Earnings Call: Q3 2021

Jan 28, 2021

Time for us to start Tokyo's external financial announcement for the Q3 of the fiscal year ending in March 2021. Thank you very much for joining us today despite your very busy schedule. I am Yatsuta of IR Department acting as a moderator in today's session. Now let me introduce the attendees on our side, Mr. Representative Director, President and CEO, Ayame Kawai. Thank you very much for joining us. Next, Mr. Yoshikazu no Nokawa, Corporate Director, [SPEAKER UNOOPOULOS:] Executive Vice President and General Manager, Global Business Platform Division, Finance Unit. I am Nuno Kawa. Thank you very much for joining us. Before starting the presentations, let me explain the flow of today's meeting. First of all, Mr. Nuno Kawa and Mr. Kawai will make presentations. After that, up until 7 o'clock, we will have the question and answer session As we explained in our email, you are currently requested to use apps on PCs or mobile terminals if you plan to ask questions. But if you do not plan to ask any 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. We will upload The audio contents of this meeting, both in Japanese and English later. It will be kind if you could also refer to them. Now Mr. Nonokawa, Corporate Rector, Executive Vice President and General Manager, will present the consolidated Financial summary. Mr. Nuno Kawa, please. So I am Nuno Kawa Finance Unit. Good afternoon. I'd like to present the consolidated financial summary of the Q3 of this First of all, you can see the quarterly financial summary. The net sales for the 3rd quarter was €291,700,000,000 17.4 percent decline from the 2nd quarter. Gross profit margin was high at 41.7 percent as our plant utilization rate increased. Operating margin was 21.6%, along with the rise of the gross profit margin. This is a graphical representation of the financial summary. This shows segment information. For SBE, Sales was 264,300,000,000 yen and segment profit margin was 20 5.7%. As I explained in the slide of financial For summary, though the sales declined from the 2nd quarter, the segment profit margin remained almost unchanged, thanks to the impacts of our plant utilization and customer mix. For FPD, as sales increased In the Q3 as well as in the Q2, settlement profit margin was improved to 17.9 For the composition of net sales in the 3rd quarter, The SPE sales accounted for 91%, while the SPV sales accounted for 9%. This slide shows the SBE sales by The sales declined in Almost all regions, particularly in the sales in Korea decreased primarily because of the drop of the sales to the memory device manufacturers. In China, just like in the second quarter, the sales proportion of the This shows SBE new equipment sales by application. From the bottom, logic and others accounted for 27%. Logic Foundry was 28%. Non volatile memory was 19% And DRAM was 26%. As The sales in the other applications and foundry declined, the proportion of the sales to logic foundry increased compared with the sales to memory device manufacturers. This Shows field solution sales. In the 3rd quarter, The sales of Field Solution was 93,500,000,000 yen The proportion of the field solution sales in the consolidated sales was 32%. The sales of modifications contributed most to the sales increase. Next, this slide shows balance sheet. For assets, total assets were 1,270,400,000,000 yen And cash and cash equivalents were 269,000,000,000 yen The decline from the 2nd quarter is mainly attributed to the increase of the inventories and payment of the dividends. The inventories increased from the previous quarter. To prepare for sales increase In the Q4, the number of process tools undergoing startup is increasing now. Liabilities were 363,600,000,000 yen And net assets were 906,700,000,000 yen The equity ratio was 70.4%. This shows the inventory turnover and the accounts receivable turnover. The inventory turnover was 122 days, coming back to the previous level. The accounts receivable turnover was 39 days. My last slide shows the cash flow. The cash flow from operating activities was 18,600,000,000 yen which is attributed to the increase of inventories. The cash flow from financing activities was minus 56,400,000,000 yen mainly because of the payment of dividends. The free cash flow was minus 34,700,000,000 yen This concludes my presentation about consolidated financial summary. Next, Mr. Kawai, our CEO, will present business environment and financial estimates. So Mr. Kawai, please? Once again, I am Kawai. Thank you very much for joining us today. Let me talk about business environment and financial estimates. Let me start with the business environment. For the WFE market in CY 2021, In addition to strong logicfoundry investment exceeding the previous year, memory investment is expected to recover driven by the spread of 5 gs and the increase of investment to