Earnings Call: Q3 2018

Jan 30, 2018

Now it's time for us to start the Tokyo Luxury Financial Announcement for the third quarter of this fiscal year. Thank you very much for joining us today despite a very tight schedule. I am Hirojama, of IR department acting as operator this year as well, we are going to make every effort to improve the IR activities. Really appreciate your support. 1st of all, I'd like to introduce the attendees from our side. In the middle, we have Mr. Tetsuotsneshichi, chairman of the board. Next, we have Mr. Toshiiki Kawai, Representative Director, President and CEO. And next, Mr. Tetsuro Hori, Representative Director, Shia, for an Executive Vice President. Now first of all, we'd like to ask Mr. Hori, the CFO, to give us the information about the 3rd quarter consolidated financial summary. Mr. Houri, please. Now I would like to make a presentation on the 3rd quarter consolidated financial summary. 1st of all, last year, October to December period, that is the third quarter of fiscal year, this fiscal year, The third quarter financial results showed good progress in line with our plan for the second half of this fiscal year along with an increasing demand from the data center display business continued to be driven by investment in the memory devices Also for flat panel display investment to generation 10.5 has started and it has been fluctuating very steadily. For the second issue, I will touch up on this issue later on again, but the FPD segment achieves profit margin of 10 19.0% and we submitted the midterm target for flat panel display, the profit margin target is 20% and we have that midterm target of 20% coming to site. And net that field solutions, food solution business keeps growing as equipment utilization goes up across a wide range of generations. Now we can see the financial summary on the quarterly basis. As you can see over here, The 3rd quarter net sales was 1,000,000,000 yen, the gross profit margin was to 1.1% and operating margin was 22.5% compared with its 2nd quarter, 3rd quarter sales was declined by 8.1% as you silver here. This is just as planned and we don't have any concerns about this values. As for the Gross profit margin and operating margin compared with the 2nd quarter, you can see some decline, however, we didn't have any acquisition because This is just because the decline in the sales net sales. Now you can see coaltry financial performance. Again, the third quarter, net sale was declined and gross profit margin was 41.1% and operating margin was 22.5%. Segment information is shown on this slide. As you can see here, flat panel display The 3rd quarter segment profit margin was 19.0 percent the previous quarter was 15.4%. So in the second half of this fiscal year flat panel, profit margin is improving. That's what we can learn from these figures. Here you can see sales by region. Compared with the previous quarter, for Korea, the sales for Korea is now getting into a kind of low in investment. However, when you see the orange color bands, you can see overall increasing the trend for the orange color band. And there are some regions where your sales were decreasing a little bit, but in Taiwan, you can see slight increase in sales. So here in a sense, this is a kind of seasonality of our sales trend. When you look at the history, the first quarter 3rd quarter sales are lower than the other quarters just because of the seasonality. That is the trend of our company. Here you can see equipment sales by application. As I said earlier, sales was declined from the previous quarter in this third quarter. However, the majority comes came from the NAND, the Novartya Memory accounting for 41%. Again, the memory devices accounts for the big portion, the DRAM, and Novartile memory accounts the big proportion out of those cells. Here you can see field solutions sales, as I said in the beginning of my presentation, there are some fluctuation in the sales. However, by and large, sales shows the increasing trend in the field solution. This shows the balance sheet on the left for assets So cash and cash equivalent was JPY 301,200,000,000 just because of dividend payment, you can see decline in cash. The inventory increased from 1000000000 to 1000000000 as I said in the previous meeting, our inventory, actually 1 third of our inventory is just because of the hours recognition criteria for sales in other words that is the completion of setting up and testers most many of those equipment waiting for the installation at the customer side. So there is no major risks over here. On the right hand side, liabilities and net assets. There is no debt and our equity ratio is around 64%. Here you can see inventory turnover and accounts received receivable turnover. For 3rd quarter, the inventory turnover was increased from the 2nd quarter because of decline in sales. And as I said earlier, some of our equipments are just waiting for the installation at the customer site These are the reasons for the increase of the inventory and currently inventory turnover is 117 days, but We don't have any major concern about this increase. The other one, the accounts receivable turnover 54 days. That we are, the collection of account receivable is going well on the steady basis. Finally, this is cash flowchart. Again, on the right hand side, you can see orange color bar. This shows the payment of dividend, interim dividend. 