It's time for us to start the introduction of financial announcement for the third quarter of fiscal year ending on March 31st, 2023. Thank you very much for joining us today despite your busy schedule. I am Yasuda of IR Department, acting as a moderator for today's session. I'd like to introduce today's attendees. Mr. Toshiki Kawai, Representative Director, President, and CEO. Mr. Hiroshi Kawamoto, Vice President and General Manager, Global Business Platform Division, Finance Unit.
I am Kawamoto. Nice to meet you.
Prior to the presentations, let me explain the flow of today's conference. Mr. Kawamoto and Mr. Kawai will make presentation. After that, until 6:30 P.M. Japan time, we'll have a question-and-answer session where we take questions from the audience. This meeting will use two channels of Webex for the simultaneous interpretation to 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. If you are not going to ask questions, you can use telephones. In addition, since this conference is intended for institutional investors and analysts, we would appreciate your 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 couple of days. It will be appreciated if you could also visit our website. Now, Mr. Kawamoto, Vice President and General Manager, will present the consolidated financial summary.
Now, I would like to present financial summary of the third quarter. In the third quarter, we generated net sales of JPY 467.8 billion, 34.0% decline from the previous quarter. By segment, SPE net sales were JPY 458.8 billion. FPD net sales were JPY 8.9 billion. Gross profit was JPY 203.9 billion, and operating income was JPY 114.7 billion.
Since the manufacture sales was rather high in the second quarter, therefore, compared with the previous year, sales was declined relatively speaking, the manufacturing cost to sales ratio increased. As a result, gross profit margin was 43.6%, declined by 2.7 percentage point from the previous quarter. Operating profit margin was 24.5%, declining by 8.3 percentage point due to the increase of manufacturing costs/ sales ratio and SG&A/ sales ratio.
This is a graphic representation of financial summary of the previous page. Really appreciate if you take a look at it. This slide shows segment information. For SPE, we generated net sales of JPY 458.8 billion and delivered segment profit margin of 29.5%. Just like the overall company results, since manufacturing cost to sales ratio and SG&A to sales ratio increased along with the decline of net sales, segment profit margin showed decline from the previous quarter. For FPD, net sales were JPY 8.9 billion and segment profit margin was -3.7%.
As for the composition of net sales in the third quarter, SPE sales accounted for 98%, while FPD sales accounted for 2%. This shows the SPE sales by region. As you can see, the SPE sales declined from the previous quarter, mainly in China, the pink portion, North America, purple portion, and Japan, the blue color.
Next slide, please. This slide shows SPE new equipment sales by application. On the right, the third quarter. From the bottom of this chart, sales to logic manufacturers accounted for 69%, Non-Volatile Memory accounted for 16%, and DRAM accounted for 15%. Proportion of sales to non-volatile memory manufacturers declined, while that of logic and others showed an increase.
This slide shows field solution sales. In the third quarter, sales amounted to JPY 117.5 billion. The sales declined from the previous quarter, which is attributed to decreased sales of used equipment and modifications, and also drop of parts sales due to the lower utilization of our customers' fabs. On the other hand, sales of the service in field solution remained strong.
Next, this slide shows the balance sheet. The total assets were JPY 2,092.7 billion. Cash and cash equivalents was JPY 389.4 billion. Accounts receivable and contract assets were JPY 454.4 billion. Inventories was JPY 632.0 billion, showing an increase from the previous quarter due to strategic procurement and manufacturing leveling. Liabilities were JPY 658.3 billion. Net assets were JPY 1.4343 trillion. The equity ratio was 68.0%. You can see the cash flow. The cash flow from operating activities was JPY 53.2 billion. The cash flow from investing activities was -JPY 13.8 billion due to the investment to the fixed asset. Cash flow from financing activities was - JPY 134.6 billion, primarily due to the dividend payment. The free cash flow was JPY 39.3 billion. This was all about the consolidated financial summary of the third quarter.
Finally, this slide shows announcement of stock split that we announced today. I'd like to briefly touch upon this issue. On the record date of March 31st, 2023, Friday , Tokyo Electron will split the shares of common stock with a proportion of one share into three shares. The purpose of this stock split is to create the environment to encourage more investment by lowering minimum investment in order to expand our investor base. While giving comprehensive consideration to various factors, including the trend of stock market, our share price, share distribution, and shareholder composition, we intend to pursue appropriate units of investment so as to further enhance our corporate value.
