increased our memory tester sales forecast for the current fiscal year by 1,000,000,000 over the October forecast. Please turn to Slide 15. Next page is about mechatronics and service business outlook for FY2019. In line with the upward revision of our memory tester sales forecast, we raised our sales forecast for tronix by 1,500,000,000 to 34,500,000,000. In our services, support and other segment, we revised our sales forecast upward by 2,500,000,000. New businesses such as our system level test business are growing. On page 16, Let me touch upon measures for medium to long term growth. Advantest is promoting management in line with the 10 year mid to long term management policy developed in April 2018. As part of our measures to focus on growth areas and enhance our partnerships with customers, We are increasing RSEs and development employee headcount in this fiscal year. We also expand our new businesses to achieve sales growth. We will develop solutions for areas around our current core business through M And A And Partnership. In order to execute these measures, we have set M and A investment framework of 100,000,000,000 yen for the entire period of Meta Management Plan. Acquisition of Isai was announced this morning in the press release. And this was executed as part of this M and A strategy. Let me explain more details about this acquisition of Isai. Isai is a test related company based in Silicon Valley whose main product is Socket, that connect testers and semiconductor devices, time to market and time to volume are becoming more and more important for semiconductor companies providing high end applications. In this context, Esai's excellent design and manufacturing capabilities enable fast product delivery to customers. Advantest will leverage our global footprint, production expertise, and customer base to further accelerate their business growth also by combining our solutions for final tests and system level tests with their products, we'll be able to offer accuracy guarantee solution from Tester to devices, and this will be additional value for our solution. Moreover, esize product consumables so we can expect to increase sales from recurring business. We thought that isai can significantly contribute to achieving our long term management goals in terms of technology, marketability, and sales synergies. Therefore, we decided to acquire the company. For your reference, Beside's recent annual sales was about $100,000,000, and they are expected to immediately start contributing to profit in FY20. This is summary. We revised our full year forecast upward again based on the strong performance of high end SOC testers and signs of recovery in the memory tester market. Though the adjustment in FY19 was not as deep or long lasting as we had experienced in the past. This was a year of market adjustments for the tester market we expect FY Twenty will be a year of recovery in both SOC and memory. There is potential for gradual improvement in business environment. In addition, our business foundation is evolving and being enhanced steadily. In February last year, we acquired the SLT or system level test division of Astronics And in this January, we acquired Eisai as M and As aligned with tester market trends. As described in a mid to long term management policy, ground design, we're expanding the scope and scale of our business beyond testing, semiconductor chips for volume production. Although uncertainty in a business environment will continue, we will strive to exceed the strong performance of FY18 in the next fiscal year by leveraging the recovery of semiconductor market and the change of our business structure. That is all for my explanation. We will now take questions. The first question is from Mr. Wadaki from Nomura Securities. Two questions per person. I understand. My first question is on the system level test SLT, which was now mentioned. Within the industry, a lot of people are taking a very positive view, and we have great expectation And in fact, you reported strong orders. What is your expectation regarding the potential of SLT for the next fiscal year and beyond. Could be that you deliberately refrain from giving us the details, but can you at least talk about the potential applications for instance. Thank you for your question. This is Mihashi speaking on SLT application area wise, we are expecting higher end SoC system level testing requirements to grow steadily going forward. With increased complexity in semiconductor processing. We expect this to continue to grow. As for other applications, regarding automotive applications due to the need to ensure reliability, further testing will be required. So that's one of the growth areas we expect to see. As for the size of growth of this business, for the time being, we don't think the size will be big enough to warrant sharing with you any specific figures. It is accounted for as one of the minor businesses, but on the other hand, Considering the future growth potential, we expect the business opportunity for us will be around 1,000,000,000 on a full year basis. Let me move on to my second question. Your competitors are saying various products are doing well. Now among the product that you did not cover in your presentation are driver IC tester, burn in tester and probe card. Can you comment on those? This is Sakamuto speaking. Driver IC, as you know, performed very strongly in fiscal year 2018, resulting in high sales figures for us. In fiscal year 2018 we saw an increase in customers and in OSAT used by customers, which resulted in a large growth in volume. Consequently, in fiscal year 2019, our DDI sales decreased significantly year on year. Looking ahead into fiscal year 