45,700,000,000, we carried out the dividend payment and share buyback back in total in fiscal 2016, but actually in this third quarter, we have the dividend payment more than the amount of the fiscal 2016 third quarter. And free cash flow was JPY 15,100,000,000. Thank you very much. That's all from my side. Let's move on. Next, Mr. Kaway, our CEO will give you the presentation on the business environment and financial estimates. Mr. Kaway, please. Once again, good afternoon. I am Kawaii. I would like to make a presentation on business environment. And the financial estimates. 1st of all, Now let's take a look at big picture and we have I have been saying this for a while. So WFE market business outlook is shown in the slides on this slide based on the midterm, long term perspective. As you know, IoT is to be introduced and the new concept of big data is generated ARVR and other new applications are being introduced and beyond 2025, she will be also introduced. When you look at the entire market, So e commerce, fintech, those businesses are coming out, and also in the future, biology, medical, medicine, transportation, autonomous driving, So new business models and new lifestyles will be emerging. In the past, we just rely on the applications such as PC, mobile phones, and smart smartphones, but now the we are now shifting to the broader demand for IoT. And when you look at the IC, itself, the demand, when you look at the demand and also we need to handle large amount of data So high speed device will be necessary and higher reliability is also important. On top of that, no park consumption is also one of the requirements and highly advanced technology need to be introduced. So the demands and technology innovations, those 2 are the kind of pillar to be pursued. The higher performance devices require further majorization, a device shrink and 3 d construction need to be introduced and new materials need to be introduced and new memory devices also need to be reduced. So we have double or triple innovation required for the future. So in the future, the semiconductors and WFE are to be driven by the demands increasing and technology innovation As a result, we are now getting into a new phase of the growth this year and beyond, we will going to see $50,000,000,000 or more growth. So that's the new phase we're getting into. So I mean, those circumstances, when you look at current year, let's take a look at this year's business environment, First of all, the WFE CapEx. As you can see here, the 2018 investment is affected to grow by about 10% from the previous year driven by the strong demand for memory devices for data centers. Last October, I talked about the investment should be almost the same as previous year, but based on that scrutiny and discussion with the customer, now we can see the investment increase by 10%. For FPD production equipment CapEx for the TFT area process. So investment in FPD production equipment expected to increase by about 20% on year on basis because of ongoing investment in small, medium sized panels and also the 6517 5 inches live screen TVs. Last year, we saw the 30% increase in the FPD market itself. But this year, furthermore, 20% market growth is expected in the FPD segment. Next, calendar year 2018 WFE market growth and business opportunities by application is shown over here. 1st of all, for the NAND, the WFE market for NAND is expected to grow by 5% on the year on year basis As for the CapEx, the leading H9X generation investment accounts for 50%. On the right hand side, you can see 3 d NAND3 capacity monthly capacity for 3 d NAND. Calendar year 2018 by the end of 2018, the monthly capacity is expected to grow to 1,200,000 wafers The driver is SSD demands for data centers. And in this area, hedging process potential is getting bigger than before in addition, film deposition, cleaning, and high speed testing system, So in all areas, we are enhancing our position in those areas and those growth will be contributing to next year business for DRAM, the wafer market for DRAM expected to increase by 30%. This is the number one growing area CapEx is driven by the 1x1y nana, which accounts for 80%. The average DRAM contents in mobile devices increased by 25% on a year on year basis. Also the capacity for server increases by 30%. So these are the contributors for the 30% or more increase for the wFE market for DRAM. And we made announcement for the mobile phone production and that mobile phone production increases you also incorporated when I talk about the 30% or more increase in this area. And business opportunities here increase in particular for DRAM itching share has been increased previous year. Again, this year, we can see edging area as one of our business opportunities. Next, logic and foundry, the WFE market for logic and foundry remains at the same level as the last year and CapEx, the nodes of 10 nanometer and beyond that accounts for 6% which includes pipelines for 7 nanometer and 5 nanometer drivers, as I said in the beginning of presentation, is needs for the higher performance of the device and also lower power consumption devices. And business opportunities, this device shrink and patterning in our company, we have several product available, but by enhancing our integration technology, we try to find the every possible business opportunities in this area. Next, let's take a look at drivers of non flash memory investment. On the left hand