Renesas Electronics Corporation (6723) Earnings Call Transcript & Summary

You'd like to hear this session in English, please click the globe icon on the bottom and select English channel. [Foreign Language] Thank you very much, ladies and gentlemen, for taking your precious time to attend Renesas Electronics' Fourth Quarter of Fiscal 2021 results presentation. Today, simultaneous translation is available. If you look at the globe button at the part on the screen -- at the bottom of the screen, please select your language from that button. For today's presentation, we have the CEO of the company, Mr. Hidetoshi Shibata, our CFO, Mr. Shuhei Shinkai; and the Head of our Automotive Solutions Business Unit, Mr. Takeshi Kataoka; and other staff are also present. From now, our CEO, Mr. Shibata, will say a few words. And after that, our CFO, Mr. Shinkai, will give you an explanation regarding the results for the fourth quarter. And then after that, we'll take questions from the participants. We expect to finish the whole session in about 60 minutes. The presentation materials to be used for today's meeting are posted on the IR website of Renesas Electronics. Please turn on your microphone, Mr. Shibata, and begin.

Once again, hello, this is Shibata, CEO of the company. Last year, we had a fire and -- to summarize that. And also, the progress of the -- our mid- to long-term business strategy. This will be explained in the progress update, which is held biannually, and that is the next session is scheduled for next month. So for today, I would like to -- we would like to focus on the full year results for fiscal 2021, which ended in December 2021. Now as you have -- many of you, I believe, have already seen the presentation. On a non-GAAP basis, revenue was slightly below JPY 1 trillion, and operating profit was slightly over JPY 300 billion, so that was the number for last fiscal year. And the demand continues to be strong and robust, and we see that sign continuing. And for fiscal 2022, in the first quarter, quite a favorable and steady expansion is projected for the first quarter, and the numbers are already presented there. So with that, on an ongoing basis, the situation remains not really bad at all for us. And all those questions that we have been receiving from you regarding at which point we'll see an inflection of demand, we will continue to carefully keep an eye on that. And if we see any signs of changes, we will be ready to take actions as necessary. That's going to be the plan for this year. So the detailed numbers will be explained by Mr. Shinkai, our CFO, so please bear with us. Shinkai-san, please, the floor is yours.

