Renesas Electronics Corporation (6723) Earnings Call Transcript & Summary

[Interpreted] Now without further ado, we would like to move on to the program. First of all, we would like to have some opening comments and the corporate strategy explanation by Mr. Shibata, the CEO.

[Interpreted] Good afternoon to you. I am Shibata. Can you hear me okay? And can all of you attending via Skype, can you hear me as well? In this way, we have this opportunity for the first time to make this conversation with the analysts. So we'll try to be meticulous and start with the introduction of Renesas, maybe somewhat redundant for some of you, but we would like to begin. So we'll start with the introduction of the company and talk about our philosophy, what are the thoughts that we have behind the management of the company and then we would like to move on to your main interest area, which is the growth strategy for the medium term. We will give you an outline. And then, after that, Mr. Shinkai will provide some explanation regarding the finance, and we will have a deep dive into automotive strategy and IIBU, that are the nonautomotive BU. So there will be 3 people from the automobile -- automotive BU and also Sailesh is also available today for the IIBU. So because we have all these members available, I think we'll be able to resolve all the questions that you may have by the time you go back. So these are the members attending today's meeting from our side. Now without further ado, we would like to start with the introduction of Renesas. Once again, we, Renesas, have started out in this world that everything is connected via the Internet, via the cloud. We are rather focused on the endpoint like automobiles, the robots and their factories. So we have pivoted our emphasis so far on the endpoints. But right now, as you look at it today -- look at us today, a vast -- a lot of these things have been -- we have exposure to the network edges, like the base stations, for example, and further up the stream, we are providing our products to the core part of the network. So compared to a few years ago, if you look at the verticals of our cloud, the shares of our exposure has been expanding over time. And the cloud, in relation to the cloud and driven by the cloud, the demand for semiconductor is continuously increasing. These are some typical numbers. For example, EVs are going to increase. For example, ADAS is going to increase, and the demand for sensors will increase continuously. And the network traffic is also expected to grow. So we have raised all these numbers and these data here. And I think you have heard about these stories elsewhere. And, of course, there are some other elements that are not listed here, and those are sustainable demand for semiconductors. In this environment, we just look at the network vertical. But if you go down to the individual use cases, how these devices are used and the semiconductors are used and now talk about the business that we are engaged in, the society, the real society, which are resident -- which are inhabited by humans and their animals, and they are taking actions, and they are incorporating information and make judgments and take some actions. So sensing is the starting point and moves toward compute and actuate. In this flow of actions, previously, we focused on the right 2 elements, compute and actuate. Those were the focal point of our management in the past. But just like the network, we have been going up the stream, and we are now addressing the sense and move and store actions, and we are able to offer a wide range of products for these needs as well. And the 4 verticals, the end markets that you -- that we have cited here, we are focusing on these end markets and providing our solutions for these markets; automobile, industry, infrastructure and IoT. This is again maybe redundant for you, but we expect a high growth in these verticals going forward. Now for each vertical, what are the sales revenues of Renesas for each vertical? Those are -- that's illustrated in the left-hand side pie chart. Half of them comes from automobile, as you may know. And then less than 20%, industrial; and IoT followed by that. And then somewhat to the north of 10% comes from infrastructure. And on the right-hand side, sorry for this busy chart, but we have elaborated our strength and our positioning. So in each of the verticals, we are well positioned relatively, and we have relatively good strength for each element. Now, again, this might be redundant, but I thought this was very important. So we developed this slide, so that we can have a discussion with you. So the 4 verticals starting from automotives, what we are supplying as product, although we say this is semiconductor. So we've illustrated this in this chart. So the second from the right, computing, microcomputers and SoC, we talk about this quite frequently in our daily conversation. So I think you have a good image of that. But when it comes to other semiconductors, those are also very important for society, and they are heavily used in society. And for our growth strategy for the future, these are indispensable for us. For example, if you look at the far left, sensor, sense itself and also the data captured from the sensor, the conditioners and also the timing devices, there are many devices here, but if we lack even one of them, the signal flow will not establish itself. So we have to -- if you are to provide solutions, taking advantage of the whole flow, we have to have a broad coverage of the entire spectrum. Now the verticals. When you look at these end market, those are the breakdown of the revenues that I talked about. And the products that we provide are also -- was also explained in the previous slide. Now, if we reclassified this in individual products like MCU and analog, this is a breakdown of our revenue just as a recap for you. So, as data, these are very important. But, again, I think this is repetitive, so I would like to skip this slide. Just one thing I wanted to inform you here is that automobile on the left and the right-hand side, the other -- than automotive, IIBU, the product compositions are quite different from one another. Please confirm that. I think when you talk about Renesas, you are always reminded of SoCs and MCU. And those account for the bulk for the automotive business still. But when it comes to IIBU, the balance between MCU and analogs are quite well balanced. And if you look at the overall balance of the entire company, MCU accounts for still a large bulk, but the product portfolio, we would like to reshuffle the balance a little bit so that we will be better balanced in the future. Now, what is the vision of our management of Renesas? I would like to change gears here a little bit. And this is, as you see on the wall of this paper, on this -- of all -- the paper on the wall in this meeting room, we have carried the same message, which talks about our vision, mission and value. In 2016, our global young and mid-tier managers had a very intensive discussion and developed these visions and mission and value. If you look at the vision, this was developed back in 2016. But even in today, in 2020, they still remain very valid. We still uphold the same vision, and I think that's very valid still. As you can see, I took office as CEO in July of last year, but even though the leader changes, we are not going to change the vision frequently. So the vision that was developed in 2016 is still upheld by the company as we run the company. Now still, having said that, what I would like to do as -- personally, I would like to just touch upon that. So there is a common theme that apply to many things that will -- I'll cover later in the presentation. We would like to make things easier, life easier for the society, and we would like to play a role there. So if you look at the photographs here, you'll have an image that we are addressing the end-users and you may think as well that we are trying to make things easier for the consumers. But not only that, our direct customers are usually the B2B customers. So by using our customers -- our products, we would like to make things easier for those people who are developing the products for the end users using our solutions. And we would like to increasingly achieve this going forward. So this is identical to what we call solutions. So we would like to eliminate the need for customers to test everything from scratch. And if it's not going to relate to differentiation, we would like to solve their pain points. So that's the relation that we would like to deal with our customers going forward. Now I would like to move on to the strategy. The slide that you're seeing here, especially analysts, you may recall this, but in the third quarter of last year, when we presented our results for the third quarter, this is the overall strategy of the corporate, balanced growth, diversification. So it's the same thing. So the message here is that our message -- our strategy remains unchanged because it's only a few months. Then, in reality, when we talk about diversification, how much progress have we made so far? Just briefly, let me give you a recap here. Here, in 2016, Intersil -- before the acquisition of Intersil, the revenue portfolio of ours by product, by end market and by the sales channel are described here. But after the integration of IDT, if you compare the same revenue breakdown, you'll see the note -- you'll notice the difference in the pie chart. We wanted to make it identifiable in -- at a glance. But the biggest market accounted for approximately 60% back in 2016, but we have reduced this composition to approximately -- by approximately 10% to around 50% for all of these different classification. So, as for the future, when we realize our medium-term plan that we will unveil to you today, I think the contribution of the largest bulk will come down even further. That will be explained by Mr. Shinkai later. And now I would like to talk about the growth for the future. Just the other day, we announced our full-year results for the last fiscal year. And many of you may have thought that this company is on the defense and that you may have gained confidence that we are doing a good job, a proper job for cost management and on the defense side. So the defense side is okay. That means the challenge for the company is about growth in the future. Maybe I thought that many of you may have got that impression after our results presentation. In 2019, the actual sales was 7,882 oku-yen (sic) [ 7,182 oku-yen ]. And this is calculated by JPY 100 to the dollar and JPY 120 to the euro. And compared against that, the yen was trending slightly weaker to that. And so that will have to be adjusted for when -- as we start this discussion. And a few years ago, we have announced that we are -- we plan to shut down some of the plants. And those products that are produced in those plants will not continue to grow even further. So those were accounted for as EoL, and that's removed from the calculation here. So if you add that kind of adjustment, the starting point will be approximately 100 billion lower than the actual number at 6,204 oku-yen. So that's what we are talking about here, as you can see in this table -- in this chart. Roughly, for the entire company, we are by and large expecting the same as market growth rate, the high single-digit in terms of CAGR. So this remains unchanged from 2016. So the high single-digit growth is expected for the company by and large for each of these business segments. And the periods may well see some fluctuations because the market may be in favor or against our favor from time to time, but this is the number that we are looking at. And if you break down between the automotive and in the IIBU, the automobile will be on par with the market growth or maybe slightly lower than the market growth in some cases. That's what we are planning for. The major factors behind this, as you can see, is that if you break down the automobile -- automotive BU, the conventional -- Yamamoto-san and Kataoka-san's presentation will talk about this as to the gateway control. And -- but those are all included -- blended together, in the automotive control segment. Information below that. As I said earlier, in the previous Renesas, 1/4 of our sales came from this chunk of information segment. But with a strong intention, we are not going to go after growth from this business so much in the future because we have limitations in our R&D resources, and we would like to find that for more strategic purposes. Therefore, ADAS and EV, we will -- in order to achieve growth faster than market in this segment, we cannot take an omnidirectional approach. And, therefore, we would like to articulate and where we are going to focus on. And we are determined to achieve growth in the areas that we have a keen interest to achieve growth. So that is the sacrifice that we are making. And on the other hand, when it comes to IIBU, the 2019 numbers calculation is the cause of this. But, industrial and infrastructure, we would like to achieve growth larger than the market average, and the IoT will be -- we'll aim for on par with the market. So the breakdown of which I would like to talk about in more detail. First, automotive, the launchpad number is 6,204 oku-yen and this is about 3,300 oku for the automotive segment. And we would like to achieve growth on par, in comparable to the market growth rate over the next several years. And how do we do that? The growth driver that you see here is the driver for the entire market. As a matter of fact, the electrification and ADAS are spread and proliferation is going to come. And within that market, we, as Renesas, what are we going to do to drive growth in each segment and outperform the market for some of the segments? That's written on the far right how we win. It's summarized there. I will use several slides to give you more concrete cases so that you can have a more tangible feeling what this means so that you can have a better understanding. But the theme here is that for the first thing, scalable device deployment is what we are aiming for. MCU and SoC, historically, were 2 separate things, but we would like to connect them seamlessly between one another. And the analysts like yourselves, I think you are well-versed in this, but when it comes to automotive, ECU may be consolidated, and that number of MCUs may come down. That's been discussed. And I think we are -- we agree with that direction. But it's not that it could be replaced with a single supercomputer. Rather, the ECU structure, which is like a -- spaghetti today will be streamlined in the future. And we -- as an aspiration, we would like to drive that streamlining process. We wanted to declare that. But the theme today, it's not that we are going to speak big about the future, but we would like to deliver results first. So we'll try to be modest. And in the streamlining, we would like to catch up with this trend of streamlining and provide a proper solution that is aligned with that trend. And the second point is about ADAS. So the coverage of autonomous driving, it's not like -- I'm not trying to go into full lineup, but then something close to full lineup is something that I would like to create. What am I saying? So at the moment -- ADAS/AD is at the moment pretty much scattered, and it's not really having a momentum. And so a lot of users will be integrating on their own. But then that takes a lot of effort, and it's not exactly sustainable. That's how I look at this. And like convention applications, I'm sure there are a lot of activities that's going to be outsourced or packaged. That's probably what we will be seeing in the end. When that happens, Renesas, historically, we did ADAS, but then a lot of the things [ were around ], camera and vision, we're so much focused on those 2 areas. And if we keep on taking that approach, we wouldn't really been able to go into that next ADAS. Why? Because if we wanted to offer a solution, we don't exactly have the right wingspan yet. And I'm sure you'll be able to look at it more. But, of course, we'll be looking at the [ spring ] part of this ADAS effort. But then we're also going to take a different approach, a pragmatic approach, if you will; for example, radar or lidar and other sensors as well. So that's something that we do want to make sure that we'd be able to offer on a near full line as part of the solution we can offer. And also finally, in 2017, when we acquired Intersil, this is something that we said ever since then, but combination with analog, the solution and synergy, that's something that we do want to make sure we'd be able to do it in a more full-fledged manner. Next is about IIBU, that's industrial infrastructure and IoT. So, again, the starting line. So that's the 2019 adjusted figure. Now for here, compared to automotive, you can see that each of the verticals are balanced -- are going to find a balanced growth. The driver for the growth, again, it's not exactly something new. In other words, automation and factories or 5G, data center or IoT. So these are the things that, yes, we all know. But then what's important is how Renesas be able to lead the industrial growth. And so that's what I wanted to summarize on the right-hand side. So one thing, this is something that I'm sure everyone will be saying, but it's really about having a differentiated technology and offer scalable solution. And I will offer some examples later on. Second is about winning combos or winning combination. You're going to hear a lot of that. But, again, Intersil, IDT were strong in this analog mixed-signal, and we, Renesas, had been strong with digital