Tokyo Shiodome Bldg., 1-9-1,
Higashi-Shimbashi, Minato-ku, Tokyo 105-7325, Japan
https://www.resonac.com/

RESONAC REPORT 2024

Resonac Holdings Corporation
Resonac Corporation

RESONAC REPORT 2024
English Version

English Version

RESONAC REPORT 2024

Dear Reader,Resonac prepares the Integrated Report every year from the position that this report is a tool for conveying to our valued stakeholders with whom we wish to have a long-lasting relationship how we have created what kind of value from the past up to thepresent and whether we have the structure and capabilities to create value in the future.
Resonac is a new company established by integrating the former Showa Denko and the former Hitachi Chemical. The 2022 edition,
the first year of substantive integration, presented mainly CEO Hidehito Takahashi’s thoughts and enthusiasm. The 2023 edition
presented the thoughts of each member of the Management Committee, “Team Takahashi,” whom CEO Takahashi trusts and towhom he delegates authority, as well as our strategies and initiatives for a “Co-creative Chemical Company” and for developing
co-creative talent, and both financial and non-financial results and progress.
With the goal of our 2025 targets for realizing our long-term vision in sight, this year’s 2024 edition focuses on the question which
everyone is most interested in, namely “whether Resonac has the earning power.” The special feature covers the “issues” and“requirements” for the Company’s survival and growth, consisting of the business portfolio, technology and people, initiatives forsustainability through trial and error, the process of cultivating individual abilities and a corporate culture for a Co-creative
Chemical Company, and the current status of risk management and governance reform.
With regard to the pursuit of the essential aspects of Resonac, we are only partway along the long journey ahead of us. The pages
pertaining to our businesses and functions also detail their respective issues and the initiatives being implemented to solve theseissues. We also hope that it will help facilitate dialogue and co-creation with you.

About RESONAC REPORT 2024
RESONAC REPORT reports on the initiatives for enhancing the corporate value with a focus on the results of the previous fiscal
year related to the Resonac Group as a whole. The 2024 edition was prepared in collaboration with Sustainability Partners of eachdepartment after the editorial policies and contents were planned at “Integrated Report planning meetings” attended by CXOs
(Chief X Officers) and members across departments and the details were discussed and agreed on at the Sustainability Promotion
Council meetings chaired by the CEO.
Key points to note
The intent of preparation for this year is as shown on the left page. The three major issues (themes) and matters regarding governance covered in this report were also prepared following repeated discussions with each executive in charge and relatedparties.
I held dialogues with the General Manager of the Electronics Business Headquarters and the CSO/CRO
regarding the progress of business portfolio reform, the challenges of the semiconductor materials
business in which we are concentrating investment as a growth business and measures therefor. Pleasealso read the challenges and initiatives of each business and the Company’s competitive edge.
Hideki Somemiya, CFO

Our activities and what we hope to convey in this Integrated Report

Resonac’s source of value is its human resources. By using the Company’s diverse range of technology
platform as a base, these human resources combine differing technologies to create the functions requiredby customers and markets. We have focused on development this year, and had a dialogue with the CTO
and the Deputy General Manager of the Electronics Business Headquarters regarding the product creation
process and human resource development.
Nori Imai, CHRO

2030
2024
2022
Establishment of
the Team
Takahashi
structureThoughts andenthusiasm of
CEO Takahashi

2023
Resonac establishedThoughts and progress ofTeam Takahashi,
development of
co-creative talent

Ideal statePrevious year of financial and non-financial
targets (2025) under the long-term vision

Communication regarding the issues
faced by Resonac andthe roadmap to overcoming them
Earning power, technology andpeople that generate profits,
and sustainability

World-class
Functional Chemical
Company from Japan

Can we generate profits through sustainability? I had a discussion on how to overcome the issues we facewith those in charge of quality assurance, compliance, and PFAS issues, risk management. I also enjoyedtalking with the people of Omachi City in Nagano Prefecture about the future we want to realize together.
Nami Matsuko, CSuO

Resonac’s governance reform has just begun. We revised the criteria for referring matters to the Boardand thoroughly shared information in advance in order to have more meaningful discussions at Board of
Directors’ meetings, thereby gradually raising the quality of discussions.The Board members shared frankopinions at the roundtable, and we will reflect them in our future reforms.
Tomomitsu Maoka, CSO/CRO

Long-term visionHelp to enhance value through communication with stakeholders including investors, customers and employees

Process of Preparing Resonac Report 2024

See here for our past
integrated reports

We are making an effort to reform the business portfolio, develop human resources, and cultivate a corporate culture
based on the idea of Corporate value = Strategy x Individual abilities x Corporate culture. We consider the Integrated
Report as a very important tool for communicating to you the progress of reform. We would like to reflect your feedback
in Resonac’s management, so please give us your honest feedback!
Hidehito Takahashi,
CEO01

1. Planning and preparation of editorial policies and contents by means of planningmeetings held every two months
Members: CFO, CSO/CRO, CHRO, CSuO, and staff from the Investor Relations Department, the Organization & Talent Development Department, the Corporate Planning
Department, the Brand Communication Department, and the Sustainability Department
2. Decision of direction and message during meetings of the Sustainability Promotion
Council, attended by the CEO, all other chief officers, and all general managers ofbusiness units
3. Discussion of each page with Sustainability Partners and those in charge of eachdepartment, and draft writing
4. Discussion and approval by the Management Committee and the Board of Directors

Key discussion points
What matters does current Resonac need to report tostakeholders? Discussed on measures we are working on to
improve our corporate value and decided on the contents.

Members of the 2024
planning meeting

About the cover page

P15
Resonac holds AHA!, a global award, as an initiative to penetrate the Company’s Purpose and Values among employees. We decorated the cover of the 2024 report with the “graffiti”
drawn by the team members who won the Gold Award at the 2023 award ceremony to express excitement for the future. “Change society through the power of chemistry” and “GO ANZEN NI! (Besafe!)” represent our messages.

02

How to Navigate this RESONAC REPORT
If you’re unsure where to start, we recommend beginning with the “How to Navigate” page. For a more traditional

03

Resonac’s Earning Power:
Roadmap to the Maximization—“ Steering & Focusing”
toward Semiconductor
Materials BusinessCan you prove effective
governance?

approach, start from the “Contents” page.

01

What kind of company is Resonac?
Do you really believe that you can change
society through the power of chemistry?

02

How do you intend to make money?
Is there something currently lacking?

 arning power: Roadmap to the maximization ofE
Resonac’s earning power echnology and people that generate profits:T

Message fromthe CEO“ Technologies are
Created by People”
Co-creative talent thrives
through their connections opens
up a path to the future with
their earning power

Looking ahead tothe next 100 years
Embarking on co-creation,
delight for the future

How do we hone and acquire the power we lack and how will wechange society with the power of chemistry? We would like to sharewith you the vision we at Resonac see beyond our challenges, and move toward thisvision together. Please also read about the challenges and progress made for eachbusiness and function.

01

05 Message from the CEO
13 Now! Fostering Resonac’s

Corporate Culture

17 Management: Team Takahashi
21 Overview of the Long-Term Vision
23 Links to Resonac’s Technology and Society— History
25 Global Business Composition /Financial and Non‐financial Highlights
27 Overview of Resonac’s Business
29 Value Creation Process
31 Co-creation with Stakeholders

03

and People That Generate Profits”(CHRO & CTO & Deputy General Manager,
Electronics Business
Headquarters)

 ustainably: The power to generate profits in good faith andSto co-create with society

Who We Are

P59 Roundtable Conversation “Technology

The power to produce co-creative talent who will consistently
create new technology

P05

CONTENTS(General Manager, Electronics Business
Headquarters & CFO & CSO/CRO)

We are very much aware that in order to change society through the power of chemistry,
we must hone our power more and incorporate what we need. Conversely, if we canacquire what we lack, we believe we will become much stronger! In this report, the CXOs
and business leaders discuss the three powers we should hone.

Yes, of course! Here you will find content thatshowcases our commitment, including a message
from CEO Takahashi filled with his passion,
insights into how we cultivate a culture to
become a company that drives societal change,
and introductions to the diverse individuals on
our management team. Find the overview of ourlong-term vision here!

What kind of governance does Resonac neednow? We believe that we must continue to take onchallenges in order to demonstrate effective
governance at a global top level that can realize
improved corporate value.
We have outside officers with the experienceand skills Resonac currently needs. Through aroundtable discussion with outside officers, thiscontent offers a candid account of everythingfrom current challenges to our ideal governancestructure at Resonac.
Starting this year, we are also providing a clear
overview of their areas of expertise. See foryourself the effectiveness of Resonac’s
governance.

P33 Roundtable Conversation“Earning Power”

02

P89 Toward the Future - Co-creation with
Omachi City, Nagano Prefecture(CSuO & employees & region/government)

03

Our Goals and Challenges

02-1 R oundtable Conversation“Earning Power” P33

73 Digital Strategies

103 Quality Assurance

75 Human Resource Strategies

104 Chemicals Management

39 Business Strategies
Semiconductor and Electronic Materials
Segment
45 Mobility Segment

02-3 E arn with Sustainability
Message from the CSuO P79

106 Respect for Human Rights

47 Innovation Enabling Materials Segment
49 Chemicals Segment
55 Financial and Capital Strategies

02-2 R oundtable Conversation“Technology and People That
Generate Profits” P59

105 Sustainable Procurement

81 Promoting Sustainability

107 Compliance

83 Material Issues and Non-financial KPIs
87 Cross-talk Between the CSuO and On-site

108 Enhancement of the Group Management
System109 Risk Management

89 Toward the Future - Co-creation with

111 Identifying and Prioritizing

Staff in Charge

Omachi City, Nagano Prefecture

91 Contributing to Society and Customers by Fulfilling Our
Purpose through Resonac Pride Products & Services
65 R&D and Intellectual Property Strategies 93 Environment
71 Corporate Marketing Strategies
102 Occupational Health and Safety

04

You can find basic financial and non-financial
data, company information, and stock information all in one place. We hope you find it useful.

Corporate
Governance Reform

113 Governance Roundtable“Governance Reform”

119 Directors, Audit & Supervisory Board
Members, Corporate Officers, and Skill Matrix
124 Corporate Governance

04 Data Section
131 Consolidated 11-Year Summary
133 Consolidated Statements of Cash Flows
137 Corporate Data/Editorial Policies“Companywide Key Risks Themes”

P113

Governance Roundtable “Governance Reform”

YouTubeResonac Channel

04

RESONAC REPORT 2024

01

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

We convey Resonac’s current and past efforts in fostering a corporate culture.

05

Message from the CEO

23

13

Now! Fostering Resonac’s
Corporate Culture

Links to Resonac’s Technology
and Society — History

17

Management: Team Takahashi

25

21

Overview of the Long-Term
VisionGlobal Business Composition /Financial and Non-financial
Highlights

27

Overview of Resonac’s Business

29
31

Value Creation Process
Co-creation with Stakeholders

Message from the CEO

Transforming our people and corporate culture are thekey to maximizing our corporate value

Resonac will change society
and the way of Japanese
corporate management
Dominance in back-end processes of semiconductor
production and Cultural transformation;
Two key identities of Resonac as the driving force ofour management

While Showa Denko excelled at raw-material technologies,
Hitachi Chemical was exceptionally strong in the field ofsemiconductor materials, possessing 10 of the 15 materials
that are vital to back-end processes of semiconductor production. Resonac combined the technologies of these two compa-

05

In January 2023, Showa Denko and Hitachi Chemical were

nies to turn raw-materials into highly functional materials. We

integrated to form Resonac. Showa Denko was a raw-material

own a wide range of semiconductor materials, each with thecompany that designs going all the way back to the molecularhighest or second-highest market share in the global market.

design level. Hitachi Chemical used raw-material to create

Resonac stands head and shoulders above its competitors

functional materials. One of the main objectives of the integra-

because it can handle everything from raw-materials totion was to leverage and refine their respective strengths.

processing, providing materials with a high level ofPresident and CEO
06

RESONAC REPORT 2024

Contents

Our Goals and Challenges

functionality. We are able to decide on specifications directly“This would never have been possible without Resonac”

My other goal is for people to say “The rise of Resonac

in conjunction with the global top semiconductor manufactur-“ Resonac transformed the way of Japanese corporatetransformed the way of Japanese company management.” I

ers, develop materials, and then sell those materials. We areManagement”

an important player in the semiconductor field, but we are not

Striving to be a company that is a spearhead for change

a semiconductor manufacturer, we are a functional chemical

Corporate Governance Reform

Data Section

Building strategies for acquiring greater market
share through semiconductor materials businesswant to present the world with innovation so great that people
think in terms of “before Resonac” and “after Resonac.” TheFirst, I will discuss our strategies. Our strategy for maximizing

approach I believe we should use to achieve this is to take on

corporate value is extremely simple: become a World-classcompany. Our value chain covers a large area from midstream

