Tokyo Electron Limited (8035) Earnings Call Transcript & Summary

It is time for us to start Tokyo Electron financial announcement of the year ending in March 2020. Thank you very much for joining us despite your very busy schedule today. I am Yatsuda of IR department, acting as a moderator in today's session. Now I'd like to introduce the attendees on our side. Mr. Tetsuo Tsuneishi, Representative Director and Chairman of the Board.

I am Tsuneishi. For more than 20 years, I have been attending the financial announcement, but this is my first experience to make presentation through online service. So we are very happy to talk with the global investors and analysts through this online service. Really appreciate your cooperation. Thank you very much.

Next, Mr. Toshiki Kawai, Representative Director, President and CEO.

I am Kawai. So this time, under such circumstances, we are very happy to have all of you in our financial announcement. I really appreciate your cooperation for today's session.

Next, Mr. Yoshikazu Nunokawa, Corporate Director, Executive Vice President and General Manager of Finance Division.

I am Nunokawa. Thank you very much for joining us today. Really appreciate your support today.

Prior to the presentation, I'd like to explain the flow of today's meeting briefly. First of all, Mr. Nunokawa and Mr. Kawai will make a presentation. After that, up until 6:30, we're going to entertain questions from you. Please send your questions to the question box on our website. Please make sure to put down your name, company name, together with your questions. We are not able to answer the questions if your name, company name are not given. [Operator Instructions] And this was the meeting for the institutional investors and analysts. So really appreciate if you understand, we only answer the questions from the institutional investors and analysts only, just like before. If we receive English questions, questions in English, we -- moderator will translate into Japanese, and our attendee will answer the questions in Japanese. For presentations and question-and-answer session will be translated simultaneously, and you can see English translation online. And afterward, we are going to upload today's session, both in Japanese and English. I hope you can enjoy it. So first of all, Nunokawa will make a presentation about our consolidated financial summary.

