ADTTF - Advantest Corporation (ATEYY) Q4 2022 Earnings Call Transcript
2023-04-26 15:03:06 ET
Advantest Corporation (ATEYY)
Q4 2022 Earnings Conference Call
April 26, 2023 3:00 AM ET
Company Participants
Yoshitake Kobayashi - Head of IR
Atsushi Fujita - Director, Senior Executive Director, CFO and CCO, EVP Corporate Administration Group
Yoshiaki Yoshida - Representative Director, President & Group CEO
Yasuo Mihashi - Senior Executive Officer, Co-CSO, Executive Vice President, Corporate Planning & Stakeholder Relations Group
Kimiya Sakamoto - Senior Executive Officer, CCRO, Executive Vice President, Sales Group
Conference Call Participants
Yu Yoshida - CLSA
Shuhei Nakamura - Goldman Sachs
Kenji Yasui - UBS
Mikio Hirakawa - BofA Securities
Masahiro Shibano - Citigroup
Yuya Yamamoto - Mizuho Securities
Presentation
Yoshitake Kobayashi
Thank you for joining Advantest FY 2022 Financial Briefing despite your busy schedule.
Let us introduce Advantest attendees, Representative Director, President and Group CEO, Yoshida; Director, Senior Executive Director, CFO and CCO, EVP Corporate Administration Group, Fujita; Senior Executive Officer, CCRO, EVP Sales Group, Sakamoto; Senior Executive Officer, Co-CSO, EVP Corporate Planning & Stakeholder Relations Group, Mihashi. And I will facilitate this session, I'm Kobayashi from the Investor Relations.
Today, Fujita will present the financial results for FY 2022 followed by Yoshida, presenting second mid-term business plan progress report and FY 2023 outlook. After that, we'd like to take questions from you. And this time after questions from institutional investors and analysts, we will take questions from the press members for 15 minutes from 5:00 p.m. Closing time will be 05:15 p.m.
Today's presentation materials are uploaded on the TDNet and on our website. Please download them if you are participating via telephone line. Let us make some advance notice before we begin the presentation. In the briefings, we will present may include forward-looking statements based on our current forecast. They may all entail risks and uncertainties. Please understand that actual results may be different from our outlook.
Now let Fujita offer you an explanation.
Atsushi Fujita
Please open the slide to page four. From my side, I would like to explain the financial results for fiscal year 2022. Fiscal year 2022 was a turbulent year, amid the end of the semiconductor demand spike triggered by COVID, global macroeconomic weakness and the semiconductor market slowdown, the favorable business environment in the first-half turned sharply downward in the second-half. Nevertheless, Advantest achieved record high sales, operating income, and net income.
We expanded our market share by reinforcing our product portfolio and strengthening our global sales and support network. In addition, we strategically executed parts procurement, production and shipments in order to meet customer delivery requests even in the middle of demand fluctuation. The key to our strong earnings was operational flexibility. Substantial yen depreciation in comparison to the previous fiscal year also boosted our business performance. ROE also reached a record high of 39.3%. I would like to express my gratitude to all of our business partners, employees and other stakeholders for their continued support in this uncertain business environment.
Please turn to page five. Here is the summary of results. Fiscal year 2022 results are as shown in this slide. Sales JPY560.2 billion operating income JPY167.7 billion, net income JPY130.4 billion. As I mentioned earlier, sales operating income and net income reached record highs and all increased significantly year-on-year.
Sales exceeded our full-year forecast announced in January by about JPY10 billion, due to faster than expected progress in deliveries to customers. However, both operating income and operating margin slightly undershot our full-year forecast, due to the recording of inventory valuation losses in fourth quarter for some system level test and other products and less favorable product mix.
Net income was roughly in line with our forecast. Combining our year-end dividend forecast of JPY70 and the interim dividend of JPY65 our annual dividend forecast of JPY135, our total shareholder return ratio, including buyback and dividend is 58%.
Please turn to next slide. This is a sales by segment in region. Even though the semiconductor market slowed down and production volume decreased, higher semiconductor performance drove an increase in test volume, which compensated for the Fed decrease in demand. Sales of SOC testers were driven by testers for advanced smartphone application processors, as well as for high performance computing and AI-related devices.
In addition, sales increased in the automotive and industrial sectors, which are seeing strong demand. Sales of memory testers also increased year-on-year as customers continued to invest in high performance memory semiconductor test capacity throughout the fiscal year, despite the decline in memory semiconductor prices. As the breakdown by region shows sales expanded in all regions, Taiwan continues to be our largest sales destination as it was in previous fiscal year.
Please turn to page seven. This is the Q4s results summary. In the Q4 of fiscal year 2022, we achieved record high sales. Gross margin declined quarter-on-quarter, due to the recording of inventory valuation losses for some SLT and other products, as well as the less favorable product mix. Each item will be explained in detail on the following pages.
