Message from the President

To Our Shareholders

IBIDEN's Purpose Inherited Since our Founding

The IBIDEN WAY, the source of our ability to create products needed by society in response to the changing times

FY2022 marked the 110th anniversary of our founding and the final year of our previous medium-term management plan "To The Next Stage 110 Plan." The overall environment surrounding the Company's business continued to be uncertain and challenging, with soaring energy prices triggered by Russia's invasion of Ukraine and rising prices of various materials due to the rapid depreciation of the yen following monetary tightening in Europe and the US, despite progress toward normalization of economic activities.
Under these circumstances, in addition to responding to the rapid changes in the environment, we have been making strategic moves toward the next stage of growth, including the start of construction of Gama Plant and Ono Plant. As a result, net sales, operating income, ordinary profit, and profit attributable to owners of parent on a consolidated basis reached record highs, with a year-on-year increase in both sales and income for the fourth consecutive year.
While we were able to celebrate our 110th anniversary with high levels of performance, we, at the same time, have been reviewing our past medium-term management plans and discussing how to develop a new medium-term management plan. This was an opportunity for us to take a fresh look not only at the reasons why we successfully built up a track record, but also at the reasons why we had been allowed to exist over the past 110 years.
The Company's business began with hydroelectric power generation, which was our founding business. Since then, the Company's core business transitioned from the housing materials business, which grew significantly during the period of high economic growth; to the Electronics Operation, which was quick to respond to the needs of the digital age after the 1970s and successfully developed plastic IC Package Substrates; and the Ceramics Operation, which saw an increase in demand for products in the automotive exhaust system field as awareness of environmental issues grew. The reason why IBIDEN has been able to continue to grow by shifting its business portfolio according to the times is undoubtedly because each and every one of our employees has inherited IBIDEN's DNA of accurately understanding the changes of the times, boldly taking up challenges with the core technologies we have developed, and creating new technologies and products. Our philosophy, which has contributed to the development of an abundant society by valuing the blessings of the global environment in the form of water resources and the creativity and ingenuity of each and every one of our employees to create products needed by an affluent society, is expressed in our mission: "We contribute to the progression of society through innovative technology, with respect for both individuals and the global environment," which is encapsulated in the IBIDEN WAY. We believe that this IBIDEN WAY, which has been built and refined by our predecessors, is the reason we have been able to survive for over 110 years.
Currently, Digital Transformation (DX) and Green Transformation (GX) are driving a major societal change. As we look to the next 100 years, we will continue to take on the challenge of creating the necessary technologies and products and moving to a new stage by responding to the needs of the times and changes in the environment, an idea that we have cherished.

Reviewing the Previous Medium-Term Management Plan to Realize Issues

Further promoting selection and concentration of businesses to establish a structure that enables optimal use of management resources for the next stage of growth

Looking back at the period of the previous medium-term management plan from FY2018 to FY2022, as mentioned above, the social environment changed dramatically, including Russia's invasion of Ukraine and COVID-19. At the time of development of the previous medium-term management plan, the Electronics Operation aimed to maintain our market share in existing fields such as the personal computer market and to expand our business in new fields such as IoT, AI, and for data centers. While we have further promoted selection and concentration of our business by withdrawing from the CSP*1business and selling IBIDEN Electronics (Beijing), we have also been concentrating our management resources on the IC package business by making large investments to meet the growing demand for data center applications. The Ceramics Operation aimed to concentrate management resources in growth areas such as the market of environmental regulations for heavy commercial vehicles and the semiconductor manufacturing equipment industry in the FGM*2 business, and to expand the exhaust system business in emerging markets. In doing so, we have pursued selection and concentration of production bases by liquidating IBIDEN DPF France and selling IBIDEN Ceram in order to effectively utilize limited resources.
As a result, although we failed to reach the target of ¥430 billion in consolidated net sales for FY2022, the final year of the previous medium-term management plan, we achieved the consolidated operating income ratio of 17.3%, which significantly exceeded the target ratio of 10.5%. The EBITDA margin also increased from 12% in FY2018 to 30% in FY2022, demonstrating that we steadily increased our earning power through the growth of high value-added products such as high-function IC Package Substrates. We feel a certain sense of accomplishment in that our earning power is increasing, even in a challenging external environment.
As the remaining issues from the previous medium-term management plan, the Electronics Operation is particularly focusing on the expansion of our share of high value-added products, mainly for servers, through the construction as planned of two plants: Gama Plant and Ono Plant, where we are making the largest ever investment for the expansion of our IC package business. The Ceramics Operation needs to realize optimal location production by utilizing four bases, two in Asia (Japan and China), one in Europe, and one in North America, to respond to changes in the business environment, and to ensure that we can capture demand in the growing Chinese and emerging markets.
In addition, to expand new businesses, we have narrowed down to three development areas for commercialization under the previous medium-term management plan: the NEV*3 field, the electronics field, and the new field. In the NEV field, we launched the NEV Unit in April 2023 to achieve stable mass production of new products for electric vehicles and promote business expansion. We think it necessary to work to establish new businesses in the electronics field and new field as well.
As a foundation to overcome these challenges and to support further growth, we recognize the importance of implementing human capital management that emphasizes talent development and employee well-being, as well as implementing management reform through DX in both production division and functional divisions to strengthen competitiveness.

