Earnings Call: Q2 2018

Oct 31, 2017

Ladies and gentlemen, thank you very much for waiting. It's time for us to start Turkey electrons 2nd quarter financial announcement. Thank you very much for joining us today. Despite there are so many financial announcement at different companies. I am Hidayama of IR department. I'll be acting as the moderator for today from this month I have succeeded from my predecessor, Mr. Sasagawa, from the viewpoint of the corporate value at to make every effort to improve their activities. I really appreciate your continuous support. So first of all, we'd like to introduce the attendance from our side. We have Mr. Ted Thornton Initiative, Representative Director, Chairman of the Board. Next Mr. Toshiik Kawai, Representative Director, President and CEO Thank you very much for joining us today. Next, Mr. Tetsuro Hurry, Representative Director, ShireFL Executive Vice President. First of all, we'd like to ask Mr. Hori to make a presentation about the consolidated financial summary for the second quarter. Mr. Hori, please? Okay. Now I'd like to make a presentation about Turkey Electron consolidated financial summary for second quarter of the EF ending in March 2018 today is Halloween, but I don't wear anything special. Next slide please. Now you can see the second quarter highlights. The sales hit the record high at 1,000,000,000 on the quarter to quarter basis, you can see the increase by 19% for SPE new equipment sales, 60% of them is for the memory customers thanks to the strong demand for 3 d NAND and DRAM devices. Next, the Field Solutions business sales has increased by 18% achieving JPY 64,400,000,000. For the 2nd quarter, the profit margin increased steadily operate profit margin was 24.4 percent, miking a new record high on the quarter to quarter basis. And the profit margin of FPD settlement, actually in the first quarter, we saw some decline, but now you can see the recovery as expected. Later on, Mr. Kawai, we'll be talking about more details, but because of the active demand for semiconductor devices, the full year sales and profit estimates has been revised applied. And now you can see the financial summary. For the net sales, for the second quarter, 1,000,000,000 and gross profit margin was 42.1%. SG and A expenses 1,000,000,000, operating income 1,000,000,000, 24.4 percent, and net income was 1,000,000,000, as you can see over here compared with previous quarter, all the figures have improved positively. Next slide, please. Now quarter to quarter financial performance is shown here. You can see the sales operating income and gross profit margin. As for the sales, compared with previous every second quarter last year, you can see increasing trend. And profit margin is also increasing slightly and operating margin now achieved 24.4 percent. We can see the high level of the operating profit margin So 24% to 26% operating margin is a target shown in the midterm business plan, and we are getting closer to the target level of the operating margin. Now you can see the segment information. On the left hand QCSPE, profit margin, you can see the steady increase in terms of settlement profit margin for SBE. So in some cases, SP is compared with sales increase, the frequent profit margin doesn't increase so much. However, in the previous meeting, SPE profit was brought forward. And after that normalization process, is taken and that is offset by the wet sales and the profit margin remains at flat Therefore, this is not a big program according to our understanding. As for the flat panel display, as I said earlier, first quarter this year, you can see slight drop because of the business of the low profit margin business, but now you can see in recovery, you can see the rather specific unique point of the profit margin for the first quarter. And as for the completion of net sales, SPE accounts for 95% and FPD accounts for 5%. Next slide, please. Especially now here you can see the sales by region this time second quarter, our courier sales was rather significant. 1st quarter, we also saw the big sales in Korea, but in second quarter, you can see more sales in Korea. Also, it's not so conspicuous. However, the sales in Japan has been increasing steadily to some extent. Here you can see new equipment sales by application. The second quarter, as you can see over here, as for the amount, the perp perp portion, free NAND nonbladder anomaly cells accounts for large portion. When you look at proportion, actually sales in 2nd quarter is rather a big, so proportion itself is declined from 40% to 35% from first quarter to 2nd quarter, but sales itself remains flat unchanged not much. And blue portion DRAM sales reaches 25% in second quarter. So when you add the map, 60% for memory sales in second quarter, 2nd quarter. Therefore, as you can see on the bottom, you can see some increase in DRAM sales to Korea and Taiwan and logic to Korea and U. S. On the other hand, you can see some decline Taiwan Factory. So that is overall trend of the sales composition by application in the second quarter of this year. Next, Field Solutions Sales are shown over here. You can see the