Tokyo Electron Limited (8035) Earnings Call Transcript & Summary

It's time for us to start Tokyo Electron financial announcement for the first quarter of fiscal year ending March 2026. Thank you very much for joining us today despite your busy schedule. I'm Yatsuda of IR Department serving as the moderator for today's session. Let me introduce today's attendees. Toshiki Kawai, Representative Director, President and CEO.

I am Kawai. Thank you very much.

Next, Hiroshi Kawamoto, Senior Vice President, General Manager, Division Officer of Finance Division.

I am Kawamoto. Thank you very much for joining us today.

Before starting the presentations, let me explain the flow of today's session. First of all, Kawamoto and Kawai will make presentations. After that, until 6:30 p.m. Japan Time, we will have a question-and-answer session where we entertain questions from the audience. This meeting uses 2 channels of WebEx for the simultaneous interpretation between Japanese and English. As we explained in our e-mail, you are kindly requested to use apps on PCs or mobile terminals if you plan to ask questions. But if you are not going to ask questions, you can use telephones. Since this conference is intended for institutional investors and analysts, we'd like to appreciate your understanding that we receive questions only from institutional investors and analysts, as usual. We will post the audio contents of this conference in Japanese and English on our website within a couple of days. It would be appreciated if you could also visit our website. Now Mr. Kawamoto will present the consolidated financial summary. Kawamoto-san, please.

Good afternoon. I am Kawamoto of Finance division. I'd like to present the consolidated financial summary of the first quarter of the fiscal year ending March 2026. This slide shows the quarterly financial summary. I will mainly refer to the figures in the blue box. In the first quarter, we generated net sales of JPY 549.5 billion, 16.1% decrease from the previous quarter, partially because of temporary pause of customers' capital investments. Gross profit was JPY 253.9 billion, 18.2% decline from the previous quarter. Gross profit margin was 46.2%, 1.2 percentage point drop quarter-over-quarter due to the increased ratio of fixed cost, along with the decrease of net sales. Operating income was JPY 144.6 billion, 21.3% drop from the previous quarter. Operating profit margin was 26.3%, declined by 1.7 percentage point quarter-over-quarter, mainly due to the decrease of gross profit margin mentioned before. Income before income taxes decreased by 17.9% to JPY 151.9 billion. Net income attributable to owners of parent was JPY 117.8 billion, 17.6% decline from the previous quarter. Capital expenditures in the first quarter were JPY 52.8 billion, consisting mainly of the new development building of Tokyo Electron Miyagi whose construction was completed in April. This is a graphic representation of the financial summary shown on the previous slide on the chronological basis for your reference. This slide shows net sales by region. As for composition in the first quarter, proportion of Japan rose by 3.6 percentage points to 11.7% quarter-over-quarter while proportion of Korea dropped by 6.3 percentage points to 16.1% from the previous quarter. Proportion of sales in China in the first quarter was 38.6%, remaining below 40% following the previous quarter. This shows SPE new equipment sales by application. In the first quarter, from the bottom of this chart, sales to non-memory customers accounted for 64%, nonvolatile memory accounted for 10% and DRAM accounted for 26%. Sales to non-memory customers were flat from the previous quarter while proportion of sales to DRAM customers declined by 11 percentage points quarter-over-quarter, partly because of their intensive spendings in previous quarter. This slide shows the field solutions sales. In the first quarter, field solutions sales were JPY 141.2 billion, growing by JPY 2.2 billion quarter-over-quarter. Thanks to high utilization rate mainly for the advanced nodes of the customers' fabs, sales of parts, service and modifications were all strong. This slide shows balance sheet. The total assets were JPY 2,509.3 billion. Cash and cash equivalents were JPY 367.5 billion, declining by JPY 128.7 billion from the previous quarter, primarily due to dividend payment to shareholders and payment of income taxes. Notes and accounts receivable were JPY 393.2 billion, decreasing by JPY 92.3 billion quarter-over-quarter. Inventories were JPY 757.1 billion, increasing by JPY 7.9 billion from the previous quarter. Investment and other assets were JPY 400.2 billion, increasing by JPY 52.5 billion from the previous quarter, mainly because of the increased share price. For the liabilities and net assets shown on the right-hand side, liabilities were JPY 636.5 billion, decreasing by JPY 134.1 billion from the previous quarter. This is mainly because of the decrease of income tax payable, along with the payment in income taxes, as I mentioned earlier. Net assets were JPY 1,872.7 billion, rising by JPY 17.5 billion quarter-over-quarter. The equity ratio was 74.0%. This shows cash flow. Cash inflow from operating activities in the first quarter was JPY 74.9 billion. The cash outflow from the investment activities was JPY 54.1 billion, mainly due to acquisition of fixed assets. The cash outflow from financing activities was JPY 151.1 billion, primarily because of dividend payment. As a result, free cash flow was positive JPY 20.7 billion. This concludes my presentation. Thank you very much for your kind attention.