computer device. And so how to have a good combination to have a winning deal. And nonautomobile area, because of the characteristics of the market, we can make sure we'd be able to have a good growth drive faster, which is going to be a very important pillar for us. The third, again, it's going to really be different from the previous Renesas, but it's really about enhancing collaboration and partnerships. Of course, we did like speak about make or buy. And it's not that Renesas always stuck to having everything from inside. But then, of course, even if we try to do it we found that there were a lot of [ lacks ] of capability. And I don't want to say we were just flagging ourselves without doing anything, but I think that sort of explains what we have been doing in the past. But then IDT, Intersil members, they have all come in the group. And so I will be touching upon this later on. But our silicon base has become much larger. And we do believe we are able to really exchange our capabilities much better now. My final point, again, just like the winning combo, it's a very important synergy theme. But then how to broaden our go-to-market, not just Tokuyakuten or Renesas sales force, not just relying on these sales team. We want to go into a more broader global distribution so that we'd be able to have a strategic partnership with these people. So to our conventional account customers, we'd be able to offer more solutions. But not only that, we also want to expand our reach to more other new customers as well. So that was a really high-level summary of what I wanted to do. But then, in order for you to understand this a little more, I do have some specific examples that I'd like to introduce. Now this is the strategy matrix that we always use, vertical, you see the end market. And then on horizontal, you find products. And to make sure you understand this, what we have here is not our entire picture of our growth. That's not it. But then it's really a matrix so that you'd be able to understand what I meant. It's like an illustration to better show what I have been saying. So first of all, on the automotive. So, again, scalability is going to be what we're going to be focusing on. So, again, you see the time frame, horizontally and vertically. You see the performance. And you find that we start from the very primitive MCUs. And the more you go, you have more -- for example, more complicated SoC. And if you see these white areas, it -- or noncolored areas, it shows some of the lineups to the current generation. For example, if it's MCU and SoC, I mean, you can see that it was pretty scattered and separate. Now this is one difficult part about automotive. For example, the driver of our revenue is this current generation. And actually, the generation before is also where we're finding growth at the moment. So this white area is actually what we're seeing generate revenue at the moment. So there is this sort of a time gap. So the timing of take off and when we start working would be a gap. And then we have the next generation, the next-generation device families. ADAS/AD device lineups that I mentioned earlier, this is where we want to have some scale-ups like SoC. So this is exactly where we're going to be fulfilling more applications other than cameras as well. And if you also look at the bottom, you can also find some of the cross domain areas like domain controllers. Some high-performance MCUs is what appears here. And even on this part -- even in this part, again, if you wanted to have more convenient life for our customers; for example, some of the -- for example, sharing IP is something that we've been working on. And I'm sure you'll be able to hear more details from Mr. Kataoka. But then in the next generation, we're going to be looking at device architecture, but then it's really going to be seamless scale-up. So, for example, electronics or electric architecture, it's all going to be streamlined at this pace. And we do want to make sure we'd be able to lead that move. And at the same time, we also want to make sure that we'd be able to make the lives of our customers even more easier. The differentiation would be in the performance and function. So if we'd be able to cater to that need in terms of the products and product lineup, that means we would not really have to work on rewriting the entire software. And that would enable us to have a very good scalable lineup of products. On the right-hand side, these are the winning combinations. For example, PMIC. This is when we have been saying ever since we acquired Intersil back in 2017, so we're finally able to materialize what we have been saying. And also, BMIC is very similar. But then we also have a demonstration exhibition. So for the battery management, we have this very -- battery management, IC and our MCU have been sort of fine-tuned so that we'd be able to offer this battery management solution. And by doing that, we believe that we'd be able to make the lives of our customers much easier and at the same time help our customers have their products with better function, and we should be able to show how we'd be able to differentiate ourselves. So, again, the scalability and winning combos. Now, of course, we -- when it comes to ECU, streamlining, ideas and plans, this is something that we do want to make sure we'd be able to focus more on. Now I know I don't have much time, so I'm going to just skip this slide. But the theme, what I wanted to say here is pretty much the same. But the one thing I would like to add, for example, on the right-hand side, radar/lidar. It's exactly where we do want to collaborate with others. So analog, wireless, IC. This is something that outside our partners be able to make or would be able to use IPs of our partners. In other words, we want to have a good partnership in offering the right solution. So this approach, it's not something that we had been that proactive with. In other words, for Renesas, it is going to be a new approach. And we do want to do more of this, so that we'd be able to have a full lineup of our ADAS products. Next is for the industrial. I'm sure you'll be able to hear this from Sailesh later. For example, on the left-hand side, this is the scalable MCU or MPUs solution. And before, there were some gaps every now and then. And MCUs, we would have our computing course. And SoC, when it comes to high-end SoC, we leveraged what we have with automotive side. So it was more like a patchwork. But then from last year, we have RA, a high-performance MCU, ARM. And this is something that we have been able to adopt in our ARM and SoC or MPU. Even inside MPU, we wanted to focus more that would cater to the industrial needs. For example, graphic function or Linux support. That's something that we wanted to focus more on. So even from the industrial customers, we'd be able to have a very seamless offering. It enables us to offer a device lineup that is easier to select. Differentiating technology is what we're trying to say on the right-hand side, so HMI solutions. And, for example, AI function. So it's not just edge, but at the endpoint, you'd be able to operate AI and reference design or to be able to offer such products, we'd be able to capture in the market that our customers would be working on. It is something that we do want to do more. And I will be skipping slides from hereon. Now 5G and data center. It's not like we're going to take a totally new approach here. We had seen a very good growth, fast growth with the team, and we hope to be able to just push on the good growth that we're seeing. As for IoT, we want to make sure that we'd be able to work more, more than automotive in terms of partnership. So, for example, connectivity, we do want -- it's an example of where we have been really proactive in partnering with others for the IP, and there already had been some announcement of Azure partnership. So that cloud partnership is something that we're trying to work with. So we are going to be very proactive in having a partnership within that ecosystem. But, again, it's also that we'd be able to have the lives of our customer easier. We want to make sure that people will not have to work each of the things separately. We want to have everything seamless. So I know I have been really speeding through. But again, it's really the solution offering, so that we'd be able to make the life of our customers easier. And it's really about how we'd be able to offer things in a more scalable manner. And so that's exactly something that we want to do and we want to keep on doing in having -- in offering the device family and our solutions. Now, to do that, is the company going to change? So I'm going to use this slide to just briefly explain that. Now jumping to the conclusion. I'm not really thinking of changing this just 180 degrees. But then there are things that, yes, I do feel that we do need to change, and I do want to make sure we make this change happen. This is something that I had -- we had already been saying. But then for targets, we don't -- of course, there are -- of course, it makes sense if you wanted to have a very stretched target so that we'd be able to motivate everyone. But then we'd like to make sure that our target is something that we can achieve. And this is something that is reflected in the revenue growth that I've already introduced. And it says here, make or buy, in the middle. It's really about working with others to have a partnership. It's not just about trying to provide everything internally. It's really about doing this make-or-buy approach so that in the end we'd be able to offer what is needed by our customers. And also the final point here is accountability. Again, this is something that we have touched upon every now and then. But from Q3, we have decided to disclose our segment information. But we'd like to continue this initiative. So we do want to respect what BUs -- each BUs are doing. And so we're going to have a more BU-oriented approach. And so that is why you'll be hearing more from ABU and IIBU, and I'm sure you'll be able to feel what our intentions behind this are. And also, as the company as a whole, again, if we're going to set a target, we do want to make sure we'd be able to show you the result. That's what I strongly want to make it happen. And so again, you may have realized that I'm not really talking too much about aspiration, but it's really because this is what I want to do. If possible, of course, it'd be better if we'd be able to achieve the target faster. And the next time, I'd be able to speak with you, I hope you'll be able to feel like I'm talking in a more motivated, forward-looking manner, so again -- the financial model. So again, here we have the 2019 adjusted figure. I mentioned that this has some adjustment like EoL, et cetera. Now gross margin, there's also -- we also have incorporated EoL. In other words, EoL part has been excluded. But then, you've heard from Mr. Shinkai earlier when we announced -- disclosed our numbers. But we're going to be doing some reclassification. For example, what we just lumped all together as SG&A, we're going to reclassify this to like either CoGs or R&D. And so this 43% gross margin includes that adjustment. Top line, I've already spoke a bit earlier, but we do want to make sure we'd be able to grow at the speed of market plus. And again, you may have seen this, but we're going to be targeting a 50% margin. And Mr. Shinkai will be touching upon this. But then when it comes to R&D, we don't want to constrain, have any constraint there. But then for SG&A, we do want to control this one notch more so that in the end our operating margin would be increased. Now when we created -- compiled our plan for 2016, we're saying that this SG&A, top line, itself is going to go in part. But now we're trying to make sure we'd be able to control SG&A. Now how can we make this margin expansion happen? I'd like to rely on Mr. Shinkai to explain more on that part. Now, also, the integration with IDT, allow me to review this a little more. So I'm going to be skipping this page, but I'd like to just explain to you what kind of impact we have been seeing. First of all, the first and foremost, cost saving is the one important thing that we have to achieve through M&A. On a run rate basis, this -- we've already been able to save $85 million already. This is something that we've been able to do from Q2 and onwards. And so if we try to put it in this diagram, it's almost like a triangle figure instead of a bar. But, of course, if you look at the triangle, it's like half of that $85 million. But then, even if we stop the entire synergy, we'd be able to see the impact of $85 million fully in this year. Now this year, again, of course, we're going to keep on working for cost savings. At the moment, the end run rate for 2020 is $120 million amount of synergy, in other words savings. At the point of acquisition, what we announced was $90 million plus. But then, that was a different year. And so back -- if we try to translate that into 2020 using the assumption back then, that would be $80 million. So compared to the previous target, that means we currently are able to outperform by like 1.5x. If you'd be able to compare our SG&A, I'm sure you'd be able to feel how tangibly we have been able to reduce the cost, and I'm sure we'd be able to prove that to you with our numbers. Now how, how we've been able to do that? So there are several elements that I have wrote on the right-hand side of the slide. I hope you'll be able to look at it later. But then one other important thing is about the revenue synergies we'd be able to have through the acquisition. So, again, deeper and broader, that's the revenue synergies that directly ties into our strategy, so boost sales per existing customers and also win new customers. That's about deeper and broader. But what are the solutions? What are the weapons to do that? It's, for example, offering this winning combination like analog and mixed-signal and digital, the combination of the 3, so that we'd be able to offer the right solution. And also -- and for broader, it's about new customer acquisition. After we've been able to acquire IDT, there's been 3 quarters. And when we revisit what we've been able to do, this is what we see. So for winning combination, we know that we've been able to go in from design in. And we already have been able to see $130 million -- approximately $130 million of achievement. So design in, it's a lifetime value. So it's not that we see this $130 million coming in directly to this year's revenue, but there are -- some will, but some you would have to wait a little more. And some would be some items that you'd have to wait several years before you see it. But then we do want to make sure we'd be able to accelerate our achievement, our growth so that we'd be able to see more impact of this winning combination into our revenue. And as for the new customer acquisition, we know we already do have almost like 12,000 new customers already approximately. And if you look at our website, you can see who would be our customers. And I was hoping I'd be able to introduce some of them to you, but I don't have time at this moment. So I hope I'll be able to sort of give you the flavor with this slide. So again, we do have in our website some of the case -- specific cases. So I hope you'd be able to find some time to sort of click into our website so that you'd be able to sort of understand more our block diagrams or some of the examples. And it really looks different from our previous web contents. In addition to that, especially now, for example, we have Sailesh, but we've been able to have IDT members come in, Intersil members come in. And there's actually this great impact of this cultural fusion, which is a very qualitative aspect. We do believe that about a quarter of the managers are from the former Intersil or IDT now. And you may remember this, but Intersil and IDT, the individual financials were like gross margin of over 60%. Or even in OP margin, it would exceed 20%. It was like closer to 25%. They already have this financial discipline. And of course, just 1 or 2 of these members may not have an impact to Renesas, but then because we have like 1/4 of these member in above the managers that sort of changed the entire financial discipline within the entire Renesas and also make or buy the collaboration that we're trying to do. Of course, Shenzhen in China will be very important, but then Silicon Valley is something that you cannot ignore at the moment. We have 800 head counts in Silicon Valley. Now 800 may not sound large, but we do have 800. And so through these 800 members, we want to really go into this growing market so that we'd be able to introduce more of our appealing products. That's exactly what I want to make it happen. So I know I have been really speeding through, but here's my summary. So again, I do believe we have great products, and we have this great portfolio, so that we'd be able to tap into our verticals, the end market. And I'm sure you'd be able to agree -- I hope you'd be able to agree to me and -- agree with me on that. And this is exactly where we want to leverage our capability, our technology so that we'd be able to address the verticals for the high-growth market. And we want to make sure we'd be able to emphasize more on achieving a result -- on delivering results. And, again, I want to make sure that I'd be able to make the lives of our customers and end-users easier. And if we'd be able to do that, we'd be able to create growth for ourselves. So that ends my part. Let's move on, and I would like to invite our CFO, Mr. Shinkai, for the financials. Thank you.

