Rigaku Holdings Corp

Thank you. Let me start the presentation. Today's presentation consists of two parts. First one is the consolidated financial reporting of the first quarter in FY25 as of December. And then the second point, the market environment has been significantly changing due to the Trump tariff, due to the U.S. policy, and what will be the impact on the content measured by Ligaku. And also we will update on our growth strategy. So first of all, let me talk about the FY25 first quarter performance report and highlight. The company-wide revenue have increased 5.5% versus the previous term or year. As I've explained before, this year's growth is the first half focus scenario. And at this point of time, a 5.5% increase at this time is basically, is almost in accordance with our annual growth plan. The product development, And also the commercial infrastructure investment, mainly on overseas, will be continued so that the adjusted EBITDA, adjusted the OI, operating profits are going to decrease, but it's also assumed as well. So that will be the scenario that is the first quarter. The results have actually reflected our plan. In the first quarter, the revenues, in regards to the revenue in the first quarter revenue, because the U.S.-Trump policy impact has been limited because it has not been really started, but then we are going to examine further more in the future impact on performance from the U.S.-Trump policy. Our pipeline has been growing in a very steady manner in the multi-purpose analytical instruments and semiconductor process control instruments is driving that growth. And compared to the pipeline, how we can convert those pipelines into revenue, conversion to revenue in terms of the timing as well as the volume is going to be very important points. Let me talk about each of the business segments for multipurpose analytical instruments. As I have mentioned before, this year, last year, we had the large supplementary budget project in China, but it has been dropped off this year. And also compared to previous year in Japan, the large project has been reduced. And due to these two factors, compared to previous year in multi-purpose analytical instruments, it is a 10.8% decline in terms of the revenue in total. That is within the range what we have already assumed. and that is the status as such. On the other hand, semiconductor process control instruments business, in the first quarter last year, the revenue was less, but now we have achieved this year the 115% year-on-year, which is more than double of the revenue growth, and that is increasing the pace compared to the previous year's first quarter pace. And that is quite, in the first half, in the second half, centered growth scenario, it is very healthy growth. And obviously, the market situation has been changing, but being reflected, the memory, large investment, the timing is somewhat delayed. But the mid- to long-term investment is quite active. so that the logic, memories, semiconductor manufacturing instruments, as well as these are growing. Also, annually, the demand forecast is going to continue to grow. So therefore, we could be bullish in this investment. So this FY25, the first quarter, consolidated earnings, the highlight of that. On the following page, let me go further drill down those points I've just mentioned. This is revenue and operating profits. As I mentioned earlier, revenue compared from 9.5 to the 20.6 billion, that was 5.5% increase. These growth come from the semiconductor process control instruments growth. in terms of product development and commercial infrastructures. And we have continued our investment in this area. And we have continued this investment from last year, that is the design. and R&D personnel cost, and also many overseas sales schemes, and this has been increased. So this situation for this human resource expense has been increased. That has resulted in the SG&A increase. And also, investment in ERP has been done as well, and the depreciation, amortization of those investments has taken place as well. So we want to make a company, and this is a necessary investment. We will continue our investment, and that is the same policy that we have. There will be some growth variations and fluctuations because of this quarter. So that is why operating profit ratio has been EBITDA profit margin rate was 19.6%. So it is still in a very good level. Adjusted current profits is exceeding 10%. And under such circumstances, we have exceeded 10%. So therefore, this is a profitable business that we can know from this first quarter performance. Let me talk about each segment. For the multipurpose analytical instruments business, as I mentioned earlier, the entire revenue has been reduced to the 9.2 billion and the 10.3 percent decline. This is the different regions, and this is a breakdown per end market and per different regions. The number one, Japan, has been reduced a little bit. In the F24 first quarter, the electron components and also protein analyzer, And there's been relatively large projects in the first quarter last year, but we don't have those large projects in this year's first quarter. And that is already embedded into a plan of the first quarter. The second point, In the second one is the non-Japanese market, and excluding China without any special factors, but for U.S., Asia, and Europe, it is 27% growth. And in China, as you can see in number three, It is about the revenue decline because of the drop of the large supplementary budget project in China. And that has been the large projects has been reduced in Japan and also protein analyzer status and SIC and also batteries in these large projects we don't have this year. That portion has been reduced. In number four, as I mentioned in the first point, in the large products for the power semiconductors, and that currently the revenue has been declined due to the short-term market conditions, but in this market, it will continue and exploit this market even more. In terms of margin, in the 14% from the 21%, it has been reduced, but this revenue decline has been impacted on the margin decline, and due to the S&A investment is continued. That is this reverse leverage due to the yen depreciation. Therefore, in case of gross margin rate, it has increased. So fundamentally speaking, pricing strategy and multipurpose analyzer, it is rather going into better situations. So therefore, we're reflecting our continued investment. Profit rate has been reduced. 14% is the FI23 level, the same as the FI23 level. So even though it has been reduced, but 14% profit margin rate is not so bad. That is the multi-purpose analyzer instruments business first quarter result.