Now Kawai -- Mr. Kawai will talk about business environment and financial estimates. Kawai-san, please. Go ahead.

This is Kawai. Once again, thank you very much for joining us today. I will present business environment and financial estimates. As some changes were observed in the business environment, we have revised WFE market outlook and our financial estimates. So let me start the revisions made and the business progress as well. In the first quarter of fiscal 2026, both net sales and profit were almost in line with guidance. Progress of strategic product sales and development evaluation activities toward POR acquisition proceeded smoothly. For film deposition tool handling a new material, namely, low-resistant metal, many NAND customers are working on evaluation with our batch furnaces. For a series of 3D integration tools, including the Extreme Laser Lift Off tool released in December 2024, we are currently having business discussion with advanced logic customers and NAND customers. In April, construction of the new development building in Miyagi was completed in which we will enhance development of etchers, one of our main products. Our financial estimate for the first half of fiscal 2026 remain unchanged. Specifically, we expect net sales of JPY 1,150 billion, operating income of JPY 288 billion and operating profit margin of 25.0%. Calendar 2025, WFE market proceeds almost as expected, although there are some shifts in investments. Factoring in impacts of exchange rate fluctuation, WFE market is expected to grow slightly from the previous year to $115 billion. The outlook of semiconductor demand remains unchanged. The WFE market in the first half of CY 2026, however, is expected to be affected by changes of customers' investment trends. Specifically, customers now seek for higher productivity through yield enhancement, optimization of supply-demand balance to raise profitability and shift from proactive to solid investment. Accordingly, we have revised the outlook of WFE market growth in the fiscal year ending March 2026 to negative 5% year-over-year. Changes in each segment are shown in this slide. Along with the downward revision of the fiscal year-based WFE market outlook, we have revised our FY 2026 full year financial estimates to net sales of JPY 2,350 billion and operating profit margin of 24.3%. Despite the downward revision, our gross profit is expected to exceed JPY 1 trillion for 2 years in a row. Despite the changes of the WFE market outlook from January to June 2026, there is no change at all in powerful growing trend of the semiconductor demand supported by technology driver of AI server applications. Therefore, we plan to invest JPY 295 billion to R&D, almost as announced 3 months ago. This shows the revised SPE new equipment sales forecast. The SPE new equipment sales in the second half of this fiscal year are expected to grow slightly from the first half to JPY 880 billion. Here is the breakdown by application. Please note that this revision is attributed mainly to the customers' manufacturing technology enhancement and their investment strategy changes, and therefore, it does not necessarily link with the semiconductor demand. As I said before, due to the changes in customers' investment trend, we are currently scrutinizing CY 2026 WFE market. Having said that, however, there is no change in our outlook of semiconductor market, which keeps expanding driven by the growing demand of cutting-edge semiconductor planned to be released in calendar 2027 for AI servers. AI servers require high computing power to process massive data at high speed. Currently, 2 of the 4-nanometer nodes GPU are used. But in calendar 2026, 4 of 3-nanometer nodes GPU will be used. And in calendar 2027, each GPU will have 500 billion transistors, about 2.5x more than the current GPU. The number of HBM will also increase. Memory capacity of HBM will increase by about 4x, driven by device scaling of each DRAM and increase of number of DRAMs to be stacked. So we are finally shift from the gigabyte to terabyte era. Investment to realize the next-generation AI computing platform is expected to start growing from the second half of CY 2026. With device scaling, advanced packaging, our business opportunities will be expanding more and more. This shows our plan for R&D expenses and CapEx. In this fiscal year, following the new development building in Miyagi whose construction was completed in April, construction of a new development building in Kumamoto and production and logistics center in Iwate is going to be completed in this coming fall. In Miyagi, we have also started construction of new production building in June, which adopts next-generation smart manufacturing concept. R&D expenses in fiscal 2026 are expected to be JPY 295 billion, as I said before. The plan for CapEx and depreciation remains unchanged, expected to be JPY 240 billion and JPY 86 billion, respectively. This is my last slide showing the dividend forecast. Reflecting the revised financial estimate for the second half of this fiscal year, full year dividend per share is expected to JPY 485 in this fiscal year. While taking account of state of cash on hand and capital efficiency during this fiscal year, we will flexibly consider implementation of share repurchase. This concludes my presentation. Thank you very much for your kind attention.

