It's time for us to start Tokyo Electron Financial announcement for fiscal year ended March 2025. Thank you very much for joining us today despite your busy schedule. I am Yatsuda of IR Department, serving as a moderator of today's session. I'd like to introduce today's attendees: Toshiki Kawai, Representative Director, President, and CEO. I am Kawai, nice to meet you. Next, Hiroshi Kawamoto, Senior Vice President, General Manager, Division Officer, Finance Division. Before starting the presentations, let me explain the flow of today's session. First of all, Kawamoto and Kawai will make presentations. After that, until 6:30 P.M. Japan time, we will have a question-and-answer session where we will entertain questions from the audience. This meeting uses two channels of Webex for the simultaneous interpretation between Japanese and English.
As we explained in our email, you are kindly requested to use apps on PCs or mobile terminals if you plan to ask questions, but if you are not going to ask questions, you can use telephones. Since this conference is intended for institutional investors and analysts, we would appreciate your kind understanding that we receive questions only from institutional investors and analysts. We will post the audio contents of this conference in Japanese and English on our website within a couple of days for your reference. Now, Kawamoto will present the outline of the consolidated financial summary. Kawamoto-san, please.
Good afternoon. I am Kawamoto of Finance Division. I'd like to present the consolidated financial summary of fiscal year ended March 2025. This slide shows the financial summary of the fiscal year ended March 2025. First of all, I'd like to highlight that results beat our previously announced guidance in net sales, income, and profit margin. Please mainly look at figures in blue box. Driven by the customer's active spending both for advanced and mature nodes, our net sales reached JPY 2,431.5 billion, a 32.8% increase year over year. Gross profit was JPY 1,146.2 billion, exceeding the JPY 1 trillion level for the first time. Gross profit margin rose to 47.1%, contributed by high value-added and high profit margin products. Operating income was JPY 697.3 billion, a 52.8% increase year over year. Operating profit margin was 28.7%, a 3.8 percentage point rise year over year.
Gross profit margin hit record high while we kept active R&D investment for the future growth. Net income attributable to owners of the parent was JPY 544.1 billion, a 49.5% increase year over year. R&D expenses were JPY 250.0 billion, a 23.2% increase from the previous fiscal year since we continued investing for our growth, as I said before. Capital expenditures were JPY 162.1 billion, mainly due to construction projects in various sites, such as development buildings in Tokyo Electron, Kyushu, and Tokyo Electron, Miyagi, as well as procurement of equipment used for evaluation. Depreciation was JPY 62.1 billion, an 18.7% increase year over year. This shows the financial trend. In the fiscal year ended March 2025, net sales, gross profit, operating income, and net income hit all-time high. Also, gross profit margin and net profit margin reached record high. ROE on the bottom was 30.3%. This slide shows the quarterly financial summary.
I will mainly refer to the figures in the blue box. In the fourth quarter, we generated net sales of JPY 655.4 billion, slightly higher than net sales in the third quarter. Gross profit was JPY 310.5 billion, a 0.2% decline from the previous quarter. Gross profit margin was 47.4%, a 0.2 percentage point drop from the previous quarter. Operating income was JPY 183.7 billion, a 7.9% drop from the previous quarter due to the increase of SG&A expenses, mainly including R&D expenses. Operating profit margin was 28.0%, a 2.5 percentage point decline from the third quarter. Net income attributable to owners or parents was JPY 142.9 billion, a 9.1% decrease from the previous quarter. Capital expenditures in the fourth quarter were JPY 34.6 billion. This slide shows net sales by region.
As for net sales composition in the fourth quarter, the proportion of Korea and Taiwan rose by 4.9 and 2.4 percentage points to reach 22.4% and 20.7%, respectively, quarter over quarter. The proportion of sales to China on the bottom remains above 40% previously, but in the fourth quarter, due to some shipment pulled forward to the third quarter and peak out of capital investment by emerging customers, the China proportion declined by 8.4 percentage points from the previous quarter to 34.3%. This shows SPE new equipment sales by application. In fiscal year ended March 2025, from the bottom of this chart, sales to non-memory customers accounted for 62%, non-volatile memory accounted for 7%, and DRAM accounted for 31%. For DRAM, active investment for advanced technologies such as HBM significantly contributed to the increase of sales to DRAM customers and the rise of its proportion.
