information meeting information meeting information meeting

1

October 26, 2004

Information MeetingInformation MeetingInformation Meeting

October 26, 2004October 26, 2004

11stst Half FY2004Half FY2004

Financial Results for 1H/FY2004 Financial Results for 1H/FY2004 and Forecast for FY2004and Forecast for FY2004

2. Review of Operations and Outlook2. Review of Operations and Outlook

NOTE

•Prepared in accordance with US GAAP•Values in charts are rounded down and may not equal totals

1.1.

2

October 26, 2004

2004-1-272004.10.262004.10.26　　Information MeetingInformation Meeting

Cautionary Statement Cautionary Statement with Respect to Forwardwith Respect to Forward--Looking StatementsLooking Statements

This presentation contains “forward-looking statements” that are based on Advantest's current expectations, estimates and projections. These statements include, among other things, a discussion of Advantest’s business strategy, outlook and expectations as to market and business developments, production and capacity plans. These forward-looking statements can be identified by use of forward-looking terminology are subject to known and unknown risks, uncertainties and other factors that may cause Advantest’s actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. These factors include: (i) changes in demand for the products and services produced and offered by Advantest’s customers, including semiconductors, communications services and electronic goods; (ii) circumstances relating to Advantest’s investment in technology, including its ability to develop in a timely fashion products that meet the changing needs of semiconductor manufacturers and communications network equipment and component makers and service providers; (iii) significant changes in the competitive environment in the major markets where Advantest purchases materials, components and supplies for the production of its products or where its products are produced, distributed or sold; and (iv) changes in economic conditions, currency exchange rates or political stability in the major markets where Advantest procures materials, components and supplies for the production of its principal products or where its products are produced, distributed or sold. A discussion of these and other factors which may affect Advantest’s actual results, levels of activity, performance or achievements is contained in the “Operating and Financial Review and Prospects”, “Key Information - Risk Factors”and “Information on the Company” sections and elsewhere in Advantest’s annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission.

Financial Results for 1H/FY2004 Financial Results for 1H/FY2004 and Forecast for FY2004and Forecast for FY20041.1.

3

October 26, 2004


1st Half 1st Half Year On Year("X"＝times)

(Forecast)

Net Sales 62.2 174.2 146.5 2.4 X 250.0

Gross Profit 30.4 88.7 78.3 2.6 X 134.0

OperatingIncome

4.4 30.9 45.4 10.2 X 70.0

Income BeforeTax

3.7 28.8 46.8 12.6 X 71.0

Net Income 2.4 17.3 28.5 11.6 X 43.0

FY2003 FY2004

Achievement and ForecastAchievement and ForecastＩn Billions of Yen


Orders, Sales, and BacklogOrders, Sales, and Backlog

1st Half FY 1st HalfYear On Year("X"＝times) (Forecast)

Orders 80.2 208.9 125.2 1.6 X 230.0Semiconductor and

Component Test Sy stem 56.3 154.0 96.1 1.7 X 175.0

Mechatronics Sy stem 16.2 39.4 24.6 1.5 X 44.0Serv ices, Support, and

Other 9.6 20.1 10.0 +3.6% 19.0

Sales 62.2 174.2 146.5 2.4 X 250.0Semiconductor and

Component Test Sy stem 40.9 123.4 113.1 2.8 X 190.0

Mechatronics Sy stem 13.2 34.2 28.1 2.1 X 48.0Serv ices, Support, and

Other 9.9 20.4 10.8 +9.3% 20.0

Backlog 34.7 51.4 30.1 -13.2% 31.4

FY2003 FY2004In billions of yen

Note:Total includes Elimination of Intersegment Sales

4

October 26, 2004


QuarterlyQuarterly Order TrendsOrder Trends

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

FY2003FY2002FY2001FY2000FY1999 FY2004

100

80

60

40

20

0

47.5

77.6

68.260.4

48.3

31.8

In billions of yen


9.616.2

56.3

20.1

39.4

154.0

10.024.6

96.1

19.0

44.0

175.0

2003 中間 2003通期 2004　中間 2004通期

OrdersOrders by Business Segmentby Business Segment

FY2003 FY20041H 1HFY FY(Forecast)

300

250

200

150

100

50

0

Mechatronics System Business

Semiconductor and Component Test System Business

Services, Support and Others230.0

80.2

208.9

125.2

Services and Other① + 0.3 bil. Yen (+ 4%)② - 1.1 bil. Yen ( - 6%)

