Hello. If you would like to hear this session in English, please click the globe icon on the bottom of the screen and select English channel. Good afternoon, everyone. Thank you very much for taking time out of your busy schedule to join us today for Q3 2023 Financial Results briefing of Renesas Electronics Corporation. Simultaneous interpretation channel is available. Click on the earth symbol at the bottom of the screen, and select language accordingly. Speakers, please turn on your video. In attendance, for today's briefing are Mr. Hidetoshi Shibata, President and CEO, and Mr. Shuhei Shinkai, Senior Vice President and CFO, and other staff members. After the initial remarks by Mr. Shibata, Mr. Shinkai will give an overview of Q3 earnings results, followed by question and answer session. The entire briefing is scheduled to last for approximately 60 minutes. The materials used in today's presentation are the same as those posted on the IR page of our website. Mr. Shibata, please unmute, and please start. Good afternoon, everyone. This is Shibata. As for the earnings results from Q3 2023, it is as you have seen. It was slightly better than expected. There are no surprises. On the other hand, as for our outlook for Q4, in comparison to the beginning of the year, it seems that the environment has somewhat changed, as I believe you have noticed. Automotive is more or less stable. Industrials, for FA overall, it is stable, but there are some differences in, or situation is, mixed picture depending on the region. And for PC and mobile, after bottoming in the second quarter, the overall trend is that of a recovery. However, it is a very slow recovery, and in Q4, we expect some seasonal decline. Consumer overall, regarding mass market overall, slightly later than other segments, it seems that inventory is being digested, so we expect a decline in Q4. So overall, we expect a slight slowdown in Q4. That is our guidance. As for general inventory, gradually, we plan to increase general inventory. Order lead time has been reduced, and it has been some time after we executed this, but there are sustained uncertainties, and there are short-term orders that have become more prominent. In order to capture those opportunities, in comparison to before, we are slightly increasing inventory, bringing it closer to the original target for inventory level. That is how things stand, and up to Q3, the performance was reasonably well, and we expect a slight decline in Q4. We would like to continue to manage and operate things cautiously. Details of the earnings results from Q3 will be given from Mr. Shinkai. Over to you, Mr. Shinkai. Thank you. This is Shinkai, CFO. I would like to present the results of Q3 2023, based on the presentation materials posted on the IR website, page three. This is the disclaimer. There is nothing new on this page. However, in the past earnings announcements, we announced about the system integration. We plan to implement this in the first half of next year, and therefore, in the Q1 and Q2, there may be some impact on sales and inventory. Q3, Q4, up to Q3, Q4 this year, there is no impact from this system integration. Once we have better visibility, we would like to update you. Page four, please. The results from Q3 is shown in middle dark blue column. Revenue is JPY 379.4 billion. Gross margin was 57.9%. Operating profit was JPY 132.3 billion. Operating margin was 34.9%. Net profit, JPY 108.3 billion. Excluding foreign exchange impact, the net profit was JPY 104.6 billion. EBITDA was JPY 152.6 billion. Exchange rate for the first half of the year is JPY 142 to the dollar, JPY 156 to the euro. Change from forecast is shown in the fourth column to the right. I will come back to this later. Results from the first nine months... Oh, correction. Change from forecast is the third column from, to the right, and results for the first nine months are in the dark blue column. Revenue, quarterly revenue trends, Q3 results is the rightmost bar. Revenue overall, year-on-year, negative 2.1%. Q-on-Q, +2.9%. ...excluding foreign exchange impact year-on-year, revenue declined 5.1%. Q-on-Q, it was an increase of 0.3%. As for the breakdown between automotive and industrial infrastructure, IoT areas as noted on this page. Next slide, please. Q3 revenue, gross margin, and operating margin are shown on this page. First, company total. On the right side, this is versus forecast. Operating margin was up 2.4 percentage points versus the forecast. Revenue was about the medium forecast by 2.5%, and about 2/3 is foreign exchange impact, and the remainder is non-foreign exchange impact. And mostly, the increase came from automotive. Next, gross margin, higher than forecast by 1.4 percentage points. As for exchange rate, flat. Product mix, there was a slight deterioration. As for production recovery, because of production adjustment, there was a slight