Renesas Electronics Corporation (6723) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning. Thank you very much for taking your precious time out of your busy schedule to attend Renesas Electronics 2023 Capital Markets Day. This is today's agenda. As you can see, we expect to finish the entire session in 3 hours and 20 minutes at about 12 minutes -- 20 minutes past 12 o'clock. The materials to be used for today's presentation is already posted on the IR website of the company. And we are expecting to post a video of this session later on, on the same web page. We prepared a Q&A session after each presentation. Those audiences participating online can raise their question in voice using the raise hand button of Zoom. If your name is called by the emcee, you are allowed to make your statement in voice, so please unmute yourself and then begin your question. We will take up to 2 questions per 1 questioner. Now without further ado, I would like to invite Mr. CEO, Mr. Shibata, CEO, to begin the session and begin his presentation.

Good morning, everyone. I am CEO at Renesas. My name is Shibata. Thank you very much for taking your precious time out of your busy schedule to attend this event. From this year or up until this last year, we held this Capital Market Day event twice a year to provide you with an update. But this time around, we have decided to integrate into 1 annual event. This time around sales and marketing were divided previously in 2 divisions. But this time around, we have integrated these 2 into 1 unit so sales and market globally overseen by Chris Allexandre will be presented. And for human resources, because we have implemented many different measures in the HR space, we have here Julie Pope from Tokyo will also make a presentation. So with these members, the familiar names like Sailesh; and Vivek; and myself and Shinkai-san from here in Tokyo and also from San Jose will be making the presentations to the audience. So now, I think I'm going to start off. This is the most scattered, I think, topic that I'm going to cover. But in the first part, I would like to talk about the updates so far. And in the latter part, I will talk about the approaches, our philosophy towards the future. So I'll try to be concise and compact and do my best there. But immediately after me, our CFO, Mr. Shinkai, will also make a presentation, then we'll take the questions for these sessions together. Now, okay. Let's look back our journey so far. The track record for last year is I think many of you I'm sure are familiar, but if we recap once again. As Renesas, we were able to achieve record profit and record sales, record revenue. And also over the last several years, we've been focusing on technical supplementation or complementations with the top 10 investments in the area of AI and radar. We have also acquired some companies. And most recently, we are trying to strengthen connectivity areas. So those companies [indiscernible] has the technology was also right on the horizon. So personally, what impressed me, if you look at the bottom right, we received several recognitions from several entities or organizations. The porter price of Hitotsubashi University previously in my understanding, this was only given to very outstanding companies only. So with that, I really wasn't expecting that Renesas will be able to gain this price, and that was beyond our imagination. So all the undertaking so far, I think, have been recognized to some extent in terms of the numbers, in terms of recognition. So therefore, last year, I think, was a very splendid year and fruitful year for us. So that was a recap that I wanted to mention at this stage. And from before, from occasion to occasion, I've been talking about the MCU. We received many questions regarding the MCU market share of Renesas at different occasions. Of course, in our business, the undertakings done today needs a little time lag for it to materialize. So we've been talking about this market share will more improve eventually. But as far as MCU is concerned, we have been able to achieve a 100 basis point improvement in 2022 compared to the previous year. Regardless of the segments, when you look at the overall MCU market share, we are the #1 position in the market right now. Then over the last several years -- over the last few years, we've been focusing on the 64-bit MPU embedded compute. In this area as well, we have been able to expand our market share to some extent in 2022. Again, we are the latecomer here, so we are still in the #4 position in this space. But over the last -- in the next several years, we would like to increase our market share and the position going forward. That is the ambition that we have. And we will have that ambition as we undertake the day-to-day operations going forward. Embedded Compute is the core of our business because we are semiconductor solutions supplier. We're placing that as a core, and Sailesh will explain -- give more color to that. But around the embedded compute, we have the winning combos and other solutions. And through those solutions, analog mixed signals and to some extent, power will be attached. And by doing so, we would like to drive growth of our business. So that's how we plan to leverage those attach capabilities. Now next page, this is the purpose of the company. The same slide again -- repeated again here. So I don't want to drag on this. But in any event, all of us including the employees and the end users included and also the most important is our customers. We have to make our lives easier for all these people. And then how are we going to achieve that, which is listed up here. That's what we call a strategic agenda. If you look at the bottom half circle there those are the items that we have to address 1 by 1. We have to align the vectors together towards the purpose and take actions. And by doing so, at the end of the day, we would like to make our customers' lives easier. And I think that will also make the end users' life easier eventually. And our employees will have a more pleasant days as they work here. So this is the strategic agenda. This remains unchanged from what we have presented to you before. So again, diversification, there's not so much update, so I would like to talk about these other 6 elements here and share with you the progress in all these other 6 elements. First, the focus for growth. For design-in progress for automotive and also for IoT, for both segments, we were able to achieve a 23% increase in design in value. And as you can see from the slide here, last year, we thought that was a stretch target to some extent, but we were able to overachieve the set target. And in terms of design-in it was a very fruitful year in 2022. And then for automotive, 20%, IoT, 22% is the target for this year. And of course, it's not only about the absolute amount, but the content of them is becoming increasingly important as a theme for us to address. As we have been talking from before, this is composed of a limited number of huge size D-in. The volatility will be significant. So we would like to have a well-balanced portfolio. And I think the details about this will be explained later in Chris' section, I think. And then solution focus. As we've been talking to you, winning combo has been making a steadfast and good progress so far. From last year, as you can see on the left-hand side, of course, count is very important. But of course, it's also very important to increase the quality so that we can provide a full system solution that are ready to use on the part of customers. So that's the reason why we are working to improve the quality, which is represented on the left-hand side. And on the right-hand side, the winning combos proportion to our total D-in has been tracked. And by doing so, our solution focused, how this is evaluated by the customers will be visible. So that's the reason why we have set this metrics here. And in this area as well, as you can see here, in last year, 1/3 of the total design-in came in from D-in. So I think we can fairly say that we have made a good progress here as well. This year, this is again another stretch target, but we believe we will aim to achieve half of our value through D-in going forward. Winning combos, this is stretch we're not really sure if we are able to achieve that, but we hope to make a good update to you when we meet you again this -- next year in this forum. And the next 1 is the strategic focus of UX enhancements. So what I would like to -- of course, Chris will cover the details later in his presentation. But in this area, to be honest with you, we at Renesas I think we are still at the catch-up phase versus our peers. So the competitors, I think this is something already taken for granted. But we are now making all our efforts to try to catch up with them. That's the candid opinion that I have regarding our state. But my view regarding Renesas, 1 of the common themes that I have is that there are good elements like technology IP or the dedicated workforce. All these individual element is very high in terms of quality. But when they are integrated, when to make things easier to use for customers, in that regard, I think even before I came to Renesas, these were the things that were pointed out that we have plenty of room for improvement from the external community. So customer experience and the initiatives that can contribute to enhancing customer experience. If you work on them more, I think the individual strength that we had from before can I think flourish going forward. So as any labor, user experience enhancement is a very important thing that we have to tackle going forward. And next Fab lite. Let me talk about the factories. This is a very small update. The new news is in the middle here, as you can see, at Kofu, 6-inch factory, 6-inch line, we have this capability in Kofu. But from 2025, we would like to launch an SiC line from 2025. This is a very small thing, but I think this is a new update that we can give to you today. And in addition, yesterday's press coverage and also in many different news, you may have seen that. How are you going to expand production going forward is a very major theme for us as well. And in Japan and also overseas and our stand-alone efforts and also partnership with foundries and other customers, we are still making studies and exploring the avenue. We would like to give more meticulous consideration to this. And at the right timing, we hope to make an update to you. But if I dare try to comment on one thing, which might be meaningful you -- for you is although we say that we are Fab lite, but power and also for some node products, like in nodes, we are committed to making continuous investments, and this will be covered by Shinkai-san later. But to some extent, CapEx and depreciation, we might have to expect some more step-up initiative in those areas. And that's 1 thing that I wanted to share with you at this juncture. So IGBT, we have announced the K6 plant in Kofu, that's 1 thing. And also the other thing that we have shared with you is the SiC new initiative that we have during these -- the timelines here. For IGBT, actually, we are making good progress already and the number of employees. Actually, in the vicinity of Kofu, there are not so many competitors in the semiconductor space, and therefore, we have been able to achieve a favorable progress of hirings after soliciting their applications. So I think as things go as planned, I think we shall be able to launch the line as planned according to the schedule. And as I mentioned earlier, in a small spot from 2025, we will make a second round of investment decision sometime this year so that we can launch the capacity and ramp up the capacity from 2025 onwards for SiC as well. I am so sorry for this scattered presentation. I would like to now talk about culture and also ESG to give you some updates. Culture, TAGIE is something that we have been eagerly promoting over the last several years: transparent, agile, global, innovative and entrepreneurial. Those are the 5 keywords here. And as we mentioned to you last year, this year, again, we conducted an employee survey, just finished it recently. The score and the response was slightly higher than last year. 92% of the employees responded to the survey. Last year, the score was 91%, and we received about 5,000 comments. And at the same time, we did find that there were a lot of positive comments in terms of transparency and the entrepreneur. And so this is exactly what we want to really focus on. In other words, even before we start to make the final decision, it is going to be important that we communicate to the members inside as well as outside the company and what we're trying to do. And so several things that we'll be discussing today is something that we have not really yet made this full-fledged decision yet. But we still do want to make sure we'd be able to share with you this information because we want to be transparent. And as for Agile Global Innovative, I'm sure that a lot of employees would still feel that there's a lot of things that we still need to work on. But with all that said, almost 70% are people, I do believe would agree that we still are doing better than last year. I think that is how they assess the current progress. In other words, everyone is feeling that we are moving forward. And also towards the right, it's really about this engagement. In other words, we want to grasp TAGIE in a more wider perspective in thinking what more we'd be able to do. For example, well-being or collaboration, there could be more areas for improvement. And especially within these, when it comes to like global or employee experience, this is something that we're going to be focusing on, especially this year. And so I hope that Julie Pope will be able to share with you a little more detail on these areas. So I hope you'd be able to look forward to what you'll be able to hear from Julie. Now this is about ESG. Last year, I think there were some areas that we were saying that, yes, we are aware, but we still haven't been able to make some new works on. But then this year, it's a bit different. In other words, all the areas that we are aware of we have or have already been able to start some progress. For example, you see some column that is in progress, but then also in darker blue, there are areas that we do find good progress so far. Of course, there are more that we still have to do, but we do believe we're making very good progress so far. So for example, these highlights for this year are the areas -- the 4 areas that we put a checkmark on. So for example, supplier engagement and some of the regular supplier audit that we've been doing. This is something that, yes, from CDP, we're getting good recognition. And also for conflict mineral. We're just looking at 3 TGs. But then now we have also been able to expand where we'd be looking at, including mica not just cobalt but also into mica. And also for index, now we're able to obtain MSCI AA rating. And finally -- at the end of April this year, we have the able to finally, issue our sustainability report. So all these activities, I think I do believe the investors are feeling more comfortable with what Renesas is doing even in terms of ESG. I do expect that the investors would be able to see what we're doing and say, yes, this is a company worth investing. And all of these activities, yes, is being reflected into our numbers. And some of the targets that we've mentioned before, it's all been achieved. And so sometimes, we do receive questions, aren't you going to update those numbers? But I still do want to think a little more before we'd be able to fully update the target. We still do have to expect high material cost in the foundries and also when we have the power side really go up. Although it's really good, the sell-through is good, but when it comes to gross margin, it's not exactly an area where we'd be able to expect such a high, high margin. And so when it comes to gross margin, especially, we still do expect it's going to be a bit challenging. And so as we look into how the portfolio would go and how the cost would go and also some of the investment required for production sites and some of the depreciation burden is something that we'd like to look at comprehensively before we'd be ready to really update the numbers. So please bear with us the numbers at the moment, we are still going to keep. And now from here on, we want to look a little more into the days ahead. I know my schedule is tight. I do have to make sure that I'd be more compact, but the message here is really a simpler one. In other words, I think this is something that I did mention in our previous earnings result, but we do want to expand our inventory. And so if you people do look at embedded computing, we want to make sure that we will be able to see an increase. Analog and power, a slight increase. And by doing that, as you can see on the right-hand side, the lead time perhaps could be reduced largely by like 30% to 40% from the customer's perspective. Now, there's a lot of less visibility, uncertainties, but we still do want to make sure we'd be able to show some results. And especially when it comes to inventory, this is an area where a lot of investors will be asking. So based on what we were experiencing back in 2020, a lot of people were asking, are you okay with the inventory? Now we have been controlling the inventory very, very tightly. But then at the same time, when we look into the future, we want to keep a balance between a tight discipline, as well as how much we'd be able to have for our future growth. We want to make sure we'd be able to have good room so that we'd be able to secure large growth. So inventory control plus shortening the lead time, this is what we want to balance out so that we really be able to focus on what growth we'd be able to achieve. And so as for target model DOI, it's going to be 20%, increase by 20% from the previous 100 to now 120 days. And some of the financial details, that's something that you'll be able to hear more from Shinkai-san later on. Now here, we're looking into 2030 aspiration, now no change to what I mentioned earlier before. But then so here, we're looking at 2x, 3x, 6x. And so the double, x2 is exactly what you'd be hearing for Vivek and Sailesh. And we're going to be now renaming it the Solutions Group, but it's really about what product line growth we'd be able to achieve. That's where we'll be able to achieve that x2. And then when it comes to x3, that's about valuation and multiple expansion. And if we multiply that 2 numbers that gives you 6x. And especially when it comes to valuation gap, filling in the valuation gap, we've always been talking how Renesas has been doing better ever since 2019. But then this is really supported by a good tailwind. What are you going to do when there's a headwind? And so that's exactly why we want to keep a mantra, forge ahead profitability and emerge stronger. And in other words, it's going to be important that we do control our expense. And as we do that, we should be able to at least maintain a good margin even if the top line starts to go down. Now our expectation at the moment, when we come back to a growth phase of the market after the correction phase, we'd be able to have a good assessment that we have been able to really strongly after the downside. And we do believe that's going to help in filling the valuation. And some of the initiatives for that is something that have been questioned by some investors, but it's about capital allocation. So I have been expressing before, but when it comes to dividend, we want to make sure we'd be able to restart offering our dividend payout as soon as possible. So we should be able to announce this in the near future. That is our expectation. And when it comes to buybacks, just very recently, we have announced a JPY 50 billion amount of buyback. And some analysts and investors are now also saying that maybe you might want to go like start saying like declaring like how much of free cash flow could be offered for dividend. And we do believe we need a little more time before we'd be ready to say that because there are some areas where we still do need to fill in, in other words, in terms of our capability. So a little more M&A, not large, but we do believe there is a little more M&A that we have to do. Now when that opportunity comes, it's something that we will not be able to say at this moment. But then when we know the opportunity presents itself, we want to be ready to go for it. But of course, if we're going to start paying out the dividend, we want to make sure we continuously pay out. And if there's a good opportunity, we also do want to go for some buybacks. And so we're going to a small start with the dividend. And once we become more stable, then we should be able to start talking about what kind of, for example, target within the free cash flow, et cetera. And so the aspiration is really the same thing that I have been saying, so collaboration and digitalization. But also when it comes to culture area of collaboration, I think these are all what ties in all together. But that's really the background in really going into the sales and marketing, where you'd be able to hear more from Chris later on. So the point here, in the past, IIBU and ABU we had these BUs each separately pursuing growth. And we do believe we have been able to see some result from that. But from here off, we'd like to make sure that we leverage the full capacity -- capability of the entire Renesas. And that's what we're saying, for example, sales and marketing integration but then, for example, auto probably would be easy to understand, but automobile is going to be like a computer on 4 wheels. And so automotive or industry, infrastructure, IoT, that type of business unit categorization might become not exactly a hindrance, but having these 2 segments, obviously, is not going to become a driver accelerator of our growth. And that is why we decided to first of all, change name. And so we want to come up with a naming centering on technology. It's a bit long, but that's -- this is how we want to call what we're going to do. And of course, for investors, I'm sure we'd be able to still speak with the language of business unit because that's probably going to come across better, especially as the investors would like to compare ourselves to peers. But then when we talk with internal members, we want to make sure that we'd be able to show our stance, our attitude that we want to leverage the full perspective, full capability of what we're doing. And that is why internally, especially we're going to be calling what we do on the way that we have on this slide. And especially when we want to, for example, with the design-in, we want to make sure that we'd be able to do some crossover activity, 2.5x more. And also winning combo 50%. So with that attitude, and so we do have this KPI, so we'll be able to facilitate or accelerate our intention to go and all one Renesas type of approach. Now digitalization, this is a quick connect studio example that I have presented here. And I'm sure there's a lot of things available. It's already available for you to see on our website. I hope you'll be able to look at. But then UX enhancement digitalization, in the end, it's really going to be -- to make our customers' life easier through digitalization. Especially when it comes to Quick-Connect, it really ties into our future business. But the device that comes on here may not always be Renesas products. And so we want to make sure that we look at this from a customer's perspective. So from the customer's perspective, they'll be able to find on this Quick-Connect studio, be it Renesas product or non-Renesas product, and they still be able to enjoy simple programming and they'll be able to order board. Once they have it in their hand, the customers would already have a lot of things prepared. So that's exactly what we're trying to offer. And of course, from here, it's really about expanding what we'd be able to put on this board. And so again, digitalization, we want to make sure we'd be able to enhance our customer experience. And when we try to do that, we don't want to just stick to just Renesas product that would come on board. So I know I've been speaking a bit longer than initially expected. I know I've been talking about a lot of things. Maybe it wasn't exactly easy for you to follow. But again what would put forth this correction, the softening, what we're finding here in the market, we want to make sure we still be able to keep a good discipline within ourselves. So that we'd be able to be stronger. Hopefully, that is going to help filling in some of the valuation gap. And of course, as we look into the future, like I mentioned in today's presentation, we want to make sure that we'd be able to unite all of the capability that we have in Renesas. And so all the individual initiatives, we want to make sure we'd be able to integrate so that we'd be able to go as 1 whole Renesas. And in the end, as we have at the very bottom, we want to make sure what we do, we will make our lives easier. And so that would materialize our aspiration into 2030. So I know I've been speaking for a long, but then I'd like to ask Mr. Shinkai to speak his part. And after that, we'd like to open the floor for Q&A. So Shinkai-san please.

