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. Tetsuo Tsuneishi, Representative Director, Chairman of the Board.
I am Tsuneishi. Nice to meet you.
Next is Mr. Toshiki Kawai, Representative Director, President and CEO.
I am Kawai.
Mr. Yoshikazu Nunokawa, Corporate Director, Executive Vice President and General Manager, Finance Division.
I am Nunokawa. Nice to meet you, everybody.
Before starting the presentation, let me explain the flow of today's meeting. First of all, Mr. Nunokawa and Mr. Kawai will make presentation. After that, up until 6:30 P.M., we will have the Q&A session, entertaining questions from you. This financial announcement uses two channels on Webex, providing simultaneous interpretation between Japanese and English.
As we explained in our email, you are kindly requested to use apps on PCs or mobile terminals if you plan to ask questions. If you do not plan to ask questions, you can use telephones. Since this is the meeting for institutional investors and analysts, we 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 it. Now, Mr. Nunokawa, Corporate Director, Executive Vice President and General Manager will present the consolidated financial summary. Good afternoon.
I am Nunokawa of Finance Division. I'd like to present the consolidated financial summary of the first quarter of fiscal year ending in March 2021. Thank you very much for joining us despite your very busy schedule, taking care of the various problems such as COVID-19. Here you can see the finance summary. The second column from the right-hand side, you can see the red color.
You can see the first quarter of fiscal year 2021. The consolidated net sales was JPY 314.8 billion, 2.6% drop from the previous quarter. Slight decline, we maintain high level of net sales. By segment, the SPE net sales was JPY 303.7 billion, maintaining JPY 300 billion level. The FPD net sales was JPY 11 billion, decreasing by 23.4%. The drop rate of the FPD segment was relatively high. The gross profit margin remained high at 40.8%. The operating margin increased by 1.8 percentage points to 23.5%, JPY 73.8 billion. Increased by 1.8% from the previous quarter.
The increase of the operating margin was attributed to such fact that SG&A expenses in the first quarter was kept low. Some of them were shifted to the second quarter. This is a graphic representation of the financial summary. You can see bar graphs. The blue color represent net sales, purple represent operating income. Orange shows net income. The line graphs, the green one represent gross profit margin. Purple line graph shows operating margin. The other business in the first quarter proceeded steadily. Both gross profit margin and operating margin ended at a high level. With regard to the second quarter new equipment sales plan, more than 80% of SPE and 100% FPD fabrication equipment have been shipped already. This shows segment information. On the left, SPE. As I explained earlier in the financial summary, impacts of the drop of SG&A expenses were significant.
Profit margin showed an increase. You can see a steady grow on the quarter-to-quarter basis. In the middle, you can see FPD. The SG&A expense decrease, but at the same time, profit margin declined due to the temporary impacts of the COVID-19 spread, inducing considerable decrease of the net sales. For the composition of net sales, just like previous quarter, the proportion of SPE sales increased due to the difference in sales area between SPE and FPD. This slide shows SPE sales by region. On the right, you can see the first quarter results. Compared with the previous quarter, the sales to memory customers, particularly in Korea and China, increased. Orange is Korea and pink color represent China. This shows the increase for memory customers. This shows SPE new equipment sales by application. In the previous fiscal year, the blue color and purple color represent memory sales.
The proportion of sales to memory device manufacturers tended to be relatively low. In the first quarter, the sales to memory customers, as you can see here, accounts for about 50%. Sales to memory customers increased considerably. This shows Field Solutions sales. In the first quarter, the sales of Field Solutions was JPY 83.7 billion, again, showing a good progress. This slide shows balance sheet. On the left, the assets. On the top, the cash and cash equivalents were JPY 322.6 billion. In the middle, you can see the light blue. That is the inventories. The inventories were JPY 413.9 billion. Thanks to recent strong inquiries, they remain relatively high, as in the case of previous quarter. On the right, you can see liabilities and net assets. The net assets were JPY 848.3 billion, as we firmly secured the profit also in the first quarter. The equity ratio was 65.3%.
