IT-related Chemicals. FY 2010 First Half Results & Business Strategy. November 4, Masakazu Tokura Director & Senior Managing Executive Officer

Transcription

1 IT-related Chemicals FY 2010 First Half Results & Business Strategy November 4, 2010 Masakazu Tokura Director & Senior Managing Executive Officer

2 Today s Agenda I. Overview of Business II. Recent Performance Trends III. Business Strategy (Corporate Business Plan FY ) 1. Business Environment 2. Performance Targets 3. Priority Initiatives 1) Strengthen Existing Business 2) Expand Business 3) Enhance the Efficiency of Our Globally Integrated Management

3 Today s Agenda III-3. Priority Initiatives 1. Strengthen Existing Business Gain competitive advantage in polarizing film business Restructure back light unit business Expand photoresist business 2. Expand Business Expand business in China as a total provider of LCD materials Develop new businesses (Materials for LEDs, 3D TVs and next generation semiconductors) Expand Dongwoo Fine-Chem s business 3. Enhance the Efficiency of Our Globally Integrated Management

4 I. Overview of IT-related Chemicals Business LCD materials Battery materials Color filters Light- diffusion panels Cathode materials Separators Light- guide panels Color resists for color filters Polarizing films Transparent resist Photoresists Process chemicals Retardation films Al targets Anti-glare & antireflection films Etchants Light control film Components Base materials Raw materials High-purity gallium Gallium arsenide epitaxial wafers Metal organics Cleansers Compound semiconductor materials Photoresists for micromachining Aluminum targets Liquid crystal polymer (LCP) Polyethersulfone Semiconductor materials LCP cast film Electronic component materials 1

5 I. Overview of Business Total Provider of LCD Materials Structure of LCDs Polarizing film Retardation film Glass substrate(low-soda alumina) Color filter Pigment dispersed color resist Liquid crystals ITO electrode Liquid crystal layer (e.g. photoresist, target, etchant, remover, high-purity chemicals) Light-diffusion panel, light-guide panel Cold-cathode tube, LED (Note) Sumitomo chemical products are indicated in red 2

6 I. Overview of Business Create a Customer-Driven Supply Chain Overseas Operations Others 4% Japan 13% China 18% Taiwan 20% Overseas sales were 87% of segment s sales in fiscal R&D labs Sales offices Production plants Future expansion plan Korea 45% 1 Japan 2 Korea 3 China(Beijing) 4 China(Hefei) 5 China(Shanghai) 6 China(Wuxi) 7 Taiwan 8 Hong Kong 9 Singapore 10 Slovakia 11 Poland 12 Belgium 13 America 14 China(Huanun) 3

7 I. Overview of Business II. Recent Performance Trends III. Business Strategy (Corporate Business Plan FY ) 1. Business Environment 2. Performance Targets 3. Priority Initiatives

8 II. Performance Trends for FY 2007 to FY 2010 Full-Year Sales and Operating Income (Billions of yen) (297.5) (307.1) Polarizing films Color filters Materials for, semiconductors, electronic components and batteries (265.2) (325.0) FY2007 FY2008 FY2009 FY2010 (Forecast) Operating income For comparison purposes, figures for FY2007 to FY2009 have been adjusted to reflect the change in the method for allocating common company-wide research expenses and other expenses applied from the beginning of FY

9 II. Performance Trends for FY 2007 to FY 2010 Half-Year Sales and Operating Income (Billions of yen) Operating (137.7) (159.8) (162.5) Polarizing films Color filters (144.6) (111.7) (153.5) 34.3 (163.9) H 2H 1H 2H 1H 2H 1H 2H (Forecast) FY2007 FY2008 FY2009 FY2010 (161.1) Income Includes one-time amortization of inspection facilities for ArF photoresists (- 6.6 billion) Materials for, semiconductors, electronic components and batteries 5

10 I. Overview of Business II. Recent Performance Trends III. Business Strategy (Corporate Business Plan FY ) 1. Business Environment 2. Performance Targets 3. Priority Initiatives

11 III. Business Strategy 1.Business Environment Demand for LCD Panels Demand growth in China and other markets faster than expected Demand for LED TVs stronger than expected 3D TVs and internet TVs launched Thriving smart phone and slate PC markets Global demand for LCD pannels for TVs (Million units) LED TV demand/lcd TV demand (%) % % % China % Others 13 Japan 66 Europe US 6

