It is time for us to start Tokyo Electron financial announcement for the second quarter of fiscal year ending March 2027. 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 would like to introduce our attendees today. Toshiki Kawai, Representative Director, President, and CEO.
I am Kawai. Thank you very much for joining us today.
Next, Hiroshi Kawamoto, Senior Vice President, General Manager, and CFO.
I am Kawamoto.
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 6:00 P.M. Japan time, we will have a question-answer session where we entertain questions from the audience. This meeting uses two-channel Webex for simultaneous interpretation between Japanese and English.
As we explained in our email, you are kindly requested to use apps on PC or mobile terminals if you wish 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 understanding that we receive questions only from institutional investors and analysts. We will post the audio contents of the conference in Japanese and English on our website within a couple of days. It would be appreciated if you could also visit our website. Now, Mr. Kawamoto will present the consolidated financial summary. Mr. Kawamoto, please.
Good afternoon. I am Kawamoto. I would like to present the consolidated financial summary of the second quarter of fiscal year ending March 2027. This slide shows quarterly financial summary. I will mainly refer to the figures in the blue box.
In the second quarter, with backdrop of active market conditions, we generated net sales of JPY 935.0 billion, 27.7% increase quarter-over-quarter, hitting the record high. Gross profit was JPY 447.3 billion, 30.5% rise from the previous quarter. Gross profit margin was 47.8%, 1.0 percentage point increase quarter-over-quarter, as fixed cost- to- sales ratio dropped along with the increase of net sales. Operating income was JPY 295.3 billion, 39.7% increase from the previous quarter. Operating profit margin was 31.6%, increasing by 2.7 percentage points quarter-over-quarter. Income before income taxes grew by 35.6% to JPY 292.2 billion. Net income attributable to owner of parent was JPY 212.5 billion, 29.4% increase quarter-over-quarter. Capital expenditures in the second quarter were JPY 32.3 billion, just for information. This is a graphic representation of financial summary shown on the previous page on the chronological basis for your reference.
This shows half-year-based financial summary. The figures in blue box are the results of the first half of this fiscal year. On the half-year basis, net sales, gross profit, operating income, operating profit margin, and net income reached all-time highs. The rightmost column shows our guidance for the first half of this fiscal year announced on July 30th. As you can see here, we have beaten these estimates in every item. This slide shows net sales by region. Sales in Korea and Taiwan remain strong, as you can see in bar graph. For China, due to the active investment of major customers, proportion of China rose by 6 percentage points to 36.4%. As we said in the first quarter financial announcement in July, on the full-year basis, proportion of sales to China is expected to be low 30s percent in the fiscal year ending March 2027.
This shows SPE new equipment sales by application. In the second quarter, from the top of this chart, sales to DRAM customers accounted for 34%, non-volatile memory accounted for 10%, and non-memory accounted for 56%. As you can see on the right side of this chart, in all applications, quarter-over-quarter growth was recorded. In particular, sales to DRAM customers recorded significant sequential growth of 45%. This slide shows the Field Solutions sales. In the second quarter, Field Solutions sales were JPY 191.0 billion, growing by 1.6% from the previous quarter. Since customers need to maintain high utilization rate, their fabs remain very strong. Parts and service sales rose by 6.4% quarter-over-quarter, recording sixth consecutive quarter growth to support the entire Field Solutions business growth. This slide shows the balance sheet. The total assets were JPY 3, 177,400,000,000 .
Cash and cash equivalents were JPY 579.7 billion, increasing by JPY 170.1 billion from the previous quarter. Notes and accounts receivable were JPY 619.0 billion, increasing by JPY 75.0 billion quarter-over-quarter. Inventories were JPY 747.4 billion, declining by JPY 4.0 billion quarter-over-quarter. As in the previous quarter, inventory turnover showed improvement. Tangible assets were JPY 623.8 billion, increasing by JPY 13.4 billion from the previous quarter. Investment and other assets were JPY 458.8 billion, declining by JPY 44.4 billion from the previous quarter, mainly due to fair market value of investment securities. For the liabilities and net assets shown on the right-hand side, liabilities were JPY 982.8 billion, increasing by JPY 170.3 billion quarter-over-quarter because of increased income taxes payable and provision of employees' bonus, both of which were coupled with our financial performance.
