Investors’ Guide FY2020
Year ended March 31, 2021

Japanese GAAP

Leadership in Total Motion Control
Nov 12, 2021

Primary Objectives
HDSI focuses our expertise and management resources on “Total Motion Control”,
developing and producing Precision Control Equipment and Components for a broad range of applications.
HDSI aims to become a world industry leader, as a highly skilled precision engineering expert with pioneering spirit.
HDSI will strengthen our management processes and our flexibility to become a winner in the dynamic business environment.

Schematic Concept of Total Motion Control

Speed
Reducers

Sensors

Controllers

MotorsOthersDrivers1

Management Philosophy
HDSＩ conducts management based on the following management philosophy.
1.Respect for the Individual
HDSＩ aspires to be a company where the rights of every individual employee are respected, and where individuals can pursue a meaningful,cultural, and worthwhile life.
We will make HDSＩ a company that believes in each employee’s aspirations, supports independent activities, creates an environment where
employees can maximize their abilities through work, and where abilities and performance are rewarded.
2.A Meaningful Company
HDSＩ wants to be recognized as a meaningful, superior company which manifests creativity, has personality and distinctive characteristics,
and whose management foundation is based on ceaseless research and development activities and a constant emphasis on quality—acompany where the entire organization finds meaning in making utmost efforts.
3.Coexistence and Co-prosperity
HDSＩ is supported by many different parties including our employees, customers, shareholders, materials and parts suppliers, affiliatedcompanies and trading partners.
We make our best efforts to create attractive products, services, compensation, working environments, and trading relations to satisfy allthese concerned parties.
4.Contribution to Society
HDSＩ broadly contributes to society and industry through our corporate activities as a good corporate citizen. The products and services weprovide directly and indirectly contribute to the betterment of society.
We aspire to be a company that helps to improve the environment and the quality of the communities where we are located.

2

History of Sales（Million ¥）50,000

History of Sales（Non-consolidated basis）

45,00040,00035,000Flat Panel Display
Manufacturing Equipment

30,00025,000

Semiconductor Equipment

20,00015,00010,0005,000

0Demand Drivers
Robotics
Working Machines
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 '87 88 89 90 91 92 93 94 95 96 97 98 '99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 （FY）

3

Operational Risks
1.Plant and Equipment Investment Trends

Because the majority of HDS Group’s products are sold as components for industrial machinery such as industrial robots, semiconductor
manufacturing equipment, and flat-panel display manufacturing equipment, plant and equipment investment trends have an influence on theoperating performance of the HDS Group.
In particular, for semiconductor and flat-panel display manufacturing equipment industries, while there is large growth from improved
conditions in the semiconductor device and panel markets and from manufacturing technology innovations, an unexpected market contraction
resulting from supply-demand adjustments or other developments could adversely affect the operating performance of the HDS Group.

2.Research and Development Results

The HDS Group develops and puts on the market distinctive, high-value-added products by intensively allocating resources to the researchand development division as a technology and technical skills organization in the motion control field. A delay in the market release or market
penetration of the resulting new products despite the continuous allocation of resources to research and development could adversely affectthe operating performance of the HDS Group.

3.Product Quality

The HDS Group has received ISO9001 certification and otherwise strives to strengthen its quality assurance system to boost customer
satisfaction and gain market advantages. Nevertheless, the emergence of unexpected product defects or other quality issues could adversely
affect the operating performance of the HDS Group.

4.Fluctuations in Foreign Exchange Rates

The HDS Group has two consolidated subsidiaries in the US, one consolidated subsidiary in China, one consolidated subsidiary in South
Korea, and one consolidated subsidiaries in Germany which has nine consolidated subsidiaries in Europe, and we are actively advancing
internationalization in our businesses. Consequently, foreign exchange rate fluctuations sometimes have a negative effect on the businessactivities of the HDS Group. Foreign exchange rate fluctuations also affect the yen-equivalent value of the Group’s assets and liabilities andrevenues and expenses from transactions denominated in foreign currencies, and may have a negative effect on the HDS Group’s operating
results and financial conditions.