2020, considering the current rates of operation We do not expect a large But trend wise, we expect TDDI and COF requirements to continue. So 10,000,000,000 yen business per year, we believe could be sustained, basically. What about others, burn in test and probe card? This is Mihashi speaking. As for burn in test, DRAM core plus something else as burn in test requirement. We expect growth in and we have already completed the product launches for that. And this will be the area where we will continue to focus. As for EB electron beam and probe card. For EB, we are providing products, mask CDSM. And with the growth in the EUV process in the foundry business, we are seeing the business opportunity presenting itself for us. But as you know, for mask CD Sam, the TAM, or the total addressable market itself is not that large. So we cannot say that it will make a large contribution to our business results. Having said that, with growth in This is Sakamoto speaking. As for probe card, we do have business for DRAM and NAND. Although we cannot mention specific customer names. As you know, we were late to enter the probe card business So we are focusing on a limited number of customers with greater chance of success to build our track record before expanding horizontally That's our marketing strategy. I see. Thank you. Next is Mr. Yoshida from CLSA Securities, Japan. Thank you. My first question, President Yoshida commented earlier that for fiscal year 2020, you will take up the challenge of achieving the highest ever profit. You did share with us your forecast for the market size for calendar year 2020. But what about the market share outlook? For memory and SoCs, respectively, and how confident are you in achieving the highest ever profit? Thank you for your question. This is Yoshida speaking. In terms of market size, compared to fiscal year 2018, it might not reach that level, but comparable size is expected in terms of market condition. So in that sense in areas where we already have a market share of 50%. We do not expect a rapid growth from that level. As for SFCs, of course on a customer to customer basis, there could be fluctuations in the market share But as far as we are concerned, maintaining our current market share, we believe would be most important. We do not expect a significant increase from here. Similarly, for memory, our current goal is to achieve a market share of over 50% The sales might not reach the fiscal a 2018 level, you might say, but system level test SLT that was mentioned earlier is seeing steady progress in orders received and growth is expected. In addition, the Socket business, the acquisition of which we announced today is expected to make an immediate contribution in terms of sales improvement of around $100,000,000 as was mentioned earlier. So even if the tester market was to shrink somewhat, we would like to keep the aspiration of exceeding fiscal year twenty 18 in terms of business results. Thank you. I have a follow-up question. Your competitor claims, it won the design in business in the area of DRAM interface testing. Even with that, you hope to achieve an over 50% market share in the memory area. Am I correct? On a customer by customer basis, they are winning and losing, and therefore, it varies. While we are confident of our absolute strength as for flash memory where we haven't been strong, we feel we can win business. And as for burn in test for memory, we are confident that we can win. So winning a market share of over 50% in memory, we believe is achievable. Thank you. My second question is on SLT. Service and other segments. In the 3rd quarter, order level was high. How sustainable is this? Do you think? And can you talk about the cost related to the acquisition of isai and profit contribution? You set sales of about $100,000,000. What is the expected profit contribution? I take it that you're asking about the visibility of SLT That is correct. The platforms that we have for system level test SLT is for SSDs, and what we acquired last both are performing strongly. Now how sustainable is this? As for SSDs, Data volume is expected to grow going forward. And further replacement of some of the hard disk market is expected. Albeit with some ups and downs along the way, we expect sustained growth to continue. As for SLT for SOCs, as was mentioned earlier, with increased complexity in the semiconductor processing, chip level testing alone would not suffice. Additional system level test would be preferred to ensure better reliability. Markets with that type of requirement we believe will increase going forward. And we expect these types of markets to grow. And therefore, we expect growth for fiscal year 2020. And we expect that growth to be rather stable not a bumpy one with much ups and downs. What about the cost associated with ESAi acquisition and its profit contribution? We cannot disclose the acquisition amount due to the contractual constraints, but of course, There are other M and A associated costs, which will be accounted for in the 4th quarter which is already incorporated in questioner is Mr. Hiroawa of Merrill Lynch Japan Securities. Thank you. Hiroawa of Merrill Lynch Japan Securities. I have two questions. First is on the SOC tester market. The market grew significantly in fiscal year 2019 after bottoming out in fiscal year 2015, Market has been expanding continuously. Going forward, as the president Yoshita said earlier, Well, the original forecast was that there would be some fluctuations. It now seems that the level of fluctuations will be more moderate. Any thoughts on that? And if you agree, What do you think are the reasons for that? That's my first question. Thank you. You are right. Since