Thank you very much for joining our English small group meeting hosted by our company today. This session will run for 50 minutes. From SCREEN Holdings, we are joined by Ms. Chiho Otobe, Senior Executive Officer and Head of Global Communication Strategy, IR Department, as well as Shinkichi Nakamura and myself, Ibuura from IR Department. This session is a small group meeting intended for institutional investors, we kindly ask that members from the media or analysts exit this session. Thank you for your cooperation. We will begin with a presentation by Otobe-san. She will provide an overview of our results for the previous fiscal year and the outlook for this current fiscal year, followed by a Q&A session. During the Q&A session, we kindly ask that you refrain from mentioning specific company customers' names. Please also note that this small group meeting will be recorded. With that, I'd like to hand it over to Otobe-san. Otobe-san, please. [Non-English content] As you see here, we had the decline of the sales and OP income, mainly caused by the decline of sales and income of SPE division year- on- year. [Non-English content] For SPE, we received a very strong order intake. In the fourth quarter of the previous year, we had a record high level of order intake. In the first quarter this year, we still see that same situation continues and expect this will continue into the second quarter. [Non-English content] [Non-English content] James-san, please go ahead with the question. Good evening, thank you very much for your time, Otobe-san, and team. It's very much appreciated. I've got a few questions, if I may. First of all, can I ask, if we look during the current midterm plan, including this year, fixed costs are increasing quite substantially because you're investing for future growth. I'm just wondering at this stage, it's obviously a little early, but when we think about what happens after this year into the next midterm plan, what are your thoughts about fixed cost growth during the next midterm plan and key expenditures that you need to make? [Non-English content] [Non-English content] One third of the JPY 32 billion will be spent on the labor. [Non-English content] This is the front page heading of the material from the earnings call. Both for the development and depreciation, and also for the CapEx, we reached a record high because of the increase in the past five years. At the same time also, we see the increase of SG&A because of the movement of people. We will make investment into the future growth, including the provision of the equipment for the evaluations. At first, the JPY 32 billion in the figure looked very big, but this is the level of the fixed cost we expect. [Non-English content] Still, this is the figure at the beginning of the fiscal year. Quarter- by- quarter, we have to review the status and the figure. Of course, under the current midterm management plan, we have the policy to make investment into the future growth. The figure will not so vary, but a further cleaning will take place from now. [Non-English content] Next mid-term management plan will be announced in the spring of next year. [Non-English content] What you see on the screen is a cash allocation for this fiscal year. You can see the R&D expenditure, CapEx, and strategic investment we'll carry out. Also about dividend payment, we are aiming at over 30% payout ratio. This would be the basis for the discussion of the new mid-term management plan, which is now taking place. In this period of mid-term management plan, we're making the investment into the future growth. In the next mid-term management plan period, we are expecting to harvest the fruit from this investment we made or we are now making. The harvest of fruit we expect is the improvement of the profitability. [Non-English content] James, do you have a follow-up question? I do. Thank you. That's very helpful. I do have some more questions. If I ask another couple, and then I can let, if someone else wants to ask a question, they can, but otherwise I have plenty more. If I could ask a couple more, please. First of all, next, I wonder, is it possible to comment on capacity limits in your core cleaning operation? To what degree you have the ability to expand and increase your sales without building new clean room facilities, where I understand the lead time is quite long. Can you comment on that, please? [Non-English content] What you see is page 12 of the material, this shows the business forecast for this fiscal year. On the very right side, you can find the full year forecast for each segment. I want to focus on SPE, which is the focus of your question. [Non-English content] We expect JPY 340 billion in sales in the second half of the year. I think we can respond to the doubling of the sales with the current capacity. We can reach JPY 680 billion sales with the current capacity. The market is also growing at the same time. If the market grows by 10% or 20% more, I think we can deal with it. [Non-English content] We expect the market will continue to grow in the next fiscal year. Expecting that growth in the market, we are now making preparation to enhance our production capability. We see the voices from the investors that expected the sales for the first half at JPY 260 billion seems a bit low, that is because of the preparation we are now making. We have the production capacity not only in Hikone, but also the fabs in Kyoto and Toyama. We are now changing the layout at these facilities and changing the equipment so that we can enhance our production capabilities. I think we can go with the JPY 340 billion for half a year sales. Even if the market grows another 10% or 20% in next fiscal year, we can deal with it. For the next fiscal year, without building a new facility, we can deal with it. [Non-English content] Of course, we think that we have to look into another two years ahead or three years ahead