Ferrotec Holdings Corporation Results for the 1 st half of the fiscal year ending March 31, 2018

Transcription

1 Ferrotec Holdings Corporation Results for the 1 st half of the fiscal year ending March 31, 2018 November 27, 2017 ( JASDAQ 6890 ) 1. This 1st half results cover six months period from April to September of Ferrotec, and six months period from Jan. to June of consolidated subsidiaries and affiliated companies included in investment profit loss in equity method. 2. These materials were prepared for the purpose of providing information regarding the company s results of operations for the 1 st half of the fiscal year ending March 31, These materials were prepared based on information available as of Nov. 27, All opinions, forecasts and other forwardlooking statements are based on management s judgments in accordance with materials available at that time and may be changed without prior notice.

2 First Half of FY March 2018 Financial Results

3 Sales and Operating income Trend Sales Trend Operating income Trend ( in millions) ( in millions) Others PV Others Electronic device PV semiconductor and other equipment-related Electronic device semiconductor and other equipment-related 42,983 33,615 2,917 8,741 6,466 32,385 2,683 8,659 6,534 37,649 4,826 36,198 5,378 10,644 8,129 6,130 6,497 6,089 9,971 6,305 1, ,218 1,436 2, , ,263 1,712 1,905 3,376 2, ,331 2,329 4, ,530 3,515 15,491 14,509 16,049 16,194 20, , FY3/16 1H FY3/16 2H FY3/17 1H FY3/17 2H FY3/18 1H FY3/16 1H FY3/16 2H FY3/17 1H FY3/17 2H FY3/18 1H

4 Consolidated Financial Summary in millions FY March st half 2Q YoY Amount Pct. of sales(%) FY March st half Amount Pct. of sales(%) Amount Pct. of sales(%) Net sales 37, , , Cost of sales 27, , , Gross profit 10, , , SG&A expenses 6, , , Operating profit 3, , , Non-operating income Non-operating expense 1, Ordinary profit 2, , , Extraordinary income Extraordinary loss Net income attributable to owners of parent 1, , , Capital investment 3,149-4,702-1, Depreciation 1,930-1, Note: Exchange rate FY3/17 1H FY3/18 1H : / US dollar / RMB(avg. rate during the period)

5 Consolidated Financial Summary FY March st half in millions Amount Pct. of sales(%) Net sales 42, Cost of sales 30, Gross profit 12, SG&A expenses 7, Operating profit 4, Non-operating income Non-operating expense Sales increased in the semiconductor and other equipment-related business, and there were no significant changes in sales in other businesses. The gross profit margin increased by 1.8 point. Higher sales in the semiconductor and other equipment-related business produced a big increase in operating income, offsetting the operating loss in the photovoltaic-related business. Total operating income increased by 1.1 billion and the operating margin was more than 10%. Ordinary profit 3, Extraordinary income 0 - Extraordinary loss Equity in earnings Foreign exchange loss 117 million 312 million 5 Income before income tax 3, Income taxes 1, Net income attributable to owners of parent 2, There were no significant extraordinary losses in the first half of FY3/18

6 Net Sales and Operating Profits by Segment Net sales ( in millions) FY March st half FY March st half YOY Amount Pct. Of Sales(%) Amount Pct. Of Sales(%) Difference Pct. change Semiconductor and other equipment-related 16, , , Electronic device 6, , Photovoltaic-related 10, , Others 4, , , Total 37, , , Operating income ( in millions) FY March st half FY March st half YOY Amount *The equipment-related business segment has been renamed the semiconductor and other equipment-related business segment beginning with FY3/18 Pct. Of Sales(%) Amount Pct. Of Sales(%) Difference Pct. change Semiconductor and other equipment-related 1, , , Electronic device 1, , Photovoltaic-related Others Corporate & elimination Total 3, , ,

7 Consolidated Balance Sheet ~Assets~ ( in millions ) FY3/17 FY3/18 1H Difference Current assets 51,245 66,493 15,248 Cash & deposits 14,778 27,166 12,388 Note & accounts receivable 17,656 19,943 2,287 Inventory 13,882 14, Fixed assets 40,855 43,994 3,139 Tangible fixed assets 34,294 37,947 3,653 Building 8,583 9, Equipment & machinery 8,454 8, [ Current assets] The issuance of stock ( 8.7 billion) and bonds ( 3.3 billion) were the main reasons for the increase in cash and deposits. Notes and accounts receivable increased along with sales and inventory increased because of strong orders. [ Main reason for increase in tangible fixed assets] 8-inch wafer equipment and facilities to raise output of ceramics and quartz were the primary reasons for this increase. Tools, furniture, and fixture 5,908 5, Land 1,280 1, Intangible fixed assets 2,060 1, Goodwill Investments & other assets 4,499 4, Total assets 92, ,487 18,387 [Intangible fixed assets] Amortization of goodwill : 114 million