The proportion of sales to non-volatile memory customers remained flat year over year, but as customer investment gradually started picking up, our sales showed an increase. Sales to non-memory customers rose significantly from the previous fiscal year, driven by strong demand for mature nodes as well as active capital investment for advanced nodes. Now, this shows the field solution sales. In fiscal 2025, field solution sales were JPY 538.3 billion, growing by 25.6% year over year. Along with improving utilization rate of customers' FAFs, we enjoyed strong sales for parts, service, used equipment, and modifications. This slide shows the balance sheet. Total assets were JPY 2,625.9 billion. Cash and cash equivalents were JPY 496.2 billion, increasing by 200.7 billion from the previous quarter. Notes and accounts receivables were JPY 485.6 billion, declining by 25.2 billion from the previous quarter. Inventories were JPY 749.1 billion, a 15.9 billion decline from the previous quarter.
Investment in other assets were JPY 347.6 billion, declining by 42.0 billion from the previous quarter due to such a factor as market capitalization decrease. For the liabilities and net assets shown on the right-hand side, liabilities were JPY 770.7 billion, decreasing by 66.9 billion from the previous quarter, mainly due to posting of income taxes payable. Net assets were JPY 1,855.2 billion, rising by 57.0 billion quarter over quarter. The equity ratio was 70.1%. This shows the cash flow. The cash inflow from operating activities in the fourth quarter was JPY 264.8 billion. The cash outflow from investing activities was JPY 38.9 billion due to acquisition of fixed assets, mainly including equipment used for evaluation. The cash outflow from financing activities was JPY 23.5 billion, primarily because of share repurchase. As a result, free cash inflow was JPY 225.8 billion. Free cash flow recorded all-time high, both on the quarterly and fiscal year basis.
This concludes my presentation. Thank you very much for your kind attention.
Next, Kawai will present business environment and financial estimates. Kawai-san, please.
This is Kawai. Once again, thank you very much for joining us today. I will present business environment and financial estimates. Let me start with fiscal 2025 four-year business highlights. In fiscal 2025, due to a drastic increase of investment in advanced logic for AI servers and in HBM, as well as portfolio investment by Chinese customers, we generated net sales of JPY 2,431.5 billion, gross profit of JPY 1,146.2 billion, operating income of JPY 697.3 billion, and net income of JPY 544.1 billion on a four-year basis, all of which hit all-time high. Driven by sales growth of high-value-added products to support technology innovation such as device scaling, higher stacking, and 3D integration, gross profit exceeded JPY 1 trillion for the first time, and gross profit margin reached 47.1%.
Sales growth rate was 33%. In particular, sales to DRAM customers increased by 59% year over year as a broad range of our tools were adopted for HBM. Our market share also increased significantly. For edge systems in particular, we succeeded in raising our shares by 6 percentage points year over year as we won 100% mass production PORs in major customers for the capacitor etching process, which is the most difficult process in DRAM production. One customer adopted our cryogenic etching system in non-channel etching process, which contributed to our sales. Also, we won new PORs in non-slick etching process, which drove sales growth, and demand for edge system grew in the interconnect process of advanced packaging for logic and HBM. Sales of wafer bonders increased driven by growing demand for HBM, while sales of wafer probers expanded, capitalizing on growing momentum of advanced logic investment.
Share of wafer bonders and wafer probers showed a drastic increase. In particular, bonder sales reached about JPY 30 billion, growing by three times over the past two years. To further expand our future profit, we made steady progress in penetrating into new technology domains. Specifically, we released multiple new outstanding products contributing to semiconductor technology innovation. For example, penetration to untapped segments such as single wafer plasma, CVD, and PVD, gas cluster beam system, which improves the efficiency of leading-edge lithography, and laser lift-off system to drastically decrease the environmental footprint of processing. In fiscal 2025, we conducted share repurchase of about JPY 150 billion in total. Next, I will talk about business environment.
As we announced three months ago, we expect calendar year 2025 WFE market size will be about $110 billion, remaining flat year over year, despite the low investment to automotive semiconductors and power semiconductors, as well as in mature node investment in Chinese emerging chip makers. Thanks to continuing expansion of AI semiconductor demand, investment for advanced logic and HBM will be expected. Accordingly, WFE market is expected to keep growing to a record high level. Also, in calendar 2026, growth of AI-related investment will drive the WFE market. GPU for AI server will shift to the 3-nanometer node from current 4-nanometer node. HBM to be used will evolve from the current 8-chip stacking to 12 and 16-chip stacking while proceeding with device scaling. In addition, full-swing introduction of AI to edge, such as smartphone and PC, will start, which will trigger demand growth of 2-nanometer node logic and DDR5.