All right. I am Shinkai, the CFO. I would now like to begin the fourth quarter and the full year results presentation for the fiscal year ended December 2021 based on the material posted on our IR website. Please go on to Page 4 of the presentation. For the fourth quarter, if you look at the middle, dark column in the middle of the table, revenue was JPY 314.4 billion, operating gross margin was 54.3%, operating profit margin -- operating profit was JPY 98.7 billion, and the profit margin was JPY 31.4 billion (sic) [ 31.4% ], and profit attributable to the owners of Parent was JPY 80.9 billion, and EBITDA was JPY 119.4 billion. As for the comparison with the forecast, if you look at the third column from -- if you look at the far right column, I think you can refer to that. And I'll give you some explanation later. And also for the full year, numbers are presented on the next dark column third from the right. And also Celeno's acquisition, which was just completed in the end of the fourth quarter, that's not included in the PO, only the [ BS ] that is consolidated for fiscal 2021. That's that accounting treatment for that acquisition. The next page, please. This is the revenue trend on a quarterly basis. The fourth quarter is represented on the far right. Overall, the revenues or the -- and we are -- achieved an increase of 64.1% year-on-year and 21.7% on a quarter-on-quarter basis. If we exclude Dialog on a year-on-year basis, 34% and 8.7 -- 8.0% on an Q-on-Q. And as for Automotive and Industrial/Infrastructure and IoT business, the numbers are presented already here. And if you exclude Dialog contribution, Automotive year-on-year was a 37% increase and Q-on-Q, 8.1%. And Industrial/IoT/Infrastructure year-on-year, 38.9%, and on a Q-on-Q, a 9.1% increase. Now page -- moving to Page 6. The fourth quarter operating margin, gross margin, operating margin and revenues are summarized here. We have presented it together with the segment results. The company total on the far right, let me begin with that. The box on the upper right shows the changes from the forecast. As for revenue, there was a 5.5% in terms of the median level, there was an increase of JPY 11 billion. The ForEx impact was about 40%, and also the remainder came from the changes from the Automotive and in the Industrial and Infrastructure and IoT business. For Automotive, if the ForEx impact is excluded, there was a slight underperformance compared to the forecast because there was some adjustment from the customer demand towards the end of the year. As for Industrial/Infrastructure and IoT, there was a significant increase compared to the forecast. PC and mobile-related demands and also the former Dialog products, there was a strong demand for them, so we were able to front-load and ship those products that were completed before in advance. And there will be some adjustments in the quarter, this current quarter. And as for the gross margin, 1.3% increase compared to the forecast, and the product mix as well as the production recovery were the major driver behind this improvement. And 80% was the contribution for this. And also for the operating expenses, there was a decrease compared to the forecast. R&D, SG&A on the same proportion made a reduction compared to the forecast. We achieved a reduction compared to the forecast. And on a quarter-on-quarter basis, at bottom right. In terms of the gross margin, there was a reduction of 0.9 percentage points, and this is mainly due to the consolidation of Dialog. That's -- that impact is -- accounts for the bulk of this. And also, if you look at the segment results on the right-hand side, as for the revenues, the breakdown was already provided to you earlier. For the gross margin and also operating margin for Industrial/Infrastructure and IoT, Q-on-Q, if you look at the numbers for Q-on-Q, you see that there are some changes there, and that's mostly due to the consolidation impact from Dialog. Page 7, please. This is the in-house inventory trends. On the far right, if you look at that column of company total, the DOI overall on a core Q-on-Q basis, we have achieved a reduction. But if you look at the left-hand side, there was a slight increase in Automotive and a reduction in Industrial/Infrastructure/IoT business. So overall, in terms of actual amount, there was an increase, and this is due mainly to the PPA impact from Dialog and the addition of Celeno. If you exclude those impacts, there are 3 major impacts because of the front loading of some inventory, including both a work-in-progress as well as finished goods, and also for the back-end production increasing than forecast and also for finished goods. For Automotive, as I mentioned earlier, the timing difference. Because of the timing, there are some back orders. That was the impact. So therefore, both for work-in-progress and also for finished goods, as we mentioned in last -- compared to the last presentation, there was a slight increase in the inventory level that we hold in-house. And this is the sales channel inventory. The far right shows, again, the company total. And just for your information, for the channel inventory, the Dialog portion is not included here, and we'll try to include the numbers after completing the integration in the first half of this year. The company total WOI on a Q-on-Q basis achieved a reduction, and if you look at the segment results on the left-hand side, Automotive, compared to the initial assumption, there was a slight increase. This is due to the OEM production adjustments. As for Industrial/Infrastructure/IoT, there was a reduction compared to our initial expectation due to the decrease in inventory and also the changes in demand. Those are the 2 factors behind this decrease in WOI. If you look at the actual amount, the inventory flat -- it may look as though this is flat or a slight increase. But in some transactions and some trade flows because of ship and debit in the actual amount, there is -- there seems to be a slight increase, and shipment debit introduction will be continued on -- in certain basis going forward. So if you look at the actual amount, there might be some times where we see a slight increase in the inventory actual amount. Now moving on to the next page, which is about the utilization rate for the front end on an input basis. Fourth quarter utilization rate was almost came in line with our expectation at 84%. On Q-on-Q, there was a slight decrease due to the number of -- actual days of operation. Please move to Page 10. This is the order trend. If you're looking at the order backlog based on the client, we have been showing you the quarterly trend. And as we have been communicating to date, for the long-term orders, we are trying to take on these long-term orders and et cetera for Dialog. Those are completed in the third quarter. And for the Dialog portion, we are completing those transactions in Q4. So going forward, the order backlog will be coming down. Also on the right-hand side, you can see the fixed order and the order backlog. Although for right now, you can see 2 bars, the bar on the left. The gray portion is a fixed order, which is coupling to the bar graph on the left. And then we have not received the order, but based on the contract, we have some orders that's been committed by the clients. That's represented by the commitment bar. And on top of that, we have orders that happens in the fiscal year. So on top of that, we have the orders in FY '22. On the right-hand side, you can see the total. So, it shows the total demand, and most of that will be the revenue for this fiscal year. And on the other hand, if you look at the bottom, you see that there will be some order backlog at the end of FY '22. And so part of this will still be on our books that's already backlog at the end of this fiscal year. So what this means is that when we work on the long-term orders that we started to do from last year, if we do not take those actions, the order backlog bar graph will be coming down in the future, so that is our projection. Please turn to Page 11. And this is EBITDA and free cash flow. In Q4, EBITDA was JPY 119.4 billion. For the full year, it was JPY 375.4 billion. On the right hand side, we can see the free cash flow. The operating cash flow was JPY 111.2 billion. Free cash flow was JPY 95.3 billion. Free cash flow for the full year was JPY 259.1 billion. Next page, please. This is the forecast for the first quarter of FY '22, please look at the dark blue column in the middle. For revenue, the forecast midpoint is JPY 336 billion. Q-on-Q, as the columns -- that's two columns on the far right, we're expecting 6.9% growth Q-on-Q. And as the gross margin, we're looking at 55.5% Q-on-Q. Improvement will be 1.2 percentage points. And then for OP, we're expecting a 34.5% as margin on Q-on-Q. It's an improvement of 3.1 percentage point. Next page, please. This the revenue and demand forecast for Q1 in FY '22. As for the forecast for sell-in, we have a Q-on-Q and year-on-year numbers that coincides with the previous slides. Q-on-Q is 6.9% through Auto, it's double-digit plus, and so it will be in mid-teens. On the other hand, and for Industrial/Infrastructure and IoT, it's a single plus, and so it's a low single digit. As I commented earlier, some of the orders have been post forward to the previous quarter, so there will be a rebound. And for the sell-through forecast, we see a similar trend for Industrial/Infrastructure/IoT Q-on-Q basis, it will be an increase of single-digit due to the rebound. And for the other segment, we are expecting an increase in double digit. Next page, please. This is the breakdown of revenue for Dialog. And a great portion, the legacy business that's in effect have been sold, licensed main PMIC business. As scheduled, in Q4, it was completed. And next, I would like to highlight a few pages in appendix, please turn to Page 19. And so this is the balance sheet. As I said at the outset, we see acquisition of Celeno. It is reflected in the balance sheet. It's about JPY 35 billion impact, which is included in this goodwill. And for Dialog's PPA in Q1 of this year, we will complete that. And at that point, the PPE will be reflected for Dialog. And for Celeno, it will be completed in Q2, and thereafter, it will be reflected. Page 21, please. And this is a reconciliation between GAAP and non-GAAP. So from this time, we have changed the category so it's easy to see. We have the recurring item and non-recurring items. Now for the non-recurring items, we had the Naka Factory Fire Impact and Others. Next page, please. And so this is rationalized in the graph. So in the middle, you can see Dialog and Celeno related. This will be reflected in Q1, Q2, respectively, after we complete the innovation process. Next, on Page 24, this is the status of our CapEx. For Q1, on a decision-making basis, we're looking at roughly JPY 40 billion of CapEx plan. And out of that, the light blue bar or -- is solely half of that is for ramp up investment, and we'll be utilizing the subsidy from [indiscernible]. And that will conclude my presentation. Thank you very much.