5.Retirement Benefits Obligations

Harmonic Drive Systems and some HDSI consolidated subsidiaries have defined benefit pension plans or lump-sum retirement benefit plans.
Revisions of the assumptions for calculating retirement benefits obligations and retirement benefits expenses, changes in the investment
environment for pension assets, and other financial developments could adversely affect the Group’s operating performance and financial
conditions.

6.Other Risks

Changes in the economic and political environment and the occurrence of natural disasters, wars, terrorism, and other unpredictable events
that cannot be avoided by the HDS Group alone could adversely affect the Group’s operating performance and financial conditions.
*The above is a summary version. For full details, please refer to the latest Annual Securities Report “Yukashouken Houkokusyo” ( in Japanese).

4Mid-term to Long-term Management Strategies and Management Targets
Mid-term to Long-term Management Strategies
In November 2020, we celebrated the 50th anniversary of our establishment, and to achieve further growth, we have formulated a
medium-term management plan (covering the period spanning from April 1, 2021 through March 31, 2024) under the key phrase “Toward
the Next 50 Years: Moving to a Solid Growth Stage”. During the previous medium-term management period (from April 1, 2018 throughMarch 31, 2021), the operating environment changed drastically owing to the US-China trade friction and the spread of the novel
coronavirus. That said, we remain convinced about opportunities for high levels of growth over the medium to long term. In the markets
where we are active—mechatronics and precision speed reducers—demand is forecast to continue rising for products used in industrial
robots and collaborative robots. Behind this demand is manufacturing investment in automation and labor savings in emerging markets
as well as growing need for addressing labor shortages and improving productivity in developed markets. To achieve a sustainable
society and sustainable management in a constantly changing world, we will continue taking on the challenge of developing technologies
and skills that capture changes in the environment to provide products and services that go beyond our customers' expectations.
Accordingly, we will strive to respond flexibly to short-term fluctuations in the operating environment. At the same time, we will implement
strategies in line with the policies outlined in our long-term vision and medium-term management plan. By maintaining a balance
between defensive and offensive approaches in our management strategy, we aim to enhance corporate value over the medium to longterm.

Our Group's Mission
To contribute to technological innovation in society through motion control technology

Long-term Vision-In pursuit of total motion control• Take on the challenge of developing new technologies and skills that capture changes in the environment• Achieve QCDS that goes beyond customer expectations• Contribute to creating a sustainable society through corporate activities

Mid-term Management Plan for fiscal years 2021–2023-Toward the Next 50 Years: Moving to a Solid Growth Stage(Basic policies and strategies)(a) Achieve QCDS that meets customer expectations
Q: Quality Control: Zero defects and zero claims
C: Improve productivity and further enhance Value Analysis / Value Engineering
D: Commit to delivery schedule requested by customers
S: Enhance ER activities by speeding up

5Mid-term to Long-term Management Strategies and Management Targets(b) Expand RD, AD, and MT businesses by developing valuable products and enhancing services[RD: HarmonicDrive®]• Create and commercialize new technologies and skills to support next-generation applications[AD: AccuDrive®, HarmonicPlanetary®]• Expand product offerings tailored to regions and various applications through business restructuring[MT: Mechatronics]• Provide products that enable customers to bring their vision to life and further improve problem-solving capabilities(c) Build a business foundation that meets the demands of the times• Promote sustainable management (SDGs)• Develop human resources capable of leading business expansion, and establish personnel systems and work styles that enhancediversity• Execute IT enhancement strategy and implement our own IoT concept• Establish a financial base to support growth and strengthen fundraising capabilities(d) Strengthen coordination and maximize synergies with overseas group companies and institutions• Maximize utilization of management resources at each site
• Maintain and promote proactive research activities with overseas research institutions• Establish a global production system(e) Create new standards that define the next 50 years through outside-the-box thinking• Proactively take on the challenge of discovering new materials, new principles, new mechanisms, and new production methods• Make strategic moves toward developing intelligent mechatronics• Foster a culture that is sensitive to changes in society and accepts variant perspectives

Management Indices Targets
The HDS Group has established the following management indices targets.
- Profit Margin:

At least 20%- Return on Equity (ROE):At least 10%

6

Sales Composition by Application Fields
0.1%
0.3%
0.9%
1.0%
2.7%
5.4%
4.8%
3.2%

（Non-consolidated basis)

Turnover (%) in FY2020
16.1%

54.0%
11.5%

Applications
Robotics

Semiconductor Equipment

Flat Panel Display Equipment

Gearbox for Motor Manufactures

Machine Tools

Optical Devices

Measuring Machines

Excavation System for the Oil

Printing Machines

Transporter

Others (including parts and materials for subsidiaries in US and Germany)

7

Semiannual Sales Composition by Application Fields（Non-consolidated basis)

Million ¥14,222

15,0002,199

10,527
10,000

5,000

0

9,260

2,326

1,706

126
739
488

1,962

4,926

3,960

200
1,163

440
1,055

376
1,161

First period

Second period

First period

177
487
618

114
522
635

FY2019

Semiconductor Equipment
Gear box Motor Manufactures
Optical Devices
Excavation Systems for the Oil

35
675
702

10,041

8,070

5,040

Flat Panel Display Equipment
Machine Tools
Transporter
Others

8

394
1,616

FY2020

Second period

Robotics
Printing Machine
Measuring MachinesPerformance Summary Operating Results
During the fiscal year ended March 31, 2021, the HDS Group’s business environment remained harsh in the first half of the fiscal year as companies
all over the world took a careful approach toward capital investment due to the spread of the novel coronavirus. However, entering the second half of the fiscal
year, environments surrounding order bookings showed signs of recovery, especially in Asian markets including Japan, as the Chinese economy became one of
the first to recover from the pandemic. Furthermore, toward the end of the fiscal year, the operating environment improved substantially as companies became
more inclined to make capital investments.
As mentioned above, the environment surrounding order bookings was harsh in the first half of the fiscal year, but rapidly improved from the second half of theyear due to increased investment in automation in the Asian market, especially in China, as well as the acceleration of large-scale investment by major
semiconductor companies in response to the surge in data demand. In addition, progress in adjustment of customer inventory, which had been at excess levels
until the previous year, also contributed to higher orders. As a result, consolidated orders for the full year rose 38.8% year on year to 41,675 million yen.
Although sales in Asian markets including Japan increased due to a recovery in orders, sales for major application sectors in Europe and the US were generally
down due to a slower recovery in economic activities caused by the spread of the novel coronavirus. As a result, consolidated net sales were down 1.2% year on
year to 37,034 million yen. By application, sales of products for use in industrial robots rose, thanks to the recovery in capital investment in automation centered on
China, as well as higher demand brought on by the adoption of industrial robots in the EV battery production process. Sales to semiconductor production
equipment manufacturers rose year on year owing to robust capital investment appetite driven by the expansion of 5G communications and progress in IoT.
Meanwhile, sales of products for use in flat panel display manufacturing equipment remained low, hurt by sluggish orders for capital equipment as in the previous
year. Sales for machine tools and automotive applications also fell for the full year on sluggish orders in the first half of the fiscal year.
In terms of profitability, we focused on building a leaner organization capable of generating profits under challenging operating environments and preparing for the
next expansion period, while prioritizing measures to prevent the spread of the novel coronavirus among customers, trading partners, employees, and theirfamilies. As a result, despite the decrease in net sales, operating income came to 865 million yen (compared to an operating loss of 195 million yen in the previous
fiscal year). In addition, as a result of the increase in operating income, net income attributable to owners of parent reached 662 million yen (compared to a net
loss attributable to owners of parent of 1,095 million yen in the previous fiscal year).
By product type, sales of speed reducers were 29,319 million yen (up 4.6% year on year) and sales of mechatronics products were 7,714 million yen (down 18.4%
year on year), accounting for 79.2% and 20.8% of net sales, respectively.
During the fiscal year ended March 31, 2021, the final year of our medium-term management plan (covering the period spanning from April 1, 2018 through March
31, 2021), we implemented relevant measures associated with the plan. Despite these efforts, results fell short of our financial goals.
On the sales front, although it became difficult to engage in in-person sales activities due to the spread of the novel coronavirus, we have been working tostrengthen our online sales capabilities and to capture orders by speeding up the process of solving issues for each of our customers. In addition, we participatedin exhibitions with thorough infection prevention measures in place, and also set up permanent virtual exhibitions on our website, combining physical and virtualexhibitions to attract more orders and open up new markets.
In terms of quality, we reaffirmed our definition of quality as "satisfying customer expectations" and have been working to improve product quality and operational
quality. One specific example of our efforts is the organization of a company-wide team to respond to urgent requests from customers, enabling us to make optimal
proposals in a shorter period of time than before, thereby improving customer satisfaction. Although there were restrictions on movement due to the spread of thenovel coronavirus, we leveraged IT tools and endeavored to maintain and raise quality under our Common Global Quality initiative to raise quality at all production
sites (Japan, Germany, the US, and South Korea) to a unified high standard.