Now we will have question-and-answer session till 6:30 p.m. Japan time. You can ask questions either in Japanese or English. But our speakers on the Japanese channel, please allow us to take all your questions only in Japanese. [Operator Instructions] So the first question from Yoshida-san from CLSA Securities.

I am Yoshida from CLSA Securities. I have a question. 2025, you have revised the WFE market outlook. I want to see some information by application. So now you are now conservative for the first half of 2026. So based on the peripheral situation, I think the advanced foundry and DRAM might be increasing so I was a bit surprised. So once again, so first half, you said rather weak, but throughout the year for 2026 I think you said double-digit growth. So what happens in the full year forecast by application and the full market, please?

By application, changes are made for logic and foundry. The advanced logic some of the customers have revised their investment plan for logic and foundry. That's the reason why we have revised our outlook partially. For others, there have been no major changes. However, NAND investment gets a bit weaker than expected. However, the NAND investment will double. That's what I said before, but original amount is not so much. Therefore, the changes in NAND investment does not have a big impact.

This is Kawai. Let me add some more comments. The customers, now technology is enhanced and they try to review the supply-demand balance when they prepare the investment plan. And also, they are shifting from the aggressive proactive investment to the steady, solid investment to enhance the yield. So there are several aspects. So from first quarter, we thought there is some upward trend. However, there have been some deceleration in the customer spending. So this trend, the demand for semiconductor does not decrease. Therefore, you can see recovery sometime in the future. From maybe the first 6 months next fiscal -- next calendar year might be some correction period. However, as I said earlier, now new technologies for AI server will be released in the second half of 2027. Therefore, from the second half of 2026 to the early 2027, we think the customers' CapEx will be increasing. That's how we view the market trend. In that sense, I thought double-digit growth is expected, but the first half of next year we'll see some deceleration, but we have a lot of expectation for the increasing trend in the second half of next year, but we are now scrutinizing the situation. But we think the positive growth is expected. So the advanced logic and logic, the proportion is about 50% to 50% for this year. The next year should be 60% to 40%. That's how we view that proportion. Thank you very much.

Let me get some clarification. 2026 -- calendar year 2026, although this is positive growth, but you are now revising the figure, scrutinizing figures. Therefore, you will give us more. And when you said proportion between the advanced and logic, are you talking about the proportion between the advanced and mature node? This year, 50% to 50%, but next year, that proportion will become 60% to 40%?

That's correct. 2027, we can see new technology for AI server. As I said earlier in my presentation, that will be a driver. That's one thing. Also, now DDR4 and DDR5 price has been reversed. Because of there are some corrections in the market, DDR5 will become a driver to further grow the WFE markets. For HAI technology, NPU will be introduced and die size will be increased by 30% as well. So these are the technology drivers, which will have the big impact from late 2026 to the early 2027. So customers' enhancement of technology for production and they are focusing on profitability. So they do have now healthy growth plan. Because of that, there are some deceleration in the investment plan. But by and large, there might be the delay of 6 months and that 6-month delay has been incorporated. And there have been no changes in device market. I think the device market will be growing as expected.

