Advantest Corp
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Advantest Corp
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Thank you all for attending the fiscal year 2020 second quarter financial briefing of Advantest Corporation. Participants from Advantest Corporation are Mr. Yoshiaki Yoshida, President and CEO; Mr. Atsushi Fujita, CFO; Mr. Kimiya Sakamoto, Executive Vice President of Sales Group; and Mr. Yasuo Mihashi, Executive Vice President of Corporate Planning.
Today, Mr. Fujita will go over the financial results of fiscal year 2020 second quarter, followed by a presentation on business outlook in fiscal year 2020 by President Yoshida, and then we will take your questions. This conference call is scheduled for about an hour. Materials are available from TDNet as well as the company's website.
Before we begin the conference call, let me make a cautionary statement. This presentation contains forward-looking statements that are based on the company's current expectations, estimates and projections. Forward-looking statements are subject to known and unknown risks and uncertainties, and actual results may materially be different from those expressed or implied by such forward-looking statements. Now Mr. Fujita, the floor is yours.
Hello, everyone. This is Fujita speaking. I would now like to walk you through the financial results for fiscal year 2020 second quarter. Please refer to Page 4 of the presentation material.
This is the summary of the results. First of all, we would like to express our deep gratitude all of our business partners and other related parties and to our own employees for their efforts to support our business amidst the COVID-19 pandemic.
A quick look back at our forecast 3 months ago. Given the intensifying conflict between the United States and China and the impact of COVID-19, we expected orders for second quarter to decrease from the first quarter. However, inquiries for SoC testers were stronger than expected, and second quarter orders ultimately exceeded the first quarter.
Quarter-on-quarter, sales and profits came in higher than expected and exceeded the first quarter results. Compared to a year ago, while sales increased, profits declined because of smaller contribution of products with high gross profit margin in our sales mix as well as the impact of foreign exchange losses. I will explain orders, sales and profits in detail from the next slide.
Please turn to the next page. This is orders by segment. First, in Semiconductor and Component Test Systems business, orders increased by 5.6% from the previous quarter to JPY 44.8 billion. Orders for SoC testers were JPY 35.8 billion, an increase of JPY 10.8 billion quarter-on-quarter. Tighter U.S. regulations on a major Chinese smartphone maker are having ripple effects such as increased inventory buildup and active jostling by competitors, seeking to take advantage of the situation, and inquiries for testers for application processors, image sensors and display driver ICs increased more than we expected. Demand for high performance computing-related testers was also strong.
In memory testers, server-related demand was robust throughout the first half of calendar year 2020 but has now softened, resulting in a quarter-on-quarter decrease in orders by JPY 8.5 billion.
In the Mechatronics Systems, orders increased by 7.7% quarter-on-quarter to JPY 9.2 billion. Orders for EUV-related nanotechnology products increased.
In Services, Support and Others, orders declined by 6% quarter-on-quarter to JPY 10.2 billion. System level test orders increased, compensating for a seasonal decrease in annual maintenance contract renewals, and the orders were roughly flat quarter-on-quarter.
Please turn to the next page. Here, you can see sales by segment. Sales of Semiconductor and Component Test Systems segment totaled JPY 47.5 billion, up 12.4% quarter-on-quarter. Sales of SoC testers for smartphone applications increased. Both DRAM and nonvolatile memory tester sales increased.
Sales on Mechatronics Systems segment went up by 29.5% from the first quarter to reach JPY 11.5 billion. We have seen an increase in sales across the entire segment.
Services, Support and Others saw its sales increase by 15.4% quarter-on-quarter to JPY 18.3 billion. SoC system level test system sales were steady.
The next page shows quarterly orders and sales by region. First, on orders by region. In South Korea, indicated in pink, smartphone-related orders increased. In Taiwan, triggered by U.S.-China conflict, orders declined due to test capacity adjustments at OSATs.
Now on sales by region, as shown in the graph on the right. In South Korea, in addition to increased sales of SoC testers related to smartphones, sales of memory testers also increased against the backdrop of high orders received in the previous quarters. In the Americas, system level test sales increased.
