Advantest Corp
TSE:6857
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
4 214
9 824
|
| Price Target |
|
We'll email you a reminder when the closing price reaches JPY.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Advantest Corp
You don't have any saved screeners yet
Thank you for attending the earnings conference call of Advantest Corporation for fiscal 2021 first quarter ended June 30, 2021. Participants from Advantest are Yoshiaki Yoshida, President and CEO; and Atsushi Fujita, CFO; Kimiya Sakamoto, Executive Vice President of Sales Group; and Yasuo Mihashi, Executive Vice President of Corporate Planning and Stakeholder Relations.
First, CFO Fujita will go over the financial results for the first quarter, followed by a presentation on the fiscal 2021 outlook by CEO Yoshida. We will then take your questions. The entire conference call is scheduled for an hour.
Materials are available from TDNet as well as the company website. Before we start, a cautionary statement. This presentation contains forward-looking statements that are based on Advantest's current expectations, estimates and projections. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause Advantest's actual results to be materially different from these expressed or implied.
Without further ado, CFO, Fujita.
Good afternoon, Fujita speaking. I will go over the first quarter results. Please turn to Slide 4. First, the business environment in the first quarter. The acceleration of digitalization as a result of the COVID-19 pandemic has boosted demand for semiconductors used in data centers, PCs and AI applications. In addition, competition among 5G smartphone manufacturers has accelerated demand growth for related semiconductors and higher functionality requirements.
Moreover, as final demand recovers amid the lifting of COVID-19-related restrictions, semiconductor shortages have become palpable in diverse sectors, including the automotive sector. In response, suppliers throughout the semiconductor market are now aggressively investing in production capacity enhancements and advanced technology.
Amidst these circumstances, Advantest has endeavored to capture the expanding demand for semiconductor test from every angle by leveraging our broad product portfolio, which is one of our strengths as a solutions provider. We have put the greatest emphasis on stable procurement of parts amidst tight semiconductor and electronic component supply conditions to ensure our ability to meet the ongoing robust demand, but procurement bottlenecks throughout our supply chain are increasing parts delivery time, which is also affecting lead time on our products.
Following the surge in the tester demand environment, our customers have been moving to secure products in advance in anticipation of longer product lead time. These trends help to boost orders received in the first quarter to a level far exceeding the record highs in the previous quarter. We also achieved record high quarterly results in terms of sales and operating income. Quarterly income decreased quarter-on-quarter due to the onetime impact of having posted deferred tax assets in the fourth quarter of the previous fiscal year.
Next slide. As for the first quarter orders by segment, Semiconductor and Component Test Systems were up 58.7% quarter-on-quarter at JPY 116.2 billion. Orders for SoC testers increased by JPY 49.4 billion quarter-on-quarter at JPY 97.5 billion.
Amidst overall strong growth, outstanding vigor was seen in orders for testers for high-end SoCs, especially application processors or APUs, which are core smartphone components and devices for high performance computing or HPC. Memory tester orders were JPY 18.7 billion, down JPY 6.4 billion quarter-on-quarter. While orders for DRAM testers increased, orders for flash memory testers declined in reaction to large orders in the fourth quarter.
Orders from Mechatronics Systems were up 11.8% quarter-on-quarter at JPY 14 billion, with growth in orders for EUV-related nanotechnology products. Orders for Services, Support and Others were up 24.8% quarter-on-quarter at JPY 31 billion. While annual maintenance contract renewals decreased due to seasonality, orders for system-level test or SLT products increased, mainly on the mainstreaming of high spec SSDs and the strength of the server and PC markets.
Next slide. Moving on to the first quarter sales by segment. Semiconductor and Component Test Systems increased by 3.3% quarter-on-quarter at JPY 67.3 billion. Coming from SoC tester sales of JPY 50.2 billion and memory tester sales of JPY 17.1 billion. In both categories, strong sales were maintained from the fourth quarter. Mechatronics Systems were up 15.8% quarter-on-quarter at JPY 11.5 billion. Sales were strong for all of device interfaces, test handlers and nanotechnology products. Services, Support and Others were up 13.2% quarter-on-quarter at JPY 18.4 billion. Our SLT business contributed steadily to sales on the momentum of continuing high orders.
