Q3 FY2024 Earnings Release Conference Q&A

We will report on our financial estimates for FY2025 at our next earnings briefing, but our perspectives on the market do not differ significantly from the views of the SEAJ. As the WFE market for FY2025 includes investment in March quarter of CY2025, when the market is expected to expand, we anticipate significant growth.

The DRAM growth rate in CY2024 is estimated to be around 30% to 40%. Adjustments in NAND investment will continue, and remain largely flat. As recovery in demand for PCs and smartphones is expected in CY2025, we expect that inventory adjustments will proceed and NAND investment will double. Logic/foundry investment will increase slightly in CY2024. AI servers will be the driver, but since customers have relatively low fab utilization rates, we expect that full-scale capital investment will take place in CY2025, and we anticipate double-digit growth then. The ratio for China is approximately 40% of CY2024 WFE overall. Investment is expected to continue in order to improve the self-sufficiency rate of semiconductors in China.

At TEL, HMB-related figures can be most clearly seen in the sales for bonding equipment. Both HBM and DRAM use the same frontend equipment, and customers allocate their capacities based on the situation, meaning that it would not be appropriate for us to calculate composition ratios and degrees of contribution based on current conditions. We have received over double the inquiries we initially expected with respect to bonders. As for frontend investments, based on recent trends, we anticipate growth from the second half of CY2024 onward when demand for leading-edge DRAM recovers.

The most recent investment ratio by application is: about 30% for memory, 60% for logic/foundry, and 10% for the remainder.
For CY2024, we expect that around 40% of WFE overall will account for mature node logic/foundry. Our forecast is that leading-edge nodes will increase in CY2025, and that the ratio of mature nodes will be lower than in CY2024.

While China did have an impact on Q3 FY2024, there was also a high proportion of products with strong gross profit margins. Gross profit margin will remain at high level in Q4, but we have factored in some one-time costs such as R&D expenses in cost of goods and inventory disposal.
We will continue to create high value-added products, provide unique, leading-edge equipment, and advance efforts to cut costs. We are also seeing steady progress on POR*⁶ acquisition. We expect that we will be able to continue improving our profit margins as we work to fulfill our Medium-term Management Plan.

Like our peers, we expect that our sales will be backloaded in CY2024. However, the reason recent sales trends have differed is due to the impact of the high amount of backlog of the other companies.

Generally speaking, parts and services sales will increase as customers' fab utilization rates improve. Although the utilization rates are low now, we expect that they will steadily recover going forward. As production becomes more active, we forecast that modifications sales will increase along with parts and services sales.

We planned our growth investment for the next 5 years anticipating the development of new products and the expansion of the SAM*⁷. We calculated specific target figures considering what comes after the Medium-term Management Plan. R&D activities need to be conducted close to our overseas customer sites as well as in Japan, so we will need investments there too.

Our recent bout of inquiries from new graduates exceeded 20,000. Including both new graduates and mid-career hires, we will hire 1,000 people domestically and 1,000 people overseas each year. As a leader in this industry, we will support student education, well consider Global, Generation, and Gender, so to speak "3Gs", and put greater emphasis on securing personnel.
For your information, although we plan 10,000 hires over the next 5 years, our staff will also shrink within this span of time including mandatory retirement, so we expect the net increase will be around 6,500.

We anticipate that the semiconductor chip market will double to 1 trillion US dollars in CY2030. If there is no change in our customers' capital intensity*⁸ and our share in the market, our sales should nearly double, so even when fixed costs increase, we estimate that our profit margins will improve. Though the equipment shipment volume will increase as the number of locations increase and factories expand, we are also considering ways to reduce fixed costs by promoting digital transformation and robotics solutions, and implementing operations to reduce incidents.

Although cryogenic etching equipment could be used for the 300-layer level, we are targeting 400-layer and higher. Contribution to sales is expected to begin in CY2025.