Please turn to the next page. Page 8 shows operating income and other related items in the second quarter. Gross margin posted 53.9% as sales mix fluctuations caused a quarter-on-quarter decline. SG&A expenses, including total other income and expenses, amounted to JPY 24.2 billion. Operating income totaled JPY 17.4 billion with the operating margin at 22.6%. The operating income for the second quarter includes a gain of approximately JPY 2.5 billion from the transfer of Advantest's probe card business.
Please go to the next page. Here, you can see R&D and other expenses. R&D expenses were JPY 10.7 billion in the second quarter, representing 13.8% as a percentage of sales. Capital investments totaled JPY 3.2 billion, and depreciation and amortization cost, JPY 2.8 billion. As for the status of cash flow, free cash flow totaled JPY 7.9 billion. Cash flow from investing activities increased due to Advantest's capital participation in PDF Solutions, Inc., announced in July.
Please move to the next page. Here you can see the balance sheet as of the end of September. Total assets stood at JPY 361.3 billion. Cash and cash equivalents totaled JPY 119 billion, down JPY 7.1 billion from the end of the previous quarter. Equity attributable to owners of the parent was JPY 235.5 billion, and the ratio of equity attributable to owners of the parent was 65.2%, unchanged from the end of the previous quarter. Share repurchase completed by the end of September amounted to JPY 10.9 billion, or 2.09 million shares, about 80% of the 2.5 million share limit set. That's all for me. Thank you for your attention.
This is Yoshida speaking. I would like to share with you our business outlook for fiscal year 2020.
First, to review the operating environment, please refer to Page 12. This is our view on semiconductor tester market for calendar year 2020. 3 months ago, Advantest forecast weaker demand for SoC testers due to tighter U.S. regulations on a major Chinese smartphone maker. Subsequent developments were as expected, causing OSATs, our customers, to prioritize test capacity adjustment. However, in the aftermath of enforcement of the new regulations, in addition to inventory buildup, other major smartphone makers have actively eyed the position occupied by the affected company. This has stimulated smartphone-related test demand, pushing demand for application processor units, CMOS sensors and display driver IC testers to a higher level than expected.
As supply chain reconstruction progresses within the industry, our broad customer base and diverse SoC tester product portfolio have enabled Advantest to successfully capture additional demand from customers who are planning to increase production, covering the decline in demand for SoC testers from the affected company supply chain.
In addition, as strong demand for high-performance computing-related products continues, it seems likely that OSATs will work through their tester surplus by the end of calendar year 2020.
Reflecting these changes in the market, we have revised our calendar year 2020 outlook for the SoC testing market to approximately $2.7 billion. Although Advantest market share will decrease year-on-year due to the characteristics of our customer mix, we feel that we are well placed to respond to the anticipated scenario of market growth heading into calendar year 2021.
For memory testers, as forecast in July, memory demand for data center-related investment is likely to level off in the short term, but this will also rebound in calendar year 2021, thanks to the anticipated tester market growth drivers, such as DRAM process shrinks and 3D NAND layer count increases.
Please turn to Page 13. This is our full year forecast for 2020. Based on second quarter results, Advantest has raised our full year forecast of orders received to JPY 260 billion; and sales to JPY 275 billion; operating income to JPY 52.5 billion; income before income taxes to JPY 50.9 billion; and net income to JPY 42.5 billion. This forecast assumes exchange rates of JPY 105 to $1 and JPY 120 to EUR 1 in the second half. For full year, we assume JPY 106 to $1 and JPY 120 to EUR 1.
Gross profit margin is expected to decrease from 56.7% in the previous fiscal year to about 54%, and operating income margin is also expected to decrease year-on-year.
In addition to the impact of changes in our product mix, this is due to our commitment to ongoing R&D investment and customer support system reinforcement, which are key aspects of our preparation to meet the new test demand driven by customer needs for test reinforcement and highly sophisticated test methods for high-performing semiconductor devices.
Please take a look at Page 14, where you can see the outlook by segment for fiscal 2020, starting with the Semiconductor and Component Test Systems segment.