Net assets were JPY 2, 194,600,000,000 , rising by JPY 51.7 billion quarter-over-quarter. This slide shows cash flow. The cash inflow from operating activities in the second quarter was JPY 351.1 billion. The cash outflow from investing activities was JPY 40.6 billion. Cash outflow from financing activities at JPY 139.6 billion, mainly due to share buyback. Free cash flow was JPY +310.4 billion. This concludes my presentation. Thank you very much.
Next, Mr. Kawai will give you presentation of business environment and financial estimates. Kawai-san, please.
Once again, this is Kawai. I will present business environment and financial estimates. Let me start with business environment.
For WFE market, reflecting a very strong demand at present, we have revised the guidance we announced at the end of July, and now its size is expected to be around $160 billion in calendar 2026 and more than $210 billion in calendar 2027. In both years, around 30% year-over-year growth is expected. The AI evolution is further expanding growth opportunities of the entire semiconductor market. In addition to generative AI, along with spread of agentic AI comes to autonomously implement multiple tasks, and accordingly, number of token is significantly increasing. As a result, GPU is required to feature higher computing capability, and HBM need to feature more capacity and broader bandwidth to support key-value cache. On top of that, demand for wide range of devices emerging, including CPU for pre-processing and control, DRAM supporting long context, and NAND SSD storing models, data, and inference logs.
In the past, computing performance enhancement was driven by processing power of logic devices such as CPU and GPU. But in the emerging AI era, the entire system performance is heavily depending on not only how powerful processing is, but also how fast large amount of data can be stored and fed to GPUs. Accordingly, roles of memory devices such as DRAM and HBM are drastically changing. Memory devices are now evolving from storage function to a central key component to support AI performance. More tokens, more semiconductors. As AI gets more sophisticated, memory capacity and bandwidth, as well as basic computing power increase furthermore, which requires more semiconductor devices and more advanced technologies. This will lead to further growth of WFE market. Next, I will present the business overview of the first half of this fiscal year.
Supported by very strong WFE demand in the first half of this fiscal year, we generated net sales of JPY 1, 667,400,000,000 , delivering record high half-year net sales. In particular, sales generated by business unit of coater/developer and cleaning systems grew by more than 50% from the second half of fiscal year ended March 2026. This business unit is based in Kumamoto plant in Kyushu, one of our core plants. They have succeeded in swift recovery from the impacts of the Kumamoto earthquake, which took place in July 2026, achieving the remarkable result, as I mentioned earlier. This is a great example that we effectively leverage overall resilience of our entire supply chain, which is one of our strengths. I'd like to extend my heartfelt appreciation to all stakeholders for their dedicated cooperation.
This slide shows business and product progress in the first half of this fiscal year. In the first six months of this fiscal year, again, we made good progress in winning PORs in the leading-edge domains, which will contribute to our future sales growth. For etching, in addition to DRAM capacitor mold etch process, where we already have high share, we won a POR in capacitor mask etch process. This is our first POR with conductor etch system for DRAM that we have strived to win for a long time. We are making steady progress in receiving orders for cryogenic etch system for NAND channel hole in volume production lines. We are also receiving a lot of additional inquiries towards CY 2027 and 2028. Also, for film deposition, we are making progress in various applications.
For logic, our new product of single-wafer CVD is well received in contact metal and metal cap deposition processes for leading-edge nodes. Sales are also growing for high-k batch ALD for deep trench capacitor used in advanced packaging. For probers, we have a clean number one share in advanced logic. By capturing growing test demand, we expect about 60% year-over-year increase in prober shipment. We are striving to further increase our production volume. With regard to prober for silicon photonics, for which technologies to implement wafer-level integrated test for photonics and electronics are essential, we have won POR by leveraging our wafer measurement technologies that we developed for advanced logic and expect contribution to our future sales. Next, I will present the financial estimates. With backdrop of strong demand for AI servers, currently, our customer keep asking to pull forward delivery timing and purchase additional systems.
