Earnings Call: Q1 2020

Jul 26, 2019

So it's time for us to start Tokyo Electron Financial Announcement for the 1st quarter of the fiscal year ending March 2020. Thank you very much for joining us despite our very tight schedule. I am Yatuda of IR Office acting as a moderator for today's meeting. So first of all, we'd like to introduce attendees on our side. Mr. Tito Tuneshi, we presented Director Chairman of the Board. Next, Mr. Toshiiki Kawai represented Director, President and CEO. Mr. Yoshi Katsu Nino Kawa, Corporate Director Executive Vice President And General Manager of Finance Division. Okay. First of all, we'd like to ask Mr. Nuno Gawa, Corporate Director, Executive Vice President, General Manager of Finance Division, to present a consolidated financial summary. Mr. Nuno Kawa, please. Good afternoon, ladies and gentlemen. Thank you very much for joining us despite very hot weather. I am Nuno Gao. I'd like to make a presentation on consolidated financial summary for the first quarter of this fiscal year. First of all, here you can see the highlights for the first quarter of fiscal year ending March 2020. The financial results of this first quarter show good progress along with the plan for the first half of this year. We have repurchased 2,900,000 shares since May 2019 as of June 30, 2019. The total share acquisition cost amounted to 1,000,000,000, achieving 29% of the plan, a maximum of 1,000,000,000. Next, here you can see the financial summary. The sales net sales in the first quarter, as you can see over here, 1,000,000,000. Gross profit was 1,000,000,000, the net sales decreased, but as you can see, the gross profit margin is 41.5% remaining at the same level as the previous quarters. The operating income was 1,000,000,000. Net income attributable to owners of parent 1,000,000,000. As I said in the previous slide, we are doing well as planned and we will expect the increase of the sales and income toward the second half of this year. Now you can see financial performance represented in a graphical manner. As you can see here, sales was declined from the previous quarter to JPY 216,400,000,000. However, the green line on the top gross profit margin, when you look at this, remains at the same level at around 41.5% over the past few quarters. Next slide, please. Now you can see segment information. You can see the sales and settlement income as well. On the left you can see SPE. For this first quarter, SPE sales was JPY 198,100,000,000. Declined from the previous quarter. In the middle you can see FPD segment information, sales was declined from the previous quarter, JPY 18,200,000,000 However, when you look at the segment profit margin, which is 19.2%, very high level, So this is attributed to increase of inventory of the products, which were shipped, but not yet recognized sales. That is the major reason of the high level of the segment profit margin. Next slide please. Now you can see SB division sales by region. On the right hand side, you can see this quarter's results, as you can see over here, in particular, just in the middle of the spa graph, orange colored portion, Korean portion, the sales drop in Korea with Republican speakers. This is mainly because of the sales reduction for of SPE for memory customers. Next slide please. Now you can see the new equipment sales by application. Once again, the top 2 boxes, the blue collar and purple collar, representing memories you can see drastic drop of those two portions for memory. The sales decreased drastically. Next slide, please. This shows sales of the fuel solutions. When you look at outnumberquarterinthe1stquarterand2ndquarter, as general trend, the sales in the number quarters tend to be lower than the sales of the even number quarters Q4 and Q2, but this first quarter sales is lower than even compared with the third quarter of the last previous year. However, the sales are fluctuating steadily There are several reasons. Actually, modification sales was reduced in Japan, Europe and Korea, slightly. That is some of the factors However, parts sales are very solid. Next slide, please. Now you can see balance sheet. On the left, you can see assets, as you can see over here, the cuts and cash equivalent dropped from the previous quarter drastically because of the payment of the dividends and share repurchase. Just in the middle, the light blue portion represents inventories. The inventory increased from the previous quarter. In order to prepare for the sales increase in 2nd quarter, equipment shipment is making group progress. Accordingly, equipment on the startup startup is now increasing. That's the reason why you can see some increase of the inventories here. On the right, you can see the liabilities and net assets. You can see drop in net assets because of the repurchase of our shares Next slide please. This shows inventory turnover and accounts receivable. Turnover. On the right hand side, 1,000,000,000, the upper line, the green line represents inventory turnover. 