As for the dividend, whose record dated March 31st, 2023, we will pay the year-end dividend based on the number of shares issued before the stock split, since effective date of this stock split is April 1st, 2023. Thank you very much. This concludes my presentation.
Good afternoon. I am Kawai once again. Now I'd like to talk about business environment and financial estimates. First of all, let me start with the business environment. Driven by progress of digital shift in the society, the WFE market has grown from $65 billion in 2020 to $92 billion in 2021, and about $100 billion in 2022. Though the WFE market is currently under adjustment due to the impacts of macroeconomy and geopolitical developments such as inflation, interest rate, COVID-19, utility cost, and sluggish final demand, we expect that the WFE market will start recovering from the second half of this year and reach about $80 billion in the full year of 2023.
Beyond 2024, the WFE market is expected to enter the stage of further growth, driven by emergence of new CPUs and data centers, which are likely to be equipped with advanced DRAM, DDR5, and 3D NAND with 3xx layers, ensuring more memory capacity. It is also expected that the data centers built in around 2017 and 2018 will be replaced by adopting innovative semiconductor devices with higher energy efficiency.
Growth of metaverse starting full-fledged service in 2025 and beyond, spread of electric vehicles, and recovery of smartphone demand are expected to strongly drive expansion of the WFE market. This slide shows business progress in the third quarter of fiscal year ending in March 2023. As for SPE in calendar 2022, our SPE business generated net sales of JPY 2.1611 trillion on calendar year basis, hitting the record high. Our new equipment sales recorded an annual growth of 22%, outperforming the WFE market, which grew by 8%.
I believe such positive results were achieved by the maximum effort we made to address the customers' demand, supported by our resilient and strong supply chain, despite the lingering procurement uncertainty and disruption of logistics. Penetration of our strategic products and acquisition of PORs in the customer's development line, which leads to our future growth, have been on course, well aligned with mid-term management plan. In SEMICON Japan, held last December, we released a new single- wafer cleaning system, CELLESTA MS2. This new equipment is able to simultaneously clean both surfaces of the wafer without reversing it, which realize higher productivity and lower running costs. Conventionally, during cleaning process, ultra-pure water or gas was used to protect the wafer surface, which is not being cleaned. CELLESTA MS2 has eliminated such needs of water or gas, which also contribute to the lower environmental footprint.
We are determined to strive for development of technologies that address our customers' needs, and we have decided to reform organizational structure in an attempt to promote technology development for application-specific semiconductor devices, which have grown considerably in recent years and expected to grow further in the future, aiming to expand business opportunities furthermore.
Application. L everaging such application-specific semiconductor devices includes Metaverse, Autonomous Mobility, Green Energy, IoT and Information and Communication. Our company calls these applications MAGIC market, in short, and will place more focus on these areas. Key elements in MAGIC market includes semiconductors such as power device, CMOS image sensor, and RF, devices embedded into semiconductors such as waveguide, micro LED, and silicon photonics, and also displays. For evaluation those key elements, broad range of technology innovation is essential.
Leveraging the leading-edge technologies we have developed so far and experience based on wealth of installed base will enhance our responsive capability. In the domains of MAGIC, displays play extremely important role as interface in order to enhance our technology innovation capability and seamless customer responsiveness by leveraging our know-how for optical devices, and we have cultivated through FPD manufacturing. Commencing April 1, 2023, we will merge Field Solution Business Unit and FPD Business Unit to newly established Diverse Systems and Solutions Business Unit, or DSS BU, for further business expansion. By efficiently investing resources to MAGIC market, where significant growth is expected, we will maximize business opportunities. As for the FPD business, capital investment in FPD fabrication equipment, TFT array process, is expected to decline by 30%-40% in calendar 2023 as a round of large amount of investment to LCD and OLED was completed.
As for the future FPD business, we will focus on high-value-added areas such as etching. For the inkjet printing system, we have suspended the development project by taking account of its growth potential. For the inkjet printing system, our technologies are advantageous, particularly in large size OLED, and we have evaluating the technology together with leading FPD customers over the past few years. Along with difficulties caused by COVID-19 spread, however, need for IT mobile display rather than need for large flat TV have grown recently, and accordingly, our customers have revised their product strategy. Consequently, our customers are shifting their focus of capital investment to micro LED, micro OLED, and IT OLED. This micro OLED is one of the devices in the MAGIC domains that I explained before.