9Performance Summary Operating Results
In terms of R&D, we have been working to expand and enrich our basic research through efforts to establish new principles and theories and achieve newtechnologies as we aim to further develop HarmonicDrive®. At the same time, we have worked to develop and commoditize elements that are potentially essential
to next-generation motion control technology. We further strengthened coordination between R&D divisions based in Japan and Germany. We conducted
initiatives aimed at raising the efficiency and research levels of our R&D activities through interdivisional implementation of development themes, researchexpertise, research equipment and facilities, and human resources. Furthermore, in application development, where we reflect the needs of the market in our
products, we added a two-level type model to our HPG-R series of HarmonicPlanetary® planetary gear speed reducer to expand our product lineup. By adding
the two-level reduction model (reduction ratio of 15 to 50) on top of the single-level reduction model (reduction ratio of 3 to 10) that we launched in 2015, we now
offer a product lineup covering a wide range of reduction ratios, from 3 to 50, and have been working to open up the market.
In terms of production, in addition to the safety and sanitary activities that we have been continuously carrying out under the theme of “safety and security,” wehave fulfilled our responsibility to supply products to our customers by ensuring the implementation of novel coronavirus infection prevention measures. In addition,
to build a production system that can keep up with rapid changes in the environment, we have continued efforts to improve productivity and shorten product leadtimes. In accordance with our efforts to raise productivity, we accelerated employee training and skill transfer associated with processes that require advanced
and proficient labor. On the other hand, we reduced the manpower required for other processes through active investment in automation. To shorten product leadtimes, we decided to introduce a new production management system and targeted the establishment of a production framework that is capable of flexibly
responding to variations in demand while continuing to apply our extensive expertise regarding high-mix low-volume manufacturing.
To combat the spread of the novel coronavirus pandemic, the Group established an internal task force on February 3, 2020 and has done its utmost to prevent the
spread of the disease while prioritizing the safety and security of all stakeholders, including employees, customers, and trading partners, above all else. So far, wehave incurred no health hazards or impact to factory operations or supply chains as a result of the novel coronavirus pandemic. Moving forward, we will continue
to devote ourselves to thorough infection prevention measures.

Performance of reportable segments is stated below:<Japan>Sales rose 18.8% year on year to 22,113 million yen as demand for products for use in industrial robots and for semiconductor production equipment recovered,backed by the normalization of production activities mainly in Asian markets including Japan, as well as the recovery and expansion of capital investment aimed at
automation and labor savings toward the end of the fiscal year. Segment income (ordinary income) rose 93.3% year on year to 4,809 million yen, reflecting higher
sales.
<North America>
Sales fell 17.6% year on year to 5,144 million yen, owing to a decline in demand mainly for products for use in amusement arcade equipment due to the lockdown
caused by the novel coronavirus, as well as a general decline in capital investment demand due to stagnant economic activity. Segment income (ordinary income)
was down 67.5% year on year to 310 million yen.
<Europe>
Sales fell 22.6% year on year to 9,775 million yen due to inventory adjustments at customers, as well as marketwide weakness in demand brought on by the
pandemic leading to lower demand mainly for products for use in industrial robots and other general industrial machinery. Furthermore, we incurred a segment
loss (ordinary loss) of 920 million yen owing to lower profits caused by lower sales, as well as 1,497 million yen in amortization of intangible assets recorded upon
the acquisition of shares in Harmonic Drive SE.

