results achieved in 2012 and our strategy for 2013 · 2014-09-26 · results achieved in 2012 and...

December 5, 2012SHOWA DENKO K.K.Hideo Ichikawa President and CEO

Results Achieved in 2012 andResults Achieved in 2012 andOur Strategy for 2013Our Strategy for 2013

2

1. Business environment

2. Performance forecast for 2013 and our strategy

3. Segment strategy

4. Expanding Growth & New Growth businesses

5. Change of organization; its purpose

6. Summary

3



3. Segment strategy



6. Summary

4

Business environment (1)Global economic growth rate and exchange rate

5.1%

3.8%

3.3% 3.6%

87.8¥/USD

2010

79.8¥/USD

2011 20122010 2011 20122010 2011 201320122010 2011

116.4¥/EUR

111.1¥/EUR79.3¥/USD*101.9¥/EUR*

* Monthly average exchange rate for the Jan.- Oct. 2012 period

Economic growth rate as announced by IMF in October 2012.

5

Business environment (2)

The yen rate staying at historically high levels

Rising electricity costs(For chemical industry: ¥20 billion/y in TEPCO district alone)

Delays in responding to FTAsTighter environmental regulations, etc.

Japanese firms facing “six-fold handicaps”

6

2006 2007 2008 2009 2010 2011 2012

Asia

Japan

Europe

USA

18.7%14.5%

2008 2009 2010 2011 2012

Asia

EU/USA

Other

14.2%

1.9%

Japan

2008Q3 2012Q2

30%20%

South Korea

Japan

Other

Business environment (3) Changes in Japan’s industrial structure

Declining international competitive power

【Semiconductors: Market share by region】

(Ministry of Internal Affairs)(WSTS)

【Flat panel TVs: Market share by country】

(DisplaySearch)

【Cell phones: Market share by region】

7

Business environment (4)Our customer industries’ situation

【Slow demand for petrochemicals】【Slowdown in electronics】

【Little progress in reconstruction】

8



3. Segment strategy

4. Expanding Growth and New Growth businesses


6. Summary

9

Estimated 2012 business results

18

42

790

2012Earlier

forecast

17.0

47.4

854.2

2011results

-8

-10

-40

Variance

10Net income

32Operating income

750Net sales

2012Current

forecast*

(Billions of yen)

＊Current forecast was announced on Nov. 1. Earlier forecast was announced on Aug. 1.

Dividend will be ¥3/share.

Dividend: ¥3/share

10

In 2013, severe business environment will continue

Japan+1.2%

China+8.2%

USA+2.1%

Europe+0.2%

Expected economic growth rates in 2013(announced by IMF in October 2012)

(Assumptions)(1) Exchange rate: ¥80/USD(2) Japan: Domestic production in 1H will remain at current level;

slow recovery in 2H.(3) Demand in China: Slow recovery(4) Electricity cost: Rate hike unavoidable

World+3.6%

11

Performance forecast for 2013 (Image)

10

32

750

2012Forecast*

+5

+3

+50

Variance

15Net income

35Operating income

800Net sales

2013Image

＊Performance forecast for 2012 was announced on Nov. 1.

(Billions of yen)

12

3235

-10

+3+10

Operating income for 2013: Cause of variance

(Billions of yen)

2012 forecast 2013 image

Lower selling prices; higher electricity cost

Cost reductions,

etc.

Higher shipment

volumes, etc.

13

Redesigning business models

Graphite Graphite electrodeselectrodes

HD mediaHD mediaRare earthsRare earths

PetrochemicalsPetrochemicalsBasic chemicalsBasic chemicalsAluminum cans; Aluminum cans;

ShoticShotic

HighHigh--purity purity aluminum foils;aluminum foils;LBPLBP cylinderscylinders

Inorganic Inorganic

functional materialsfunctional materials

LEDLED

Advanced battery Advanced battery materialsmaterials

Allyl derivativesAllyl derivatives

SemiconductorSemiconductor--processing highprocessing high--

purity gasespurity gases

Functional chemical Functional chemical materialsmaterials

Organic Organic ELEL for for lightinglighting

SiCSiC epiepi--wafer for wafer for power devicespower devices

Base（Stable）

Base（Growth）

Growth and New Growth

Energy/environment market

High-grade electronic device market

Industrial base materials market

14

Overseas

In Japan

Strengthen supply chains to serve ASEAN/China markets

In the area of petrochemicals, chemicals, aluminum and rare earths, we will revise business structures to improve profitability.

