It's time for us to start Tokyo Electron financial announcement for fiscal year ending March 2019. Thank you very much for joining us despite your very busy schedule. I am Yatsuda of IR Department, acting as a moderator for today's session. First of all, I would like to introduce the attendees on our side. Mr. Tetsuo Tsuneishi, Representative Director, Chairman of the Board. Next, Mr. Toshiki Kawai, Representative Director, President and CEO. And we have Mr. Ken Sasagawa, Vice President of Accounting Department. First of all, Mr. Sasagawa, Vice President of Accounting Department, will present the consolidated financial summary. Good afternoon, ladies and gentlemen. Thank you very much for joining us despite your very, very tight schedule. I am Sasagawa, taking care of Accounting Department. Let me make a presentation on consolidated financial summary for fiscal year ending March 2019.
The first slide shows the highlight of fiscal year ending March 2019. For fiscal 2019, in the expanding SPE market, we have established our product competitive edge, and we succeeded in this project. For FPD as well, we have succeeded expanding our share, and consolidated sales increased by 13% on year-on-year basis, and that was the record high. For the profit, the gross profit, operating income, net income attributable to owners of parents, set new records high. Net income attributable to owners of parents was JPY 248.2 billion. ROE was 30.1%. Once again, here you can see financial summary. Net sales was JPY 1,278.2 billion, almost the same level as our estimates. Announced October 2018, JPY 1,280 billion. SPE sales was driven by memory sales, increased by 10.6% to JPY 1,166.7 billion.
FPD sales, thanks to the G10.5 sales increase, increased by 48.2%, JPY 111.2 billion. The gross profit was increased by 10.8%, JPY 526.1 billion. The gross profit margin was 41.2%. Gross profit margin was reduced by 0.8 points on year-on-year basis. This is because of the inventory of the last year was incorporating the cost of goods. Also, we are investing for the future development and growth. SG&A expenses increased by 11.2%, JPY 215.6 billion. The major reason for the increase, as you can see on the bottom of this chart, R&D expenses increased by JPY 16.8 billion on year-on-year basis. Also, increase of labor cost is another reason. The SG&A sales ratio was reduced by 0.2 points because of the increase of sales. As a result, operating income was increased by 10.5%, JPY 310.5 billion. Operating margin was 24.3%.
The net income attributable to owners of parent was increased by 21.5%, JPY 248.2 billion. Earnings per share was JPY 1,513.58. Now you can see the quarterly basis summary. The fourth quarter sales was increased by 19.0% on quarter-over-quarter basis, JPY 319 billion. SPE sales was increased by 20.6%. FPD sales was increased by 5.6%. The group's profit margin was 41.5%, increased by 0.6 points on quarterly basis. The SG&A expenses, JPY 55.8 billion, increased by JPY 4.8 billion from the third quarter, mainly because of the increase of R&D expenses of JPY 3.5 billion. As a result, operating income was JPY 76.4 billion. Operating margin was 24%, 2.1 point increase from the previous quarter. Now you can see segment information. For SPE sales, as you can see on the left-hand side, the segment profit margin was decreased by 1.8 points on year-on-year basis, 28.0%.
Profit margin of product themselves increased. In order to prepare for the long-term, mid-term market growth, we are now carrying out the strategic investment. That is the reason why you can see slight decrease from the previous year. For FPD sales and segment profit margin, as shown over here as well, the full profit margin achieved a 21.8% for FPD segment. We hit the record high. Our company's differentiation technology improved the competitive edge of the products. As a result, sales and profitability was increased. The profit margin was increased by 4.1 points from the on-year basis. This slide shows its SPE division new equipment sales by application. As you can see for foundry logic sales, it's very steady. For memory, you can see a drastic improvement. Next slide. The new equipment sales by product for SPE division.