Resonac’s Purpose is to “change society through the power ofthe challenges of transforming JTCs. As I touched on earlier,

Functional Chemical Company.

to downstream sectors, and we have an overwhelming market

chemistry.” I truly want to change society. I have two conceptual

companies must unleash employees to express their full

P21 / Overview of the Long-Term Vision

To do this, we will reshapeshare as a supplier of semiconductor materials for back-end

goals I would like us to achieve. The first is that, when some-potential. At the same time, employees must be able to act

our business portfolio from the three perspectives of (1)processes. Furthermore, we have exceptionally high techno-

thing becomes popular decades from now, I want people to beautonomously. We must continue to develop wonderfulwhether the business is a good fit for Resonac’s strategy, (2)logical capabilities for each material. This is one of Resonac’s

saying “This would never have been possible without Resonac.”products and services, but we must go beyond that to showwhether the profitability meets Resonac’s minimum

essential aspects, from a business portfolio perspective. In

For example, AI is poised to change society in major ways.

the world the potential of our employees. If we can create

terms of profit, as well, the profit margin in selling resin used

To enable semiconductor packages for AI applications toin semiconductor materials as-is, as a raw-material, is com-

rapidly process high volumes of information, it will be essen-

Japanese companies will change. This may be an experimentpletely different from the profit margin from selling functional

tial to place both logic and memory on a single substrate, or toof massive scale, but with Resonac, I would like to show thesuch an environment, I am confident that the management ofmaterials needed by semiconductor manufacturers, produced

stack up chips in 2.xD or 3D integrated packages. This will

world an actual example of how JTC culture can beby blending resin with filler (powder). By turning raw-material

require material innovation, as well. Semiconductor manufac-

revolutionized.

into functional material, we can assure EBITDA margin of 25 toturers are competing against each other to achieve new— These are my conceptual goals for how Resonac can

30%.

package advances. We are already supplying three newchange society. I believe that working toward these conceptu-

There is another essential aspect of Resonac that I would

materials that contribute to the evolution of these packages,

al goals will also contribute to the maximization of Resonac’s

like to emphasize: our efforts to instill our Purpose and Values

and we enjoy the top market share worldwide. We have also

corporate value.

throughout the Group and to foster our corporate culture.

made progress on the development of another promising

Major, long-established Japanese companies such as

material. Package materials are one of the areas in which

former Showa Denko or former Hitachi Chemical (the kind of

Resonac particularly excels, and we can contribute to the“Corporate Value = Strategy x Individual abilities x

companies that have recently come to be called “Japanese

evolution of AI in each manufacturer through our materials. It

Corporate Culture”

Traditional Companies,” or “JTCs” satirically) often haveis like we have the same impact as Shohei Ohtani, whom every

extremely skilled engineers and scientists, but do not allow

Major League team was vying to sign. If we keep contributing

them to reach their full potential. To unlock that potential,in this way, I believe that my dream, where people decades

Striving to raise the level of these three elements
I believe that corporate value is the synergistic product ofcompanies must transform their entire cultures. We arefrom now say “the great AI transformation would never havestrategy, employee’s individual abilities, and corporate

working hard to cultivate a new corporate culture, driven by abeen possible without Resonac,” will be an attainable one.

culture. The only way to maximize corporate value is to takepowerful desire to urgently leave behind our past as a JTC.

Furthermore, as we are not a semiconductor manufacturer

these elements to the next level. Unfortunately, not all threeEver since I was appointed CEO, we have been creating a

but a functional chemical company, even if something new andof these have been raised to the needed level, so we are in the

totally different from semiconductors takes the world byprocess of addressing them, one by one. I would like to explain

distinctive business portfolio and refining the transformation

07

Who We Areof our corporate culture. As CEO, I am responsible for maximiz-storm, we can provide functional materials for that. The power

what we are doing to elevate the levels of each of theseing our corporate value, and I have worked diligently to do thatof chemistry is at the heart of every industry, so the range ofelements — that is, what specific measures we are implement-

without wavering. But where is our Group heading? That is thefields where we can make people say “It would never haveing to maximize corporate value.

next thing I would like to talk.

been possible without Resonac” is limitless. What is more, we

Note: The three major management issues, “earning power”

have the combined R&D and technical strengths of Showa

through unflagging reforms to our business portfolio; “profit-

Denko and Hitachi Chemical, and at our Stage for Co-creation

generating technological capabilities and people develop-

open innovation site, we are using computational sciencement” that are our sources of value; and “sustainability,” themethods to develop state-of-the-art technologies. I am

ability to progress into the future in step with society, areconfident that Resonac will change society through the power

explained in the Sustainability special feature section.

of chemistry.



P33

P59

P79

08

RESONAC REPORT 2024

profitability requirements, and (3) whether Resonac is the best
owner for the business.
Of course, our business portfolio ideals will change with theContents

Our Goals and Challenges

Corporate Governance Reform

Data Section

statements is, of course, vital, but this can only be achieved if

working styles and ways of thinking of the autonomous

perform proofs of concept. We cannot afford to be behindhand

each and every person in each business unit works hard. That

employees produced by these initiatives will affect manyin developments in the world of AI.

is why I dedicate so much time and effort to improving employ-others within their workplaces.

discussions regarding their concepts, and where they canIn this way, through a series of stages, we have beenchanging demands of the world at large. Large-scale invest-

For a company such as our own, which has a wide range of

ee engagement. Just sitting in a chair in the President’s office,ment can lead to overestimation of unidentified risks, leadingbusiness segments, minimizing conglomerate discounts is abrows furrowed, trying to fire people up over the phone—that

developing autonomous, co-creative talent that embodies ourto hesitation. We need to believe in our current ideals, based

critical business issue. Our Long-Term Vision of becoming awill not change the numbers on financial statements. If you

Purpose and Values. We examine how established our Pur-on the three perspectives I mentioned earlier, and take that

World-class Functional Chemical Company tackles this issue

work upstream, thinking about what kinds of management

pose and Values have become among employees through thefirst step forward without delay. In other words, I believe it isby closing the chapter of our history in which we are a com-measures should be implemented, and what needs to be doneengagement survey we conduct each year. The percentage ofimportant to actively invest in necessary businesses andprehensive chemical manufacturer and by building a businessin order to implement those measures, you eventually get torespondents indicating that they put our Purpose and Values

peripheral technologies if we are to maintain sufficient mass

portfolio specializing in functional chemicals.

within the semiconductor materials sector.

improving employee engagement. This is the challenge at the

into practice has increased significantly. I believe we are

In the process of deliberating the reshaping of our businessheart of maximizing corporate value. Instead of using stopgap

steadily approaching our goal of becoming a company that

Until now, semiconductor performance improvements have

portfolio based on this strategy, last February we announced

measures to boost revenue, it is ultimately more effective todevelops co-creative talent that represents Japan’s manufac-

been reliant on miniaturization in front-end processes. Howev-

that we were considering a partial spinoff of our petrochemical

focus on the root of the matter. That is what a CEO should do,turing industry. 

er, the limits of miniaturization are within sight. There is abusiness. The petrochemical business produces few deriva-

and it is what I can do precisely because I am the CEO.

P13 / Now! Fostering Resonac’s Corporate Culture

trend of seeking greater cost performance by creating larger

tives, and we have achieved little success in connecting it withIn the first year after the integration, I thoroughly communi-

substrates or multi-layer substrates in back-end processes,

our monomer production. In that sense, I’m afraid that Resonac

cated my ideas and approach throughout the company. I met

or in connecting substrates laterally. More attention than everis not the best owner of this business, but at the same time wewith over 1,000 employees over the course of the year inis being focused on back-end processes. We have a dominantmust consider the happiness of our employees. Resonac istown-hall meetings and roundtable discussions, in which I

market share in this area, so we have the foundation fromfinally breaking away from the JTCs, and we have just started

discussed our Purpose and Values. We had a lot of feedback

With regard to the third element of corporate value, corporate

which we can create a greater presence. I believe we must use

working together to carry out transformation. Simply transfer-that employees wanted two-way communications with manage-

culture, transforming corporate culture is an area that we

this as a tailwind and take advantage of this for further

ring the business to or partnering with another company would

ment, so in the second year we started holding “Moyamoya

have devoted special attention to, alongside people

growth.

be against the cause. The solution we came up with after much

Meetings.” This program gathered junior employees to sharedevelopment.

Our core competence in the semiconductor materials

struggle was the partial spinoff approach. We would remain

their moyamoya (frustrations) and to engage in discussions

No matter how we may try to promote our Purpose andbusiness lies in development. We especially focuse on appro-

connected as a single community while eliminating conglomer-

with management about potential ways to use Value to solve

Values, they will not become truly established if executives

priately and continuously hiring and developing R&D talents.

ate discounting. We would not be publicly listed parent/subsidi-

these problems. Frustrations can provide insights and cantake the initiative. That is because when higher-ups change,

To deal with geopolitical risks, we are also building a basic

ary pairs, but the strengths of each business could be leveraged

resonate with others, and the process of searching for solutions

movements come to a standstill. To institutionalize these

database related to our supply chain.

to their fullest. I think this makes it a wonderful solution. Thisis a small-scale example of co-creation.

changes, we must foster a corporate culture that spontaneous-

The Packaging Solution Center, our development site inwould also benefit shareholders and enable us to achieve theNow, in our third year, employees have a base understand-Accelerating co-creative innovation by reforming
our corporate culture

ly produces co-creative talent. Combining co-creative talent

Kawasaki, has the latest semiconductor manufacturing

overarching goal of independence for the petrochemical

ing of our Purpose and Values, and our culture of co-creationand cultural transformation will accelerate co-creativeequipment. Through the JOINT2 consortium we establishedbusiness. That said, there is still room for additional tweaking,is beginning to take root. The next thing we wanted to do is toinnovation.

there, we are working with manufacturers of semiconductor

so we need to think further about the specific details.

have employees take a good look at themselves, so we began

manufacturing equipment, materials, and substrates to takeon the challenges of developing new technologies. Furthermore, we will open a second consortium in Silicon Valley, U.S.
We want to increase Resonac’s presence and level of activity

Improving engagement to unleash our people’s
individual abilities and foster their autonomy

For Resonac, producing synergy between Showa Denko andholding our “Purpose Exploration Café.” During these ses-

Hitachi Chemical is a vital challenge. For example, so far, thesions, employees reflect on their past, examine their present

synergy we have produced has been limited to topical efforts,

state, and talk about their future ideals. At the end of thesesuch as one site developing powder upon request fromsessions, we ask them, “What is your purpose?” This question

another site that manufactures semiconductor materials. We

is asked to prompt participants to look inward and realize thatare trying to connect such synergies to produce comprehen-

Next, I would like to talk about employee’s individual abilities.

their happiness lies in their purposes. Participants looksive synergy. We are reallocating powder development

strengthen our relationships with GAFAM and others. In recent

When it comes to individual abilities, I think it is important

objectively at the relationship between their own purposes

scientist to sites that make materials. We are trying to pro-years, major semiconductor manufacturers, fabless compa-

that Resonac be a company in which the employees canand that of Resonac. What I tell them there is that Resonac isduce a chemical reaction, but by mixing people, not chemicals.

nies such as GAFAM, and major IT companies clustered inenjoy their work.

the vehicle by which they can achieve their own purposes, so I

The next issue will be where to place our center-of-excel-

in the U.S., and we believe that it will be important to leverage
the advantages of our site’s location in Silicon Valley to

Silicon Valley have started designing their own semiconductors. They need sites with which they can engage in close

09

Who We Are

As I have often discussed, a CEO’s job is to maximize
corporate value. Improving the numbers on financial

want them think of how they can use Resonac. I want ourlence functions. We are planning to set up separate R&D sites

employees to be autonomous, not reliant on the company. The

for raw-materials and technologies such as powders, resins,

10

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

The resources belonging to the Research Center for Computa-

my resolve and conviction when it comes to maximizing

tional Science and Informatics, which were originally used bycorporate value, and I think that is what they are betting on.

former Showa Denko, have been reassigned to former Hitachi

That resolve and conviction are unswerving, but I also often

Chemical’s semiconductor materials field, and that is where

talk about our need for unsullied cause and dignity to maxi-

the Center currently focuses its support. I am really looking

mize corporate value. It is difficult to maintain resolve andforward to seeing what kinds of results this approach willconviction while also maintaining greater good and dignity. If

generate.

all we were after was maximizing corporate value, the best

All kinds of business sites are proactively launching activi-

choice might, for example, be to fully spin off our petrochemi-ties such as these, which embody our Purpose and Values.

cal business. But that is the approach of a capitalist, and I am a

Taking concrete action also accelerates the transformation of

corporate manager. No matter what happens, I do not want us

our culture. However, I think of the transformation of ourto abandon our cause and dignity.

corporate culture as a decade-long project. That is why evenWith respect to the third point that long-only investors

after I step down as CEO, this transformation of our corporate

focus on, a company’s track record, we are expecting to show

culture must maintain a steady course. I am communicating

solid numbers this year. I have started my third tour of ourclosely with the Nomination Advisory Committee aboutbusiness sites around the world, talking directly to employees,

selecting a successor who will carry on this Purpose andand I can feel how the atmosphere at the sites has changed. I

Value management, or perhaps extending my own term of

can see a difference in the expressions on the faces of employ-

office somewhat. This will be a long battle, but our people andees at the sites. Seeing these changes, I am confident that we

our corporate culture are at the heart of our maximization ofare building an even more solid track record. I assure you: you

corporate value, so we will keep working on them, steadily

can look forward to seeing some great results in the future.

and diligently.