Please turn to page eight. This is sales by segment for the fourth quarter. First, in semiconductor and component test systems business, the result was JPY110.8 billion, which is an up by 12.4% quarter-on-quarter. SLT tester sales were JPY86.9 billion, an increase of JPY6.9 billion year-on-year. While sales for high-end SOCs were sluggish, sales analog semiconductors increased. Memory tester sales were JPY23.9 billion, an increase of JPY5.3 billion year-on-year. Product delivery for both DRAM and non-volatile memory increased.
In Mechatronics Systems business, the result was JPY17.6 billion, up by 23.9% quarter-on-quarter. Sales of SEM metrology products increased amid wider adoption of EUV lithography technology by semiconductor manufacturers. In services, support and others, the result was JPY19 billion, down by 24.6% quarter-on-quarter. In our SLT business, which currently has concentrated sales exposure to a limited number of customers sales contracted significantly due to a decline in consumer related demand.
Page nine, please. This is the breakdown of sales by region. In Taiwan, sales of both SOC testers and memory testers increased. In other regions, delivery of testers for automotive and industrial devices progressed mainly in Southeast Asia. In South Korea, due to sluggish consumer demand smartphone-related sales decreased.
Please turn to page 10. Gross margin was 53.4%. Gross margin declined significantly quarter-on-quarter, primarily because of the recording of inventory valuation losses of approximately JPY3 billion on memory and storage SLT products. In addition, high-end SOCs occupied a less prominent place in this quarter's product mix resulting in less favorable sales mix, which caused gross margin to decline quarter-on-quarter. SG&A, including all other income and expenses was JPY40.1 billion. Operating income was JPY38.6 billion. Operating margin was 26.2%.
Please turn to the next page. As far R&D expenses in the fourth quarter R&D expenses were JPY16.2 billion. CapEx was JPY8.2 billion and depreciation was JPY6.1 billion. In fiscal year 2022, R&D expenses were JPY60.1 billion, CapEx was JPY25 billion depreciation was JPY21.4 billion. This was a year in which we made further investments in R&D targeting at medium to long-term growth. As for cash flow, free cash flow was JPY17 billion in the fourth quarter and JPY43.5 billion in full-year.
Please turn to page 12. This is balance sheet. Total assets was JPY600.2 billion, cash and cash equivalents JPY85.5 billion, inventories JPY169.1 billion, goodwill and intangible assets JPY95.8 billion, equity attributable to owners of the parent JPY368.7 billion. With a ratio of 61.4%.
In fiscal year 2022 due to difficulty procuring parts and materials Advantest held more inventories in order to enhance our ability to meet customer demands from a mid to long-term perspective. We will strive to refine our inventory management for optimal responsiveness to the change in market conditions.
This concludes my explanation on the financial results. Thank you for your attention.
Yoshiaki Yoshida
Thank you very much from my side, I will explain the second mid-term business plan progress report and FY 2023 outlook.
Please turn to page 14. This is the result of the second year of second mid-term management plan. This slide shows the financial progress of our second mid-term management plan to-date. In July 2022, we revised our MTP2 targets based on our FY ‘21 results and FY ‘22 outlook. The right side of the slide shows our cumulative results over the two years of the MTP2 periods so far. Compared with the revised targets highlighted within the red dashed line, amidst growing recessionary risk our business environment is becoming increasingly uncertain, but in terms of progress in a second year of MTP2, we achieve a record high results.
Continuing on from the previous year in addition to capturing the higher test demand for smartphone, HPC, and high performance memory devices where we have a competitive advantage, we steadily pursued a strategy of expanding our customer base in the automotive industrial and consumer sectors, which paid off along with our product strategy in the form of higher sales to these sectors.
Unfortunately, the semiconductor industry as a whole is currently facing headwinds. Since the volatility is inevitable in this industry, we set our MTP2 targets as three-year averages. Although market conditions are likely to be less favorable in FY ‘23, the final year of the plan, we will strive to achieve our targets.
Please turn to page 15. This is the MTP2 progress report so far. In 2018, we formulated our ground design at any year plan to define our goals for the next decade. And since then we have been working to achieve it. As part of our ground design, our second mid-term management plan or MTP2 is a three-year initiative to solidify the foundation for Advantest further grows in the context of strong growth expectations for the semiconductor market.
This slide summarizes our progress in implementing our MTP2 strategies over the past two years. As semiconductors become more complex, we have pursued R&D and carried out M&A in future growth areas with a view to technological trends. In FY 2022, we launched the inteXcell and innovative new memory test cell and acquired CREA, a major Italian test equipment manufacturer, which specializes in power semiconductors.
In addition, we further enhanced our responsiveness to customer needs with ongoing sales, support hiring, and have made progress in securing needed human capital in anticipation of future business expansion. In order to seek operational excellence, we launched a global business operation initiatives and commenced activities to promote a business process reform.
