Earnings Call: Q1 2021

Jul 28, 2020

Thank you very much for joining us today despite your busy schedule. I am Yatsouda of IR department acting as a moderator in today's session. Now let me introduce the attendees on our site. Mr. Tito Tineshi, Representative Director, Chairman of the Board. I am Tineshi, Nashamichi. Next is Mr. Toshiaki Kawai, representative Director, President, CEO, I am Kawai. And Mr. Yosifazuno Nokawa Corporate to Executive Vice President And General Manager Finance Division. I am Nuno Kawa, National Miyjediwari. Before starting the presentations, let me explain the flow of today's meeting. First of all, Mr. Nuno Kawa and Mr. Kawai will make presentation. After that, after until 6th we will have the Q And A session entertaining questions from you. This financial announcement uses 2 tunnels 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, but 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 due to no 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. Nuno Kawa, our Corporate Director, Executive Vice President and General Manager will present the consolidated financial summary. Good afternoon. I am Nuno Kawa 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 a very busy schedule taking care of the various problems such as COVID-nineteen. The here, you can see the final summary. The second column from the right hand side you can see direct power. Now you can see the first quarter of fiscal year 2021, The consolidated net sales was JPY314.8 billion, two point six percent drop from the previous quarter. Slide decline, but we maintained high level of net sales. By segment, the SPE net sales was jpy303.7000000000. Maintaining JPY 300,000,000,000 level. While the FPG net sales was JPY 11,000,000,000, decreasing by 23.4%. The drop rate of the FPG settlement was relatively high. The gross profit margin remained high at 40.8%. The operating margin increased by 1.8 percentage points to 23.5 percent. 1,000,000,000 increased by 1.8% from the previous quarter. The increase of the operating margin was attributed to such fact that SG and A expenses in the first quarter was kept low, and some of them were shifted to the 2nd quarter. This is a graphic representation of the financial summary. You can see paragraphs. The blue collar represent net sales, purple represent operating income and orange shows net income. The line graphs, the green one, represent gross profit margin, and purple line graph shows operating margin. The R business in the 1st quarter proceeded steadily Both gross profit margin and operating margin ended at a high level. It was to the 2nd quarter, new equipment sales plan, more than 80% of SPE and percent FBB Fabrication equipment have been shipped already. This shows settlement information. On the left, SBE As I explained earlier, in the financial summary, impacts of the drop of SG and A expenses were significant. Profit margin showed an increase. You can see a steady grow on the quarter to quarter basis in the middle Ukraine CFPD. The SB SG and A expenses decreased, but at the same time, profit margin declined 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 SP sales by region. On the right, you can see the 1st quarter results. Compared with the previous quarter, the sales to memory customers, particularly in Korea and China increase. Orange's Korea and pink color represent China. So this shows the increase for memory customers. This shows SPE new equipment sales by application. In the previous fiscal year, The blue collar and purple carlar represent memory cells. The proportion of sales to memory device manufacturer tended to be relatively low in the first quarter. However, the sales to memory customers, as you can see here, accounts for about 50%. So sales to memory customers increased considerably. This shows fuel solution sales. In the first quarter, the sales of distribution was JPY 83,700,000,000 Again, showing a good progress. Next, this lecture's balance sheet. On the left, the assets. On the top, the cash and cash equivalents were JPY 322,600,000,000. In the middle, you can see the light blue that is the inventories The inventories were JPY 413,900,000,000. 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 848,300,000,000 as we firmly secured to the profit also in the first quarter. The equity ratio was 65.3 percent. This shows the inventory turnover and accounts receivable turnover. You can see inventory turnover green color line 123 days remaining at the 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 5 1,000,000,000. The cash flow from financing activities was minus JPY 53 point 5,000,000,000 due to the dividend payment. Free cash flow was JPY 37,600,000,000. 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 Kauai. Thank you very much for joining us this part. You are very busy schedule today. So let me start with the business environment. Though there are some changes what increases decreases bifurcation in WFE market, as you can see here, in general, there have been no major changes from the financial estimates. Announced on June 18. Although it is necessary to keep closely looking at the macroeconomic trend, along with the COVID-nineteen spread WFE market is expected to grow by 10% and the FPD fabrication equipment TFT area process market is expected to grow by 15% on a year on year basis. Next, this shows business progress. Our business activities in the first quarter made good progress. With various countermeasures against COVID-nineteen spread taken, our factories operated in line with the plan in general. The equipment installation is conducted by mobilizing local and Japanese expert employees as well as remote support services partially. The field solution business is making good progress in line with full year plan. Thanks to the high utilization rate of our customers fab. Next, I'd like to talk about our business opportunities and focus areas for the future. For logic foundry, The EUB lithography will be introduced to the high volume production lines. Compex will further scale down in geometry and in the near future, a complex 3 d structure such as gate all around or GAA will need to be adopted. For the UVography, we are developing developer and hedging process technologies which adapt to new resist materials and also developing technologies to enhance yield and productivity. To address