Tokyo Electron Ltd

TSE:8035

Earnings Call Transcript 2023-Q4

[Koichi Yatsuda, Vice President of Investor Relations]

Now it's time for us to start Tokyo Electron financial announcement for the fiscal year ended on March 31, 2023. Thank you very much for joining us today despite your busy schedule. I am Yatsuda of IR department acting as a moderator for today's session. I'd now like to introduce today's attendees. Mr. Toshiki Kawai, Representative Director, President & Chief Executive Officer;

[Toshiki Kawai]

I am Kawai, Nice to meet everybody.

[Koichi Yatsuda, Vice President of Investor Relations]

Next, Mr. Hiroshi Kawamoto, Vice President and General Manager Global Business Platform Division Finance Unit.

[Hiroshi Kawamoto, Vice President & General Manager, Finance Unit]

I am Kawamoto.

[Koichi Yatsuda, Vice President of Investor Relations]

Prior to the presentation, let me explain the flow of today's conference. First of all, Mr. Kawamoto and Mr. Kawai will make presentation. After that, until 6:30 Japan Time, we'll have a question-and-answer session where we take questions from the audience. This meeting uses two channels on Webex for simultaneous interpretation between Japanese and English. As we explained in our e-mail, you are kindly requested to use apps on PCs or mobile terminals, if you plan to ask questions. But if you are not going to ask questions, you can use telephone only.

In addition, since this conference is intended for the institutional investors and analysts, we appreciate your understanding that we received questions only from institutional investors and analysts. We will post the audio contents of this conference in Japanese and English on our website within a couple of days. It will be highly appreciated if you could also visit our website.

Now Mr. Kawamoto, Vice President and General Manager, will present the consolidated financial summary. Mr. Kawamoto, please.

[Hiroshi Kawamoto, Vice President & General Manager, Finance Unit]

Good afternoon. I am Kawamoto. I'd like to present the consolidated financial summary of fiscal ended in March 2023. First of all, I will present the financial highlights for fiscal year ended in March 2023 on this slide. As you can see from the left, net sales, operating income and net income are presented in chronological order.

The full net sales on the left. We generated a record net sales of JPY2.209.0 billion, delivering 10.2% year-on-year increase. Though memory spending decelerated in the second half of the year, logic/foundry maintained their investment in the broad range of technology nodes from leading edge to mature nodes. We delivered operating income of JPY617.7 billion and net income of JPY471.5 billion, both of which also hit record high.

ROE was 32.3% as you can see on the right. Being kept at 30% or more, which is the goal in our midterm management plan. This shows financial summary. For net sales, as I reported earlier, we landed fiscal 2023 at JPY2.209.0 billion 10.2% year-on-year increase surpassing financial estimate we announced on February 9 shown on the far right. By segment, SPE net sales were JPY2.155.2 billion, 10.9% year-on-year increase, while FPD net sales were JPY53.6 billion, 10.3% down from the previous fiscal year.

Gross profit margin in the middle was 44.6%, 0.9 percentage point decline from the previous fiscal year due to soaring material cost and inflation impacts. Operating margin was 28.0%, declined by 1.9 percentage points from the previous fiscal year, partly because of our rising R&D expenses for future growth.

On the bottom, earnings per share were JPY1007. Next, this slide shows quarterly based financial summary. In the fourth quarter, we generated net sales of JPY558.2 billion, 19.3% increase from the third quarter. By segment, SPE net sales were JPY543.3 billion and FPD net sales were JPY14.9 billion. We delivered gross profit of JPY251.6 billion and operating income was JPY152.7 billion.

Gross profit margin was 45.1% and operating margin by 27.4%, increased by 1.5 percentage point and 2.9 percentage point, respectively from the third quarter. These results are attributed to decline of manufacturing cost to sales ratio and SG&A sales ratio due to the net sales growth from the third quarter. Meanwhile, on the bottom, capital expenditures increased from the third quarter because internal evaluation tools and construction in progress were accounted for.