116 days at a high level This is because of the reduction of sales. Also as I said earlier, we see the increase of the inventories. So these are the 2 major reasons for that. On the other hand, you can see the lower line graph accounts receivable turnover has decreased. We are collecting account received verbal steadily and we can see some reduction in sales. So those 2 are the major reasons for the reduction of the account receivable turnover. Next slide shows cash flow. This shows cash flow. On the reconciled, you can see downward bar orange color bar, which is by the conspicuous, representing cash flow from financing activities minus JPY 99,900,000,000 the payment of dividends, 1,000,000,000 and share repurchase of 1,000,000,000. So those 2 already components. So big downward bar is over here. On the other hand, cash flow from operating activities was 1,000,000,000 and cash flow from investing activities decrease in a fixed asset declined in the FAST quota relatively. Because the free cash flow was 1,000,000,000. Thank you very much. That's all about the financial summary. Thank you very much for your kind attention. Next, I'd like to ask Mr. Kawai, our CEO, to make a presentation on business environment and financial estimates. Mr. Kawai, please. Once again, good afternoon. Thank you very much for joining us despite a very busy schedule. I am going to make a presentation on business environment and financial estimates. So business environment, there are no major differences in our outlook, both for S PE and FPD from the previous meeting in April 2019. For the SPE, the capital investment in COI 2019 is expected to decline by 15% to 20 on the year on year basis. Although the CapEx for Logic And Foundry is strong, very much. The CapEx for memory is expected to go through a temporary adjustment due to the soft demand. But now we can see the very good inventory adjustments along with the inventory adjustment memory investment is expected to recover in calendar year 2020 FTD production equipment Although full year capital investment is expected to drop by 30% on the year on year basis, we expect the recovery in the second half of this year. So now you can see the WFE market environment and business opportunities by application. 3 months ago, the WMI market for Logic And Foundry was considered to grow by about 25% on a year on year basis, but this time we have made 10 point upward revision and it is expected to grow by 35% on a year on year basis. For memories, for non volatile memory and DRAM, both of them, we have made 10 point downward from our outlook in April, the WFE market for non RADA Memory is expected to decline by about 60% on a year on basis, and now beefy market for DRAM is expected to decline by about 40% on year end basis. For this year, memory and logic and foundry. Compodition was above 50% and 50% at the beginning. That's what we slowed in the beginning. However, the logic and foundry increased by 10 points and the other half memory declined by 10 points So there's no major change when you look at the full year. The capital investment for memory We think the current we are now at the bottom. So we need to see one more quarter and we will see a new investment plan maybe after 1 quarter. That's how we analyze the market situation. Now you can see the business highlights in the first quarter. For fiscal year 2020. The SP business strategies are implemented as planned. We are winning PORs in focus areas. So itching, As you can see, it's for IoT And Automotive Areas for midterm long term plan, we think IoT and Automotive is expected to grow just like storage and demand is increasing in those two areas. In that area, we got a new POR from a customer. That's what happened in etching. For film deposition and cleaning. We want PORs in critical processes for memory. For the film deposition, For 3 d NAND, we got 1 POR for DRAM, we got 2 PORs in total, 3 PORs, are got in the first quarter in ALD Business in Korea. For cleaning as well, critical cleaning process, we got the opportunities and we are now making business there. In other area than free focus area, we want a new order for Celsius in the nonweta memory market. Celsius is high value added waferglobal with tester mounted. The field solution business continues to go well. Actually, while setting 4000 units per year, and our installed base is growing to 69,000 units. Based on this background, our fuel solution business continues to go well. The Tell announced a partnership with Breach not for profit public private alliance in Frodea to develop SPEs and process technologies for Automotive And Industrial Applications, which are expected to grow drastically in the future. We made this announcement in the semicon West. This bridge is mainly working on 200 millimeter wafer technologies and this area is expected to grow furthermore through the partnership with Bridge we are going to promote the activities to meet the demands for automotive and industrial application so that we can set our positioning and we are promoting market penetration in those areas. For FPT, We expect to recognize sales for PICP for G10.5 and inkjet printing system for all the panels within this fiscal year. Year 2020 financial estimates. So the GWF E market is in the phase of adjustments in this fiscal year. Fiscal year, and there have been no changes for the financial estimates from the previous meeting. This shows 2 equipment sales and a breakdown by application in SPA division. The actual for the 1st quarter and estimates for the second quarter and onward. The up show sales in the first quarter was in line with our plan, as Mr. Nuno Kawa said earlier. And the majority of new equipment plan to sell in the second quarter have been shipped. There are no changes in our sales forecast both for the first half and second half of this year, but as I said earlier, the breakdown by application is changed from announcement of 3 months ago. For the second half of this year, the combined sales of VOSik foundry and logic and others are expected to account for about 60%. The sales for DRAM and non VADA memory will account for about 20% each. I'm very sorry, but so customers are now mice to some extent. So when we used to use orange and green color very clearly, that may expose the customer's investment plan, I'm afraid to say so we have just used the pink color coding rather than the orange green color coding this time. Really appreciate you understand this change. Next, you can see R and D expenses and CapEx plan, there are no changes from the previous meeting. R and D expenses is 1,000,000,000, CapEx 