8 Consolidated Balance Sheet ~Liabilities and net worth~ 8 ( in millions ) FY3/17 FY3/18 1H Difference Current liabilities 32,108 37,788 5,680 Notes and accounts payable 13,926 15,519 1,593 Shot-term debt 5,002 5, ,538 5,878 1,340 Current portion of longterm borrowings + Bonds [Interest-being debt ] Fixed liabilities 20,290 22,889 2,599 Bonds - 2,712 2,712 Long-term debt 12,625 12, Total liabilities 52,399 60,678 8,279 Net Assets 39,701 49,809 10,108 Shareholder s equity 33,208 43,849 10,641 Total accumulated other comprehensive income Non-controlling interests Total liabilities & shareholder s equity 6,015 5, , ,487 18,387 Current liabilities Notes and accounts payable increased due to growth in accounts payable as sales increased Short-term debt +Current portion of long-term borrowings+bonds Long-term debt + bond etc. 11,278 million(9,541) 14,865 million (12,625) Total 26,143 million (22,166) [Net interest-being debt -1,023 million (7,388) Net assets *Parentheses represent the figures as of end-fy3/17 Breakdown: Shareholder s equity Capital surplus: 8,711 million Net income : 2,319 million Dividends : 370 million Foreign currency translation adjustments : 625 million

9 Consolidated Cash Flow 9 ( in million) FY3/17 1H FY3/18 1H Cash flow from operating activities 2,915 4,794 Income before income taxes 1,821 3,802 Depreciation 1,930 1,916 Exchange gain & loss( :gain) Changes in notes & accounts receivable ( :increase) 2,662 2,665 Changes in inventories( :increase) 372 1,053 Changes in accounts payable( :decrease) 2,434 1,902 Others Cash flow from investing activities 2,779 4,640 Payments for purchase of tangible fixed assets 3,149 4,702 Proceeds from sales of tangible fixed assets Proceeds for purchase of shares of subsidiaries accompanying changes in the scope of consolidation Others Cash flow from financing activities 3,689 12,311 Changes in short-term borrowing Proceeds from long-term debt 6,590 2,485 Payments of long-term debt 1,885 2,178 Proceeds from the issuance of bonds - 3,245 Proceeds from the issuance of stock - 8,659 Payments for dividend Others 73 2 Changes in cash & cash equivalents 2,526 12,327 Cash and cash equivalents, beginning of year 10,038 14,778 Cash and cash equivalents, end of year 12,564 27,166 [ Operating cash flow] Income before income tax + Depreciation 5,718 million Decrease in operating CF due to increase in notes & accounts receivable 2,665 million Decrease in operating CF due to increase in inventories 1,053 million Increase in operating CF due to increased accounts payable: 1,902 million [Investing cash flow] Main content of payments for tangible fixed assets acquired Shanghai subsidiary: 1,576 million Hangzhou subsidiary: 1,522 million Yinchuan subsidiary: 595 million [Financing cash flow] Proceeds from the issuance of bonds: 3,245 million Proceeds from the issuance of stock: 8,659 million

10 Full-Year Forecast(revised on Nov.14) ( in million) FY3/17 FY3/18(E) YoY(%) Net sales 73,847 85, Operating income 5,678 8, Ordinary income 5,675 7, Net income attributable to owners of parent 3,256 4, Capital investment 7,322 10, Depreciation 3,593 4, Note: Exchange rate FY3/17 FY3/18(assumed rate) : / US dollar /RMB(Avg. during period) 10 Capital investment is based on cash flow considering unprojected large-scale capital investment and accounts payable facilities at the end of previous fiscal year.

11 Business forecast (sales by segment) ( in millions) FY3/17 FY3/18(Est.) YoY(%) Semiconductor and other equipment-related 32,243 41, Vacuum Feedthroughs 8,160 10, Quartz 8,242 10, Ceramics 6,266 8, CVD-SiC 1,905 3, EB-Gun, LED 3,817 3, Semiconductor wafer 3,854 4, Electronic device 12,627 12, Thermo-electric module 11,747 11, Ferrofluid, others Photovoltaic-related 18,773 18, Quartz crucibles 2,041 1, Solar silicon 10,599 11, PV manufacturing Epuip Solar cell, Others 5,166 5, Others 10,204 11, Total 73,847 85,

12 Status by Segment and Outlook

13 Segment 48% Semiconductor and other 15% equipment-related Electronic device 23% Photovoltaic-related Vacuum feedthroughs Quartz Ferrofluid Monocrystal ingot PV silicon(ingot) OEM Multi- crystal ingot PV wafer Solar cell Ceramics CVD-SiC Thermo-electric module Consumable Substrates for power semiconductor Quartz crucible Vessel 13 The bar chart represents the pct. of each segment in FY3/18 1H sales

14 Semiconductor and other equipment-related Sales ( in million) 25,000 20,617 21,077 CVD-SiC 20,000 15,000 10,000 15,914 15,491 16,049 16, ,181 1, ,948 2,624 1,693 1,906 3,270 2,877 2,993 3,273 2,527 1,868 1,949 1,941 1,643 1,661 2,438 2,468 4,087 3,988 1,674 2,098 5,153 5,547 Semiconductor wafer Ceramics EB-gun, LED,others Quartz Product 5,000 3,625 3,999 4,105 4,137 3,527 3,636 3,966 4,194 5,622 5,315 Vacuum Feedthrough 14 0 FY3/16 1H FY3/16 2H FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E)