* 1 CSP:Chip Scale Package, a small chip-size package substrate mainly used in devices such as smartphones

* 2 FGM:Fine Graphite Material/Machining

* 3 NEV:New Energy Vehicles including electric vehicles

Initiating "Moving on to our New Stage 115 Plan" to Head Towards a New Stage

Nurturing five powers as reinforcement activities in the new medium-term management plan to enhance competitiveness

For the next leap, we have formulated a new medium-term management plan for the next five years (from FY2023 to FY2027) called "Moving on to our New Stage 115 Plan" (abbreviated as MNS 115 Plan). The new medium-term management plan focuses on five main reinforcement activities (powers to be strengthened) and foundational activities as a manufacturing company to respond to changes in the business environment, whereby the entire IBIDEN Group will work together to achieve sustainable growth. The five main reinforcement activities for achieving sustainable growth are summarized (with taglines) as follows: "Make our business operations even more competitive (power to earn)," "Commercialize new products (power to grow)," "Promote the manufacturing reform (power to maintain)," "Reform the corporate culture (power to change)," and "Proceed with ESG management (power to sustainability)."
For "making our business operations even more competitive (power to earn)," our first priority is to maintain a mindset of taking on the challenge of innovation, rather than accepting existing values and business models as the norm. Without being bound by the current business model, it is important to maintain high competitiveness through product strength, and to establish a mutually agreed-upon solid business model, thereby achieving enhanced competitiveness together with customers.
Ensuring the growth of the Electronics Operation, where we are making large investments, is an essential element for strengthening competitiveness. In the Electronics Operation, the new medium-term management plan anticipates significant sales growth based on the assumption that Gama Plant and Ono Plant will become fully operational. Although growth in demand for semiconductors is slowing down due to slowdown in demand for personal computers and restrained investment by large users of high-performance servers, we are sharing a future-oriented roadmap with our customers and planning the business accordingly. While the Electronics Operation is subject to rapid changes in the market, we will reduce risk by establishing a production system that can flexibly respond to any delays or changes in the roadmap due to changes in the business environment at existing and newly established plants.
In the Ceramics Operation, we expect the supply shortage of semiconductors and the rapid trend toward electrification and the move away from diesel in the passenger car market, especially in developed countries, to ease to a certain extent. However, risk factors such as continuing high raw material costs and energy prices especially in Europe are still a concern. We aim to build a business foundation that will continue to generate profits even in the face of market changes by strengthening our sales capabilities in growth markets such as China and India, and also by continuing production in optimal locations from a logistics and cost perspective through making the most of our four bases in Japan, China, Hungary, and Mexico. We expect to increase sales of the Ceramics Operation from ¥89.9 billion in FY2022 to ¥100 billion in FY2025 and improve the operating income ratio from 6.8% to 10%, respectively, thereby transforming the business into a profitable one.
For "Commercialize new products (power to grow)," we will promote the commercialization of new products based on market changes, customer needs, and convenience through innovative business models in order to create new businesses and new products following the Electronics and Ceramics Operations. Currently, we are allocating resources to the electronics field, NEV field, and new field, engaging in activities to nurture future businesses. We understand that cultivating the next pillar of business requires accurate business strategy planning, product development without backtracking, and a seamless start-up process. In the NEV field, we will accelerate the start of mass production and overseas expansion by integrating manufacturing, sales, and technology through the creation of a business unit. In the new field, we will achieve growth as a group on a consolidated basis through new product and new business development with the participation of subsidiaries and associates.
In order to create new products and new businesses, it is important to strengthen our business intelligence, which enables to make comprehensive decisions based not only on customer information but also on industry and market information. In a rapidly changing era, we will analyze and understand various data from different angles, draw up future scenarios, and formulate corporate strategies, which will lead to commercialization.