steady increase, although there have been some fluctuation 2nd quarter this year, fleet solution sales achieved 1,000,000,000. So solution sales has been increasing steadily so far. Next slide please. Balance sheet is shown over here. The 2nd quarter, as you can see over here, the total asset exceeded JPY 1,000,000,000,000. This is first time for last. So JPY 1,000,000,000,000 yeah, we don't say that it's big enough to be good. We don't see such kind of shrink, but on the left, you can see the assets. The cash and cash equivalent was 1,000,000,000. Also, inventory 1,000,000,000, quite huge portion for the inventory. But in our company, we have the very unique recognition system for the sales, as I said before, the ships which the equipment which are already shipped, but waiting for the installation. Actually, one third of the shipped equipment are just waiting for the installation at customer sites. And quite a few equipment orders shipped just waiting for the installation at the customer sites. That is the reason why you can see the huge amount of inventory. On the right to consider liabilities. We don't have any debt. So the profit of the first half is just recognize as net assets and net asset increased and liquid ratio used to be 67% at the end of March 2017. And now we have 68% of equity ratio in 2nd quarter, one point increase. Next slide please. Inventory turnover and accounts receivable turnover are shown over here as for the accounts receivable turnover because of the big sales 54 days. And our midterm business plan set the target of 60 days. And we are just below our target as for the industry turnover 107 days, slight decrease from previous quarter, our targets in the midterm business plan 95 days, but as I said earlier, one third of the shipped equipment are just waiting for the installation that the customer signs. So inventory itself, the size of inventory itself is following our plan. Now you can see cash flow. As you can see here, the free cash flow 2nd quarter was 1,000,000,000 for 2nd quarter. The orange color, the cash flow from the financial activities are just payment of the dividend, and we achieved 1,000,000,000 name for cash flow from operating activities. You can see a slight decrease in the cash flow fleet, cash flow in the first quarter because of the increase of the inventory attributed to the increase of the shipment, as I said earlier. Many of the equipment, the increasing number of equipment is now waiting for the installation. So as for the free cash flow, in a sense, you can say we can see the very good conditions on the steady basis. Thank you very much. That's all about my presentation of the 5 summary for the second quarter. Now we have Mr. Kawai, our CEO, make a presentation about our business environment and financial estimate revisions. Mr. Kawai, please. Once again, Thank you very much for joining us today. Now I'd like to make that presentation about the business environment and revision refinance estimates. First of all, let me start with the WFE market outlook. As you can see here, there are some drivers for future growth. And they are driving the growth for the future, along with the startup of the high performance computing and data centric society, Now you can see semiconductor market growing rather rapidly right now. Accordingly, WFE market is reaching $45,000,000,000 or more. So that is the trend in this market. For next year, DRAM, 1x nanometer, 1y nanometer and 3d9 next generation for logic, 7 nanometer and pilot line for 5 nanometer. Because of those factors, you can see the continuous and steady growth of the market is expected for next year as well. 2019 and beyond you can see the full fledged introduction of 5G. So as we said before, the equipment market will step up to a next phase. So that's our recognition. So I mean, those circumstances, this year's business environment is shown on this slide. 1st of all, for WFE CapEx. In the previous meeting, I said that 3d NAND and DRAM demand drives drove the market and growth rate of 10% or more was expected. That's what I said in the previous meeting. However, recently I got the information from customers and you can see some positive upward revision can be shown. So I said in the previous meeting, what we revised, we may revise our forecast in the revision of budget Actually, you can see the 25% growth from previous year. That is our new focus for this CapEx in year 2018 as well. So this year, you can see 25% increase. But on top of that, the 2018, you can see equal were more than this year's CapEx. So I'm looking forward to next year. Me, myself, as for the FPD, production equipment CapEx for the TFT Arab process, again, the demand in 2017 is expected to increase by 30% driven by the continuous investment in small and medium panels for mobile applications and set up of G10.5 for as for FPD production equipment as well, by 2018, thanks to G10.5 investment expansion. You can see 20% more growth than this year. That's our expectation for next year. Next, So 2017 market growth and business opportunities by application. Let me start with NAND. In the previous meeting, I talked about 30% market