In the first half of this fiscal year, we hit record high net sales, operating income, and operating profit margin. In the second half, we expect to beat this record again. In the full year fiscal 2027, we expect net sales of JPY 3,700,000,000,000 , gross profit of JPY 1,772,000,000,000 , and operating income of JPY 1,169,000,000,000 . Operating income is expected to grow by 87% year-over-year, topping JPY 1 trillion for the first time. Net sales in the second half of this fiscal year expected to exceed JPY 2 trillion, and we have secured sufficient production capacity for this level of sales. This slide shows SPE new equipment sales forecast. Actual sales in the first half of this fiscal year were JPY 1,265,700,000,000 .
In the second half, we expect new equipment sales of JPY 1,560,000,000,000 , and on the full-year basis, we expect significant year-over-year growth of 59%. The breakdown by application is shown on this slide. This slide shows our plan for R&D expenses and CapEx. In fiscal 2027, we plan full-year R&D expenses of JPY 335 billion. We will actively promote R&D to enhance the foundation of technology competitive edge and support semiconductor technology innovation. For CapEx, we plan to spend JPY 190 billion on the full-year basis. In the previous fiscal year, construction was completed for the third development building in Miyagi, process development building in Kumamoto, and Tohoku Production and Logistics Center in Iwate. Next summer, construction of Miyagi Innovative Production Center will be completed finally, which is expected to address drastic demand growth in the future. The picture on the bottom shows the current status.
As you can see, the construction is on track as planned. Next, I will present the dividend forecast. Based on the full-year financial estimate we announced today, fiscal 2027 full-year dividend is expected to be record high, JPY 191 per share. As announced on May 29th, 2026, Tokyo Electron will implement a 5:1 common stock split on October 1st, 2026. For your information, full-year dividend would be JPY 955 per share if it were before the stock split. Finally, in the board of directors meeting held today, we established share repurchase facility of up to JPY 150 billion. This decision was made based on the comprehensive consideration of such factors as our ability to generate cash expected from our broadening business opportunities and enhancement of cash position and cash efficiency. We will keep striving for appropriate balance sheet management.
This concludes my presentation. Thank you very much for your kind attention.
We will have question-answer session until 6:00 P.M. Japan time. You can ask questions either in Japanese or English, but 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 raise hand button on Webex. For details, please refer to the instructions attached to the invitation email. I will call name of 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 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 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. We will translate your English question, and on the Japanese channel, I will read it out in Japanese, and speakers will answer in Japanese. On English channel, the question and answer will be simultaneously interpreted into English on the real-time basis. As we would like to take questions from as many participants as possible, we would like to take one question per person. If time allows, we will take additional questions. The first question is from Mr. Yoshida from CLSA Securities.
Thank you very much. I am Yoshida from CLSA Securities. Thank you very much. Very strong achievement. On slide 13, WFE market, if possible, could you give us breakdown by application, please? In the past presentation given, the expectation of this fiscal year growth rate, this time, the over 60% growth is given, but coater/developer and etching, what is your view of the growth rate and WFE market? Based on the investment, what sort of expectation do you have for the growth in next fiscal year?
Thank you very much for your question. Regarding your first question, CY 2026, logic is about 60%, and memory accounts for about 40%. $160 billion, so DRAM, high $40 billion, NAND is mid-teens billion, and logic foundry, high $80 billion. Wafer-level package, factory automation is around $10 billion. For logic memory proportion, logic is 60% and memory is 40%. For next year, 30% increase is expected to $210 billion that I said in my presentation.
For memories and logic proportion, should be close to 50/ 50, 1:1 . Logic is slightly larger in proportion than memory. DRAM is about low $70 billion. NAND is high teens billion. Logic and foundry in the middle single digit above $100 billion. Factory automation, wafer-level package should be almost the same as this year, low teens billion. That is the breakdown by application according to our forecast. For advanced and mature node proportion, for this year, 50/ 50 between the advanced and mature node. Calendar 2027, advanced node is 55%, while the mature node is 45%.
Thank you very much. So earlier, as I asked you, by product, what sort of focus do you have? Say, so coater/developer is 50% or more, etching 25% more, and what is your view for next year growth of those products?
Coater/developer, now you can expect very strong growth. Etcher, etching system is expected to grow as well. One unique thing is coater/developer, our share is more than 90%. Current semiconductor CapEx for coater/developer, I think we cover almost all the CapEx of coater/developer in semiconductor investment. Compared with other product, coater/developer grows more than other products. For proportion, Yatsuda-san, could you.
