Earnings Call: Q2 2020

Oct 30, 2019

Thank you indeed and for your precious time, despite your busy schedule. If I may, I would like to start, advance the financial briefings and for the second quarter, FY 2019. Do allow me, you know, for us to introduce the participants from Adventist. Starting from the screen aside and at the center, first, Yoshaki Yoshida, Representative Director, President and CEO, Next, associate in Fujita, Director, Managing Executive Officer. Next, Kimiya Sakamoto, Executive Vice President Sales Group. And allow me to introduce myself. My name is Yasuo Miyhasin, Corporate Relations Group, serving as the MC for the session. First, Mr. Fujitan will explain the financial results and for the second quarter of FY 2019. Then Mr. Yoshiran President will explain our FY19 outlook. Then we are quite happy to receive your questions. We plan to end this session around 5 pm. Without further ado, hamishta Fujitsu. Hello, everybody. This is Fujitang. I am delighted and to make a report concerning FY 2019 second quarter results summary. Looking back at the industry environment 3 months ago, there were considerable uncertainties in response to macroeconomic weaknesses and the proliferation of the protectionist and trade policies. We were cautious about the business environment in the second quarter. In addition, due to the strong first quarter results, We expected a quarter on quarter slowdown in the second quarter. As expected, reflecting the sluggish demand for end products, many customers continue to have a wet unseen attitude, in regard to the Tester investment. However, with the impending full scale commercial rollout of 5G, aggressive Tester investment, continued among 5 gs related resources and conduct manufacturers. As a result, orders declined Q on Q on Q, but not to the extent that we had expected coming in at JPY 58,300,000,000. Sales and profit and also on a progress better than we had expected and both exceeded the figures posted in the first quarter. Year on year, memory test orders failed due to having of demand in the sector. Which was in a bottom phase 1 year ago, but the decline in sales and profit was, compensated for by the strong performance of Esourcing testers holding results flat YY. Regarding operating income, in the same period of the previous year, we posted a one time profit from the sale of business sites of approximately 1,000,000,000. Excluding that, profit for FY 2019 second quarter rose YY In the second quarter, the US dollar moved in a somewhat negative direction against our ForEx sensitivity. Next, the orders by segment, the same conductor and component of test systems. 43,100,000,000, down 13.6 percent quarter on quarter. Exourcing test orders were 33,300,000,000. As in the first quarter, demand was mainly known for new smartphone associate devices, utilizing advanced processes. The first quarter has sold the demand for Natestas for engineering applications for devices used in 5G smartphones, such as application processors and the baseband processors. Going one step further, The second quarter saw investments and touched us for initial ramp up of volume production of these devices. Orders for Tester's in other areas were generally weak. Normally, Tester orders increased from the first quarter to the 9,800,000,000. This was due to the continued demand for testers for high speed DRAM, and then expanding demand from the local memory companies in China. Mechatronics systems 6,800,000,000 yen, down 5.8% QOQ, Southeast and others, 8,400,000,000 yen, down 4.6% Q on Q. Annual maintenance and contract orders decrease in every summer, but this that was offset by an increase in the system level test related orders. So the rate of decrease in orders overall was lower than usual. This page shows sales by segment. Sales of Sinconductor and component test systems were up 2.1 percent quarter on quarter to 52,000,000,000 yen. SoC tester sales were 41,800,000,000 yen. As with orders, these were mainly driven by 5 g smartphone related demand. Memory tester sales were 10,200,000,000 yen, as with orders, these were mainly driven by high speed DRAM test demand. Machatronic system sales were up 40.6 percent quarteronquarterto9.4000000000. Diva interface sales increased owing to the growth of memory tester sales, services, support, and others sales grew 18.9 percent quarter on quarter to 10,300,000,000, as sales of system level testers for both SSDs and SOCs increased. This slide shows orders by region. Taiwan is indicated by orange and orders decreased from the previous quarter due to order concentration in Q1. This is for testers of engineering a purpose for 5 g smartphone SOCs. China is in yellow. And orders increased as the launch and expansion of China's local semiconductor supply chain progressed across the SOCs and memory sectors. As for sales by region, South Korea, Taiwan, And China saw strong sales of testers used for high end SoCs utilizing advanced