With regards to governance, in order to reinforce a global Headquarter management system, we introduced a CxO system to clarify management accountability. Furthermore, in January this year, we appointed a Group COO, and a Group Co-COO and shifted to a system with three representative directors. We feel that our growth foundation has become broader and more resilient, while maintaining industry-best customer satisfaction.
Please turn to page 16. This is semiconductor test market and a market share report. The calendar year ‘22 semiconductor tester market is estimated to have been worth about $5.2 billion, a year-on-year growth rate of about negative 6%, with the SoC tester market accounting for about $4 billion of that total and the memory tester market coming in at about $1.2 billion. Despite lower demand for semiconductors for cornerstone consumer electronics products, technological evolution in high-performance semiconductors drove demand for testers, which we believe compensated for the overall market contraction.
We estimate that our calendar ‘22 market share was about 57%, an increase of about 10 percentage points year-on-year. We believe that we have won the number one market share for the second year in a row, including a roughly 58% share of the SoC tester market and about 53% of the memory tester market.
In calendar year ’22, despite the market contraction, we expanded our sales by capturing the growing test demand for high-performance semiconductors such as HPC and Al devices, and gained market share.
Please turn to page 17. This is 2023 semiconductor market outlook. Uncertainty about the future of our business environment is increasing due to factors such as the increasing risk of global recession, due to soaring inflation and interest rate hikes, concerns about expanding geopolitical risks, and the potential for profound exchange rate fluctuations exist.
With the global economic slowdown impacting final demand, the semiconductor market is seeing production adjustments in response to surplus inventories. We estimate that it will likely take six to nine months for demand for semiconductors used in smartphones and other cornerstone consumer electronics to revive. Under these circumstances, the semiconductor tester market is expected to shrink in calendar year ‘23 for a second straight year.
We estimate the calendar year ‘23 SoC tester market will be worth between $3.4 billion and $3.8 billion, a year-on-year decline. While demand for testers for automotive and industrial devices is expected to remain firm, consumer electronics-related tester demand is expected to go on declining in the first half of the year.
In the calendar year ‘23 memory tester market, we expect strategic investments in high-end memory to continue, but it is estimated that the overall size of the memory tester market will decrease year-on-year to $900 million to $1.1 billion, due to the deterioration of memory semiconductor demand.
However, in the long-term, we expect an increase in semiconductor demand from new applications, including electric vehicles and ChatGPT will contribute to the expansion of the semiconductor tester market.
Please turn to page 18. This is FY 2023 forecast. Due to the slowdown in the tester market, our FY ‘23 forecast calls for sales of JPY480 billion, operating income of JPY105 billion, income before income taxes of JPY103.5 billion, and net income of JPY78 billion.
Customers are expected to continue their inventory and production adjustments for the time being. We foresee sales declining in the first half, but they should gradually improve in second half. Our full-year gross margin is expected to be around 55%. We forecast a decline from the previous fiscal year primarily due to changes in our product mix.
Our operating margin is expected to decline to 21.9% as we continue to invest in R&D and CapEx to respond to new projects and applications that will ramp up in calendar year ‘24 and beyond. This forecast assumes exchange rates of $1 to JPY130 and EUR1 to JPY140.
Our latest forecast for the impact of exchange rate fluctuations on FY ‘23 operating income is plus JPY1.1 billion per one yen of JPY depreciation versus U.S. dollar, and minus JPY0.3 billion per one yen of JPY depreciation versus the euro.
Regarding the tightening of restrictions on the export of semiconductor production equipment to China by the United States and its allies, the direct impact on our FY 2023 earnings is currently expected to be minor, but we will continue to closely monitor the situation.
Please turn to page 19. This is FY ’23 outlook by segment. This is FY 2023, semiconductor and component test systems outlook. Our full-year FY ‘23 SoC tester sales forecast is JPY265.0 billion. Tester investment is likely to slow down across a wide range of applications. Due to the global economic downturn, we expect a drop in demand for advanced process products such as devices for smartphones and data centers, as well as for mature process products used in automotive and industrial applications.
Our full-year FY ‘23 memory tester sales forecast is JPY70.0 billion. Although customers will continue to make some technology buys in anticipation of long-term high-end memory demand growth, memory tester sales are expected to decline due to worsening memory semiconductor market conditions.
Please turn to page 20. This is FY 2023 Mechatronics and a service support and other business outlook. Our full-year FY ‘23 Mechatronics system, system sales forecast is JPY45 billion. Sales over device, interface of products, and test handler is expected to decline in step with the slowdown in tester reinvestment.
However, sales of SEM metrology products are expected to stay flat year-on-year due to wider customer adoption of EUV lithography and increased demand for mature process photomasks.
