[Interpreted] Thank you for waiting. At this point, we'd like to begin this earnings announcement session for the fourth quarter of fiscal '18. .

Executive Vice President and Chief Financial Officer, Hiroki Totoki; corporate executives, Senior General Manager of Finance Department, Atsuko Murakami; and VP, Senior General Manager of the Global Accounting Division, Hirotoshi Korenaga..

Mr. Totoki will present the financial results of fiscal fourth quarter and also give you the outlook for the fiscal '19. And 20 minutes will be spent for speech to be followed by 15 minutes Q&A. Altogether, we will spend 45 minutes. .

Mr.

Totoki?.

[Interpreted] I will talk about these 2 topics. The fiscal '18 consolidated sales increased 1% year-on-year to JPY 8,665.7 billion and operating income increased JPY 159.4 billion to JPY 894.2 billion. .

As is shown in this slide, adjusted operating income excluding extraordinary items increased JPY 99.7 billion to JPY 809.3 billion. .

Income before income tax has exceeded JPY 1 trillion for the first time in our history, reaching JPY 1,011.6 billion..

Net income attributable to our shareholders increased to JPY 425.5 billion to JPY 916.3 billion. Consolidated operating cash flow excluding Financial Services segment for the fiscal year was JPY 753.4 billion. We have begun to disclose cash flow by segment from this earnings announcement. .

Excluding the Music segment, in which we acquired EMI Music Publishing in fiscal '18, all the business segment generated positive net cash flow. And the Game & Network Services segment and the total of the 3 segments included in the Electronics Product & Solutions segment, which was created on April 1, made significant contributions.

This slide shows these results by segment..

Now next is the consolidated results forecast for fiscal '19. Consolidated sales is expected to increase slightly year-on-year to JPY 8,800 billion. Operating income is expected to decrease JPY 84.2 billion to JPY 810 billion. But adjusted operating income in the previous fiscal year was JPY 809.3 billion.

And assuming no extraordinary item in the current fiscal year, adjusted operating income is expected to be flat year-on-year. .

Net income attributable to Sony shareholders is expected to decrease JPY 416.3 billion to JPY 500 billion. Consolidated operating cash flow excluding Financial Services segment is expected to be JPY 760 billion. .

And FY '19 forecast for each segment is shown here, is in that year-on-year increase in loss in All Other, Corporate and elimination is primarily due to an increase in expense for future growth including AI and robotics..

Now I will explain situation in each business segment. First, the Game & Network Services, and the sales were JPY 2,310.9 billion. Although, PlayStation 4 hardware sales decreased, overall sales increased 90% year-on-year, mainly due to an increase in game software and network services revenue.

Operating income increased JPY 133.6 billion to JPY 311.1 billion due to the impact of the increase in sales. Sales in fiscal '18 are expected to be JPY 2,300 billion. Despite a decrease in unit sales of PS4 hardware and the impact of foreign exchange rates, sales are expected to be essentially flat due to an expected increase in game software sales. .

Operating income is expected to decrease JPY 31.1 billion to JPY 280 billion. Despite PS4 hardware cost reductions, we expect operating income to decrease due to the increase in development expense for the next generation console and low contribution from the first-party game software title, like God of War last year..

Now I'd like to introduce the initiative SIE is implementing in gaming space, which is attracting much of the attention. SIE currently operates PS Now in this area. And today, I will explain the current status of this service and at the corporate strategy meeting in IR day next month, we will discuss our vision and strategy in this space. .

SIE is committed to the vision of making PlayStation the best place to play by delivering users the best content in the best manner possible. Game streaming is one important way to achieve that. SIE made a deliberate strategic move back in 2012 when it purchased Gaikai, because SIE anticipated that the future would involve game streaming.

At that time, Gaikai was a potential competitor, because it was operating game streaming service and SIE decided to acquire it in order to capture technology and their intellectual property. Five years have passed since PS Now is launched in the United States in 2014. This is a subscription model and charges $19.99 per month.

This year, we added 9 countries in Northern and Southern Europe, bringing the total number to 19 countries. .

