Passion Extension 2009 2010 · 2014. 9. 26. · Passion Extension （2009～2010） SHOWA DENKO...

Passion Extension （2009～2010）

SHOWA DENKO K.K.

Kyohei Takahashi, President & CEO

Showa Denko’s Strategy in Drastically Changed Environment

Showa DenkoShowa Denko’’s Strategy s Strategy in Drastically Changed Environmentin Drastically Changed Environment

February 10, 2009February 10, 2009

This presentation, containing performance forecast and business/product development programs, has been prepared based on information available at this moment. The Company cannot guarantee that these programs will be implemented or the performance forecast will be accurate. Please note that actual results may differ materially from the forecast or plans due to a variety of factors, including changes in the market conditions. Development of businesses and products may be delayed or not materialized due to a variety of factors, including market acceptance and the introduction of new products by competitors.

Unprecedented global recession triggerd by the U.S. financial crisis

Drastic changes in the business environment

(2009-2010)While maintaining the basic concepts of the Passion Project, we have

worked out “Passion Extension” to meet the drastic changes in the environment.⇒Preparing for the new project for 2011 and thereafter Speedily carry out structural reform in response to the changes in the

business environment

Identify market segments that will grow in the future

Return to the track of continuous growth as soon as the economy recovers.

Passion Extension～ Preparation for a new business plan

HD

Petrochemicals Ethylene A 30% cut (due to SM, PP and acetic acid production cuts)

Acetic acid Suspended plant operation (w ithdrew from PTA market)

Chemicals Acrylonitrile A 30% cut in production

Inorganics G. electrode Producing in line with demand; maintenance in 1Q

(Progress in inventory adjustment)

Aluminumheat exchangers, and aluminum cylinders for printers

Production cuts in response to a sharp decline in HDD production

Production cuts in high-purity foils for capacitors, Shotic ,

Production cutbacks at the moment～ Making intensive cuts; inventories in supply chains being reduced

■

■

■

■

■

Carry out drastic structural reform and focus on high-growth areas where we have competitive advantages

Create individualized products by deepening and merging wide-ranging material technologies centering on inorganics and metals

Original image Revised image（2010）

Companyimages

Images of the financial targets

(2010)

By enhancing the company value, we will contribute to the interests of all stakeholders.

Unique chemicalcompany with individualized productsTechnology-oriented company

Financial strength

CSR

Operating income 100.0 billion yen ⇒ 40.0 billion yenD/E ratio 1.0 times ⇒ 1.4 times

Earn the full trust and confidence of the market and society

Establish financial strength by squeezing assets and reducing interest-bearing debt

Passion Extension（2009-2010）

Passion ExtensionPassion Extension（（20092009--20102010））

Contribute to the good of society

Maintain basic concepts, but lower financial targets～ Carry out structural reforms in response to drastic changes in environment

（billion yen）

Revised target images in 2009 and 2010～ Expecting slow recovery after hitting bottom in 2009

Net Sales 1,003.9 800.0 900.0 1,000.0

Operating Income 26.8 17.0 40.0 100.0

Profit ratio 2.7% 2.1% 4.4% 10.0%

Interest-bearingdeat 392.9 385.0 360.0

D/E ratio 1.63 times 1.6 times 1.4 times 1.0 times

2010(Original image)

2009(Forecast)

2010(Revised image)

2008Actual

Improve business portfolio by promoting growth strategies and structural reform

Carry out drastic cost reductions

Secure sufficient cash flows

Improve financial strength

1

2

3

4

5

Allocate managerial resources efficiently by very carefully selecting investments

Strengthen R&D to ensure future growth6

Major tasks under “Passion Extension” (2009-2010)

Rare earth magnetic alloysRare earth magnetic alloysHDHDUltrabright LED chipsUltrabright LED chips

HighHigh--purity foil for capacitorspurity foil for capacitors

HighHigh--performance componentsperformance components

Heat exchangersHeat exchangers

Aluminum cansAluminum cans

Aluminum, etc.Aluminum, etc.