This shows the inventory turnover and accounts receivable turnover. You can see inventory turnover, the green color line, 123 days, remaining at a similar level to the previous quarter. The lower line graph, the purple one, represents the accounts receivable turnover, which was 49 days, unchanged from the previous quarter. My last slide shows the cash flow. The cash flow from operating activities was JPY 552.7 billion. The cash flow from financing activities was minus JPY 53.5 billion due to the dividend payment. Free cash flow was JPY 37.6 billion. This concludes my presentation on the consolidated financial summary.
Thank you very much for your kind attention. Next, Mr. Kawai, CEO, will present the business environment and financial estimates. Mr. Kawai, please.
Once again, I am Kawai. Thank you very much for joining us despite your very busy schedule today. Let me start with the business environment. Although there are some changes, or increases and decreases, by application in WFE market, as you can see, in general, there have been no major changes from the financial estimates announced on June 18th. Although it is necessary to keep closely looking at the macroeconomy trend, along with the COVID-19 spread, WFE market is expected grow by 10%, and the FPD fabrication equipment, TFT array process market, is expected to grow by 15% on year-on-year basis.
Next, this shows business progress. Our business activities in the first quarter made good progress. With various countermeasures against COVID-19 spread taken, our factories operated in line with the plan in general. The equipment installation is conducted by mobilizing local and Japanese expat employees, as well as remote support services partially. The Field Solutions business is making good progress in line with full-year plan, thanks to the high utilization rate of our customers' fab. Next, I would like to talk about our business opportunities and focus areas for the future. For logic foundry, EUV lithography will be introduced to the high-volume production lines. Contacts will further scale down in geometry, and in the near future, a complex 3D structure such as Gate-All-Around, or GAA, will need to be adopted.
For the EUV lithography, we are developing coater developer and etching process technologies which adapt to new resist materials, and also developing production technologies to enhance yield and productivity. To address highly scaled-down contacts, we are developing ALE, which is high selectivity atomic layer etching technology, and also deposition technologies of new low-resistance metal materials. In addition with GAA plasma etching and gas chemical etching, both of which are our core competencies, as well as screening free from patent traps, will present new business opportunities. For DRAM, advanced patterning technologies are essential. Our company is developing and proposing various solution packages combining a wide range of our products. In particular, capacity module, though they are particularly demanding and challenging, provide our company with numerous opportunities to leverage our strength.
We are investing development resources to enhance competitive edge of our products. For 3D NAND, our customers are engaged in development of higher stacking of more than 200 layers. It requires to realize both precise etch control profile and high etch rate in the HAR process. For ALD and CVD, film quality and gap fill performance are critical differentiators. For the 3D NAND as well, there are also increasing demands of high productivity with etching to remove sacrificial films with high selectivity. Our company is expanding our share in these high value-added areas. Next, I'd like to show the financial estimates. There have been no changes from the financial estimates announced on June 18th. As I presented in June, we compiled the financial estimate reflecting the impacts of COVID-19 and other factors.
As of today, we plan to achieve the record high full-year net sales of JPY 1 trillion 280 billion. The R&D expenses and CapEx plan also remains unchanged from the announcement on June 18th. In order to make maximum use of our future growth potential, we are planning a record high R&D expenses of JPY 135 billion and CapEx of JPY 56 billion. We will continue active investment for future growth to achieve the objective of the mid-term business plan. This shows dividend forecast of this fiscal year. Again, there have been no changes. We are planning to pay the full-year dividend per share of JPY 660, along with the payout ratio of 50%. Thank you very much for your kind attention. This concludes my presentation.
We will have the question and answer session until 6:30. We'll receive questions in both Japanese and English, but our attendees are on the Japanese channel. Please allow us to restrict questions asked verbally only in Japanese. When you ask questions in Japanese, please hit raise hand button on Webex. For details, you are kindly requested to refer to instructions attached to the email.
