Q2 FY2018 Earnings Release Conference Q&A
We expect the overall WFE market to be at least the same size as CY2017 in CY2018. However, from our negotiations with customers, we sense that the levels could exceed our forecasts, particularly in relation to memory. The outlook for FY2019 is also looking favorable.
By application type, in terms of memory, both DRAM and NAND are likely to be strong. Investment by logic foundries is currently being curtailed by factors such as sluggish growth in the number of mobile handsets, but they plan to undertake an investment in 7nm and for pilot lines of 5nm during CY2018, so we can expect investment to be at least the same as CY2017.
We forecast year-on-year growth for both groups.
The number of major customers for each application is smaller than it was in CY2000, and customers are taking firm control of their investment based on past experience, so we do not believe there is duplication of investment. The market is underpinned by semiconductor demand driven by the establishment of new data communication networks, so we forecast investment to be firm.
The SSD usage ratio in the client sector is forecast to be 50% even in CY2018, and the 3D NAND usage ratio in SSD is forecast to be 80%, with scope for further growth in 3D NAND. Technological innovation will be required in areas such as speed, wide bandwidth, and low power consumption in addition to capacity for all memory, including DRAM, with the construction of a data-centric society, so we expect demand to remain firm.
Within memory, DRAM customers in particular invest with a strong awareness of the DRAM price trend, so as mentioned earlier, we expect sustained strong growth.
Within our medium term focus areas, in cleaning, we have expanded the deployment of our equipment for backside bevel in addition to the business we have won in the phosphoric acid process for 3D NAND. In deposition, the ALD business is progressing as planned. These developments have already started contributing to sales from FY2018.
It is because of the product mix and the increase in strategic investment towards the performance verification of our equipment by customers, backed by the expanding business opportunities generated by market growth.
As mentioned earlier, we expect investment in CY2018 to be at least the same as the previous year, and from our negotiations with customers we sense that there is considerable upside potential. We are currently monitoring the situation, but we expect year-on-year investment in each application to be at least the same.
The profit margin for the Field Solutions business is above the company average, so growth in this business is positive for the company’s overall profit. The budget for FY2019 sales has not yet been formulated so we cannot be certain, but we expect ongoing demand, so it is likely to grow. However, since most of this business is after the end of the warranty period, the contribution from the etch systems you have noted will commence at least one year after shipment.
We forecast a full year operating margin for FY2018 of 24%, which is definite progress towards the 26% target in our medium term business plan. We continue to strengthen the competitiveness of our products and improve operational efficiencies aimed at achieving our 26% target.
We are confident that the shares will rise by a few points in both CY2017 and CY2018. In addition to the suitable position we have established in logic from the past, we have already acquired POR from two customers for patterning DRAM interconnects. Even in relation to 3D NAND, we have acquired POR from two customers for the slit process. We expect a considerable increase in sales of etch systems in FY2018, but the contribution from slit application POR will be from one customer only. In CY2018, the investment in mass production by the second customer and plans for 9X generation investment should contribute to increased share.
Customers are forecast to commence investment in 9X generation in CY2018, and they also plan to invest in future generations. Customers are currently investigating whether the structure of the device at that time will be the existing single-tier or a new two-tier structure. However, regardless of which structure is used, the high aspect ratio etch needs to be done quickly and with good etch profile. Our company’s etch systems should be able to demonstrate their strength such as in terms of etch rate.
There are concerns about a lack of supply for quartz, silicon, electrostatic chuck in particular. But we strictly manage our lead time to meet customer requirements.
We have expectations for both market feasibility and business opportunities in relation to EUV. Coater/developer for EUV require improvements in uniformity, reduction in defects, and high sensitivity resist to improve the productivity of the EUV exposure tool and so forth. Using our equipment LITHIUS Pro™ Z technology as a base, we shall incorporate additional functions and provide added value.
In terms of the inkjet printing system for manufacturing OLED panels, we expect the market to be established with the advent of 8K large-scale TVs. We expect there will be prospects for our business around CY2020, the year of the Tokyo Olympics.
WFE (Wafer fab equipment): The semiconductor production process is divided into front-end production, in which circuits are formed on wafers and inspected, and back-end production, in which wafers are cut into chips, assembled and inspected again. Wafer fab equipment refers to the production equipment used in front-end production and in wafer-level packaging production
POR (Process of record): Certification of the adoption of equipment in customers' semiconductor production processes
The above content is a summary of question and answers session.