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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Now it's time for us to start Tokyo Electron financial announcement for the fiscal year ended in March 2022. Thank you very much for joining us today despite your very busy schedule.
I am Yatsuda of IR department serving as a moderator of today's session. I would like to introduce today's attendees: Mr. Tetsuo Tsuneishi, Chief Corporate Director, Chairman of the Board.
I am Tsuneishi. So I'm going to resign in the Shareholders' General Meeting in June, but I hope I can see you by June. So I'd like to say a few words on that occasion.
Thank you very much for joining us today. Next, Mr. Toshiki Kawai, Representative Director, President and CEO.
I am Kawai. Nice to meet you, everybody.
Next, Mr. Yoshikazu Nunokawa, Corporate Director, Executive Vice President and General Manager, Global Business Platform Division Finance Unit.
I am Nunokawa. Nice to meet you, everybody.
Prior to the presentations, let me explain the flow of today's meeting. First of all, Mr. Nunokawa and Mr. Kawai will make presentations. After that, until 6:00 Japan time, we will have a question-and-answer session where we take questions from the audience. This meeting will be conducted using 2 channels of Webex with simultaneous interpretation between Japanese and English. As we announced by e-mail, if you prefer to listen to the audio only, you can participate by phone, but if you plan to ask questions, please use application on your PC or mobile devices.
In addition, since this briefing is intended for institutional investors and analysts, we will take questions from institutional investors and analysts only. We will post the audio of this briefing in Japanese and English on our website within a couple of days. So please, access to the website if necessary.
So let's move on to the presentation session. First, Mr. Nunokawa will explain the consolidated financial summary. Mr. Nunokawa, please.
Good afternoon. I am Nunokawa, Finance Unit. I would like to present the consolidated financial summary of the fiscal year ended in March 2022.
This slide shows the financial Highlights for fiscal year ending in March 2022. As we were able to well cope with the rapidly growing SPE demand, in fiscal 2022, we generated net sales of JPY 2,003.8 billion, increasing by 43% on the year-on-year basis. Net sales exceeded JPY 2 trillion for the first time for us. Gross profit was JPY 911.8 billion. Gross profit margin was 45.5%. Operating income was JPY 599.2 billion. And operating margin was 29.9%, all of which, together with net sales, set remarkably high record high, new records. Also ROE was 37.2%, which also significantly surpassed the midterm management goal of 30% or more.
This shows financial summary. As I said before, net sales increased by 43.2% year-on-year basis, achieving JPY 2,003.8 billion. which exceeded the financial estimates that we announced on February 10 by JPY 53.8 billion. By segment, SPE net sales was JPY 1,943.8 billion, 47.8% year-on-year increase, which surpassed our estimates. FPD sales was JPY 59.8 billion, 28.6% decrease from the previous fiscal year, which was in line with our estimates. Gross profit margin was 45.5%, increased by 5.1 percentage points on a year-on-year basis. Operating margin was 29.9%, increased by 7.0 percentage points from the previous year due to the increase of gross profit margin and drop of SG&A and sales ratio. Earnings per share was JPY 2,807, hitting the record high driven by the profit growth.
This slide shows quarterly-based financial summary. Net sales in the fourth quarter was JPY 564.8 billion, 11.5% increase from the third quarter, delivering our highest ever quarterly net sales. For SPE, we generated JPY 549.2 billion of net sales, 12.4% increase from the third quarter. In fiscal 2022, net sales steadily grew quarter-by-quarter as we implemented proactive procurement and production to cope with the rapid market expansion, and succeeded in capitalizing on the demand growth. For FPD, we generated JPY 15.5 billion of net sales, declining by 12.1% from the third quarter. Gross profit margin was 45.3% and operating margin was 29.8%, showing a decline from the third quarter. This is due to the timing of recognizing SG&A cost such as R&D expenses. Profit margin was kept at a high level.