12 I. Overview of Business II. Recent Performance Trends III. Business Strategy (Corporate Business Plan FY ) 1. Business Environment 2. Performance Targets 3. Priority Initiatives

13 III. Business Strategy 1.Objective and Basic Strategies Basic Strategy No.1:Create a customer-driven supply chain Expand business in China as a total provider of LCD materials Enhance the Efficiency of Our Globally Integrated Management + Basic Strategy No.2:Develop innovative technology Improve productivity of R&D and technologies development (Build technological platforms) Enhance development of proprietary materials and core technologies Objective: Establish the foundation for sustainable profitability through technological innovation 7

14 III. Business Strategy 2. Target and Basic Strategy (Performance Targets) (Billions of yen) (325) (400) Materials for, semiconductors, electronic components and batteries Polarizing films Color filters Operating income NOPAT Invested capital ROI FY (8.0%) 19.0 (5.8%) % FY2012 (Forecast) 44.0 (11.0%) 35.5 (8.9%) % Rationalizations (FY09 vs. FY12) 70.0 billion Investment (FY10 to FY12) 90.0 billion (Operating Cash Flow billion) Turnover of invested capital

15 I. Overview of Business II. Recent Performance Trends III. Business Strategy (Corporate Business Plan FY ) 1. Business Environment 2. Performance Targets 3. Priority Initiatives

16 III-3. Priority Initiatives 1. Strengthen Existing Business Gain Competitive Advantage in Polarizing Film Business Restructure Back Light Unit Business Expand Photoresist Business 2. Expand Business Expand Business in China as a Total Provider of LCD Materials Develop New Businesses (Materials for LEDs, 3D TVs and next generation semiconductors) Expand Dongwoo Fine-Chem s Business 3. Enhance the Efficiency of Our Globally Integrated Management

17 III. Business Strategy 3. Priority Initiatives 1) Strengthen Existing Business Gain Competitive Advantage in Polarizing Film Business Challenges 1. Change in competitive landscape Growing competition with LCD panel producer s in-house production 2. Marketing strategy for China and other countries with growing demand Strategy for business with LCD panel producers in Japan, Korea and Taiwan (e.g. Samsung, CMI) Strategy for business with LCD panel producers in China (e.g. BOE) 3. Enhance Product Portfolio Initiatives for gaining competitive advantage Increase production volume Continue developing innovative technologies Enhance supply chain in China Expand high value added small-sized polarizing film business by increasing sales for smart phone and slate PC applications (double the current annual 40 billion in sales) 9

18 III. Business Strategy 3. Priority Initiatives 1) Strengthen Existing Business Gain Competitive Advantage with Higher Production Capacity Increase production and sales volumes Investments in new production facilities (Constructing a new plant in Taiwan, studying further investments in China and Korea) Increase productivity of existing facilities with new technology Build supply chains for Chinese LCD panel producers (e.g. BOE) Polarizing film production capacity (Million m2 /year) 12/31/ /31/2012 Capacity Capacity Japan Existing facilities Line No.3 Wide roll Korea Existing facilities Line No.5 Extra-wide roll Line No.6 Undecided - Undecided Taiwan Existing facilities Line No.3 Extra-extra-wide roll China Line No.1 Undecided - Undecided Total α 10

19 III. Business Strategy 3. Priority Initiatives 1) Strengthen Existing Business Gain Competitive Advantage in Polarizing Film Business Pursue innovative technologies Upstream: Midstream: Develop products using in-house materials Enhance core technology (e.g. stretching, adhering, adhesive coating, inspection) Downstream: Cooperate with LCD panel and TV set manufacturers (e.g. polarizing films with additional functions) Develop products using in-house materials (Develop new materials) Enhance core technologies Develop polarizing films with additional functions Upstream Midstream Downstream 11