[Foreign Language] Now we'd like to move on to the Q&A session. The moderator will first like to explain how to raise questions. [Operator Instructions] All right. So the first question from Citi Group Securities, Ms. Fujiwara-san.

This is Fujiwara from Citigroup Securities. Can you hear me?

Yes, we hear you.

All right. So 2 questions, so please allow me to ask them. One point of confirmation at the outset. On Page 10 of the presentation, on the right-hand side, you have the total demand on this line for the fixed portion is about JPY 1.2 trillion, according to what I see here. And on top of that, you have the commitment and also the orders coming in 2022, which appears to look like JPY 2 trillion in total, and there's a backlog of about JPY 500 billion, according to what I see here. So according to your view, I think, has total revenue, JPY 1 trillion. Is that your projection basically? Is that what is shown in here? This -- the actual direction is okay, but JPY 1.25 trillion appears to be too bullish. But that basic direction is correct. Okay. So let me dived down into that JPY 1.5 trillion. Let's say that hypothetically, that JPY 1.5 trillion is correct. Then this JPY 1.5 trillion, if you wanted to fulfill that, do you have the capacity available to sustain that sales? And also, if JPY 1.5 trillion, if you wanted to do that, if you exclude the consolidation impact of Dialog, I think 30 -- mid-30 some percentage increase was already achieved in 2021 and then in 2022, excluding Dialog. I think 10% or Y-o-Y increase, I think, is projected or planned for fiscal 2022. And I think that is a high level by international comparisons. So practically, do you think that is possible? Can you give us a direction about that?