Let me first discuss SoC tester business outlook for this fiscal year. Although OSAT investment in new testers is currently weak due to the tightening of U.S. regulations on a major Chinese smartphone maker, competition among smartphone players is also understood to be stimulating demand for testers across a wide range of applications. OSATs are diverting surplus testers to different uses, in line with the restructuring of the industry supply chain, and we are proactively cooperating with their efforts. We estimate that test capacity adjustments will turn the corner within the year.
Based on these trends, we have raised our full year sales forecast for SoC testers to JPY 117 billion, JPY 13 billion higher than our July forecast. There are also signs of recovery in end demand for automobiles, industrial machinery and consumer products heading into 2021. In preparation for growing demand, we are closely watching the timing of renewed full-scale customer investment.
Moving on to Page 15, which shows the memory tester business outlook. In the first half of fiscal 2020, investment in data centers boomed, and demand for DRAM and 3D NAND testers was strong. As server-related memory demand has paused, tester sales are expected to be weighted towards the first half. However, with the increasing acceptance of new normal lifestyles around the world, data traffic volumes are expected to increase further. Memory demand is predicted to grow in 2021 and thereafter.
Advantest will comprehensively capture the growing demand for memory testers in response to DRAM process shrinks, the shift to LPDDR5 and DDR5, the expansion of memory demand for high-performance computers and increases in 3D NAND density.
Let me go on to Page 16, where I will discuss the outlook for Mechatronics and Services, Support and Other business. In our Mechatronics segment, Advantest forecast full year sales of JPY 38 billion centered on device interface products.
In our Services, Support and Others segment, we expect solid field service sales as well as increased sales of system level test products. Therefore, we have revised our forecast for segment sales upwards by JPY 2 billion to JPY 63 billion.
The growth of the 2 system level test businesses, one acquired from Astronics of U.S. and the other being Essai of U.S., which we acquired, will compensate for the decline in SoC tester sales resulting from U.S.-China conflicts.
Let us move on to Page 17. This is my last slide. To sum up, despite significant uncertainties, such as the COVID-19 pandemic, U.S.-China conflict and negative global economic growth, customers' motivation to invest has not trended downwards as much as was feared. In light of our second quarter results, which exceeded our plan, and our second half outlook, Advantest has revised our full year orders and sales forecasts upwards by JPY 20 billion and JPY 15 billion, respectively.
Although the impact of tighter U.S. regulations on the major Chinese smartphone maker has had a marked impact on the SoC test supply chain, supply chain restructuring is underway. Advantest's broad customer base and diverse product portfolio enable us to capture the new demand created by this structural change in the smartphone market and will compensate for the decline in SoC tester demand related to U.S.-China conflict.
The impact of tighter U.S. regulations is expected to turn the corner by the end of the year, and SoC test demand for automotive semiconductors and other devices is on a recovery trend. Business conditions are expected to improve in calendar year 2021, although the prospects of the global economy remain uncertain.
Advantest's system level test business, which has been strengthened through M&As over the past 2 years, is steadily growing and contributing to overall sales. Both SoC and memory devices will continue to evolve in calendar year 2021 and thereafter. Advantest will continue to invest in R&D and strengthen our customer support system to ensure we capture the growing demand for testers driven by semiconductor performance and reliability improvements.
Last but not least, I would like to take this opportunity to thank our customers and business partners, who supported us with our production system under the pandemic of COVID-19; and our employees, who performed their duties steadily under the environment that was unfamiliar to them. That is all. Thank you for your attention.
First question is from Mr. Wadaki of Nomura Securities.
This is Wadaki from Nomura Securities. Market environment is changing so rapidly, and it looks very different from 3 months ago. Around when or in which month did you see tidal change in the market? This is my first question.
Yes, let me answer your first question. Business environment is indeed changing so drastically. Even after the U.S.-China friction began and got escalated causing much confusions, many things have been happening. Amidst such circumstances, it was quite recent, in October or actually, in the latter half of October, that we became confident to raise our full year forecast. Market dynamics are moving so fast. As the impact of the U.S. regulation became quite significant and the conditions surrounding smartphone market became more definitive in mid-September, OSATs activities started to pick up suddenly and divert excess testers to new customers. As a result, reallocation of excess testers progressed relatively well, and we are now starting to see some additional demand by the end of the year. So the market is changing quite significantly, in our view. So in short, it was quite recent when we observed the significant changes in the market.