Next, this slide shows the segment information. For SPE, we delivered net sales of JPY2.155.2 billion, segment income of JPY696.3 billion and segment profit margin of 32.3%. For FPD, we generated net sales JPY53.6 billion and segment income of JPY1 billion. FPD segment profit margin declined by 4.5 percentage points to 2.0% as variation loss was accounted for along with the suspension of the inkjet printing system development project. For competition of net sales SPE sales accounted for 98%, while FPD sales accounted for 2% as you can see on the right hand side.

This shows SPE new equipment sales by product. SPE new equipment sales in fiscal 2023 amounted to JPY1.692.7 billion 12.9% increase on a year-on-year basis, while the sales composition by product suddenly changed due to the change in customer's investment mix. Now this shows its PE new equipment sales by application. As you can see here, the pink portion, the sales to logic/foundry showed a significant increase because of their active investment. On the other hand, the proportion of the sales to memory manufacturer decreased as they adjusted investment while rebalancing their inventories.

This slide shows field solutions sales. In fiscal 2023, the field solution sales amounted to JPY474.0 billion, increasing by 4.0% on year-on-year basis, driven by growing installed base, our parts and service sales maintained a strong growth following the previous fiscal year.

This shows balance sheet. So total asset as of the end of fiscal 2023 were JPY2.311.5 billion, cash and cash equivalents were JPY473.1 billion, increased by JPY85.6 billion from the previous quarter. Accounts receivable and contract assets where JPY464.8 billion, inventories were JPY652.2 billion. Lower left, investment and other assets were JPY282.9 billion increased by JPY58.4 billion from the third quarter, partly because of growing value of the stocks we own. Liability shown on the right was JPY712.0 billion, increased by JPY53.7 billion, due to the increase of accrued employees' bonus, income tax payable, et cetera. Net assets were JPY1.599.5 billion. The equity ratio was 68.7% remaining high level.

My last slide shows the cash flow. In the fourth quarter, cash flow from operating activity was JPY109.6 billion, mainly due to profit posted along with the increase of net sales. The cash flow from investing activities was minus JPY23.1 billion due to the expenditure for capital. As a result, the free cash flow was JPY86.5 billion.

This concludes my presentation about the consolidated financial summary of fiscal year ending March 2023.

[Koichi Yatsuda, Vice President of Investor Relations]

Next, Mr. Kawai will present business environment and financial estimates. Mr. Kawai, please.

[Toshiki Kawai]

Good afternoon, everybody. I am Kawai. Now let me talk about the business environment and financial estimates. First of all, let me start with full year business highlights for fiscal year ending in March 2023. As Mr. Kawamoto reported before in fiscal 2023, we renewed record high, both in net sales and income. The circumstances in order to prepare for the future growth, we made record high R&D investment of JPY191.1 billion. For our business performance by leveraging our high value added strategy products, we successfully won PORs and customer adaptions making steady progress toward the achievement of midterm management plan that we established last June.

In the hard hedging, which is the strategic process with special focus placed, we won the development PORs from multiple customers. Also for the firm deposition tools, we won the development POR with new materials for NAND. In addition, for the single wafer cleaning tools, processes for custom adoption are steadily expanding. We established a new business unit of DSS or diverse systems and solutions last month to intensify our activities to address MAGIC market, which has high potential for further growth. MAGIC stands for, Metaverse, Autonomous Mobility, Green Energy, IoT & information and Communication. This started, in April this year.

As we celebrate our 60th anniversary this year, we have established a vision, a company filled with dreams and vitality that contribute to technological innovation in semiconductors. As it becomes the common global goal to drive both digitalization and decarbonization for global environmental conservation, semiconductor technology innovation plays very important role. By leveraging our professional expertise that we accumulated as a leading company in the industry and continuously creating high value added advanced equipment and technological services Tokyo Electron aims to increase mid and long term profits and enhance our corporate value in a sustained manner.

As a milestone, we set the financial goals and announced our net zero initiative as shown here on this slide. While semiconductor is further gained importance as an essential contributor to developed society full of dreams, Tokyo Electron will promote our business activities based on TEL’s shared value, our guiding principles to contribute to technology innovation of semiconductor.