growth. Ratio, but actually now you can see the market growth of 50% that is our revision of the market trend future. As for the CapEx, 6x7x generation investment accounts for about 70%. So NAND bit growth is supported. Actually, 45% bit growth is expected. But about half of that is attributed to the demand for the SSD, especially SAT for data center, that growth is very active right now. For this year, 3d NAND CapEx When you do claim capacity, as you can see on the right hand side, 700,000 per month, that level of capacity is to be reached this year. Including to our focus. As for the business opportunities, the Etcha split process should be our opportunity. Next year, as I said earlier, 9x generation investment will start. So including that free NAND capacity achieves 1,100,000 with level per month. This year for a swift process, actually 2 companies, we won't be or for 2 companies out of which one company adopted process. And we expect the growth according to that trend DRAM 50% increase is expected. For CapEx, 1x nanometer node, the leading edge node accounts for 60%. Of the investment and drivers include average DRAM content in mobile device will increase by 25% and DRAM contents in servers will also grow by 40% and business opportunities, once again, itching system in particular, the combined patterning and back end of the line, the interconnect process those 2 are the opportunities for us in major leading 2 companies have adopted our system. And that constitute our business opportunity. Next, logic and foundry. We are projecting the same level as the previous meeting. You can see increasing difficult patterning and miniaturization and device strength. And we are providing the diversified range and that steady progress has been confirmed so far. Next, 2018 SPE business progress by segment. It's shown over here. In particular, we are focusing on 3 areas itching, film deposition and cleaning. For each area, we are increasing our shares we have providing we have been providing high value added products to address next generation technologies. When you add them up, you can see the increase of share by several points in every area. For memories, For etching film deposition cleaning on average, we have doubled for the growth. And 3 d NAND high speed testing system that is called multi cell test system In other words, Celsius is a processed product name, and you can see the 3 times of growth from the previous year. So by and large, SB business strategy has been followed as planned. Next, FPD business progress. It's shown over here. Again, you can see very steady progress. There are three issues. Number 1, G generation 10.5, we are establishing leading position for G10.5. And we have the PICP edging system having high uniformity and low part consumption. And that's sales is rather good and we have the new platform, Betelecx having that PICP shamber So we had 3 chamber before, but now we have increased number of chamber to 5, from 3 chamber to 5 chambers. And we have released this new platform Metalex based hedging system from July this year as planned. In particular, for the profit, we are focusing on improvement of the profit and we can see the steady increase of profit. So based on that background, for fiscal 2018, we have revised our financial estimates Here you can see the result of the estimates. Thanks to the customer investment increasing and increasing market share, we have revised our financial estimate upward. The sales for full year was increased by 1,000,000,000 from the previous estimate achieving 1,000,000,000. The gross profit margin was 41.3% operating margin will be 24%. So our financial model for midterm plan is getting closer based on our results. And FPG, as you can see here, FPE 1,000,000,000,000 FPD sales is expected to be 1,000,000,000. The net income attributable over the years of parent is 1,000,000,000. We are going to revise our record high drastically So EPS will be 1206. Now you can see the SP division, new equipment sales forecast. This show new process tool sales focused by application, and you can see proportion of them. The blue collar shows DRAM purple represents novel diomemoly, green color represent logic foundry and orange color represents the logic and others. As you can see over here, for the second half of this year, DRAM, just because of the tight supply, you can see SEAP increasing investment. And 3 d NAND is also very steady. NYX Generation equipment is to be delivered from second half of this year Logic and foundry 10 nanometer and 7 nanometer in this continues. And solid investment also continues for the previous news before 28 nanometer. As I said earlier, this is about the new equipment sales forecast As for the Field Solutions, the first half of this year, JPY 110,000,000,000, Mr. Holly earlier, October 2nd quarter, The first quarter 2nd quarter in total, actually the first quarter is 100 18,800,000,000. 