Dependence of semiconductor materials demand on economic conditions and electronic equipment production trends

「Although shipments remained stable in the current consolidated fiscal year, many uncertainties remain, including geopolitical risks such as US trade policy and the situation in the Middle East, as well as foreign-exchange movements. We will continue to closely monitor market conditions.」

「当連結会計年度においてはパネルメーカーの稼働率に大きな落ち込みはみられず、一定の受注を確保することができました。」

「In this business, sales volume for the current interim consolidated accounting period was 29.98 million m. Market demand declined substantially due to the backlash from front-loaded shipments made in the first quarter consolidated accounting period in preparation for US tariff policies. As a result, inventory adjustments throughout the supply chain continued, leading to a substantial decline in our shipments as well.」

「The market has finally begun to show signs of a pause in the recent deterioration, but many uncertainties remain, including the implementation of US tariff policies and the economic slowdown in China. We will continue to closely monitor market conditions, including foreign-exchange movements.」

「South Korea and Taiwan were once the centers of FPD (flat-panel display) panel manufacturing, but China is now the main production country. The FPD industry had previously been able to maintain stable production and sales, with little fluctuation throughout the year. However, over the past 3 years, industry capacity utilization has fluctuated sharply, making market demand extremely difficult to forecast.」

「Orders have recently begun to show signs of a modest recovery. However, based on our research indicating that television unit sales are flat and taking into account the continuing excess inventories, we believe that recovery will take some more time and will continue to conduct a careful assessment.」

「Orders in the third quarter of the current consolidated fiscal year fell sharply to 13.12 million m. As the business entered an inventory adjustment phase similar to the previous fiscal year, average monthly shipments in the third quarter of the current consolidated fiscal year were 4.37 million m. (Normally, average monthly shipments are approximately 6.00 million m.) The inventory adjustment is expected to continue until around March 2024, with a full-scale recovery expected from April 2024 onward.」

「Sales volume for the cumulative first two quarters was 40.39 million m and remained on track, following the first quarter consolidated accounting period. Orders had remained sluggish through the third quarter consolidated accounting period of the previous fiscal year due to excess LCD panel inventories after the COVID-19 demand surge, but turned to recovery from the fourth quarter consolidated accounting period onward and remain strong. Although market conditions are expected to remain favorable as described above, the decline in LCD panel prices since September is a concern, and we will continue to closely monitor market conditions.」

「Following substantial inventory adjustments in the cumulative first quarter of the previous fiscal year due to excess LCD panel inventories after the COVID-19 demand surge, the market turned to recovery from the fourth quarter consolidated accounting period of the previous fiscal year onward. It remained strong in the cumulative first quarter and recovered to pre-COVID-19 levels.」

「In this business, full-year sales volume was 59.45 million m, a substantial 27.8% decrease from the previous period.」

「Sales volume for the cumulative first 3 quarters was 41.81 million m, a substantial 36.2% decrease year on year. As previously reported, LCD panel inventories peaked between the end of June and the end of July, resulting in sluggish shipments of 9.86 million m in the second quarter consolidated accounting period. However, shipments recovered to 15.79 million m in the third quarter consolidated accounting period, indicating a recovery trend.」

「Panel manufacturers' production cuts due to excess inventories, which began in the cumulative first quarter, have continued and led to a decline in spacer tape shipments. Panel inventories peaked between the end of June and the end of July and subsequently declined slightly following production adjustments, but remained excessive. As a result, sales volume for the cumulative first two quarters was 26.02 million m, a substantial 47.8% decrease year on year.」

「Following manufacturers in South Korea and Taiwan, Chinese manufacturers also began reducing production of LCD panels. Industry-wide capacity utilization reportedly declined by more than 20% to levels seen 10 years ago. Television unit sales are believed to have fallen sharply due to various overlapping factors, including efforts to correct television panel prices below cost and declining global purchasing appetite caused by the Ukraine crisis.」

「In this business, the global decline in television demand continued during the third quarter consolidated accounting period, amid adjustments to excess inventories built up due to uncertainty about the outlook arising from the easing of stay-at-home demand in North America, container shortages, material shortages and other supply-chain disruptions. Full-year sales volume consequently declined 10.0% from the previous period.」

「In the third quarter consolidated accounting period, shipments fell sharply by 30.5% year on year due to a global decline in television demand. The decline is believed to have resulted from excess inventories caused by uncertainty about the outlook amid the easing of stay-at-home demand in North America, container shortages, material shortages and other supply-chain disruptions. There are some signs of a modest recovery in the fourth quarter consolidated accounting period, but inventory adjustments in the television market are expected to take time, and a year-on-year decline is considered unavoidable.」

「Although shipments had remained at record-high levels for 8 consecutive months, signs of a pause in growth became apparent during the second quarter consolidated accounting period.」

「Sales volume for the first-quarter consolidated period reached a record high of 26.62 million m since the company's founding, increasing sharply by 23.1% year on year. In June 2021 alone, combined production at the Japan and South Korea sites reached 10 million m for the first time.」

「In the semiconductor materials business, orders recovered to levels before the spread of COVID-19 from the cumulative third quarter onward, and orders are expected to exceed the previous year's level from the fourth quarter consolidated accounting period onward.」

「Shipments of spacer tape in the semiconductor materials business decreased 8.8% year on year. Net sales decreased 16.8% year on year, as recovery in products for smartphones and other applications with higher selling prices remained slow, in addition to the stronger yen, weaker Korean won and Taiwanese dollar.」

