Tokyo Electron Limited (8035) Earnings Call Transcript & Summary

It's time for us to start Tokyo Electron Financial Announcement for the second quarter of fiscal year ending March 2026. Thank you very much for joining us today despite your busy schedule. I am 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.

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

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 6:00 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 and mobile terminals if you wish to ask questions. But if you're not going to ask questions, you can use telephones. Since this conference is intended for institutional investors and analysts, we would 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 will be appreciated if you could also visit our website. So first of all, Mr. Kawamoto will present the consolidated financial summary.

Once again, good afternoon. I am Kawamoto Finance Division. I'd like to present the consolidated financial summary of the second 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 second quarter, we generated net sales of JPY 630.0 billion, which is in line with our guidance, 14.6% increase quarter-over-quarter. Gross profit was JPY 284.8 billion, 12.2% increase from the previous quarter. Gross profit margin was 45.2%, 1.0 percentage point drop quarter-over-quarter due to the increased ratio of fixed costs. Operating income was JPY 158.4 billion, 9.5% increase from the previous quarter. Operating profit margin was 25.1%, declined by 1.2 percentage point quarter-over-quarter, mainly due to the impact of increased development expenses. Income before income taxes increased by 6.0% to JPY 161.0 billion. Net income attributable to owners of parent was JPY 123.8 billion, 5.1% increase quarter-over-quarter. Capital expenditures in the second quarter were JPY 91.2 billion, consisting mainly of the payment made at the start of construction of the production building at Tokyo Electron Miyagi and development building of Tokyo Electron Kyushu. This is a graphic representation of the financial summary shown on the previous page on the chronological basis for your reference. This shows financial summary on the semiannual basis. The figures in the blue box are financial results in the first half of this fiscal year. The far right column shows the financial estimate for the first half of this fiscal year we announced on July 31. As you can see, our results in most cases, exceeded our guidance. This slide shows net sales by region. As for the composition in the second quarter, proportion of Korea rose by 5 percentage points quarter-over-quarter to 21.1%. Proportion of sales in China was 40.3% in the second quarter, reflecting the trend of pulling forward from the second half of this fiscal year. This shows SPE new equipment sales by application. In the second quarter, from the bottom of this chart, sales to non-memory customers accounted for 59%, nonvolatile memory accounted for 14% and DRAM accounted for 27%. In the first half of this fiscal year, composition of SPE new equipment sales by application was mostly in line with our estimates. This shows the Field Solutions sales. In the second quarter, Field Solutions sales were JPY 160.3 billion, thanks to high utilization rate of the customers' fabs in the second quarter. Sales of services were strong and modifications increased as well. As a result, Field Solutions sales grew by JPY 19.1 billion quarter-over-quarter. This slide shows the balance sheet. The total assets were JPY 2,667.0 billion. Cash and cash equivalents were JPY 455.2 billion, increasing by JPY 87.7 billion from the previous quarter. Notes and accounts receivable were JPY 411.4 billion, increasing by JPY 18.1 billion quarter-over-quarter. Inventories were JPY 720.4 billion, declining by JPY 36.6 billion from the previous quarter, partly because of drop in inventory at the factories. Tangible assets were JPY 561.2 billion, increasing by JPY 80.9 billion from the previous quarter, primarily due to the capital expenditures that I mentioned earlier. For the liabilities and net assets shown on the right-hand side, liabilities were JPY 662.3 billion, increasing by JPY 25.8 billion from the previous quarter. Net assets were JPY 2,046 billion, rising by JPY 131.8 billion quarter-over-quarter. The equity ratio was 74.4%, just for your information. This slide shows the cash flow. The cash inflow from operating activities in the second quarter was JPY 175.8 billion. The cash outflow from investing activities was JPY 86.7 billion, mainly due to acquisition of fixed assets. Cash outflow from financing activities was JPY 1 billion. Free cash flow was plus JPY 89.1 billion. This concludes my presentation. Thank you very much. Now Kawai-san will make a presentation regarding business environment and financial estimate. Kawai-san, go ahead, please.