deterioration. On the other hand, production costs, this include lower production costs due to lower utilization and a decline in cost of starting Kofu than original expectation and decrease in inventory write-down. And these reductions were larger than what we expected, and these were positive factors for production cost. As a result, 1.4% upside. Operating expenses declined slightly, and as I mentioned earlier, operating margin was up by 2.4%. Below that, Q-on-Q, operating margin is more or less flat. As for gross margin, exchange rate impact was flat. Product mix deteriorated slightly. Automotive increased and IoT also increased. As for production recovery, due to production adjustments, utilization was lower, so there was a slight decline. On the other hand, production cost improved, so overall, the results were flat. As for operating expenses, mainly, R&D increased. That was therefore an offsetting factor for operating margin. By segment, please, I refer to the left side of the slide. For Q3, what is noteworthy is that, in automotive, operating margin was 0.9% Q-on-Q. Automotive, mainly from the second half of the year, we are increasing R&D. Because of that, operating margin Q-on-Q is declining. Next page, please. This is about inventory. This will be our all in-house inventory. The overall DOI has declined Q-on-Q, and it's 100 days. By segment, mainly, it has declined in automotive and industrial infrastructure, and basically flat. In actual amount, it is basically flat quarter over quarter. Next slide, please. So this is sales channel inventory. In all of these segments, basically, in terms of the WOI, has increased on Q-on-Q. The auto slight increase, industrial and infrastructure, an increase. In both segments, it was a little over nine weeks. And overall, the inventory level is nine weeks+. In terms of industrial infrastructure, the inventory in JPY terms has increased Q-on-Q, quarter over quarter. That is, the sales through decreased more than expected industrial infrastructure segment to, in terms of mass market sales. Next slide, please. So, this is the inventory analysis of in-house and sales channel inventory. On the left, for in-house inventory, in terms of raw material, its cost has gone up, material has gone up. Due to the decline of the inventory, we have ramped up due to production adjustment, it has gone up. The fourth quarter, it's going to go up as well. In terms of the work in process, in terms of the expansion Die bank for the 40 nano MCU, including that, at the end of third quarter, basically, we have ended what is necessary. Going forward, the mix Die bank should be optimized. That is, we should consume the Die banks, and if necessary, we have to increase that. By doing so, we want to improve the mix. In the fourth quarter, with the weaker demand Die bank should be consumed. At the same time, production adjustment is going to be conducted, so the work in progress is going to decline. On the other hand, with the quarter, Die bank, we want to gradually increase that, but I think it'll take until maybe going into next fiscal year. In terms of the finished products, in the fourth quarter- ... we have been shipping depending on the demand, and it has lower than expected. In the fourth quarter, advanced production, basically, this is preparing for the less operating days for back-end production of Q1, and we are forecasting a one-off increase. On term, in terms of the sales channel inventory, the fourth quarter, automotive, industrial, infrastructure, IoT, so the multiple OI has increased. In the fourth quarter, the intention is to slightly increase the inventory. In terms of the year-end terms inventory, so, basically flat for industry or slightly down for industrial infrastructure and IoT. Automotive, basically flat. Next slide, please. So this is the front-end utilization rate on buffer input pace. That the, the third quarter, because it's less than 60%, it has been a little low due to production adjustment. For the fourth quarter, we are anticipating a slight decline from this level. In terms of the front-end utilization rate, we think that the rate will bottom in Q4. Next slide, please. This is gross profit and operating profit quarterly trends. Please refer it at your leisure. Next slide, please. This is EBITDA and free cash flow. On the right-hand side, in terms of the cash flow chart, in this, we have excluded the impact of the deposit provided to Wolfspeed. Third quarter operating cash flow was JPY 111.8 billion. Free cash flow was JPY 89.4 billion. In terms of the difference between the second quarter, is that the payment of the corporate tax occurred in the third quarter. Next slide, please. So this will be the fourth quarter and full year forecast. In terms of the fourth quarter, this is in the middle, the dark blue column. In terms of revenue, the medium value, JPY 358 billion. Year-over-year, it's a -8.5%. Quarter-over-quarter, it's -5.6%. If we exclude foreign exchange impact, going below the line, it's -8.2% year-over-year, and -6.8% quarter-over-quarter. In terms of gross margin, it's 56.3%. Operating margin, 30.5%. In terms of the gross margin, quarter-over-quarter, it's -1.9 percentage points. The major reason behind this is that the worsening, slight worsening of the product mix, the utilization, decline rate declined through the production, adjustment and, the increase of the production cost. So in terms of the operating margin, it's, minus 4.4%, Q-on-Q. That is through the concentration of OpEx at the term end. In terms of R&D, SG&A is going to increase in the fourth quarter. For the full year forecast, please, refer to the three lines beyond that. In terms of the revenue, JPY 1,465.8 billion. Gross margin, 56.9%. Operating margin, 33.8%. That is our forecast. Now going to the appendix, and please go to page 18. The third quarter GAAP and non-GAAP reconciliation, that is. One follow-up is that in terms of the non-recurring items, the third line from the bottom, and from the... This is about the mark-to-market valuation and due to the deposit for Wolfspeed. That's a quarter due to the increase of the U.S. interest rate, the bond value has gone down, so there is an unrealized loss. So this is a non-cash, unrealized loss. So this is excluded. So based on the direction of the U.S. interest rates, so it is a possibility that this will come up as non-recurring items. And going to page 21. This is about the situation about the CapEx. For the third quarter, SiC Takasaki factory mass production second phase investment, decisions have been made. For the fourth quarter, R&D and IT related investment, this means the high single digit level of sales of investment is anticipated. That's all from me. Thank you. Thank you very much. We would now like to open the floor for questions. Mr. Shibata, please turn on the video. I would like to explain how you are able to pose questions. I will say, "Please raise your hand if you have a question." If you have a question, please click raise hand icon on the screen, and I will be calling on you in order by company name and your name. Once your name is called, you will be able to speak. Please unmute your microphone and please start with a question. Due to time constraint, please limit the number of questions to two per person. We would now like to entertain questions. If you have a question, please raise your hand. First, from Daiwa Securities, Sugiura-san, please. Please unmute, and please start. Thank you for taking my question. I'm Sugiura from Daiwa Securities. I have two questions. First is about utilization ratio. According to the material, overall utilization is coming down, but 8 in and 12 in, by different inch size, there are different movements. Could you give us more about the background? Mr. Shinkai said that you expect Q4 to be at the bottom for the moment, and beyond Q1 2024, what is your outlook in terms of utilization ratio? I would like to ask Mr. Shinkai to address the question about utilization ratio in Q3. There was inventory adjustment, and there was also Die bank inventory mix. Regarding 8 in, at the end Die bank was in the shortfall, and we produced for that. Die bank inventory restocking was finished, and therefore, there was a decline. So that is how the situation is different for different inch lines. As for Q4 and beyond, our outlook for utilization. Regarding Q4, similarly, we believe similar trends to continue. To be more Die bank restocking will be more or less completed at the end of Q3, so there will be a slight decline. On the other hand, for 12 in, a mixed improvement will progress, and there will be slight increase, but overall, utilization will be slightly down. That is our expectation. Q1 and beyond, in 2024, next year, in Q2 and in the second half, because of the demand expected, utilization or production may be increased. For one thing, 12 in factory is dealing with a 47 nano microcontroller, and there, there will be contribution from the increase in production of this. As a result, from the latter half of the second half of the year, utilization is expected to increase, and therefore, that will be pushing up overall utilization. The second question is similar to the first question. So he said that you're going to increase this channel inventory because there's some short orders coming. So why are these more short lead time orders coming in? And based on that, next fiscal year's sales, of course, as long as that's visible to you, what is your outlook? Can you give us a hint about your outlook? So it's not really related to a specific sector. So for the mass market. And we don't, in the mass market, we can't see the actual specific applications. In terms of the automotive-related business, it's the same situation. I think, in the wide range of sectors, I