I have another question. Under the current circumstances, where difficulties against one company are helping other players to gain strength, I assume competitive situation and customer portfolio become quite important. I would appreciate it if you could describe the current competitive landscape for iPhone applications, Exynos, Snapdragon, other media techs as well as competition by Teradyne in memory tester business to the extent possible.
I am not able to disclose specific numbers about specific customers. But as you are all aware, I'm afraid we continue to be rather weak in the North American major smartphone manufacturer business for application process unit business, I must say. However, all the other customers you just mentioned are using our testers extensively. And on top of that, we have many customers for display driver ICs and other baseband processors. So aside from the North American major smartphone maker, current situations are positive to our business.
Just to clarify, as for the companies that I mentioned earlier, may I understand that your market share is higher. I know that you cannot comment in detail, but any color you can add?
Based on the number of customers, it is clear that we have higher market share. But even if we excel in terms of the number of customers, size of the business of the smartphone maker that I mentioned earlier is quite significant, and it has a considerable impact on annual tester market shares and drives the significant changes in the market share each year. But in terms of the customer count, we believe we are doing better.
How about the memory tester business now? Your competitor is claiming that their business is growing quite rapidly.
For the memory tester business, our peers started off with a small market share. Therefore, their business looks to be growing quite significantly, but our market share has been consistent, somewhere between high 50s and 60%. So we don't have a recognition that we are losing market share significantly.
It is certainly true that our peer entered into the back-end business for DRAM, which was traditionally our stronghold, but we don't think that is going to change the market share dynamics overall significantly.
In the memory business, in addition to the North American peer, we're also competing against a Korean player. Under the customer's dual-sourcing policy, we have maintained the market share of around 60%. And we are now competing against a different peer over the customers with dual-sourcing arrangement, but we believe that our market share is successfully maintained.
Next question is from Mr. Yoshida of CLSA.
I am Yoshida from CLSA. My first question is you have raised the full year guidance on orders from JPY 240 billion to JPY 260 billion. To break this down by segment or by product, which business contributed to the upward revision by JPY 20 billion? Also, this guidance suggests your expectations of the orders in the second half to exceed the first half result. How do you think the orders will trend in the third and fourth quarters, respectively?
Orders for SoC testers and SLT are expected to increase.
I see. So the upward revision of JPY 20 billion is attributable to SoC testers and SLT.
That is correct.
Any color you can add in terms of the split between the 2, about half and half?
Clearly, the contribution of SoC testers is bigger. So rather than SLT, it is SOC which is expected to grow significantly.
I see. And how are you projecting the order level in the third and fourth quarters in the second half, respectively?
We think the orders will trend flat from the third quarter into the fourth quarter.
I see. So this JPY 134 billion is split almost half and half between third and fourth quarter. Is that correct?
Yes. While there are a lot of activities taking place in the market at the moment, as we try to look through the fourth quarter, many uncertainties still remain, including second wave of COVID-19. But we believe orders in the fourth quarter will reach the level projected in the third quarter, so half and half between the 2 quarters.
So even after taking into account the uncertainties, you still project the orders to reach the third quarter level? And if things go well, is it possible that the fourth quarter will exceed third quarter?
Yes, that is correct.
I see. My second question is concerning SLT. Along with the upward revision on orders, you raised the sales forecast of Services, Support and Others by JPY 2 billion. I know you don't disclose the forecast on Services, Support and Others alone, but I believe orders for SLT were very high last year. So what is your expectation this year? Also, heading into the next fiscal year, I believe demand for high-performance computing is going to increase. Can we expect the order to exceed the last year's level?
This is Mihashi speaking. Your questions are about the order expectation on SLT on a year-on-year basis. Out of the orders for Services, Support and Others segment overall, SLT contribution is expected to remain almost unchanged from last year. As the overall order volume increases from last year, SLT orders are also steadily growing.
As for high-performance computing applications, we think it accounts for roughly 20% of SoC total addressable market, or TAM. And since the supply of advanced node wafers to our customer will increase, we also expect our high-performance computing-related orders to increase next year compared to this year.