processes as well as image sensors, power management, ICs, etcetera. In Korea, although the sales remained weak in Q2, overall sales were steady, thanks to the contribution of SoC testers. This page is about operating income. Gross margin was 57.3 percent to maintain above 55% despite slight worsening product mix. SG and A was 23,300,000,000 yen, declined slightly from Q1. Operating income was 17,700,000,000 yen. Operating margin was 24.8%, up 1.9 points quarter on quarter. As we are currently adding personnel for future business expansion, It is difficult to improve profitability for the time being. Still, we could achieve operating margin of nearly 25%. This page is about investment and cash flow. R and D expenses were 9,900,000,000 yen in the quarter under review. Depreciation and amortization were 2,100,000,000 yen to recognize an increase over the previous year. This is due to the new lease accounting standard of IFRS, which was applied from this fiscal year. And an temporary increase of the amortization of intangible assets caused by, acquisition of Astronix's system level test business in February. As for cash flow, we recorded 25,000,000,000 for free cash flow in this quarter under review. Due to the balance between orders and sales, collection of trade receivables improved to increase operating cash flow in Q2. This slide is about financial position and shows the balance sheet as of the end of September 2019. Total assets was 323.6000000000. Cash and cash equivalents increased 23,400,000,000. From the end of the previous quarter to 134,800,000,000 yen, equity attributable to owners of the parent was 230,600,000,000 yen, and ratio of equity attributable to owners of the parent was point 0 percent, up 1.8 point from the end of the previous quarter. That is all for the explanation of the financial results of Q2 Thank you. Hello. This is Yoshida. I will cover our outlook for FY19 and test the market outlook for the calendar year on 2019. May I remind you that here, we are looking at the calendar year, not the fiscal year. The market data for the touchless and the market size is available on the calendar basis. I hope you understand this. First of all, on the brief discussion on our business environment, the trade friction between the U. S. And China has not yet been resolved. And inventory adjustments in continuing in the supply chain of many products. With the exception of individual strategic investments, many customers are not in any hurry to invest in testers. However, no test demand for 5 g related semiconductors and has been booming since spring. And based on this, we have raised our calendar year 'nineteen outlook for the sourcing attached to market to efficiently $2,600,000,000. Back in July, we said it will be around $2,000,000,000 but we decided to raise it to $2,600,000,000. The moment you touched the market and has been in a slump, but, investment and from several customers and has been picking up a little. Taking this into account, we estimate that the market in calendar year 'nineteen will be was around $550,000,000. Back in July, we said to the fact that it may come down below 5 $550,000,000. Since advances in the broad customer base is the principal source of strength, the current the market situation and the customer's investment stands are slightly disadvantageous for us. It is kind of difficult for me to fully explain this. But an overall decline definitely is going to have impact on our market share in certain cases. So, if we lose in certain margin, that is going to have the great impact upon us. However, if our market estimates and earn accurate, we will be able to maintain our share of approximately 50% or above in our calendar year 'nineteen in both SLC and the memory. Following a calendar year 2018. In recent years, the driving force behind the demand and has been a test reinforcement and extended reliability assurance needed for the higher performance same contractors. In fact, volume production of an high end semiconductor is now expanding in the SLC and even in memory. Although it is not widely noticeable in the Hilara sector yet. That's, we do believe that there is going to be more room for to further ground from next year onward. FY19 forecast although, uncertainty in the global economy and the sense of, desalination and and the product demand and the same conductor demand, continue as before. Increased on demand for 5G related associates and contractors and has made up for it. Boosting Adventists, the results in the first half and to a higher level than originally expected. Based upon this, we decided to revise our full year forecast. We have increased our estimates and full sales by JPY 170,000,000,000 for operating income by 1,000,000,000 yen and for net income by 10,500,000,000 yen. Because of the acceleration of 5G related demand, investment was very vigorous in the first half in FY 'nineteen. We therefore expect that 5G related