Next, I will talk about current business environment. For the semiconductor market, according to the general view of various market research companies, around minus 10% growth is expected in 2023 compared with 2022. But the semiconductor market is expected to recover in 2024 and the market size in 2024 is expected to exceed that in 2022. As for the WFE market this year, because the policy interest rate keeps spicing along with the current trend of inflation and because memory manufacturers are rebalancing their inventories, we have revised our outlook slightly downward from that in February 2023 and now expect around $70 billion to $75 billion in market size.

However, our perspective that WFE market will strongly grow in 2024 and beyond remains unchanged. Various applications and technologies to drive the strong growth are shown here in this slide. Growing investment to data centers, recovery of smartphone demand, PC replacement demand triggered by new OS introduction, spread of EV and autonomous driving, and adoption of generative AI such as ChatGPT, which is what they covered these days. Driven by these trends and factors, we expect the WFE market keeps growing significantly toward the future. And accordingly, semiconductor technology innovation will be further promoted.

For logic to achieve low power consumption in the two nanometer node and address high speed GPUs, [indiscernible] GAA nanosheet and backside PD and structure will play central role in the technology inflection. For DRAM, in order to address DDR5, high speed working memory, chip makers will introduce EUV lithographies and High-k metal gate. For NAND to realize larger storage initiative to deliver high stacking structure of 300 layers finally will start. In addition, the NAND manufacturing processes is expected to adopt multi tiers stacking and bonding technology to bond memory sales and peripheral circuit fabricated in different levers.

Our company offers the broad product portfolio coping with such future technology inflection, we believe the area indicated in both phase in particular will provide us with great business opportunities. We aim to expand the share in those high value added areas.

Next, I will present the financial estimates for fiscal year ending in March 2024. As I described earlier, due to such factors as concern for deceleration of macro economy, chipmakers currently differ and trim their capital investment. I mean, those business circumstances in this fiscal year while curtailing fixed costs, we plan to make record high R&D investment of JPY200 billion to fund future growth. Taking account of these factors in fiscal 2024, on the full year basis, we expect net sales of JPY1.700 billion, gross profit of JPY741 billion, operating income of JPY393 billion and net income of JPY300 billion.

The semiconductor technology innovation is expected to play an important role toward the future driven by migration to data driven society through the spread of ICT an initiative to build the decarbonation society due to the importance of high speed, high capacity, high reliability and low power consumption, the WFE market is expected to grow further more. We expect the market will recover significantly in fiscal 2025.

This slide shows SPE new equipment sales forecasting FY fiscal 2024. As shown here, SPE new equipment sale was expected to be JPY573 billion in the first half and JPY690 billion in the second half of fiscal 2024, we expect that net sales will bottom out in the first half of fiscal 2024 and start recovering in the second half and beyond.

This shows our plan for R&D expenses and CapEx. In fiscal 20 24, we plan to spend R&D expenses of JPY200 billion and capital investment of JPY124 billion, both of which are expected to hit a record high. And we project depreciation expenses were JPY57 billion. The capital investments are expected to increase in this fiscal year. As shown here, R&D buildings and distribution center in Yamanashi, Iwate, [indiscernible] are planned to be prepared for further business expansion. We will accelerate proactive R&D and capital investment to corporate's growing market and meet ever diversifying needs for leading edge technologies.

Next, this slide shows the dividend forecast. The fiscal 2023, full year dividend per share is JPY1,711 which includes the 60th anniversary commemorative dividend of JPY200. Effective on April 01, 2023, Tokyo Electron split the shares of common stock in proportion of one share into three shares. As for dividend in fiscal year ending in March 2024, since value after stock split applies, we plan to pay a full year dividend per share of JPY320. Just for information, the full year dividend per share, which does not take account for stock separate is JPY960.

In the Board of Directors meeting held today, it was decided that well will purchase shares up to JPY120 billion. In accordance with our capital policy, we made this decision by comprehensively considering investment for future growth to pursue a long term profit increase in current cash position. We will continuously make an agile and flexible balance sheet management.

