Ajinomoto Co., Inc. (2802) Earnings Call Transcript & Summary

Good morning, everyone. Thank you very much for taking your precious time out of your busy schedule to attend the Functional Materials Business's Virtual Business Briefing & Factory Tour by Ajinomoto. I thank you very much. My name is Kaji of the IR Group. I'll be serving as MC today. For today, we have Corporate Senior Vice President, Mr. Kurashima; Corporate Vice President, Mr. Bompas; and Corporate Vice President, Mr. Nakano; Corporate Executive Vice Officer, Mr. Yokota; and Corporate Executive Officer, Nakamura. Those are the 5 members participating from Ajinomoto. Because there are non-Japanese officers, when Mr. Bompas make a statement, simultaneous translation is provided. We expect to finish the overall meeting in about 1.5 hours. At the outset, we will hear the opening remarks from Mr. Bompas, followed by the first section in which we'll make a presentation and the factory tour and the second part, the Q&A session. Today's material is posted on Ajinomoto's homepage, the IR section, so please take a look as adequate. Please be advised that today's meeting is recorded, including all the way to the Q&A session, and this information will be posted on Ajinomoto's IR site later on. Now without further ado, we would like to begin the meeting. Mr. Bompas, the floor is yours.

Good day to everybody. My name is Gwin Bompas, and I have the responsibilities for Ajinomoto's science division of Ajinomoto. Thank you very much for your time today to attend this session. And unfortunately, under the state of emergency, we're not able to meet in a face-to-face environment. However, I do hope that this remote style meeting enables more of you to join into this call. The objective of this call is to share with you some deeper insights into our functional materials businesses, and we look forward to your questions at the end of the presentations. As all of you are aware, the functional materials business is one of the core businesses in Ajinomoto in terms of organic growth, profit generation and providing solutions. In our quest to become a solutions-providing company, you will hear today, not only our strengths from the innovative technical perspective, but also our integrated partnership style approach with our customers and our customers' customers in order to understand their future product challenges for us to come up with solutions to these future challenges. I believe you will appreciate that in this sector, product life cycles are relatively short. And therefore, if one is efficient in one's collaborative product development cycle with your customer, then this creates a barrier for others. We, at Ajinomoto, strongly believe that this business helps generate value to people around the world by allowing them to live well through improved communication, improved information sharing, convenience and connectivity, not only with others, but also with the increasing numbers of smart devices in their lives. We see this very much as part of our ASV, our Ajinomoto Shared Value. Now I would like Yokota-san to explain more details behind the business; and then Nakamura-san to give you deeper insights into the facilities. Thank you.

Thank you, Mr. Bompas. Now we would like to move on to the first part of today's meeting. Mr. Yokota, the floor is yours.