The average annual increase in paid subscribers has exceeded 40% since the service was launched. And the number of users has increased around the same amount every year, reaching approximately 700,000 today. We have leveraged our strong relationship with the publishers to provide over 750 PlayStation 3 and PlayStation 4 titles to our subscribers.

And this number is more than 3x that of the second largest game subscription service provider..

Now PS Now is also an all-you-can-play subscription service. For users who want to enjoy gameplay without worrying about the network connections, SIE released download feature in September 2018 for PS4 titles.

Since the launch of this download service, gameplay time per user has grown significantly to the point of where the gameplay time on downloaded PS4 title is double that of streamed titles, contributing to higher user engagement and the retention of the PS Now service.

In this way, SIE has accumulated wealth of expertise in the game streaming space and plan to leverage this expertise to provide ultimate game user's experience for both consoles and game streaming space..

Next is Music segment. The sales increased 1% to JPY 807.5 billion and this increase is due to an increase in streaming of music and impact of consolidating EMI, substantially offset though by a decrease in physical sales in recorded music due to the impact of new accounting standard. .

Operating income increased JPY 104.7 billion to JPY 232.5 billion and operating income this year included JPY 105.3 billion of net extraordinary item related to the acquisitions of EMI. And in the last fiscal year, we also had a gain on the sales of real estate. .

Operating income generated from mobile game applications accounted for an additional of 20% of operating income of this segment and was essentially flat year-on-year. Sales in fiscal '19 are expected to increase 3% to JPY 830 billion.

We expect sales to increase mainly due to the impact of full year consolidation of EMI and an increase in streaming revenues, partially offset though by a decrease in sales from mobile game applications and physical and digital download sales in recorded music. .

Operating income is expected to decrease JPY 97.5 billion to JPY 135 billion. This decrease is due to the absence of the gain from the acquisition of EMI recorded in the previous fiscal year..

Next, about Pictures segment. The sales decreased 2% to JPY 986.9 billion. Despite the strong performance of Venom and Hotel Transylvania in fiscal '18, theatrical revenues decreased compared to the previous fiscal year when we had Jumanji and Spider-Man as well as due to decrease in Media Network sales. .

Operating income increased JPY 13.5 billion to JPY 54.6 billion. This significant increase was due to an improvement in the profitability of Motion Pictures, partially offset by the recording of JPY 12.8 billion in expenses relating to the portfolio review for Media Networks. .

Sales in fiscal '19 are expected to increase 9% to JPY 1,080 billion. The increase is due to the expected increase in sales of Motion Pictures driven by sequels to major releases and from Television Productions. .

Operating income is expected to increase JPY 10.4 billion to JPY 65 billion. This increase is due to the absence of JPY 12.8 billion in expenses recorded in fiscal '18 for the portfolio review of Media Networks and also because of expected benefit of the review to be felt in fiscal '19 results. .

Next is about Home Entertainment & Sound segment. The sales for the year decreased 6% year-on-year to JPY 1,155.4 billion. This decrease is due to decrease in unit sales of televisions resulting from a strategic decision to focus on profitability and also negative impact of foreign exchange. .

Operating income increased JPY 3.8 billion to JPY 89.7 billion. Despite the negative impact of foreign exchange and the decrease in sales, we were able to increase profit due to the shift to high value-added models..

Next is Imaging Products & Solutions segment. The sales for the year increased 2% to JPY 670.5 billion, due mainly to an increase in sales of high value-added products, including mirrorless single-lens cameras and interchangeable lenses. .

Operating income increased JPY 9.1 billion to JPY 84 billion. This increase was due mainly to the increase in sales of value-added products and reduction in operating cost..

Next is Mobile Communication segment. The fiscal '18 sales decreased 31% to JPY 498 billion due to a decrease in unit sales of smartphones.

Operating loss increased JPY 69.5 billion to JPY 97.1 billion despite a reduction in operating expenses and a decrease in impairment charges against long-lived assets, loss increased due to the aforementioned decrease in sales..

And our plan to reduce operating expenses by about 50% compared with the fiscal year ended March of 2018, in an effort to turn a profit in fiscal year ending in March 31, 2021 or fiscal '20. This plan is progressing according to the plan. We have accelerated our plan to cease production at our Beijing factory.

