Representative Director of Board, President
I sincerely thank everyone for the exceptional support given to us.
The structures of the economy and society are being changed by the spread of fifth-generation mobile communications systems (5G) and the progression of the digital transformation (DX) due to the increasing use of big data, artificial intelligence (AI), the Internet of things (IoT), and other advanced technologies. These technologies have the potential to create innovation on a different order of magnitude than ever before. It is expected that the progress of semiconductors will continue as a key technology for achieving this potential.
At the same time, the importance of semiconductors is growing from a strategic perspective. Moreover, the markets for semiconductors are expected to continue expanding in the future, including in the automotive market, where technological developments such as autonomous driving and EVs are accelerating as well as in the medical field to support people’s health. In addition, semiconductors’ needs are expected to become more sophisticated and diverse as key devices that speed up the transition to a decarbonized society and support the evolution of technologies that is essential for the realization of green transformation (GX).
The Shinko Group is committed to developing highly competitive products, based on our interconnection technology that brings the marvelous features and benefits of semiconductor devices into people’s lives. We will strive to provide products and services with high value for customers and to support their success. Through these initiatives, we will pursue our own development and growth. In addition, we will focus on cash flow and on building a solid management foundation able to continually generate profits.
Furthermore, we are committed to the practice of the SHINKO Way, which embodies the Shinko Group’s corporate philosophy and policies. Through the SHINKO Way, we pursue harmony with stakeholders while developing business that helps realize a sustainable society and create a brighter future by addressing various sustainability issues, including climate change, the most pressing global environmental challenge.
The Shinko Group received strong orders in the first half on the back of expanding demand for automobiles and industrial equipment, etc. However, in the second half, our operations are largely affected by inventory adjustments and other factors due to the slowdown in the semiconductor market .On the other hand, by anticipating the medium- to long-term expansion of the semiconductor market, in our mainstay flip-chip type packages, we promoted the development of production systems to meet the expected growth in demand for high-performance semiconductors: We began building the new Chikuma Plant (Chikuma City, Nagano Prefecture) and boosted capacity at our Kohoku and Wakaho Plants, both located in Nagano City, Nagano Prefecture. In the area of ceramic electrostatic chucks for semiconductor manufacturing equipment, we also promoted the construction of a new building at our Takaoka Plant (Nakano City, Nagano Prefecture), aiming to start operations in fiscal year 2023. In this and other ways, we continued to allocate management resources in growth markets. As the semiconductor market slowed down in the second half, we worked hard to secure orders through aggressive sales activities, focusing on productivity improvements and cost reductions company-wide. Moreover, we reconsidered the timing of operation for some of our capital investments. As a result, while demand for flip-chip type packages remained strong at the beginning of the period, it was significantly affected by declining demand for PCs in the second half. Net sales of leadframes declined in the second half due to the slowdown in the semiconductor market. Conversely, revenue from ceramic electrostatic chucks, IC assemblies and plastic BGA substrates increased due to increase in demand as well as substantial depreciation of the yen. As a result of these factors, net sales were 286,358 million yen (up 5.3% year on year), ordinary profit was 78,755 million yen (up 3.9% year on year), and profit attributable to owners of the parent was 54,488 million yen (up 3.5% year on year). So, with sales and revenue higher year on year, net sales and all profits reached record high.
The semiconductor industry is expected to be a severe market environment: Negative growth is expected due to factors such as decline in demand for PCs and smartphones, prolonged inventory adjustments, and the impact of semiconductor export restrictions. On the other hand, with the spread of 5G, the increasing use of AI and IoT, and the progression of digital transformation (DX), etc., society and the economy are becoming digitized. Consequently, the applications for semiconductors are expected to keep growing, further increasing the demand over the medium-to long-term. Moreover, the significance of semiconductors is growing as key technologies to support the promotion of the green transformation (GX), including the transition to renewable energy and advancements in energy conservation to achieve a decarbonized society. At the same time, global competition is expected to intensify, requiring setting up development and production systems that can adapt rapidly and flexibly to increasingly sophisticated and diverse market needs and changing demand.
In such a severe environment, the Shinko Group will work hard, across the board, to boost productivity and cut costs. We will also develop our proactive sales drives to have consistent revenues. We have made continual, focused capital investments for markets with promising growth and have augmented our production capacity to increase sales. Our focus will be on steadily making capital investments and technological developments for these growing markets to identify the potential for medium- to long-term market growth of our products and technologies, with our sights set on the Group’s future development. For our flip-chip type packages, which meet the need for semiconductors with higher functionality and speed as well as power saving, we are committed to reinforcing our production system and broadening our customer base in view of the expansion of cutting-edge semiconductor market, especially for servers. We are focusing on the construction, which started last year, of our Chikuma Plant (Chikuma City, Nagano Prefecture), our sixth production plant, with operations set to begin in fiscal year 2024. As semiconductor manufacturing equipment market continues to grow, we anticipate steady demand for ceramic electrostatic chucks as a key component. Accordingly, we will expand our mass production system through the improvement of our new building in our Takaoka Plant (Nakano City, Nagano Prefecture), which is scheduled to operate in fiscal year 2023. Further, at our Arai Plant (Myoko City, Niigata Prefecture), we have begun construction planning for a new building to increase the production capacity of our plastic BGA substrates to meet the demand for semiconductor memory with higher speeds and lager capacities, aiming to further develop the market for our products that contribute to higher performance semiconductors. Given the growth in medium- to long-term demand, these capital investments will be carried out after making appropriate decisions on timing and content as necessary, also considering the market conditions.
To achieve “Progress without Limits,” the Shinko Group will provide customers in semiconductor markets where continued growth is expected with high-value products and services offering solid value and rooted in customer requirements for function, performance, cost, and quality.
Representative Director of Board, President