Mr. Yoshida, thank you very much for your question. Next question is from Mr. Wadaki, Morgan Stanley MUFG Securities, Research Japan.

First of all, about the downward revision. I think it's a kind of plateau, so I understand the downward revision. I have a question regarding China. In general, in your company, so the companies on entity list will not be conducted at all? Or as for -- you don't sell [indiscernible] products, but you are selling other products to the customers, Chinese customers, on entity list. Could you explain the situation, please?

Our company is not affected by the entity list. We are shipping the tools approved by the Japanese government, METI. So we are following the METI's policy.

So your company products, for example, the products on the entity list, roughly how much percentage of your products are related to the entity list? And how much percentage are not related entity?

More critical equipment are to be regulated. That's the natural trend. Therefore, it's not volume based or month based, it's a bit difficult to say. But to some extent, there are some equipment we are not allowed to ship over the past few years. But clear figures or numbers cannot be disclosed in this meeting. So we are following METI's policy and METI's rule. So now the revision of financial estimate is not attributed to the export control.

So about more than 50% or less than 50%.

Way below 50%.

So more than 10% of your products are affected by the regulations?

We haven't calculated the percentage. I'm sorry for that.

Mr. Wadaki, thank you very much for your question. Next question is from Mr. Nakamura of Goldman Sachs Japan.

This is Nakamura. So the second half of your -- this fiscal year, now you have made the downward revision. I want to know more about that downward revision. WFE market for calendar 2025, so there have been no major changes, but you have revised your outlook downward. That means in the market, your market share has been declining. Is that what you mean? Or there had been drastic change for the outlook of the January to March 2026 over the past 3 months? On Page 13, you can see several factors related to the downward revision. So when you quantify those factors, which factor plays the major role? If the customers' productivity goes up, even if the semiconductor market will grow, I'm afraid the SPE industry cannot enjoy good business. Could you explain those things, please?

First of all -- could you repeat the first question once again, please?

Okay. The calendar 2025, WFE market does not change so much while your financial estimate has been revised downward. Why does it happen?

Thank you very much. This time, WFE market on the calendar year basis should be $115 billion so the WFE market outlook is increased. But because of the exchange rate, the equipment produced in Japan, when they are calculated on the dollar basis, actually increased by $3 billion. The remaining $2 billion is coming from the leading-edge logic pulled in investment together with other reasons. That's the reason why we have increased the WFE market outlook by $5 billion. As for your second question, what you say is correct. So the fourth quarter, we think -- so from March to -- from January to March next fiscal -- next year, we thought we can see increasing growth from the January to March 2026. That's our previous forecast. However, because of the changes in the customer strategy, where they are trying to improve productivity and they try to focus on profitability now, that actually our outlook has been revised downward. So impacts are shown on Page 13. And you asked me quantify those factors, that's what you said in your question. There are 5 factors on Page 13: the customers' investment revision for advanced logic, the reduction of the legacy investment by the emerging customer, Chinese customers and investment plan change because of the focusing on the profitability and DDR4 and DD5. So this is the order from the top towards the bottom. I think this is the order of the impact, especially the top 3 has a major impact. When it comes to China, the emerging semiconductor manufacturers in China, that is about $2 billion. On the basis of fiscal year, the impact is about $2 billion. So the Chinese emerging customers, maybe there are about 150 chip makers in China and that 150 Chinese chip makers are getting more -- a little bit conservative. And when we accumulate the figures, that is amounted to $2 billion. So 5 factors and the top one is a major one. I mentioned primarily there are 3 major reasons on the top for our downward revision.

Mr. Nakamura, thank you very much for your question. Next question is from Shimamoto-san from Okasan Securities.