CeramicsCeramics

Graphite electrodesGraphite electrodesFine carbonsFine carbonsInorganicsInorganics

Conventional compound Conventional compound semiconductorssemiconductors

SemiconductorSemiconductor--processing materialsprocessing materials

CapacitorsCapacitorsElectronicsElectronics

Basic chemicalsBasic chemicalsFine chemicalsFine chemicals

AmmoniaAmmoniaLife scienceLife scienceChemicalsChemicals

Specialty polymers Specialty polymers (development)(development)

Plastic productsPlastic productsOlefins Olefins （（Improve facilities at Oita)Improve facilities at Oita)

Organic chemicalsOrganic chemicalsPetroPetro--

chemicalschemicals

Cash cowCash cowGrowth driversGrowth driversNew growth driversNew growth drivers

Base businessesBase businessesGrowth businessesGrowth businesses

Launch of new productsLaunch of new products Business expansionBusiness expansion Structural reformStructural reform

- Sold shares in Showa Aluminum Powder and Heisei Polymer

- Sold the business of moisture removal sheet for perishable foods

- Formation of JV in aluminum alloy

- Dissolution of Showa Aluminum Alloy

-Completion of withdrawal from the commodity foils business

Specialty polymers Specialty polymers (SHP now a 100%(SHP now a 100%--owned owned subsidiary)subsidiary)

- Sold Kokusai Eisei(Tender offer for Showa Tansan shares)(Tender offer for Showa Tansan shares)

Portfolio～Step up portfolio improvement based on accomplishments under the Passion Project

1. Portfolio improvement through implementation of growth strategies and structural reform

Rare earth magnetic alloysRare earth magnetic alloys

HDUltrabright LED Ultrabright LED

chipschips

HighHigh--purity foil for capacitorspurity foil for capacitorsHighHigh--performance componentsperformance components

Heat exchangersHeat exchangersAluminum cansAluminum cans

Aluminum, etc.Aluminum, etc.

CeramicsCeramics

Graphite electrodesFine carbonFine carbon無機無機

Conventional compound Conventional compound semiconductorssemiconductorsSemiconductorSemiconductor--

Processing materialsProcessing materials

ElectronicsElectronics

Basic chemicalsBasic chemicalsFine chemicalsFine chemicals

AmmoniaAmmoniaLife scienceLife scienceChemicalsChemicals

Specialty polymers Specialty polymers (development)(development)

Olefins (improve facilities at OitaOlefins (improve facilities at Oita))

Organic chemicalsOrganic chemicalsPetroPetro--

chemicalschemicals

Cash cowCash cowGrowth driversGrowth driversNew growth driversNew growth drivers

Base businessesBase businessesGrowth businessesGrowth businesses

Specialty polymers (SHP now a 100%Specialty polymers (SHP now a 100%--owned subsidiary)owned subsidiary)

Tender offer for Showa Tender offer for Showa Tansan sharesTansan shares

Expand overseas production bases

Aim to become the world leader in

CNT

Develop and launch high-value

products

Promote alliance to solidify business

foundation

Drastic reform;consider alliances

Shift production to overseas sites

Concentrate on selected areas

Introduce new furnaces to reduce CO2 emissions and increase competitiveness

Use proprietary technologies to

establish presence

Expand flourinechemical business

Portfolio～Further improvement in business portfolio in 2009 and 2010


Growth drivers

New growth drivers

Structural reform

HD

Semiconductor-processing materials

Based on our leading position in technologysolidify our business foundation through M&Astrategy

Focus on fluorine chemicals business

Ultrabright LED chips Use proprietary technologies to establish our presence in the market

Fine carbon Establish “only one” technologies and products on a global scale

Fine chemicals Develop and launch high-value products

Rare earth magnetic alloys Expand overseas production sites

Aluminum

Petrochemicals

Ceramics (alumina)

Carry out drastic structural reform; start alliances

Increase competitiveness of naphtha cracker

Move production bases overseas

Major topics for business portfolio improvement1. Portfolio improvement through implementation of growth strategies and structural reform

Other 1%Fujitsu7%

HGST18%

Samsung7%

Seagate30%

Toshiba 9%

WDC 28%

[ HDD shipment ](Oct.-Dec. 2008)

TrendFocus

HDD demand trends in 20091. Portfolio improvement through implementation of growth strategies and structural reform

■ HDD industry trends Shipment volumes：Total demand will be lower than the

results in 2008.Inventory adjustments in 1H. Substantial cuts in media production in 1Q.Gradual recovery in 2Q. Recovery in 2H depends on macroeconomicrecovery.(No change in medium-term growth outlook: 10%/y or more)

Notebook PCs will continue to drive growth in 2009. Further reorganization of the industry is expected.