This is Kawai. Once again, thank you very much for joining us today. I will present business environment and financial estimates. Let me start with the business environment. CY 2025 WFE market is expected to be $115 billion in size as projected in July. Investment in the mature nodes is soft in general, while investment in NAND is now picking up after being soft over the past few years. In particular, advanced logic and DRAM for AI applications are driving investment. The era of AI sure is here. The strong AI server demand and technology innovation of semiconductors essential for AI servers will act as a powerful driver to continually lead dramatic growth of investment for leading-edge semiconductors. For DRAM, investment not only for HBM, but also for commodity DRAM are growing sharply. Double-digit growth is expected to continue next year and beyond. For NAND, along with the growing demand of SSD for data center, namely enterprise SSD, utilization rate is improving at our customers' fabs. For logic, along with device scaling to 2-nanometer and 1.4 nanometer, further investment growth is expected in the future. The need for advanced packaging and testing are growing day by day. They become more and more important. For mature nodes, investment is expected to continue at the current level. Driven by those factors, CY2026 WFE market size is expected to hit a record high. We expect expansion of demand for high value-added cutting-edge equipment in coming years. In the growing semiconductor production equipment market, Tokyo Electron has established an advantage to strategically capitalize on diversified business opportunities as we offer not only front-end process tools for device scaling and device stacking, but also 3D heterogeneous integration tools and testers. There is a consensus that in year 2030, semiconductor market will reach $1 trillion in size. Among various technology innovations by 2030, Tokyo Electron has a lot of business opportunities. For example, for etching, due to growing investment in HBM featuring numerous interconnect layers, we expect the sales of JPY 500 billion in total for DRAM interconnect process by year 2030. For bonder and other 3D integration tools, we generated sales of about JPY 30 billion in previous fiscal 2025. From now on, however, drastic expansion is expected in applications of advanced logic, DRAM and NAND. And accordingly, we expect to generate sales of more than JPY 500 billion by year 2030. Tester demand is growing more than expected. Looking back Tokyo Electron's history, there was time when prober business made up bulk of our sales. The current tester momentum is just like that time. In the case of advanced probers for AI and HPC, where Tokyo Electron has high market share, along with the increase of test time and test process as well as introduction of new test methods such as die prober, high growth rate of CAGR of more than 15% is expected between 2025 and 2030. We are also focusing our efforts on penetration to new business areas and SAM creation. For die probers, whose market size is expected to account for 10% to 15% of total prober market, we have achieved agreement with customers to initiate evaluation for development. For logic of future generations, single wafer plasma-enhanced CVD is expected to boost business opportunities for void-free gap fill. The market size of plasma-enhanced CVD is currently about JPY 1 trillion. The gap field business is expected to grow to about 10% of this market. Tokyo Electron has succeeded to develop damage-free gap field deposition technology. And we have started evaluation with leading-edge customers to expand the application of this technology. There are more projects going on very well. For low-resistant metal film deposition, evaluation is going smoothly at multiple DRAM and NAND customers, and we won POR from one customer. For cleaning equipment, we are making good progress in SPM vapor cleaning and system to clean both sides of wafer simultaneously, which lead to our market share enhancement. For etching, in addition to the business growth of DRAM capacitor for which we are in dominant POR position, customers will start investment in mass production of NAND with 400 layers at the end of next year. Accordingly, our cryogenic etching system will be deployed into high-volume manufacturing line, driven by market growth and our share increase growth potential expanding significantly. We will actively promote customer engagement activities and forward-looking R&D activities and strive to continually enhance our corporate value. Next, I will present the financial estimates. Reflecting the results of first half of this fiscal year, we have revised our financial estimates. For full year fiscal 2026, we expect net sales of JPY 2.380 billion, gross profit margin of 45.3% and operating profit margin of 24.6% as shown here. In the ongoing third quarter, we sold some of shares we own and recorded extraordinary income. Taking these factors into account, we have revised fiscal 2026 net income upward by JPY 44 billion to JPY 488 billion. Now this slide shows fiscal 2026 SPE new equipment sales forecast. The SPE new equipment sales in the second half of this fiscal year remained unchanged from the 3 months ago. As expected, growth slightly from the first half to JPY 880 billion. The breakdown by application is shown on this slide. This shows our plan for R&D expenses and CapEx. In this fiscal year, following completion of Miyagi new development building in April, construction of a new development building in Kumamoto was completed this month, October. A production and logistics center in Iwate is also planned to be completed next month. In Miyagi, we are -- we also started construction of new production building in June, which adopt next-generation smart manufacturing concept. R&D expenses in fiscal 2026 are slightly revised to JPY 290 billion. 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 estimates and selling of some shares we own, the full year dividend per share is expected to be JPY 533 in this fiscal year. While taking account of balance between status of cash on hand and capital efficiency during this fiscal year, we will flexibly consider possibility of share repurchase. This concludes my presentation. Thank you very much for your kind attention.