highly scaled down contact we are developing ALE, which is high selectivity, atomic layer hedging technology and also deposition technologies of new low resistance metal materials. In relation with GAA plasma etching and gas chemical etching, both of which are our core competencies, As well as screening free from pet and claps will present new business opportunities. For DRAM, the advanced patterning technologies are essential Our company is developing and proposing various solutions packages, combining a wide range of our 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 3 d NAND, our customers are engaged in development of highest stacking of more than 200 layers. Recognized to realize both precise edge control profile and high edge rate in the hard process. And also for ALD and CVV, film quality and gap fill performance are critical differentiators. For the 3 d NAND as well, there are also increasing demands of high productivity web itching 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 18. As I presented in June, we compiled a 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 1,280,000,000,000. The R and D expenses and CapEx plan also remains unchanged from the announcement on June 18. In order to make the maximum use of our future growth potential, we are planning a record high R and D expenses of JPY 135,000,000,000 and CapEx of JPY 56,000,000,000. We will continue active investment for future growth, further growth to achieve the objective of the midterm 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%. You very much for your kind attention. This concludes my presentation. We will have the question and answer session until 6:30. We will 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 Raising 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 1 by 1. 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 secure chariot. We cannot answer question if no name or affiliation is given. On the Japanese channel, I'll 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'm 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. So the first question please. Mr. Shibano, Please. I have Shivano from Citigroup Securities. Yes, Mr. Shivano, please. In June, Gabri 2020 assumption was forecast was presented, and it also came up with the financial estimate in this fiscal year. And in March 2020, after that, some of the memory manufacturers decided to push out the CapEx plan as June 18th, you announced that WFE market is expected to grow by 10%. According to my understanding, however, you did maintain your January forecast. The Western market expected to grow by high teen level. So is your internal assumption declined a little bit And if that is the case, are there any impacts on that temporary set that is around the same of your focus. That is the first question. I also have the follow-up question later on. Now let me answer to your question. I am Kawai. So initially this year, we set the tour about 10% more than 10%. But June 18th, We said 10% growth of the WFE market compared with the last fiscal year. That's what I said. Band WFE as a whole. And now we are in the July. And when you at the WFE market site itself, there have been no changes in our focus in terms of the size of WFE market. So that's why our full year forecast 1,000,000,000,000, we didn't change that full year forecast at all. According to your my understanding, for memories, I just heard that there are some declining demand from memory, but logicfoundry demand remain high. That's the reason why there is no major change in the total size of WFE market. Is correctly, is that correct? For application, there are some increase or decrease by application depending on the opinion. That's what I meant actually, high performance computing. Actually, there are wider applications for hyper performance computing, the logic and foundry, actually, they are growing steadily. However, for DRAM, SmartForm demand has decelerated, and there are some, slowdown in the data center investment because of their strategy. There is slight decrease for DRAM. So slight increase in demand for DRAM compared to the last year. When it comes to 3 d NAND, actually declines elasticity is rather high, So if the price goes down, the demand may increase for NAND, so about 50% increase is expected on year on year basis. And I still have the same opinion for NAND demand. Thank you very much. What you have said, is Q1 2020 calendar year WFE market focused. But your fiscal year ending in March 2021, including January to March. So there are some difference between calendar year year and a fine fiscal year, but 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. So it's been 1 month since June. Let's see. When you look at towards the first 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 and forecast yet Thank you very much for your answer. Mr. Shivano, thank you very much. Next question is from TRS A. Security is Japan. Mr. Yoshida, please. Thank you very much. I am Yoshida from CLSA Securities. Thank you very much. My first question is about the so for our question for Wafi incorrect, and 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? Actually, the COVID, under the COVID, maintains impacts, and there are various trends in the macro economy. Of course, so you must closely watch the trends of the macro economy and impacts of COVID-nineteen IoT AI5gdatacommunute traffic increase. So those things will be increasing and growing steadily. So our society will be more and more depending on ICT, ICT Technology and ICT will be implemented in the society more and more in the future So 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 said, announced the GDP is expected to grow by 5.4% next fiscal year. So data traffic is expected to grow furthermore. And I think the data traffic increase is 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, but We are not able to give you any specific fears or numbers because we must closely look at the impacts of COVID-nineteen. I'm sorry for that. But we can I have one follow-up question? The other day, Intermed 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 the 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 notices. And as well as a general analysis concern, there are no major impacts on our business. Thank you very much, Mr. Yoshida. Next question is from Mr. On Nomura