side, you can see the outlook of non bid demand composition by application by using BAR Graph. For SSD, I'm sorry, nonde bit growth rate for 20 18 is about 45%. The green portion SSD bid growth is expected to be about 50.9% till 2021. Therefore NAND bit growth is mainly driven by SSD followed by mobile. Mobile GAGR is about 32% from 2017 to 2021. That's our expectation. This demand for server capacity grows rapidly as I said earlier for server capacity. In 2017 is about 300 exabyte, but 2021, it will goes up to It will go up to 1 Zettabyte. So there is a strong potential for growth because SSD contest right now for server is only 9%. So this is the great potential. There is a great potential for growth. The fiscal this fiscal year SP Business progress is summarized over here on this slide. Due to growth in market size and our share, the full ESP sales for memory is expected to be doubled on a year on year basis. And the field solution business sales has increased as Mr. Holli said earlier, the accumulated 9 month sales amounted to JPY 181,000,000,000 increasing by 22% on the year on year basis. The used equipment upgrade, CIP, the service contract and parts in every area, we can see some increase. And as for the sales of our stranded products are expanding steadily in the quarter as well as a strategy not only etching, but also ALD equipment, cleaning process, we can see the steady increase. For etching last year, etching market exceeded $10,000,000,000. The production capacity is to be increased, which is necessary, but as we announced the logistics building has started its operation from this month and our new development building will be completed by September this year. And within the existing building, we have added a new production line by October this year so that we can increase our production capacity by double. Now FPD business progress, it's shown over here. Actually there is no slight difference or no change from the previous meeting slide, as Mr. Holli said earlier, the 3rd quarter profit margin was 19%. Which was increased from previous year and we can expect full year profit margin of 15%. So we are getting closer to the 20% target midterm target for FPD profit margin. That's the current status. So 2018 financial estimates, Again, financial estimates are shown on this slide. There is no change on this slide from our October meeting. So let me just skip this slide. And for SPE segment, you can see new equipment sales forecast on this slide. So the third quarter, up until third quarter, you can see actual values in fourth quarter, you can see the estimates from January to March this year. As you can see over here, purple portion which represents 3 d NAND is a kind of driver, but blue portion DRAM is increasing rapidly. That's the current status for 4th quarter FY2018 throughout this year, memory is expected to account for about 60%. And as for the details, for DRAM, the DRAM supply is really tight 3 d NAND. In this Q4, we have started delivering equipment for the next 9 next generation for logic and foundry, 10 nanometer, 7 nanometer investment is going on and next year, we will see 5 nanometer as well. So 2018 R And D Expenses CapEx plan is shown over here. Again, there is no change from October 31 2017 announcement. So I won't touch upon into the detail but our intention is we are going to find out the opportunity for business and we are going to make a upfront investment so that we can capture the potential business opportunities so that we can cope with the expanding market. Now here you can see the 2018 dividend forecast. There is no change. So this slide is just the same as our announcement on October 31. 2017. The dividend per share on the full year basis is and expect to raise the dividend per share more than 70% on year on year basis and we are going to achieve record high dividend for 4 consecutive years. Through increasing our profitability, we are going to return a lot to the shareholders. This is the last slide of my presentation. As a summary, so 2017 calendar year 28 team WFE market expected to increase by 10% FPD production equipment market is expected to increase by 20 sent. I mean, those circumstances for our company, both FSPE and FPD businesses we are going to outperform the market growth. And as for the expanding equipment market, and more the business getting at technology getting higher and when challenging, our value goes high gets higher. So in order to satisfy customer expectations, we are going to make active investment in our development activities. For 5 nanometer node, the pilot line is to be introduced for that one, we are going to develop the process integration technology, which become more and more critical. We have established process integration center and we're going to promote the development in that process integration center and IOG applications. And as I said earlier, we are going to expand the field solution business to cope with the emerging IoT applications. Now I'd like to entertain questions up to until 6:30. Could you raise your hand if you have any question? Could you identify yourself by your name and affiliation before asking questions? Could you then make your question to one followed by another one? Again, please pick up clearly and slowly because this session is also uploaded to the web website. So could you raise your hand if you have any questions, please? Yes, the gentleman on the front