Earnings Call: Q4 2021

Apr 30, 2021

Thank you very much for joining us today despite your busy schedule. I am Yatsuda of IR Department acting as a moderator in today's session. Now let me introduce the attendees on our side. Mr. Tetsu Tsuneishi, Corporate Director, Chairman of the Board. I am Tsuneishi. Next, Mr. Toshiki Kawai, Representative Director, President and CEO. I am Kawai. Next, Mr. Yoshikazu Nonokawa, Corporate Director, Executive Vice President and General Manager, Global Business Plat for Division Finance Unit. I am Nuno Kawa. Before starting the presentations, let me explain the flow of today's meeting. First of all, Mr. No no Kawa and Mr. Kawai will make presentations. After that, up until 6 6 o'clock, Japan time. We will have the question and answer session containing questions from the audience. The financial announcement uses 2 channels on WebEx, providing simultaneous interpretation between Japanese and English. As we explained in our e mail, you are currently requested to use apps on PCs and mobile terminals if you plan to ask questions. But if you are not going to ask questions, you can use telephones. Since this is a meeting for institutional investors and analysts, we would appreciate your understanding that we receive questions only from institutional investors and analysts as usual. Is an analyst as usual. We will upload the OEO contents of this meeting both in Japanese and English later. We would be happy if you also refer to them. Now Mr. Nonokawa, Corporate Director, Executive Vice President and General Manager, will present the consolidated financial summary. Mr. Nonoka, please. I am the Nonokawa Finance Unit. I would like to present the consolidated financial summary of the fiscal year ending in March 2021. This slide shows the financial highlights for fiscal year ending in March 2021, driven by the growing demand for SBE and FPD. Net sales increased by 24% on a year on year basis. Gross profit was 560 4,900,000,000 yen and operating income was 320,600,000,000 yen both of which, together with net sales, set new records. ROE was 26.5%, showing considerable rise from the previous fiscal year. This shows financial summary. As I said before, driven by SBE and FPD market growth and also smooth progress of equipment startup operations despite cross border travel restrictions due to the COVID-nineteen spread. Our net sales was 1,399,100,000,000,000,000, 24.1 percent increase on year on year basis, which was 39,100,000,000 more than the financial estimates that we announced on January 28, 2021. By segment, SP net sales was 1,315,200,000,000, 24.0 percent increase on on year on year basis. And FPD net sales was 83,700,000,000 yen 26.8 percent increase. In both segment, Net sales exceeded our focus. Gross profit margin was 40.4%. Operating margin was 22.9 percent increased by 1.9 percentage point on the year on year basis because of the drop of SG and A sales ratio. Earnings per share was 1,562,200,000 hitting record high due to the share repurchase we conducted in fiscal year ending in March 2020. This slide shows quarterly based financial summary. Net sales in the 4th quarter was 439,200,000,000 yen 50.6 percent increase from the Q3, setting a record as quarterly based net sales. For SBE segment, net sales was 415,400,000,000 yen 57.2 percent increase from the 3rd quarter, JIA, setting a new record as quarterly net sales. For FED segment, net sales was 23,700,000,000 yen declining by 13.3% from the 3rd quarter. Gross profit margin was 40.6%, declining from the 3rd quarter due to the inventory reduction. Operating margin was 25.1 percent, rising by 3.5 percentage point from the 3rd quarter because of drop of SG G and A sales ratio along with significant increase of our net sales. Next, this slide shows the segment information. For SBE, sales was 1,315,200,000,000. Segment income was 300 and 62,500,000,000 yen and segment profit margin was 27.6%. For FPG, sales was 80 3,700,000,000 yen segment income was 8,800,000,000 yen and segment profit margin was 10.5%. While FPD sales increased, Profit margin declined on the year on year basis. This is attributed to increase of fixed cost to sales ratio due to adjustment of our plant utilization to adapt to the market slowdown. Composition of net sales remained unchanged from the previous fiscal year, 94% for SBE and 6% for FPG. This shows SP division new equipment sales by application. In calendar year 2020, for memory segments, Our sales to DRAM and nonvata memory customers grew significantly from 2019, thanks to their proactive investment to enhance their capacity for leading edge technology nodes, which are our focus areas. 