Hello. Thank you very much for attending the virtual business briefing and the factory tour. My name is Yokota of the specialty chemicals department. Please bear with me today. Next slide, please. This is what I intend to cover today. At the outset, I would like to give you an overview of the functional materials business, and then I would like to talk about the electronic materials business. The next slide. In the 2025 midterm plan, Ajinomoto Group vision was stated, which is to contribute to greater wellness for people worldwide, unlocking the power of amino acids to resolve the food and health issues associated with dietary and habits -- dietary habits and aging. The functional materials business addresses the live well part of the eat well and live well mission. As you may know very well, our company is using the glutamic acids. The seasoning AJI-NO-MOTO has been materialized for the first time in the world, and we have been marketing this. We are collaborating all the factors and integrating and analyzing all these altogether for this and develop the new products and new applications and new methods and addressing the needs to each region's people and provided all sorts of solutions for the Asian regions. And for a long period of time, we have conducted amino acid research. And based on this, we have realized bioscience technology. So therefore, in the area of health care and foods and life support, we are providing solutions worldwide. Using this leading edge-based bioscience and fine chemical technology, we have added a fundamental design technology and deliciousness technology to run a fast development cycle. So all these technologies that are reinforcing one and another, we have been trying to solve the customers' issues. This is the functional materials business's mission and vision. The mission is, we will contribute to a smart life with high-performance fine chemical products. The vision is to become recognized by our customers as the best partner by building a deeper relationship with them and helping to solve their problems and issues and by providing the best service and highly specialized, high-performance fine chemical products. So we'd like to become our best partner for customers as a result of this. The next page. This is the functional materials business's core company, which is the Ajinomoto Fine-Techno Co., Inc. The overview is that it was founded in September 1942 with a capital of JPY 315 million and the number of employees, 313 as of April 1 this year. We have the electronics materials division, functional materials divisions and the activated carbon division in this company. In the electronic materials division, the mainstay product is Ajinomoto Build-up Film, ABF for short. In the functional materials division, adhesive and the compound products, dispersing agents, the materials as well as flame retardants. And for the activated carbon division, activated carbon and adsorption resin are the main products. And in the Ajinomoto Fine-Techno Co., in this company, more than 50% of the power used is derived by biomass, i.e., 6 million kilowatt of natural energy is used. Now I'll now talk about the mainstay product of the electronics material business, the Ajinomoto Build-up Film, ABF for short. ABF, if I put it simply, it's all about the film-type insulation material, protecting the core components in personal computers. Inside a computer, there are so many electronic components, which is the motherboard. And in this motherboard, on top of the motherboard, the brain of the computer, which is the CPU, is installed. This yellow section is what I just mentioned. And the IC chip is installed on the substrate, which is called semiconductor packaging substrate. On the bottom left, this is the cross section. On top of the motherboard, semiconductor packaging substrate are installed. And on top of that, IC chip resides. In the middle, the blue part, the semiconductor packaging substrate's cross-section is what you see in the middle. The yellow part is the core material, and the gray part is the ABF insulating material. And the brown part is the copper wiring. So 3 layers of ABF each are installed on the core. The ABF picture is what you see on the right, 500-millimeter width and the 5-meter is roll -- is the length of the roll. So it comes in a roll-shaped film. So in the electronic materials business, this business has started up more than 50 years ago. At this point of time, the MSG is fermented out of sugarcane and other materials. In 1960s, MSG was, at one time, produced in compounds. But in order to make effective use of intermediates, the epoxy resin was -- a curing agent was developed. And then in the glutamic acid neutralization process, the caustic soda was produced out of resolution. And then we have utilized this for the chlorinated paraffin as flame retardants. For the nucleotide seasonings, this has been utilized for the phosphorus oxychloride was developed into phosphate ester. Paraffin and the phosphate ester has been developed into resin additives and then to compound and then for more high value-added materials for electronic materials. In 1999, the interlayer insulating material for semiconductor packaging advent of Ajinomoto Build-up Film was developed as a result of this. In 1990s, in the latter half of 1990s, there was a major turning point. From ceramic to plastic packaging was the change that we have seen in this period. The ceramic is just very heavy, and process is very complicated and therefore, very expensive. But by converting into plastic, cheap and thin and light and small products have been produced. So the very less expensive personal computers, back then it was $1,000 personal computers. But now we have the high-performance personal computers, and the Internet use has become explosive, which led to the widespread developed adoption of ABF. So we were able to capture the time. In the semiconductor packaging, the insulating material requires an even thinness -- thickness, and also the fire retardant and those are curing out -- curing properties. And on top of that, micro wiring is also very needed. And also high insulation reliability, micro wiring, adhesive and reliable connections are also required properties for this. The conventional ink-type printing -- ink plus printing process is -- has so many processes, and the poor smoothness and air bubbles remain in the wires -- between the wirings, and therefore, those were the issues that we needed to solve. These issues were able to be solved by filming. So we have started the development. But all the technology that we have wanted, those technology that could last for a long time, so therefore, in 1994, we have adopted this technology. This is the first film-type material in the industry. In the production process, I will talk about this in more detail in the -- using video. So here in this slide, I would like to talk about the processes using the ABF just briefly, just simply. At the outset, using the laminator, in the vacuum laminator, on top of