Thank you very much. We would like to invite Senior Vice President and CFO, Shuhei Shinkai.

Thank you very much. I am Shuhei Shinkai, CFO. And in this segment, I would like to talk about how we are moving ahead to achieve our aspiration towards a sixfold increase in our market cap. I will cover recent priorities, initiatives taken and capital allocation approach. Let's brief down the sixfold increase. We have on horizontal access the scale which is expressed as twofold and triple on the vertical access to represent valuation growth. Back in fiscal 2022, the aspiration is USD 12 billion. In 2030, the aspiration is to top 20 billion, which means an average annual growth rate of 7% to 8% will be achieved. At this point onwards, main measures taken is execution of the midterm plan. We need to expand on production capacity, we need to pursue inventory management, we need to acquire complementing technology through M&A. Let's look at the valuation of the vertical access. This can be broken down into 2 steps. The first step is close the valuation gap, eliminate the discount applied. And the second step is to grow the multiples even further. We need to first focus on the first step and a down cycle management achieved shareholder returns, increase fall through to free cash flow. And I would like to dwell on these points today. And moving on to the next slide. Please look at the shaded area at the center of the slide. The adjusted results for the full fiscal year 2022 after adjustment, register JPY 1,228.2 billion in sales, 36% in gross margin and 35% in operating margin. And just as a reminder, the adjusted results reflect exchange rates, adjusted to midterm rates. JPY 100 to the U.S. dollar and JPY 120 to the euro as applied to continuing operations. And compared to the midterm model on the right, both indicators, sales growth and also margins have also made good progress to date. Even in an economic downturn, we plan to operate within the scope as indicated in this model. And moving on to next page, related to down cycle operational management, we need to take a look at changes in operational resilience. Up until this point in time, in terms of gross margin, operating margin, we have been able to maintain at certain levels. So what has changed compared to the past? Please pay attention to the right-hand side of the slide. In terms of fixed costs between 2019 and 2022, we have been able to contain the increase in fixed cost to about 20%, even while sales doubled between this period. Amortization costs were controlled, M&A synergies were materialized, and SG&A savings continue to contribute to the performance. And hence, the overriding operating leverage has been contained, has become smaller. In terms of production mixes at the front end, 2019, at this point in time, in-house production accounted for over 60%. For 2022, this has been controlled to around 40%. Changes in operating rates now have a smaller impact on gross margin. The circular product mix, there's been an increase in analog and the margin cushion is now larger. These changes have increased financial resilience. Let's move on to the next page. And let's touch on the situation this year. As you see on this slide, first half of 2022 to the first half of 2023, we are looking at the gross margin bridge. Comparing it to on a year-on-year basis, gross margin is expected to decrease 3 points. We've broken this down into some blocks. In terms of amortization expenses, there's a slight decrease year-on-year and registering positive for gross margin in automotive and industrial infrastructure, IoT, sales year-on-year has declined. And therefore, company-wide mix has deteriorated due to lower sales volume year-on-year. And looking at utilization at the center, there has been some decline in terms of competitive utilization, 250 basis points. First half of last year and the first half of this year in comparison, utilization for 90% has declined to 70%, that's about a 20 percentage point decline. As we saw in the earlier slide, when we look at the changes within the cost construction. Currently, utilization 10% change would have an impact of about 1 percentage point on a company-wide gross margin. And hence, where the utilization rate decrease is 20 percentage point, this translates to an approximately 2.5 percentage point deterioration in gross margin. And the circuit manufacturing cost has been increased and also an improvement in product mix which are almost equal. There is increased raw material and electricity costs as well that in-house plants increased outsourcing costs to foundries. However, this has been offset by mix improvement and price increase. And that describes the situation from previous year into this year. Let's look at the outlook. We will be prosperous ahead, the amortization costs are very left. As real investment to expand production, we expect this will increase in stages. And for automotive, there will be a pickup on back of demand recovery. So there will be an upturn and the same applies for utilization as well. When we look at the manufacturing cost mix. Of course, this is dependent on external, of course, market situation on cost side and also mix side, we have been attempted to strike a balance. In the subsequent pages, we are going to look at the capacity and also M&A. And moving on, here we're looking at capacity. Our production strategy is based on a fabless or Fab lite model. 28 nanometers and beyond are outsourced to foundries, and at the center, the 40 nanometers and below are manufactured in-house. And also our foundries and very down below power discrete are manufactured solely in our in-house facility. 2030, we plan to top 20 billion in sales. That's about double the current level. Capacity expansion also needed to materialize both in foundries and also in-house as well. The composition with the fabless and Fab lite model and also power discrete, we are currently considering investment in these areas. As the power discrete investment is intended for of Kofu K6 and also Takasaki for SiC production expansion. And looking at the rate, we are looking at capacity expansion as an assumption, and we're looking at investment 5% against sales, that's the current level of investment against sales. This will arise exactly at one point in time, this will materialize, will be decided as we are currently studying various scenarios, and we will update you. And we have the capacity status on the bottom right-hand corner, in 2024 MCU analog and 2025 power discrete capacity will ramp up. The time of the capacity ramp-up will be synchronized with the start of amortization and also cash out. In other words, amortization will start to increase from the year 2024. Moving on. Here we're looking at the inventory strategy. In order to pursue strategic inventory, we need to round up the DOI level. We will expand a die bank and shortened the order lead time and this will put into -- focus the die bank Holdings, die banks of general purpose MCU and also MPU and analog and power products will sent the bar higher. And as for those who are produced in-house, due to prospective ECM, the die bank will have work as a buffer for products manufactured. The current DOI model of 100 days and plus is where we currently are. And this will now be increased and rounded up to 120 days. As a result, what will happen is described in the bottom right-hand corner, the lead time for orders, for general purpose products will be reduced by 30% to 40% under plan. Starting with those for which die bank expansion has been completed. In a phased manner, we will be materializing on shortening of lead time for orders fulfillment and switching gears. The review on the horizontal access measure, an important component of capital allocation is M&A. I'd like to reflect back on past M&A deals. There have been 3 major M&A transactions to date in just IDT and also dialogue as you recognize, after acquisition, growth has been registered, especially an interest in 6 years have doubled. There's been a remarkable growth and dialogue. We are seeing growth registered around 2%. And below, we are looking at the cost synergy against the target. We are overshooting the target. This is attributed to the reduction in cost expenses, cost-cutting measures and the 3 large M&A transactions have produced positive results. In retrospect, valuation at acquisition was not that high. I believe it's fair to say so for these M&A initiatives will remain as a major investment opportunity. And moving on, here, we're looking at tuck-ins -- we're looking back on the tuck-in in M&A, a fairly small size in terms of technology as [indiscernible] platform. We have a drive to also conduct M&A and tuck-ins for minority investment combined, there have been 8 acquisitions thus far totaling USD 400 million overall. As we see at the bottom of the slide, from industrial IoT to automotive, we have acquired a wide range of available products. And so how are we going to capitalize on the technology on a company-wide basis, there will be an explanation offered by IFEC later on. And how are we going to utilize the platform, and this will be explained by Chris Allexandre later on. And here on capital allocation, as I've mentioned thus far, we have invested in growth and also shareholder returns to emphasis is where we will be moving towards the policy of shifting the excess capital allocation to investment in growth and shareholder returns remains unchanged. We will consider capital investment, especially in the area of mature process. Of course, we are studying various options. In terms of investor, we have the DOI model, which will be updated. We will shorten lead times and also prepare for BCM. Financial health, the leverage target remains unchanged. And as for M&A, this will remain an important strategic option. Shareholder returns. Assumptions dividends will be paid out on a stable basis in a small amount to be achieved as soon as possible. Share buybacks will be carried out flexibly model update. We've recently updated DOI model from the conventional 100 days to 120 days, otherwise remains unchanged. However, as we have indicated, we need -- we understand that there's a need to revise the DOI model, particularly for capital expenditures, updates will be made in due course. And lessee, this is the same as the initial page. We will color in the sixfold area map sequentially. And today, I venture to explain AMB measures captured in AMB. And in subsequent opportunities, we will update you on progress here and on other initiatives. Thank you very much for your kind attention.

Thank you very much for the presentation. Now we would like to move on to the Q&A session. In the Q&A session, Shibata-san and Shinkai will answer your questions. [Operator Instructions]. BOA Securities, Hirakawa-san, the floor is yours.

BOE Securities. My name is Hirakawa. I have a question to the President. What left as the strongest impression to me was all Renesas. On Renesas, where do you think is the biggest center force of your company? Is it the purpose of the company or customer centricity? Or is it the pay raises, approximately in line with the profit growth? What drives the unity of the company more strongly? Can you talk about that? That's my first question. My second question is about the valuation expansion. I think this after all, the Renesas profit has been increasing, but if the automotive profitability is much higher, I think you'll be able to enjoy greater reviews. So maybe this is something that you're going to address in your Phase 2 maybe. But can you share your thoughts about that? That's my second question. So can you answer these questions?

Thank you. Regarding the central force, there are many things that can come into play there. For example, the closest things, and I think the most important thing will be the interaction with customers. As I mentioned earlier in my presentation, for example, when it comes to automotive, automotive, the customer -- they may be asking that they will be willing to listen to proposal of nonautomotive technology, for example. And in our conventional categorization, those customers who are not really viewed to be automotive customers, but they are now coming into the space of automotive business. So that's happening day in and day out. So through those interactions with customers, I think in order to make customers' lives easier, we have to deliver and propose all that we have, including the assets of the acquired companies in a way that is easy to understand for customers, easy to use by customers. And that will, I think, lead to great reviews, especially when it comes to the changes of applications and technology. And in addition to that, in the geography that's showing a faster rate of growth like the customers in Vietnam, India and China, if you go to those markets, we have to break away from the conventional thinking and because these initiatives are better appreciated by these markets. So we have to consider these things and come up with the idea that will be better appreciated by customers. I think that will be the biggest driving force to drive unity. The second point is the market share of the automotive, which is very difficult for me to comment. But because of the EV ramp up, I think the power discrete will see a surge immediately over the short term. And I think we are lagging behind compared to other competitors to some extent. IGBT, we started -- we thought that this is going to start off from 2025 in our case, so in the meantime, when you look at the automotive semiconductor, I think we will continue to face some challenges in this period. But thereafter, if you consider the growth thereafter, of course, automotive is a very exciting space, and we have to step up our activities. Of course, that is the ambition. But still, as we've been talking from before, we have to also achieve a good balance between the different segments in a favorable fashion. So we have to look at the entire company and achieve growth as the overall company in a smooth way. So that is the primary ambition that we have at the moment. Did I answer your question? And I'm sorry, in the outset, I said that some SiC production line, Takasaki and Kofu, I mixed together. But to be precise, the 6-inch Takasaki line will be the startup phase that we are going to use. So that's the clarification that I wanted to share with you.

Next from Daiwa Securities, Mr. Sugiura.