All right. So -- and in order to avoid misunderstanding, JPY 1.5 trillion, I think is too bullish. So I think that is too much. So I don't think we can expect that. So JPY 1.5 trillion, if you talk about the supply based on that, then I don't think that is feasible for us, and that is not our plan either. And as a basic direction since last year and for this year as well, on a continual basis, we are expecting a significantly large growth, and that is true. And the supply to our company for that portion, according to what we can already see today, I think we have by and large secured those supply for us. What I say -- mean by and large is that roughly speaking, there are 2 points here. Although the size is not that significant yet, foundry and OSAT and some raw materials, those suppliers, mainly when we think about them on an ongoing basis, the supply increase or allocation increase are still being requested, and some portion of that is included here in these numbers. And also, this continues to be the trend for the last 2 to 3 years. Omicron and the COVID-19 impact still remains, and we still have that impact here and there. So what is happening, and we don't have any certainty as to when and where the supply could be suspended. So those are the 2 factors. So JPY 1.5 trillion, I think is too much. But on a comparison with last year, I think we can expect a steady growth on a continual basis. And the materials and the supply for that and the capacity to achieve that in-house as well as outsourcing the capacity for that. I think volume lines have been secured. That's what I wanted to say here. That's all from me.

Okay. So one follow-up question on that. So you are -- you said that you are continuously requesting some allocation increase to some partners, but divide that for first quarter. If you look at the full year of fiscal 2022, I think this is the -- I think, the lowest level. So should we continue -- should we expect a sequential increase over the quarters, coming quarters?

The annual guidance is not provided this time around. So I don't want to repeat this interaction. I think it's difficult for me to repeat this interaction. But as of this point, how should I put it? We are not expecting significant volatility, so a favorable sequential curve is projected. That's what I'm saying.

Next question is from Hirakawa-san of from BofA Securities.

This is Hirakawa from BofA Securities. My first question is, last year, the [indiscernible] semiconductor sales increased by 35%, and it was over 30%. I think the increase in the content per vehicle and also fulfilling the inventory, how would you break down that growth? There is a concern that there is too much semiconductor out in the market, so that's the background of my question. And on top of that going forward, we look at the auto production and also the automotive semiconductor growth. And also, what kind of gap should we expect between the 2 given the content [indiscernible] increasing? So that's my first question.

Well, we have Mr. Kataoka, so I will ask him to take the question later. But before that, let me offer you a few words. So looking at the [indiscernible] increasing, if I make a very conservative or solid comment, I guess we will not see a major change in the number. But intuitively, looking at the recent business trend, the content impact is getting bigger than before. So that's my first end impression. So I think this is coming from 2 factors. One is that I think you are also getting this impression, and this may be a consensus. But recently, if you look at entry-class vehicles, the ADAS equipment is very robust compared to before. So what's installed is actually as good as for the premium luxury cars, so that's one impact. And also the second factor is the shift to EV, as you all know. We're seeing that impact, so that's the one major impact. And the second factor that I'd like to highlight is looking at the U.S. OEMs. They have been quite vocal and open about this, but there's been a lot of constraints on supply, the manufacturing and sales, and already had to prioritize what they want to do. So they have been quite selective. And our clients are client-based, I think is prioritizing the vehicles that's higher in price for the electronic contents and the semiconductor contents that's higher in these premium cars. And I think the OEMs are increasing the production of those high-end cars. Also ADAS has compared to the previous trend. Looking at the most recent trend, the semiconductor contents per vehicle is becoming greater. So that's my another impression. I will hand over to Ms. Kataoka for further details.

