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Edited Transcript of 8035.T earnings conference call or presentation 30-Jan-20 10:59am GMT

Q3 2020 Tokyo Electron Ltd Earnings Presentation

Tokyo Feb 12, 2020 (Thomson StreetEvents) -- Edited Transcript of Tokyo Electron Ltd earnings conference call or presentation Thursday, January 30, 2020 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Koichi Yatsuda

Tokyo Electron Limited - IR Officer

* Toshiki Kawai

Tokyo Electron Limited - President, CEO, GM of Corporate Innovation Division & Representative Director

* Yoshikazu Nunokawa

Tokyo Electron Limited - EVP, GM of Global Bus. Platform, Finance, Export & Logistics Control, Internal Control and Director

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Conference Call Participants

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* Damian Thong

Macquarie Research - Head of Asia Technology Research

* Hisashi Moriyama

JP Morgan Chase & Co, Research Division - Head of Japan Research

* Masahiko Ishino

Tokai Tokyo Research Institute Co., Ltd. - Senior Analyst

* Mikio Hirakawa

BofA Merrill Lynch, Research Division - Research Analyst

* Takeo Miyamoto

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst

* Tetsuya Wadaki

Nomura Securities Co. Ltd., Research Division - MD, Senior Research Officer & Analyst

* Toru Sugiura

Daiwa Securities Co. Ltd., Research Division - Research Analyst

* Yu Yoshida

CLSA Limited, Research Division - Research Analyst

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Presentation

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [1]

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It's time for us to start Tokyo Electron financial announcement for third quarter of the year ending in March 2020. Thank you very much for joining us despite your very busy schedule. I am Yatsuda of IR department, acting as MC for today's session.

Now I'd like to introduce the attendees on our side. Mr. Tetsuo Tsuneishi, Representative Director, Chairman of the Board; next, Mr. Toshiki Kawai, Representative Director, President and CEO; and we have Mr. Yoshikazu Nunokawa, Corporate Director, Executive Vice President and General Manager, Finance Division.

So first of all, Mr. Nunokawa, Corporate Director, Executive Vice President, will present the consolidated financial summary. Mr. Nunokawa, please?

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Yoshikazu Nunokawa, Tokyo Electron Limited - EVP, GM of Global Bus. Platform, Finance, Export & Logistics Control, Internal Control and Director [2]

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Ladies and gentlemen, good evening. I'm Nunokawa. Thank you very much for joining us despite your very tight schedule. Now I'd like to present the consolidated financial summary for the third quarter.

This page shows the financial summary for the third quarter. On the right-hand side, the net sales was JPY 295.4 billion. Gross profit was JPY 117.5 billion. Gross profit margin was 39.8%. Operating income was JPY 64.7 billion. Operating margin was 21.9%. Net income attributable to owners of parent was JPY 49.3 billion. I'd like to give you more details from now on. Next slide, please.

Here, you can see financial performance represented in the graphical manner. As you can see here, for the third quarter, sales, net sales was almost the same as the previous quarter, that is second quarter, almost the same. When it comes to the comparison between third quarter sales and second, fourth quarter sales -- actually, the third and fourth quarter, the third quarter is at starting quarter of the second half of the year. Usually, the third quarter is a kind of recess compared with second quarter sales. The third quarter sales used to be smaller in size. However, this fiscal year, the third quarter sales is almost the same as the second quarter sales. On the other hand, I'll touch upon this issue on next page as well, the generated fixed costs in the third quarter is slightly smaller than the debt in the second quarter, that is the reason why the operating margin in the third quarter is higher than the one in second quarter.

Now you can see segment information. On the left, SPE results are shown. Sales was JPY 282 billion. The segment income was JPY 72.5 billion. Segment profit margin was 25.7%. Just like the overall trend, the -- compared with sales in the second quarter, the sales in the third quarter slightly increased. And also, segment profit margin increased slightly. FPD sales was JPY 13.3 billion. Compared with the second quarter, the sales was declined a little bit in the third quarter. And segment profit margin was also declined in third quarter compared with the one in second quarter. On the right, you can see composition of net sales in the third quarter. SPE accounted for 95% while FPD accounted for 5%.

