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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
It's time for us to start Tokyo Electron financial announcement for the second quarter of fiscal year ending March 2020. Thank you very much for joining us despite your very busy schedule. I am Yatsuda of IR Department acting as today's moderator. Before introducing our attendees for today, we'd like to express our deepest sympathies and condolences to the people who were affected by a series of typhoons affecting Japan last month and this month. Our CEO, Kawai, and all our employees sincerely hope for a prompt and early recovery.
Now I'd like to introduce the attendees on our side. Tetsuo Tsuneishi, Representative Director, Chairman of the Board; next, Toshiki Kawai, Representative Director, President and CEO; and next, Yoshikazu Nunokawa, Corporate Director, Executive Vice President and General Manager, Finance Division. So first of all, Mr. Nunokawa, Corporate Director, Executive Vice President and General Manager, Finance Division, will present the second quarter consolidated financial summary.
Good evening. It's getting dark. Thank you very much for joining us despite your very tight schedule today. I'd like to make a presentation on the second quarter consolidated financial summary. First of all, I'd like to talk about the highlights for the first half of this fiscal year, April through September 2019. Net sales was JPY 508.4 billion and operating margin was 20.2%. Part of SPE sales was pulled forward, while the Field Solutions business was very strong. The sales in the first half of this year was higher than our expectation. In addition, due to the sales increase in the processes for which we have got new orders, the profit ratio also surpassed our expectations. Reflecting the results of the first half of this year and the latest information, we have revised the full year sales forecast. Later on, Mr. Kawai will talk about this issue.
We have repurchased 6.35 million shares since May 2019. Total repurchase has amounted to JPY 104.5 billion. This corresponded to 70% of the maximum of JPY 150 billion.
On this slide, you can see the financial summary for every 6 months. As I said earlier, compared with the forecast, net sales -- because of the pulled forward sales from the second half of the year and strong Field Solutions sales business, JPY 508.4 billion, and profit is higher than expectation. Gross profit margin was 40.2%, and operating margin was 20.2%, achieving JPY 102.4 billion.
Now you can see the financial summary on the quarterly basis. On the quarterly basis, the second quarter net sales was increased by 34.9% from the first quarter, achieving JPY 292.0 billion. The gross profit margin was 39.3%. Operating margin was 20.5% in the second quarter.
This slide shows a graphical presentation of the information shown in the previous slide. On the right-hand side, you can see second quarter. Gross profit margin, which is the green color line on the top, as I said earlier, 39.3%. Operating margin was 20.5%. This slide shows the quarterly-based segment information. On the left, you can see SPE; in the middle, you can see FPD sales information. As for SPE, between first quarter and second quarter, the sales was increased by 37.2% from the first quarter to second quarter. FPD, in the middle, sales increased by 10.3% from the first quarter to second quarter. On the right-hand side, you can see composition of net sales between SPE and FPD, and you can see the results on this chart.
This shows SPE sales by region, again, on the quarterly basis. On the right-hand side, you can see the result of the second quarter. The -- compared with the first quarter results, the second from the top, North America; and toward the bottom, second from the bottom, China; and on the bottom, Southeast Asia. In those regions, sales increased significantly. This shows a quarterly-based new equipment sales by application. On the right-hand side, you can see second quarter results. You can see the results from the second full quarter of fiscal 2018. As you can see over here, left-hand side, over the past 2 years, I should say, the top portion, blue color portion and purple color portion, representing memory, specifically DRAM and nonvolatile memory, are conspicuous about 60% to 70%. While logic sales accounted for 30% to 40%. However, on the right-hand side, you can see 2 bars on the right-hand side. The proportion between memory and logic now becomes 50% to 50%. So the proportion has been changed over the past 2 quarters.