56,000,000,000, depreciation is 1,000,000,000. We plan to continue upfront investment in an effort to our midterm management plan and to promote further growth. Finally, we'd like to talk about dividend focus for this year. Dividend per share is remaining unchanged from previous financial announcement if the ongoing share repurchase is not taken into account. We plan to announce the correction of dividend along with the ongoing share repurchase in the financial assessment of the second quarter of this fiscal year. Thank you very much Now I'd like to entertain questions from the floor after until 6:30. I'd like you to limit question by 1, together with the one more follow-up question, could you identify yourself by your name and affiliations? And today's financial announcement will be uploaded to our website. So it will be highly appreciated if you could speak slowly and clearly. So if you have any questions, could you raise your hand please? Yes, the gentleman in the front row please. I am Maraki from Nomura Securities. I have a question about the market trend Actually, the fresh investment, which was expected in July to September, has been gone, which is really disappointing and it's not because of you, and but we are a little bit disappointed. There are some good news logic foundry, China, but I think those good news cannot offset the negative story in terms of the size. So you said you have some focus. Do you have any good news In the first quarter, if you may think it's too early to say anything, if you could share your idea with us. We really appreciate that. So there are various things, actually, there are quite a few good news. There are so many potentials in the market, But in one word, it's for logic and foundry is rather strong and we can expect a lot in the future And now you can see 5G relevant applications coming out and investment plan is now getting more crit. For memories, I have been talking with the top management of different customers in the semicon West and also this week through various meeting with customers. But there are something in common among the comments made by top management of the customers, which is we need to wait for another quarter. There are various factors right now, but we need to wait for another quarter, then we will see some concrete investment plan. So I think we can expect what happens after the next quarter. I have one follow-up question for memory, China they are, making investment a lot, but I don't think that size is rather limited, only forty K or 50 K the size of the investment. Do you include those China investment in your expectation? I think we have included those share investment for next fiscal year plan, not this year. Thank you very much for your I'm Hiroa Gawa from Merrill Lynch Japan Securities. I have one question about Field Solutions. You said Field Solutions business going well, particular part sales was very good. That's what you said earlier in your presentation. For memory, utilization is now going down, but you set past businesses going well. I want to understand the reason why the past business goes well. That's my first question. There is no particular specific reason for that, but we should say parts business doesn't drop too much. Maybe that's the correct way to describe this duration. When you look at the figures, as presented earlier, when you look at the sales compared with previous quarter, you can see slight decrease. This is the weather general trend, the old quarter, 1st quarter, 3rd quarter, you can see slight decrease from the previous quarter, 2nd or 4th quarter. But when you compare it with this quarter was the third quarter of fiscal last fiscal year, there is slight decrease. Which is rather unique for this fiscal year. That's what I explained in my presentation. When you look at the details, let me just repeat the same thing once again. The sales of modification slightly dropped. That was a major reason. On the other hand, the parts sales didn't decreased drastically. So that's what I said in my presentation. So if that is the case, the second quarter depart business or field solutions sales as a whole, what sort of expectations do you have when I look at the market trend you compare us the performance with the third quarter of fiscal year, but fuel solution of the first quarter this year is increased by 10% from the first quarter of last fiscal year. So do you think you can see a good trend in the FICC solution in the second quarter as well, I should answer the FICC Solution Businesses progressing as planned. As I said earlier, we ship about 4000 units every year So you can see growing installed base year by year. And actually the manufacturing line of the customers in operation So you can see the steady increase of the demands for the field solution business. Mr. Gentlemen, the 2nd row, please. Thank you very much for presentation. I admire though from Mitsubishi, UFVM Morgan Stanley Securities. I have a question on investment for memory customers. You said we should wait for another quarter. What will happen after one quarter, is it getting clear that the investment is decreasing or the investment is getting recovered? When the memory vendors said they are going to reduce CapEx drastically in 2020, I should tie it two memory vendors made such kind of announcement. So their comments are a bit different from what you said. You said After one quarter, you can see something clear. What will become clear? The investment will be decreased or investment will recover. There are some differences between your comment and the commitment by the tier 2 memory vendors. Could you just explain that? I just talked about our expectations. When we wait for another 3 months, then their investment plan become more concrete. That's what I wanted to say. For year 2020, the