I will announce the name of the person who will ask a question one by one. Please check the chat box on the Webex, 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 chat box to send the question in text, together with your name and affiliation to the secretariat. We cannot answer a question if no name or affiliation is given.
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 translated to English on the real-time basis. For the questions verbally asked in Japanese, please allow us to limit to one question with one follow-up question. For English questions sent in text, I am sorry, but we will receive only one question without the follow-up question. If we have extra time toward the end of the meeting, we will receive additional questions. The first question, please. Mr. Shibano, please.
I am Shibano from Citigroup Securities. Yes, Mr. Shibano, please. In June, WFE 2020 assumption forecast was presented, and you also came up with the financial estimate in this fiscal year, ending in March 2020.
After that, some of the memory manufacturers decided to push out the CapEx plan. As of June 18th, you announced that WFE market expected to grow by 10%. According to my understanding, you did maintain your January forecast, the WFE market expected to grow by high teen level. Has your internal assumption declined a little bit? If that is the case, are there any impacts on that 10% that is a grand assumption of your forecast? That is the first question. I also have the follow-up question later on.
Let me answer to your question. I am Kawai. Initially this year we said toward more than 10%, June 18th, we said 10% growth of the WFE market compared with the last fiscal year. That's what I said. WFE as a whole, now we are in July, when you look at the WFE market side itself, there have been no changes in our focus in terms of the size of WFE market. That's why our full year forecast, JPY 1,280 billion, we didn't change that full year forecast at all. According to my understanding for memories, I just heard that there are some declining demand for memory, but logic foundry demand remain high. That's the reason why there is no major change in the total size of WFE market. Is that correct?
Yes, that's correct.
For application, there are some increase or decrease by application depending on WFE. That's what I meant actually. High performance computing, actually, there are wider applications for high-performance computing. The logic and foundry, actually, they are growing steadily. For DRAM, smartphone demand has decelerated, and there are some slowdown in the data center investment because of their strategy. There is slight decrease for DRAM, slight increase in demand for DRAM compared with last year. When it comes to 3D NAND, actually the price elasticity is rather high, if the price goes down, the demand may increase for NAND. About 50% increase is expected on year-on-year basis, I still have the same opinion for NAND demand.
Thank you very much. What you have said is CY 2020 calendar year WFE market forecast, your fiscal year ending in March 2021, including January to March. There are some difference between calendar year and fiscal year, that changes are to be absorbed by the end of March 2021. There should be no major changes for the application mix as well. Is that correct?
Yes. That's how we view the market trend.
I understand. I have one follow-up question. In June, you said that you have received all orders for the sales plan for the first half of this year for the SPE new equipment. It's been one month since June. Let's see. When you look at toward the third quarter of this fiscal year, how do you view the progress of the orders to be taken? If you have any explanation, could you share that with us, please?
Actually, we haven't disclosed that much in forecast yet.
Thank you very much for your answer.
Mr. Shibano, thank you very much. Next question is from CLSA Securities Japan. Mr. Yoshida, please.
Thank you very much. I am Yoshida from CLSA Securities. Thank you very much. My first question is about the follow-up question for WFE in calendar. We are now in the second half of the calendar year. How do you see the WFE market in next calendar year, 2021? Could you share your idea with us, please?
Under the COVID-19 impacts, there are various trends in the macroeconomy. Of course, we must closely watch the trends of the macroeconomy and impacts of COVID-19, IoT, AI, 5G data traffic increase. Those things will be increasing and growing steadily. Our society will be more and more depending on ICT technology, and ICT will be implemented in the society more and more in the future. Next calendar year should be big year for the market, and I haven't changed that opinion. In that sense, the IMF, the other day announced the GDP is expected grow by 5.4% next fiscal year.
Data traffic is expected to grow furthermore, and I think the data traffic increase should be more than the general GDP growth. That's why we expect a strong growth in WFE market as well in calendar year 2021. We are not able to give you any specific figures or numbers because we must closely look at the impacts of COVID-19. I'm sorry for that. We can expect rather strong growth in WFE market.