data centers. Amid those circumstances, The WFE market in calendar year 2021 is gaining momentum to grow almost by 20% from the record high CY 2020 market size. For the FPD fabrication equipment, TFT The array process market, the investment to OLED for mobile applications will increase from the previous year, But investment to LCD for large side panels is expected to decrease. In the future, driven by By the OLED investment, FBD equipment market is expected to grow in calendar year 2021. However, due to the transition In large size panel investment from LCD to OLED, the FPD market is expected to decrease by about 30% on year on year basis. Next, this slide shows the WFE market outlook by application for The logic and foundry active investment will be further enhanced due to expanding applications driven by the ICT promotion. The logicfoundry is expected to drive the WFE market growth this year. For DRAM, Inventory adjustments are proceeding smoothly along with increasing demand for 5 gs mobiles, PCs and data centers. Some investment plans are pulled forward, and the investments started to recover from the beginning of this year. For nonvolatile memory, as applications of SSD are expanding, Strong investment is expected to continue just like the previous year. This shows the business progress in the 3rd quarter. Along with the transition to the data driven society, the WFE market is now entering a new phase of growth. Amid such circumstances, in an attempt to maximize growth potential of our company, We implemented various measures in the 3rd quarter as well. The first measure was release of new product and new platform. Seresta FCD, a new product for cleaning process, employs the supercritical DRY technology to provide solutions to the issues in the cleaning and drying processes for ligandetch devices. Celestai CD has already been introduced to high volume DRAM manufacturing lines For its future introduction to logic and 3 d line, some of the evaluations have started. EPISODE UL, a new Platform for etching systems enables us our customers to select a number of chambers from 4 to 12 chambers flexibly satisfy various customer needs. On top of that, it is equipped with our proprietary smart tool to realize autonomous autonomous process control through big data analysis. Next, I We'll talk about enhancement of our digital transformation activities. Our company has developed software in support In order to further enhance software development capability to promote digital transformation, we moved With our advanced technological capability, we will provide our customers with high value added and further improve our So efficiency. For our production capacity, operations started In the new production buildings in Tohoku and Yamanashi, both of which were completed in the Q2 of this fiscal year. As a result, capacity potential in Tohoku plant and Yamuna's plant has been raised by twice and 1.5 respectively. Accordingly, we are now ready in terms of production capacity for future increase of demand. Another topic in the Q3 is our environmental initiative. As ICT, Information communication technology is to be implemented actively toward the future. Our company will contribute to reduce Power consumption in the following three aspects: Firstly, we will support our customers in their technology development for low power consumption semiconductor devices by using our Process II technology. Secondly, as At 2 Vendor, we will raise productivity of our products and reduce energy consumption of our products during their use stage. And thirdly, will promote energy conservation in our own operations. Our corporate philosophy, we strive to contribute to the development of dreams, Inspiring society through our leading edge technology and reliable service and support, fulfilling this philosophy will lead our company contribute to sustainable development of the society and also enhance our corporate value. Based on such idea, we revised the midterm environmental goals for 2,030 to make them more challenging. In the revised goals, for the target to reduce CO2 emissions per by 30%. The reference year was changed from 2013 to 2018. For the CO2 emissions in our sites, our company will raise the ratio of Renewable energy to 100 percent in every site by 2,030. And accordingly, We have raised the target to reduce the total CO2 emissions compared with the reference year of 2018 from by 20% to by 70%. Next, I'd like to show the financial estimates. For the fiscal year ending in March 2021, we have revised the full year financial estimate upward, reflecting the demand increase. The POR we won in the recent years have now been introduced into the customers' high volume production lines by which we are able to take the full advantage of the customers' enhanced investment in our financial performance. We plan to increase the full year net sales by 