4, LogicFoundry as well. We maintained high level of sales last year as our customers kept investing not only in leading edge Device nodes, but also in the wide range nodes from 14 nanometer to matured technology nodes. This slide shows new equipment sales, just like the previous page, by product in this case. As I said in the previous slide, since our sales to memory, particularly to nonvolatile memory device manufacturers produced significantly in fiscal 2021. Proportion of etching and felt deposition systems increased as they are used a lot for 3 d NAND multilayer stacking. Next, this slide shows fuel solution sales. In fiscal 2021, the fuel solution sales was 362,300,000,000 yen 19 sent year on year increase, driven by growing installed base and high Utilization rate of customers' fabs. Parts and service sales showed the significant growth. Next, this shows has balance sheet. For assets, total assets were 1,425,300,000,000. Cash and cash equivalents were 311,500,000,000. Accounts receivables were 191,700,000,000 yen and inventories were 415,300,000,000 yen Compared with the 3rd quarter, inventories declined, but all the others showed an increase. Liabilities were 400,800,000,000 yen Net assets were 1,024,000,000,024 0.5000000000. Equity ratio was 71.1%. This slide shows inventory turnover and accounts receivable turnover. The inventory turnover was 108 days. The accounts receivable turnover was 50 days as accounts receivables increased from the 3rd quarter. Finally, this shows cash flow. In the Q4, cash flow from operating activities was 58,600,000,000 yen Free cash flow was 39,400,000,000 yen This concludes my presentation about the consolidated financial summary. Now Mr. Kawai will present Business, Environment and Financial Estimates. Mr. Kawai, please? Good afternoon, everybody. I am Kawaii. Now I'd like to talk about business environment and financial estimates. Let me start with Fiscal 2021 Business Highlights Full Year Business Highlights. The financial results exceeded our forecasts. Both net sales and operating income hit record highs. Despite cross border travel restriction due to COVID-nineteen pandemic, through effective collaboration between our overseas subsidiaries and our plant, we were able to properly address the demand growth and accomplish equipment start up operations, which constitute the basis is for a record high sales. For SBE, We released Celesta SGD cleaning system with supercritical dry technology mounted and EPISODE UL, a new platform for etching system. Also for FPD, we launched an etching system equipped with PICP Pro, a new chamber for high resolution processes. For both SBE and FPD, these high Value added new products have started to contribute to our sales. For Field Solutions, due to high utilization rate of customers fast, Demand for parts and services was strong, which drove our net sales increase on the year on year basis. Next, I will talk about business progress toward a longer term growth. Our R and D investment hit record high in fiscal 2021 to promote creation of high value added next generation product, which our customers will need in the future. In Tohoku plant and Yamanashi plant, the new production building started their operations, which ensures our production capacity ready for the further for demand growth. In addition, we moved existing sub photo office to a new placed to reopen it as Tel Digital Design Square to promote digital transformation, which enables us to provides high value added production service and enhance our productivity. For our environmental initiatives, we revised midterm environmental goals for 2,030 to make them more challenging. Next, I'd like to present our business environment. For WFE market in calendar year 2021. At the time of the 3rd financial announcement, we expected about 20% year on year growth. However, due to the strong logicfoundry investment as well as now accelerating memory investment, We currently expect that WFE market will grow by about 30% on the year on year basis. For the FPD fabrication equipment, TFT array process market, there have been no changes in outlook over the past 3 months. This slide shows the WFE market outlook by application. For logicfoundry, investment is expected to increase by about 30% on year on year basis due to further proactive investment driven by expansion of applications triggered by ICT spread and promotion. For DRAM, along with growing demand for 5 gs mobiles, PCs and data centers, DRAM is in short supply. To address this situation, high level of investment is expected in calendar year 2021, which is about 45% increase on the year on year basis. For non bratai memory, investment is expected to increase by about 15% on a year on year basis since the customers continued steady investment to prepare for midterm and long term big demand growth. Next, I will present the financial estimates for fiscal year ending in March 2022. In fiscal 2022, net sales will be 1,700,000,000,000. Gross profit will be 739,000,000,000 yen Operating income will be 440 2,000,000,000 yen and net income will be 330,000,000,000 yen expected to set new records. The full year profit margins are also expected to hit record high, specifically 43.5 percent for gross profit margin and 26.0 percent for operating margin. As new sales recognition standards will be applied from fiscal 2022, this slide does not state comparison with fiscal year ending