Next slide shows SPE division sales by region. On the right-hand side, you can see the results of the third quarter. The third from the bottom, the green portion, which represent Taiwan sales, you can see drastic increase for Taiwan sales thanks to the strong sales to the foundry customers. And second from the top, that is the sales for the North America, just like the second quarter, the sales to North America was very strong. And second from the bottom, the red color portion, which represents China, sales in China. For this, the global companies and local China companies, manufacturers, the sales for both global and local manufacturers was very good following the second quarter. Next slide, please.

This shows SPE division new equipment sales by application. On the right-hand side, you can see the third quarter results. As you can see over here, the orange color on the bottom and green color, the logic and logic foundry. The sales increases further from the second quarter's sales, and the logic foundry and logic accounted for more than 60%. Next slide, please.

Now Field Solutions sales are presented here. You can see the fluctuation of sales of the Field Solutions here. The sales was JPY 74.6 billion, almost comparable with the sales in second quarter. So we can precede the solid sales of these Field Solutions.

Next slide shows balance sheet. As for the assets, compared with second quarter, on the top, cash and cash equivalent slightly decreased from the second quarter. Inventories, just in the middle, the light blue portion. The inventories, just like second quarter, you can see slightly high level of inventories in the third quarter as well. On the right, you can see liabilities and net assets. As you can see here, net assets for third quarter decreases from the second quarter. This is because of share buyback. In the third quarter, equity ratio was 65.4%. Next slide, please.

Here, you can see inventory turnover and accounts receivable turnover. On the top, the light green line represent inventory turnover just the same level as second quarter. The purple line on the bottom shows the accounts receivable turnover. Again, the turnover in the third quarter is almost the same as the one in the second quarter. Next slide, please.

Now you can see the cash flow over here. The cash flow from financing activities, as you can see, was minus JPY 84.4 billion, so significant negative value. This is orange color bar, so the JPY 45.4 billion for the share buyback and JPY 39 billion for dividend payment and others. On the other hand, cash flow from operating activities were JPY 52.1 billion. Next slide, please.

As I said earlier, the share buyback announced in May 2019 was completed on December 31, 2019. The number of shares acquired was 8,392,000 shares. Total cost of acquisition was JPY 149,999,000,000. Out of which today's board meeting, we decided to cancel 8 million shares of treasury stock, which represent 4.84% of issued shares. As a result of this cancellation, the number of outstanding shares after the cancellation is 157 million shares, as you can see on the slide. The difference between 8,392,000 and 8 million shares, which is 392,000 shares, which were not canceled, are planned to be used for share subscription rights as stock-linked compensation. We are going to keep them in treasury stock. That's all about my presentation of our third quarter finance summary.

Next, Mr. Kawai, our CEO, will present business environment and financial estimates. Kawai-san, please?

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Toshiki Kawai, Tokyo Electron Limited - President, CEO, GM of Corporate Innovation Division & Representative Director [3]

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I am Kawai. Once again, thank you very much for joining us today. I'd like to make a presentation on business environment and financial estimates. First of all, I'd like to talk about business environment for this year.

For WFE CapEx. As you can see here, for this year, the investment for logic and foundry remains solid, maintaining the trend from the previous year. In addition, memory investment is expected to recover. As a whole, we expect an increase of WFE CapEx on a year-on-year basis. Semi and VLSI research said that the WFE market is expected to grow by 5% on a year-on-year basis, but our company's view is a bit different. We think the growth rate is higher than 5%, and we now scrutinize the condition of the market right now. For panel display, in calendar 2020, the production equipment CapEx is expected to increase by about 15% on a year-on-year basis due to solid investment for G10.5 LCD as well as an increase of investment for G6 OLED for mobile and G8.5 OLED for TV.