row, please. I am Valerie from Nomura Securities. Thank you very much for very exciting presentation. And I think there's a good Automosophy at Automacevi over here. So one question I want to ask right now, calendar year 2018 WFE market expected to increase by 10 percent, as I discussed with you on Elevator, many of your suppliers, parts suppliers were asked by TEL to increase their capacity by two times twice, but but you said your growth will be at performing the market growth, but I think the 10% or more market growth might be expected. How do you think about that? As I said in my presentation, we are going to performed the growth of the market itself in principle in our company. So technology innovation is expected market growth is also expected. That's area we are going to develop the products. That's where we have the product portfolio for the high innovation and market growth itching and film deposition area are promising area for future growth. We are going to increase our share and also increase the entire market itself based on the midterm, long term perspective when it comes to the CapEx We cannot increase anything from tomorrow, so we'd like to have the longer perspective. And for the short term perspective, as well as long term and midterm perspective as I said in my presentation, we can see the increasing trend. So when you think about the kind of increasing threat as for the increasing area for it, we need to enhance the capacity furthermore. As I said in my presentation for etching, October to see, are we going to add 1 more production line so that we can double our production capacity? That's what I said earlier. So related to the production capacity increase, our partner or parts vendors, we're asking the parts vendors to do the very similar things. That means not only HR but also the diffusion furnace and quota developer relevant parts vendors, I think you are also asking those partners to increase that. So you said out perform drastically the market growth. Is that what I can interpret what you said? Yes, if you maybe you can think in that way. Thank you very much for your question. Next question, please. Yes, the gentleman on the first row, please, on the other side, please. Thank you very much for your presentations. I am Miamoto from Mitsubishi Yefijemogan Stanley Securities. I have a question on page Slide 17. I want to ask about the understanding of risks. So, WFE, the NAND, 5% or more DRAM is expected to increase by 30% and foundry and logic is going to remain flat. And are there any risks or factors which cannot realize these values for each product, especially the unit price of the NANDIS going down, that might have some negative impacts on CapEx. If you have some discussion with the customer, what sort of discussion do you have with the customer? Could you give us some comment on that, please? The first of all, the NAND, their memory as a whole, The cost our customers are now generating profits and cash flow as long as CASM is generating risk, cash flow and profit We don't have any concerns. The market itself is oligonomaxed and customer does have some accumulation of experience and they are watching market. So customers are not expected to invest excessively to crash the market itself. That's the assumption that we have. So at this moment, there's some shortage in the market. In other ways, even at the same amount and now we can see the same generation product as the same price but there are some decline and maybe we can see some gap fell so that that will give us some tailwind to promote our growth. So the in the case of NAND in particular, the NAND does feature the very high elasticity against pricing. As for DRAM, as I said in my presentation, The mobile devices amounts are being watched by our company. The 30% I talked about and the mobile amount are also taken into account when I talk about 30% growth. For logic and foundry, Again, as for device factors, I think the risks is very much limited for 5 nanometer and 3 nanometer as well. We are going to do. We need to do many things. The other day, in Taiwan, stock foundry, manufacturing, talked about the CapEx. Their top management talked about some some issues about the Capital investment and this and what they said really support our estimation. When it comes to the macroscopic economy, as you know, this year in the United States, there will be midterm election and the American government might issue some stimulate economic stimulation measures. Therefore, there might be no concern on that issue. But there is some geopolitical risks, geopolitical risks, but those geopolitical risks cannot be controlled by one company. Thank you very much. So on page 17 upper right, you can see the 3 d NAND monthly capacity value. For DRAM from 2017 to 2018, how much monthly capacity do you expect for NAND? I'm sorry. I think demand is rather high, was significant, as you know, but we haven't collected data for NAND monthly capacity. Thank you very much. Thank you very much for your question. Next question please. Yes, the gentleman on the front row, please. Thank you very much. Hi, I am Maritomi from CLSA Securities Japan. My question is very similar to the previous question. But the rear fee forecast that this is the area that I want to ask question. For NAND, the 5% increase and 30% increase for the DRAM. That's what you said in your presentation compared with previous meeting, So by