Our full-year FY ’23 services, support and others sales and forecast is JPY100 billion year-on-year increase. We expect strong demand for maintenance services due to the steady growth of our installed base. In our system-level test business we expect sales to remain flat year-on-year, including sales to postponed into FY ’23 due to the impact of the decline in consumer-related demand in FY ‘22.
Please turn to page 21. This will be the final page, and this is a key measures for FY 2023. Currently, the semiconductor market is in the midst of an adjustment that began in the second-half of calendar year ‘22. We expect it will be a little longer before the market bottoms out. But it should pick up again going into calendar year ‘24. FY ‘23 and the final year of MTP2 will be a year in which we strive to achieve our MTP2 targets and prepare for a new wave of demand by building a stronger and a more resilient management foundation.
And we have key images. We will strive to create the ideal customer value through the development of leading edge test technologies including a further expansion of our test solutions for future growth and markets such as AI and power semiconductors, and reinforcement of our data analytics business foundation.
We will continue to make necessary gross investment in new projects targeting a future business expansion. In addition, we will seek operational excellence by among other things refining a supply chain management for better responsiveness to demand, fluctuations, and actively utilizing the DX to improve company-wide productivity.
Finally, we held our first sustainability briefing at the end of last month. The briefing explain our belief that betterment of our human capital is one of the keys to improving our corporate value. To that end, we have launched a mid to long-term project to support the sustainable growth of Advantest by introducing ESG initiatives, including investment in a human capital by promoting the enhancement of individual employee's skills and the deployment of a global personnel system.
That's all for my presentation. Thank you very much.
Question-and-Answer Session
Operator
Now let us open the floor for questions. We will take questions in the following manner. On the Webex screen, please click the participant icon and then press raise button -- raise hand button when you are designated by the facilitator, a mute button is displayed. Please unmute before you speak and the state your affiliation and your name before stating your questions. We'd like to take only one question and one follow-up question per person. If we have time, we shall entertain additional questions. There are also simultaneous interpretation streaming service. So please ask your question slowly and clearly. We'd also appreciate you [Indiscernible] from asking questions about the individual companies. We'd also like to limit questions to be stated only in Japanese, because speakers are only listening to the Japanese line.
Thank you for your understanding. Now let us take questions. From Mitsubishi UFJ Morgan Stanley Securities, Mr. [Wataki] (ph).
Unidentified Analyst
Can you hear me?
Yoshiaki Yoshida
Yes, I can hear you.
Unidentified Analyst
Thank you. Thank you. Regarding your revenue forecast, there could be certain upside in my view. Based on market conditions you are conservative for the drop in revenue and mid-tier local manufacturers investment is gaining momentum and ChatGPT now having a lot of the momentum, everyone looking for business opportunity. And I'd like to know the advantage to view on these developments?
Yoshiaki Yoshida
Well, this is Yoshida speaking. First of all, regarding our outlook. You think that we -- our outlook is rather conservative, but the most recent condition is rather difficult and for mid to long-run, we are confident market is going to grow and the customers in China mainly in fabulous areas, they are quite active. However, for the time being on our operational levels, best case is that this revenue forecast. And if we are able to maintain our market share, we could achieve more. And we believe that we can maintain our market share. So of course, I'm not going to say there is no possibility for upside. However, we are not still uncertain about the bottom out in our side, so this is our outlook.
And regarding ChatGPT, there are court discussions in the market. And certainly, on a customer basis, there are -- we are capturing almost all of the major players, but direct impact on revenue would be in the second-half of this year or maybe in fiscal year 2024. Therefore, we like to prepare ourselves. So we like to position this period for preparation. That is my answer.
Unidentified Analyst
And can I ask a follow-up question? Regarding this performance forecast, when did you make this forecast?
Yoshiaki Yoshida
Well, around January to February, we made a calculation of the numbers and based on these numbers, we made our budget.
Unidentified Analyst
I see. Okay. That is all my questions.
Operator
Thank you. Now let us move on to the next question. Yoshida-san from CLSA.
Yu Yoshida
This is Yoshida from CLSA. Can you hear me?
Operator
Yes. Please go ahead.
Yu Yoshida
Thank you for this opportunity. In the tester market, this year, we are seeing or expecting a decline for two years in a row. At this point, among the fabulous customers when we look at the roadmap toward fiscal year 2024, how do you foresee the tester market?
Yoshiaki Yoshida
Please allow me to explain. Customer's plan for device development is something we understand through our engagement with customers toward fiscal year 2024, advanced node -- new advanced node is going to be used by some customers and we know, who they are and we are involved in those projects. Testers, we need to collect a lot of technological data and engineering testing capacity is going to be needed. And in fiscal year 2024, in various projects with customers, we are currently engaged and preparing. So that we can succeed in multiple projects that could contribute to our revenue in 2024.
It is true that 2023 is going to be a moderate year. But in 2024, we are expecting to capture a meaningful portion of the TAM. That's all from me. Okay, can you hear us, Yoshida-san?