2nd half is 1,000,000,000. So 4 year should be 1,000,000,000. That's our plan for the field solution. Next, fiscal 2018 R and D expenses and CapEx plan. Is shown over here. R and D expenses has increased from 1,000,000,000 to 1,000,000,000 more CapEx as well to used to be 1,000,000,000, but we have now upward revision to 1,000,000,000. So billion increase for the CapEx is for RNG tools, especially in order to differentiate ourselves, we are developing the next generation technologies to address the process integration. This is my final slide. So dividend forecast, it's shown over here. As you can see here, we are expecting to raise dividend per share more than 70% year on year basis. So the dividend reached new record high for 4 consecutive years, we are going to focus on the profit increase so that we can improve our shareholder return activities. Thank you very much. That's all about my presentation. Thank you very much. Now I would like to start the question and answer session up to until 8:6:30. And identify yourself by your name and application before asking question. Today, we have so many attendees. I'd like you to limit your question to one followed by another question. So this question and answer session, webcast is to be uploaded on our website So please make a question concise and please speak slowly. At shorthand, you have a question survey and really appreciate your support for this as well. So could you raise your hand if you have any questions? Yes, the gentleman in the front row, please. Thank you very much. I'm Madhagi from Nomura Securities. I'm getting very happy when I come here. And today, I become very excited today. I have one question. So the my major question is about 2018 outlook. That is my major concern. Actually, TSMC investment, I have some concern about TSMC investment for the future, but you have the 4 different categories according to your system. You have another factor China. So how do you see the growth next year? And how do you see the market next year as well? In principle, as I said in my presentation, we will see next year as equivalent or more than this year. However, me myself, talked with top management of different client, where customers, and I can get the very positive information from our customers. Therefore, there is some possibility that the market condition will be revised upward. So when you adapt everything, you can see the drastic increase in market, but I think on the balance, we came up with the presentation and focus and next year is markets should be the same as this year or more than this year, but there is some potential. So as I said in the middle of my presentation, I'm looking for to seeing the condition for next year as well. So by application, how do you see the market condition? For example, logic venturing, declining the dam, increasing 3 d NAND, increasing furthermore or what happens in China. Could you let us know your focus by application, please? For DRAM and NAND, both of them will grow steadily according to our understanding for logic foundry as well. For the time being, you can see slight decline according to your understanding, maybe because of the number of the mobile devices, to be shipped. But next year, we'll see the 7 nanometer and 5 nanometer pilot line, then you can expect the same level as this year or more than this year. So the same or more than this year. So we don't have any negative outlook. In any case. Thank you very much. Thank you very much. Next question please. Yes, the gentleman on the front row please. Thank you very much. I'm UGawa from Goldman Sachs, Japan. I have a question about Shell for Eja. In 2017, you said you're going to increase this year, but what happens, what will happen in 2018, 3D9X and 1Y nanometer for DRAM will be coming out do you see some increase in trend in addition if there is some increase, but the change rate from 2016 to 2017, what about the rate of change from 2018 to 2019, and we really appreciate your comments. As I said earlier, for this year, several points increase in our March in our share. Next year as well, several points increase is expected. I'm sorry, I just said several points. We are sure that we can see another several point increase next year as well because for the actually logic in the beginning, we have established certain position for logic. In addition, for DRAM as well, we can have the patterning or interconnect process. We want POR from 2 companies and for the fab company, they are planning. To place order to us. That is the current condition and select process for NAND, readily NAND. We won the PORs from 2 companies. This year, age growth is rather significant. There is only one company that will contribute to the high volume manufacturing. Next year, second company will start investment to high volume manufacturing, especially they are going to start investment to 9X generation. So we are going to enhance our positioning by several points next year. Share, but 2019, you can achieve to 30% or higher. That is your target as little by little. You are increasing your market share steadily. Is that correct? Yes, that's correct. Thank you very much. Yes, the gentleman on the front row, please. I am Moriyama from Morgan Security, Japan. I had asked the same question in the previous meeting. So customers business opportunity, when you get the business opportunities from your customer