Investor Update

May 24, 2021

Slides

It's time to start. So we'd like to begin Adventist's briefing on its new Midterm Management Plan. We thank you for taking the time out of your busy schedule to join us today. Yoshiaki Yoshida. It's nice to be here. Next, our Director and Managing Executive Officer and CFO, Atsushi Fujita. It's nice to be here. I'm from Corporate Planning and my name is Yasuo Mihashi. I will be the moderator today. You can find today's presentation deck on TD Net as well as our website. If you are joining us today via telephone, we ask that you download the presentation materials. Prior to the briefing, I have one point to note, namely that this briefing will include some forward looking statements, all of which are subject to risks and uncertainties. Please be aware that actual results may deviate from such statements. Without further ado, I'd like to give the floor to Mr. Yoshida. My name is Yoshiaki Yoshida. Bidder. Thank you for taking the time to join us today. We disclose the outline of our new midterm management plan that is our 2nd midterm management plan last Friday. Today, I would like to share more details of the plan based on the agenda you see here and briefly discuss our medium to long term aims. Firstly, let's take a look back at our 1st midterm management plan. We defined what we in April 2018. In addition, our first 3 year mid term plan which covered fiscal years 2018 through fiscal 2020 and which we abbreviated as in TP1 was formulated at the same time as the grand design to further its goals and we have made efforts for the past 3 years to achieve our these are the key management metrics and results of MTP1. We set ambitious targets compared to our results for 2015 into 2017, but our results greatly exceeded our targets across all metrics. These 3 years have seen great and unexpected changes such as the US China trade conflict in COVID team, but I am proud to say that Adventis has responded swiftly and surely to these changes, including by expanding production capacity and bolstering our local support capabilities in a timely manner to meet strong demand. 2 main factors contributed to the achievement of our MTP-one targets. Firstly, as the semiconductor tester market expanded, we steadily increased our market share in the semiconductor tester business and achieved sales growth in excess of market growth. Shares in the tester market may fluctuate considerably on a calendar year basis depending on the investment of major semiconductor manufacturers, but we were nevertheless able to increase our share by meaningful 14 points on average in 3 years of MPT-one. For the past 3 years, SoC testers have been buoyed by active growth in test demand for various semiconductors in regions, mainly related to 4 gs and 5 gs smartphones. Against this backdrop, we were able to greatly expand our market share by expanding our customer base and enriching our range of solutions to meet diverse needs. And the memory sector, we were able to maintain the high market share that we had held for many years by leveraging our broad customer base and the diversity of our solutions. The second factor that contributed to achieving our MTP-one targets is our efforts to expand our business domains. In line with our grand design vision, we have made 2 acquisitions and 1 capital and business events over the past 3 years. Among these, the 2 SLT businesses we acquired contributed significantly to Advantis results, thanks to the growing demand for higher performance semiconductors. Under NPT-one, we set a target of $100,000,000,000 for strategic investments. We only spent about half of this amount, but the benefits exceeded our expectations. Additionally, we utilized EMS manufacturing to respond to higher production requirements resulting from demand expansion and thus did not need to make large CapEx outlays. As a result, our cash on hand increased. Please turn to Page 8. I would also like to touch on how we have stepped up our non financial initiatives over the last 3 years. To achieve our grand design, we have broadly revised the Advantist way, which Aidsar business activities to focus on fostering a corporate culture and human resources development for global operations and have endeavored to create an organization that helps our employees worldwide work toward the same goals. In terms of ESG, we have increased the gender and national diversity of our Board of Directors, increase the national diversity of our executive officers and undertaken initiatives such as supporting the TCFD, to pitting in the global compact and reforming our work styles. As of 2019, we began issuing an integrated report to enhance our information disclosure. These efforts helped us to maintain the quality of our business globally by keeping up with the rapid expansion of product demand and enhancing our support capacity even amidst the drastic changes in our environment brought about by the response to COVID-nineteen. We believe that they thus supported the achievement of our MPT1 targets. I'll now move on to our external environment. Please turn to Page 10. 