So may I understand that SLT orders are increasing this year from last year and expected to grow further next year? It seems that the contribution within the overall services support and others will stay almost flat year-on-year. But just singling out the order volume of SLT alone, may I understand that the orders are growing this year than last year and expected to increase further next year?
Mr. Yoshida, my apologies, I was referring to different data points. As for orders, orders for system level test is expected to decline to some extent in fiscal year 2020 from fiscal year 2019. Please allow me to correct my earlier statement. But within the Services, Support and Others segment, sales contribution from system level test became quite high in this second quarter, which we just ended this fiscal year, compared to last year, and that is expected to be the case on a full year basis as well. So SLT's sales contribution is expected to increase from last year.
Next question is from Mr. Nakamura of Goldman Sachs.
This is Nakamura from Goldman Sachs. I would like to ask 2 questions. First, when you earlier explained about SoC business, you mentioned that demand is recovering slightly. You touched upon inventory buildup. As smartphone manufacturers other than Huawei become quite aggressive in making investment, isn't there a risk that tester demand is inflated to the level above real demand? This is my first question.
On your first question, production level was raised backed by the buildup inventory through mid-September or until September 15 when the tighter U.S. regulation came into effect, and until then, OSATs were very busy. And because of a concern that after September 15 some of our testers will become idle, we weren't that bullish on the order outlook from the first quarter through August or early September. Investment stance was very cautious. However, since September to date, demand is growing further. In our view, this is not inflated demand competing over the position enjoyed by the affected vendor. We believe additional demand is coming through supported by real demand. While the idle testers will be utilized, testers are still expected to become short further down the road. That is why we think our order volume is starting to increase. The estimate may include some business over the same opportunities, but we don't think that this increase is due to double ordering.
I see. It was very clear. So smartphone-related demand doesn't seem to be that bad at the moment. So we shouldn't be concerned about a significant drop in the fourth quarter or next fiscal year from the current high level. Is that right?
Right. And also, new device launch is scheduled toward the next fiscal year. Back in July and August, we were concerned that surplus testers could be distributed in the secondhand market, but our concern didn't materialize, fortunately. That is because our customers would like to secure production capacity in view of next generation and, therefore, didn't decide to sell testers in secondhand market, in our view.
My second question is a bit early to ask, I believe, but concerning tester market outlook for the next year 2021. We're expecting market growth toward next year, according to your explanation earlier. But in the case of SoC, for instance, how much growth are you foreseeing from $2.7 billion projected for this year? I would appreciate it if you could share your views by application. Also, you project the memory testing market to grow to $1 billion this year, but what is your outlook toward next year?
This is Sakamoto speaking. As for next year's outlook, we will put together our forecast on TAM early next year based on market situations, customers' investment schedules as well as many other factors. As you are aware, due to the U.S.-China tension and second wave of COVID-19 and associated uncertainties into the future, we have not been able to come up with our forecast accurately just yet. But we feel that demand is recovering toward next year related to 5G base stations, whose schedules were stalled due to COVID-19 and smartphones. And high-performance computing and AI application demand continues to be strong, and we are starting to see some recovery in demand for automotive applications, analog, ASICs, automotive, MCUs, industrial equipment and customer -- consumer electronics as well as the most advanced process for smartphones or rather high-performance computing applications. So it is our current view that SoC TAM will grow further from 2020.
For memory testers, from calendar year 2020 through 2022, while not very significant, we're still expecting some growth. Due to the introduction of EUV and miniaturization of DRAM, chip count will increase. Also, tests will become more sophisticated, leading to longer test time, and 3D NAND density will also increase. In addition, our customers are planning to expand their fab and reinforce their investment in memory business in China, among other factors. So the memory tester market is also expected to grow toward 2021, and we certainly would like to capture the growth opportunities.
The next questioner is Mr. Damian Thong from Macquarie Capital, Capital Securities Japan.
Damian Thong from Macquarie Capital, Capital Securities Japan. Can you hear me?
Yes.
My question has to do with the margin of the semiconductor testers of your company. In the first half of this fiscal year, it was about 27% or 28% on the average. When I derive the margin by looking at your guidance for the second half, it will be about 26%, which struck me as hitting the bottom more or less.