20 III. Business Strategy 3. Priority Initiatives 1) Strengthen Current Business Expand Product Line for High Value Added Small-Sized Films Technology Strategy (Develop Thinner Polarizing Films) Large sized film STP:Super Thin Polarizer UTP:Ultra Thin Polarizer Polarizer with integrated retardation film STP UTP Integrated TAC TAC TAC TAC PVA TAC Adhesive PVA TAC Adhesive Retardation Film Adhesive PVA Adhesive Retardation Film Adhesive PVA Retardation Film Adhesive Retardation Film Adhesive Features of new products Use of slim type TAC films Use of slim type retardation films Use of slim type adhesive materials Use of integrated retardation films Develop thinner Polarizing Films 12

21 III. Business Strategy 3. Priority Initiatives 1) Strengthen Current Business Restructure Back Light Unit Business In order to meet the growing demand for LED TVs, we modified our lightdiffusion panel plants around the world to produce light-guide panels. (Tons/month) 6,000 5,000 4,000 3,000 2,000 1,000 0 Light-Guide Pannel Production Capacity China: Modified 2 pants Japan: Modified 2 plants Korea: Modified 2 pants 1Q 2Q 3Q 4Q CY2010 Poland: Modified 2 pants 1Q~ CY2011 Poland Korea China Japan Light-diffusion panel production capacity: 9,000 tons/year (2010.4Q) Light-guide panel production capacity: 60,000 tons/year (2010.4Q) In-house processing of printing process expected to lower costs (In-house processing planned to start around H) 13

22 III. Business Strategy 3. Priority Initiatives 1) Strengthen Current Business Road map for the miniaturization of semiconductors DRAM 1/2 Pitch 65nm 45nm 32nm 22nm Expand Photoresist Business nm 45nm 32nm 22nm 16nm ArF- Dry Logic DRAM Producing first generation ArF-i photoresists at commercial scale ArF-i ArF-i-DP Competing fiercely Prolonged lifecycle of ArF-i Last generation of miniaturization technology? 16nm Flash EUV 14

23 III. Business Strategy 3. Priority Initiatives 1) Strengthen Current Business Expand Photoresist Business Investment and Business Strategy for ArF Photoresist Investment in ArF Photoresist Production plant Inspection facilities e.g. New production plant for ArF photoresist 12 e.g. Stepper for ArF immersion exposure billon process, defect inspection equipment (Note) The new plant and facilities were constructed at the Osaka Works Launched operations in March 2009 Background ArF immersion exposure process is expected to be used in manufacturing process for semiconductors with 5X to 2Xnm wide circuit line Global ArF photoresist demand to reach 80 to 100 billion in 2014 (2/3 of the demand expected in Asia) Our ArF immersion photoresist delivers high performance with our proprietary PAG and resin Aiming to gain leading position in the market 15

24 III-3. Priority Initiatives 1. Strengthen Existing Business Gain competitive advantage in polarizing film business Restructure back light unit business Expand photoresist business 2. Expand Business Expand business in China as a total provider of LCD materials Develop new businesses (Materials for LEDs, 3D TVs and next generation semiconductors) Expand Dongwoo Fine-Chem s business 3. Enhance the Efficiency of Our Globally Integrated Management

25 III. Business Strategy 3. Priority Initiatives 2) Expand Business Expand Business in China as a Total Provider of LCD Materials Locations of LCD plants in China Hefei BOE-HF(G6) Q BOE-HF(G8) Q~ Guangzhou LGD(G8) Shenzhen TCL(G8.5) Q~ 蘇州 無錫 Beijing BOE(G8) Q~ Nanjing CEC & Nanjing Panda (Sharp)(G6, G8) 2011 Kunshan IFO(AUO)(G7.5) Q Suzhou Samsung(G7.5) Plants in red: Investment under consideration Plants in black: Under production or construction 16

26 III. Business Strategy 3. Priority Initiatives 2) Expand Business Expand Business in China as a Total Provider of LCD Materials Locations of our production plants and sales offices in China Sumika Huabei Electronic Materials (Beijing) Established: November 2009 Sumika Electronic Materials (Wuxi) Established: July 2004 Sumika Electronic Materials (Hong Kong) Established: September 2005 Sumika Electronic Materials (Hefei) Established: August 2009 Huanun (Shenzhen/Under consideration) 合肥 Sumika Electronic Materials (Shanghai) Corporation. Established: April 2009 無錫 Sumika Electronic Materials (Shanghai) Established: September 2001 香港 17