Due to these drivers, the WFE market is expected to show a double-digit growth. For AI applications, cutting-edge semiconductor technologies are essential toward the realization of semiconductor devices featuring ultra-high-speed, large capacity, high reliability, and low power consumption. Technology innovation is moving forward, supported by two primary drivers. One is device scaling, which is well-known intrinsic nature of semiconductor innovation, and the other is a new driver, heterogeneous integration. Along with the evolution of such technologies as GAA, backside PDN, next-generation DRAM, higher stacking NAND, and packaging processes, our business opportunity will expand more and more. Together with our customers developing cutting-edge technologies, Tokyo Electron works on concurrent development of four generations, looking 10 years ahead. This slide shows some examples of focused technologies we are addressing for next generation and the generation after.
To capture these business opportunities, for sure, we are actively investing in R&D so as to improve our future corporate value. Next, I will present the financial estimate for fiscal 2026. In the ongoing fiscal 2026, we expect full-year net sales of JPY 2,600 billion, positive growth of 6.9% year over year. The details are shown in this table. We expect record-high net sales and operating income again in this fiscal year. We will keep on investing for further growth, planning to invest JPY 300 billion for R&D. This slide shows SPE new equipment sales focused. As the investment in advanced nodes for AI server and investment by Chinese chip makers were pulled forward to the second half of fiscal 2025, there is a sense of lull in the first half of fiscal 2026.
In the second half, we expect the situation will improve and investment by customers preparing for calendar 2026 market growth will be activated. Based on this forecast , the SPE new equipment sales in the second half of this fiscal year are expected to be JPY 1,100 billion, which is record-high half-year sales. This shows our plan for R&D expenses and CapEx. Following new development building in Miyagi, whose construction was completed the other day, construction of a new building in Kumamoto and production logistics center in Iwate is planned to be completed during this fiscal year. In Miyagi, we will start construction of a new production building in June, which adopts next-generation smart manufacturing concept. In fiscal 2026, we expect R&D expenses of JPY 300 billion, CapEx of JPY 240 billion, and depreciation of JPY 86 billion. This is my last slide showing the dividend forecast.
In fiscal 2026, the four-year dividend per share is expected to be JPY 618, surpassing the previous record. This concludes my presentation. Thank you very much for your kind attention.
We will have a Q&A session until 6:30 P.M. Japan time. You can ask questions either in Japanese or English, but as our speakers are on the Japanese channel, please allow us to take audio questions only in Japanese. If you ask a question in Japanese, please click the raise-hand button on the Webex. For details, please refer to the instructions attached to the invitation email. I will call the name of the person one by one. Our secretariat will contact you in advance, so please check the Webex chat box. When asking a question, you are kindly requested to unmute your microphone for yourself.
When your question is answered by our attendees, please hit the raise-hand button once again to remove the raise-hand signal. For questions in English, please use the Webex chat box and give your affiliation, name, and question in text and send it to our secretariat. We will refrain from answering questions if your name and affiliations are not given. On the Japanese channel, we will translate your English question, and I will read it out in Japanese, and our speakers will answer in Japanese. On the English channel, the question and answer will be simultaneously interpreted into English on a real-time basis. As we like to take questions from as many participants as possible, we'll take one question per person. If time allows, we will take additional questions. The first question is from Mr. Yoshida from CLSA Securities.
I am Yoshida from CLSA Securities.
Regarding WFE market focus 25 and 26, you said there is no change from the previous announcement by application. What is your view for the WFE market? If you have figures, please let us know. What sort of growth rate do you expect in China for the WFE market? Thank you.
The breakdown by device shared by 2024 last year and this year. We do have some focus. As far as our analysis concerned, 2024 high-end logic 20%. DRAM accounts for 17%. NAND accounts for about 5%. Others, including CMOS image sensor, five automation devices accounts for 13%. China accounts for 45%, around 45%. Out of 45% of China, 70% are for commodity logics. That is how we view the WFE market by application. This year, CY 2025, the high-end logic accounts for 20%, the same as last year. DRAM, HBM, 20%, 3 percentage point increase.