the circuits, the ABF is added so that the curing occurs. And the -- where we have to make sure that there is no bubbles, and the smooth connection is very important. And then the laser drilled vias will be made for interlayer. So processing capability becomes very important. Then desmear treatment is applied to remove the -- and make electrics copper plating. Then to photosensitive materials, the pattern formation is done. And by peeling off of these photosensitive materials, the first layer is complete. Then we reproduce the customers' processes. And that is the strength of our company, which makes the entry barrier for other companies. Next is the ABF value chain. Starting from raw material manufacturers, we purchase resin. And then the formulation is our bloodline or essential, and therefore, it is a closed technology with us. And our direct customers are substrate manufacturers, where the packaging substrates are made and then sent to CPU manufacturers for assembly. And then electronics manufacturers use them for their computer production. As I previously mentioned, ABF, when base substrates are made, we deal with chemical manufacturers as well as equipment manufacturers. Next slide, please. And regarding the manufacturing processes, the video will show, and in greater detail, the raw materials are used to produce varnish, and then varnish will be applied on PET film to be dried to construct a film. Then the complete film is stored and delivered to customers. Those are the 3 processes. Varnish is produced within our facility. However, we outsource coating and cutting as well as transportation in order to achieve a light -- asset-light approach. Next slide, please. These are ABF applications. Mainly they are used for CPUs, GPUs and chipsets, and semiconductor packaging substrates are the main usage. Non-PC applicants include game console, servers, communication network and onboard equipments. As the graph indicates on the right, this is the percentage volume by application. In 2013, the PC accounts for 50%. And the server and network, because of the diversified application in this portion, then in 2021, the server and network accounts for 50% of the total usage. Next slide, please. This shows the overall long-term trend of market conditions. COVID-19 will only accelerate the growth of semiconductor market. Because of the confinement period and restrictions, more people work home and learn from home. And people tend to stay home. Therefore, PCs and games are booming. With the advent of 5G, United States restrict -- imposed restrictions on China. However, servers and network applications or markets are booming as well. The graph on the right shows the global semiconductor market trend. As you can see, in the last 3 years, CAGR was 6.7% and is expected to further grow, with the advent of 5G and further adoption of 5G with the accelerated growth of self-driving vehicles and AI. In the next 10 years, it is likely to more than double. And then by 2030, it will top JPY 1 trillion. Therefore, this market is expected to grow much more in the future. This graph shows the -- well, rebasing to 2001, this graph shows the ABF shipment evolution with the customer capacity growth. In 2021, the market -- the shipment grew by 125%. And then thanks to the personnels increase as well as capacity increase, we can handle all the increasing demand by ourselves. Some media reports that ABF is in short supply. However, regarding ABF, please rest assure that we are meeting customers' demand. And this is the ABF strategy in 2020-2022 MTP. As you can see in these metrics, the existing business will be maintained, while new businesses will be expanded. The bottom layer, bottom half indicates that the existing markets, but we'd like to cultivate new usage as well. And in upper left is the -- with the advent of 5G, new markets will be cultivated. Then lower right indicates the new development for existing applications. Inductor application or other magnetic materials made is one. This comes in 2 forms. One is film, and one is [ form ]. And then this can be used to save energy of computers and also reduce CO2 emissions. Then upper right indicates the new challenges to be tackled on. This will be involved in smartphone application. One component, resin material can be used to enable the low-temperature curing process in order to shorten the period of this process. And then for the [ HDI ], high-density application is another usage of candidates that we are considering. Next slide, please. Then regarding the future trend of semiconductor packaging, this will become much larger and more laminated and multilayered as well as micro wiring. We would like to prototype based on users' need and gain of customer approval feedback. And we'd like to ensure or further hasten the rapid development cycle. And to expand the R&D capability, we are constructing a new R&D facility, which is expected to complete in June 2022. Then cutting-edge R&D equipment will be used for evaluating our materials, and we'll be able to further work closely with the customers. As I outlined earlier, ABF, that was developed by us, is used as inner layer insulating material for -- and serving as a key material for semiconductor packaging material. It is a de facto standard material, and as the market grows, our business grew. Then in the semiconductor industry, in order to increase the speed and enlarge the size, our -- we created a development co-creation ecosystem that leads the IT industry, whereby we invent new materials. And it is very hard to switch to materials outside this ecosystem. So this constructs as a strong entry barrier for our competition. Materials and AI -- materials informatics as well as AI and new cutting-edge technologies will be adopted to further refine this high-speed development. We will also incorporate advanced IT modalities, such as neurocomputing, quantum computing and optical computing as well. We are already in the consortium and future disruptor technologies. We are to ensure that we stay at the very cutting-edge of this industry. And then regarding the business network going forward, Ajinomoto as well as Ajinomoto Fine-Tech conduct R&D, technical support, and we handle technical discussions with customers. Ajinomoto Fine-Tech is also responsible for sales purchasing and manufacturing as well as QA. And then at AFT U.S.A., which is based in Silicon Valley, they collect information of the cutting-edge trends. And then an entity in Taiwan collects information in China as well as Taiwan, where semiconductor manufacturing is robust. This is my last slide. The pandemic forced people to stay home, and also, more people are working from home as well as learning from home. Also, with the advent of 5G and the expanded telecommunication network, GX is accelerating. Through ABF, we'd like to improve means of communication as well as convenience and improve people's QOL, so that we can address people's ability to live well. This is our ASV. Thank you very much for your kind attention.