Now you can see WFE market outlook and business opportunity by application. For logic and foundry, as I said earlier, high level of CapEx is expected to be maintained from the previous year, especially CapEx for the leading-edge node to 14-nanometer device node. For NAND, along with inventory adjustments, memory prices bounced back to the upward trend. Investment is expected to start again gradually. For this year, investment for the transition from 9X layers to 12X layers will increase. For DRAM, as memory prices bottomed out, and in early 2020, inventories will be normalized. Restart of the investment is expected.

This shows FY 2020 business progress. This shows the result from first quarter to the third quarter of this fiscal year. SPE business in the 3 focus area. We won additional PORs in those 3 focus areas for etching VU. The wave on PORs in expanding CMOS image sensor, IoT and automotive sectors and bookings increased. Firm deposition for the equipment for LV and T333, single-wafer metal system and batch tools in all cases, we want additional PORs.

For cleaning, promotion of bevel cleaning proceeds steadily. Bookings for new models and new areas increased. Along with a growing installed base, which has exceeded 70,000 units. The Field Solutions business maintains its momentum even in the phase of adjustments in the WFE market. For flat panel display production equipment, the new product sales are moving steadily. We are now focusing on the high value-added areas so that we can introduce new products there. So PIC -- sales of PICP G10.5 plasma etching system for high-resolution FPD is increasing. For inkjet printing system for promising OLED, we introduced the tools for R&D, and the evaluation tools have been installed to the quite a few customers. That is the business progress from first quarter to third quarter of this fiscal year.

Next, I'd like to talk about financial estimates for fiscal year 2020. There have been no changes for financial estimates from October 31, 2019, announcements. We are progressing very well towards the financial estimates.

Next slide shows SPE division new equipment sales forecast. This shows the sales by application. The second -- the sales plan of the second half of this year remains unchanged. Sales to logic and foundry customers are strong, and sales to memory customers expected to increase from next year -- next fiscal year.

This shows R&D expenses and CapEx plan. Again, there have been no changes from our announcement in October 31 last year. There are some updates. Now we are building 2 new production buildings. For those 2 production buildings, the operation expected to start from summer this year in order to take care of the increasing demands and to be prepared for the expanding orders for the future. For those 2 purposes -- from this summer and on, we are going to start operation in these 2 new production buildings.

This is my final slide. You can see dividend forecast for this fiscal year. Year-end dividend focus has been revised based on the results of the share repurchase, which is JPY 293.

Thank you very much. This concludes my presentation.

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Questions and Answers

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [1]

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Now I'd like to entertain questions from the floor up until 6:30. Could you limit your question to one, please, together with one follow-up question? Before asking a question, could you identify yourself by your name and affiliation? And today's announcement meeting will be uploaded to our website. Could you make your question concise and clear? Really appreciate your cooperation. Could you raise your hand if you have any questions, please? Yes, the gentleman in the front row, please.

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Tetsuya Wadaki, Nomura Securities Co. Ltd., Research Division - MD, Senior Research Officer & Analyst [2]

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I'm Wadaki from Nomura Securities. I think Kawai-san could say positive 11% or a 10% growth but actually, yesterday's financial announcement, several companies said that Samsung flashing business started and their suppliers cannot catch up such kind of Samsung's demand. Would you -- is it possible for you to talk about 2-digit growth rate?

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Unidentified Company Representative, [3]

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I think there is a big opportunity of our growth for the future, and I think those figures will refer -- the WFE market is expected to grow rather positively. 2-digit growth is your question. Actually, American competitor talked about the 2-digit growth rate forecast, and that view is not so much different from our view. I hope this answers to your question in directory. I hope you understand it.

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Tetsuya Wadaki, Nomura Securities Co. Ltd., Research Division - MD, Senior Research Officer & Analyst [4]

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My follow-up question. There is some concern yesterday, one competitor revised their financial estimate downward, and you are rather conservative as well. I wonder there is something wrong taking place? For example, in China, the investments are not so active, for example. Do you see any risks? Do you feel any risks?

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Unidentified Company Representative, [5]

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No, I don't think there is nothing negative happening right now.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [6]

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Next question, please. Yes, the gentleman in the next aisle, please.