Good afternoon. I am Nunokawa of Finance Division. I would like to present the consolidated financial summary of the fiscal year ending in March 2020. This is the business highlights of the year ending in March 2020. The net sales declined due to the impacts of the SPE and FDP (sic) [ FPD ] capital investments. And accordingly, the gross profit margin dropped by 1.1 points from 41.2% to 40.1%. Our company, however, kept investing for the future growth. Meanwhile, as a result of our efforts to build up resilience against lower sales, we succeeded in maintaining high profitability as the operating income was JPY 237.2 billion. The operating margin was 21.0%. The net income attributable to owners of parent was JPY 185.2 billion, and ROE was 21.8%. Now this slide shows the highlights of the shareholder return policies implemented in the year ending in March 2020. In the last fiscal year, in addition to the payout ratio of 50%, we conducted the share buyback of JPY 150 billion, out of which, 8 million shares were canceled. This represents 4.84% of the issued share before the cancellation. We will maintain the appropriate balance sheet management so as to enhance the shareholder value in the future as well. This shows the financial summary. As I said before, despite 11.8% decline due to the adjustment in the SPE and FPD markets, the consolidated net sales was JPY 17.2 billion more than the financial estimate we announced on October 31, 2019, achieving JPY 1,127.2 trillion. By segment, the SPE net sales decreased by 9.1%, while the FPD net sales decreased by 40.6%. The decline rate of FPD net sales turned to be relatively high. Compared with our financial estimates, the actual net sales of SPE exceeded our financial estimates, while that of FPD was below the estimates. This is because of high proportion of Chinese FPD panel manufacturers, and accordingly, the COVID-19 impact was more serious in the FPD market. It should be noted, however, that since our sales recognition standard is based on the completion of setup and testing, the timing of sales recognition of the delivered equipment was slightly shifted, which resulted in the sales decline. The sales, which was not recognized in the year ending in March 2020, were not canceled but are planned to be recognized in this fiscal year. As I said in the beginning, high profitability was maintained, and the operating income and the net income attributable to owners of parent, exceeded our financial estimates. Despite the decline of the net sales on a year-on-year basis, we increased the investment for the future growth, including R&D expenses and capital expenditures. Now this shows the financial summary on the quarterly basis. The net sales in the fourth quarter was JPY 323.3 billion, increasing by 9.5% from the third quarter. Accordingly, the gross profit margin increased by 0.4 points, achieving 40.2%. Despite the growth of the net sales, the operating margin was 21.7%, declined by 0.2 points because of the impact of the customer mix. Next, I'd like to talk about the segment information. In the SPE segment, the sales was JPY 1,060.9 trillion. The segment income was JPY 270.4 billion, and segment profit margin was 25.5%. For the FPD segment, as I said before, due to the impact of the COVID-19 in China, the sales was JPY 66 billion, failing to achieve our financial estimates. But as our resilience against the lower sales had been enhanced, the sales profit margin was high at 16.0%. We succeeded in maintaining the profitability in the FPD segment as well. For the composition of the net sales, the SPE proportion was increased to 94%, while FPD accounted for 6%. This shows the new equipment sales by application in SPE division. In the logic and foundry, from the second half of calendar year 2019, the demand for advanced processors for data centers and 5G smartphones started growing, which resulted in significant increase of capital investment to process tools for leading-edge device nodes, namely our core competence areas. As a result, our sales to the logic and foundry customers increased considerably. In memory, after the several years of continuing capital investment to enhance production capacity, the capital investment underwent adjustment in calendar year 2019. As a result, our sales to the memory customers decreased on a year-on-year basis. This slide shows the new equipment sales presented in the previous slide by product instead of by application. As shown in the previous slide, in the year ending in March 2020, the investment to the leading-edge device nodes in logic and foundry increased significantly. And accordingly, proportion of the sales in logic/foundry increased. On the other hand, the investment for nonvolatile memory decreased. As a result, the sales proportion of coater/developer for the lithography process was raised since more coaters and developers are used in logic device production and foundry than in nonvolatile memory production. Meanwhile, the sales proportion of our etching system decreased. This is because investment for the matured technology nodes using the power semiconductor devices and discrete increased, where our etching systems are not used so much. The market share will be presented by Mr. Kawai later in his presentation. This shows the Field Solutions sales. The new equipment sales dropped in the fiscal year ended in March 2020 due to the adjustment in the market. But the Field Solutions sales increased by 5.7% on a year-on-year basis, achieving JPY 304.8 billion. Although the investment to enhance production capacity underwent adjustment, our installed base showed solid growth. In addition, the demand for semiconductor devices remained strong, and the utilization of our customers' factories didn't change so much. As a result, the sales of parts and field service was strong. Despite the drop of the investment to new equipment, our customers increased their investment to used equipment and modifications, which enable them to make the effective use of their assets. This is the balance sheet. First, assets. In the fiscal year ending in March 2020, the cash and cash equivalents kept declining due to the share buyback conducted from the first quarter to the third quarter. In the fourth quarter, however, the cash and cash equivalents increased to JPY 338.4 billion. The inventories was JPY 392.0 billion. Thanks to the recent active inquiries, the level of inventories was kept relatively high in the fourth quarter as well as in the third quarter. Next, liabilities and net assets. Due to the share buyback, the net assets declined from the first quarter to third quarters. But as we secured the incomes in the fourth quarter, the net asset turned out to be JPY 829.6 billion. The equity ratio was 64.1%. This slide shows inventory turnover and accounts receivable turnover. The inventory turnover increased because we strategically added up the inventories in order to prepare for the prospective market recovery from the first half to the second half of the year. Inclusive of the accounts receivable, turnover is attributed mainly to the customer mix, but it is expected to decline through the improvement of the terms of payment. My last slide shows the cash flow. From the first to the third quarters, the negative cash flow from financing activities was significant in amount due to the share buyback. But in the fourth quarter, we didn't pay dividend, and cash flow from financing activities shrunk to minus JPY 400 million. Thank you very much for your kind attention.

Now Mr. Kawai, our CEO, will present the business environment. Mr. Kawai, please?