Next, this shows the segment information. For SPE, sales was JPY 1,943.8 billion. Segment income was JPY 667.4 billion and segment profit margin was 34.3%. The new PORs we won contributed to net sales to maintain high profit margin. We set record high profit margin. For FPD, sales was JPY 59.8 billion, segment income was JPY 3.8 billion, and segment profit margin was 6.5%. While profit margin decreased due to the sales decline along with the adjustments of the customers' FPD CapEx, we continued the investment for our future growth. For composition of net sales, SPE sales accounted for 97% because of the increase of SPE sales, while FPD sales accounted for 3%.
This shows SPE new equipment sales by product. SPE new equipment sales in fiscal 2022 amounted to JPY 1,499 billion, 56% increase on the year-on-year basis. In all products, we generated more sales than the previous fiscal year as the share of our key equipment increased in calendar 2021, and we succeeded in coping with the rapid demand growth.
This shows SPE new equipment sales by application now. In fiscal 2022, sales in every application increased. In particular, sales to logic foundry and DRAM manufacturers showed a significant increase. For logic foundry, in calendar 2021, the customers' active investment to a wide range of device nodes from the leading edge to mature nodes contributed to our sales. For DRAM, our sales growth was driven by the customers' CapEx recovery, as well as new PORs we won last year.
Next, this slide shows field solutions sales. In fiscal 2022, the field solutions sales was JPY 455.9 billion, recording 26% year-on-year increase, driven by growing installed base and high utilization rate of customers' fabs. Our parts and service sales maintained a strong growth following the previous fiscal year. In fiscal 2022, sales from modification business also showed a significant year-on-year increase, driven by the strong demand for mature device nodes.
This shows balance sheet. Total assets were JPY 1,894.4 billion. Cash and cash equivalents was JPY 371.2 billion. Accounts receivables and contract assets were JPY 433.9 billion. And inventories increased from the previous quarter to JPY 473.8 billion, due to the implementation of the procurement and production strategy designed in line with our future sales plan. Liabilities were JPY 547.4 billion. Net assets were JPY 1,347 billion. The equity ratio was 70.5%.
This shows the inventory turnover and accounts receivable turnover. The inventory turnover was 86 days, remaining unchanged from the previous quarter. The accounts receivable turnover increased from the previous quarter to 79 days because of the account receivables increase.
My last slide shows the cash flow. The cash flow from operating activities was minus JPY 37.1 billion, maybe because of the accounts receivables increase. The cash flow from investing activities was minus JPY 20.7 billion. The cash flow from financing activities was minus JPY 200 million. The free cash flow was minus JPY 57.9 billion.
This concludes my presentation about the consolidated financial summary. Thank you very much.
Next, Mr. Kawai will present business environment and financial estimates. Mr. Kawai, please.
Once again, I am Kawai. Now let me make a presentation on business environment and financial estimates. Let me start with the business highlights of the fiscal year ending in March 2022.
As Mr. Nunokawa reported earlier, we hit the record high in all items, including net sales and profits in fiscal 2022. Our current financial model was set toward the fiscal year ending in March 2024, including net sales of JPY 2 trillion, operating margin of 30% and ROE of 30% or more. We have achieved this fiscal model 2 years earlier than the original timeline. By leveraging our strategic high value-added products, we successfully won PORs, which contributed to the improvement of net sales, profits and market share of key products.
For the feed solution, due to high utilization rate of customers' fabs, the demand for modifications, part and services remained strong, and we generated annual net sales exceeding JPY 450 billion for the first time. Supply shortage of various materials, including semiconductors, continued in the global market, but we believe that we achieved net sales of JPY 2 trillion as we were able to address the demand, thanks to the strong and committed cooperation of our partners. Towards future growth, we spent record high R&D expenses and CapEx.
Next, I will talk about business environment. For the WFE market in calendar 2022, we expect about 20% growth now, slightly higher than the one we announced in the February earnings conference, driven by strong semiconductor demand. Along with the progress of digital shift in the society such as data center, investment to a broad range of generation is expected to continue. For the FPD fabrication equipment, TFT array process market, our perspective remains unchanged. In calendar 2022, a slight increase is expected on a year-on-year basis. Next, I will talk about WFE market outlook by application. By reflecting the current trend of the customers' investment, we have revised the outlook as shown in this slide. For logic foundry, we previously expected 20% plus growth, but we have revised it upward to about 25% year-on-year growth.