Securities. I am Madaki from Nomura Securities. Thank you very much. A first question. So I have a question on the market trend. In North America, I mean, how do you view North America market? Do you have any comments? You say you cannot say anything of a with customer, but there are many interesting news coming up from North America. So 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. Saverus Countries do have their own strategies, the North America, are planning to increase their production capacity. That is a general trend, so 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 there's timing need to be investigated to find out when, so 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. So you don't have any specific inquiries from North America customers, okay? My follow-up question is about Korea. So there are some troubles and many conflicts. So Korea 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? So the Korean as for the Korean market, for one thing, So, if we provide where number 1 performance equipment process tools, our business will not be affected so significantly. So we are now leading the technology innovation And that is most important thing for us to pursue as long as we are number 1 in the technology innovation. As you know, our industry is depending on the strong technology innovations, 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, Ms. 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 3 d NAND Technology. Challenge, how do you see the technological challenge for logic and 3 d NAND, for example, logic Intel made announcement the other day about some changes in their production strategy, 7 nanometer or a 10 nanometer. There are now hitting some ceiling while limit. Obviously, but from your viewpoint, the logic scaling, how much logic scaling will be possible in the future? Also for 3 d in hand, you said 200 layers or more. You talked about etching process for 200 layers more up to 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. Hark etching technology that you have been working and market share of Hark etching is to be obtained, there are any changes in your focus in the part of that market. Okay. So 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 high and higher, new structure, new materials should be introduced and also more than more technologies need to be developed. In order to satisfy those needs, we cannot stop technology innovation. However, having said that, the intangulation or various power to consolidate different technologies is necessary. 3, we have been developing our core competence that 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, But we are carrying out joint evaluation together with customers. Those are the items under the joint variation with customer is increasing and the technology innovation is growing exponentially. I don't think that is exacerbation. I think the technology innovation is accelerated rather than slowing down, that's the feeling I have. So from now on, we'll see more and more technologies to innovate it. That's the current status. For 3 d NAND, there are 3 major hedging 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 3 d 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 manufacturers in terms of their technology and how do you view the time frame? Could you share your idea with us, please? I'm sorry. I cannot say anything about specific for the specific customers. I'm not in a position to make any comment on the specific customer. We appreciate understanding. Okay. Thank you very much for your kind comments. Thank you very much, Mr. Muriyama, 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. So the plan for the first half of this year So when you look at when you have these past quarter results, when we deduct it from the First half, I think that 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. But do you see the Q2 results will be higher than the plan? Or the Q1, sales by region. When I look at the Q1 sales by region, So in China, the sales in China increases from April to June. So maybe from January to March, you are supposed to recognize the sales, but because of the COVID nineteen, you are not able to recognize the sales in the January too much. That's the reason why sales in the first quarter looks rather high because of the service recognition. Is that the correct understanding? Let me answer to your question. About your question, as you said in your question, in the past, our results of the 2nd and 4th quarter are better than the 1st and third quarter. That was the general trend in the past. But this fiscal year, the 1st quarter results, and when you compare the first half plan, as you said, the Q2 result is supposed to decline, but you say it's correct. That's how it looks like. The fast 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 But as Mr. Yamamoto said in your question, the first the previous quarter, the 4th quarter, actually some equipment was started up. But because of COVID-nineteen, Some of the sales were shifted to Q1, the first quarter. And there 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. So 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. I so may I May I say something? I am Kawai. I want to add some comment. Actually, you see here is a bit different from the previous years, maybe because the COVID-nineteen impacts. That's how we understand this art 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 situation. As you said, if the things go well, there are good possibilities that due to sales will exceed the plan. In the future, but we can see the future so well because of the COVID 19 impacts. So as of today, we haven't decided to modify the Q2 forecast because it's too early for us to see say something decisive for the Q2 forecast, we are under in the middle of the impacts of the COVID nineteen and there are many changes. So there are possibilities that Q2 sales will exceed the plan. But When you look at the overall situation, are there any sufficient factors for us to make a decision to change the Q2 focus, we think it's not it's too early to say such kind of thing. Actually, I have one follow-up question. So if that is the case, the shipment from April to June and also the start up situation in the global market. Are there any stagnation, or 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 