Yes, as a whole, demand has been expanding. Therefore, the amount will be more than our previous expectation.
Thank you very much.
Yoshida-san, thank you very much for your question. Next question is from Ms. Tamura of Morgan Stanley MUFG Research Japan. Ms. Tamura, please.
Thank you very much. I am Tamura from Morgan Stanley.
Thank you very much.
I have a question regarding the focus of this fiscal year performance. For second half of this year, gross profit margin, you said 48%. That is what you said in your presentation. On the other hand, for second half, top line in second quarter, 48% has been already achieved. Toward the second half, top line is expected to grow further more. Also, the fourth quarter, maybe price optimization contribution may start to appear. How do you reflect those things? I want to understand how do you view the gross profit margin for the second half of this fiscal year?
Thank you very much for your question. This is Kawamoto. I would like to answer to your question. For the first half of this fiscal year, 47.4%. That is our gross profit margin. So 1 percentage point improved. 48.3%. You may think we can achieve higher level of gross profit margin.
Partially, the first half of this fiscal year, we have some pull-in delivery of the high gross profit margin products shipment. Second half of this fiscal year, because of mass increasing of production, we need to add the cost of the increase of production. Based on those information, when you compare first half and second half of this fiscal year, the gross profit margin increased by 1 percentage point. About 50% comes from the increase of production. Remaining half is derived from the ongoing effort of price optimization. This is our view. That is the current status. Thank you.
Let me add some more comment. Partially, we need to address production, and there are some requests for pull-in in delivery, and that requires some costs. Customer understand the cost increase because of the increase of production, and customers are very kind to address increase of cost because of the production increase. The soaring prices, we need to come up with the appropriate pricing. Actually, we are on progress, and customers are very kind to understand the price optimization. Next fiscal year, we may have some addition, and we are working on revision of the pricing for next fiscal year, and we are on track when it comes to the consensus with our customers. About 50% level of gross profit margin, is to be achieved early next fiscal year. That is what I said the other day. As for that, we are on progress as planned.
Thank you very much. One clarification. Maybe you talked about surcharge in the first half of your explanation. Second half of your answer is the price revision from next fiscal year. Did it collect the price revision is not incorporated in this fiscal year for surcharge? You are incorporating the surcharge, but CFO said that has some impact. This year, you cannot cover some of the surcharge that has some impact on the gross profit margin of the second half of this fiscal year. Is that correct?
It is not all, actually. There are some pull-in requests for delivery timing. We have a lot of inquiries for that. By the end of this year, as much as possible, we try to address customers' request for pull-in the delivery timing. For second half of this year, maybe there are quite a few startups, and there is very high gross profit margin in the case of startup because there is no material cost. Whether we can incorporate that sort of impact, that is what we are considering when we prepare the budget right now. Things are going on very smoothly. However, gross profit margin in the second half of this fiscal year cannot incorporate those factors.
Thank you very much. That was very clear. Thank you very much.
Thank you very much for your question.
Ms. Tamura, thank you very much for your question. Next question is from Mr. Shibano of Citigroup Global Markets Japan.
I am Shibano from Citigroup Global Markets Japan. Thank you very much. I want to ask one question regarding margin as well. 50% and 35%, as for those levels, in the fourth quarter, on the three-month basis, is it possible to achieve that in the fourth quarter? As CEO said earlier, if early next fiscal year you can achieve that level, probably sales should be increasing steadily throughout the year. That is your expectation. So next year, full-year margin, at least, 50% for gross profit margin and 35% for operating profit margin, is that correct understanding?
So next, as for the financial estimate for next fiscal year, we are now scrutinizing some data. So we are addressing many things, and we are going to report it in the future. For profit margin enhancement and expected WFE market growth, we need to consider those factors. So gross profit margin and operating profit margin improvement should be promoted furthermore, needless to say. That is part of our consideration. Specific figures cannot be released today here, but further growth is promoted through our effort. 50% gross profit margin is to be achieved in fourth quarter or not. That is your question.
Earlier, I talked about startups. If the startups' activities are pulled in, there is a possibility that we can achieve 50% of gross profit margin in the fourth quarter. Customers are now working very hard to construct their facilities. So depending on progress, there might be some changes. So it is possible to achieve the 50% of gross profit margin during the fourth quarter, but that is affected by the customers' utility readiness. So we cannot say anything decisive today, but there is a possibility.