Next slide. Orders by region. In the first quarter, customers showed strong motivation to invest in every region. Notably, in Taiwan and China, orders for testers for high-end SoCs, mainly smartphone and HPC-related devices increased significantly. In other regions, Southeast Asia saw strong orders for testers for devices used in PCs, servers, automotive applications and industrial equipment.
As for the first quarter sales by region, in Taiwan and China, smartphone-related sales increased. Percentage of net sales to overseas customers reached 97%, the highest level ever as investment appetite increased in our main overseas sales territories.
Next slide. Operating income and others for the first quarter. Gross profit margin was 56.4%, which represented a quarter-on-quarter improvement due to an increase in sales and a more favorable sales mix. SG&A, including all other income and expenses totaled JPY 28.6 billion, an increase of JPY 4.7 billion quarter-on-quarter. Please note that in the fourth quarter of the previous fiscal year, a profit of approximately JPY 5.6 billion from the revision of the pension system at the German subsidiary was recorded as other income.
Excluding the impact of this onetime gain, net SG&A expenses decreased slightly quarter-on-quarter. Operating income was JPY 26.1 billion, and operating margin was 26.9%.
Next slide. First quarter R&D expenses and others. R&D expenses were JPY 11.8 billion, and R&D to sales ratio was 12.1%. CapEx was JPY 2.6 billion, and depreciation and amortization totaled JPY 3.4 billion. As for the first quarter cash flow, free cash flow was positive JPY 11.5 billion.
Next slide. Balance sheet for the period ending June 30. Total assets were JPY 428.2 billion, of which cash and cash equivalents were JPY 145.1 billion. Equity attributable to owners of the parent was JPY 285 billion. Equity ratio was 66.6%, up 0.3 points from the end of the previous fiscal year.
That's all from me on the first quarter financial results. Thank you for your attention.
This is Yoshida speaking, to present the fiscal 2021 outlook. Please turn to Slide 12. Outlook of semiconductor tester market trends for 2021. As explained at the briefing session on our new second midterm management plan held in May, Advantest is in the midst of a situation where we can benefit from the expected growth of the semiconductor and semiconductor test markets in the medium to long term, driven by the progress of the digital revolution and the push for energy efficiency improvement.
In 2021, demand for semiconductors will grow along with increasing final demand and higher end product functionality, driving aggressive investments in major regions targeting higher semiconductor performance and production capacity enhancements to solve the semiconductor supply shortage.
In the SoC tester market, the production ramp-up of new APU and HPC products as well as increasing device complexity associated with miniaturization should support higher tester utilization at customer sites for the time being.
We anticipate further increases in investments to expand test capacity, mainly for high-end SoCs. At this time, the calendar year '21 SoC tester market size is expected to be USD 3.8 billion.
In the memory tester market, device evaluation in terms of miniaturization, multilayering and higher speeds and bandwidths helped by digital revolution has been driving the tester demand continuously since last year. As a result of slightly adjusting our market size outlook, based on the latest customer trends, the calendar year '21 memory tester market size is currently expected to be USD 1.4 billion.
As our customers have been moving to secure products early in anticipation of longer product lead times, it's now more difficult to estimate the market size than in the past. If the market trends as expected, it will grow more than 20% for the second year in a row.
Page 13 shows fiscal year 2021 forecast. Based on our Q1 results as well as future outlook, we have raised our full year forecast to JPY 400 billion in orders, JPY 385 billion in sales, JPY 100 billion in operating income, JPY 100 billion in income before income taxes, and JPY 75 billion in net income.
In this forecast, if it is achieved, orders and sales will reach record highs. Operating income will reach the JPY 100 billion level for the first time, setting a new record in 24 years. Regarding future orders, although we anticipate some falloffs in response to the sharp increase in orders in the first quarter, orders should continue to stay at a high level in the second quarter and beyond. Orders are harder to forecast than in the past. We will be prepared for a potential for further upside depending on the economic situation.
In terms of sales, in addition to the recent increase in backlog, we anticipate a high level of orders in the future. So solid sales are expected to continue in each quarter of fiscal year 2021. We plan to increase sales by 23% compared to the previous fiscal year. We are not significantly concerned about production capacity, but the shortage of semiconductors and parts has become a major issue across various industries. We will endeavor to secure all necessary parts to avoid lost opportunity due to supply chain bottlenecks.
