SK hynix Inc. (A000660) Earnings Call Transcript & Summary

[Foreign Language] Good morning, and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the Fiscal Year 2020 Fourth Quarter Earnings Results by SK hynix. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2020 fourth quarter earnings results by SK hynix.

[Interpreted] Good morning, good afternoon and evening to those calling in from abroad. This is Park Seong Hwan, the Head of Investor Relations at SK hynix. Welcome to the SK hynix 2020 Fourth Quarter Earnings Release Conference Call. Before starting the conference call, allow me to introduce the executives present here with me today. First, Jong-Won Noh, CFO and Head of Corporate Center; Jang Hyeok Jun, Head of Finance; Park Chan-dong, Head of NAND Marketing; and Park Myoung-Soo, Head of DRAM Marketing. Let me issue a disclaimer that all outlooks presented by the company are subject to change depending on the macroeconomic and market circumstances. With that, we will now begin SK hynix' earnings release conference call. Jong-Won Noh, or you can also call him Kevin Noh, who is the CFO and Head of Corporate Center, will first present the earnings for the fourth quarter and 2020, followed by the company's plan and market outlook.

[Interpreted] Good morning to everyone for the first time. This is Jong-Won Noh, Head of Corporate Center. Before briefing you on the company's financial performance in the fourth quarter, I will give you an overview of last year's operational performance and this year's direction. The global economy remains subdued throughout 2020 with a global pandemic and escalation in trade conflicts, which also slowed down the memory market since mid-last year, which actually had started the year with hopes of recovery. Despite the adverse condition, the company achieved KRW 32 trillion in sales and KRW 5 trillion in operating profit, both significant improvements year-on-year, thanks to rapid development of leading technologies, stable mass production of key products and industry-leading competitiveness. For DRAM, with the beginning of mass production of 1Z nanometer from the third quarter last year, the portion of leading-edge 1Z nanometer and 1Y nanometer technology neared 40% exiting last year and is planned to go beyond 75% by the end of this year. We will also introduce 1A nanometer products within the year, which has productivity improvement of 40% over 1Z nanometer, to keep strengthening our technological leadership. The company throughout last year was able to drastically increase server DRAM market share on the back of industry-leading quality products. Last October, we launched the world's first DDR5 product with nearly double the speed and 20% less power consumption compared to DDR4. The company will keep fortifying its position in the server market with the competitiveness of 16-gigabit products based on our leading-edge technology. Meanwhile, the company has the largest market share with HBM2E, which started sales beginning the second quarter of last year. We will strengthen our dominance in the graphics industry by actively responding to high-performance computing and AI acceleration market with these kinds of strategic products. For NAND, our industry's first 128-layer product took up 30% of the production at the end of the fourth quarter. Our 128-layer products will take more than half of the total production during the first half on the back of fast yield improvement and consistent production ramp-up, leading the market transition into 128-layer technology. In addition, the company is fulfilling requirements from customers in a timely manner with our 128-layer technology. Following last year's expansion of mobile and client SSD sales, this year, we are planning to expand the supply of server SSDs. Meanwhile, we are preparing for mass production of 176-layer products developed last year and having 35% higher productivity over 128-layer technology. We plan to broaden its applications down the road, starting from high-end mobile products, which require high-performance and low power characteristics, continuing our competitive edge from 128-layer technology and onward. Last year, our SSD sales increased significantly. And the NAND portfolio, which has been focused on mobile, has improved vastly. In particular, the data center SSD showed a sixfold increase in sales, exceeding the original plan. Also by securing meaningful market share in eSSD, we have laid ground to accelerate revenue growth. And the signing of the agreement to acquire the NAND business from Intel last year will be crucial in driving up the company's NAND competitiveness. Besides improving portfolio and achieving scale of economy, it is meaningful that the company secured a human resources pool with higher understanding of the business and established a cooperative relationship between the 2 parties. The company will thus establish its position in the NAND market as surely as in the DRAM market and will begin to write a growth story unique to us. Now I will report on the company's financial performance in the fourth quarter 2020. Consolidated sales in the fourth quarter was KRW 7.97 trillion, down 2% from the previous quarter, but up 15% year-on-year. Bit shipment growth for DRAM and NAND in the fourth quarter were 11% and 8%, respectively, both outperforming the guidance as the company actively responded to the continued strong demand for mobile. DRAM average selling price fell 7% quarter-on-quarter, and NAND ASP fell 8% quarter-on-quarter. DRAM price decline is slowing down, mostly in server and graphic products, while the magnitude of price decline for NAND slowed down in all applications, excluding discrete products. Thanks to strong mobile demand from China, MCP sales rose precipitously for 2 consecutive quarters, and prices also rose quarter-on-quarter. Revenue portion of MCP increased to 22%, and we expect the upward trend of sales to continue following the strong demand. Operating profit in the fourth quarter fell 26% quarter-on-quarter as revenue decreased due to the drop in ASP and weakness of U.S. dollars. However, operating profit increased 298% on a year-on-year basis to KRW 0.97 trillion, and operating profit margin was 12%. Depreciation and amortization in the fourth quarter was KRW 2.59 trillion, slightly up from the previous