Tokyo Electron Ltd

TSE:8035

Earnings Call Transcript 2021-Q2

[Koichi Yatsuda, executive]

Now it's time for us to start Tokyo Electron Financial Announcement for the second quarter of fiscal year ending in March 2021.

Thank you very much for joining us today despite your busy schedule. I am Yatsuda of IR department acting as a moderator in today's session.

Now let me introduce the attendees on our side. First, Mr. Tetsuo Tsuneishi, Corporate Director, Chairman of the Board.

[Tetsuo Tsuneishi, executive]

I am Tsuneishi. Thank you very much for joining us today. I'm very happy to see so many people.

[Koichi Yatsuda, executive]

Next is Mr. Toshiki Kawai, Representative Director, President and CEO.

[Toshiki Kawai, executive]

I am Kawai. Nice to meet you.

[Koichi Yatsuda, executive]

Next, Mr. Yoshikazu Nunokawa, Corporate Director, Executive Vice President and General Manager, Global Business Platform Division Finance Unit.

[Yoshikazu Nunokawa, executive]

I'm Nunokawa. Nice to meet you.

[Koichi Yatsuda, executive]

Before starting the presentation, let me explain the flow of today's meeting. First of all, Mr. Nunokawa and Mr. Kawai will make presentations. After that, up to until 6:30, we will have the Q&A session, entertaining questions from the audience.

This financial announcement uses 2 channels on Webex, providing simultaneous interpretation between Japanese and English. As we mentioned in our e-mail, you are kindly requested to use Abson PC or mobile terminals, if you plan to ask questions. But if you do not plan to ask questions, you can use your telephones. Since the system meeting for institutional investors and analysts, we would appreciate your understanding that we receive questions only from institutional investors and analysts as usual.

We will upload the audio contents of this meeting both in Japanese and English later. It would be kind if you could also refer to them. Now Mr. Nunokawa, Corporate Director, Executive Vice President and General Manager, will present the consolidated financial summary. Mr. Nunokawa, please?

[Yoshikazu Nunokawa, executive]

Good afternoon. I'm Nunokawa of Finance unit. I would like to present the consolidated financial summary of the second quarter of this fiscal year ending in March 2021. Thank you very much for joining us today despite a very busy schedule.

This slide shows the financial summary for the first half of this year. The net sales of the first half of fiscal 2021 was JPY 668.1 billion, 31.4% increase on a year-on-year basis, which exceeds the financial estimates announced on June 18, 2020. The SPE net sales was JPY 635.4 billion, exceeding the expectations. This is because despite the travel restriction imposed due to the COVID-19 spread, the start-up activities were performed smoothly, and some customers look forward to their capital investment plans from the second half of this year.

For FPD, though its start-up activities were affected by the travel restriction in the first quarter, thanks to the improvement achieved in the second quarter, the FPD net sales in the first half of this year almost met our financial estimates. The gross profit was JPY 264.8 billion. Margin was 39.6%. The operating income was JPY 147.4 billion. The margin was 22.1%, which was the above financial estimates announced on June 18.

This slide shows the quarterly-based financial summary. The net sales of the second quarter was JPY 353.3 billion, 12.2% increase from the first quarter. The gross profit margin was 38.6%, increasing from the first quarter. This is partly because the FPD net sales showed the considerable increase in the second quarter [ due to shopping ] proportion in the total sales. It is also because of the increase of the fixed costs.

The operating margin was 20.8%, decreasing from the first quarter. This is primarily because of the increase of the R&D expenses. This is a graphic representation of the financial summary.

This shows the segment information. For SPE, the sales grew just like the case of the consolidated financial summary. The SPE sales was JPY 331.6 billion, and segment profit margin was 25.8%.

For FPD, along with the sales increase, the segment profit margin rose to 10.2%. For the composition of net sales in the second quarter, SPE sales accounted for 94%, while the FPD sales accounted for 6%.

This slide shows the SPE sales by region. The sales grew in every region. The sales in Korea and China, in particular. The second one from the bottom in pink color, and orange one in Korea increased. In China, the proportion of local customers showed increase.

This shows SPE new equipment sales by application. From the button, logic and others accounted to 32%. Logic/foundry was 18%. Nonvolatile memory was 26% and DRAM was 24%. The proportion of the sales to memory device manufacturers and to logic device manufacturers was 50 to 50. This shows field solution sales.

In the second quarter, the sales of field solution was JPY 81.7 billion. The half year sales, which is a total of the sales in the first and second quarter, amounted to JPY 165.5 billion, hitting the record high.