Lastly, let me speak a little about why I feel so confident
about the future. It is because I have experienced the business
transformation that is essential for maximizing corporate

Unswerving “Resolve and Conviction”
Steadfast dedication to “Cause and Dignity”
In my leadership, I strive to achieve both

value, and I can conceptualize our goals. There are not thatmany corporate managers with a clear image of their goals.
My goal is a company in which we share the same values,
working in an environment with just the right level of competi-

As I have said countless times, a CEO’s job is to maximize

tion. One in which teams work together to achieve their goals.

corporate value. As part of my efforts to do so, I have been

A company that feels wonderful to be a part of. A company

working to raise our percentage of long-term shareholders.

that provides an overwhelming feeling of accomplishment. My

Twice each year, I visit long-only investors in Europe and thegoal is for every employee to experience this. The feeling ofand monomers. This will take us beyond mere synergy to

The Research Center for Computational Science and Informat-

U.S. and urge them to invest in Resonac. I believe that one ofaccomplishment I experienced while at GE* may responsible

producing true co-creative innovation.

ics brings together exceptional people. It uses computational

the reasons that our stock price has been relatively solid isfor my strength as a corporate manager. I think it would be

Furthermore, we are starting to see self-directed moves

science to perform, for example, 100 parallel simulations

that we have increased the number of these long-term

wonderful if we could all experience forming teams to work

connecting marketing to development. For example, from theinstead of 100 separate experiments, as would otherwise beinvestors.

toward our goals—if teams defined their own goals based onstarting point of “what kinds of materials are necessary fornecessary. It then selects the simulation with the most6G,” we are thinking about the material properties that arepromising results. A single experiment using the most promis-

look at (1) whether or not they can trust top management’s

wonderful company? I am doing my utmost to make that aneeded for 6G applications and deciding which center ofing parameters suffices, instead of performing 100 different

abilities, (2) whether the company is living up to its promises,

reality for Resonac.

excellence would be the best choice for them. Such a trend isexperiments. This can dramatically reduce developmentand (3) the company’s track record. Investors understand myactually beginning to emerge.

times. This is a true game changer. The Center’s exceptional

commitment to maximizing corporate value, so it would

There have also been some interesting movements by thetalents also takes the initiative, going to various worksites andappear that we have met criteria (1) and (2). Investors often

Research Center for Computational Science and Informatics.

asking if there are any simulations they would like carried out.

ask me, “You are not going to quit, are you?” They believe in

When long-only investors make investment decisions, theyvalues shared by all of their members. Wouldn’t that be a

*GE: GE Japan Holding Corporation

11

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RESONAC REPORT 2024

Contents

Now! Fostering Resonac’s Corporate Culture
PurposeSince 2023, the CEO and CHRO have been visiting business sites to hold Moyamoya Meetings where
employees come together to discuss how to solve the concerns and frustrations that they face on adaily basis through our Values and co-creation. In these meetings, participants give advice to eachother from the perspective of the Values, and propose practical solutions to these problems. Upper
management and plant managers subsequently make decisions whether to adopt the solutions, thenand there. The purpose of these meetings is to (1) ensure psychological safety so that they can
openly speak their mind, and (2) encourage employees to take action based on the Values to solve
problems.

Open Minds & Open Connections
Solid Vision & Solid Integrity

Concerns /frustrations

Action. That’s the Resonac Way!
Example of changed
behavior in employees
through the Moyamoya
Meeting itself

answer is “Yes.” To Resonac, our Purpose and Values are not just for decoration.
We use our values as the basis for our actions and from this year, we are reflecting
them in our MBO. By taking action that is consistent with our values, these values
are instilled in one’s own value standards, and that awareness leads to a sense of
Purpose. This is the Resonac way.

Example of changed
behavior in employees
from cases raised at the
Moyamoya Meeting

Our progress toward the inculcation of the Purpose and Values
2023

Know and understand the Purpose and Values

Making them tangible and a personal concern
Appreciate the Purpose and Values and autonomously
implement them

Establishing a mechanism for the autonomous
implementation

Theme

Dissemination
From understanding
to empathy

Diversity andco-creation
Implementation

Deeper dialogue
Autonomy

PolicyMake action based on the Purpose and Values into a routine

Dissemination frommanagement
Formulation and deploymentof PVe.g., Roundtable

Interactive communication
between management andemployeese.g., Moyamoya Meeting

Learn about own origins andpurposeLearn about own daily
activities
e.g., Purpose Exploration Café

Degree of empathy with P: 47%
Degree of empathy with V: 51%

Degree of empathy with P: 63%
Degree of empathy with V: 64%

Degree of P implementation: 24%
Degree of V implementation: 25%

Degree of P implementation: 48%
Degree of V implementation: 51%*P = Purpose, V = Values

13

2024

Promoting recognition and understanding

ChangeAnnounced our corporate philosophy (Purpose and Values)

2022

Data Section

implementation of values

Agile & Flexible

Concerned individuals carry out the Values
themselves
Other participants provide Value-based advice
Decision-making based on Values by management
and plant managers

We are sometimes asked “Can the Purpose and Values really be inculcated?” The

Prior to the integration of former
Showa Denko and the former
Hitachi Chemical to form Resonac
in 2023, we consolidated andeffectively integrated our management structure in 2022, andestablished the Purpose andValues, our corporate
philosophy.
Since the management integration, each employee has been
implementing a variety of initiatives aimed at implementing our
Purpose of “Change society
through the power of chemistry”
and our four Values.

Corporate Governance Reform

1. Moyamoya Meeting — Creating an environment that facilitates psychological safety andPassionate & Results-Driven

Change starts from our own actions.
Value

Our Goals and Challenges

Specific measures for instilling Purpose and Values

ValuesChange society
through the powerof chemistry

Who We Are

PV implementation:higher than or equal tothe previous year

Employees participate in the
Moyamoya Meeting andexpress their opinions andfrustrations
Frustrations raised by
employees

Too many meetings, there
are meetings one doesn’t
need to attend taking timeaway from other tasks

Open communication withmanagement
Feeling that their concerns
were addressed immediately

Action toresolveconcerns

Plant volunteers started holding
Moyamoya Meetings independently,
enabling smoother communication within
the organization

Management’s response

CEO Takahashi explained how
to improve the efficiency of
meetings and selectparticipants through theemployee website and othermeans

Changes in employee behavior

Each employee was able to revise theirown and subordinates’ flow of routine
work, including meetings

2. Purpose Exploration Café — Exploring personal purpose and its connection to Resonac
2030
Foster a rewarding
corporate culture thatoffers a high degree ofpsychological safety, inwhich diverse
personalities arerespected andco-creation can occur
Establish anorganization in which
co-creation culture isthe corporate identity
and where diverse
human resources canthrive and generateinnovation

through dialogue

In 2023, we held Value-based discussions (in Moyamoya Meetings). In addition to this, in 2024
we have been holding “Purpose Exploration Café” in order to foster a sense of personal connection with our purpose, thereby facilitating autonomy among our employees. Participants delve
more deeply into their true values by reflecting on their past and receiving feedback fromothers through dialogue. This helps them to gain an awareness of their own purpose as well asa deeper sense of purpose. The workshops also aim to provide an opportunity for employees
to think about the overlap between Resonac’s purpose and their own purpose, thereby
encouraging them to take the first step toward achieving our purpose.

Purpose2025 targets
Degree of empathy with
P: 70%
Degree of empathy with
V: 75%
Degree of P
implementation: 55%
Degree of V
implementation: 60%

Share background and views
Receive feedback from others
Think about the overlap with Resonac’s Purpose

P86 / List of Non-financial KPI Targets and Results

14

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Now! Fostering Resonac’s Corporate Culture

Engagement survey — Fixed-point observation of the penetration of Purpose and Values

Specific measures for instilling Purpose and Values 

3. Global Award AHA! — Promoting the implementation of Values

Point 01

We are implementing AHA! (Awards of Harmony), a global award that all Resonac Group employees can submit
preliminary entries to. Cross-organizational teams establish declarations of action based on our Purpose andValues, set targets and concrete initiatives, and submit entries themselves. Afterwards, during the team exchange
event, screening, and the award ceremony for the winning teams, we aim to discuss our experiences of the Values
practiced in the challenge and empathize with each other. This will serve as a valuable stimulus for further
practicing these Values and fostering “co-creation” beyond the framework of the program. In fiscal 2023, 921 teams
from 11 countries participated (totaling about 11,500 employees) in the AHA! award, sharing many experiences of
implementation of values.

Opportunities for
personal growth
Point 02

Resonac regularly conducts engagement surveys focused on listening to employees’ voices in a timely manner and utilizing them in management through various
measures.
Following the engagement survey conducted before the integration of the twocompanies (2021), issues such as empathy with the corporate philosophy, ensuring psychological safety, and job satisfaction were raised. Therefore, we have
implemented various measures to address these issues, including the following.

A connection ofequalsExamples of implemented measures
Town hall meeting /Roundtable

AHA! Meeting 2023
Screening events were carried out for the 921 participating teams, of which 13 teams were selected for Gold
Awards, 36 for Silver Awards, and four for Progress Awards. The AHA! Meeting held in March brought together
around 300 people, including the award-winning teams, executive officers, and other related parties to award thewinning teams, praise them,Team exchange
Final judging
Entry
First screening
and share their activities.
event
event
January to February

June to July

SeptemberGold Award winner (1) 
Declaration

We want to further inculcate the Valuesin Oita!

At the Oita Petrochemical Complex in the Olefins and Derivatives
business, the team worked to improve awareness, understanding, andimplementation of the Purpose and Values. Under the keywords of“Agile & Flexible” and “Open Minds & Open Connections,” members
from various departments of the Oita Petrochemical Complex gathered
to plan and implement unique Value inculcation activities that had notbeen conducted at the complex before, such as broadcasting a video
message from the complex representative, holding an exchange
meeting attended by all departments, and creating a mascot
character. The results of the
post-implementation questionnaire
showed that the awareness andunderstanding of the Purpose andValues had increased from approx.
50% to 80%.
AHA! evaluates initiatives with a focus on
the process itself. The Progress Award
recognizes efforts to pursue a high goal,
even if these efforts failed to produce
results at the time of assessment.

AHA!
Meeting
Next March

Training sessions to bolster theco-creative collaboration
capabilitiesT raining to promote behavioral changes in the necessary elements for co-creation, such as psychologicalsafety, unconscious bias, and constructive discussion
There were 1,172 participants in 2023
As a result of the training, the behavioral change rate rose from 23% in 2022 to 32% in 2023
For all managers

REBLUCA
 community where each member explores the kind of future they want to contribute to, their own will andsense of purpose, and then takes concrete actions to “change society through the power of chemistry”
Members consist of volunteers
There were 36 participants in 2023
6 5% responded that employees who have participated in the initiative are creating a positive impact on thepeople around them

November

We want to co-create with customers
and realize next-generation technology!

Resonac Korea’s sales team received orders for CMP slurry fornext-generation products by accelerating co-creation with customers.
We need to listen to customers’ needs for next-generation products
and technological trends for front-end semiconductor materials, andincorporate them into the development of Resonac products. The teamdemonstrated the two Values of “Passionate & Results-Driven” and“Solid Vision & Solid Integrity” tolisten to customer needs and also
rapidly reflect them in productdevelopment. This is the result ofcommunication activities withcustomers as well as the development team.