I am Shimamoto from Okasan Securities. I have some questions for figures. The very simple question, CY calendar year WFE. Calendar 2025 WFE market, you said $115 billion, this is the upward revision. On the FY basis, also on the dollar basis, the minus or negative 5% is expected. Compared with previous year, 5% increase on this calendar year basis, but minus 5% on the fiscal year basis. So 3-month difference makes that big difference.

That's correct.

So that's because of the outlook from January to March next year has been drastic changes.

Yes. We thought you can see some increasing trend from January to March and we thought we need to do some preparation because in the technology driver, we were expecting increasing trend from January to March. However, there is only actually the decreasing trend from January to March. This -- the fourth quarter of our fiscal year or calendar year January to March, WFE market trend has been shifted or pushed out. We thought the WFE market will increase, but actually now it's revised downward. When it comes to share, our share in the SAM has been secured. Therefore, this is not negative or downward revision because of the decline in share. Each company made their own announcement, the timing of delivery or product mix are the reasons. Therefore, our share is not declined, I want to add this comment. I'm sorry, I answered to the previous question as well.

I have one follow-up question. When you look at full year basis, there is the possibility for positive growth, that's what you said. But some projects have been pushed out. Is that how you view the market trend? Or some projects or some investment are canceled? How do you view the market situation?

The semiconductor demand is expected to grow toward next year, and that outlook hasn't changed at all. We have revised downward revision. So one of the reasons is the customers' approach to enhance productivity by improving yield. And customers are more aware of profitability by balancing supply, demand more effectively and they try to shift from the proactive aggressive investment to the solid investment, especially among logic customers. So these are the major changes from our original previous outlook. When it comes to investment project, there have been no cancellation at all. So maybe the delay should be 6 months at maximum.

Thank you very much for your question, Mr. Shimamoto. Next question is Mr. Yamamoto of Mizuho Securities.

I am Yamamoto from Mizuho Securities. Can you hear me?

Yes.

I have a very similar question, sorry for that. So 6 months delay you referred to. But as for your company, the first half and second half sales by application, could you give us some more information regarding the sales in the first and second half by application? DRAM, you can see some decline in figures, but actually DRAM sales from the first and second half, your sales will be increasing. And NAND sales, you expect a drastic increase from the first and second half, but actually it declined. Non-memory, you saw there is some increase from the first to second half, but actually the non-memory sales remained flat. So maybe for NAND, deceleration is a major factor. You said on Page 13, you said the first 3 are the major factors, and I think the NAND is the #3 factor. But actually when you look at figures, the amount is almost the same, but the change rate for NAND is rather big and significant. So could you explain those figures, please?

I think there are some specific issues for Tokyo Electron. So could you refer to Page 15, please? Could you refer to Page 15. On the left, you can see the sales by application for the second half of this fiscal year, the JPY 880 billion. On the right, you can see our announcement in April. The estimate announced April, JPY 1,100 billion. And the height of the bar chart, the change of the height of bar chart represents the changes or revision of our outlook. The green portion back in April, the height of green bar, when you refer to the left-hand side, the second half of this fiscal year, there is no change in proportion. However, height of the green bar is decreased because of the changes of the strategy by some logic customers. The NAND, you can see reduction of purple portion, 15% back in April. However, now we expect an 11 percentage. So you can see height of the purple portion. That represents the amount. You can see the data of the previous fiscal year. As you can see, height of purple is more than last year when you look at this fiscal year's purple portion. So supply-demand balance for NAND is well closely watched by NAND customer and NAND customer conducted some adjustment, and we have incorporated that adjustment made by the NAND customers.

The first half of next year is a kind of correction period. So there is some difference between calendar year and fiscal year, but your company's new equipment application sales might be reduced in this first half of next fiscal year. Is that correct understanding?

Actually, toward 2-nanometer node, the customers' investment plan, not only one company, I think more customers will present their investment plan towards 2-nanometer node. So we want to closely watch the situation. It's so difficult to find out the right timing.

Mr. Yamamoto, thank you very much for your question. Next question is from Kamisaki-san from Tokai Tokyo Intelligence Laboratory.

