7735.T

Market Environment and Demand Trends

• The global wafer fabrication equipment (WFE) market is projected to grow ~20% in both calendar 2026 and calendar 2027, with steady growth over the next two years.
• AI-driven investment is the primary growth driver: leading-edge foundry and logic clients are launching large-scale projects, while advanced memory products (including HBM and mainstream DDR) are in shortage, driving strong capex growth across DRAM and NAND memory. Image sensing, power devices, and advanced packaging are all showing early signs of recovery after a period of sluggish demand.
• The China WFE market is growing, with particularly strong demand for advanced semiconductor equipment driven by AI infrastructure buildout, which plays to SCREEN's competitive strengths.

Strategic and Operational Updates

• SCREEN expects to outperform overall WFE market growth, driven by its competitive positioning in high-growth segments. The company has expanded production capacity at its Hikone facility and launched its ATCA R&D hub in New York to support future growth.
• SPE post-sales (consumables, replacement parts, maintenance) is a core profitability driver: full-year post-sales revenue is projected to exceed 100 billion yen for the first time this fiscal year, supported by higher fab utilization among customers.
• The GA segment continues to grow recurring revenue, and its new roll-fed digital printing press has received strong inquiry in North America, with growing demand for CTP offset printing equipment in Japan.
• The FT segment recently integrated the advanced packaging business, creating synergy with its existing display equipment business to drive stable long-term profit.
• The PE segment is expected to see a full market recovery starting in H2 FY2027, driven by recovering memory and advanced packaging investment.
• SCREEN has joined Applied Materials' newly launched EPIC Center in California as an innovation partner to deepen collaborative R&D. The GA segment has launched full-scale flexible packaging digital printing collaboration with Chiyoda Gravure.

• Full year FY2027 consolidated guidance was upwardly revised: net sales increased from 725 billion yen to 743 billion yen, operating profit increased from 150 billion yen to 156.5 billion yen, and net income increased from 110 billion yen to 115 billion yen. First half guidance was maintained at 317 billion yen net sales and 56 billion yen operating profit.
• Segment full year revisions: SPE net sales increased 20 billion yen to 620 billion yen, and operating profit increased 6 billion yen to 159 billion yen (25.6% margin); GA sales and operating profit each increased 1 billion yen from prior guidance; FT advanced packaging sales guidance was lowered from 47 billion yen to 43 billion yen; PE sales guidance increased 1 billion yen.
• The annual full-year dividend was raised from 175 yen to 183 yen (interim dividend held at 60 yen, year-end dividend raised from 115 yen to 123 yen), hitting a new record high for the company.
• WFE growth by application was revised upward: DRAM growth was raised from 'less than 25%' to over 25%, NAND growth was raised from 'less than 15%' to ~20%, and advanced logic foundry growth was revised from 'less than 25%' to over 20%.
• The upward full-year revision reflects record high inquiry and order volume, with most full-year sales already visible; revenue will accelerate in the second half, with Q4 revenue higher than Q3.
• Management confirmed that 90%+ of the delayed Q1 project revenue will be recognized in Q2, with roughly half of the expected Q2 delayed revenue already shipped as of the earnings call.

For the first quarter of FY2027, SCREEN Holdings reported total consolidated net sales of 121.7 billion yen, down 10.3% year-on-year. Operating profit was 14.3 billion yen, down 41.1% year-on-year, with an operating margin of 11.8%.

• SPE (Semiconductor Process Equipment): Net sales of 93 billion yen, accounting for 76.5% of total consolidated revenue. Sales declined 16% year-on-year, with operating profit of 14.3 billion yen and an operating margin of 15.4%. The decline was driven by lower sales in China and Taiwan, delayed project revenue recognition pushed to Q2, and reduced demand from foundry and logic clients.
• GA (Graphic Arts): Net sales of 1.38 billion yen, accounting for ~11.3% of total consolidated revenue. Sales grew 0.9 billion yen year-on-year, with operating profit of 0.14 billion yen (up 0.8 billion yen year-on-year) and an operating margin of 10.3%. Growth was driven by increased recurring business sales.
• FT (Fine Technology): Net sales of 10.8 billion yen, accounting for ~8.9% of total consolidated revenue. Sales increased 0.8 billion yen year-on-year, with operating profit of 1.2 billion yen (up 0.4 billion yen year-on-year) and an operating margin of 11.8%. Growth came from higher equipment sales for OLED and LCD displays, and FT received a record high quarter order volume.
• PE (Precision Equipment): Net sales of 3.1 billion yen, accounting for ~2.5% of total consolidated revenue. Sales increased slightly year-on-year, but operating profit came in at -0.2 billion yen due to higher fixed costs.

• There is ongoing uncertainty from geopolitical tensions globally, and management noted that rising raw material costs driven by geopolitical factors are pressuring margins.
• The company faces capacity and supply chain constraints: while existing capacity covers projected demand for FY2027 and FY2028, a sudden jump in demand to much higher levels (such as 30 billion yen in unplanned incremental demand) would be difficult to accommodate due to supply chain limits.
• High customer fab utilization currently delays equipment upgrade scheduling, as customers cannot pause production to perform upgrades, creating near-term pressure on post-sales upgrade revenue.
• An earthquake in Kumamoto Prefecture was ongoing during the call, with management still collecting information and noting the call may need to end early, though no material operational impact was disclosed during the call.

Q: What is the average lead time for SPE equipment, how much order visibility does the company have for full-year FY2027 sales, and what is the breakdown between Q3 and Q4? What is the demand trend for next fiscal year by application? / A: Average lead time for SPE equipment is 4 to 5 months. Almost all full-year FY2027 sales are already visible, which is why management raised the full-year guidance. Q4 will have higher sales than Q3, and memory clients are pushing for accelerated delivery, with current demand exceeding near-term production capacity. The demand trend for next fiscal year will be largely unchanged from this year, with aggressive memory investment driving growth through the first half of next year, and logic investment holding steady at this year's level. No concrete new logic client projects are ready to disclose yet.

Q: Can SCREEN's production capacity accommodate further WFE growth through 2027 and 2028, if demand rises to much higher levels than currently projected? / A: Current capacity expansion projects are sufficient to cover all projected demand for the next two years, including upside beyond base projections. The company is already remodeling facilities in Nagaoka and Kyoto to add additional capacity, which will be complete early next fiscal year, and is expanding capacity at the existing Hikone facility. While a sudden, very large jump in demand to 30 billion yen in incremental unplanned demand would be difficult to accommodate due to supply chain constraints, management is confident SCREEN can keep up with demand growth better than other industry suppliers. The company will update the market on longer-term capacity plans as part of its next mid-term management plan.

Q: Is there further upside to full-year FY2027 sales and profit beyond the current guidance, and how is the company approaching pricing amid strong demand? / A: There is limited room for material further upside to the current full-year plan, as production is already fully scheduled. Small incremental upside is possible but will not result in a 20-30% sales increase. Price increases are not driven by the strong demand position alone: higher equipment performance improvements are reflected in pricing, and rising raw material costs are passed through to customers. Customers understand and accept these price adjustments, as both performance improvements and raw material cost increases are industry-wide.

Q: Why did SPE operating profit drop so sharply in Q1, and what will profitability look like in Q2? / A: The Q1 profit decline was solely caused by lower sales, with no unexpected extra costs. Fixed cost spending was almost exactly in line with plan, with only negligible deviation. No one-time factors are expected to impact Q2 profitability, and the projected product mix for the quarter will deliver the profitability assumed in guidance.