Next, this slide shows the balance sheet. The total assets were JPY 1.2767 trillion. Their breakdown is decrease of the accounts receivable and inventories, and increase of cash and cash equivalents.

On the right, liabilities and net assets. The net assets were JPY 898.6 billion due to the increase of the retained earnings. The equity ratio was 69.4%. This shows the inventory turnover and accounts receivable turnover. The inventory turnover was 111 days. The accounts receivable turnover was 38 days, also at a relatively low level.

My last slide shows the cash flow. The cash flow from operating activities was plus JPY 53.1 billion. The cash flow from financing activities were minus JPY 4.4 billion. And the free cash flow was JPY 40.2 billion.

This concludes my presentation about the consolidated financial summary. Thank you very much for your kind attention.

[Koichi Yatsuda, executive]

Now Mr. Kawai, our CEO, will present business environment and financial estimates. Mr. Kawai, please?

[Toshiki Kawai, executive]

Once again, I am Kawai. Thank you very much for joining us today. Now I'd like to talk about business environment and financial estimates. First of all, let me start with the business environment. For the WFE market this year, we have more positive outlook from 3 months ago, exceeding more than 10% market growth on a year-on-year basis. In calendar 2020, the WFE market is expected to hit the record high. For the FPD fabrication equipment, TFT Array Process market, there's no change in the outlook, and we expect 15% growth on a year-on-year basis.

Next, this slide shows the WFE market outlook by application. For logic and foundry market, we have more positive outlook than 3 months ago, expecting high-level demand exceeding the previous year. For DRAM and nonvolatile memory, there is no change in our outlook. The WFE investment of the DRAM manufacturer is expected to remain unchanged from the previous year. The WFE investment of nonvolatile memory manufacturer is expected to increase by about 50% from the previous year.

This shows business growth progress in the first half of fiscal year 2021. In the first half of this fiscal year, there was some concerns about the COVID-19 impacts on our business. And in such circumstances, however, both net sales and operating margin exceeded our financial estimates. The net sales increased by 31.4%, and the operating income increased by 43.9% on the year-on-year basis.

Despite the travel restriction, we successfully completed the start-up activities through the collaboration between the overseas subsidiaries and the factories in Japan. SPE sales was higher than our estimates. This is because the startup activities were performed smoothly, and some customers put forward their capital investment plans. The FPD business turned back to a recovery track in the second quarter as the setup activities were steadily proceeded.

For the field solution business, though the logistics were restricted due to the COVID-19 impact, we achieved the sales growth. This is attributed to the provision of timely support to maintain high utilization rate of our customers have by optimizing inventories at our local subsidiaries. In addition, our new production building started their operations in July at Tohoku factory and in August Yamanashi factory. We are now ready to address an increasing demand expected in the future.

Next, I'd like to show the financial estimates. We have revised the full year financial estimates upward by reflecting steady progress in the first half of the year and customers' additional capital investments. Specifically, the full year net sales is expected to be JPY 1.300 trillion being increased by JPY 20 billion. The operating income is expected to be JPY 281 billion being increased by JPY 6 billion.

This slide shows the SPE new equipment sales for August by application. The net sales in the first half of fiscal 2021 was JPY 474.4 billion, exceeding the estimates announced on June 18 by JPY 44.4 billion.

The full year net sales is expected to be JPY 910 billion, which is JPY 30 billion more than the initial forecast in comparison with fiscal 2020 sales of JPY 765 billion.

Accordingly, the full year sales of new equipment is expected to increase by about 20% from the previous fiscal year. The composition with the sales by application has been slightly revised to reflect the market environment.

Next, I'd like to talk about the R&D expenses and CapEx plan. As I said earlier, in the first half of this fiscal year, new production building started the operation in Tohoku factory and Yamanashi factory. In November 2020, we plan to move our supply office to a new place, which will function as our hub for software development.

In Miyagi factory manufacturing etching systems, the construction of Miyagi Technology Innovation Center is planned to be completed in September 2021, which is designed to promote the collaboration with our customers and suppliers. As you can see, we are planning a record high R&D expenses and CapEx in this fiscal year in order to ensure to realize steady growth in the future.

So this shows dividend forecast, along with upward revision of both financial estimates in the first half of this year and full year financial estimates. We are planning to pay full year dividend per share of JPY 675.

This concludes my presentation. Thank you very much for your kind attention.