NAND accounts for 10%. Last year, 5%, so slight increase. Commodities and factory automation-related devices, as well as CMOS image sensor, wafer level packaging accounts for 15%. China accounts for about 35%, out of which 80% is logic. The proportion of China last year was more than 40%. However, in the WFE market, that should be about 35% by lunch, declined by about 10 percentage points from previous year. That's our expectation.
Thank you very much. One more follow-up question. Compared with the figures you announced three months ago, are there any changes? Now the Trump administration announced a tariff quite recently. Are there any changes in the customer's attitude toward investment? For example, in China, ASML says that their sales are expected to grow. Those figures, compared with three-month prospect, are there any changes? Are there any changes in customers' attitude for investment?
Right, by and large, there have been no changes over the past three months. In reality, last fiscal year results have been revised upward a little bit because there are some figures pulled forward. However, there have been no major changes over the past three months.
Thank you very much for your answer. Thank you very much, Mr. Yoshida. Thank you very much for your question. Next question is from Mr. Wadaki from Morgan Stanley MUFG Research Japan. Wadaki, please.
I have a question regarding China tool vendors know that, but actually quite big investment for memory was made. LAM and AMAT do have become more aggressive. However, because of the following regulations, the market situation might become much stronger, difficult. The changes in China now, how do you view that? What sort of impact do you expect for the future deregulations to be imposed?
Thank you. Yes. At present, the regulations or tariffs, those things are discussed quite often nowadays. About your question, that changes in Chinese market because of the regulations, I do not see any significant changes. No, I do not think there is a major change. The information we have already knew has been incorporated in our figures announced today, but there have been no major changes happening right now. That is how I view the Chinese market. The middle of 40% will be declining to in the middle of 30% level. I do not think there is major change in the Chinese market focus. I do not have any impression.
Okay, I have one follow-up question. Competition in China, how do you see? Actually, in the past, you are increasing your market share in China. The local Chinese vendors and American vendors, are there any competition landscape change?
For example, Chinese tool vendors are growing rapidly right now. The Chinese government promotes industry, especially in the field of commodities. In the field of commodities, there are only limited differentiation factors such as environmental performance, like net zero or productivity. Therefore, there is some limitation in differentiation. In that sense, within China, the Chinese tool vendors are now growing in share. That's how I view the competitors in China. For American tool vendors, there is no change in the competitive landscape with or against American tool vendors. We do not have any intention to capitalize on the regulations imposed by the American government. We are working on the fair basis, and we do not see any particular impact. In the future, when it comes to global share, we should promote technology innovation furthermore.
Our company tries to provide values to the global market, and the opportunity is growing. China is growing, but all of other areas are growing now, and we think we can improve our share. The share in the global market, I think we have a plan to further increase our share on the global market. Because of the regulations, our share in the Chinese market, when you think about regulations and also Chinese tool vendors expected to grow their sales.
Thank you very much. That was very clear. Mr. Wadaki, thank you very much for your question. Next question is from Mr. Nakamura of Goldman Sachs Japan. Mr. Nakamura, please. Thank you very much.
This is Nakamura. I have a question regarding 2026, the new fiscal year. I want to understand more about your business plan for this fiscal year.
By six months, for the first half, the gross profit margin will decline a little bit according to your plan. Could you let me know more details about that trend? You can see the acceleration of the sales toward the second half of this year compared with three months ago. The focus from your customers has been changed or no changes in the focus from the customers.
This is Kawamoto. Let me answer your question regarding the profit margin. Profit margin declines a little bit in the first half of your fiscal year. As you pointed out, as I said before, in the first half of this fiscal year, you can see some low in the sales. That has a great impact. We continue our investment for further growth. We are investing in R&D continuously, and you can see some increase in labor costs as well.
When you think about the overall picture for the first half of this year, profit margin declined from the second half of the previous fiscal year also because of the decline in sales. For the second half of this fiscal year, the sales are expected to recover or improve. Toward next fiscal year, the investment for leading-edge nodes will be increasing. Therefore, you can see an increasing trend of the profit margin. That's all from me. Thank you very much. Let me add some more comments. The first half of this fiscal year, there is the sense of low. However, toward the second half of this fiscal year, the AI server inquiries are very strong. In addition, next fiscal year, PC smartphones demand is expected to increase to some extent. That is an additional factor to drive the market.