Here, you can see the total return amount fluctuation. When the share repurchase is completed as planned, total return amount in this fiscal year is expected to be JPY270.3 billion, including the dividend payment based on the payout ratio of 50%, we will keep working to enhance shareholders value.

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

[Koichi Yatsuda, Vice President of Investor Relations]

Now, well we'll have question-and-answer session until 6:30 Japan time. You can ask questions either in Japanese or English, but as our speakers are available on the Japanese channel, please allow us to take audio questions only in Japanese. If you ask a question in Japanese, please press the raise button -- raise hand button on the Webex. For details, please refer to the instructions attached to the invitation email. I will call the name of the person to answer question one by one. Our secretariat will contact you in advance. So please check the Webex chat box. For questions in English, please use the Webex chat box and enter your affiliation and name and your question in text and send it to our secretariat. We will refrain from answering questions if your name and applications are not given. On the Japanese channel, we will translate your English question and I will read it out in Japanese and speakers will answer in Japanese. On the English channel, the question-and-answer will be simultaneously interpreted into English on the real time basis. We'd like to take as many questions as possible, therefore, we we'll take one question per person. If time allows, we we'll take additional questions later on.

So first question is from Mr. Shibano of Citigroup Global Market Japan. Mr. Shibano, please.

[Masahiro Shibano, Citigroup Global Markets Japan]

I am Shibano from Citigroup Global Markets. I hope you can hear me.

[Koichi Yatsuda, Vice President of Investor Relations]

Yes, I can hear you.

[Masahiro Shibano, Citigroup Global Markets Japan]

Thank you very much. So as for new fiscal year, SPE business environment. I'd like to ask a question about the business environment for SPE. I have a question on Page 31, you can see the SPE sales by region. And when you look at China in fiscal 2023, JPY496.7 billion and no change is from the fiscal 2022. Towards 20 24, the new fiscal year, what sort of plan do you have for the Chinese market? So as for the background, the Chinese local customers, there are some customers who are working on leading edge devices or matured device nodes. So there might be some expansion in the demands. So as far as your company's concerns, could you share the current status of your company in China market, please?

[Toshiki Kawai]

So let me answer to your question. I am Kawai. The proposition in China market for fiscal 2022 was about 26%, in the market side it was about 30%, in fiscal 2023, to about 24%, so slightly declined in terms of our proportion in Chinese market. For this fiscal year, probably, maybe 30% a little bit more than 30% will be achievable for fiscal 2024 according to our expectations. So, because of the geopolitical environment and market conditions, so legacy matured nodes of semiconductor is expected to grow and quite a few customers are there in China. So that market is expected to grow.

Another factor is leading edge technology nodes, especially in the first half of this fiscal year, there is some suppressed investment and WFE market gets smaller. But legacy nodes investment is more active. Therefore, about 30% is a kind of level of our position in China for this fiscal year.

[Koichi Yatsuda, Vice President of Investor Relations]

Thank you very much, and Kawai answered to your question. Mr. Shibano, thank you very much for your question. Next question, is from Mr. Hirakawa of BofA. Mr. Hirakawa, please.

[Mikio Hirakawa, BofA Securities Japan]

I am Hirakawa from BofA Securities. I have a related question. So fiscal 2024, the SPE sales, you said in the second half of the fiscal year logic/foundry is expect it to grow, that's your plan. And when you look at current inquiries, the logic/foundry -- the investment from the first to second half of this year, what is the driver, the leading edge technology node or matured technology nodes and could you just let me know the drivers of the growth of logic/foundry throughout this fiscal year?

[Toshiki Kawai]

Right. For example, on Slide 20, little by little memory spending’s are expected to increase in terms of absolute value toward the second half of this year, pink color counts for 69%, about 70% which is logic. And as you can see [indiscernible] logic starts recovering first ahead of the memory. The primary factor or driver is the demand for legacy nodes for IoT device applications. So the growth in that area is getting larger with MAGIC market, MAGIC, DSS business unit was established last month, and those areas, MAGIC area, of course, Chinese market are growing in terms of MAGIC market, similarly, the foundry taking care of commodity devices are now growing all over the world. This is how I would like you to understand the trend for this fiscal year.