quarter. EBITDA was KRW 3.56 trillion, with EBITDA margin of 45%. For nonoperating items, there was foreign currency-related costs of KRW 0.33 trillion, including loss on foreign currency transactions from the weak dollar in the course of recovering account receivables. On the other hand, there was a gain of KRW 1.72 trillion on year-end fair valuation of our investment in Kioxia, adding up to a total of KRW 1.27 trillion of net nonoperating income. Profit before tax was KRW 2.23 trillion, up 66% quarter-on-quarter. And net profit was KRW 1.77 trillion with a net profit margin of 22%. Consolidated cash balance at the end of fourth quarter was KRW 4.95 trillion, up by KRW 0.95 trillion from the previous year. Interest-bearing debt was KRW 11.25 trillion, increased by KRW 0.73 trillion year-on-year. As such, the company's debt-to-equity ratio and net debt-to-equity ratio stood at 22% and 12%, respectively, at quarter end. With improved profitability and reduced CapEx in year 2020, free cash flow, which is cash flow from operations less acquisition of plant, property and equipment, was KRW 2.2 trillion. Per the company's dividend policy announced last year, the total dividend payout will be KRW 800 billion, which is roughly 36% of total FCF, and dividend per share is KRW 1,171. Next is the company's market outlook and future plans. This year, DRAM industry bit demand growth will be above supply growth as we expect supply growth to be constrained, while strong demand from server and mobile applications persists. More specifically, we expect the server DRAM demand growth to be above 30% this year as key hyperscale customers resume new data center investments, new server CPUs with 8 DRAM support channels instead of 6 will be launched, leading to new server replacement cycle. For smartphones whose sales plummeted last year due to COVID-19, new 5G products are slated for launch, while the trend to adopt high-density is expected to continue. We expect 5G smartphone unit sales to double this year to approximately 500 million sets. And recent major models adopt 6 gigabytes to 8 gigabyte DRAM, and we expect that mobile DRAM demand growth will be above 20%. In the PC market, notebooks and gaming PC demand is likely to remain strong as customers' inventory level has been reduced following sales pickup in the fourth quarter of last year. And for graphics, HBM2E market is expected to grow as the impact of new game console and GPU launches remain and demand for AIDC accelerator grows. We also anticipate robust demand from the consumer market, with increase in smart home devices and expansion of 5G network infrastructure. On the other hand, as the generally high inventory level across the industry eases off in the first half of this year, the NAND market environment is expected to gradually recover as we enter the second half. For mobile, new 5G product launches and aggressive build demand from customers buying for market share and adoption of high-content NAND will drive demand. Strong demand growth of over 30% is expected in client SSD as demand remains strong for laptops and with the impact from new game consoles that adopted SSD. And launch of the new server CPU and content per box increase will drive enterprise SSD demand in earnest from the second half. Based on the demand environment explained so far, DRAM demand growth this year is expected at between high teens and 20%, and the company is planning for a bit growth in line with the market. NAND demand growth will be in the low 30% level. The company is planning to outgrow the market despite the decrease in wafer capacity following the transition to 3D NAND. By converting to 128-layer and 176-layer products, we will achieve rapid growth and continue to cut costs. Despite the seasonality in the first quarter, the market remains relatively healthy, mainly in mobile and PC sectors. Thus, the company's DRAM bit shipment growth will be similar quarter-on-quarter, while NAND bit shipment growth is aimed at mid-single-digit percentage. The company intends to maintain prudent investment policy this year against the external uncertainties that still persist. As was the guidance, CapEx last year was considerably less than in 2019, slightly below KRW 10 trillion. This year, despite the opening of M16 late last year, we will keep the current focus on spending on technology migration. This will increase our CapEx year-on-year, but only to a limited extent. Last, I will discuss the company's ESG plans. We have already communicated our goal of creating a virtuous cycle by seeking sustainable growth with a balanced business portfolio of DRAM and NAND while making a contribution to humanity and society by strengthening ESG and leading to further growth of our business. Last year, we became the first in Korea and the first semiconductor company to join RE100 with a commitment to using 100% renewable energy for our power consumption by year 2050. Earlier this year, we also became the first global semiconductor company to issue a green bond with a total value of $1 billion. Proceeds from the issuance will be invested in environment-friendly projects, such as building a new state-of-the-art wastewater treatment plant and water recycling systems. And we will proceed with various projects to improve energy efficiency, including the development of low-power SSDs in order to reduce carbon emission throughout the ecosystem. We newly launched the ESG organization under direct control of the CEO to more systematically internalize ESG management and also installed ESG Management Committee to discuss strategies on how to manage ESG risks that could potentially have a significant financial impact and turn them into opportunities. Rather than passively responding to stakeholders' request, we will integrate ESG components into our business from technology to product development and build a source of competitiveness to provide differentiated value proposition to our customers and shareholders. SK hynix will not seize to innovate and evolve our business and external environment beyond our previous achievements. In so doing, we will turn year 2021 into the first year of SK hynix being reborn as a true global memory company, soaring higher with a strong and balanced pair of wings in DRAM and NAND. Thank you very much for your attention.