This is Sugiura from Daiwa Securities. I have 1 question. So within the semiconductor industry. I think you have been able to obtain like excess income or profit. And for the past 2 years, for example, the semiconductor price had always been going up even though it should have been going down. And also, nowadays, it's really going on a downturn. But then if you look at the entire semiconductor industry, there's a lot of BCP inventory that is being required. I mean there are still some customer that's looking for inventories. And so with that perspective, maybe there were like extra revenue or income that you've been able to gain. There are some concerns around that. And do you think there's going to be a negative rebound do you think there's such a risk? I mean, some people might be feeling that. And so you are looking at the business on yourself. Do you think there's a potential for that? For example, do you think there's a chance that you might find this negative rebound in that sense? And if that's going to materialize in the end, in order for you to still achieve your target, how do you think you'd be able to control that? So if there's any like thoughts that you have at the moment? Can you share that with us?

When you comes to that I'm not exactly sure if you'd be able to say it as excess or extra revenue or income. I'm not exactly sure if that's really the right way to express that. But that said, if we try to look at this from the entire semiconductor industry, I think like historically speaking, it's more like more value that had been leaking out of the semiconductor space. And I think that was something that we have been observing in the past. So, I think it's really the profit. I think we now are more positioned to be able to secure the profit that used to just leak out of the semiconductor space. That's the view that we have. Now with that said, on a short-term perspective, of course, there will be some ups and downs. And so when it comes to price and the revenue and profit, it's not like we're always going to keep on finding a steady growth in all these. And so in a short-term perspective, I'm sure there will be some ebbs and flows and ups and downs. But then still, if you'd be able to look at this in a long-term perspective, I'm sure we'd be able to really progress in a more optimal pace. But then, just like I mentioned also from Mr. Shinkai, looking at our current operation, cost is increasing. We are actually feeling that, especially the procurement cost. And when we manufacture the utility cost and labor cost, it's all rising. And so it's not exactly like a deflationary trend that we've been finding in the past. I mean in the past, if we just wait, we'd be finding all the costs go down. But then maybe the paradigm has already shifted now. That's what I feel. And also, how are we going to progress ourselves? That really goes back to today's theme, and I'm sure it's going to be a future theme as well. But it's really about how we'd be able to enhance value. It's not for each device, but it's really about user experience. It's really about digitalization. And it's really about expanding the scope of the value we'll be able to add to this the offering or the solution we'd be able to offer. So for example, in the past. We would just try to measure the weight of the semiconductor and thinking of what the price would be, but it's more going to be a bit different. It's not going to be a value you can just measure and wait. And I think semiconductor is really going to be the center of this new paradigm. And it is going to take time before we'd be able to actually feel that and see that, but it is really the direction that we need to pursue. If we'd be able to achieve that trend, then that short-term ups and downs should be balanced. We should be able to absorb that. That's how I feel.

Next question is from Fujiwara-san from Citi Group.

This is Citigroup Securities. My name is Fujiwara I also have 2 questions, if I may. First question, regarding the margin resilience, this is a question regarding margin resilience. In this down cycle, the margin it's not likely to go down significantly. So I think you're managing quite well. But in this minor down cycle, what is the headwind? And what is the tailwind, if you will? I think because those are mixed together in this cycle right now. So in this down cycle, what was the major tailwind for you? And in the next down cycle, you may have employed countermeasures against the headwinds. So as what will become useful for you in the next down cycle. What is your expectations for that? Can you share that projection? That will be appreciated. That's my first question. My second question is about the power semiconductor-related investments. The gross margin looks inferior compared to other products you said. But the power exposure, automotive overall or maybe other aspects, to what extent do you think you can expand going forward? If you have an image of that, that would be appreciated. So can you talk about them?

All right. The first question will be answered by Shinkai-san.

Well tailwind and also the headwind. In that regard, I would say that you look at -- I talked about the bridge and the gross margin from this year from last year and this year. The rise was a good tailwind for us because how to control that is going to be very important as we see increase in depreciation as in line with the production increase in the future. If you look at the far right block, the overall cost increase and the mix improvement and the price hike, those are well balanced today. So that's the successful factor this time around. And then raw material prices and the hardware material prices and the price hike and also the mix. What's going to happen to them going forward? That will be affected heavily by the environment. So we have to take them into consideration, but we don't have a straightforward answer, but these are going to be very important elements that we would like to keep a close eye on these developments going forward. And the other thing that I will add here is the Factor utilization hovering around -- that will have a 100 basis point impact with a change of 10% utilization. As you may recall, from around mid last year, we have been we started putting a break on the activities, and that was criticized that we started to take actions too early. But we'll try to put a brakes to ourselves early on so that we can take actions when need be. So as a consequence, we were able to keep our inventory at a very low level. So we are now when we start trying to increase inventories, that will sustain the utilization of factory and that is the case today. So although this is an internal factor, but I think this has turned positive and as a tailwind and underpinned our performance. So even in the downfall in the future, if you can manage in the same way, I think we shall be able to moderate the changes of our margin trend. So we talked about the inventory increase or decrease. I think we have to hardly work on those controls, looking at the trends of the market. And of course, we just started our activities in the power space. So we cannot talk big and declare JPY 100 billion, hundreds of billions. And we don't have that significant hike target right now. So we don't want to disclose that either. However, no matter what we think about it, EV is the most typical application, but even other than EV, power, especially centered on renewables, this is going to have electricity close to carbon neutrality. And I think that's a straightforward leaner expansion that we can definitely expect. So power, I think, we are expecting that this will become a significant portion to some extent in our business. But unless we are able to catch up with this production, this will only be a pie in the sky. So therefore, we have to make sure to ramp up our production. And also we have to consider our production plan at different factories going forward and decide on what will be the optimal level and also decide on the margin. Those are the things that we have to consider going forward. That's it.

Supplemental question, a follow-up quick question regarding power. Automotive -- in the automotive sector, I think you are comparable to the market. I think that is the ambition you have to stay comparable to the market, but also for power, are you trying to catch up with the market? Is that your immediate target?

For power, we are starting from a very small base. for now. So as for the market share, we have an ambitious plan to expand significantly because our size is very small today, according to our estimate, even with IGBT we are slightly less than 10%, I believe, at the current moment. So we would like to aggressively and significantly expand this area, including IGBT. That's the plan.

Now we'd like to take questions from [ Mr. Kojima ]from Nikkei BP.

This is Kojima from Nikkei BP. I hope you can hear me. Like a follow-up to the earlier question. I wanted to ask about power semiconductor as well. Now on Slide 11 of what Mr. Shibata's presentation. I think you're talking about IGBT and SiC, I think you had a slide like that. And so SiC, when you say SiC you're going to manufacture for the time being in Takasaki. Is that correct?

Yes, that's right.

Are you also going to manufacture in Kofu? Do you have any plans like that?

Well, at this moment, I can't really say, but at this moment, Kofu is for 12-inch. We want to have a Kofu focussed on 12-inch. SiC is not going to go for 12-inch. Which means it's going to remain in Takasaki. But of course, we don't know what the future could be, but that's the current plan.

And so at point of 2025, let's say you went into a ramp-up and then SiC and IGBT, what is going to be the scale that you have in mind?

Still small. SiC at the moment, at the point of FY '25, it's just going to be like a peanut size business, just got started, something like that. And from -- it's going to be like second phase and third phase from '26, year '26. So that's what we have at the moment in plan. And in terms of IGBT if things go steadily and well, thinking from the current scale, it's probably going to double or triple. It should become quite large at the point of 2025.

IGBT you mentioned like 10%. And so under 10%. Is that going to be the share of the current market?

Yes. Well, it's not exactly IGBT, but within EV, IGBT share with an EV. And that's just our assumption mind you.

We are almost running out of time. So this will be the last question. From Goldman sachs Securities Takayama-san.

Let me ask my question. regarding M&A and capital allocation also M&A, including capital in the context of capital allocation. In the period up to 2030, I think you're basically planning your target based on organic growth. But in addition to that, do you think it is meaningful for you to add a sizable M&A in addition to organic growth? That's my first question. And you're also looking into software-related acquisitions. So what are the areas that you still need to complement at this point of time? That's my first question.

Yes. Our plan remains basically unchanged. Software digital will be the centerpiece of our activities, so I think we need to make sizable acquisitions or investments in these spaces. And also, this is something that we have been talking from before, connectivity and compounds. Those are the things that we would like to reinforce. So depending on the deal and depending on the project, the size will vary from small ones to quite large ones. So I think we're looking at a broad range here in terms of size of investment. And because it depends on the counterparty. So this is something we cannot really foresee. So we have to keep a very wide spectrum in mind and continue thinking. That's the current status.

So let's say, in 2030, towards 2030, do you have that -- in order for you to achieve a certain revenue size, are you looking into acquisitions? Maybe you have to consider that your organic path will not allow you to achieve that revenue. Will that be an approach that you can take?

I will not roll out that possibility, but that is not our mindset today. The acquisition that we are thinking about right now are perhaps the PO impact, I believe, is not going to be that significant, even if we carry out a sizable M&A. So it's rather trying to complicate -- complement our missing capabilities or shortcomings, if you will. So in that regard, it's not going after the numbers. So it's like in order for us to be comparable with our peers in that respective sector, we would like to add those tuck-ins to complement our capabilities. So in terms of revenue, as we have been talked about -- talked before, and this will be covered by Sailesh and Vivek later. So we would like to continue with the plot in line that is a strategy that we are planning to follow.

And my second question is about the SiC. Once again, can you share with us what is the strength that you can expect by going into this space from now onwards because all the other peers are well advanced in the SiC space. So can you explain what's the reason why you have decided to go in here? And also when it comes to supply chain, in terms of procurement of raw materials, have you confirmed?

As for the second part of the question, raw materials SiC as we have discussed before, so if i see still at this point of time, I think the SiC is still at the early phase of the business. So silicon is a very mature market. So I think a different approach is definitely needed for silicon carbide. So I think we would like to broadly look into partnerships. So that's my answer to the first question. And then the first part of the question, it doesn't make sense for us to enter this space at this point of time. The same applies to IGBT. We are also a latecomer, a significant latecomer in these spaces for SiC and IGBT. But of course, it's very difficult to quantify, but perhaps I would say 1 of the strengths that Renesas has that cannot be quantified is around power. We are capable of developing something very efficient. So silicon and carbide and also for IGBT, we are very significantly latecomer. But for the current generation and for the future, I think we are receiving a great review because of our performance from the customers. So the same applies to IGBT. So we would like to send a proper amount of time and if we can build on our current initiatives, I'm sure that we shall be able to enjoy great recognition from the customers. As of now, the technical expectations and also looking down into the future, the supply is going to expected to be not enough. So all the customers around the world are showing a strong interest and we are receiving a lot of very powerful inquiries from those customers. So I think there's plenty of space still available. And I think we are well positioned to increase our market share even we've entered the space from now onwards.

Thank you very much. We have received other questions. However, due to time constraints, we would like to close this Q&A section for now. We would like to now invite Senior Vice President, CSMO and Head of Global Sales and Marketing Unit, Chris Allexandre. Chris the floor is yours.