[Mikio Hirakawa, BofA Securities Japan]

Thank you very much.

[Koichi Yatsuda, Vice President of Investor Relations]

Mr. Hirakawa, thank you very much for your question. Next question is from Mr. Nakamura of Goldman Sachs Japan.

[Shuhei Nakamura, Goldman Sachs]

I am Nakamura of Goldman Sachs, Japan. So the semiconductor device market 2024 should be almost the same size or larger than the market size of 2022. That's what you said earlier, for WFE. I think you said [indiscernible] three months ago, but at present, do you have a very similar trend for WFE market as the semiconductor market, whether there are any difference in the recovery trend between semiconductor market and WFE market.

[Toshiki Kawai]

In principle, semiconductor, and WFE markets, those two markets are now in line with each other to some extent. Each company toward 2024, about 10% increase from this fiscal year and bigger than 2022 and 2025 market will be larger than 2024. That's how quite a few companies are expecting for future. Second half of this fiscal year, the recovery will start gradually and market grow more in 2024 and 2025. So the MAGIC market, the volatility is limited, so the MAGIC market expected to grow steadily and stably. So about JPY500 billion DSS business unit sales and we have a plan for JPY850 billion towards the end 2027, so we can expect linear increase to 2024 and 2025. So because of new CPU [indiscernible] replacement will be accelerated with higher performance and lower power consumption. Accordingly, DDR5 will be another driver and smartphone ever since COVID-19, they purchased smartphone and there is replacement demand for smartphone along with the future recovery of the macro economy. Then high speed were high end device will be sold higher more. And PC, now you can see the steady decrease in inventory and also PC replacement demand is expected along with the introduction of new OS, operating system. So now you can see well balanced condition, six to four ratio between logic and memory, maybe little by little, we can -- coming back to the previous proportion, 2025 maybe the ratio between logic and memory should be almost the same as 2020 or 2021.

[Koichi Yatsuda, Vice President of Investor Relations]

Mr. Nakamura, thank you very much for your question. Next question is from Mr. [Tong] (ph) of Macquarie Capital Securities.

[Unidentified Participant]

I am Damian Tong from Macquarie Capital Securities. On Page 20, DRAM, by application you can see the composition, DRAM sales is expected to grow. And what is the reason for that? Could you explain the reason why DRAM sales will be increasing?

[Toshiki Kawai]

So again, the memory market is expected to recover little by little. So that's one of the reasons quantitatively. So as you can see, figures are shown here on the slide, for DRAM, there are about four customers by large. All of those four customers they don't have the uniform investment increase, but now they are bottoming out DRAM investment. Starting from the first half of fiscal 2023, it's been about one year since they started the adjustments. So maybe you can see some trend or symptom of recovery. So we are now building this focus based on customers' capital investment plan. So we expect the gradual increase of customer investment from the first half of this fiscal year. So this year, for [indiscernible] also from the second half of this year start recovering and that will grow in next fiscal year.

For memory as a whole, we will start to recover from the second half of this fiscal year, as for the order, as I said, the logics for commodity, first to start recovering, which is the large portion and high end logic and DRAM are almost comparable with each other and NAND comes last. That's our forecast for the recovery of different applications. Thank you very much.

[Koichi Yatsuda, Vice President of Investor Relations]

Mr. Tong, thank you very much for asking question. Next question is from Mr. Ishino of Tokai Tokyo Research Center. Mr. Ishino, please?

[Masahiko Ishino, Tokai Tokyo Research Institute]

So on page 20, once again, so first half of this fiscal year a 38% decline and second half declined by 11% according to your forecast. And so calendar year 20% to 25% reduction is expected in memory, that's what Mr. Kawai said earlier. So, it just presented now. As we discussed earlier, the legacy norms demand increasing China, so there are some positive symptoms appearing in the market. So, Mr. Kawai, so first half, there might be little limited possibility for the upturn revision. But are there any possibility of the upturn revision. So for example, generative AI might be the driver for upward revision or how do you view the trend of memory demands? Demand from our memory customers.