back in 2000, that was some excitement and deprecation of orders happened back in 2000. So customers, in order to defeat against the competitor, they placed orders more than necessary, sort of situation doesn't happen this year. So you can see very sound. Orders according to the demands. Is that correct? I understand it. Yes, that's correct. Actually, the governance has been well established and our customers are taking account of shareholders values very seriously. In reality for customers, so each segment logic, foundry and memory, to some extent, the leading leading companies are now working on this area, a number of customers has been narrowed down. So many customers did have some experience. Therefore, they are controlling the governance properly. And also debt traffic, many people said in IoT work data traffic is increasing and set up of data traffic and IoT, I investigate that area. I think that sort of trend supported the market and you can see the city increase. Thank you very much. Thank you very much. So next question please. Yes, the gentleman on the front row, please. Thank you very much for your presentation. I am Mia Moto from sub issue, FGM Margastante Escobarities. I have a question on Page 22, and I'm sorry, To ask some repetitive question, on second half DRAM NAND foundry, you can see the proportion for those for the second half. So toward this first half of next year, how do you see the trend for each? I want to see near future. Outlook. I want to see your view on the trends. Are you talking about the proportion among those different rather than the proportion, I want to see the actual amount how actual how does actual amount change? Several times, I already explained the same or more than same, actually. For each proportion, 25%, 40%, 10% 25%. So there's no big gap or difference among them. Every element is expected to grow steadily. That's our expectation. So first, half of next year, JPY 440,000,000,000 will be increasing furthermore and every area will be increasing, yes, the same or more than this year. So I have some follow-up questions. So some customers are placing quite a few orders because of the extension of the lead time. Do you see some trend as such? Actually, way before actually this kind of trend doesn't happen now, but from the early this year for silicon based materials and electrostatic checks are getting running short, so quite customer places order at earlier stage. That trend started early this year And quite recently, this is not new trend now, especially for quotes, Saligum and Electrocetic Chuck, we are delivering our products in accordance with the customer requestment for the delivery, and we are focusing on that area. For delivery schedule, we are understanding delivery schedule and there is no duplication of orders at all according to our understanding. Thank you very much. Thank you very much. So next question please. Yes, the gentleman on the second row, please. Thank you very much. I am Ari Tomi from Shield S. Securities Japan. I have a question for POR. I want to understand the condition for POR. For EHA, you have won 2 PORs for slit process. I think you have already won these 2 PORs for slits 2nd quarter not only HR, but also other process tools, have you won any other PRs? If any, I'd like you to your idea with us please. For cleaning system for cleaning system, 3dnet, but the phospholic acid cleaning process, you can see very steady increase and for cleaning and so once again, We have back surface, bevel cleaning. We are focusing this area as well. For that application, you can see some increasing trend of the application in this area. Baksa Babble Cleaning. In the focus area, 1 of the focus area is the film deposition for that film deposition ALD. So we are following our plan very steadily. Thank you very much. So we confirmed that we are following our plan I have one more question What is the contribution to sales? Maybe sales contribution will happen next year or already sales contribution started has started this year. The sales has been contributed this year already. Thank you very much. So I'd like to enter today next question. Yes, the gentleman on the opposite side of the second row please. Thank you very much for your presentation. I am Yossita from Deutsche Securities. First of all, my first question is about 3 d NAND. I saw the weather output. Information on Page 17. So this year, 700,000 and next year 1,100,000 wafers and that will be increasing furthermore next year. So for 3 d composition will accounts for 90% to a higher, I think 3 d composition will get in closer to 90%. Anyways, three d NAND composition will be increasing. Now you can see investment increase because of greenfield, But when that will hit the surging, what will happen to the size of the WFE market when there is no further increase of the weather upward, what happens beyond year 2020? I hope I understand your question properly and I try to answer to your question. For client SSDs, as of today, that's about next year, sorry, about 50%. Adoption of SSD is expected for next year. In that sense, we do have some room for margin for growth for the future. Among