Now we'd like to start the question-and-answer session until 6:00 p.m. Japan time. You can ask questions either in English or Japanese, speak. Bt our speakers are on the Japanese channel, please allow us to take audio questions only in Japanese. [Operator Instructions] As we like to take questions from as many participants as possible we will take 1 question per person. If time allows, we will take additional questions. So the first question, Yu Yoshida-san from CLSA Securities.

WFE market forecast next year, for DRAM, you made some comments. But once again, as a whole, WFE market, how do you view next year WFE market? And also by application, could you share your image of the growth rate? And first half of next year, your competitors say the sales will be -- the market should be flat and recovery starting in the second half of next fiscal year. And what's your view? What is your view?

WFE market forecast or outlook. At present, we are now scrutinizing WFE market trend. You can see quite strong inquiries, especially for the leading edge nodes for AI server, we have rather strong inquiries. In particular, DRAM is expected to grow double digit. That's how I view for next year. The strong -- very strong demand for AI server is now coming. However, there is one thing I want to note. Although demand is rather strong, the customers' fab space is limited against a very, very strong demand. So fab space of customers might have some limitation. So we have strong inquiries, but in second half, recovery is expected because once the open space is available in the customers' fab, they all have process tools moving to the new open space in their fab. For this year, logic and memory proportion should be 35% for memory. Out of memory, 80% is from leading-edge memory and 20% from non-advanced memory out of 65% logic, non-memory, 25% from is leading edge and 75% is non-leading edge. So in the breakdown next year, the memory and non-memory proportion should be 40% to 60%. Maybe in the future memory, 85% is from the leading-edge memory. As for logic, for this year, 25% is from leading edge. But next year, about 40% of total logic are leading-edge logic next year.

I have one short follow-up question. Next year, this first half of next year, if the market is -- remain flat, so now you have the January to March, you can see some drop expected. So if there is no change, so April to June, you can see drastic recovery in next fiscal year. Is my view is correct? Or as you said earlier, we need to wait for the second half because there is no open space.

I think inquiries are rather strong for next fiscal year. So delivery adjustment is now being conducted. So AI server demand is growing. So now we can see the timing of recovery. So the market is now moving as we expected. So we can have a great expectation for next year.

Next question is from Mr. Nakamura of Goldman Sachs Japan.

I am Nakamura from Goldman Sachs Japan. Can you hear me?

Yes.

So 3 months ago, the calendar '26 WFE market was drastically revised. And after that, various OpenAI news and memory market has been booming. So there was drastic changes over the past 3 months. You said there are strong inquiries. And once again, 3 months ago, when you made downward revision, there are some factors for that downward revision. And how do you view those factors right now? In particular, in some memory customers, you said the yield has been improved. And because of that, you declined the WFE market outlook. in the first half of next calendar year. How do you view the current situation?