Due to the market share improvement, coater/developer and etching sales increased in particular. As for the market share, later on, Mr. Kawai will touch upon this issue later. This slide shows Field Solutions sales. As you can see, the part service sales is steadily increasing. The Field Solutions sales achieved JPY 288.2 billion. The green portion, the used equipment modification sales decreased a little bit because of the reduction of the chamber sales. Those chambers are attached to the existing production line of the customer sites, so those chamber sales are not necessarily coupled with the sales of the new equipment. This sector business, because of the increase of shipment, are expected to see very stable sales. This shows balance sheet. On the left, you can see assets. The total of assets is JPY 1,257.6 billion.
On the left-hand side, you can see the end of March 2018, the increase by JPY 54.8 billion on year-on-year basis. You can see the details over here. In particular for inventories, which is increased by JPY 10.1 billion on year-on-year basis. This is because inventory of the equipment shipped to be installed is declining. Inventory of product raw materials and supplies at our manufacturing subsidiaries is increasing. In order to prepare for the equipment with long-term lead time and to prepare for the future demand increasing, we are now increasing some inventory. Tangible assets also increasing mainly because of the development building in Miyagi and new production building in Tohoku, Yamanashi, and purchase of the R&D tools. On the right-hand side, you can see liabilities and net assets. The liabilities was JPY 369.5 billion, JPY 61.7 billion decrease on year-on-year basis.
Please refer to financial review for details. The major reason for reduction is reduction of accounts payable and customer advances. On the bottom, you can see the total net assets increased by JPY 116.6 billion, achieving JPY 888.1 billion, because of the increase of the net income. This slide shows inventory turnover and accounts receivable turnover on the quarterly basis. For the inventory turnover, because of the increase of the fourth quarter sales, the inventory turnover was 101 days, decreased by 10 days on year-on-year basis. Accounts receivable turnover was 42 days. Decreased by 10 days on the year-on-year basis. This is the last slide of my presentation, showing cash flow. As you can see over here, the cash flow from operating activities was JPY 65 billion. The cash flow from investing activity was minus JPY 14.4 billion. Free cash flow was JPY 50.5 billion.
On the lower right of the table, you can see the cash on hand at the end of the fiscal year, JPY 392.6 billion. Thank you very much. That's all from me. Next, Mr. Kawai, President and CEO, will make a presentation on business environment and financial estimates. Mr. Kawai, please.
I am Kawai. Nice to meet you everybody, once again. As introduced now, I'd like to make a presentation on business environment and financial estimates. The first slide shows the SPE business highlights for fiscal 2019 by product. You can see the information. For coater/developer, we improved existing high share. For the cleaning equipment, we differentiate ourselves by bevel cleaning and pattern collapse prevention technology, we increased the share by 5 points in current year 2017, and we maintained that share. For wafer prober, we achieved share number 1 for 2 consecutive years.
For film deposition, we increased our share by 2 points. Next year and on, we will see the market growth. In order to prepare for that, we are now building new production buildings to enhance our capacity. The major, biggest market etching system, we increased our share by 4 points last year. WFE share as a whole, Tokyo Electron as a whole, we achieved the share of 15%, which is record high for us. The share improvement of every business unit contribute to the market share of 15%. Now we can see FPD business highlights. For FPD business, our net sales exceeded JPY 100 billion. As you can see on the right-hand side, you can see segment profit margin.
Our operating margin target in midterm business plan is 20%, and we achieved 21.8% in actual for segment profit margin. The sales of equipment for G10.5 expanded, and this new product for G10.5 contributed to increase of sales and profit margin. As for the G10.5, PICP new product was released, and for G4.5 inkjet printing system for OLED panels, were also released, and we obtained some orders. That's all about the highlights of the FPD business progress. Now you can see the calendar year 2018, SPE market share and FPD production equipment share for fiscal year 2019. Now you can see our market share. As I said earlier, for the SPE, last year for dry etch system, the share was increased by 4 points, and for deposition system, the share was increased by 2 points.