The next is page 88. We represent the results of semiconductor process control instrument business. As I said, it's increased to 115.5% increase year-on-year. And first point, logic foundry, it's very good. It respects the current market of the increasing of the semiconductors market. Japan, EU, and Asia are leading, especially Japan and Asia. But Logic Foundry deliberately was strong in EU as well. So the first one, Logic Foundry, is very, very good. And the second one was fairly small, and the memory was very small. But it was lagging behind rather than our expectations. Still, it's better than the last year. So we see that the delay of the mass production investments, but it's still leading in Asia. And for data center, so we see this, signs of demand expansion. The timing is the key. So for instance, the last year, so the memory is coming is what I feel. That is what we feel in the first quarter. The third item, production instrument maker. And additionally, China's semiconductor producers, and we've started initiatives for that. That is very good for the midterm perspective. We haven't planned for the significant or dramatic problem for China market, but But yeah, it is going up rather than our expectation. And for margin, we see the sales close. But comparing to the last year, it is getting better and better. But for gross margin, so we see the increase in Asia sales. So it shows the gross market decrease. growth margin. Growth margin rate is getting slightly decreased, but we see the leverage effect. That's why we see the increased sales profit rate. That's it for semiconductor process control instrument business. Next page is parts and service business. So it's still within the expectation, as I mentioned earlier. And for per service business, it's getting worse, slightly worse than our expectation. So sales by sales decreases by 18% and the contents service is getting good as planned. Yeah, we achieved a growth with 7.4% year-on-year. So we are going to achieve the two-digit growth and including the expansion in the maintenance business. So we are going as planned. That is service business. On the other hand, cells and parts and other analytical instruments, I like to separate into two segments or three segments. The first one is, as I mentioned earlier, for EUB, multi-layer millers, and for here, A customer's inventory adjustment is getting longer. So comparing two years ago, it's getting half. So we don't expect increase. Maybe it will be even or slightly more. That is what we have expected. But actually, the customer's demand was more decreased. That's why it's out of our expectation. that is caused the sales decrease the other thing is that the core component sales like x-ray generation sales so partly we change those strategies as i introduced earlier especially for semiconductors the uh sales demand is increasing so we are enhancing the internal resources And for core component, that is really included into our semiconductors. And for core component sales, the development and the measurement for special orders, we don't take any specific measures. That is what we have decided that is cause the sales decrease logically. the external sales, we will decrease for short term to focus on the system sales for semiconductors. So it will recover our sales loss, but we will see some time lag for that. For this part, review in the past year. So we will see some changes from our expectations. And from here, the analytical instrument, for example, thermal instruments. And PCI, clinical imaging. So other than x-ray instruments, so we will see some gap for timing in the first quarter, but for those three terms, we will catch up with later soon for first quarter. So there are some events which were out of expectations as well as a timing gap. and receiving this sales impact, the merging has also decreased. That is the current status for the first quarter for core components. That is EBITDA's waterfall, basically. So there's no significant changes. And for gloss merge, it's getting increased. And the great factor is the mixed status. Semi-conductors, mixed rate is very high that impacts our sales. And there's also the pricing strategies that contribute to the gross margin for 2%. On the other hand, And for this first quarter, the semiconductor control instrument business, it is increasing in Asia, that is going through distributors, that is causing a sales commission. And comparing to the last year, it is going to be negative. And you see the latter two parts, and R&D and others, SG&A. So we are going with the fundamental business strategies, and it is dragging the sales. So the gross margin increasing 2.0%, and it is consumed with L&D and other SG&A that is causing EBIT margin decrease by 19.6%. That is it. current status for the first quarter, the financial consolidated status. And from here, I'd like to talk about the responses to market changes and updates of growth strategy. Firstly, I'd like to talk about the Trump's strategies. So the impact on us and our measures, I'd like to talk about it. So firstly, the direct impact is the tariff. The tariff's direct impact. So our sales, 26% of our sales is planned for U.S. Among those 26%, the export to the U.S. is 20%. That means... 