Initially, we had expected early recovery. That's the reason why we need to make the revision. But 3 months later, you can see some momentum gaining now. We landed the first half of this fiscal year with the results in line with our forecast. We received the orders and had fixed the production plan. I think we can fulfill the plan. Initially, we had the expectation for early recovery. That's the reason why we need to make the downward revision 3 months ago. But now we can see some symptoms for recovery. Initially, we expected early recovery both for logic and NAND market. Currently, you can see some growing trend of PC and smartphone demand. But initially, we expected a bit too early recovery. And the demand for the mature node has been decelerated. Because of that, we came up with downward revision 3 months ago. For mature node market, also in the future, maybe the investment remain unchanged. For leading-edge AI server-related area, the market will be growing. Therefore, portion of the mature node will be declining gradually. Did I answer to your question?

Thank you very much. So calendar 2026 WFE market trend. So when you say your current comment, 6 months ago, you said you expect double-digit growth. And 3 months ago, you retreat that comment. But what is your view for WFE market 2026 calendar year?

WFE market is expected to hit the record high in calendar 2026. For memory demand, it is really big, drastically big. So against that big demand, we may not be able to fill the demand. So we may see memory shortage. In that sense, long-term super cycle might start. And also customer production plan should be closely watched. In that sense, when customers' fab capacity is ready, in the second half of next year, you can see another jump in the business. So this is one of the way to view the next year, and I feel comfortable about that kind of outlook. Demand is growing, definitely. and deliveries have started. But even that, the supply cannot catch up with the demand. So we need to be carefully watched the capacity enhancement.

Next question is from Mr. Wadaki of Morgan Stanley MUFG Research Japan.

So I'm sorry, I was not able to connect rightly. So I think the atmosphere in the market is improving. And next market, you may -- it may be difficult. Maybe 20% growth can be achieved, excluding China. How do you view the market growth next year at Kawai-san?

So rather high growth rate can be expected. But actually, my expectation is not so accurate. So I think I feel very good. condition.

So even if 20% growth outside of China, depending on Chinese market, overall situation might be rather difficult. So SML is not so good in China next year. So how do you think about the outlook of China?

In principle, certain level of semiconductor devices, including commodity devices are required. Therefore, certain level can be maintained. However, I cannot hear any bright news.

My concern is the restriction -- risks of regulations. How do you view the risks of regulations?

So compared with the previous period, there are quite a few considerations. But as far as our company is concerned, we haven't identified anything additional. So we must closely watch the situation of regulations. And when we ship equipment from Japan, there are quite a few equipment shipped from Japan. So we must abide by the Japanese regulations continuously. This is how I view the trend. However, the portion of the Chinese market different from the geopolitical viewpoint, the AI server proportion goes up, the leading-edge area portion is increasing. Therefore, the general proportion of China market will be declining.

Next question is from Shimamoto-san of Okasan Securities.

I'm Shimamoto from Okasan Securities. So my question is a bit different from other questions so far. Next fiscal year is the final year of the midterm management plan and sales target is JPY 3 trillion. You haven't removed this target, but market has been improving so far. So your milestone target, how do you view this midterm management plan target? As for the growth rate, growth rate is expected rather high. How do you view the trend?

So for our midterm management plan, ever since its announcement, there have been various changes in macro economy, geopolitical situation between America, China, regulations, inflation, Russia-Ukraine war. So there are quite a few things happening over the past 3 years. So there are some difference from our original assumption. But for some equipment, in the beginning, there are some regulations imposed on some of the equipment. And those changes or difference have some impact on our performance of the achievement of financial model. But having said that, high value-added leading-edge equipment evaluation is going on track. So by providing high value-added equipment, we do have the strong earning power. So the -- excluding macroeconomic impacts as far as our strategy is concerned, I think we are now fulfilling our strategy smoothly. 40% gross profit margin 5 years ago has been increasing to 45% along with the provision of high value-added products. In the future, in the leading-edge area, our technology is provided to more and more opportunities. And as I said earlier, there are various factors, but we try to offset those impacts because of the strong demand for AI servers. Therefore, if the WFM market grow to a certain expected level, I think we may get close to our midterm management plan. So we should closely watch various factors to pursue the possibilities.