Thank you very much, Mr. Yokota. Next presenter is Nakamura-san.

Hello, this is Nakamura, President and CEO for Ajinomoto Fine-Techno. Thank you very much for giving your precious time this morning. I thank you very much. Now I would like to take you to the virtual tour of our Gunma plant and showing a video that introduces the manufacturing process of ABF, the production method of semiconductor packages that use ABF and our R&D activities. This is going to be a 12-minute video. [Presentation]

That concludes our virtual tour. Our entire team worked together to meet the robust demand for semiconductor packaging worldwide and in order to also address future technological needs with a strong sense of responsibility and commitment. We appreciate your continued support for electronics materials, the vision of Ajinomoto Group. Thank you very much for your kind attention.

Thank you very much, Mr. Nakamura. Now we'd like to move on to the Q&A session. [Operator Instructions] Overseas investors are more than welcome to raise their questions in English. Simultaneous interpretation will be provided, so there may be some time lag between your questions and answers in English. [Operator Instructions] Because of the time constraint, we may not be able to address all the questions. Please be advised. Now we'd like to begin the Q&A session. [Operator Instructions] Yes, the first question from Mizuho Securities, Saji-san.

I have a question relating to the integrated circuit, ASIC for networks. The benefits for this, what are the benefits that you expect from this business? I just wanted to confirm your expectations. In your slide, in 2021, with servers and network combined, 50% of your business will come from that, that was explained. And during the last meeting, I think you covered a similar topic. But last time, the server and network was divided. But this time around, the server and network contribution was put together, combined. So it has blurred the numbers. So can you talk about the contribution from network? And in fiscal 2024, what is the impact from the network and server portion? Can you share with us your expectations? And if there is any impact in terms of floor space in the total quantity? And what kind of changes do you have to foresee in terms of the unit price, in terms of the shipments? What is the expansion that you're expecting from that increased demand? So especially centered on network-related demand, the mix of application may change. So what is the impact that you are foreseeing from that? That's my first question. That's the only question that I have.

Well, thank you very much for the question. The first part of the question relating to the server and network that was separated previously in our presentation. But this time around, we have combined the server and network. For that matter, because based on the information from customers, the applications for servers and networks are projected based on certain hypothesis and assumptions. But even if it's the same ABF type, depending on the application, actually, it was very difficult to distinguish all these differences, so that's the reason why we have decided to integrate the server and network in a single category. In terms of floor space in this space, I think Nakamura-san can talk about that.

The server network package substrate, in terms of the size, 40 millimeters -- square meters and 75 millimeters. The buildup layer on one side is 7 layers up to 10 layers. That is the projection that we have. In terms of the actual personal computers substrates, it's 35 meters and 25 by 50. The [indiscernible] and the buildup is 3 to 4 layers on one side. So the server, network packaging numbers increases, means the ABF will increase significantly in terms of total volume. However, server and network for those applications, the high-speed electric signals will be transmitted. So as a material, the transmission loss will have to be mitigated. So the low current property, low current conductivity, those material is the direction that we have to pursue. And also the packaging -- package substrate will become larger, so the low-temperature development is also needed. That's one thing. That's all that I have.