orders may slow down temporarily, in the second half of FY 'nineteen. On the other hand, memory and, storage related demand, which has been soft, is increasing, if only slightly. We are now making comprehensive orders and sales and plans around that assumption. Gross profit margin is expected to improve by a few percentage points year on year from 54.5 percent to around 56 up to 57%. The exchange rate assumptions for the second half of the fiscal year now have been revised 105 yen to the US dollar and 120 yen to the euro, taking into account the most recent actual figures. For the full year, we assume JPY 107 to the US dollar and JPY 121 to the euro. Now, outlook by segment. It's also an international business and outlook. For the current fiscal year. The major trend for the progress of semiconductor performance to underpin is continuing. In particular, sales in this year and have been heavily driven by and the baseband processors in 4 future 5 gs and handsets. In the first half, we do receive, an in high volumes and overtached the orders in the 4 digit device types from several major SIM contractor manufacturers. These orders in the world will convert to sales in the second half of FY 'nineteen. So that and sales in our SLC and our Tesla business is to flat from the previous fiscal year. On the other hand, considering the timing of 5G smartphone production next year, We suppose that 5 related orders may slow down temporarily in her in the second half of the year. However, we think, you know, this adjustment is going to be an adjusted temporary. The adoption of half gen handsets and has still to become widespread and the performance of the servers and the game, her con consults will also be improved next year. Additionally, you know, full scale demand for the 5 g using the millimeter wave balance is expected a few years from now. We expect that in this measure next industry and trends will continue to stimulate demand for associate testers and through advances and end resources and contact performance, growth in production volumes, and in her further adoption of advanced processes. Next is about Memory Testa Business Outlook. DRAM has well defined technological drivers for memory tester cells that are less susceptible to memory supply demand fluctuations, such as shift to DDR5 and expansion of demand for high speed products for high performance computer. Amid poor overall market conditions, we have not changed our expectation that tester investment for these advanced devices will start in Q4 in this sector. We originally expected it to start in Q3 at the beginning of this fiscal year, but now we expect the demand recovery will begin in Q4. Also, as indicated in Q2 orders, we are receiving more customer inquiries for DRAM testers than a estimate made 3 months ago. So we revised our full year sales forecast for memory testers upward slightly from 30,000,000,000 to 32,000,000,000 yen. In addition to increasing demand for high end DRAM, the number of layers stacked on NAND flash continues to increase. If bit demand returns, the tester market will see an overall structural recovery. Also in China, the DRAM tester market is beginning to ramp up in addition to NAND flash. We'll watch future development with anticipation. Next page is about megatronics systems and services support and others. As for megatronics systems, Although we have not changed our forecast of decreased sales in its related business due to the prolonged slowdown in memory customers, test to investments, we have slightly raised our segment sales forecast by 1,000,000,000 to 33,000,000,000 yen due to upward revision of the forecast for memory testers. For services, support, and others, we have increased our forecast by 2,000,000,000 to 40,000,000,000. In this area, we can expect solid sales in field services And SSD system level test is growing more strongly than a previous forecast. In addition, the system level test business of Astronics, which we acquired in February, is making progress expect The revised forecast reflects these factors. For measures for medium to long term growth, Let me explain a little about Grand Design announced in April 2018. Advantage is promoting management in line with this 10 year mid to long term management policy. Our key measures for the second half of FY 'nineteen remain the same as explained at the beginning of the fiscal year. In order to maintain and expand our market share from CY 20 onwards will prioritize strengthening engagement with industry leading key customers and maintenance and expansion of our market share. Customer support requests for next generation 5 g devices and future new device development continue to increase. We intend to accelerate, investments in staff such as system engineers and application engineers and in R&D. At the beginning of this fiscal year, we announced to increase investment to increase our headcount by about 200 in this fiscal year. But as we see