I have one follow-up question. For memories, there are some fluctuation -- big fluctuation of memory. I think that is the critical issue. especially NAND. For the time being, there had been no investment for NAND, but customers' utilization goes up and NAND price goes up as well. So appetite for investment on Page 13. So now you have increased -- there is no increasing inquiries, but do you have a high expectation next year for inquiry for NAND?

Right. Yes, definitely. I think next year is a good year for NAND, strong year.

Next question is from Mr. Hirakawa of BofA.

I am Hirakawa from BofA. The Field Solution business, now we have JPY 160 billion, one step higher. That's what you showed us. Now over here, it's not greenfield, but brownfield. That's the reason why it goes to JPY 160 billion. Towards next fiscal year, I wonder WFE market growth, that figure will be declining? Or do you think JPY 160 billion should be a new standard?

So for customers, utilization rate is increasing. Therefore, field solution is growing accordingly. That's one thing. And leading-edge node, the customer assets should be upgraded. CIP continuous improvement project is the kind of upgrade or modifications will be rather high in volume. So we do have demand for CIP. -- etching system, for example, in our company, customers asking for upgrade from [ Ulucus 4 to Ulucus 7 ]. So these are the drivers.

I have one follow-up question. If that is the case, second half of this fiscal year or the next fiscal year, the field solution is JPY 160 billion should be a kind of standard. Is that correct understanding?

In the future, increasingly, so the installed base creates the new value. So field solution modifications and uptime improvement of the equipment, also yield enhancement, which is really critical. Therefore, how can we support our customers to enhance the yield or how can we provide the services and technology to support customers to improve yield, which has become more and more critical. Therefore, the field solution sales is expected to grow along with the increase of the installed base growth.

Next question is from Yamamoto-san from Mizuho Securities.

I am Yamamoto from Mizuho Securities. Cost control. I have a question regarding cost control. Tokyo Electron is working hard to grow. That's your direction. And you have the company-wide power to promote the growth. I know your driving power is very strong. So in some cases, your forecast is not correct upward and downward. But for the growth, you have very strength. When your performance is in downturn phase, -- why don't you think about streamlining your structure rather than bloating? This could be a great opportunity to stop and look back. That's how I view your company's trend. Even under the leadership of Kawai-san, the cost cut is not so much and initially committed gross profit margin of 47% and gross profit margin in the midterm management plan is higher than that. I thought you couldn't reduce cost in the previous guidance cut, including SG&A ratio. But 3 months later, you could only reduce cost this much. And there is a wide gap in profit margin against what is committed to the capital market. Even under the leadership of the Kawai-san, you are not able to change the corporate culture.

I don't think in that way, I want to say that. For one thing, our employees are a source of value creation. So actually, investment for human resources is equal to the investment for further growth. That's our management policy. So for the future, semiconductor market is growing based on that growth, $1 trillion. So we want to have the steady preparation to prepare for the $1 trillion semiconductor market. Short term, midterm and long-term strategy for growth should be considered carefully. Ever since cancellation of integration with Applied Materials over the past 10 years, our sales has been increased more than 4x -- about 4x. Our profit has been increased by 8x. So from now onward, $1 trillion market or more than that, that's the new era. Therefore, we are now working on the R&D investment, CapEx and human resource investment. We do have plans for that to prepare for $1 trillion semiconductor market. We are now preparing for that. Based on such assets, we want to make the best use of our assets so that we can enhance our capability for the device market, which is to be doubled. For short time, so we have the performance-based bonus. to have the downside flexibility. But now we have the huge market next year and 2 years from now. So we must follow. Otherwise, we are not able to address customers' requirements. On the other hand, when it comes to efficiency, digital transformation should be utilized, for example, robotics, DX manufacturing with AI and robotics using the current assets, we should be prepared for the sales to be doubled in the future. So we'd like to exceed the midterm management plan in terms of the operating profit margin. And this is the growing industry and this growing industry is cyclicality. The financial crisis or IT bubbles or cloud, COVID-19, there have been many events in the past. So we should be capable of a dynamic capability to cope with various changes or events in the market so that we can achieve world-class profit margin. So competitors are now working on various initiatives. We are aware of that. So under such strategy, we try to further enhance our profit margin.