I am Kamisaki from Tokai Tokyo. I have a question regarding emerging Chinese chip makers. WFE market assumption on calendar 2025, second half of calendar 2025, I think the investment is getting weaker. So for the first half of calendar 2026, do you think that further reduction is expected in the first half of the calendar '26 among the Chinese emerging chip makers?

So annually, it's about JPY 45 billion to JPY 46 billion. I think that's the trend toward 2026. The legacy node market and the number of chip makers in China is rather big. There are so many emerging Chinese chip makers. I don't know the average. It's a bit difficult for me to give you the answer. But the WFE in China, this year, $45 billion or $46 billion, I think the size of the revenue market remain unchanged. However, the entire WFE market is going up. Therefore, the proportion of legacy will be declining next calendar year.

So for the new foundries, their yield has been improving. And now you can see more and more new foundries. Do you think so or you don't see any new emerging foundries?

So far, there is no such trend. If the emerging chip makers' yield is improving, so the parts and service sales are expected to increase because their utilization rate goes up. However, so far, we haven't seen such kind of trend. Kamisaki-san, thank you very much for your question. The next question is given in English text, so let me read it out. The question is from Tammy Qiu-san of Berenberg Asset Management. The question is, "What's the growth driver for second half 2026 regarding acceleration, please? Then, is your 2026 WFE estimation still unchanged? Also on China, has China spending bottomed after scaling back you have been seeing or can it go down further?

Three questions. As for your first question, the growth driver is AI server applications, the leading-edge logic for AI server and HBM. When you refer to Page 16 of the slide, as I said on Page 16 of the slide, at present, the current device for AI server, 4-nanometer -- 2 of the 4-nanometer node GPU are mounted right now. But in the future, 3-nanometer node GPU -- 4 of them actually will be mounted in the future in calendar 2027. Now there are 200 billion transistors right now. However, in 2027, 2 years from now, 500 billion transistors will be mounted. As for HBM, at present, there are 8 HBM for 2 GPU to generate the memory capacity of 288 gigabyte. But in year 2027, the memory capacity will increase to 1 terabyte, the 16 DRAM dies to be stacked and the number of layers will be increasing from 12 to 16. So these are the major drivers. What was the second question?

Yes. The second question is, is your 2026 WFE estimation still unchanged?

So 2026 WFE market outlook is under investigation right now. There is some delay from January to March 2026, but second quarter from April to June 2026 when we can see some recovery trend. So we are now scrutinizing WFE market trend in calendar 2026 and we are now scrutinizing the situation. But anyway, 2027, then you can see the steady increasing investment for AI server. And I think the preparation for such new innovation will start from the second half of the 2026. WFE market is expected to grow in later 2026. We want to analyze the situation more to come up with something more clear.

The third question is regarding China. From last year to this year, so WFE market in China has been shrinking. Do you think the Chinese WFE market bottomed out? Or do you see some more decline in WFE market?

For DX and GX, semiconductor demand for digital transformation and green transportation will be increasing steadily. And the Chinese customers, self-sufficiency in China is not yet fulfilled in Chinese market. And at present, there are some struggle in power semiconductors. I think China proportion is about -- in the middle of the 30% level. When WFE goes up, when it comes to amount, Chinese market is also expected to grow. So we don't see the further decline in Chinese WFE market in the future.

Thank you very much for your question. Next question is from Yoshioka-san from Nomura Securities.

I am Yoshioka from Nomura Securities. Can you hear me?

Yes, I can hear you.

So WFE market and TEL growth potential, this is what I want to ask. First of all, FY '26 or fiscal year ending March 2026, you have made the downward revision, minus 5%. What was the figure 3 months ago announcement? And after that, after you tell me, what about this fiscal year, you said that Tokyo Electron sales will decrease by 3%. That means your company outperformed the WFE market. But when it comes to the fiscal 2027, do you think you can outperform WFE market? Are there any difference between TEL's potential for growth and WFE market trend?