think a lot of clients think that the outlook is obscure, so they have a tight inventory. So if the demand goes up, then it means that they'll have to stock their inventory. That's happening at all types of inventory, so we want to catch all that type of demand. So that's the reason why we're taking this action. So how long will this continue? It's very difficult to say. Specifically, in terms of the Japanese customers, the March end, the end, close the books at the March end. So the first quarter, until the first quarter, next fiscal year, I think they will try to focus on the control of their inventory. I think that will be quite prominent until then. On the other hand, this is based on the macroeconomic situation. Currently, and from the second quarter of next year, I think the view is going to change a bit. Maybe, we're going to see a more uptick in the situation. That is our assumption. But that said, let me repeat. So we will be trying to not miss the path that much. We will be very cautious, and gradually, whether it be in-house or sales channel inventory, if necessary, we'll control that. For the time being, for the in-house inventory, we'll control that. For the sales channel, we want to gradually increase that, and by doing so, we want to respond to the situation. Thank you for your answer. Thank you very much. Next, from Goldman Sachs, Takayama-san, please. Please unmute, and please start with your questions. Thank you for taking my question. First of all, about October to December, the sales forecast, could you elaborate on that further with more granularity, which is stronger, which is weaker, and by region as well? And other than automotive- ... separating into the traditional three subcategories, can you discuss which is strong and which is weak? And, is this due to actual demand or due to year-end December and inventory adjustment due to seasonal factor? Inclusive of that, if you could elaborate, please. Yes. The trend that is worth mentioning is by region for automotive in the U.S. The strike, people are on strike, and we are not seeing impact according to the data, but there should be certain impact, so we have incorporated that. I believe there will be a decline somewhere. I don't know whether that will be Q4 or next year, but we are prepared to see some decline, and that is already included in Q4. As for Europe, in Europe, there are major Tier 1 customers concentrated in Europe, as you are aware of, and I expect them to tightly control inventory. So in Europe, regarding automotive, we expect some decline, significant decline. Whereas for Japan and China, we do not anticipate a major increase, but we believe we expect a slight increase. Automotive workers are on strike in the U.S., and what we feel is that we may be too cautious regarding automotive outlook, but we also do not want to suffer from a downside, so we would like to take a more cautious outlook for Q4. In terms of products, it is similar to the patterns that we see usually. SoC is fluctuating, so on quarter-on-quarter basis, we shouldn't focus too much on increase or decrease. But over the short term, power may decline slightly. That is what we anticipate. Our power products centering around IGBT, we have not fully expanded our sales yet due to our capacity conditions. Up until the launch, ramping up in 2025, we will be supplying to select customers in Europe and the U.S. And depending on the sales and competitiveness of these select customers, there may be some fluctuation. In Q4, IGBT, we expect things to be somewhat more difficult. Otherwise, there is nothing worthy to mention regarding automotive, in terms of products. Other than automotive, it may be somewhat repetitive to what I've mentioned earlier, but FA, flat or slightly better than flat, we expect that slight growth to continue. On the other hand, mass market and home appliances, mainly consumers, a double-digit strong decline, including seasonality, is expected. And other than automotive, we expect large growth from cloud-related area. We believe that there will be double-digit, strong growth. This is similar to what we discussed last time. The growth currently is driven by DDR5, the demand for DDR5. As for DDR4, I believe the customers are still digesting inventory, maybe up to next quarter. But on our side, the shipment of DDR4 is quite limited already, and we do not expect much impact for us. And in Q1 next year, or from Q2 next year, for AI servers, we expect to see a ramp-up of power products. So for cloud data centers, we think growth will further pick up. And for PC, as I mentioned earlier, overall trend is that of a recovery. However, in Q4, because of seasonality, we expect a decline. My second question is, I think it's a kind of overall, big picture question. So you have the what you're seeing for Q4, Europe and, Europe and United States, so automotive components, inventory or