Now you can see Field Solutions sales on the quarterly basis. Second quarter of this fiscal year, sales was JPY 75.8 billion. Against the full year forecast, the -- our progress level is about 50% in the first half of this year. So the sales progressed steadily for the Field Solutions business. Now you can see the balance sheet, again, quarterly basis. On the left, assets are shown. On the top, cash and cash equivalents, JPY 339.9 billion. In the middle, you can see, light blue portion, which represents inventories in the second quarter, JPY 376.3 billion. Just like the first quarter, inventory remained at a high level. On the right-hand side, you can see liabilities and net assets. Net assets was JPY 803.1 billion, as you know, because of the share repurchase, the net asset declined from the first quarter but still, equity ratio is about -- is 68%. Now you can see inventory turnover and accounts receivable turnover on the quarterly basis. The top line, green color, shows the inventory turnovers in the second quarter. As you can see, the high level inventory turnover is maintained from the first quarter because the inventory turnover is calculated based on the past 12 months' sales. So the sales are shown on the bar graph in the blue color. So when you look at the sales over the past 12 months, you can see the reason why the inventory turnover level is rather high and accounts receivable turnover was 37 days in the second quarter.
Now you can see the cash flow on the quarterly basis. As you can see, cash flow from operating activity was JPY 81.7 billion. Cash flow from investing activities was minus JPY 15.8 billion, cash flow from financing activity was minus JPY 65.4 billion. Out of which, share repurchase amounted to minus JPY 65.3 billion. So most of the cash flow from financing activities are from share buyback. Free cash flow, the green color line, was JPY 65.8 billion.
Thank you very much. This concludes my presentation. Thank you very much for your kind attention.
Next presentation is given by our CEO, Mr. Kawai. He will be talking about business environment and financial estimate revisions. Mr. Kawai, please.
Once again, I am Kawai. Good evening. Thank you very much for joining us despite the late hours. Now I'd like to talk about business environment and financial estimate revisions.
Let me start with the business environment. For both SPE and FPD segments, there have been no major changes in our business outlook since the previous financial meeting announcement. WFE, this year, 2019 investment, declined from the previous year by 15% to 20%. The logic/foundry is expected to be strong. For memory, inventory adjustment are in progress, and we can see the recovery investment next year, and that outlook remains unchanged. FPD very similarly, though FPD CapEx will decline by 30% on the year-on-year basis, we can expect recovery on the CapEx from the second half of this year as expected. In particular, throughout next year, small and medium-sized panel investment is expected to recover for OLED, 5G and mobile applications.
Once again, calendar year 2019 WFE market outlook by application is shown over here. As I said earlier, there have been no changes from the previous financial announcement. Logic investment is strong. The CapEx for memory has been suppressed, but you can see some recovery trend next year.
Now you can see second quarter business progress. The SPE business strategy is implemented as planned for 3 focus areas, namely etching, film deposition and cleaning. We are -- we won the PORs continuously for etching. We won PORs in the IoT and automotive areas in the second quarter as well as the first quarter successfully, and we can win back [ applications ] from our competitors.
For film deposition. For ALD and batch film deposition, we saw some progresses for ALD -- both of them are for leading-edge logic devices. For ALD, the high hard mask formation for the critical patterning process, we won PORs. This is for selective film deposition process. The application for the selective film deposition is expected to increase for leading-edge logic devices. For batch system as well. Our batch tool is replacing single-wafer processing because of the productivity, throughput and footprint. So our batch system replaces the competitors' single processes. And we already won the PORs. For cleaning, bevel cleaning application is increasing. Newly, we won orders from a new Chinese customer. For the future, the Moore's Law continues.
On the other hand, the hyper-mass area -- commodity hyper-mass area and customization area is expected to spread or expand driven by IoT, AI and 5G. For those areas, 200-millimeter process tools are to be used. As we reported in the previous meeting, there is a consortia in Florida, United States, and we installed 200-millimeter demonstration tools in that consortia, where our environment was established to develop SPE and process technologies for automotive and industry applications as well as the applications that I said earlier.
For flat panel display production equipment, inkjet printing system for OLED panels for customers' development lines has been released. In many of the right-sized customers, in the future, all the investment is expected, and we won orders for the inkjet. Now I'd like to talk about this fiscal year financial estimates. By reflecting the results of the first half of this year and the latest information, we have revised the full year financial estimates. As Mr. Nunokawa said earlier, for the first half of this year, part of SPE sales are pulled forward. For the second half of the year, the financial estimate has been revised by reviewing the latest information. Accordingly, the full year sales forecast is now JPY 1,110,000,000,000, increased by JPY 10 billion. Operating income is JPY 225 billion, increased by JPY 5 billion. And the net sales attributable to owners of parent is JPY 170 billion, increased by JPY 6 billion.