investment will recover That means compared with 20192020, the CapEx for memory is increasing, although the memory vendor memory vendor set, they want to reduce the CapEx, but you think the memory investment will increase we think we are in the bottom in the market. So in the future, we will see the increase. Do you think increasing orders or shipment are you talking about next year's expectation? So when you say you can see some increase increase in shipment or orders, Both of them, we think we are going to see some increase both in shipment and order. The next So when you wait 1 quarter, we will see more complete investment plan. Inventory has been decreasing considerably. And after 1 quarter, you will see more clear trend in inventory. And based on that trend of the inventory reduction, you will see more complete concrete investment plan. One more follow-up question. Now you have pink color to combine logic and foundry. There is no demarcation between the 2, but year 2020, what is the direction for the future, foundry and logic? What sort of expectations do you have for Logic and foundry? Do you think increasing trend or do you see some plateau situation? Could you give us some comments, one for logic and one for foundry, please? Our review on the market, we think both of them logic and foundry will be increasing, but I meant both were increased for DRAM gradually towards the second half of next year Actually, the investment starts from next year and we can see the enhanced investment in the second half of next year for DRAM. NAND the very similar trend to DRAM is expected for Logic And Foundry Very similarly, very solid trend is expected. But again, in the second half of next year, you can see the considerable increase in investment. So volume and foundry, you can see rather high level But next year, you can see further increase in investment, both for logic and foundry. Is that what you said? So for this issue, it's a bit too early for us to say something concrete. So when I look at the fluctuation of the investment plan, there should be no major difference Thank you very much Hi. I'm Moriyama from the Morgan Securities Japan. So memory supply demand situation is improving now that's what you said in your presentation. So I want to understand the reasons why you think memory supply rematriation is proving. There are several factors, I think. For example, over the time, the inventory will be reducing. That's one of the factors. In addition, on the supply side, if you look at the supply side as well, where now you can see the Japan Korea trade issues about the export of the semiconductor materials, also power outage in Yokai's factory of Toshiba memory So could you just elaborate the reason why you see some improvement in the memory supply demanduation? So the in addition to the inventory adjustments, there are drivers, including data center and smartphone. In addition, I should say for technologies, 5G irrelated technologies are also part of the factors, positive factors. In the technical area and data center and smartphones will be the major drivers. On the supply side, as I said earlier, the inventory will be reducing over the time. That's the only reason for that on the supply side. So could you elaborate your question, Vladimir Moore, please? So in Toshiba, there was power outage and flash memory supply might be reducing because of that power outage and also hydrogen flow light, how the customers from your viewpoint how to your customer address the potential shortage of supply of hydrogen flow light do you think that impact the future memory, supply and demand? How much impact do those factors have on the market? In 3 months from now. There are various factors. You talked about several factors. The regardless of those factors, my comment remain unchanged. Mayakawa from Credit Suisse Securities, Japan. I have a question on the financial estimates. There are no changes on your financial estimates. But you have changed the sales mix by application, and I wonder what sort of impact does it have for the gross profit margin? The sales for NAND was reduced by JPY 30,000,000,000. And the sales for DRAM was also corrected downward by JPY 20,000,000,000 and sales to Logic was increased by JPY 50,000,000,000. So for NAND, I think HN system, a lot of HN system is installed for the NAND. That means NAND's business feature hype profit margin, but now you have increased a lot for the foundry. And are there any any factors to offset that margin. About your question, So by application, I should say So change in sales mix do not have any impact on the gross profit margin. I think that is your question. There's no major impact on gross profit margin. So for logic and foundry, there's no big difference in the product mix or for foundry. Now you have the high share, including itching system or EUV, Because the truck installed and truck profit margins rather high, there should be no problems. Is that what you mean? No, by application, there's no major difference. So even if there are any changes in application, that doesn't impact our gross profit what is unique to our company is exposure has remained unchanged regardless of application, even if some application increases or some application did decreases that doesn't impact our group's profit margin. So market share, for example, the HHI investment is reduced but your share target doesn't change. Is that what you mean? But HR itself, for logic, that our share of HII is rather high and memory investment is rather high, but when you just look at the share, the Ayrshire in etching in logic is higher. So when you look at the sales plan by product, even if the there are some changes in sales mix by device. There is no change in sales mix by product. Is that what you mean? Yes, that's correct. I am Adi coming from 0.72 during your presentation, we talked about inventories, in the first half of this year, the fact I think this was the positive factors toward the first half of this year My question is about the customer advances in the balance sheet. About 35% increased of custom advances are shown in the balance sheet. How can we understand this? So now we can see the orders increased drastically now or customer mixes has been drastically changed or just increasing customer advances to what second half of this year, just like inventories Do you think this increase in customer advances could be translated as a positive factor for the second half of this year? Which slide are you talking about the balance sheet? I have a question on customer advances in the balance sheet. 