from now. As we announced in the previous fiscal year, we already acquired the property or land, and we are now thinking about what kind of fab or in what capacity we have to build on it. We started the preparation of the soil for the construction of the fab. James, please go ahead with the question. Sorry. Thank you. From when you decide, the lead time for building the fab and it being ready for production, is that a year and a half? Or what sort of lead time is that to completion? [Non-English content] From the decision making to the shipment of the products from the newly established fab, I think at least one year or one and a half year is required. What you see on the screen is the map of the place called Yasu, which is located between Kyoto and Hikone. There we started the preparation of the land for the construction. I think this one year or half a year would be very important for decision making because of the very limited resource of the construction site at this moment, so that the human being or the other resource related to construction is very scarce. Directly after the preparation of the soil on the property, we have to start the construction. That's the idea by the management at this moment. Okay. This will likely come on stream in the year to March 2029, I guess. Is that a good guess? [Non-English content] Yeah, that is around the time you can expect the shipment, but a bit earlier than that, maybe. Yeah. I am trying to think, in terms of the increase in fixed costs that will come with the plant, it obviously comes with sales as well. Will that have a significant impact on profitability, do you think, in the short term or not? [Non-English content] The next fab we will build would not be the one like the S3-3, which required much fixed cost because of the introduction of the robots and other systems whose depreciation period quite short. The new one will not have the fixed cost at the level of the S3-3. S3-3 will continue to be the only fully automated factory on our side. We do not expect the significant jump in or increase in the fixed cost from now. Okay. Thank you. In terms of R&D expenditure after this year, I know you have opened a new R&D facility during the course of this midterm plan, which has lifted things up. Do you expect R&D costs and investment to grow roughly in line with sales growing forward, or will there be a difference? What sort of pattern do you expect? [Non-English content] When i see the other peers they spending about 10% of their sales for R&D purposes. Of course, just to raise a proportion is not a good thing we have to look into the quality or what kind of investment we make, but our policy is not to stop containing the R&D expenditure, but rather we'll increase the R&D expenditures even with some fluctuations. Thank you. Can I carry on asking questions or have other people got their hands up? I have many questions, but I don't want to hog if other people want to ask questions too. Please keep question asking. Questions. Please do it. Okay. Thank you. Thank you very much. Can I ask next, I'm interested in the trend and your thoughts on the trend on SPE spending in China. Some different companies have slightly different ideas. You, I think, are expecting a rather flat demand in China. I'm just wondering, because obviously, outside China, there is a huge AI-driven investment boom. I'm wondering if also within China, in their own economy, there isn't a very similar boom happening as well. I'm just wondering, is anything happening recently to make you question your assumption that sales or the demand will be flat this year? Is anything changing? [Non-English content] Compared to the timing of the earnings call in January, I think the demand by the Chinese customers at present is stronger. We heard that our competitors making a comment that they expect 20%-30% growth in China, and we are skeptical that level of growth. What you see on the screen is the composition of sales by destination, and the 37% is the one for the first half. If we make it into full year, I think the level is the same as that of the first half or slightly larger than the first half expectation. When you look back the past two to three years, the China proportion was close to 40%. I think for this fiscal year, the proportion will be a little bit less than 40%, a little bit 40%. At present, we are seeing the stronger demand from the Chinese customers than before. Thank you very much. If we look at overall demand, I gather that the level of orders and inquiries in the fourth quarter was extremely high. Just to help me, if we look at last year and you think about Q1, Q2, Q3, Q4, can you give me an image of how orders changed over that period in a sort of image form, please? [Non-English content] As you know that we do not disclose the orders of the figures, but we are asking for the trend, let me show you the trend. What you see on the screen is the sales from the first quarter to fourth quarter in the year ending in March 2026. The image about the order trend was a bit higher than these. The pattern is the same. A quieter first half and then a much stronger second half, particularly fourth quarter, yeah? [Non-English content] Is that what we expect with the sales? The first quarter, not so high, but step- by-s tep or by quarter- by- quarter, we expect the gradual increase. It's the expectation about the sales. That's great. The environment in Q1 compared to Q4, is it very similar? Is it stronger? Is there any change that you notice in client behavior? [Non-english content] Well, order level or orders inquiries, activity. I'm just trying to, well, is the market compared to Q4 in Q1 keeping the same sort of level or become stronger or weaker or clearer visibility? Is there any change you've noticed in Q1? [Non-English content] As for the orders compared to the Q4, we see the stronger trend in the Q1, and it's been continuing to increase. Which