[Interpreted] Now we'd like to move on to the presentation by the CFO of the company, Mr. Shuhei Shinkai. He will be introducing the finance of the company.

[Interpreted] Good afternoon. I am Shinkai, CFO. I would like to talk about the finance. Roughly speaking, I'm going to cover 3 major topics. One is the achievability of the financial targets that we announced in 2016. Second is the new financial model and the details of that. And number three is about the -- how to enhance our shareholder returns and the measures that we are taking in order to achieve that target. First, I would like to talk about the attainment of the medium-term growth strategy and the financial numbers. As you can see here, the top line growth in the focus areas, we wanted to achieve double the market growth in the focus area, gross margin of 50%, OpEx, the numbers here are approximately 30%; and the operating margin, more than 20%. That was a number that we have declared in 2016. And what are the track record up to 2019 are presented on the right. In the growth areas, between 2016 and '19 was 7% versus a market average of 6%, so we have not been able to achieve 2x the market growth. Gross margin, due to the -- even after the impact of IDT, consolidation was 44%. OpEx was at the upper side of the range, but was 13% as a result because of 31% in overall. So gross margin had a large deviation vis-à-vis the targets. So what were the factors that led to this shortfall? Let me just recap on that. On the left-hand side, this is the target model back in 2016, and the 44%, we wanted to start from that and go to 50% over the medium term. And there were 4 major components to achieve that according to our plan. But the track record of 2016 was 44%. Therefore, the progress of the planned numbers and what kicked in, that was unexpected. Let me explain them to you. On the right-hand side, you see the 4 major planned boxes. The Intersil consolidation was completed as planned. Product mix improvement, this was an issue back then, which is the low gross margin products. We switched them to the new generation product then made a good progress in eliminating this low gross margin product. Three is the manufacturing optimization, and we try to modernize and streamline our production and also close the 6-inch fabs. And including all these, I think we are making a positive progress and making a positive contribution to the gross margin improvement. And when it comes to revenue growth, we were not able to meet the 2x market growth target and went short -- and fell short of that. So those were the progress of the planned initiatives, but there were also unplanned moves -- developments. One is the excess capital expenditure, especially in 2017 the front-end capacity increase investment was done excessively as it turned out, so the depreciation had a pressure on the depreciation -- on the gross margin. And that was a negative contribution to the gross margin. And next to that is the excess inventory. The adjustment was completed by the end of December 2019. However, for that adjustment, we also had to adjust the manufacturing. And, therefore, that had a negative impact on the gross margin. And on the other hand, when it comes to IDT, we integrated IDT, and that was completed in 2019, and that had a positive impact on the gross margin. So, as I just mentioned, there was the sales growth -- revenue growth and excess capacity and excess inventory. Those things had a negative impact on the gross margin. And therefore, we -- the actual for fiscal '19 was 44%, far below the target of 50%. So what -- based on the reflections and the learnings from this, in the new model the revenue growth and operating leverage, we are not going to rely too much on that and still achieve an improvement in gross margin. That is the plan for the coming years. For the gross margin, that was all my -- that I had to comment on. But on the other hand, what we were able to achieve in the period between 2016 and '19 are illustrated here. These are the successful factors. So let me share them with you. On the first one, this is fixed cost, and this is the -- we have succeeded in suppressing the regular cost, and also we are able to achieve the synergies with integration with IDT and others. And we also implemented early retirement program. So even after the 2 acquisitions, we were not able to -- we did not increase the fixed cost significantly. The middle part is inventory. And since 2017, it remained at high levels. But by the end of fiscal '19, we were able to streamline it to a very lean inventory level. So -- and in addition to that, we improved the demand forecast accuracy and shortened the decision-making chain and also improved the flexibility of our procurement. So as a result of these, inventory is quite well under control right now. And CapEx, the third point, as I said in the previous page, in fiscal '16 and '17, we had a huge amount of CapEx outlays, but since 2017 and onwards, and '18 onwards, we suppressed the CapEx level quite significantly. And we introduced internal KPIs to monitor CapEx and improved financial validation and managed to control the CapEx within the target range. So with all these 3 points, although it took -- some of them took time, but we were able to put them under control at the regular level as of the end of 2019. And I think this will continue to be on the track going forward. And as a result of that, what happened to free cash flow? As a result of controlling fixed cost, inventory and CapEx, we controlled them very tightly. As you can see there, EBITDA, and for the last 3 years, remained flat. However, the free cash flow continued to improve constantly. In 2019, free cash flow, in terms of absolute amount, was JPY 140 billion, and which amounted to 20% of our total revenues. And going forward, we will focus on EBITDA as well as our financial -- our free cash flow as we manage our financials going forward. Now I would like to talk about the new target model -- target financial model for the future. And as Mr. Shibata covered in his part, and this is the same slide. And the starting point is the adjusted numbers after -- for 2019. So that's the starting point number. Over the long-term, automotive, industrial, Infra, IoT, those are the 2 pillars that we'll be focusing on. And we have targets for these pillars. And then as a blend of that, we have set the corporate target. For automotive, the revenue growth is the same as comparable with the market, and the gross margin will start from 40% today. And over the medium term, we would like to aim for 45%. In operating margin, we are currently at slightly less than 10%, but we'll try to improve this to 10% to 15%. Industrial, infrastructure and IoT, revenue, we would like to achieve a higher than the market average. And for gross margin, we're starting from slightly less than 55% to over 55% to 60%. And then operating margin will start from less than 20% and aim for 25% to 30% range. Corporate. Overall, we would like to achieve revenue growth higher than the market average, gross margin 50% and operating margin over 20%. So the revenues composition to achieve this. The automobile -- automotive, ADAS and EV, we are going to expand our exposure in these businesses -- to these businesses. And for finance wise, those are -- factors that will affect the product mix will be SoC for data and for EV, IGBT. Those will be the -- though -- and other power products are going to increase. That is what we are going to focus on for industrial and infrastructure. In the industry area and BU and infrastructure, 5G and data center analog, those will be the products that we are expecting to increase going forward in terms of our composition. So overall, other than MCU products, are expected to grow over time. And therefore, we'll be able to achieve a diversification of the portfolio over the medium term. That's the basis of our plan, and that's reflected in this pie chart. So on the left-hand side, you see By segment. At the moment, we have like half portion for automotive. But -- and then in the mid -- long-term, we do want to make sure that we'd be able to expand this industry, infrastructure. IoT would also be on par with automotive. But then, if you look at the right-hand side, By product, MCU proportion at the moment is [ 51% ], which is going to decrease, proportionally speaking. But ADAS or MPU, in other words, SoC proportion is going to increase in long-term. And infrastructure, that is going to grow. And so analog itself is going to maintain the same proportion. But then, of course, that means the scale itself is going to increase. But power, there's going to be IGBT for EV. So those would be some of the examples that would boost up the proportion of power. In other words, if you look at this, anything you -- and so it's -- we're not just going to rely too much on MCU for autos. We're going to have a lot of product portfolio, and that is going to be seen in the product mix. This change in the mix is also going to improve gross margin. Now for gross margin, again, these are the steps that we want to take to achieve the target. Starting from left, that's the 2019 adjusted figure, that's 43%. There's going to be 2 adjustments from there. First is about the IDT consolidation. In other words, it's going to be coming in for the 12 months period. And also, the inventory adjustment has already been ended. And if we'd be able to put that numbers back, that means our real capacity at the moment, the current run rate is going to be 45%. So this is where we'd be able to start ourselves with. From thereof, we're going to see 4 major activities, items that happens so that we'd be able to achieve 50%. So first of all, depreciation scale down, 2016 and 2017, we know that versus sales, there were CapEx. The CapEx ratio was 10%. But then from 2018 onwards, this has been controlled very tightly. And because of that, even for depreciation, we know that 2019 is going to be the peak. And from 2020, depreciation is going to decrease. So we do believe we should be able to achieve this decrease of depreciation. Next is structural reform. So again, this is something that I did mention from 2016 revisit. But then some of the 6-inch, some of the scale downs, we'd be able to do this more, and we'd be able to reduce some of the production costs. And that's something that we can achieve. And then is -- and then the next part is product mix. This is something that I did speak in the previous slide. But then there is going to be a great change in the overall product portfolio, and we'd be able to enjoy an improvement in the product mix. The final part is volume and others. Now it's not that we're relying too much on the scale increase. What's different from 2016 is we don't rely too much on operating leverage. What's the background? So, again -- what is going to impact the gross margin? So, again, the front-end product mix -- production mix. First of all, starting with in-house portion. At the moment, we are expecting this current in-house scale is going to be maintained. Of course, the utilization would fluctuate. But then, overall, we are trying to maintain this in-house scale. But then, there are going to be, for example, like the foundries parts that we want to increase. So, again, in the long-term, in-house portion will maintain and will be maintained. In other words, there are going to be -- we'd be able to control where we need to implement CapEx. There are a lot of products that we want to do with in-house; for example, Legacy or anything around IGBT or Power Discrete. This is something that, yes, we want to keep on doing this in-house. But then when it comes to IGBT, are there going to be main tenants, capital expense? Turning to the foundries part. This is going to increase. And that means the variable cost proportion is going to increase. Operating costs, of course, will be diluted. And that is what we are going to find in the front-end production mix. That's also related to what I mentioned in my earlier slide, that we're not going to rely too much on operating leverage in achieving our gross profit. Next is about SG&A. It was 14% in 2019. But then, again, what was in SG&A; for example, CoGs and R&D, we're going to reclassify some of the costs to the production side. That means the 2019 adjusted figures would be 12% rather than 14%. So we are trying to make sure we'd be able to see an improvement. And where can we do that? First of all, it's about logistic cost, anything around IT or IT spend and G&A outsourcing spend. I think there are potentials for us to be able to do better in these areas. For example, Intersil, IDT, this is an area where we'll be able to enjoy the synergy, especially in the long-term, cost saving synergy. This is something that we'd be able to reduce in the long-term. Of course, it's not exactly an area where we'd be able to reduce immediately, but we're trying to make sure we'd be able to lower down the entire SG&A in the long run through these 3 elements. And once we lower this, we want to maintain this. So the more we see the top line grow, we want to make sure that we'd be able to keep this SG&A level. In other words, the proportion of SG&A is going to decline in the long run. That is what we're trying to do. My final part is about shareholder value creation. Because what we're going to be doing, what I have been explaining is really about making sure we'd be able to create shareholder value. Now, first of all, we have a slide on equity value, the model or the trends. At the moment, Renesas share price, I do believe, is more undervalued. But if we'd be able to implement several initiatives, we'd be able to enjoy more upsides. We'd be able to materialize that. The point in making sure we'd be able to have better equity value, I think there are 3 buckets that I can point out to or steps. First is sum of the parts. In other words, creating value by changing how people would see our company. And then through -- this is deleveraging. By making sure we'd be able to have more free cash, we'll be able to enhance our corporate value. The third is about the revenue growth, so that we'd be able to have an increase in equity value. So it's these 3 areas. So the first, how people looks, assesses the current business. We -- if we'd be able to change this, there are going to be some upsides in the value and see -- people regarded Renesas as more MC or automotive. But then, we'd be able to show other parts that we'd be able to do. And if we'd be able to show the appeals of that, I do believe we'd be able to enhance our validation. And this current intrinsic equity value includes that sum of the parts. And I think this current intrinsic in equity value is exactly our current value. And there is already this JPY 140 billion of free cash flow. That was to be like 10%, but then if we'd be able to do the deleveraging on 10% level annually, that means we'd be able to see the market cap increase. Of course, theoretically, we'd be able to increase our market cap by doing that. But this is something that we can do on a short run. And within the management team, this is an area where the CFO, myself, will be responsible for. So I'm going to be focusing on these 2 blocks so that we'd be able to enjoy the upside potentials. The third block is something that we're going to be doing more. In other words, I'm sure you'd be able to see, after you'd be able to hear the presentation from IoT infrastructure business unit, that this is really going to happen. So the second box, in other words, deleveraging. I'd like to add a little more on that. Now already, the actuals from 2019. I think the confidence level is something that would sound convincing. In 2019, December, the net debt per EBITDA, the multiple is 3.2x. And what we're trying to do is, in December 2022, we want to bring it to under 1x. That's what we're trying to do. And also, I'd like to add a little more about the first block that I mentioned, it's the sum of the parts. In 2016, in the midterm plan, when we disclosed that, we've always been saying that we want to tap into a new vertical. That would be about analog, and that's something that we have been working on. And you know that the 2016 product portfolio, we've changed from there, and we are going to keep on changing. And so proportionally speaking, the MCU automotive proportion has become smaller. We have -- we are catering to more verticals. We have more products now. That's exactly something that is the passage that we have been paddling, and this is exactly the route that we want to keep on doing. On the other hand, try to base from the perspective of current share price, please look at the right-hand side. So again, EBITDA is approximately 2,000 oku-yen, and there's a 10x multiple. And that's how we look at this. Now this 10x of the multiple, I do believe this enterprise value really comes from the automotive side. In other words, people think of the entire Renesas as auto -- automotive. On the other hand, for example, for automotive, I'm sure there's this automotive part of the multiple. But then industrial, infrastructure, IoT, there will be the analog multiples. And if we try to apply that, this is exactly what you find on the right-hand side. In terms of the contribution of EBITDA, I do believe it's really half-half, maybe industrial side will be larger. But really, it's a good balance between automotive and nonautomotive side. And if we'd be able to apply each of the multiples, I do believe the entire corporate multiples would be x14, the multiple should be 14 on a weighted average basis. So of course, in order to make sure we'd be able to materialize this enterprise value, we need to make sure we'd be able to explain ourselves more. And for analysts, to you, we ask you to please tell our message to each of the investors you'd be speaking with. Here's my summary page. In order to maximize shareholder return, these are the things that we want to do. First, we're going to commit to the results. It's, of course, first of all, we're trying to show you some achievable financial targets. So first and foremost, we have to make sure we commit to the results. And also to be more specific, we also want to focus on cash generation. It's about EBITDA, free cash flow, those will be the KPIs that we want to emphasize, so that we'd be able to enhance shareholder return. Investing for growth is something that we want to keep on doing as well. As for shareholder return, we want to have optimizational leverage. We want to make sure we'd be able to invest for future growth, but we want to be very agile. We want to keep an agile attitude. In other words, we will be focusing on, for example, buybacks instead of just focusing on the dividend payout. So that concludes my part. But before I close, again, I do believe it is going to be important that we achieve what we say we will in the financial target, especially in terms of maximizing shareholder return and value. So this is something the management, the team will be focusing on. So thank you very much.