[Foreign Language]

[Foreign Language] [Operator Instructions] [Foreign Language] The first question will be provided by Ricky Seo from HSBC.

[Foreign Language] [Now before starting the Q&A session, let me issue a correction. It was stated earlier that the company's DRAM shipment bit -- DRAM bit shipment growth will be similar quarter-on-quarter. But let me make a correction that it is the company's DRAM bit shipment, not growth. So DRAM bit shipment is expected to be similar quarter-on-quarter. Now the first question.] I have 2 regarding DRAM. First is about the DRAM market. And I see that what you have stated today, so your guidance today appears to be more positive than what you have stated in the previous quarter. So can you just elaborate a bit more on the kind of market changes that you are seeing per application? And then the second question is regarding the inventory. So for the DRAM companies, so especially for SK hynix and as well as your customers, what is the current level of the DRAM inventory?

[Interpreted] Thank you very much for the questions. I would like to first respond to your question about the demand and supply for -- per application. Now for the PCs. Now since the previous year -- since the pandemic that started last year, we believe that in the first half of this year, so we believe that the -- compared to the outlook, the PC shipment is going to be much higher than expected. So for the -- so for our market outlook. So we thought that also because of the base effect, we thought that the PC shipment was going to grow by about mid to single percentage compared to 2020. But then now as the developments unfold in the first half of this year, we see that both the market and the customers appear to be upwardly adjusting their outlook. Of course, we have to be cautious in this outlook because it also involves other issues of the global SEM. But then if such incremental demand does transpire, then we believe that this can also translate into demand for other memory, including client SSD. And for servers, since COVID-19, we see that companies are increasing their use of multi-cloud services or hybrid cloud services. And as a result of this, the cloud service providers and also the enterprise companies are tightening their competition over the business, and we see that this is resulting in growing demand as well. Now it was mentioned in the general market outlook earlier, but then, yes, there are plans for constructing new data centers. And also, the investment that had been held back in the past 2 years, we see that many of the investments are now starting again. And also with the launch of the new server CPUs, so we see that the server set build is also going to increase. So compared to last year, there is expected to be about low 10 -- so low teen percent increase in the set build. And for mobile, with focus on the smartphones, we see that the companies are increasing their competition to take away market share. And this is also leading to fiercer competition over the specifications for their flagship models. And also in the market, we see that the shipment is beginning to pick up since the sluggishness of last year. And there's also the increasing share of 5G smartphones as well, which means that there is an increase in the adoption of the high-density MCP. So overall, we believe that the demand for mobile this year is going to outpace the average bit shipment growth. And we also expect the graphic demand to be healthy this year following the pickup in the PC sales and also launches of game consoles. And now pertaining to your question about the inventory level in the industry. Now, of course, regarding customers' inventory level, please understand I'm not in the position to discuss that. But then overall, we see that there are some differences per application. For example, for server and mobile, we see that it is a bit slightly higher than the industry average. While for PC and others, we see that the inventory level is slightly lower than the average. But having said that, for server and mobile, although the inventory level is slightly higher than the industry average, because there is also the ongoing demand for build, we do not believe that it is a cause for concern. Of course, on the other hand, there are some concerns of demand overshoot, and we are also mindful of that possibility, and we are cautious about that, too. But then we do see that there is a healthy demand for build in -- on the ground. And also on the near-term basis, we see that the fulfillment, so the supply fulfillment for the demand coming from the customers, is falling short. So again, for the time being, I believe that it's not a cause for concern. Now for the company, the DRAM inventory level is kept at within 2 weeks, so below the 2-week level. And we will be responding to the real demand coming per application so that we will be able to maintain a balanced inventory.