region, in particularly China region, how do you view the Chinese market? What Chinese investment in China, I should say? That's the I want to ask to you. Thank you very much. In a word, there is no change in our view on China. So WFE Impact impact on WFE for calendar year 2018 this year, but 1,000,000,000 So China accounts for 18%. That's our prospects. For next year 2019, 12,000,000,000 and China accounts for 23%. That's how we view the Chinese market Then in China excluding overseas players, the China local IC vendors, when you just focus on the China local IC vendors, 2,000,000,000 in 2018 and 3,000,000,000 in 2019. That's the prospect that we have right now. The current delivery plan is also remained unchanged from the previous meeting. In that sense, there have been no changes about China market from the previous meeting. Next question, please. Yes, the gentleman on the 2nd row close to the aisle, please. Thank you very much, representations. I'm Yoshida from Deutsche Securities. Again, I have a question about the prospect for WFE market. 2019 how do you view WFE market? What sort of assumption do you have for that? For example, based on this for NAND and DRAM will increase furthermore and logic and foundry as well. Along with the device shrink, I think there's some intensity of investment will be increasing. At the same time, lithography intensity will be increasing as well. So I think investment for exposure system will be increasing furthermore And how do you see the market and what sort of market share do you expect for 2019? So midterm and long term perspective is adopted when we look at the outlook of the future growth of the market. As I said in my presentation, towards 2020, we are expecting the steady increasing trend and that macroscopic trend remain unchanged And depending on customer investment plan, there might be some adjustment, but still there should be some growing steady growing trend. For 2019, the amount in China will be increasing. At the same time, as I said earlier, there is a shift toward 5G. Therefore, in 2019, we haven't carried out in scrutiny, but there is no negative sentiment at all. For China, you can see some increase. I agree with you But as you as you said earlier, the China local IC vendors, the investment is expected to be 1,000,000,000 or 1,000,000,000 I think those values might not be updated yet. Do you see some upward revision of those figures I think that it is highly likely that we are going to revise them upwards in the future. Next question please. Yes, the gentleman in the rear please, just in the middle. I am Nakan Romeo from Jeffrey Japan Limited. Again, I have toward midterm period toward 2020, the market remains strong. I quite agree with you, but based on the assumption, so 3 d NAND capacity graph on page 17. So 2018 profit margins rather big and 9x generation accounts for majority, then the big growth based on the NAND capacity is rather strong and NAND growth might be more than 5%. But 2019 the profit margin might decline drastically. So when you just focus on NAND, when there a strong investment this year, but there might be some adjustment investment for NAND next year 2019. How do you view the focus If there is, means, any mistake in my assumption, could you correct my assumption, please? Toward the end of second half of this year, there is some investment to the 5G infrastructure starting in the second half of this year for the data or data communication, there might be quite a few drivers, not only mobile, but also servers, as I said in my presentation, demand for mobile and server is rather huge. In reality, now 2017, it's as low as 9%. But if there is more application in those area servers and mobile, And when we see the stable growth expected, therefore, we don't have any negative sentiments, even if there is a quite big bit golfer, it should be no concern that the investment might stop. Thank you very much for your answer. Next question, please. Are there any other questions? Yes, gentlemen, the second, well, just in the middle, please. I am Mishino from Tokai Toyota Research Center. The semiconductor, including China, many of IC vendors are very active in investment when it comes to the materials in particular, but silicon wafer supply is very much limited asking many of the silicon wafer vendors, they are rather conservative and they don't have so much preparation ready for very active investment, but Chinese manufacturers, for example, this year, they're going to build the new 10 new firms, but I wonder how they built or manufacture ICs without having the silicon efforts, but how do you see the growth when there is an limitation by the materials silicon wafers from the viewpoint of the materials, how do you see the scenario for the future growth of this IC market? Could you share your idea with us, please? Actually, there is no reduction in production and there is the slight stable supply of the silicon wafer, but at this moment, the silicon wafer supply cannot catch up with the demands but we don't have any pessimistic sentiment. I'm rather optimistic in this situation of the silicon wafer supply in principle in a sense, present, just like our suppliers, like parts, vendors. We ask them to increase parts, but same time our customers ask the wafer vendors to ask them to increase whether supply does the current state does. But in principle, there is no limitation or restriction by the reference