in March 2021. This slide shows the SB new equipment sales forecast in fiscal 2022. As you can see here, sales will be 625,000,000,000 in the first half and 6 JPY 335,000,000,000 in the second half of the year. Both of them are expected to be by far more than the sales of First half of fiscal 2019, JPY 504,300,000,000 which set the record at that time as half year sales. Therefore, full year SPE new equipment sales is expected to be 1,260,000,000,000, 31% year on year growth. Meanwhile, new equipment sales on the calendar year basis will increase by more than 40% on the year on year basis, outperforming the WFE market growth rate. Next, both R and D expenses and CapEx are expected to hit record high in fiscal 2022. We plan to spent 100 and 60,000,000,000 yen for R and D and 64,000,000,000 yen for capital investment and depreciation expenses of 43,000,000,000 yen are expected. Where we accelerate proactive R and D and capital investment to cope with growing market and diversifying needs for find news for leading edge technologies. As we already announced in the press release, We plan to build a new development building in Mirasaki City in Yamanashi Prefecture. We are determined to further enhance our technology development capability to support next generation semiconductor manufacturing processes. This slide shows the dividend forecast. Based on the fiscal 'twenty two financial estimates and payout ratio of 50%. We plan to pay dividend per share of 10.61 on full year basis, which will cross the 1,000 yen mark for the first time, setting a new record. Finally, I will present the midterm management plan. As you can see here, both fiscal 2021 results and fiscal 2022 estimates are well in line with our financial model in the midterm management plan. We will keep working hard to achieve those financial models. We will hold off on the midterm management plan announcement meeting this year as there is no change in the financial model, and we presented our technological strategy in IR Day. Thank you very much for your kind attention. This concludes my presentation. We will have Question and answer session until 6 o'clock Japan time, where we'll receive questions both in Japanese and in English, but our attendees are on the Japanese channel. Please allow us to restrict properly ask questions only in Japanese. When you ask questions in Japanese, please hit please hand the button on WebEx for details. You are currently requested to refer to the instructions attached to the e mail. I will call name on the person who ask a question 1 by 1. Please check the chat box on WebEx as our Secretariat will inform you in together with your name and affiliation to the Secretariat. We will refrain from answering the question if no name or application is given. On the Japanese channel, I will read out the question translated into Japanese, and our attendees will give an answer in Japanese. While on the English channel, it will be simultaneously translated into English on a real time basis. For questions verbally asked in Japanese, please allow us to limit one question with one follow-up question. For English questions sent in text, I'm very sorry, but we will receive one If we have extra time toward the end of the meeting, we will receive additional questions. And after asking question, in order to eliminate any noise, could please make sure to mute your microphone, please. So first question please. The first question is from Mr. Shibanoh of ST Group Security. I'm Shibanou from Citigroup Global Markets Japan. My first question is about this year's plan and financial model relationship. For this time, 1,700,000,000,000 yen that is the plan for this. And that is 2020 for the financial model just in the middle column of your financial model. So accordingly, gross margin, 43 5% and financial model, just the same as financial model. However, on the other hand, when you look at the SG and A expense, There are some gaps between the estimates and the plan. So now you think about potential growth potential. It's difficult to for us to project the reduction of this G and A expenses. How do you view this current status? Nonoka san, please. I am Nonoka. Let me answer to your question. Thank you very much for your question. The midterm management plan for 2024, we have the midterm Management Plan, Financial Model and this fiscal year's plan. So 1,700,000,000,000 yen is the expected net sales. So So compared with the financial model, the gross profit margin is just the same as the model. However, SG and A expenses slightly more than the financial model. That's what you said in your question. So as you said earlier, so SG and A expenses are not likely to decrease in the future. When you think about the future growth, we need to continue our R and D expenses. So we don't have any plan to reduce SG and A expenses. In reality, this fiscal year, the SG and A costs, more compared with the plan, actually, these SG and A expenses are more than our plan, mainly because of the R and D development, R and D