Substantially cut production in response to sharp declines in demand.

Leading the world in commercial production of high-capacity media. Started the world’s

First commercial production of the fourth-generation PMR media. Also leading in the race for the fifth-generation.

Rapid increase in the production of high-capacity glass-based media (Shipment of aluminum-based media declining)

We will further strengthen our position through positive reorganization focusing on glass-based media.

■ Showa Denko’s HD media business

Intensively cutting production in response to sharp production cuts by the HDD industry（Our plant utilization rates: 70% in 4Q ’08; 40% in 1Q, and 60% in 2Q, ‘09）

Rationalization measures to be implemented in 1H ’09

Fixed costs at all production sites to be cut by a total of ¥3 billion

（including ¥1 billion fixed-cost reductions in Taiwan and Singapore due to intensive production cutbacks in 1Q and workforce reduction)

Renewed VPA with major customers

■ HD

HD：Improving profitability through production cuts in response to a sharp drop in demand


Fuji Fuji ElectricElectric9.4%9.4%

FujitsuFujitsu3.9%3.9%

HOYAHOYA11.1%11.1%

Showa Showa DenkoDenko36.3%

HGSTHGST20.3%20.3%

WDC(Komag) 4.2%

Trend Focus

SeagateSeagate1414..77%%

2006 2007 2008 2009（Forecast）

(SDK estimated)

0

10

20

30

40

50

60

70

80

90

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

Desktop PC Notebook PC

The HDD market will shrink slightly in 2009. In the medium term, however, demand for HD media for mobile PC applications will grow.

Showa Denko will focus on rapidly growing glass-based high-capacity HD media. Consolidation with HOYA’s glass-based HD media business

1) The new JV will start up in 2Q ‘09.2) Our position in the glass-based HD media market will be strengthened further.

(Million units)

HD: Integration with HOYA to become world No. 1 in notebook PC applications


[ HDD shipment trends]Mobile application growing

[HD media market share for mobile applications ]（CQ3)

0.1mm0.1mm0.1mm

Graphite electrodes・World leader in 30- and 32-inch electrodes・Future capacity expansion is being considered.

Rare earth magnetic alloys

ＶＧＣＦ High-performance ceramic products・Ceria-based glass polishing slurries for LCD/HD applications

・Titanium oxide for capacitors

・A leading maker in the world・Demand growing for use in HDDs and cars・Building a plant in Vietnam (already 2 in China)

・World leader in LIB applications・Build a 400t/y plant for use in resin composites・World leader in carbon nanotube

TM

Aiming to become a leader in inorganics/metals (1)1. Portfolio improvement through implementation of growth strategies and structural reform

Ultrabright LED chips・Covering the whole wavelengths

Photocatalyst

SiC epitaxial wafers・For energy-saving power devices・Commercially producing high-quality epi-wafers

・Highly efficient production setup・Trial manufacture of new catalysts responsive to visible light

・Commercialization efforts in NEDO project・Future market size: ¥2.8 trillion

・Graphite cathode material for LIBs・Growing demand for use in PCs, mobiles and cars

SCMGTM

・Planning to use 6-inch wafers

Aiming to become a leader in inorganics/metals (2)1. Portfolio improvement through implementation of growth strategies and structural reform

Ready to contribute to the expansion of electric vehicle market(For GHG reduction and energy conservation)


To provide high-performance parts for electric vehicles

Additive in anode/cathode （VGCFTM ） Graphite cathode material （SCMGTM） Aluminum laminate package Aluminum foils for electrodes

Small inverters with minimized loss

SiC power devices

Small and efficient motors

Rare earth magnetic alloys

High-capacity, long-life lithium ion batteries

■ Adopted in LIBs for cars

Key technologies Graphitizing

Raw material evaluation

Quality desigining

Vapor-grown carbon fiber ＣＮＴ synthesis

technology

Graphitizing technology

Graphite cathode material Graphitizing technology Raw material evaluation

technology

100nm

■ We have the largest share in the world’s large-diameter graphite electrode market.