So our midterm management plan, 2027 is a target year of our midterm management plan and product mix and timing of delivery. So there is not consistent trend. But when it comes to our earning power, our company's earning power is getting stronger and stronger. So Gartner made announcement April this year for the share when it comes to WFE market, the calendar year, the growth rate is 5.6%. And our company's growth rate was 23%. Therefore, especially our etch sales increased and [indiscernible] developer share is increased from 90% and further higher. And 3D integration bonder/debonder, actually, our sales of bonder/debonder has been increased by 3x over the past 2 years. So our earning power is getting stronger steadily. Because of that, 5 years ago our gross profit margin was 40%. But recently, our gross profit margin has increased by about 5 percentage points. So the gross profit is exceeding JPY 1 trillion for 2 years in a row. Needless to say, regulations have some impact. High value-added product cannot be delivered to Chinese market, as Wadaki-san said in his question. And geopolitical impacts and inflation impacts are also observed. But our gross profit exceed JPY 1 trillion for 2 years in a row and our gross profit margin has increased by 5 percentage points over the past 5 years, and our share has been increasing. So our share and profit growth, both of those 2 factors are improving steadily despite those geopolitical factors. Maybe next fiscal year, we will closely see whether we can achieve those figures, but it is clear that our earning power is improving steady. Also ROE, 30% or more. Last year, we achieved 30.3% ROE. So we achieved our midterm management goal 2 years ahead of the target year. So if the sales come back, we are able to achieve the figures or targets of midterm management plan sometime in the future. And midterm management plan is not a final goal. It's a kind of interim goal for us. So on the FY basis, we haven't disclosed information of the WFE market on FY fiscal year basis.

So FY 2027, WFE market growth and Tokyo Electron's sales are almost comparable?

Yes, of course, we won't be below the WFE market growth in fiscal 2027. I think we can outperform the WFE market also in the fiscal 2027.

Thank you very much, Mr. Yoshioka for your question. Next question is Mr. Nakanomyo of Jefferies Japan Limited.

On Page 13, I'm sorry, repeat the same question once again. I try to improve my understanding. So some leading-edge logic customers are revising their CapEx plan. So you may not be able to talk about a specific customer, but your 3 major customers, originally 2 logic customers didn't change their investment so much. In that sense, the active investment made by only 1 logic customer and that particular logic customer has changed their investment plan for January to March 2027? Or do you think, too, the other 2 logic customers' investment plan will be deferred furthermore?

It's a bit difficult to make that comment. I think your second option is more likely.

So capital efficiency improves for the one major logic customer and your business is rather getting smaller.

No, that doesn't happen.

And January to March next year, it's 6 months ahead, and now you have revised your outlook. That means the changes in January to March is rather clear or realistic.

So now various customers and some top management have been changed, the new top management issued a new policy or direction and some customers' financial announcement are made and we have incorporated all those factors. And number four, HBM, HBM investment. And again, the investment efficiency gets better and investment for HBM is not increasing so much or scaling of DDR5 improves investment efficiency, or only the matter of timing of investment. So semiconductor demand itself is growing and toward year 2030, the semiconductor market is expected to grow to $1 trillion. There is no major -- no changes at all for this major trend. For 2027, the new device for server will be spreading furthermore. So there is no change in the growing trend of semiconductor market demand. So in that sense, there have been no changes compared with the previous outlook, but customers' technology production technology is improved. Because of that, some revision were made. Our short-term financial estimate has been revised downward and that portion has a negative impact. However, on the other hand, the investment -- actually customers closely watch supply-demand balance and customers are more focusing on profitability and they try to improve productivity and they are improving their yield, so they can produce chips with low cost. So now for midterm, long-term perspective, these factors have positive impact to further drive the growth in mid- and longer-term perspective because of the technology innovation. So as for the financial estimates, maybe we might have some impact for 6 months and there are some symptoms and we'd like to address to the capital market properly. And because we are -- we have become aware of this kind of trend, we decided to make this announcement.

Thank you very much for your question, Mr. Nakanomyo. Next question is Mr. Shibano of Citigroup Global Markets Japan.