Good morning, everybody, from my part as well. My name is Chris Allexandre. I'm the Global Head of Sales and Marketing, and welcome again to the Renesas Capital Market Day. What I'm going to share with you today is the vision and the action we are taking to deliver on this growth ambition that we have set for ourselves. Let me start with the playbook, which basically sets this vision this vision of our growth is centered around 2 things: what we call broader and deeper. Selling more Renesas product and increasing our content and systems to our customers is what we call deeper. Selling to more customers and expanding our customer base, both product and technologies is what we call broader. Both together will help us to diversify our revenue base from a product and customer standpoint, which will ultimately give us more vector of growth and deliver a sustainable long-term growth to the 20-plus billion that we've set for ourselves. Let's talk about deeper first. As we continue to invest in our portfolio, and Sailesh and Vivek will talk about the investment that we are making from an R&D standpoint, as we continue to make acquisitions, we have a lot more to offer to our customers to basically populate the Board and capture more of their content and the bond. Also, we are leveraging our strong and expanding position on the embedded processing side with a lot of MCUs that we are shipping to a lot of customers and expanding on the MPU side, which we can use to wrap around analog, power connectivity and all other products that we have. On the broader side, essentially gaining more customers is going to help us to add on top of the revenue we do with big customers, a lot of revenue coming from mid- to medium-sized to smaller-sized customers, which will have revenue as well as both margin. This whole vision is centered around what Shibata-san talked about, which is this sorting solution and expanding our cross-selling capability. We talked about a win combo, and I will go into detail, but this is really kind of the baseline -- the baseline of our strategy. If you go to next slide, it shows how we execute on that vision. Essentially, what we've done is we've divided the sales force into a 4 plus 1 lane. Each of the vertical that we focus on, IoT, infrastructure, industrial, automotive, for each of those, we have a dedicated worldwide sales NFA team that is engaging globally with all the big customers of today and the big customers of tomorrow, where we can drive growth in those equipment. We also below those equipment, are addressing a lot of subsegments that we can drive growth. For instance, that would be cloud and infrastructure that will be telecom or networking or that would be a factor automation and building automation in this scale. So those teams are globally focusing on the execution to win at those set of global customers and local customers that will drive the growth in those equipments, as well as making sure that we duplicate the success from 1 customer to the other. And this is where we really take deeper to the next level by improving this duplication and that success. On the broader side, we have a dedicated sales force that really partner with distribution. That is deployed geographically in all the key territories around the world that is focusing on finding new customers, engaging with them, making sure that we provide the full solution of Renesas using the winning combos, and making them more and more engaged and more and more significant. The other thing, and I call that the sixth line is something that Shibata-san talked about as a growing investment, which is a digital lane. We actually believe that mid to long term, more and more of our business will actually be digital-enabled or actually fully transacted digitally with the customers. And that's something we're investing on both from a web standpoint, from a capability of tool standpoint and a lot of things that we are doing to really enable our customers to do more on the digital side, and we'll come back to that in a second. If you go to next slide, as we combine sales and marketing earlier this year, we set 3 priorities for us to go and execute on that vision. Number one was the organization development to enable the future. Renesas vows to grow more than 50% over the next multiple years to set to get to the 20 billion, we are in constant transformation. So we need to continue to improve the organization and skills and leadership to go and execute on that. Number two, was to execute on the go-to-market I just talked about. How do we make sure that we execute day in and day out on basically this go-to-market and it's broader and deeper? And the last but not least, deliver results, okay? In this first soft environment, what we want to focus on in making sure that we, at the end of the year, execute on this designing goal that we have, which will set ourselves for success for 2030 as Shibata-san and Shinkai-San just talked about before. If you go to next slide, please. Let me start with the organization. We are moving from a product sales to a solutions sales, okay? The winning combos are helping us to get there. And it's a continuous improvement on how we leverage this full portfolio to be able to capture more of the system of the customers. And this is kind of where we continue to improve the skills and the focus and the capabilities of our team. Number two, as we combined the organization together, we were able to drive on the sales operation and of course, the digital marketing side, a lot more efficiency by combining all market together into 1 sales team. The third one is very important is how we basically leveraged the broad sales and marketing deployed regional organization to go broader in all markets. In the past, we used to focus on the automotive side on the big customers. And now combining this sales and marketing to get under 1 unit, leveraging the distributors all together across all markets. We're able to go a lot broader and we have a big strategy on increasing the number of customers on the automotive side. Last but not least, technical team as Shibata-san talked about, as we see growing need for our customers to tap into technologies that come across the Renesas portfolio, we've put together the technical team into 1 organization so that all the combos, all the system expertise, all the product can be used seamlessly across all markets that we served, the 4 plus 1, as I mentioned. Now let's talk about the next slide. Let's talk about the winning combo. Shibata-san talked about it. We started this journey back in 2019 with a very humble 35 winning combos. Again, the winning combos are system architecture that we provide our customers to help them to design their application. They are using the full extent of Renesas portfolio. And now a few years later, we now have more than 400 winning combos across multiple applications and multiple segments. You can see here, we have winning combos across the multiple market that we are focusing on as well as the mass market and key technology. What is very interesting to look at is as we get more traction and more feedback and more engagement from our customers, we are improving on the quality of the combos. And what was a paper design that got to a system architecture has now become a full system hardware and software solution that we provide the customer that we call proof of concept. And if you go to the next slide, you see that on the left side, as the number of combos are growing and will -- can you go back 1 slide, please? As you see the number of combos going and the target to be at 500 by the end of the year, you see a growing number as a percentage of those combos being what we call a full system solution and PoC, with 35% at the end of the year that are real full system solution we provide to customers. On the right side, this is where you see how those combos are really changing our business with the customers. This is the design-in coming from the winning combo that we've introduced. Of course, we had a slow start because we had to build and change the mindset both our teams, as well as the customer. And then you start to see that we had tailwind coming from customers, distributors, our own sales force, and the perception of the customers of Renesas has completely changed. And we had a big acceleration in '21 to '22, getting to about 30% of our total design-in in 2022 coming from combo. As Shibata-san talked about, we've set a very aggressive goal for this year where we believe 50% of our design-in will come from the combo, which really illustrates how we are moving from a product sale organization to really a system sale organization, and that will drive the growth for the future. Go to next slide, please. I talked about go-to-market and organization. So we have those 4 global vertical sales in FA organizing that focus on the infrastructure, IoT, industrial and automotive. They are global. They use local resource to closer to the customers. What they do is really kind of combine the strategy and execution to make sure that we can duplicate. You can see a SAM equivalent between the automotive around EUR 35 billion, as well as the IoT, industrial and infrastructure, around EUR 33 billion as well. So big opportunity for us to grow with customers that are big today where we can expand, as well as customers where we believe we can grow significantly in the future. Next slide, please. On the regional side, it's a different ball game. Here, it's about building a pipeline of new customers. The sales team here is essentially partnering with distribution, making sure we find new customers, engaging them with any product we have ideally with solutions and building more of the engagement to get to a more significant engagement. And as the engagement gets more significant, we actually assign resources to get a lot deeper in those customers. So the long-term vision is a lot of our growth, we actually come from those customers and I will show you the design-in example later on today, a lot of the growth will come from those customers as they are new for Renesas where we can engage with the full portfolio that we have on the embedded processing, analog power and connectivity. So a very interesting approach here. Next slide, please. I talked about the technical team and the importance of combining all the skills that we have, the technical competency we have around the company into 1 sales force. What we are seeing is [Foreign Language] I've realized that we have to be a lot easier to do business with and provide a lot of easiness to our customers in terms of implementation of our product, our solution, as well as finding the necessary information. And this kind of drives us back to improve that we can serve as a big customer. So really kind of our broader and deeper is basically a self-fueling in terms of capabilities. Can you go to the next slide, please. I talked about the second priority, which is to deliver results. In this environment, what matters the most for us is to make sure that we set ourselves for success in the next few years from now, okay? And we measure that by design-in. Shibata-san talked about the fact that we've been continuing to grow nicely or this an actually even beat our target than we had for '22 and growing very nicely, both on the IoT infrastructure industrial as well as the auto side. You can see that we have set ourselves another ambitious goal with 24,000 [indiscernible] for this year in terms of design-in and TV. And actually, based on where we are, we feel like we are well on track to achieve that goal. So very important for us to get there. There are a few things I want to get your attention on that slide. Number one is you will see that the design-in is across multiple products and multiple markets. We're not growing with 1 market, not growing with 1 technology. If you look at both analog and power and embedded processing as well as all the lanes we are focusing, every design-in is building momentum. Number two is you can see that the mass market, which is the go broader, is actually growing design-in 2x the speed of the rest of the segment we are focusing on. That tells you that the solution approach and the engagement with a lot more customers is basically feeding our growth for the future. And last but not least, you can see on the right side that the analog and power CAGR of design-in growth is slightly higher than the embedded processing. As I mentioned earlier, with a lot of touch points that we have, selling billions of MCUs and NPUs to a lot of customers, and expanding that and expanding our market share, as we talked about earlier and that Vivek and Sailesh will talk about, we have a higher opportunity to attach a lot more analog and power in a lot of our customers. So really kind of showing here on design-in the impact of our strategy and our vision. If you go to the next slide, please. Now the growth will come from the execution of that model, okay? I talked about the duplication, I talked about the diversification, I talked about the deepener and broader, but there are few things that we are doing and are going to do to really kind of get to next level and accelerate that growth and get to the 20-plus billion. Number one is, I introduced that earlier, this 6 lane, okay, which is really the digital lane, okay? And we not just more directly and indirectly, but do more with our customers digitally, and I will talk about that in the future. One is this cross system group cross-selling. How do we make sure that we leverage the full technologies of Renesas in all markets? We used to be very confined on the automotive product for automotive, nonautomotive product for nonautomotive. Now what we see is in many markets, there is an opportunity for us to leverage this technology. I'll give you 2 examples. We see good traction with our expanding IGBT product portfolio into energy and industrial market. We see a great opportunity with our position sensors that have been getting a lot of traction on the automotive side now also on the intro side. On the flip side, has the architecture of the car is changing. And as the SoC needs a lot of high power, we really see a pull from the customers on products that are very similar if not even the same product that we are selling into the cloud and the service space. So really great opportunity for Renesas to use this this across-the-board technology that we have and products that we have in the solutions group to go and get to the next level. Last but not least, our vision is long-term success will be about how do we enable customer to reduce design barrier and reduce complexity? So UX going to next level. How do we make sure customers are implementing solution without complexity. If you go to next slide, please. I talked about cross solution group cross-selling. You can see it, we started to make inroads in '22, really about how we took the existing product that we have to more customers and to more segments. And particularly on the power. I mentioned the expansion on the IGBT, great success in taking IGBT to a lot more customers. But we see a huge opportunity to accelerate this year. And the combination into 1 sales and application and marketing which is really giving us this opportunity. And you can see that on the design win. We believe this year will give us a lot more acceleration on that front. In particular, on the [indiscernible] where we see the technology on both sides of the aisle, be able to serve all markets. If you go to the next slide, please. Talk about digital. Digital is the foundation of our future in terms of how we serve the customer. We actually believe more and more customers will self-serve in the future, get information by themselves and want to really kind of interact with them digitally. We are spending a lot of investment and expanding our capability to be able to serve the customers as well as using data to understand better our customers. Go to next slide, please. And what we use for that is the web. The web is really where a big area of investment is for us. It's the always-on customer enablement platform. This is where customers can find content, could it be data sheet, white papers, absolute tools, lab on the cloud, QC Studio and any other tools that we have, as well as technical support. Our hope, our strategy and our goal is really to accelerate customer success by giving them the opportunity to be simple, smooth and streamlined from searching selecting and designing. We continue to invest in our web. We've doubled the size of the team. We've made a lot of improvements in terms of visits, and now we are sitting about 1.2 million visitors on our website per month, and we believe this will continue to expand. We are continuing as well to improve our capabilities. You can see here the introduction of our engineering community, really the vision of customers can go online and get answers to their own question by themselves without having to by design, interact with somebody from Renesas or our distributors. So we will see great traction there. We've also more recently introduced our online store. This is the beginning. We just introduced it a couple of weeks ago. We have 3,500 products, which are our main products that we want to lead with. But we believe this will continue to expand and really wanted to give the customers the ability to select and buy directly on the Renesas web. And as we continue to evolve as a company, as I mentioned, moving from a product sale to a solution sale, we are redesigning, as we speak, our web, which will give the opportunity to customers as they click on block diagrams of the winning combos to get the full product pop up with the list of parts and the ability to buy and really kind of make it seamlessly. Next slide, please. The other thing I talked about is how do we make sure that we simplify the ZIM process. We believe the customers of the future will reward the suppliers that make their life easier. In terms of reducing risk and improving time to market. We've invested in a lot of tools, we continue to invest. On the left side, you see the lab on the cloud. We introduced that about 2 years ago. Lab on the Cloud is basically the broad market winning combos online and the ability for customers to go to test them without touching them, everything remote, okay? And this is keeping -- helping customers to reask the product that we have and tweak and play with it and make that decision. Then we've introduced a couple of months ago, the concept of QuickConnect studio, a tool that really helps customers to start software development without even touching hardware. It's really a drag-and-drop function that needs the need to detail dealer sheet understanding, application notes, competitive checks and even configuration and even hunting for software drivers because the tool is doing it for you and basically helping customers to build the system and starting to develop their software. As we go to customers being ready to move to hardware, we provide the functionality through QC IoT, which is really combining the different bots together in a seamless way through standard interface that helps the customer in a kit and very efficient and fast way to build the system. Now as Shibata-san talked about, we don't want to limit the customer experience to only the product that Renesas has. We're actually now embracing our partners, software partners, hardware partners to complement our portfolio so that the customer on our QC Studio and our QC IoT really leverage the full ecosystem of Renesas end partners to do their full design. And moving forward, we are really believing with QC 2.0, which will release sometime next year, that we're going to take the design automation to next level. Next level, meaning that you actually can design the bug, do a schematic and do a layout without even touching hardware. It's really I believe long term is how customers are going to reward suppliers. If you go to the next slide, please. This is really the vision. The vision is to make the customer design journey much easier, much faster and with less risk. By doing that, we want to leverage both the QC Connected and the QC Connect IoT, which together will help the customer to do that. So that's a fundamental aspect of our vision, which you're going to hear as well from Vivek and Sailesh later on today. Next slide, please. Now it comes to my conclusion. I talked about the playbook. I talk about how we're going to drive growth. There are 3 things I want to leave you with on how we're going to get to this 20-plus billion. Number one is the execution on the playbook of broader and deeper, which is essentially increasing content per customer, leveraging the full portfolio we have and the presence that we have in the embody processing side, going to more customers and leveraging the shift to solution that we have within combo. Number two is the cross solution group cross-selling acceleration that will give us new opportunities, new partners on the automotive side, new port on the industrial side, you portion the bond market, the IoT and the infrastructure using the full portfolio of Renesas. Number three, which is more mid to long term, is how by creating a seamless journey digitally with the customers. as well as the design will create more loyalty, reducing these design by [ error ] and getting more traction from customers to buy from Renesas. And we believe this will have a long-term impact, not just on our revenue, but also on our valuation as a company. Thank you.

[Operator Instructions] From UBS Securities, Mr. Yasui

This is Yasui from UBS I have 2 Questions. and to question 1 Renesas.com seems to be very interesting. But how much of the web online sales account for the today's revenue total because it's more like the solution type of business model you would really target. But in online, it's kind of limited solution providers I would know like how much of the percentage of today is really going through the online. That's one. Then also I have never heard of like the online sales from the competitors. Is any competitors doing the similar service? That's the question 1 for the e-commerce. And the second one, it's distributors. Well, you still have a lot of distributors, but winning combo looks like a solution provider directory from the the Renesas, the parent? So how do you treat with like distributors relationship going forward?

Thank you very much for your questions. So let me start to answer the first one on the online sales. So first of all, today, this revenue is not very significant, okay? It's a very small portion of our revenue that is basically transacted on our website. We just introduced the eStore as I said a couple of weeks ago, but also we have partners like [indiscernible] and many others, but it's not a significant portion. But we believe this will grow for the future. Now you should not look just at how much sales you're getting, it's how much design in you're getting, right? It's a lot of touch point as customers are buying online, for your partners and on your die website, you can trace the customer, the habits and what they are buying. So we can follow up and this drives not just revenue, but also design-in and revenue for the future. So I believe -- the growth will come not just from the revenue we're going to transact it, but how much will be enabled digitally. Now you asked me a question about who else is doing that? Many other competitors have a new store. I would point to Texas Instruments being the leader in that space, having a store now for a couple of years. So we are not the only one. Now to answer your question about distributors. So first of all, we have reduced significantly the number of distributors. We used to have a lot more distributors. And we've reduced it over the last few years. And now as we combine the automotive and nonautomotive sales force into 1 GSM, we took another step in reducing the distribution network. And actually, this action was really driven about how do we make sure that every distributor is engaged on the entire portfolio. And on an entire market that we serve, okay? Both the 4 vertical lane, as well as the broad market. And this gives us the important not just to do our own combos. But for them to help us by doing their own combos. So now what we see is a lot of our key distributors are starting to do, winning combination by themselves, leveraging the capability of Renesas, okay, our MCU, or MPU, our analog, SoC and power, and connectivity and really take it to the next level. So we believe this reduction of distribution network is actually going to help us to accelerate and get more traction using that.

[Operator Instructions] The next question [ Rodney Rayde ]

[ Rodney from Reddot Capital ]. I have 2 questions. I think the first is in terms of your growth strategy to get to that 20 billion over 2030. How do you see growth in terms of your current customers versus new customers? I mean, what do you envision would be the distribution in order to get to that target? That's the first kind of basic question. And the second one has to do with your sales force. I know that you've moved to a solution-based sales force. I mean my image of that is that those titles sort probably requires a number of retraining. So if you could just give me an update in terms of how you're addressing that transition of your sales force from product to solution sales. And then just a related question is, how do you see your sales team growing in this area as we get through to 2030. So if you could just give us a sense of what the numbers are today and where do you see this growing through to 2030 to get to that 20 billion number?