[Foreign Language]

[Foreign Language] The next question will be provided by S. K. Kim from Daiwa Capital Market.

[Interpreted] First, congratulations on the good performance. I have 2 questions regarding NAND. Now it was explained so far that there appears to be much improvement in the DRAM market. And as a result, the prices are also expected to move up. And also, the performance is also expected to move up accordingly. Now for the NAND market, although the price continues to decline, there are expectations of market improvement this year as well. So can you explain a bit more about your outlook on the NAND market this year with focus on demand and supply dynamics? And also, the CFO touched upon this earlier about the NAND migration plan. So can you also give us your outlook on the profitable outlook on the company's NAND business with focus on the timing of profitability improvement?

[Interpreted] Now first of all, regarding the NAND market demand outlook for 2021, we believe that it is going to remain healthy throughout the year, thanks to increase in smartphone sales driven by 5G as well as growing demand for PCs and game. And for servers, where the demand remains relatively slower, we see that the customers are using up their inventory, and there is increasing adoption rate of the CPU, so increasing content per box in the CPUs. So we believe that this is also going to drive stronger demand. Now on the other hand, we see that the supply increase is going to be limited because of the margin pressure on the part of the suppliers. So this would not -- this will make it difficult for them to increase their investment by much. So overall, the market in 2021 is likely to see demand grow quite healthy because of the circumstances.

[ Now then this is the CFO responding to your question about the profitability of NAND and also the potential timing of the turnaround. ] Now let me use the analogy of learning to play golf. Now when you first learn to play golf, when you first hold a driver, then it is very difficult to get both the distance and the direction right, meaning that you need to first get the distance, then work on the direction. Now for SK hynix, it is true that we got started late in NAND. And also, we were a bit belated in converting to the 3D NAND, which places us in a rather disadvantageous position compared to the peers. But then we also believe that in the 128-layer products, we are moving ahead of others in terms of moving on to the technology and also the pace of our mass production. So we intend to maintain our technological competitiveness. So it is -- so for -- in order to ensure such technological competitiveness and mass production capacity, we have been focusing the company's resources on this front. But now I believe that it is time for us to work on the direction in the golf or the driver. So now that direction for us means cost competitiveness. So that is going to be one area of focus for us down the road. So for our NAND business, we are trying to turn it around within the year. And of course, for the acquisition of the Intel NAND business, of course, we also need to receive the regulatory approval first. But then afterwards, in the initial days, there is going to be some increase in cost, but we will continue to focus on improving the NAND profitability so that we will be able to improve -- make the improvement in a faster date.

[Foreign Language]

[Foreign Language] The next question will be provided by Kyung Min Kim from Hana Financial Investment.

[Interpreted] First of all, when it comes to cash holdings, then normally, it is used for acquisitions, like M&A or facilities investments or dividend payout. So what is the company's plan with your cash holdings on each of these 3 fronts for the mid- to long term? And the second question is, now for the memory products as well, we see that there is the new trend of using the EUV lithography equipment. So what is the company's plan on using EUV for your memory products?

Now then regarding your question about the allocation of our cash resources. Now the first category for the CapEx, we will make our decisions based on 2 criteria: the market circumstances and the need to maintain industry competitiveness. And for dividend, as had been announced earlier, the dividend per share, KRW 1,000, so that is fixed. And then the -- on top of that, the 5% from FCF. So that is the company's dividend policy for now, and we will maintain this dividend policy until this year. And for the remaining cash resources, we will be investing them into the areas or the categories where we believe will be instrumental in ensuring the company's future growth and development.

And now regarding your question about the EUV. Now the company has been planning to introduce EUV from a few years ago. We already have secured the EUV equipment, and we would be applying them to our development and mass production as needed. And then now for the medium to long term on securing of the further EUV, if necessary, we are also in close consultation with the vendor. Now as was mentioned in the presentation, EUV is going to be applied for the first time this year for the 1A nano, which involves the math curl and CS and then it is going to be on the YB nanometer products that we will be applying the EUV in earnest.