■ Exclusive supplier to the LIB market

■ Participating in resin composites market

Graphite electrodes VGCFTM SCMGTM

Graphite cathode material (SCMGTM) adopted in electric vehicles1. Portfolio improvement through implementation of growth strategies and structural reform

Large LIB for cars, and LIB for power tools

■ Restructure production setup to improve profitability■ Pursue alliances as one of the alternatives

Commodity aluminum materials (rolled products and extrusions) ⇒Review production setup, including saving of labor

Aluminum cans⇒Increase production efficiency and reduce costs; withdraw from bottle production

Heat exchangers⇒ Accelerate restructuring of our North American production site, and expand capacity in Asia

Cylinders for LBP⇒Establish a global production setup to

meet growing demand

Net Sales 2008

232.8billion yen

【Aluminum sales breakdown】

Sheets

Extrusion

Bevaragecans

Shotic

Ingots

Aluminum: Carry out drastic structural reform and consider alliances


Other,elimination

Heat exchangers

0

10

20

30

40

50

60

70

80

90

100

2002 2003 2004 2005 2006 2007 2008 2009(forecast)

■ Reduce investment from 2008 level Results in 2008: ¥54.8 billionPlan for 2009 : ¥44.0 billion

Very carefully select investment items and focus on strategic areas of high growth Rationalization and labor-saving measures will be given priority.

[Capital investment trends](billion yen)

Substantially reducing capital investments in 20092. Efficient allocation of resources through careful selection of investments

Electronics 6.0Aluminum and other 3.5Inorganics 1.5Chemicals 1.0

0

2

4

6

8

10

12

14

2005 2006 2007 2008 2009(forecast)

（billion yen）

• Breakdown by segment (billions of yen)

Reduce purchasing costs of all items, including raw materials and auxiliary materials

Establish an optimized production setup in accordance with the present levels of plant utilization

Increase productivity through SPS（Showa Denko Production System）activities

Set to take additional measures in response to further declines in economic conditions

[Cost reduction trends]

Planning to reduce costs by ¥12 billion in 20093. Carry out drastic cost reductions

55.7

17.0

76.7

40.026.8

68.7

52.138.5

57.2

60.0

49.8

60.4

38.0

34.234.1

34.5

0

10

20

30

40

50

60

70

80

90

100

110

120

130

2003 2004 2005 2006 2007 2008 2009 2010

O.I. Results Depreciation expenses

The total of operating income and depreciation expenses in 2009 will be maintained at the 2003 level; will increase again in 2010.

[ O.I. before depreciation ]

Passion ProjectPassion Project Passion ExtensionPassion Extension

Page ２０

Ensure sufficient cash flows4. Ensure sufficient cash flows

（billion yen）

Higher depreciation expenses due to HD capacity expansion, etc.

（forecast）（revised Image）

360

502

581

622

527

433

396 393385

449

3.18

2.83

3.87

4.46

1.841.63 1.6

2.17

1.4

300

350

400

450

500

550

600

650

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Interest bearing debt D/E ratio

（billion yen）（times）Outstanding debt D/E ratio

2009 forecast 385 billion yen 1.6times2010 revised images 360 billion yen 1.4times

Passion ProjectPassion Project

1.43

Passion ExtensionPassion Extension

（forecast）（revised image)

Continue to steadily improve financial strength despite severe environment⇒ Drastically reduce inventory and very carefully select investments