10

Results ⅰ Net Sales, EBIT
（Consolidated basis)

Net Sales

EBIT

EBIT=Ordinary income + Interest paid － Interest income（Million ¥）（Million ¥）67,80970,00017,18318,00060,00016,00054,33945,347
AVE. 5-yr

50,00014,00011,97012,00037,48740,00030,00037,034

7,772
AVE. 5-yr

10,00030,069

8,000

7,955

6,000

20,0004,000

10,000

0

2,000

2016

2017

2018

2019

2020 （FY）

11

0

316
2016

2017

2018

2019

1,434
2020 （FY）

Results ⅱ EBIT to Net Sales Ratio, EPS（Consolidated basis)

EBIT to Net Sales Ratio

EPS
（¥）

35.0
30.0

200.00175.0026.5

25.0

150.0025.3

117.62125.0022.0

100.0020.0

15.7 AVE. 5-yr

15.0

82.48 AVE. 5-yr

83.86

75.00
50.00
25.00

-11.38

0.00

10.0

2016

-25.00

3.9

5.0

2016

2017

2018

2019

2020

2017

2018

2019

6.88
2020

（FY）

Dividends paid per share

0.8
0.0

215.42225.00

（%）

（FY）

FY

2016

2017

2018

2019

2020

Dividends(¥)

20

26

38

20

20

※1.

Net income attributable to owners of parent for fiscal 2016 included 13,963 million yen of
valuation gain (gain on step acquisition) because the consolidation as a group subsidiary of theGerman company Harmonic Drive AG, previously accounted for under the equity method, required
revaluation of the existing equity holding at the market value of the additionally acquired equity.

12

Results ⅲ Total Assets, Equity Ratio（Consolidated basis)

Equity Ratio

Total Assets（Million ¥）（%）
138,584

140,000

80,000101,999

131,848
35,98852,49990.0

38,117

80.0

71.7

72.5

70.0
60.0

27,73673.3

73.5

69.0 AVE. 5-yr

54.0

50.0

60,00040,000100.0

140,028

44,885120,000
100,000

142,872

74,262

86,08597,987

95,85940.0

101,91030.0
20.0

20,000
0

10.0
2016

2017
Current Assets

2018

2019

2020

0.0
（FY）

FixedAssets

13

2016

2017

2018

2019

2020

（FY）

Sales Structure by Regions（Consolidated basis)

By Regions（Million ¥）By Regions（%）

67,80970,000

100.0

13.9

7,554
60,00054,33950,000

7,222

40,00013,50630,00020,00030,069
4,189
1,798
4,574

0

15,952

6,856

75.0

37,48737,034

4,555

3,691

5,482
12,63437,445

19,5062016

6,240
14,0562017

Domestic

11.2

12.2

10.0

6.0

28,12810,00013.3

2018

North America

2019

Europe

15.2

24.8

10.1

23.5

26.4
33.7

10.1

13.9

50.0

16.6

9,775

64.9

5,144

51.8

25.0

55.2

49.7
37.5

18,4212020 （FY）

Other Region

0.0

2016

2017

Domestic

14

2018

North America

2019

Europe2020

Other Region（FY）Sales Structure by Product Types（Consolidated basis)

By Product Types

By Product Types（Million ¥）67,80970,00010,92360,00030,06937,48737,034

9,456

7,714

16.1

80.0

82.2

83.9

2016

2017

2018

44,64324,0592016

2017

Reducers

25.2

20.8

50.0

56,885

6,009

20,000

0

17.8

75.0

9,695

40,00010,00020.0

54,33950,00030,000

100.0

2018

28,031

29,319

2019

2020

74.8

79.2

25.0

（FY）

Mechatronics

0.0

Reducers

15

2019

Mechatronics

2020 （FY）

Profitability EBIT to Total Assets Ratio, ROE（Consolidated basis)