Yes, I'm Kataoka from the Automotive Solutions Business Unit. Last year, we have seen various data points, and looking at the auto production increase, that was about -- was 3% last year. And the content growth, we have various data points, but it is considered to have grown by 8% to 15%. But some are saying it's 20%, so it's a wide range. But as Mr. Shibata mentioned earlier, there is a construct on the order production so the OEMs of shifting their focus on the high value-added cars, which means that they are using more semiconductors, and I think the content growth may exceed that 8% to 15% that I just said. So in sum, the production in growth and the contents growth put together, we may see a growth of around 20% or more. But as you pointed out, our growth is at 35%. So where this is coming from is that on top of what we're seeing in the market, the inventory at the OEM in Tier 1, it's at historical low last year. And even today, that's been the case. Also, I think they are building up on the inventory level. So that is the delta we're seeing. But clearly, [indiscernible] is building up for sure, so we are paying close attention to that. Growth OEMs and Tier 1s, we are closely coordinating with them to monitor the situation. But if you just look at the OEMs, the inventory of finished [ threats ] is at historical low, and that's what we can see from the general data. And for this year, the production unit, there are various data points. But what we have on hand, some data points suggest more than 10% growth. And the contents growth as last year, there will be a strong. So in sum of auto altogether, we can expect a high growth. But having said that, the auto production volume will be impacted by semiconductors or other components. So if the auto production does not grow by over 10% as I said, then in total, there could be some adversity. So that's something that we need to closely monitor going forward.

I have another follow-up question. You said that you are closely monitoring the inventory level. How about the backlog? How about the clients' inventory level? Are they at a healthy level? Can you share to the [ extent ] possible? How closely are you watching those inventory levels? Can you help assure me with the inventory level that you're monitoring at the client base?

Kataoka-san, would you like to answer?

Well, let me I will -- can I take the question. This is Shibata. As we don't see a surprising level at a macro level. Different companies, when we talk to them, and based on the discussion and also where we can get the actual figures, we are monitoring the trend. And also, we are also watching the macro data points. In particular, the trend of the inventory level is something that we are closely monitoring. As I try to say, if the absolute value of the demand of the inventory is high or low, but compared to the previous level, we're trying to see where we are today in a cycle. Also reflecting the financial data also, when we take a comprehensive macro view, we can see if the current level is okay or if it is alarming. So that's how they're trying to view the trend. So I will be repeating myself, but last year, about 2/3 of the revenue or increase in revenue, I think it was okay. But 1/3 of the revenue growth regardless of it was additional or not, I think it was a buildup in inventory. So that is my view. On the other hand, for this year, looking at the auto production compared to last year, the projection by many is that it's going to grow quite significantly compared to last year. So if everything went smoothly, then we should not see the situation as a major concern. So looking at the OEM's production plants and also the third-party's production plants versus those plants, if we see underperformance in the actual numbers, then we may have to rethink our strategy.

Now the next question is from Daiwa Securities, Sugiura-san.

This is Sugiura from Daiwa Securities. I have a question regarding the demand. First, 2022 ABU and IIBU. For market growth, which is expected to achieve a higher rate of growth? In Q1, I believe IIBU's, because of the reaction of the shipment that was made in advance, I think the growth rate for Q1 is lower with IIBU. But for the full -- on a full year basis, for Automotive versus IIBU, which can expect a higher rate of growth? And if possible, can you also comment on the demand trend by application? And also, due to this product portfolio, is there any element where you can achieve a higher growth than the market average? Can you comment on that as well?

As regarding the revenue growth, I think ABU will -- is expected to achieve a higher rate of growth compared to IIBU for this year. For IIBU, mainly has a strategy intentionally, all those efforts for diversification. I think those will skillfully and successfully kick in, and I think that is already manifesting itself. And on the other hand, because we have diversified to some extent already, those cloud data center applications which can achieve a high rate of growth compared against those portfolio that we have a high debt on, I think relatively speaking, the growth rate will be smaller because that's a necessity, and that's inevitable. When it comes to Automotive, we are expecting a huge rate of growth this year after those years' performance. Of course, the details will be added by Kataoka-san later, if there's anything else that he can comment on. But for application, ADAS, EV-related applications are expected to achieve a high rate of growth according to our projection. But in our case, especially the third generation SoC as well as 40-nano micro MCU, because of the deals that we have acquired in the past, at last, now being deployed, so we think that is manifesting itself in terms of huge sales growth. Of course, it's very difficult to define properly what SoC is. But I think compared to market average and compared to our competitors, I think this is an area where we are seeing a larger rate of growth, higher rate of growth. That's all for myself. But Kataoka-san, do you have anything to add?

Yes. For automotive, electrification as in also xEV electrification as well as ADAS in Gateway, those applications are going to increase in number, and this is going to be a standard feature for all cars. Which used to be an optional choice in the past, but MCUs and SoC in our case is therefore expected to increase significantly in some cases, triple or 3 -- double compared to last year because in total, I think we can expect a significant growth for those applications going forward. That's all for me.