Improve financial strength5. Improve financial strength

Growing needs in the areas of environment

and energy

Individualized technologies of Showa Denko accumulated over many years

Interconnection of organic/inorganic chemical technologies

<<Future target areas:Future target areas:““imageimage”” in 2015in 2015>>

Environment/energyEnvironment/energy・・ Semiconductor devicesSemiconductor devices・・ Energy devicesEnergy devices・・ Lighting modulesLighting modules

IT Chemicals IT Chemicals

6. Strengthen R&D to realize our ”image” under the new business planFully utilizing our position as the unique chemical company with excellent

inorgnic/metal technologies

Page ２２

＜＜Three major target segmentsThree major target segments＞＞

ElectronicsElectronicsAutomotive partsAutomotive partsEEnergynergy and environmental goodsand environmental goods

＜＜New growth driver businesses in 2010New growth driver businesses in 2010＞＞

Six SMUSix SMU projects (Environment/energy; projects (Environment/energy; semiconductor devices; energy devices; semiconductor devices; energy devices; displays/illumination; IT chemicals; displays/illumination; IT chemicals; automotive parts)automotive parts)

SDK Group technologies Individualized technologies: Fusion of organic/inorganic chemical and metal technologies

accumulated over many years Deepening core technologies for the future (Molecular design, reaction control,

organic/inorganic hybrid, and other technologies)

Trends in society and market Request for reductions in environmental impact Increased demand for energy; Measures to cope with the depletion of resources

＜Contribute to environmental protection as the unique chemical company with excellent inorganic/metal technologies>

GHG reduction: Cathode material for LIBs for cars; carbon separtors for fuel cells, etc. Conservation of energy: VGCFTM; LED chips; SiC power devices; organic EL, etc. Conservation of resources & recycling: Platimum-subsitute catalysts for fuel cells; production

of chemials based on used materials

Value to be provided by the Showa Denko Group

6. Strengthen R&D to realize our “image” under the new business plan

Contribute to reduction of impact on global environment

First company in Japan to commercially produce epitaxial wafers for SiC power devices

■ SiC power devices

Development roadmap

Achieved 100-times improvement in material performance

■ Organic EL

Developing InGaN-based LED chip technologies

■ LED chips

Requirements for commercial use in electric vehicles

Showa Denko’s efforts for FCEV commercialization

■ Fuel cell components

Supplementary data～ Development efforts by Showa Denko Group

Showa Showa DenkoDenko

AISTAIST CRIEPICRIEPI

【【Joint Joint researchresearch】】

<SiC<SiC epitaxial wafer supplierepitaxial wafer supplier>>ESICAT Japan,ESICAT Japan, LLPLLP

Supply of SiC epitaxial wafersSupply of SiC epitaxial wafers

SiC epitaxial wafer consortium

Technology Technology transfertransfer

• Epitaxial wafers (2, 3, and 4 inches in diameter) with world’s leading quality

• Starting full-scale epitaxial wafer business following takeover of ESICAT Japan’s business

• Epitaxial wafers (2, 3, and 4 inches in diameter) with world’s leading quality

• Starting full-scale epitaxial wafer business following takeover of ESICAT Japan’s business

2”φ 3”φ 4”φ

Developing SiC epitaxial wafers with the top-level quality in the world: large diameter, low deficiency, and high uniformity Taking over ESICAT Japan’s business; becoming the first Japanese company

to produce SiC epitaxial wafers on a commercial scale

SiC power devices: First in Japan to commercialize epitaxial wafers

Showa Denko

Takeover in January 2009

Supplementary data

Developed an innovative film-forming technology for nitride-based compound semiconductors Developed a new crystal process using MOCVD; production based on four-inch

epitaxial wafers; aiming to shift to six-inch epitaxial wafers

Hybrid-PPD enables the use of 4” wafers.

Hybrid-PPD enables the use of 4” wafers.