the, adjustment or the consumer goods, inventory adjustment is going to impact. Going into the next fiscal year's, Q1, is going to normalize? So the fourth quarter... So is it, basically fourth quarter, you have the adjustment in the fourth quarter, it's going to be adjusted, or maybe starting for the fourth quarter, you're going to see a stronger dip? Well, I think it's too early to talk about the first quarter of next fiscal year, but our assumption as of now is that Q-- maybe we better to have the same level of anticipation as the fourth quarter. I think that's safer, because in the inventory adjustment, mainly coming from the Japanese clients, I think it's going to impact the first quarter. So the calendar year, fourth quarter, in terms of our regional exposure- ...So in Europe, mainly in Europe or in Asia, excuse me, in terms of consumer electronics and for the mass market, makes the market this different market by market, I think there'll be the inventory adjustment because it's the year-end of the calendar year. In the Japanese clients, they're looking at the end of their fiscal year, end of March, and they, I think they moved to adjust their inventory. So maybe that will offset each other Q-on-Q. So the fourth quarter to the first quarter, we can't anticipate a you know, strong increase. So once this is over, in going to the second quarter, I think we'll go back to the run rate. That's the image that we have right now. Understood. Thank you very much. Thank you very much. Next, from Citigroup Securities, Fujiwara-san, please. Please unmute, and please, start with your question. Thank you for taking my question. I'm Fujiwara from Citigroup. Can you hear me? Yes, we can. About inventory adjustment, I also have question. Automotive, from around the spring this year, you have been saying that customers are adjusting inventory. In Europe, it will be mainly in Q4 and other customers Q1 next year. As for Europe, after inventory adjustment, adjustment in Q4, will that adjustment be completed? Is that your expectation? As for Japanese customers, is it going to be only Q1 next year that there will be inventory adjustments, and adjustment volume is such that you expect things to normalize in Q2? Well, it is difficult to say anything definitively, but the impression we have is something similar to what you have mentioned. As I said before, I also feel that the customers are very tightly managing inventory, perhaps excessively so. And so they are pressed with securing supply at the same time. This is transitory, I believe. So there is a need to secure enough supply, and also need to tightly control supply, and it may be somewhat excessive in some parts. So to be honest, I don't think current trends will continue. Thank you. Thank you. The next question will be: in terms of the shareholder return, I would like to hear your thoughts about that. Conventionally, in terms of share buybacks, we have conducted that. The INCJ is the, I think, basically bought it from the top shareholder, INCJ, from the summer onwards, afterwards. They have been releasing the shares into the market without you buying back from them. I think basically they asked you before they took this action. What is the reason why they are not, you're not buying back from them? Going forward, will you, you will not buy from them, or depending on the share prices, that's the reason why you didn't buy back from them. Depending on the share prices, is there still a possibility that you buy from INCJ? So our priority for our company, we want to start paying dividends as early as possible. So from our point of view, the appetite towards share buybacks, compared to the beginning of this year, has diminished. That's from our point of view. I'm talking about our point of view. So whether it be INCJ or from the market, depending on the share price level, we will consider, of course, we to shareholder return, including share buybacks. But at the beginning of the year, we have ended our run of share buybacks. Our focus is now more on paying dividends. That's all from me. Thank you. Thank you very much. Next, from Nikkei Newspaper, Sato-san, please. Please unmute, and please start. I'm Sato from Nikkei Newspaper, English media, Nikkei Asia. I have a basic question, two basic questions, if I may. First is about utilization. There was a question earlier. In Q3, it is declining on finished products. In terms of product areas, in what areas are you lowering utilization and the recovery that you expect? Where do you expect to see recovery in utilization? Mr. Shinkai, could you take that question? Yes. As for Q3, in terms of products, products, about microcontrollers, as I Die bank was not sufficiently available, so we were producing. But other than that, there were some adjustments in Q3. As for Q4, more or less for all of the products, generally, we expect adjustment... In Q1, there are facilities