Based on these backgrounds, we have decided to reallocate our resources to those areas with faster growth potential so that we can maximize profits. As I said earlier, Field Solution Business Unit and FPD Business Unit will be merged in fiscal 2024, and accordingly, we will not disclose financial performance specific to FPD segment because those two business will operate the biz all together.
Next, I will present the financial estimates for fiscal year ending in March 2023. In November 2022, we revised fiscal 2023 financial estimate. This time, we scrutinized the results of the third quarter and estimates of the fourth quarter again, and we are going to revise the financial estimate upward by JPY 70 billion.
On the full-year basis, we expect net sales of JPY 2.170 trillion, gross profit of JPY 946 billion, operating income of JPY 580 billion, and net income attributed to owners of parent of JPY 433 billion. This slide shows SPE new equipment sales forecast in the fourth quarter. Compared with the third quarter, there's little change in application mix and slight growth is expected in sales. As I said earlier, SPE new equipment sales in calendar 2022, from January through December, were JPY 1.6896 trillion, growing by about 22% on a year-on-year basis. On a fiscal-year basis, we also expect about 11% growth. In calendar 2023, we will work hard aiming to outperform the market again. This shows our plan for R&D expenses and CapEx.
The plan remained unchanged. As we announced before, over the five years to go, we plan to invest more than JPY 1 trillion in R&D and spend more than JPY 400 billion for capital investment, mainly in evaluation tools. To achieve the midterm management plan, we will continue proactive R&D investment. My last slide shows dividend forecast. For interim dividend, we paid JPY 857, which is record high interim dividend. Along with the revision of our financial estimates, year-end dividend is expected to be JPY 531. As I said in the previous meeting, while celebrating our 60th anniversary this year, we are planning a commemorative dividend of JPY 200 per share at the end of this fiscal year with our sincere gratitude to the shareholders who have warmly supported our growth. This concludes my presentation.
Thank you very much for your kind attention.
We will have question-and-answer session until 6:30 P.M. Japan time. You can ask questions either in Japanese or English, as our speaker is available on the Japanese channel, please allow us to take all your questions only in Japanese. If you ask a question in Japanese, please press the raise hand button on the Webex. For details, please refer to the instructions attached to the invitation email. I will call name of the person who ask a question one by one, our secretariat will contact you in advance, please check the Webex chat box as well. For questions in English, please use the Webex chat box and enter your affiliation and name and your question in text and send it to our secretariat.
We will refrain from answering questions if your name and affiliation are not given. On the Japanese channel, we will translate your English question into Japanese, and we will read it in Japanese, and speakers will answer in Japanese. On the English channel, the question answer will be simultaneously interpreted into English on the real time basis. During question-and- answer session, we'd like to take as many questions as possible. Therefore, we will take one question per person. If time allows, we will take additional questions as well. First question. First question is from Mr. Nakamura of Goldman Sachs Japan. Mr. Nakamura, please.
Thank you very much. I'm Nakamura. For WFE market, I would like to learn about how to look at the WFE market 2023. That's about 20%. The second half is the expected recovery in the market. What sort of application will drive the recovery in WFE market first? In 2024, you have any forecast for 2024? In the previous meeting, 2024 will exceed the results of 2022. That's what you said in the previous meeting. As of today, what sort of latest viewpoint do you have for the 2024 market?
For WFE market is $80 billion, around $80 billion. At present, adjustments are just being conducted. We are just in the middle of adjustment period, 20% decline in this year. Actually, we are very close to the bottom, so we can see the sharp increase from now on. As a result, we can achieve $80 billion. That's how we view the WFE market.
Memories are now under adjustment, as we presented in previous meeting, and that condition remain unchanged. Proportion, up until recently, last year or two years ago, we said proportion was about 60% to 4%. Logic 60% and memory 40%. That was the kind of proportion between logic and memory. Last year, from the second half of last year, 70% to 30% in investment. In the first half of this year, memory investment will be reduced. Maybe 80% is divided into 80% to 20% between logic and memory. That's how we view the WFE market. In the recovery, in the second half next year, especially the fourth quarter, we could expect some recovery in memory. As for the sequence of the recovery, actually customers are now reducing their utilization ratio of their fab.