For DRAM, our outlook remains unchanged, and we expect about 15% increase. For nonvolatile memory, we previously expected about 5% growth, but we have revised it upward to about 10% growth.
Next, I will present the financial estimates for fiscal year ending in March 2023. In fiscal 2023, on the full year basis, we expect net sales of JPY 2,350 billion, gross profit of JPY 1,075 billion, operating income of JPY 716 billion and net income of JPY 523 billion. All of them are expected to hit the record high. For full year profit margins, we also expect the record high, specifically gross profit margin of 45.7% and operating margin of 30.5%.
This slide shows the SPE new equipment sales forecast in fiscal 2023. As shown here, we expect to generate JPY 850 billion in the first half and achieve milestone of JPY 1 trillion in the second half of the year. The full SPE new equipment sales is expected to be JPY 1,850 billion, a 23% increase from the previous fiscal year. Next, this shows our plan for R&D Expenses and the CapEx. In fiscal 2023, we plan to spend R&D expenses of JPY 190 billion, 20% increase from the previous fiscal year, and capital investment of JPY 75 billion, 30% year-on-year increases, both of which are expected to keep the record high. And we project depreciation expenses of JPY 46 billion.
On March 31, we announced a new development building construction in Kumamoto Prefecture. Also today, we issued a press release about the new development building in Miyagi Prefecture. We will accelerate proactive R&D and capital investment to cope with growing market and meet ever-diversifying needs for leading-edge technologies.
Next, this slide shows the dividend forecast. Based on the financial estimate for this fiscal year and payout ratio, the 50%, we plan to pay full year dividend per share of JPY 1,678, which is expected to set the new record. As presented so far, we have achieved the financial model that we developed in 2019 based on the assumption of net sales of JPY 2 trillion, actually 2 years ahead of the original timeline.
Aiming at further growth and corporate value enhancement, we are now preparing a new midterm management plan. On June 8, we will hold the meet new midterm management plan announcement meeting and the Secretariat will send invitations to you. I would be very grateful if you could join us in this meeting.
Thank you very much. This concludes my presentation.
[Operator Instructions] Okay. So first question is from Mr. Yoshida of CLSA Securities Japan. Mr. Yoshida, please.
I am Yoshida of CLSA Securities Japan. Can you hear me?
Yes, I can hear you.
We can hear you. Thank you.
So my common question. This time, 2022 WFE market outlook has increased a little bit upward. But the 2023, there are some concerns for 2023 in the stock exchange market. So at present, toward 2023, WFE market outlook by application could be shared with you, if possible.
Let me answer to your question. I am Kawai. Let me answer to your question. As of today, from the customers -- we talked with customers and also, we have the -- we can see customers' CapEx plan for next year 2023. We can expect a lot for 2023. We can expect a positive growth in the WFE market, according to our understanding. For logic, continuously very strong and digitalization proceeds. So legacy nodes of devices are to be increased, and we can expect the capital investment in that area. And for DRAM, for this fiscal year, the investment is rather -- the growth, last year, it grew rapidly. But this -- compared with this year, we can see more positive growth in 2023. So for DRAM, we can expect positive growth as well.
My follow-up question is about DRAM market. For this year, there will be market expected by -- increase by 15%, but when you look at the composition, the DRAM growth is negative. So what is the reason for that, because of the customer mix? Or because of the shift in the fiscal year-end capital year by 3 months -- calendar year by 3 months?
So there is -- I think strong investment continues. So there's a bit -- 3 months difference between fiscal year and calendar year that might have some impact on those figures. That's how we can understand the value.
Next question is from Mr. Nakamura of Goldman Sachs Japan.
I am Nakamura. For the next fiscal year guidance, I have one question. For new fiscal year, the compared between the first half and second half, there is some difference. So what is the reason for that? Could you explain the reason why there is some gap between first and second half of this fiscal year?