Okay. Thank you. So the #1 question is, how do we see the growth from the 12.5 thousand to the 20-plus billion between the broad and deeper. I would say it's equal, okay? And from a percentage standpoint, and you saw it in the design-in. You're going to see a lot more growth as a percentage coming from new customers. And if you look at a lot of our expansion on the MCU side and Sailesh will talk about our expansion in market share in MCU. And I think Shibata-san talked about it earlier on today. Really, it's a lot of new customers actually that we are getting. So from a percentage standpoint, you're going to see that mostly coming from new customers. But from a dollar point of view, it's going to be even between the 2, between now and '30. Now you touch a good point. This is a constant change and retaining an improvement in skills in terms of how you move from product sale to solutions sale. I would say on the FA side, on the technical side, we're actually changing the mix, okay? What used to be and being a product experts are now becoming more solution experts, okay? And that takes a bit of a different -- we're actually hiring some time even technical people from our own customers, okay? So really kind of a change there. From a sales point of view, lot more requirement to be technical with a lot of depths to be able to lead the discussion as a consultant with a customer. trying to understand what they want to do, instead of what we have -- so to lead the conversation in term how we solve their plan. Now you asked me a question what's going to be the sales force side in 2030. I don't know that to be honest with you. But what I would say is the revenue coming from the vertical side is actually doesn't come at a much higher number of people. So you basically by duplicating success across more customers in the same vertical you can achieve that with pretty much the same type of sales force. On the broader side, we will continue to expand as we get deeper into the customer base. And as we get more touch points and partnering with our distributors. We also need to add people to be closer to the customers, but the revenue growth is going to be much faster than the OpEx and the number of people we're going to have, which is, I believe, the value of that model, which will drive a lot more fall through and a lot of leverage compared to number of people we have.

Could you just give me a sense of the current size of your sales force currently and how it's split between the 2?

We have about 1,000 sales in FA around the world, okay, give and take, if we include the open headcount that we have. So it's about 1,000 people across the board and fairly even between the different markets and the different lanes and the broad market and about 60 sales and consultant and 4 on the technical side. Hopefully, that answered your question.

Bank of America Securities. We have Mikio Hirakawa-san.

I have 2 questions, please. First one, is there with the solution group cross-selling. Do you see any difference in progress of this strategy by region? And if you see some difference, what would be the reason for that difference? That's the first question. And second question is there reading cumber. Winning combers you are trying to increase the portion of winning combo and it's been increasing, actually. But winning combo products should have higher value to clients. So how does that contribute to your gross margin target going forward?

Very good question. So the first question about how do we see in different geographies, the difference in terms of leveraging this cross-sell of the cross solution group. We don't see a difference by geo, we see a difference by customers. Clearly, the most innovative customers are the ones that really are driving a lot of the use of new technologies that we have across multiple of the product line into solutions. So for instance, we see our leading automotive customers really talking to us about, hey, you guys have a significant position into the cloud space with power. This is the same type of architecture, okay? This is high power, multiphase around CPUs and really putting us into helping them to do their next-generation design. So I would say the answer is not really market dependent, but really kind of innovating customers to noninterest. On the IGBT for Industrial, we've seen a lot of progress in China and where we've seen a lot of acceleration and now followed by Europe on the energy saving type of application. The other question was about the -- can you remind me of your last question?

Winning combos should have higher margins -- yes.

So the benefit of winning combos, as I mentioned, is we are making them a lot more sophisticated. What used to be a reference design or paper design has got into a real full software and hardware. So the first thing we see is, number one, we get more content. So the benefit of that is more revenue in an easier way, okay? It has become a lot easier for our customers to use Renesas connectivity, Renesas power, Renesas analog around Renesas MCU than designing somebody else. That's number one. Number two is, of course, we see a benefit because as customers can use it in an easier way. There is less competition for us. So I believe long term, we still -- we're going to see some benefit on the margin because we have less competition. And I think customers are more and more rewarding time to market and easiness to design instead of best product to integrate, okay? And I think ultimately, the companies that will be the leading from a solution standpoint, we'll be able to not only extract more revenue but attract more margin from the customers as we bring more value.

Thank you very much. There appear to be no further questions. And therefore, we would like to close this Q&A session for now. We would like to thank you, Chris. With that we would like to invite Vivek Bhan. Senior Vice President. The floor is yours.

Hello. My name is Vivek Bhan, I'm the SVP and Co-GM of the High Performance Computing Analog and Power Solutions Group. I will take the opportunity today represent our automotive strategy and the progress in our automotive business products and technologies. Next slide, please. Let me start by highlighting that automotive continues to be a very exciting growth area for the market as well as for NSS. Number of vehicles continue to grow. We also are expecting to see continuous increase in content and demand for semiconductors per vehicle. Overall TAM for semiconductors and the adoption of new architectures provides significant opportunity for growth for Renesas and Renesas products. Next slide, please. As we look into our current financials, we have achieved strong growth with 30% CAGR from 2020 to 2022. With our continuous activities and product mix changes, we have improved our gross margin year-over-year. During this period from 2020 to 2022, we have achieved growth in key multiple application segments like vehicle control, cockpits and growing focus areas like ADAS, EV and Gateways. Overall, very good progress with top line growth and bottom line profitability for Renesas in automotive space. Next slide, please. Let me take the opportunity to summarize our overall strategy and direction for automotive growth. We will continue to accelerate focus on our key growth segments around electrification, ADAS and EV with our solutions and application focus. In addition to these focus areas for E, EV and ADAS, we are going to expand our product offerings by enhancing and collaborating across various Renesas groups beyond automotive, which enables us to bring more existing technologies from nonautomotive space to more automotive qualified versions. With this IP and product reuse and strong collaboration or software frameworks, tools, customers, we expect to further accelerate our automotive business. Next slide, please. Let me share some more color and details on E applications as well as architecture trends, which continue to evolve and provide growth opportunities for Renesas. Next slide, please. E, electrification is one of our key focus segments. And we have already MCU design wins in various domain controllers and various zone architectures around the globe, winning with global customers. The continuous evolution of E architectures allows Renesas to provide differentiating solutions to address the evolving requirements of the E/E space. We, as Renesas, see opportunities in MCU, in compute as well as in analog, with expanding domain and zonal implementations. We expect our growth in E/E to exceed the overall growth of the market in the next 5 years or so. Next slide, please. Providing more color in Renesas for our E/E architectures, we offer a very rich portfolio of products, which cover end-to-end compute solutions covering full range from low-end applications to high-performance compute implementations. We offer scalability with our product families, with higher levels of reusability of hardware and software across various IP segments. We will continue to provide enhanced flexibility to support a broader ecosystem and a wide range of partners. As is shown in this slide, we continue to expand our products for high-performance compute. We are doing more solutions for cross-domain applications. We are extending our products and solutions for domain and zone architectures, which is further fueling our growth going forward. We will continue to invest and expand our proprietary RH850 architectures which have a very rich history of adoption in the market on both hardware and software side. Along with the RH850 products that will continue to grow, we also announced today that we will expand our portfolio by introducing ARM-based MCUs for automotive applications, starting with those products for vehicle control solutions. By also introducing ARM-based MCUs, we expand our reach in the market and also allow for more software reuse from SoCs to MCUs using ARM cores. In addition, we will also provide more products for crossover MCU capabilities. Crossover combines the high performance of SoCs, along with the strong capabilities of MCU like fast boot and power consumption. So our product portfolio is expanding, and that provides the foundation for our growth going forward. Next slide, please. In addition to our products and hardware, our focus and investments in software continue to grow. We are providing more tool suites that can offer optimized opportunities for artificial intelligence as well as compute solutions in general. Our software-first approach through virtual environments allows opportunities for our customers to accelerate vehicle deployments and also allow early system verification and optimization. Renesas will provide cloud-based environments for customers to start early automotive application software development and evaluation without having to rely or wait for physical hardware. With these virtual environments, enhanced compilers, simulators, estimators, customer can validate systems and use cases a lot earlier. They can optimize and improve their solutions, thereby accelerating development and deployment of Renesas products and customer solutions faster into the market. Next slide, please. After E/E, let me talk about the next key segment for us, which is autonomous driving or ADAS, and I'll provide some more color on our activities in this space and the applications that we serve. Next slide, please. ADAS growth, as you can see in the slide, is expected to exceed overall market driven by our compute product portfolio. Our ability to offer more solutions in sensors, including camera and radar sensor solutions, as well as combining a lot of these products with our analog offerings. Applications like front-end cameras, parking, autonomous driving, higher integration of sensors and sensor fusion continue to provide opportunities for Renesas to grow into ADAS markets. Next slide, please. As we know, sensor fusion and integration of increasing number of sensors and sensor technologies continue to be key trends for ADAS and the automotive space. We are expanding our Radar family of products from MMICs to integrating more complex digital to provide solutions for satellite and smart radar applications over time. We are also pushing through multiple engagements or current MMIC products with our customers and have successfully demonstrated proof of concept with Radar MMICs, along with our car SoCs. Camera and Radar applications will be serviced through various Renesas products and solutions, with underlying focus on better integration, improved power consumption and overall efficiency and BOM size for the systems that we put together. Next slide, please. Radar products and radar product portfolio, which is expanding, we are also increasing our compute capabilities with a wide range of solutions to meet ADAS segments. When I say higher compute, we are talking about higher range of tops, higher BMIPs that we can offer more sensors that we can integrate. And all these are part of growing trends that we can address through Renesas road maps. Our cloud-based development tools or capabilities to offer agile network support will enable global teams and partners to accelerate adoption and deployment of the solutions into the market. We as Renesas continue to invest and improve our artificial intelligence capabilities, software suites and AI tool chain to simplify customer journey and capabilities to estimate, validate and optimize AI networks and layers. Also, what is important is increasing the attach rate, the attach rate of our analog products like power management to our own compute solutions, and that attach rate increase will be a strong focus for our strategy going forward, which will not only increase the content in ADAS solutions from Renesas, but also allow us to optimize complete solutions better, make them more power efficient, as well as overall reduce the size of the system and the BOM for that particular application. Next slide, please. I talked about electrification and ADAS. The other key segment as part of our strategy and very important for our growth is electric vehicles. EV is a very strong growth space in the market as we know, and is a strong focus area for Renesas. Let me take the opportunity to share some activities that we are doing to significantly grow our presence in various global EV solutions. EV adoptions continue to increase around the world. We expect a very strong contribution to our revenue growth, driven by our broad portfolio of products for EV, as well as our capability to combine that wide portfolio to build and offer better optimized complete system solutions. We are also increasing our investments for power products for the EV space. Some of that was shared by Shibata-san earlier in his presentation. Overall, E/E is another strong strategic focus area for us. where we see strong growth potential and expect to exceed overall market CAGR in terms of our own progression. Next slide. Let me talk more about our EV activities. Renesas has a very broad portfolio to offer when you look at our digital, analog, power and software products. With this broad portfolio, we can also offer fully validated and optimized system solutions, integrating the different products in our portfolio. The various solutions for EV that we can put together can enable new OEMs and emerging players to get into markets a lot faster. We are also growing or set of system and winning combo solutions, some that Chris also talked about, that integrate a lot more content from Renesas and allow us to offer solutions and reference designs that are optimized for cost and performance for systems like traction inverters, battery management systems, power chain, DC/DC converters for different EV implementations. Next slide, please. This slide highlights some key systems like traction inverters or onboard chargers, our power supply networks or any DC/DC structure, that can be completely developed and optimized using Renesas product portfolio. Through our products, we continue to focus on improving vehicle range, higher power efficiency, accuracy of our products, including battery health and a more integrated BOM through these optimized system solutions. We are also adding algorithms and flexibility to fine tune performance for our customers as we continue to grow our product offerings in the EV space. Next slide, please. To further highlight the strength of Renesas' broad product portfolio, what is important to also understand is that we can offer solutions for different emerging trends that we see in the EV market, including various combinations for ECUs. In the slide shown are examples of independent issue architecture as well as integrated ECU functions in what is called an E-Axle implementation. These different trends require different system integration and bond optimization, and all those can be addressed through different products in the Renesas road map. Our system knowledge that also Chris talked about, which is growing, our rich portfolio, as well as our flexibility to address different configurations allows Renesas to offer a breadth of solutions for various market needs and various market regions. Next slide, please. Power, I think, Renesas is very vested in growing power business, Shibata-san talked about it. Power is a key component of the EV market and a very important segment for Renesas growth also. As we grow our investments, we are investing and expanding our product offerings. Core IGBT shown on the left-hand side, we are offering new AE5 process, which allows significant improvement in power loss, thereby improving efficiency of the products enabling longer drive range and battery life. With our K6 fab with 300 kilometer capability, we offer mass production for this new IGBT AE5 devices from 2025. Today, as Shibata-san mentioned, we are also very excited to announce our silicon carbide related actions and progress. For silicon carbide, we will have an in-house fab ready for production from 2025 with increasing capacity in the following years. We have auto qualified silicon carbide MOSFET samples available from third quarter of this year, third quarter of 2023, for our customers to validate in their systems. Renesas will offer devices for silicon carbide for different voltage ranges, whether it's 650 volts, 1,200 volt applications or even 1,700 volt applications with competitive performance as well as increasing investments in capacity. With both IGBT and silicon carbide product portfolio, we expect to accelerate the growing needs for power in the EV space. It also allows us to take those power solutions and integrate them with our own gear driver units, and take those combination of subsystems into our own inverter solutions driven by Renesas MCUs, Renesas BMIC as well as Renesas sensors to offer complete system solutions with majority of the content coming from Renesas. Next slide, please. As I mentioned earlier, and it was covered by Shibata-san and Shuhei as well as Chris, Renesas is uniquely placed as we have a very strong automotive and nonautomotive product portfolio and a lot of technologies to offer in both automotive and nonautomotive. There is a significant company-wide effort to increase growth in utilizing these technologies and IP, specifically from non-auto segments like consumer connectivity, servers, space into the auto industry. As we know, the progression of auto architectures continue to integrate more features and more performance like what we have seen in the consumer service space. Next slide, please. Just to illustrate that opportunity, we can leverage assets from non-auto to auto. And as you can see from this slide, there are many of our industrial and consumer technologies that are also needed and required for automotive applications. By quickly bringing these technologies across within Renesas, we quickly expand our products. We create new opportunities to expand the business and we diversify our revenue contributors. We are excited about existing technologies that we have in NFC, BLE, LED, haptics in the non-auto space, and how we can leverage that and qualify them for auto, thereby allowing Renesas to offer more broad portfolio of products and more complete solutions for various automotive applications. Next slide, please. This slide is another example of family of connected technologies that we already offer in our industrial and consumer space and can now quickly be adopted, modified and auto-qualified. Adoption of cross collaboration across Renesas beyond the work done by the current automotive teams allows us to leverage IP products, deliver better solutions in areas of digital keying, wireless BMS or tire pressure monitors. In addition to IP and technologies, we are also now leveraging heavily across the company frameworks and tools that provide better infrastructure for our customers for faster deployment and development of products. Next slide, please. This is my last slide. So again, thank you for listening to the presentation on automotive. We are very excited and looking forward to driving growth in our strategic areas through investments that we are making, investments in end-to-end compute solutions, including high-performance compute. Number two, strengthening further our #1 position in MCU by not only expanding our RH8 family-based product, but also introducing today on-base MCU products in automotive space. We are growing our software investments, our development and capabilities around AI, as well as our overall tool infrastructure as key areas for us to compete globally and also accelerate and simplify customer adoption for our products, a lot of what Chris will talk about. What is also important is we are investing in power devices like silicon carbide and IGBT, and we will be offering these products through our internal manufacturing and foundries. And last key point here is we are leveraging IP and product across nonauto into automotive applications. providing another frontier to grow and win and expand in the global market space. Automotive is a key area for Renesas. We are investing in it and believe we can grow the business significantly in the next 5 or so years. Thank you.