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Takeo Miyamoto, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [7]

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I am Miyamoto from Mitsubishi UFJ Morgan Stanley Securities. I'm sorry, I'm talking about your midterm business plan of 2 years ago. At that time, you linked your WFE market and sales size. And at that time, WFE was $58 billion and you expect your sales of JPY 1.4 trillion. But after that, the competitive market environment has been changed. I know there is no linkage between your sales and the WFE market. But when you think about the following changes in the competitive market, do you think it's possible for you to achieve the sales of JPY 1.4 trillion if WFE market close to $58 billion? Or do you think this kind of combination of figures might change because of the change in the market condition?

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Unidentified Company Representative, [8]

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I think the competitive situation hasn't been changed over the past 2 years. And for us, we are providing high value-added products and technologies, and we are prepared to create WFE market. That's what we are determined. That's the reason why we do not link ourselves and WFE market size. But within 5 years, we are going to achieve JPY 2 trillion sales, 30% for operating profit margin and ROE of 30%. For those figures that we market is expected to be $65 billion to $70 billion. We have 3 different financial scenarios. But in order to achieve them, we need to come up with new product with high value added. In order for us to achieve the financial model, we need to enhance our own technology. It may take some time, but within 5 years, we try to satisfy our financial model. And there have been no changes in the competitive consideration. But if WFE market grows too quickly, it's not possible for us to provide the product, which means the market condition. We need to think about PORs as well. But in order to address such kind of situation, we are now developing high value-added products. There might be some deviation, but, anyway, we try to satisfy our financial model within 5 years to come.

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Takeo Miyamoto, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [9]

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My follow-up question is, you said that you have a very similar viewpoint as American competitor. But for application -- by application, you have a similar perspective. NAND flash recovery is biggest in this year, that's what your competition said. And DRAM market does not recover. Is that your viewpoint as well?

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Unidentified Company Representative, [10]

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I think there is a possibility for DRAM market as well. The investment plan, so NAND inventory adjustment going on faster. Therefore, I think the investment for NAND will start first. However, it depends on the progress of customers' production situation. For example, if the DRAM capacity is not good enough or sufficient enough, the DRAM investment may come first. So actually, the inventory situation and investment situation are not exactly in line with each other.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [11]

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The gentleman just behind, please?

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Mikio Hirakawa, BofA Merrill Lynch, Research Division - Research Analyst [12]

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I'm Hirakawa from Merrill Lynch Japan Securities. I heard the conference call of American competitor. But actually, in China, there is the Coronavirus outbreak. How do you see the impact of that Coronavirus outbreak right now? Now you have positive results for the third quarter, but you haven't changed your full year financial estimates. Is that because of the potential impact of the Coronavirus? Could you let me know your viewpoint, please?

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Unidentified Company Representative, [13]

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I hope that the people who have been affected by Coronavirus will recover soon. When it comes to its impact on our business performance, I think that it should be only minor impact on our business. Business itself exists, and the startup schedule adjustment is going on. Therefore, I don't think there is a big impact on our business performance.

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Mikio Hirakawa, BofA Merrill Lynch, Research Division - Research Analyst [14]

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As for your business performance, Nunokawa-san said earlier, the sales in the third quarter was higher than the sales in the second quarter. So the second and fourth quarter sales having higher than the sales of the third and first quarter, but have you ever taken any countermeasures to level out your sales also there? Or do you see only the big demands in the third quarter?

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Unidentified Company Representative, [15]

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I think both of them, so we are doing every effort to level off the production. And also, you can see increasing trend of the demands, and we are addressing customer requests to start up our system sooner. So 2 aspects to come up with the result in the third quarter.

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Mikio Hirakawa, BofA Merrill Lynch, Research Division - Research Analyst [16]

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Sorry, I was not so good at asking questions. When you look at next year for leveling production, do you think it's possible for you to level off the production level or still, in fiscal year ending in March 2021, do you see higher sales in second and fourth quarter as well?