Gross profit margin is expected to be around 55% for the full year. Concern about the impact of rising parts prices has been voiced, but we don't think this will be a significant factor. The forecast is based on exchange rate assumptions of JPY 110 to the U.S. dollar and JPY 135 to the euro for the 9 months from Q2 of this year. Exchange rate sensitivities in terms of FY '21, operating income is plus JPY 1 billion per JPY 1 depreciation against the U.S. dollar, and minus JPY 150 million per JPY 1 depreciation against the euro.
Please turn to Page 14 for FY '21 outlook by segment. I will start with Semiconductor and Component Test Systems. In view of the present favorable business environment, including record high quarterly orders for Q1 and expected high level orders going forward, our full year FY '21 sales forecast for SoC testers has been raised by JPY 25 billion from the April forecast to JPY 194 billion. In APUs, HPC, et cetera, advancing semiconductor complexity through miniaturization is currently driving tester demand higher. This trend is expected to continue for the time being.
We are seeing active capacity expansion to solve the semiconductor shortage mainly for automotive and the industrial equipment applications. Our full year FY '21 sales forecast for memory testers has been raised to JPY 69 billion, an increase of JPY 1 billion from the April forecast. As data revolution accelerates, demand for NAND and DDR4 and 5 testers is expected to remain stable. In these circumstances, we expect sales to increase mainly for DRAM high speed testers where Advantest has a competitive advantage.
Page 15, please. Our Mechatronics-related business is closely linked to our memory tester business. Demand for test cells is expected to grow as demand for memory testers remains strong. In addition, demand for nanotechnology products is strengthening amid the wider adoption of the EUV technology. We, therefore, have revised up our sales forecast for FY '21 by JPY 6 billion to JPY 48 billion. In Services, Support and Others, we have raised our sales forecast by JPY 3 billion to JPY 74 billion. This is based on the increase in demand for system-level test products and growth in our field services business linked to our growing installed base.
Page 16, please, for share repurchase. As part of our shareholder return policy under the second midterm management plan, we announced to aim for a total annual return ratio of 50% or more, including share buyback. Based on today's upward revision of the earnings forecast, we will acquire JPY 70 billion of our own stock to enhance shareholder return and improve capital efficiency. The acquisition will be executed during the 8-month period from August 2021 to March 2022 and a total of up to 10 million shares will be acquired, which is equivalent to 5.1% of the outstanding shares, excluding treasury stock.
Page 17 shows a summary. Digital revolution accelerated by COVID-19 pandemic has greatly boosted semiconductor demand with customers making active investments in capacity expansion and the semiconductor performance in key regions. We have raised our full year orders forecast by JPY 50 billion and the full year sales forecast by JPY 35 billion.
Based on the significant increase in Q1 orders and the company's future market outlook, we aim to exceed JPY 100 billion in operating income, which would be a record high. The shortage of semiconductors, the rollout of new APU and HPC devices and the increasing complexity of these devices are all expected to support high tester utilization at customer sites for the time being. We foresee that the strong demand for testers will continue.
Given our expectations for further cash flow improvement, thanks to favorable business performance, we will buy back shares to enhance shareholder return and improve capital efficiency. Due to strong demand, our second midterm management plan launched this year is off to a good start.
We aim to achieve the targets of the plan while being fully aware of the risks, such as difficulty in parts procurement due to supply chain bottleneck, decrease in demand due to delays in global economic recovery and the potential impact of the U.S.-China conflict and economic security policies on the semiconductor industry.
This concludes my presentation. Thank you.
[Operator Instructions] The first questioner is Mr. Wadaki from Nomura Securities.
Wadaki from Nomura Securities. Congratulations on your presentation on spectacular financial results. I have a couple of questions. I believe that there are many business opportunities being presented today, including system-level test chiplets, China move towards low power consumption servers to name a few. I think the tester market itself is undergoing structural change. Can you comment on this structural change? Which driver do you think is most significant for Advantest?
Thank you, Mr. Wadaki. This is Mihashi speaking. You said structural change. Specifically, what particular aspect do you have in mind?
Well, there are several reports on this, increase in system-level tests on chiplets and also in relation to move towards lower power consumption of servers. Intel is losing its market share. While, accelerators are growing, and there is a China factor.