expenses. R and D expenses are more than our original estimation. That's that's one of the reasons. And also IT system enhancement also requires some expenses, and that expenses is a bit higher were faster than our original plan. That is the reason why we have more SG and A expenses for 2024, not only the sales but also the expenses. Of course, we need to control expenses, but the gross profit margin should be increased furthermore, and the SG and A expenses to sales ratio should be reduced. That's how we try to achieve our financial model. This is how we plan to achieve our financial model. This is the answer to your question. Thank you very much. I have one follow-up question. As for the net sales target for this fiscal year, new equipment. So you expect a very drastic growth. And when compared with the past few years, now you have the very high level of the sales, but your capacity and supplier capacity as well and the condition of the personnel or facilities for supply chain, are there any uncertainty in the future, but or do you have the appropriate resources both in your company and supply chain? So cost Up might have we don't have there is no concern of cost up or any problems in the second half of this year. I am Kawai. Let me answer to your question. First of all, in principle, as for the privilege, There should be no problem in terms of our readiness for supply chain. Our partner companies, We have the annual production meeting. We have very close relationship and communication with the Suppliers. As for our capacity, production capacity, as you know, little by little, we are enhancing and improving logistics. In Miyagi, for example, we have the distribution building, and we added some production lines. So we have been working on the enhancement capacity steadily. And in Tohoku and Yamanashi, now we have the new buildings, and new buildings started the operation. So the capacity is 1.5x or 2x more than before. So that's the situation. So communication with supply chain and our own capacity for production, both in both aspects, There is no concern about the resource program at all. So we are planning to achieve the expected level. As you said, the financial model and our current let me just give you some additional comments About your previous question, the gross profit margin of 43.5% are likely to achieve. That is one of the great achievement of ours. That's how I view the current condition. On the other hand, In Tokyo Electron, our growth strategy, our financial model, So we have we do have the technology roadmap with customer that includes next generation products with high value added. So this is how we try to come up with Technology Roadmap. And we need to enhance our penetration so that The our products are to be adopted by customers' high volume production. That's how we can enhance the top line. So this is how we can reduce sees SG and A expenses to sales ratio. And recently, semiconductor The demand is expanding because semiconductor now constitutes the social infrastructure. So the proactive and Active Technology Innovation should be enhanced or driven by the active CapEx and R and D development. I just added some comments to your earlier Mr. Shibanu, thank you very much for your question. Next question is from Shiela Securities, Mr. Yoshida from Shiela Securities Japan. I am Yoshida of CLSA Securities. My first question. For this year, WFE market you said 20% growth was expected, and now you said 30% growth is expected in WFE market for this here. So where in which segment, by application, by region, which area shows more growth potential than 3 months ago. So 20% to 30%, so about 10% increased in our prospect for the WFE market growth. So the logicfoundry cap investment is very chief. But in addition, memory investment has been accelerated. So in all applications, the investment is getting higher than before. DRAM as for DRAM, the in the past there are some adjustments, But now for 2 years, the round CapEx or capital investment was adjusted over the past 2 years, but now there is DRAM is in short supply, so they need to add investment were pulling forward some planned investment, logic, memories. For memories as well, 3d NAND. The investment is increasing as well. So in all the areas as applications, the capital investment is increased. That's the reason why we added 10% for our prospect of the WFE market growth to 30%. Mr. Yoshida? So by region, how How do you view Zwieva market growth by region? By region, In all regions and areas, the WFE market is growing evenly. There is no can I say unevenness, so the WFE market is growing evenly throughout the regions? So maybe WFE market is about dollars 85,000,000,000 That should be the size of the W market this year. So next year and on, when you how do you the continuity of the market growth. Could you just let us know your current view for this next year WFE Market Growth. Yes. So as one research company announced the other day, the semiconductor device market, about 50% of that is driven by data