Abolish the “business sector” system; Strengthen and reorganizethe functions of business divisions and plants; Increase the speed of commercializing new products based on newly developed technologies.

Change of organization

Business strategy for 2013Redesign existing businesses

- Accelerate globalization- Improve profitability of domestic operations

15

Capital investment plans for 2013Carefully selecting projects in view of the severe business environment

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

(\100 million)

Petrochemicals Chemicals Electronics

Inorganics Aluminums Others

299

412

908

693

548

387

580

388

503450

Image

16

232

132

2011 2012 Plan 2013 Target

332

232

132

Cost reduction plans for 2013Total amount for the 2011-2013 period

(¥100 million)

【Up energy efficiency in Kawasaki】【Improving HD media throughput】

【Major ongoing projects】Reduce energy/electricity costsIncrease the ratio of low-cost raw

materials・HD: Up productivity (World’s highest level）・RE: Use more recycled materials・GE: Up cost competitiveness at Omachi・Petchem: More diversification in feedstock・Chemicals: Drastic cost reduction in basic

chemicals and industrial gases

17



3. Segment strategy

4. Expanding Growth and New Growth businesses


6. Summary

18

PC demand

HD drive

No growth in 2013 due to stagnant EU economy and slowdown of emerging economies.

Slow demand for PC applications. Growing demand for server applications due to progress in cloud computing.

Will return to growth track in 2014.

DD（Disk/Drive） ratio will rise. Growth rate of media will be higher than that of drives.

PMR ６G to continue as the mainstream for a long timeIn-house volume production of 6G will start. SDK will be the first to launch７G.

HD media

Segment strategy EL HD (1)

Business environment for HD media in 2013

19

140139157146

120

176166160

CQ1 CQ2 CQ3 CQ4 CQ1 CQ2 CQ3 CQ42011 2012

(Million units)

(Estimates by TrendFocus and SDK)


Quarterly shipments of HD drives

20

650620590582622651558536502

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

680

997659453423

CAGR +30%【Growing market for nearline servers】


Medium-term outlook for HD drive industryAnnual shipments: Results and forecast

- No growth in 2013; Return to growth track in 2014

(Million units)

(Estimates by TrendFocus and SDK)

CAGR +3-5%

21(TrendFocus)

Seagate

30%

HGST

15%


HD media market shareAs of CQ3 2012

Western Digital

18%

Fuji Electric6%

249 million units

SDK 31%

22

2006 2008 2010 2012 2014 2016

PMR SMR

TAMR

PMR 7G

334GB

500GB650GB 750GB １TB

500

1000

(GB/p)


Road map toward higher storage capacityWe will launch PMR 7G (650GB) in 2013, and lead the industry.

（Storage capacity per 2.5” media）

40%/year growthSlowdown to a 20%

year growth

23(TrendFocus)

As of CQ3 2012. SDK is supplying to all drive makers.


HD drive industry market share

Toshiba 14%

Western Digital45％

Seagate 41％

139 million units

24

Segment strategy EL RE

Remodeling rare earth business strategy

(2) Develop the Chinese market

(1) Rebuild our RE magnetic alloys business with new technology(Dy-free)

(3) Diversification of raw material sources

【Sites in China】

Producing RE magnetic alloys

【Chichibu Plant】R&D centerProducing high-end items

【Site in Vietnam】

Producing recycled materials

25

Segment strategy EL LED (1)

Establishing a JV in GaN LED business

【Market situation】Growing marketRise of makers in Taiwan,

South Korea and ChinaDeclining prices

Toyoda Gosei

Showa Denko 30%

70%

Establish a JV to strengthen competitive position

TSオプト12/1より

TS Opto (as from Dec. 1)

26

Segment strategy EL LED (2)

Develop the market for plant growth facilitiesSDK’s proprietary technology (660nm-wavelength high-brightness LED)New cultivation technology (Shigyo process, developed jointly with Yamaguchi University)

- Licensing the technology for free to Kawauchi Village, Fukushima Pref.