Mechatronics① + 8.4 bil. Yen (1.5 X)② + 4.5 bil. Yen (1.1 X)

Semiconductor and　Component① +39.8 bil. Yen (1.7 X)② +20.9 bil. Yen (1.1 X)

FY2004

① 1H YoY Change② FY Forecast YoY 　　　　　　　　　　Change

In billions of yen

Notice:Total includes Elimination of Intersegment Sales

5

October 26, 2004


QuarterlyQuarterly Sales TrendsSales Trends

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

Fy2003FY2002FY2001FY2000FY1999 FY2004

100

80

60

40

20

0

74.572.0

68.2

35.143.6

27.1

In billions of yen


9.913.2

40.9

20.4

34.2

123.4

10.828.1

113.1

20.0

48.0

190.0

SalesSales by Business Segmentby Business Segment


300

250

200

150

100

50

0

250.0

146.5174.2

62.2

Mechatronics System Business

Semiconductor and Component Test System Business

Services, Support and Others

Services and Other① +0.9 bil. Yen (+ 9%)② - 0.4 bil. Yen ( - 2%)

Mechatronics① +14.8 bil. Yen (2.1 X)② +13.7 bil. Yen (1.4 X)

Semiconductor and Component① +72.2 bil. Yen (2.8 X)② +66.5 bil. Yen (1.5 X)

FY2004

① 1H YoY Change② FY Forecast YoY 　　　　　　　　　　　Change

In billions of yen

Notice:Total includes Elimination of Intersegment Sales

6

October 26, 2004


2.412.7

25.8

5.7

30.0

87.7

3.6

31.9

77.5

6.0

52.0

132.0

Sales


Other① +1.2 bil. Yen (1.5 X)② +0.2 bil. Yen (+ 5%)

SoC① +19.2 bil. Yen (2.5 X)② +21.9 bil. Yen (1.7 X)

Memory① +51.6 bil. Yen (3.0 X)② +44.2 bil. Yen (1.5 X)

FY2004

① 1H YoY Change② FY Forecast YoY 　　　　　　　　　　 Change

200

150

100

50

0

SoC

Memory

Other

190.0

113.1123.4

40.9

Semiconductor and Component Semiconductor and Component Test System BusinessTest System Business

In billions of yen


12.37.8 8.84.53.8

24.8

29.1

31.8

28.6

10.4

16.2

57.9

37.0

34.6

16.27.513.4

37.6

60.0

53.0

34.0

13.023.0

67.0

60.2

74.3 73.266.7

Sales Sales by Regionby Region

FYFY2003

1H FY(Forecast)1HFY2004

①+26.7 bil. Yen (4.4 X)②+21.1 bil. Yen (1.7 X)

Taiwan

Rest of Asia

SouthKorea

Europe

Americas

Japan

FY2004

①+24.7 bil. Yen (3.0 X)②+30.8 bil. Yen (2.1 X)

① +7.3 bil. Yen (1.8 X)② +5.3 bil. Yen (1.2 X)

① +3.0 bil. Yen (1.7 X)② +2.5 bil. Yen (1.2 X)

① +9.6 bil. Yen (3.5 X)② +6.7 bil. Yen (1.4 X)

①+12.8 bil. Yen (1.5 X)② +9.0 bil. Yen (1.2 X)

① 1H YoY Change② FY Forecast YoY

Change

%70

60

80

300

250

200

150

100

50

0

250.0

146.5174.2

62.2

AmericasJapan

EuropeSouth KoreaTaiwanRest of Asia

Overseas Sales RatioIn billions of yen

7

October 26, 2004


Operating Income Operating Income andand Net IncomeNet Income

FYFY2003


Net Income①+26.1 bil. Yen (11.6 X)②+25.6 bil. Yen ( 2.5 X)

Operating Income①+40.9 bil. Yen (10.2 X)②+39.0 bil. Yen ( 2.3 X)

FY2004

①1H YoY Change②FY Forecast YoY

　Change

80

70

60

50

30

40

0

20

10

43.0

70.0

28.5

45.4

17.3

30.9

2.44.4

Net Income

Operating Income

In billions of yen


億円

03年度（予想）

Operating Profit and LossOperating Profit and Lossby Business Segmentby Business Segment

