Financial Review

Consolidated Financial Results of FY2020 Q3 (April 1, 2020 through December 31, 2020)

Overview of Business Results

January 28, 2021(in billion yen)
  Nine months ended December 31, 2019 Nine months ended December 31, 2020 As compared to the corresponding period of the previous fiscal year increase (decrease)
Orders received 197.1 220.7 12.0%
Net sales 207.7 222.2 7.0%
Operating income 47.1 46.2 (2.0%)
Income before income taxes 47.8 43.2 (9.6%)
Net income 38.7 36.5 (5.7%)

During Advantest’s third quarter ended December 31, 2020, the global economy faced a severe contraction due to the worldwide COVID-19 pandemic. Although governments are making efforts to salvage their economies, struggling to balance economic activities and infection control measures, 2020 still saw a historic global economic contraction.
On the other hand, in the semiconductor test equipment market, demand for memory test systems and SoC test systems for devices used in data centers and game consoles increased against the backdrop of the worldwide adoption of remote work and growth in home consumption due to lockdowns. Lockdowns and other restrictions on movement also depressed demand for automobiles and industrial equipment from early spring, but with the recovery of final product manufacturing, customers in these sectors regained their appetite for investment in the third quarter. Mixed influences impacted smartphone-related demand, with the trend towards increasing demand for test equipment due to smartphone performance improvements counterbalanced by surplus capacity in the Chinese smartphone-related supply chain triggered by tighter US regulations, but against the backdrop of fierce competition amongst other smartphone makers, the surplus capacity issue was resolved sooner than Advantest had expected.
As a result, orders received were (Y) 220.7 billion (12.0% increase in comparison to the corresponding period in the previous fiscal year) and sales were (Y) 222.2 billion (7.0% increase in comparison to the corresponding period in the previous fiscal year). In terms of profit, operating income was (Y) 46.2 billion (2.0% decrease in comparison to the corresponding period in the previous fiscal year) due to a lower proportion of high gross profit margin products in our sales mix compared to the corresponding period in the previous fiscal year. Operating income for the period includes a one-time gain on a business transfer of approximately (Y) 2.5 billion. Income before income taxes was (Y) 43.2 billion (9.6% decrease in comparison to the corresponding period in the previous fiscal year) and quarterly net income was (Y) 36.5 billion (5.7% decrease in comparison to the corresponding period in the previous fiscal year) due to higher foreign exchange losses caused by the appreciation of the euro against the US dollar. Average currency exchange rates in the period were 1 USD to 107 JPY (109 JPY in the corresponding period of the previous fiscal year) and 1 EUR to 122 JPY (122 JPY in the corresponding period). The percentage of net sales to overseas customers was 95.4% (94.9% in the corresponding period in the previous fiscal year).

Semiconductor and Component Test System Segment

(in billion yen)
  Nine months ended December 31, 2019 Nine months ended December 31, 2020 As compared to the corresponding period of the previous fiscal year increase (decrease)
Orders received 140.4 154.0 9.7%
Net sales 152.2 142.1 (6.7%)
Segment income 52.1 41.1 (21.1%)

In this segment, test demand for SoC semiconductors for HPC (high-performance computing) applications stayed firm amidst the widespread adoption of remote work and the growth of home consumption. Sales of memory test systems also continued to be strong, with demand centered on memory devices for servers and game consoles. In addition, due to exacerbated friction between the United States and China, demand for SoC test systems from the smartphone-related supply chain weakened in the first half, but on the other hand smartphone performance gains and fierce competition among smartphone makers have been driving growth in test demand for devices such as image sensors, display driver ICs, and application processors. Orders for SoC semiconductor test equipment have been strong since the second quarter, mainly driven by these device types.

Mechatronics System Segment

(in billion yen)
  Nine months ended December 31, 2019 Nine months ended December 31, 2020 As compared to the corresponding period of the previous fiscal year increase (decrease)
Orders received 23.6 29.5 25.2%
Net sales 26.1 30.1 15.5%
Segment income (1.6) 4.8 -

In this segment, orders for nanotechnology products increased amidst expanding adoption of EUV lithography. Growing demand for memory test equipment also drove sales of device interface products, which are strongly correlated with memory test demand. In addition, a gain of approximately (Y) 2.5 billion from the transfer of Advantest's probe card business was included in this segment's profits.

Services, Support and Others Segment

(in billion yen)
  Nine months ended December 31, 2019 Nine months ended December 31, 2020 As compared to the corresponding period of the previous fiscal year increase (decrease)
Orders received 33.1 37.6 13.6%
Net sales 29.4 50.5 71.9%
Segment income 3.7 8.1 2.2 times

In this segment, the system level test business, which handles the products of Essai, Inc., acquired in January 2020, and Advantest's SoC system level test systems, among other products, saw robust demand across the board amidst active data center investment and higher smartphone performance requirements.

Overview of Financial Condition

Total assets at December 31, 2020 amounted to (Y) 362.7 billion, an increase of (Y) 6.9 billion compared to the fiscal year ended March 31, 2020. This was primarily attributable to an increase of (Y) 8.3 billion in other financial assets, (Y) 7.6 billion in trade and other receivables, and (Y) 5.8 billion in inventories offset by a decrease of (Y) 16.2 billion in cash and cash equivalents. The amount of total liabilities was (Y) 124.0 billion, a decrease of (Y) 0.3 billion compared to the fiscal year ended March 31, 2020. This was primarily attributable to a decrease of (Y) 5.5 billion in trade and other payables offset by an increase of (Y) 2.5 billion in other financial liabilities and (Y) 2.4 billion in deferred tax liabilities. The increase in other financial assets derives from fair value measurement on invested securities, and the increase in other financial liabilities derives from an increase in deposits received. Total equity was (Y) 238.7 billion. Ratio of equity attributable to owners of the parent was 65.8%, an increase of 0.7 percentage points from March 31, 2020.