sectors or countries, which areas are driving the increased strength? [Non-English content] Advanced foundry and advanced DRAM are leading the growth. This is the trend we can find in the market. They have been strong, and they are strong. That's great. Could I ask now, if we look into 2025, do you have any data in terms of how your market share, your global market share changed for single wafer cleaners and batch cleaners and your other products? I'd be interested, I know there are various factors that impact that, but if you could talk about the change and any factors that led to that. [Non-English content] [Non-English content] In FY 2025, our market share for the single wafer cleaning equipment was taken away by the competitors a bit. [Non-English content] Let me correct my wordings. Not that market share taken away by the others, but the sales volume or growth of the sales volume by the competitors is larger. [Non-English content] This competitor has a strength in the cleaning for the BEOL. In FY 2025, in the BEOL, with some reasons, they recorded the larger sales earlier than us. [Non-English content] Since we record that sales when we complete the installation or setup, while the competitors, this competitor, records the sales when they make the shipment. There's a difference of one month in timing of recording the sales. In FY 2025, our guess is that they recorded the sales earlier than us. That resulted in the difference of the sales volume. [Non-English content] It does not mean our POR was taken away by the competitors. It is purely because of the timing. In FY 2026, we expect a sales increase in the area of FEOL, where we have the strengths, also some customers switch their POR from these competitors to us in the field of the BEOL. In this fiscal year, we expect the increase of market share. That is very interesting. [Non-English content] About the spin scrubber on the right side, this is a simple version of the single wafer cleaning equipment, and we are growing the market share of this product. Our guess is that the Taiwan Foundry using this product for the CoWoS or the advanced packaging, which is contributing to our gaining the market share. [Non-English content] Sorry, can I just ask one follow-up question about the POR? Because I am interested, and then I will stop. Can I just check, you mentioned that in the back end of line, you have won one or two. How many you have won a POR? Does that mean your competitor has lost it, or can you explain in a bit more detail? I am very interested in this change in POR because it is potentially rather significant. [Non-English content] For the BEOL, there are several cleaning steps, a switch was made from the competitor's one to us on one step. The customers' number is not one. There are several of them. Okay. What sort of scale of business might that represent? [Non-English content] They prefer from commenting on the expected scale. Okay. Thank you very much. I'll let someone else ask a question. Thank you. Okay. Thank you. [Foreign language] [Non-English content] Hello? Can you hear me? Yes. Yes。 Yeah. I just have a quick question regarding to your price strategy. I think you mentioned in your post results call that you negotiate with your customers regarding your price, and price increase can help to offset components cost inflation. I think given the recent situations, overall ASP supply is pretty tight or even tighter compared with two to three quarters ago. Do you feel you have stronger pricing power for now? I mean, not only to offset your cost inflation, but actually try to negotiate a price increase to increase your operating margin in the next few quarters. I'm just wondering, maybe first for the second half of this calendar year, how much price increase do you expect to be reflected in your guidance? Or your guidance already reflect this price increase? Beyond the second half this year, for the next calendar year, and do you still expect a price increase? Thank you. [Non-English content] First of all, for this fiscal year, including the early contribution from the price hike and offsetting of the cost inflation are included in this forecast. Our policy is to go into negotiation with customers in order to improve our ASP in the mid to long term. [Non-English content] With the same customer and with the offering of the same product or same function, it is difficult to raise the ASP. Basically, we think that the hike of the raw material prices have to be added on to the selling prices or as the pass through. It is difficult because of the business practice. If there is a price inflation of raw material six months ago, we include them in the forecast at present. There is a half a year or one year gap, but that is reflected in our forecast. [Non-English content] Next fiscal year, we will have the new management plan period to start. Our policy under the new mid-term management plan is to increase or improve our ASP and at the same time improve our profitability. Please wait until next spring for the details. Basically, by improving the quality, function, and development capability, we are going to raise the prices and also improve the profitability. [Non-English content] Every year in late fall, between October and November or December, the top management between SCREEN Holdings and customers have the negotiation over the price for the coming year. That is the timing for us to discuss the prices with customers. [Non-English content] President Goto's idea is to continue to improve the margin. He is not satisfied with the current level of margin. In order to improve our profitability, there is no option for us to offer the discount. The policy is to improve the ASP and improve the profitability and productivity. Thank you for the answer. I just want to double confirm. In terms of the price increase, you only have one price increase per year, or is it possible to maybe have twice or