center servers, for example, smartphones, PCs, automobile, tablets. So these are the drivers of about 50% of WFE market, and that also drives the technology innovation. So 2025 towards 2025, Gartner also announced the gradual increase phase by phase increase in that area. 5 gs smartphone, in year 2021, Gartner said about 560,000,000 units, the 5 gs mobile accounts for 38%. Oh, I'm sorry, smartphone. So 1,490,000,000 smartphone and 5 gs Mobile is 560,000,000 units, accounting for 38%. By year 2025, the 5 60,000,000 5 gs Mobile will increase to more than 1,300,000,000 units. So in terms of unit, the 5 gs Mobile increased by 2.5 times, and 5 gs Mobile have more higher semiconductor contents. So that's the trend toward the future. And digital in green. So those 2 are the major pillar in the market as a whole, and semiconductor importance will be further enhanced in the future. So because of that, continuously, active investment or big years will continue. That's how I view the future market. Thank you very much for your Thank you very much, Mr. Yoshida, for your question. Next question is from Mr. Wadaki of Nomura Securities. Mr. Wadaki, please. Thank you very much. That's very clear and strong message. Thank you very much for that. My first question is relevant to Mr. Yusta's question. So year 2022, how much percent growth is expected by application, for example. You don't have to be accurate, but could you just let us know your current feeling? By application for actually memory both memory and logic, actually, there is a very saw the strong demands both for memory and logic. So according to my understanding, for this year. So I wonder how much of them are pulling forward being pulled forward. When you think about that potential, It's a bit difficult for me to let you know something clear and cannot give you some quantitative focused, but maybe we can expect the same level or more than the same level as 2021 WFE market size. Thank you very much. One follow-up question. So by application, the flash memory on Page 21 of your presentation and non broadband read So 15% is the market increase. But as for your sales, actually, your sales to the Novartis memory is more than by far more 15%. So do you increase the share increase? Or are there some hidden reasons of the great increase of your sales to the Novarti memory customers. So as I said earlier, for example, CY 2020, while new equipment sales, so calendar year basis, 40% increased. So WFE market is expected to grow by 30%, but our sales outperforms that. But for this year, as Radakasa knows very well, memory investment, After the adjustments, the memory investment is now increasing. But in the case of memory, as you know, the new equipment investment accounts for the higher proportion. So in that sense, so that's the leading edge area. That growth is rather significant for this year. In the case of logic, needless to say the new capital investment, investment to the new Equipment, of course, there is such kind of investment. But in the case of logic, commodity area also increased for Logic Application. So indicate field solution business is expected to grow because of that commodity business. But memory investment, the leading edge tools are high demand, and that proportion is rather high. So As I said, 3 d NAND, the film deposition and etching are expected to grow in sales. And this is how I can answer to your question, Wataki san's question. And this is how we analyze The situation. Thank you very much. Mr. Wataki, thank you very much for your question. Next question is from Goldman Sachs. Mr. Nakamura of Goldman Sachs Japan. Thank you very much. I am Nakamura of Goldman Sachs. For New Year, the about the group's profit margin, I want you to give us some background compared with last year increased by 300 basis points. So SBE New equipment sales increases drastically. I think that is a major reason why. But over the past few years, is about 40% around 40%. That is the gross profit margin. But could you just let me know the reason why there is some difference? Thank you very much for your question. So for this year's gross profit margin for this fiscal year, for this fiscal year, 43.5%. In the past, compared with the previous years, the level of gross profit margin is increased, as you pointed out. The major reason, actually the size increase. As you pointed out in your question, SPE sales increased drastically. Because of that, The marginal profit ratio and gross profit margin increases, and we have been promoting productivity enhancement so far. That is very down to earth activity, and we can see some results of the Productivity Enhancement from this fiscal year and onward. So that's the reason why we can see some improvement in the gross profit margin for this fiscal year's plan. Thank you very much. That's very clear. Thank you very much. One follow-up question. For this fiscal year, so the sales recognition standards will be changed from this fiscal year. Because of that, sales or profits are impacted by the