In the 2023 survey, the response rate improved from 63% to 83% compared to the 2021 survey, indicating a rise in employee
interest toward the engagement survey. Furthermore, the positive response rate for psychological safety, which we are placing
importance on, rose from 51% to 60%. On the other hand, the score for engagement itself remains at 50% level, the same level as
the previous survey. Based on the results of our survey analysis, we have set the following four companywide priorities and plan
to make continued efforts for improvement.
Regarding the inculcation of our corporate philosophy, which we consider important, degree of empathy for our purpose andour values increased significantly from 47% to 63%, and 51% to 64%, respectively. We will continue our efforts to improve theinculcation of our Purpose and Values.
Engagement score

Future actions“Disagree”“Strongly disagree”

Negative

NeutralPositive evaluations from AHA! participants
2023

2024 target

2025 target

70%

Improved year
on year

Improved year
on yearP86 / Non-financial KPI Results and Targets“Neither agree nor disagree”

Number of
respondents

Positive

21,00254%

Implementation of corporate philosophy
Degree of empathy
with the purpose

16pt up
47%

63%
This
surveyDegree of empathy
with the values

13pt up
51%

Previous
survey64%“Strongly
agree”“Agree”

Response rate

83%

This
surveyPsychological safety

Previous
surveyInteractive communication
between all employees

The flow of work
processes with poor
productivity

Promote business process
reform as a company-wide
activity

Job satisfaction

Inadequate careerdevelopment support
for employees

Provide more career
information, support
personal growth, create
opportunities for dialogue

A foundation for
greater engagement

Ensuring psychological

3pt up9pt up51%

Feedback from
employees is notreflected inmanagement measures

Target25,452(up 20pt from theprevious survey)

Previous
survey15

The CEO and CHRO visit plants in person to discuss the Purpose and Values with employees.
Carried out at 63 plants in 2023
The Moyamoya Meeting was also held at the same time

Gold Award winner (2) 
Declaration

We listened to the voicesof all employees throughengagement surveys andimplemented steady
improvements. We also
set KGIs and KPIs andcarried out measures toachieve them.

60%
This
survey58%
Previous
survey61%Thissurvey*Previous survey: September 2021, This survey: implemented in July 2023
*Based on a comparison with 2022 figures, as our Purpose and Values were released in December 2021

across the company
and in the workplacesafety16

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Committing to the leadership of Team Takahashi that has diverse talents fulfilling with theircharactors, Resonac is promoting reformation that aims
maximizing corporate value.

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RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform#Team Takahashi- Overhead View with FFS Theory#Team Takahashi: “This is the kind of leader I want to be”

The Five Factors & Stress (FFS) theory was developed in the study of stress and personality. It quantifies human thought and behavioral
characteristics in terms of five factors and stress values, and provides insight into whether an individual’s latent strengths are being
positively or negatively expressed.
Resonac uses FFS theory to deepen self-understanding and understanding of others, and promotes the creation of teams in which eachindividual is aware of their own role and are able to leverage their strengths while maintaining psychological safety. Resonac’s
management team, Team Takahashi, is structured in a manner truly suitable for a period of transformation. CEO Hidehito Takahashi
leverages the characteristics of LM (leadership personnel) to lead everyone, while TG (tugboat personnel) is responsible for pioneering,and ML (management personnel) is in charge of improvements.

LM

Diffusible
FactorLM

TG(leadership personnel)
TargetTargetHidehito Takahashi

Thinking and action style

TG

Nori Imai

Masato Fukushima

CHRO

Nami Matsuko

CTO

ML

Takafumi Sakurada

General Manager, Advanced Functional
Materials Business Headquarters

Five factors
Condensable Factor: Intensity ofcommitment
Receptive Factor: Ability to accept
unconditionallyDiscriminative Factor: Ability to
distinguish between black and whiteDiffusible Factor: Ability to break out
and move forward
Preservative Factor: Ability to build
up while maintaining*”Diffusible and preservative” factors and“receptive and condensable” factors are pairs,
whereas discriminative factor stands as anindependent trait among the five factors.

Shigeru Fujita

Receptive Factor

Condensable
FactorCFO

CMO

Satoshi Hara
General Manager, Mobility
Business Headquarters

General Manager, Device
Solutions Business Unit

Tomomitsu
Maoka
General Manager, Olefins & Derivatives Business Unit

TargetM
 arkets on the verge ofwithdrawal, markets that arelike wringing a dry towel

CMEO/CQO

Yasushi Makabe
Hiroyuki Yamashita General Manager, Hard Disk Business Unit
General Manager, Electronics Business
Headquarters

Strict rule adherence
Business maintaining

General Manager,
Olefins & Derivatives
Business Unit

I leave things up to teammembers first, elicit theiropinions, and then work
together to find the bestsolutions and direction.

TG

ML

MakotoTakedaAlways listen to the concerns ofteam members, find solutions
together, and ensure no one feels
alone! (cheerful R&D environment
where everyone is equal)ML

American Football head coach
type: I believe in a unified
team spirit and the skill of my“players.”

Hiroshi
Adachi

General Manager,
Basic Chemicals
Business Unit

I want to be a leader who canmaximize team strength whileleveraging individuality.

Satoshi Hara
General Manager,
Mobility Business
Headquarters

General Manager,
Device Solutions
Business Unit

ML

MasatoFukushima

Chief Technology Officer(CTO)“Frontline first”: I want shareconcerns, stay close to thefrontline, and always move
forward.

Not exactly the image of an
ideal leader, but my motto is
to cry together and laughtogether.

Hirotsugu
FukudaNaobumi
ShimpoChief Operations, Manufacturingand Engineering Officer(CMEO)
Chief Quality Officer(CQO)

General Manager,
Hard Disk Business Unit

ML

Symphonic type: I want tochange society with a team ofdiverse members who areconnected by the sameaspirations.

I want to be a leader who canspeed up tasks to achieve ourlong-term vision.

ML

César
Castiñeira

General Manager,
Graphite Business Unit

I aspire to lead, influence, andfinally transform others
through example, integrity,
humility, vision, and hard
work.

Team building with FFS theory ~Case study of the CFO organization~

ML

Naobumi
ShimpoThinking and action style

Responsibility

Yasushi
MakabeChief Human Resource
Officer(CHRO)

General Manager,
Basic Chemicals Business Unit

General Manager, Graphite Business Unit(anchor personnel)

Takafumi
Sakurada

ML

Nori Imai

César Castiñeira

Developer: Dr. Keichi Kobayashi

ANTG

I want to be a leader who
improves rules and work
environments that enable
everyone perform to their fullpotential.

Hirotsugu Fukuda
Hiroshi Adachi

ML

TG

Play both defense and offense
at will, while keeping a broad
perspective and looking at thewhole picture.

Shepherd type: I want to justlet team members roam freeand be by their side, but will letthem enjoy being lost

I aim to make quick decisions
based on information sharing,with a constant awareness ofbalance.

General Manager,
Advanced Functional
Materials Business
Headquarters

CSO/CRO

MakotoTakedaHiroyuki
Yamashita

Nami
MatsukoTomomitsu
Maoka

Chief Strategy Officer(CSO)
Chief Risk Management Officer(CRO)

Chief Sustainability Officer(CSuO)

General Manager,
Electronics Business
Headquarters

CSuO

Hideki Somemiya

TG

Captain type: I want toencourage free and open
action among team members,
deciding the course throughthe exchange of ideas.

Responsibility

Business development

ML

Passion-sharing type: I want
to share a vision andenthusiasm, and ignite
motivation.

Chief Marketing Officer(CMO)

Scouting ahead

Responsibility

Business expansion

New market oriented

Shigeru
FujitaHideki
Somemiya

Chief Financial Officer(CFO)

I want to be a person who canensure thorough psychological safety, and a presence that
others want to support

Thinking and action styleCEO

Leading by example

TG

Chief Executive Officer(CEO)(tugboat personnel)G rowth market, market
reform oriented

Hidehito
Takahashi

Data Section(management personnel)
TargetStable markets that
contribute to profits

Thinking and action style

Steady improvement
Responsibility

Preservative
FactorBusiness improvement

We have further expanded the area of utilization from management analysis and recommended active utilization
at the organizational level since 2023. In the CFO organization, for example, workshops incorporating FFS theory
were conducted during junior training to let participants personally experience differences in team discussion
processes and outputs, and we received feedback such as “I understood the importance of diversity” and “Itseems like our work environment will become more comfortable.” There is a growing awareness that FFS is amore accessible and useful tool.
It is not about being good because one particular factor is high nor what type is superior, and we continue topromote the use of FFS theory to understand one’s own and others’ ways of thinking and actions and to build astrong team that can complement each other’s personalities.

Workshop at the CFO organization*As of July 1, 2024

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RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

2030

We are here

Overview of the Long-Term Vision

2025

Showa Denko and Hitachi Chemical were integrated to form Resonac in 2023. We see this as our second founding, and with thestated goals of the long-term vision to transform into a world class functional chemical company from Japan by 2030, we aremoving forward with our journey of value creation.
Based on the belief that sustainability is the cornerstone of its corporate strategy, Resonac has established financial andnon-financial KPIs and targets linked to material issues for sustainability and its envisioned ideal state. It has establishedstrategies for each business and function and is making progress on related initiatives.

Change society throughthe power of chemistry

PurposeMaterial Issues for
Sustainability

Gain credibility throughresponsible business
management

Strengthen co-creativity &competitiveness and createsocial value throughinnovation and business

Develop autonomous,
creative, and active humanresources and culture

2023
2022
2021

Start of “Team Takahashi”
management team

Establish a leading positionand secure strong growthpotential on a continuous
basis as a materials
manufacturer driving thehigh growth of cutting-edge
semiconductors

Portfolio reformF ocusing management resources on
semiconductor materials businessFinancial andNon-financial KPIs

Targets for 2025

Further focus!

Say & DoFinancial KPIs

Financial KPIs

Net sales

Net sales

Active investment insemiconductor growth field¥1.3 trillion
Company that cancompete on the worldstage

Company that contributes
to a sustainable global
societyCompany that develops
co-creative talent that
represents Japan’s
manufacturing industry

8.2%

Ability to train competitive
talent with shared values

Key strategies

Cultural transformation andhuman resource development

Scores of the survey on implementation of the
Purpose and Values

48% Values: 51%

1
3

Establishment of a world-classrevenue baseInnovation (technology x business model)

2
4

Improvement in Portfolio
Management
Strengthening of managementfoundation (platform)

2

Improvement of internal efficiency

Serious occupational accidents

Non-financial KGI / KPI targets thatmeasure the progress of 15 components
linked to material issues

Net D/E ratio

1.0X in a stable manner
Inculcation of Purpose and Values andcultivation of a co-creation culture

30Greenhouse gas emissions(Scope 1 + Scope 2)% reduction from the level of 2013(* 2030 target)

Serious occupational accidents

0

P83 / Material Issues and Non-financial KPIs

21

Improvement of the market
environment and capitalization ofopportunities

Greenhouse gas emissions(Scope 1 + Scope 2)4,226 kt-CO

ROIC

10% over the medium to long term

1.00

Purpose:Financial KPIs

20%

Acceleration of co-creative
innovation

Net D/E ratio

Capability to create innovations
and to develop new businesses¥1 trillion

EBITDA margin

0.5%

World-class competitivenessand profitability

Over

EBITDA margin

ROIC

Long-term vision
Ideal state

World-class
functional
chemical company
from Japan

Long-term vision(2021–2030) begins

Results in 2023

Non-financial KPIs

Resonac established

Data Section

0
Portfolio optimization

Non-financial KGI / KPI targets thatmeasure the progress of 15 components
linked to material issues
P83 / Material Issues and Non-financial KPIs

22

RESONAC REPORT 2024

Contents

Links to Resonac’s Technology and Society — History
Here we introduce some examples of value provided through technology and products by theformer Showa Denko and the former Hitachi Chemical, along with examples of co-creation bornfrom technological synergy since the two companies merged in 2023.
As a “Co-creative Chemical Company,” Resonac aims to continuously grow and improve corporate
value going forward.

1930’sEstablished Sobo Marine Products K.K. (later Nihon Iodine
K.K.) to manufacture and sell iodine in 1908. Showa
Fertilizers K.K. started production of ammonium sulfate(fertilizer) using domestic technology in 1931. Nihon ElectricalIndustries K.K.
(former Nihon Iodine
K.K.) succeeded indomestic productionof aluminum and its
industrialization in
1939. These twocompanies mergedin 1939 to form
Showa Denko K.K.

Former Showa Denko

Our Goals and Challenges

Corporate Governance Reform

Data Section

2023

Please also read the“Company History” page on
our website.

2006

Worked to facilitate use of electricity as amaterial and foster domestic technology

Who We Are

Resonacestablished2017

Key device contributing toenergy saving in all machinesthat run on electricity

Recycling steel resources with theworld’s highest level of electrodequality

Began contract manufacturing of SiC
epitaxial wafers for power devices.
Expanding their application in power
supplies for data center servers, railcar
and EV devices, etc.

Acquired SGL GE, a graphite electrode supplier, withthe aim of further global expansion.

Resonac experienced its second founding, as afunctional chemical company that operates thesemiconductor and electronic materials, mobility,
innovation enabling materials, chemicals, and otherbusinesses, and possesses a broad lineup of material
and technology offerings spanning midstream anddownstream areas.

Co-creation Case Studies

2003

Started chemical recyclingthat realizes decarbonization
and resource recycling

Contributing to further
miniaturization of
circuits with
development ofphotosensitive film

Started the plastic chemical recycling
business. Achieved 1 million cumulative
tons of plastic recycled in 2022.