30 5% increase in customer advances in the balance sheet. So inventory so inventory increased from the previous quarter? No, I don't ask about the inventory. I have a question on the liabilities. Customer advance is 1,000,000,000 is increased to 1000000000. So it's not about PowerPoint or slide. It's in the presentation. Okay, I understand your question. As for our business, so customer advances, as you said, So it depends on timing. In some cases, we receive money a bit earlier than usual And now you can see increase of customer advances because we've got money payment a bit earlier than usual. So in our business practices, our company sales as recognized when after the completion of the startup and testing, but in some cases, we received money from the customer from that criteria. In such a case, we just handled that money as customer advances. In this particular quarter, we can see some increasing customer advances. That is the major factor. So when we ship or deliver our product to overseas countries by boat, the payment term or conditions are very good in the case of the overseas customers. In some cases, So we get money, journey, delivery or journey startup. That sort of thing sometimes happen. Ultimately, 10% of the total payment is received during the completion of the startup and testing, but 90% is handled as the customer advances. For this particular quarter, we received customer advances rather a lot compared with the other quarters. Thank you very much for your question. Thank you very much for your presentation. I am Umawa Goldman Sachs Japan. On page 17, you talked about PORs and I want to understand more details about those PORs for etching from deposition and cleaning, you've got the PORs for each of those 3. I want to understand the PORs and the timing that those cells are recognized. Could you make some comment on that issue, please? Next fiscal year, memory investment is expected. That's what I said. For 3d NAND, slit processes, for example, and DRAM patch processes for those areas, actually ALD are used ALD is used for both of them, the suite of 3 d NAND and DRAM batch process. So the GLS is linked to the investment plan and we have no idea yet yet, but the critical processes, the 3 PORs of ALD. So this is the high value added area, so we expect expect a lot in this area. For example, let's assume the weather starts up 10 K based on that assumption, could you make some comment or for hedging system when you bring 1 POR, the sales amount is rather big, but for further position, you want multiple PORs, maybe you can give us some negative amount of sales compared with the hedging system, for example. I'm sorry I cannot make any comment as of today. I am Stefaan from Morgan Stanley Securities. I have a question on FPD forecast. Could you give us some explanation, please? The final demand is not so strong. But your focus for the future is not so bad. And you are expecting some recovery from the second half of this year. Could you give us the reasons why you'll have such kind of positive forecast for the future? So in the second half of this year, there are several drivers, including G10.5 mobile, small and medium sized panels, OLED investment, this kind of investment will be improving or recovering the second half of this year. Thank you very much. Over the past 3 months, your focus hasn't been changed. Is that correct? That's correct. I am Yassy from UBS Securities Japan. I have a question on the upward revision of logic investment, I know that Taiwanese big customer increased their CapEx, But structurally, do you expect the further increase of logical investment? What sort of factor to take account when you upward revise your Logic investment focused, for example, in Korea. So courier and customer want orders in the leading edge technology. That's what I heard. And 5G, the design is increasingly complex. AI chip will use convolution neutral network So design is getting more and more complex, the manufacturing process will becoming more complex. So next year, I wonder logic investment really increases. 2 to 3 months are there any changes? So the demand is rather weak and do you think logical investment where demands will be increasing in the future? You talked about you mentioned to some key ways, so those the demand of those items are now increasing. Specifically 5G related demand is now emerging. Mobile devices, AI devices, the demands for mobile devices and AI devices are all oil increasing, which contribute to the investment plan. Is it correct when I understand there is no change in your outlook of the market? That's correct. Our outlook of the market hasn't changed. I have one follow-up question on M and A, merger and acquisition, Applied announced an acquisition, and I heard about some reorganization in Hitachi Group. And how do you view M And A? In terms of size, And there are also the U. S.