And we have excited -- exited several regions such as the Middle East and Central and South America. .

We believe we can turn a profit in fiscal '20 by launching products like Xperia 1, which we announced recently, differentiated by Sony's technologies in important regions of East Asia, including Japan and Europe. .

Now turning to fiscal '19 forecast for Electronics Products & Solutions segment, which we formed in April to create new value and improve management efficiency in the 3 electronics business segments. We expect sales to decrease 3% to JPY 2,240 billion and operating income to increase JPY 44.5 billion to JPY 121 billion.

Sales to outside customers of the Mobile Communications business within this segment are expected to decrease 16% to JPY 410 billion. And operating loss is expected to shrink from JPY 50.1 billion to JPY 47 billion. We will continue to disclose the financial results of the Mobile Communications business for the time being..

Next is Semiconductors segment. The sales for the year increased 3% to JPY 879.3 billion. And image sensors sales increased 10% year-on-year, primarily due to an increase in demand from mobile devices..

Operating income decreased JPY 20.1 billion to JPY 143.9 billion. And as you see on this slide, the operating income of the previous fiscal year included some extraordinary items and adjusted operating income increased, therefore, JPY 23.5 billion.

This increase in adjusted operating income was due mainly to an increase in sales of our image sensors, partially offset though by an increase in research and development and depreciation costs. .

Sales in fiscal '19 are expected to increase 13% to JPY 990 billion. The increase is due to expected increase in image sensors sales for mobile devices. On the other hand, operating income is expected to be JPY 145 billion, essentially flat from last year. And this is due to continued increase in depreciation expenses and R&D expenses..

In October of last year, I explained our plan to invest about JPY 600 billion in the 3 years through fiscal '20 and to increase image sensor production capacity to about 130,000 wafers per month on a 300-millimeter wafer basis.

As of today, there is no major change to this plan, but we will pay close attention to trends in demand and make decisions regarding the execution of the investment in stages.

Already as we look out to fiscal year ending March 31, 2022, and beyond, we expect demand for smartphones to continue to increase due to the trend to a larger sensors and multi-lens cameras. We are currently deciding whether to construct a new building to meet this increased demand.

And if we decide to construct a new building in fiscal '19, capital expenditure through -- to fiscal '20 might increase by about JPY 100 billion, and demand for image sensors is expected to increase at a relatively slower pace from fiscal year ending March 31, 2023, and we expect the amount of our capital expenditures to decrease.

As we consider investments going forward, we are continuing to prioritize capital efficiency and are working to increase ROIC. And we'll provide more details on this point at the IR Day meeting next month..

Next, I would explain the Financial Services segment. In fiscal year '18, Financial Services revenue increased 4% to JPY 1,282.5 billion. This increase was due to higher insurance premium revenue by Sony Life. .

Operating income decreased JPY 17.5 billion year-on-year to JPY 161.5 billion. This decline was primarily due to the absence of a gain on the sale of real estate held for investment purposes recorded in the previous fiscal year as well as a loss on the valuation of investment securities recorded in the current fiscal year. .

Financial Services revenue is expected to increase 4% to JPY 1,330 billion and operating income is expected to increase JPY 8.5 billion to JPY 170 billion. These increases are mainly due to an increase in insurance premium revenue at Sony Life. .

Today, Sony Financial Holdings announced a new management team and the new candidates for its Board of Directors. The changes are meant to strengthen the Sony Financial Holdings governance function as a holding company and to further grow its business under SFH umbrella. Sony fully supports these changes.

By increasing the number of outside directors and directors from Sony, we aim to strengthen management of the company from the perspective of a shareholder and contribute to an increase in the corporate value of SFH as a listed company. .

In fiscal year '18, we recorded a second year historically high operating income, income before income taxes and net income attributable to stockholders. We expect to maintain high level of profit in fiscal year '19. Moreover, we were able to record a third-year profit in the fourth fiscal quarter.

I think that our ability to generate stable profit is a result of our efforts to increase a proportion of recurring revenue and strengthen our profit foundation..

This concludes my explanation of our financial performance. I would now like to explain our decision to cease providing mid-range operating income guidance by segment going forward and our decision to withdraw the fiscal year '20 operating income targets for each segment that we announced in May of last year. .