Thank you very much. I have one follow-up question. For cost for production capacity enhancement is what you said earlier, related that issue. For example, in the future, when you raise or enhance your production capacity, you may generate some additional cost in midterm or during next year. That is one question I want to ask. When you move in your equipment, when you ship your equipment, you need to secure the necessary components and materials. Do you have any problem in procuring the necessary components and materials? Also, the progress of construction of customers' fab, are there any limitation? So even if you can ship everything as planned, the customers side, they are not ready because of the delay in the construction of their fab. Is it possible?
So for next fiscal year, the further production capacity enhancement will be necessary. Therefore, we are now planning further enhancement of production capacity. So very sudden or very rapid, strong demand inquiries are coming in. We are now catching up with the very rapid inquiries. Maybe things are getting settled down toward the end of this year and January, and we can see further growth after that.
We do have good plan to increase our production volume by expanding production capacity for growing demand. The customer think about long-term agreement. That is what our customers are doing. We are getting this kind of information rapidly from our customer so that we can procure necessary components. As we experienced in COVID-19 period, we had some weak point in supply chain. We try to secure the procurement of the necessary component in advance proactively. In that sense, one year or two year rolling forecast is to be shared between our customers and our company. We also try to procure the components which might become running out proactively.
Thank you very much.
Shibano-san, thank you very much for your question. Next question comes from Ms. Shikanai from JPMorgan Securities.
Thank you very much. I am Shikanai from JPMorgan Securities. I have a question regarding pricing. Some competitors, they say they revise price only once. It is not the continual price optimization. That is what your peer says. Your company, because of the there is some difference of the American peers because of the foreign exchange rate. Your price optimization may take place not only this year, but also next year as well. That is one question. As for the gross profit margin, 55% is what you said, but again, you have that sort of level of the gross profit margin, 55%.
For the price revision, we do not say it is one-off. Inflation and many other factors of the soaring costs of components and materials, we have a very good discussion with customers so that we can optimize prices continually. You should see the price optimization from the viewpoint of inflation rather than foreign exchange rate.
If there is very drastic changes in the foreign exchange rate, when yen depreciation goes up, then you can have relative high increase of the cost from the overseas suppliers. Then you need to discuss with customers. For example, the market will be growing further more, then we may need additional resources in the future. So we need to have a good appropriate price optimization for technology innovation is now advancing very rapidly, and customers' productivity enhancement will lead to very high value. So how can we remove particles and reduce the defects so that we can help customers to enhance their yield? So we need to make contribution for customers' yield enhancement. In some cases, by using or leveraging AI, maintenance time can be controlled so that we can maximize equipment uptime through upgrade or by providing new products and new models.
By providing the new value, then we try to revise price based on the optimum price at each point of time. As for your last question, could you repeat your last question once again, please?
Gross profit margin, so 55% is given by your American peers. Can you think about 50% level of the gross profit margin?
Needless to say, there is huge opportunities where we can provide value to the customers. Demand is growing rapidly. In such area, cost reduction effect and efficiency enhancement can have positive contribution, our operation, as you can see our vision. Actually, our profit is measure representing magnitude of value of a products and service. So we need to improve profit margin further more. We need to make continuous effort to improve our profit margin.
Thank you very much.
Shikanai-san, thank you very much for your question. Next question comes from Mr. Nakamura of Goldman Sachs Japan. Mr. Nakamura, please.
Thank you very much. This is Nakamura.
Thank you very much.
I have a question regarding materials and your production capacity. Just clarification. The current visibility of sales or inquiries for next fiscal year, do you have any restrictions in terms of procurement of components? There is no such restriction. Next year, if your sales increase just like the WFE market growth, then your sales will become JPY 4 trillion or JPY 5 trillion. Second half of this fiscal year, you said there is no problem of production capacity. For the future, how do you think about production capacity enhancement? Thank you.
For the materials and components, at present, we are focusing on this area intensively. As you pointed out, the components and materials for each item, we have very precise management.
We are struggling, and we do not deny that. Every possible measure will be taken to achieve the plan we announced today. Day by day, we are watching, closely watching the situation. For our production plan, WFE market growth should be closely watched so that we can have precise plan. As you pointed out, we are closely monitoring supply chain and take proactive actions against supply chain. That is what we need to do as the equipment manufacturer.