EBIT to Total Assets Ratio

（%）

ROE

（%）
50

30.0

45

25.0

42.8

40
35

20.0

30
25

15.0

10.0

7.8

5.9
AVE. 5-yr

8.6

15
10

10.1

5

5.0

0.2
0.0

12.7
11.2 AVE. 5-yr

20

12.0

2016

2017

2018

2019

0

1.0
2020

（FY）

16

-5

-1.1
2016

2017

2018

2019

0.7
2020
（FY）

Stability

Interest Coverage Ratio, Debt / Equity Ratio（Consolidated basis)

Interest Coverage Ratio

Debt / Equity Ratio

Interest Coverage Ratio = Net Cash provided by operating activities / Interest paid-net（Times）（Times）
1,200

0.5

1,122.2

1,000

0.4

800

0.3

682.5

441.6
AVE. 5-yr

600

0.28

0.2

0.09
AVE. 5-yr

400

0.1

200

0

97.4

213.1

92.9

0.02
0

2016

2017

2018

2019

2020

（FY）

17

2016

2017

0.02
2018

0.07
2019

0.06
2020

（FY）

R&D Investments（Consolidated basis)（Million ¥）

2,500

2,476

2,122 AVE. 5-yr

2,000
1,500
1,000

2,444

2,195

20.0

2,114
1,383

4.6

3.9

2016

2017

500
0

（%）

6.6

5.9
3.7

2018

R & D Expenditure

Fiscal Year

10.0

2019

2020

（FY）

Percentage of Net Sales

2016

2017

2018

2019

2020

Number of R&D persons

86

111

129

139

144

Share of total employees (%）

9.9

11.5

11.6

12.7

13.0

18

0.0

Capital Expenditures（Consolidated basis)（Million ¥）23,87625,00020,00015,0008,757

10,000

5,000

7,892

9,412 AVE. 5-yr

4,576
1,959

0

2016

2017

2018

※ Purchases of tangible and intangible fixed assets

19

2019

2020

（FY)

Consolidated Balance Sheets（Million ¥）FY2016FY2017FY2018FY2019FY2020Current Assets

27,73652,49944,88535,98838,177

Fixed Assets

74,262

86,08597,987

95,859101,910

Tangible fixed Assets

14,64421,30640,85245,50041,991Intangible fixed Assets

47,834

48,97644,41540,21241,003

Investment and other Assets

11,78315,802

12,718

10,146

18,915

Total Assets

101,999

138,584

142,872

131,848

140,028

Total Liabilities

39,387

29,86529,59425,129Current Liabilities

29,96823,934

13,18015,944

5,127

Long-term Liabilities

7,954

15,453

16,685

13,65020,00222,014

Total Net Assets

62,611

108,719

113,277

106,718

Shareholders’ Equity

110,059

50,39388,933

97,07993,192Other Comprehensive Income

91,784

4,661

10,446

6,564

3,435

11,104

－

625

625

625

－

7,557

8,712

9,008

9,464

7,170

101,999

138,584

142,872

131,848

140,028

Subscription rights to shares
Minority Interest （Non-controlling Interests)

Total Liabilities and Net Assets

20

Consolidated Statement of Income（Million ¥）FY2016FY2017FY2018FY2019FY2020Net sales

30,06954,33967,80937,48737,034Gross profit

13,86625,70330,446

12,003

12,582

SG&A

6,052

13,386

13,821

12,198

11,716

Operating income

7,813

12,316

16,624▲195865

Ordinary income

7,958

11,946

17,185236

1,366

Net income attributable to owners of parent

19,732

7,777

11,322▲1,095662

21

Consolidated Statement of Cash Flows（Million ¥）FY2016FY2017FY2018FY2019FY2020Cash flow from operating activities

7,225

9,233

15,121

10,9509,555

Cash flow from investing activities▲32,522▲8,171▲22,399▲12,537▲4,180Cash flow from financing activities

24,64817,493▲3,271

2,362▲3,611

Effect of exchange rate changes on cash and cash equivalents

▲121

95

▲171

▲33

▲108

Net increase (decrease) in cash and cash equivalents▲770

18,651▲10,720

742

1,654

Cash and cash equivalents at end of year

9,668

28,32017,60018,342

19,99622

Share Price Trend
Share Price
HDSI’s Share Price (Closing)