FY2004

① 1H YoY Change② FY Forecast YoY

Change

Services and Others① +0.1 bil. Yen ( 1.3 X)② +4.5 bil. Yen ( - )

Mechatronics① +6.7 bil. Yen ( 3.1 X)② +3.7 bil. Yen ( 1.3 X)

Semiconductor and Component① +34.1 bil. Yen (10.5 X)② +28.3 bil. Yen ( 2.0 X）

60

50

40

20

30

0

15.09.9

57.0

2.0

37.7

11.2

28.6

Semiconductor and Component Test System BusinessMechatronics System Business

Services, Support and Others

10

-2.50.5

3.13.6

0.7

FYFY2003


In billions of yen

8

October 26, 2004


In billions of yen

Current Assets

Accounts Receivable

Fixed & Other Assets

Current Liabilities

Fixed & Other Liabilities

Shareholders’ Equity

% of total assets

Inventories

Total AssetsTotal Assets

Mar. 2003

Cash & Cash Equivalent

Sep. 2004

86.2

7１.4%

32.6

139.9

273.7

76.2

349.957.4

42.5

249.9

Liabilities & EquityLiabilities & Equity 349.9

Mar. 2004

42.9

74.9%

34.9

87.3

182.0

99.2

281.228.3

42.1

210.6

281.2

Balance SheetBalance Sheet

76.1

67.0%

49.4

101.1

255.7

75.0

330.866.6

42.4

221.7

330.8


Cash FlowCash Flow

1HFY2003 FY2004

FY 1H FY (Forecast)

Free CF① +28.1 bil. Yen （3.5 X）② +45.7 bil. Yen （3.0 X）

Investment CF① -3.0 bil. Yen （-2.3 X）② -4.9 bil. Yen （-2.0 X）

Business CF① +31.1 bil. Yen （3.3 X)② +50.6 bil. Yen （2.8 X）

FY2004

①1H YoY Change②FY Forecast YoY 　　　　　　　　　　　　　　Change

80

70

60

50

30

40

0

20

10

△100

Investment CF

Business CF

Free CF

68.9

78.9

11.0

44.5

23.128.2

39.2

13.3

-5.3-5.0-2.2 -10.0

In billions of yen

9

October 26, 2004


CAPEX CAPEX andand DepreciationDepreciation

FY2002 FY2003 FY2004(Forecast)

9.010.0

9.3

5.6

10.9

7.5

Depreciation

CAPEX

1H(Result)

6

4

2

8

0

10

12

5.1

4.0

In billions of yen


12.0

02年度 03年度 04年度

R&D ExpenseR&D Expense%

20

10

30% of Net Sales

30

20

10

0

FY2004(Forecast)FY2003FY2002

25.021.6

23.6

24.1 12.4 10.0

1H(Result)5

15

25

In billions of yen

10

October 26, 2004

11

October 26, 2004

2. 2. Review of Operations and OutlookReview of Operations and Outlook


Factors Behind Sales Expansion in 1H/FY2004Factors Behind Sales Expansion in 1H/FY2004

Japan

Taiwan

Rest of Asia

Americas

South Korea

SoC Tester

Memory Tester

(Digital Consumer Products )

(DRAM, Flash Memory)LCD Driver Tester (LCD Panel Drivers)

Memory Tester (Flash Memory)SoC Tester (PC-Related)

Memory Tester (Flash Memory)

LCD Driver Tester (LCD Panel Drivers)

SoC TesterMemory Tester (DRAM, Flash Memory)

(PC-Related)

12

October 26, 2004


Orders

Sales

Operating Income

Net Income

230 billion yen

250 billion yen

70 billion yen

43 billion yen

Performance Forecast for FY2004


Order Trends in 2H/FY2004 (Forecast)Order Trends in 2H/FY2004 (Forecast)

Stable Weak

Japan

Taiwan

Americas

SouthKorea

Memory Tester

Memory Tester

SoC Tester

Memory Tester

DRAMFlash-Memory

(PC-Related)

DRAMFlash-Memory

DRAMFlash-Memory

Memory Tester (DRAM)

LCD Driver Tester

LCD Panel Drivers

SoC Tester Digital ConsumerProducts

LCD Panel Drivers

LCD Driver Tester

13

October 26, 2004


Investment moves to DDR2

CAPEX for 300mm plants

Increasing range of applications

CAPEX in Taiwan

Positive FactorsPositive Factors


Potential Risk FactorsPotential Risk Factors

The conditions of American economy

Trends of Semiconductor prices

Demand for PCs

Rising Oil prices

14

October 26, 2004


Semiconductors Shipment and Growth Rate

98 99 00 01 02 03 04 year

0

50

-50

%

20

10

0

In billions of US dollar

Growth Rate(6months moving average)