60,000,000,000 yen to achieve 1,360,000,000,000 yen Operating income is expected to increase by 25,000,000,000 yen to achieve 306,000,000,000 yen The consolidated net sales in the 4th quarter is expected to hit record high of growth high of 400,000,000,000 yen Next, this slide shows the sales focus only for SBE new equipment in the 4th quarter. Due to the increase in investment of leading edge, logic Foundry and memory, the SBE new equipment sales is expected to be 297,000,000,000 yen which is record high quarterly net sales. The R and D expenses and CapEx plan in this fiscal year remain unchanged from the announcement on October 28, 2020. As I said earlier, we raised Production capacity in Tohoku plant and Yamanashi plant. In order to realize sound and steady growth in the future, we are implementing record high R and D investment and capital investment. We will continue proactive investment for further growth to achieve the targets of midterm management plan. And finally, this shows dividend forecast. Along with upwards In terms of the financial estimates, the year end dividend per share will be 3.80 yen increasing By we are planning to pay the full year dividend per share of 740 yen Thank you very much for your kind attention. This concludes my presentation. Now we will have question and answer We will receive questions both in Japanese and English. But as our attendees On the Japanese channel, please allow us to restrict properly asked question to only in Japanese. As our Secretariat will inform you in advance that you will be the next person to ask a question. If you ask a question in English, please use the chat box On the Japanese channel, I will read out The question translated into Japanese and our attendees will answer it in Japanese, while on the English channel, it will be simultaneously plated into English on the real time basis. For the questions verbally asked in Japanese, please allow us to limit to without a follow-up question. If we have extra time toward the end of the meeting, we will receive a second round of questions. And when you ask a question, please make yourself closer to the microphone. And after asking a question, please make sure to mute your microphone, please. So now let's start the question and answer session. First question is from Mr. Yoshida of CLSA Securities Japan. I am Yoshida of Shiela Sei Securities. My first question for the forecast of WFE market. This year, CY 2021, 20% almost 20% increase is expected. That's what you said earlier. When you divide into first half and second half of the calendar year, so your competitor said the First half sales is higher, but according to your focus, how do you view the focus in the first and second half of this year. At present, I think we We did receive strong inquiries. So 20%. We are very getting closer to 20%. There is some momentum getting very close to 20%. On quarterly basis, we are now carrying out the scrutinization on the quarterly basis August. One thing we can say at this point is the strongest segment is logicfoundry, followed by DRAM And NAND, when you say almost 20% growth, that is the proportion for composition in the market. So your question, as you asked earlier, I think in each quarter, we do receive the strong inquiries for each quarter evenly, almost evenly. So I think the condition for us is rather Average. Of course, we must be careful about the timing of the customer's strategic investment. So we are now scrutinizing the customer's plan. I have one follow-up question. So now the you talked about the focus By 50 days, when you look at the Q4, the nonbo tie NAND sales is expected to increase drastically. So by region, which region is stronger than the others in terms of the sales focus for the 4th quarter? By region, as of today, I'm sorry, but We are not able to refer to the amount by region. Logic Foundry and memory, But the proportion between the 2, for CY 2021, memory accounts for 40%, logic Foundry accounts for 60%. That's the rough figure I can give for the current year 2021. Thank you very much. What I want to ask is 4th quarter. According to your full year guidance, for the new sales, maybe the Q4 sales I'm sorry, the Q4. So NAND is rather strong. I want to understand the background, which region? No sales is stronger. I am yes to that. Let me answer To your question, so NAND flash, we have limited number of customers. So if we refer to the region, you may understand the name of the customer. Therefore, it's so difficult for us to give us the figures by application by region. Thank you very much, Mr. Yoshida, for your question. Next question is from Mr. Nakamura of Goldman Sachs Japan. Thank you very much. I am Nakamura of Goldman Sachs Japan. Thank you very much for your presentation. So I have a on WFE market. So 2021, the 20% plus almost 20% increase, you Talked about very strong outlook for 2021. So USPE