[Operator Instructions] We'd like to ask Yamamoto-san from Mizuho Securities.

This is Yamamoto from Mizuho Securities. My question is about power semiconductor, you're going to enhance power semiconductor for auto. Now you're going to enhance. But at the same time, Renesas, is this related to how Renesas has become much strong to analog. Now Vivek, you came from Dialog. But then Renesas has also Intersil, has been acquiring a lot of other entities. And so nowadays, the analog product has become much stronger in Renesas. And so in that sense, even if it's for auto, do you believe the fact that analog portfolio is now becoming richer, is really enhancing. It's really pushing, it's becoming a boost, a driver to enhance SiC and IGBT. Do you think that's the case? Or it doesn't have nothing to do with that. In other words, with EV, there's going to be SiC, IGBT anyway. And because you have a technology, is it just about adding more CapEx? How is the trend? Or how do you see it?

Thank you and a very, very good question. So I think you had multiple portions of your questions. I'll try to answer it one by one. The first question was, do we believe we are becoming very strong in analog due to the acquisitions that we have done as well as the recent investments in our road map. Absolutely, yes. Renesas traditionally was very well known for microcontrollers, and we did a lot of SoC compute activities. With acquisitions for the Intersil, IDT and then Dialog, there has been a significant increase in our analog capabilities, analog capabilities that complement very well what we do on the digital side. So that is absolutely a correct observation on your side. As far as power is concerned, we see power as a very critical area. We see power also a very critical area for EV and automotive, as well as Chris mentioned, power will be important also in many energy applications, solar applications, wind and so forth. And we do recognize and realize that. We have been investing in building teams for power and improving what we already had in Renesas capabilities for power and further enhancing those capabilities to offer differentiating solutions. So that is one reason that we feel confident in our journey for power going forward. Also, as I mentioned, it is not only about offering SiC devices and IGBT devices. We intend to integrate those devices with our own analog gate driver units, that could potentially be driven by our own microcontrollers and sensors and be able to provide complete solutions, integrating digital, analog, power and software together. So when you look at our system capabilities, our growing strength in analog, and our increasing investment in power, all these allow Renesas to participate and expand what we could do compared to what we were doing in the past. And that positions us very well, not only in power, but also as a strong solutions provider going forward in automotive as well as in nonautomotive space.

I do have a follow-up question. Infineon and STMicro in Europe, they would have MCU and SoC, I do believe they also have their product, MCU and SoC. But how much do you think -- I mean, I'm not exactly sure how Renesas is strong in analog in that space compared to these peers, but I understand European peers could be like be a bit ahead in some areas. But then how do you compare Renesas product lineup? What is the strength in being able to offer a complete solution versus what the European peers would be able to offer? Do you think the users would feel the difference or from the users, is it not that much different? How do you feel do you -- how do you think you'd be able to differentiate yourself?

Again, very, very good question. So the question is -- we have a very broad portfolio, and we can offer system solutions. So can a few of our key competitors, although they don't have all the components that we have, but they do have a share of components that are matching our portfolio. What we are focused, and Shibata-san also mentioned to it, is making sure that, one, we focus heavily on differentiation in terms of whether it's power efficiency, it's BOM size, whether it is how we bring these components together. It's not only how you define different components and integrate them, but also how you define from the beginning a solution when it comes together is more optimized than anyone picking up different components from different suppliers. So we are focused on optimizing the system. We are focused on providing differentiation, as well as making sure the value of the total solution not only in terms of hardware, software, user experience, customer support. But in general, our KPIs are able to provide that value and translate that to what our customers are also putting into the market. So we feel strongly about our system growth, our system solutions and our wide portfolio that enables us to deliver that differentiation to the market.

I have 2 questions about -- one is the sensor fusion. And the other one is the E/E architecture. First of all, in the sensor fusion, you showed the -- a lot of the radar system integrated many of the integration of the -- in radar system. And -- but I can't understand the future smart radar, what do you mean by the smart radar? And the other one is, don't you think about the use of the LiDAR system, not radar, it's LiDAR. This is first question.

Yes. Okay. Let me answer your first question, and I look forward to your second question also. So what I talked about ADAS is a growing space for more integration of sensors and solutions that enable more autonomous and driver-assisted driving. We already had a very strong presence with camera solutions. To our camera solutions, we are also adding significant capabilities in Radar solutions. By combining camera capabilities with Radar, we offer a broader sensor fusion system together. As far as your question on satellite radar versus future versions of Radar, they are different architectures with different amounts of digital integration and decision-making, whether it is done in a centralized structure or it is done at the periphery. So whether the data goes to the centralized SoC, and that's where we make all the decisions, or is some of the decision-making done at the distributed endpoint to reduce the amount of traffic that has to go to central SoCs. Different market architectures on play and through our wide portfolio of products, we can service to MMIC solutions, satellite radars, and smart radars. Different approaches that OEMs are adopting for Radar implementation and integration in the market. As for your question on LiDAR, LiDAR is also a technology that has been discussed for Level 2 or Level 2+ or even Level 3. Majority of those solutions are delivered through camera and Radar integrated sensor solutions. The adoption for LiDAR has been slow. There is expectation that LiDAR will become of interest, but maybe we still see that, at least from our viewpoint, 5 to 7 years out. We are keeping an eye on LiDAR, but definitely, the opportunities that we see from customers are around cameras and radar-based solutions.

And the second question about this one is the E/E architecture. I am very impressive with -- you showed that the more integration of the OBC and BMS, battery management system and traction in better as well. So when do you see the expected such a whole integration of the E/E architecture, especially in the EV system. When will you expect that such availability of such a system?

Another very, very good question about our system sale, and we talked about in the EV space. We're providing complete traction inverter integration or OBC integration. So a lot of those reference designs are already being developed. We have some early versions of testing and validation happening as it happens over the course of the next 6 months and 1 year. We will start bringing more and more of those winning combinations and reference designs into the market. So it is a continuous process. And I would say some of the work is already underway. And in the next year, next 18 months, you will see a lot more reference designs and system combined system optimized solutions validated by Renesas and being offered to our customers. Next, we'd like to take a question from Izumi-san, SBI.

EV and ADAS. Design in and order activity is what I would like to ask about. I think like 2 years ago, I think we were hearing like AD ADAS was slowing down. I think that's something that we heard like 2 years ago. But then from last year, how has it changed? Do you think EV and ADAS would become more active in terms of sales activity. Do you think it's becoming more active? So can you share with us what your outlook is and what you see at the moment? So that's my first question.

So if I understood your question correctly, your question was about EV and ADAS markets. And our design-in progression and interaction with our customers. We see a lot of opportunities in both EV and ADAS space. We are -- have a lot of strong customer interest. I think Chris showed some of the progress we have made for automotive DNs, which has been very encouraging. And we expect in the next 4 to 5 years, the contribution from EV and ADAS solutions to be a significantly higher percentage of our revenue. So we have ambitious goals, we are absolutely seeing market interest. We are developing the product portfolio to support the market requirements, and we expect all that investment and effort to contribute to a significantly extended percentage of our revenue in the next 5 to 6 years.

In other words, EV and ADAS both are really active in the market at the moment. That's how you feel, right?

As far as the market is concerned, if your question is about the overall market, yes, we do see a lot of customer interest, both for ADAS as well as EV. And we see a lot of interest in the products that we are bringing to the market. So I confirm that we do see market strong growth and opportunities for EV and ADAS.

And so my second question is about AD, ADAS. The redundancy of the system is probably one important factor that you have to look at. Now when Renesas, do you think you've been able to fully respond to the needs from the clients in terms of this redundancy issue?

If I understand the question, your question is about redundancy. And I'm assuming this is redundancy from a safety and reliability perspective. We absolutely, in our customer discussions talk a lot about the ASL levels of qualification, what level of redundancy and monitoring that we have to deliver, specifically for ADAS, what kind of duplication of circuits that we have to do. Those are very active part of what we do day in and day out, and they are absolutely being offered through our solutions. I also talked about not only SoC and compute, but also integration of analog and power management into our ADAS solutions. So when we look at redundancy and safety and reliability, not only are we looking at the product level, whether it's a SOC or a PMIC, but also system reliability, system functional safety, system redundancy, system monitoring, and those are part of our architecture definitions and something we discuss with customers all the time.

So any other questions? However, we need to close this Q&A second for now. Thank you very much.Next, I would like to invite Sailesh Chittipeddi, AGM of Embedded Processing, Digital Power and Signal Chain Solutions Group.