there are no specific factors. And there might be some unexpected factors coming out. So we cannot see we cannot see the future. That's the reason why we didn't. We haven't modified the forecast of this fiscal year. Next question is from Mr. Hirakawa of Mellynch, JAPA Securities. I am Hirokawa from Mellynch. I have a question on China that yourselves in China. In your presentation, For 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 times high, but 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 proposition between the 2 was about 40 to 60 logically smaller than memory The ratio is 60 to 40 for last fiscal year. Memory in particular, DRAM were under adjustment last year. Last go a year. However, this year, the memory DRAM, the slight increase, but three d NAND, 50% increase. So by and large, in calendar year on year on year basis, when you can see our result about fifty-fifty, The memory and logic is 50%, 50%. That's how we will view the market. The results, sorry. Thank you very much. I'm sorry. I was not able to hear you very well because of noises. So just to talk about overall market rather than China market, the same understanding is applied to China or I'm sorry, I talked about global market rather than China market. If it's cost, as a follow-up question, could you just focus on China? So maybe last year, so memory and non memory, what is the proportion in China last year? And now we are middle middle of after the April, June period, but it's the changes between memory, non memory, China market. Could you share your idea with us, please? Well, for that question okay. I am Yafuda of IR department. May I answer to your question? Last year, in China, especially local Chinese manufacturers, they on memory investment this year, but we expect its foundry in China, but actually we cannot see any growing trend in the China foundry yet, but where the end of this year, Chinese foundry customer Next on the announcement of the increase of CapEx. And I think foundry's, proportion in our sales will be things will be increasing. Thank you very much. So June April, June period. So memory in China sales was very good, rather than local memories, but it's a kind of investment done by the global memory manufacturers, other 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 the investment. Coolland Corporation Mr. Krish Sandker. This is the question in English. So let me just speak out to be about the question in Japanese. How do you see your NAND Edge market share evolving this year and next year with both international NAND manufacturers and Chinese domestic non manufacturer. Share. So the changes in share So tear product in NAND, so tells 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 sleep 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 select process area, for NAND. You can see some increasing trend. We can see increasing trend in the split our share in the split process. As for the future, further, High aspect ratio trend is going on. So we are focusing on the hard process and high age rate and precise profile control ability. These are the advantages, and we can capitalize on that core competencies. We have the midterm business plan and itching is expected to grow further more. And that is the one of the drivers for us to achieve the midterm business plan. So 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. Yassy of UBS Securities. Mr. Yassy, please Thank you very much. I am Yasui. I also have a question on the limit of the scalability. Of the devices. So now Intel make 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? What 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? So Intel's announcement last last week, there are many comments coming out on that announcement. But actually, that is the customer's strategy. So 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. So limit of the mutualisation How do you view the limitation of this capability? According to my understanding, in the past, 1,000,000,000,000, for example, was invested in the high volume production line for the advanced technology node. But 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 increase the cost is increased and sales is decreased So, how do you see the limitation of the skating? From the viewpoint of the process to 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, technology innovation, actually so the storage, speed, low power consumption, and high reliability. So in different aspects, we have been promoting technology innovation. And in our company, we are working on the leading HEU V, Coache Development Technologies. We have the 100% for the volume for the high volume production for quarter developer used for the EUV Esography and patterning, itching, film deposition, and cleaning, those applications we have. Devices for all those applications. So 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 provides us a lot of business opportunities. RNG expenses and CapEx, we are going to enhance the R and D investment and CapEx in the future actively, we may see increasing depreciation as well, but in order for us to provide high quality services and products, including field, solution 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. And 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 Apo Joapo, But we are determined to pursue high value added application creation in the leading edge area, and you can see more and more opportunities in about our installment base has increased by 4000 units year by year, which provide higher opportunities for our fuel solutions services. And using data by using DX Digital Transformation. There are many opportunities for enhancing efficiency, remote services, we can provide remote support to the customers, but are more in the future. So 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 UFGA Morgan Stanley Securities. I am Hasegawa. In the first quarter results, I want to get some confirmation from you. This net sales in the first quarter will stand 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 and A expenses were lower than expected, I think that has been suppressed to some extent. So could you just give us more reasons why you can see higher results than the plan? And you have more customer advances and where did you get the orders? Could you just give us more details about the results