Yu Yoshida
Yes. I did hear you. Thank you. I have a follow-up question. SLT system level test business. There is a valuation loss on inventories together with memory tester, you explained the amount was JPY3 billion, but only for SLT alone, how much was it? And the revenue forecast for SLT in this fiscal year is flattish, slight increase. So I believe it is steady for testers business. What is the background here? You mentioned that some of the opportunities were deferred from the previous year, but can you please explain your view on the market situation?
Yoshiaki Yoshida
Yes. Regarding system level test, federation loss was recorded for memory related system level test. And the exact amount is something we would like to refrain from disclosing. But more than a half of approximately JPY3 billion is the answer I can share with you, which is a large amount. Memory related system level market declined, and there is quick switching over to the next generation. Meaning that we have to face with our materials on hand becoming obsolete.
Regarding system level test. Our challenge has been related to not only memory, but SLT system level test. And our weakness is that we only have a limited number of customers. With a significant decline of system level test, we once again recognize our high dependence on limited number of customers and business stopped there and some of the opportunities were deferred and we had to postpone some of the opportunities that we thought we will be able to secure.
For the deferred opportunity, we believe we will be able to capture them sooner or later, and we are expecting them to contribute to revenue in fiscal year 2023. Also, consumables related system level test business is in the company that we acquired. In that market, once inventory adjustment ends, we can expect some market to recover. And there, we will be able to expect revenue that will be equal to the revenue from the previous year.
Yu Yoshida
Is it not the case that the customer -- number of customer is decreasing?
Yoshiaki Yoshida
No, we are strategically trying to increase the number of customers and there is a sign of new demand. So customers’ performance recovery and by acquiring new customers, we would like to leap toward fiscal year 2024.
Yu Yoshida
Thank you. That's all. Thank you.
Operator
Thank you very much. Let's move on to the next question. Goldman Sachs, Nakamura-san, please.
Shuhei Nakamura
Well, thank you very much.
Yoshiaki Yoshida
Thank you.
Shuhei Nakamura
Well in your previous explanation, the revenue it is expected to recover in the second-half of the year to some extent, but in the current order situation. What sort of recovery story do you have it for the second-half of the year? What’s your view on this?
Yoshiaki Yoshida
Could you repeat your question? Or let me clarify your question, so the current order situation. Looking at that -- what sort of recovery do you expect in the -- do we expect in the second-half of the year? Was that your question?
Shuhei Nakamura
Yes, that's right.
Yoshiaki Yoshida
Okay. Thank you very much in the first-half of the year until maybe there is a order backlog and we will continue the shipment. AT, BT these are mobile devices are the key, and when will they recover this is something that we are trying to figure out by talking to customers and we are monitoring the timing very closely. And in this current situation, at this point in time, we have been speaking to customers, but they gave a varied answers about the recovery timing. Some customers are saying in the second-half of the year they have a more production plan. So we have some expectations from such customers, but other customers have test the capacity available already, they are still trying to use up all the capacity that they already have. Given these situations for different customers, the situations vary. Thank you.
Shuhei Nakamura
Thank you very much. Understood, if that's the case in the second-half of the year mobile, we will need to do fluctuation, and server and HPC. What about the trends of these areas?
Yoshiaki Yoshida
Regarding HPC, looking at the current customer trends, the order backlog capacity is still being used up by those customers. This situation is going to continue just like the first-half of the year and towards the second-half of the year as was mentioned, generative AI, conversational AI and HPC AI, these demands could -- in 2024 grow into a great deal, because of that in the second-half of FY ’23 we believe that these are trends will manifest themselves.
Shuhei Nakamura
Understood. Thank you very much.
Operator
Thank you. Now we'd like to take the next question, Mr. Yasui from UBS.
Kenji Yasui
Yasui from UBS, can you hear me?
Yoshiaki Yoshida
Yes. I can hear you.
Kenji Yasui
Thank you. I have also question concerning HPC, so many people paying attention to HPC, so a number of the customers and also the -- I'd like to know whether they are increasing number of the customers for HPC? Whether the potential customers are on the increase or not?
Yoshiaki Yoshida
Well, You know some companies and you can imagine, please consider that we are already doing business with them on top of that, for example, in China or in Japan or in Taiwan and South Korea, and in Europe, there could be certain possibilities for such players to emerge, but any [Indiscernible] activities cannot be observed. Of course, in China, there are certain customers of ours may start coming to this area, but we have not seen that. And customers in the U.S. we believe that we are quite closely working with them.
Kenji Yasui
Well, regarding the potential customers in the United States, do you believe that there could be certain phase where they would make the investment or you are not sure or expecting that to happen in the second-half?
Yoshiaki Yoshida
Already designing the devices and making prototype, that is our assumption and we had project on that. But as you know around the world, there are also regulations and rules making. Therefore, when mass production stage comes in, in what part of the manner including the back end processes, we have no clear plans.