The first half and the second half of this fiscal year, yes, that's correct. So continuously, the capital investment plan -- so along with the digitalization, in the second half of this year, we can see more inquiries. That should be the answer to your question. So high-speed CPU investment continues and memory are necessary for that, and memory investment will continue. So strong data center investment will also continue. And for smartphone, 5G application devices -- also there is investment for the 5G devices because those reasons, we received more inquiries in second half of this year. The market is a bit large according to the investment plan of our customers.
My follow-up question is regarding American 2 vendors. They are suffering from the shortage of the materials. Because of that, they can see more sales in the second half of this year. But don't you have any impact of the shortage of the raw materials or components?
So the parts and materials, all the time, we must pay attention for procurement. So we are focusing on that area, carefully looking at the situation. Last year, September -- ever since September last year, we have established corporate production division. So corporate production division as well was established. And also manufacturing and sales, sales department are communicating very closely. And as I said in my presentation earlier today, the supply chain management.
So we do have partner companies in the surroundings of our factories. That's the reason why we have a very close relationship. And we also have a frequent meeting with the suppliers, sharing information on our investment. So from that viewpoint, and also in domestic market, we can secure the procurement. That has a positive impact. So actually, COVID 19 impact was very much limited in that area. So continuously, we will make it sure to manage supply chain and procurement.
So as for the impact of the shortage of the materials and parts, that might have the impact on the increased sales in the second half of the fiscal year. We don't see the market in that way. So new CPU release or metaverse demands are the drivers, and server demand will be increasing and 5G smartphone memories devices, I also expect it to increase in the second half of this year. And for DRAM, DDR5 nanometer for NAND, the investment for 170 layers more will be conducted. And for servers, CPU, GPU, FPGA and 5G smartphone application processors are also expected to grow. So leading edge logic demand is expected to grow. And also mature nodes.
So automotive manufacturers are planning to increase their production and also the electric vehicle shift and image sensor and power device demand also increasing for the automotive market. So these are the drivers as well. So we don't see the increase in our market in the second half of the year is because of the shortage of the raw materials and parts.
Next question is from Mr. Wadaki of Nomura Securities, Financial Economic Research Center.
My first question is actually, I was very much impressed and agreed with Kawai's comments when you asked until when the market grows and Kawai said, the equipment market growth has just started. Actually, you mentioned to that issue earlier in answering to the previous question, but could you elaborate that issue a little bit more? Could you share more idea with us, please?
It's true that -- so when we share the development road map with our customers, we do have a broad portfolio of the products. And for patterning, related process, we do have quite a few processes relating to patterning, and we are positioned in the good market share. So 5 years and 10 years to come. So when you look at the road map for 5 years, 10 years and the investment trend for the 3 generations or 4 generations, when we align those data, we can see the timing of the release. That's what we discussed with our customers based on their investment road map. We can expect significantly strong growth for the future.
IoT, AI, 5G, industrial IoT, metaverse. So we expect a lot from those applications and the new era has started little by little. So in the macroscopic manner, we can expect the solid growth of the market. And each manufacturer, for example, in this industry -- so technology innovation is really essential for the companies to increase for the high speed, high capacity, high variability, low power consumption.
So the -- each customer just carry out very solid marketing activities to see the balance between supply and demand so that they can devise the investment plan, development plan to be adjusted in line with the market growth.
When I look at that situation, now, there are unknown factors in the global markets, including Russia, Ukraine or sanction implications. We need to pay attention to those situations in the global market, but microscopically, as I said earlier, I think the market is expected to grow very solidly and strongly. As far as management is concerned, we need to continue the very solid investment for the future growth every year, and we should not be the microscopic. We should be very careful to look at the long-term perspective so that we can continuously increase high value-added products.
So my explanation is a bit different from your question. I hope I answered to your question.