[Koichi Yatsuda, executive]

Now we will have a question-and-answer session until 6:30. We will receive the questions both in Japanese and in English. But our attendees on the Japanese channel, please allow us to restrict questions asked by -- asked verbally to only in Japanese. If you ask questions in Japanese, please hit raise hand button on the Webex. For details, you are kindly requested to refer to the instructions attached to the e-mail.

I will announce the name of the person who asks the question one by one. Please check the chatbox on Webex as our secretariat will inform you in advance that you will be the next person to ask a question. If you have question in English, please use the chatbox to send the question in text, together with your name and affiliation to the Secretariat. We cannot answer a question if no name or affiliation is given.

On the Japanese channel, I will read out the question, translated into Japanese and our attendees will answer it in Japanese. While on the English channel, it will be simultaneously translated into English on a real-time basis.

For the questions verbally asking in Japanese, please allow us to limit one question with one follow-up question. For the English question sent in text. I'm very sorry, but we'll receive one question without a follow-up question. If we have some extra time towards the end of meeting, we will receive additional question.

Now let's move on to the first question. The first question is from Mr. Wadaki from Nomura Securities.

[Tetsuya Wadaki, analyst]

Can you hear me okay?

[Toshiki Kawai, executive]

Yes.

[Tetsuya Wadaki, analyst]

I have one question. So to our next fiscal year there are some concern that is if trade friction for China and U.S. and also Europe. Do you have -- do you have any comment on that, please?

[Toshiki Kawai, executive]

I think we have the good business relationship. But as you know, there are quite a few geopolitical situation we are facing. So under these circumstances, I am not able to give you any comments, specific comments. However, when you look at the market, as you know, ICT will be introduced and implemented very strongly. I'm sure there are some investments in the future. Therefore, as far as our company is concerned, we are going to lead the market in terms of our technology innovation. That's important for us. So I'd like to focus our efforts on further technology innovation.

[Tetsuya Wadaki, analyst]

I have one follow-up question. So by application, logic -- I have some concern for logic. How do you see the condition of logic next year?

[Toshiki Kawai, executive]

Well, when you look at WFE market, I want to say one thing today. So June this year, I said next year will be a big year. That's what I said back in June this year. Next year will be the big year. At present -- so the WFE market this year, we are going to see the record high in the WFE market. But still, we have COVID-19 concern, the presidential election in the United States, and also geopolitical concerns still remain. There are some issues. But next year, WFE, even if you're considering those factors, we -- I think next year, WFE market will exceed this year. Even if this year, we are going to hit the record high and year 2022 will be higher than 2021. So next year and year after, [ we will see the decrease ] in a row. That's how we view the market for next year and the year after, in that sense, but we need to focus to prepare for the big years. So DRAM supply-demand balance is one thing and 10-nanometer, 7-nanometer and 5-nanometer MPU and GPU release and 5G mobile and data center investments. So those 3 factors, as what Mr. Wadaki knows, DRAM supply-demand balance actually, maybe in first quarter next year, the demand will increase little by little because of the tight balance. For logic and foundry, so high-speed CPU, the 10-nanometer, 7-nanometer and 5-nanometer, the demands will continuously increase and that's how we view the market.

[Koichi Yatsuda, executive]

So next question. Mr. Yoshida, CLSA Securities.

[Yu Yoshida, analyst]

I am Yoshida. My first question, actually, is the kind of follow-up question of Mr. Wadaki's question. So this year, next year and year after, when you look at WFE market, you said WFE market is expected to grow continuously. Next year, if WFE market grows, what is the level of the market growth for next year? As by application, how do you view the application? Are there any specific application, which drives the WFE market growth, which application is expected to drive the market growth?

[Toshiki Kawai, executive]

Actually -- so although I said big years, we must look at the market conditions very closely and carefully. Because the COVID-19 spread is one of the uncertainty. And we don't -- we also have the presidential election in the United States and geopolitical issue, those things might have some impact on the macroeconomy. So we need to be careful about the timing of those different factors.

So on the quarterly basis, there are some shift in our outlook. So for quantitatively, it's so difficult for us to give you some comments. However, for our midterm management plan, 2024 -- year 2024, $65 billion to $70 billion. It's the market size we expect. And we think the market grows steadily toward that size in year 2024.

So of course, the midterm management plan, just look at the full years to come. But I think the direction of market growth is precisely correct. By application, you asked about. As for the specific application, which drives the WFE market, essentially, 5G infrastructure requires logic/foundry business and logic/foundry will start the capital investment and also for servers, DRAM, 3D NAND and there are some other applications. So memory, maybe in the second half of the first quarter, memory is expected to recover from the second half of the first quarter of next year.

