Management Policies, Business Environment, and Issues to Address, etc.
Forward-looking statements herein are based on the Group’s judgement as of the end of fiscal year 2020 under review.
1. Basic Management Policies
Based on the mission statemant of “to be the world’s No. 1 silicon wafer supplier by exceeding the expectations of our customers and stockholders, by recognizing the value of our employees, and by being good neighbors in comminuties,” the Group has developed technological capabilities and abilities to roll out a wide range of products for the manufacturing of high-quality large- to small-diameter silicon wafers used in making semiconductor devices. By taking full advantage of these strengths to create a stable supply capability, the Group seeks to contribute to the advancement of society. Making especially strong efforts to raise its technological capabilities to meet the extremely strict quality and cost demands of its customers, the Group seeks to maintain and improve its standing in the silicon wafer industry.
Under these basic policies, the Group is committed to further strengthening its business foundations and meeting its mandate from stakeholders, aiming for sustainable growth of its business.
2. Targeted Management Indicators and Medium- to Long-Term Management Strategies
The semiconductor silicon wafers market is expected to grow in the medium to long term along with the growth of the semiconductor market, although there will be factors causing short-term market fluctuations. Driving this growth are 300 mm wafers that meet leading-edge scaling needs. Meanwhile, demand for 200 mm wafers is rapidly recovering especially for automotive, despite the global economic slowdown caused by the spread of COVID-19 infections. Depending on its demand for consumer and industrial applications, a full-fledged recovery in demand for 200 mm wafers is expected from 2021 onward.
In this business environment, the Group will promote further differentiation of its mainstay 300 mm wafers through technology development and investments designed to meet the increasingly tough requirements its customers have for higher precision and better quality products along with advances in scaling technology. In response to the issue of demand exceeding production capacity, the Group will make individual, disciplined capital investments at appropriate times, giving all due consideration to their economic rationality. As for wafers of 200 mm or below, the Group will continue ensuring that its production capability is commensurate with the market environment. In addition to strengthening cost competitiveness, the Group will pursue differentiation from its competitors by concentrating its management resources in the fields where demand is expected to grow including wafers for the IoT and fifth-generation (5G) mobile communications system.
Given that semiconductor silicon wafers are part of business areas with a volatile market environment, the Group will continue making efforts to improve profitability and work on building business foundations that can promptly and effectively respond to changes in the demand environment.
Thanks to the improvements the Group has made to its financial position, the Group achieved at the end of 2019 the medium-term financial targets it had set in 2015 at the time of the capital increase through public offering. These were the equity-to-asset ratio of 50% or higher and the gross D/E ratio of 0.5 times or lower. With this achievement, the Group reviewed its shareholder return policy and, in addition to the existing dividend payout ratio of 30%, it has started providing a shareholder return of 10% through the purchase of treasury stock.
3. Business Environment and Issues to Address
With respect to 300 mm silicon wafers used in semiconductors, in the short term, the supply-demand tightness is expected to intensify for logic semiconductor applications as demand will be driven by applications for 5G, smartphones, and data centers. In addition, robust demand for 200 mm wafers is anticipated to continue with a rapid recovery in demand for automotive and consumer.
In this environment, the Group, in line with its Vision, will continue striving to maintain its strong presence among customers through technology development to meet customer needs for higher precision products and to achieve product differentiation, while improving profitability through the increased productivity, optimized pricing, and cost reduction. The Group will also carefully and closely monitor changes in the market environment amid concerns over the impact of the COVID-19 pandemic, US-China trade friction, and other issues.
With respect to capital investments, to fulfill its responsibility to customers as a supplier, the Group will implement disciplined capital investments as needed in line with SUMCO’s market share, taking into consideration matters such as supply and demand forecasts of the wafer market on each occasion and the lead-time required to newly install or increase production facilities.
The Group is currently holding excess inventories of polycrystalline silicon, the main raw material of silicon wafers. This is attributable to the discrepancy that has arisen between the demand forecasts made at the time the Group concluded long-term purchasing contracts and the consumption outlook as a result of rapid changes in the market. The inventory balance peaked at the end of the fiscal 2016 and then began to decline. It is expected to return to an appropriate level in the medium to long term. The balance of raw materials and supplies, including raw material inventories, shrank by 7.3 billion yen year on year to 142.1 billion yen.