business, the net sales, is expected to increase by 20 what is the level of the increase of the net sales Legacy nodes for the semiconductor automotive semiconductors, there are some shortage of the semiconductor for automotive region. When you increase the Shipment of the legacy nodes equipment, can you come up with the is it possible for you To realize your guidance, from that viewpoint, POR winning activities are We are moving on very smoothly, and we do not miss any potential POR. Therefore, the WFE market is It's expected almost 20%, and we're trying to take full advantage of that market increase. In addition, For legacy nodes, you asked about legacy nodes. For example, what is hot in public is the automotive Semiconductors are now running short. So that's what newspapers says day by day. But even for that, our company do have the strong presence in that area as well. And in the industry and in society, we can make big contribution in that area as well. In principle, when semiconductors are In shortage, as for the process to vendor, there are no negative impacts on us That provide us big business opportunity. So that we can increase the sales of the Process which is good for us, very good for us. And legacy tools, not only the new demand for legacy tools, but even for the Leading edge device, the customer purchased the leading edge process tools for the leading edge devices, And they can also make the best use of the existing process tool and also upgrade or modifications or to improve throughput of the existing process stores, in that sense, not only new sales, But also fuel solution business, I think that market trend has a positive impact on our business. In the future, semiconductor market in line with the Moa Zuo, that will have the shrink, but at the same time, AI customization and also hyper mass production. So there are 3 Direction in the future, technology innovation and semiconductor mass production sorry, mass consumption, those 2 are combined each other To grow the semiconductor market for automotive semiconductors devices, in the near future, The EV will become the mainstream in the automotive industry, so we'll have the strong or a deepened relationship with the automotive semiconductor device manufacturer that will give us the great in short term, midterm and long term basis. Did I answer Thank you very much for your detailed answer. Thank you very much. Mr. Nagamura, thank you very much. Next question is from Mr. Shivano of Citigroup. Thank you very much. I am Shivano from Citigroup Global Market Japan. Earlier, You said WFE market is expected to grow by 20%, and you said Tokyo Electron can outperform the market growth. So when you look at the end result, maybe 20% sales increase, that should be 1.5000000000 or 1.6000000000 yen When I simply add 20%, so your target within 5 years, you have the financial model 1 point 5 or 1,700,000,000,000 yen so you are getting closer to that midterm management plan. So next year, if you achieve 1,500,000,000,000 yen net sales and OP margin, 26.5%. Is it difficult for you to That level of the operating profit margin, if it is so difficult yet, so how do you fill the gap? I understand you haven't calculated the net sales for next fiscal year. But maybe it could be possible for you to achieve very close to the 20% increase in net sales next year, But margin target, now you have some gap between your target and current operating margin. How do you plan to fill the gap between your current operating profit margin and your target operating profit margin. So about your question. So there are many ways. So AI, 5 gs, there are many applications. So the applications are increasing. Accordingly, WFE market is Expanding, so our midterm management plan, at present, we are now preparing the next fiscal year Budgets and we are going to report it to you in the future. So if WFE market increases, we are not able to achieve the target right away. That's not the case. So our target applications In those target applications of our company, so how we can provide value added along with the stage generation transition. And that's how we can gain the profitability. So even if WFE market grows, that will help us or enable us to achieve the mid term management plan. That's not the case, but now you can see several generations And Tokyo Electron is prepared to provide high value added Solutions for those generations, along with the time and along with the generation, we are going to achieve the midterm management plan. So WFE market size, there are many Factors. So we need to scrutinize those factors closely. But our activities will remain unchanged. So that's how we try to implement our plan for the future. Thank you very much, Mr. Shivano, for your question. Next question is from Mr. Waragi of Nomura Securities. Mr. Thank you, please. Thank you very much. Thank you. So thank you very much