Okay. In that sense, just one clarification. For the September, December to January to March, there is no shortage or restriction in terms of procurement of components. You said it is very difficult.
For example, sometimes we may use part of customer's inventory depending on some. As for the additional orders that we are doing partially, but we are now managing the situation of procurement or securing components and materials.
Thank you very much.
Nakamura-san, thank you very much for your question. Next question comes from Mr. Shimamoto of Okasan Securities. Mr. Shimamoto, go ahead, please.
I am Shimamoto of Okasan Securities. I have a question on page 13, WFE market for calendar 2027, more than $210 billion. I have a question regarding this figure at present. Now, you have revised the forecast upward. Other companies in supply chain, I think the supply might be very difficult, but based on that constellation, have you come up with this figure, or you just came up with this figure based on demand increasing, demand growth? You said more than $210 billion. What could be the bottleneck? Are you aware of the restraints in the supply chain or supply side?
In principle, when you say $200 billion or more, as I said earlier, we accumulate figures based on the shared rolling forecast. Based on communication with our customers, we came up with this forecast of the WFE market size next year. There might be some possibility for further upward revision of the WFE market size because of strong inquiries. That is the reason why we said $210 billion or more. In particular, more tokens, more semiconductors that I said in my presentation. We need to address those trends, and we also calculated WFE market size. Risks or restrict, we do not, based on the restriction, we came up with this forecast based on the customers' investment plans. The other question is— do you have another question?
Thank you very much. Your answer was very clear. I have one follow-up question for 2027. If you can see some pull-in, then 2028 might be negative growth compared with 2027. Do you have such kind of forecast? I am sorry, this is rather long-term visibility issue.
Well, memory price is getting higher and higher now at present. Because of that, $ 1 trillion or $ 1.6 trillion, that is the size of the semiconductor market. According to SEMI 2030, $ 2 trillion, or in some cases, $ 3 trillion can be achieved. CAGR is 5.7% CAGR. In the case of $ 3 trillion, CAGR of 17%. That is the growth rate toward 2030. Based on that, year 2030, toward year 2030, we will have another or further growth trend. As I said in my presentation, for memory roles, how much memory do you have?
That is a very big factor to determine the level of AI performance or inference. AI performance is determined by memory, and AI performance technology innovation will continue in the future. Agentic AI and physical AI and high-performance computing era. Those things will be drivers. As far as we are talking with customers, nothing related to this relation is raised by the customers. AI investment, cash flow issue for AI investment, and energy balance in some cases in the United States. Some restrictions imposed by the state government. We should closely watch those trends. These are different factors. Other than those factors, I think strong inquiries are continuously expected. For long term, the market is growing steadily. As for the other factors, we need to take appropriate action to address those other factors. We need to have that kind of capability.
Thank you very much for your clear answer.
Mr. Shimamoto, thank you very much for your question. We have about seven minutes, and three people are raising hands, so we need to go quickly. Next question comes from Kinoshita-san from UBS.
I am Kinoshita from UBS. Thank you very much. Congratulations for wonderful result, financial performance. My question is related to previous question for 2027 and beyond WFE market forecast. I want to learn more about your opinion. You said in the past, when you make a forecast, you look at entire supply chain, not only your company. You try to consider entire supply chain to identify bottleneck. Demand might be much stronger, but this is the level of WFE market size, you can. 2027 WFE market outlook has been revised upward.
Does that mean you raised it because of the not so much bottlenecks in supply chain, or are there any other factors or reasons that you revised WFE market size prediction upward? What do you think about 2028? Supply chain bottleneck will become more serious than now, so do you think WFE market size will not grow so rapidly, or do you have some solutions and growth rate of WFE market will be increasing furthermore? I have those two questions. Thank you.
Compared with the past, semiconductor roles have been expanding. In the past, PCs and smartphones were driving the semiconductor demand in most cases. However, now things are totally different. At present, data and AI are driving demand. It is super cycle, and someone said more than super cycle. As far as demand is concerned, there is no doubt about strong demand.
Additionally, applications are expanding. Agentic AI and physical AI are the end goal, and also data center models. When you think about all those factors, there might be some restrictions, but actually, we do receive very, very strong inquiries. It's incredible. As I said earlier, if there are some other factors for fluctuation, we must closely watch other factors.