significantly strong demand for support from customers, we'll hire more employees than this plan As for capital investments, we do not consider large scale investments to increase production capacity as this is not necessary for the time being. Still, we intend to actively implement facility, renovation for higher efficiency in production and development and invest in IT systems. Putting this all together on the investment in FY19 is expected to be 39,000,000,000. Capital investment will be 10,000,000,000 and changed from our initial plan. Depreciation and amortization will be 9,500,000,000 yen. SG and A expenses are expected to be around 95 to 96 1,000,000,000, including R and D expenses. This is the last page for summary. In the first half of this fiscal year, performance results exceeded our initial estimate owing to the increased SOC tester investment. As a result, we have revised both sales and profit forecast upwards. Although we foresee the possibility of a temporary slowdown in the second half based on the investment trend of our major customers, many customers are developing leading edge devices used in 5 g, high performance computing, IoT, etcetera. This means that there will be wider usage of technologies used for these devices such as miniaturization, stacking, and greater integration of circuits on tips, which require more accurate testing and technologies which make reliability more difficult to ensure. We assume these trends should support the growth of the Tester market over the medium to long term. There are uncertainties in, external environment which is still unresolved such as US China conflict, the global economy, and exchange rate fluctuations and we cannot be certain about market recovery in Q4 yet. Therefore, we have to be ready for the risk sudden changes in market environment will grow Advantest's business father as we carefully examine opportunities and risks. We'll continue to strive to achieve the goals set forth in a mid to long term management policy Grand Design by reinforcing our customer support capabilities. Today, we distributed the integrated report at the entrance This is our first integrated report, and we appreciate if you go through the report and send your feedback questions and come Now we'd like to receive your questions. Please give your name and affiliation and please show your hand before you ask your questions. Anyone, please. What again, Nomura Securities, thank you. Questions about sourcing and memory testers. First associate testers, market expectations are growing so rapidly. TSMC is receiving a lot of orders in the advanced area. A short term basis. So I assume it will have a consequence, in fact, an owned, advanced or on a 5 g tester and they are making a big investments, which the current affairs unit testers are going on so strongly? Once in a mass production and starts in the SLC and the test market may explode. I wonder if you have the same expectations. So, these are the two questions. You know, maybe, Mr. Mihashi and Kim responded about TSMC and then Mr. Takamoto responded about 5 gs and maybe Mr. Yoshida make a kind of summary. Thank you for your question. Yes, in the advanced processes, the latest and no are growing, pushing the growth of test services. As Mr. Yoshida mentioned this earlier, with the advanced processes growing. Naturally, the number of transistors to be incorporated and that is naturally dramatically growing. For example, with the latest new 7 nano EUV, it, has more than 1,000,000 transistors. And that compared with the her earlier than 7 nano Imagine how lithography, the number of transistors, grew on a more than a 20 or 30%. So with that, and in the background, naturally, you know, our associate testers will have a positive impact together with, you know, more transistors and incorporated. Making tests more complex, particularly in the zone, in the latest nodes area. If this trend on a hit those of hundreds who was the latest notes. It's also in the demand and will naturally grow. So now we believe, well, with a pass possible slowdown, for some time to come, we are assuming there could be some adjustments possible in the second half. That said, and, of course, you know, we do believe that the demand for our solution will grow, you know, together with, you know, advancing knows. Maybe I did not make myself clear. Let me, double check that. And if you also believe that SMC5 nano, or on how the insects and, has not finished yet. It will have had to come back. How what do you think? Well, in the previous briefing session, we told you that, you know, we had received a bit order, for our testers. And, this been already, covered and announced by the GMC. I believe you understand what I'm talking about. So the question here is how this, mass production face wraps up, which the base stations being built in the 2020 and onward, 5G enabled mobility or on the smartphone, will naturally ramp up. And there will