15 Status and Outlook for Vacuum Feedthroughs (m ) 8,000 6,000 4,000 2,000 0 FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) PV 22% Transition of sales 3,966 4,194 Sales by category Other 20% FPD 23% 5,622 Semiconductor 28% LED 7% 5,315 1.Status of 1st half of FY3/18 In the semiconductor market, there was a large volume of investments for 3D-NAND flash memories used at data centers. Therefore, sales of vacuum feedthroughs were strong In the FPD market, organic EL investments in Korea and China increased.higher sales of Ferrotec vacuum feedthroughs used in vacuum processes and of vacuum feedthroughs and dustproof seals used in robots In Europe, there was higher demand in the photovoltaic market Small increase in contract processing sales because of firm orders 2.Outlook for 2nd half of FY3/18 More growth in demand involving vacuum process semiconductor manufacturing equipment In the FPD market, demand for large LCDs and organic EL displays is expected to remain very strong Demand for contract processing is likely to start growing, mainly in China [Measures] Continue joint development projects with manufacturers of semiconductor manufacturing equipment Capital investments for large processing machinery Strengthen ties among Ferrotec Group companies to generate synergies Strengthen sales activities in Asia 15 Note) Other: Vacuum feedthrough equipment for industrial use, aviation, medical care, science, etc.

16 Status and Outlook for Quartz Products (m ) Transition of sales 1.Status of 1st half of FY3/18 8,000 6,000 4,000 2,000 4,105 4,137 5,153 5,547 Sales in the U.S., Japan, and Taiwan were strong supported by strong demand from major OEMs and other end users. Sales rose rapidly as demand for quartz consumables for etchers was up, particularly from major U.S. and Japanese OEMs. Major Japanese OEMs increased production of next-generation film deposition machinery. Continued to add capacity at the Hangzhou (China) plant to meet increasing demand for use in semiconductor manufacturing equipment. Commenced delivers of Si parts for etchers to major Japanese OEMs PV 1% FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) LCD 1% LED 1% Other 4% Sales by category Semi End User 26% OEM 67% 2.Outlook for 2nd half of FY3/18 Demands for replaceable consumable materials and for quartz parts for 3D-NAND memory are expected to continue to increase, along with rising investment in semiconductor manufacturing equipment in China. Start mass production of Si parts for Japanese OEMs [Measures] Increase production capacity at our plant in China (expand the new plant in China and add new equipment) to meet the rapidly rising demand from major OEMs. Work more actively on development projects involving nextgeneration and later-generation devices.

17 Status and Outlook for Ceramics Products 17 5,000 4,000 3,000 2,000 1,000 (m ) 0 2,993 FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) FC Export 25% Transition of sales 3,273 Sales by category FC Others 17% FC Semicondu ctor Equipment 23% 4,087 3,988 MC Semiconduct or testing 18% FC(Fine Ceramics) MC(Machinable Ceramics) MC Japan 4% MC Export 13% 1. Status of 1 st half (Jan-Jun) of FY 3/18 Machinable ceramics Photoveel Strong sales in Japan of test jigs for automotive logic devices Started supplying ceramic parts for precision test jigs required by the increasing miniaturization of semiconductor devices Strong overseas sales of parts used in medical applications Fine ceramics Big increase in demand in Japan for parts used in semiconductor manufacturing equipment and FPD equipment Rapid growth in overseas demand for parts used in etching equipment; work is under way to raise output at the new factory in China 2. Outlook for 2 nd half (Jul-Dec) of FY 3/18 Machinable ceramics Photoveel A recovery in Japan of orders for semiconductor memory test jigs Overseas demand for medical equipment parts is expected to be strong in late 2017 Fine ceramics Demand continues to grow in Japan for parts used in semiconductor manufacturing equipment and FPD equipment Demand continues to grow overseas for parts used in etching equipment 3. Sales policy Machinable ceramics Wafer circuit inspection equipment needs overseas are shifting to new, high-precision jigs; Continue to expand production and sales operations to meet this demand for high-precision products Fine ceramics Customers are asking for more output of parts because of growing demand worldwide for semiconductor manufacturing equipment; the goal is to raise capacity by expanding factories in order to achieve more sales growth

18 Status and Outlook for CVD-SiC Products 18 2,000 1,500 1, (m ) 0 Japan 33% North America 21% 1,212 Transition of sales 693 FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) Sales by category Reference: The following figures present sales of ADMAP Inc. 1,643 1,661 Taiwan 6% Europe 2% China 38% 1.Status of 1st half (Jan-Jun) of FY 3/18 Strong sales of semiconductor manufacturing equipment parts in Japan and overseas Started of mass production of new equipment parts contributed to sales growth Started mass production of CVD coatings on new large components Entry into non-semiconductor fields 2. Outlook for 2nd half (Jul-Dec) of FY 3/18 Foresee strong sales in Japan and overseas of semiconductor manufacturing equipment parts due to new investments in China Start mass production of new products due to the success of the aggressive development and fabrication of prototypes of new equipment parts Continue to use large-scale facilities to speed up the growth of activities for large components Start mass production of niche products to meet highly advanced requirements Aggressively enter the non-semiconductor field [Measures] Establish a production framework capable of meeting the increasing demand for equipment parts at large semiconductor manufacturing equipment suppliers in Japan and overseas Establish a production company in Korea and start mass production of semiconductor manufacturing equipment parts Continue to aggressively enter the non-semiconductor field Reinforce product development and prototype capabilities