3 years ago when formulating our grand design, we examined socioeconomic mega trends and their potential impact on our business and considered mid to long term strategies based on them. Since then, these megatrends have developed more or less as expected overall. But major unexpected such as sharpening friction between the United States and China and the impact of the global COVID-nineteen response have also occurred, causing uncertainty to increase and risks to diversify. We have also seen movements such as the reaction against globalism and the push for stakeholder capitalism, which call for a reexamination of values previously thought to be unquestionable. As I discussed on the previous page, the digital revolution is expected to progress further in the next 10 years in terms of technology and business and consequently semiconductors will have larger and more diverse roles to play regarding social conditions. It is expected that changes in society, the structure of industry and individual lifestyles will accelerate. Geopolitical risks and other uncertainties will increase. How we put ESG into practice will also become more important. Based on these predictions, we believe it is necessary to work on responsiveness to risks and opportunities as well as on enhancing our ESG initiatives, while adhering to our existing growth strategy within the framework of our grand design. Our corporate purpose and mission is to enable leading edge technologies. We have continued our business in keeping with this mission of refining advanced technologies and attributing to the development of our customers and society in general for the past 30 years. Far from being dated this mission which is central to Advantus identity will only become more and more important in the future our purpose and mission underpin our resolve to contribute to the development of the semiconductor industry and the sustainable development of society through our business activities and to meet the expectations of all our stakeholders. Our Grand Design Vision statement remains unchanged. In order to continue adding value for our customers and the evolving semiconductor value chain, we will continue to seek to expand our business domains including through M and A activity. Our Grand Design also sets out what we want to be and what we should do. We will adhere to our commitments and strategies in keeping with our external environment forecasts, but in order to respond to the growing mindfulness of ESG worldwide, we will also further enhance ESG initiatives such as our response to climate change. This has been added as a 5th strategy of our grand design line to underline the importance of contributing to humanity's sustainable future through our business activities. Please into page 14. I'll now discuss business our business environment as background to our sales target. Due to the recent shortage of semiconductors many have come to understand that semiconductors are indispensable for improving presses into M, meaning machine to machine data traffic will increase significantly and the semiconductor market will grow further over the medium to long term as technological evolution further improves the performance of individual semiconductors. At the same time, g efficiency of semiconductors will be improved in response to social demands for smaller environmental footprints. It can be said that contributing to semiconductor innovation contributes not only to the semiconductor market, but also to the creation of a better world. How will the role of semiconductor testers change as the semiconductor market continues to grow? As semiconductors increasingly take on the role of social infrastructure, semiconductor production volumes will continue to increase. The technological evolution of semiconductors happening in parallel will generate increasing complexity that drives needs for testing and stronger quality assurance. These two factors will multiply the demand for semi conductor testing. In addition, customers seeking stable volume production of high performance mean conductors are finding time to market and time to quality even more important. As the difficulty of designing and manufacturing semiconductors increases at an accelerating rate, the progress of actually passing electricity through devices to verify and correct their performance and reliability on the spot in other words, the role of the tester is becoming more and more important. I'll now summarize the trends I just mentioned in the context of the tester market. In the past, the demand for semiconductor testers has been fluence by trends in the market for final products such as PCs. In the years when semiconductor production and technology progressed, demand and grew and in other years efficiency would improve and tester demand would fall. This was a cyclical market. However since 2017 when the spread of applications using semiconductors, the shift to semiconductors as and grows. In the future, semiconductors will be increasingly required by society and the development of further infrastructure will drive the market. In addition the technological evolution of semiconductors will continue in the future. Demand will continue to rise and fall due to improvements and test efficiency, etcetera, but due to the increasing difficulty of technology, this impact is likely to be smaller than in the past. Overall, the semiconductor tester market is expected to grow more stably in the future. This slide shows