Former Hitachi Chemical (Showa Denko Materials)
1912

1998

Achieving improved charging
and energy efficiency ofelectronic devices and theirminiaturization

1992

Started research into insulating varnish
essential for electronic goods aiming atdomestic production

Contributed to higher density ofsemiconductors that raise thereliability of electronic devices

The company relied on imported insulating varnish formotors at the time, so it started research and succeededin producing it domestically in 1914.

Started sale of reflow-resistance epoxy
molding compounds, which prevent cracks
in semiconductor molding compounds
caused by heat.

1955

Enabled mass production of electronic
circuits, a key contributor to the popularization of commercial television.
MCL, copper clad laminates for printed circuitboards, contributed to the realization of mass
production of electronic circuits using the same
principles of printing.

Started mass production of anodematerials for lithium-ion batteries that
improves charging efficiency.

2001

Contributing to the future ofmobility with weight reduction
Succeeded in manufacturingmolded plastic rear door modules
for the first time in Japan, using
our resin molding technology
cultivated over many years
Contributed to improved efficiency
and reduced CO2 through lower
weight, playing an important rolein the advancement of CASE*1.

Through co-creation with the polymer
synthesis technology of the Functional
Chemicals Business Unit and the
Photosensitive Materials Business
Unit, a new photosensitive film wasdeveloped, enabling even finer anddenser printed circuit board circuits.

Expanding the analytical column “Shodex” ×“Gelpack” product lineup and strengthening
its manufacturingsystemAs a result of the merger, analyticalcolumns sold by both the former
Showa Denko and the former Hitachi
Chemical have been added toResonac’s lineup since the merger,
promoting co-creation leveraging thestrength of both companies. Aims to
improve analytical column performance by improving packing
materials (material particles).

See the following pages for more case studies:
P39 / Co-creation Case Studies in Each Business
P68 / Co-creation Case Studies Using Computational Science*1 CASE (Connected, Autonomous, Shared & Service, and Electric)

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RESONAC REPORT 2024

Contents

Who We Are

Global Business Composition / Financial and Non‐financial Highlights
EuropeNumber of employees
Number of companies

Japan

1,552
16

Number of employees
Number of companies

Number of employees
Number of companies

1,419,635 1,392,621

1,500,000

1,000,000

906,454

150,000

1,288,869
100,000

973,700

120,79813.3

15

87,1986.1

50,0001061,726
4.4(19,449)

500,000

Net sales¥101.8 billion¥607.1 billion¥98.6 billion

Composition

Composition

Composition

7.9%

0

2019

2021

2022

2023

46,75050,00040,000(5)(50,000)(Year)

R&D expenditures (Millions of yen)
Ratio of R&D expenditures to sales (%)

7.7%

47.1%

2020

2019

47,13597,726

100,000
6.00

3.38

3.29

3.53

3.31

Asia
Number of employees
employees
Number of companies
companies

China

69,05278,647
68,64380,0005,648
30

Number of employees
employees
Number of companies
companies

Net sales¥266.4 billion
Composition

20.7%

3,049
21

Number of employees
Number of companies

Net sales¥174.2 billion
Composition

13.5%

Net sales¥40.7 billion

4.00

60,00040,000

0

2020

2021

2022

2023

438
4

107,074
96,63392,516
91,9640

2019

26,054

2021

2022

2023

Resonac (non-consolidated) andformer Showa Denko subsidiaries(in and outside Japan)

20.0

33,68430,0002020(Year)

Ratio of female managers (%)

40,00033,908(Year)

50,21637,704(Year)

Number of employees (persons)

Other regions

2023

20,000

0

2019

2022

2.00

2.27

10,0002021

120,000
8.00

42,697

34,37920,6052020

Capital expenditures (Millions of yen)
Depreciation and amortization (Millions of yen)

30,00020,000

0

(0.3)

(2.0)

Net sales

5(3,764)0

Net sales

Data Section

Operating income (Millions of yen)
Ratio of operating income (loss) to sales (%)

Net sales (Millions of yen)

1,229
8

Corporate Governance Reform

Resonac made former Hitachi Chemical a consolidated subsidiary, and started on July 1, 2020 to incorporate
Hitachi Chemical’s sales figures and income/losses into its consolidated financial statements.

North America

11,92424

Our Goals and Challenges

25,80315.0

23,84020,00010.0

10,000

5.0

0

7.1

7.1

7.3

2019

2020

2021

Consolidated

12.6

12.4

2022

2023 (Year)

0

2019

2020

2021

2022

2023

(Year)

Composition

3.2%

Ratio of employees working outside Japan (%)

Greenhouse gas emissions (Scope1+Scope2; kt-CO )
2

100.0

5,000

4,657

4,266

4,483

4,360

4,226

2021

2022

2023

4,000

75.0

54.5

54.6

51.2

50.8

50.0

3,000

50.0
2,000

Semiconductor and Electronic Materials

Mobility

Innovation Enabling Materials

Chemicals

Others

25.0
1,000

0

0

2019

2020

2021

2022

2023

(Year)

20192020(Year)

P131 / Consolidated 11-Year Summary

25

26

RESONAC REPORT 2024

Contents

Overview of Resonac’s Business

Who We Are

Our Goals and Challenges

Business portfolio
categories andinvestment policy

Please also read the“Products” page on our
website.

Corporate Governance Reform

Data Section

Core Growthbusinesses

Growth investment appropriate formarket expansion and sales expansion

Fundamental
Technologies
Stable Earnings
businesses

Investment within the scope of
depreciation and amortization centering
on investment for maintenance, BCP, andprofit improvement

Next-Generation Upfront investment to ensure sales
potential in addition to market expansion
businesses

Fiscal 2023

Semiconductor and Electronic Materials
Net sales

Operating income¥338.1 billion ¥(9.4 billion)

Mobility
Net sales

Innovation Enabling Materials
Operating income

Net sales¥216.1 billion ¥5.4 billion¥93.0 billion

Operating income¥7.9 billion

Chemicals
Net sales

Operating income¥516.3 billion ¥7.7 billion

Portfolio attributesS emiconductor Materials (front-end/back-end processes)
Device Solutions (Hard disk media)
Device Solutions (SiC epitaxial wafers)

EBITDA margin(2025 target)

30% or more

Automotive Products
Lithium-ion Battery Materials
Aluminum Specialty Components

EBITDA margin(2025 target)

EBITDA margin(2025 target)

Ceramics
Functional Chemicals (resins, etc.)
Coating Materials

20% or more

15% or more

EBITDA margin(2025 target)

Olefins and Derivatives
Basic Chemicals
Graphite Electrodes

15% or more

CMP slurry

Epoxy molding
compounds

Copper clad laminates

Resin rear door
modules

Powdered metal
products

Disk brake pads

Electrical insulating
varnishes

Pin fins

Coating materials

Dry ice

Sodium hypochlorite

Ammonia

High purity gases, etc.

SiC epitaxial wafers

Hard disk media

VGCF high-crystalline,
high-purity carbon
nanotube

Anode materials forlithium-ion batteries

Aluminum radiators

Titanium oxide formultilayer ceramic
capacitors

Resins for color filters

Functional resins andmonomers

Polypropylene

Graphite electrodes

Biostimulant material
KROPICOResonac’s technologies and products are used in various aspects of our daily lives

Wind/solar power generation

27

Data centers

Wearable devices

Vehicles, EVs, mobility

Recycling (steel, plastics, etc.)

Fertilizer

PCs, smartphones

Plastic bottles, TVs

Steelworks, power generation plants

Cooling, tap water28

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

For example...

Change Society through the Powerof Chemistry

Contribute to the sustainable development of global society by creating functions required of the times as an advanced material partner

Harmony with the global environment

Happiness and prosperity of people

Plastic has made our lives richer and more convenient. While its easy-touse nature makes it an ideal material for disposable products, most ends up
in the sea. Our chemical recycling technology can break down marine
plastic waste that poses a threat to the marine ecosystem to the molecularlevel, and convert it into recyclable resources of hydrogen and carbon
dioxide gas.

The advancement of semiconductors has enabled AI to reach a practicallevel, enriching our lives in many aspects including logistics, smart farming,
demand forecasting, finance/insurance, office work, automated driving,
shopping, and beauty. We seek to extend our effort to solutions to social
issues including increased food production in response to environmental
problems and food and water shortages, and the advancement of the
medical field in response to the declining birthrate and aging population.

P92 / Kawasaki Plastic Chemical Recycling BusinessResults in 2023

Number of patentfilings (in Japan)
Number of patentfilings (outside Japan)
Percentage of patents
related to SDGs

671
1,602
29.5%

”Co-creative Chemical Company”
Provision of customer value by identifying downstream customer needs
and producing innovation through the adaptation of multiple technologies
as made possible by possessing a broad lineup of material and technology
offerings spanning midstream and downstream areas

Rawmaterials

Processing,molding,
assembly

Compositematerials

Evaluation,
simulation

DialogueMarketSemiconductormaterials

Results in 2023

Chemistry toSynthesize

1,526,000 kl

Midstream materials technologies
to promote Fundamental
Technologies/ Materials
businesses that lead to various
businesses¥11,225 million(As of March 2024)

Chemistry to
Formulate
Function design technologies topromote downstream application
business

Number of employees

Identificationof customer
needs

Value
provision

SiC(As of December 31, 2023)

Lithium-ion
batterymaterials

Aluminumspecialty
components

Innovation Enabling Materials

Resinmaterials

Coating

Ceramics

Chemicals

Combination of broad-ranging technologies to create innovation

102

ValuesPassionate & Results-Driven

Foundation

Agile & Flexible

SafetyCompany that develops
co-creative talent that
represents Japan’s
manufacturing industry

2030 targets

Develop corporate culture & human resources
conducive to co-creation
Co-creation with stakeholders(As of December 2023)

Capability to create
innovations and to develop
new businesses

Ability to train competitive
talent with co-creation values

Total number of locations
worldwide(Number of consolidated
subsidiaries)

World-class competitivenessand profitability

Company that contributes
to a sustainable global
society

Automotive
products

Functional
chemicals

23,84029

Hard disk media

Mobility

Energy consumption(crude oil equivalent)

World-class Functional
Chemical Company
Company that can compete
on the world stage

Advanced materials partner for one-stop solutions

Environmental capital
expenditures

Develop autonomous,
creative, and active
human resources andcultureSemiconductor and Electronic Materials

Downstream accessBase of long-term customers
and trusting relations built
through co-creation with arange of stakeholders

Gain credibility throughresponsible business
management

Ideal State(long-term vision)

Focus our investment
on this segment

MarketMaterial technologies, functionengineering technologies,
assessment technologies, anda wealth of expertise related toorganic chemicals, inorganic
chemicals, and aluminum

P33 / Roundtable Conversation “Earning Power”

Value creation model:

Chemistry to Think

Source of value
creation

Evaluation technologies andSimulations

Strengthen cocreativity &competitiveness andcreate social value
through innovation andbusiness

Data Section

Future we seek to realize through the power of chemistry

Value Creation Process

Material issues

Corporate Governance Reform

Olefins andDerivatives

Open Minds & Open Connections

Compliance

Solid Vision & Solid Integrity

Basic chemicals

Graphiteelectrodes

TSR: Aim to rank among
the chemicals industry’s top

25%

over
the medium to long term
Achieving Sustainability Vision
30

RESONAC REPORT 2024

Contents

Co-creation with Stakeholders
In order to realize our Purpose and create and provide new value to society,
Resonac is committed to co-creation with our employees, customers,
shareholders and investors, local communities and governments, business
partners, and the next generation and students. By implementing activities
from an inclusive perspective and reflecting constructive dialogue in management, we aim to achieve further growth as a Co-creative Chemical
Company.

60

Data Section

Leading JOINT2, a consortium aimed at developing next-generation
semiconductor packaging technology
JOINT2 was launched by 12 participating companies in 2021 with the aim of developing
next-generation semiconductor packaging and evaluation technologies through collaboration with other companies. The combination of the member companies’ materials andequipment will allow materials and equipment to be evaluated under conditions similar
to the semiconductor evaluation tests conducted by customers, thereby helping toP.39 / Front-end / Back-end Semiconductor Materials
shorten development times.

Customers

See P.15 for the detail of
Global award “AHA!”

Purpose(2023)

See here for details on
Sustainability Meeting

Corporate Governance Reform

Connect with a diverse range of people andco-create optimal solutions

Create social value by resolving social issues

Investor dialogue
by the management

P.58 / Communication with Shareholders and Investors

Our Goals and Challenges“Happiness andprosperity of people”“Harmony with the global
environment”

Shareholders
and investors
We create forums for dialogue on human capital management, evolving our governance, and other topics, throughwhich we openly deliver the current state of our Company,
both the good and the bad. This meeting also facilitates
dialogue with investors.