My second question in -- on Page 10 of the presentation, I have a question as well for this page. Regarding the backlog, the backlog growth, Q1, Q2 and Q3, that remained very high. But in the Q4, the growth rate has slowed down quite significantly. So for your order efforts, your long-term efforts, I think this has had a positive effect on the fourth quarter. But your long-term efforts for order taking, how did this traffic into the backlog level? And I just wanted to know if these changes -- the slowdown is a trend change or not?

Well, thank you very much for asking that question. This is a matter that I think it is very important that you understand. So that's the reason why we drafted this graph here. But one step before that, I would like to mention that each company are taking different measures in this area. Like a U.S. company, a particular U.S. company, they have already included some fixed orders for next year already in this year's number, and European companies do not do any effort like that at all. What we have done is that for the full year of this year, all those orders for this year, those were -- we try to finalize and fix them, first and foremost. So we are not talking about next year basically at all. So last year's -- in the middle of the last year, since the middle of last year, we thought that we have to fix these orders. Otherwise, we won't be able to catch up with the supply in many different plans. So for the demand for fiscal 2022, we requested customers to fix those orders. Those requests were given to customers. Accordingly, all those gray portion here, except for some little portion which is a mixture of some many things. But basically, those are the orders to be delivered in fiscal 2022, and nothing beyond that are basically included. So we started this effort in the middle of last year, and it started to increase significantly in the early part. But then in the fourth quarter, the fiscal 2022 orders were already secured and already issued. So therefore, as Mr. Shinkai mentioned, our activity to secure our orders is already finished. And then as we have informed you the last time, the Dialog effort was somewhat related, so therefore, those are not included here. So flatting out here was a natural outcome as a result of our planned efforts. Therefore, this gray portion is expected to come down going forward. This is what we wanted to convey to you, and that's the reason why we prepared this diagram. And at the risk of repeating myself, beyond this, outside of this framework in writing, the non-cancelable orders have been agreed to and that accounts for a sizable portion, which is represented by the commitments in the middle section there. The reason why we have done this is because based on the request of customers, they wanted to use a conventional EDI system for order placement. So for the orders beyond that for the future, they didn't like that kind of operation. Some customers resisted that idea. So for those customers, we said it's okay, so we admitted that. So outside of that system, we decided to agree on the order taking in order placement. So when the deadline becomes closer on the EDI system, the orders are going to come in and those are already committed. But in terms of our system, it is not recognized as orders yet. And the top section here, the orders in fiscal 2022, those are from new customers and our long-term customers and other. And due to other reasons, those are not really finalized yet as an intentional decision. So that was decided by our side, rather. So for those customers though, just like before, asset and lead time will be set for taking those orders just like before. So those middle portion commitments in total, those numbers are already fixed. And as we move forward, this will traffic in and be blended into the grayed portion. And then at the top of that, the total amount of that is already not fixed, and that's the reason why this is expressed in gradation colors. That's the rationale behind this graph. So therefore, as time goes on, the gray bar will come down in terms of the size. And therefore, to offset that slightly, the commitment portion and the orders in fiscal 2022 will blend in to the gray portion. And that -- for that portion, that the amount will come down. And then on the right-hand side, the dark blue part, that will be translated into the revenues that is represented by the dark blue part. Now as for the orders from fiscal '23 onwards, although we have received some questions already, because the overall market is still difficult to make a proper forecast, so we would like to spend some more time. So towards the middle of this year, we will have to consider whether to repeat the same practice or give more flexibility, shorten the time frame or extend the lead time. I think we will have to decide on the most appropriate selection and respond to customers. I hope this answered your question.

I have a follow-up question on that. On one hand, production lead time is getting longer, and also the demand for and supply for semiconductor remains to be very tight. So therefore, the shortening the lead time, I think, in practicality is very difficult according to my view. So if that is the case then, certainly, the fixed orders will translate into revenues and then that will be delivered. But once the orders for fiscal 2023 becomes -- kicks in, I think the backlog coming down was difficult to understand. I think the backlog will not come down that much. So can you comment on that part as well?

Right. Towards the middle of the year, it depends on the efforts that we conduct and undertake towards the middle of the year. So are we going to repeat the same process and the efforts as last year, then the gray bar may go up.

Okay, understood.