-China trade frictions. How do you view the Mandai policy? When it comes to M And A, does the question I was asked in many places? But about the M and A, we do not deny the possibility of merger and acquisition. If M and A has positive impact on our stakeholders and shareholders. If it has a positive impact on the corporate value improvement and if we can provide some benefits to our customers in technology terms and if we can get the good our own eye, then we don't have any we do not deny the possibility of M and A in those cases. However, there are some other options We need to make the decision whether M and A is the best solution In some cases, JDP joint development project, the program could be best option to make the smoother or speedy developments, we need to make the good decision for each case. In the future, to some extent, when you look at the top 4 to vendors, I think top 4 top 5 to vendors have the high market share, So those top 2 vendors may think about the possibility of a Monday little by little, when it comes to our viewpoint on M And A, we will think about M And A based on their positive impacts. I'm Dani Anton from Macquarie Capital Securities. I have one question. The gross profit margin your gross profit margin is rather stable around 40%. When you look at the next fiscal year, you expect the increase in your sales and the gross profit margin will be increasing or do you think gross profit margin remain unchanged So you sell you got DPO for ALD and initial development costs might be generated for this fiscal year. Then next year you can see some improvement in the profitability. Do you have any comment on that? We made announcement of mid management plan and we announced, we are going to increase gross profit margin for midterm and long term. We want to increase our gross profit margins specifically in the we are going to provide high value added products and top line will be increasing in the future when market recovers and gradually the gross profit margin will be increasing. And the 3rd area is field solution, we are going to achieve the sales of JPY 380,000,000,000 in 5 years to come, And if the field solution proportion is increasing, actually the field solution profitability is higher than the corporate average If field solution proportion increases, we can increase our gross profit margin. The 4th error is FPD. We already achieved FPD operating margin over 20%. Therefore, we have revised our midterm management plan to increase the FPD operating margin to 30%. And there should be no difference between the SBE and FPD in terms of margin. I am Shimamoto from Nokasan Securities. I have a question on memory market. You said memory market is a expected to recover in year 2020. In the past, you said that WFE market will recover next year to cancel the negative growth of this year, at present how strong the market will recover in year 2020 we have any idea on that? There are various factors So at this moment, it is too early for us to say something decisive on the factors. The WFE market might recover to the level of the previous fiscal year But about the degree of recovery, we want to wait and see what will happen in the market. I have one follow-up question. On Page 20, I have a question on Logic And Foundry. So fiscal year tells sales is expected to increase by 50% to 60% on a year on year basis. But on calendar year WFE market in application, it's at 35% logic inventory. So your service outperforming the market. Is that just only because of the difference between fiscal year and calendar year Or are there any unique factors to tell? Could you make some comment on that issue, please? Our sales outperforms the market growth. So the area that we are playing actually the area that we are playing is outperforming WFE market as a whole and when we have the advanced generations critical processes will be increasing in proportion. That's the reason why we can now perform market growth. Thank you very much. I am Mishina from Tokai Tokyo Research Center. Mr. Kawai, you said We are in the bottom right now in various meetings, but when you say bottom, what is the major inflection point, which make you think we are just in the middle of the bottom. Are there any trend upward? If you can see that not for the shipment, maybe in terms of orders, by application, which application will start recovering fast. The logic including logic and foundry. So as far as TEL is concerned, your company is concerned, you are selling various good process tools, but when you look at different applications, which application, which equipment do you expect the first recovery area? For example, NAND or DRAM, So in the past, but to bottom out in terms of orders, which applications start to bottom out fast? So 50 to 50 is the ratio of the memory and logic in this fiscal year, that proportion will be changed to 40% to 60%. That's what I said in my presentation. 1st of all, logic and foundry the demands is rather solid and strong in logic and foundry. Next year, the investment in memory will be increasing but now in the past, we said NAND comes fast, then DRAM followed. That's what we said in the past, but recently, market situation is changing, maybe the order between DRAM and NAND, there should be no big difference in sequence between DRAM and NAND. So both DRAM and NAND will start recovering at the same time. So logic foundry comes first, followed by DRAM and NAND and there is no time lag between DRAM and NAND recovery. Is that correct? Yes, that's right. I have one follow-up question, field solution. So for fuel solution, when it comes to the new equipment sales that is picked up and down station. However, the food solution business remains at the high level, which supports the overall corporate business performance. When you look at the customer needs, so field solution, you said the sales targets of the field solution is JPY 380,000,000,000, but in which area you can see increasing