For FPD production equipment, G10.5 investment ratio was increased, and thanks to that, we can see the 10-point increase of the coater/developer market share. In order to achieve the midterm business plan, we are now focusing on R&D to provide best product, best service, and best solutions to the market. Now you can see our business environment. Our perspective of the business environment, both for SPE and FPD segment, do not change so much from the previous financial announcement, but there are some positive information to indicate sign of recovery from different customers. System-on-chip type application processor with modem embedded for 5G communication and ICs for high performance computing, including NPU for data center, GPU, and AI. All those semiconductors are now promoting device shrink furthermore. For memories over the past two years, memory market grew rapidly.
Because of that previous growth, we are now in the middle of the adjustment period, especially in NAND. The inventory adjustments are proceeding actively, and you can see some sign of recovery in the second half of this year. When you look at the midterm, long-term growth trend of semiconductor market, we are getting very close to the bottom, and probably and possibly, we will see some recovery trend in the future. For flat panel display, mobile device shipment has slowing down, and you can see some temporarily adjustment period for CapEx, but we have the smartphone for 5G, flexible display, and large size TV panel, including 8K. Those demands are increasing next year. In order to prepare for that demand increase, FPD production equipment market is expected to recover from the second half of this year.
This slide shows calendar year 2019, WFE market, and our business opportunities by application. Our view of market trend by application hasn't changed so much, but for non-volatile memory, you can see some symptom of recovery in investment. I'll touch upon this issue later when I talk about the new equipment sales forecast. Next, I'd like to talk about financial estimates. SPE and FPD market is in the phase of adjustment. Net sales for the first half of this year, JPY 490 billion. Second half of this year, JPY 610 billion. Full year sales is expected to be JPY 1,900 billion and -13.9% on a year-over-year basis is expected. Our sales performance is expected to be better than the market trend.
This year we are in the phase of the adjustment, we are going to continue our investment for growth in order to be prepared for this market recovery in next year. This slide shows SPE division new equipment sales forecast by application for fiscal year 2020. For DRAM, we are going to see the supply-demand adjustment towards the second half of this year, and full-fledged recovery of the investment is expected to start in next fiscal year. For NAND, full-fledged recovery is expected to start next fiscal year. Ahead of DRAM, there are some symptom recovery from the second half of this fiscal year. For logic and foundry, the sales increase is expected from previous fiscal year. In order to prepare for IoT society, the investment to the leading-edge generation will be increasing, and also the investment to the technologically mature generation is rather solid.
A proportion of the critical layer process, that is our focus area, is increasing. For logic and foundry, the sales is expected to outperform market trend. Now you can see the R&D expenses and CapEx plan for this fiscal year. R&D expenses is expected to be JPY 120 billion. CapEx is JPY 56 billion. Depreciation will be JPY 33 billion. These are the budget for this fiscal year. IoT, AI, and 5G. In order to prepare for the coming data-centric era in the enhanced growth phase, we are going to achieve the midterm business plan, and we are going to further improve our market share. We'd like to continue our upfront investment. Finally, I'd like to show you our dividend forecast. Dividend per share of fiscal year 2019 was higher than the forecast by JPY 34, achieving JPY 758.
For this fiscal year, although the net income is expected to decline because of the market adjustment, there is no change in the shareholder return policy. In accordance with dividend payout ratio 50%, this year dividend per share will be JPY 502. From now on, we are going to focus on the shareholder return by increasing our profit as much as possible. Thank you very much for your kind attention. This concludes my presentation. Now I'd like to entertain questions from the floor up until 6:30 P.M. First of all, I'd like you to limit your question to one together with one follow-up question. Please identify yourself by your name and affiliation. This financial announcement will be uploaded to our website, please speak slowly and briefly. Now, could you raise your hand if you have any questions? Yes, the gentleman in the front row, please.
Thank you very much. I am Amada Keith of Nomura Securities. I'm very happy to hear a very good symptom of recovery in the near future. Now, Mr. Kawai reinforced that feeling. I'd like you to share with us your feeling. I got some information from WFE Vendor A. They got the big orders, WFE Vendor B also got some order from Taiwan as well. Could you share your idea with us about the market trend, please?