I am Shibano of Citigroup Global Markets Japan. For the quarterly performance improvement or momentum for the further improvement of your financial performance, so the quarterly sales the fourth quarter should be the bottom. Is that correct understanding? There is no quantitative disclosure, I understand that. When it comes to qualitative manner, in terms of orders, do you see some decreasing trend in orders? Let's say, the July-September period should be the bottom period. Is that correct understanding?

So the bottom period, we should investigate to scrutinize furthermore. I think January-March period is very close to the bottom. We should study more to see what happens in -- what will happen in April to June, there might be some delay by 3 months or 6 months. But in the second half of 2027, we will see a new device for AI server. When you think about that new device, there is a possibility to have the sudden increase or growth in the market. So we also need to watch the enhancement of customers' yield.

You talked about midterm management plan when you answered to the question of Mr. Yoshioka, I have one follow-up question. For FY 2027, it's the target year of midterm management plan. So 6 months ago, so maybe you said you can achieve the net sales of JPY 3 trillion. And do you think there are some changes in that prospect or external environment has been changed over the past 3 years and not only the recent -- most recent changes, but I think overall trend has been changed. So would you like to refresh your grand targets or you don't think -- there is no need to revise the midterm management plan. When it comes -- I think the approach to the fixed cost and investment has been changed. How do you view the current midterm management plan?

As I said a little bit earlier, so now we can see improvement of the gross profit margin and our share has been improving. And new products, process of record, POR or qualification by the customer has been acquired. So there are quite a few good positive factors because of that. So now there is a kind of delay by 6 months and we try to find out the magnitude of impact. But for midterm management plan, maybe in fiscal 2027 or 2028, ever since the announcement of our current midterm management plan, there have been many changes in terms of geopolitics. But we are making steady progress in our business, and we are keeping the investment for further growth in the future and there is high expectation for further technology innovation. Therefore, we have no intention to revise our midterm management plan. The only thing is the timing for achievement of midterm management plan, which will be affected by WFE market trend to some extent. But when WFE market reaches a certain level, we are sure to achieve the targets.

Thank you very much for your question. Actually, one more question. The question is from Varun Rajwanshi from Lazard Asset Management. The question is, can you please make a comment on your market share, excluding China? Are there areas where Tokyo Electron is losing share? Your sales outlook for this fiscal year is much worse versus what peers are suggesting.

First of all, among different applications, the leading-edge area, we don't lose shares in the advanced areas. Partially, in China, the general purpose or legacy node devices because of the Chinese government policy, the Chinese tool vendors are improving their share. That's true. Last year, WFE market analysis announced by Gartner, the WFE market grew by 5.7% on average. Tokyo Electron grew by more than 23%. Despite weak yen, the growth rate of 23% or more is very outstanding. And actually, 3 Chinese companies are among the top 20 and some of their sales growth rate is more than 40% in the Chinese legacy market. Our share in that Chinese legacy market has been declining slightly. However, when it comes to the volume zone for our further growth, that is cutting-edge technology area, we keep our share. Compared with our peers, there might be some strong negative impacts. Some companies may have stronger figures for share in this year. That is because of product mix and the timing of delivery. But in our existing markets, we don't lose our market share at all in the leading-edge area.

Thank you very much for your question. So it is time for us to close today's conference. Before closing, however, I'd like to make an announcement. SEMICON West will be held in Phoenix, Arizona for 3 days from October 7 to 9, 2025. On day 1, October 7, Tokyo Electron will organize a fireside chat from 1:00 joined by Mr. Kawai, Mr. Akiyama, Mr. Ishida and Mr. Sekiguchi. In this event, we plan to discuss our midterm and long-term business opportunities and growth potential. If you go to SEMICON West, please join us in this event. We will send you the details later. And lastly, we'd like to continually improve our IR activities based on your precious feedback. So we would like -- appreciate your kind cooperation in filling out the questionnaire before you exit the WebEx. Thank you very much for taking time to join this conference despite your busy schedule today. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]