19 Status and Outlook for Semiconductor wafer and Deposition Equipments 5,000 4,000 3,000 2,000 1,000 0 (m ) Transition of sales Semiconductor wafer 2,438 2,468 1,906 1,948 FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) Semiconductor wafer: 1.Status of 1st half of FY3/18 Market conditions for 6-inch and smaller items have been firm since the beginning of the year and its price is increasing. There is also a trend toward increased production volumes. The 8-inch wafer factories in Yinchuan and Shanghai started operating in July Outlook for 2nd half of FY3/18 Strong orders for 8/6-inch wafers to continue due to solid demand for wafers involving the IoT, sensors, power semiconductors and other market sectors Plan to start mass production of an 8-inch wafer of our company in December 2017 [Measures] Raise the production yield of 8-inch wafers and increase monthly output capacity to 450,000 units (in 2020) (m ) EB gun and Deposition equipment: 5,000 1.Status of 1st half of FY3/ ,000 3,000 2,000 1,000 0 EB Deposition Equipment 1,868 1,949 2,098 1,674 FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) Pushed back communication chip investments because of sluggish sales of the cuurent smartphones Inquiries received about deposition equipment for compound semiconductors used in next-generation mobilephones 2.Outlook for 2nd half of FY3/18 Foresee growth in demand for equipment in the communication and filter sectors for IoT applications Developing new applications involving base stations for 5G networks [Measures] Create more IoT applications and reinforce development activities for applications involving 5G networks, which are expected to become operational in 2019 and 2020

20 Electronic Device Segment Sales ( in million) 8,000 6,000 6, ,862 6, ,497 6, , Ferrofluid, SMT, others 4,000 6,074 6,485 5,737 6,010 5,853 5,623 Thermoelectric module 2, FY3/16 1H FY3/16 2H FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E)

21 Status and Outlook for Thermo-electric Module Products 21 (m ) 8,000 6,000 4,000 2,000 0 Consumer 9% Science 3% 5,737 Transition of sales 6,010 5,853 5,623 FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) Power device substrates 9% Communic ation 7% Biochemic al 11% Sales by category Others 7% Photology 4% Automobile 37% Automobile,Oher 1% Semiconduc tor 12% 1.Status of 1st half of FY3/18 Automobile Seat Application Sales of automobile seat application decreased partly because the growth of U.S. automobile sales has peaked out. Head-up display sales were unchanged Other Applications Expansion of communications equipment applications for mobile communications systems Also growth in temperature management applications for semiconductor manufacturing equipment Power semiconductor device substrate sales increased in Europe and Japan 2.Outlook for 2nd half of FY3/18 Automobile Seat Application Sales of automobile seat application will probably remain soft despite prospects for higher sales in China Strengthen R&D to meet growing demand for other applications in the automotive sector Other Applications More growth expected in demand for devices used in mobile communications systems Also anticipate more growth in demand for power semiconductors used in industrial, home and automotive applications [Measures] Increase the number of sub-assembly products and strengthen sales activities (for semiconductors, medical products) Add new types of modules and increase the lineup of embedded products Continue capital investments for increasing output and using automation Continue to make investments for increasing the output of power semiconductor device substrates

22 Photovoltaic-related Segment Sales ( in million) 12,000 10,644 10,000 8,000 8,741 1,692 4,449 9,766 3,337 8,129 1,829 9,972 3,006 9,006 2,467 Solar cell & Others Solar silicon 22 6,000 4,000 2, ,241 5,482 3,242 5,117 6,078 5,677 1,704 1,820 1, FY3/16 1H FY3/16 2H FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) Quartz crucibles PV manufacturing Equip.

23 Status and Outlook for Quartz Crucibles (m ) 5,000 4,000 3,000 2,000 1,000 0 Transition of sales 1, FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) 1.Status of 1st half of FY3/18 Although crucible demand remained weak, sales were strong from Q1 due primarily to increasing demand in the semiconductor sector Higher demand for small and medium-diameter products resulting from growing demand for semiconductor wafers and higher demand at Chinese manufacturers Implemented structural reforms for multi-crystal vessels in response to declining demand 2.Outlook for 2nd half of FY3/18 More volume growth expected in crucible shipments for monocrystal crucible for semiconductors because of strong demand for semiconductors Continue structural reforms in the unprofitable vessels for solar cell Mono-crystal quartz crucible Multi-crystal vessel [Measures] Increase sales of semiconductor crucibles by focusing on semiconductor applications Increase output of medium-diameter (22 to 24 inch (200mm)) semiconductor crucibles Aiming to develop a 32-inch crucible in the future 23