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Unidentified Company Representative, [17]

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So we'd like to achieve the leveling as much as possible. However, the customers are very active in investment. So still, there might be some fluctuation in our sales, but it's not negative trend, but it is a positive trend. Fortunately, our supply chain has been enhanced. Therefore, we are able to take care of the sudden increase of the demands. In that sense, we are prepared to address the demands either from logic customers and memory customers, wherever it comes. So accordingly, there might be some increase or decrease of the sales a little bit, but in principle, we are going to improve our production efficiency. And at the same time, we do have a good organization to prepare for the fluctuating demands that what we are doing right now. Actually, there is 2 things: delivering our production, and leveling of sales. Those 2 are different. As for the sales, it depends on the customer demands. The sales fluctuation is affected by customer demands. When it comes to the production itself, as Kawai-san said earlier, we try to achieve the leveling of production as much as possible. There might be some increase or decrease of inventories, however, we try to improve efficiency by leveling off the production. That's what we are making efforts right now. Let me add one more comment. Even in the initial guidance, the sales in the second half of this year is higher than the one in the first half of this year. So there is another reason for that.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [18]

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Next question, please. Yes, the gentlemen again in the front row, please?

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Yu Yoshida, CLSA Limited, Research Division - Research Analyst [19]

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I'm Yoshida from CLSA Securities Japan. As for the new sales, I have a question on new sales. This time, you showed us the actual for third quarter and estimate for fourth quarter by application. But when you compare it with the original second half of this year forecast, the total of the logic and foundry and NAND, actually, the total sales was higher than the original guidance, but DRAM sales was smaller than the original forecast. Could you let me know the reasons why, please?

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Unidentified Company Representative, [20]

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For the details, it is necessary for us to check the details. But as for the big trend, the logic was very strong, and proportion of the sales to logic customers is rather high. I'm sorry, I'm not answering to your question because it's necessary for me to check the details.

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Yu Yoshida, CLSA Limited, Research Division - Research Analyst [21]

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So logic and foundry, when you divide logic and foundry, which sales was revised more upward?

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Unidentified Company Representative, [22]

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As for my impression, the sales toward foundry customers are higher. Yes, the sales to the foundry a bit strong. However, the sales to the logic customers is getting stronger than our original expectation. The sales to the DRAM customers was weaker than our expectation because of the delay in the production adjustment.

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Yu Yoshida, CLSA Limited, Research Division - Research Analyst [23]

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I have one more follow-up question. Your Japanese competitor talked about the delay in orders are present to fill the similar situation, the delay in orders?

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Unidentified Company Representative, [24]

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I'm not prepared to give any comments on the competitor's statement, but we don't see anything happening about orders.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [25]

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Next question, please? Yes. The gentleman in the front row, please?

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Damian Thong, Macquarie Research - Head of Asia Technology Research [26]

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I am Damian Thong from Macquarie Capital Securities. In the third quarter, Field Solutions sales to SPE customers was JPY 72.2 billion. Earlier, SPE sales in the third quarter was relatively strong. Field Solutions sales was in good trend as well continuously. So annual full year guidance used to be JPY 278 billion. But when I look at the results of the third quarter, you may exceed your plan for full year sales for Field Solutions. How do you think about that?

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Unidentified Company Representative, [27]

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Field Solutions business is growing steadily. As you said, JPY 278 billion, that is our initial guidance for the sales. And by the end of third quarter, we have achieved 79% of the initial guidance. If we assume what we said is just uniform that by the third quarter, we are supposed to achieve 75%, so 79% is higher than 75%. We are doing much better than our plan, and we think we can exceed our initial full year guidance sales.

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Damian Thong, Macquarie Research - Head of Asia Technology Research [28]

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I have a follow-up question. The fourth quarter and next fiscal year, I think the trend is getting stronger. How do you think about the growth rate of the Field Solutions business? Could you share your idea with us, please?