Where should I start in answering your question? For data center, smartphone, actually data center is an actual big driver. Memory, not only memory, but also high speed logics. In those areas, we have very strong inquiries from the customers. For CPU. For 5G is now coming. To prepare for 5G, investment to 5 nanometer node is now being implemented within the foundries, in particular.
Not only 5G, but also GPU and other high-performance computing ICs. The investment in those area will be implemented very actively in the future. For memory, flash memory, for example, maybe in this coming summer, the inventory will be running out. That's what our customers say. The inventory adjustments will be completed, we will see new demand. Now we have the increase in productivity, but customers are now thinking about the new CapEx plan to meet the increasing demand toward the second half of this year. This is a kind of consensus in the industry. They are going to see some orders from the customer, we will ship some equipment to customers. For China, the memory investment, actually, last year, the China proportion was about 17% above our sales. This year as well, very similar level of orders are expected from China customers.
Some flash memory, local Chinese IC vendors placed order to us. As I said earlier before, it is very close to the industry consensus. For logic, because of 5G, remains very solid, we have memory demand added to that logic demand. We will see the V-shaped recovery in the future. We expect a lot for next year. I have one follow-up question. You don't receive any orders or inquiries at all, or do you actually receive some orders, inquiries? Yes, we do receive some orders. Thank you very much.
Thank you very much. I am Yoshida from Deutsche Securities. For this fiscal year, you can see the new equipment sales focused by six months. For foundry and logic, you can see drastic increase outperforming market trend. That's what you said in your presentation. By product, are there any specific product which drives this increase? For example, EUV coater/developer is a kind of driver. Because of that product, you can enjoy higher sales increase than other competitors. Is that correct?
Sales of every application is expected to increase from the first half of this year and second half of this year. For EUV, last year, that was a quite big investment, but not only for CPU, for high-performance computing, we too need to have coater/developer for the existing device nodes as well. We do have the coater/developer for EUV lithography, but we also have the inquiry for coater for existing conventional coater/developer as well. In industrial and automotive application, for example, European customers, there is some increasing trend of the investment. Thank you very much.
I have one follow-up question. Every six months basis. When you look at competitors for memory on the current data basis for 2019, there is a rather flat trend between first and second half of this year. For your fiscal year, you can see great increase in the second half of your fiscal year because of the January-March period 2020 has a big contribution of the increase of the sales. Is that correct unde rstanding?
Yes. The gap of the three months between the calendar year, fiscal year should have a big impact. The customer try to find out the right timing for investment. There might be some gap or delay by one month or two months. For the quarter, impact is rather big in that sense. Our competitors uses sales recognition standards based on the shipment, as you know. In our case, we recognize our sales based on the completion of setup and testing. Because of this difference in sales recognition standard, that three months gap might be mitigated a little bit. There is no big gap as three months. Maybe the delay or gap should be 1.5 months. Is that correct understanding?
Yes. Thank you very much.
I am Ogawa from Goldman Sachs Japan. For the second half of this year, I have a question on the focus of the sales for memory. You expect the increase from the first half of this year to second half of the year, but I want to understand the nature of this investment for NAND and DRAM. Is that the greenfield investment or investment conversion to the next technology node?
You are talking about the recovery timing of the memory investment. Maybe in the beginning, the investment for conversion should be larger than the investment to the greenfield. That's what we expect for this fiscal year.
If that is the case, in the second half of this year, conversion and greenfield investment will be coming up. When you look at the ratio conversion, investment to conversion is more than investment to the greenfield. Is that correct understanding?
Yes. The major investment is for the conversion.
My follow-up question is about the China local memory vendors. In the previous year, what is the proportion of the sales to the China local memory manufacturers, and what is their contribution to the first and second half of this year?