Kenji Yasui
Well, thank you very much. A follow-up question, my second question is regarding this fiscal year's revenue guidance and the revenue is JPY80 billion to be reduced, but operating profit would be reduced JPY63 billion considering the marginal profit your view is for profit to decrease quite significantly? And I'd like to know your views on the gross market and please also enlighten us with the product mix?
Yoshiaki Yoshida
Well gross margin compared to last fiscal year, our plan is to see a little bit of the dip that considering the product mix, this is not significant change. And at the operating income level, this dip appears to be slightly big. But although we are in the down year, but we are not going to spend unnecessary expenses and we like to control where we can role. And as I mentioned, we have a new project and we'd like to also making a capital investment for production expansion for the future growth. And we are also working on Advantest cloud and a better business and we'd like to secure some manpower.
So we are not intending to work on that, so beyond 2024 leap forward, such expense requiring investment is likely to continue. So currently our phase is where we have to spend expenses and it appears, because especially the revenue is declining, but we are considering this is the investment phase for our future. So operating income and operating margin decline is something we have to accept at the moment in order to make progress.
Kenji Yasui
I might repeat, but it's not deterioration with the product mix, you are sharing.
Yoshiaki Yoshida
Well, 57% gross margin will be developing 55% or so. Therefore, product mix could be thus favorable. You could consider that. However, the raw material cost increase and we are also making effort to raise our prices. So in this kind of the manner, we like to aim to exceed 55%. However, our current view is around 55% that would be, sort of, the point given our current product mix.
Kenji Yasui
Thank you very much.
Operator
Thank you. Let us move on to the next question. Next is Hirakawa-san from BofA Securities. Please go ahead.
Mikio Hirakawa
Thank you. This is Hirakawa from BofA Securities. Thank you. In fiscal year 2023 in the SoC tester market, there's minus 5% to 6% was your view for the market. And the factor for this range, what do you have as the factor for this range? And minus 19% is for SoC tester in this fiscal year. And what was the basis for your forecast? That is all. Thank you.
Yasuo Mihashi
Yes, Hirakawa-san, hello. This is Mihashi speaking. So minus 5% to 15% for SoC tester market. The reason for this expectation is due to the macroeconomic situation recovery of consumer electronic products is the key there's recovery in the Chinese market together with a smartphone market recovery. And to what degree is that going to recover is the question that we had when we decided this range minus 19% is our figure.
Mikio Hirakawa
And in terms of market size, where do we see our potential decline in sales?
Yasuo Mihashi
There's JPY3.9 billion -- excuse me, please lease give me a second. JPY3.4 billion to JPY3.8 billion is the range we are explaining. This is below the midline, that is our expectation for the TAM and we considered this based on our expectation for the TAM at the moment.
Mikio Hirakawa
Thank you. As a follow-up, are you preferred to have company-wide number? But if you divide your sales forecast between front and the back end. Can you give me some hint? What is the breakdown?
Yasuo Mihashi
Yes, as President, Yoshida explained earlier, basically, in the first-half, there is less visibility in the market. There is excess capacity as well, so there will be more concentration in the second-half in our sales forecast.
Mikio Hirakawa
Well, I think I misunderstood because Sakamoto-san mentioned earlier that in the first-half, you will be filling order backlogs. So I expected that there is a significant amount of order backlog. In the previous earnings call, I think there was nine months worth of inventory. So I expected more risk to be in the second-half. But was that wrong. Where is it that I'm wrong?
Yasuo Mihashi
Well, perhaps you do not consider the lead time. So nine to 12 month was the previous lead time, but currently it has improved to six to nine months. As a result, Q4 sales grew, so in that regard, we are recovering, but due to lead time. In the third and the fourth quarter based on the market recovery, there will be more sales growth, compared to the first-half of the year.
Mikio Hirakawa
Thank you.
Yasuo Mihashi
Thank you.
Operator
Thank you very much. The next question, please. Citigroup Ashibano-san, please.
Masahiro Shibano
Thank you very much for your explanation, Ashibano of Citigroup. In the earlier explanation, in 2024 towards 2024 HPC recovery is expected. This may be the case. Against this backdrop generative AI, could be a promising application. So the background to the explanation, does that include the inside of yours when you have communications with customers. You haven't received the orders and so on yet, but from the second-half of ’23 towards ‘24. Do you already have some inquiries or being visible that can lead to such better growth? Or is it more of a high level expectation of whole hopes on the part of the company? That's my first question.
Yoshiaki Yoshida
Well, from customers, specifically, device tester projects are underway. So it's not that we may receive orders. Device are actually being a designed and the prototypes are being created under so one, that's the current situation. So there are some specific projects that are underway and we wonder when the timing of a mass production is nasty about of the timing of mass production. Thank you very much. Did I answer your question?