Thank you very much. I have one follow-up question. The other day, Intel made financial announcement in which they said that they have a plan to use foundry for their leading edge technology node. Does this plan of Intel have any impact on your future business plan or strategy? If any, could you share that with us, please?
As for Intel, we are not in a position to make any comment on each individual customer's financial announcement. However, by and large, in general, we do carry out some general analysis, and as far as our general analysis is concerned, there are no major impacts on our business.
Thank you very much, Mr. Yoshida. Next question is from Mr. Wadaki of Nomura Securities.
I am Wadaki from Nomura Securities. Thank you very much. The first question, I have a question on the market trend. The North America, how do you view North America market? Do you have any comments? You said you cannot say anything about specific customer, but there are many interesting news coming out from North America. I wonder, the North America will be growing in the future. How do you see the North America market?
There is a big growth potential in North America. Various countries do have their own strategies. North America are planning to increase their production capacity. That is a general trend. North America market is expected to grow furthermore. That's how I view the market. The change will not come soon, but various facilities and various timing need to be investigated to find out when. I cannot say any specific timing, but when you look at midterm, long-term trend, I think some growth is expected in North America market.
Thank you. You don't have any specific inquiries from North America customers, okay. My follow-up question is about Korea. There are some troubles and many conflicts. Korean customers may have some negative feeling about the Japanese manufacturers, and your market share might be affected by such kind of sentiment. How do you view that trend?
As for the Korean market, for one thing, if we provide number one performance equipment, process tools, our business will not be affected so significantly. We are now leading the technology innovation, and that is most important thing for us to pursue. As long as we are number one in the technology innovation, as you know, our industry is depending on the strong technology innovation. As long as we lead the technology innovation, our business will not be impacted.
Mr. Wadaki, thank you very much for your question. Next question is from JP Morgan Securities, Mr. Moriyama. Mr. Moriyama, please.
Thank you very much. I am Moriyama from JP Morgan Securities, Japan. Thank you very much. The slide 16, I have a question on slide 16. From your viewpoint, when you look at current semiconductor logic and 3D NAND technology challenge, how do you see the technological challenge for logic and 3D NAND? For example, logic, Intel made announcement the other day about some changes in their production strategy, 7 nanometer or a 10 nanometer.
They are now hitting some ceiling or limit, obviously. From your viewpoint, the logic scaling, how much logic scaling will be possible in the future? For 3D NAND, you said 200 layers or more. You talked about etching process for 200 layers or more. Up until last year, you worked on 96 layers, and now you're shifting to 120 layers, and next year, maybe 200 layers. You have been working on this area for years. HAR etching technology that you have been working and market share of HAR etching is to be obtained. There are any changes in your forecast in that part of that market?
Okay. Technology innovation, actually, when you look at the history, the technology innovation never stops and will not stop in the future. High speed, high reliability, low power consumption, high storage, all those requirements need to be satisfied, and those requirements are getting higher and higher. New structure, new materials should be introduced, and also more and more technologies need to be developed. In order to satisfy those needs, we cannot stop technology innovation. However, having said that, the integration or various power to consolidate different technologies is necessary. In our industry, we are the leader in our industry. We have been developing our core competence, the technology competence and service competence. We must further enhance those competencies because that will provide us higher value added, and we will see more market applications.
Now, there are several applications on this slide 16, that we are carrying out joint evaluation together with customers. The items under the joint evaluation with customer is increasing, and the technology innovation is growing exponentially. I don't think that is exaggeration. I think the technology innovation is accelerated rather than slowing down. That's the feeling I have. From now on, we'll see more and more technologies to be innovated. That's the current status. For 3D NAND, there are three major etching processes. For MLC, we did have high market share for years. For SLIT, we are making good progress. That's what I feel about the condition situation right now.