This shows the new equipment sales by application, the actual sales for the first of this year and estimate sales for the second half of this year. The sales of the first half of this year increased by JPY 10 billion from our plan because part of sales was pulled forward from the second half of this year. The sales breakdown by application was in line with our plan. The sales estimate for the second half of this year is JPY 440 billion. The full year sales estimate increases by JPY 6 billion from our estimate in the first quarter. In the second half of this year, sales for logic/foundry is expected to grow significantly. This shows our R&D expenses and CapEx plan. The R&D expenses are raised by JPY 3 billion from the first quarter financial announcement to become JPY 123 billion. We additionally increased R&D expenses to achieve our midterm business plan and to prepare for the future growth. For the CapEx and depreciation, there have been no changes from the previous financial announcement. Finally, this shows this year's dividend estimates. The interim dividend is JPY 246 per share, reflecting the share repurchase results in the first half of this year. The year-end dividend is expected to be JPY 290 when the ongoing share buyback is not taken into account, but we are planning to revise this forecast depending on the results of the share repurchase in the second half of this year.
Thank you very much for your kind attention. This concludes my presentation.
Now we'd like to entertain questions from the floor up until 6:30. [Operator Instructions] And today's financial announcement will be uploaded to our website. [Operator Instructions] So the gentleman in front row, please?
I'm Wadaki from Nomura Securities. I have one question about the memory investment in the second half of this year, and I want to know how accurate it is. During the -- in the security sector, we have some common stories. One big company in Korea achieved [ 20,000 ] might have [ 40,000 ]. And in China, one company talked about [ 50,000 ] maybe next year. So these are the stories I can hear. Are there any other information? Or what of the accuracy of the information I just talked about?
Gradually, the inquiry from customers are now increasing. So the plans you talked about, I think that is the correct information. For other companies, you can hear some new information gradually. About 3 months ago, I said that we need to wait for another 3 months to see some tangible plans. That's what I said about 3 months ago. And actually, you can hear something from our customers. As for the situation, for logic, it's strong, and memory, 3D NAND, recover first and followed by DRAM recovery. So in our factories during the WFE adjustment period, our factory's operation has been suppressed. But we try to prepare for the recovery or normalization of our operation right now.
I have one follow-up question. According to your forecast, maybe China is put aside. So existing manufacturers right-sized investment for 3D NAND will start in the second half of this year. Is that your view?
So when it comes to the contribution to sales, the logic/foundry is rather big in the previous graph. But the finalization of the investment -- so I think inquiries are getting much clearer than before.
Thank you very much for your question. Next question, please. The front row. The gentlemen in the front row, the next item, please.
I am Miyamoto from Mitsubishi UFJ Morgan Stanley Securities. I have a question on the operating margin in the second half of this year. The sales was increased for the first half of the year by 20%. On a year-on-year basis, the sales has increased. But when it comes to your operating margin, compared with the first half of this year, slightly increased. But on a year-on-year basis, the operating margin is decreased. So could you just explain the reasons why the operating margin does not increase? You said R&D expenses increased by JPY 3 billion, but that contributes only 0.4 points. So could you just give me the reason why there is no big increase in the operating margin?
There is no major reason for that. The customer mix and others are the reasons for that. That's how I would like you to understand the reason.
So logic/foundry increases. Is that what you mean? Could you just say that again, please? The sales of the logic/foundry increases in the second half of this year, so there is no increase in the operating margin from the first half of this year.
No, no, no. So the customer mix and product mix, both -- those 2 factors contribute to this phenomena.
There's the gentleman next to the previous gentleman, please.
I am Moriyama from JPMorgan Securities Japan. I have a question on the actual sales on the first half of this year. Once again, SPE sales was pulled forward. I want to get the breakdown of that. I think that is because of foundry business. But just for information, by application or by region, what kind of process tool is the driver of this pulling forward phenomena? Also throughout the year, for the second quarter, developer, etching system and cleaning system, just what it changes? The orders from the customer or sales are now pulled forward. What sort of drivers are there? Specifically, what sort of process tools function as a driver for pulling forward the sales?