6% is produced in the U.S. So among them, 20% will receive the impact of the tariff. This 20% is divided in 2%. 40% is going through our subsidiary in the U.S. for multi-purpose analytic instrument, and 6% is directly selling to the customers in the U.S. from Japan. That is the semiconductor process control instrument, technically. through U.S. subsidiary that our subsidiary leads importers. That's why they need to pay TALIF. So we need to pay TALIF, and it should be transferred into the price to deliver to our customers. And for semiconductor, this is a direct sales. So our customer in the U.S. will be the importer. That's why customers are obliged to pay TALIF. but it may lead to the price discount request from the customers. That's why we need some discussion with the customers. Anyway, if the basic tariff is 10%, the sales price impact is, and for a multipurpose instrument, it will be 4% to 5%, and for semiconductor, it will be 10%. So how we should do is I think we can transfer it to the sales price and for ordered price and the future order as well. So it could be transferred to the price in first three and for multi-purpose instrument. So it will be the price increase by 4% to 5%. And for future order, so we can pricing for the future and we can plan the budget. So our strength is capability. So the price increase is available. That is what we're seeing. But if it's already ordered, it could be a bit difficult. And we need discussion. And we have continuing the negotiation with the customers for April and May. And, yeah, it is already completed and concluded. So I think that half of the loss could be covered. And for the ordered contract, so totally against emerging impact, I think we can make it minimized. Semiconductor. To mitigate this impact, we are considering various efforts such as focusing on the cost to sales prices, modifying distribution, loose expanding and inspection work at U.S. facilities, and utilizing custom duty exemptions for U.S. made parts and modules. With these measures, we believe we can manage the direct impact of the tariffs. If the scenario changes and it exceeds 10%, like 20% and 30%, so we haven't seen the resolution for that. So we don't know what is going to happen. But the possibility is very low. But it happens. We need to think about the market approaches. And, of course, we need to utilize our U.S. subsidiaries and localization. And for module products, maybe we will utilize the exemption of tariff and taxes that is available. That's why we see a very minimized impact of coming from tariff increase. On the other hand, besides the tariff, there's some indirect impact. So it's going expanding. This is what we are examining. So first is the in the U.S. changes. So due to U.S. government spending cuts, there is a risk of reduced business opportunities in the life sciences and academia segments. These accounts for about 2% or 7% of the total sales respectively in the U.S. So we will see some impact from that. And for your reference, so for RIGAC, the largest impact is life science. That should be 2%. So within 2%, we will see the impact. So the overall academic year, it will be 7%. So among 7%. So if the 7% is legalized, but it's just 0.7% among entire LIGAC, but of course we need to see the impact from that. Besides, so the strategy changes will impact and leading to the economic slowdown and the import industry for America I mean the U.S., it will become negative, like discoloring the investment among customers. And for Asia, in the Asia market, these factors may be seen. that is what we are going to see and keeping close eye. And for semiconductor, like tips, we're concerned, but currently we don't see such rumors so far. So we are rather optimistic, but of course possibility isn't zero, so we should be ready to pivot to take actions for the status or situation changes and for the measures in the U.S. from academia to shifting to industry and enhancement of the approach and the business enhancement as in the U.S. like China. We see negative values in China as well, but looking at the momentum in China, it will grow. Asia and China for this part. So we would like to cover the weakness of the US. And of course we need to access relate the pillars race strategy. So I like to talk about it later in the latter pages. and for development and new domains needs is exceeding and increasing. So we need to deep dive for those new domains. And the half of the semiconductor is a development. So we have this strong needs for this development of semiconductor. so customer won't stop the development in semiconductor regardless of the economic status so we need deep dive into this domain and furthermore the supply chain segregation if it happens it will be multi-layered and for a mid and long term it will be good good news So in China and Europe, respectively, the supply chain, separate supply chain will generate it. And we can enter those new supply chains. That is enough possible. So we would like to generate the new business there. That is what I think.