Thank you very much.
Kinoshita-san, thank you very much for your question. Next question comes from Mr. Nakanomyo of Jefferies Japan.
I am Nakanomyo from Jefferies Japan. Thank you very much.
Thank you very much.
My question is totally different in nature. The other day, as a part of Japan-U.S. tariff negotiation, the investment to United States covers the semiconductor field, and the Japanese government will make investment to GlobalFoundries with amount of $20 billion. I saw Tokyo Electron, your company's name there. My question is that simply your business opportunity expansion? Is that positive impact on your company? Or because this is investment and loans, do you take some obligations as a company?
This is business opportunity. There are no obligations on our side.
Thank you very much.
Thank you very much.
Thank you very much, Mr. Nakanomyo, for your question. Next question is from Mr. Yoshioka of Nomura Securities.
I am Yoshioka of Nomura Securities. The Tokyo Electron sales increase and WFE market growth, there is some difference between the two, and that's why I have a question. In 2026, probably Tokyo Electron's sales should be 40% increase year-over-year. On the other hand, WFE increased by 30% in 2026, so there is 10 percentage points difference. Your performance is much better than the WFE market by 10 percentage points.
When it comes to 2027, of course, I know there is no outlook for 2027, but when you think about some factors to increase your shares or production status based on that kind of information, when you think about 2027, for example, 10 percentage points, can you outperform WFE market by 10 percentage points, or do you think your sales growth is in line with WFE market growth? It's okay if you could just give us some gut feeling. How do you view the situation in 2027?
In principle, our company focus on coater/developer, etching system, film deposition, and cleaning systems. These are focus areas. For etching, there are several approaches. When you produce semiconductors, those technologies are essential. On top of that, market is really huge in size. In those areas, 30% increase.
I think we can, in line with market growth, or we can also outperform market growth in certain segments. I touched upon coater/developer earlier. We receive inquiries from all over the world. There is no exaggeration. I think for coater/developer, we can outperform the WFE market. We can drive further growth for advanced packaging. Next fiscal year and onward, we can see the considerable growth in the field of 3D integration. I think there is a huge opportunity for further growth. For probers, test processes are so huge in number. The number of probers is not announced, but as I said in my presentation earlier, there is very huge inquiries coming in. Next year, we can see the huge demands and also strong demand continue 2028 as well. We do receive very, very strong inquiries for testing.
Because of those reasons, we are in the direction to outperform the market growth when we prepare the plan for the future.
Thank you very much.
Thank you very much, Mr. Yoshioka, for your question. The last question comes in in text. Current status of supply chain and capacity for flexible production ramp-up. Are you currently seeing any bottlenecks in the procurement of key components or in equipment lead times? In addition, if customer inquiries strengthen beyond your current outlook, driven by robust demand from AI and other applications, how much headroom do you have across your own factories and broader supply chain to flexibly ramp up production and respond? We would appreciate your views.
The production capacity enhancement, we expect its strong inquiries. It is necessary for us to take proactive actions in Tohoku. We have logistics center and automated warehouse.
In other plants, we are now watching production status, where we can have the enough space for production, also building the development building, the largest market, etching. In August 2027, we are going to have a new plant for etching to add some more capacity. This is how we are very proactive in addressing enhancement of capacity, production capacity. So I don't think there is any problem. Of course, we need to be very careful and creative, but we can take care of the production capacity. For supply chain, I cannot give you anything detail, but there are some critical parts and units or modules. Continuously, we need to have leverage, very strong partnership, and sometimes we support our suppliers so that we can fulfill the demand from the market.
As for the production capacity enhancement, as an industry, the entire industry is working very hard to improve the capacity. So there are some critical parts, and we prepare lists of critical parts so that we can take appropriate actions against those critical parts, which is necessary.
The last question was from Mr. Fan of Huat ai Securities. Thank you very much, Mr. Fan, for your question. This concludes today's section. Lastly, we'd like to continually improve our IR activities based on your precious feedback. So we would appreciate your kind cooperation in filling out the questionnaire survey before you exit the Webex. Thank you very much for taking time to join this conference despite your busy schedule. This concludes today's session.
Thank you very much.