I would like to talk about business environment. Let me start with business highlights of the year ending in March 2020. The result exceeded our financial estimates, achieving the targets for both the net sales and the income. The SPE business progressed as planned, and we won multiple PORs in the focus areas. In the FPD business, we received increasing number of orders for Elius inkjet printing system used to manufacture OLED panels, and its evaluation proceeded toward adoption by our customers. The Field Solution business remained strong, and its sales increased on a year-on-year basis. We maintained active R&D and capital investments, although the SPE and FPD markets were in adjustment in the year ending in March 2020. Both R&D and capital investment increased on a year-on-year basis. Next, I'd like to look back the business environment in calendar year 2019. In the WFE market last year, the investment for memory devices underwent adjustments, while the investment for logic/foundry grew more than expected. The total amount of investment in the WFE market exceeded the forecast, resulting in limited year-on-year decline of 8%. By application, the investment in logic/foundry increased by about 50% on a year-on-year basis due to the accelerated investment for leading-edge technology nodes. For nonvolatile memory, investment decreased by about 45% on a year-on-year basis. Due to the recovery of investment for memory starting from the end of the year, however, the full year investment exceeded expectation. For DRAM, the investment dropped by around 40% on a year-on-year basis. At the year-end, however, DRAM price bottomed out and signs of recovery started to come into view. In the FPD production equipment market, the investment dropped by 25% on the year-on-year basis. From the second half of the year, however, investment for OLED panels started to increase, and accordingly, the market came back on the costs for recovery. Now this shows calendar year 2019 SPE manufacturer ranking announced by VSI -- VLSI Research. Our company was ranked the third. This shows calendar year 2019 market share by product. There were some increases or decreases in our market share by product. This is primarily attributed to the investment mix of our customers. Our market share by product was well in line with our business plan. Next, I'd like to talk about our current effort to address COVID-19. Let me start with our manufacturing operations and procurement of parts. Our manufacturing sites have introduced the maximum measures to prevent the COVID-19 infection by combining shift work system, traffic line segregation and teleworking. With these measures implemented, manufacturing operation and procurement parts are conducted as planned, for the equipment shipment and parts delivery to our customers. At present, there is no big impact on the equipment shipment and parts delivery to the customers. We maintain the stable delivery of parts to our customers by appropriately controlling inventories at overseas subsidiaries. Equipment installation and customer support at our customer sites are handled by our local and expat employees, and there is no impact at present, as of now. Other measures taken by our sites. The teleworking is now implemented, essentially at all sites of TEL Group, including Akasaka head office. We are prepared to keep addressing COVID-19 flexibly so as to cope with changing situations effectively. This shows financial estimates of this fiscal year ended in March 2021. Along with the growing data traffic, there is a strong demand at present for semiconductor devices used in the data centers and 5G smartphones. Driven by such demand increase in the WFE market, the investment for logic/foundry remained strong, and the investment for memory has started to recover. As a result, the inquiries for SPE remains strong. It's necessary to pay close attention to the impact of COVID-19. But at present, there is no major change in the investment plan of our customers. We plan to disclose our financial estimates at the right timing, taking account of COVID-19 impacts on the macro economy. This shows our plan for R&D expenses and capital expenditures in this fiscal year. We expect to spend about JPY 135 billion for R&D. The capital expenditures of about JPY 56 billion are expected this fiscal year. Both R&D expenses and capital expenditures are planned to be increased on a year-on-year basis. We will continue active R&D and capital investment to prepare ourselves for further growth of WFE market. This is about our dividend forecast. In the year ending in March 2020, the full year dividend per share was JPY 588, which was higher than our forecast. We are planning to disclose the fiscal year 2021 dividend forecast at the same time as the announcement of our financial estimates. Next, I'd like to talk about the midterm management plan. In the IR meeting for the midterm management plan held in May 2019, we presented the financial model to be achieved within 5 years from 2019. There have been no changes in this financial model, and we are progressing steadily toward the achievement of the model. Since 2015, we have held the IR meeting for the midterm management plan every year. But for this year, we have decided not to hold the meeting because of the COVID-19 impact. My last slide shows the market outlook and our corporate value. In the WFE market, the investment for logic/foundry remains strong, and the investment for memory has started to recover. It's necessary to closely monitor the impact of COVID-19, but we expect the strong demand for wafer fabrication equipment will continue. On top of that, teleworking, online learning and remote diagnosis are actively introduced in addition to IoT, AI and 5G, all of which accelerate the transition to the data-driven society. The SPE and the FPD production equipment will remain essential in the future. And therefore, the midterm and long-term market growth is expected. Our company is determined to enhance our corporate value and contribute to the development of the society with fuller dreams by delivering best products and best service through integration of our innovative, diverse technologies. Thank you very much for your kind attention. This concludes my presentation.