[Foreign Language]

[Foreign Language] The next question will be provided by Myung Sup Song from HI Investment & Securities.

[Interpreted] Now in the last conference call, I remember the company talking about how you're going to strengthen competitiveness of the system IC. So I would just like to ask about the company's strategy regarding the system IC. And then the second question is, now it was also mentioned earlier that because of the COVID-19 crisis, unexpectedly, there has been a much higher demand for PCs and servers probably because of the need to remain in noncontact. So there has been a much stronger demand for these products, especially starting from the second half of this year and continuing to this day. But now then, what about the flip side? In other words, what if COVID-19 goes away and we all go back to normal? Then perhaps the demand related to such noncontact activities would plummet. So then perhaps this would have a negative impact on the demand overall. So this is one of the concerns in the market now. So what is the company's view on such possibility? And if it does happen, then how do you plan to respond?

Now regarding your first question about the system IC or the 8-inch foundry. Now as you would know, SK hynix has in the Cheongju M8 site the foundry in the capacity of 100,000 to 120,000 products. So 8-inch foundry with a capacity of between 100,000 to 120,000. Now as you would know, the 8-inch business is currently booming. And the reason is now normally, there would be tech migration going in the order of 6-inch to 8-inch then to 12-inch. But then moving on to 12-inch requires enormous investment. And that is why after moving from 6-inch to 8-inch, it is very difficult to migrate to 12-inch. So right now, there is a very strong demand for 8-inch while supply is being -- supply is limited. So for SK hynix, we expect the boom in 8-inch to continue for some time. And in order to seize this opportunity, we decided to relocate our 8-inch facilities to China where further cost-cutting would be possible. So we have already come out with a plan to relocate, and the plan is currently being implemented. Initially, our plan was to complete the relocation across 2 years. But given that the demand coming from the customers is very strong and rising, we now plan to complete the relocation as soon as possible. And as for our product portfolio, we would be broadening from the existing DDI CIS to the higher-margin PMIC and other diverse products. And also because of the shortage of 8-inch capacity, we have also invested as LP investor for the 100,000 capacity in the Cheongju foundry of magnet chip. So for both the M8 assets that we are currently relocating and also the magnet chip or the key foundry that we are currently indirectly owning as an LP investor, so for these 2 facilities or assets, we would be considering various options as we watch the market circumstances and also try to respond better to the customers' demand so that we will also be able to provide better value proposition to the customers.

And now regarding your second question. Now yes, this is a complex and difficult question or possibility, I would say. So if COVID goes away and things go back to normal and more people enjoy outdoor activities, then perhaps the demand for IT, for staying or working out-of-home might go away. So I believe that this concern is valid to a certain degree. But then on the other hand, what we have experienced over the past couple of years, so the nonface-to-face working environment or the online education or home entertainment, so I believe that more businesses and more people now realize the importance and the value of such working or learning or home entertainment environment as well. And I do not believe that such understanding of these values would go away anytime soon. So perhaps they will become part of the new normal and will stay around for some time. And for the 5G smartphone, it is expected that their sales will more than double year-on-year. And also this year is likely to be the inflection point for new technologies, so not only the 5G but also edge computing, AI and the VR equipment. And we see that now there are attempts being made to discover new values out of these equipment and devices and then concretize them into other types of services or devices. And this is something that we have already witnessed at this year's CES as well. So yes, I believe that there are other factors to consider as well as such. And also, for example, the company's digital transformation, which got kickstarted last year, is also going to accelerate. So there are all these various factors. And I believe that they, combined, will continue to drive demand in the market. And last is you also asked whether if this risk transpires, then how we are going to respond. But if it is a risk, I believe that it's a risk factor with very high degree of uncertainty. So rather than thinking about this as a, let's say, a stand-alone risk factor, what we can do and have done is increase the percentage of customers on an annual contract. And by doing so, I believe that we are able to further -- bring about further stability to our business.

[Interpreted] [ And the CFO has added that ] the movement toward noncontact, I do not believe that this is going to disappear all of a sudden just because COVID goes away. So I believe that a part of it is also going to stay.

[Foreign Language]

[Foreign Language] The next question will be provided by J.J. Park from JPMorgan.