24 Status and Outlook for Solar Silicon 8,000 6,000 (m ) Transition of sales 6,078 5,482 5,117 5,677 1.Status of 1st half of FY3/18 Solid sales of mono-crystal wafers to new OEM clients Growth of solar power additions in China, India and other emerging countries was larger than forecast (42.3GW in China for Jan-Sep 2017, an annual rate of about 50GW) 4,000 Market prices had been decreasing slowly, mainly for multi-crystal vessels, but prices started recovering gradually around April 2,000 0 FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) 2.Outlook for 2nd half of FY3/18 Continue to aim for profitability by achieving sufficient capacity utilization, chiefly for N-type mono-crystal wafers Worldwide new solar power in 2017 is estimated at about 100GW, 25% more than in 2016; but prices started declining in July, mostly for mono-crystal products, because of a temporary downturn in demand in China and India As of October, polysilicon prices were moving up due to tighter environmental restrictions in China but wafer prices were declining [Measures] Monocrystal ingot Multi- crystal ingot PV wafer Further pursue process of thinner wire technology with fixed abrasive grains Improve the performance of N-type mono-crystals to meet customers demands 24 Focus on products with substantial added value

25 Status and Outlook for Solar cell (m ) 5,000 4,000 3,000 2,000 1,000 0 Transition of sales 3,337 3,006 2,467 1,829 FY3/17 1H FY3/17 2H FY3/18 1H FY3/18 2H (E) 1.Status of 1st half of FY3/17 Secure profits with high conversion efficiency mono-crystal cells utilizing PERC technology Significant volumes of orders in emerging countries, mainly China and India 2.Outlook for 2 nd half of FY3/17 For solar cells, in response to the declining prices of both monocrystal and multi-crystal products, increase orders for mono-crystal products using PERC technology Taking actions to remain price competitive by raising conversion efficiency in response to increasingly heated competition in the mono-crystal solar cell market Solar cell [Measures] Improve profitability by using PERC technology to raise conversion efficiency Focus on products with high conversion efficiency and added value Become more competitive by using wafer quality and cell technology Cut costs by using automation 25

26 Ferrotec Holdings Corporation Medium- to Long-term Growth Strategy /Progress Reports November 27, 2017

27 The semiconductor market is booming In particular, China's growth rate will rise to the top level in The effects of the 'China Production 2025' national policy There is also the possibility that China will take over second place in the world share, outstripping Taiwan ($ U.S billion) Changes in China's semiconductor manufacturing equipment market China (E) 2018(E) *Prepared by Ferrotec Holdings based on the Market statistics report by SEMI

28 Technology Trends and New Semiconductor Demand Due to technological trends, semiconductor demand is sure to continue into the long term Technological trends IoT 3D-NAND Big data AI Influence to semiconductor market Lots of different devices are being newly connected to the network Increase in semiconductor demand (discrete, power system) in new fields Demand for miniaturization, and for the replacement of high-speed large-capacity devices is emerging Increase in demand for consumable supplies due to complicated process stages Demand for semiconductor memory increasing for enormous data analysis applications Increase in integrated data volume due to utilization of big data Increased demand for memory, sensors, etc. 28 Automatic driving Mobile communications system (5G) Power semiconductor Increase in demand for parts accompanying the addition of new functions High speed and large capacity, increased number of terminal connections Increase in demand for memory for use in edge servers and for sensors Trend toward worldwide power saving Expansion of demand deriving from increased adoption of inverters

29 Toward achieving the sales target Continuing capital investment in order to capture demand 1. OEM production for semiconductor manufacturing equipment Contract production in special fields 2. Increase production of semiconductor material products Establish new factories in highly profitable fields 3. Establishment of a new company in Hangzhou, China To increase production of 8-inch wafers Capturing market for the utilization of EV vehicles and industrial power semiconductors Demand for semiconductors accompanying shift towards adoption of EV

30 Toward achieving the sales target Continuing capital investment in order to capture demand 1. OEM production for semiconductor manufacturing equipment contract production in special fields 30

31 Covering Trends with the Breadth of Product Group 2.Increase production of semiconductor material products Establish new factories in highly profitable fields Won the "Best Supplier Award" from a major US equipment manufacturer Our semiconductor-related products Next generation technologies CVD-SiC Contract processing Quartz Ceramics IoT 3D-NAND Vacuum feedthroughs Silicon parts Equipment cleaning Power semiconductors Big data Communications 31 Power semiconductors etc

32 Expansion of production capacity semiconductor material 2.Increase production of semiconductor material products Establish new production base Expand production capacity by establishing new production line CVD-SiC products Quartz products Ceramics products 32 Silicon products

33 Expansion of production capacity semiconductor material 2.Increase production of semiconductor material products Increase productivity with smart factory utilizing the IoT 33 Robotization and automation The smart factory project is underway (DCB production line)

34 Strengthen service business - Cleaning business 2.Increase production of semiconductor material products (cleaning business) Demands from customers factories for increased production of semiconductors, FPDs, and organic EL Factories located in regions in which semiconductor makers tend to gather Fourth factory in Dalian completed 30% 超 34 Dalian Factory which is completed in March