Now we'd like to entertain questions up to until 6:30. [Operator Instructions]

Let me read the first question. The first question is from Mr. Moriyama of JPMorgan Securities. "I have a question on sales growth ratio by equipment for this fiscal year. For example, compared with the consolidated sales, how do you view the sales growth ratio by equipment? I also want to understand the background."

Coater/developer sales is expected to increase because of the increase of EUV lithography investment. For etching, the sales of etching should be driven by the memory investment. Therefore, even if logic investment slows down a little bit, I think that etching sales is strong.

"What about the film deposition, cleaning or product sales? If you have any idea, could you share that with us, please?" Mr. Kawai could you answer this question, please?

I'm Kawai. Please let me answer to your question. In my presentation, I talked about the trend of the market. At present, there have been no major changes in our customers' investment plan. High demand is expected. In the previous financial announcement meeting, the -- one of the competitor talked about 2-digit growth of the WFE market. And I said, I didn't find anything strange. And since that time, there have been no changes in our customers' investment plan so far. Of course, we need to closely monitor the trend or situation of COVID-19. But as far as this fiscal year is concerned, logic investment is strong, and also memory investment is expected to grow as well. Therefore, the memory investment is expected to grow together with the very strong investment of logic, so etching for each product. Coater/developer are also expected to increase. For memory investment, if memory investment is increased, our film deposition system sales might be increased as well. In the previous meeting, the prober market share was changed a little bit because of the investment mix. But when memory investment increases, we can see some positive impact on our prober market share as well. Thank you very much for your question.

Mr. Moriyama, thank you very much for your question. Now next question is from Mr. Wadaki of Nomura Securities. "So in the usual recession, OSAT first reduced their investment, followed by foundry. But in this case, both OSAT and foundry altogether haven't changed or reduced their investment. How do you think about the reason why for that?"

Again, I would like to answer to that question.

Kawai will answer the question.

In principle, IoT, AI and 5G, all those applications are expected to grow drastically in the future, that I said earlier -- as I said earlier. But communication at present, just like the food and health care, telecommunication is expected to become very essential infrastructure. And that infrastructure is supported by semiconductors. In reality, when you look at IP traffic -- from January to March, when you look at the global IP traffic, if my memory serves, the global IP traffic was almost doubled from January to March, therefore, 5G smartphones and data centers. So in every case, there is a very strong demand for the semiconductor devices. That's how I feel right now. This is how I can answer to the question from Mr. Wadaki.

Next question is from Mr. Shibano of Citigroup Global Markets Japan. "I understand the COVID impact on your production is very much limited. But in the future, when your competitors' production supply or installation of equipment are limited, and are there any cases that those delay have impact on your sales recognition? For example, are there any cases that you deliver the products, but you are not able to recognize the sales?"

Yes. Please allow me to answer the question. It is true that the competitors made announcement of some impacts on their production. But our customers at present are trying very hard to meet the original plan in order to meet the very strong demand for semiconductors. They try to achieve the original plan. So quite often, our customers are talking with their key suppliers, including TEL and probably with our competitors. In the United States, the SPE manufacturers are designated as the essential business. Therefore, probably, I think the competitors will catch up. Within the one quarter, there might be some impact. However, I don't think there should be big impact in the industry.

Mr. Shibano, thank you very much for your question. The next question is from Mr. Mark Li of Sanford C. Bernstein. The question is, "The U.S. Department of Commerce announced new export control action on April 27, which includes semiconductor equipment. I heard that there will be a 60-day grace period before this becomes effective. How will the announcement of DOC affect your ability to ship to Chinese customers? Will you be accountable for ensuring your equipment won't be used by, say, SMIC or YMTC for metal use and seek approval first, if you are not sure? Does this announcement expand the list of the equipment that is subject to this control?" Mr. Kawai, please answer to this question.

Yes. This announcement was made on April 27. Just because of time difference, this is quite news for us. So at present, we are now studying the details about this particular announcement. Therefore, we are currently analyzing the current situations. And we are not able to make any comment on each individual customer. I hope you understand that. But our company's philosophy is to provide leading-edge technologies and services, and then we'd like to make good contribution to the society so that it will have the good, bright future. So we need to have the world-leading technology innovation. And this is where we want to focus on.