From these perspectives, I think there are several, very strong tailwinds blowing in favor of Advantest. Are you finding anything that are different from the past? I would be interested to hear your view, Mr. Mihashi.
Thank you for that clarification. As you have correctly described, the advancement of various technologies continue to drive the semiconductor industry. For sure, as we've been saying for some time, there are no shrinkage, particularly double patterning in recent years and also going forward, high-NA and high resolution is to drive the advancement of scanners. Increased complexity of the semiconductor production techniques is good news for the testers, which are needed to ensure semiconductor quality.
So going forward, we should continue to expect the technology advancement to be tailwinds in favor of our business. While we don't see a big change, we expect this pattern to be repeated in the future. Moreover, advances in chiplets and other devices with 3D structures that you mentioned will encourage manufacturers not only to thoroughly test individual chips on ATE, but additionally, to perform SLTs to ensure the quality of the device once the multiple chips have been integrated.
This will also serve as a tailwind for the testing growth. The advancement in semiconductors overall, including functions, low power consumption, these serve as a very strong tailwind.
I see. My second question is on China. Shipment of semiconductor manufacturing equipment to China is extremely strong. At the same time, some say this is demand being boosted in anticipation of sanctions being imposed on China. How much is the real demand versus artificial demand do you think? On the other hand, some suspect that there actually would be no sanctions. What is your view on the current state of the China market? And what is your outlook?
Our sales in the Chinese market are growing, mainly in memory testers for the Chinese companies, of course. But when it comes to SoC testers, sales are not necessarily originating from Chinese companies alone, but rather original orders coming from U.S. fabless companies and elsewhere. So there is a mixture in terms of where the orders originate.
What is currently active in our China business is not only 1 or 2 testers being supplied to fabless companies, but also larger orders consisting of products that cover the global supply chain, not just from within China.
Therefore, we do not consider this to be a purely China risk. Going forward, while there, of course, is concern over national economic security, it's unlikely that the U.S. could completely be independent of the Chinese supply chain. I don't think that will be easy.
So in that sense, while there is a risk, I doubt either party would embark on the economic sanctions that will kill their respective business. That is our current view. But of course, we remain vigilant because politics are unpredictable.
I see. A follow-up question. You alluded to artificial demand, and I was wondering if that was mostly attributable to China. But now I take it that, that is not the case and that artificial demand is more global in nature, am I correct?
I wouldn't call it artificial demand. It's real demand. It's just that customers have no choice but to place orders way in advance since testers are not readily available, given that delivery time is getting longer. It used to be orders replaced 3 to 4 months in advance, but now they are getting longer. So it's not like double ordering is taking place as some people suspect.
Next questioner is Mr. Damian Thong of Macquarie Capital Securities.
Damian Thong of Macquarie Capital Securities. Congratulations on your very strong first quarter results. I have 2 questions. First is on test time. Clearly, centering on high-end SoC testing demand and production is growing. Compared to the past, how much is test time increasing today? That is, for this year and what about next year? I believe the test time is a factor that is driving demand for your business, and that is the reason why I'm asking this question.
My second question is on your forecast for the second quarter sales, which you expect to decline quarter-on-quarter. What is the reason for that? Orders for April to June were rather strong, some of which are to translate into sales in the second quarter. Or are you expecting sales to realize later in the October, December or January, March quarters? Are you expecting the lead time to be getting longer?
This is Sakamoto speaking. Your question is on test time. As was mentioned earlier, with further node shrinkage, devices become more complex and test intensity goes up and test time goes up. It's hard to say quantitatively as there are various different devices, and we cannot say how much percent increase per different types of devices. But basically, with increased complexity, test time tends to get longer, and we expect that trend to continue.
Your second question on our second quarter sales forecast. True, slight decline expected quarter-on-quarter.
Yes, I'm asking for the reason for this slightly conservative forecast.
As CEO Yoshida briefly explained earlier, we're not concerned about their production capacity at all. But procurement of semiconductors and electronic components is becoming more challenging, and we are factoring in a possible impact from that. Orders in the first quarter were strong. And conventionally, with delivery time of 3 to 4 months, orders in the first quarter were to translate into sales in the second quarter. That used to be the cycle. But with the delivery time becoming longer, with that in mind, we are projecting the second quarter sales as you see there.