35 Expansion of peripheral services which we aim to develop as new business Future development of cleaning business Gansu Dalian Beijing Cleaning factory Tianjin Qinghai Ningxia Shanxi Hebei Shandong Shanghai Tianjin Neijiang, Sichuan Shaanxi Henan Jiangsu Dalian, Liaoning Sichuan Hubei Anhui Shanghai Plan Chongqing Zhejiang Jinjiang, Fujian Hunan Jiangxi Tongling, Anhui Guizhou Fujian 35 Yunnan Guangxi Zhuang Autonomous Region Guang dong Taiw an Customer factory

36 Expansion of production capacity semiconductor material Started operations at 8-inch wafer factory in China Construction of Yinchuan plant and Shanghai plant completed in July, in accordance with the business alliance concluded with GWC Co., Ltd., the third largest manufacturer of wafers in Taiwan Started mass production targeting monthly volumes of 50,000 units in October, 80,000 units in November, and 100,000 units in December Aiming for monthly production of 150,000 units by the beginning of the new year 36 Yinchuan plant

37 Expansion of production capacity establish a new company in Hangzhou, China 3. Establishment of a new company in Hangzhou, China, for the production of 8-inch wafers With Hangzhou City as a partner, aiming at monthly production of 300,000 wafers for 8-inch wafers Capital investment requirements to be funded by cash on hand, borrowings, and a subsidy from the city of Hangzhou Hangzhou 37

38 Expansion of production capacity establish a new company in Hangzhou, China Strengthen customer relationship with Global Wafers 38 Greatest emphasis on semiconductor wafer products Top runner in China with 8-inch wafer The construction of the new 8-inch factory is scheduled to start within the year 8-inch market potential of 5.8 million units/month Cost competitive advantage with the in-house production of pulling apparatus and crucibles Towards a monthly production volume of 850,000 wafers including small diameter wafers Cash on hands Government support Hangzhou 8-inch 300,000 units/month Shanghai 8-inch 150,000 units/month Shanghai 6-inch 400,000 units/month Yinchuan Ingot 6 to 8-inch New capital investment Existing cash contributi on Already installed

39 Semiconductor process coverage area of our products Our products are used in almost all semiconductor manufacturing processes ~ General semiconductor manufacturing process (partly omitted)~ Start Wafer manufacturing process Single crystal ingot pulling Silicon wafer generation Pattern formation Resist processing (From) Front-end (testing) Etching Wafer cleaning Heat treatment oxidation CVD Inspe ction Post - proc essi ng o u r p r o d u c t s C o v e r a g e a r e a o f 39 Qua rtz CVD SiC Ceram ics Silicon parts Vacuum Feedthro ughs Cleani ng Contract(e d) processing For processing equipment For wafers For deposition, etching equipment applications, etc. For deposition, etching equipment applications, etc. For deposition, etching equipment applications, etc. For etching For etching Support provided as a follow-up service at all stages Support provided as a service at all stages For cleaning, oxidation, diffusion devices For cleaning, oxidation, diffusion devices For heat treatment equipment For heat treatment equipment Wafer inspection (probe card)

40 Structural Reform of Photovoltaic-related Business Structural reform of photovoltaic-related business Demand in emerging countries is steady. Improve profitability with higher value-added products Implement structural reforms for the current fiscal year to the next fiscal year Pulling device is in operation for our own 8-inch semiconductor About 50% of crucibles was shifted to semiconductor applications 40 Shifted the photovoltaic applications into the semiconductor applications

41 Strengthen communications equipment sector Transition to 5G standard for communications in Japan ongoing - with 2020 as target Anticipate an increase in demand for semiconductors for optical communications The mobile industry market predicts market size to be twice as large in 2020 (460 trillion yen) * 1 Source: * 1 Quoted from the Ministry of Public Management, Home Affairs, Posts and Telecommunications report 5G as a Revitalization Strategy for Japan Thermo-electric Module Constant temperatures in communications laser diodes, repeaters, antennas etc. 41

42 Strengthen core business products 4.Capturing market for the utilization of EV vehicles and industrial power semiconductors Anticipate a growth rate in excess of 30% and 3 trillion yen of market size by 2025 Demand also increases in the automotive field due to the development of Electric Vehicles (EV) Continue to increase production Toward 1.8 times of production capacity In 100 millions 35,000 30,000 25,000 20,000 The world market for power semiconductors 24,239 31, ,000 10,000 5,000 0 More than 30% (Forecast) *Prepared by Ferrotec Holdings based on the data by FUJI KEIZAI CO., LTD.