Earlier, you gave us comments on the expected demand for SoC testers next year. If you can steadily grow every year, do you see possibility of getting back toward the previous peak levels such as 30%, which you did reach in the past? Obviously, the development cost to your company has been increasing, but I would assume the product mix may have been improving as well. Therefore, on a net basis, do you think you'll be able to reach the historical peak of the margin?
Are you asking whether our operating margin, which was 22.6% in the second quarter and slightly over 20% in the first half, can go back to higher levels next fiscal year and thereafter?
Yes. What I want to know is the margin for semiconductor SoC testers, which is a bit higher at around 27%. Previous peaks, as far as I remember, are 35% or 36%, which was recorded in the first half of 1 year ago, if I remember correctly. If your sales recover to the level of the previous year, do you expect the margin to get back to around 35% or 36%?
If you can take a look at Page 14 of the presentation material that I explained about earlier and compare the yellow portions of the bar chart of fiscal 2019 and 2020, indicating sales of SoC testers, you can see there was a drop of about JPY 40 billion. Since this is something that everyone knows already, I think it's okay for me to say this. So our high-end SoC testers are commanding a high margin, and those testers have fallen this much in sales. All product families that are compensating for the gap, such as system level test products, are growing significantly. All memory testers are also filling the gap. Since that is how the product mix is, the resultant fall in the gross margin is a fact that we should accept.
Now if you ask us whether the operating margin can recover to extremely high levels, if not fully to what it used to be, if sales of SoC testers start to grow significantly again, we believe it will steadily go up but cannot make any commitment because exactly to what extent it will recover also depends on the mix of other products. At least what we can say is that if the sales of SoC testers get back to what they were in 2019, a fair degree of improvement in the operating margin can be expected.
Now SLT, or system level test, products are showing a bit lower margin for now, but this is because of the additional development cost burden and tremendous man hours spent in production. Obviously, the gross margin for new products, such as SLT, will be improved through our efforts to improve the operation of the company. At least, I believe that if sales of SoC testers get back to what they used to, the operating margin will improve. Although we say we are making upfront investments, they are really designed for generating new sales. The incremental sales from new product families should aim for better margins than the existing products. So you are correct in assuming that an increased share of SoC testers in sales will naturally push up the operating margin.
The next question is from Mr. Hirakawa of Merrill Lynch Japan Securities.
Hirakawa from Merrill Lynch Japan Securities. I have 2 questions. My first question is about the JPY 9 billion upside in orders for the second quarter over your forecast. Could you give us the background and breakdown, for example, were there demand for SoC with advanced process nodes or new applications for smartphones? If you can explain by referring to which applications that contributed, that will be appreciated.
Sakamoto speaking. The actual result of orders in the second quarter exceeded our forecast by slightly more than JPY 8 billion in SoC testers. Of the JPY 8 billion overshoot, automotive, industrial machinery and consumer products together accounted for half, and another 40% was from display driver ICs. So those will add up to 90%.
My second question is about the size of the 5G-related tester market. If I remember correctly, last year, it was worth USD 500 million. I may be wrong, but that is what I remember. But what is your assumption of its size this year? And how much of that will be accounted for by sales of your company? And how do you see that market to change next year? You do not have to touch upon the estimate for yourselves. I'd like you to share with us your estimate for the size of the 5G-related tester market this year and next and possibly your sales out of the total.
Sakamoto speaking. In terms of 5G-related demand, we assumed $800 million to $1 billion worth as the TAM. Conflicts between U.S. and China changed the lineup of our customers. But in light of those changes, we came up with the estimate of $1 billion approximately.
Then what has been incorporated in your estimate for 5G smartphone-related demand in the case of SoC devices, application processor units, baseband processors, RF, CMOS image sensors and display driver ICs?
Roughly speaking, we expect to capture about 40% to 50% of the market for now.
And that will be for this year or fiscal year ending March 2021? Or is 2020 more accurate?
Yes.
Then what about next year?