be several customers and, they are using TSMC processes yes, with this point in your mind, as I said earlier, there will be more demands in the 4, the advantage and they're still seeing it in the market days. Any comments in about 5 g? As Wayne explained to this in the ending, her last results briefing. We, received an orders mainly driven by the engineering. And in the second quarter, we did receive an orders from those customers who entered the initial mass production for ES or NCS engineering samples or the commercial samples. And as Mihashi has just mentioned, those tests are prepared, you know, to be used. So a slight slowdown could be, you know, possible in the second half. So there could be, somewhat on a slowdown, but moving toward the 2020, several customers, of ours and how we'll move into mass production phase in our 4th quarter. So, in 2020, More 5 gs devices will be animated together with the infrastructure or the base stations and being built. There will be more on devices included in the first and the second half in 2020 and the first half in 2021. Furthermore, the device, features will be in a further enhanced year by year. So we believe, you know, more advanced in tests will be required as year goes on. They have to conduct testing to verify if you know, their devices are fully functioning or not. For reliability, you know, there will be, you know, more testing items and as well as and a longer notation time required. All in all, now we do believe that an attestation demander will increase and surely and steadily. So, both in, volume, both in terms of, the stringent and the test requirement I do believe that the direction to be in a further increase in, in this testing space. Now, sub 6 gig is coming up. And, of course, the millimeter wave will follow. And once, millimeter wave is here, they have to a variety of frequencies, resulting in more complexity of devices. That's pushing up more demand for the testing. And, we have not changed our view that 5 gs will definitely drive, you know, those demands on a midterm basis. Mr. Shira, do you have anything you'd like to add? Yes. As the adoption of 5 gs into the society. I do believe that it will take 10 years, so it is yet to come. And we adjust them standing at the entrance point. Waste devices are becoming more complex and the capacity becoming a large on her making her on the testing her more difficult. And, if you believe that, you can assume that, they'll be using exactly the same test methods. You're wrong. Definitely, customer service will try to increase the test efficiency, and we are here to support their efforts at the same time. So together with, you know, complex and a texting environment, whether or not there's going to be the linear relationship between their side and outside, probably not but many devices are going to come into, deployed in many aspects of society. The only smartphone, but also in factories and also in offices and in recoupments and also on a health care, equipment, everything is going to be interconnected. If that's the kind of assumption we're going to make, think we have to develop a huge amount of devices, and we are here now to try to offer the broaden how support in the field of the testing in order to support our customers and our partners. It's very important for us to, you know, receive feedback from the customers and partners so that we can be up to the point we have to actually deliver to the marketplace. And thank you. My second question, Anyone can respond to my second question, please. Memory, test us, particularly for China. As you know, they are actually making those, the products ignoring the patterns. So the sooner later, the US will come and get them. There is such a concern. What do you think? And, any view, not as advantest, and, as for the Flash, some manufacturers have stopped a reduction in manufacturing, and they have turned the corner, and I am just wondering if this will have a positive impact on your any comments in this regard? Well, please try to understand that we are not in a position to say anything about the patterns. But that said, though, I want a gut feeling is that on demand or her encouragement to us and has not gonna change drastically. Well, and, of course, and, there are risks. Hope you are with me here. As for, you know, test the demand, for NAND in China, our customers have gone through engineering samples, Moving on to initial her mass production and then commercial mass production. So the customers in our make and studying her preparation have for, CapEx. So naturally, there is going to be a demand for this. So we will, that's support this. We are now moving into such a phase. Actually, talking about Nandan, I was not talking about China and her brother, Samsung or the Toshiba who have already hand on the corner. I'm wondering if, there will be, any investments on being made there. Yes. DRAM versus NAND. NAND is definitely recovering