27 III. Business Strategy 3. Priority Initiatives 2) Expand Business Expand Business in China as a Total Provider of LCD Materials Plans to supply LCD materials to BOE and other customers Customer Supplying subsidiaries Products Schedule SEMH(Hefei) BOE Hefei (G6) Chemicals Commercial production started from October 2010 SEMW(Wuxi) Polarizing films BOE Beijing (G8) SEMB(Beijing) Polarizing films Light-guide panels (Under consideration) Chemicals (Under consideration) Trial production to start from Q, Commercial production to start from Q BOE SEMS(Shanghai) Aluminum targets Commercial production to start from September

28 III. Business Strategy 3. Priority Initiatives 2) Expand Business Develop New Businesses Case 1. LED related business <LED Chip> Materials: MO (TMG TMI) LCP Package <LED Package> Sapphire substrate 1 Sapphire substrate Main Material: High-purity alumina 2 3 Heatsink (Soluble LCP) 4 19

29 III. Business Strategy 3. Priority Initiatives 2) Expand Business Develop New Businesses Case 2. High performance films for displays Polarizing films for 3D TV Polarizing films for OLED Devices LCD OLED 3D technology Optical functions of films Active shutter technology (*2) Circular polarizer Passive technology (*1)(*2) Left and right circular polarizer (+)λ/4 Polarizing layer (-)λ/4 Polarizing layer Anti-reflection Examples of the structure λ/4 Polarizing layer Panel Panel Polarizer λ/4 Polarizing layer OLED *1:Films for passive technology can be used in OLEDs and PDPs *2:Displays stereoscopic vision using liquid crystal shutter glasses *3:Displays stereoscopic vision using polarized glasses with no shutter function 20

30 III. Business Strategy 3. Priority Initiatives 2) Expand Business Develop New Businesses Case 3. Epitaxial wafers for compound semiconductors Material GaAs (electronics) GaAs (optical) GaN (power) Solar battery Keyword Ubiquitous computing Office revolution Energy-saving Satellite Smartphones Color printers (copy machines) Inverter-run air conditioners Applications Hybrid vehicles Exploration & communication satellites Sales (2010) 3 billion 1 billion - - (2020) 10 billion 3 billion 10 billion ( 2 billion) 21

31 III. Business Strategy 3. Priority Initiatives 2) Expand Business Expand Dongwoo Fine-Chem s business (Billions of won) 2,500 Sales Employees Started production of light-guide and light-diffusion panels Expand into China and energy-related businesses (Persons) 2,600 2,000 2,100 1,500 Change in ownership (Sumitomo s holdings increased to 100%) Started production of color filters 1,600 1,000 Started production of polarizing films 1, (F) Introduced Sumitomo s technology First expansion period Set up effective organization Second expansion period Third expansion period

32 III-3. Priority Initiatives 1. Strengthen Existing Business Gain competitive advantage in polarizing film business Restructure back light unit business Expand photoresist business 2. Expand Business Expand business in China as a total provider of LCD materials Develop new businesses (Materials for LEDs, 3D TVs and next generation semiconductors) Expand Dongwoo Fine-Chem s business 3. Enhance the Efficiency of Our Globally Integrated Management

33 III. Business Strategy 3. Priority Initiatives Enhance the Efficiency of Our Globally Integrated Management Daily exchange of technology, marketing and procurement information between group companies as well as integration of strategy and tactics Sumitomo Chemical acts as a control tower and develops basic technology Build technological platforms Set up targets for shared productivity benchmarks between group companies in polarizing film business Japan Japan Taiwan Korea Taiwan Korea Take advantage of each company s strengths and, at the same time, expand group -wide common technological platform for core technologies 23

34 Forward-Looking Statements Statements made in this material with respect to Sumitomo Chemical s plans, projections, strategies, beliefs, and future performance that are not historical facts are forward-looking statements that are based on information available at the time of the preparation of this material and include risks and uncertainties. Factors that could materially affect actual results of Sumitomo Chemical s future performance include, but are not limited to, economic conditions in the areas of Sumitomo Chemical s business, demand for Sumitomo Chemical s products in markets, downward price pressure on Sumitomo Chemical s products resulting from intensifying competition, Sumitomo Chemical s ability to continue to provide products that are accepted by customers in highly-competitive markets, and movements of currency exchange rates. 24