That was very helpful. My follow-up question is about the risks, including Ukraine, for example. For the risks, there are various risks. My concern is [indiscernible]. For your HR, I'm afraid the [indiscernible] program might affect your HR. Don't you have to concern about that?
Our customer -- I think it has to customer decision, our customer judgment. That impact, we don't see any impact in that area, and we don't see any impact on the investment plan so far.
Next question is from Mr. Hasegawa of Mitsubishi Morgan Stanley Securities.
I am Hasegawa of Mitsubishi Morgan Stanley Securities. So about the market trend for the future, you said for logic and NAND, you share -- you revised your outlook a little bit. And according to your slide, Page 20, from the second half to first -- last gaps. So maybe, the first half increases or second half, do you think that there is an increase? What is the reason for that between -- about the difference between first half and second half? And you say 2023, you said strong growth is expected. So I can expect the rapid growth in 2023? When I look at the second half of this year, so customers' investment plan are very strong. What is the change? And what sort of prospect we should see for 2023?
The primary -- I'm sorry, I cannot hear your voice very clearly so far. So there is some growth. The major area for growth is high-end logics. The -- increased most rapidly, 20% -- very close to 20%, but we now set around 20%. So the -- on Page 20, Slide 20, you can see the sales expectation based on that rapid increase of the high-end logic, this area from the first half to second.
And I think the second half sales has expanded compared with original.
What is your question?
So originally -- so now, you have first half and second half outlook for the first time. You can see increase in the second half of the year or you can see rather increase in the first half of the year. Which is the appropriate reason?
I should say, from the late first half to the second half, you can see a slightly increase.
I'd like to add one more comment. In the previous year, we have the first quarter to fourth quarter, you can see study in pacing sales little by little. Now, we received very strong inquiries. So first half and second half, maybe the -- those figures just reflect the condition of the strong inquiries and increase from first to second half, now we have limited customers. It depends on the customer investment plan. So our sales outlook is based on the customers' investment plan. So this is not our intention, but this is just because of the timing of customers' investment.
So let me answer to your question simply. So additional investments are now appearing. Therefore -- so in the previous outlook, we had some additional inquiries. So against that additional inquiries, we have revised our outlook for this fiscal year, the first half and second half you can see some increase from the first half to second half.
It's clear. As for the risks, I want to ask about the risks. So now you can see very strong increase in the market. But when you look at the data center investment, do -- so some companies have some deterioration in their performance. Don't you have to worry about the continuity of the data center investment? Are there any concerns?
For data traffic, I think that the traffic increase is steady. Therefore, there is no bubble-like condition or situation at all. On the other hand, when you look at macro economy, more global situation, so we must be very careful, and we need to take a close look at the situation in the global market and the world.
As Mr. Wadaki said earlier, the investment plan is to be increased. That sort of voice of customer are not yet heard. So we should pay close attention to the macroscopic area, but I think semiconductor market is going to grow very steadily.
Mr. Hasegawa, thank you very much for your question. Next question is from Mr. Hirakawa of BofA Securities. Mr. Hirakawa, please?
I'm Hirakawa of BofA. But midterm management plan, I have a question about midterm plan. Now you achieved the current management plan 2 years ahead of your original timeline, but gross profit margin and net sales are almost the expected JPY 2 trillion, but the gross profit margin is one point higher than the target. So gross profit margin is higher than your expectation. Have you analyzed the reason for that? That's my question.
Yes. In our company, our basic philosophies, we strive to contribute to the development of dream-inspiring society through our leading-edge technologies and reliable service and support. And we provide high value-added products that customer needs in the future. So high value-added products should be adopted along with our plan for the future. And actually, we have implemented our plan very solidly. That is the reason why we increased the gross profit margin higher than our target value.
My follow-up question is June, you are going to announce the new midterm management plan. So in the previous meeting, you said within 5 years. In the previous midterm plan, you said 5 years. So when you think of $1 trillion, so that is the market size. But as for the range, you also look at the 5 years to come. Are you going to have much longer-term perspective when you set up the new midterm management? If you can share some information with us now, I'd be very happy.