of the first quarter. For example, customer advances. So I am Nuna Kawa. Let me answer to your question. Thank you very much for your question. First of all, about Bi Region, As you asked earlier, so in China, I talked about China earlier, And as you can see here, Korea, the portion of Korean sales increased. So by and large, compete this previous quarter to JPY 300,000,000,000 last quarter, but North America slightly shrunk Similarly on the bottom, the green color Taiwan sales decreased a little bit from the previous quarter. Directly speaking, as you can see, as I said earlier, on the bottom, pink color, China, sales in China and sales in Korea, orange color increased from previous quarter. So China I talked about China mainly, but also in Korea, we saw the drastic increase in sales in the first quarter. Korea and China. And 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 And in this quarter, you we received a bit more customer advances. I cannot name the name. I have one for that question. So what is the custom acceptance of the equipment. The which region you saw the higher sales than your expectation and by device, by region. Are there any characteristics by device or vision 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. And the 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. But in every region, our start up staff members were very high 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. Hasay Gala. Next question is from overseas. Let me just read it out. This is a question from Mr. Harry Chen of Nansham Life Insurance. The question is, are you gaining market share in China because of raising U. S. China attention? Let me answer to your question. I am Kawai. So US China, trade friction. I'm not in a position to sending about the country to country about that travel relationship of the 2 different countries. But 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, and we are not willing to obtain that kind of market area. We want to remain share from the US manufacturers because they are not able to deliver their products. But under that policy, we are still increasing our share. Mr. Chen, thank you very much for your question. Next question is from Mr. Segira of Daiwa Securities. Mr. Segira, please. I am Sigvera of Daiwa Securities. Earlier in the presentation, you talked about DRAM Capital Investment, you said, dirham Capital Investment decreased slightly. So you just talk about 1 count customer, or do you see the general trend among the old DRAM manufacturers? The background is actually this year, the DRAM share increased. And 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 is concerned. I'm not giving you any answer based on one specific customer. So for your soon. I'm just talking about the overall trend of DRAM Manufacturers. So when you look at DRAM market, smartphone decelerated demand is decelerated and data center. Actually, they have slowing down. They are slowing down the CapEx because of their strategy. Increased it slightly compared with the previous year. So CPU will be coming out this fiscal year. So towards next fiscal year, we see summit pending trend for DRAM DRAM market. That's what I can say about the trend of the DRAM market. Follow-up question. So you said your company outperformed market growth, and there is no changes in that view. Cracked, no changes in our view? I have one more follow-up question. So DRAM forecast, So now we have some decrease, but that decrease in DRAM can be filled out compensated by the foundries. So which regions the foundry in which region may, offset or fill out the negative growth of Yes. There are some cancellation but offsetting, but I'm sorry we are not able to give you any specific answer for that. Understand. Mr. Thank you very much, Mr. Segura. Now I have one last question Jim, Mr. Isino of Tokai Tokio Research Center. Mister Isino, please? Hello? Can you hear me? Yes. We can hear you. I put down the notes on our chat box as of April and now in July. From the viewpoint of Mr. Kawayi, how do you view the WFE market environment? 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? So between April July, over the past 3 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 we that reason why we made announcement on June 18th. WFE So there are many factors increasing or decreasing factors. And now we can see 10% increase in the BFA market. On year on year basis. As for more details, as I said earlier, there are some offset highperformancecomputing growth, which drive foundry, capital investment, On the other hand, smart phone and data center purchases less DRAM now So DRAM shows some decline in demands. So they are offsetting each other. As a total, there is no big difference. So the total value remain unchanged between June July, but there are some differences in details. I have one follow-up question. The China Are there any equipment you cannot deliver or ship to Chinese market? Because of China, Chinese customers or because of the equipment nature of equipment? The first question is, are there any equipment you cannot deliver or ship to the Chinese market. So entity list, the customers on entity list, unfortunately, we are now able to deliver things to the customers on entity list. But we don't have any other products affected at this moment. Thank you very much. One more thing. Next fiscal toward next fiscal year. Many customers are now watching the market situation but 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, IoTai5g are to be promoted by the semiconductors. So general trend as a whole remain unchanged. That's one thing I wanted to say. And also, one more thing I want to add is that, for example, logic the EUV applications will be increasing in logic, for example. And now we have 100% share for quota developer for EUV lithography, we also have products equipment for patterning, and we are asked required to promote Technology Innovation. And we want to make contribution to the society and industry. So we have high potential to contribute to society And Industry, and we'd like to meet the needs of the society by providing good technology, advanced technologies. So I want to share that idea with you. That's the reason why we picked this comment. Thank you very much, Mr. Xin, 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 touch schedule. Thank you very much.