As for the first half of this year, actual sales, nonvolatile memory for foundry, so there is no particular customer but sales was pulled forward. Anyway, as I said earlier in my presentation, the sales of the Field Solutions business was also increased. So these are the major reasons of the increase of the sales in the first half of this year. By product. Actually, we haven't reported that sort of information in the past, but there is no particular process tool to drive this phenomena. But by and large, all the products drive this phenomena. Once again, nonvolatile memory, foundry sales and the Field Solutions sales were found higher than our focus in the first quarter of this year.
So in particular, for example, for process EUV lithography now introduced in the high-volume manufacturing lines, so does that impact your sales? But that doesn't happen this year. Maybe next year and onward, the EUV lithography might have some impacts on the -- your business. But so far, there is no major impact on that.
The product composition or sales increase are almost in the same proportion in terms of the growth rate. The increase from the previous forecast is because of the investment to the 5G application and for the memory area. For memory area, our company needs to be prepared for the future recovery of memory investment. We need to be proactive to prepare for the future recovery. That sort of movement is now existing. It is too late for us to invest a huge amount of resources after we receive inquiries. We should make the best use of the time to prepare for the future recovery of the memory. That is important for the production. So there are some bookings as well. And it is really good for our industry because we can see the future symptom of the investment recovery to be prepared for that.
As for the EUV lithography, the technology innovation is going on. So we need the lithography installed into the manufacturing line. That will have the positive impact on our business because we have quota and developer and process tools are installed on both sides of the EUV. And we have patterning, film deposition, cleaning, and etching. We have all those products together as a company. So when EUV is introduced and technology innovation is proceeded, other applications will be increasing. And new applications like selective film deposition might be coming out. In either case, there's a potential for growth.
Next, yes, the gentlemen on this aisle, please.
I am Yoshida from CLSA Securities Japan. My first question is a kind of follow-up of Wadaki-san's question. I have a question on SPE. New equipment sales, the second half of this year, NAND composition ratio is rather low. Today, a Korea memory manufacturer made a financial announcement and CapEx was rather big. So I wonder, the sales will be incorporated in the second half of this year. Actually, the net in second half of this year, the estimate does not include the sales. Why does that happen? Because those tools are not in operation for a while. That's why those tools cannot be accepted. Is that the reason for that?
Our company sales recognition standard is completion of setup and testing. At present, we just received inquiries for memory, and the investment plan is now getting tangible or visible. The memory inquiries will start contributing to our sales from the first half of next fiscal year. For DRAM, the sales will be increasing from the second half of next fiscal year.
I have one follow-up question. The next year, business outlook. You talked about -- if possible, WFE CY 2020 forecast, if possible, by application, and could you just let us know about the potential for growth?
Today, 1 IC vendor made financial announcement today. You talked about that. And I think macro economy is taken into account. It is a bit difficult for me to say how much growth is expected in next year for the WFE market. We cannot quantify the value yet, but I'll say right now is, in our factory, the production has been suppressed so far. But we -- I have issued instructions to the factories to bring back to the normal situation of capacity. Last year, our sales was JPY 1,280,000,000,000. At the same time, we made efforts to improve the production, procurement as well. Together with suppliers, we suppressed the procurement to some extent. But we try to bring back procurement and production to the normal level, little by little. That's the current status. Relatively speaking, the plan we presented today for the sales, for our fourth quarter, the January to March 2020, I think we can increase production to fill the capacity of actuaries, too, significantly.
The gentleman in the middle in the neighboring aisle, please.
I am Yasui from UBS Securities Japan. I have one question on logic investment in the second half of this year. Sales is expected to grow significantly. In reality, Taiwanese largest foundry is planning to make big investment. How about the continuity of this investment? Your company's second half of this year sales, that level will be continuing every 6 months. Or are there any potential drop in terms of your sales in the future? Could you just explain that, please?
In principle, I think high standard investment will continue in the future. Last year, the calendar year last year, actually, our company recorded the highest sales in our history. At that time, the semiconductor market size was $468.8 billion. Year 2030, that will become $1 trillion. That is the general forecast of the semiconductor market size growth. In reality, over the past 13 years, the semiconductor device market was doubled in size, and we will see another doubling trend toward year 2030. For smartphone, according to [ TSR ] forecast, in year 2023, [ 1.54 billion ] units will be sold, out of which, 745 million units are to be used for the 5G. So there will be various kinds of devices coming up for 5G application. So the customer who made big investment, when you think about their share, I think, that level of -- high-level of investment will continue in the future.