We are managing Sony Corporation from a long-term perspective and have established a cumulative 3-year consolidated operating cash flow excluding the Financial Services segment and ROE as our key performance indicators for the period of the mid-range plan which lasts through fiscal year '20. .

We also announced operating income targets for each business segment in fiscal year '20, the final year of our mid-range plan, because we thought that these targets would enhance investor understanding of the direction of the businesses.

However, because the operating income targets by segment are only an estimate of a single point in the future, and we are also concerned that they cannot accurately reflect our long-term trends and direction of our businesses.

Moreover, despite only 1 year having passed since we announced the targets last year, the operating environment for each of our businesses has significantly changed and the gap has risen between the actual state of certain segments and the targets that we announce for those segments.

Consequently, we are restoring the targets and we will cease providing guidance for operating income by segment for the final year of our mid-range plan..

We will continue to update you on the status of cumulative 3-year consolidated operating cash flow excluding the Financial Services segment which is one of our mid-range targets. We would also continue to disclose our operating income forecast by segment for each fiscal year.

We ask for your kindness and understanding as we focus on managing Sony for the long-term and we are in a conversation with capital markets towards the long-term..

In conclusion, I would like to explain the current status of our consolidated operating cash flow excluding the Financial Services and capital allocation policy. At this point in time, we expect 3-year cumulative operating cash flow to exceed JPY 2,200 billion.

As for the use of the cash that is generated, we plan to continue to prioritize growth investment that contribute to the increased corporate value. Most fiscally, we plan to spend approximately JPY 1,100 billion on capital expenditure primarily for image sensors.

And we decide to construct the new building in the semiconductor segment that I mentioned earlier. This amount might increase to JPY 1,200 billion. Strengthening our content IP and supplementing technology not found in the Sony Group will continue to be the focus of our strategic investments.

In this way, we will also be an option depending upon the status of our free cash flow and the stock price. .

We plan to continue to increase the amount of dividends in a steady manner over the long-term. Last year, we mentioned strengthening our balance sheet as one of our goals of our capital allocation strategy. But due to our improved financial results, we now think that we have recovered to the point where we'll have sufficient financial strength.

Going forward, we would aim to increase our corporate value through growth investments while maintaining a healthy balance sheet. Thank you. .

Now we'll move on to Q&A session. Those of you with questions, please wait for the microphone and please identify yourself by stating your name and affiliation before asking the question..

When the questions are asked in English, the interpreter will interpret the question into Japanese and the answers will be in Japanese. And please, 2 questions per person. .

Any questions, please?.

[Interpreted] Nishimura of Credit Suisse Securities. Thank you. Two questions. First, your perception or view about the plan. Usually, at the beginning of the year as a risk, you set a buffer for the overall company. But what is your forecast here? Looking at the numbers, you have not incorporated a buffer in the current plan.

So what's your policy about this?.

And the second point about semiconductors and increase in development expenditure.

If possible, on a quantitative basis, how much for a total increase of JPY 20 billion? So what about the semiconductors and also, the content and substance of it?.

[Interpreted] About the risk buffers, we incorporate that in the performance forecast. But for fiscal '19 forecast, we have not incorporated the risk buffers in the semiconductors development expense.

In terms of change from fiscal '18, if I may put it that way -- in terms of change from fiscal '18, if we were to indicate that, we do not disclose it on a quantitative basis. But as R&D expenditure, well, I should be very careful about how we respond to this.

But compared to the previous year, if there are any changes, I would say no major changes, which means that I earlier mentioned from fiscal '17 to '18, excluding the extraordinary items, I talked about increase in profit. And at this time, that will be flat on year-on-year. So that, I think, may give you some clue.

Next question, please?.

[Interpreted]Ezawa, Citigroup Securities. Two questions please. Firstly, about gaming business, on the streaming or cloud gaming, I think, once you commented that Sony found it threatening that cloud gaming was appearing. But today, you said Sony was indeed in cloud gaming.

So the improvement of the environment for the cloud gaming, is it a threat for Sony or is it a plus cannibalization against the existing business may be one sort of a threat? So what is your view?.