Mr. Lee, thank you very much for your question. The similar questions are coming from Mr. Hirakawa of Merrill Lynch Japan Securities as well. Next question is from Mr. Shimamoto of Okasan Securities. "How does the suspension of the operation of factories of Applied Materials and Lam Research on your operation?" Mr. Kawai, could you answer your question -- the question, please?

For this, I am not in a position to make any comments on the operation of our competitors' factories. I think they are going to address this issue properly and appropriately.

Thank you very much, Mr. Shimamoto, for your question. Next question is from Mr. Sugiura of Daiwa Securities. "So you said that memory investment are recovering between NAND and DRAM. Do you think which comes first? Recently, the investment for server and data center are getting more active. Accordingly, do you think any possibility of the pulling forward of the DRAM investment? Could you give us some comments in comparison with the situation 3 months before?"

Between NAND and DRAM, which comes first? That is your question. I think NAND comes first in recovery. Therefore, there is strong investment in NAND expected for the future. But as I said in my presentation earlier, also for DRAM, signs of recovery are coming into view. At present, our customers are focusing their efforts on how they can implement their original plan. So these are the area our customers are working very hard right now. And after that, for DRAM, there might be some addition or they may pull forward the investment on DRAM. That's what we can expect. This is how I can answer to your question as of today.

Mr. Sugiura, thank you very much for your question. Next question is from Mr. Maekawa of Crédit Suisse Securities Japan. "You said that TEL acquired PORs as planned. When it comes to WFE market for 4 devices: DRAM, nonvolatile memory, foundry and logic, how much are you going to outperform the growth of WFE market? Could you give us some quantitative information about 3 years, from 2020 to 2022? How would you outperform WFE market?"

For etching, lithography process, in particular, the truck for EUV lithography and prober share is expected to grow along with the increase of memory investments. The film deposition, again, especially for batch process, we can expect the solid increase of the sales. Therefore, I think we can outperform the market growth very well. However, the future travel restriction, our engineers are frontline customer sites, may be impacted slightly when they carry out the start-up at the customer sites. There is the possibility of some delay because of the travel restrictions and other factors. So there might be some delay. I mean those circumstances, I'm afraid I cannot release any specific figures or numbers today. In particular, our sales recognition is based on the completion of setup and testing. And that might have some impacts on our business outcome.

Mr. Maekawa, thank you very much for your question. Next question is from Mr. Hanaya, SMBC Nikko Securities. "The leading competitors failed to achieve their financial estimate in the short-term period. However, your company successfully exceeded your financial estimate. How do you understand the reason why? Do you expect that you are suffering from similar negative impact a little bit later than your competitors? Similarly, I understand the Field Solutions sales is increasing in the longer term because of the increase of the installed base. But in the fourth quarter, I've got the impression that Field Solutions sales was very strong. Are there any change in the trend among the customers? And if any, do you think that trend continue in the future?"

Yes, it is true that FPD sales was impacted by the lockdown of Wuhan, to some extent. On the other hand, when it comes to SPE division, our local and expert engineers are working very hard. And we are making flexible use of the resources in order to complete the start-up as planned. And some of this start-up planned early this fiscal year are pulled forward -- were pulled forward. For example, by doing those activities, we are very happy to say that we have achieved our financial estimates in every item with high accuracy. And when it comes to the trend among our customers, I don't think there is anything special happens in our customers' activities. Our customers are concentrating their effort to realize or achieve their original plan. And we are having very close communication with customers so that we can support our customers to achieve their targets.

Thank you very much, Mr. Hanaya, for your question. So next, we have a question from Damian Thong of Macquarie Capital Securities. "What growth can we expect this year in Field Solutions? Would it be stronger than last year? What was your year-end installed base?"

The Field Solutions business is proceeding as planned, as I said earlier in my presentation. Although the top line declined, the Field Solutions sales increased on a year-on-year basis. When it comes to the number of equipment installed, you can see steady increase. Now installed base exceeds 70,000. The more detailed figure for installed base is higher than 72,000 as of today.