ahead of the DRAM. So sooner, later, there will be any demand. So we believe any specific inquiries? Well, not yet if you are talking about a bit inquiries. Thank you, Daniel, for your detailed response. I appreciate it. Thank you. We'd like to move on to an execution, next question, please. This is an Xinon token, a Tokyo Center. My first question is that 5 g, pre service got started in China. Some are already offering a commercial and commercial services. So now I'd like to know, you know, how you view the demand for 5 g devices this year. Now year and the year after next. I believe international market demand will rise in an accelerated fashion. What I have in mind here is, currencies you had with, 4 gina LTE. I'm talking about you and her factories in China, just in the 2 years from 2014, the demand shut up in 2 x to 400,000,000. And I am just wondering if you are ready to, meet with, you know, such a rapid inquiry in demand in 5 g. Certainly. Let me stop here. Thank you for your question. And I need to, clarify now your question, whether or not, if I understood your question, clearly, if there's a wrap ramp up in 5 chain or whether or not an advantage is ready to meet with the demand or whether or not, if we have any concern in terms of capacity. Am I right? Well, I would like to know, your current forecast as to the 5 share demand currently and whether or not you're ready to go for it. Well, thank you. Well, out of the current smartphone demand being a 1,400,000,000 globally, then our assumption for 5 g is, 10% plus out of 1,400,000,000 in 2020. Coming from a smartphone manufacturers. So we do believe that, such a migration to, 5 Sheena is going to take place, basically, in the following year. That's the assumption how we are making. Then, as for our production capacity, what's that in mind? Yes, sir. And then, you know, you're right. Then, when we are actually working on them for the LTE, you know, there was some some issues. But, now as for this 10% growth of 5 share, yes, now we are ready now in cooperation with our partners, we are ready, you know, in terms of pipeline flow. Thank you. Furthermore, the consensus in Taiwan or in China is 150,000,000 in 2020. And we are also hearing, coming from China. The minimum 200,000,000 is going to be also impossible, and some manufacturers are a bit stronger in the Tallangas it could be as big as 250 or up to 300,000,000. So here now, I would like to inquire if Advanterson is truly ready to cope with that kind of scenario. First, whether or not they expect a number of smartphones and our Natesto business and are in a good alignment. Well, I have to say that that is not necessarily the case. Putting into different lane, which devices go into action our testers will also grow to x. Well, may I remind you that, same point I talked about earlier? When our customer are ready to move into mass production, they should have improved, they are not testing efficiency. They should have improved, they are ill. So with this in mind, the 2 acts not necessarily mean to act on our side. The fact is that, we and the customers will have a good dialogue, and we do receive the growth forecast then we also make a preparation. If there is going to be an explosive growth in demand, yes, we are more than happy to respond to such a demand But, and as of now, we are not, yet convinced that that will be the case. Putting a different lane on some of the in our smartphones are just a name. We are not 100% sure on that, and they are not truly qualified smartphones and to be declared as 2 5 gs phone may I remind you that we're going to be somewhat careful here? Thank you. Next, my second question and the last question. I would like to ask about DDR5 HBC. If I'm not wrong, a new, plant and will be in a building in southern, Korea next year, What is your view on, how much in this DDL 5 and an HPC accounts for, you know, in next year? Here and again, I need to ask you if you can be up to the rapid increase in demand. Thank you. Yes. On DDR 5 and or LP DDL 5. Yes. It is likely to ramp up in the second half and or in the upcoming, you know, 4th and a quarter. The mass demand and comes from, higher end smartphones, talking about DDL. So this has been our strong belief. And here now, we believe there is going to be, the linear allocation to the how phones and any question. No? We believe the volume ramp up will be quite possible with the fire for general migration, how we talked about it earlier. And in regard to the question concerning our production capacity, as Mr. Yoshida mentioned at this point earlier, with the very initial ramp up of DDR 5 launch. Efforts are needed to be, you know, highly made, for the better quality. And, it'll come to, test the business within higher capacity. And, we're happy to report to you that yes, and we have enough production capacity in order to meet with those demands. Thank you. Yes, please. I am my cover from Credit Suisse. I