[Interpreted] Now we would like to entertain the questions. [Operator Instructions] Now any questions from the floor?

[Interpreted] I am from -- Miyamoto from Mitsubishi UFJ Morgan Stanley. Regarding Page 4 of the finance presentation, and I do understand visually from the different colors, but this gap between 44% versus 50%. Can you give us the contribution of each initiative to this gap of 6%? That's my question. And also, the revenue growth is in a negative territory. So Mr. Shibata, can you answer what failed for you to deliver the revenue growth? That's the question for Mr. Shibata. So can you answer that, my first question?

[Interpreted] Regarding the first point, the first half of your question regarding the gap between 50% versus 44% of the actuals of the gross margin, I think you're asking about the contribution, the plus and minuses for each initiative. So one plus mark indicates 1 point and one plus mark, a negative mark, a minus mark, accounts for 1 point. I think that explains -- that answers your question, and that will add up to 6%. So in terms of top line, I'm very shamed to share this with you, but as we deploy many different products, to be honest with you, that was a very selfish deployment in a nutshell. We did not really have a quiet, a calm analysis on the market environment and market demand and the competition's moves and the -- not only the prices, but also the value-added by each product. We just repeated an unsuccessful practices many times. So we had an R&D pipeline back then, but the revenue plan and expectations -- we had revenue expectations for that. But the R&D people, we conducted R&D and release products, but the revenue came in much shorter than our earlier expectations. That's what we have to reflect upon.

[Interpreted] My second question is about your competition. Can you give us your overview? I think later on, we'll be hearing about the more detailed presentation regarding automotive and IIBU, but when you look at the overall state of competition, especially the semiconductor players in China are going to grow significantly as a supply in the future, so what is your view regarding the state of competition? And how are you going to see these changes over the next 3 to 5 years? Can you comment on that? That's my second question.

[Interpreted] We are expecting a huge change over time. There are several factors behind these next 3 to 4 factors. I'm not going to preach on a Buddhist, but -- on a Buddha, but due to this unfortunate relationship between U.S. and China, Huawei is very conspicuous in that they are giving priority to local suppliers, and that's already a phenomena that we're already seeing. So even if the solution performance, even if there's a difference, the local players are given a priority, and that's one driver behind this. And the second thing is about the Chinese suppliers' technical capability, technical prowess is coming up in the -- as a starting point. And the third point is that the Chinese suppliers, given the geopolitical landscape today, they are now having access to easy-to-use IP. So all these are now serving as a tailwind against the Chinese players. But [ there is ] 5 MCUs, I think those are easy to build at the moment. But -- and because of that, we are not going after device stand-alone and dependent so much on the digital. We are now going to shift that and take advantage of analog mixed signals, so that we can differentiate ourselves through solutions. That's the change of focus, and I'm not going to preach on the priest, but I think analog is going to be increasingly difficult, because even the same person wants to produce the same thing, the tools will be different. The facilities will change, so we won't be able to produce the same thing. So therefore, the analog -- by increasing the proportion of analog in the total portfolio, we are going to produce something that cannot be mimicked immediately and defend our position and then achieve a competitive advantage. That's our strategy.

[Interpreted] A point of confirmation. So regarding your growth plan, the Chinese players, the moves are already factored in, in your growth plan. Is that correct? So your -- Renesas' growth over the market average is already factoring the Chinese players?

[Interpreted] Yes, whatever that can be factored in is already factored in.

[Interpreted] And my third question is about your capacity. You presented your -- today's capacity, and you are going to maintain the in-house capacity unchanged, and the utilization rate today is already low. And is it okay that you go -- will stay and maintain the current level? Even on your balance sheet, isn't it -- does it make sense to reduce it further?

[Interpreted] In terms of utilization, of course, this is affected by the cycle, and it could go down and up. But on the 6-inch fab shutdown is now making progress. And so when that is accounted for, the overall capacity will come down, but still, yes, there are some extra capacity that are redundant. And what to do about the fixed cost for that? We need some strategic measures for that. And that will be studied separately.

[Interpreted] My name is Yasui from UBS. My first question is about gross profit improvement. You said you want to improve this by [ 10 ] percentage points. But then the CAGR of revenue, I think that was 7%. [ In semis ], of course, you'd be able to improve the margin if you'd be able to increase the top line. Now in the picture that you showed us, I don't think you really included about the scale impact. But then, do you want to increase the gross profit even with the -- without the top line? Or are you trying to make sure we'd be able to grow the top line?

[Interpreted] Yes. So what we -- so if you'd be able to look at the 2, for example, product mix, if the sales increase and the analog side, for example, if we'd be able to see more sales on the analog, of course, that's something we want to factor it in, of course. So that's a part of the sales we want to increase. But then volume and others, this is another area where we are relying on increase of top line. So these are the 2 areas that we're trying to rely on top line growth. But otherwise, we're not really relying too much on top line growth.

[Interpreted] So if I may confirm. So in that case, the scale advantage, for example, the final 2 that you're saying here, what is your idea about how you generate revenue?

[Interpreted] So the sales assumption is something that we already introduced. So CAGR 7% or a little more than that is something that we want to achieve.

[Interpreted] So with 2 years, that's 14%. And then 3 years, 20%. And once you achieve that, you'd be able to see this increase by 2 percentage points?

[Interpreted] Yes. And also, it's going to increase by foundries. That means we're going to see some variable costs. So the marginal profit is not really going to improve.

[Interpreted] My second and my final question as well. You mentioned about R&D. You -- Mr. Shibata, you mentioned that there's a lot of development initiatives. And at the moment, especially for the automotive side, you have a lot of initiatives, that is going to go all the way to 2023. But this world of auto really changes. But then you expect that in the world of 2023, the CAGR of 7% to 8% is something that you expect, and you see it quite visibly right now?

[Interpreted] It's something I would not really be able to say at this point. But I think it's this year that we really don't have visibility. We have this coronavirus. And so the demand and production, how much of this is going to decline is something that we really can't tell at this point yet. But then again, I mentioned 2023. But I'm actually looking into like 2024. I think that's really the time of the take off in reality. But if you look at the time horizon like 4 to 5 years, the market CAGR that I mentioned, we should see it happen.

[Interpreted] If I can add another question. What about the number, the volume growth? Like content per bar -- per box and the unit growth? How do you see that when you're saying this CAGR growth?

[Interpreted] So contents, like 100, and otherwise it's contents.

[Interpreted] Next questioner, the person in the front row, please.

[Interpreted] Merrill Lynch. My name is Hirakawa. I have only one question. Well, it could be divided into 2 parts. But in the first part, as Mr. Shibata mentioned, the management, 25% of the management team are from the IDT and the former Intersil. So for the future direction, what are your focus point for the future? Do you have any ideas about that? And my second question is about your -- as you exit, I think you need more -- in order to execute your plan, you have to have more researchers and developers. As CEO, what kind of engineers would you like to attract to the company? And what kind of measures are you going to implement in order to attract those developers and engineers? Can you share your views on that?