that will be increasing production at a factory producing 47 nano microcontroller. So there, we expect to see increase in utilization. So final finished products on the part of the customers, same from customers, depend, as for the market environment, what is the impact from the market environment? For example, microcontroller, for what application is improving, so you expect some change in Q4, or am I mistaken? Let me see. As for demand, Mr. Shibata explained our forecast for demand for Q4, and basically in line with our forecast, the demand we are producing, in a nutshell. As for 47 nano MCU that I've been mentioning, there is a shortage, and supplies are still tight in some areas, and these are mostly for automotive. And therefore, in the next quarter, Q4, the driver is microcomputers for automotive for most of the part. I see. Basically, automotive was declining in market in Q3, and you expect a recovery? That is not necessarily Die bank concept. perhaps I should explain the concept Die bank. from before, semi-finished products are kept at a certain inventory level. That is how we manage things from some time ago, and that is in order to reduce the lead time for our customers once they place orders. This is also for the purpose of ensuring business continuity, including natural disaster response. We have been keeping some inventory level of semi-finished products. On the other hand, up until last year, end of last year, whatever we were selling, whatever we were producing, we were selling very quickly, so we were not able to build that inventory much. Because market was somewhat weak, slightly weak, we are now able to increase the Die bank inventory. for some of the products, it was quicker. For some others, it took more time, especially for 8 in wafer. For microcontrollers with larger line widths, we were able to increase inventory, and for that purpose, we used a factory, to put it differently. As for market environment, is market strong or weak? For the short term, as I mentioned earlier, automotive is very stable. On the other hand, recently, we feel the weakening from our consumers, and only for Q4, PC, mobile, will be declining substantially. So that is our forecast of the market environment. Automotive, consumer, if we compare the two, clearly consumer demand is much weaker. So, if possible, what would be the optimal utilization rate? Of course, it depends on the product. So I think right now, 60%, it used to be 80%. So what is the optimal level? Well, optimal, it's difficult to say what's optimal. So, I think ideally, we want to have a 100% utilization rate, so it, it goes up and down, but maybe 80%, 85%. We want, maybe we want to target that level. But as you know, the semiconductor demand is quite volatile, so it's very difficult to actually control the utilization rate as we wish. Understood. Thank you very much. Any other questions from the audience? Please use the Raise Hand button when you have a question. And, we are accepting questions from those who have already asked questions. From Nomura Securities, Yamazaki-san, please, please unmute and state your question. Yamazaki from Nomura Securities. I have two questions. One, in terms of the trend of your product prices, I would like to hear your comment about that. So in the past three years, you have been increasing your prices, but when there seems to be more supply than demand going, what's going to happen going forward? Is it going to kind of, kind of be a normal trend, that the price will slightly decline? Or because there's a cost push, are you still going to increase the prices? I would like to hear about the direction of your price strategy as much as possible. My second question is that the Chinese market, so there is a dispute between United States and China. With the mature node, I think there's a lot of focus on mature nodes, so the microcontrollers and power chips, I think basically this is where the competition may become fiercer. So what is the competitive landscape in the Chinese market? Can you talk about that? So that would be my two questions. ... So going to your first question, from our point of view, current price level, we think that it's quite adequate, but, considering various elements. So as much as possible, we want to maintain this level. I think that's optimal. As you have pointed out, so when demand supply balance, the demand start to be a bit weaker, but on the other hand, the cost hasn't gone down that much. So we is not in the situation that we can say that we're going to reduce the price right now. So in the, to your second question, IGBT, well, in China, it's really a lot of competition, not only us. In China, there's a lot of up-and-coming players in IGBT. So I think very d- it's very difficult to grow the IGBT business in China. So in terms of our future plans, we are not pretty much focused on China, so that is our assumptions