needs from the customer. So you said you are selling 4000 units per year but in which area do you see the increasing needs in fuel solution from the customer? And where can you improve the value added to support your business performance, although the market trend is rather stylish. In terms of volume, now you can see the growing installed base and you can see stable demands in the fuel solution market. So the parts sales increases in line with the growing installed base, I think you understand that area and the future high value added area, our strengths are in the area of the liability of our products, product competitive edge, and also number 1 service ability capability. So these are the strengths of our company Now technologies are getting more and more critical and we need to achieve 2 to to matching or chamber to chamber matching, that will have a very big bit importance. So we need to improve uptime of equipment and yield enhancement is another area and uptime enhancement and yield enhancement are very important, more important than the price of the tool itself to support the customer to improve their profitability. So that's the area that we can focus on in terms of food solution service. And in the future, we'll see the AI artificial intelligence and we can provide remote field solution services. So this is how we can enhance the value added in the field solution services. So this kind of advanced field support July 1 last year, we reorganized our organization to establish corporate Innovation division And in this corporate innovation division, we formed Digital Transformation Team, And this is where we further increase the value added by adding new service models So now 7 nanometer, 7+6 nanometer or 5 nanometer, So there are some critical changes that sort of critical changes play as the tailwind for the Fairfield Solutions business. Is that correct? Yes, that's correct. I am Eva from Nomura Asset Management. The first question that I have, when I look at this financial announcement, it seems like detail try your best to squeeze your gross profit margin of 41.5 percent rather high of the profit margin. How do you view or evaluate this gross profit margin. If you could further reduce SG and A, that could be better but now you maintain the 41.5 percent gross profit margin. What is the reasons why to maintain this high level of profit margin, gross profit margin. Now the sales net sales was declined, but the gross profit margin as I said earlier remains unchanged from the fourth quarter of last fiscal year. So we tried our best. And one of the reasons why is on the on one hand, there is the increase of inventories to prepare for the sales increase in the second half second quarter of this year. Manufacturing cost and expenses are now turned into the inventories. Honesty speaking, that happens So we do not necessarily squeeze out the gross profit margin. So it's a bit different from your understanding. Really appreciate if you understand in this way. So SG and A I hope you could further reduce SG and A as well. That's my second question. The applied material on Kokusai Electric is going to obtain the approvals from the authority about their merger. They are going to seek for the approval this question might be very difficult for you to answer. You are the competitor, but for the position area, 2 years or 3 years to come, the merged company will become your strong competitor. And you are you could take various countermeasures. Could you share your idea with us, please? What would would you like to know specifically For example, this is just a layman's view you might think in that way. So ASMI, so AMR wanted to acquire ASMI, but tell code could acquire SMI. That could be one of the options you could take. How do you think about that? About the Applied Material announcements. So the announcement will not change our strategies. In principle, As far as our company is concerned, we are going to enhance our technology and process to performance, batch, semi batch and single wafer processing, we do have those technologies already. So rather than think about merger, we should enhance our applications and also enhance the process performance and process tool performance, that's what we are supposed to do. So we do have a very good product portfolio. So in principle, we are going to follow existing strategies to enhance our technologies to provide high value our customers. Thank you very much for your answer. We have a lot of high expectation to you. Now we want to take one more question because we are running out of time. No more questions. May I say one thing about your question earlier? You talked about the reduction of G and A expenses. As our President said many times before, when it comes to development expenses, that is our investment for further growth in the future. So even if the memory investment is going down, we haven't loosened or reduced our investment in our RNG because that is part of our strategies So development CapEx and evaluation tools, we haven't reduced our investment in those areas, that is the reason why we didn't reduce SG and A expenses so much. But I think that is very important strategies for us for long term and midterm. We are supposed to go through very severe competitions in the market. We must not reduce our RNG investment. That's the reason why we just maintained the same level of the SG and A expenses. Although you may think we could reduce SG and A expenses furthermore, of course, even if we suppress some other expenses, but we want to maintain the high level of investment to the R and D for development. I wanted to add this comment finally. Thank you very much. This concludes today's financial announcement. Thank you very much for joining us to start your type schedule. Thank you very much.