[Interpreted] Are you asking whether we are planning to increase those managers from former Intersil and IDT? It doesn't really matter to me. The current proportion will be okay if we're not going to see a huge plunge in the percentage of those former Intersil, and former IDT. It's not that we are doing changes because for the sake of making up the service. But to be honest with you, I don't want to really be bound by the nationality of the people. So we have done -- the reason why we're using this English document despite the majority of people being Japanese here is because of our intention to diversify our workforce. As I met another CEO from another company the other day, it's very difficult to [ permeate ] the Japanese business philosophy to the foreign people, but we are developing our materials from English from the beginning. So we are not translating Japanese into other languages. So we don't have that kind of setback from the beginning. So it's not that we're saying 25%, we are complacent with that. The more would be much better. If we can see an increase in the proportion of foreigners, so it could be better for us. But the engineering talent, there's no end to this. Everybody is now wanting to have excellent engineering talents. The logic hardware designers is something that we need a lot. But if I dare try to say something, it may sound as though I'm not [ needing ] anything that I didn't mention, but that's not the case. But if I just try to dare pick up 1 or 2 points. I think analog engineers are quite difficult to raise internally. So we would like to retain our existing resources and maybe from outside people with connectivity experience. We will have to have -- hire them. And in terms of solution, I think in order for us to take advantage of solutions going forward, software will become very important going forward in the future. So we would love to further increase the number of software engineers. But again, there are people from the media today. So at the risk of repeating myself, if -- I'm not saying that these areas only are very important. All engineers are very important across the board to us. So don't misunderstand this.

[Interpreted] Due to time reason, we can only entertain one more question here.

[Interpreted] Maekawa from Crédit Suisse. I have 2 questions. My first question. Again, how much sales do you generate from device, device portion alone? The reason I ask this is because you want to go into more solution. Now sales is probably -- it was going to be like a plus 1% versus the market. But then when you say solution, I don't know if we should use ASP, but I think it's really going to increase. And when that happens, depending on the product, it can actually sort of see a decline in terms of revenue. So that's why I wanted to know how much sales do you generate from device? And how much do you want to increase this as you look down the road?

[Interpreted] Well, the sales, it's really coming from each of the devices. When we say solution, of course, in the end, I would know. But basically, it's like a reference design. People would say, if they like that, that specification is actually applied to other applications. And so when we see this in P&L, it's going to be on as device sales.

[Interpreted] I got that. My second question. You talked about deleveraging and also a partnership, collaboration with other companies. Usually when you try to collaborate with others, from the customer's perspective, so here's the price that is already set, and of course, the portion that you'd be able to take from a certain deal would become less, depending on the deal. But on the other hand, you're trying to increase your gross margin. And you're trying to go for deleveraging, and you're trying to reduce that part. But for example, if you -- in the finance model that you currently have, how much, for example, for the acquisition is accounted in for? So the balance of M&A as you look down the road, can you explain that to us a little more?

[Interpreted] We have a partnership. It doesn't mean -- it doesn't always mean that we have less part of the pie to enjoy. Of course, there are, there might be some deals. Now again, I don't want to preach on the choir, but then like MCU, and -- well, for example, CPUs ARM. And so we have ARM, but then it doesn't mean that we're enjoying less for us. And it doesn't mean because we go into a connectivity IPD that the -- of course, we know if we go into a very competitive area, the part of the margin that we'd be able to enjoy may become less. But then, it doesn't mean that if we go into more of this, that's going to scrutinize our financials. No, that's not what we're trying to do. And of course, we'd like to keep a good balance as we try to seek for more partnerships. So deleverage in our current financials is based on the assumption that we will be increasing more partnerships. And we want to make sure that our margin would not be too diluted because of that. Now when it comes to acquisitions, that's something we have to look at, for example, market and geopolitical factors. And if we'd be able to have everything in March, we'll be able to go for another acquisition, but it's not that we have anything specific in mind at the moment.

[Interpreted] Now we would like to resume. We would now like to invite the Head of the Automotive business unit, Mr. Shingo Yamamoto; as well as from the Automotive Solution business unit, the deputy, Mr. Maoka, Tomomitsu Maoka; and also from the Automotive division, Mr. Takeshi Kataoka, Deputy General Manager. So these 3 gentlemen will be explaining the automotive strategy to you.

[Interpreted] Good afternoon to you all. I am Yamamoto, responsible for the Automotive business. The automotive BU as it was introduced, we have from this BU, including myself, 3 members will make a presentation. I will begin with an overview; and Mr. Kataoka will talk about digital SoC; and Mr. Maoka, he's also responsible for analog power, so he will mainly talk about analog power product in his presentation. Now the Automotive division business unit of Renesas. We have seen that there are 2 major trends ongoing in the automotive industry. This is a matter of fact. So -- but I just wanted to renew and remind you that because this is the perception that is forming the core of our medium-term plan, so the one mega trend that we are seeing is the change of end-user need and the associated market trend change associated with that. For example, end users are now raising the expectations for environmental friendliness. And they are more demanding for safety and security, and they are looking for comfortable and convenient automotive society. Based on these needs, we are seeing a major technical innovation. So technical innovation is now going through a rapid change, and that has caused -- called CASE, K-A-S-E, of this -- C-A-S-E, the -- from the perspective of semiconductor manufacturers, there are some listed points. So therefore, we are going to address connected and automotive and autonomous driving and electrification. So those are going to be the focus point for us. This is somewhat a distance for us, so we are going to focus on the 3 points that I mentioned as part of our technical innovation.

[Interpreted] I'm sorry, the Skype was disconnected. So please pause for a while because we've got a disconnection of Skype. [Technical Difficulty]

[Interpreted] Now we would like to resume the session from here. So, the technical innovation is driven by CASE. And because of that, in each market, there will be some segments that will enjoy a huge growth. And we would like to keep an eye on this change in the segment trends, and that was incorporated in our plan. Now the other one is the change of the E/E architecture. The left-hand side is today and the past. So all the semiconductors, because of the structure of the car, was distributed. And this was in order for us to supply the functions and add necessary functions based on the market needs. And through the process of adding all this functionality, we have arrived at this distributed architecture. But for tomorrow, in the future, through the centralized architecture, especially the OEM and Tier 1s, they are going to address the inefficiency of development and -- in order to address the cost of development. When they have to upscale and upgrade, they are verifying what kind of things are needed in order to achieve backward compatibility that is going to become very cumbersome. And that's the reason why they are now showing a new need for a E/E architecture. And the other one is a factor that will drive a significant improvement in the speed, which is the -- our market entry by new OEMs because they don't have the legacy system, because they have started out from the electric vehicles, the E/E architecture have been optimized from day 1. So they have started the development process from that optimized state. That means that from concept to design and towards development then to market the car. This cycle has been shortened significantly. And that is the difference that they are enjoying. So the existing OEMs, to counter this, they have a very strong threat, how to counter this. So the large OEMs, the incumbent players, they have a need to accelerate their efforts towards this new trend -- to address this new trend. That is another change that we are seeing today and for tomorrow. The integrated, centralized E/E architecture is the state of tomorrow. And in what step will this integration be achieved will be varying depending on the legacy systems and what the emphasis that they have. So their concept of integration is somewhat different from one approach to another. But as we talk about scalability for the future, Renesas, the actuator, the endpoint and the ECU, the domain control unit, gateway and the centralized computing system, we are going to be a company that can address all these different fields. And in order to do that, we are now ensuring a very smooth communication with the customers, and I think that will provide us a huge business opportunity for the future. Now let me talk about this thing because when we announced our medium-term plan for 2016, I just wanted to recap what the kind of internal discussion we had back then. So there were 3 major challenges that you see here back then. As Mr. Shinkai mentioned in his presentation, profitability was one thing that we are addressing as a challenge. [ Maybe we ] also fell short of the profitability target of fiscal 2016 -- that we developed in fiscal 2016 because we were not able to shut down the fabs. And that was one major setback that we had. But in the new medium-term plan, we would like to optimize the fab utilization and offer higher added value to the customers. Of course, we may not be able to eliminate the problem altogether, but we'll try to improve from the current level. Second, design in. By securing design in, we would like to win more businesses and achieve higher revenues. But securing the D-in is a very important leading indicator for our business, but this is not guaranteed. So how to improve the accuracy is something that we have to work on. And when I talk about the quality of accuracy, this is about D-in converting into revenues. So this conversion rate and also the profitability -- the revenue profit and the profitability versus revenues, we have achieved a slight improvement. I would like to come back to this topic later. And for the solutions. In the past, in the MCU, we achieved a significant success in the past and compared to other companies, because we were able to introduce the miniaturization, nanotechnology, we were able to deliver performance and reduce the chip size without talking about so much about the cost efficiency. But now that the market has become mature, for one thing, we have to be more aware of the cost in our development process and in our activities. So we have to attach more focus on that part. And this will be -- this was explained during Shinkai-san's presentation, but in solutions by combining 2 or 3 devices, we would like to address the efficiency of our customers and lead them to the improvement of customers' experience. And for Design-in, this is the historical track record and the expectations for the future. For example, in 2016, there was a huge number of D-ins. Back then, the OEM networking and the early phase collaboration was not carried out so extensively, and therefore, this includes some D-in wins with some Tier 1s, but only one or a limited number of OEMs. And for 2018 and '19, it seems as though that there is a huge plunge in D-ins, but this is because in these years, we avoided the low GM, low gross-margin project. Because for the sake of improving our marketing capability, we decided to stay away from those low-margin products. And therefore, in terms of the number of quantity and numbers, the amount, it seems as though that the performance plunged in 2018 and '19, but the actual quality of the projects has improved. Especially, we have achieved that towards -- until the end of 2019. So I think we'll be able to deliver a much better number than what you see here on this chart in fiscal 2020 onwards. And as you can see here, the D-in activities of our company, how will that kick in, in our revenues, how will this be converted into revenues, there is a time lag always and therefore, the medium-term numbers that we shared with you today, the vast majority of them has already been secured for D-in. So I think those -- the achievability of these numbers are, to some extent, quite solid. But we would like to achieve some upside so that we can further improve the performance. So in 2023 and '24, for the design ins that we could secure today will be affected in 2023 and onwards, and we would like to accelerate our activities in that front. And this is the nonconsolidated number for the automotive BU only, and this is already shared by Mr. Shinkai already in his presentation. And previously, I would like to first explain the initiatives we are going to embark on to achieve these numbers that you see here. First and foremost, the market growth is presented on the left-hand side here, and the right-hand side is the long-term targets of Renesas. And these dark blue parts, which is represented by legacy vehicle control and information and in our overall explanation, the vehicle control. Of course, there were some market data that were available and not. So a gateway and available units are also included. But the growth opportunities are quite different between the legacies versus nonlegacy. So this is classified as vehicle control and domain control and gateway opportunities. But we classify them quite separately within our internal account -- internal management and because there's a great demarcation between that. So please be advised of that. And what is important is that [ 9 to 1 ] is the current proportion, but we would like to increase the proportion of the growth area to 35%, so that they will account for 35% of the total with the existing ones accounting for 65%. And we would like to still achieve the -- more than the status quo growth rate for these existing ones. So we would like to improve the cost efficiency and the cost competitiveness as we address these opportunities in the future, so that we don't lose against the competition. And I would like to talk about the value proposition to customers. Open, trusted and innovative is the value that we propose to customers. And I think these are familiar words to you that are often used by -- out there by many people. But when we think about why our products are selected by customers, these are the reasons that explains the reason why customers will choose our products. So as we provide our products and engineering solutions, open, trusted and innovative, are the baseline that we will never let go and deliver all the time. And often it's about when it comes to the term products and different generations, and we would like to achieve scalability in various directions so that we can enhance the reusability of the software assets of the customers. And for that, we would like to offer a conspicuous open platform and develop them together with customers. And a second one is automotive safety, which is about quality and the safety and security. So the spheres of this will become much larger as we win the confidence of customers and so that customers will definitely include us as part of the options that they will look into and then when there are orders. So as you may know, Renesas, half of our company sales comes from automotive. So I think the long-term commitment to the automotive customers is very important for us, as we address this trusted value proposition. Innovative. It's about the endpoint computing and end power consumption. These are the strengths of Renesas, so we will continue to pursue these values going forward. And this is already known, and I think many of you already understand this. So the first point is about our market share in automotive sector. And I think we are well dispersed in our order receipt. So which area of the E/E architecture do we plan to cover? Actually, in each of the different product segment, we are well advanced. So I think we can approach from either way. And when it comes to customer footprint, the Japanese companies accounted for more than 50% today, but this proportion has come down to less than 50%. So Japanese, European and the American companies, as they produce these products, we would like to think together with them foreseeing their needs 5 years ahead. And how early can we provide the solutions, including kit solutions and power and analog and launch them in the market, is going to be a very important pillar of our strategy. And on the other hand, Renesas covers a wide range of product segments. So in each of these different segments, when they are translated into RFQ, we are having to -- we have to compete with many different types of players. So, i.e., #1, 2, 3, the way we compete against them, are quite different from one another. For #2, I think for the bottom part, we are going to have a development process that are quite cost competitive. And for the DCU, because we have the scalability of MCUs, by and large, Renesas and NXP are the main players in this field. So we would like to compete against them for this market. So if that is the case, we are not going to lose in all the battles. So that means we can secure, to some extent, of market share. For #1, the biggest competitor there in terms of scalability for the high-end products, I think it is difficult for us to compete. And they are well advanced than us when it comes to the development environment, but we would love to address the mass market by providing low and mid-end and high-end products and not so many players are able to offer this range of products. So in terms of delivering efficiency, we are always invited to large-scale projects. And that position remains unchanged, and we can further reinforce this competitiveness. And when it comes to analog and power customers, we have a combined solution. And by providing this, the -- compete against the analog stand-alone. I think we can have a good competitive advantage, and we can leverage our existing assets and easily move on to the next step. And then that will save the testing on the part of customers. And by addressing this, we would like to increase the number of negotiations. So that's the baseline. So within the same structure, we want to make sure we'd be able to win. In other words, from digital low end, we want to fight there. But then at the same time, we also want to go into, for example, SoC. It's the MCU synergy that we want to add. So scalability, reusability amongst the customers should be expanded. We want to work on a combination with analog, so that we'd be able to offer a concrete solution overall. So we did an acquisition consolidation of Intersil and IDT. So that's why we've been able to expand ourselves in sense, compute, actuate. And if you look at the vertical, we have the applications. And if you look at this matrix. So Renesas, we've had some strength in this middle compute segment. But then, for the actuator -- actuate areas, this is where we have lots of Intersil coming in. And so we are able to enhance the data flow here. But then sense, this is where we'd be able to use the strength of IDT. And we are now able to have the coverage of areas where we would not have been able to. For example, camera. We have been strong with ADAS from before. But then lidar, radar, these technologies, by enable -- by having these technologies, we're now able to better foresee what the customers are trying to do. For example, SoC, what are the functions that you need to consolidate, integrate? We are now able to work together with the customers from earlier stage now. And I think that is very much our strength now. Digital and analog, what are the combinations we'd be able to do? Now we do already have various patterns that we'd be able to utilize. So in these areas, I think we'd be able to have Mr. Maoka explain more about this. Now my final part. Again, what are the perhaps secondary impacts of this scalability? We were in this pyramid, like Tier 1 OEM structure. But because we have the scalability now, we are able to work 5 or 6, 7 years before earlier in terms of design, and we'd be able to talk together from the software, hardware side. We're now able to talk with all these people. And all this information that we'd be able to obtain could be fed back to some of the works that we'll be able to do. And so that is why we're now able to have better ability to go into design win. So again, these network-type communication. This is exactly what we want to enhance from hereon as well. So from now on, it's going to be about digital. And you will hear from Mr. Kataoka more.