for very strong focus for the future. For the next year, I have some concern about China and United States and Europe, how do you see the risks in those regions? For the America and China As a company, not in the position to answer to that question. On the other hand, our company bilateral negotiation, So we will take a close look at the bilateral negotiations between nations. One thing we can say now, actually so far for China, the local manufacturers in China, That accounted for 15% to 20% of the WFE market so far. And we need to closely look at the impacts on that market segment. But ICT applications will be expanding definitely. Investment accordingly will be implemented somewhere in the world, commodity applications, low power consumption and leading edge applications, Technology innovation will be essential. Therefore, somewhere in the world, investment will be going on. Therefore, In order for us as long as we have the leading edge technology capability, world class technology capability, we are able to achieve our target. That's the position we have when we develop our strategy. So our strategy will not be affected. One thing we can say is bilateral negotiation. We are going to closely look at the But that's our negotiation and we'd like to be fair when we promote business activities. One follow-up question. So China, Europe and America, the leading edge package, I think you are the general provider, the Japan leading provider of comprehensive package of the process tools. So as for the package, but how do you see the market forecast, not only WFE, but also with the practice. So I understand your question is about 3di business. China? So 3TI, so we can provide the value added I value by providing our process tools. So our business opportunities in calendar year 2021, our business opportunities for etching, cleaning, film deposition, plover and packaging. All those areas will help us to increase our business opportunities and business performance. Thank you very much. It's not only for China market. I just talk about global market. So you do have the various diversified business opportunities. Thank you very much for your answer. Thank you very much. Mr. Waragi, thank you very much for your question. Next question is from Mr. Hiragawa of Bank of America. One question. I think my question is a kind of follow-up question of the previous question. Next year, China, So WFE China accounts for 10% to 15% in WFE market. So when you compare 2020 20202021, so now the breakeven market increases by almost 20% And China local players, so from 2020 to 2021, how the proportion of the local China players rose or decreased for memory and non memory. Could you divide it into memory and non memory, please, when you talk about proportion of the China local players. 15% to 20%. Based on the previous figures, the China players accounts for 15% to 20% in total WFE market this year as well, there should be no major Change in that proportion of the China local players. For logic and memory proportion, I'm sorry, I'm not able to give you any answer on that area. So in principle, along with the market growth, China local players will increase their investment. Is this correct understanding? Yes. For high end commodity and every type of applications, China players' investment are coupled with the global trend. Thank you very much, Mr. Hirakawa, for your question. Next question is from Mr. Yamamoto of Mizuho Securities. Mr. Yamamoto, please. I am Yamamoto of Mizuho Securities. Thank you very much. I have some specific question about figures. So now you have revised your 4th year 60,000,000,000 yen increase and Gross profit is expected to increase by £26,000,000,000 Then 43% should be the marginal profit ratio When I calculate those figures, but the 4th quarter, you have 400,000,000,000 yen sales, But 40.5 percent gross profit margin, so figures are so 43% marginal profit Ratio, that's how we can calculate the figure. Even if the sales increased to 400,000,000,000 yen in Q4, it's difficult for you to increase the gross profit margin more than 41%. What sort of costs are generated? But what is the reason why the gross profit margin doesn't reach the level of the marginal profit Mr. Yamamoto, thank you very much for your question. As you pointed out, the 4th quarter Sales is 400,000,000,000 yen as you said. So when you do some calculation, as you said, the gross profit margin So 41.8 percent in the 3rd quarter, but 40.5% in the 4th quarter. This fiscal year when you look back this fiscal year, Q1 and Q2, The 40.8% in the 1st quarter and 38.6% in the 2nd quarter. Unfortunately, gross profit margin, unfortunately, is not was not steadily increasing. So we are now working on the half year budgets And we are now looking at half year based calculation for the fixed costs. And this fiscal year, the Q3, in particular, Production activities, I