For the previous fiscal year, when you look at the appendix slide, page 29, you can see the SPE sales to China. That was about JPY 200 billion for actual basis. This is about China region, including the non-Chinese IC vendors, in addition to the China local IC vendors. For this fiscal year, ongoing fiscal year, you can see slight decrease. Actually, consolidated SPE sales also decreasing a little bit, but sales to China declined a little bit, but that decline is not drastic. There is no big difference between China and other regions in terms of the decreasing ratio. Next question, please. Yes, the gentleman next to the previous gentleman, please.
Miyamoto from Mitsubishi UFJ Morgan Stanley Securities. For slide 19, page 19, for calendar year 2020, it's a bit too early to ask this question. You said that there is a kind of big expectation for logic, DRAM, non-volatile memory. Which device is most expected to grow rapidly when it comes to the growth rate? Which device is expected to grow most rapidly? 2020. Year 2020, right?
Yes. Every device is expected to grow. One moment, please. For logic, remains solid in growing. For memory, considerable increase is expected. For DRAM, 3D NAND, both of them toward next year. In next year, you can see drastic increase or significant increase is expected.
Last year, WFE Gartner said $59 billion, if my memory serves. That could be the good balance for calendar year 2020. Just confirmation, for DRAM this year, on page 19, decline by 30%. Non-volatile memory is expected to decline by 50%. Is it possible for those two devices to turn to the positive value? What is the level of recovery for both DRAM and non-volatile memory?
The negative portion will be canceled? Is that what you want to ask?
Yes, +30% and +50%. Is that correct understanding?
It depends on customer CapEx plan, but we do have very similar feeling to yours. Non-volatile memory investment recovers more strongly because of strong decline in sales. Is that correct? Yes. Non-volatile memory investment recovery will start earlier than DRAM investment recovery. I have that same question. Page 15, you can see the share by product, but toward 2020, which portion shows a drastic increase in share and which product doesn't grow so much? For coater/developer, we will maintain this high share level. That's what we expect. For etching system, for memory areas, we obtained some share. Last year, we won some share for memories. Actually, for example, slit processes and memory patterning processes, we gained some market share. However, that share increase contribute to the sales increase only partially. When you see the investment in memory, you can see some increase. We can expect a lot from etching system.
For logic, for 5G, our share of etching system is rather high, we can expect some demands for this year. We don't have any pessimistic forecast for future. I shouldn't say at all, but we have rather positive forecast or perspective for the future of the market. For film deposition system, for semi-batch system, we added some PORs last year, that will be used for the high volume production. We can see some increase. Also for cleaning system, productivity is enhanced. That is one of the major challenge of the customer, what is important is enhancement of yield. In that sense, our company's bevel cleaning system, the application will be increasing rapidly, expect a lot in this area as well. Therefore, our company's strategy or my own strategy is to focus on the following areas.
The areas where continuous technology innovation is expected, and areas where new products are to be launched, and areas where value added are provided, and areas where market expansion is expected, and areas our company's knowhow or expertise can be utilized or leveraged. These are our focus areas. Our strategies worked effectively. Toward next fiscal year, we do have the very positive perspective. Gentleman at the top floor, please.
I am Ishino from Tokai Tokyo Research Center. On page 18, you explained the issue. The NAND demand is now increasing while the inventory will be decreasing. That's what you said. Yesterday and today, Intel made the financial announcement, and demand from data center is not so good. That's what I heard. I mean, those circumstances, NAND recovery comes rather fast. How do you view this trend? In the future, why DRAM recovery is rather delayed? DRAM recovery, what sort of symptoms should we see to check or find out the recovery of DRAM demand?
The memory inventory is decreasing. There are quite good adjustments going on at the customer sites for the CapEx, capital investment. They do keep manufacturing memories, but supply-demand balance, there are some shortage. That's what we heard from our customers. In the future, when we get into the data centric area, we will see 5G communication. High speed CPU is to be increased. Large capacity, high resolution, high speed communication is necessary. In other words, high speed data consumption will take place. That's where memories demand are expected. Because of that, non-volatile memory and DRAM, for both of them, we will see the increasing trend in the demand.