[Yu Yoshida, analyst]

I have one follow-up question. SPE new net sales, so you said there are some sales pulled forward, which region and for memory, for example, DRAM in the second half of this year, when you look at the composition, I think there are some adjustment for DRAM in the second half of this year. So when do you see the recovery of the DRAM? So you said the supply-demand balance will be changing from the first quarter. When do you think DRAM investment will start recovering?

[Toshiki Kawai, executive]

So as for the first half of this year, there are some increase, there are 2 reasons. The first reason is in June, when I announced our financial estimate in June, compared with that time, so we are very happy to see logistics movement was rather smooth in the supply chain, including inside and outside Japan. We can see smooth operation in the supply chain than expected.

In China and other overseas markets. 3D NAND, so things are going very well. That's one of the reasons. And also, 5G infrastructure, require certain developments. And there are some additional demands for that. So these are the factors to increase -- for the increase.

[Yu Yoshida, analyst]

For memory, DRAM recovery timing, how do you view the timing of recovery of DRAM?

[Toshiki Kawai, executive]

The timing of recovery of DRAM, in calendar year the second half of the first quarter and little by little, from the beginning of next year, the DRAM is expected to recover little by little. That's how we view the market.

[Koichi Yatsuda, executive]

Next question is from Mr. Yamamoto from Mizuho Securities.

[Yoshitsugu Yamamoto, analyst]

I am Yamamoto from Mizuho. Can you hear me?

[Toshiki Kawai, executive]

Yes, I can hear you very well.

[Yoshitsugu Yamamoto, analyst]

I have one question. For the gross profit margin improvement, for this fiscal year, so we had JPY 1.300 trillion, a 40.2% is the plan for the gross profit margin. So JPY 1.5 trillion. Your target is gross profit margin of 43%. That is your target for the midterm management plan. So now you have some net sales getting closer to your target of midterm management plan. But why can you see the rather low level of depressed profit margin? Do you increase demand forward? There are some other reasons that gross profit margin does not increase so much compared with the increase of the net sales. And what triggers the increase of gross profit margin in other ways?

[Toshiki Kawai, executive]

Thank you very much for your question. For me, we have our target WFE market. So there are 3 different models, financial models. I think you mentioned to our financial models. So when you look at midterm, long-term perspective, JPY 2 trillion, 30% so JPY 2 trillion and 30% operating margin is our target. So that is our main scenario of JPY 2 trillion sales and 30% of operating profit.

When you look at the reality, as I said earlier, we can see very strong inquiries from the market. So the production and new technology development, and we are investing to the future growth to achieve the midterm management plan. So we are now increasing R&D expenses to achieve the target. We say specifically in the midterm management plan. That affects the operating margin and gross profit margin. But when you look at midterm, long-term perspective, rather than on the quarterly based, we are focusing more on the midterm, long-term perspective. That's why current gross profit margin looks a bit lower than the plan, as you pointed out, but we are steadily proceeding with our plan toward midterm management target. So R&D expenses are expected to increase. Furthermore, I think that's the Tokyo Electron's culture.

[Yoshitsugu Yamamoto, analyst]

On the other hand, top line, could be increased furthermore, is it that what you see in the market? What is your impression for the top line?

[Toshiki Kawai, executive]

In principle, what we think about in the midterm management plan, based on the financial model, we do have the fixed costs. And when you look at the business expansion, we need to utilize digital transformation to improve efficiency. At the same time, we need to be very active in the R&D investment. So top line, improvement by improving top line, we try to reduce the fixed cost per sales, by which we can improve operating margin.

So top line needs to be increased. But when you look at the market and our R&D activities, we are rather confident to achieve some improvement.

[Koichi Yatsuda, executive]

Next question is from Mr. Moriyama from JPMorgan Securities, Japan.

[Hisashi Moriyama, analyst]

I'm Moriyama. For 2 years to come, you said, we're going to see 2 consecutive big years. That's what you said, very strong comment. But in order for you to pursue further in growth, so when you look at the current situation, how do you improve your market share? Do you have any perspective in terms of the growth of your market share? Could you share your idea with us, please?