So now I'd like to explain about the multi-purpose analyzer instruments business, the actions as well as the environment change. And then this is where the uncertainty is increasing. We will take the PR3 strategy, lab-to-fab strategy, and oil and gas mining. And those areas, we will explore those business opportunities in those areas, and also border control with Canada from that portion. There will be a new business, a new inquiry has been happening. So we'd like to work in an agile way to shift to the Pillar 3 strategy. And not just in the U.S., but also global recession risk, and also the sentiment may go down among the customers. But for this issue, and R&D, this is an R&D innovation market, that we are working for, R&D innovation market will not be impacted. The volatility is less in this long-term and R&D domain, so we will make the steady manner to try to explore the demand to be sought after. In the necessary portion, we will continue our investment. In the short term, promotions and the travel expenses will be reduced or cut. And looking at the status of the global economy, but we will use sales resources and lab strategy will be further accelerated and to promote that. So that is the action that we can take. Also in R&D area, material informatics, especially material development, the machine learning and robotics are used, will be used to make the different combination of the materials, to make the automatic inspection continuously, and by analyzing using the AI to make the composition of the material. And these activities have become more active. Just yesterday, the University of Tokyo has issued a press release, and Bigaku has contributed to that. These are laboratories. This is informatics, material informatics, symbolic initiatives, so that to generate a new demand to go against, to fight against the recession concern. That is the action that we will take. As it has been mentioned, it is in some ways to Japan. Because of the demand of the new products has been reduced, and there have been decline of the large projects, that we will accelerate for that, PILA-3 strategy to be further accelerated, and also Lab-2-5 strategy. And also in China, we will continue the SIC market. In terms of Synergy-ED, electron diffraction system, We will further penetrate. We are focusing on pharmaceutical manufacturer and to further enhance and take more to be sold, selling the electron diffraction system so that the electronic devices, those semi-standard to be complied with. And for the batteries, automation XRD diffraction system The airtight sample holder receipt of the order has been started. And also the battery material automation, we are partnering with the European companies in the life science area, Boston Laboratories and Focused, and also in Japan. We have started contracted analysis business for the pharmaceutical companies in Japan, as well as in the U.S., so that will be the update of this area of the PIR-3 strategy. That was the multi-purpose analyzer. But now in the next is the semiconductor process control. Mr. Ogata, I will explain the semiconductor process control instrument business. Thank you. I will explain the environmental change as well as the actions against it in semiconductor process control instruments business. An AI-related and memory area is expecting the growth and recovery of the market, and we need to take this to further enhance our sales and service activities. And also, we have increased in the project base to meet the demand in the state-of-the-art process. and to establish a competitive edge and to build the growth base. And let me explain about some of the four environment change. Even though the mass production investment has been developed, but due to the change of the semiconductor market, there will be some delays in the memory area. in some of the areas. But in doing a shift of the focus from mass production to more to development phase, and there'll be quite demand is quite high. So to take the balance of that, the new type of investment opportunities that to look after and look for that, In the top three memory manufacturers, we are expanding our receipt of the order as well as our revenues for top three memory manufacturers. For