Good morning, everyone, and welcome to the industrial infrastructure and IoT business update. It's been a while since I provided an update to the team, some extent have been looking forward to this opportunity to talk about what's transpired over the last -- over the course of the last 1 year. I'm going to begin with a recap of our financial results. I'll talk a little bit about the share gains in the microcontroller and the microprocessor where we've seen gains based on Gartner's. I'll talk about the secular growth opportunities that we see. On top of the growth that we see in the embedded processing side, by adding analog power and connectivity, we get significantly more growth for the business. We'll also talk about the embedded processing, plus the Ethernet file for industrial markets and how we see growth on the Edge side of the business. Then I'm going to switch gears and talk about AI. AI is a big opportunity in particular, whether it's predictive AI at the endpoint when it comes to AIoT devices, whether it comes to predictive AI for the industrial landscape, or whether it's generative AI impacting AI as far as the infrastructure landscape. Then I'll talk about the points that were alluded to, starting which Shibata-san [indiscernible] on the Cross Solutions Group operation to drive growth. And I'm going to end with talking about the U.S. improvements to buy the best of software, hardware, and then I'm going to summarize. Next slide, please. Let me begin by talking about significant growth, IoT [indiscernible]. What we find for the business between 2020 and 2022, we had a tremendous growth. It grew by close to 53%, including Dialog. Excluding Dialog, we grew at a very healthy clip to 33%. Each of our segments grew by 30-odd percent but the industrial at 37% growth, the infrastructure with 32% growth and the IoT space, [indiscernible] including [indiscernible]. So you can see that with or without the acquisition, our growth had share -- and also, we were able to take advantage of the pricing situation in the market to drive our top line. So all 3 factors contributed to what you see in the results that are shared in this particular slide. Over the same time period, our ARM-based microcontrollers, as well as our 64-bit ARM-based microprocessors, I'll talk about that in the next few slides. From a market share perspective, one of the things I'd like to begin with is talking about the #3 position that we are now firmly in when it comes to nonautomotive applications. So for industrial and IoT applications, we grew our share from 11% to 12.2% when it comes to the market. On the 32-bit, this is where we've made the most inroads whether it's our ARM-based microcontrollers, whether it's their proprietary RX microcontrollers, or whether it's our 16-bit RL78 based microcontrollers, Renesas gained a lot of share [indiscernible] too. We're #1 now in the 16-bit microcontroller market, we moved to the #5 slot when it comes to the 32-bit. As you may remember, more recently, we've introduced our most advanced 22-nanometer products, as well as the [ R88 ] helium core into the marketplace. This, combined with [indiscernible] based microcontroller that we introduced of which I'm happy to note we've got our first design in makes a big difference for us in terms of our overall share. Let me now talk about our 64-bit microprocessors. Here, we grew our share again with our RZ family, whether it's the RZT or the RZG or the RZN. We grew our share from 9.1% to 10.7%. On the DRP, which is an embedded neural processor, we grew our -- we introduced our products in 2021, and I'm happy to say that we gained about 1.2% share. Now this is a small base, and we expect to grow significantly over the next several years in this particular environment. We've set aggressive share gain targets for our organization. We expect that by 2026, being close to 25% share for the general purpose in industrial automation, and about 15% for the DRP based AI company. Next slide, please. So let me tell you how our core business when it comes to the microprocessors and the microcontrollers is growing. Let me now talk about some secular growth opportunities. When your core business grows, you have a tremendous opportunity to attach other products such as connectivity, analog and power. And these are products that not only Renesas had, if you would also acquired it on the basis of some of the acquisitions that were made, and if you can look at the slides that are shown here, on the left hand side, it shows the revenue that we have, on the MCU and the MPU side. And on the right-hand side, I show you the potential attach opportunities. Again, Chris and Shibata-san mentioned this during the course of the presentation. If you look at the numbers, we have an opportunity for expanding SAM by 3,900 oku-yen approximately. What does that mean in terms of revenue. This should add if we execute very well between 400 to 500 oku-yen over the next few years on an annualized basis once we hit our stride. We noticed this is meaningful and makes a tremendous amount of difference for the positioning of the company on the back of the growth that we see already on the microcontrollers and the microprocessors. Next slide, please. Let me now talk about something very similar at the edge. On the industrial MPU market, I had shown you that we gained share. On top of that, we are now introducing industrial Ethernet 5 products where this technology was obtained by combining Dialog's teams knowledge capabilities that were based out of Bingan and Dresden, they had done the Creative Chips acquisition. This technology allows us further to leapfrog and gain more market share of almost 4% SAM expansion or baseline case. Now if you look at the light blue bar portion there, which is expanded on the right-hand side, there's 3 categories of products. One is the 100 megabyte, the next is the 1 gigabyte, and last but not the least, T1L set of products. You can see the CAGR for those products, even though it's only 4% on the left-hand side represents a great growth opportunity of a very small base for us. So the attach concept that has been repeatedly spoken about by Shibata-san, by Chris, by Vivek, as well as now myself, shows you that there's a tremendous opportunity for secular growth on top of what we have, a very strong base of microcontrollers and microprocessors. Next slide, please. Let me now talk about an additional vector of growth, which we are very, very pleased with. This is the how artificial intelligence is impacting every element of our business where whether it's generational API -- excuse me, generational AI based on GPT [indiscernible] or GPT4, that's impacting our business at the core. And I'll talk about that in detail later during the presentation, whether it's predictive AI which impacts primarily the Edge or the endpoint, that offers a very good opportunity. And the last but not the least, a very important aspect when it comes to endpoint and Edge AI is power consumption. So sustainability is a huge theme. And I think that's been alluded to again, early in the presentation by Shibata-san, and I'm going to touch about -- touch upon this topic a little bit later during the presentation as well, where our power-efficient products make a tremendous amount of difference at the end point of the network, okay? So for us, the mission is very simple. It's about enabling intelligence from the cloud to the endpoint sustainably. If we can do that, it aligns superbly with the mission mentioned by Shibata-san of making lives easier. AI is impacting every element of our lives, whether it's the cloud, whether it's the Edge with robotics or whether it's the endpoint. This is something that we take to heart. Doing it sustainably is going to be an important element of our success moving forward. Next slide, please. So let me talk about the AI transformation, the growth at the endpoint, the Edge and the core. I'm going to begin by talking about endpoint AI, which offers significant prospects for growth. Next slide, please. So why does even AI matter at the endpoint. It's really about real-time response, it's about security and data privacy. It's about efficiency and low power, as well as low cost. I had mentioned low power as being an important ingredient for sustainability. And here, you see it. Most of the devices at the endpoint are very low-power consumption devices. Most of them are below 5 watts when it comes to [indiscernible] . On the chart on the right, I show you the AI chip TAM, and interestingly enough, if you look at the light blue lines, it shows us our potential SAM expansion opportunities in this area. And by the way, this is on top of the baseline that Chris had shared earlier of nearly $10 billion plus SAM that already exists in this market. So we're very excited about the AI [indiscernible]. One of the reasons we have quite reality in AI not too long ago, was for the ability to get us tiny machine learning algorithms that can be implemented on top of our microcontrollers. And this gives us a tremendous leg up in the market when it comes to industrial applications, in particular. Tiny machine learning is a subset of the overall deep learning landscape. But tiny machine leading algorithms are suitable for microcontrollers and can be implemented with very low power and very low memory footprint, and that makes especially attractive for these kinds of applications. Next slide, please, So you're well aware of our set of products that we have. This chart kind of demonstrates if you look at memory on one axis, you look at performance on the other axis. You can find that our solutions that we have, whether it's the 16-bit RL78, whether it's the 32-bit RZ and the RA. The RZ/A and the RT family, or the RZ general-purpose family or the embedded AI families with the RZ/V, we can tackle different from all the way from the very, very simple object -- number recognition, signal processing to anomaly detection to voice recognition to classification, as well as things like pose estimation, object detection and classification. This is something that is very unique. These are very scalable solutions that we can implement on our products, all the way from the very low end of object classification, the very high end [indiscernible]. So our portfolio of products is uniquely suited for this market on endpoint AI growth. Next slide, please. Let me now talk about AI at the Edge or primarily for the industrial market. The industrial market, we see that there are several use cases driving market potential. One is predictive maintenance. So again, this falls into the realm of predictive AI as did endpoint AI. To predictive maintenance, real-time monitoring of process conditions, whether it's preventive quality control, machine inspection, machine vision or data preprocessing for Edge computing. We have very good solutions, very good landscape. If you look at the growth over the baseline, and you'll see very small, but it's going to grow at a very healthy clip. We expect that the CAGR for this market is going to grow at about 31%. When you include embedded processors plus sensors, which was aided to earlier during the presentation, but we expect to grow twice the SAM. Why? Because our products on the RZ/T and the [ RCM ] side are really having an impact with the customers. They're excited about these products, and these are things that will make a difference when we start to embed some of our algorithms to drive the next phase. Next slide, please. Let me now change gears talk about the large language models and how they're transforming the AI landscape and the infrastructure. I had said earlier that what we've talked about was predictive AI impacting the edge and the end point. To be clear, generational AI will eventually get to the end point in the Edge, but it's not something at this moment that will have an impact. Generational AI for the moment is hugely impacting cloud companies, as you're very familiar with -- on providers like NVIDIA and so on. We're seeing tremendous traction because of [indiscernible] very simple. On the left-hand side, you see data center and architecture today, moving from DDR4 to DDR5 now I've spoken about this in prior meetings. But the DDR5 is just launched just 3 months ago because of the delay on the [indiscernible] launching. So we're starting to see by the fourth quarter of this -- so you'll start to see production in a particular market. That's the core market, and that includes the analytics supported by that kind of architecture. Moving forward now, and you see what does AI generational systems matter, right? It's workload specific. So you're no longer looking at CPUs, becoming much more workload-centric driven. That particular environment, products shown in dark blue are products we already have. The products that are highlighted in light blue are products that are sampling, okay? So if you look, for example, RCDs the data power management ICs, the chem sensors, the hubs, the clocks, those are all available. Oscillators, we're sampling today. On the right-hand side, it shows you the products that we have today in dark blue that are already addressing the AI landscape. Yes, by the way, we're starting to see some initial revenue already from these class of products. But there are new products which are being worked on, such as the CXL memory expansion, the oscillators that are sort of dedicated for this application as some of the other -- the CXL memory expander or the enterprise data standard form factors at the very bottom whether, it's the compute at the very top the accelerators in the metal, or the EDSFF, which really represents enterprise data standard form factor products, that's at the bottom. Our solutions uniquely address the needs of this market. This, again, is mixed signal analog technology, which Renesas has a superb capability. There is one other element where we see great opportunity for growth, next slide, please. Which is -- which if you look at it, the baseline SAM is shown here at the bottom. And at the very top, you see our AI and new product SAM expansion opportunities is reflected in this slide. So on top of what we see DDR4 and DDR5, we now have an additional growth vector, which is AI-specific workloads providing us additional opportunities if we can execute on our products. This is going to determine the next growth in the next phase of success for our businesses. Next slide, please. Let me now talk about the other big opportunity when it comes to AI. It is all about digital power. Digital power impacts every aspect of our business, and again, back again to sustainability, it's how you manage power efficiently. Data centers are one of the biggest consumers of power, and one of the things that Renesas has done very, very well is to take our digital power technology with our smart power stages and provide a competitive advantage over everybody else. If you look at the far left, the products in dark blue are the ones that are shipping today. The ones metal or production that is going to launch next year. And on the far right is the next generation of AI products that are being developed today. Now some of the products that are in light blue, we're already sampling to customers very clear. These are products that we expect to see traction in the marketplace. And when you look at the far right, which is the AI SoC, one of the important trends, and I think Vivek also spoke about this is the move towards 48-volt technology. Right-hand side, it's integrated battery charger. When I talk about the Cross Solutions group sales, I touched on this, some of these products that we're defining for 48 volts apply equally well for the automotive landscape. And that's the reason why we're organizing sales as well as our solutions team to attack the common technology needs across a variety of market landscapes. Next slide, please. So how should you think about the point of -- how should we think about the power business for us. When you look at the bottom half, -- it shows you our traditional SAM expansion between now and the end of the year -- excuse me, at the end of 2030 and on the top, it shows you the new product growth that is coming from the products we will be introducing in the next year 12 to 18 months. Clearly, digital power is an important vector for growth and one that we see has been critical for us as not only from an AI perspective, but also from a sustainability perspective. Next slide, please. Let me now talk about automotive. I've spoken about the importance of power, and we talked about cross solutions. When you look at the vehicle of today and Vivek alluded to this, it has a distributed architecture. Tomorrow or in the very near future, it's more of a centralized architecture, and in the future, it's going to move to zonal architecture. Well, the fact that she announced multiple rails in these systems, it need to be supported with digital multiphase controllers, plays very well into Renesas. We have the expertise. When you start thinking about a certain amount of deals and things like digital control and telemetry, performance-based technologies stocking the company is much more important. We see as large an opportunity with digital multiphase controllers in vehicles as we do in servers. Just think about the chart that I showed earlier and think about the potential opportunity terms of getting traction in the automotive landscape. I already have some of our first designs-ins in this area. I'm very happy to say that our digital multiphase controllers are getting out of interest from some of the vehicle manufacturers. Next slide, please. Another similar opportunity is in timing. As the vehicles become electrified, timing and synchronization assumes a great deal of importance. Whether it's -- today, we have about one clock in the system but we're developing a set of clocks, buffers and synchronization devices that start to make a huge impact. So the vehicles in the very near future will have at least two clocks, including auto clocks that we're developing specifically for this market. So knowledge when it comes to servers and synchronizing timing in networks starts to matter much more in vehicles. So when you think of the concept of a server on wheels, you can think about why timing and securitization starts to matter much more than in the past. So in the vehicle of the future, when you move to a fully on architecture, you'd have at least four clocks not to mention other buffers and synchronization devices. In addition to these products, we also have things such as AMS, we have our connectivity solutions, or TPMS that Vivek alluded to, whether it's NFC for door locks, whether that's the acquisition we just announced with Pantronix or some of these other technologies that we're bringing to bear in connectivity and analog. It makes a tremendous amount of difference for Renesas' long-term prospects by being able to align our sales team respect to the technologies that address these various market needs. Next slide, please. Today, again, it's super important. Shibata-san spoke about this, Chris spoke about this let me also touch on this particular point because it's equally important. The customers no longer just buy a piece of hardware. It is how easy is products and our fusions. So we have a great bit of emphasis whether it's the tool chains versus our E2 studio, whether it's our development kits, whether it's the embedded software, whether it's our configurable mixed-signal IC tool that came from the Dialog acquisition, which allows you to program a whole bunch of analog components just by using software entire or they design the hardware system. That gives our customers a tremendous advantage. So those are the kinds of things that we're doing. And with reality, AI, we're integrating our AI training models. All these solutions that make a big difference in terms of hospital experience. And for ability, as Renesas provides solutions to the customer going forward. Next slide, please. I began by talking about our financial results. Let me also end by talking about our financial outlook and how I see it. When you look at our growth for the IoT industrial and infrastructure and, yes, additionally, the other markets move out. We expect to see a growth I hope I've shared the data enough to convince you that there's a great opportunity to far outgrow the SAM in the markets in which we participate. I expect to do all of that while maintaining gross margins 60% -- and our operating margins of between 30% and 35%. To summarize, next slide, please. Our market share gains for microcontrollers and microprocessors provides us with a tremendous opportunity for secular growth by attaching analog power connectivity either wired or wireless, whether it's Ethernet, which is wired or whether it's wireless like Bluetooth, NFC, 5G technologies -- all those things that are going -- AI is going to allow us an opportunity pervasive AI, especially getting an efficient group sector above what I've had a chance to share. Integrating AI elements industrial infrastructure gives us a opportunity and further UX enhanced solution group collaboration allows us to multiply our scale grow Renesas and position them well to achieve the targets set forth by Shibata-san as well as Shinkai-san during the course of the presentation. Thank you very much for your attention.

[Operator Instructions] First question will be from Goldman Sachs, Takayama-san.

So I have one question about the market share. So you mentioned 25% in general market and automation and 15% in AI. Could you elaborate on this target in terms of thought process behind the numbers and also visibility to achieve it?

Thank you. Let me sort of -- the way we look at it, we have a midterm plan which is based on products that we're introducing and the additional share that we capture every step of the way for achieving those growth. So these growth targets are set based on the traction and the customer before we sort of set a goal for ourselves of achieving certain numbers. So we already look at the penetration that we have in the market with existing customers. So for example, let's just take the case of Renesas. We already know the amount of share in these vertical markets with some of the customers that we have, and by introducing some of these new products, we are calculating based on how much opportunity there lies to extend that share. Based on that, for the vertical markets that would be the answer other markets, it's more about making these products, ease of use of what we're trying to do to gain that incremental share. Now for the industrial markets, obviously, the vertical markets will drive a lot of the growth. And the broader markets will be more kind of [indiscernible]. But the 25% that I shared for the industrial automation is very realistic in terms because a lot of this is already in our design and [indiscernible], we do not see that in our design. It takes a good 5 to 6 years really recognize there. So we feel pretty confident about [indiscernible]. Hopefully, that answers your question.

Yes, we'd like to take questions from Yasui-san from UBS Securities.

This is Yasui from UBS. Thank you very much for your presentation with high energy as usual, and then on -- the question for the memory DDR5, the peripheral, the component, I have two questions. The first one is the technology in the market. Well, like AI specifically, will drive like a higher like a bandwidth of the memory. So there are three aspects. I think the more high -- like I said, high frequency. The DDR5 can the standard is 4.8 gigahertz, people are already talking about 6 gigahertz or 7 gigahertz or something like that. That's one. And then second one, the compute CXL memory and HBM. And then three of them, we are assuming like a key driver, which one of them drives the Renesas revenue the most -- that's the question one. And another question is really which one the market is going to adopt first because of the gene? That's the question broadly the question one.

It's a very -- good question. So thank you for it. Thank you for it. So in the near term, it's going to be a question of time. In the near term, the DDR5 going to higher and higher speeds and higher performance including MCR, which is something you might have heard about, is getting traction right now. We'll be able to get to a higher performance. HVM, just because of the cost, will have a position without a doubt, it will have a position, but it's going to be sort of at the very higher end of the performance curve. And there are companies primarily because you have to deal with things like through silicon vias and so on, had added tremendous amount of cost to the process. Today, right, there's companies that have introduced CXL 1 and CXL 2, but those haven't got a ton of traction in the marketplace. We expect CXL 3 and the markets really gonna get -- and that's when we'll start to see the acceleration other than likely it's going to be in the 25, 26 is where you're going to see a lot of traction from CXL so today, DDR4 to DDR5, DDR5 faster performance, moving to MCR and then moving into the CXL. And then finally, HBM will always have a sweet spot. The cost of HBM is very, very high today. Just because the number of layers that you got to go through in terms of memory at contributed to by way of the it can be a process Hopefully, that answers your question.

And second question is really the demand itself because really, a lot of people talking about like generative AI to cumulative demand. Renesas talking about like customer having a lot of inventories design-in or like order momentum, like do you really see any upside of the potential for this specific story?

Yes. So good question again. So -- so from -- as I alluded to earlier, we are seeing some spot opportunities on the AI generated demand to not getting into too much specifics, it's generative AI that's driving some of the demand in the near term by way of upsides. Now do we see the demand pick up again by, say, late fourth quarter, early first quarter, I'd say the answer is probably you'll start to see some pickup when it comes to the server demand, right? So that's kind of what you're looking for. But in my view, the inventory down the inventory winding down is probably occurring a dispute in time. And I think the demand will start to pick up sometime towards the fourth quarter and the first quarter of next year. But that being said, we do see opportunities for generative AI that are coming up in tiny lumps. I wouldn't want to say that's something it's going to switch our fortunes overnight, but it's something that we're starting to see much more than we did in the past. And that's the reason why I was excited about it. I certainly think that's a good prospect for our growth, if we can execute on our strategy very well.

Mr. Mitsuda, please begin your question.

I'm Matsuda, I'm a technology analyst. And my question is about the risk file risk time embedded progress. So how do you decide which design should be used for the -- in the individual applications such as the RISC-V or Arm based core. And also you are designing the microcontrollers and SoC as well using the Andes or Sifive from the licensing of the Sifive or Andes and to date, do you develop your own cores, CPU cores of RISC-V?