Because that may have some impact on the balance between supply and demand. Slightly DRAM might be a bit earlier than NAND in terms of recovery, but depending on the utilization ratio of customers as well, DRAM and NAND may recover at the same time. This is our view for the WFE market. For 2024, the direction in 2024, as you know, there are various factors we need to closely look at. In 2024 and 2025, the recovery trend will continue. That focus remains unchanged. In particular, high speed CPUs and DDR5 are 300-layer, 3xx- layer 3D NAND. 2025 already we have seen some emergence of the metaverse, and metaverse will start the full-fledged service in year 2025. New servers and low power consumption devices with high speed will coming out.
In 2016, 2017, we hit the peak. Data center will be replaced with the new innovative semiconductors with high target energy efficiency, not only 2024, but 2025, you can see the growing trend. Last year, WFE market hit the maximum, almost the same or more than last year. WFE market will grow that much in 2025. In our viewpoint, I can say our view doesn't change. In that sense, 2024 and 2025, the COVID-19 impacts. We had the strong demand for PC or mobile. We had the strong demand during COVID, in COVID spread, and we may see some replacement demand for the PC and mobile phones as well.
Thank you very much for your detailed answer.
Mr. Nakamura, thank you very much for your question. Next question is from Mr. Yoshida of CLSA Securities.
I am Yoshida from CLSA Securities, Japan. For this year's guidance, now you revised the financial estimate upward. Now you have the new equipment and Field Solution. I think your focus is right upward, especially for Field Solution. What sort of background are there to increase the focus? As for new equipment, by application, maybe the logic and DRAM increases and NAND dropped a little bit. I want to see which was the driver to revise your financial estimate upward.
Thank you very much for your question. About your question, JPY 70 billion upward revision was made, and your question is what is the major reason for that upward revision of JPY 70 billion? Is my understanding correct?
Yes.
Partially for logic. Next fiscal year, April and onward, we have some expectation of sales, but actually those orders are pulled forward to the fourth quarter of this fiscal year in the two companies in logic area, two logic manufacturers. Also the America-China trade conflict. The October 7th last year, the American government announced their export control and customers, American tool vendors were not able to deliver their products to the China customers. We incorporated the impacts of that trade export controlled at maximum level. Of course, the export control had some impact, but compared with the worst scenario, there was not so much drastic change in the China customers, the CapEx plans. That is the reason why we made the upward revise by JPY 70 billion.
For China in particular, as you said earlier, DRAM is from China's impact mainly. Is that correct understanding? All of the items are covered by the American government export control. I wonder maybe the customer's CapEx plan might be changed. Actually, not only DRAM. Actually, I want to just give you some overall answer rather than specifics to the DRAM.
How about Field Solution? Maybe you have revised the financial estimate for Field Solution upwards as well. What is the major reason for that upward revision?
For the Field Solution, in the previous meeting, there have been no changes in principle. Kawamoto-san just answer that because of the microphone. By and large, for Field Solution, there have been no changes in our financial estimate.
Thank you very much for your answer.
Thank you very much, Mr. Yoshida, for your question. Next question is from Mr. Hirakawa of BofA Securities. Mr. Hirakawa, please.
I am Hirakawa from BofA Securities.
My question is a kind of follow-up question of previous question. For 2022 and 2023, WFE market, t he impact of the American trade regulation, what is the proportion of the impact of the American regulations and total edicts from calendar year 2023 and or fiscal year 2023? What sort of impact are you suffering from that, can you say, regulation imposed by the American government?
Geopolitical issues are hot topic right now. As one company, we are very careful making some comment, honestly speaking. As a company, I would like to refrain from making specific comments on those issues. Last year, we reported some facts, and based on that, the WFE should be $80 billion. That's our current prospect. That we want to report to you this time.
I would like to ask some questions. In the 2Q, you reduced, revised the second half financial estimate by 20% and 50%, 50% between the China market and the memory adjustment. Now 10%, half of that, less than 10% impact is smaller than 10%. Is that correct understanding?
Well, there are still many factors which have some influence, and we cannot see the clear direction in the future. If we receive some new information, we try to respond to that new information appropriately. As for your question, we didn't conduct such kind of calculations, please allow me to refrain from answering that question.
Thank you very much, Mr. Hirakawa, for your question. Next question is from Mr. Wadaki of Mitsubishi UFJ Morgan Stanley Securities.
I am Wadaki. Thank you very much. Thank you very much. I have one question. Toward next year, 2023, 20% deceleration is expected, and I think the drastic decline might be expected depending on some tool, prober, edger, coater/developer or diffusion furnace. For those decline do you expect for each one of those tools, equipment?