how semiconductors are to evolve and how this will lead to opportunities for Advantest. Firstly, semiconductors are becoming more highly integrated. In addition to node shrinks, there will be an increasing number of cases where circuit integration will be increased by using advanced packages and heterogeneous integration. This adds to the complexity of semiconductors. As a result we expect an increase in demand for testers in conjunction with the addition of new test processes the ability to accurately measure electricity is essential for improving energy efficiency and speeding updated transmission. Existing test equipment will be replaced or upgraded for new tests. The 3rd item introduction of integrated systems controlling semiconductor performance and quality is a new concept. We have built a cloud environment for this called Advantis Cloud Solutions. In addition to capturing system level test demand, we will introduce quality control across the fragmented manufacturing process of semiconductors to see if it will be possible to shorten time to market. We will continue to work on the development of innovative solutions combining hardware and software while exploring solutions with our customers. As I have noted, the semiconductor market which is the source of our growth is expected to grow sustainably. In addition, as the role of semiconductor testing is set to expand. We expect this favorable environment will continue for the time being. These expectations are factored into our 2nd 3 year midterm management plan, which covers the fiscal years 2021 through 2023. We're referring to this as MTP2 for short. We formulated this in order to further secure our path toward achieving our grand design goals and this plan starts this year. Under MPT2, we target average sales of JPY 350,000,000,000 to JPY 380,000,000,000 over the 3 years of the plan. Regarding market share, we have already exceeded our long term target of 47%. So we aim for 50% or more in the future. Regarding our grand design goals, we had targeted sales of 300,000,000,000 under MTP-1s conservative scenario, but we already achieved that in fiscal 2020. So we now intend to reach for the 400,000,000,000 yen in sales under our base plan in fiscal 2027 or earlier. I'll now move on to an explanation of MPT2. I'll first provide an outline of MTP2. MTP2 aims for a further leap toward achieving the final goal of our grand design. Following the success of our previous midterm management plan, we will work to expand our core business and grow businesses in new areas. To that end, we aim to maintain aggressive growth investments and at the same time to seek further capital efficiency. We will also enhance our ESG initiatives seeking to improve corporate value and strengthen our foundation for sustainable growth. We will promote 5 strategies to achieve the goals of MTP2. Numbers 1 through 4 are inherited from our previous midterm management plan, but number 5 is a new strategy. During the period of the previous midterm management plan, major unexpected changes such as the U. S. China trade conflict act and the COVID-nineteen pandemic occurred. We must heighten our ability to respond to such changes in the future. Great changes in society and in the structure of industry are both risks and opportunities. We will therefore hone our ability to keep up with future changes in the environment and respond to uncertainties while also further enhancing our ESG initiatives. Senior ESG initiatives. Our semiconductor tester business as a whole has as three strengths that I will touch on now. We will further reinforce all of them. Product portfolio currently positions us to capture demand in all directions. We will continue to provide solutions in keeping with the evolution of semiconductors and further strengthen our position. Regarding our customer base, we will accelerate the acquisition of emerging players, including major IT companies that have entered the growing semiconductor market in recent years and promising fabless companies with the aim of solidifying our mid to long term growth base. With our large customer base of semiconductor manufacturing companies including IDMs, fabless companies, foundries and OSATs. We are unique in the SPE industry. We will develop new solutions that leverage this customer base. Our comprehensive consulting ability rooted in our testing expertise is also a strong advantage we will enhance our local resources so that we can provide even better high quality consulting near our customers. This is the medium term model of the tester market that is the premise for MTP2. It is based on future growth forecast for SOC testers and memory testers. Compared to the 3 year average for our previous midterm management plan, the market is expected to grow by to mentally 20% to 25% over the next 3 years. Tester investments unlike fab capital investment plans are made on short time horizons of a few months tracking real demand from our clients and their application trends. We created this forecast based on our current application and technology trends and information from our customers, but in the long term demand for testers will trend similarly to demand for front end equipment. If that trend develops in the medium term, numbers closer to the aggressive numbers