This is Yoshida speaking. Should parts and materials procurement proceed smoothly, it's highly likely that the actual sales could exceed the forecast. But we are factoring in some uncertainties and thus, a conservative forecast.
I see, what is the delivery time right now?
Currently, around 6 months.
I see. So it's getting rather long. And I have a follow-up question. The new product that you announced this year, the EXA Scale test system, what's the impact? How do orders look like?
Yes, adoption by our key customers is proceeding very smoothly for engineering to mass production purposes. So going forward, we expect it to make a contribution to SoC tester business.
Next questioner is Mr. Yoshida from CLSA Securities.
Yoshida from CLSA Securities. My first question is on order forecast, which has been revised upward by JPY 50 billion. By application, where is the increase coming from? SoC tester were very strong in the first quarter. So were those the source? Can you give us the breakdown by application as well?
We made upward revision to order forecast by JPY 50 billion on a full year basis, mostly in relation to SoC testers, almost all in relation to SoC testers. By application, computing and communications account for nearly 70%; automotive, industrial equipment and consumer applications over 20%; and DDICs a little less than 10%. That's the breakdown.
I see, in other words, basically in line with the current product mix, correct?
Yes. The breakdown is basically in line with the current makeup. We also made upward revision to the sales forecast for Mechatronics Systems, Services, Support and Others. But in terms of orders, they are not reflected right. For orders, SoC account for a large proportion. So in comparison, Mechatronics Systems and Services, Support and Others don't have much effect in terms of sales. Most of upward revision to sales is in relation to SoC testers.
I see. My next question. Just your market outlook is becoming strong for the remainder of the year. What about next year? What is your outlook for the market next year? And if you are projecting an increase or decrease, what are the factors behind?
Indeed, we are having discussion to identify the outlook for 2022. For the second half of 2021, visibility is still very much limited partly in relation to the delivery time becoming longer. We see signs of change in the pattern.
So if I could talk about the second half of this year first, regarding the possible large investments by our major customers in fiscal year 2022, that decision has yet to be made by the customers. And as these decisions become clearer, we will have better accuracy in our guidance for the second half orders. Frankly, the accuracy of the current guidance is not that high.
As CEO Yoshida briefly mentioned earlier, there is a possibility of upside to our guidance. So we need to take all that into consideration. But based on what is currently available, TAM for calendar year 2022 is expected to be similar to or greater than that of calendar year 2021. That is our expectation.
So in that sense, fiscal year 2021 with orders of JPY 400 billion and sales of JPY 385 billion is going to be a very good year. And we expect this to continue into fiscal 2022.
The next questioner is Mr. Hirakawa from BofA Securities.
Hirakawa from BofA Securities. I have 2 questions. First is probably partly the same as Mr. Yoshida's question earlier. As for orders, you expect the JPY 400 billion level to be sustainable on a constant basis. You raised your forecast for this year from JPY 350 billion to JPY 400 billion.
Of this additional JPY 50 billion, how much is coming from the semiconductor shortages and how much from technology advancement, which is more sustainable? I know it's very difficult to say exactly, but as a general feel, what is the ratio? If it's only semiconductor shortages, I'm afraid it is going to be temporary. That's my first question.
As you have correctly indicated, it's really hard to say exactly. But my personal view is that the investment related to node shrinkage continues, and there are foundries that have a capability for more advanced process node, although the number is limited. And the high-end devices and the mobile-related applications, we see migration to more advanced process node. For example, 5-nanometer node this year, 4-nanometer next year, 3-nanometer beyond that. Of course, we don't know if that's exactly going to happen, but that is the current projection.
And if that's the case, and as indicated in relation to the very first question, test time is getting longer. And of course, before the next product is launched, there will be an attempt to shorten the time if that could be afforded.
But actually, with the adoption of more advanced node, the test time is increasing. So the more complicated the process, the more test items. So instead of time being shortened, the test time is getting longer. As long as this trend continues, the current situation that we find ourselves in, the very strong need for testers, we believe will continue. So we believe order growth to be maintained.