Trump, tariff impact and supply chain multiples has been progressed. So in terms of the mid to long-term business opportunity, there is still opportunity to grow. In paying attention to the impact from the Trump tariffs, and that we are thinking of the appropriate measure against it and also globally market change to be addressed, global sales scheme, especially in the U.S. and Asia to be able to gain more business opportunities. In next, AI chip structural change, there's drastically progress in the technology development roadmap and also roadmap progress will be further accelerated. And therefore, they will focus on the development area. And also R&D, we are making continuous investment as well to address in the innovation. This will be further explained in the next page. And the fourth point in the nation-state-led rapid growth is in the Chinese semiconductor market. And we are now focusing on the agency or distributor channel to be further multiplexed. so that we will enhance our contact with the customers and enhancing our technologies. We have a plan to start our Taiwan Technology Center, which will be utilized to business expansion in China. And also in 2025 targets, the progress in regards to the progress toward the 2025 targets in advanced logic and foundries. And then we are proceeding with a project with the major customers, and this is going very well. This is like aluminum, ultra-thin film, and also transistor to be used, very thin film function on our films. The needs is quite high. And next generation transistor as well. Those are silicon, silicon, germanium, multi-layer film analysis and so on. The needs of our products are increasing, and we are working on that as well. And also for the customers, the variation of them has been well done as well. It has been well penetrated in those new areas. And also for next-generation advanced packaging, advanced XI inspection, and these demonstrations will be actively used for the adoption of that. Next is the memory area. The AI chip used, HBM, is used in AI chips and also NAND and flash memories. There have been quite a rapid pace of the development and quite demand for that. Those top three memory manufacturers, we have received good orders from them. And also the high performance, and also in the improvement, we have received the AXI demonstration measurement has been requested as well. And then the numbers of the layers or the lamination will be increasing, and also scaling will be further progressed. that's been used, those connected portion defect may increase. So therefore, new type of inspection demand will likely to rise. For WFE business, in the major WFE companies, we are promoting further collaboration with major WFE manufacturers, and also the recognition to be further awareness to be increased. Next page.

We are aiming even further ahead and taking various initiatives for further growth. I would now like to provide an update on the progress. First, regarding advanced logic. We are developing new methods and collaborating with customers to meet the growing demand for silicon substrates, multilayer films, and functional films used in high-performance transistors, particularly for advanced device processes like GAA and CFET. In addition to that, we are also working on major external structure analysis for the three-dimensional GHC VET. As for progress, regarding our silicon galvanium analysis instrument, we have already delivered units to multiple customers, and the applications are currently underway. Some evaluations have been completed, and we are now moving on to the next phase, which involves the deployment of multiple units. Regarding Hi-K metal gate films, these are high-performance thin films. We are expanding and refining applications for our existing tools, such as XLRD, XLR, and XLR. We are capable of measuring extremely thin films. These tools are being adapted by our customers. To the right, on this right, we show an example of structural analysis of GAA-GFET. The multi-layer structures in these future transistors, such as up to eight layers, have a significant impact on the final performance of the device. therefore controlling these structures is critically important we are currently developing analysis instrument capable of measuring these 3d structures our current generation tools have already been delivered to customer sites Looking ahead, we are working with partners such as the IMEC Consortium and academic institutions to explore X-ray methodology approaches and accelerate development of the next generation system intended for mass production. AIMING COMPLETE DEVELOPMENT THIS SYSTEM BY NEXT YEAR. NEXT, IN THE AREA OF ADVANCED PACKAGING, AS MICROMAC AND TSV CONTINUE TO SCALE, PACKAGING BECOMES INCREASINGLY COMPLEX WITH MULTI-LAYER STRUCTURES, WHICH LAYS THE RISK OF DEFECTS. WE HAVE