fiscal year 2015, market has been growing steadily and continuously. On the other hand, we believe that in this industry, in this testing market, overall, there would be fluctuations. Market growth associated with the advancement of technology plus the market growth associated with the growth in semiconductor volume. These are the two factors that constitute the size of the market. So when the balance is lost in either of these factors fluctuation follows, That's the way we see it. This is Yoshida speaking. As mentioned, we do expect fluctuations could take place. But overall the market growth appears stable. In retrospect, that's the case, but when you look closely, you would find that, for example, slowdown in LCD driver tester is made up 4 by 5G and the like. That's what's been happening. The fact that this scope of applications is widening, I believe, is moderating the size or the level of fluctuations. As was mentioned earlier, the more advanced the technology, the wider the application areas. For example, currently CMOS image sensor has continued to grow. Doesn't seem to slow down, which makes up for the slowdown in LCD driver. So by having multiple applications, we see one complementing or compensating for the others. Thus smaller fluctuations. I see thank you. My second question is on the market outlook. For calendar years 2019 2020, what was and what is the assumed market size of the 5G related market. If possible, can you break it down to infrastructure versus handsets? And what about your market share? That's my second question. I recognize we have not been able to provide good explanations about 5grelated business volume and I think that's why you raised this question. For calendar year 2019, we originally estimated the expected market growth by 5 g as $200,000,000 to $400,000,000. But we are aware actual growth was more than that. I'm sorry to say this, but we do not have data about the itemized market share for devices for base stations and for handsets. I'm sorry to say this, but we do not have data about the itemized market share for devices for base stations and for handsets. What I can say here is additional contribution by 5g rollout was around 500 to 600,000,000 US dollars out of total SoC market in calendar year 2019. Thank you. This is a follow-up question from 2019 to 20. How much growth is expected for the 5 related market, or do you expect flat growth due to the strong performance in 2019? Can you share your thought about it? For 2019 2020, we currently estimate flat growth. Thank you. Next, Mister Hanaya from SMBC Nikko, please. Hello. I am Hanaya from SMBC Nikko. I have two questions. My first question is related to the earlier question by Mr. Hiroawa In the previous quarter, you mentioned a possible slowdown of 5 gtester market. Can you provide updates on your market outlook on this area? You said you expect flat year on year growth from CY 19 to CY 20 can assume you estimate flat growth even only for 5 g market as well. I am Sakamoto. As explained earlier, in FY19, customer demand in 5 g market is increasing faster than our expectation and that is significantly contributing to our business. And your question is if this trend will continue in 2020. As we are seeing customer investment accelerated earlier than we expected in FY2019, we estimate flat growth in FY2020. Having said that, the growth trend of 5 g handsets will surely be obvious in FY Twenty than FY19. And we expect to see increase of applications related to 5g Handsets in which we have competitive advantage. Our sales organization are determined to capture such opportunities in the market. You said there will be applicable to both the entire SOC market as well as 5G related market, or do you expect to see growth of 5G market? We expect flat growth for 5 g market as well. My second question is about your outlook on memory testers. You expect over 20% year on year growth in CYAD 20 and mentioned competitors started to come into the LP DDR5 market. Will this over 20% growth in CY 20 be driven by flash memory? If so, can you share your view on LPDDR5 testers if this growth should be considered as a one time event, or is it going to affect the full year business next year? I'm Sakamoto. LPDDR5 testers started to increase earlier than we expected. And we are seeing growing demand in its initial phase. We assume this growth will continue over time. Regarding Flash Memory, business is recovering in client and enterprise SSDs. And they will become the Can you tell me which one will be the stronger driver for the growth in 2020? DRAM will be the stronger driver in terms of value. Although it is rather difficult to present an outlook for second half of FY 2020, our business is anticipated to improve as we expect ramping up of DDR5. Okay. Thank you for your detailed explanation. That's all for my questions. Thank you, Mister Hanaya. Next, Mister Nishiyama from Citigroup, please. Hello. I am Nishiyama from Citigroup. I have two questions regarding 5G, assume orders from April to June were for engineering applications. And orders from July to September were for preliminary phase of volume production. What do you think The orders from October to December are used for. And when do you expect to receive orders for full scale volume production? I am Mihashi. I understand your question is about the purpose of use for the orders. April to June for engineering applications, July to September for preliminary phase of volume production, and how about October to December orders? Customers have not reached the phase of large scale volume production as the growth is not big enough yet. Still, volume production has already started among our customers. And the orders in