AI server technology innovation is also having some impact. For PCs and smartphones, the market used to be large during COVID-19. Ever since that time, the number of PCs and smartphones has been declining. However, quite recently, you can see some picking up trend. Windows 10 support will discontinue during this year. Because of the battery life, the number of PCs and smartphones will be increasing. On top of that, you can see a function of own device AI and semiconductor content will increase. We can see increasing investment last year. That's the reason why we expect double-digit growth next fiscal year. That's the reason why the second half of this fiscal year sees some growing trend. Fixed costs to the sales will be declining because sales will be growing. The gross profit margin is expected to grow as well. Thank you very much.
In March, the American government announced tariffs. Are there any changes in customers' reaction?
No, there is no change in customers' focus. Thank you very much.
Mr. Nakamura, thank you very much for your question. Next question is from Mr. Yasui of UBS Securities. Mr. Yasui, please. Thank you very much. I am Yasui from UBS.
I have a question regarding the demand difference between the first and second half of this year. You can see low in the first half of this fiscal year, according to my understanding. That is what Kawai-san said earlier. However, having said that, when you look at the situation, the Chinese players try to place orders as soon as possible. I think that is the trend. That trend remains unchanged. Therefore, the first half of this fiscal year, China and others, if there is any difference, please let us know.
Actually, the Japanese supply chain is well established. We are very flexible and agile to meet the short delivery lead time requirement. We have a very strong and resilient supply chain here in Japan. Even if there are some inquiries or orders pulling forward for AI server and China, we have been addressing those inquiries and demands. In that sense, the confidence level of the figures for the first half of this year is rather good because we do have orders. What we already signed gets the LOI from our customers. Therefore, the confidence level for the figures in the first half is rather high. For the second half of this fiscal year, we do have demand, but we should see the qualification by customers and yield enhancement by customers. We need to closely watch the situation in the customers' staff.
When it comes to tariffs, there have been no changes so far. About 8% for America, even if there is some impact. That is the impact. We must closely watch the situation. Let me just give some comments for tariff. Of course, we must closely watch the situation from now on. If something is decided, we must address the situation to come up with the best solution together with customers through the discussion with customers. Now there are various regulations and changes. We did have experience in the past many times, actually. Tariff, we try to come up with new products which feature higher productivity to overcome negative impacts of tariff. That is the mission of Tokyo Electron.
Therefore, our mission is to promote semiconductor technology innovation and productivity enhancement. That's our mission. This is the purpose of the semiconductor production equipment manufacturers that remain unchanged. This is what we are going to do. This is a core of our business. We need to take appropriate action. Thank you very much.
I have one follow-up question. There are some overlaps. I'm sorry for that. Here's a guidance. First half is rather conservative guidance for the second half of this fiscal year. You are trying to watch the impact of tariff. You think this is the figure you can maybe achieve. As for the possibility, first half and second half, are there any possibility that the result becomes much stronger in the first half of this fiscal year?
When the budgets are finalized, we need to be prepared.
We should, if customers place us some orders earlier than expected, and there is a possibility, and we are making announcement of those figures, I think this is most likely figures for the first half and second half of this fiscal year.
Thank you very much. Mr. Yasui, thank you very much for your question. Next question is from Mr. Hirakawa of BofA Securities.
This is Hirakawa from BofA. Thank you very much. I have a question regarding application. According to your presentation, HBM toward 2026, AI-mounted PC and smartphone will be appearing. On the other hand, the DRAM proportion. For the fiscal year ending in March 2026, you can see some decline. Maybe the difference between fiscal year and calendar year, or are there any low somewhere, or there are some changes in legacy nodes? Could you elaborate this portion, please?
Yes.
For DRAM, there are very strong inquiries. Last fiscal year, the sales to DRAM customers increased by 50% or more. For months in this fiscal year, you can see an additional 10%-20% growth expected. That is how we view the market trend. There is no sense of low in the sense total amount and the device scaling in both cases, the number of HBMs and device scaling in both aspects. There is a very strong inquiry for DRAM. Therefore, you can see some additional increase by 10%-20% in DRAM sales. Let me add one more comment. On a fiscal year basis, it is true our guidance says that DRAM sales decline. However, on a calendar year basis, we think the DRAM sales growth will slightly outperform the WFE market. Investment in China for DRAM declined this year.
Kawai-san said earlier, actually, it is true that the DRAM demand increased outside of China. However, the DRAM demand in China is declined. There is some offset between the two.
I have one follow-up question. Even if there is a decline in China for DRAM, you can see about 20% or 10% increase on the calendar year basis. Is that the correct way to see the DRAM market?