[Toshiki Kawai, executive]

Thank you very much. We haven't changed our plan at all. So we are striving very hard to improve our market share etching system, film deposition, critical layers, ALD coverage or conformity should be improved. And also cleaning and lithography related facilities, the result of related process tools. So the centering on the etching and patterning process, we are going to improve our market share, and we haven't changed our plan. So if that is the case, so etching, ALD cleaning so these are 3 cores to improve or to drive the market share increase. That's what you said. But when it comes to etching. So 3D NAND and layer stacking, now from 96 layers to 128 layers, maybe next year, 144 layers next year.

[Hisashi Moriyama, analyst]

I think, so from your viewpoint, 3D NAND technology, how can I put it. I'm sure the technology is getting more and more challenging, but still, in order for you to further improve your market share, are you -- do you have any idea for the trend of the 3D NAND technology shift? And how do you view that? And how do you plan to increase your market share for that? Could you just -- this is my follow-up question.

[Toshiki Kawai, executive]

Okay. So HARC process and HARC technology is really critical for us. In other words, the etching. So now we have the multiple layers and etching speed, etch speed, or etch rates should be improved. And also, the profile should be precisely controlled speed, I mean, etch rate and high aspect ratio. And also the profile control. So these 3 are really critical for us. So that's where we can have some opportunity to improve our market share.

[Unknown Executive]

The one thing I want to add to your question. So what is -- you're asking about current? So currently, 128 layers, mass production has started, and we are going to improve our share in the next generation from 128 layers after 128 layers.

[Hisashi Moriyama, analyst]

So when you say next, how many layers after 128?

[Toshiki Kawai, executive]

It depends actually to which customer has different road map. So there is no good alignment. Some customers at 14x, or 16X or 19x. So it depends on customer for the number of layers for next-generation after 128 layers.

[Koichi Yatsuda, executive]

Next question is from Mr. Nakamura of Goldman Sachs Japan.

[Shuhei Nakamura, analyst]

I am Nakamura from Goldman Sachs Japan. I have a question on China-U.S. trade friction. On Slide 8, you presented the sales by region for China. In the first quarter, second quarter, you can see some increase in Chinese sales. Does that include the sales pulling forward from the second half of the year? And American manufacturers are not able to export their product so much because of the trade restriction. And does that have any positive impact on your business performance? Or year 2021, you said the WFE market continuously grow and the China local customers, how do you view the capital investment by the China local manufacturers?

[Toshiki Kawai, executive]

The U.S.-China trade friction is very critical at present. And for many of our customers, this issue is really critical. We are in the critical situation. I'm very sorry that we are not able to make any specific comments on that friction -- trade friction between the 2 nations. Last year, 20% of our business, comes from China last year. Maybe in the future, we maintain the same level or we may see some increase in the proportion of our China business. However, as you asked in your question, there are several unknown factors or uncertainties. And as I said to Mr. Wadaki, so when you look at the situation, the ICT is promoted furthermore. And we are now pursuing the leading edge. There must be some investment, and we must be ready for the future investment. For that purpose, we need to maintain our ability to promote technology innovation all the time, which is most critical for us. In that sense, we are investing a lot to the R&D, and we are accelerating our R&D investment. I'm very sorry, but I cannot give you some direct answer to your question. But this is how I can answer to your question.

[Shuhei Nakamura, analyst]

One follow-up question. So the China local memory manufacturers, how do you view their investment for the future? Is it also difficult for you to answer?

[Toshiki Kawai, executive]

Sorry, yes, it is difficult for me to answer to that question. Investment, we expect -- we hope, there are some investment.

[Koichi Yatsuda, executive]

Next question is from Mr. Hirakawa of Merrill Lynch Japan Securities.

[Mikio Hirakawa, analyst]

I'm Hirakawa from Merrill Lynch. My question is similar to the previous question, I'm afraid to say. This year, SPE, you have a plan for SPE business and the leading foundry in China. I think your sales to the leading China foundry is increases. And I think for the American manufacturers that have negative impact. So the fiscal year ending in March 2021, you may see some negative impact for that customer. But actually, you said you have revised your financial estimates upward. So how do you view the increase or decrease of the sales to the China customers?

[Toshiki Kawai, executive]

So that's about the capital investment plan for each customer. And when I talk about product mix, that may -- can you say have you imagine the investment plan of each customer. I'm sorry, I cannot answer to that question.

[Mikio Hirakawa, analyst]

Okay. Then I have different questions as a follow-up question. So this time, R&D, you are accelerating, enhancing your R&D investment and software investment. Development is to be done in this Sapporo, Iwate, Miyagi and Yamanashi, but Sappo is something new. Now you have the software development center. Are there any geographical reason that you selected Sapporo for software development?