[Interpreted] So my name is Kataoka. I look after the digital side. So today, I will be speaking about the most growing part of this automotive, so for ADAS and with control. And another area, for example, SCB, that's also another growth area. But this is something Mr. Maoka will be explaining to you afterwards. So first of all, allow me to go from ADAS. This is the system trend. As you know, the ADAS level, it's really going to go up from current level 2, but there's going to be like camera, there's going to be lidar/radar. So there's going to be more sensors on a car. Camera, radar, lidar, SoC to control all of these is going to be required. And also, with all these, you have to be -- you have to make sure you'd be able to create like -- performance like autonomous driving. So SoC, you need to have better performance. Now OEM Tier 1 people, especially as they look into this high-end system, which is very complicated now, and that is why they have to look at the development and efficiency there as well as the cost, which is increasing. So all OEM or Tier 1, if you look at RFQ, it really is self-explanatory. But from low end to high end, it's going to be important that they look into the scalability. And so that is why they will speak with us, the Tier 2 people, to see how they'd be able to make it happen together with us. So here, this is the market of ADAS/AD and what our outlook is. Now ADAS/AD market, we expect that it is going to keep on seeing a very high market growth. There are several areas, but then from top, there's FC, that's front camera. Next is surround view followed by AD, that's autonomous driving, ECU. And also, the final one is radar/lidar. And within all of these areas, we expect there's going to be a high CAGR or market growth. And with that, we expect that we will be able to outpace the market growth in all of these areas. We want to make sure we'd be able to expand our performance. And with that, we should be able to grow the revenue to good extent. Why and how can we achieve that? So I'd like to introduce about our strength in some of the initiatives. There are 3 things that I would like to share with you. First is the product portfolio, expanding product portfolio. As you know, we have been focusing on MCU and SoC, we're already strong there, especially in camera or autonomous driving, ECU, the compute part. This is where we already had a lot of customers select us. We already do have several products that's already on mass production phase, especially in radar/lidar area. This is an area where we already had SoC, MCUS, of course. But on the other hand, anything around analog like MMIC. This is something we did not have and that's why we found some limits in expanding our coverage. But now we have IDT consolidated. And so now we have this MMIC, the analog products within the portfolio. So the processors of MCU and this analog would be able to combine that and offer this to our customers. Here's another specific example. Again, going from low end to high end. So MCU, SoC, we are able to have a full coverage. We're able to do this in a scalable manner. And versus that, the former IDT MMIC, this analog portion is now optimized from low to high end. We are able to combine that. So that to our customers, we are able to offer to both applications radar or lidar in all phases. And also, this MMIC from former IDT, because we have that in our product portfolio now. Now areas where we had -- compared to when we only had MCUs and SoC, we're now able to have, enjoy a better price. Because we now have MMIC, the price actually has gone up by 2.5x. So you can see that by expanding this product portfolio, we're seeing a very good upsize and we will be able to keep on expecting good upsize to our revenue. The second point is about the software scalability. On the left-hand side, we put this very general ADAS/AD SoC blocks. There's a bus system and also safety security. But there is this common portion, and then you have communications and then ARM CPUs. And also on top, we have ADAS hardware engines. This is like vision, IP or AI, IP or could be GPU, the graphics IP. So we have all these blocks. And within ADAS, there are specific applications, with their front cameras, surround view and also AD, autonomous driving. And so first of all, we want to have this bottom, this common part. And then depending on the application, we want to, for example, put the communications channel -- expand the communication channel. And also, depending on the performance that you want to create, you'd be able to change numbers of CPUs and also ADAS hardware engines. Depending on the performance or the function, you'd be able to put -- change the number of the engines. And this is something that we have been able to do. So OEM Tier 1 software development, we have been able to apply the scalability. The third topic is about the low power. And especially within ADAS and AD, the high end is about the sensing part. And for that part, that requires a lot of performance. Therefore, this is written in many magazine articles, the horizontal ECU of 30 watts, that kind of power is needed. So that we -- that's what -- something that we see frequently. And this is the product of our competitors. Against that, what's unique about our product is that we feature low-power consumption. So if you use our products with the same performance, the fan cooling is enough. So that is indicated by the AI performance by watt. If you compare it against the competitors, our AI engine, we have a very creative architecture design. And also, we have this low-power consumption technology that we developed over time. So compared against the competitors, the performance per watt is more than 3x higher, and this allows us to achieve very low power consumption. From the viewpoint of Tier 1s and OEM, this small ECU, for one thing, will allow them to be more cost competitive. And furthermore, because this is small, the restrictions pertaining to installation inside the car would be limited, and also the weight also can come down accordingly. So the low-power consumption plus the low weight, this will translate into higher fuel efficiency. So these 3 points are the strength of our company. And with this, we would like to further achieve growth that is higher than the market average in this area of ADAS. Now I would like to talk about domain control and gateway. Towards the requirements for CASE, there is the change of the E/E architecture. So the system is becoming more complicated than ever, with ECU numbers increasing, and the connection is also becoming more complicated than before. In order to respond to these changes, as you can see here, ECU, a hierarchy and integration is definitely needed. We need to have a different layer structure, and data processing and routine -- routing is going to be done at the connected gateway. So the domain control, these are going to be the 2 key devices. And that is going to enjoy a huge market growth rate in the future. And of course, we are going to focus our efforts in these 2 opportunities. And this is the overall automotive control and DCU control outlook and our plans. So the DCU and the gateway, domain control are right in the middle. And the bottom part is the existing vehicle control that we excel in from -- for such a long time such as the chassis and parts and other bodies. And those are the single control units for that. So this existing part accounts for significant bulk in terms of quantity. Although the growth rate is very low, for this opportunity, we would like to follow the market CAGR and achieve growth accordingly. But when it comes to the gateway and DCU area, which is expected to enjoy a very fast growth rate, we would like to achieve a growth faster than the market and expand our business. By doing so, with the total automotive, we would like to achieve a growth that outpace the market average. That is the plan for our business going forward. And if you are able to do that, of course, we already have a leading position, but we would like to further expand the lead in the automotive control area going forward. Now why are we focusing on this gateway, domain control to achieve growth? Let me explain that from here. Gateway and domain control basically compared against the traditional vehicle control, this executes multiple applications and therefore, by doing so, we would like to achieve an improvement in performance. And the data handling, data communications, the functionality will have to be enhanced significantly. Vehicle control is an area that we enjoy a very large market share from the beginning, from early on, and like 30% here for the body and low-end gateway. But on the other hand, when it comes to the SoC, infotainment and ADAS, in these areas, we also have a very high market share, too. Therefore, the software scalability that comes from vehicle control, and I suppose, and we have this very high quality for automotive such as SoC and the security and the IP and network IP and the routing accelerator IP for the routing of data. By the combination of these different technologies, we would like to offer valuable products for the customers' viewpoint, and achieve growth rates higher than the market average in the area of gateway and DCU. So I would like to go into details pertaining to the software scalability here. Inside the car, the total number of codes in a car exceeds more than 100 million, and this is going to expand and increase exponentially going forward. Renesas, too, in order to improve the efficiency of the OEMs associated with the increase of the development of software, we would like to ensure the scalability of the softwares. One is the scalability inside the application, and the other is the scalability between different applications. And the third point is the scalability between different generations. When it comes to the scalability within the applications, because we have MCUs and SoCs and a broad lineup, so within the single application from low end to high end, we will -- we are able to offer scalability because we're using the same IP, the reusability of software is very high from the beginning. And when it comes to the scalability across applications, because we have automotive broad products for the automotive applications and depending on the applications, the functions are different from application to application. But there are IP that are made common, and we would like to achieve commonality to the extent possible. So even if between the applications, as you can see here, 30% to 40% or 30% to 70% of software reusability is already ensured. That is -- that can be delivered. And the last one is from different generations, between different generations. The existing automotive MCU supply -- as a supplier of MCUs and suppliers, we are adopted by many different OEMs. And therefore, the scalability between different generations is already ensured by our historical assets. So on these 3 different axes, we would like to achieve scalability, which we believe is our strength. And depending on the competitors, there are some competitors who cannot ensure scalability between generations or cannot offer proper scalability between or within the application. So because we have strength in these areas, we would like to leverage that and further expand the DCU and gateway business. And in reality, the major OEMs and Tier 1s are now approaching us for this capability in DCU and gateways. And here is the plan for 2021 for the major Tier 1s for -- have given us a standard MCU platform, mainly for DCU and powertrain for the RH850 product. We already have this as D-in. And for Gateways, the major OEM for SoE -- SoC, the gateway controller, has been awarded to us, and the mass production will start from 2021 according to the plan. And also, another major Tier 1 company, we received the D-in mandate for the standard MCU platform. And this is a standard platform, and we have been adopted for that. So as you can see, in the main control and for Gateway, based on our strength that we already have, we would like to further expand the business in these areas going forward.