of current front end equipment companies could come within reach in the future. With regard to market share, we will aim for a level that is one step higher than the market share achieved during our previous midterm management plan period as higher performance semiconductors will go mainstream over the next 3 years. I'll now discuss our measures for each business segment. And SoC testers, we believe that further node shrinks and the widespread adoption of advanced packages and 5 gs millimeter wave devices will create great opportunities for us. Apart from advanced processes, the SOC tester market has a number of other growth paths. As the best partner of our customers who lead the world in innovation, we will develop test solutions cooperatively with them. And memory testers, we plan to continue to claim a majority share of the market by leveraging our position as the only tester vendor that can provide solutions for all players in all testing processes. And our mechatronics related business, we will promote sales of test cells. The nanotechnology division will focus on mask inspection equipment and also explore other applications for our EB technology. G. The SLT division, which has driven remarkable growth in our services support and other business segment over the past 2 years, we'll continue to pursue business expansion through new customer wins. To grow recurring sales, as we will also grow sales of consumables such as contactors to seek synergies with growth of unit sales. In the field of analytics, we will develop innovative solutions based on our Advantis Cloud solutions integrate hardware and software while holding discussions with our customers. These are the numerical management metrics for MTP2. Sales, depending on the tester market conditions, we are looking for 3.50 for operating profit margin 23% to 25%. For net income 62,000,000,000 yen to 70 €1,000,000,000 ROE of 20% or greater, earnings per share of 320 to 370 yen. Operating profit margin will not increase significantly due to the fact that development costs and costs associated with adding to our local support personnel will continue to be incurred as we expand our business and we do not anticipate one time profits such as were posted during the period of MTP1. We will maintain our improved profit margins and seek to expand them albeit not significantly. Net income growth during the period is expected to be impacted to an extent by the fact that we new and we have incorporated some shareholder returns through share repurchases into our EPS estimate. As demand for semiconductor testers is expected to grow in the future, we will maintain our high level of R and D investment, and which is the source of our growth during MTP2. In addition, as mentioned earlier, with promising new players expected to emerge in new players expected to emerge in the semiconductor manufacturing field. We plan to aggressively invest in courting those promising emerging customers to further solidify our business foundation. We will need to add excellent human resources to reinforce our support capabilities, which are one of Advantis strengths. It is difficult to improve SG and A efficiency during a customer development phase such as this, but we hope to improve operational efficiency and thus raise overall profitability. Regarding growth investments other than R and D spending, we plan to use 100,000,000,000 for M and A and other purposes and 40,000,000,000 for capital expenditure. In terms of selecting M and A opportunities, we will continue to search for deals that can generate synergies, is especially in the domains of our grand design vision regarding shareholder return on the premise of a stable business environment during the MTP2 period, we will change our turn policy from the performance linked semi annual dividend payout ratio of 30% to a minimum amount of 50 yen per share semi annually and 100 yen per share annually with the goal of ensuring stable and continuous dividends. Our target is a total annual return ratio of 50% or more, including share buybacks. Cumulative shareholder returns for the MTP 2 period are expected to be 1 150,000,000,000 yen or greater. However, this shareholder return policy may be revised in the investment growth opportunities that require more funds than expected and or the deterioration of business performance due to changes in our market environment. Our balance sheet management goal under MTP2 is to allocate the cash flow we generate to investments and returns while maintaining financial soundness. We will use a shareholders equity ratio of 50% or more as a measure of financial soundness. Our capital efficiency metric is ROE of 20% or higher both of these will be KPIs. Regarding cash management, the minimum amount of cash we expect to hold under normal business conditions during the MTP P2 period will be around 80,000,000,000 yen. We expect our cumulative operating cash flow for the period to be more than 220,000,000,000 which with the addition of surplus cash on hand as shown in the graph on the right would give us 290,000,000,000 yen available for future growth investments returns. We will aggressively search for growth investment opportunities. However, we will balance this policy with the return of profits to shareholders. We will also