43 Enhance automobile-related field expansion of automobile products Increase in automobile products in response to the spread of EV Including combined electric and gasoline PHV vehicles, the market for EV will exceed 10 million units in 2035* In addition to Britain and France, China is also going to restrict gasoline-powered vehicles Demand is surely set to rise in response to the increase in assemblies 1500 (cars) 1000 The world s EV and PHV market To grow drastically in the next 20 years *Prepared by Ferrotec Holdings based on the data by Fujitsu SEMI 11.7 million EV PHV thousand (Forecast)

44 Enhance automobile-related field expansion of automobile products Start automobile-related project with the development of EV Target 20 billion of sales for 3 years Potential products Related products of current sensor for EV Battery cooling system for EV Head-up display Magnetorheological suspension Sub air conditioner for EV Rider communication chip 44

45 Sales target With continuing its capital investments, we target net sales at 100 billion yen and operating margin at 10% level for FY3/19. In 100 millions 1, ,000~ Semiconductor and other equipment-related :43~46 billion yen Electronic device :19~22 billion yen Photovoltaic-related :18~20 billion yen FY3/17 FY3/18 FY3/19 General industrial equipment (Others) : 14~16 billion yen

46 Reference Materials

47 Company profile Corporate Name Date of Foundation Address Listed President Ferrotec Holdings Corporation September 27, 1980 Nihonbashi Plaza Building, 2-3-4, Nihonbashi, Chuo-ku, Tokyo Japan JASDAQ (Listed Code:6890) Akira Yamamura Business Segment Business management, R&D operations of group companies Capital Issued Stock Related Company 17,572,000,000 JPY 37,002,202 shares [34 Consolidated Subsidiary] [6 Companies Accounted for by the Equity Method] 47 Employees [Consolidated] 6,536 [Non-consolidated] 69

48 Corporate history 1980~ 1990~ 2000~ Started manufacturing and selling products using ferrofluids (computer seals, vacuum feedthroughs) Vacuum Feedthroughs 92 Started manufacturing and selling thermomodules and modules in China 98 Started manufacturing and selling quartz products for the semiconductor industry Thermo-electric module Quartz 02 Started contract manufacturing service business for silicon wafer processing, machine tool production and other activities (Shanghai factory) 05 Started photovoltaic products business; started manufacturing and selling machinery and crucibles for manufacturing silicon ingots and crystals 08 Started manufacturing and selling ceramic products Ingot Single crystal silicon growing furnaces Machinable Ceramics With a core of ferrofluid expertise ~ Ferrotec s core Technology ~ Establishing operations in other countries 91: Established subsidiary in Massachusetts, USA 92: Established subsidiary in Hangzhou, China 95: Established subsidiary in Shanghai, China 97: Established subsidiary in Singapore 99: Started operations in North America and Europe by acquiring Ferrofluidics Building a new profit structure 02: Started contract manufacturing service (CMS) business at the Shanghai factory, including silicon wafer processing, machine tool production and other activities Expertise in production technologies extending from component processing to final assembly allowed Ferrotec to start the CMS business 05 : Increased manufacturing and sales activities for photovoltaic products in Hangzhou, China 48

49 Operating Margin by Business Segment Operating Profit margin (%) Semiconductor and other equipment-related Electronic device PV others FY3/16 1H FY3/16 2H FY3/17 1H FY3/17 2H FY3/18 1H

50 Strategies for M&A and Alliances Time Company acquired/alliance partner Description April Transition to a holding company structure, change of company name Changed company name to Ferrotec Holdings Co., Ltd. July 2016 Acquired Asahi Seisakusho Co., Ltd. Acquired a major business-use laundry equipment manufacturer July 2015 Acquired ADMAP Inc. Acquired ADMAP which manufactures and sells CVD-SiC products Oct Merged with a subsidiary Merged with Ferrotec silicon which manufactures and sells single crystal silicon products 50 Sep Established a joint venture manufacturing and sales company Jul Acquired shares of IMI in the US Began sales of pure silicon products Ferrotec, a local subsidiary and Covalent Materials agreed to establish a joint venture Hangzhou Solartech Co., Ltd. to manufacture and sell vessels and related products. April Merged with a subsidiary Merged with Ferrotec Quartz which manufactures and sells quartz products Jan July Acquired the Temescal Division of Edwards Vacuum Acquired of Sumikin Ceramics. Changed the name of the company. Acquired the Temescal Division of Edwards Vacuum which is the leading manufacturer and distributor of electron beam-based evaporative coating systems. Acquired 90% of the surviving company Sumikin Ceramics & Quartz Co., Ltd. after spinning of its business except the ceramics business, converted it into a subsidiary, became Ferrotec Ceramics and made it a wholly owned subsidiary in 2013 Dec Jointly established an assembly sales company in Korea. Established "CMC Ferrotec" with the local company for the manufacture of solar cell manufacturing equipment. April Established a joint venture Manufacturing Corporation in Korea Established joint venture corporation Ferrotec Korea Co.Ltd with Korean Company(KSMC Corp) for manufacturing Vacuum Feedthrough. Nov Merger and liquidation Merged with Ferrotec Precision, which produces Vacuum feedthrough. Liquidated two subsidiaries(dec.). Sep Established a joint venture in Taiwan Established Ferrotec Taiwan jointly with a local partner to sell vacuum feedthroughs and offer maintenance services Dec Established a joint venture with LTD Ceramics Inc. (USA) Established joint venture in China to manufacture ceramics July 2005 May 2005 Acquired NORD Co., Ltd.(Russia) Business alliance with KSM Inc.(Korea) Acquired company that manufactures and sells Peltier (thermoelectric) devices in order to increase share of global market Alliance for mutual sales of vacuum feedthroughs and products associated with semiconductor manufacturing equipment July 2004 Exclusive contract with Applied Films(Germany) Gave this company exclusive rights to purchase Ferrotec vacuum feedthroughs Oct Feb Business and financial alliance with Aliontek Business alliance with Toshiba Ceramics and Mitsui Co. for wafer production by commissioning Technology alliance with ALIONTEK CORPORATION, which has technology for the grinding of quartz products, strengthened manufacturing technology for quartz products in China Ferrotec silicon wafer production equipment moved to China factory to conduct a CMS business, and manufacturing is outsourced to this factory