Shipment Value


Factors of Increasing ProfitFactors of Increasing Profit

Expanding Expanding Sales and Sales and

Market ShareMarket Share

Restructuring Restructuring of of

ManufacturingManufacturingOperationsOperations

Continuous Continuous R&DR&D

Timely Release of

New Products

Further Increasein Share

of Memory Marketand

Target Share of SoC Market: 20%

Reduced Lead Times

and Inventories

Increasing ProfitIncreasing Profit

15

October 26, 2004


Restructuring of Manufacturing OperationsRestructuring of Manufacturing Operations

Introduction of the Store Production System

Lead Time Reduction

Reorganization of Manufacturing Operations

Inventory Reduction

（From 3 Months to 1 Month）

（From 49.4 billion yen to 32.6 billion yen）


　　

Products Slated for Release in FY2004

Digital Consumer ProductsDigital Consumer Products

LCD Driver ICLCD Driver ICMixed SignalMixed Signal

Image SensorsImage Sensors

DRAM Front EndDRAM Front End DRAM Back EndDRAM Back End

ＳｏＣ Handlers　ＳｏＣ Handlers　 EB LithographyEB Lithography

T2000 ModulesT2000 Modules

R F Test SystemsR F Test Systems

SoC/AS

Memory Tester

Other

Optical Test SystemsOptical Test Systems

FY2003FY2003 FY2004（Forecast)FY2004（Forecast)

26%26% 27%27%

Number of New Products 1515 2525

Memory TesterMemory Tester 44 44

SoC / ASSoC / AS 1111 1414

OtherOther －－ 77

New Product Ratio

16

October 26, 2004


61% 11%

$1.1billion $2.3billionSize of Market, Year 2003

Memory Tester SoC Tester

Expanding Sales and Market Share Expanding Sales and Market Share

(Estimated by Advantest）


2002 2003 2004 2005 2006 2007 2008

500

1000

1500

2000

2500

DDR SDRAM

600/1200

2500/50005000

[Mbps]

AZUSA

T5593200/400

166/333200/400

266/533

333/667400/800

400/800 533/1066

667/1333

DDRII SDRAM

DDRIII SDRAM

T5593+Option

700/1400

800/1600

1000/2000

1250/2500

Graphic DRAM

RLDRAM

300/600400/800

500/1000

600/1200

750/1500800/1600

1000/2000?

SSRAM

500/1000

600/1200750/1500

1000/2000SGRAM

250/500

1000/2000

450/900

500/1000

year

DRAM Trends and TestersDRAM Trends and Testers

(Estimated by Advantest）

17

October 26, 2004


98 99 00 01 02 03 04 05

98 99 00 01 02 03 04 05

2468

10121416

NAND

NOR

NAND

NOR1234567

0

0year

FlashFlash--Memory MarketMemory MarketIn billions of dollars

In billions of bits

＜Sales Trends＞

＜Bit Count Trends＞

（Source: Nikkei Business Publications, Inc）

year

（projected）

（projected）


The T2000 TodayThe T2000 Today＜＜Expanded LineupExpanded Lineup＞＞

Development of Development of

Modules for a Modules for a

Wide Variety of Wide Variety of

ApplicationsApplications

Reduced Reduced FootprintFootprint

Low Cost Low Cost MainframeMainframe

18

October 26, 2004


300mm Equipment Investment

<EU>2 Lines（3 Lines）

<Asia>8 Lines（10 Lines）

<Japan>9 Lines（3 Lines）

<North America>2 Lines（6 Lines）

＜Predicted for Coming Years＞

Upper Level：scheduledLower Level：operating

(Projected figures: Advantest）


Uses of Semiconductors Breakdown

0%

5%

10%

15%

20%

25%

30%

35%

1995 2000 2004 2007

PC

CellularPhonesAutomobiles

Servers

Video Games

HDD, ODD

Digital STB

DVD Recorder

ＤＶＤ Player

Digital StillCamerasDigital TV

PC

Cellular Phones

Automobiles

(Projected figures: Advantest）

Servers

19

October 26, 2004

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