mean, utilization rate increased. In other words, the 3rd quarter, the inventories increased. Accordingly, the fixed costs, which were not recognized in the Q3, will be recognized in the Q4 as cost of goods NPL. So these are the factors as well. So this is the reason why we came up with this forecast. So efficiency should be enhanced and marginal profit ratio need to be improved furthermore so that we can increase gross profit margin. But we need to Wait for a while before we can see the tangible impacts on the increase of gross profit margin. I am Kawai. Let me just give the additional comments. As Nokawa said earlier, at present, But 20% is growing ratio of the WFE market. At present, we do receive very strong inquiries. So we have increased Our capacity potential and we are now implementing our manufacturing plan aggressively, so fixed costs might be changed in the future. Another thing I want to say right now. So in order for the growth, We do have the high potential for growth. So it's a bit different from other companies. So now we are investing large amount of money for the future growth. And as for R and D expenses in the cost of That includes the investment for the future growth. That is Simply say, compared with other manufacturers, our Performance or focus are not the same as others. So when we find some business opportunity, we can Move on to then as for the gross profit margin might be affected to some in such case. Thank you very much for your answer. That's all from me. Mr. Yamamoto, thank you very much for your question. Next, we have Mr. Yasi of UBS Securities. Can you hear me? Yes. I have two questions. The first question Last year, Mr. Kawaii made some comment in the public 'twenty one. You can see the growth. In 2022, we will see higher factor to increase the market size. If my memory says, That's what you said. By 2021, the Taiwanese Foundry increased the investment drastically. So as for from the viewpoint of the stock exchange market, we have some concern that the growth will continue in the 2022 as well. Now DRAM is recovery and you can see stronger investment in DRAM in 2021. So what will happen in 20 '22 for further growth? 2nd question is when you have the performance improved, So the gross profit margin is about 40%, and everyone thinks the gross profit margin should be higher than that. So when the sales increase, it's because of maybe 50% is it possible for you to increase the gross profit margin to 45% to 50%. With high speed, you can see increasing with high rate. So one thing we can say is we are now facing big years. 2021 is a big year, and 2022 is another And those prospect or focus remain unchanged. The calendar year base or quarterly base, there might be some shift in our focus or trends, But maybe we will see very good 2 years, 2 consecutive big years. And our prospect for 2 years to come remain unchanged. Needless to say, DRAM NAND And nonvatile applications I'm sorry DRAM, NAND and foundry logic. So we look at those different segments and there are some difference among those segments. But when it comes to big years Prospects. From the end of last year, My view or our view remain unchanged. And I think our prospect the likelihood of our prospect is getting more certain. So which is bigger, 2021 or 2022? Actually, some investment plan has been put forward. We need to look at very closely, but actually both 2021 2022, those 2 years will be big year, unprecedented big years? That's the first question. About the gross profit margin question, So needless to say, in our midterm management plan, the value added and also the marginal profit ratio of the equipment and also gross profit margin. But all of them are supposed to increase in accordance with a mid term management plan in our business model, Which portion should how much? So to some extent, we do have some rough estimation And we will see the steady increase of those figures. So gross profit margin, So we are implementing midterm management plan because we think we are sure that we can increase gross profit margin. Thank you very much, Mr. Yossi, for your question. Next question is in text. Mr. Yoshino of Tokai Tokyo Research Center. I want to understand the for the EUV lithography. So IR department will answer to the question. EUV lithography for 5 nanometer in foundry, so quite a few EUV lithography system have been shipped for 5 nanometer. So when you look at the recent increase of the investment by the foundry, our targeting on the 5 nanometer, a leading edge Technology node. So the size of the foundry investment is increasing year by year. The size of investment is expected to increase for the proportion of the leading edge technology node from 5 nanometer to 3 nanometer. For 3 nanometer node, I think The EUV lithography adoption will be accelerated further north for quota developer product, but we do have 100% share For the