I have one more question. For NAND, which is below cash cost, none of NAND vendors are making profit at all. From the buyer's viewpoint, the NAND, which is below cash cost, we will not see any further decline of the price of the NAND. That is the reason why NAND demand will be increasing. On the other hand, DRAM. Every DRAM manufacturer enjoys 30% level profit margin, and DRAM price will continue declining in the future. How do you think about this market trend?
There is demand for memory, and actually our customers are considering thoroughly about what you have said, and they are trying to find out what to do against that. In principle, memory demand is increasing, each vendor is trying to find out the good timing to accelerate their production. We have a lot of expectations in this field. However, the inventory itself is being consumed. Therefore, demands and needs, when demands and needs are increasing, I think the customer will restart, resume the investment once again.
When it comes to the symptom or trigger to recover the investment, now we can see the inventory decreasing and the increasing number of buyers, and NAND price will be below cash cost. Customer will purchase NAND even if the price is going up. The trigger to see the recovery of investment is the improvement of supply-demand situation. Is that correct understanding?
Yes. I do not disagree with you. Any other questions from the floor? Yes, the gentleman in the middle, please.
I am Yamamoto from Mizuho Securities. I have a very simple question. Could you give me your forecast for SG&A expenses for the first half of this year and full year basis?
For our forecast for this fiscal year, for SG&A expenses, JPY 221 billion on full year basis, as you can see on the slide. JPY 107 billion for the first half of this year. Second half of this year, JPY 114 billion, JPY 221 billion on the full year basis. Thank you very much. Gentleman in the front row, please.
I'm Damian from Macquarie Capital Securities. I have a question, one question about Field Solutions. I want to know about the forecast for this fiscal year, Field Solutions for SPE business. What is the level of your forecast? Additionally, GlobalFoundries announced to sell their fabs to ON Semiconductor. Because of this, there are quite a few used equipment coming out into the market. What sort of impact does this announcement of GlobalFoundries have on TEL's Field Solutions business? How do you view? I think there are some positive impact on our Field Solutions business. How do you view this?
As for your first question, let me answer to your first question. That's about financial estimate. Field Solutions sales for this fiscal year is about JPY 278.0 billion. WFE sales is expected to decrease by 15%-20%. That's our forecast. For this Field Solutions segment, the sales should be almost the same as the previous year. High level of sales is expected for Field Solutions.
I have one follow-up question. For the gross profit margin, what is the level of the gross profit margin?
I'm sorry, we are not supposed to disclose our profit ratio. Sorry for that. For this used equipment for foundry, for 300 millimeter wafer fab, that's about GlobalFoundries announcement. They are going to sell their fabs to ON Semiconductor. At Field Solutions, there might be some expanding opportunity for upgrade or modification of the equipment. In every area, there are some potential opportunities. As for the factors, we do have the used equipment business, we also have the parts business. Parts business sales accounts for about 50% of the total sales of Field Solutions.
As you know, the number of the equipment installed has increased year-over-year, increased this year, and expected increase next year. IoT application, we have increasing opportunities for sales of used equipment, upgrade, and modifications. There is business opportunities for every area. About your question, there are so many factors to increase the Field Solutions sales on the steady basis. Any other questions from the floor? Yes, the gentleman in the middle, please.
Thank you very much for your presentation. . I have a question about gross margin. The slide 21, second half of this year, gross profit margin is expected to be 40.8%. You can see some improvement from the first half of this year to the second half of this year, still lower than the previous fiscal year. Toward the next fiscal year, if the utilization ratio will be improved, do you think the further increase would improvement of the gross profit margin? In the second half of this year, are there any negative temporary factors which suppress the improvement of the gross profit margin? I want to understand why, in the second half of year, there is no such great improvement in the gross profit margin. Maybe is it possible to come back to 41% level? Are there any potential for that?