[Interpreted] Good afternoon. I would like to follow after Kataoka-san. This is Maoka, and I would like to talk about the analog power in the automotive business. And Kataoka, now changing to Maoka, this is 2 consecutive speakers as -- with the name of oka at the end. So please bear with me. Now I would like to talk about the automotive category -- market by category. As you can see by this graph here, this is 2019 and the long-term market projection. As you can see from this graph, the bottom 2 are the MCU and SoC, which are the products that we call digital. On top of that, we have the 3 others, analog, power and others. So analog and power, and if you look at the size of the bar, you'll see that -- and notice that this is a very significant market opportunity. And the growth rate is not inferior either compared to SoC and MCUs. And because there are some -- many different drivers behind this, some are listed on the right-hand side. One is the electrification, and this is going to be a significant driver for the semiconductor business. And the other one is related to electrification. Because the cars are going to be driven battery -- a large battery, the architecture itself is going to change. I'll come back to this topic later. I'll be okay. I think we have an audio problem. Am I speaking too loud? No. Now we have solved the problem. So by having a large battery, the architecture itself will be affected. And the third point is that the mechanical components, because the performance of semiconductors and the safety will be verified, those mechanical components will be replaced in the future. And again, at the risk of preaching on a Buddha, the ADAS will require lots of sensors, and therefore, the analog semiconductor demand is going to rise in the future. So we covered this already in the previous presentation, but -- and these points are already covered. But through the acquisition, we have added new capabilities to the company, and this is just one example. And this doesn't -- it's not comprehensive. So just take a look at this as an example. So we have the input and output all the way from left to right, the signal chain. So the input side is sensing. These IDT components have an edge. And when it comes to the output side, the former Intersil components have an edge there. So the original Renesas were strong in computing when it comes to MCUs and SoCs, but we now are able to cover the entire signal chain with the acquisitions of the 2 companies. So as it was mentioned during the outset, we are trying to expand the coverage and make it easier for customers to use our product. And these are the actual cases that we're already seeing today as a tangible result when it comes to Radar/Lidar, ExV -- xEV and information. In all these areas, we are on the same board, allowing customers to use more Renesas products on the same board. And what this means at the end of the day is that -- let me talk about this here with this slide. So on the left-hand side, sense, compute and actuate. And this is the -- a cycle of change that will run in rotation, and this will allow us to provide solutions. And also, the depths on the same board that we can cover will increase. So we'll be able to sell more products, and this will allow us to go deeper. And that's one thing. The other vector is that we'll be able to allow people to use our product as a combination. So those customers who do not have a strong engineering capability can go directly into development and verification and reduce their turnaround time for development. So that is about us going broader on the horizontal axis, meaning that we'll be able to address a broader amount of customer segments and address a larger customer base. So we'll become -- we'll be able to go deeper and wider in terms of our reach. So it's not that we are going to address a larger component variety, but this will extend the width of our business model. And another significance of that, I would like to touch upon that here. On the left-hand side, this was covered in Yamamoto-san's presentation. This is the digital asset that we had from before, MCU and SoCs, and leveraging these things, we would like to address the -- our analog and power opportunity listed on the right-hand side. What this means is that, as I said at the outset, in the beginning, the market growth, analog and power is going to provide a market driver, and we can leverage that and we can address that opportunity. And further, by having an enhanced solution capability, we can cover more content on the same board. The data content that we can address will become much larger, and also, as I mentioned earlier, we can change the business model, allowing us to reach -- expand our reach. So if you multiply that altogether, more driver and dollar content and market access, this is going to be a new model for growth. So what are the components or a number of the components that we would be able to offer? This has also been increasing. What we have here is a layout of what we want to promote -- is the products that we want to promote. And of course, if I try to go one by one, it's going to take too much time. So I hope you would be able to take a glance at this. And for example, BMIC, battery management IC, this is something that we have a general exhibition in this room, so I hope you will be able to take a look at it. But then, again, what, for example, analog and power component that Renesas already had, and then we can add on to that, to the power of other companies that we've been able to consolidate. And I talked about dollar contents. And people ask me, what is my image. So this is just an example. And it's just an assumption or a calculation that we just did. And the -- depending on the configuration of the customers, these numbers can change upside or downside, so this is something that I want you to keep in mind. But then, this is what we can say with our calculation. This is just an example that I wanted to show. So auto, of course, you would know, but it has lots of applications. And within each of the board, there's this digital. If it's -- compared to when we already had MCU and SoC, if we would be able to add this power of analog, how much dollar contents would increase. This is something that we wanted to indicate in this plus-some percent. So if you take a look at this, you can see that there's a large jump. So these are where we have been strategically expecting to happen. For example, one example on the right-hand side, top right, we have steer by wire as one of the applications. Compared to when we only had MCU, we now have IPD and sensors now. And so that means we now are able to have a 200% increase in dollar content. So again, depending on the configuration of the customers, it really depends. So that's what we expect. Now in reality, looking at our analog power, I mean, a lot of the products are already being used. For example, this IPD product. One specific example is, for example, Land Rover is a high-end car produced by an OEM. And recently, this OEM has introduced about this new Defender, and in this Defender, our IPD is used. So you do already see some established model using our analog power products. And just to give an example. Now when you heard Mr. Shibata, you heard about winning combinations or winning combo several times. One of the examples of a winning combo is this, for example, and this is the analog AHD link that you did see in Mr. Shibata's presentation. So through our combination, we can start with camera all the way to display, and we would be able to do this in a more affordable and easier manufacturing. So it's a solution that we would be able to offer. The advantage of this product, so usually, when you use a digital cable, you need to look at the interface and you have to make sure all of the interfaces matches. And each of these digital cables could be heavy. It could be expensive. But then if you would be able to use analog links, then you don't have to worry about this interface matching so much. And the cable itself would be a very affordable twist cable. In other words, it's lower cost and it's also lighter. Nowadays, you have to work with lightweight, for EVs, especially. And so if you would be able to have a lighter cable, that alone is a benefit. So that's just one example, is a type of the -- in terms of the solutions that we will be able to offer now. Now I mentioned about EV. EV is something that we hadn't really touched upon yet. So let me delve into this a little more. At the moment, what is the market and what is the market outlook? Let me give you an example or a data. On the left-hand side, what we show you is the strategy. It's a data, it's a forecast from Strategy Analytics. So the first part is about 2017 Q2 forecast, and the one beside that is the 2019 Q3 forecast. So what does this mean? With -- so the forecast has become larger with time. The market confidence level has increased, expanded from 2017 Q2 to 2019 Q3. Just a while ago, a lot of countries were saying EVs, but then I think the market itself was a bit of a hype situation. But then I do really -- we do really find specific EV models, and we are finding more confidence in how EVs could come out in the road. And so you can find the strength of the market now. And in this environment, where are we? So this EV or this vehicle market, what can we offer? Again, through acquisitions of companies, we now have more ranges of offerings. This is just an example of what we can offer now. For example, on top left, here is the inverter. On the right-hand side, that's the battery management. So those are the examples where we would be able to expand our presence, and each of these components would be able to add value to the solution that we can offer. So battery management. Again, MCUs that we had, we were able to combine that with new elements. And battery management IC, of course, is one area that we can go into. But then, for example, power management IC is also another area we'll be able to go into as well as IPD. So we'll be able to combine that in offering a solution now. Now battery management IC. One -- compared to one MCU, for example, it was just -- if it's a board, there are 5 battery management. If you have more number of cells, of course, this BMIC would increase. And of course, if one BMIC can control more in a battery cell, that means you would not need that BMIC, but then you're now finding, at the moment, more battery cells, meaning more numbers of BMIC. And of course, it doesn't mean that we just want to keep on increasing BMICs on a board. But the growth, we would be able to expect through the contents growth. I think there is a great potential here at the moment. What did this market provide for us? And I think there are a lot of ripple effects. For example, on the left-hand side, so it's not just about EV. And of course, this is again something that you really know already, but there are a lot of EVs around. There is the full battery EVs, all the way to hybrid. And even in hybrid, there are a lot of subsegments, which I am sure you are very well aware of. Our company, I think this is something Mr. Shinkai already said several times, that we have IGBT. In other words, power discrete, which is used a lot for EVs. So this is something that we have now. And when you look at our product performance. We try to set a lot of benchmarks, but when it comes to like switching loss, or when it comes to the performance, we do find that our IGBT performance is really high. In addition to that, we used to be one of the players within the auto community, so a lot of people do credit us. IGBT, there's the Taycan in Porsche, a very high-end car. And this model would use our IGBT. So that's one fact. So analog power products at the moment have been given credit by many people in the market. In addition to that, again, this is something that I did mention earlier, but when you have batteries in a car, this enables a lot of variations of needs in the market. For example, this 48-volt voltage. This has become a pretty hot topic in the market. I'm sure you've heard about this. So if you would be able to put in 12-voltage to this 48-voltage, you be able to have good efficiency, and it's more -- you can also offer more safety and you would be able to offer in various packaging. And this is an area where we're finding some expansion in terms of potential. Now what are the ripple effects of this market trend? Anything that was mechanical, it can be transferred to electric drive. And so in other words, areas where we didn't really expect where we would be finding more electric or semi areas to come in, we are able to have an expansion into this area. And also new type of markets, for example, we have like electric wheelers or these light vehicles, these new categories are something that we would be able to address now because we have all these power semiconductors. Now I'm going to continue speaking more about EVs. So again, MCU, gate driver, IGBT, and also, there's the inverter kit solution that bundles all these. This is something that we've always wanted to offer, and we've already had been offering some to our customers. But by using all of this, we are able to offer a lot of optimization, and what do I mean by that? So for example, this is one specific inverter system that we would be able to introduce. Again, MCU and IGBT, by focusing on these characteristics, we would be able to offer the solution by inverters. Now inverter, there's a lot of power content compared to MCU. There's analog -- and well, there's a lot more content. In other words, the BOM content itself, it becomes larger. So there's one advantage there. But it's not that -- it's not only that. We would be able to optimize the entire solution that we would be able to offer with a combination of MCU. So for example, on this inverter solution, we are actually focusing. We have been focusing on this. And as we -- we have also tried to downsize what we would be able to offer as inverter, and a lot of clients like that. And IGBT, power control, not only that, but then a solution from MCU. This is something that the market really appreciates what we would be able to offer them. One more comment that I do want to make, by acquiring IDT, we now have position sensors, inductive sensing. In other words, it uses semiconductor so that we would be able to do the sensing for a certain position. Now our main market that we have in mind is the motor controller. By using this sensor, you don't have to have any magnets or you don't have to have -- you do not need a resolver. So the position, the -- and how you want to have the motors, you would be able to have more variance -- variations. And also, if we would be able to optimize the form, the shape, then you would be able to go into any areas where we had been offering some mechanical solution or a hydraulic solution. You would be able to really introduce these position sensing, in other words, the market that you would be able to cater to expands. There's actually a team or -- a team with the capability to design these [ coils ]. And so we are now preparing ourselves to cater our products to this expanding need and market. So those are some of the initiatives that we're trying to drive through. And with this expansion of the market and need, we do believe that we should be able to enjoy growth like this that you have on the slide. Now power. Compared to the market growth, you may think that it's lower. It's lower than the market growth. But then there would be some legacy products that we currently offer. And if we try just to do some offset on that, this is the type of the carrier that we would be able to select on power. But IGBT, MOSFET, if you just focus on that, it's either like 11% or 7% growth, which is higher than the 6%. In other words, it can outpace the market. So this is the way we would like to expand our business. So thank you very much.