Thank you for your question. With respect to how do we decide which product goes in, it's largely application-driven and cost driven. Very simply, today, at least for the microcontroller and the microprocessor side, we began by using the Andes. But we have developed our own core, a product family called Tokyo 5, which is internally developed entirely -- and we have a set of products that are coming out of [indiscernible]. I'd mentioned earlier that we got our first design in is micro. That's for a motor controller application, very simply put. That's where we see the earlier opportunities. Other area where we saw a potential opportunity as with voice processing, very simple voice processing. Now what would dictate the choice? ARM obviously has a phenomenal ecosystem without a doubt. And despite the inroads that RISC-V is making, it will take quite a bit of time for them to get traction to equivalent level of ARM. So in the very near term, it's customers that are cost sensitive on the microcontroller side where it makes a big bit of difference. And then the other side of it is another microprocessor. It's just a question of, again, cost sensitivity and where we've implemented it first is our gateway applications typically very cost sensitive. So that's kind of where we've put the RISC-V solutions. With respect to the second question which you had asked, which was, are we developing a RISC-V I've already answered that. Andes is where we work with before. But today, we're developing a core based on Tokyo 5, which is what we call it. And we have a set of products called Sapporo and a few others that will be coming out. They're named after Japanese beers, just so you know. And these are products that are going to be coming out in the very near future. I hope that answers your question.

We've already used up the allotted time, so we will now like to finish this Q&A session for Sailesh. Sailesh, thank you very much for your presentation. Next, we would like to move on to the presentation by our CHRO, Julie Pope. Julie Pope will make the presentation. Julie, the floor is yours. Please begin.

Hello, and thank you for taking the time today to join our HR strategy presentation. As our moderator shared, my name is Julie Pope, and I lead the HR function at Renesas. In my presentation today, I'll be focusing on three key areas. First, I want to share with you the changes we've made to the HR function over the last 18 months. These changes were made to enable the HR function to be positioned to support company growth and achieve our 2030 aspirations. Culture underpins everything we do at Renesas, and during the second part of my presentation, I'll focus on the steps we've taken to embed our culture and ensure we have a compelling employee value proposition. And finally, I plan to share the outcome of the most recent culture survey and areas where we will focus for the rest of this year and beyond. So before I get into my content, I want to step back a bit and give you some context about the population and footprint of our organization. Renesas has formed of over 21,000 employees in 28 countries around the world, and we have over 125 physical locations. Within our population, we have employees based in factories. We have many engineers in labs. We have other office-based employees and we also have a sizable remote-based population. Having this diversity of employees and location creates an interesting challenge for an HR organization. Our goal is to create an environment in which every single employee is enabled to do their best work. And we also want to be able to attract and retain the very best talent in our exceptionally competitive market. In addition to the population context, we're also impacted by the history of Renesas. We're an organization that's been formed from multiple acquisitions, and as you saw earlier, we continue to be highly acquisitive. This gives us a benefit of many diverse perspectives. However, it also means that we're complex. So in addition to the complexity and the global dispersion, we're also operating in a very rapidly changing environment. With this backdrop, we made our HR organization to be structured to be agile and to respond as an effective partner to the business to achieve our company aspirations. So in the rest of the presentation, I will share with you how we and HR have taken on this challenge. So I'll start to the changes that we've made to the HR organization, and when I joined Renesas just under 2 years ago, it was very clear to me that we have a very capable and committed HR team that was delivering to the business. So as I looked at the HR transformation, I wanted to be sure that we were actually designed for the future so that we could scale with the business and support the growth, and the first part of that transformation was to operate as a global function. Previously, our HR support was at a country level or a regional level. And while operating in this way has an advantage that it's more simple, as a global company, it meant we were having -- we were inefficient. We were solving problems, the same problem in multiple locations at the same time, and we also meant that our global leaders had to navigate this and often do different actions based on the country or the legal entity. So by having an HR, a global HR structure, this allows us to implement global strategies and to create more consistency in our employee experience. Next, we've created global centers of expertise because it was important that we have deep experts in our talent, reward, HR technology and our operations functions, and also that these groups were able to look at our company through a global lens. So our experts are available to support both our HR community as well as our business leaders. Another area is a focus is on simplification, and you'll hear this throughout my presentation that as a business as an HR function, we need to reduce the complexity. Our managers were spending way too much time on the HR core processes, and so navigating that was quite difficult. So over the past 18 months, what we've been doing is globalizing our HR technology, our systems and our operations so that HR can become much easier to do business with. These changes are not complete. It will take us some time, but we've defined a road map, and we will continue to raise the bar each year. Finally, we are working on embedding and reinforcing our culture as we deploy systems, tools and resources for employees. These changes mean we're better able to leverage our scale and drive that more consistent employee experience. So once we've restructured our HR function, then important to really look at where we prioritize, where do we focus, and in this year, we have set forth the strategic priorities, which will carry us through the next 2 to 3 years. First, in partnering with the business to enable growth, and this is really where we can have the most reach and the most impact as an HR function. Working with managers to make sure that they bring out their best in employees means that HR support can be multiplied through better manager effectiveness. As an organization which is highly acquisitive, our focus on providing support active M&A strategy is also very important. Our HR team supports M&A from the beginning of due diligence right through to integration. Our teams also work on strategic workforce planning by leveraging insights into talent availability across the globe. We're able to partner and with both business leaders and provide them with data and insights that enables us to be intentional about where we grow the organization. The next pillar I'll talk about is in the area of talent being able to attract, engage and retain our talent is extremely critical. This is also where we can take advantage of our global footprint. In the talent acquisition space, we're focused on improving our ability to recruit and select the best employees regardless of where they might be located. In the past year, we have moved from a model that was recruitment on a very local basis, which really limited the talent pool we looked at to looking at the best talent around the world regardless of where they sit. And so really focusing on finding those passive candidates as well as the active ones. In the reward space, we're ensuring that we have market competitive offerings for employees, and in 2022, we took some significant steps to harmonize our benefit offerings and to simplify our compensation structure so that it's easier for employees to see the connection between our compensation and their activities. We'll continue this focus going forward, looking for ways for employees to benefit from our performance, including introducing employee share purchase plans. Talent engagement is also where we focus on the important matters of diversity and workforce mobility, and I will speak to these in more detail shortly. Finally, on operational excellence. This is about getting the basics right. We recognize HR is an enabling function, and to do that well, we must have a service mindset. We're simplifying our tools, our resources, policies, processes, so that it's easier for managers and employees to get what they need. We're also focused on improving our HR technology so that we're automated where it makes sense to be and focused on getting accurate data and insights. On culture, as you've heard from Shibata-san many times, this is extremely important to us. And today, I'll -- through the next part of the presentation, I'll give a few updates. So as we looked at where we focused last year, again, simplification incredibly important to impact our agility. We also looked for more ways to embed our culture as well as enabling flexibility in our organization. So starting with embedding culture, we wanted to take our culture actions to the next level. And so we wanted to show employees what it meant to exhibit our culture elements. We've shared information through many communications channels, including written communications, we have a TAGIE Times newsletter. And also, we've produced documents to show what it means to have a TAGIE mindset. We also have video communications, and we've engaged employees through competitions. We've also taken steps to embed the culture through the employee life cycle. And what this means is as we're recruiting, we are assessing candidates against our TAGIE elements. We're also enhancing capability and again, both through our communications as well as providing training and development to increase that capability. We were really pleased to see in our latest survey that over 70% of our employees believe their leaders are exhibiting a TAGIE mindset. In the topic of flexibility, this is an area where we believe we can differentiate ourselves from the competition. In the post-COVID world, you see many employers who are calling employees back to the office against the backdrop of productivity concerns. We are convinced that we can better address productivity and collaboration by creating more mature environments where employees and managers are empowered to work together to create the best working patterns that make sense for them. We also believe that operating in this way will appeal to a smart, highly engaged talent who seek flexibility. We're also seeing high level of engagement from some of the other actions we've done, like Focused Fridays, where we encourage employees to have meeting-free Fridays and able to focus on tasks or other items that require work without interruption. And our employee response to our Renesas Day was overwhelmingly positive. Renesas Day provides all employees with the same day off. And what this means is they're actually able to take a break from their day-to-day work. Also in the topic of flexibility, we launched this year a remote working abroad offering. At launch, we gave employees the option of over 2,000 combinations of nationality and destination. Now this is quite complex because you do have to pair up the different nationalities with each destination, which is why there's so many. But the effort really paid off. We had a great response from it, and over 60 employees booked and were approved for this flexibility in the first week. Employees choose this benefit if they want to extend the vacation with a period of remote working. And it's most popular with our diverse workforce, many of whom are living outside of the area in which they were born. So the remote working a broad benefit means they can extend visits to family who they may not have been able to see a lot over the past 3 years. On the topic of diversity, we are very aware that a diverse and inclusive environment can boost our business results. Our biggest challenge in this space is in the engineering space, there is often a lack of diversity in the talent pools in engineering programs. To address this challenge, we have partnered with universities at an early stage to ensure that Renesas is known and that it is a recognized brand. We've also developed a number of partnerships like with inspiring girls so we can encourage more women into STEM subjects. And we have other partnerships that we can leverage for talent pools. Recognizing the importance of role modeling, we really want to bring more senior, diverse candidates into the population, and that's another area of focus. And finally, we aim to create an inclusive environment. So employees are enabled to do their best work. We deliver a number of events, including panel discussions and guest speakers and we have employee resource groups and celebrate landmark events like International Women's Day and Pride Month. On the topic of talent mobility, enabling our talent to move within the organization has a number of benefits. For the employee, it enhances engagement, provides development and it enables career progression. For the business, investing in mobility enables us to accelerate the development of high talent. In this space, we started work last year to make our internal openings more visible to employees. We have so many opportunities, and we want to enable employees growth in development within our company by facilitating more talent moves. And in the global mobility space, we're currently working to create rotation programs. We want to be able to both develop our employees but also have best practice sharing across our diverse teams. Shibata-san shared with you earlier that we just completed our culture survey. And what we saw was really great participation with over 90%, and we also saw our engagement go up a bit. For the remainder of the presentation, I would like to share more about the areas that we're focused on that we had defined so far that we want to focus on. So we've defined three global priorities, the first of which is being more global. We know right now we are not taking full advantage of the globalness of our company. And so we want to do a number of things, one of which, with our many acquisitions is to get them integrated into the company more quickly so that we're spending time on connecting those teams and sharing information early on. We are also taking action around our naming conventions. Words matter, and our language can put us in silos versus bringing us together under one global Renesas family. At a site level, we are reconfiguring our offices to create more collaborative spaces, so we have more employees coming together to network with their peers. Under employee experience, we want to continue focusing on the opportunities available to individuals across teams and across borders. This year in the survey, we asked a new question on well-being. And what we heard from employees is they need some support around workload and other things that we can provide to make their -- make it easier to work at Renesas, which also gives us to the point on simplification. As I've mentioned several times, our complexity means we're not always easy to do business with. And so we will continue to work on making that easier from employees. The final category is on talent density. If you're not familiar with the term of talent density, it really relates to the percentage of top talent in the organization. And so again, there's a number of things that we're looking to do here. One is around our employee value proposition, making sure that's very clearly defined. So both our current and our new employees know what we have to offer. We're also focused on bringing in some top specialist talent into key roles. And finally, I've mentioned before, manager capability. We do need to continue to increase this capability to enable managers to provide the best support to their employees. So the way that we will do this, the way we will take this action is really focused around distributed accountability. We will continue to drive some top-down activities, but we'll also look at more bottoms-up. So we want to make sure that we're listening to sites and what's happening at the site level and also that the managers are taking action. The reality for most employees is that the manager makes the most difference in their day-to-day experience. So we want to determine how to get managers to best support their teams. We're confident that this approach will enable us to address more of the survey feedback more than we were even able to last year. So in summary, we are excited that we have an HR structure that is enabled for the future. We are prioritizing what we're doing within HR to get the biggest impact, and we are enabling the company on our exciting new journey. So this concludes my presentation. I really thank you for listening today, and I am happy to take questions.

[Operator Instructions] Mishioka-san, please present your question.

[indiscernible] remote workers and when has that been introduced? When has remote working being introduced? Just for reference from which country are they from? In long term hires, if there's a policy as to how many will be taken into account. If you could just share the numbers, that would be very helpful.

Yes. I think you're asking about the remote working abroad. So this is a benefit that's open to all employees. And so -- and it's really to facilitate flexibility. So the remote working, in this case, is not on a permanent basis, although we do have many remote workers -- but this is to allow, let's say, someone who has been living away from where their family is to extend vacations and work for a longer period up to 30 days in another country. Does that answer your question?

Yes, thank you very much. Has that encouraged more people to recruit themselves?

It's certainly helpful as we do our acquisition. So what we've seen is almost all candidates these days are asking us about our flexibility policies, and so to be able to provide both the flexibility we provide for office workers as well as things like remote working abroad, it makes us a very attractive, makes our proposition even more attractive as an employer.

Was that a program that has been newly installed this year?

Yes, it is. The remote working abroad, we've had flexible working. So that isn't new. But this remote working abroad with the up to 30 days, we only launched that a few months ago.

Are there any other questions? [Operator Instructions] If you'd like to ask Mr. Shibata to give a closing remarks to wrap up today's session.

Yes. This is Shibata once again. I know it's been a long session, but then I hope because we have been able to do it for quite a long time, we've been able to provide enough information. Looking in today's theme, the first thing that we discussed was about this softness and in this era of connection, be it target model or capital allocation. This is something that we do want to be given a little more time before we'd be able to share with you more information. However, compared to the past, when we have been really preparing ourselves, I think we have come to the point of time where we can feel a bit more aggressive, for example, our own in-house inventory, I think we'd be able to [indiscernible] up so that we'd be able to be ready to really show robust growth when the market really becomes more active. So that was the really first part of the message. And then the second part of the message, going back to Vivek's and Sailesh's presentation. So the market opportunity, we do believe we're finding a very good market opportunity it's actually accelerating at the moment, be it on AI or sustainability or could be about electrification of automobiles, and so we know there is a wider scope of opportunity. And so it's really about how we'd be able to materialize that so that we'd be able to see it as our result. It's really about the execution. And I think this is something that we need to buy a little more time. The third message is related to go-to-market and product line or also going to what -- I think it's all tied in to what Julie was able to present at the end. I hope that's what you felt. But again, the theme is to have 1 global Renesas, All Renesas. In other words, our it's really about integrating our good aspects, it's really about uniting our force so that we'd be able to exercise what we're able to do to the world to outside. And I think this is again something that we'd like to buy the time so that we'd be able to show what we can. And I hope you'd be able to be a little more patient. And so this time, we decided to change our format in launching our Capital Market Day. And we, again, would like to keep on hearing your feedback. And depending on how the situation is in the market, how we are doing, how your interest would be, we'd like to hold another session like this. And so once again, thank you very much for staying with us for a long time. Thank you very much.

Thank you very much. This concludes Renesas' 2023 Capital Market Day. Today's material and video, you'll be able to see it within our website. We expect to post the video clip from later on today. Thank you very much for staying with us. [Statements in English on this transcript were spoken by an interpreter present on the live call.]