I have one follow-up question. Next year, as for upside information, you talked about memory and logic, the high level will continue. So based on this, are there any upside final demands, for example, data center, autonomous driving or new services, high, medium, long? Are there any upside information on the final demands? Are there any expectation from your company, although, they are not visible yet?
I rather want to say, things are becoming more visible as expected. That's the current status. For logic, I already made -- talked about that in my presentation, and automotive and healthcare in various fields, seamless image sensor is another potential area. For memories, as I said earlier, the 3D NAND market, the adjustment period is completed -- coming back to normal. DRAM as well. Next 1 quarter, DRAM market will come back to the normal conditions. For memories and logic and devices for automotive and industrial are expected to grow from now on.
Thank you very much for your question. So the next question, the gentleman in the front, in the same aisle, please?
I am Damian Thong from Macquarie Capital Securities. I have a question on Field Solutions business. The first half of this year, the Field Solutions sales is higher than your plan. Could you give me the actual amount of money of the increase from your plan? And I have one more follow-up question later on.
The progress rate in the first half of this year for Field Solutions business, as I said in my presentation, is 50% plus. To be more specific, 52% progress rate is achieved in the first half of this year. So it has been steady proceeding.
So according to your original plan, 50% for the first half of the year and 50% for the second half of this year, is that correct understanding?
Yes, that's correct.
One follow-up question. For this time, we have -- the full year forecast has been revised upward. Field Solutions business estimates are also revised upward or figures for Field Solutions business remain unchanged?
For Field Solutions business, there have been no changes in terms of the estimate for the Field Solutions business.
Thank you very much. Next question, please. Yes, the gentlemen in the rear of this room, please?
I am Yamamoto from Mizuho Securities. I have a question on the increase of the share for the film deposition. The number of steps for hard masking LED has been increased. That's what device manufacturers have said and other 2 vendors said. Maybe that's about NT333, that's my guess. If I'm not correct, please correct me. But other companies like Lam, AMAT, ASM, they are using the single-wafer process. What sort of advantage do you have? That's the first question. As for logic, you said that the single-wafer process is replaced by the batch process. That didn't happen so much in the past. What sort of applications?
For logic, the batch replaces single-wafer process. For ALD, the system you talked about, we are making best use of the characteristic advantage of that system. So our process-to-concept is really essential to come up with that film deposition. As for the replacement by batch process, as of today, because of the relationship with customers, we are not able to make some announcement. But for the future, the number of process steps increased -- I mean those circumstances. We also need to think about [ STGs ], environmental aspect, space or throughput aspects. All those aspects are becoming more and more important. So if film deposition can be implemented, in fairness, that will be the better choice. Therefore, so based on our performance and through the trial with our customers, we found it possible to use furnace for the film deposition. And we expect the further increase of the number of steps in the future.
You don't have to disclose the name of the customer, but what sort of film application the replacement from single to batch taking place? Could you share the idea with us, please?
One moment, please. The material is selecting.
Thank you very much for your question. Next question, please. Yes, the gentlemen in the rear row, please.
I'm Nakanomyo from Jefferies Japan Limited. For FPD, I have a question on FPD. The first quarter and second quarter, the profit margin has declined. Could you explain the reason why? Toward the second half of this year, what will happen to this profit margin? I also have a question on the FPD market in next year. What sort of forecast do you have for the FPD forecast? The slide says there have been no changes from the first quarter financial announcement, but there must be some changes over the past 3 months. Are there any changes in terms of your prospect or focus for the next year FPD market?
For your first question, as far as our company is concerned, the operating margin of FPD business is to be improved, focusing on the high value-added area. The major issue is PICP, the plasma ICP, etching. The steady growth is achieved so far for the future. Inkjet area, and also PICP technology are to be used to explore new applications. That's what we are doing right now. In that sense, there are further growth potential in the FBI business -- FPD business.