apply to stop the technology innovation. So there is no such thing happening. For this year, there is some kind of, say, sufficient supply or wafer, silicon wafers. Of course, there is a need for adjustment of silicomae for supply and demand. In other words, that is one of the issues that customer need to think about, but there should be no measure change in their plan on the customer side, our customer side. So that's the reason why I explained our scenario in my presentation when it comes to the bid growth in order to secure this kind of very rapid bit growth 6,000,000 wafers per month. The capacity is not enough. The NAND DRAM leading vendors are reducing number of test wafer and they use those test wafers for the production itself. That's the current status. And the wafer supply restriction in order to maintain this level of market from the viewpoint of the 2 vendors for 2020 2020. How many silicon efforts do you think is necessary from your viewpoint how many silicon wafers let's say for 300,000,000 wafers per month that 7,000,000 wafers are necessary in year 2020 in order support this NAND bit growth. How many wafers are necessary? Do you have any reference for that? We are now just in the middle of marketing to find out it. Thank you very much. Are there any question? Yes, the gentleman on the second row, please. Thank you very much. I am Oogawa from Goldman Sachs, Japan. I have a question on page 17 logic and foundry CapEx forecast is just the same as previous year. Which page are you referring to? Page 17, please, the logic and foundry, your focus is just the same as the this year, but how do you see the impact of EUV refill of introduction? The foundry manufactured investment investment is also but at the same time, investment toward EOB recovery will be increasing. Accordingly, investment to other 2 might be declining It's my understanding, correct. In your company, quota, developer, and HR, these are major 2 products what sort of impact do you see because of the introduction of UV lithography? Essentially for the divash shrink number of the precious steps is expected to grow. However, just because of the introduction of AUV lithography increase suppressed step can be suppressed to some extent. According to our understanding, the criticality of technology and number of process steps, we need to think of a totality, but hedging market is expected to grow. Then for quota and developer, So together with EUB, the subgroup system, we need to enhance the productivity with throughput of quota on developer. That's our challenge. So we need to add the functions to our quotas and developers. If you think about those additional functions, we can see increasing trend in the market as well. So we can see the growth potential for the future. Are there any other questions? Yes, the gentleman on the 3rd row, please. I'm Yassy from UBS Securities Japan. I have a very simple question. The cash on hand, about cash on hand, your target level, I think you have more cash on hand than your target. Do you have any potentiality for the buyback or M and A how do you think about the share buyback and M and A? How we can use the cash? Actually, our policy does remain unchanged when it comes to the usage of the cash. About 2 years ago, we say that comfortable double cash should be JPY 250,000,000,000 and that figure remains unchanged even now. And the potential M and A or possibility of M and M and A, for example, needless to say, we are now focusing on SBE and it BD Business and based on those 2 hubs, we are thinking about the potential investment for our father growth. And we need to spend cash effectively. And when you think about the share buyback, as I as we say always, we are always flexible in buyback. So when you say flexibility, at present, the smartphone is rather weak, and the market is rather stable. So you may see more cash next year. And the amount of cash on hand will be increasing. So any possibility for share buyback, I think there's some expectation for the market that you may start the share buyback and there is any criteria for the absolute value when you start the share buyback or anything if you say something about criteria, our policy doesn't remain flexible. I'm sorry, I understand your point. Thank you very much for your question. Any other questions from the floor? Yes, the gentleman in front row, please? I am Sigra from NDAUA Securities. I have a question about the gross profit margin. This year, now you are investing a large amount of money and we will see more burden for the depreciation next year and we'll have the increase of the cost of materials and also labor costs will be increasing in the future I mean, those circumstances toward next year, is there any possibility to further improve gross profit margin if it's possible? What sort of measures are going to to further improve the gross profit margin, could you share your idea, please? 