Thank you very much. I have a follow-up question for 3D NAND. Recently in China, for example, YMTC, the China local NAND manufacturer. Do you think in the future, is it possible for them to catch up with the global NAND manufacturers in terms of their technology? How do you view the timeframe? Could you share your idea with us, please?
I'm sorry, I cannot say anything about specific customers. I'm not in a position to make any comment on the specific customer. I really appreciate understanding.
Okay. Thank you very much for your kind comments.
Thank you very much, Mr. Moriyama, for your question. Next question is from Mr. Yamamoto of Mizuho Securities.
I am Yamamoto of Mizuho Securities. Thank you very much. I have one question. As for the financial results, the plan for the first half of this year. When you have this past quarter results, when we deduct it from the first half, I think the second quarter, we will see some decline.
It didn't happen in the past. Usually in your company, Q2 results were better than Q1 results. Do you see the Q2 result will be higher than the plan? Or the Q1 sales by region? When I look at the Q1 sales by region, in China, the sales in China increases from April to June. Maybe from the January to March, you are supposed to recognize the sales, but because of the COVID-19, you are not able to recognize the sales in the January to March. That's the reason why sales in the first quarter looks rather high because of the sales recognition. Is that the correct understanding?
Let me answer to your question. I am Nunokawa. Let me answer to your question. Thank you very much for your question. About your question, as you said in your question, in the past, our results of the second and fourth quarter are better than the first and third quarter. That was the general trend in the past. This fiscal year, the first quarter results, and when you compare the first half plan, as you said, the Q2 result is supposed to decline.
What you say is correct. That's how it looks like. The first quarter sales was rather high, thanks to the good progress. That is good news. On the other hand, when you deduct the Q1 result from the first half of this year, we forecast Q2 result might be lower. As Mr. Yamamoto said in your question, the previous quarter, the fourth quarter, actually, some equipment was started up, but because of COVID-19, some of the sales were shifted to Q1, the first quarter. That is a reason why the sales in the first quarter look rather high. That was one of the reasons why Q1 sales was rather high. As a result, Q1 and Q2 in this fiscal year, Q1 results are higher than Q2 expected results. That's how we see at this moment.
Thank you very much for your answer. May I say something? I am Kawai. I want to add some comment. Actually, this year is a bit different from the previous years, maybe because of the COVID-19 impacts. That's how we understand this odd trend. The first quarter, actually, we need to start up the equipment, but we are in the middle of the state of emergency, but we need to take good care of that situation. In second quarter, we are now supposed to do various activities to take care of the situation.
As you said, if the things go well, there are good possibilities that Q2 sales will exceed the plan. In the future, we cannot see the future so well because of the COVID-19 impact. As of today, we haven't decided to modify the Q2 forecast because it's too early for us to say something decisive for the Q2 forecast. We are in the middle of the impacts of the COVID-19. There are many changes. There are possibilities that Q2 sales will exceed the plan.
When you look at the overall situation, are there any sufficient factors for us to make a decision to change the Q2 forecast? We think it's too early to say such kind of thing. Actually, I have one follow-up question. If that is the case, the shipment from April to June, and also the startup situation in the global market, are there any stagnation?
There is no stagnation at all, but you are now reflecting various risks. That's the reason why you decided not to change the current plan. There are no specific factors, and there might be some unexpected factors coming out. We cannot see the future. That's the reason why we haven't modified the forecast of this fiscal year.
Next question is from Mr. Hirakawa of Merrill Lynch Japan Securities.
I am Hirakawa from Merrill Lynch. I have a question on China, that your sales in China. In your presentation, in Korea and China, memory customers sales are rather high in the April to June. That's what you said earlier. Could you give us more details? For example, year-on-year basis, that is 2.7 x high. On the year-on-year basis or quarter-to-quarter basis, what sort of trend you can see for the memory sales, for example?