The total, we do not see a 10% increase, but the DRAM, other than excluding China, you can see the growth expected about 10% for DRAM. This year, about 10%-20% excluding China. Yes, that is right. I am sorry. I made a mistake in the year date, chronological figures.
Thank you very much, Mr. Hirakawa, for your answer. Next question is Nakanomy o-san from Jefferies Japan.
I am Nakanomy o from Jefferies Japan. Can you hear me? Yes. I am sorry.
This is a kind of repetitive question. Now the Trump administration will announce the tariff, and the global economy will face the recession. I think that's a risk case. Even under such a situation, this focus for your business outlook or WFE market will not be impacted so much. Is that how you view?
This is Kawai-i. As I said earlier, we must look at the market situation very carefully. As of today, our sales to North America, which is subject to the impact of tariff, accounts for about 8% out of the total sales. It is a very limited impact. The WFE market, actually, there is nothing decided yet. There have been no changes in the WFE market situation. When it comes to the macroeconomy as a whole, however, according to the tariff introduction, we must closely watch the situation of the macroeconomy dynamics.
In that sense, for example, the semiconductor or electronic equipment will be subject to the tariff given by the American administration. They are saying that, but tariff is not actually imposed yet. Even if tariff is imposed, we should wait and watch what happens to that. For short-term perspective, as I said earlier, 8%. We will see what happens to that 8%. We must closely watch the situation regarding that 8% impact in North America. If there is any burden on the customer because of the tariff, we should take appropriate action. Also, for mid-term, long-term perspective, actually, a new model tool is launched every 18-24 months. We must introduce new products with high productivity to cancel the negative impacts of the tariff. This is how we can provide value to the customer properly by proposing new products.
This is our business core mission. We need to take appropriate action in the mid-term, long-term perspective. Short-term, we must be closely watching the situation. Mr. Nakano Mio, is everything clear for you? Thank you.
Thank you very much for your question. Next question is from Mr. Shimamoto of Okas an Securities.
I am Shimamoto. Thank you very much. I have a question regarding the WFE market for this fiscal year. You already talked a lot about this year. When it comes to next year, 2026, high-end logic, DRAM, and NAND, as well as China market. Do you have any picture about the two-digit, double-digit growth? Could you elaborate your outlook?
For composition, I said in the beginning. Let me just repeat. High-end logic, 20%. DRAM accounts for 20%. NAND accounts for 10%.
Factory automation, CMOS image sensor, wafer-level packaging, and others account for about 15%. China accounts for about 35%, out of which 80% accounts for logic. That's how I view the situation. From the viewpoint of market, AI server demand is continuously strong. 2-nanometer mass production investment will be accelerated. One foundry is now promoting this. That will become multiple chip makers. That's what we can expect. In addition, PC and smartphone will be increasing in unit. Semiconductor content of PC and smartphone will be growing furthermore. These are the drivers for the double-digit growth.
Thank you very much. You said that's about calendar 2026, those 30%.
I'm sorry. Calendar 2026, that's the question you asked about. I'm sorry for that. Yes. Calendar 2026, almost the same as 2025. Yatsuda-san, do you have any additional comments?
Maybe increase in logic area next year.
What we expect. NAND investment is almost comparable. DRAM investment is expected to grow in 2026. As I said earlier, the leading-edge customers, excluding China, will increase. The investment in China will decline. We can see an increase in the advanced DRAM investment. The major driver is advanced logic. The advanced logic proportion will increase furthermore. Thank you very much. That means DRAM increases. China hit the bottom this year. Leading-edge logic is also a driver. Actually, we do not have any prospect that China will grow drastically. Actually, major drivers are the investment outside of China. The China market remains almost flat between this year and next year, according to our understanding. Advanced logic will show a drastic increase. DRAM will further increase. Thank you very much. For example, the advanced node and mature node.
Last year, for example, that proportion is 4-6. We have more mature nodes. This year, 5-5 between mature and advanced nodes. Next year, the leading-edge node accounts for 60%. Commodity accounts for 40%. This kind of trend will continue for a few years. Advanced nodes will increase in proportion furthermore.
Thank you very much. Shimamoto-san, thank you very much for your question. Next question is from Mr. Kamisaki from Tokai Tokyo Intelligence Laboratory.
I am Kamisaki from Tokai Tokyo . I have a question regarding China. I'm sorry. I'm so persistent. The fourth quarter, the China sales decreased. After that, originally, the first half, the business is rather strong. Second half, the business goes down. That's how you view the CY 2025. However, when it comes to China, there is no difference or changes in this focus.