FSTs, three d NAND accounts for 80% or plus. And client SSD, you can see some potential of further growth. Based on that understanding, I think continuously the trend the increasing trend will continue for the DRAM or memories as a whole, not only for 3 d NAND and DRAM actually, As I said earlier, in my presentation, we are going to see data centric society. And when data centric society is established, now you can see huge amount, not only capacity, you need to think about the high speed and high bandwidths and low power consumption, all those characteristics need to be achieved through the technology innovation. Therefore, namely demand will continuously strong. So I hope I understood your question properly, and I tried to answer to your question from the comprehensive viewpoint answer to your question properly? Yes, thank you very much for your answer. So you talked about the memory issue. So I have one follow-up question for the memory. Now we have capital intensity increasing, a number of customer has been decreasing, as I said earlier. So if memory price goes down what sort of reaction will take place on the customer side. In other words, so someone some company will continue investment furthermore, but in order to maintain the price they're trying to and maintain the price or the company just stopped the investment all offset? And how do you see the trends, especially for the DRAM, customers, when I talk with DRAM customers, especially the planning division people, I talked to with those people. So for DRAM area, actually many of them or all of them are very much aware was sensitive to the price issue DRAM price. So capacity in the market is increasing and they are aware of that sort of trend when they are running business. In other words, we feel very real shirt by talking with those customers. So they have some experience from the previous years and they learned a lot. So there are very much aware of the issue. That's the reason why I said steady growth will be continuing in the future in my presentation. So on the supply side, there is no likelihood that prices decreased. Maybe when price may drop, that may because of the demand side, that could be the only risk factor you need to think about. So you can see some startup or new generation product, you have some yield problem. There are some adjustment period. However, that sort of adjustment takes place at any time. So I don't have any major concern on that. Thank you very much. Thank you very much. Any other questions from the floor? Yes, the gentleman just behind the previous person, Thank you very much. And my color from Credit Suisse Securities, Japan. I have one question about Lam Research. HR for the leading NANDerman Financialer. Actually, I think the lung research signed the severe contract up to until the end of 2018. So for up until that time, the split or most difficult, high aspect ratio area for them, they can sell their product only to Samsung. That's the condition right now. So at the end of 2018, will expire. Then other manufacturers, including Japanese manufacturer, they are waiting for the end of 2018, when you think about HSA share beyond 2019, just because of the expire of the exclusive contract, but sort of impact do you see? And you have a loan, the Clio asset, there should be no problem. I would like you to give me your idea. We have positive understanding or I should say we don't have so much concern on that issue. When I look at our midterm business plan, HN share has been revised to some extent. We have higher aspect ratio in the future and our company has innovative technologies with high rate to come up with good patterning profile. So the end of March 2019, I think We'd like to expect furthermore at the next stage. So that's the reason why we have revised our market share for EHA. About that issue, you mentioned new technology can be introduced. So we don't have any concern. Needless to say, We are always seeking for number 1 in area. And of course, our competitors are growing and innovating a lot. But according to our plan, we will introduce our new technologies and we can some business opportunities there and we haven't changed that area. So for 9x or beyond that area, so our present cost of 9x generation might be lower than the cost of 6x or 7x8. And have you accelerated that area or do you think you just start up 9x generation and gradually try to reduce cost for 9X. So where I think depending on 2 scenario business opportunity of your company might be different. Could you share your idea, please? For 9x next year, investment will be starting and build that our client customer do have some plan. So that is the double stage or all one etching, they have 2 different options for approach, but our application When the process is completed, so current full current generation as well. H rate, we do have our technology do have some advantage in terms of the H rate. So we do have some advantage. In other words, 6x or 4x generation maybe 2 stages, even for that, I'm going to be win the POR so that we can FedEx increase the share because of your good product. Is that what you mean? So 