And secondly, operating income by segment, no longer you will not be announcing the last year figure of the 3-year plans. But in the stock market, people may understand this because your outlook is now probably less favorable than before, that's probably why you decided to cease announcement of this figure.

I'm sure it's not that, but can you explain this reason?.

[Interpreted] First of all, whether the cloud gaming is an opportunity or a threat, and I talked about the acquisition of Gaikai in 2012. And if I express it in terms of quantitative explanation, I think there may be a threat, but we have to turn the threat into an opportunity. This serves to all kinds of business.

The change in threat must be captured accurately and to make sure that business opportunities can be created, so that we can grow in that particular business, which as a matter, of course, something that we had followed.

And unless that opportunity becomes truly opportunities and everybody finds that to be an opportunity, then there will be competition. There will be another set of threats.

But for us, the game streaming, I don't know how long it'll take, but the growth of the game is not a surprise for us, because there has been the streaming game service from early 2000. So many players have been rising to the challenge of this business. So for us, it's not a new story at all.

And it's important, therefore, for us to indicate to you our solid strategy and vision. But we will be presenting our strategy and vision in this -- for this business at corporate strategy meeting and on the IR day. And ceasing of the announcement of the targets we withdrew the number that we already announced.

We did it at this time, because the consolidated operating income for fiscal '18 last year, we're talking about JPY 670 billion. At that time, the steeper gains from EMI acquisitions were not included. So -- but that was a one-time factor, but still the guidance we gave you 1 year ago for this year's operating income was JPY 770 billion.

But once we closed the year, the operating income actually recorded was almost JPY 900 billion. So compared to the [ ARP ] guidance we gave you, we had upside improvement for fiscal '18 results.

Looking at this by segment, for Game & Network Services, for instance, including free-to-play software including first-party and third-party games compared to its expectations, there was a much larger growth we enjoyed. And the second point is about the Music business. The EMI catalog was acquired by us and it's the larger acquisition we made.

So that changed the assumption. And also for Mobile Communications, the size of the smartphone business is now smaller. We decided to shrink that business, which -- that has changed the directions of business.

And so for semiconductors, rather than the profitability, but the substance of the demand has changed, because initially -- earlier, we were looking at the growth of the market globally of the smartphones. But today, on top of that, image sensors themselves going to smartphones are getting larger and also, smartphones are using multi-lens cameras.

So the number of components are increasing. So the nature of the growth of the market has changed. If you look into breakdown of the market. So in just short period of 1 year, the demand composition has changed significantly.

Needless for me to say, therefore, compared to 1 year ago, it's not because the target in our fiscal '20 is down that we've decide to suspend announcing of these numbers, no. .

[Interpreted] Nakane from Mizuho Securities. I have 2 questions. The first question is about games. I'm trying to organize my thoughts about your assumptions, hardware, software, network if we divide into those categories, what you have said is that hardware sales will go down and the profit will go down, will be negative.

Software, overall, is a positive growth. But first party will decline. Therefore, in terms of operating income, it will go down.

Network, is it positive or are you saying that you'll be conservative, so you're not assuming a big growth? So could you advise us on what might happen? If the software should contribute to the increase of revenue, what will be the reason? How are you going to achieve its growth? And are you incorporating the reduction of SG&A?.

My other question is how you're going to incorporate it in your results, the reduction operated in your results, the reduction of SG&A? That's the first question. The second is about the cash flow. Thank you very much for giving us segment-specific cash flow numbers. Next year is almost flat and you said you will not disclose by segment.

But if you could advise how to look it. And I think the games decline would be offset by other contributions.

But I think how much buffer do you have? And you talk about EP&S, but Mobile and Home Entertainment & Sound, how would it change into the next year? The revenue and profit, how are the changes?.

[Interpreted] So your question is about fiscal year '18 and '19. The sales revenue compared to '18 is a reduction of JPY 10.9 billion. There are 2 drivers. First is the sales of the PS4 hardware. This will come down JPY 80 million for -- a little less than JPY 80 million, would go down to JPY 60 million in the new fiscal year.