Masahiro Shibano
Yes. You did. I muted myself and couldn't unmute myself, so I apologize. So I have a follow-up question. These are about numbers, so SoC is the sales outlook from the previous year and this year, I believe that they're being added of fluctuations. So HPC related a portion if you're trying to separate the HPC, I think it's difficult for you to say a percentage point, but could you say maybe 20%, 40% or 60%? Can you give me some colors perhaps? Thank you.
Kimiya Sakamoto
This is Sakamoto speaking. Well, it is difficult to mention numbers in a quantitative manner, but in FY 2022, and ‘23 when you make a comparison between the two years in FY ‘23. A lot of our SoC applications exist, for example, mobile AP, BP, HPC, AI applications. So overall from associated market, if you look at that portion in FY ‘23, accounts for HPC and AI, the largest portion, that's our exercise result. So looking at that, our business segment we have a strong share in this business segment. So it contributes to our sales, that's our current expectation.
Masahiro Shibano
Thank you very much.
Operator
Thank you very much. Now we'd like to move to the next question. Mr. Yamamoto from Mizuho Securities.
Yuya Yamamoto
JPY480 billion of full-year revenue. What is the split between first-half and second-half? And what will be the driver for recovery or increase in the second-half?
Yoshiaki Yoshida
Hello, Mr. Yamamoto. Well, regarding the split between first-half and the second-half, we'd like to, if possible, avoid making clear split, but roughly speaking, second-half would be more than 10% bigger. That is our view. Did you get me?
Yuya Yamamoto
So 10% recovery from first-half to second-half what area would be driving this recovery? Which segment?
Yoshiaki Yoshida
Well, segment wise. Mobile recovery is what we are expecting. And concerning FY 2023, our customers, rather than concentration evolving, there will be a functional increase. So whether we could expect a significant recovery. We have not yet to confirm that, but towards the second-half, smartphone related demand to be recovered. That is our expectation. Conversely speaking, the first-half revenue is rather visible.
Yuya Yamamoto
Can I understand in that manner?
Yoshiaki Yoshida
Yes.
Yuya Yamamoto
Thank you very much. That's all my question.
Yoshiaki Yoshida
Thank you.
Operator
Thank you. We are almost reaching the time to finish this Q&A. But next, we'd like to move on to questions from the media. Nakashima-san from [Indiscernible]. Please go ahead. Are you there? If not, [Matura-san] (ph) from Nikkei, please go ahead.
Unidentified Analyst
This is [Indiscernible] from Nikkei. Thank you for this opportunity. I have a question related to investments, I'm on page 11, there's the investments at JPY60.1 billion from R&D. In the fiscal year that ended, I believe the amount of investment was the largest in your history. And you mentioned a couple of times in your explanation, that in fiscal year 2023, it is going to be a difficult year? But what is the level of investment that you are looking at especially in comparison against the previous year?
Also, in a difficult year like this, how are you going to be making investments, your targets, your focus areas. Can you please give me more color on that? Thank you.
Yoshiaki Yoshida
Yes. So are you talking about CapEx when you say investments, Matura-san.
Unidentified Analyst
Oh, excuse me R&D expenses, capital expenditure, I'm talking about both.
Yoshiaki Yoshida
On page 18, we have performance forecast for fiscal year 2023 and we have put the amount of CapEx and R&D expenses. And in terms of the targets in focus area, as for R&D expenses, of course, we need to increase head counts for R&D. And as we have been saying, and there is development project. We need to reinforce our structure, that is why we are expecting an increase for R&D expenses.
And for CapEx, we have been trying to control this further compared to 2022. This is a slight decline, but where we are planning to invest is the most simple answer I can give you is in Arizona, in the U.S., factory is currently newly built. To manufacture a large number of sockets with robots, this is requiring a large amount of investment. From the U.S. or the State government, there is a benefit that we can be supported. Therefore, it has meant of capacity, there is one area.
And in Taiwan, we are about to acquire a company named Shimpu, which manufactures test boards. And for Taiwanese customers, U.S. customers, we need to enhance our production capacity. Such investment for growth is expected and included in this JPY21 billion. Also for the past two years, we have been working on improvement of this environment, but that is going to moderate in this fiscal year.
So we will be selective of opportunities to make investments.
Unidentified Analyst
That is all from my side. Thank you.
Yoshiaki Yoshida
I apologize for not noticing these numbers on this page. So there is a slight decline in CapEx. And this is not because of a difficult performance or the market condition, but this is just due to adjustments.
Unidentified Analyst
Yes. Understood. Thank you.
Operator
Thank you very much. Okay, let's move on to the next question. [Indiscernible] Newspaper, [Indiscernible], please.
Unidentified Analyst
Can you hear me?
Yoshiaki Yoshida
Yes, we can.