3gbusiness3dnatbusinesshighaspectratio, we need to come up with high speed, good pattern profile are the requirements from the customer. So we need to focus on the high end so that we can provide the technology in advance of technologies that are adapted Then customers are clarifying the product for previous generations. Thank you very much. Next question please. Yes, the gentleman on the 2nd rule, please, if I'll end. Damian Tom from Curric Capital Securities. I have one question for this year for Field Solutions. Forecast is revised upward and what sort of impact can you see for the operating margin? And what is your expectation for next year growth ratio? As we said before, for field solution profit margin is higher than the average. Therefore, when field solution is increasing, that means the corporate profit is increasing positively. And the targets of the field solution sales So next year as well, demands will be increasing in different areas, so we can see the increase for next year as well. For example, this year JPY 250,000,000,000 is the sales for the field solution. Yes, 1,000,000,000. So that is the basis for this year. So the next year So you can see maybe the subsidy flat or increases. Per field solution grows more than the process to business. Is that correct? We haven't compiled next year budget yet. So I cannot say anything specific today, but there is I think we are sure you can see some increasing. The number of jumpers for HR is rather high and number of chambers increasing for next year, that could contribute to your sales for fuel solution. Is that correct? Yes, that's correct. The area for Field Solutions business is after the warranty expiry. So that means beyond 1 year after the shipment, okay, thank you very much. Thank you very much. Next question, please. Yes, the gentleman just in the middle. Please. I mean, Yoskar for Morgan Stanley, MUFG Research Japan. So just here, WFE, is $45,000,000,000 or more and next year, the same level or more, that's what you said earlier. So a you have the upper case of the midterm business plan that environment is now being established. When that happens next year, are you going to getting closer to the achievement of the targets and objective of the midterm business plan next year and on? And then also I have another related question. This year, you have revised your plan drastically upward, but I think the full year gross margin is slightly declining. Are there any reasons for that? The first question, so this fiscal year, 24% is the operating margin. And we are going after 26%. And I think we are making steady progress to achieve 26%. So continuously, we'd like to enhance our product competitiveness and we need to enhance our efficiency in various area so that we can achieve 26% properly and surely So the market condition has been established as we planned. As for your second question for the gross margin, that is just because of the product mix. And also the very high market growth condition market growing condition. And we are carrying out some evaluation and that evaluation requires some investment. That is the reason why there is some slight decrease in the gross margin. I have one more question. So now your industry is rather busy right now. So many you are running shortage of many things, and that may restrict your further growth. I'm afraid to say, for example, do you have any concern or problem any things which are running short of right now? Well, Silicon Quotes and electrostatic Chucks So for each area of those 3, we are trying to deliver our product to meet customer requirement of delivery, we are working together with partners. We are managing the situation properly and we are focusing in this area. So for in our factories, we are holding partnerships at same time, also in Tokyo, we are going to hold the partners stay just before the semicolon in Japan. And on that partner's day, we are closely, discuss with our partners and share the our production forecast for the future. Thank you very much. So next question please. Yes, the gentleman in the front row, please. I am Shimada from SMBC Nikko Securities. No one has asked that question. I have been waiting for that, but actually orders or inquiries but you won't release any information on orders. So when I second half, compete with first half U. S. Sales is expected to grow furthermore. So April to June, I think the I thought did July to this September, you can see some deceleration, but when you look at the sales, even in the July to September, you are still in the expansion period. So this year, 20% plus increase and next year, you said equal or more than equal. It's rather vague you don't say specifically 20% next year as well. So inquiries or orders in the first half of next year, maybe you can see some in was some momentum slowed down a little bit. Do you expect that sort of trend for first half of next year in advance. So you just maintain the high level first half of this next year. So you can see some increase for the orders or inquiries now, but maybe first half of twenty eighteen, you can see some can I say plateau time? So when you discuss with your customer, you