different by the change. So if possible, could you just give us some figures based on figures of last year's results by using the new Standard. Thank you very much for your question about the change of our sales recognition standard. For us, So the sales recognition standard is now changed, and that change, in principle, will not have any impact on the sales or profit. There are some positive and negative impacts, but basic understanding, Because of the change of the standard, we don't see any increase or decrease of the profits or net sales. That's our understanding. And When you look at the results, the comparison of this previous fiscal year, so after the end of this quarter, by using the previous standards, sales recognition standards, we have some expected level of this sales. In the past, we have been CST, see the completion of setup and test. That was the previous standards for sales Recognition, and we can show the results based on GST at the end of this quarter. Thank you very much. That was very clear. Mr. Nakamura, thank you very much for your question. Next question is from Mr. Shimamoto of KASAN Securities. Mr. Shimamoto, I'm afraid your microphone is muted. Could you unmute your microphone, please? Mr. Shimamoto, I'm afraid we cannot hear your voice. Could you repeat your question once again, please? Hello? Can you hear me? Yes. Now I can hear you. I'm sorry. I have one question for next this fiscal year. So you are earning a lot of money this year according to your plan. And the payout ratio is 50%. So once again, how you plan to use the cash? Maybe you are maintaining the policy for flexible share repurchase, but do you have any plan or policy For M and A, you know the koxai electric might be on the market for sale. So do you have any idea for the M and A? And how do you think about the use of your cash? Let me answer to your question. First of all, about the cash. How mainly, In principle, we are going to invest for our further growth. That's how we tried to use our cash. For R and D I'm sorry, M and A policy, So when it comes to M and A, we do not deny the possibility of M and A. So when we see the solid market growth and when Good profitability is confirmed, and shareholder profit and positive impact for customers are also confirmed. Then we will see the M and A as one of the options. However, not only M and A, joint evaluation, but also joint evaluation might be another option to take. So this is how we try to provide high value added products that customer will need in the future. So this is how we try to encourage is the people surrounding our company happy. If people become happy, then M and A might be one of the options to take. As I said earlier, as you mentioned earlier, we are XBO in considering the possibility of the share buyback or share repurchase. Thank you very much. I have one follow-up question from Looking your company externally from external viewpoint, you are very good, and you also outperformed WFE market. And I don't think there Any missing portion in your strategy? But from your viewpoint, Mr. Kawaii, when you look at your technology line Product Line. Are there anything that you think you need to improve in the future? If any, could you just let me know what it is. There are so many things we need to challenge and all of them, so challenges actually are opportunities for us. That's how I view the challenges. Therefore, financial model should be achieved. We need to make solid effort to achieve financial model. And next to the financial model, 2024, That is one of our target year, 2024. Needless to say, however, In my mind or I should say, in the mind of Board members, we are always thinking ahead beyond year 2024. So we need to identify these challenges. There are so many potential opportunities for growth Opportunities for potential growth. Thank you very much for your answer. Mr. Shimamoto, thank you very much for your question. Next question is from Mr. Damian Tono of Macquarie Capital Securities. We received question in text. Let me just read doubt. So SPE Field Solution growth is 19% compared this year, but this year, 9% it remains at 9%. So I wonder this prospect is rather conservative. But parts Sales. How do you view the growth potential growth of the parts sales? I am Nuno Kawa. Let me answer to your question. So for your solution business. So fiscal last year, 19% growth was achieved. And this year, we plan to achieve 9% growth for this fiscal year. You said that prospect is rather conservative. So Field Solution Business, so mainly composed of the parts and service and used equipment and modifications. Last fiscal year, Because of the high utilization rate of customer fabs, parts service sales grew significantly. For this fiscal year as well, this growth of parts and service sales expected to grow furthermore, but there was no there would be so much jump just like previous year. So for used equipment and modifications, We expect the further growth of the sales for modifications and used equipment, in particular, for