Unidentified Analyst
Thank you. About the lead time or delivery time? Six to nine months is the lead time you mentioned. Normally you use three months, so when can things be normalized? And to that end what sort of a measures? Are you planning a new -- if you're planning any new measures, could you please talk about them? Also, difficult procurement situation of a semiconductors, is this changing? And because of the inventories are increasing, so could you please talk about the background as to why? Thank you.
Yoshiaki Yoshida
Regarding the lead time, two to three months lead time was a thing over a few years ago. But over the past three years or so, lead time has been expanding, because of the tied semiconductor market. The market has improved, so because of the lead time has been expanding little by little, our parts are procurement suppliers provide a volume that we require. They cannot provide a volume that we need. It's not just us, but also automotive industry has suffered from this, so lead time has been expanding as a result.
I believe that the peak was last autumn through winter. The semiconductor market peak or bottom When you look back, you will know for the first time. So in advance, so at the beginning, you cannot really understand of foresee when the peak or bottom is, when you look back, you finally understand when the peak was and when the bottom was. I believe though maybe the peak was a last summer through autumn looking back.
And then once the peak is over, the supplier started supplying things some more smoothly than before. There are some delayed parts and so on. But in that sense that, because of the improvement on a part of suppliers, our lead time has been improving or shortening as well. So we have a long lead times parts and we try to placing orders we're not ahead of -- when they were needed. So because of an expansion of supplier, supply a capacity our inventory and level has been increasing as well. Of course, we don't want to see our inventory keep increasing so we need to control, but I believe that the current level is a peak level. That's our hopes.
Going back to two to three months lead time is something that cannot happen in the immediate future. In my view that is because in the past companies and so on suffered to a great deal. They didn't have enough inventories. So as a result, they couldn't ship products out, so they started holding high level of inventories. Having said that the suppliers increase their capacity that not the case actually. So once the upcycle starts happening again, there will be a supply shortage once again in the future. Because we cannot, necessary, we cannot always avoid such a situation, so how to control a demand and supply is something that we'd like to keep working on this year.
Unidentified Analyst
So in the immediate future or foreseeable future are you talking about FY ‘23 and ‘24, so normalization won't happen in those three years?
Yoshiaki Yoshida
FY ’23, well I said lead time should be somewhere between six to nine months. If this continues, and in FY ‘24, if there is another upcycle of the market, then the lead time will expand once again. We are concerned about this.
Unidentified Analyst
Yes. That's right. Okay one more question. So maybe the market will make it some momentum going forward, because of ChatGPT and so on such generative AI is gaining much attention. Are you also paying attention and are you -- you are selling testers to GPU players and so on, I believe. How much upside can you expect because of this? Could you talk about the size of your expectation here? Thank you.
Yasuo Mihashi
This is Mihashi speaking. Well, ChatGPT is a hot topic today, and because of the growth of our ChatGPT, GPU and accelerators, processing the capacity, high processing capacity. Business should grow and we have customers in this space, so we should be a benefited this can be a testing stone in a way. Having said that using ChatGPT you need an environment and consumer electronics, we'll be using ChatGPT and data centers and high performance data centers, maybe the high performance of GPUs that we'll be deployed here.
So if the usage of a ChatGPT increases, including a macroeconomy, we need to see the recovery of consumers electronics as well. So if this positive development happens then a performance a trend and the data center space can grow. And currently a GPU and a high performance computing areas, we have a sudden positioning in this market. And going forward, I believe that this trend is going to benefit us.
Unidentified Analyst
When do you expect such a benefit to materialize?
Yasuo Mihashi
Well for the time being is very uncertain and unclear, so in the -- in this quarter and the next quarter, we'd like to get more clarity on this and we would like to communicate our analysis to you. Thank you.
Unidentified Analyst
Thank you very much.
Operator
Thank you. Now from [Indiscernible], please.
Unidentified Analyst
Can you hear us?
Yoshiaki Yoshida
Yes, I can hear you.
Unidentified Analyst
So in about from electric devices [Indiscernible] and CY ’23, what is the image of the market share of the semiconductors tested by SoC and memory tester, particularly for memory testers in the GDR5 -- in five high speed, there are quite the strong presence of the competitors. So could you share the market share image for calendar year ’23?
Yoshiaki Yoshida
Well, for market share image for 2023, SoC and memory combined 55% to 60% and SoCs same 55% to 60% and the memory 50% to 55%, so that is our view. And for our memory high speed, the competition is existing. However, in the DDR side DRAM, we are making advantageous moves, so even though there are competitions, but concerning market share, we are not expecting a significant impact on our market share.
Unidentified Analyst
Thank you very much.
Operator
We have received a lot more questions, but unfortunately, this is time to close today's earnings call for fiscal year 2022 for Advantest. Thank you very much for your attendance.
For further details see:
Advantest Corporation (ATEYY) Q4 2022 Earnings Call Transcript