My second question is about market share. The company has raised its market forecast by USD 500 million, of which $400 million is for SoC and $100 million is for Memory. On the other hand, the sales forecast has been raised by JPY 35 billion depending on ForEx. And I believe that the company expects to take 70% or so of the overall market growth. How do you expect your market share to develop in year 2021? Would you please share with us your thoughts on this point? What is the expected trend? That's all.
As you said, we have raised the total available market for SoC to USD 3.8 billion from USD 3.4 billion previously. That's an increase of USD 400 million. The breakdown of the USD 400 million is about $250 million for computing and communications and the $150 million for automotive and other. Based on that, our calculated market share for SoC is about 50%. That's the result of our simulation. Naturally, this will change as the environment changes, but this is our share expectation under the current environment. So that's 50%.
For Memory, it is revised up by 100 million. Of that, DRAM accounts for 50% and Flash accounts for 50%. Based on that, we expect our market share to be above 50%. That's what we are expecting.
The next question comes from Mr. Nakamura of Goldman Sachs.
I have 2 questions. The first is about the sales target for fiscal year 2021, which was revised upward. According to the 3-year plan that was released in May, the range was JPY 350 billion to JPY 380 billion. The current level seems to be already higher than that range. Taking in account the business environment for the next 3 years, is the company already in a situation where the target needs to be revised upward again? Can you share your latest outlook, including market forecasts?
I do understand that it's difficult to foresee the future at this point. We do not believe that the cyclicality is gone. The business trends of going up and down repeatedly remains still unchanged. We formulated our midterm plan sometime in the latter half of last year towards the first half of this fiscal year. So there is no doubt that the recent trend is much more upbeat compared with what we had assumed at that time. If the business is strong next year, for example, for fiscal year '22, it may decline in fiscal year 2023.
If that will be the case, I believe that the average for the next few years could be JPY 380 billion. So that's still possible. So that's my first point.
Another point is about the upside potential. With the current shortage of semiconductors, there are moves to increase capacity around the world and plans to expand capacity, not only for 300-millimeter, but also for 200-millimeter. And they are announced one after another all over the world.
It would not be surprising if a peak demand for testers come one more time when those new fabs are up and running. Assuming such an upside scenario, it's not surprising if the company outperforms its midterm plan targets. However, our midterm business plan has just begun, and we have not yet reached a point where we would revise it upwards. That's the current situation.
I understand now. The second question is about the shortage of parts and materials mentioned earlier. If possible, please give us more detail on the shortage of those materials and how much it is actually affecting your production and sales?
Also, please comment on the impact of the lockdown in Malaysia, which was started in June and is supposed to be lifted in August later? So could you give us your comment on this?
Let me answer the simple question first. The lockdown in Malaysia has not had a major impact on our production so far. In Penang Island, the situation is not that serious. We are told that the production itself is on schedule. So we do not think there will be any impact on the production capacity itself.
However, as for the shortage, we are running out of inventory for a wide range of parts and materials. For example, in semiconductor manufacturing, there is a shortage of substrates.
Some people are wondering how long this is going to last and say that it may last for next 2 to 3 years. That seems to be the situation. Today, it takes many more substrates to make a 3-dimensional semiconductor than in the past. Even though it is certainly needed many times over, it can easily take 1 or 2 years to build up the capacity.
So the situation that we are facing at the moment has never been experienced before. It's not just the parts that are used to make our testers. But a lot of things are happening in upstream, and it is becoming a big problem for the entire semiconductor industry.
As a result, it's difficult to procure some semiconductors to put on to our testers. This is a matter of whether the chicken comes first or the egg. If we can't make testers, they cannot make semiconductors. And if they cannot make semiconductors, we cannot make testers. In order to avoid such a situation in the overall industry, CEOs and other top executives of companies are having discussions at the moment to address and continue procurement.
Unfortunately, we cannot disclose specific company names though.
The next question is from Mr. Hasegawa of Mitsubishi UFJ Morgan Stanley Securities.
This is Hasegawa from Mitsubishi UFJ Securities. Let me ask you a quick question. What was the timing of the decision to revise the forecast this time? Earlier, you mentioned that the midterm plan was formulated in the second half of last year to first half of this year. Can you give us some details on when exactly you actually decided to announce the revision?