[Interpreted] Now we would like to entertain the questions from the floor. If you have a question, please raise your hand and indicate.

[Interpreted] Citigroup Securities, my name is Fujiwara. I have 2 questions. The first question, on Page 6 of the presentation. In the next several years, at which timing do you think your Design-ins will be converted as illustrated in this chart? So for the next 3 years or so, the target, this time around, the ADAS and [ ADs ] and the DCU and Gateway, those are the growth area according to your plan. But are you able to secure D-ins? Have you been able to secure D-ins that will allow you to outperform the market in these respective segments, and how many have you achieved? If it's not the case, then when do you think that you will be able to start outperforming the market? Can you elaborate on that point? That's my first question.

[Interpreted] Outperforming the market, whether we are outperforming the market. Actually, we -- it's difficult to obtain our overall data that will allow that assessment. So we are seeing whether we are able to see -- achieve the orders and secure the orders from the competition. So when you look at these data, in 2016, '17 and '18, the ADAS-related elements that we have already secured in orders, these are already taking off. And as for the MCUs, 28-nano products are already starting to take off. So for the SoCs, SoCs, especially the ADAS, there are new projects that are leading the market. So compared against the market, we believe we'll be able to perform higher and faster compared to the market average. However, having said that, in my explanation earlier on this point, if there's another excuse that we have to share with you, the -- when we received the orders from -- in 2017, the SOP timing that we had anticipated from the customers and the volume thereof, now that the business [ then ] has already started recently and the actual time frame for a customer's launch of business has been delayed somewhat compared to the initial plan. And the OEMs had been planning a broader and a more -- a significant volume, but I think due to the customer demand, the demand -- the actual quantity has come in slightly lower compared to the initial plan.

[Interpreted] My second question. In the last part of the presentation, you had mentioned that the IGBT will be installed for inverters going forward according to your plan. IGBT, first and foremost, in what kind of format are you going to sell them? Is it a module? Or is it a stand-alone basis? And in terms of your financials, so you mentioned that the CapEx will also be laid out for that purpose. So what's the amount of CapEx side do you have in your mind? And for IGBT compared to analog, the profitability may not be so good compared to analog, but what is the profitability of your new IGBT?

[Interpreted] Thank you very much for the question. Currently, the IGBT form factor will be the BER foundation. There are some discrete products. But basically, the BER foundation is the form factor that we supply with. But in reality -- sorry that I'm now talking to an expert, but some customers, of course, are purchasing modules in some cases and therefore, that kind of discussion. We are involved in such kinds of discussions in many cases. So if that is the case, the module customers, we work together with them and come up with a proposal, and that's how we behave. And also, when it comes to capital expenditures, as you mentioned, you're right. With the quantity increasing, we will have to increase our capital expenditures, but at the moment, we can reuse the existing facilities to a large extent. So right now, the -- in the business plan that we have presented to you, we are not -- we have not allocated a huge amount of capital expenditures for the sake of IGBT. Without that, even today, if the scale of business is limited to what I shared with you, we can manage that within the current facilities. And for the profitability, as you rightly pointed out, when you look at the market, when you look at it from the gross margin perspective, on average, the analog -- compared against analog, the profitability may look inferior compared to analog. The IGBT has less profit margin. There are -- this is due to 2 factors. One is that the R&D for the product itself compared to analog is still limited in terms of percentage. And therefore, when it comes to the power discrete products, the cash flow and operating margin, we are attaching a more significant importance on the cash flow and operating margin for this discrete product. And the other thing is that in this picture, as you see here, MCU, gate driver and the solution by the combination thereof, we are going to provide added value. And comparing at the gross margin of the market, we are securing orders with a higher profit margin. So through this combination, we would like to manage our business going forward.

[Interpreted] Next question please.

[Interpreted] My name is Ishino from Tokyo Tokai. So I have 2 questions. So if I can turn to Page 10 and Page 19. So again, Intersil, IDT, you've been able to consolidate the 2 companies, and so therefore, you probably have a better sales channel to overseas accounts. But then on Page 10, if you look at the share, for example, if it's like ADAS, 27%, if you -- is this about Japanese customers or overseas -- or if you would be able to have a breakdown of this Japanese versus non-Japanese for body or EV as well, how does it look like in terms of proportion? And also, on Page 19, you say that you're expecting great growth with ADAS, AD. And that probably would mean that you're going to see a great growth with the overseas customers. But then does that mean you'll have more proportion of overseas customers versus Japan?

[Interpreted] Yes. So again, the previous powertrain, chassis, body or xEV, for that, there's a bit of a geopolitical situation, especially for powertrain. We've been traditionally strong with Japanese customers. And Germany Tier 2 companies would be strong with German customers. And so that's the same with xEV. But then when it comes to body, we are very strong in that sphere. So especially, Western companies, OEM, Tier 2s, we've had good relations with them. And so for body, we have been able to cater to the needs of non-Japanese, Western customers. But then when it comes to the new ADAS, this is an area where we want -- we're going to move a bit differently. In other words, we're trying to offer a new application, which means, especially, we want to focus on European customers and that's something that we've been doing. This is because the application itself is something that developed mainly in the European market. And so that's why we have been able to talk with a lot of large OEM Tier 1 people in the Europe -- in Europe already. And of course, we have also been able to speak with Tier 1 OEMs in Japan as well because we already do have a good share. So Japan and Europe, we do think we would be able to leverage the strength here in these 2 markets in expanding our presence in the American market.

[Interpreted] So in other words, what you have on Page 19, in other words, you're expecting this revenue growth. It seems like it's more than 5x. It's going to be a large jump with ADAS, AD in your presentation material. So you're trying to achieve this jump through acquiring non-Japanese, European, U.S. customers. At the moment, maybe Japanese versus non-Japanese would be on par or maybe it's like -- but from hereon it's going to be like 20 -- or it's going to be like 20% from Japan, 80% from non-Japan.

[Interpreted] Well, yes, at the moment, we are trying to see growth with European customers, but then we also want to cater to the needs of Japan, Japanese customers, but then afterwards, in the North American customers. There was this German very mega Tier 1 company that had been able to make an announcement, but then they both use camera coming from us.

[Interpreted] Can I follow -- make a follow-up? So Intrasil and IDT acquisition, this enabled us to have a sales expansion to non-Japanese companies. That's what you said, but that's not our business model. We do want to leverage on the technology that Intersil and IDT would have. But then we want to offer a more comprehensive solution because of that. It's not about -- it's not exactly about sales channel because we do believe this business model is going to enable us to have a very high future growth. IDT, Intersil technology, those additional technologies that we've been able to offer, that enables us to offer more solutions or service to the more analog power customers that Mr. Maoka was explaining about.

[Interpreted] And also on Page 39. This is about semis for EVs or battery controller. And in this field, you are being used by -- so you have linear used by Tesla. So you do have that number or share there. Now what is the area where you would be able to enjoy [ more ] advantage than Tesla in this regard? And these customers, do you know if they have a very large order coming in from their own customers?

[Interpreted] Well, first of all, for the battery management part. One unique factor of this product is about cell measurement ability, and especially, the drift of the -- view drift and how much control you would be able to have is far better. Now ever since we've launched our -- this product, it's not that we -- it's not that we've had such a long time ever since we've launched this product. Of course, there's already some deals that we've been able to sign for, but then when it comes to lifetime value, we still are in our more earlier days. In other words, we just got started. With that said, when we discuss with our accounts, they talk about this high function or usability. And if we include MCU, the safety features that we would be able to offer, this is something that customers really appreciate us. So we're hearing such voice -- voices. So we want to make sure we would be able to capture this momentum, and if we would be able to do that, we should be able to capture more market share. But again, this is something that we still need to work more from hereof as well. Now especially, again, I'm preaching to the choir, but when it comes to EV, China is a very large market in that regards. But then at the moment, like just right now, it's going to be quite difficult to find some momentum in China. So we do have to wait a little more. Perhaps like in the mid- or latter half of this year and around that time, we would like to really analyze what's going on in an entire market.

[Interpreted] So again, control management unit for EV and compared to linear, the area where you have technology advancement is really this high feature. And especially, we know there's coronavirus incident going on in China. But then, it's been more than 6 months since you've introduced what solution you would be able to offer. So what is the voice that you're hearing? What is the feedback you currently are hearing from your customers or from the market?

[Interpreted] Well, it's really going to be like a repetition of what I just said earlier. So again, some of the features and with MCU, the solution. In other words, usability. This is something that our customers appreciate. Now within our presentation, I mentioned about we did have a Board to explain, but then there are a lot of things that already -- can already be used as a reference design, which our customers can order immediately now. And they would be able to sort of figure out how they would be able to use our solution. For example, if they want to put it in their batteries, what kind of performance they would be able to do. So these simulations can actually be done in a very short term. And so this is one of the feedbacks that we are getting from the customers, and I think this is one of the advantages that we would be able to enjoy.

[Interpreted] The gentleman over there, please?

[Interpreted] My name is Yamasaki from Nomura Securities. I've got 2 questions. The first relates to the previous IGBT discussion or the MOSFET and other power discrete products. In the past, you did not put so much focus in these products, but this time around, you have shifted your strategy to attach more importance on that. What triggered you, this change of direction? And 300 [ nanometers ] is the market direction. So in your current business plan, you mentioned that you did not foresee any need for any incremental CapEx. But I think in the future, the competition will be decided on the amount of investment. So what is your view on that? Can you comment on that?

[Interpreted] I would like to ask -- answer the first question first. The first thing is that it was mentioned during the presentation, just briefly, but the market confidence level is rising quite significantly. Actually, in actuality, the customers -- we have received a lot of trade negotiations offer from customers, and when you look at the EV introduction in each market, there are so many uncertainties in the past. But now this is now becoming a reality to a large extent. And actually, the production is also increasing in reality. So the negotiation is now bearing lots of certainty compared to before. And what is grateful to us is that this automotive market and the power of semiconductor -- as a power conductor -- a semiconductor player, we are now perceived as a very credible player. And this is what we are seeing in the actual feedback from customers, which is a very grateful development for us. And that is the reason why we have made a judgment to go for this market and made this strategic shift. The [ 300-millimeter ] opportunity, of course, as we discussed with customers, we are receiving lots of feedbacks from customers in one way or another. And amid that discussion, it's not that we are completely ignoring such requests, so how to respond to these requirements is something that we are currently looking into and performing some investigation. But it's not that we have decided on the final answer, and we have not made a final judgment as to where to make an investment. We don't have enough material to make such decisions. So we are just receiving lots of feedbacks from customers and positively looking into -- seriously looking into the opportunities that we may need to address in the future.

[Interpreted] My second question is about the 40-nano micro MCU has started to take off. And now you're talking about the opportunity for the 28-nano. But in Mr. Shibata-san's presentation in the outset, you mentioned that the nano's structure and that the flash is one of your strengths and that you're also very strong at the leading MCUs. But this was not covered in the automotive presentation. So in the 28-nano, with other companies adopting MRAM and DRAM, what is -- the strength of processing may not be able to be manifested in the future. So how are you going to compete in this environment going forward?