multiple price increases in case the situation changes? Like you have a very strong order book or the cost inflation is above your earlier forecast. Thank you. [Non-English content] [Non-English content] [Non-English content] In addition to that top management negotiation, which takes place once every year, we have the daily basis talk or negotiation between our customers and the salespeople. When we provide the same line and same equipment to the customers from the one we already delivered a year ago, without any addition of the new functions, it would be difficult to ask for a big increase in the selling prices. On a daily basis, we have the negotiation with customers through the salespeople, but from that, we cannot expect much increase in the prices. [Non-English content] I think you want to find out the next timing when you can expect the upward revision of the forecast figure. One example is the fourth quarter of the previous fiscal year. We originally did not expect our OP margin to exceed 30%, but it did in the last fourth quarter, which was a record high at the quarter. What happened at that time is the more than expected growth could be seen in the post-sales in overseas market was achieved, which resulting in the growth of the OP margin. As for the post-sales in overseas, that is a kind of area which the forecasting is very difficult. We may have another this kind of situation from now. Thank you very much. I have another question, a very quick question. I think on your slide for the SPE composition of sales by destination forecast, you showed the forecast by region in the first half of this fiscal year. We can see that the sales to North America surged a lot to 15% versus single-digit percent last year. Just want to confirm the reason behind, is it because there's some new round CapEx or SPE spending by the U.S. players, or it's driven by TSMC? Do you expect the spending in North America can maintain this level in the next few years? Thank you. [Non-English content] This growth we expect in North America is mainly because of the Taiwanese foundries Fab in Arizona and the South Korean chip manufacturers production capability in Texas. [Non-English content] [Non-English content] [Non-English content] The IDM and the logic customers in North America are planning the greater investment in this fiscal year than in the previous fiscal year, but not so much growth expected in the first half. Expect a larger investment in the second half. Understood. Thank you very much. That's my question. Thank you. Thank you. We have another investor who has question, is it [Jay Z] [Non-English content]? [Non-English content] [Foreign language] Can you hear me? Hello, [Jay Z] [Non-English content]. Okay, maybe you are okay? No question? Okay. Okay. [Jay Z] [Non-English content]。 Let's move on then. James [Non-English content], you have another question? I do. Yes. We still have a few minutes to finish. Please. Thank you. I've got one last topic I'd like to understand, if I can. I wonder, could you explain the level and the breakdown of your advanced packaging sales that you recorded last year and what you're expecting this year, when I think they move to the FT division. I'm interested, if we just look at that advanced packaging area, I think there are various development costs, so maybe it's loss-making at the moment. If you can think about also what will happen after this year, your hopes for that area. Thank you. [Non-English content] Thank you very much for your question. We expect a growth of this advanced packaging area from the past fiscal year to this fiscal year. For this fiscal year, we expect about JPY 10 billion scale of sales for the SPE, mainly for the whole company, mainly in FT segment. There's maybe three people coming in. [Non-English content] We exceed the 10 billion in scale of sales by achieving the 20% growth from the previous fiscal year. [Non-English content] For this fiscal year, we expect many of the Remotia, which is in the center of the slide, will be delivered to the customers not as a sales, but as an evaluation equipment. For this fiscal year, as in the sales of the advanced packaging, we see the increase from the CoWoS for the SPE. Great. Thank you very much. For last year, what was the level of sales last year, please? [Non-English content] We are a few billion JPY. This year by 20% growth, we can expect over 10 billion JPY. Thank you. At the moment, this business, because the scale is small and you're investing in R&D and things. At the moment, I guess the profitability is poor at the moment. What level of sales do you need to achieve to have a good level of profitability? [Non-English content] At this moment, we have this business under the FT category, and this is the current situation. At this moment, we cannot describe how much sales scale we have to expect to achieve the certain expected level of margin for the Advanced Package business. We have long term view, so in the year ending in March 2033, we expect JPY 40 billion -50 billion scale of the sales for the Advanced Packaging, and at that time, we can expect a very good margin. [Non-English content] Basically, President Goto's idea is to focus the reorganization or the alignment of the business portfolio, which is also targeting at the improvement of the margin of SPE and others. As for the Advanced Packaging OPM, I cannot talk about the specific target we will have. Basically, we want to get it closer to that of the SPE OP margin. Great. Thank you very much indeed. That's very kind. I have run out of questions. Thank you. Thank you very much, James. It's time to close the session. Thank you very much for joining us today. We expect your continuous support for us. Thank you very much. Thank you very much. Bye. Have a nice day. Thank you. Hope to see you before too long. Thank you. Thanks very much. Bye. Thank you. Bye bye. Thank you. Bye bye. Bye. Thank you. Bye bye.