consider using debt depending on our cash position. Also as I noted on the previous page, I would ask you to understand and that the scale of shareholder returns may be reduced in certain cases depending on our business environment. Lastly, I'll touch on our definition of corporate value and our ESG philosophy. We will contribute to humanity sustainable future through our business activities. First of all, as shown in the graph, we aim to improve corporate value by pursuing the 3 axis of shareholder value, stakeholder value in ESG value in a well balanced manner, we believe we can grow future profits while expanding the matrix that can institute our corporate value. We believe that further enhancement of our ESG initiatives will synergistically promote the growth of the other two axis and thus of our overall corporate value. G, governance is the first essential component of ESG enhancement with major social change underway, we will continue to consider what a company should be and seek to implement management and operational systems that boost our earnings power. With this aim, we will promote a management system in line with global business trends, our executive compensation system, establish and implement succession plans, strengthen our governance system areas such as operations and aim to implement governance that balances the interest of all stakeholders not just shareholders S. In terms of society, we will promote values such as respect for human rights including throughout our supply chain and step up our policies on the development and fostering of our human resources which are the source of our growth. Regarding climate change initiatives, we have reestablished the goals of scope 1 plus 2 for our in house initiatives and scope 3 for our value chain initiatives to further contributions to a net zero carbon future. In addition to our support for the TCFD and RE100, we are also currently preparing for SBT certification. The urgent need to respond to climate change is felt both in society at large and in the semiconductor industry where we do business. We will actively promote our efforts in this respect. We have been working to disclose our ESG and other non financial information through initiatives such as our triennial environmental action plan, which is now in its 8th machine in 2019. As a result of these ongoing efforts, we have received numerous ESGs related awards globally, including the corporate governance of year 2020 winner company award in January of this year and the great place to work award in Germany. In addition, external ESG evaluators have recognized us such as Sustainalytics listing us among top rated companies since there is still much room for improvement in the world overall social trends and demands will go on changing. We will continue to respond to changes during the MTP-two period further enhance our ESG initiatives and improve our external evaluations. I will close by summarizing today's highlights. Under our previous midterm management plan, we achieved all our financial targets by expanding our share of the expanding semiconductor tester market and growing our business through M and A. The digital transformation is increasing the importance of semiconductors. Their market is thing and they are gaining in performance, complexity and reliability. As such, we believe that the our business environment will remain positive for the time being under our new midterm management plan as steps were the final goal of sales of 400,000,000,000 yen set forth in our grand design, we will pursue 2 axis. Revenue and profit growth through expansion of existing businesses utilizing our strengths and the development of new businesses, which is a mid to long term theme. The new mid term management plan also calls for continued active investment to achieve our grand design goals while improving capital efficiency and reinforcing shareholder turns. On the other hand, during the previous midterm management plan, unprecedented risks such as the US China trade conflict then the COVID-nineteen pandemic emerged uncertainty is increasing we aim to improve further our ability to adapt to future changes in our environment and respond to risks and opportunities. We will enhance our ESG initiatives. This concludes my presentation of our new midterm management plan. Thank you for your attention. We will proceed then with the Q and A session. Mr. Yoshida from CLSA securities. You have the floor. Thank you very much for your presentation. This is Yoshida from CLSA Securities. Questions regarding the tester market. I believe that in the current fiscal year, you're anticipating reaching the average 3 years levels that you assume under MTP2. But you also mentioned that you might be able to see growth similar to that for front end equipment. If in that case you were to see growth of around 30% in the market over the next 2 years, This is Yoshida. We are at present looking for quite a high growth rate from front end equipment. But at the same time, the lead time for front end equipment can be 1 year or even more in some cases. And so there is actually a lag until that contributes to production. So what I'm saying is that the demand for front end equipment and testers does not happen at the same time. For example, over the past 3 