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Unidentified Company Representative, [29]

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The figures for next fiscal year are not yet disclosed. Maybe in next meeting, we are going to announce our financial estimates for next fiscal year. Having said that, essentially, the Field Solutions business has been growing very steadily. And IoT, 5G and AI -- actually, 5G is the main driver. Mobile and infra investment is going on, and utilization of the customers' tools are getting closer to their maximum level, then that will contribute to the sales of our parts as well. Therefore, we can expect a lot for the Field Solutions business in the future. So in principle, we need to look at the installed base. When the utilization remains unchanged, then Field Solutions sales increase is in proportion with the number of units delivered within 1 year. But if customer changes or adjust their production, parts and service sales might be adjusted. But for the time being, there have been no information we got that the customer is going to adjust their production.

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Damian Thong, Macquarie Research - Head of Asia Technology Research [30]

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But how many units have been installed so far?

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Unidentified Company Representative, [31]

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We have -- our installed base is higher than 17,000 units.

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Hisashi Moriyama, JP Morgan Chase & Co, Research Division - Head of Japan Research [32]

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I'm Moriyama from JPMorgan Stanley Japan. I have a question on Slide 17. You are talking of a product strategy. And for etching, cleaning systems or for EUV lithography, coater and developer, I have some question. For etching, for trading and hole etching, how do you see the business opportunity? And what is the timing of your business from 96 layers to 128 layers? I think for this year, business has been determined already. But next year and beyond, in which generation of 3D NAND do you see the possibility of the orders? So what is the next timing that you can tell the orders come for etching?

For cleaning and coater/developer, I have some question. For cleaning, you said you got orders for the new models. Could you just explain what is new model, please? And also, in market share, there have been no changes for the market share, just in case I want to get some clarification on market share. As for the product-related question, EUV lithography has now shipped 18 unit systems, 26 systems. And for this year, 35 systems already. But as you pointed out before, by shifting to EUV lithography, as a result, the -- what is the growth of the coater/developer sales in amount of money? Do you think you can see increase or decrease of your coater/developer business or sales?

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Unidentified Company Representative, [33]

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As for your etching -- question on etching, the number of applications are now increasing. And in principle, the HARC, high aspect ratio contact business, is supposed to be captured. That's what we are targeting on. And partially, you can see some good results. And next to 120 layers, when we think about our etch rate and our etching performance for the high aspect ratio holes, I think we can get some positive results, but it depends on customers' device structure, whether it goes 1 tier or 2 tiers. That also affects the timing, but according to our current midterm business plan, instead of 120-plus layers, that we should target on the next generation, that's where we can see a full-fledged adoption of our system. But even before that, the HARC, I should say, HARC, we can see the positive results for the HARC process so far.

As for the cleaning, the bevel system and also high throughput system with multiple chambers, that's another area we are focusing on. And also, another application is mid-temperature SPM business. In addition, Chinese market, we are introducing cleaning system in China market as well. So for the share, market share, we have penetrated into Chinese market. That should have very significant positive impact. The new model application, increase of applications and bevel system will become more and more important to increase the yield. And the bevel system is adopted in China as well. In Chinese market, our system is contributing to their yield enhancement activities as well. And our new model, the model with increased number of chambers and mid-temperature SPM, these are our new models.

And as for your question on the EUV lithography for our coater and developer, it depends on specifications. But in principle, we are focusing on high value-added area. In EUV lithography system, we must not make any mistake there, and we must have proper control. And by having proper control, we can enhance our value of system. And by introducing EUV lithographies, we will see more and more solutions that have positive impact on customers' CapEx as a whole. Therefore, not only coater/developer, but also in other applications, we'll see the positive impacts on customers' CapEx.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [34]

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Next question, please? The gentleman in the middle of the room, please?

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Toru Sugiura, Daiwa Securities Co. Ltd., Research Division - Research Analyst [35]

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I'm Sugiura from Daiwa Securities. I have a question on logics and foundry. So Page 16 of the slide. You are talking about 14-nanometer. So I'm interested in personally, the investment to 14-nanometer, does it come in the first half of 2020 or second half of calendar year 2020? So when you compare 2019 and 2020, so how much contribution, 14-nanometer investment to WFE market increased growth? Could you share your idea, please?