have three questions. My first question is about 5 g. And the estimated sales of 142,000,000,000 for SOC testers in FY 2019 about how much would be 5grelated sales? We expected this question and various figures are running in my head about it. Let me explain the definition of 5 g. 5 g devices include base stations, and sub 6 gig baseband, and APU will be available in the market. We have explained the expected market size for 5 g is from 200,000,000 to 400,000,000 US dollars. This is based on the assumption that Testing time will be longer due to more complex device functions and more complex protocol verification to cover both 4g5g by introducing 5g Technologies. With that, we estimate an increase of 200 to 400,000,000 US dollars including other RF such as millimeter wave bands. To answer your question, I should say, our estimate of business growth related to more complex 5g devices functions include analysis on how many customers are actually making their tests more complex and longer Therefore, it is difficult to answer your question by clearly stating how much sales would come from 5 g. We have been discussing this issue internally to make a proper answer to this question. And we suppose it would be more appropriate to do so after taking more time to examine this issue carefully. Okay. Then I will ask differently. In your plan at the beginning of this fiscal year, sales forecast for SOC was 113,000,000,000 yen. And this time, it was revised upward to 142,000,000,000 yen. Can I assume most of the increase of 3,000,000,000 will come from 5 g? You can assume major part of the increase is related to 5 g. Let me explain a little more. As earlier mentioned by mister Wadaki, 5 g related semiconductor use the latest processes such as TSMC's 7 nano plus and the devices using such processes are considered as 5grelated products. With this background, business opportunities for many engineering and initial mass production increased our SoC related business volume. Did I answer your question? Okay. Thank you. Again, about 5 g to increase production of 5 gs smartphones, it is necessary to increase usage of mid range devices and cost is a big issue for mid range devices. When you talk to AP vendors like Qualcomm and high silicon, What is your observation about their cost consciousness for the mid range AP? As mister Yoshida mentioned earlier, increase of smartphone production does not mean linear growth of testers as a result. What I want to know most is what is the cost target in this regard and how much test time reduction can be expected for mid range AP compared to high end flagship model AP for smartphone. As 2 major 5 g devices are currently driven by such customers and fierce competition already exists among customers for mid range devices since the age of four g. We have been receiving requests for lower cost testing, and that is a challenging issue for a long time. Cost pressure is getting higher for testing OSAT used by fabless customers year by year. And this leads to cost reduction requests to us. We are always trying to figure out what is the best way to address this issue in a competitive environment? However, we do not want to start price competition. So it is essential to focus on reducing cost of test through shorter test time for supporting capacity utilization rate improvement. As such, we continue to make various proposals in those areas to help customers cost reduction. Will not change this attitude for 5 g products. Can you tell me your rough estimation on how many more chipsets can be tested in case of mid range devices? Let me give you additional explanation. In general, Test cost for customers devices depends on application. But for low end devices, the test cost is required to be contained around 1%. In case of some applications with high added value, the cost is about 8%. You suggested pressure on the test cost for middle range devices is high, and that is true. But it cannot be explained simply by stating how much is acceptable. For instance, wafer cost is the same, regardless high end or middle range devices. And the cost is changed by the processes used Mid range devices do not use top notch processes. So to answer your question, I can say mid range devices are under stronger cost pressure. And as I said, we are always under pressure to lower the test cost. And we are trying to figure out the way to improve efficiency by discussing with customers to address this issue. Thank you. This is my last question about your market share. In the presentation, Mister Yoshida said 50% would be maintained, but he sounded rather conservative Teradyne said the market share is growing both for DRAM and NAND in their recent financial results briefing. What is your view on your market share trend for DRAM, NAND, and SoC in 2018, 1920? I understand this totally depends on customer's investment decision, but I'd like to know what is your thought on this math If by 18 was the