For my information, in 2021, you have given out the projection. Is the quantity the same? So the composition, so in 2024, what is the contribution from server and network in terms of composition to the total shipments?

The personal computer distribution in 2021 is 40% in the current projection. But in 2020, due to COVID-19, e-learning and work from home, those demand increase, so the personal computer in fiscal 2020, IDC -- according to IDC surveys, on a year-on-year basis, it was 113%. So unprecedented level of growth was seen in 2020 because of such demands. But going forward, the personal computers growth rate on a CAGR basis is not going to be so significant. So rather, the server and network proportion to the total is likely to increase going forward according to our projection.

Well, you don't have any quantitative indications, but the total number will increase, and therefore, the unit price increase is expected to be large. Is that right?

Yes, that's correct. Yes.

Thank you very much for your question. Next question, please. Mr. Hirata from UBS Securities.

This is Hirata speaking, responsible for electronics products from UBS Securities. Do you hear me?

Yes.

I need to keep my question to just one question. Regarding ABF application in servers and network, with the technological advances, how much adoption is changing? Speaking of server, 40-millimeter or 4 to 7 layers of ABF is used in that size. But towards the second half or towards next year, the another size will be applied. And also 3D packaging is underway in terms of R&D and other companies. So in terms of the standard ABF package, but 2.5D or 3D going forward, what is the amount of usage of ABF is likely to change? And also, regarding next-generation ABF that you have touched upon, 2.5D and 3D. When that happens, what change needs -- does ABF need to make?

Thank you very much for your question. As you are aware, server applications is becoming larger. Chiplet or [ multi-tips ] are being used, and 2.5D or 3D, there are many forms or possibilities. However, underneath, there is a huge substrate required. And for that purpose, ABF can withstand the high-speed electric signals. So by utilizing the low current and also laminated, our multi-stack, the low-processing design is required. And then speaking of 3D, we need to actually implement micro wiring capability as well, involving the desmear process to roughen the surface of the resin, and the degree of roughness must be nuanced or fine-tuned. And also, we need to increase the adherent strength of the copper plating. So micro wiring has the specific needs for us to fine-tuning our technology. That concludes my answer. I hope that answers your question.

[Interpreted] And regarding the amount of use of ABF, how much ABF is needed for 2.5D or 3D? Is it likely to increase in terms of the total number of ABF as well as the total area of ABF?

[Interpreted] Yes. Traditionally, we used to have only 2 packages. But if we increase the number of layers, then the 2 packages is integrated into 1. So when the 3D happens, the number of items may be reduced, but the total -- as the total layer grows, we need to produce more quantity. So overall, ABF needs to increase in terms of its volume.

Thank you very much. Now we would like to entertain the next question, which is from Goldman Sachs Securities. Takayama-san.

[Interpreted] My name is Takayama from Goldman. I'm also responsible for electronics materials and components. On a related note to the previous question, in 2024 and 2025, the shipment, there was a slide about that and I have seen that. So in 2024-2025, the multichips memory with those are installed, how -- what's the contribution? What's the proportion of such packages to the total? And even beyond that, how do you think those will increase the adoption, I think, like AI and servers and automobiles, what other applications are you assuming for? And at one point of time, I think there will be a point of saturation in terms of total volume and in terms of the unit price, so I think on the package side, that you will have to start working on rationalization and cost reduction. So can you project where to hit the peak of such demands?