For memory and logic proportion, I said 80% to 20% between logic and memory. That's what I said earlier. In that sense, for example, 3D NAND will use the long etching processes. The investment in that area compared with last year will be decreasing. On the other hand, for logic, in the case of our company in particular, last year, about 55% increase was recorded for logic sales last year. In that sense, D RAM and 3D NAND as well as logic, we can see a very good balance in orders that we received so far.
Therefore, by product, there is no drastic decline. We have very limited impact because there is a good balance in orders among different products, there is no big change in the proportion of the applications within ourselves. For other tool vendors, for example, ASML, they are very bullish. I wonder the topography is good and also SCREEN made a great announcement around that cleaning is very good. On the other hand, Lam Research was rather bearish and 3D NAND is not so good. Etcher diffusion furnace might be very difficult. Don't you feel that sort of impression? For 3D NAND, you can see some significant effect. For logic, we do have high share in the logic area, and that area is growing. Therefore, we don't see the drastic kind of increase or drastic decrease for some of the product.
Thank you very much. That was very clear.
Mr. Wadaki, thank you very much for your question.
Next question is from Mr. Shimamoto of Okasan Securities. Mr. Shimamoto, please.
I am Shimamoto of Okasan Securities. Thank you very much. S econd half of 2023, you can expect some recovery in the market. I see vendors also mentioned to the very similar perspective for the future and the accuracy, a probability of our forecast. Application, you said smartphone demand will be increasing, but there are some risks. In 2023, there are any areas which might have slower recovery in 2023. Are there any concerns or are you prepared for some of the negative estimates?
Under current situation, now you can look at the macroeconomy, inflation, geopolitical development, which increases the energy or utility costs, and memory inventory is now under adjustment. These factors are there, and also PC and smartphone replacement demand. We also have the problem or impact of the energy cost increasing, so the consumers are not so much active in replacing their PCs or smartphone. Interest rates, generally speaking, I think interest rates might have some, can you say mild change? Industry adjustment, memory, so manufacturers are very aware of the inventory. That might be some acceleration. We need to closely watch the conditions of macroeconomy and adjustments in the market. Having said that, however, last week, the SEMI was held last week. Now I have many opportunities to talk with various customers, taking those opportunities.
In the second half of this year, the memory market will start recovering, and accordingly, the new, can you say, trend of the investment will start for memory as well. Now we have inaudible area, inaudible era, and we must pay attention. We cannot ignore the situation of United States-China trade conflict. By and large, we need to take consideration of those risks, and maybe $80 billion should be the appropriate number for WFE market. There might be some increase or decrease, and we should look at the progress to make adjustment to that amount. A s for now, $80 billion should be the appropriate number.
For 2024 and 2025, the market trend will be increasing. We are now in the middle of the bottom, so we should be prepared for the positive change in the future. We miss the surge startup. We must be prepared for the very prompt recovery in the market. That's what we need to pay more attention closely, and we are now focusing on that area.
Thank you very much for your very thorough answer. It was very, very clear. Thank you.
Mr. Shimamoto, thank you very much for your question. Next question is from Mr. Ishino, Tokai Tokyo Research Center. Mr. Ishino, please.
Thank you very much. Can you hear me? Yes? Thank you. Thank you very much. I have a question regarding WFE market. In the previous meeting, Kawai-san made a comment, the second quarter should be the bottom in the market, and from the third quarter, some recovery starts. That's what Kawai-san said, and we agreed each other.
Now earlier, Mr. Kawai said, compare with the initial financial estimate, the utilization rate of the wafer fab has been declining. Therefore, certain increase or recovery is expected in the future, and you said you need to prepare for the certain recovery in the market. If you said that, when you look at memory market, and memory market is deteriorating, and many of the manufacturers are now very close to or below the break-even point. Right now, the utilization rate of customers fab as a whole, how much decline do you see? F rom Mr. Kawai's viewpoint, when you can see some surge in the recovery of the market?
That's what we are trying to locate the timing. We try to find out the right timing, right? Not only our company, but also our customers are very careful to find out when the market starts recovering precisely. Roughly speaking, the memory balance maybe in June and onward, the memory is expected to recover little by little in June and onward. That is general trend. We have some increase in CapEx accordingly. Not only the demand, supply demand balance, maybe you can see innovation or generation replacement takes place every 1.5 years-2 years.