high volume production line, so the criticality of the cleaning equipment And equipment will be increasing and that will give us great opportunity for us. So EUV Investment, that's the frequently asked question for our company. The EUV lithography expansion will give us Great business opportunity to us. After the introduction of EUV lithography to the customized line, our sales has been improving. So that's how I would like you to understand the impact of the EUV reserve revenue on our business. So Mr. Shino, we will see one follow-up question from Mr. Shino. ASML revised their prospect downward. How do you look at that, the downward revision of the sales by ASML? I think there might be some Short term adjustment, but I think the trend of adoption of EUB lithography will remain unchanged. So there is only There is one customer using the EUB lithography, but I think other companies also adopt the EUB Lithography in the future, therefore, the adoption or introduction of A2B lithography will be increasing. For DRAM, The leading edge customer is going to adopt it, the EUB lithography. So we think the EUB lithography will be adopted for the DRAM. But actually the number of the processes are not so many for EUB Resurglar for DRAM compared with foundry. So the I just adopted limited number of EOB lithographies. Thank you very much for your question. Next question is Mr. Damian Ton of Macquarie Capital Securities. Mr. Damian Ton, please? Thank you very much. Can you hear me? Can you hear me? Yes. In the Q3, field solution sales looked very high, especially for SPE. And also in the Q4, fuel solution sales is expected to be very high. So could you give us some So 200 millimeter or upgrade modification demands, there might some demand for those, but in addition, are there any other things and the focus for next fiscal year, in particular, the number of the process tools to be shipped, how much level would you expect in next fiscal year? So the IR department will answer to your question. So 3rd quarter sales, so field solution business increased a lot. At present, we are in the improving trend, especially parts service sales has been increasing steady. But Q3, you saw the great increase because of the modification business. It's a kind of transient business. However, the modification business is does not steadily increase or maintain. The parts business is expected to grow steadily on the other hand. And sometimes we see some modifications, inquiries for modification from time to time. For a legacy note, modification demand is increasing. So we think that is our business opportunity, and we try to capitalize on that trend in the market. I have one follow-up question. May I ask one follow-up question? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Yes, please. For modifications, The sales of the modification, could you let me know the annual sales for modification business? For modification only, We do not release the information, but parts and service accounts for 60% and used equipment modification accounts for 40%. That is a rough proportion. But recently, parts service, because the customer's fab utilization rate is rather high, so part business accounts for more than 60% of our total Field Solutions business. Thank you very much for your answer. Thank you very much, Mr. Tom, for your question. Next question is from Mr. Hanaya of SMBC Nikko Securities. I am Hanaya of SMBC Nikko Securities. I have very basic question, I'm sorry. But just clarification. For the Q3 actual for sales, I wonder your sales was less than your expectation for the 3rd quarter. How do you view the sales in 3rd quarter? Do you think the sales in the 3rd quarter is just the same level of your expectation? Or are there Some amounts of sales which were put forward sorry, pushed out to the 4th quarter. For that, I am Nonopawa. I want to answer to your question. For the Q3 sales compared with the Q2 sales, you can see the significant decrease in the sales in the Q3 from the Q2. For one The sales in the Q2 because of the sales putting forward from the Q3 to Q2, you can see the picking sales in the Q2. But actually, shipment itself, The end of the Q3, the number of the Process 2 shipped is increasing. So that sales will be recognized in the 4th quarter. So there are no particular reasons in the Q3. I am Kawai. I'd like to ask a question. Actually our Q3 sales is just as planned. There is no major reasons particular reason for the decrease in our sales. Thank you very much. Mr. Hanaya, thank you very much for your Next question is from Mr. Mike Gawa of Credit Suisse Securities Japan. I am Mike Gawa of Credit Suisse Securities Japan. So I was impressed with your figures. So what what changes over the past 6 months? So what was the driver to encourage your customers to increase the investment. What is your understanding? When you look at final Demands compared