Who We Are

Changesociety
through thepower of chemistryBusiness
partners

REBLUC (Resonac Blue Creators)

Employees

REBLUC is a purpose-driven thinking community that wasstarted to elicit mutual understanding, where the passions
and sense of purpose of each and every employee overlap.
From April 2024, we also started joint research with JAXA
on a cosmic materials project started by REBLUC.
P.67 for details on joint research with JAXA

Number of participants

66

Resonac Pride Award
In 2023, we launched a system to honor employees and teams
that embody our Purpose and Values through their involvement in social contribution, cultural, sporting, and other activities, both within and outside the company. We have received
nominations for various activities carried out in Japan andoverseas.

We conduct questionnaire surveys of the roughly 450 suppliers we do business witheach year, and engage in dialogue based on the results. The survey results and supplier
feedback are also reported to the management and reflected in procurement measures.
P.105 / Sustainable Procurement

Community andgovernments

Number of entries

115

Next generationand students

See P.89 for co-creation initiativein Omachi City, Nagano Prefecture

31

Implementation of awareness activities forplastic chemical recycling (KPR)

Participation in the Ministry of the Environment’s “Decarbonization ×
Reconstruction Town Development Platform”

In cooperation with the elementary schools attended
by the children of our employees, we implemented
activities in which we transported plastic waste
collected at the schools to the Kawasaki Plant forrecycling as part of our SDGs activities. We communicate the importance of a circular economy to thesechildren.

In the 12 municipalities of Fukushima Prefecture affected by the Great East Japan
Earthquake, we are participating in a long-term partnership aimed at achieving
both decarbonization and reconstruction. We have three production and logistics
bases in Fukushima Prefecture. As such, we will continue to contribute to thereconstruction of disaster-stricken areas, such as by participating in the exchange
of information and the establishment of networks to realize the decarbonization
and reconstruction of these communities, as well as participating in individual
themes that we can contribute to.
WEB

Click here for more information on our participation in the Ministry of theEnvironment’s Decarbonization × Reconstruction Town Development Platform(in Japanese only)

Creating new value through joint research anddevelopment with students of the Tokyo Institute ofTechnology
Students at the Tokyo Institute of Technology and our engineers are
conducting joint research into fields such as new materials forsemiconductors. With computational science utilizing AI and othertechnologies becoming increasingly important in improving theefficiency of material development, we will work to create newvalue through close communication with students.

Studying our integrated reports at university seminars
as a form of industry-academia collaboration education
We held seminars studying our integrated reports at Hitotsubashi
University, Meiji University, and Tokyo Metropolitan University. In
addition to promoting an understanding of Resonac’s views, reality
and our value creation process, the feedback obtained from Gen Z
students is reflected in our sustainability initiatives and disclosure.

32

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

02-1 Earning Power

Resonac’s Earning Power:
Roadmap to the Maximization— “Steering & Focusing” toward
Semiconductor Materials Business

Hideki
Somemiya
Chief Financial Officer (CFO)

Hiroyuki
Yamashita

Tomomitsu
Maoka

General Manager, Electronics
Business Headquarters

Chief Strategy Officer / Chief Risk
Management Officer (CSO/CRO)

Resonac has chosen to advance its portfolio reform and steer toward semiconductor materials business.
General Manager of Electronics Business Headquarters, CFO, and CSO/CRO share their views from their respective
positions and roles, on why this move is necessary, the revenue generation strategy, and perceived risks as well as
their determination to overcome those risks.

Focusing on Semiconductor Materials and Portfolio
Reformenvironment and internal factors, I don’t think it would reallybe fair to say that we have handled all the essential projects
at a drastic speed. There are still a lot of things left for us to

Somemiya: First off, I would like to talk about portfolio reformtake care of. For example, we are yet to complete our petro-with respect to creating overall “earning power.” We arechemical business reorganization or our deliberations regard-

resolute in our desire to really focus our efforts on our coreing strategic options for Life Science business.

growth business of semiconductor materials. I believe that the
progress we have made on our portfolio reform over the last
two and a half years since 2022, when our companies effective-

Portfolio management policy

ly merged, demonstrates this resolve. We have steered awayfrom the old management approach by the former Showa

Fitness forstrategy

Denko, where the role and purpose of each business was
unclear. We have categorized our business portfolio, based on

02

Stable Earnings, Fundamental Technologies/Materials, and
Next-Generation businesses, clearly defining roles and

Our Goals and Challenges
We delve into the themes of business, technology and people, and sustainability from theperspective of generating profits.

33

Roundtable Conversation “Earning Power”

47

Innovation Enabling Materials

39(Front-end / Back-end
Business Strategies
Semiconductor Materials / Hard
Semiconductor and Electronic Materials disk media / SiC epitaxial wafers)

49

Chemicals segments

Mobility

55

45
33

business attributes, into the four categories of Core Growth,(Olefins and Derivatives / Basic Chemicals / Graphite electrodes)

requirements for each. There have been many changes in our

Optimization of the portfolio
through continuous revisionand replacementbusiness environment in the intervening time, but we have
speedily carried out structural reforms and implemented
measures to ensure that each business can perform its part.
Profitability andcapital efficiency

Best owner

P55 / Financial and Capital Strategies

Maoka: Based on our portfolio management strategy, we have
performed business divestitures where appropriate. Over the
past two and a half years, we have sold off a total of nine

Somemiya: I think it is also important to look at Resonac’sbusinesses, but when you take into account the market

portfolio reforms and the value of its portfolio itself in terms

Financial and Capital Strategies
34

RESONAC REPORT 2024

Contents

Our Goals and Challenges

Corporate Governance Reform

Data Sectionof how they are evaluated by the capital market. Since fiscal

society and customers. From the perspective of actively

eventually becomes a commodity, so what I think will be truly

Yamashita: We also expect to see an increase in the volume of2022, we have clearly defined our Semiconductor and Elec-creating a collaborative consortium and leading the industry, I

important is how to build a development structure that canmaterial demanded by customers. Substrates will become

tronic Materials Segment, one of our segments for disclosure,

feel the importance of clearly communicating with stakehold-keep producing new products. Specifically, I think we need tolarger as manufacturers shift to making chiplets. This will

and we have reorganized our disclosure segments so that weers, as you two discussed.

speedily identify the needs of society and our customers,

result in an increase in the surface area of copper cladcan share our equity story even more clearly. The combination

Maoka: So, reflecting again on why we have gone with semi-reflect those in our development, and bring high quality

laminate boards. Due to the issue of substrate warping,of the product and technology innovations of your Businessconductors, I think it is because our Purpose is to “change

products to market faster than any other company.

substrates will also become thicker. The more layers used in

Headquarters led by you, Mr. Yamashita, your media strate-society through the power of chemistry,” and with Resonac’s

Maoka: In terms of customer needs, I feel like there is a

3D-NANDs, the more CMP slurry will be used. As the number

gies, Mr. Maoka, and the appeals that the IR team and I aretechnology, the power of chemistry, as our core, we arevoracious appetite for AI, a technology that will change theof HBM chip layers rises, the amount of NCF that is used will

making to investors are finally starting to create a greater

capable of generating profits by applying that to semiconduc-world. Hardware capabilities are not keeping up with thealso rise. In this way, the amount of our material that is usedrecognition that Resonac is not simply a chemical manufactur-

tor applications. Doing so requires outlets other than justgrowing capabilities of software. Hardware is not satisfying

will grow faster than the amount of chips that are produced.

er or a graphite electrode company, but a company that makes

semiconductor materials, fundamental technologies, andthe needs of those wishing to roll out AI services—neither inThis means that, in addition to development, it will also be

semiconductor materials, primarily for back-end processes. It

shared infrastructure such as the Research Center for Compu-

terms of volume or quality. GAFAM, so-called hyperscalers,

important to prepare a supply system that can meet growing

seems that our portfolio reforms are beginning to be accepted

tational Science and Informatics.

are moving to create their own hardware, such as their own

customer demand. Customers are expressing concerns about

by those outside the company.

Yamashita: Semiconductors are said to be the staple of theGPUs and CPUs. The industry’s tides are changing.

the ability for supply to keep up with the dramatic rise in demand

industry, and there will be demand not only from AI, which is

Yamashita: In that sense, I see new technological processes

for AI-related products. That is why we think it is vital that we

P58 / Communication with Shareholders and Investors

Mr. Maoka mentioned that there

currently very strong, but also frombeing shaped, starting in the U.S. I

take the lead in increasing ourare things we still have to take carevarious industries such as IoT,

think our strategy of setting up a

production capacity. Specifically, weof. One of those is a partial spin-off

medical care, and autonomous

Packaging Solution Center (PSC) inare considering increasing ourof our petrochemical business,

driving. We cannot go wrong betting

Silicon Valley following the setup in

production capabilities for NCF andwhich we have decided to begin

on semiconductor materials for the

Kawasaki City and launching theTIM (thermal conductive sheets),

exploring this year. Our goal is totime being. Generally, the semicon-

US-JOINT consortium, enables us

materials used in AI-related devices,

promote accurate market evalua-ductor market is said to have ato rapidly identify our customers’

which have recently been seeing
tremendous growth.

tions of our semiconductor materials

CAGR of 6 to 7%. I believe that weneeds. Through the JOINT2 consor-

and our petrochemical businesses,

already have a product lineup andtium at the PSC (Kawasaki City) thateach of which has its own distinct

position that will produce growth

we are already leading as well as

it is important to hire and train

business characteristics. Althoughthat surpasses that.

the TIE and SATAS consortia thathuman resources to handle thiswe recognize the need to assign

Maoka: Unlike the equipment andwe have decided to join, we willdevelopment and production. Major

some resources to making thesedevice industry which has many big

co-create with other companies,

At the same time, we also believe

semiconductor manufacturers arebusiness portfolio reforms, we will assign resources to theplayers, the semiconductor materials industry is spread out

achieving what would have been difficult if not impossible on

strategic development of our semiconductor materials businessbetween many small companies. Among those, we are the first

our own. With respect to competition on the information front,

to take steps to recruit new personnel while preventing the loss

at the earliest possible time.

to go out and try to really expand our scale, and I think we canwe believe that these initiatives will prove advantageous toof our personnel at the same time. By leveraging the locations

lead the restructuring of the industry.

us, as we will receive an overwhelming amount of informationof our Stage for Co-creation (Yokohama) and our Packaging

from our customers and our co-creation partners.

Solution Center (Kawasaki), two of our research and develop-

P05 / Message from the CEO

Maoka: I think it is safe to say that we have managed toestablish a much stronger image of Resonac as a semiconductor materials manufacturer than we had in the past. At thesame time, I don’t think we have reached the same level ofrecognition as major semiconductor equipment manufactures

Co-creation: Semiconductor Materials Business
Strategies for Achieving Sustained Successfor example. We are still on our way to becoming a company

35

Who We AreP40 / P articipation in TIE, the Cutting-edge Semiconductor Consortium, andEstablishment of US-JOINT

setting up research and development sites in Japan, so we needment sites, and widely showcasing the results of their R&D
activities, we will recruit diverse personnel and focus on

Maoka: Our co-creation activities through PSC and JOINT2 candeveloping them.

also be seen as proactive efforts for making us the de facto

Maoka: I think that is a key point. Device manufacturers arewhose name immediately gives away where we are from andYamashita: I would now like to delve a little deeper into the

choice. Being the first choice is important, due to switchingheadhunting personnel from material manufacturers likewhat we do. That is where we truly need to be, and I think it“earning power” of the semiconductor materials business. I

costs. Through our consortium activities, I want to go from aourselves and from equipment manufacturers. This is not justhappening in Japan, but across the world. We need to redefine

will also help reduce conglomerate discounting.

think an absolutely vital part of our strategy will be to achieve

situation in which each company is making their own separate

Yamashita: There is a great deal of interest in semiconductorsustained success with advanced semiconductor materials. To

specifications to one in which they can feel confident knowing

who we are competing against in recruiting personnel, and wematerials, and technological progress is rapid. It is not easy

realize an EBITDA margin of 30% or more in 2025, we need tothat they will be able to meet market demands by using ourneed to develop personnel retention measures.

for one company alone to continuously meet the needs ofmanufacture products with high added value. Every productmaterials.



P111 / Companywide Key Risks Themes

36

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Somemiya: Now that Resonac is finally gaining recognition as

we need to think about how to fill in those missing pieces if wereduce production lead times and how we should devise ways

will share information about these efforts with society asa semiconductor brand, I think another urgent issue is to

are to aim to achieve a fairly large market share. We must also

to maintain inventory.

appropriate.