years, the testers saw more growth in the end equipment, we believe. At present, the production capacity for semiconductors is insufficient and so everyone has major CapEx plans, but that will not come online and produce new wafers that come around for testing for some time. And so therefore, this JPY 350,000,000,000 to JPY 380,000,000,000 that we're talking about, in terms of JPY 350,000,000,000 We believe that we can reach that number in the fiscal 2021. However, in the case of 3.80,000,000,000 yen that's the average that we're talking about. So if we reached $350,000,000,000 in fiscal 2021 and then we were to suddenly reach $380,000,000,000 in fiscal 2022. And then in 2023, is it, if we were to reach 400 €1,000,000,000, we would not find that odd. In that case, it means that the average would be close to JPY 380,000,000,000 over 3 years for our sales. That means that we do see that possibility. But if you look just at the 380,000,000,000 and say that we're being quite reserved, we're conservative about our growth outlook. I don't believe that you I can't say it's not conservative, but we don't think that this plan is just completely conservative by any means. Thank you. And if we were to reach 400,000,000,000 yen then of course ROE and EPS would naturally be higher as well. But in terms of the growth rate average growth rate for the 3 years. We do believe it will come within the range that we have shared with you. Do you follow me? Yes I see and then my second question concerns system level tests and your new midterm plan, you said that for your new businesses including SLT that you expect between JPY 35,000,000,000 and JPY 40,000,000,000 in sales. If we think about the fact that Astronics had generated about €30,000,000,000 in orders in the 1st years after the merger and that SA generated around €12,000,000,000 in sales. Then this seems a bit lackluster. But could you tell us what you are thinking in terms of updates on the outlook for the business environment and orders for SLT. I don't think That the number you just gave for Astronics is right, but it is true that we acquired SA last year and that it has generated numbers in excess of $10,000,000,000 for us in 1 year. Astronics also is now at above a 10,000,000,000 yen And both of these acquisitions were of businesses that had somewhat limited customer bases. And by leveraging our customer base and giving them access to more customers, we do believe that we will see faster growth from them going forward. And We don't make a clear distinction between services and others, so I can't give you a precise number, but these are definitely businesses from which we expect further growth. When you had just emerged, I think that you were saying that you saw the possibility of potential growth of 20% to 30%. But right now, what do you expect the potential growth rate to be? The potential growth rate, give me a moment, please. Actually, I'm going to have Mr. Mihashi respond to you on that. This is Mihashi from Corporate Planning. In terms of the growth potential, we had previously said 20%, and we believe that there's an ample possibility of us achieving that. However, at the same time, because we have to address of the needs of individual customers, our progress is somewhat slower than what we had initially anticipated. I see. However, if I were to add just one point, it would be that we do have high expectations for growth over the next 3 years. I see. Thank you. Thank you. Then we will move on to the next question. We would like to proceed to the next participant's questions then. Mr. Nakamura from Goldman Sachs, if you please. Thank you. Thank you. I have two questions. The first concerns Slide 16. As regards the tester market For 2021 onward, you are saying that compared to the previous cycle, you are expecting to see less cyclicality. Could you specify, please, what sorts of changes it is that you're seeing compared to the previous goal that is driving this reduction in cyclicality? And as regards to our earnings outlook, you made reference to subscription models or to the leveraging of data. How might those help reduce the volatility of your earnings? We do not believe cyclicality will be as pronounced in the past. And when I say the past, if you think back 20 years or so, we saw the dotcom bubble and the great recession. And in each instance, there were major shock waves. And in between those, there were also smaller shock waves driven by changes in growth of the end products such as PCs, digital cameras and feature phones. And that's resulted in fluctuations in the production of semiconductors. Against that backdrop, our tester sales repeatedly went up and down. But since 2017 the ups and downs for other SPE and the reason for that is because there has been a broadening in the range applications for semiconductors. For example, we are no longer solely reliant on the likes of PCs or cell phones. And for example with 5 gs taking off, we are going to see semiconductors become facets of our daily life in a wider variety of ways as such as for games. And while their use in cars might be limited at the moment, that is going to be increasing. And also the increase in data volume means that a greater performance is demanded of the semiconductors used in data centers or for