We can also expect some investment to prepare for the next generation but t he quarter level, for example, calendar, your third quarter or fourth quarter in the calendar year or in the fiscal year. Would it be in the second quarter or third quarter? The quarter based estimation is a bit difficult to be conducted, but what we can say is now we can see some increasing trend in the future, therefore, we must be prepared for the future recovery trend. Procurement should be properly done so because we know what sort of products are sure to be delivered. We need to have some inventory for that area to have a good procurement. When the COVID-19 pandemic started, we increased inventory to some extent, and similarly now, we are now preparing for the future growth.
The utilization rate in the industry, how much decline do you see in the utilization rate of the wafer fab? Are there any technology innovation going on in parallel to eliminate or offset the utilization rate decline? Twenty percent WFE, m aybe you can see the V-shaped recovery from the bottom. That is the presumption you have. You haven't changed your market focus. What slight changes in the market focus?
Actually, our focus hasn't been changed drastically. If that is the case, maybe the V-shape recovery starts from the July to September. I wonder whether that is starting from July to September or next quarter. It's a bit difficult for us to say something precisely now, but three months we shouldn't, can I say, jump by three quarters, the quarter by quarter one, and we need to think about the leveling of the manufacturing to be prepared. We can see the increase. We don't know when, which month, the recovery starts. Rather than pinpoint when, which month the recovery starts, we should come up with big picture when we run the company.
Thank you very much.
Thank you very much, Mr. Ishino, for your question. Next question is from Mr. Nakanomyo from Jefferies Japan Limited.
I'm Nakanomyo from Jefferies Japan Limited. Thank you very much. I have similar question. I'm very sorry for that. Once again, the second half of next year, you can see expect demand recovery. Now you take orders in accordance with your production lead time. If in July to September, rather than recovery , I think that is terms of shipment. If you can see some increase in shipment in July to September period, then you may see some increase in trends of orders now. This is my understanding. This time, there is no clear change in the orders. In some cases, some projects are pushed out or orders are not suddenly increases in all of a sudden. That's what I feel personally, but how do you view the recovery trend?
Now there were some disruptions in logistics, so customers are now preparing for the future recovery. Some customers are doing that. On the other hand, there are some customers putting their foot on the brake all of sudden. Utilization rate of self has been declining in some of our customers. There are varied situation. Situation is varied from one customer to another. Even if you ask us when to recover specifically, I would like to refrain from giving you some specific answer. We are now facing the bottom, the market, and you can see some recovery trend in the second half of this year, so we must be prepared for that future recovery.
Memory, the balance in memory, we must take a close look at the balance of memory, but we don't change our view that the market start recovering from the second half of this year. We will report it once again. We will see some trend of recovery in the future.
One more question may I ask? 2023, the memory proportion declined drastically. That's what you said. So far, relatively speaking, your sales in memory to the memory manufacturers were the big. For 2022, memory customers purchase decreased. For
2023, again, the drop of memory demand might have some impacts, but still you can outperform the market. Yes. As I said earlier, last year. As for last year, for logic accounted for 55% sorry, logic growth grew by 55%. Logic grew 55%. Coater/developer also increased, and etching sales also increased. Broad range of our products are purchased by the logic lines, logic manufacturers and cleaning equipment and metallization, metal film deposition area. You can see some increasing demand, so you can have a good balance in receiving orders.
Now even if the proportion between memory, logic and memory changes from 60% to 40%, 70% to 30%, but 80% to 20%, that sort of difference or change in proportion does not have a big effect, impact on ourselves. One, now you can see the proportion of our sales over the past one year or two years. Our sales proposition, as you know, the logic country is dominant compared with memories. Compared with other competitors, our sales is well balanced, so memory proportion is not so high.
I understand that point. 2021, when you compare with 2021, I think your proportion is higher than the market average.
This is determined by the customer's CapEx, proportion of customer CapEx. Our sales competition is determined by customers, proportion of investment. As you can see, there is a very good balance.
Thank you very much. That's now clear.
Mr. Nakanomyo, thank you very much for your question. Next question is from Mr. Yasui of UBS Securities.
Thank you very much. I am Yasui. For China, the sales to China 2023 WFE, how do you view the sales to Chinese customers? Could you share your idea? For example, Samsung China factory, that should be the foreign companies in China and also local China customers. Do you see some increase or decrease trend in the Chinese market in 2023?