We discussed the figures for the midterm plan until -- just before the announcement, and there were no major orders as of April that would require us to revise the figures we had already announced. The major orders started to come at the end of April and continued into May and June and also into July. In April, we could not foresee the current order trend. So that was what happened. Orders for the fourth quarter were quite significant. And therefore, we thought that there will be a fall in the first quarter. However, they trended in the opposite direction. This is what actually happened. So that's why we included the April trend when we formulated the midterm plan that we announced in May. And we thought that we could achieve the range of up to JPY 380 billion on average. So we set that as our target. So in summary, the change in trend in the first quarter was beyond our expectation.
The revised plan refers to a lead time of 6 months, but I understand that this lead time is the period from the time your company receives an order to the time of delivery. Can you comment on the assumptions for material procurement in this revised plan?
Well, there are many materials and components with longer delivery times according to the revised results, the second half of the year will be generally flat in terms of the level of sales. I would like to know if you could share any assumptions about the procurement of parts and materials.
If we suddenly ask the suppliers to double their supply, they will not be able to respond to such a request. Naturally, we procure based on the supply and demand outlook, but we also procure parts with long lead time well in advance. However, orders are increasing rapidly now.
So we are asking for delivery as soon as possible, but the suppliers respond to us only with delivery dates they are able to promise with confidence. However, over time, it is possible that the delivery dates will gradually shorten.
So in that sense, we will be making efforts to bring forward sales as much as possible compared with what we currently expect based on our procurement plan. Well, that's a possibility with the current shortage of semiconductors all over the world. We do not think we can accelerate the delivery so dramatically, say, 3 months or 2 months. In that sense, you can understand that our current sales plan is within the range of levels that we can stably procure.
If that's the case, do you think that the level of JPY 123.8 billion in the order backlog at the end of the fiscal year can be generally fulfilled, but not 100%? Even if there are JPY 120 billion left at the end of the fiscal year, that doesn't mean that it has to be fulfilled in the next 3 months.
Understood. We don't know if it will end up at JPY 120 billion or if it will increase any further. It also depends on when the delivery dates are. At that point in time, if customers still think that they can increase production, it's possible that the level of the red bar on the chart will be higher.
I would like to add that there is a considerable possibility that the order book may expand even more. So it seems that the current type situation will not be easily resolved anytime soon, but the company will do its best. At the moment, there are very few semiconductor suppliers. I believe we can confidently say that they will ship the required volume at any given time.
Understood. The second question is completely different from the first. But I was wondering if you could explain the impact of the partnership with PDF Solutions. It's been about a year now since the investment was made last year.
This is Mihashi. I would like to answer your question. We started our partnership with PDF last year. Since then, we have been conducting activities to implement our cloud environment on their cloud platform. And in such an environment, we are currently rolling out various applications for customers to use. We have even started to operate some of these assets outside of the areas of mass production. However, having said that, in terms of the contribution to sales, we still have to deep dive into the desired customer value proposition.
At this point, no significant impact has been generated yet. But first and foremost, we would like to utilize the data to improve the effectiveness of testing or the efficiency of the overall semiconductor manufacturing process while continuing to conduct deep dive analysis.
Understood. How do you evaluate then the results of year 1 in terms of ROIC, R-O-I-C, for the capital the company has invested.
Well, for year 1, as mentioned earlier, we spent most of the time building an environment where we could do business using data before we could recover our investment in terms of ROIC. That's how we spent the first year. From the beginning, we did not plan to be able to recover our investment in terms of ROIC in a short period of time. That's not the nature of the investment.
Regarding data analytics, it is a business that if we don't do, we could put our tester business in jeopardy. So there was such an implication that we had to protect the tester business. Based on that understanding, the investment was made from a medium-term perspective with the intention of building a software-centric business ourselves. So we are not planning to recover the investment in a certain number of years in terms of ROIC.
If so, is it correct to say that the investment was made in anticipation of the comprehensive impact on the company's business rather than to recover the investment in a certain period of time, such as 3 years?
Yes, you're correct. In that sense, we are already seeing an impact. Joint development with customers that directly leased to hardware sales is already underway. And if we consider the sales of testers that have come out of it, we can say that we are already recovering a large part of the investment. However, this impact is not counted as a return on investment in the software business per se.
With this, we would like to conclude the Q&A session. Thank you very much for your participation in our briefing today.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]