[Interpreted] Thank you very much for the question. As of 2024, in specific terms, the customer service composition is something beyond our knowledge. We don't know the details about that. But basically, the high-performance packaging, packaging the semiconductors, as I said, the chiplets, the multichip [ tendency ] and the miniaturization of the semiconductors will make further progress. And therefore, the substrate, 2.5D and 3D will also make progress. And also, in some cases, for personal computers, that -- such kind of structure may be adopted for personal computers even. So -- and beyond that, when you talked about saturation, but of course, the growth area today are servers, the cloud, especially edge computing are expected to grow significantly. And beyond that, the 5G-related base stations and circuits will also increase significantly. And even beyond that, AI and automobile-related applications will continue to grow in a similar fashion. And then beyond that, optical fiber transmission, that kind of [ eco ] package, [ co ] package may begin to show an increase in demand, as Yokota-san mentioned. But we -- with entity is now spearheading the eye on innovative optical and wireless network. We are part of that consortium. So polymer and optical fiber -- optical are combined. So that kind of a technical trend monitoring is continued by our company, and we are also partnering with the universities' labs for the development of such materials. But beyond that, it's very hard to predict, but that's what I can say.

[Interpreted] So in 2024 and beyond that, you are expecting to see a rapid pace of growth. Is that your projection? Is that correct?

[Interpreted] Yes, I would say so. Well, rapid pace of growth, in 2024, 2025, the 5G-related investment will continue to be aggressive up until that point of time. And the semiconductor manufacturers and packaging manufacturers are also quite aggressive in their capital expenditure plan. So up until 2024, we foresee growth. But beyond that, we might see some leveling off of the growth rate.

Thank you very much for your question. Next question is from Mr. Morita from Daiwa Securities.

[Interpreted] My name is Morita, Daiwa Securities. Speaking of management perspective, the Ajinomoto headquarter itself is concentrating the selection and concentration process and focus their resources on to the core businesses. And listening to your presentation, maybe the electronics material part is a high growth area. So you must have been very supported by the headquarters as well previously. However, is there any change or further support needed from Ajinomoto itself? Are you likely to expect more support from Ajinomoto and the Ajinomoto itself is conducting -- transforming itself through DX and other initiatives. Speaking of Electronics division or materials, are they likely to spur any change within your group?

Morita-san, this is Gwin Bompas, and thank you for your question. Your question around about additional support needed from Ajinomoto going forward. As you know, this Functional Materials business is already identified as 1 of our 6 core businesses within the Ajinomoto Group, and we will continue to focus our resources, that's both the people and the technologies as well as our capital resources, to continue to develop these 6 core areas. So to answer your question, this is very much part of our future strategy that there will be ongoing support into this business area going forward. And as we said before, this is a very integral part of our business, connected closely with our R&D development cycles across all of our other core businesses. It's also connected in the way that we interface with our B2B customers. And we use the solution providing business solving and business resolving opportunities with our customers across many of our B2B businesses. So we see this very much integrated going forward. And yes, of course, we will continue to support the future growth of this business from Ajinomoto perspective. Thank you.

[Interpreted] Speaking of integrated management, could you clarify, elaborate a little more on the integrated approach that you mentioned? And also, this is a growing area, electronics materials. So what level of additional support would you like to require or request from Ajinomoto?

So in terms of the integrated approach, our smart -- R&D cycles are using smart techniques to accelerate the product development life cycles, tried to identifying early issues and opportunities with customers, so we can -- ahead of the curve, together with the customers try to find solutions. This is very much part of our integrated approach. Of course, Ajinomoto does not know everything, and we are collaboratively working with outside organizations, as Nakamura-san mentioned earlier. We are parts of various industry consortiums. We work closely with universities. Our people out in California as well as in Taiwan are constantly scouring for the new technologies and engaging with the trends in the marketplace. So we are utilizing in a very, shall we say, collaborative way, not only our own resources, but external resources. And I expect this will be something that will be required for the future, to continue to have strong external collaboration partners so we can stay ahead of the curve.

Thank you, Mr. Morita. The next question is from Mizuho Securities, [ Goto ] -san the question. The floor is yours.

[Interpreted] I am [ Goto ] from Mizuho Securities, responsible for electronics materials and components. Can you hear me?

[Interpreted] Yes, I hear you.