For that issue, could you wait for our announcement of the mid-term management plan, please? We are going to make announcement in June -- on June 8.
Okay.
Next question is from Mr. Shimamoto of Okasan Securities. Mr. Shimamoto of Okasan Securities.
I am Shimamoto of Okasan Securities. Can you hear me?
Yes.
I have a question regarding appendix, the market share. So compared with last year, you can see some increase or decrease in -- depending on the area. By and large, the market share has increased. So could you give us some additional explanation about the market share? The reason for increase in market share, for example.
Toward the end of the slides?
Yes.
Actually -- so we got so many process of records, PORs. So various customers, each customer is making every effort, every view on many PORs actually. For the film deposition, our sales increased by more than 70%. We achieved 70%, and etching NAND process, we won -- we increased the share. In some cases, for dry etch, other competitors' dry etch process was replaced by tungsten etch replaced by cleaning to improve the efficiency of the process, or supercritical dry has been penetrating into the market. So these are the major drivers of the market share increase, this time 15% or more in total WFE market share. So these are the drivers of the market share increase to 15% all in all, in total.
So in particular, I think the cleaning increased the share rapidly. Do you have any comment on that?
So supercritical dry adoption to eliminate or avoid pattern collapse has been one of the drivers. And also slit process, we were able to win the PORs for slit process. And product mix could be the driver -- one of the drivers. Our competitors' sales proportion for 3D NAND is rather big. But in calendar 2021, 3D NAND proportion declined in the WFE investment. However, TEL's 3D NAND share increased. I think that was the major reason for the increase of the market share.
Next question is received by text. Let me read it out. Mr. [ Damian Tonoma ], [ Kure ] Capital Securities. SPE field solution fiscal 2023 sales expectation is at the same level as that of fiscal 2022. Don't you think this is too conservative?
Nunokawa will answer to that question.
So last fiscal year -- so we had a very strong increase of field solution sales. As I said earlier in my presentation, so the modifications sales increased considerably, and that contributed to the sales increase. On the other hand, this fiscal year, how much sales we can expect for modifications? So it's so difficult to make some prediction. So the growth of modification. So we do receive some -- we just calculate those figures based on the solid inquiries that we received already.
So in particular, for modifications, I think we were a little bit conservative in expecting the sales for modifications. So parts and services, needless to say, we can see the steady increase for growth. So as you pointed out, so there is no concern of this too much conservative prospect for the future in the field solutions sales.
So actually, the tool shortage is now happening. So we do receive the inquiries for the tools itself for all the generations on all nodes. Rather than modification, actually, our customers are running short of the number of tools. So we do receive inquiries for the tools. So this outlook is not conservative, but I think this outlook is appropriate.
Next question is from Mr. Ishino of Tokai Tokyo Research Center. Mr. Ishino, please.
I am Ishino of Tokai Tokyo Research Center. I have one question. So your performance is very good and your sales, net sales, when you compare with 30 years ago, your current sales is really great and you have grown to the leading-edge company. So -- but when you look at the current status, the parts shortage for the SPE to be provided to the devices. So you are now -- how you can enclose the supplier of parts so that if you secure the appropriate number of parts to be embedded into the process tools? So as Tokyo Electron is concerned, now your business is rather big. So how do you think about part procurement strategy? Could you share your strategy about the parts procurement, please?
In our company -- so E-COMPASS is a scheme we have established for environment -- to take care of the environmental regulations to promote recycling and to reduce the footprint of the equipment, enhancement of productivity. So in various aspects, we are making every effort. I mean those circumstances, we need to make good effort throughout the supply chain. So as much as possible, we try to have long-term perspective of market trend, and we share the information with our suppliers.
Based on that, we try to have the good appropriate production plan and procurement plan. We have very close communication with suppliers in those areas. When I look at big factories in Kyushu, Miyagi, Yamanashi and Tohoku, for each factory, they do have the procurement staff. And there for electronic devices, chemical -- we do have specialist procurement staff for electronics devices or chemicals. So we do have those specialists in each factory.