Kawauchi Village’s plant growth facilityupon completion (conceptual drawing)

Cultivation of vegetables under LED lighting

27

Emerging markets

Industrialized countries（US, Europe, and

Japan）

(Based on estimates by WSA and SDK)

(Million tons)

Electric steel demand will grow in emerging markets.

116(41%)

China

India China China

India India

285

411446

169(59%)

500

China

India

179(44%)

189(42%)

(40%)

232(56%)257(58%) (60%)

2001 2010 2011 2015

Segment strategy Inorganics GE (1)

Forecast of electric steel production

28

Markets in Markets in emerging emerging countriescountries

Volume zoneVolume zone

Expand capacityExpand capacity

Increase shareIncrease share

Markets in Markets in industrialized industrialized

countries countries HighHigh--end productend product

UHPUHPCreate addedCreate added--

valuevalue

Newco in China


Entering a new stage

SDKCOmachi Plant

29

SDKC：45 KT/Y ⇒75 KT/Y（up 30 KT/Y） As from 2014


Capacity expansion at SDKC, of USA

(1) SDKC (USA)・Serve the markets in North/Central/South America and Europe

(2) Omachi Plant (Japan)・Serve the high-end markets in South Korea, Taiwan, ASEAN, etc.

・Produce connecting pins

(3) New company in China・Enter the Chinese market (volume zone)

Building strategic supply chains

30

Segment strategy Inorganics Ceramics

Chemical alumina project

TayanPlant construction Trial run Full-scale operation

Yokohama Stop operation

Production capacity: 300 KT/Y⇒ Serve existing markets in

Japan and East Asia;Advance into the markets in ASEAN

2013 2014 2015

Construction in Indonesia progressing smoothly

【Tayan, Kalimantan, Indonesia】

31

0

200

400

600

800

1000

1200

1400

1600

jan apr jul oct jan apr jul oct

60

65

70

75

80

85

90

95

100

C2C2 priceprice

US$/T %

20122011

NaphthaNaphtha priceprice

Segment strategy Petrochemicals (1)

Petrochemicals market and plant utilization

Spread （C2 － Naphtha）

Operating rates of ethylene plants in Japan

(JCIA, etc.)

32

Segment strategy Petrochemicals (2)

Strengthen competitiveness of Oita ComplexStrengthen cooperation with upstream and downstream operations

- SM plant: Renewal (in the middle of 2013)- JX Oita Refinery: Mutual supply of raw materials and fuels

Increase value of steam cracker fractions- Develop a butadiene manufacturing process based on

acetaldehyde

【Oita Complex】

33

Segment strategy Chemicals (1)

Improve cost competitiveness in basic chemicals

【Power generation plant】

AN： Strengthen business in by-products and derivatives (such as glycine) CR： Expand sales of high-value gradesIndustrial gases: Reorganize the system within the Group to improve

marketingIPP (power generation business): Maximize power supply. IPP contract

to be renewed in 2014.Utilities: Cost reductions, including utilization of steam pipes on the seabed

34

●●

Functional polymers


Globalized operations in high-value products -１

Korea Showa Chemicals（Specialty gases）

●

Shanghai Showa ChemicalsShanghai Showa Electronics MaterialsShanghai Showa Highpolymer(Functional polymers)Shanghai Showa Highpolymer Trading (Functional polymers)

●Zhejiang Quzhou Juhua Showa Electronic Chemical Materials （Specialty gases）●

● Showa Specialty Gas (Taiwan) Taiwan Showa Chemicals Manufacturing（Chemicalproducts）

● Eternal Showa Highpolymer(Functional polymers)

Showa Specialty Gas SingaporeShowa Highpolymer Singapore (Functional polymers)●

High-performance materials for cars (BMC)Semiconductor-processing specialty gases

(NH3, N2O, HBr, etc.)