As for financial estimate, we don't announce the financial estimate by region, but 26% for China for full year basis. In the first half of this year, about 80% is for the local Chinese customers and 20% is a global customers in China. Over the past few years, the capital investment by the global players decreases in China. Next year, 2023, as for the financial estimate, we do not announce or present the financial estimate by region. Please allow us refraining from answering to your question specifically.
Okay.
Thank you very much, Mr. Yasui, for your question. Now, if you have second question, please raise your hand because so far we haven't received any new questions. If you have second questions and follow-up question, could you raise your hand, please? Any questions from the audience?
Next question is from Mr. Shibano of Citigroup Global Markets Japan. Mr. Shibano, please.
I am Shibano from Citigroup Global Markets. As for the profitability, I would like you to share your idea with us. Up until third quarter, now the net sales declined. Against that, you have maintained relatively high profitability. When you look at next fiscal year, WFE will decline by 20%. Along with the market trend, your sales are expected to decline several percent. When it comes to profitability, for example, this fiscal year 2023, do you see profitability will decline in fiscal 2024? Do you have any potential to maintain the profitability in next fiscal year? Could you share your idea with us, please?
As for budgets, we are now reviewing or discussing the budget right now for next fiscal year. Therefore, I would like to make some announcement in next quarterly review meeting, quarterly meeting for financial announcement. We need to closely look at the current status, and we prepare the appropriate plan for next fiscal year. We'd like to announce that plan in the next meeting for financial announcement. Short-term, now we are in the bottom, and we will see some recovery. Preparation for recovery is what we are working on right now. We need to take comprehensive consideration. We must make appropriate action.
Thank you very much.
Mr. Shibano, thank you very much for your question. Next question is from Mr. Yoshida of CLSA Securities Japan.
My second question is about, I'm sorry, I'm so persistent. Yeah, 2024 WFE market trend. So far, you said memory demand will recover from the second half of next year, this year. Now 2023. You set the focus for next fiscal year. Memory top vendor is a bit bullish compared with some expectation in terms of capital investment plans because of there might be some prolonging balance utilization. In 2024, there might be some decline in the capital investment toward year 2024.
We discuss with our customers directly, exchange information with our customer. As I said earlier, many of our customers are now trying to find out the right timing for recovery. That means many of our customers expect the recovery in the market. Gartner, SEMI, many organizations are reporting WFE financial estimates, and many of them announce the recovery trend in the WFE market compared with last year. What happens in next year, as far as we are concerned, we think equivalent or better. That's how we view the market in the future, equivalent or better. That view does not change, remain unchanged.
Thank you very much.
Mr. Yoshida, thank you very much for your question. Next question is from Mr. Ishino of Tokai Tokyo Research Institute.
Thank you very much. This is my second question. I want to ask a question about Rapidus. I want you to give us some comments. Your former chairman, Mr. Higashi, is now the chairman of Rapidus. Now the semiconductor, from the viewpoint of the Korea IC vendors, Rapidus should be the competitor. I think your position is rather sensitive. From the customers, what would you do to take care of those different customers? Mr. Kawai, how, what sort of thing do you think, how do you answer to your competitive vendors?
Rapidus and Tokyo Electron are independent of each other, nothing linked between two. The Tokyo Electron is a global manufacturer. As you know, our sales, 80% of our sales are from outside of Japan. We should remain fair all the time, and that basic position remains unchanged. Rapidus is one of the very important customers, and we will address the important customers. So far we have cultivated the relation of trust, and that trust relationship will remain unchanged. Tokyo Electron is trusted by our customers. Turnover ratio for us, our turnover ratio is rather small. Tokyo Electron is trusted by our customers because we have very high levels of information security, and we maintain the high level of information security from now onward as well.
Mr. Higashi is chairman of Rapidus. Mr. Higashi has used to be our chairman in the history. There is no special relationship between our company and Rapidus. We are expanding global business. Rapidus is one of our important customers and overseas customers, Korea, Taiwan, and American customers. All those customers are trusting us.
Thank you very much.
Mr. Ishino, thank you very much for your question. Now since there seems to be no more question, we'd like to conclude today's financial announcement. Lastly, we'd like to continuously improve our IR activities based on your precious feedback. We appreciate your kind cooperation in filling out questionnaire before you accept your Webex. Thank you so much for taking time to join this conference despite your busy schedule today. Thank you very much.