10,000Tokyo Stock Price Index (Closing)
（￥）

（￥）

2,400
9,000
2,100

8,000

Number of shares of common stock

issued and outstanding:
96,315,400 shares (As of March 31, 2021)

Number of shareholders:

6,017 persons (As of March 31, 2021)

7,000

1,800

6,000

1,500

5,000

Market capitalization:¥720,048,549,000(As of March 31, 2021)

1,200

4,000
900
3,000
600
2,000
1,000

HDSI’s Share Price(Closing)

Tokyo Stock Price Index(Closing)

02020/42020/52020/62020/72020/82020/92020/10 2020/11 2020/12

2021/123

2021/22021/3300

Note: The Tokyo Stock Price Index (‘TOPIX’) is a composite
index of all common stocks listed on the First Section ofTokyo Stock Exchange.

0Harmonic Drive Systems Inc. is listed on JASDAQ standard marketof Tokyo Securities Exchange , Inc.

Investors’ Guide FY2020
Year ended March 31, 2021

Appendix

Results forecasts on this document are based on the management’s decisions for future businessstrategies and performance, and may include risks from the business environment, uncertainties,
and other factors. For this reason, the understanding is that the actual business results may notagree with the business prospects as presented on this document.

Nov 12, 2021
24

Outlook for FY03/22
FY03/22 Outlook
Although the business environment surrounding our Group remains unpredictable due to concerns
about the prolonged spread of the novel coronavirus, demand for products used in semiconductor
production equipment is firm, and we expect demand for products used in industrial robots to trend
favorably on the back of investment in automation in the automobile, electronics, and home applianceindustries.
To achieve a sustainable society and sustainable management in a constantly changing world, we willcontinue taking on the challenge of developing technologies and skills that capture changes in theenvironment to provide products and services that go beyond our customers' expectations. Accordingly,
we will strive to respond flexibly to short-term fluctuations in the operating environment. At the sametime, we will implement strategies in line with the policies outlined in our long-term vision and mediumterm management plan. By maintaining a balance between defensive and offensive approaches in ourmanagement strategy, we aim to enhance corporate value over the medium to long term.
In regard to our consolidated earnings forecast for the fiscal year ending March 31, 2022, based on theabove business environment, our Group projects net sales of ¥56,500 million (+52.6% year on year),
operating income of ¥8,200 million (+847.0% year on year), ordinary income of ¥8,200 million (+499.9%
year on year), and net income attributable to owners of parent of ¥5,500 million (+730.2% year on year).

25

Forecast ⅰ Net Sales, Operating Income（Consolidated basis)

Net Sales

Operating Income（¥ Million ）（¥ Million ）80,00060,00020,00067,80970,00056,50054,33916,00014,00050,00037,48740,00016,62418,00037,03430,00012,316

12,00010,000

8,200

8,000

Forecast

6,000

20,0004,000

10,000

0

865

2,000
0

2017

2018

2019

2020

2021 （FY）-2,000

26

2017

2018

2019

-195

2020

Forecast

2021

（FY）

Forecast ii

Operating Income to Net Sales Ratio, EPS（Consolidated basis)

Operating Income to Net Sales Ratio
（%）

EPS

（¥）
150.0024.5
25.0

117.6222.7
100.00

83.86
14.5

15.0

57.14
50.00

6.88

5.0

2.3
2017

2018

2019

-0.5

2020

0.00

2021

（FY）

2017

2018

2019

-11.38

Forecast-5.0-50.00

27

2020

2021

Forecast（FY）Forecast iii

Dividends paid per share（Consolidated basis)

Dividends paid Per share（¥）

Dividends paid per share (left axis)（¥ Million ）38

40

Basic Policy on Earnings Distribution
At HDSI, our basic policy is to distribute earnings inaccordance with operating performance.

30

26
20

20

20

20

For future business development, internal reserves aremostly invested in such areas as researching anddeveloping new products, expanding and improving
production facilities, and upgrading information
management systems. Internal reserves are also used foragile execution of capital policies.

Forecast

100While our general dividend policy is to maintain an annual
dividend payout ratio of 30% of net income attributable toowners of parent, we determine return to shareholders
through comprehensive considerations including dividend
continuity and the maintenance of sufficient internal
reserves.