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Unidentified Company Representative, [36]

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The 14-nanometer investment is about China customer, the customer in China. So yes, as I will give you some details. So this is about the financial estimate for next fiscal year. We haven't issued our guidance yet, so we are not able to give you any answer about first half or second half of next year. But when it come to the 5G-related devices, there has been increasing needs for 5G mobile. Demand is going up, that's how we understand the market situation.

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Toru Sugiura, Daiwa Securities Co. Ltd., Research Division - Research Analyst [37]

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Even for the WFE market situation, you cannot announce the -- any information on first half or second half of next year?

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Unidentified Company Representative, [38]

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Correct. We are not able to release any information as of today.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [39]

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Next question, please. Yes, the gentleman on this side. The second row from the front, please.

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Masahiko Ishino, Tokai Tokyo Research Institute Co., Ltd. - Senior Analyst [40]

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I am Ishino from Tokai Tokyo Research Center. I have a question for logic and foundry. I have a question on logic and foundry. The 7 -- within this year, the 7-nanometer node will be shifting to 5-nanometer node, and also 3-nanometer node is coming in within our site. At that time, what is your business opportunity? How do you think about your business opportunity in the area of the 3-nanometer node from the viewpoint of your business opportunity? So in the 3-nanometer node, even for the 5-nanometer, technology level is going up. And I think your R&D investment will be going up. So in the 3-nanometer node, do you think you are going to enhance the R&D investment furthermore?

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Unidentified Company Representative, [41]

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Our R&D investment for 5-nanometer, 3-nanometer and beyond 3-nanometer, we are now looking at the multiple device nodes. And customer share their road map from N-plus -- into N-plus 4 generation. In our company, this provides us with the great opportunities. Because our company's product portfolio, as you know, we have the lithography-related products, also for lithography, the firm deposition and etching, cleaning, so we have all products for the 4 major patterning processes, and we have been building long good relationship with our customers. And also, extendability of the installed based products, more than other competitors, we are in a good position to share customers' road map together for the quality enhancement of chamber to chamber matching as well. We are trusted by our customers. The more critical technology becomes, the more we can make the best use of our advantage for the future. In particular, for coater and developer, we have more than 80% market share. For EUV lithography, our share is 100%. So all the semiconductor devices have been treated within our system, so we'd like to make the best use of our continuing relationship with a customer when we try to further enhance our growth.

IoT and 5G, 2 years ago, semiconductor device market was $468.8 billion. By year 2030, it might become $1 trillion market. 2 years ago, WFE portion was about 12%. But in year 2030, toward year 2030, if the proportion remains unchanged, WFE portion will be growing furthermore. I think our R&D investment goes up, but demands and sales also increased -- are increasing rapidly. Therefore, we don't think R&D costs will become our burden.

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Masahiko Ishino, Tokai Tokyo Research Institute Co., Ltd. - Senior Analyst [42]

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I have a follow-up question. In the future, EUV lithography will be introduced more and more. And according to the company in the Netherlands, initially, they said the number of etching process will be decreasing, along with the introduction of the EUV lithography because of the replacement. However, recently, the number of etching process are not decreasing but might be increasing instead. And this time, you said you are going to enhance the capacity of the production. So you talked about the market size of $1 trillion, but it's too early to say that. But how do you view more near-term perspective in the future?

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Unidentified Company Representative, [43]

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The comment made by the company in the Netherlands is a bit different from our comment slightly, but we don't think the number of etching process will be decreasing at all. I think, rather, introduction of EUV lithography will help us to increase the number of other processes, which have positive impacts on our business. And I don't know why the person from Dutch company said such kind of comment. But as you know, introduction of EUV lithography will help us to improve our business in all tools. It is true that there are some processes which might decrease because of the introduction of EUV lithography, but there are some other processes which are not dependent on the EUV lithography. Therefore, I think the market is moving along with our perspective.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [44]

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Any other questions from the floor? We have 10 minutes to go, so maybe we can have second question from the gentleman who already asked questions. So yes, the gentleman in the front row, please?