[Interpreted] Now I also have 2 questions. First, the CFO has mentioned this earlier, but then it's about the cost reduction. So what do you believe is going to be the further cost reduction that is going -- so can you just give us an outlook on your cost reduction this year in both DRAM and NAND in comparison to last year? And the second question is, now the M16 is going into operation starting this year. So what is going to be the product allocation in M16 as well as the expected capacity by the end of this year? And what is the maximum capacity for M16?

Now first about the cost reduction. Yes, the unit cost reduction has been ongoing, and we have also achieved last year what we have been achieving in the other years as well. So -- and we are also going to repeat the feat this year as well with the continued migration to finer technology and more efficient investment so that we will be able to cost -- we will be able to reduce cost at a rate that is at least similar to last year's.

[Interpreted] Now we -- so what we are going to do is for both DRAM and NAND, we will continue to work toward cost reduction that can go beyond last year's extent. Having said that, we also have to be mindful of the currency effect. Now because of the currency -- so because of the weak dollar, now we believe that we will be able to achieve our goal based on the Korean won. But then when it is translated into the dollar, then perhaps the kind of cost reduction that we have seen in the Korean won might appear to be slower when it is in the dollars. Now -- and then about the M16, so thank you very much for this question. And yes, this is a 3-layer facility. Because usually, the fabs are in a 2-storey structure, but then this is the 3-storey building, so the largest 3-storey fab of its kind in the world. And the -- it is -- so the construction is completed, and we will be holding the completion ceremony on February 1. So we would be starting our pilot volume production utilizing our latest technologies starting this year. And we would also try to make adjustments, if necessary, depending -- while keeping an eye on the DRAM market. So we would try to fulfill the market demand as we operate the M16 as well as the mass production on a variable basis. So mass production will begin in full starting in June when the pilot test will be completed. And then from that point on until next year, we will be making the investment flexibly depending on the market circumstances.

[Foreign Language]

[Foreign Language] The next question will be provided by Nicolas Gaudois from UBS.

Just as a follow-up on capacity planning for DRAM, in particular, but also for NAND flash. I mean it looks as if you are so far responding to demand upside a little bit more cautiously than you have had in prior cycles that you just explained for M16 in particular. Could you maybe elaborate a little bit on what has changed from your perspective? And why so far you're approaching this DRAM upcycle, in particular, more on the cautious side than you may have had before? And secondly, on technology, you made a comment in your presentation about productivity improvement of 40% for DRAM for 1A nanometer versus 1Z nanometer. Could you just clarify, you're talking about 40% more bits per wafer on a comparable year basis? And if that is the case, that seems to be quite a step-up. So could you elaborate on how you're getting there and whether there's actually a change in design for DRAM involved? [Foreign Language]

[Interpreted] Now then let me respond to your first question. Now yes, you are right. We are remaining a bit cautious, and that is because just like last year, we continue to see some exogenous factors this year. Now for example, for COVID-19, so there are high hopes that this will go away soon. But then, yes, it does have to happen first. So COVID-19 has to disappear, hopefully, with the help of the vaccination. And then this also has to translate into the recovery in the real economy as well as pickup in consumption. So at this point -- and also at this point, we are coming out with a different -- so we have different plans per application in preparation for a stronger demand this year. And also, according to this plan, we would also be expanding our business in the different applications. But then we also see that there are some supply chain factors as well, which could also affect the demand. And also the global trade conflict continues so there could be some complications coming from that as well. So yes, we are remaining cautious. But having said that, we do believe that demand this year is going to be much more positive than the supply side. So overall, we believe that our business is going to achieve a performance that is better than last year's.

[Interpreted] Now regarding your second question about the 1Z nano. Now for the company over the course of its evolution from 1X to 1A, 1Z nano, we have been maintaining pretty much the same technological platform without any major technological changes. But on the other hand, you would know that more recently, the technological competitiveness gap, in other words, the technical or the technological gap between the different DRAM companies, is reducing. And now regarding your question about the 40% productivity improvement. Yes, you're right. So it is based on the same yield. And it means that there is improvement in the bit per wafer. Now as the technological gap between the different companies continues to be reduced, I believe that what is perhaps more important than the technology itself or the specifications could be the ability to maintain stable mass production and speed of ramping up. So yes, the -- in order to achieve the 40% bit growth or the productivity improvement, this also requires various technological investments as well as cost competitiveness.

[Interpreted] And that concludes the SK hynix 2020 Fourth Quarter Earnings Release Conference Call. Thank you very much for your attendance. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]