That 1 point level on year-over-year basis, there are several factors. Number one, customer mix. Number two, product mix. Also, ne xt fiscal year, the market will be improving and we are getting into the further enhanced growth phase. Therefore, we can expect a lot. Also, our share will be increasing. We are promoting for the application evaluation. We are doing a lot of promotion for application evaluation. Although top line declines a little bit, but we do carry out promotion and needs for upgrade to enhance performance. There is the R&D expenses in cost of goods. Customer mix, product mix, and further growth. Promotion for further growth and for upgrade, we have R&D expenses in cost of goods. We are incorporating investment for next fiscal year. That is the factors to impact this figure.
Thank you very much. I have one follow-up question, just clarification I want to get. For 2020, WFE will be coming back to the level of fiscal 2018, your gross profit margin or gross profit can be increased furthermore. Is that correct understanding?
Yes. From slightly different viewpoint, I would like to add some more comments. Over the past two to three years, we were actively invest in the facilities and human resources as well. For this fiscal year, we are now controlling the investment to resources, and we can see some increase of the human resources. The cost of the resources added last year will have impact on our gross profit margin throughout this year. That is one of the factors to reduce the profit margin. If next year, we will see the increase in sales, we can see the increasing trend of the profit margin as well.
Now we have the new financial model or mid-term business plan. Based on this mid-term business plan, we are now implementing our activities. From the viewpoint of the operating income, operating income is expected to improve. Together with, coupled with the operating income. Not everything is coupled with that, but even for the gross profit margin, as I said earlier, is expected to increase or improve for the future. Any other questions? We do have 10 more minutes, so maybe you can ask the second question, if any. Yes, please.
Thank you very much. I am Ishino from Tokai Tokyo Research Center. I have a question for FPD on page 16. You can see the FPD business highlights on page 16. When I look at FPD industry, large panel, like G10.5, Hefei or China Star operates the factories for G10.5, which was good. For 65-inch panel, used to be JPY 400, but now JPY 200, so they cannot make any profits at all with that level of the price.
G10.5 factory, many of the panel manufacturers try to change direction. The amorphous silicon cannot be used any longer, need to be changed or replaced by this oxide. Many of the leading companies try to stop the production of G10.5, shifting to the G8.7. Probably, I do not think there is any big impact on your business, but how do you view the investment to the large size panels? There is some change in direction. On the other hand, size of number of masks will be increasing. That creates some business opportunities for you. How do you think about that? It is true that Gen 10.5 needs is rather high right now.
According to your question, what happens if the demands or needs for Gen 10.5 is declining? PICP, the plasma control technology, do have the high advantages, and our customer appreciate that technology a lot. Not only for Gen 10.5, that technology can be used in various applications. PICP plasma technologies can be used not only for etching system-wide technology, but when we have the processes without using hydrogen, this technology can be used in various manners. For each application, we are now preparing for the launch of the new products right now. In that sense, the high-definition panel, flexible panel for different viewpoint, we think the ongoing technology innovation, and we are now preparing for that technology innovation. We should not rely only on the Gen 10.5 when we prepare the strategy and prepare for the future market trends.
Thank you very much.
I am Araki from Nomura Securities. I also have a question for FPD. In 2019, there are quite a few investment plan for the small and medium-sized panel, there's only one now. They are pushed out to 2020. Recently, China Star, BOE, Tianma, and Visionox, all those companies made some announcements. Maybe you can see some symptom of a recovery for the small and medium-sized panels. That's what I expect. What do you think about that for the generation 6 panel?
I myself, not talking with customer directly, there are quite a few CapEx plans for the small, medium panels, maybe you can see some recovery in long term. Our company has factories in many places, including Kunshan, for example, and the utilization ratio of those factories are now improving. That's how I can answer to your question. For small, medium-sized panels, there is some needs for gaming, esports. I think there is increasing trend, needs over there. That's what we can expect some increased recovery. Any other questions from the floor? Since there is no more questions, this concludes our financial announcement. Thank you very much for joining us despite a very busy schedule.