[Toshiki Kawai, executive]

Okay. Thank you for your question. Actually, we do have -- we did have Sapporo software development office. This is nothing new for us. So including the employment or recruitment, we know the situation in Sapporo and in Hokkaido, there are talented software engineers and we know that. So in the future, when we use digital transformation, more and more 5-nanometer, 3-nanometer and 2-nanometer, the device shrink was perceived. And as you know, for NAND -- 3D NAND, more than 200 layers need to be developed. So criticality goes up further and further.

So our process tool performance need to be improved and sensing technology should be utilized so that we can change the tacit knowledge to the explicit knowledge. And we do have domain knowledge. That is our strength and data [ guidance ] analysis. We do have the ability to analyze the data as well. So customer will ask us to come up with much higher technology level, and we need to meet the customers' expectation in terms of the technology innovation.

We want to improve the environment of the Sapporo office so that we can brush up our ability to develop software. And from the viewpoint of SDGs, especially energy consumption, energy preservation. So customers are, of course, expected to produce a device with low power consumption.

So in the future, the yield process tool should be improved. And also uptime ratio should be improved which become more -- very important in the future. So we do have the domain knowledge and we want to add digitalization or ability of science, ability of analysis, then we can be in the industry and also we can satisfy our customers' needs.

[Koichi Yatsuda, executive]

Next question is from Sugiura of Daiwa Securities.

[Toru Sugiura, analyst]

I'm Sugiura from Daiwa Securities. So I have a question for competitors. So in China -- in Japan, the cleaning manufacturers, very active in increasing their market share. From your viewpoint, how do you view the competition? There are some risks of more severe competition, not only for cleaning but also the patterning process, would you see some changes in terms of the competitive market fluctuation?

[Toshiki Kawai, executive]

All the time, for all applications, we are facing very severe competitions. So not only our company, but also our competitors, working very hard while competing each other. And that competition is good for our industry and good for our customers, best for our customers. So every competitor is a wonderful company. So Tokyo Electron want to become only 1 or #1 manufacturer in the industry, and we want to provide the technology customer will need in the future proactively so that we can provide our product to the high value-added area by leveraging our knowledge. This is how we try to satisfy our customer.

For competitions, I'm sure competition will continue all the time in the future. And what is important here, so including commodity devices, we need to reduce the power consumption. We need to increase the speed, storage and reliability. The new device, new package are to be pursued as well. So technology innovation should be promoted continuously and technology innovation. As long as technology innovation continues, the market is expected to grow continuously. So you mentioned 2 specific manufacturer. And we want to compete with each other in the future as well.

[Toru Sugiura, analyst]

I have one follow-up question. As someone said earlier, so 2 to 3 years to come, how would you improve your market share? And which area has high probability to increase your market share?

In the past, you mentioned to ALE metal film deposition, thus chemical etch for [ gate or around ]. Are there any area that you may be able to increase your market share? If you have some specific application or area, could you share that with us, please?

[Toshiki Kawai, executive]

As those area that you mentioned right now, we are steadily now proceed. Visibility is getting higher. In our midterm management plan, on the quarterly basis, we review our progress against midterm management plan. And we look at the top line to check the condition. And when top line increases, we can proceed with our share improvement plan, along with increase in the market, include etching, film deposition, gas chemical etching and cleaning critical processes as well as lithography. In those areas, visibility is increasing or improving.

[Koichi Yatsuda, executive]

Are there any other questions from the audience? We have 7 minutes to go. Maybe you can ask second question. If you have any. Could you put the firsthand button? Or could you give us your question through chatbox. We have a question from Mr. Yoshida from CLSA Securities Japan.

[Yu Yoshida, analyst]

I'm Yoshida. I have one clarification question. So SPE and FPD, in the second half of this year, when I look at your sales plan, sales plan for each. So third quarter and fourth quarter, what's the direction do you have?

Usually, the fourth quarter sales is higher than the third quarter sales. But how do you review the third quarter and fourth quarter sales for FPD and SPE?

[Toshiki Kawai, executive]

So may I answer to your question on behalf of IR. Our sales recognition is based on the CST, completion setup and testing. And also business unit make commitment on the 6-month basis. So every 6 months, there are some trend of the sales. There is a tendency that sales increases from the third quarter to fourth quarter.

[Koichi Yatsuda, executive]

There seems to be no more questions. Thank you very much for joining us. This concludes today's financial announcement. Thank you very much for your participation despite your very tight schedule. Thank you very much. Thank you very much.