As has been discussed, base stations and smartphones, which had been stagnant under the pandemic of COVID-19, are expected to grow as we head into 2021. Furthermore, as was said, in the competitive market, those that can enjoy higher margins will be obviously high-end smartphones, and semiconductors designed for them will probably be supplied. If that happens, then the higher sophistication in semiconductors will require advanced process nodes to be used and testing time to be extended. From those 2 perspectives, we believe our TAM will become even larger.
I want to ask more -- I want to ask 2 more follow-up questions, if I may. You mentioned 5G smartphones. Does that mean that $1 billion you referred to does not include 5G base stations? And the other question, when you look at the market in 2021, I believe the customer mix will probably be favorable to your company, and therefore, expect your market share to grow further from 40% to 50%. If I'm wrong in having this expectation, please let me know.
What I referred to does include base stations.
When you say 40% to 50%, is it 40% to 50% out of the smartphone market? Or 40% to 50% out of the $1 billion market?
It's 40% to 50% out of the $1 billion market.
I believe the customer mix in 2021 will help you expand your market share in that year.
As Yoshida said earlier, those who supply products to smartphone manufacturers, while not every one of them, are part of our broad customer base. Moreover, besides application processor units and baseband processors, if sales related to smartphones increase, CMOS image sensors and display driver ICs, among others, become also relevant. Since our product portfolio is diverse enough to cover those items, we can hope for increased demand across the entire spectrum of our product.
The next question is from Mr. Moriyama from JPMorgan Securities. .
Moriyama from JPMorgan Securities. My first question has to do with the SoC tester market estimate you raised back to the level you originally forecasted back in January. You lowered the estimate to $2.4 billion once in July but ended up bringing it back up to $2.7 billion, which was your estimate at the beginning of this year. If you look purely at numbers, though there were issues such as U.S. regulations over a Chinese smartphone manufacturer, the estimated size of the market wound up at the level forecasted at the beginning of the year. In today's presentation, there were different offsetting factors mentioned. But to put it in an extreme manner, despite various negative factors, am I correct to understand that things got back to where they were at the beginning of this year, ultimately?
To look more closely, as the gap left after Huawei dropped off has been -- being fueled by Xiaomi, Vivo and OPPO, are you saying it was enough to offset the gap? Or though that was not enough, are you saying that other applications such as automobiles and display driver ICs have grown more than expected and turn out to be enough to bring the market back to the originally estimated level? In other words, if I can add more, would it be fair to say that even though none of the players in your customer mix managed to make inroads into APU business, the size of the market has been brought back to where it was in the end.
Sakamoto speaking. We brought back our estimate from $2.4 billion to $2.7 billion, which meant that there was an increase of $300 million. The breakdown is the following: application processor units represent $240 million; CMOS image sensors, $30 million; display driver ICs, another $30 million; in total, $300 million.
Increments from application processor units are benefiting both our growth and the growth of our peer, while we, Advantest, are the one who benefits from the increments from CMOS image sensors and display driver, ICs. CMOS image sensors and display driver ICs are growing more than expected at the beginning of the year, and the extra growth is being captured by our products.
That was very clear. Another question on the market estimate on Slide 12. In response to a question asked earlier, you responded in qualitative terms that SoC test market is expected to be mostly flat in 2021 while memory tester market is estimated to show growth in 2021 as part of the longer-term process of moderate growth toward 2022. The fiscal 2020 is expected to achieve a 10% year-on-year growth if you do the math. Aside from how your company defines the word moderate, the memory tester market has grown at 50% this year. And if there is a 50% increase in the next 2 years, that would give you a 20% increase in a single year. Now does your company see that as moderate? Generally speaking, when you say moderate, you may associate that with levels like 5% to 6%. Based on the 10% growth of the tester market this year, what kind of growth for next year do you think would seem reasonable at this moment, considering the memory tester market as well?
Mihashi of Corporate Planning speaking. Your question is hard to answer, but our estimate is probably a single-digit growth, or in other words, mid- to high single-digit growth is our estimate.
Are you talking about combined market SoC and memory testers? Or are you just referring to memory tester market?
We're talking about each of the 2 markets. So you can also apply that to the total market.
Okay. So at this moment, your estimate is a single-digit-plus growth can be seen for each market. Is my understanding correct?
Yes.
Thank you for the questions.
That concludes today's conference call. Thank you again for your attendance.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]