Also, there will be ForEx implications and we have incorporated the negative impact of FX. But game software growth would offset some of the impact that I have talked about. Where would it come? How do we achieve the increase of revenue of software? Third-party players, they will have an appealing line-up in the coming fiscal year.

There was Spider-Man and God of War was released by third-parties, so that helped. And PS Plus would be increased steadily. So by combining those positive factors, we believe that the revenue would be flat. Now profit, the operating income, the first party, of course. The margin for the first-party software is higher.

So in that context, it may push down some of the revenue and profit -- operating profit. And there are some implications of the foreign exchange market. But what is offsetting is the cost improvement of the PS4 hardware. So that remains the developmental cost, the increase of such costs for the next generation.

So if you compare with the last year in terms of operating income, I think the difference can be explained by the increase of the development cost for the next generation.

Do we incorporate the reduction of SG&A?.

[Interpreted] We have not incorporated in any significant way, but the mix has changed. The SG&A for the next generation is bound to increase. Therefore, for the existing business, the PlayStation 4 SG&A would be more efficient and effective, so that we will be better prepared to develop the new generation. Cash flow by segment, this is a new effort.

This year, now compared to the last fiscal year and FY '19, if you make comparisons, declines, as you guessed is Game & Network Services, operating income will decrease and so will the cash flow. EP&S, the operating cash flow is expected to decline. .

[Interpreted] What is the reason?.

[Interpreted] First, the operating cash flow and operating income, if you look at the difference, the EP&S, HE&S and IP&S, if you combine those 3 together, it will be JPY 76.6 billion, whereas the cash flow is JPY 153.8 billion.

Why is there such a big difference between the operating cash flow and the operating income there is a reduction of the inventory. And also there could be a valuation type of decline without the cash-out. But in 20 9 out -- some of the cash-out will be deferred. There have been some losses.

Therefore, this is a reason for this large gap between the 2 numbers. Now in the meantime in 2019 compared to the operating income, there are no positive factors that we're assuming. As a result, the EP&S cash flow compared to '17 and '18 will be negative. Now where are we generating positive numbers? Music is one.

Except for the EMI implications revaluation, we are -- they are increasing the revenue. And also, there's increasing amortization depreciation and therefore the Music will see an increase of the cash flow. Semiconductor, operating income will be flat, but depreciation would increase. As a result, the cash flow would be positive.

Therefore, Game, EP&S will be in the negative. Music, Semiconductor would be in the positive. Now we do not anticipate a significant buffer. There are not particularly significant factors that would push up the numbers compared to last year. .

[Interpreted] Next question?.

[Interpreted] Okazaki of Nomura Securities. The first point concerning the 3 hardware, electronics segment, what is the purpose of integration? And 5G development was taken up to push up the smartphone business.

But this time by integrating without the section TV or camera, what is your view about development of next-generation hardware? And then the management efficiency, by consolidating the 3 business segment, are you expecting the cost reduction? The second point has to do with semiconductors. You are talking about investment in a new building.

And in the course of coming half a year or the past half year, any differences? Originally, you said that the existing building will be sufficient, but any changes in automotive application or the building application of image sensors is another aspect.

And is that another reason for putting up a new building?.

[Interpreted] So about the purpose of integration and creating EP&S, the one is making the various functions as platform to achieve higher efficiency, especially for communication or communication technology. The technology is incorporated in all the devices and making the platform so that we can improve the efficiency.

And that would give us the upside for us and lead to cost reduction. So we decided to integrate the 3 businesses.

And some of the products which may not belong to any of the 3 businesses or by integrating these 3, it will become easier for us to address the B2B market, and we thought there was a good timing to consolidate or integrate these 3 businesses. And concerning the semiconductor so far about the new building, we did not talk about it explicitly.

But internally among us, we had a constant review and study of it including simulation. And last time at the earnings announcement for the third quarter, in terms of difference between that time and now, we have been very cautious about looking at the outlook. But now, we feel that demand is very strong and it's becoming more and more certain.

Therefore, in terms of wafer number for the fourth quarter, it'll not be at full rate operation, but starting the first quarter, the operation will be full operation. That reflects a strong demand, and we can confirm that. .

[Interpreted] Next question, please?.

