Q3 FY2022 Earnings Release Conference Q&A

Our forecast is that CY2022 has the potential to grow by nearly 20% year-on-year, and, at present, we expect to see positive growth in CY2023 as well.
As for CY2023 WFE investments by application, in light of further progress in the digital shift of society, robust investments in both leading-edge and mature generations of logic/foundry will continue. We expect that memory including both DRAM and NAND will maintain the same scale of investment as CY2022. As for DRAM, we will need to observe the extent of DDR5-oriented investments that will be made.

We forecast our CY2023 market based on inquiries for our equipment and customer investment plans. Furthermore, we have communications with our customers utilizing the medium- to long-term technical roadmap we have developed, that also serve as valuable sources of information in our market forecasting efforts.

In CY2021, roughly 25% of investments in the total WFE market were made in China, and roughly 80% of those investments were made by local Chinese customers. We expect the same will hold true for CY2022.

The first factor is that TEL has worked to establish proactive procurement and production capabilities in anticipation of rapid growth in the WFE market. This has allowed us to thoroughly respond to expansions in demand. Another factor is our steady penetration in strategic products for the key areas of etch, deposition and cleaning, which has expanded our market share. Specific examples include new POR acquisitions in NAND Slit in etch processes, and adoption of cleaning systems using supercritical dry technology, which prevent pattern collapse, for mass-production.

Thanks to advancements in efforts to level procurement and production, as well as the application of the new revenue recognition standards, we are starting to see mitigation in the seasonalities of the past. We develop our financial estimates based on considerations of these conditions and on component procurement risks, among other factors.

The downward revision was due to adjustments to the timing for NAND investments by certain customers, which led us to forecast that sales recording would be slightly delayed.

Thanks to our execution of proactive procurements and production in anticipation of growth in the market, we have been able to address increases in demand. However, recently it has become more difficult to procure various different types of components, not just semiconductors. To address this, our Corporate Production Division, which we established in September of 2021, began full operation and implemented various thorough responses, which include selecting substitute parts and standardizing components. We also continue activities such as holding production update briefings every half-year at each of TEL's plants, and sharing demand forecasts with our suppliers.

There are two different types of lead time: the lead time between order receipt and sales recording, and the production lead time between the start of equipment production and the completion. There has been a tendency for the former type to grow as orders are being received from customers earlier than has been the case in the past. But thanks to our proactive component procurement strategy, the latter type of lead time has not grown longer.

Currently, TEL’s plants are operating at nearly 100% utilization rate. However, it is possible for us to further expand our production capabilities in response to additional growths in demand. We are also planning enhancements to plant space and production personnel that look ahead several years into the future.

Modifications sales fluctuate quarter to quarter. For the medium to long term, demand for modifications, upgrades and relocations will continue to grow, driven by increases in the installed base and demand for mature generation equipment.
As for parts, in order to address increased demand, we are sharing information regarding demand forecasts with suppliers as appropriate. In addition, we are increasing TEL's inventory of parts to avoid a bottleneck in parts procurement.

In both leading-edge and mature generations, equipment that can provide high added value with respect to perspectives like productivity, equipment uptime and yield is the equipment that gets selected. TEL strives to achieve differentiation by providing the best products and the best service for all generations.
Specifically, in Q3 FY2022, we released Tactras™ UDEMAE™, a 300 mm etch system for power devices. This product utilizes process libraries built up in 200 mm systems for 300 mm systems, and is also equipped with functions that suppress particle generation in the wafer bevel areas, an ability that is critical to the manufacturing of power devices. We believe these products are providing significant added value in mature generations.

As we anticipate that Backside PDN will start to see use in generations following 3 nm, equipment investments in CY2023 and CY2024 will be limited. We expect that investments will pick up in CY2025 onward.
Business opportunities for TEL include depositions of low resistance metal, a new material, as well as wafer bonding.