[Toshiki Kawai]

So according to my understanding, last year JPY99 billion, JPT1 billion last year, JPY70 billion to JPT75 billion for this year, so about 25% to 30% decline is expected for this year, according to our forecast. In our company, relatively speaking, we fulfilled our delivery schedule to meet customer orders, but depending on the type of the product or materials required, some of the shipment are pushed out to this fiscal year from previous fiscal year. Because of that, several variants fluctuation is expected. Against that, we try -- we can outperform the WFE market, although the WFE market is expected to decline in terms of sites.

As for the growth potential, of course, it depends on the timing of the recovery. For one thing, the macro economy inflation and relative increase of interest rate, so macroeconomic environment is one thing. And also, memory, especially how well the NAND inventory can be rebalanced. So depending on those factors, to some extent, the full macro economy, high end logic/foundry may conduct some adjustments. So just as said against the plan, about 50% in the first quarter -- one quarter, The first half of next year will be affected by this year's business environment and memory inventory adjustment. The first quarter of next fiscal year might be pulling forward or might be pushed down because of that. So when you think everything comprehensively, those fears are achievable. But they are -- needless to say, we are now thinking the growing trend on year-on-year basis. So we can have some expectation of upward revision of this forecast. So your company inventories are rather high according to some information, so even if there are some demand increase, you don't have to worry about the inventory. You don't have any concern about your inventory's level.

So as Mr. Kawamoto will explain more, but conclusion is, our inventory level is appropriate. So for all of a sudden startup or recovery of the market in the second half of this fiscal year that we are prepared to increase the capacity all of a sudden to cope with the market trend. Therefore, our current level of inventories is appropriate.

[Hiroshi Kawamoto, Vice President & General Manager, Finance Unit]

So I am Kawamoto. I want to add some comments. As you said, the high level of inventories, as I said earlier in my presentation, compared to two years ago, the inventories are more than two years ago. As Mr. Kawai said now, the factories, our main factories or plans do have a strategic procurement increase. There is some inventory turnover ratio decline, but we try to be prepared for the sudden upward swing of the market trend. Thank you very much.

[Koichi Yatsuda, Vice President of Investor Relations]

Mr. Ishino, thank you very much for your question. Next question is from Mr. Yamamoto of Mizuho Securities. Mr. Yamamoto, please.

[Tsutomu Yamamoto, Mizuho Securities]

I am Yamamoto from Mizuho Securities. Again, on Page 20, the new equipment sales forecast for DRAM. Again, so I'm sure you are very clear -- certain about the fast half of this year. But I don't have such kind of sentiment that the market comes back in this way. So I wonder, TEL share increasing, is that because of this trend? Or do you think customers' investment recovered fully? Because of that, you can see increase in DRAM, and you don't have so much impact of the TEL's market share increase slightly from both elements. So customer mix is another factor according to my understanding.

[Toshiki Kawai]

Right. Correct. So, slight -- gradually for DRAM, you can see the trend of recovery in the DRAM market and also our penetration ratio and share increase is also achieved. So there are two reasons. So for next fiscal year, I just wonder about the share for each application. Maybe next fiscal year, you can see some positive growth of your market share, right? As I said in the beginning, so we have won the PORs very steadily and that trend is really on track. So we expect the increase of our share in the market. So not only next fiscal year, in order for us to achieve the midterm management plan, our progress is on course.

[Tsutomu Yamamoto, Mizuho Securities]

Thank you very much. That's all from me.

[Koichi Yatsuda, Vice President of Investor Relations]

Mr. Yamamoto, thank you very much for your question. Next question is from Mr. Yoshida of CLSA Securities, Japan.

