8035.T

Fiscal 2026 Full Year Business Highlights - Generated record net sales of JPY 2,443.5 billion. - Field Solutions sales grew with improvement in customers' fab utilization rate. - Completed R&D centers in Miyagi and Kumamoto and production and logistics center in Iwate; started constructing new production building in Miyagi. - Won PORs in advanced domains, including high market share in major etching processes for memory applications and PORs in Advanced Packaging. ### Business Environment - Expect WFE market to grow by 20% or more from calendar 2025, ranging from $150 billion to $170 billion for 2026 and 2027. - Spendings in high-end devices expected to grow 30% or more year-over-year. - Geopolitical risks like Strait of Hormuz blockage need close attention. ### Fiscal 2027 Sales Growth Drivers - Coater/developers expected to grow by 50% or more year-over-year due to EUV-related demand and investment for capacity enhancement and device scaling. - Etching systems expected to increase by nearly 30% year-over-year driven by strong positions in dielectric etching, DRAM capacitor process, and GAA structure opportunities. - Advanced Packaging sales expected to grow by 60% or more year-over-year with strong inquiries in advanced logic and HBM areas.

Financial Estimates - From fiscal 2027 onward, will disclose first half financial estimate. - First half of fiscal 2027 net sales expected to be JPY 1.570 billion, gross profit JPY 715 billion, operating income JPY 431 billion, all half year records. - Second half of fiscal 2027 expected to grow stronger with further shipment increase to DRAM and advanced logic customers. - Fiscal 2027 full year R&D expenses planned at JPY 330 billion, CapEx at JPY 190 billion. - Fiscal 2027 interim dividend expected to be JPY 361 per share. - First half of fiscal 2027 SPE new equipment sales expected to grow 41% year-over-year to JPY 1.200 billion.

In the fourth quarter, net sales were JPY 711.8 billion, up 28.9% from the third quarter. Gross profit was JPY 333.1 billion, up 41.3% from the previous quarter, with a gross profit margin of 46.8%. Full year net sales were JPY 2,443.5 billion, up 0.5% year-over-year, hitting a record high. Gross profit was JPY 1,107.8 billion, exceeding JPY 1 trillion for the second consecutive year but with a gross profit margin of 45.3% due to soaring costs and product mix changes. Operating income was JPY 624.9 billion, with an operating profit margin of 25.6%. R&D expenses were JPY 277.8 billion, up 11.1% year-over-year. Net income attributable to owners of parent was JPY 574.4 billion, up 5.6% year-over-year. Field Solutions sales in fiscal 2026 were JPY 626.0 billion, up 16.3% year-over-year. SPE new equipment sales by application: DRAM customers accounted for 31%, non-flat memory 10%, and non-memory 59%.

Risks - Ongoing geopolitical risks, particularly if the blockage of the Strait of Hormuz is protracted, there is a concern about shortage of parts and materials triggered by supply chain disruption.

Q: Regarding the outlook of the WFE market, is the understanding correct about the market size and composition, and any changes from 3 months ago?

A: WFE market size is expected to grow from $120 billion in 2025 to over $150 billion in 2026 and $170 billion in 2027. Memory proportion is expected to grow slightly. AI server inquiries have been added and some orders pulled forward in the past 3 months.

Q: Regarding the midterm management plan, confidence level and expectation for achieving targets?

A: Steadily progressing toward sales and ROE targets. Operating profit margin challenging due to foreign exchange, labor cost, and logistics cost increases. Taking actions to improve, aiming to achieve 50% or higher gross profit margin within 2 years and 35% OPM.

Q: Regarding share of etch system, reasons for share decline and actions to increase share?

A: Reasons include customer mix, regulations, and timing of delivery. Process share is increasing in areas like conductor etch, and there are opportunities in interconnect and capacitor processes, GAA, etc.

Q: Regarding profitability, other reasons for lower gross profit margin forecast besides labor cost and inflation?

A: Fixed costs increasing, need to take actions for price rise and productivity enhancement.

Q: Regarding lead time of products, current lead time and confidence in first half forecast?

A: Lead time getting shorter, with high confidence in first half forecast as received a huge amount of inquiries and orders.

Q: Regarding revenue driver for fiscal 2027, reason for coater/developer drastic growth and factors for Advanced Packaging sales growth?

A: Coater/developer growth due to EUV-related demand, investment for device scaling and capacity enhancement. Advanced Packaging growth driven by strong inquiries in advanced logic and HBM areas, including coater/developer for other coating films, laser tool wafer bonder, etc.

Q: Regarding second half of fiscal 2027 outlook, growth expectation and factors to outperform WFE market?

A: Second half expected to grow stronger with strong inquiries. Focus on core competence in high-end area devices to outperform WFE market.

Q: Regarding silicon photonics market opportunity and Field Solutions drivers?

A: Tokyo Electron has technologies applicable to silicon photonics from flat panel and CMOS image center. Field Solutions growth due to increased utilization rate of customers' fab, leading to more parts and support revenue.

Q: Regarding pricing strategy and gross profit margin improvement?

A: Fair pricing strategy, raising price when necessary and focusing on productivity enhancement, high value-added products, and new products.

Q: Regarding first half of fiscal 2027 sales drivers and next year growth expectation?

A: No special factors for first half growth, mainly AI server-related orders. Next year growth expected with positive factors like AI implementation acceleration and NAND shortage impact.

Q: Regarding next midterm management plan focus area?

A: Focus on patterning, device scaling, heterogeneous integration, enhancing share in etch market, expanding Advanced Packaging, and launching high value-added products.