storage. And those demands are increasing. And so for that, we are no incur at the mercy of the demand for a single type of product and Instead, we're seeing demand from a variety of different industries that makes for greater stability. And so in 2020 one and beyond. We won't say that we're not going to see any waves such as the sort we saw in the past, but we do believe that we're going to DLS cyclicality. And it's the stability that we've seen over the past 3 years that makes us so confident. That's how stable our business environment has been and the generation of our cash flow has been. And so in fiscal 2021 as well. We're looking forward to a good year and believe that we are continuing to see a stable environment. What was the second question? It regarded subscription businesses. As regards subscription models, we have the Advantis Cloud solutions, which will be a foundational service for us. That's what I was discussing. But frankly, I have to say that it's going to take a little bit more time for us to be able to generate earnings from that. And I am not LTC money keep coming in. Our customers are among the top innovators in the world And so we will be working with them because we need to think together with them about what kind of a solution and that we can provide that will assist with manufacturing semiconductors, raising yields and shortening time to quality and time to volume. And in that sense, I think that the best fit for us is the combination of software and our testers. So a fusion between software and hardware. That's the sort of solution that I think would be the best fit for us. And that will require quite a bit of investments. And frankly, I think that over the next year or so, we are cement. And frankly, I think that over the next year or so, we are going to be investing more than we earn. And I believe that it will be another 18 or 24 months before we're able to My second question concerns the multiple references that you made to a mini millimeter wave device testing. When do you think that that's a market is going to get off the ground in a meaningful way and also what do you expect the size of the millimeter wave device testing market will be? We are working even as we speak on developing millimeter wave testing technologies with our customers and we believe that it will be as of the latter half of twenty twenty two when those are needed in a meaningful way to support mass production. This year, we will be validating a variety of different technologies. And it will be as of the latter half of the next year that a variety of products by which I mean devices will be launched and those are going to go into mass production in the latter half of twenty twenty two or in 2023 roughly. And even Just with RF models, I believe that we can expect an annual market of 20,000,000,000 yen or $200,000,000 to $300,000,000 in terms of demand. I see. Thank you. Duradaki of Nomura. He says, page 15 illustrates that you are of the same mind and as me. So I would like to ask for a comment on the memory wall. It is the transfer of data between the memory and the CPU view that is keeping semiconductors from consuming less power and gaining more performance. Is anything being done about that on the semiconductor side that has attracted your attention and that you believe will have fits for you in terms of your testers? That's his question. Our answer is that we agree. It is true that the transfer of data between the memory and the CPU is an issue at the moment and with data volumes increasing, it is a true that power is not being used efficiently in terms of assessing data and in response, the industry has been proposing applications that to grade the CPU and the memory such as via the processing and memory concept. It has also been working to bolster the processing power of the CPU itself, as well as that of the memory side. In graphics applications For example, we expect to see adoption of high speed transfer technologies that incorporate PAM4 into GDDR6, for example. And when there are advancements in semiconductor technologies Gs such as that. Just as we have described under our midterm plan, we believe that that accelerates initiatives for semiconductor testers as well. So we will benefit in that sense, we believe. His second question North America. And that since the foundries are being attracted because of security considerations, he believes that the priority will also be given to U. S. Made testers and what do we think of that risk? Well, I do believe that we're going to see a lot going on in terms of national economic security going forward. But even if America is to reshore manufacturing, the bit that you're asking about the priority being given to American made production equipment. Is that Mr. Wadaki's own personal opinion? Well, this is a question for Mr. Wadaki. He's asking what we think of the risk. Well, we can't rule that out as a risk. And if that were to happen, then it will, of course, be important in terms of what kind of response that we take. But if American companies or the American fabless players are producing just with American technology. If that's the question, then that's not the case. They are using materials and equipment from Asia and also continuing to produce in Asia as well. Their divide