MOCVDMOCVD

New technology （Hybrid PPDTM）

New technology （Hybrid PPDTM）

PPD（Plasma-assisted Physical Deposition）

PPD（Plasma-assisted Physical Deposition）

HybridHybridMOCVDMOCVD

Launched green LED chips

Launched green LED Launched green LED chipschips

Launched blue LED chips

Launched blue Launched blue LED chipsLED chips

Shift to Hybrid-PPD-based production

Shift to HybridShift to Hybrid--PPDPPD--based productionbased production Shit to 6“linesShit to 6Shit to 6““lineslines

Shift to 4“ linesShift to 4Shift to 4““ lineslines

‘05 ‘06 ‘07 ‘08 ‘09 ‘10

4“lines completed44““lines completedlines completed

LED chips: Developing InGaN-based LED chip technologiesSupplementary data

0

50

100

150

200

2005 2010 2015

Effic

iency

(lm

/W

)

Incandescent lamps

Fluorescent lamps(Efficiency )

2008

cost

(￥/ｌｍ

)40lm/W10,000hr

2012

¥3/lm or less

150lm/W50,000hr

10

To achieve high durability and efficiencyby developing white luminescent deviceswith a “new-concept” structure

Ｒ＆Ｄ

MarketingReplacing

incandescent lamps

Sample distribution LaunchReplacing fluorescent

lamps

White EL device

Organic EL:～ Development roadmapSupplementary data

For next-generation lighting

Now at a level close to commercialization for the illumination market due to longer life and higher efficiency

（Evaluated based on conventional-structure OLED)

Efficiency

（lm/W

)

1,000 10,000 100,000 10,000,000

Durability （hr@100cd/m2)

Illumination market (¥1.5 trillion)(including ¥0.5 trillion for lamps)

FPD market (¥6.2 trillion)(including ¥0.15 trillion for materials)

1,000,000

1

10

100

1000

Signboard market (¥0.7 trillion)

：Progress in 2008○：Device performance(In colors as emitted)

：Progress in 2008○：Device performance(In colors as emitted)

SDK blue SDK green

SDK yellow

SDK red

Organic EL: Achieved 100-times improvement in material performanceSupplementary data

Fuel cell costs should be reduced to 1/100 to realize commercialization. Develop platinum-substitute catalysts Reduce the weight of separators Establish an infrastructure of hydrogen,

including its storage

Development of platinum-substitute catalysts is essential because of limited deposits of platinum.

Development of a substitute for metallic separators is essential in view of their weight and costs.

Materials-based approaches

World total: 922 million units

100 kW FCV→100 g Pt !!

50,000 tons(218 t/y)

300 million cars or less even when half of

the deposits is used

Japan: 76 million units (8.2%)

No. of four-wheeled cars (2007)

Platinum deposits

Fuel cell components: Requirements for commercial use in electric vehiclesSupplementary data

Low-cost, thin, and light carbon separators

Fine powder of graphite with high electrical conductivity

Low-cost production using a high-speed molding process

Special surface treatment for high drainage

Member of a project at NEDO

Niobium-based (Ⅳ/Ⅴ group ) oxide catalyst

High specific surface High crystallinity High-speed production Member of a new project at NEDO

Platinum-substitute catalystCarbon separators

Developing “1/100 cost” materials for fuel-cell electric vehicles (FCEVs) Commercialize fuel cell components in preparation for the expected spread of

FCEVs in and after 2015

Supplementary data

Fuel cell components: Showa Denko’s efforts for FCEV commercialization

NetSales

OperatingIncome

NetSales

OperatingIncome

NetSales

OperatingIncome Net Sales Operating

Income

Petro-chemicals

335.4

16.4

395.1

19.6

400.2

-1.3

245.0

3.0

Chemicals79.2

5.1

84.7

7.4

93.3

5.3

100.0

2.0

Electronics165.5

28.6

201.0

25.8

188.8

9.3

155.0

0.0

Inorganics74.3

16.1

84.6

20.9

88.8

19.2

90.0

17.5

Aluminum260.1

6.5

257.8

8.0

232.8

-0.2

210.0

0.0

HQ costs andother -3.9 -5.1 -5.5 -5.5

Total914.5

68.7

1,023.2

76.7

1,003.9

26.8

800.0

17.0

2006

〔Passion Project〕 2009（forecast）2007 2008

（billion yen）

Reference～ Operating Income by segment

Passion Extension 2009 2010 · 2014. 9. 26. · Passion Extension （2009～2010） SHOWA DENKO...

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