Then the lead time itself, I don't think we have seen a significant extension of the lead time in my perception. So the semiconductor device manufacturing lead time or after taking the orders towards the shipment -- until the shipment, that lead time, because the demand is so strong, it's getting longer, of course. But when it comes to the semiconductor production equipment, after order placement and until that is delivered to us, that lead time is also getting longer and longer. That is true. But when it comes to capacity, production capacity, such as raw material, foundry and also the production capacity, how to allocate those capacity? Actually, each company for the allocation beyond next year, is not really finalized. I think most of the companies have not finalized the allocation plan at all. In our case, rather, towards the middle of this year, we are going to finalize the allocation plan. We received that kind of proposal, of course, some major companies, I think, are talking about the second half of this year. But -- so that means there are flexibility for us and room for us to make changes. So we can wait until then. So we are trapped and then decide on the absence for next fiscal year and beyond.

The next question is from [indiscernible], Equity [indiscernible].

This is [indiscernible] from [indiscernible]. Can you hear me?

Yes, we can hear you.

My first question is, looking at the bottom profit, I think there was a change in accounting period. And I think you have renewed the previous record high. I think there was some changes in the market, but in achieving a record high profit, how would you assess the reform that you have conducted to achieve this? And based on that, for this year, what is going to be the focus of your strategy? Are there any initiatives that you are prioritizing and focusing on for this year?

Well, it's hard to say one thing has contributed to this, but -- we may be blowing my own horn, but we have come up with products that's more needed by the clients. So to a certain extent, we were able to offer it at a appropriate value and price. So that sales strategy is starting to make progress and bear fruit, so I think that's one contribution that we were able to enjoy. And it's difficult to express this, but I think that the biggest thing and something that really reflected into our result was, how should I put this? So even if I say something really nice, and -- it's difficult to foresee what's going to happen in the future. And with those uncertainties, we have to have multiple scenarios on our hand. And in accordance with the changes in the projection in the market, we have to decide if we are going to go to the right path or the left path or we are going to step on the brake or excel. And I think compared to before, we have been able to make the decisions very quickly and have been able to execute those decisions. Also, I think that's the one big factor that helped us. Also in the market where demand is very strong like we are seeing right now, the products with high demand, and we have taken initiatives to increase our product where the demand is strong. And also, when the demand comes off, we take the opposite initiative. So from ramping up the production and also procuring our raw material allocation negotiation with the OSAT and foundry for securing the allocation, all of those corporate activities have been conducted based on the changes in the projection in the market. And I think we have been able to move with agility much better than before. And what we are going to focus on this year? To answer that question, looking at just this single year, like I have received a lot of questions and I have referred to Slide 10 to answer that. And the further demand, I believe we have done what we need to do to a certain extent. And for executing the delivery to the customers, we know what we need to do as it's just executing those plans. So in that sense, for this year, we are going to shift our gears so that from a midterm perspective or in September last year, we updated the target. But we want to try to upgrade that to the next level or the level thereafter so that we can achieve a lead. So we want to prepare ourselves to be able to achieve such big leap in the future. So that will be a tuck-in acquisition or investment, and then we'll continue to explore those opportunities. And as regarding production capacity, we will reconsider if what we're doing right now is the right strategy. We will continue to review and revisit the strategies in place. And also looking at our business model, we will look at where the source of the value proposition is coming from. Is it okay for us to continue as an extension of the existing business, or should we dig deeper to take necessary actions to enhance our value proposition? That is also something that we will continue to contemplate on. And as I always communicate with the analyst, soon, we are being behind the competitors, but we would also like to take action in regards to shareholder return. So those are going to be the focus for this year and to make them possible from near-sighted strategy, I want to have a longer-term perspective to refine our long-term strategy.

I have another question. Looking at the Q4 that just ended, for IIBU, I think there was a growth, it was consolidated by Dialog. Looking at Q1 for IIBU, looking at the different applications, would there be any change in that trend? What is going to be the driver? Can you elaborate on that?