So your target -- ultimate goal is rather high. So you don't have to worry about short-term turbulences?

Right, 3 year or 4 year, 5 years ahead, we should closely look at the future. And we also need to think about the -- our employees' work life balance and work-life balance of supply chain as well. So if the market is flat, things are different, but actually, our industry is growing industry. So short-term, midterm, long-term perspective should be respected when we run the operation of our company.

Next question is from Mr. Nakanomyo of Jefferies Japan.

I am Nakanomyo of Jefferies Japan. Can you hear me?

Yes.

I have 2 questions. Number one, on Slide 14, now you are talking about the bonder laser. You said JPY 300 billion -- you said JPY 500 billion by year 2030. That means JPY 100 billion per year is achieved somewhere in the future, maybe 2026. So mainly driven by NAND wafer bonding according to my understanding. Could you elaborate JPY 500 billion for bonder laser. Could you give me some breakdowns, please?

At present, the momentum is rather strong. HBM, high-bandwidth memory is now coming. And logic, backside PDN, for example. So quite a few applications are now expanding for bonding, bonder, debonder, temporary bonder debonder, laser trimming, extreme laser lift-off, their applications are expanding and wafer-to-wafer stacking is also coming. So next fiscal year, we can expect the drastic growth in this area. When it comes to applications, not only expansion of applications, HBM, we do have the strong position as a company. And that is expected to expand other companies. Maybe we can enhance the share. So application expansion, market expansion and share increase. By those 3 factors, we can see the drastic growth in this area. Of course, step-by-step growth will be followed. But by year 2030, quite large market will become one of our pillars. So you don't have any figure for next year sales. You cannot say that today. I want to say, but I'm sorry, let me refrain from saying any figures.

Another question, a very similar question, I'm sorry, for NAND. So DRAM is expected to have double-digit growth, but that is the NAND growth rate? For this year, last year's market was rather low. So actually, your sales for NAND customer should be growing considerably. So next year, the investment for NAND with 400-layer will start maybe with high confidence level, maybe double digit, maybe high teens growth is expected for NAND or through the penetration of generative AI, storage of servers require NAND, NAND demand will be going up. I think 2022, we hit the record high of JPY 340 billion. Can you see very similar? So I want to see the growth rate of NAND in year 2026.

Figures will have been increasing gradually. So next fiscal year, we can have a high expectation for NAND. So NAND with 400 layers, the NAND WFE is expected to grow drastically. From the second half of next calendar year, investment for mass production of NAND with 400-layer will be growing gradually. I think NAND market is better than this year, and we can have high expectation in 2026. Mr. Yatsuda, do you have any comment?

At present, for inquiries, the data center, the nearline demand is now growing. But PC and smartphones, that is the major market of NAND. Actually, the PC and smartphones market is rather soft, but migration investment will continue next year as well. So investment for 400-layer NAND is highly expected. When the demand for PC and smartphone increases, we can see the capacity enhancement investment for NAND. But for the time being, there is no symptom of the increase of the demand for NAND in the smartphone or PCs. Therefore, we cannot give you any specific numbers now. Next question is from Mr. Yoshioka of Nomura Securities.

I am Yoshioka of Nomura Securities. Again, on Page 14, I have a question regarding Page 14. This is just a clarification. So Etch, JPY 500 billion more in total by 2030. So what is your cumulative sales so far? I want to get the number for that. And the same line for Prober, you are expecting to grow the prober, but your competition -- competitor is rather strong for HBM. So your company, so in order to achieve the CAGR of 15% or more, the market is expected to grow furthermore? Or do you improve the share? Are there any factors for you to increase your share? So I want to see how the prober business grown.