October to December period were to address such move. We another growth in AP for smartphone in the first quarter or later. Can I assume the orders are expected in April, June period, or later? That is correct. Okay. And you suggested the market for 5 g will make flat growth from 19 to 20. How about your market share? Can you expect growth in 2020? Do you mean for 5 g related market? Yes. Customer mix significantly affects the market share. For 2020, there might be some difficulties in the first half, but towards the second half, we estimate situations will become favorable for us. 5 g device rollout effect was originally from $200,000,000 to $400,000,000, but it was Jellie from $500,000,000 to $600,000,000. Is this statement for 2019? Yes. Okay. My second question is about DDR5, and it is related to questions made earlier. Your competitors are saying that they are retaining more design wins for LPDDR5 than you. Do you recognize it as reality that you're losing your market share to them? As mister Yoshida mentioned earlier, We believe our test system has an advantage in LPDDR5, and we have long term relationship with our customers So we are not anxious about losing our market share. As we are aware that our customer will continue their policies to purchase from tube vendors. We'll remain vigilant and make sure to maintain our market share. Okay. That is all. Thank you. Thank you, Mr. Nishiyama. Next, Mister Maikawa from Credit Suisse, please. Hello. I am Maikawa from Credit Suisse. I have two questions. First one is about your TAM outlook that is in 2020, $2,700,000,000 for SOC and $800,000,000 for memory. Can you tell me the down for the first half and the second half in terms of year on year growth. I am Mihashi. Your question is about the breakdown of TAM for the 1st and the second half. As for SOC, we estimate flat growth from 1st to second half. And for memory, business is expected to improve from 1st to second half. If 5 g market will remain flat, in other words, it continues to be reasonably strong from the second half of nineteen to the first half of twenty, then can I assume the 5 g market will be weaker in the second half of twenty, but that will be offset by recovery of other SOC related markets? To make the flat growth between 1st and second half. I appreciate if you can tell me the estimated change from the second half of nineteen to the first half of twenty. Computing and communication ICs account for about 60% of our SoC sales. And we estimate this percentage will remain unchanged from the second half of nineteen to the first half of twenty. Tam will remain unchanged between those two periods as well? Yes. Okay. If that is the case, Earlier you mentioned annual market size in 2020 will be almost the same as 2019. Looking back in 2019, 5 g market came into existence in April to June period or later. So it's demand concentrated in the second half. So in 2020, the demand for 5 g will be more in the first half, and it will subside in the second half. I know you cannot make a clear forecast for the second half of this year now. But can I assume that is the assumption you used to make this $2,700,000,000 TAM outlook? I apologize if I couldn't answer your question properly so far. Business opportunities are generated for different use such as engineering, volume production, validation, etcetera. In addition, Reliability assurance for a new process note will also be required. As such, various factors will create a balance. Under such a circumstance, we are still not be able to review for making clear estimation yet. Okay. That's fine. My second question is related to that point. Going forward, foundries and logic manufacturers will start adopting EUV lithography 45 or 7 nanometer process notes. I'm afraid this is a little difficult to mention, but in 2020, how will their yield affect the demand for your SOC testers? Do you expect the demand will increase as they will struggle more was yield compared to 2019. Can you share your view on the demand for your testers in relation to their yield? I am Yoshida. We cannot directly mention yield of our customers. But generally speaking, more testers will be required when you need to ship a certain number of low yield products that can be considered as a general theory in our business. When starting to apply a new process note, the yield of new products tend to be worsened. But if you still need to secure a certain number of products, large initial investment in testers will be needed. The demand we saw in the first half of twenty eighteen might have been generated in such a context. So when 5 nanometer process node comes in and customers yield gets deteriorated, It is possible the demand for tested shoots up. However, customers are always trying to improve efficiency in testing, and it would take some time to fulfill the built up capacity for testers. Therefore, we forecasted a slight decline in the second half of FY2019 expecting a possible decrease after the quite strong demand we saw in the first half of that fiscal year. However, it didn't decrease as much as we expected, and we assume this is because volume production started and the production volume gradually increased. So not only yield, but also production volume increase affects the demand for testers. I appreciate if you understand that Pam for our testers will vary depending on the production volume for 5 g as well as 4 g, which is still in production. I'm clear. Thank you very much for answering such a difficult question. That is all. Thank you, Mister Mikeawa. We received some more questions, but we have run out of time. This is the end of the Q and A session and a conference call today. Thank you very much for your participation.