High-purity specialty gases

34

35


Globalized operations in high-value products - ２

2000

1000

2012 2020【Market forecast for components used in purifying

processes】

(¥100 million)

【CIM® Monoliths columns】

ShodexTM (Analytical HPLC columns)- Meet growing demand in emerging markets

Invest in a venture company in Europe- Entering the purification resins market through tie-up

with BIA Separations

(Estimates by SDK)

36

ShoticTM

LBP cylinders

High-purityaluminum foils

Cooling unit (for power device)

Heat exchangers

Segment strategy Aluminum (1)

Evolve into a cluster of core businessesEstablish leading positions on the world marketProprietary aluminum forming technologies

Aluminum cans

37【Showa Denko Aluminum (Nantong) Co., Ltd. 】

Sakai（Refining）

Plant construction

Trial run and start-upNantong (China)

2013 2014 2015

Expansion

Aiming to advance into the Chinese market; Expand refining/processing capacities (in and after 2015)


Expand high-purity aluminum foils business in China

38


Global strategy for Shotic businessBuild a new aluminum casting plant in Malaysia

(for use in forged automotive parts)⇒ To meet growing demand in ASEAN and India

Shotic Malaysia

Shotic Singapore ●

39



3. Segment strategy



6. Summary

40

Expanding Growth & New Growth businesses

LIB materials: Accelerate marketing for automotive applicationsProduct mix based on innovative technologies

- Expand business in the existing four items (products based on carbon and aluminum)

- Accelerate R&D of new products (binders, tab leads, electrolytes, etc.)

【SDK’s LIB products】【Growth of small LIBs and automotive LIBs】

(B3 Corporation)

■ Automotive LIBs■ Small LIBs

41

0

100

200

300

400

500

600

700

【SiC product market growth and timing of launch】(Year)

Max

vol

tage

for S

iC d

evic

e

2010 2011 2012 2013 2014 2015 2016 2017 2018

0.6

1.2

1.7

3.35

10

Cars

Power generation/transmission

Industrial equipment

Data centers

New energy

Trains

(kV)

Electric appliances

Expanding Growth & New Growth businesses

SiC epitaxial wafers for power devices

(¥100 million)

Leading technology and quality (smooth surface; low deficiency)Up production capacity by steps for high-quality products to meet growth4” wafer ⇒ 6” wafer (accelerate development)

(Dream Incubator Inc. 2010)

0

100

200

300

400

500

600

700

42



3. Segment strategy



6. Summary

43

CEO

Business sectors (6)Research & DevelopmentHeadquarters

Staff sections at head office

Business divisions (15)

Production Technology

Headquarters

Change of organization (1)

【Present】

Marketing, production, SCM, and development

44

CEO

Business sectors (6)Research & DevelopmentHeadquarters

Staff sections at head office

Business divisions (15)

Production Technology

Headquarters


Marketing, production, SCM, and development

Abolish the systems of business sectors and headquarters

45

CEOCorporate officers in charge

Business divisions (13) Plants (12)Staff sections at head office

Business Development

Center

【New organization】 (effective Jan. 4, 2013)

Direct supervision by CEO to increase the speed of decision making and execution

Reorganize the functions of business divisions and plants⇒ Strengthen the functions of profit centers


Business strategy, marketing Production, technology, SCM R&D

46

Strengthen the areasrelating to

growth businesses

Strengthen existing businesses

Projects

Areas of growth and next-generation industries

(Electronics; Energy/Environment)

Institute forPolymers and

Chemicals

Institute forAdvanced and

CoreTechnology

DevelopmentDepartments

at Plants

Change of organization (4)【New R&D organization】

Plants and Business Development Center will cooperate to quickly commercialize new products based on newly developed technologies.

Newly set up “Institute for Polymers and Chemicals” and “Institute for Advanced and Core Technology” under Business Development Center.

47



3. Segment strategy



6. Summary

48

Redesign domestic operations

Strengthen global supply chains

Strengthen business structure

through drastic reforms

Carefully select R&D themes and accelerate commercializationStep up cost reductionsMaximize cash flows by increasing operational efficiencyPursue best locations for business

Summary: Goals to be achieved in 2013

Ideas, hopes and dreams

for your happily ever after.

results achieved in 2012 and our strategy for 2013 · 2014-09-26 · results achieved in 2012 and...

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