On year-on-year basis, last year, memory and logic, the proportion between the two was about 40 - 60. Logic was more than memory. The ratio is 60 - 40 for last fiscal year. Memory, in particular DRAM, were under adjustment last year, last fiscal year. However, this year, the memory, the DRAM, a slight increase, but 3D NAND, 50% increase. By and large, in calendar year, on year-on-year basis, when you can see our result, about 50/50. The memory and logic is 50/50%. That's how we view the market. The result, sorry.
Thank you very much. I'm sorry, I was not able to hear you very well because of noises. You just talk about overall market rather than China market. The same understanding is applied to China? I'm sorry. I talked about global market rather than China market. If it was, as a follow-up question, could you just focus on China? Maybe last year, memory and no memory, what is the proportion in China last year? Now we are in the middle of after the April-June period, what is the changes between memory, no memory, China market? Could you share your idea with us, please?
For that question. Okay. I am Yatsuda of IR department. May I answer to your question? Last year, in China, especially local Chinese manufacturers, they focus on memory investment. This year, what we expect is foundry in China. Actually, we cannot see any growing trend in the China foundry yet. By the end of this year Chinese foundry customer make some announcement of the increase of CapEx, and I think foundry's proportion in our sales will be increasing.
Thank you very much. April-June period, memory in China, sales was very good. Rather than local memories, but it's a kind of investment done by the global memory manufacturers rather than the China local memory manufacturers. Is that correct understanding?
No, no. Actually, the China local memory manufacturers were rather active in the April-June period in their investment.
Thank you very much.
Thank you very much, Mr. Hirakawa, for your question. Cowen and Corporation, Mr. Krish Sankar. This is the question in English, let me just read out the question in Japanese. How do you see your NAND etch market share evolving this year and next year with both international NAND manufacturers and Chinese domestic NAND manufacturer? Share.
The changes in share. TEL product in NAND. TEL share in NAND, how much increase is expected? That's the intention of the question, I understand. As I said earlier, the Tokyo Electron etching for NAND application, MLC, we are acquiring. We have obtained high share for SLIT process. We are making good progress for the evaluation, and you can see some evaluation results coming out little by little. Based on that, for SLIT process area, for NAND, we can see some increasing trend. We can see increasing trend in our share in the SLIT process. As for the future, further high aspect ratio trend is going on. We are focusing on the HARC process, and high etch rate, and precise etch profile controllability. These are our advantages, and we can capitalize on that core competencies.
We have the midterm business plan, and etching is expected to grow furthermore, and that is one of the drivers for us to achieve the midterm business plan. Against the objectives of the midterm business plan, we are on the steady progress to achieve the midterm business objectives.
Mr. Sankar, thank you very much for your question. Next question is from Mr. Yasui of UBS Securities. Mr. Yasui, please.
Thank you very much. I am Yasui. I also have a question on the limit of the scalability of the devices. Now Intel made announcement about 7 nanometer, and it's rather inevitable. Have you expected that sort of limit in terms of the scalability of the logic devices beyond 7 nanometer? Or do you think that is the very serious problem inside of your company? In other words, did you expect such announcement by Intel, or it was kind of out of blue for you? Could you share some idea with us, please?
Intel's announcement last week, there are many comments coming out on that announcement, but actually that is the customer's strategy. I'm sorry, we are not in a position to make any comment on our individual customer's announcement. I have nothing to talk about that.
I understand. I'm sorry for that. I have one follow-up question. Limit of the miniaturization, how do you view the limitation of the scalability?
According to my understanding, in the past, JPY 1 trillion, for example, was invested in the high volume production line for the advanced technology node. That level of investment is now being slowed down. As a result, I'm afraid your company's sales might be reduced.
You are not able to gain profit because the cost is increased and sales is decreased. How do you see the limitation of the scaling? From the viewpoint of the process tool industry, what sort of impact do you expect because of the limit of the scaling of devices?
I'm sorry. Actually, I'm not able to hear your question very well because of some noises, so I hope my answer is matching your question. I can answer properly to your question. If it's not, please let me know. If I understand your question correctly, to begin with, as I said earlier, the technology innovation, actually, so the storage, speed, low power consumption, and high reliability. In different aspects, we have been promoting technology innovation. In our company, we are working on the leading-edge EUV Coater/Developer technologies.