「This business had achieved growth of more than 20% for 4 consecutive periods as the proportion of 4K televisions, which consume 2.7 times as much of our spacer tape, continued to expand. However, from the third quarter consolidated accounting period of the previous fiscal year onward, inventory adjustments by some customers due to US-China trade friction and the impact of the novel coronavirus resulted in negative growth for the first time in 5 periods.」

「From the third quarter consolidated accounting period onward, inventory adjustments by some customers due to US-China trade friction and the stronger yen, weaker Korean won and Taiwanese dollar had an impact. In addition, in the fourth quarter consolidated accounting period, operating adjustments at panel manufacturers and other factors related to the novel coronavirus resulted in a ¥67 million decline in net sales for the second half alone and a ¥16 million full-year decline, the first decline in 5 periods.」

「Semiconductor materials business: Due to the stronger yen, weaker Korean won and Taiwanese dollar, and inventory adjustments by some customers, shipments were flat, resulting in the first quarterly year-on-year decline in net sales in 5 periods, a decrease of ¥46 million.」

「Sales volume increased substantially by 17.4% year on year in the cumulative first two quarters. However, due to the impact of a stronger yen and weaker Korean won, net sales increased only 8.0% year on year.」

「Sales also grew substantially in the cumulative first quarter, with shipments increasing 21.8% and net sales rising 17.6% year on year.」

「Compared with the strong growth in the previous period, shipments increased 23.3% and net sales rose 21.7% in the current consolidated fiscal year, with this business accounting for approximately 55% of the Group's consolidated operating profit.」

「In the semiconductor materials business, shipments increased 26.1% and net sales rose 30.9% year on year in the fiscal year ended March 2018. With growth of more than 20% expected in the current consolidated fiscal year, we have completed production capacity enhancements to increase the combined monthly capacity of our plants in Japan and South Korea from 5.7 million m to 8 million m. Since July 2018, order volume has exceeded 7 million m for 6 consecutive months, and shipments for the first 3 quarters increased substantially by 23.2%, resulting in a significant increase in profit. Strong demand is expected to continue.」

「In the semiconductor materials business, shipments increased 26.1% and net sales rose 30.9% in the fiscal year ended March 2018. In the current consolidated fiscal year, cumulative shipments for the first two quarters increased a further 21.9%, and orders exceeding 7 million m per month have continued for 5 consecutive months, substantially above combined Japan and South Korea monthly production capacity of 6.5 million m (previous-period average: 5.7 million m).」

「In the semiconductor materials business, shipments increased 26.1% and net sales rose 30.9% in the fiscal year ended March 2018. In the current consolidated fiscal year, shipments for the first quarter cumulative period increased a further 20.1%, and strong demand is expected to continue for the time being in the short to medium term.」

「While global demand for LCD televisions is growing at approximately 3% annually, the proportion of 4K televisions, which consume more than twice as much of our Group's spacer tape, has exceeded 30%. As a result, shipments increased 26.1% from the previous period and net sales rose 30.9%.」

「As global demand for LCD televisions grows at approximately 3% annually, the proportion of 4K televisions, which consume more than twice as much of our spacer tape as conventional televisions, has exceeded 30%, resulting in shipments increasing 26.7% year on year and revenue increasing 36.7%. In addition to expectations for a further increase in the 4K television mix, mass production of OLED televisions, which consume more than four times as much spacer tape as conventional televisions, is expected to ramp up in earnest, and substantial growth is anticipated over the next several years.」

「Revenue for the six-month consolidated period increased sharply, with volume up 23% and revenue up 31%, driven by the expanding penetration of 4K televisions, market-share gains from high-quality 4K-compatible spacer tape and entry into the smartphone market.」

「Sales volume for the first-quarter consolidated period increased sharply by 20%, driven by the expanding penetration of 4K televisions and market-share gains from high-quality 4K-compatible spacer tape.」

「From the cumulative third-quarter consolidated accounting period onward, sales volume grew significantly, up 21.6% from the previous fiscal year, due to the wider adoption of 4K televisions and increased market share achieved with high-quality spacer tape for 4K televisions.」

「Order volume, which had been sluggish, recovered sharply, with shipment volume increasing 15% year on year due to the wider adoption of 4K televisions and adoption of the Company's spacer tape in mobile phones. However, sales remained flat due to yen appreciation.」

「Although the Company revised its plan, announced on 9 August 2016, amid sluggish order volume caused by yen appreciation and the deterioration of the Chinese economy, signs of improvement have gradually emerged in order volume due to the wider adoption of 4K televisions and adoption of the Company's spacer tape in mobile phones. Shipment volume increased 21.8% year on year in the second-quarter consolidated accounting period alone, and the forecast for the full-year final result is an expected increase of 15.9%.」

「The Group is concentrating its management resources, namely its people, assets and capital, on an expansion and growth strategy centered on the PIM (Powder Injection Molding) business, while working to bring the new plant acquired in Higashiomi, Shiga Prefecture, into operation as soon as possible. During the cumulative first-quarter period, sales remained sluggish due to yen appreciation, the slowdown in the Chinese economy and restrictions on sales of PIM materials.」

「Demand for the Company's products is strongly affected by economic trends in Japan and worldwide, particularly production levels and consumption trends for personal computers, LCD televisions and plasma televisions, and these factors may affect the Company's financial position and operating results.」