COMPLETED THE DEVELOPMENT OF PROTOTYPE SYSTEM REFERRED TO AS THE AFER VERSION OF OUR XI TOOL. now engaging in collaborative work with customers, including sample demos, and moving towards the next stage of commercial discussions. On the right side of the slide, you'll see a technical example involving TSB through Silicon VHS. These involve delivering the holes into the waher embedded copper electrodes to ensure connectivity. As the minimization of the TSV's progress is void and defects become more likely, we are currently developing methods to automatically detect such defects. As for a beta version of our system for mass production, we plan to complete it by the end of this year and enter the customer evaluation phase. Regarding our hybrid methodology, In the future, such as for CFETs, 3D NAND, or higher-spec 3D structures, conventional techniques face limitations in 3D measurement. To address this, we are developing a hybrid metrology that combines X-ray and optical techniques. As shown on the right side, this approach involves using both X-ray and optical sleeping measurements, analyzing the data with a hybrid engine, and outputting accurate measurement values for evaluation. We are not just talking about this in theory. Concrete plugless is underway. We are working with partner companies and the first-generation system is scheduled to be installed at the customer site in the summer of this year in Q3. In parallel, we are developing a next-generation system with enhanced capabilities. That concludes the update on the progress in semiconductor process control instrument. I'll hand the floor back to Mr. Kawakami. Lastly, I'd like to talk about our production capacity. As we have shared previously, we are implementing a capacity doubling plan. As I mentioned earlier, our core growth strategy remains unchanged despite a more uncertain environment. Therefore, we are committed to completing this project as planned and doubling our production capacity. Starting with our Yamanashi plant, this is our main plant where we manufacture analytical tools and core plant parts. The expansion will be completed next week. If any of you have a chance, we would be delighted if you could come and see. The expansion in our Osaka plant has already been completed. This facility... primarily produce fluorescent-related systems and semiconductor metrology instruments. It is now fully prepared to enter a high-volume production phase. In addition, Nippo Precision, which is located very close to our Yamanashi plant and is responsible for assembling semiconductor systems, has agreed to allow us to use their plant No. 6 The expansion of this facility has also been completed, and we are now in a position to increase production capacity immediately. Through these facility expansions and lead time reductions, we are preparing to meet high production volumes expected particularly in the second half of the year, especially in Q4. This preparation will be finalized in May and June, representing an update to our enhanced production framework. That concludes my presentation so far. I'd like to wrap up with a brief summary. In the first quarter of fiscal year 2025, we experienced a leavening increase but a decline in profit. This was within expectations. We are seeing significant changes in the external involvement, such as tariffs, and we are taking short-term defensive measures to address this shift. We have already began initiatives such as tariff countermeasures and tactical expense control. That said, we have no intention of changing our fundamental goal strategy. We will continue to invest in growth, in creating L&D, commercial development, and infrastructure. Through these initiatives, we will steadily move forward in converting our lower pipeline into actual business opportunities. However, it is true that uncertainty, especially compared to the last year, has increased. In particular, we are closely monitoring potential delays in order closures in the multi-purpose analytics system segment, especially in the United States. We intend to implement countermeasures to accurately assess and manage these risks. The semiconductor sector remains strong. Advanced technology development is accelerating regardless of macroeconomic conditions. We will continue to focus our efforts in the area and ensure we keep pace with the rapid technological progress. Looking further ahead, we are optimistic about the Chinese market entering the advanced segment. We see this as a positive development over the medium to long term. We are currently reviewing both positive and negative factors, and depending on the outcome, we will carefully assess the potential impact on our full-year earnings guidance by the time we announce our first half results. Apologies for the lengthy presentation. That concludes our remarks. Thank you very much.