We have the 100% for the high volume production for Coater/Developer used for the EUV lithography and patterning, etching, film deposition, and cleaning. Those applications, we have devices for all those applications. The applications and patterning, when they are combined each other, and when you see the new materials as well, I think there will be increasing opportunity for us to create our values. That provide us a lot of business opportunities. R&D expenses and CapEx, we are going to enhance the R&D investment and CapEx in the future actively. We may see increase in depreciation as well, but in order for us to provide high-quality services and products, including Field Solutions services, we must pursue the top-line increase and also bottom-line increase. From that viewpoint, we try to achieve the financial model in the midterm management plan.
There are many chances for us to achieve the financial model. Therefore, we are very happy to see increasing number of business opportunities, as we said in our midterm business plan. Although things are challenging, but they are achievable. I'm sorry if my answer is not good enough for you. It's not apple to apple. We are determined to pursue high value-added application creation in the leading edge area, and you can see more and more opportunities. About our installment base is increased by 4,000 unit year- by- year, which provide higher opportunities for our Field Solutions services. Using data, by using DX, digital transformation, there are many opportunities for enhancing efficiency, remote services. We can provide remote support to the customers furthermore in the future. Our midterm business plan says we do see the high growth potential toward the future. Thank you very much.
I'm sorry, my sound is not so good enough because of noises. Thank you very much. Mr. Yasui, thank you very much. The next question is from Mr. Hasegawa of Mitsubishi UFJ Morgan Stanley Securities.
I am Hasegawa. In the first quarter results, I want to get some confirmation from you. The net sales in the first quarter would turn out to be good by region. Do you think that is because the acceptance in China were more successful than expectation? As for the SG&A, expenses were lower than expected. I think that has been suppressed to some extent. Could you just give us more reasons why you can see higher results than the plan, and you have more customer advances? Where did you get the orders? Could you just give us more details about the results of the first quarter, for example, customer advances?
I am Nunokawa. Let me answer to your question. Thank you very much for your question. About by region. As you asked earlier, in China, I talked about China earlier. As you can see here, Korea, the portion of Korean sales increased. By and large, compared with previous quarter, the JPY 300 billion last quarter. North America slightly shrunk. Similarly, on the bottom, the green color, Taiwan sales decreased a little bit from the previous quarter. Relatively speaking, as you can see, as I said earlier, on the bottom, pink color, sales in China, and sales in Korea, the orange color, increased from previous quarter. China, I talked about China mainly, but also in Korea, we saw the drastic increase in sales in the first quarter, Korea and China.
As for the customer advances, for this, we are not able to give specific information on customer. As far as our business is concerned, we have some advances from the customer. That's our business style. In this quarter, we received a bit more customer advances. I cannot name the name.
I have one follow-up question. What is the customer acceptance of the equipment? Which region you saw the higher sales than your expectation? By device, by region, are there any characteristics by device or region or devices? Could you give us some implications?
As for the sales, I'm sorry, let me repeat the same thing. China and Korea, the sales increased a lot. Acceptance by the customer, actually, we are working on completion of the setup, and there is no major advancement of the completion of the setup. In every region, our startup staff members worked very hard to complete the startup steadily. That's the reason why we saw the increase in sales. Thank you very much.
Thank you very much, Mr. Hasegawa. Next question is from overseas. Let me just read it out. This is a question from Mr. Harry Chen of Nippon Life Insurance. The question is: are you gaining market share in China because of rising U.S.-China tension?
Let me answer to your question. I am Kawai. U.S.-China trade friction. I'm not in a position to say anything about the country, about our relationship of the two different countries. In principle, our company's policy, we are determined to engage in the fair competition with the American competitors.
For various reasons, American competitors are not able to deliver their product to China market. We are not willing to obtain that kind of market area. We want to remain fair in our competition with American competitors. We won't get any market share from the U.S. manufacturers because they are not able to deliver the products. Under that policy, we are still increasing our share. Mr. Chen, thank you very much for your question.