with China might widen further, but I don't believe that that means they're not going to work with other regions going forward. And moreover, I don't think that the American companies that produce SPE or semiconductors are going to completely discard Chinese market. I do believe that that is another way to look at it. And I believe that there is nothing else that we can do except for engage in solid gathering and analysis regarding what is going on politically and internationally and then to respond to that. And so we need to enhance our capability to adapt. And of course, there is no guarantee that nothing will happen that might have an impact on our midterm plan. So please assume that we have formulated this plan based on that understanding. And I give the floor to Mr. Hirakawa from BofA Securities. Can you hear me? Yes, we hear you. Thank you. Can you hear me? Yes. Thank you. I have two questions. This is Hirakawa BofA. Thank you. My first question concerns your announcement on capital allocation, which was very parent. I'm actually surprised, but I would like to ask about that. You are targeting a total return ratio of 50%, which is higher than before. But you're saying that shareholder return will be 150,000,000,000 no more over 3 years. And meanwhile saying that the upper range of net income that you're targeting average is $70,000,000,000 and $70,000,000,000 times 3 is 210,000,000,000 so if the shareholders are going to be receiving $150,000,000,000 from $210,000,000,000 that means that the total return will be quite a bit above 50%. Is there any way that 50% is your dividend payout ratio and that we can expect you to make up the difference in other ways? That's the first question. We are saying that the total return ratio will 50% or more. So there's no upper limit. But we have not said anywhere that our dividend payout ratio will be 50%. In other words, as regards the dividend, we will have JPY 100 as our base and we will not be lowering it below that. We hope that we will be able to gradually raise it from there. And so in the case of this 50% and what we would do if there was any GAAP. We do naturally believe that we will have profits beyond that. So there's the possibility that those could go to share repurchases. And this 150,000,000,000 yen would not be funded solely by net income, but also from leftover budget from the past 3 years. We had said that we were going to spend €100,000,000,000 on M and A, but we only used a €50,000,000,000 So we have a surplus cash. And so it means we're thinking of a shareholder return inclusive of that cash over the next three And so it means that there is, as you suggest, a possibility that our total shareholder return goes well beyond 50%. I see. View? Then my second question, and at the risk of belaboring the point, there is a President of SPE back end peer of yours, who is saying that the cyclicality, including at OSAT is somewhat reflective of the desires of humans in the sense that when times are good, they find themselves investing. And so he doesn't think that the cyclicality is going to go away. And I understand what you were saying about the increased number of applications, meaning that there is not going to be cyclicality anymore. And also that over the past 3 years that there has been less cyclicality. But at the same time, there are concerns in the capital markets that there is going to be a slight correction in Chinese smartphones. So I would like to ask you, Mr. Yoshida, what your thinking on cyclicality is. Thank you. If you understood us To say that we think there's going to be no more cyclicality, then I apologize. We're not saying that there's going to be no more cyclicality, but only that the market is going to be less cyclical. There are definitely still going to be ups and downs. And if there is a major investment, then you will see pauses or sometimes prolonged pauses juggling, we believe. And when things are going this well, then of course, we have to prepare for them dropping off at some point. And all of the analysts are carrying on about a potential peak. And we don't think that SPE will grow and never peak because that's not possible. If There are good times, then you always see pauses or even sometimes slight retreats are possible. And over these 3 years, we don't think that we are going to consistently grow up into the right. But at present, it is true that conditions are very strong. And if, the economy were to grow more robust in the wake of the pandemic, given that everyone right now is saying that supplies are still short, then we think that conductor production could strengthen further. But then the question is what happens after that once the economy calms or with everyone having increased their capacity to supply semiconductors for cars, We have to be mindful of what's going to happen after that. Does that answer your question? Thank you for the very detailed answer. Yes. Is that fine? Thank you then. Thank you. Thank you. We had received other questions, but we've reached the end of our scheduled time. So I would like to close out the Q and A session here. And additionally to close out the briefing that Adventis has hosted today on its new midterm management plan. We thank you for taking time out of your busy days to join us. Thank you.