For etching system, the DRAM interconnect process alone for HBM, investment increase is expected, not only HBM, for DRAM, there is the investment growth, but interconnect process in the case of HBM will be 4x more. Therefore, it's rather stable, strong growth is expected. That's the reason why JPY 500 billion or more. That's what we want to say. So simply about JPY 100 billion per year, simply calculating, but getting closer to 2030, the sales will be growing gradually. In addition, for capacitor edge, we are in the dominant positions for major customers. Therefore, that will bring us the big business opportunities. As for prober, when it comes to prober, in particular, cutting-edge logic, our position there is rather strong. The leading-edge logic. in the area of leading edge, we are dominant position. So our share is increasing steadily. So that application, the test for that application, the test time and test volume are increasing steadily and that has a strong momentum. AI server demand increases. Accordingly, the prober business grows rapidly with a CAGR of 15% or more and CAGR 15% or more includes die probers. And die prober for the future is expected to grow -- accounts for 10% to 15% of the entire prober market. We agreed with our customers on the evaluation for development. And if they are in progress, we may have some opportunity to make some announcement, but we have consensus with customer -- agreement with customer to conduct evaluation for development, and we can expect the good growth.

Next question in text. So let me read it out. The first question is from Mr. Rolf Bulk of New Street Research. You mentioned in your prepared remarks, mature nodes WFE spending is expected to remain roughly flat at current levels. Does this include or exclude Chinese investment? What do you expect for Chinese WFE spending growth next year? And what is your level of confidence or visibility on this?

Thank you very much for the question. For mature node, yes, China is included. China is included. We need to take account of various things. But when it comes to future outlook, maybe flat, including China. So mature node market remain flat, including China. That should be the appropriate way to view the future. WFE market is driven by AI servers, the cutting-edge technology, that is the major driver. So that's where we must provide high value-added products with good strategy. So stable and continual growth is expected.

Thank you very much, Mr. Next question is from Lepin Huang of Huatai Securities. Management highlighted advanced packaging as a key growth driver in the past. Could you introduce what is the progress in this area and quantify current revenue contribution from equipment sold into advanced packaging applications and the future target?

So for the advanced packaging, the bonder and debonder and prober-related products are rather important, bonder, debonder and probers the 2 years, our sales has been tripled, and we achieved about JPY 30 billion last year of the sales. When you refer to Page 14, as I said on Page 14, the bonder debonder, 5 years to come, we are going to achieve the cumulative sales more than JPY 500 billion. So that's our plan. And this plan really reflects the high potential advanced packaging or integration or heterogeneous integration. die prober is expected to grow furthermore. On Page 14, I already talked about that, including our expectations.

Next question is Tammy Qiu from Berenberg Securities. Let me read it out. You mentioned the leading-edge logic/foundry investment will accelerate. Will leading-edge foundry logic grow significantly next year year-over-year? Driven by which node, 3-nanometer or 2-nanometer node, which node will drive the growth? Will all the foundry and logic players CapEx up year-over-year or only 1 or 2 players will invest where China bottoms back to 20%-ish of your revenue at some point?

Well, thank you very much for your question. So currently, it's flat and mature node. and that covers China market. That's what I said earlier. In the future, high-end nodes for AI server will drive WFE market growth. Let me answer to your last question, I'm sorry, 30% or less. There is rather high, highly likely that the China proportion will go below 30%. Talking about your earlier questions, the logic, leading edge. Node is expected to grow. Yes, we need to scrutinize the figures or percentage, but we do receive the strong inquiries. Therefore, we expect the growth -- strong growth. Any other questions I should answer generally about nodes. So it depends on customers' situation. So we are a supplier, so we are not able to give you any comments because we are a supplier. So we need to be ready to fulfill the customers' demands and make some contribution.

Thank you very much, Qiu-san, for your question. So no more questions. So since there seems to be no more questions, we'd like to conclude or close the financial announcement. Lastly, we'd like to continually improve our IR activities based on your precious feedback. So we would 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.]