used Equipment, as you know, used equipment themselves is now running showed in the market, so we are not able to expect so much drastic increase in the sales of the used equipment. So that is the reasons why we just see 9% growth for fuel solution sales for this fiscal year. So from the viewpoint of the market, let me just add some comments. So now semiconductors are running short, and there is the new investment. In the case of memory, in particular, the leading edge tools are high demand in demand in the memory. So the new equipment sales increases drastically. So that's the major proportion in this year's prospective focused Sales. Field solution, however, will show the steady growth. But more than that, the new equipment sales grow furthermore. As Nobu san said earlier, the used equipment is in short supply, so there is not so much used equipment in the market. On the other hand, upgrade or relocation or modifications are not a potential. But compared with the proportion of the new equipment sales, those solution area is not so much, so that's the reason why we came up with 9% for parts and service because of the higher utilization rate and growing installed base, deposit services sales are increasing steadily. Mr. Ton, thank you very much for your question. Next question is from Mr. Hirakawa from the BOA. Let me just read it out. Year 2022 the March 2022, SG and A is expected to increase 53,000,000,000 yen per year. R and D is expected to grow by 23,000,000,000 yen But other than, for example, IT investment, could you let us know the IT investment, for example? Thank you very much for your question. Nonokawa will answer to your question. SG and A, so as for the breakdown of SG and A, I am sorry, but I cannot shared that with you now. But in your question, you mentioned to IT investment. Last year, we invested certain amount of money for IT, but this year as well, we are planning to enhance IT investment. So that is one of the reasons of increase of the SG and A expenses for this fiscal year. And as I said earlier in my answer, R and D expenses compared with the midterm plan, R and D expenses are more than our financial model. And we are determined to continue the investment of R and D. So that's the increase in portion, again compared with the last year fiscal year. Mr. Hiragawa, thank you very much for your question. Next question is from Mr. Isino of Tokai Tokyo Research Center. Again, we received the question in text. Me just read it out. WFST market EUV lithography proportion In 2021 'twenty five, how do you view the proportion of EUV lithography in Wafi market? Your market is how much increase of your share expected from year 2021 to 2025. So WFE market first Question is about EUV lithography proportion in the WFE market. How do you view the sales related to the EUV lithography? As the about the share our share, let me just talk about that. About the Composition of EUV lithography, maybe IR will present that. Is it possible? Yes. So IR Department will answer to the first part of your question. So we expected the main scenario in the midterm management plan is WFE's market of 56,000,000,000 to 70,000,000,000. But this year, our focus is about 30% increase. According to the calculation, about $85,000,000,000 is the size of the market. One of the drivers is EUB relevant portion. So our market is growing, but now EUB Lithography is introducing rapidly. The EUV proportion increases, but from 2021 to 2025, EUV lithography is now being penetrated into a market considerably. So I think our market growth, almost the same level of EUV lithography growth, especially the leading edgelogic foundry, EUV portion is rather high, but in the case of memory segment, EUV proportion is not so much high. And for this fiscal year, the major driver is memory customers. So we think we can outperform the WFE market, as Kawai san said earlier. So 40% or more sales is expected for this fiscal year. For year 2025, for year by year, the customer investment trend will be changing from year to year. So it's so difficult for me to give you some speak answer for year 2025. As for the our share, Let me WFE market, the financial model linkage. So let me just explain those things now. So when you look back 1 year past 1 year, so strong and resilient society construction. So ICT Technology has been implementing in every industry, and digital transformation is going on in every industry. Semiconductor industry becomes more and more important because the semiconductor constitute the infrastructure of the society, digital and green. And every country has very positive policies. And there are many changes in business and WFE market is growing more than expected. Accordingly, as we presented today, for this fiscal year, Our sales is expected to be 1,700,000,000,000 yen So the area we haven't penetrated. So there are some matured technology nodes or commodity demands are rapidly increased right now. Our financial model is based on patterning or other leading edge high value added next