[Yu Yoshida, CLSA Securities]

I am Yoshida of CLSA Securities, Japan. I have a question regarding WFE market. So you said JPY70 billion to JPY75 billion. I think those figures almost comparable with your American competitors. Last year, JPY99 billion, wafer level packaging is included. And when you look at the large population, I think decline ratio is more significant than your American competitor. But what is reason for that gap or difference. That's one question. And also, you said in the previous meeting, JPY80 billion, the change here is due to certain applications. Could you give us the potential applications, which have the impact on your downward revision of the trend from JPY80 billion to JPY70 billion to JPY25 billion.

[Toshiki Kawai]

So macro economy impact is one thing. And in that sense two things. Number one, high end inventory logic investment was reviewed and revised to some extent. That's one thing. And second, each company quite recently, for memory, relevant memory spending was announced and that was revised in downward, especially for NAND. So they are now rebalancing their inventory that has the impact on our figures. High end NAND and foundry -- high end foundry business, those figures were incorporated that we say JPY70 billion to JPY75 billion this time. We have almost the same overall picture with our competitors. But for our presentation, timing is behind other competitors, maybe because of that, we have been able to incorporate changes in customer investment plan. But basically there is no big difference between us and other competitors.

[Yu Yoshida, CLSA Securities]

As for 2024, you said that recovery trend is detected for 2024. In each company about 10% increase from this year to next year is expected by various companies. But this year decline ratio is rather big. So 2024, 10% improvement, then you cannot achieve the level of 2022. So could you just let us know the growth rate expected in 2024, please?

[Toshiki Kawai]

So now you can see semiconductor market, device market forecasts. As you can see here, 2023 about 10% decline is expected. By 2024 and 2025, you can see increasing trend expected. For this, our company have no disagreement against those focused. So the tool, WFE is expected to grow by 10% almost the same level of 2022. So the macro economy condition and inventory condition have some impacts. So I hope the WFE market becomes comparable with semiconductor market. But the one quarter shift might take place and depending on the one quarter shift, the condition of our figures might be affected.

[Koichi Yatsuda, Vice President of Investor Relations]

Thank you very much, Mr. Yoshida, for your question. Next question is from Mr. Wadaki of Mitsubishi UFJ Morgan Stanley Securities.

[Tetsuya Wadaki, Mitsubishi UFJ Morgan Stanley Securities]

I have a question regarding the trend by product. I also interviewed the parts supplier and your competitors. And there is some different view, for example, [indiscernible] is one thing and co-development and cleaning is rather good in progress. So what is the difference in the business outlook by product?

[Toshiki Kawai]

So the difference in our business outlook by equipment is your question. So in the case of quota developer, 89% is our share -- market share. Therefore, there is some investment that we can catch up quite certainly. As for the amount etching market is biggest in size. But when it comes to share, the other day Gartner give us the news announcement, for etching last year because of the depreciation by 20% our share was affected last year. For firm deposition, actually, the batch deposition system is the main product. When memory customer stops or defer their investment, then our deposition business is affected for provers, so it depends on product mix or customer mix. So I hope I answer to your question. Did I answer to your question?

[Tetsuya Wadaki, Mitsubishi UFJ Morgan Stanley Securities]

So why cleaning system is doing so good? That's my main question. Why cleaning systems is so good?

[Toshiki Kawai]

1 of the reason is super critical try to prevent the patent clubs. That's one contributor. And SPM market. So in the past Tokyo Electron, purchase FSI and now we have TMEA, Tail Manufacturing and Engineering America, TMEA. So TMEA is the name of our company and they have unique technology, and Tokyo Electron also has unique technology to come up with the differentiated technology to increase our share in SPM market. So there are some applications for cleaning system. So for supercritical dry and SBM market, we increased the share as you know the SPM market in large in size.

[Tetsuya Wadaki, Mitsubishi UFJ Morgan Stanley Securities]

Thank you very much. It was very clear explanation.

[Hiroshi Kawamoto, Vice President & General Manager, Finance Unit]

I have one additional comments. So could you refer to Page 8. Once the year, we announced the sales competition by product. I think you are -- your question is based on this slide. The etching growth is a bit weaker than others. Maybe that's your area of interest. So at present, NAND market is under adjustment. That has the quite big impact. Actually, the etching and film deposition. So actually etching sales is rather big in NAND market. So when NAND market do adjustment, then our etching is a bit limited.