I think that we also need to review and revise our contracts

establish a stock-based compensation system in line with Mr.

anticipate the introduction of new technologies that could

Yamashita’s strategy.

present a threat to us and think about future approaches thatwith customers. We need to change the dynamic which has

Yamashita: The semiconductor industry used to consist of

are not just extensions of our current approach.

been so common until now in which material manufacturers
are responsible for absorbing all the damage caused by thedevice manufacturers at the top, equipment manufacturers
underneath, and then material manufacturers, right at thebottom. This structure may have been the result of the fact

Recognizing and Dealing with Risks

that the materials used in back-end processes had little

P95 / Climate Change Strategies

WEB

Participation in Semiconductor Climate Consortium (SCC)WEB

Resonac Starts to Consider Recycling Plastic Waste Emitted
from Semiconductor Manufacturing Process and Reusing It as
Gases for Semiconductor Manufacturing

deterioration of the semiconductor production cycle.

Somemiya: The capital market also has high expectations for

Maoka: On the other hand, there is an aspect of a businesscarbon neutrality investment, so we can’t afford to hesitate.

cycle that arises because it is a growth industry, and when

We need to work hard to leverage subsidies and sustainablefinance. We will consider every method that is open to us,

impact on the performance of semiconductors in the past.

Maoka: Turning to geopolitical risks, there has been a recent

market participants simultaneously hold inventories to take

However, technological innovations in back-end processes aretrend of building domestic semiconductor plants, and I would

advantage of growth opportunities, it can lead to a recession

while also taking into consideration balancing carbon neutrali-

now making major contributions to improving semiconductor

like for us to take a measured and careful look at whether thisall at once. A recent example is when the semiconductor

ty investment with our core business.

performance.

would be effective for achieving economic security whenindustry suffered a tremendous slump from 2022 to 2023 due

Maoka: In the semiconductor industry, carbon neutrality

Maoka: There is now this desire to spur innovation in semicon-

taking entire supply chains into consideration. We then needto factors such as the data center bubble. In the past, semicon-

business opportunities and risks have been a hot topic asductor back-end processes, but there are many problems thatto think about what measures Resonac should implement.

ductors were almost exclusively for computers and homesustainability issues. In addition to that, there has been a lot ofcannot really be addressed using the conventional approach

There is an especially high likelihood of U.S. and Chinese

appliances, but now they are used

global discussion about the risksof achieving front-end process innovation through devices.

supply chains becoming decoupled. This is probably not ain smartphones, servers, IoT

presented by the forthcoming PFAS

Packages themselves have become extremely small, so

matter of simply building plants in the U.S. This will require

devices, and more. The range of

regulations. There is quite a gap

multiple problems, such as heat, vibration, and electricalcareful handling, with thorough consideration for the cost of

applications for semiconductors

between Japan and other countries

properties, must be tackled together. There are high hopes

business operation.

has grown, so I think that thein the level of focus being paid tothat materials will be able to address all of these problems at

Yamashita: We need to determine how much these risks will

industry will move away from thethis issue, so one task that will needonce. We see this as an opportunity for material manufactur-

manifest themselves. Various customers are stepping up

extreme changes we have seen

to be addressed is how to reduce
this gap.

ers, such as Resonac, to gain a greater presence.

their requests regarding supply chains, such as their de-with the silicon cycle, instead

Somemiya: We supply a diverse lineup of back-end process

mands for BCP measures. The effects of this U.S.-China

gradually stabilizing.

materials, and it is becoming clear that we are increasingly

decoupling are emerging, and we are engaging in scenario

Yamashita: Lastly, regarding

being recognized as a leader in the back-end process area,planning in preparation for unexpected situations. That said,

sustainability, demands fromYamashita: It is true that, in terms

including the JOINT2 consortium. The US-JOINT consortium

if these scenarios occur, I think it will also test the abilities ofimportant customers for carbonof overall investment, we have been

you discussed earlier, Mr. Yamashita, are being supported andthose in the field to take action based on the current

neutrality (CN, hereinafter) havejoined by numerous companies, including TOK*1 and Namics*2.

circumstances.

been rapidly increasing and intensifying, making it an unavoid-

tor materials field. While we were unable to generate cash in

By having Resonac present a future roadmap for package

Somemiya: The topic of geopolitical risk comes up in dia-able issue. For example, when our customers apply for SBTi,

2023, we are fully aware of the high expectations placed on us,

designs through PSC and JOINT initiatives, material manufac-

logues with investors, too. There are also often questions

they require their suppliers including Resonac to reduce GHG

and we are committed to fulfilling our accountability byensuring that this business generates tangible results. I feel

P87 / C ross-talk Between the CSuO andOn-site Staff in Charge

focusing heavily on the semiconduc-turers, including Resonac, will be able to add further value

about volatility in the semiconductor cycle. When market

emission to meet SBTi request. By acknowledging our custom-

proportionate not only to the volume and the number ofconditions are deteriorating, we need to minimize the damage

ers’ commitment and viewing CN investments as growthstrongly that I must ask the members of the Electronics

products they supply, but also to the technology they use. I

it causes to us. When market conditions are improving, weinvestments, I feel that the time when such investments will

Business what we should do essentially without being

believe that over the coming decade, material manufacturers

need to follow the market on that upward trajectory. So welead to business continuity and expansion is surprisingly close.

complacent.

will create a new era in which they can provide even greaterneed to further strengthen our resilient structure.

added value.

Yamashita: That is why we are working on ensuring that ourThis will also strengthen our presence in the industry, andwe need to keep this in mind as we carry out initiatives as one

I believe we should take the reins in the back-end pro-sales force identifies what is happening on the customer sideof the founding members of SEMI’s Semiconductor Climate

cess-focused technological innovation that is currently inin a timely fashion, considers multiple scenarios based on

Consortium. We also carry out initiatives we are uniquely

progress. To do that, we need to keep an eye on overall trends,

minor changes in ordering information, and shares the results

positioned to conduct, including deliberations regarding

taking a bird’s eye view of the industry as a whole, in addition

with production sites without delay. There is only so much you

resource circulation by using our proprietary chemical

to the areas focused on by those in the field. We recognize thatcan do to curb volatility on your own. We are working torecycling technologies to convert waste from our production

there are some “missing pieces” with respect to materials, andimprove manufacturing SCM, including how much we canprocesses into hydrogen and carbon dioxide resources. We*1 TOKYO OHKA KOGYO CO., LTD.
*2 NAMICS Corporation

37

38

RESONAC REPORT 2024

Contents

Who We Are

Semiconductor and Electronic Materials

Front-end / Back-end Semiconductor Materials

Please visit our website for
information on our key
contributions to social issues
through our business.

Through our strengths, which include a wide range of products and co-creation with industry peers, we are able
to quickly catch up with changes in the industry to create high-value-added products that meet customer needs.
This contributes to continuous business expansion, which drives Resonac’s growth into a world-class functional
chemical company.

Because we have a lineup of products that cover a wide range of materials from front-end to back-end semiconductor materials and weown several products that command the top market share, we can anticipate growth exceeding the increase in the number of chips as thenumber of components used rises with the higher integration of semiconductors
With data volume increasing as demand for semiconductors for AI rises, the semiconductor design process is becoming even moresophisticated and complex. Against this backdrop, our strong ability to propose back-end materials enables us to respond flexibly tocustomer requirements
Japan and the U.S. lead JOINT, a consortium of material, equipment, and substrate manufacturers aimed at establishing next-generation
semiconductor packaging and evaluation technologies. We use our expansive network to quickly grasp changes and create high-value-added products that meet the needs of our customers

Front-end process (wafer process)Deposition

Etching

Lithography

General Manager, Electronics Business Headquarters

Supply advanced semiconductor materials to support the advancement of the digital society, such as the
rapidly growing AI demand, and realize a sustainable society by contributing to energy conservation andreducing environmental impacts

Semiconductor materials: Front-end¥74.6 billion

Consolidated¥1,288.9
billionSemiconductor materials: Back-end¥162.5 billion

P27 / Overview of Resonac’s Business

39

High purity
gases

Chemicalmechanicalpolishing (CMP)

Ceria CMP
slurryResults in 2023
Net sales and income decreased year-onyear due to continued weakness in thesemiconductor market from the second halfof 2022
Adopted by the Ministry of Economy, Tradeand Industry’s “Project to Support theAdvancement of Supply Chains using Digital
Technology”
Participated in the Texas Institute forElectronics (TIE), a U.S.-based consortiumfor semiconductor innovation
Completed the introduction of our domestic
SCM reinforcement system for major
products
Started preparations for the establishmentof an R&D base in Silicon Valley, U.S.,a hub
for prominent semiconductor
manufacturers

Plans for 2024
Strengthen the revenue base by revamping
our product portfolio and working for
speedy fruition of our investment efforts toincrease production
Decide on investments to increase domestic
production of new materials such as NCF
insulating adhesive films for HBM and TIM
heat dissipation sheets for 2.xD packages
Implement specific measures against
climate change and geopolitical risks
Strengthen and implement our global R&D
and key account strategies, and marketing
capabilities
Place further focus on fostering ourorganizational culture and developing
human resources through workplaceenvironment development and workshops,
etc.
Introduction of global supply chain
management enhancement system

Buffer coating
Rewiring process

Photosensitive
insulating
materials (PID)

Back-end processes (packaging)
Dicing

No.

1

No.

1

No.

1

Si interposers

HBM
Mounting

Non-conductive
die attach film
(NCF)

*HDM share

For etching

Driving the industry and become a leader in co-creation as the No. 1 manufacturer of back-end semiconductor materials
It has become apparent that there is a limit to the increase in density of integrated circuits (IC) in front-end process. As such, in recent
years, attention has been turning to moves aiming for higher integration through the evolution of back-end technologies, such as chipletsand 3D mounting. This is also an opportunity for us as the No. 1 global supplier of back-end materials. We will thus strive to drive thesemiconductor materials industry as a leader in co-creation.
Strengthening product capabilities centered on advanced semiconductor materials
New materials are being developed and adopted amid expectations for packages for next-generation semiconductors, including AI semiconductors, to witness dramatic growth. The adoption of our back-end products is also on the rise, and we aim to gain an overwhelming
position in next-generation semiconductors by strengthening our product capabilities.
Building a robust supply chain management system immune to geopolitical risks
Various countries are rolling out initiatives and regulations to secure semiconductors and establish supply chains from the standpoint of
economic security. Amid geopolitical risks such as soaring raw material, energy, and logistics costs and supply chain disruptions, we areworking to further strengthen our supply chain management system.

¥338.1 billion

High-purity
solvents

Global share

Issues to Be Addressed

Net sales for Semiconductor andElectronic Materials segment:

Data Section

Resonac products for semiconductor manufacturing processes

Hiroyuki Yamashita

Fiscal 2023 Net Sales

Corporate Governance Reform

Resonac’s Strengths

Business Strategies

Vision for
the future(2030)

Our Goals and Challenges

Primary
connection
Underfill

Underfill(CUF/MUF)

Secondaryconnection
Substrate mounting

Molding Dicing

Moldingcompounds(EMC)

Heat sink
mounting

ThermalInterface
Material (TIM)

Package substrate manufacturing
Core preparation
Circuit fabrication

Hole drilling
TH plating

Build-up wiring
fabrication

SolderresistSolder/copper
bump fabrication

No.
Copper cladlaminate (CCL)No.

1

For packaged
substrate

Dry film resistNo.

1

Solder resist
(SR)

No.

1

No.

2

No.

2

100%
Carbon thermal conductive
sheet for AI applications

1

For FC-BGA

Co-creation Case Study

Participation in TIE, the cutting-edge semiconductor consortium
In 2023, we became the first Japanese manufacturer and material manufacturer to participate in the
consortium of semiconductor manufacturers “Texas Institute for Electronics” (hereinafter “TIE”) basedin Texas, U.S. TIE is a non-profit organization consisting of public- and private-sector
companies that aims to advance the roadmap of cutting-edge semiconductor technology
by five years. We were invited to participate due to our strengths being recognized. By
participating in TIE, we aim to co-create with other companies and contribute to solving
problems through the research and development of cutting-edge technologies.

*The above share figures for products are based on Resonac’s estimates.
*HDM: HD Microsystems, a joint venture between Resonac and DuPont

Other case studies are available on
our website
Plan to establish a new R&D
base in Silicon Valley forsemiconductor back-end
processes
Participation in the Semiconductor Assembly Test
Automation and Standardization Research Association(SATAS)

Establishment of US-JOINT, a consortium for the developmentof next-generation semiconductor packaging technology inthe U.S.
We plan to establish a consortium in Silicon Valley, U.S., in which ten materials- and equipment-related companies from Japan and the U.S.
will collaborate on next-generation semiconductor packaging. In next-generation semiconductors, packaging technology for back-end
processes is gaining attention, resulting in the rapid advancement of packaging technologies such as 2.5D and 3D.
Through US-JOINT, Resonac will co-create with customers and participating companies to verify the latest semiconductor package
concepts and accelerate the R&D of materials and evaluation/mounting technologies by gaining insight into market needs in real time.
40

RESONAC REPORT 2024

Contents

Please visit our website for informationon our key contributions to social issues
through our business.