And at the corporate level, we share information altogether and the shared information is to be also communicated to the -- throughout the supply chain. So the market trend can be analyzed by sales department. Based on that, we prepare the agile and proactive procurement plan.
So I have a very basic question, I'm sorry for that. So etch system, for example. So when you look at parts, for example, electrical [ static ] check, the plasma electronic electrode and plasma electrode, so those basic parts are very important, key components. Not only your company but also other tool vendors are now trying very hard to purchase those key components from the limited number of suppliers. So I'm sure you are making very effort -- every effort. So for example, the financial support or how -- what sort of measures do you have to secure the procurement of parts? Now we can see good financial performance. I'm sure you do have some strategy to secure the procurement. Could you share that strategy with us, please, if possible?
So depending on the situation, maybe the information sharing is important to find out the critical area to address. So throughout the supply chain, we try to identify the challenges -- suppliers' challenges. Maybe we can support our suppliers when they try to tackle with their own challenges. So we have very close communication. So I think that was the much clear explanation.
We need to identify challenge at each stage and provide solution for each challenge. So where we can support, we provide solid support to suppliers. For that purpose, all procurement or purchasing stock members, directors, the factory managers and me myself, including the top, Mr. Sasaki, the top of the corporate production division, every 2 weeks, we hold the meeting about the risk management for the procurement of the parts and raw materials so that we can take most appropriate actions at each time.
I'm sorry, my question was very difficult to answer. I'm sorry for that.
Next question is from Mr. Maekawa, Credit Suisse Securities Japan.
I'm Maekawa of Credit Suisse Securities Japan. Can you hear me?
Yes.
As for -- I have 2 questions regarding PORs, including a follow-up. The first question is about gross profit margin. So now you can see drastic improvement, as Mr. Hirakawa said. The midterm plan, you gave us some explanation. But when you set up midterm management plan, gross profit margin improvement can be achieved by providing value added through the development of the new equipment. So compared with 2019, when you won't be [ able ] to improve the profitability, were you able to see that trend in some area?
But after that, you developed new products and you won PORs. However, across -- what is the proportion of the sales of the products or equipment which made contribution to the increase of the gross profit margin? When I look at the new fiscal year, so gross profit margin is expected to grow by 0.2 percentage points. So maybe, the increase of the parts and material cost might have some negative impact of the gross profit margin. So if there's no increase in cost of the parts and materials, how much gross profit margin can you expect increasing for the high value-added products? This is my first question.
I'm sorry. For each time -- so which application -- so within all business units, we try to develop new products and new functions, and those new function products are adopted. So when you ask about the proportion of the products which made contribution to the gross profit margin increase, I said there are quite a few products which made positive contribution.
How can I put it? So with the partner companies, we do not force them to reduce costs, but we try to discuss with them how to create value for the technology innovation of semiconductor industry. This is our strategy and direction. In that sense, the new high value-added products, that proportion is really high now within our company. So this is how you can understand our portfolio.
In our industry, the greatest potential for growth is the technology innovation. So we need to innovate ourselves in order to catch up with the market trend. So for example, CO2 emissions reduction or global climate environmental conservation for those purposes, semiconductors make very great contribution for the global environment, the environmental-friendly. So if you can do something by using only 1 tool instead of 2 tools in the past, so if you continuously make same things, you don't have to worry about that, but we are expected to promote technology innovation all the time. So this is the reason why we now arrive at this position.
So we cannot say we can see this much increase this year because we recorded that much last year, but we need to look at product mix and size of the market. There are various factors to consider. So one thing I want to say is technology innovation is expected and new functionality is expected in the market. In that -- in those areas, we can see repeated orders in the area where technology innovation is accelerated and new functionality is highly demanded. So this is how we try to develop new products.
My second question. So this is a kind of not core area for your company, the NAND, the future NAND market, the bonding technology, the mass production introduction might be new area for 3 years or 5 years to come. When I looked at the area, I don't think your company has entered. So [ blinder ] -- so just for wafer bonding machine, I know you are providing wafer bonding, but do you also incorporate peripheral area? I heard you did it. Maybe I can hear something new in the next midterm management plan. So when you look at the market, are you planning to expand the scope of your products for the bonding technologies if possible?