year, we could increase our market share significantly. It especially with SoC, we could record remarkable growth to go over 50%. As for memory, we have been in between 50 to 60%. In this area, we are his historically not the very strong with flash memory, but strong with DRAM. This is because test specification for flash memory can be developed with relatively simple features. Therefore, profit margin is not very high, and we have not focused much on this area. However, recently, more layers are stacked on NAND, and this makes its test more difficult and requires longer time for testing. And test market for NAND is growing as a result. We cannot ignore this trend and now we are strengthening this area. Paradigm may say they are growing their share for DRAM. However, we believe we maintain a strong position for DRAM. We assume their claim of increased market share is just because of larger NAND testing market. When demand for DRAM test is back, We are sure, share will grow again. We have been considered weak with NAND. But we are trying to gain the ground in this area. We are not satisfied with 50% market share Instead, we intend to maintain the market share over 50%. Still, it would be very difficult to reach 60 or 70 considering the current competitive landscape. Competitor is not only 1. There are other competitors in Korea, and we may have other competitors in Taiwan and China for low end devices. Also, some customers develop and make testers by themselves. Under such circumstance, we cannot be too optimistic take and do not expect over 60% market share. As long as we maintain 50% share as minimum, we can secure the number one position. So our target is to maintain over 50% market share. As we are running out of time, I'd like to take one last question before concluding the session. The gentleman in the back, please. I am Ushikawa from Morgan Stanley. I have two questions. First question is about 2nd half outlook. You repeatedly suggested possible slowdown in the 2nd half can assume you just suggested possibility and you do not see any sign of slowdown, or are you seeing slowing down the situation already in October? Regarding smartphone related business, investment in OSAT could start again around the Chinese New Year. If you are not sure about it, what is your concern? My second question is, aside from smartphone, what is your 2nd half outlook for display driver, automotive devices, and MCU. They are weak in the first half, but do you expect recovery in the second half? For the second half, estimated order and sales are smaller than the first half, and it is natural to have such impression that our business performance log for Q3, and we do not expect significant decline in sales. Still, we cannot have a clear outlook for orders in Q3 and Q4. We can see the situation in October but as November December are the months when customers lower their production. And with uncertainty of world economy, we do not expect strong order taking during that period. In Q4, when new fiscal year starts for our customers, especially with memory related business and in the US, it is possible new investment opportunities arise from them. Given that circumstances, our attitude may look too conservative if market environment changes in q 4, For instance, by an announcement of an agreement between US and China in November, we can expect recovery. We maintain conservative view for now based on the situation we currently observe. Regarding display driver, automotive devices, and MCU, we were not strong in the first half. And for the second half, unfortunately, we still cannot see a sign of strong recovery. Display driver had performed quite well until last year and taking last fiscal year as 100. This year stands at a level of 50 or 60, and which is not considered as a serious decline. But to be honest, we cannot clearly see when it will come back to 100. Recently, We heard Korean display driver companies announced a significant profit decrease or deficit. And as such, good news cannot be heard very much in this area. Still, in terms of technologies, demand for display driver will grow, and we expect its recovery sometime in next year. As for automotive devices, As concerned all over the world, we cannot expect a certain recovery in this area However, electrification is progressing steadily and significant investments are being made in Europe. In that sense, Semiconductors are making a recovery and with increasing importance of reliability, they need to perform thorough testing, which requires testers. We are sure about this medium term trend and not pessimistic about the future. Unfortunately though, this trend is not obvious yet. Thank you. I recognize some more people are raising hands, but I am sorry we have run out of time. This concludes the financial briefing. For the second quarter FY 2019 of Adventist Corporation. Thank you once again for participating the briefing despite your busy schedule.