Mr. Thong, thank you very much for your question. Next question is from Mr. Nakanomyo of Jefferies Japan. "You said that there is no major changes in the investment plan among the customers. But when the global economy continue to slow down, there might be some drop in the demand for the consumer products. What is your image? How much downturn or how long downturn will force your customers to change their investment plans? I know it is difficult for you to make a prediction, but please give us your gut feeling."

It's a wonderful question, I think. The points you talked about are the area that we are going to watch very carefully. And we are currently analyzing the impacts on the macro economy. And at this moment, we are not able to give you any logical explanation. That's the reason why we are refraining from making announcement of the financial estimates this time. We are now studying and watching the area that you mentioned in your question.

Thank you very much, Mr. Nakanomyo, for your question. Next, we have a question from Mr. Hasegawa of Mitsubishi UFJ Morgan Stanley Securities. The question is about outlook of the inquiries. "How do you view the momentum of the inquiries and delivery timing of new equipment from the second half of this year through next year? Could you let us know your opinion by device, please?"

From the second half of 2020 to 2021, of course, we need to closely monitor the impacts of COVID-19. But when I look at investment map, we think investment are expected to grow furthermore as an overall trend. Logic investment and memory investment are expected to grow altogether. That's how I view the future. So logic investment is strong, and investment on NAND is now increasing, followed by DRAM investment. So overall trend, from the second half of this year through next year, I think there is a ground -- growing trend in the market.

Mr. Hasegawa, thank you very much for your question. Next question is from Mr. Aiba of Nomura Asset Management. "This time, you are introducing gas chemical etching system in your new building. Could you let us know about current level of inquiries and future outlook of gas chemical etching system, for example, Korea, Samsung, 3-nanometer gate-all-around, Taiwan, TSMC, FinFET? Which one of them do you think you have more opportunities for business?"

The gas chemical etching system, the Certas is the name of the product of ours. And this Certas has been designed to take care of our customers' devices. And this etching system is used for the critical layer. And this is a kind of typical product to create served available market. Therefore, in the future, we can expect increasing applications of this product. Actually, both memory and logic processes Certas has been adopted. But I'm not able to give you any specific information for each individual customer.

Ms. Aiba, thank you very much for your question. Next question is from Mr. Yoshida of CLSA Securities Japan. "This time, you didn't release your financial estimates. What sort of risks do you expect at this moment? Is that only the risk of the delay in start-up? Or are there any other risks? If any, are they on the memory side or logic side? You do have the very strong plan for the capital investment and R&D expenses, but what sort of assumption do you have for the WFE market in 2021 when you set up that kind of plan for development?"

The delay of start-up is just limited. And we didn't make any announcement of financial estimate. That is mainly because of the reasons other than semiconductor business. Actually, COVID-19 may trigger some issues beyond our expectation. We need to closely analyze that sort of potential unexpected impact. We are now studying it. The COVID-19 impact on macro economy is the major reason why we didn't announce our financial estimates. It's necessary for us to scrutinize the impacts of COVID-19 on macro economy. Memory, logic and others as well as the day of start-up are just minor factors. A major reason for not making announcement is macro economy. As I said earlier in my answer, as far as our company is concerned, we are seeking to have the world-leading technology innovation ability. Higher storage capacity, higher speed, higher reliability and lower power consumptions are required in the future. Therefore, we need to have solid financial basis, and we must continue investment for further growth, which is really important. We have almost finalized the plan for investment. We have announced JPY 135 billion for R&D investment.

Thank you very much, Mr. Yoshida, for your question. So there are no more new questions. You can ask the second question, if you have any. Next question is from Mr. Shibano of Citigroup Global Markets Japan. "This time, you didn't disclose your financial estimate. On the other hand, you have announced about 12% increase of R&D investment. Do you assume the positive trend or increasing trend of the demand for equipment when you look at the longer span like by the end of March 2022 or by the end of calendar year 2021, even if there are some drops in sales in short-term periods through the second half of this fiscal year? Are there any tangible or intangible factors to make you have some positive outlook in the 2020 or 2021?"

Yes. We have positive outlook. And there are some supporting factors to give us positive outlook for the future. So we are going to implement activities to achieve our midterm management plan by investing JPY 400 billion for R&D in 3 years starting from fiscal year 2020. And we do have some positive signs behind this decision that we made.