don't you have different feeling. Of course, it depends on the application. So by application, especially for memory, I think some desolation may take place, but how do you view the future condition of the market? I'm looking forward to next year. That's what I said earlier in my presentation. The high level is to be maintained, I should say, there is some more potential than the high level. That's how you should understood the market. When I discuss what converse with the customers, I feel a sense of huge potential. So we are now trying to determine the level of the demands that's the reason why I just said equal or more than this year. We don't have any negative outlook. At all for the future next year. So memory should be okay, but when you look at logic increases a lot in the second quarter. Maybe because of MPU applications, this area, Logic, do you think the very same trend for Logic next year as well? And Intel has postponed their plan for investment, but also that situation have the very strong outlook for the Logic. For memory, I understand, but when you think about it very naturally, foundry doesn't agree so much. But on page 8 and page 9, logic sales proportion increases a lot. So do you have any idea for the trend of the Logic for next year? This is my follow-up question. I for logic foundry as for logic foundry, the same as this year, or we will be fluctuating just between 20162017. So in that sense, we don't see any negative forecast. And I'm afraid I cannot talk more about this issue. So please allow me to stop answering to your question right now. Okay, thank you very much. Thank you very yes, the gentleman on the front row please. Thank you very much for your presentation. I'm Siyura from Daiwa Securities. For next year outlook, once again, sorry for that. You said the same as this year or more than this year. So the existing IC vendors or new imrs in Chinese local vendors, when you have 2 categories, even for the existing IC vendors, can you see some increasing trend, or do you think the existing IC vendors are just remain flat but you can see an increase in the emerging Chinese local vendors. I think both elements are included. For Chinese customers are also incorporated. An existing IC vendors, our customer's investment is also incorporated. Based on those 2, we came up with our focus for next year. I have one more question to follow-up. In your presentation earlier, you said, when you include every element, the next year figure becomes really extravagant, but what's sort of application do you think about maybe memory that was, is it DRAM or could just show me the breakdown? Focus for future. In principle, memories are rather good If we just followed the plan, memory will contribute ourselves a lot. Both DRAM and NAND will make a contribution. Thank you very much. Thank you very much. This should be the last question. Any other question from the floor? Mr. Moriama, JP Morgan Securities, Japan. I'm sorry, once again, I have one question. For EUV electography and all that development. I have a question on that regard. Next year, what sort of change would you expect for EUV lithography quota developer? I want to see the contribution to the net sales and profit and for OLED as well, I don't know, to what extent TV market will be being format. But in the past, by using printing technology, the position system is presented from your company, But do you think any market is expected for future? So that is a new question, product So I want you to give me some idea. Let me start with AAV, lithography quota developer. Is that your question? Yes, you do have 100% share. I think there is some fluctuation, but by and large, do you think some increasing trend? But to begin with, EOB market, I think for this year, let's say, 12 systems and next year, maybe 20 systems are to be delivered. From your viewpoint, how do you see the market? Do you think the market really exists there for the I think the UV assembly market do exist. When it comes to the business opportunity, I think that it's quite a significant business opportunity for one issue, improvement of uniformity and reduction of defects is another and high sensitivity resist is to be used for accelerating exposure. So by doing that, UV throughput is to be improved So these are the area for business opportunities. And also for the metal resist, we need to come up with reduction of the metal contamination CIP and performance improvement. So there are so many factors for opportunities for us. In principle, the details proceeds should be used as a basis and we can provide additional function to provide the value added to expand business. That should be our business opportunity. As for your second question, all that in particular inkjet printing technology that you have asked about. In principle, what we are doing right now So for 8 K large sized TV, we do have some expectations when it comes to business, Tokyo Olympics 2020 should be the trigger point for us to see some business opportunity. Thank you very much. So it's time for us to close today's financial announcement. Thank you very much for joining us today. Thank you very much.