51 Business performance (FY3/18 1 st half Plan(revised on Aug. 14) vs. Results ) in millions FY3/18 1H Plan Amount Pct. Of Sales(%) Amount FY3/18 1H Results Pct. Of Sales(%) Amount Semiconductor and other equipment-related 20, , Vacuum Feedthroughs 4, , Quartz 5, , Ceramics 4, , CVD-SiC 1, , EB-Gun, LED 2, , Semiconductor wafer 2, , Electronic device 6, , Thermo-electric module 6, , Ferrofluid, Others Photovoltaic-related 7, , , Quartz crucibles Pct(%) Solar silicon 4, , , PV manufacturing Epuip Solar cell, Others 2, , Others 7, , Total 42, , Gross income 11, , SG&A expenses 7, , Operating income 4, , Ordinary income 3, , Net income 2, , Net income=net income attributable to owners of parent

52 Business performance ( FY3/18 1 st half vs. 2 nd half plan) in millions FY3/18 1H FY3/18 2H Amount Pct. Of Sales(%) Amount Pct. Of Sales(%) Amount Pct(%) Semiconductor and other equipment-related 20, , Vacuum Feedthroughs 5, , Quartz 5, , Ceramics 4, , CVD-SiC 1, , EB-Gun, LED 1, , Semiconductor wafer 2, , Electronic device 6, , Thermo-electric module 5, , Ferrofluid, Others Photovoltaic-related 9, , Quartz crucibles Solar silicon 6, , PV manufacturing Epuip Solar cell, Others 3, , Others 6, , Total 42, , Gross income 12, , SG&A expenses 7, , Operating income 4, , Ordinary income 3, , Net income 2, , *Some figures are rounded.

53 Business performance ( FY3/17vs. FY3/18 Initial Plan ) in millions FY3/17 Results FY3/18 Initial Plan Amount Pct. Of Sales(%) Amount Pct. Of Sales(%) Amount Pct. change(%) Semiconductor and other equipment-related 32, , , Vacuum Feedthroughs 8, , , Quartz 8, , , Ceramics 6, , , CVD-SiC 1, , , EB-Gun, LED 3, , Semiconductor wafer 3, , Electronic device 12, , Thermo-electric module 11, , Ferrofluid, others Photovoltaic-related 18, , , Quartz crucibles 2, , Solar silicon 10, , , PV manufacturing Epuip Solar cell, Others 5, , Others 10, , , Total 73, , , Gross income 19, , , SG&A expenses 14, , Operating income 5, , , Ordinary income 5, , , Net income 3, , Capital Investment 7,322-10,000-2, Depreciation 3,593-4, *Some figures are rounded.

54 Business performance ( FY3/17 vs. FY3/18 Revised Plan ) in millions Amount FY3/17 Results Pct. Of Sales(%) Amount FY3/18 Revised Plan Pct. Of Sales(%) Amount Semiconductor and other equipment-related 32, , , Vacuum Feedthroughs 8, , , Quartz 8, , , Ceramics 6, , , CVD-SiC 1, , , EB-Gun, LED 3, , Semiconductor wafer 3, , , Electronic device 12, , Thermo-electric module 11, , Ferrofluid, Others Photovoltaic-related 18, , Quartz crucibles 2, , Solar silicon 10, , , PV manufacturing Epuip Solar cell, Others 5, , Others 10, , , Total 73, , , Pct(%) 54 Gross income 19, , , SG&A expenses 14, , , Operating income 5, , , Ordinary income 5, , , Net income 3, , , Capital Investment 7,322-10,000-2, Depreciation 3,593-4, *Some figures are rounded.

55 Business performance( FY3/17 1 st half vs. FY3/18 1 st half ) in millions FY3/171H Results FY3/18 1H Results Amount Pct. Of Sales(%) Amount Pct. Of Sales(%) Amount Pct(%) Semiconductor and other equipment-related 16, , , Vacuum Feedthroughs 3, , , Quartz 4, , , Ceramics 2, , , CVD-SiC 1, , EB-Gun, LED 1, , Semiconductor wafer 1, , Electronic device 6, , Thermo-electric module 5, , Ferrofluid, Others Photovoltaic-related 10, , Quartz crucibles 1, Solar silicon 5, , PV manufacturing Epuip Solar cell, Others 3, , Others 4, , , Total 37, , , Gross income 10, , , SG&A expenses 6, , , Operating income 3, , , Ordinary income 2, , , Net income 1, , , *Some figures are rounded.