Mr. Shibano, thank you very much for your question. Next question comes from Mr. Hasegawa of Mitsubishi Morgan Stanley. "How much sales were not recognized at the end of March 2020 because of the impact of COVID-19? And when will they be recognized? What kind of countermeasures do you take against travel restriction and restriction on face-to-face business meetings?"

As for your first question, actually, some of the flat panel display sales were not recognized at the end of March 2020. Because of that, in the FPD business, we failed to achieve the financial estimates. This is how I would like you to understand the values. When it comes to travel restriction, the restriction of the face-to-face business meetings, in principle, we are utilizing the -- our expert and local engineers on sites. That's what we are doing right now. However, when it comes to the COVID-19 impact, we need to be prepared for the second and third waves -- potential second and third waves. For that issue, we may need to adjust expat employees or we may need to introduce remote support by using cameras so that we can enhance the remote support. So in principle, we are going to enhance the local resources. At the same time, the customer plan to increase the investment toward the future. Therefore, we need to increase the number of the expat employees in local sites.

Mr. Hasegawa, thank you very much for your question. Next question comes from Mr. Ishino of Tokai Tokyo Research Center. "The every SPE manufacturer is now enjoying high level of orders. And some of your competitors are concerned about the shortage of the parts supply. How about your company?"

Yes. Obviously, the demand for SPE is very strong. And also, we have some concern about the impact of COVID-19. So it is necessary for us to manage the parts supply for our process stores. We need to have a good supply chain management. However, as of today, as far as our company is concerned, we don't have any major problem of the delay of the SPE delivery because of the shortage of parts supply.

Mr. Ishino, thank you very much for your question. Earlier, we have a question from Mr. Hasegawa of Mitsubishi Morgan Stanley, and we received the same question from Mr. Hasegawa of Mitsubishi UFJ Morgan Stanley. Next question. Again, we have a question from Mr. Hasegawa of Mitsubishi UFJ Morgan Stanley Securities. "I have a question on PL. The segment income adjustments increased in particular in the fourth quarter. Similarly, SG&A expenses increased in the fourth quarter. Could you let us know the reasons, please?" Mr. Nunokawa, please? Thank you very much for your question. Nunokawa would like to answer to your question.

The increase of SG&A expenses and segment income adjustment in the fourth quarter is attributed to the slight increase of the R&D expenses in the fourth quarter compared with the one in the third quarter.

Mr. Hasegawa, thank you very much for your question. One more question we received. "You said that the orders for inkjet printing system for OLED increased. But could you let us know the outlook of overall FPD business in this fiscal year?"

We can expect the increase of sales of the inkjet printing system for OLED for this fiscal year. However, first of all, it is necessary for us to accelerate the start-up activities in Wuhan. And for this purpose, we are assigning engineers of Tokyo Electron Shanghai to Wuhan to catch up with the schedule for the start-up in Wuhan. This is what we need to do fast. Driven by the increase of OLED investments, we can expect the increase of FPD sales in this fiscal year, but we are not able to disclose any specific numbers.

Thank you very much, Mr. Hasegawa, for your question. Maybe we can have some more time for the last question. Now we have a question from Mr. Maekawa of Crédit Suisse Securities. "You said earlier the NAND investment are now recovering. However, the euro NAND sales in the fourth quarter failed to achieve your estimate by JPY 10 billion. Maybe this is because of the delay in setup and testing in China. On the other hand, you said earlier, in order for the NAND investment to achieve full recovery, it is necessary that only Samsung and China local manufacturer but also other NAND manufacturers start NAND investments. Have they started NAND investment yet? So when you say JPY 10 billion, that is the value of the previous fiscal year, right?"

In China, because of the lockdown in some of the cities in China, our setup activities have been impacted. But at the same time, logic customers asked us to pull forward start-up, and we meet this request by adjusting our resources. Chinese market is gradually coming back to normal. And our local resources can do their job right now because of the imminent lift of the lockdown. Therefore, we are working towards the recovery. We are now preparing our start-up plan in detail. And there have been no major changes in our customers' investment plan at all.

Thank you very much, Mr. Maekawa, for your question. So now this concludes today's session. Thank you very much for joining us today despite your very tight schedule.

Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]