[Interpreted] Ayada, Deutsche Securities. Two points please. First point is about the semiconductors. you are thinking about this year for this business. Mr. Totoki earlier, thank you for hesitating making remarks about this, but this year, sales is about 110 billion increase. So marginal profit will be increased about JPY 50 billion, thanks to that.

But offsetting that, the cost of depreciation and R&D cost and foreign exchange, which of these factors will be the large impact in the order of the impact. Can you tell some more? And also about the capacity, sales increased by 13%.

So the current capacity of 100,000 per month for this year's plan, is that enough? How does it stand? In terms of operating income, it's going to be flat. But there's a positive factors actually it's the MSS for mobile applications in terms of volume and in terms of pricing the same impact will be felt upside.

But then there are some minus negative factors as well in the order of the impact on the depreciation cost followed by R&D expenditures, and also the impact on the cost of business due to the inventory fluctuations. The ForEx impact is about JPY 5 billion. So that's very large. And about the capacity, currently the production capacity is about 100,000.

But at the end of 2019, it will be 107,000 on the output basis. Thank you. My second question is rather more technical. There's been change in country to Middle East leasing these assets, so handling the operating lease is now different.

What are the impact of that on the balance sheet? And also ROIC by segment will be affected also I think, but how has this affected your ROIC by segment?.

[Interpreted] In total, the accounting change, the impact of that, both assets and liabilities will now be on the balance sheet. Currently, the real estate basically between JPY 300 billion and JPY 350 billion is the impact. But with regard to details of the facilities, we don't have the concrete detailed figures.

So maybe at the end of the first quarter, we should have these figures available, but that's the general level of impact. .

[Interpreted] In the first quarter, yes, we will disclose the numbers regarding cash impact. But as of now between 300 and 350 in real estate, that's the level of impact. Please understand that. And in terms of ROIC by segment, ROIC will be negatively impacted. But the ROIC that we had disclosed this time did not incorporate this impact yet.

So for the first quarter, we should be able to make the impact of this more visible. And as this happens, we will be revising our disclosed figures. .

[Interpreted] We are running very short of time, so I'm afraid the next question would have to be the last question. .

[Interpreted] SMBC Nikko, Katsura. I have one question on the semiconductor for the sake of confirmation, FY risk is being talked much in the market.

So have you incorporated that implication? How do you look at the risks in coming up with semiconductor projections? Also, JPY 100 billion of investment if you're indeed going to make such an investment, there are market concerns. .

[Interpreted] The cash flow that has been generated by entertainment will be used by semiconductor. That is the view or concern of the market and when we will give the details during the strategy meeting and IR day, so I can only give you sort of a brief explanation. And I think we should draw a distinction between next fiscal year and thereafter.

The increase of capacity by constructing new building is to satisfy the demand for 2021 and beyond. So please note that the new building will be constructed to satisfy the needs beyond 2021. Now for 2019, in the first half, I think we are all right. In other words, we have the enough capacity. We'll have to run at a full rate.

But about the risks in the second half, yes, we will have to be discrete and cautious. I think we cannot avoid being cautious. But having said so, our customers are diverse. Compared to several years ago, our transaction have diversified. And I think that is a positive development for us and that would positively impact our performance.

I'm not singling out any particular customer rather than associating the decline with any particular customer. But shall I say that we are doing businesses with the entirety of the market. And I believe that such a relationship is preferable and will continue and sustain. And the gaming network is generating cash.

And you said that, that cash is being used by semiconductor. Now as a way of thought, we talked about the EP&S cash flow. Some of these 3 segments, they will continue to generate a stable cash flow into the future. And ROIC is at a high level. The cash coming out from this should be able to cover the semiconductor investment.

Of course, there will be cash flow coming out from semiconductor business, but semiconductor plus the EPS cash flow should be able to cover the investment towards fiscal year 2022. That is my view at this point of time. Should the environment change drastically, of course, we will have to address those changes.

But right now, having looked at different factors, we believe that what we believe would be true and feasible. .

[Interpreted] Thank you very much. This will conclude our briefing. We would like to thank for your kind attendance..

[Statements in English on this transcript were spoken by an interpreter present on the live call.].