Realizing the transformation of manufacturing and corporate culture under the slogan of "Each and every employee takes on the challenge of transformation"

In order to maximize the "power to earn" and "power to grow," it is important to strengthen the foundation that supports them, namely, by "promote the manufacturing reform (power to maintain)" and "reform the corporate culture (power to change)."
For "Promote the manufacturing reform (power to maintain)," the Company has grown by advancing numerous reforms in monozukuri, or manufacturing, since its founding. To sustain this ability and continue to grow, a solid foundation and basic strength as a manufacturer are indispensable. Bearing this in mind, we will cultivate efficient and high-level manufacturing capabilities by advancing integrated management of Japanese and overseas bases under the concept of One Factory*4 with the objective of enhancing on-site capabilities; promoting DX to realize sophisticated workplaces and mechanisms by utilizing digital technologies that enable data-driven approach and mechanism analysis; and improving productivity and transferring skills to younger employees.
For "Reform the corporate culture (power to change)," our goal is to build an organization that can flexibly adapt to market changes by increasing the number of purpose-driven, self-sustained personnel who are highly responsive to changes in the market environment. In particular, at manufacturing sites, which are the foundation of IBIDEN, it is necessary to develop knowledge workers, human resources who can think, devise, and innovate on their own, and to enhance our on-site capabilities. As the foundation for this, we are advancing human resource education and development through specialized education, relearning or recurrent education as needed, and reskilling to acquire new skills.
People are the key to growth and creating greater value. As part of human capital management, we are advancing practices from both management and employee perspectives. Particularly from the viewpoint of employee well-being, we aim to create an environment where individuals can actively thrive by fostering a cycle where the company's growth is personally felt and individual growth contributes to the company.
For "Proceed with ESG management (power to sustainability)," the fifth pillar we advocate, contributing to social issues through our business has been a significant theme we have addressed since our founding, in addition to strengthening the foundation for value creation. If the global environment and society are not sound, sustainable corporate growth cannot possibly be expected. To nurture the "power to sustainability," which is essential for contributing to sustainable development of society as well as our sustainable growth, it is crucial for each employee to take action based on an understanding of what we should achieve through our business activities to address social issues indicated, for example, in the SDGs.
Our contributions to the SDGs through our technology and business activities include "response to climate change and transition to a decarbonized society." Our initiatives toward the transition to a decarbonized society are an essential element for the Company to grow. We have established the GX Promotion Division as a dedicated company-wide department. The division is working together with business units to seek innovations in production technology and facility improvements to promote low-carbon operations. It also considers expanding the use of renewable energy and initiating the use of new energy sources. Furthermore, we are considering measures not only for our own activities but also for those of our entire supply chain. In addition, looking at the electronics market, the need for energy saving is increasing along with the sophistication of data processing capacity, and this trend is expected to intensify in the future. We will continue to improve our technological capabilities to meet these needs with our products.
The Company has grown by contributing to the development of an abundant society through innovative technologies. This is the way the Company should be and will never change. We will continue to aim for further corporate growth by developing businesses that meet the needs of society, with the awareness that our business and technological advancement are directly linked to contribution to the creation of a sustainable society.

* 4 One Factory: A system that consolidates and shares information among production bases in Japan and overseas, and aims to build and deploy highly competitive and stable quality around the world in a flexible manner, just like a single factory.

Embracing change as a constant, we take on the challenge of a new stage while enhancing competitiveness

The Company has initiated steps towards a new stage by setting management goals in our new medium-term management plan that we will exceed the highest-ever sales and operating income achieved in the final year of our previous medium-term management plan. On the other hand, the current growth of demand for semiconductors has been slowing down due to the fact that the demand for personal computers, which has increased as a result of telework and online education becoming the norm, has run its course, and the recovery of investment by large users of high-performance servers used in data centers has been delayed. Therefore, we anticipate a plateau in both sales and profits for FY2023 to FY2024. This is a phase we had anticipated, and we are actively pursuing thorough improvements at the operational level and are committed to enhancing our competitiveness for the next stage. We will establish a framework that outlines the growth trajectory of our business in line with the timing of market recovery and increased demand.
In the new medium-term management plan, we strongly focus on the idea that change is constant. We believe that the shortcut to achieving our significant goals lies in enhancing our competitiveness together with our customers, business partners, and employees, without fearing drastic changes to our current business model. Following the spirit of the IBIDEN WAY that we have nurtured thus far, we will flexibly respond to environmental changes and face these challenges.
Our approach involves sharing our thoughts with all stakeholders, including customers, shareholders, and employees, and creating new value. Currently, we are making investments aimed at continuous growth using the cash generated by that growth, but we are also comprehensively considering and making decisions about shareholder returns, balancing between growth investment and long-term stable dividends. We will continue to engage in dialogues with all our stakeholders and take on the challenge of moving to the Company's new stage toward realizing a sustainable society as our Group-wide efforts. We ask for your continued unwavering support for the Company going forward.

President & CEO
Takeshi Aoki

For "commercialize