for our future plans. I think it's difficult for that situation to change going forward. In terms of microcontrollers and analogs and conductors, currently, it is not a situation that we started to see local competition coming up one after another, but I think it's just a matter of time. Maybe it's just a matter of time. So we have to focus more on high performance, high reliability, and not just selling devices, but we have to focus on selling solutions. We have been saying that from before. I think we'll have to patiently accelerate that trend. So rather than just trying to sell independent products, I have to-- we have to get away from the situation. So, the analog semiconductor business, we have to have a more, high added-value product for power semiconductor stuff, microcontrollers, and, I think basically, we can still compete. But with the micro, controllers and analog semiconductors, we can't expect the strong growth. I think the growth will be a more moderate one, that's all. Thank you. Thank you very much. Next, from Nikkei, Mukano-san, please. Please unmute, and please start. I am Mukano from Nikkei Newspaper. Thank you for taking my questions. The other day, you've made announcement that you will be, reorganizing based on product. What is the intent for that, and, why now? As we announced, we, as a company, are now in a different phase. That is the answer, a common answer to both of your questions. Up to now, in the past, we focused more on achieving results over shorter term, and internally, we call this speed boat, but with more segment focus. I do not know whether this is the right way to put it, but we want to tolerate somewhat more in consistency. We focused on speed, but I think we were able to achieve certain results based on that approach. So over medium to long term, going forward, we would like to ensure growth. For that purpose, we would like to use various resources internally, more efficiently. And for short-term measures and for medium to long-term measures, we would like to implement both equally well. That is the main target. Why now, in terms of timing? That is because we've judged that now is the time. Thank you. Thank you very much. Next, from Kyodo News, Nakajima-san, please. Please unmute yourself and ask your questions. So this is Nakajima from Kyodo News. Can you hear me? Yes. Thank you for taking my question. So in terms of the exchange rate, the JPY has appreciated a lot. So JPY 140 level of the JPY to dollar, I think this is more or less established. So the current exchange rate level for you, for your company, for your business environment, what impact does it have? Is it comfortable, or if it's this appreciation, it's a concern? And compared to a couple of year ago, I think the view of the exchange rate as market has changed, currency market has changed. So in terms of your strategy, are you going to increase your production in the Japanese market? Are you going to change any CapEx assumptions? ... based on this depreciation, Shinkai will answer your question. Yes, in terms of the level of the exchange rate, whether it is comfortable or not, to be frank, I don't know. That's my frank answer. From my point of view, so it's not very good that our performance will be volatile based on the exchange rate. So there are two initiatives. One is that our target financial model is that basically, we look at a flat neutral, and so 100 against the US dollar and 120 against the EUR. We basically use that for planning. So the past couple of years, we have been doing that type of exercise. Another point is that to be able to reduce the volatility due to the exchange rate, we are hedging. So we have been, we are trying to hedge against the appreciation, meaning that the downside risk due to the appreciation of the JPY, we protect that. We want to try to, you know, we're moving away. We are disposing of the upside from the depreciation. But rather than the level of the JPY exchange rate, I think the volatility, how much the volatility that is has a negative impact. In terms of our direction of our investment, whether this will have an impact, for the not exactly the exchange rate in itself, but in terms of the market, in terms of the areas that we conduct investment, we will look at the attributes, whether the cost base is high or low, not only the exchange rate. This includes the inflation situation of each of the markets, and at the same time, the necessary resources, whether it exists in those local markets. So we will decide based on these conditions. That is all. Thank you. Thank you. Thank you very much. Next, from Morgan Stanley MUFG Securities, Yoshikawa-san, please. Please unmute, and please start. I'm Yoshikawa from Morgan Stanley. Thank you for taking my questions. About infrastructure, I have question. DDR5 is the driving force, as Mr. Shibata mentioned earlier. This year, sales from infrastructure, I