The merging foundry investment declined, according to my memory. Are there any changes in your outlook?
There have been no changes at present. Yatsuda-san, do you have any additional comments? Three months ago, we announced the figures. There have been no changes over the past three months. As I said, the fourth quarter, the China proportion goes down. Absolutely, the amount goes down as well. The reality is in line with our focus.
Is it correct if I understand that there is no difference between the fourth quarter and first quarter? We can expect additional decline in the second half of this year from the first half of the year. Is this correct understanding?
In the future, now we can see a drastic decline in the emerging customers. On the other hand, existing customers continue their investment.
We do not see any ups and downs in the future.
Thank you very much. That is very clear. Kamisaki-san, thank you very much for your question. Next question is from Tong from Macquarie Capital Securities.
I am Damien Tong from Macquarie Capital Securities. Earlier, HBM, Bonder, and Deb onder, the about JPY 30 billion is the sales volume. This fiscal year and next fiscal year, how do you view the outlook and cryo etching? Earlier, NAND flash in next fiscal year should be flat. There is some demand. I mean, those circumstances, next fiscal year, NAND flash too, how much growth do you expect for NAND flash customers? Bonder and Deb onder, for the HBM, the drastic growth has been recorded. Actually, the sales have increased by three times over the past two years, achieving JPY 30 billion. We have big expectations in this area.
We thought it was doubled, actually increased by three times. Now we achieve JPY 30 billion. Maybe next year, you can see another drastic growth, according to our focus. It has been increasing steadily. Maybe that's how we can see the trend of this market. In addition, temporary Bonder, not only temporary Bonder, but also backside for logic or 3D NAND. The evaluation in those areas is now going on. Bonder, Deb onder growth, Deb onder sales growth is expected to be very huge. This year, we can see another step of increase compared with last year. Next, the cryogenic etching. Again, the full swing introduction of 400 layers and 10 micrometer depth profile application. Those applications will be introduced in 2026. This year and not next year. Next year will be the big year for the growth of this market.
We have won the mass production POR from one customer. Two other customers are now evaluating the technology. The other day, we held IR Day for the high aspect ratio profile. We use the wavelength of the current and voltage. Also, the pulse width will be enhanced. Ion vertical penetration should be enhanced. That is how we can differentiate our machines from our competitions. This is how we further enhance the performance of the cryogenic etching system. We are now working on the release of the new products.
Thank you very much. May I ask one more follow-up question?
Yes, please.
DRAM etcher, that is dielectric etcher. You did have the share of 60% last year. You have increased the share. Now you are winning PORs.
When you look at the customer engagement for year 2026, along with the growth of DRAM market, can you expect further growth in market share?
When it comes to share, for this year, our share is about increased by 6 percentage points. As I said earlier, we will see a more exciting situation in etching. We can see the opportunity of the drastic growth at the cutting-edge technology, DRAM capacitor etcher. That is one area for high potential growth. We are taking some advantage because of pulse and ion angle incident angle adjustment. Those two are the advantage that we have. When it comes to cryo etcher, cryogenic etcher, we have the rectangular waveform and also pulse. This is how we can further enhance our business opportunity for slit, NAND slit. We won't beat against the competitor and also HBM interconnect process, especially in Korea.
The market is now growing rapidly. There are four key areas. For a few years to come, you can see further growth in those four key areas. This is really exciting. Etcher business can see another step of growth for three years to come. All the investors have very high expectations.
Thank you very much, Mr. Tong, for your question. We have two more questions before closing today's session. Next question is from Yoshio Kasam from Nomura Securities. Yoshio Kasam, please.
Thank you. I have a question regarding NAND. The second half last year, the NAND sales for NAND customers have been increasing. Do you think the investment for NAND is increasing generally? Is that because of the increase of your share? Or do you see some new emerging investment for NAND in China?
Could you let me know why NAND sales for NAND customers has been increasing? Second half, compared with this first half of this year, you can see the drastic increase of the sales to NAND customers. Could you let me know the factors for the growth of the NAND sales in the second half of this year?
Now we can see increasing volume. The NAND market has been growing. That's one thing. We have been increasing our share in the growing market. For China market, the China market does not grow. Therefore, the inquiries are increasing in leading-edge NAND market. We succeeded in increasing our share. That's the current status. For next year, this trend is expected to continue. Mr. Yatsuda, do you have any additional comments?