As for the profit margin, the commodity areas, we had some sales in the second quarter of this year, and that proportion increases. Because of that, the situation is just temporary for [ Nomina ]. For the future, the profit ratio is expected to improve. For next year, 5G mobile area, in particular, G6-generation OLED investment is expected to grow. For G10 large-sized panel, as well, partially remain in the future. As I said earlier, our business opportunities of our company include PICP etching area and large-sized panel, G10 specifically, we are making some success, but that portion of the business will remain. Those 2 factors are drivers for the next fiscal year sales forecast.
May add one more comment providing some information. You asked about the reason why this profit margin decreased, although the sales increased from the first quarter to second quarter. Actually, manufacturing costs, which were turned into inventory in first quarter, were recognized in the second quarter along with the sales recognition. That is the reason for that.
So when you look at the first half of this year, on average, and that level remains unchanged in the second half of this year. As for the segment profit margin, we do not disclose the information for the second half of this year.
Yes, the gentleman in the front row, please. The second row, please?
I'm Maekawa from Credit Suisse Securities Japan. I have a question about the focus for next fiscal year. How do you view the next year condition? Now you said the memory investment will recover, but in principle, the announcement made by the memory manufacturers indicate a decline in investment, except for Samsung. But you said, memory investment will recover next year in your presentation. SK hynix, Micron, Western Digital and [ Kokusai ], those CapEx will be declining. On the other hand, Samsung and China -- Chinese memory manufacturers increased their investment. And their investment increase is more than the decline of the other manufacturers' investment. Or the memory manufacturers who make announcement of decline of investment also start increasing investment when the memory device market recovers. That's sort of optimistic view do you have? Could you just let me know your view, please?
You talked about the conventional memory manufacturers and Chinese customers. They have different agenda actually. So those memory manufacturers do not share the worldwide memory demand. As you said, the conventional memory manufacturers are now adjusting their inventory. And foundries and logic investment is strong, which creates new memory demands for 5G. 5G is spreading. And now, you can see new CPUs to be released in the future. Accordingly, the high-speed data center investment will be recovering little by little. And 5G mobile also increased. At present, memory inventory level comes back to the normal situation. Probably, 3D NAND supply may be less than the demand. In particular, for NAND, you have simple demand. Also, the NAND will replace all hard disks. So there are double factors, the unit demand and replacement from the hard disk. So there are 2 different factors to drive the demand. Because of that, we are now receiving quite increasing inquiries.
So I'd like to sort out what you have said so far. So for one thing, the inventory adjustment will be completed, and the demand will come back. Also, logic -- leading-edge logic devices are introduced to increase the memory demand. So you talked about those issues before. So those 2 factors are coming at the same time. Or do you think the adjustment of inventory comes first, and after that, logic will become the new driver? Is that correct understanding?
So the inventory adjustment is completed, to some extent, and inventories now coming back to the normal status. For NAND, the replacement demand -- I mean, replacement of hard disk by NAND is taking place, and NAND supply might be running out. That is expected to happen next year. For DRAM, things are going very smoothly and new demand for 5G and technology innovation, and also, the process tools to take care of those new technologies. So we have new demands for those areas. So that's what is expected to happen next year.
So next year, bit growth of DRAM and NAND. How do you view the bit growth of DRAM and NAND next year?
Bit growth is a bit complicated, and there are various figures coming out for this year as well. Today, one customer made an announcement, and it's too early for us to refer to the bit growth for next year. Demand is expected to grow. On the other hand, the macroeconomic factors need to be considered, and the customers are now trying to find out the best timing for investment.
Thank you very much for your question. So next, the gentleman in the front row, please?
I am Sugiura from Daiwa Securities. I have a question on the profit margins. At the beginning of the fiscal year, you talked about the strategic expenses that become margin pressure. I think you said that. So that sort of strategic expenses are equal level the first half and second half of this year? Or the strategic expenses are more in the second half of the year? That's the reason why the profit margin is not so much improved in the second half of this year. That's my question.
So when you say strategic expenses, are you referring to the R&D expenses?
Including the expenses for the valuation tools as well.
So we have been carrying out a very active capital investment. We are now constructing new buildings. Accordingly, we have the depreciation. Chronologically, when you compare first half and second half of the year, in the second half of the year, depreciation amount will be more in the second half of this year, and R&D expenses was increased by JPY 3 billion, as we said in the presentation, in the second half of this year.