[Tetsuya Wadaki, Mitsubishi UFJ Morgan Stanley Securities]

Thank you very much.

[Koichi Yatsuda, Vice President of Investor Relations]

Thank you very much for your question, Mr. Wadaki. Next question is from Mr. Yoshikawa of Morgan Stanley MUFG Research, Japan.

[Kazuo Yoshikawa, Morgan Stanley MUFG Research, Japan]

I am Yoshikawa from Morgan Stanley. My first question, now you have the single segment disclosure, FPD sales is not disclosed, but for new equipment sales are disclosed and also maybe the difference from the total sales should be composed of the field solution sales and FPD sales. And the difference is about 15% decline from the previous fiscal year according to your forecast. So, because FPD investment adjustment is major reason and how do you see the market trend of the field solution business?

[Koichi Yatsuda, Vice President of Investor Relations]

So, let me -- I am Yatsuda, let me answer to your question. As for the field solution, quite recently the parts sales are now increasing rapidly, but now customers' fab utilization rate is declining. Therefore, now we have some conservative forecast for this fiscal year because of that. So for a few years, the parts service has been increasing steadily, but for this fiscal year, I think the parts service hit the plateau because of the decline in utilization rate of customers fabs?

[Kazuo Yoshikawa, Morgan Stanley MUFG Research, Japan]

Thank you. Another question I want to ask is about logic/foundry, you said the investment in the matured nodes is rather strong in the previous fiscal year, logic/foundry, leading edge and matured node, 20 nanometer or bigger, that proportion is about 60 to 40 according to your information, that 60 to 40 that proportion remain unchanged? And what is your expectation for this fiscal year? So for this calendar year, matured node accounts for about 40%. 2022, just for information, our expectation was the matured node accounted for 30% including memory.

[Kazuo Yoshikawa, Morgan Stanley MUFG Research, Japan]

Thank you very much. That was clear.

[Koichi Yatsuda, Vice President of Investor Relations]

Thank you very much, mister Yoshikawa, for your question. Next question is from Mr. Yasui of UBS Securities.

[Kenji Yasui, UBS Securities]

I have a question regarding 2024. How do you view the fluctuation of gross profit margin? So you said utilization rate is declining, but could you share your forecast for the gross profit margin, please?

[Toshiki Kawai]

So maybe your question is about the gross profit margin forecast and you said probably, you can expect higher gross profit margin than presented here.

[Kenji Yasui, UBS Securities]

Yes, exactly. That's what I asked.

[Toshiki Kawai]

As you pointed out, the previous year gross profit margin is 44.6%, as of today 43.6% expectation, 1 percentage point decline is expected as of now. So the sales -- net sales declined significantly by 23% specifically and that has the impact on the gross profit margin. This is how I'd like you to understand. So ultimately, we try to catch up and we are making effort to catch up but as of today, because of the significant decline in the net sales, we expect 1 percentage point decrease in the gross profit margin.

[Koichi Yatsuda, Vice President of Investor Relations]

Mr. Yasui, thank you very much for your question. So since that is no more questions, we'd like to conclude this meeting. That is -- before we close this session, I'd like to make one announcement. [Semicon] (ph) West will be held in San Francisco for three days from July 11 to July 13. On day one, Mr. Kawai, our CEO will make a keynote presentation on future technology outlook starting at 8:55 in the morning, in the main hall, also at [indiscernible] Hotel near the venue of Semicon West where we organize fireside chat from 01:00 to 02:00 in the afternoon where Mr. Kawai, CEO and Mr. [indiscernible] EVPP and GM and Dr. [indiscernible] will give follow-up talks of the keynote presentation and discuss our long term growth opportunity. If you go to the coming Semicon West, please join us in those events where we'll send you the details about fireside chart.

Lastly, we'd like to continually improve our IR activities based on your previous feedback. So we would appreciate your kind cooperation in filling up the question here before you exit the Webex. Thank you very much for taking time to join this event despite your various scheduled today. Thank you very much.