[Interpreted] All right. So this might be somewhat ambiguous. But right now, the packaging technology, if you look at the future trend, ABF will have the concentration of added value, I believe. Going forward, the semiconductor technology will continue to change, of course. So the risk factors, given the current situation, if anything changes in the future, what kind of risk do you foresee? What are the potential risks? Can you elaborate on that point? And of course, 3D could be 1 potential area for that could pose a risk. But the chip is it a larger [ requires the ] memory? Depending on that, I think the answer might be different. So it may not necessarily be negative altogether, but including that point, if there are any risks that you foresee, can you share such risk with us?

[Interpreted] Nakamura-san, can you?

[Interpreted] Yes. Thank you very much, Mr. [ Goto ] for your question. The risks, well, after all, because we are living in a very fast-changing inventory. So if anything, disruptive as the technical innovation occurs and if the current packaging structure changed dramatically and the insulation material like ABF, if the property changes significantly, that could pose a risk for us. The 3D implementation that was raised as an example. In the case of 3D, when -- in order to connect with the motherboard, the packaging substrate is going to be necessary. So multilayer and miniaturization, we will have strength in that. So I think in that case, our presence will become stronger. And also fan-out technology, of course, is drawing attention. Of course, in this case, packaging substrate will not be used, wafer level, panel level fanout will be done. But material for that, we are also developing the necessary materials. And the fan-out components can be installed on the substrate used, developed by ABF. The fanout technology, the ABF flip chip, BGA, just like that, we can address different needs and grow together, grow both of them together, I believe. And another risk is optical transmission. And as I said, we are developing and participating in a consortium, and we were able to identify all the necessary materials at an early date and develop the necessary materials and make proposals to customers. That's all.

Thank you very much, Mr. [ Koto ]. Next question comes from Mr. Yamaguchi from Goldman Sachs -- Ms. Yamaguchi.

My name is Yamaguchi from Goldman Sachs. I'd like to raise a quick short-term question. In terms of the forecast for this year, the 10% of sales failed to reach 10% growth target and the revenue -- excuse me, profit is flattening or leveling off. What is the story behind this? And also, you showed us a graph. In 2022, you expect to -- your sales is expected to grow significantly. What is the story behind these 2 factors? And also, another -- the previous question was regarding any risks that you foresee. Well, sluggish logistics, if you see any logistics issue, please let us know.

[Interpreted] Thank you very much for your question. So in 2021, sales didn't grow as much as 10%. And in 2019 to 2020, between those 2 years, our direct customers, semiconductor packaging and manufacturers, accelerated their CapEx investment. Therefore, the volume grew by 125%. However, in 2021, the substrate manufacturers, their capacity is almost full -- fully operated. Therefore, during the fiscal 2021, the sales growth will be lower than the growth we witnessed between 2019 to 2020. However, during this fiscal year 2021, when the customer further accelerates their CapEx investment to grow their production capacity, then our volume may grow down the road. And speaking of the logistics or distribution, it was hard to maintain the container -- secure containers availability, so we sometimes air-shipped the products to deliver the product by the deadline at customer's end. That is the effort we are taking.

[Interpreted] So speaking of OP margin, could you comment? Regarding the profitability or OP margin, could you please comment?

[Interpreted] Speaking on profitability or OP margin, it touches upon product mix. And during the 2021 fiscal year, new ABF adoption is not forecasted. Therefore, depending on the price fluctuation, the variant will be the volume variant and also switching -- customers switch to new customers -- new products. That may impact the unit price sales as well as GP ratio. But during the 2021 fiscal year, we don't foresee any huge change with the profitability or OP margin. Thank you very much.

Thank you, Yamaguchi-san. The next questioner is from Mitsubishi UFJ Morgan Stanley, [ Puchino ] - san.

[Interpreted] This is [ Luchino ] from Mitsubishi. I'm also responsible for electronic components. I have 1 question. The ABF has maintained competitiveness. But what's the secret behind that in terms of technology or in terms of the relationship with suppliers, I think those are the factors maybe? But also with the pharmaceutical companies, your relation with them? Because when you process the materials, are there any issues or problems? I think you have to work together with the supply chain partners. So from those perspectives, can you elaborate what are your strengths that led to your competitiveness?