So in that sense, the strategic investment in the second half of this year is more than the one in the first half of this year. I have one follow-up question. So now business environment is now recovering. And for the strategic expenses, do you have any plan to further increase strategic expenses in next fiscal year?
For this year, R&D expenses is about JPY 123 billion. But including this year, 3 years to come, we are planning to invest JPY 400 billion for R&D.
Thank you very much for your question. Next question, please. Yes, the gentleman next to the previous gentlemen, please.
I am Ishino from Tokai Tokyo Research Center. I have a question on DRAM. When customers are preparing for starting up of the new manufacturing line, they are to be used for the device node of 1z nanometer, as you said in the Page 21. So device -- sorry, process tools for the 1Z node should be the mainstream. However, yield of 1Z node is not so good. Why the yield is not so good? And I think port yield will be leading to the business opportunity for your company. So in the era of 1Z, where you can find the business opportunities? That's the first question. And second question, about DRAM, China. I think there are many inquiries to produce the DRAMs in China, but can you export process for DRAM to China without any problems?
For DRAM. For your first question, 1Z node for DRAM?
Yes, that according to the DRAM manufacturers, 1Z node should be the mainstream, but there should be many challenges. However, those challenges will be good business opportunities for TEL. Where do you find the biggest opportunity, business opportunities in terms of your product, for DRAM 1Z node? What sort of the business opportunities would you expect for 1Z era of DRAM?
In principle, patterning should be the key. We have the wide equipment portfolio, as I said earlier, lithography area. Our company provides coaters and developers for the lithography process. And our share in this process is 90%. We are in the very position in the lithography process. EUV, for the high-volume manufacturing, our share is 100%, cleaning, film deposition and etching. So in those areas for patterning, 4 consecutive key processes, we can provide process tools. That is the area that we can find business opportunities.
For [ high metal gate ], for the material-based speed enhancement technology is required for DRAM. So new applications inquiry will be coming and that also constitutes our business opportunities. So 1Z, in the era of 1Z, EUV lithography, do you think you EUV lithography will be used for the device node of 1Z? Or do you think EUV is too early? I think that is one of the hot topics for today. But could you just share your idea with us, please?
Each IC vendor is now studying the timing or possibility of adoption of EUV lithography. They may choose the methodology featuring highest productivity or they may think about differentiation when you decide the product. So we can't -- I cannot make any clear comment on that issue yet. The IC vendors are now pursuing and studying almost all the potential options.
Yes, the gentleman in the middle, please.
I am Yoshikawa of Morgan Stanley MUFG Research Japan. Your competitor, WFE manufacturer, has said -- one of them said, this year's China local customers' WFE investment amounted to $6 billion. But your company, if my memory serves said $3 billion to $4 billion investment in -- by Chinese local customers. And what is your current view of the investment of China local customers this year? What will happen next year? What sort of growth do you expect for next year in terms of the China local customers' investment?
Let me answer to your question. Our company does not disclose the total amount of investment of the all Chinese local customers. But when it comes to the China local memory manufacturers, investment should be almost the same as last year. Last year, there are 3 Chinese memory manufacturers, but this year, there are only 2 Chinese local customers. And we said JPY 2 billion to JPY 3 billion investment is expected for this year. And I think the competitor may include investment of the logic, foundry and power devices.
I understand. So if that's the case, so your outlook remains unchanged from the previous announcement.
For this year, yes, there is no changes. But we haven't announced our forecast for next year yet. I forgot to answer one of your questions about the export. In principle, so we are going to abide by the regulations and laws, and we want to remain fair when it comes to the business. So there are some issues in the America/China trade frictions. And we do not plan to get our competitor's market because our competitors are not able to export their product to China. But we try to fight against our competitors by pursuing leading-edge technologies by providing our values. That's how we try to do business.
Thank you very much for your questions. It's time for us to close the session. But there seems to be many questions from the floor. So I want to take one more question, if any. No more questions from the floor? Okay. Thank you very much. This concludes our financial announcement. Thank you very much for joining us today despite your very busy schedule.
Thank you very much.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]