Next question is from Mr. Sugiura of Daiwa Securities. Mr. Sugiura, please.
I am Sugiura of Daiwa Securities. Earlier in the presentation, you talked about DRAM capital investment. You said DRAM capital investment decreased slightly. You just talk about one customer, or do you see the general trend among all DRAM manufacturers?
The background is, actually this year, the DRAM share increased. You are supposed to outperform the market growth, and I want to see that any impact on that plan. As far as I'm concerned, our company's concerned, I'm not giving you any answer based on one specific customer. For your question, I'm just talking about the overall trend of DRAM manufacturers. When you look at DRAM market, smartphone decelerated, demand is decelerated. Data center, actually, they are slowing down the CapEx because of their strategy. Having said that, DRAM demand increases slightly compared with the previous year. CPU will be coming out this fiscal year. Toward next fiscal year, we see some expanding trend for DRAM. DRAM market. That's what I can say about the trend of the DRAM market.
Follow-up question. You said your company outperforms market growth and there is no changes in that view.
Correct. No changes in our view.
I have one more follow-up question. DRAM forecast. Now we have some decrease, but that decrease in DRAM can be filled out, compensated by the foundries. The foundry in which region may offset or fill out the negative growth of the DRAM demands?
Yes, there are some cancellation, but offsetting, but I'm sorry, we are not able to give you any specific answer for that.
I understand.
Thank you very much, Mr. Sugiura. Now I have one last question. Mr. Ishino of Tokai Tokyo Research Center. Mr. Ishino, please.
Hello? Can you hear me?
Yes, we can hear you.
I put down the notes on chat box. As of April and now in July, from the viewpoint of Mr. Kawai, how do you view the WFE market environment? Are they improving? No changes from April to July? If it's improving, if there is no changes, please let us know. You said DRAM CapEx, capital investment, is slowing down, but offset it by foundry CapEx. How do you see the overall trend? Between April and July, over the past three months, what sort of changes have you seen so far?
Our financial estimate announcement was delayed from April to June 18th. Because of the COVID-19, things have been changed, and that's the reason why we made the announcement on June 18th. WFE. There are many factors, increasing or decreasing factors. Now we can see 10% increase in WFE market on year-on-year basis.
As for more details, as I said earlier, there are some offset high-performance computing growth, which drive foundry capital investment. Smartphone and data center purchases less DRAM now, DRAM shows some decline in demands, they offset each other. There is no big difference. The total value remain unchanged between June and July, there are some difference in details.
I have one follow-up question. To China, are there any equipment you cannot deliver or ship to Chinese market because of Chinese customers or because of the nature of equipment? The first question is, are there any equipment you cannot deliver or ship to the Chinese market?
Entity List. The customers on Entity List, unfortunately, we are not able to deliver things to the customers on Entity List. We don't have any other products affected at this moment.
Thank you very much.
One more thing. Toward next fiscal year, many customers are now watching the market situation. Next fiscal year, I think many customers do have the very ambitious plan. Our original outlook in January was the growth rate in high-teen, but it was revised to 10%. I think that some decreasing portion for this fiscal year will be carried over to next fiscal year. IoT, AI, 5G are to be promoted by the semiconductors. General trend as a whole remain unchanged. That's one thing I wanted to say. One more thing I want to add is that, for example, logic, the EUV applications will be increasing in logic, for example.
Now we have 100% share for Coater/Developer for EUV lithography. We also have products equipment for patterning, and we are required to promote technology innovation. We want to make contribution to the society and industry. We have high potential to contribute the society and industry, and we'd like to meet the needs of the society by providing good technology, advanced technologies. I want to share that idea with you. That's the reason why I repeat this comment.
Thank you very much, Mr. Ishino, for your question. It's time for us to close today's financial announcement. Thank you very much once again for joining us despite your very tight schedule. Thank you very much.