Looking at the sequential trend, I wonder how relevant that communication is, and I always question myself at that point. But as I commented earlier, some of the positive factors are catching up in the production. And if we each -- the future demand and the negative impact appears in the following quarter, so it's like a next picture. Also I wonder if it makes no sense for me to talk about the sequential trend, but looking at the long-term trend, this year, the strong area is for Industrials, particularly for factory automation. Also, something that's easy for you to imagine in those kind of factors, I think this has started to become strong from last year, and I think that will continue to show strength. And also, for PC, mobile computing, slightly lagging behind that, the supply is starting to catch up. But this year, the printer demand I think will be quite high for this year versus that for PC mobile computing. Compared to last year, I think we will see a significant slowdown. What -- as we discussed in the last result presentation, the way that slowed down is becoming more moderate. So it's going to be a moderate growth, is what I see. And also on the same note, for home electronics like the AC, I thought that there will be some weakness. But at this point, it has not weakened as we had anticipated. So PC, home electronics, for those, there will be some slowdown, but it will be slightly stronger so the slowdown will be more moderate. And where we can see some bullishness is cloud data center. So some -- the NPU vendors for the platform upgrade, it will be subject to the upgrade. But already, for DDR-5 compatible product has been seeing risk growth in this year. And also next year or so, I think there will be another growth to another level. So this trend is coming from [indiscernible] and as a cloud and data center. So those are the sectors which are quite strong in demand, and for PC in consumers, there will be some slowdown. But compared to before, relatively speaking, it will be quite strong. So that's the view I see in front of us.

Now since we are running out of time, we would like to make the next question the last question for today. The question will be Yasui-san from UBS Securities.

I have 2 questions. The first, your market share seems to have increased according to my simulation. But of course, there is an impact of the Naka factory fire, so it may have come down and then rose again. So do you have any sense of actual growth in your market share in some of your products? So can you comment on that point first? And my second question is about after the new year, the industry seems to have accepted about the shortage of the semiconductors, and therefore, the semiconductor market is not likely to collapse. So as a way of your negotiation when it comes to price negotiation, do you -- are seeing some favorability in your position? Or what about cancellations? Product mix, I think -- are you luring customers towards the products that you are producing? So in terms of your contract negotiation, are there any favorable conditions that are expected for this year in terms of your negotiation with the contract with customers?

Well, the background of your question, I believe I have a good understanding on why you came up with that question, but I think it's very difficult for me to comment on them. So how should I put it? Well, in that context, I would say the tailwind is likely to continue this year. That's how I see it. I'm so sorry. Can I stop here? All right. If I comment too much, it will come back to me like a boomerang, so the tailwind continues. I wasn't really able to hear your first question. Your market share -- all right, market share. Market share at this point of time, I think we should not be overreacting to that, so I think we should comment on them after the third-party numbers become available. But at this point, those products and areas that we wanted to grow are beginning to show an increase, that's what we sense. Especially, as I mentioned earlier, in the case of Automotive. Strategic projects, if you will, those are very made clear and those are -- again, at the risk of repeating myself, these are enjoying a strong growth, and I think that those will be reflected in numbers. And in the case of Industrial/Infrastructure and IoT because we have a wide set of products, so it's very difficult to generalize things. But from ourselves who are conducting this business, the original Renesas products, the former Renesas such as MCU and SoC, and BMIC. After 2013, we have suffered a reduction in market share constantly. Of course, that was helpless. But we -- because we did this intentionally. But from an outside person's point of view, I think it looks as we have suffered a gradual decline. But in these areas, we have been able to successfully change the trajectory of those market share of those products. I don't want to say -- make any bullish comments and I made a mistake afterwards. So after the third-party numbers become available, which is expected in 2 to 3 months, if my comment is supported by those numbers, I think I can make further comments. But at this point, I would like to resume my comments at this junction.

All right. Thank you very much. With this, we would like to finish the Q&A session. And finally, I would like to ask Mr. Shibata to make a final comment.

Thank you very much for your time today, and thank you for all of your questions. Like you asked, the numbers are growing quite steadily. And some of you may feel, is this going to continue? And is it going to be the right forecast? And on that point, we are continuing to monitor the trend so should there be any changes in our perspective and interpretation, well, we will share that as quickly as possible. At this point in time, we are not concerned over this trend. And another point that I'd like to highlight is that making this year the turning point, we want to strike for further growth, so we want to transform ourself to pursue further growth. In March, when we update you the progress on this strategy, at that point, we will not be at that point to stay sure but during the course of the year and when we reflect on this year, I'm hoping that we can comment that in the near future, we will be able to try to strive for further growth. But next month, we will offer you more details on how we are making progress in our midterm plan. So once again, thank you very much for your time today despite your busy schedule.

So with that, we'd like to close the result briefing for Q4 of FY '21. Thank you all for your participation today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]