2017

2018
2017

2019
2018

2019

2020
2020

2021

（FY）

2021

28

Business Activity － Products
Leadership in Total Motion Control
Nov 12, 2021
29

Total Motion Control
Our business Domain

Developing and producing Precision Control Equipment andComponents for a broad range of applications, focus on “Total
Motion Control”

Schematic Concept of Total Motion Control

Speed
Reducers

Sensors

Controllers

MotorsOthersDrivers30

History of Harmonic Drive Systems Inc.
1950 1960 1970
55
64
History

InventedHD

First
Introduced
to Japan

J/V

76

USM+
Hasegawa
Gear Works

1990

1980
79
100%
subsidiaryof USM/
EMHART

Current HDSI

95

2000
98

2010

ISO ISO
9001 14000 (IPO)

Products

Equipments for Optical, Aero, Space and Environment

Semiconductor and Flat Panel Display Equipment

Our
GrowthRobotics

Before Dawn

Harmonic Concert (Classical music concert)

Community
RelationsHarmonic Lecture Meeting

TRIAD
31

History of Sales（Million ¥）50,000

History of Sales（Non-consolidated basis）

45,000Aerospace
Mobility

40,000

Advance Medical
Technology

35,000Flat Panel Display
Manufacturing Equipment

30,00025,000

Semiconductor Manufacturing
Equipment

20,00015,00010,0005,000

0Demand Drivers

Robotics
Machines Tools

71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 '92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 （FY）

32

Sales Structure by Product Types（Non-consolidated basis）

Turnover (%) in FY 2020

Controller

1.0%
14.7% 12.3%

HarmonicDrive®
(Component type)

9.1%
Actuator

62.9%
HarmonicDrive®
(Unit type)

Planetary Gear

33

Principle and Advantages of “HarmonicDrive®”
Flexspline

Circular Spline

Wave Generator
The flexspline is deflected by the wave
generator into an elliptical shape, so theflexspline teeth to engage with those of thecircular spline at the major axis and to becompletely disengaged across the minor axis.

A clockwise rotation of the wave
generator causes the flexpline torotate in the opposite direction while
subjecting it to elastic deformation.

Advantage of “HarmonicDrive®”
Compact Design/ Reduced WeightNon-backlash
Hollow Construction
High Reduction Ratio by Single Stage
High Efficiency
High Torque Capacity
High Positioning Accuracy and Repeatability
High Torsional Stiffness
Simple Installation and Assembly
Low Noise and Smoothness operation
34

When the wave generator rotates
one revolution clockwise, theflexpline moves counterclockwise by
two teeth relative to the circularspline.

Features and Benefits “ Compact and Lightweight”
Comprised of just three basic components

Compact and Lightweight

Circular Spline

Flexspline

Wave Generator
35

Features and Benefits “ Zero Backlash”

Θ

Clearance between
mated gear teeth

Backlash
1,000mm

Backlash

Applications
General Industrial
Machinery

Backlash

Backlash after 1m

Our Products

8.7mm

None

0.5 degrees

Transporters and Processing
Machinery

0.05～0.25 degrees

0.9mm～4.3mm

Robotics and Semiconductor
Equipment

0～0.02degrees

0～0.3mm36

Feature Applications
Industrial robots
Hayabusa 1. 2 Photograph courtesy of JapaneVTOL

Aerospace Exploration Agency (JAXA)

Robotic Surgical System

Optical-infrared telescope “Subaru”
installed on Mauna Kea on the island of
HawaiiPhotograph courtesy of the National
Astronomical Observatory of Japan,
National Institutes of Natural Sciences

Cobot Photograph courtesy of Techman Robot Inc.

37

Target Segment Image
Price
High positioning accuracy

Servomotors + Reducers
Robotics, Semiconductor
Equipment

Normal positioning accuracy(Inverter motors or
Stepping motors or
Servomotors) + Reducers

Focusing on
expansion of torque

Transporters, Processing
Equipment etc.

General-purpose motors + Reducers

General Industrial Machinery
Accuracy

Note: This graph is conceptual. The shape, size, and position of images used do not accurately reflect market size or product positioning.

38