generation products. At the same time, we try to provide these Production Services. So WFE market scenario should be reviewed and revised if necessary. So now we have the semiconductor device shortage in the global market, NWP market and financial model. We are now in the middle of the reviewing our financial model right now. So actually, the area that we haven't penetrated is also growing very rapidly. And share plan the plan to increase share. Maybe we should revise the share plan as well at the same time has the revision of our WFE market forecast. And once again, I want to share the idea with you when some solid understanding has been produced. But as I said before, the patterning system being evaluated and also adopted by our customers. And that progress is in line with our plan. Mr. Ishino, thank you very much for your question. So one More question. Although it's time, it's 6 o'clock, so I'd like to share one more question. So we have Mr. Iba, Nomura Asset Management. Mr. Iba, please. Thank you very much. So one question for the gross profit margin. For the 4th quarter, the gross profit margin didn't improve so much. But this year so 43.5 percent is to be achieved in the first half of this year, so I feel very happy to hear that. But this improvement is because of the high volume production or the improvement activities. But when it comes to the financial model compared with financial model, 43.5%. So that is 2 years ahead. You achieved already 43.5 percent 2 year earlier than your prospective timing. But Are there any reason for that? Actually, this is the driver to improve the gross profit margin or this portion was not enough compared with the plan, if any. So now you said you are now reviewing the financial model. But let's say 2 years from now, when the sales is again 1,700,000,000,000, how much Improvement can you see for the gross profit margin in 2 years to come? Thank you. So I am Nonokawa. Let me answer to your question. So 2 years ago, we prepared this model. And current gross profit margin, so 43.5 percent against 1,700,000,000,000 yen. So our current figures are just the same as the financial model, but difference from the our scenario we produced 2 years ago. So I shouldn't say anything so specific but major things. So profit gross profit margin and marginal profit or proportion of the raw materials and also the fixed cost, the balance among those things and current balance is a bit different from the balance we expected 2 years ago. As for the figures, I'm sorry, we cannot share the specific figures with you. The another point, 1,700,000,000,000 yen If we can achieve that level in the 2 years from now, what happens to the gross profit margin? I'm sorry I cannot give you any specific value, but according to our current plan, The figure is expected to increase, needless to say. I'm so sorry. I cannot give you any details, but proportion of the raw materials and processing costs, in other words, the fixed costs are to be revised once again. And in the future, we are going to further improve the gross profit margin. So that's the difference from our scenario that we produced 2 years ago. I'm sorry, my explanation was not so Sufficient, but this is how this is best I can answer to your question. My follow-up comments. So the financial model essentially, financial model focus is on the top line, the operating margin and ROE. So these are the area we focus on in financial model. So those figures, So there are some product mix, macro economy and customer mix. Because of those factors, things might be different. So it's so difficult to have the 100% matching with the plans. So we should provide this product and this service. By doing that, We try to enhance the operating margin and ROE. We want to increase ROE and operating margin. So 43.5 percent gross profit margin. We are likely to achieve gross profit margin. That was the very good news and good progress so far. On top of that, so now we can provide high value added product To the customer, we are planning to increase the top line, highly likely that we can increase the top line. And accordingly, we can increase gross profit margin as well. As a result, the fixed cost ratio to the sales should meet for our financial model in the future. But 2 years to come, So there are so many positive factors. But in order for us to achieved the financial model. Of course, we need to closely look at the management market trend, and we should manage our operation properly. Thank you very much. I expect a lot for your new financial model. Thank you very much for your question. So this concludes the Financial Announcement Meeting. Finally, from this meeting onward, we have set The questionnaire survey on WebEx so that you can easily send your feedback not by e mail, but by through WebEx. We would very much appreciate your kind cooperation as we'd like to learn from your precious inputs and continuously improve our IR activities. Thank you very much for joining today dispatch a very tight schedule. Thank you very much.