believe there is a adjustment, of DDR4. So overall, I suspect that there's not a substantial increase, from the past year. The DDR4 portion, for AIM is, declining as a percentage. And, next year, with the DDR5, memory content, the growth is, expected. And, can you expect, reasonable increase in revenue as a result? Is that how our products, mix, is handled? And from, Q1, PMIC, for, AI server will be, starting, and how meaningful is that? What is the, size that you expect? DDR5, I believe, will be driving growth at a reasonable pace. So whether yes or no, the answer would be yes. Is it going to be Q1 or Q2? It is difficult to say which quarter definitively, but PMIC or power stage for AI will be starting. Right now, as of now, when we look at the infrastructure business in comparison to how things stand currently, I don't expect it to be so large. Q-on-Q, Q-on-Q, well, in any event, it will not be so substantially larger, but it will be also offering us a reasonable support. For AI, is it going to be a strong driver, and will AI business be increasing at 50%, 100% per annum? At the moment, that is not what we expect yet. But if customer base expands, then perhaps that might become a reality. But we will be starting, customer by customer, and we believe that it will be offering us a supporting cushion. Thank you. Thank you very much. Next, Nikkei, Nikkei BP, Kojima-san, please. Please unmute yourself and ask your question. This is Kojima from Nikkei BP. Thank you very much. Hello. So on the 19 Thank you very much. I just got one more question. When you say that the customer orders as channels inventory could be aggressively tightening, can you perhaps share your thought on that? I believe over very specific to the outlook demand, and what is your- Could you wait for a moment? Could you wait for a moment? Can I go on? Excuse me. There has been some technical issues. Please go ahead. So you talked about organizational change, but you didn't answer on the 19. So for the automotive microcontroller and R-Car, which product group will they be included? ...So I think basically it will be in the high computer. Yes. The second question is that, for the, to be able to support the, the customer, the people who will be able to support the customer, are they, are they belong into the product group, or in the, or, or they belong in the software of, visualization in the other product group? So basically, they will be residing in the sales department. So we have this, solution engineers, and basically, they will be in the product group, and they will be salespeople. Understood. Thank you. Thank you very much. Next from Nikkei, Sato-san, please. Please unmute, and please start. Are there any other questions? Mr. Sato, if you have question, please unmute. I'm sorry, I was having trouble unmuting the microphone. One question, if I may, Europe. About automotive in Europe, there is a tight management of inventory expected, and a decline in Q4 is expected. Could you describe the background of this, looking at the market from your perspective, European automotive in Q4 and beyond, or next year and beyond, what is your outlook? European automotive, that is not how I characterized in Europe. There are globally very large-scale Tier 1 customers, multiple Tier 1 customers. Oh, I see. Mainly, these customers are trying to very tightly manage inventory. That is what I said. Tightly manage or reduce inventory, could you further elaborate on that? We have been discussing this on previous occasions. For Tier 1, we cannot casually say this because it's others, but they're quite tight in terms of cash flow, and they have to therefore manage cash flow very closely. And across the board, I think that that is the tendency, and that has continued for the past several quarters. That is, that is our view. Thank you for taking my questions a number of times. Thank you very much. There is still some time, but there is no question, so with this, I would like, we'd like to end the Q&A session. So finally, Shibata will give some words. So, I think this is reflective of the not many questions, so maybe it's not much of a newsworthy earnings report that we have announced. In the first quarter and the second quarter, we have been going forward in a very cautious manner. Next year, at a certain timing, we are anticipating recovering the market and the cloud business growth, mainly in AI. That's what we're looking at, but maybe a bit into the future, the 2025, the EV-related Kofu plant, and in terms of ADAS-related products, I think basically it will start from 2025. So from 2024, the first half of 2025, we would like to maintain this growth, and then go forward with business. Well, thank you very much for attending despite your busy schedule. With this, we would like to end the third quarter earnings call for the third quarter 2023. Thank you very much for your participation.