with 6 months ago, there should be no major change or stronger final demands. And technology, the major change is TSMC. They got the order from Intel CPU. I think that is a kind of upward factor. But other than that, are there any other Factors to increase the final demand or any technological factors To increase the investment of the customers, I am Kawaii. So according to my understanding, the major change in our industry Actually, in the past, PC centric era and after that, PC and mobile centric era. And now we are in the big data centric era, having IoT, AI and 5 gs. So demand for the products are final products and semiconductors are required for that, but now semiconductors' devices required for some value provision. So we are now entering the new phase of growth And we are just in the middle of that new era getting into the new era. So the supply demand balance, there are some adjustment, needless to say. So there are some adjustment period in the future, but by and large, semiconductor device market exceed $1,000,000,000,000 In year 2030 or 2,031, I think that this market increase continues. In principle, last year, last spring, the COVID-nineteen pandemic started. And super large data center, because of the demands from them, there were Some shortage of the DRAM concern of the shortage of DRAM, so they purchased large amount of DRAM strategically in last spring. But now data driven society, DRAM inventory is decreasing rapidly. So after the adjustment period is So after the adjustment period is completed, now we are in the phase of another growth. In that sense, Demands for PC increasing and 5 gs mobile 5 gs infrastructure, 5 gs smartphone market is growing and data center demand also recovering. And in the future, the high performance or high speed CPU will be coming out. When you look at those market trends, and that's the reason why the customers' investment are getting more and more active now. There are Different viewpoints and ideas. I'm sorry, my answer is rather obstructive. So data center, PCs and 5 gs mobiles and other applications, Automotive Semiconductor Devices, so these are the drivers. So actually, Everything is a kind of driver to increase the customer investment. Thank you very much, Mr. Maika, for your question. We have one more question in text. So let me read it out. Mr. Hasegawa of Mitsubishi UFJ Morgan Stanley Securities. Post sales business Profitability might be changed. The Q3, you can see the reason what is the reason modification business increased in 3rd quarter? And what sort of impact do you have from the increase of modification in the 3rd quarter? So the Q3 as for the Q3 modifications, That is directly linked to the customer's plan, so IR department will answer to that question. Yes. As for the modifications, each customer So we received orders for modifications along with the customer's plan. So it's so difficult for us to focus the trend of modification in the beginning of the year. And by chance, we have many modification orders in the Q3. So when we see the demand Increasing the customer, then the customer purchase the process tool, but it takes time. So The simplest way to address the increasing demand for the customer is introduce modification for their Existing machines to enhance the productivity. So that's the reason why we do have very strong inquiries for And by chance, those modification orders increased in the Q3. As for the changes in profitability, modifications Do have the high profit margin in some cases, the field solution business. So we do have existing technologies and we can use the existing technologies for our business opportunities. That's reason why we can enjoy higher profit margin for the Field Solutions business. I am Kawaii. I want to add some For midterm and long term perspective, from the viewpoint of the profit margin, I think we can Process store upgrade inquiries, our request is increasing. Example, once we deliver a process tool, for example, batch system, that each batch could be increased from 100 reference to 150 reference, that is order for modifications and machine learning about our metrology. By using those advanced technologies, we can enhance uptime of the machine or maintenance should be improved to enhance the yield. So this is how we can provide added values to the customers. And now you can see increasing number of Wafer fabs. And we have shipped 4,000 5,000 units. So in a moment, we should complete the diagnosis of the Process 2 Remote support, we need to have infrastructure to be built every year to provide remote support to the increasing installed base. For those reasons, field solution business is expected to increase their profitability. Mr. Hasegawa, thank you very much for your question. So now it's time for us to close today's Financial announcement. Thank you very much for joining us despite your very busy schedule.