Now you can see a drastic increase in sales.
Actually, over the past two years, the NAND investment was very small. Because of the recovery, you can see drastic recovery. Actually, when it comes to the proportion of the NAND, it is not so big. At present, this is a brownfield investment rather than greenfield investment. We receive increasing inquiries for brownfield investment.
Thank you very much for your answer. That was very clear. Mr. Yoshio Oka, thank you very much for your question. The next question, this is the last question. Mr. Shibano from Citigroup Global Markets Japan.
I have Shibano from Citigroup Global Markets Japan. For this fiscal year, the CapEx and R&D budget, when I look at your figures, the drastic increase is expected for this fiscal year. In this fiscal year, now I understand the assumption.
For next fiscal year or fiscal 2028, when you look at the situation in the midterm perspective, how do you view the fluctuation of R&D investment and CapEx? For R&D, I think you are planning to increase R&D gradually. When it comes to CapEx, do you think you increase CapEx in 2027 and 2028 as well? Do you see you are going to hit the plateau somewhere in the future for CapEx?
Mr. Kawamoto will give you the answer. Mr. Kawamoto will answer the question.
Mr. Shibano, thank you very much for your question. Yes, we are maintaining high level for this fiscal year. Tokyo Electron Miyagi and Tokyo Electron Kyushu, as we announced before, we do have the new development buildings in those two sites. That investment is rather huge to increase our CapEx.
After that, we will make a decision in the future. Things are not decisive. As for the Miyagi production building, require about JPY 100 billion investment. That impact will be appearing next fiscal year, the increase in CapEx. Afterward, we will see what we are going to do in the next Mid-term Management Plan. We do have some plan. We are going to continue a certain level of investment for the future. Mr. Shibano, JPY 1.5 trillion investment for R&D for five years and CapEx of at least JPY 700 billion. These are minimum value of investment, actually. When you look at the market growth potential and our growth potential, we do not have any plan to stop this kind of investment. R&D building, actually, this year, quite a few development building construction will be completed.
Next year, I think the number of buildings to be constructed will be decreasing about two years from now. We need to enhance research activities furthermore because of the new business opportunity. We will see the macroeconomic dynamics and also semiconductor environment as well to make a decision what to do. I think this year, our capital investment is rather big, as I said in our presentation. Thank you very much. In that sense, compared with five years in the past, you are making quite big R&D investment and capital investment last year and this year. Now you have the fiscal year ending March 2027. You are going to pursue the OPM of 35% or more, ROE of 30% or more, operating income of JPY 1 trillion or more.
When it comes to the Mid-term Management Plan target, and when you can get the recovery of the huge investment, and when you say 35% or more OPM, when can you be able to achieve this kind of target?
If possible, the WFE market, that's about $100 billion or more. When it comes to China market, the access by the Western tool vendors in Chinese market will become more and more difficult. Also, presence of the China local tool vendors will increase their presence. In midterm, there is no need to reduce your focus. Because of the growth of the leading-edge logic, you can compensate the decline in China market.
Thank you very much for your question. When it comes to sales, what are the fixed cost ratio against sales? Every six months, we incorporate it to look at the market trend.
We are making every effort to improve the profit margin. We are trying to invest in the R&D. We also do the CapEx. We always watch and review the financial finance model while we are making decisions for investment. JPY 1.45 trillion in the second half of this year. We do have such plan. A 30% or higher operating profit margin is now being planned. When we double it, the top line is getting very close to our Mid-term Management Plan target. What is very good for us is the value added for AI servers, what PCs and smartphones, high value added product. Proportion of the high value added product will be increasing furthermore in the future. In that sense, that's the reason why gross profit margin has been increasing so far. I think that's where we can have high expectations.
We should pursue two double-digit sales increase in the double-digit market growth. When you think about that, 35% or higher operating profit margin, we know this is a challenging goal. It is a challengeable target. Next fiscal year, as planned, or two years from now. We need to watch the macroeconomy trend and also the impact of the tariff. We are on the growth trajectory.
Thank you very much. Thank you very much, Mr. Shibano, for your question. This concludes today's conference. We would like to continuously improve our IR activities based on your precious feedback. We would like to appreciate your kind cooperation in filling out the questionnaire before you exit the WebEx. Thank you very much for taking time to join us in this conference despite your busy schedule today. Thank you very much.