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Mikio Hirakawa, BofA Merrill Lynch, Research Division - Research Analyst [45]

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I'm Hirakawa from Merrill Lynch Japan Securities. As of the end of December, you have completed your share buyback. And you are very confident about the growth of the midterm, long-term period. But how do you view the results of this share buyback? And what's your plan for the future? Could you let us know that, please?

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Unidentified Company Representative, [46]

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As for your -- our short answer, it was the great timing that we decided to carry out share buyback. The hindsight, we could have decided much earlier, but that's only the hindsight. But when you think about future growth, I think that was the great timing that we made a decision of carrying out the share buyback. So we -- our self-evaluation was very positive for the share buyback. As for the future, we just follow the conventional ongoing direction policy. We try to carry out the share buyback flexibly at the right timing at the right size. Of course, when it comes to the use of the cash, the primary use of cash is to invest the money for further growth, including R&D or CapEx for development activities. That is the first option to use the cash. And if it leads to midterm, long-term growth, there is a possibility for us to invest money for M&A. For the share buyback we repurchase, actually, we have committed to achieve the 30% or higher ROE, and that's our commitment to all of you. Therefore, management of balance sheet might become necessary for us in some cases. And that policy remains unchanged for years.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [47]

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Yes, the gentleman in the second row, please?

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Masahiko Ishino, Tokai Tokyo Research Institute Co., Ltd. - Senior Analyst [48]

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I am Ishino from Tokai Tokyo Research Center, and I have a question on Page 17 about FPD for the G10.5. So major manufacturer presented or announced that they're going to decrease their investment for G10.5 by half. How do you think about that? And for quantum dot display for TV, the investment of that system started. But how do you see the opportunities for your inkjet system?

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Unidentified Company Representative, [49]

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Compared with SPE, flat panel displays, investment has been more fluctuating. That's how I view the FPD investment, but FPD investment will not disappear. There is just the shift in timing. When you look at the future, along with the introduction of OLED, the monitor will be shifting to display. And because of the design flexibility of OLED, I think there will be expanding demand for OLED in the future. Regardless of the timing of the investment done by customer, it is clear that demand will be increasing constantly. There should be no problem in the FPD market as long as we are working on the technology innovation to provide the high value-added product to the market, there should be no problem.

As for inkjet printing system, from the viewpoint of the cost and our target area is the OLED display, which size is a bit bigger than the one for mobile application. And quite a few customers who declare to use inkjet printing system are now adopting our G4.5 inkjet printing system for their development activities, and they are actively evaluating the system, which is a very positive trend for the future.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [50]

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Any other questions from the floor? Yes, the gentleman in the front row, please?

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Takeo Miyamoto, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [51]

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I am Miyamoto from Mitsubishi UFJ Morgan Stanley Securities. So according to your competitor, this year, the inquiries from China local manufacturers will be growing rapidly by about 40% to 50% for this year. That's what they said. How do you view the system? Do you think -- do you have their very similar feeling or slightly different from your competitor?

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Unidentified Company Representative, [52]

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Our view is not so much different from their view.

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Takeo Miyamoto, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [53]

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The same level of the growth rate do you expect?

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Unidentified Company Representative, [54]

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I'm sorry, I cannot give you specific values for next fiscal year, as Yatsuda-san said earlier. 14-nanometer investment, yes, we can expect a lot from that. And by and large, the American competitor's comment sounds somewhat not so much different from ours. I have one additional comment. For this year, what we're expecting this year is the investment to increase the capacity. In the past, the Chinese manufacturers have been investing a lot to the R&D in order to catch up with overseas competitors. But from now on, they are going to invest a lot to increase their capacity. In that sense, we can expect a lot this year.

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Koichi Yatsuda, Tokyo Electron Limited - IR Officer [55]

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Okay. There seems to be no more questions from the floor. I would like to conclude today's financial announcement. Once again, thank you very much for joining us today despite a very busy schedule.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]