1st of all, we already submitted our Midterm business plan, our financial model in other words, 1,200,000,000,001,050,000,000,000 and we have the gross profit margin and operating margin values and we know that we haven't achieved those targets by two points. That's our understanding. How we can fill the gap of two points, we have 2 years ago before the end of this midterm business plan. And about your question, the improvement of the gross profit margin, So you asked us that sort of measures or methodology do we have to improve the gross profit margin? I think there are several measures For number 1, we can reduce the cost for RNG, but before that, let's say we need to encourage our customers to recognize our value in technology so that they can sell our products at the appropriate price That's primarily the important thing. And before after that, we have warranty and we need to improve efficiency in startup operation. There are very basic issues, but that's how we try to improve the gross profit margin. What is difficult is So when you say 1,200,000,000,000,000, we are getting closer to that. We need to think about this year beyond, the future beyond. And for sort of plan should we have, we are now discussing the plan after that beyond that mid term plan, but there is more room to further improve our gross profit margin and we are making every effort day by day. I have one follow-up question. Earlier this year, you said you try to enhance the high value added products so that you can improve the gross profit margin Are you following your plan at this moment? Could you give us some update, please? Yes, we are steadily following our plan to enhance the high value added products. There are many things. Now when we see the sudden increase in sales, then accordingly, fixed costs will be increasing rapidly, but we try to control those increase of the fixed costs properly so that we can come up with good profit margin, gross profit margin. So marginal profit ratio for individual talk cannot be disclosed. In some cases, we are exceeding our plan. In some cases, we are just in line with the plan. Thank you very much. Are there any other questions? Yes, the gentleman on the front row, very close today. I'll please I'm Jami Anton from market capital capabilities. For 2018, the calendar year WFE market expected to grow by 10%. So could you give us the figure of the growth ratio by product? If you have any data available, could you share that with us, please, especially the growth rate of EHA for this fiscal year? I'm sorry, but we do not disclose information of the market sites by product, I'm sorry for that. But could you give us some gut feeling the rough round fear could you share some comment with us, HR growth about the HR growth. Essentially itching market is growing, the system major area for when it comes to growth rate. Therefore each product, in every product, we are going to increase our share. I mean, that the market size of the itching is the largest So DRAM, our market is improving or increasing this year for DRAM. Market is expected to grow by 30%. That's what I said in my presentation. Another issue is the slit process We will warn the process of record for one customer. Our products will be introduced into the mass production line past year, the other customer product will be getting into their manufacturing line this year. So Those business will be materialized. So all products are expected to grow and also etching system is growing rapidly. So 2017 calendar year, your company's extra share how much sort of package do you have for the share of the HR? We do not disclose any division figure, but several points increase. That's what I can say right now. Thank you very much. We do have some time for another question. Yes, the gentleman in the middle. Close to the wall, please. Thank you very much for your presentations. I'm Shivanov from Citigroup Global Market Japan. I heard a lot about the mid term perspective. So I want to ask some questions about short term. In the beginning, Mr. Holly talked about the October to December, so it wasn't so He said it's a bit low. That's what he said in his presentation, but key user term as planned, but when you look at the third quarter sales, do you think the values for the third quarter is just as you planned. Is that correct understanding? And I have another question on page 23. Now, you can see the 4th quarter focus for product sales by application. So now you can see the drastic increase of the sales from the third quarter to 4th quarter, and this is also as planned increase. And if that is just as planned, now we can see the drastic increase in the fourth quarter, you may need to a lot of capacity for engineering and parts. Do you have sufficient engineers and parts for that drastic increase? As for the third quarter sales, this is just as planned and within our company, we don't have any surprise for the sales of the third quarter. As for the fourth quarter sales, as you said, this is rather significant increase if we materialize. I think This Q4 sales is expected to become record high for the quarter 3 sales. This is just the accounting matter, as I said before, we are using completion of setup and testing criteria for recognition of sales, even for the sales for the 4th quarter. Some of the machines already delivered was shipped in the third quarter. I cannot give you any specific numbers, but quite a few tools already shipped to the customer, although sales recognize in the fourth quarter. So that really depends on the number of personnel and how our customers are prepared to receive the installment of the equipment. If they are ready, we can achieve this level of sales for the fourth quarter. Thank you very much. I think we do have some more time for one of 2 questions. Are there any other questions? No more questions from the floor. Okay. Thank you very much. This concludes our financial announcements.