As far as Tokyo Electron is concerned, so we need to provide leading-edge technology and reliable service and support to provide high value-added products. By doing that, we try to increase our market share. That is our basic direction. So Tokyo Electron technology -- if our technologies can create one and only products, the product only Tokyo Electron can produce, that is we call new space. Served available market is to be increased, and the area -- what customer wants Tokyo Electron to do, we'll take care of. So that's where we can provide high value added, then we try to address that new market. We are prepared to address new market if we are required. 5 years to come, or 10 years to come and beyond, when you look at the long-term road map, there are quite a few diversified business opportunities. So of course, we need to grow our conventional products in our segment. And so far, we have been working as a leading company, and we do have the know-how and proprietary technology. And if we can identify some new area through the discussion with the customers and if we can increase the available market, we are prepared to address the new area. So we need to create one and only, one of the kind product. That's what we always have in our mind.
The last question is from Mr. Shibano of Citigroup Market Japan.
I am Shibano of Citigroup Market. I have a question regarding CapEx. Your capital investment plan. So you made up an announcement, the Koshi JPY 30 billion Kumamoto Prefecture and JPY 47 billion investment in Miyagi for [ co-TEL ] developer and etcher are to be produced in -- developed to those areas. I think that level of investment rather large, even compared with the previous investment you made. So what is the contribution to the production capability or capacity by investing that much money for the development? So you used to invest about JPY 10 billion level projects compared with the project capital investment. The new plans for capital investment is large in size. So do you have any new plans for that?
So first of all, I'd like to make some report to you. For this announcement, so we try to address diversified applications. We try to develop the products to address diversified applications. When I look at the customers' road map, there are quite a few opportunities. So this investment is not for the production building, but for the development building. So both the Kumamoto and Miyagi, both of those 2 projects are construction of the building for development, R&D buildings.
As for the building, there are various factors incorporated. The previous experience, like massive earthquake, for example, we incorporated the experience to design the building, having the earthquake-proof by introducing leading-edge technology. And construction cost itself has been increasing in some area, and we need to take appropriate budget to take care of the construction cost. That might be one of the reason for the larger level of the capital investment plans.
Do you have any additional comments, Mr. Nunokawa?
I think Mr. Kawai gave you the appropriate and sufficient explanations. So TEL Kyushu and TEL Miyagi. So they are constructing new development buildings. So this is the capital investment for the purpose of development, and that building do have the clean rooms for the purpose of development. Besides it must be difficult to see on the slide, I'm afraid to say, the building size is so-so, I should say. So the amount of money for these new projects are larger than the previous investment for the production buildings. And as Mr. Kawai said, we have incorporated earthquake-proof technologies by designing our clean room specifications very carefully, and the valuation environment within the clean room was designed -- is to be designed appropriately. So we are now trying to introduce new insights based on the previous experience.
So 2023 -- 2022 and 2023, you said you can see the bright -- so as far as your production capacity, you just follow the existing plan to satisfy the required capacity -- production capacity?
Yes, we are doing various efforts, making every effort so that we can address the increasing number of inquiries. And of course, we are improving the production efficiency.
Mr. Shibano, thank you very much for your question. So now it's time for us to close the session. So before closing today's session, I'd like to share one more piece of information. As Mr. Kawai said in his presentation, we will hold the midterm management plan announcement meeting at 4:00 in the afternoon on June 8, 2022. In this meeting, we plan to announce a financial model which serves us our new midterm goals and our strategies to achieve the goals and pre financial goals to support our mid- and long-term growth. We would be very appreciative if you could join us in this meeting. We will send the details this meeting.
Lastly, we'd like to continue to improve our IR activities based on your feedback. So we would appreciate if you kindly are filling out the questionnaire survey before you exit the Webex. Thank you very much for taking time to join this meeting 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.]