Hard Disk MediaWe will increase capacity and improve quality of HDD* s by developing and launching the latest technologies
ahead of our industry peers. In doing so, we will enable HDDs to maintain their superiority in large-capacity data
storage for data centers, thereby contributing to the development of a highly digitalized society.
Yasushi Makabe

General Manager, Hard Disk Business Unit

Contribution to storage demand that supports increased data traffic volume and transmission speed as alarge-capacity media technology leader
Contribution to a sustainable society by reducing GHG emissions in production processes and at customers’ data centers

Issues to Be Addressed
Maximizing HDD’s advantage over SSD*2• Through the development of our proprietary technology, achieve a thinner substrate with the aim of accelerating the increase in recording
density and increasing the number of media in the drive for MAMR*3 and HAMR*4, thereby contributing to a further increase in thedata-storage capacity of HDDs
Restructuring the earnings model to transform into a business structure capable of responding to fluctuations in demand*1 HDD : Hard Disk Drive• Speed up decision-making to respond to structural reforms and market growth*2 SSD : Solid State Drive• Respond flexibly to fluctuations in demand*3 MAMR : Microwave Assisted Magnetic Recording*4 HAMR : Heat-Assisted Magnetic Recording¥338.1 billion

Results in 2023

Plans for 2024

Carried out business restructuring (siteconsolidation and organizational downsizing) in response to the drastic fluctuationsin HDD demand, which expanded rapidly
until 2022, with the aim of speeding up
decision-making and strengthening
competitiveness ahead of anticipatedfluctuations in HDD demand down the line

Continuation of industry-leading development and mass production of world-class
HD media to lead technological innovation inmedia for large capacity near-line servers
Further increase revenue by ensuring therealization of last year’s structural reforms,
developing a production system that canswiftly respond to a demand recovery, andexpanding sales

Consolidated¥1,288.9
billion

Device Solutions

R&D Strategy Roadmap¥66.2 billion(HD media, SiC epitaxial wafers, Compound semiconductors (LEDs))
P27 / Overview of Resonac’s Business

Further rise in demand for highcapacity nearline drives• Accelerated adoption of SMR*5
technology• Effort toward productization of
HAMR
Products in 2024
Max capacity: 32 TB(2.9 TB per media)
SMR

2030
Achieve 80 TB drive

2025

2027

34 TB (SMR)
40 TB (HAMR)

37 TB (SMR)
50 TB (HAMR)

Action taken to meet customer
requirements• Differentiate our products bycombining SMR drive
technology and our media• Continue joint development for
HAMR and produce results• Strengthen development
systems at multiple bases andaccelerate development
through parallel development• Enhance reliability andmechanical characteristic
evaluation*5 SMR: Shingled Magnetic Recording

41

Advantages of HDDs

Data Section

Comparison of Manufacturing Costs between
HDDs and SSDs (per GB of storage; for data centers)

Low cost
When it comes to cost per GB of storage capacity, HDDs will continue to have asufficient cost advantage over SSDs for differentiation in the future. Maintaining
this difference is key for HDDs to maintain an overwhelming superiority in data
center applications.

1

Net sales for Semiconductor andElectronic Materials segment:

Corporate Governance Reform

HDDs remain superior to SSDs in terms of cost and energy consumption (CO2 emissions) for large-capacity data storage used in data
centers, thus continuing to play a central role in storage (our estimate)

Semiconductor and Electronic Materials

Fiscal 2023 Net Sales

Our Goals and Challenges

Resonac’s Strengths

Business Strategies

Vision for
the future(2030)Who We Are

SSD

Cost ($)

HDD

0.4$0.3200.3

Low environmental impact
Embodied CO2 per storage capacity during the lifetime of a HDD from its
manufacturing to data center operation is said to be roughly 50% less comparedto that of a SSD.
Additionally, SSDs generate more heat in data centers than HDDs. If theelectricity needed for cooling is also factored in, HDDs reduce CO2 emissions
even further.

0.2

1/15

$0.127$0.021

1/11$0.012

0.1
0

2018

$0.0661/10$0.0072023

2028 (Year)

We possess the technological capabilities to develop and mass produce the world’s most advanced media ahead of the rest of the industry
We are able to develop collaboration technology through co-creation with all three HDD customers, enabling the provision of Best Fit products
We are able to make proprietary development and improvement of our production facilities to achieve the industry’s highest level ofproductivity and production quality that our peer companies cannot imitate
We possess an integrated production system for aluminum substrates and aluminum HD media, and manufacturing technology forhigh-rigidity thin aluminum substrates
We have production sites in Japan, Singapore and Malaysia with good access to customer locations in Southeast Asia, thereby reducing
BCP-related risks
We conduct proactive recruitment and mobilization of excellent human resources from overseas, enabling the operation of a diverse andhighly internationally competitive organization

Changes in technology

Significantly contributing to data economy with
rapidly providing for markets of cutting-edge harddisk media technology
With the spread of cloud services and the increase in video content,
the amount of data generated and stored continues to increase
dramatically worldwide, and data centers to store data requirelarger-capacity hard disk drives (HDDs). Resonac is a supplier of HD
media, key components that determine the storage capacity of
HDDs. For 35 years since we started our business in the late 1980s,
we have continued to lead the world in providing and mass producing HD media while always co-creating new technologies with ourcustomers.
Resonac will continue pursuing further technological innovation
to realize higher-capacity HDDs and support the growing data
economy.
*1 LMR :Longitudinal Magnetic Recording*2 PMR :Perpendicular Magnetic Recording*3 ePMR :Energy-assisted PMR*4 AFC :Antiferromagnetically Coupled

Resonac’s revolutionary technological development in HD media
Changes in storage density

Resonac’s technological development

Storagedensity(Gbpsi)Development of PMR
media(World’s first)

100000
HAMR
10000
1000

MAMR/ePMR*3
PMR*2

Development of SMR
media(Industry’s largest storage
capacity of 2.6 TB/disk)

Development of
AFC*4 Media

100
Development of MAMR
media
(World’s first)

Development of sputtering
method to replace
conventional coating method

10

1
0.1
0.01

Technological innovation spurring
increase in record density of
HD media year after year

0.001
0.00010.00001

LMR*1

1960

1970

1980

1990

2000

2010

2020

2030 • • • • • • (Years)

NoticeIn July 2024, we transferred our hard disk media business through a company split with the aim of speeding up the decision-making of the global hard disk media business, thereby stabilizing, optimizing, and further strengthening business
operations.
42

RESONAC REPORT 2024

Contents

Semiconductor and Electronic Materials

Please visit our website for informationon our key contributions to social issues
through our business.

SiC Epitaxial Wafers

As the world’s largest independent supplier and technology leader of SiC epitaxial wafers, key materials for
improving the performance of the growing SiC power semiconductors, we will strive to provide solutions while
co-creating with customers to help realize energy conservation around the world.
Makoto Takeda

General Manager, Device Solutions Business Unit

SiC epitaxial wafer technology leader to lead the industry’s technological innovation
Proactive provision of solutions in response to more sophisticated and characterized quality requirements
Expansion of production of eight-inch (200 mm) SiC epitaxial wafers and productivity improvement tocontribute to further expansion of the SiC device market

it y

43

ic

Wafer
+
Epitaxial layer+
Devicemanufacturers

SiC devicestr

SiC epitaxial wafers

Solar power
generationec

P27 / Overview of Resonac’s Businessel¥66.2 billion

Data centersofDevice Solutionsow

SiC wafers(HD media, SiC epitaxial wafers, Compound semiconductors (LEDs))

Stable supply of electricity

Hybrid vehicles

Storagebatteries

Air conditioners

it y

As a manufacturer specialized in epitaxial wafers that does not handle SiC devices, attract device
manufacturers that manufacture wafers and epitaxial wafers in-house as customers

billionWind power
generation

Solar/wind power generationic¥1,288.9

Data centers, storage batteries
Faster data processing, energy saving

Railcars
Railcars, electric vehicles,
hybrid vehicles

PCs, air conditioners, other
home appliances
Compactness, rapid charging

PCs

Electric vehicles

Weight reduction, higher performance,
extended cruising range, energy saving

Attractiveness of SiC Power Semiconductors

Resonac’s business model as a manufacturer specialized in epitaxial wafers

Consolidated

Power semiconductors used in everyday lifetr

Expand our supply capacity by capitalizing
on market growth of SiC epitaxial wafers,
which is driven by the rapid expansion of
the SiC power semiconductor market
stimulated by the advancement ofdecarbonization and electrification
Accelerate research and development ofeight-inch (200 mm) SiC epitaxial wafers

Power semiconductors control andconvert electric power and are used in all
types of devices that are powered byelectricity, everything from industrial
equipment to familiar home appliances.
With less power loss and heat generation
than conventional silicon-based power
semiconductors, SiC power semiconductors are key devices that contribute toenergy conservation, achieving bothvoltage characteristics and conversion
efficiency. The market for SiC power
semiconductors is expanding as they arewidely used in various applications, suchas xEVs including electric vehicles (EVs),
renewable energy, high-speed charging
stations for xEVs, and railcars.

ec

Sales grew due to increased shipments of
SiC epitaxial wafers
Our six-inch (150 mm) SiC single crystal
substrates received the Awards for
Excellence in the 2022 Nikkei Excellent
Products and Services Awards (sponsoredby Nikkei Inc.)
We received the Excellence Award in thesemiconductor electronic materials
category of the 2023 Semiconductor of theYear Award (sponsored by Sangyo Times,Inc.) for our accomplishments in thedevelopment and mass production of
third-generation high-grade SiC epitaxial
products
Used in the Denso inverter installed in the
Lexus RZ, Toyota’s new EV model
Strengthened partnership with Infineon
Technologies

What are SiC Power Semiconductors

elPlans for 2024

Topicsof¥338.1 billion

Results in 2023

We are the world’s largest distributor of SiC epitaxial wafers with strengths in technology that reduces defects in SiC wafers withepitaxial layers
As a specialized manufacturer of SiC epitaxial wafers, we focus solely on the production of SiC wafers and SiC epitaxial wafers. This
enables the provision of SiC epitaxial wafers that meet the needs of device makers, who are our customers, by coordinating with them
Our SiC epitaxial wafers have been used for various applications owing to their high quality, including industry-leading low levels of
surface-defect density and basal-plane dislocation
Possession of knowledge in DX, production management, and manufacturing that supports our technological advantages
Advantages in intellectual assets (based on research by France-based KnowMade)
Amid growing expectations for an increase in the number of chips per wafer due to a larger wafer diameter, we started shipping samplesof eight-inch (200 mm) SiC epitaxial wafers in 2022 with the aim of starting early mass productionow

Net sales for Semiconductor andElectronic Materials segment:

Data Section

Fl

Fiscal 2023 Net Sales

Corporate Governance Reform

Fl

Issues to Be Addressed
Maintain and enhance technologicaladvantages
Expand production of eight-inch (200mm)
SiC epitaxial wafers, differentiate fromrivals, and ensure productivity.
Strengthen technology collaborations andour ability to coordinate with customers

Our Goals and Challenges

Resonac’s Strengths

Business Strategies

Vision for
the future(2030)Who We Are

Manufacturers specialized
in devices

Epitaxial layer+
Devicemanufacturers

Compactness and weight reduction SiC power semiconductors have high withstand voltage and excellent thermal characteristics.
Compared to conventional silicon-based power semiconductors, SiC power semiconductors enable compacter design and contribute
greatly to weight reduction of electric units.
Extended cruising range It is known that the cruising range of vehicles using SiC power semiconductors is extended due to the combined
effect of weight reduction and battery performance improvement (loss reduction), making SiC power semiconductors key devices for the
diffusion of electric vehicles.

Co-creation Case Study

Green Innovation Fund project
Initiatives in “Development of Eight-Inch SiC Wafers for Next-Generation Green Power Semiconductors”
We proposed the “SiC Wafer Technology Development for Next-generation Green Power Semiconductors” (hereinafter the “Project”) as oneof the R&D items in the Green Innovation Fund Project for constructing next-generation digital infrastructure. The New Energy and Industrial
Technology Development Organization (hereinafter “NEDO”) publicly solicited applicants for this project, and our proposal was adopted in
2022.
This Project aims to reduce costs of SiC power semiconductors by increasing the diameter of SiC epitaxial wafers and reducing the densityof deficiencies in SiC epitaxial wafers and SiC wafers, which are used as a raw material in producing them. This Project is a long-term R&D
project to be carried out from fiscal 2022 to 2030, in which we are developing technology to accelerate the growth of SiC bulk
single crystal in cooperation with NEDO. The results of our R&D activities will be evaluated by multiple device manufacturers.
With the aim of social implementation of the outcomes, we will strive to contribute to the further spread of high-performanceand highly-reliable SiC power semiconductors.
44

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Resonac’s Strengths

Business Strategies

Mobility

Please visit our website for informationon our key contributions to social issues
through our business.

In response to rising technological needs associated with CASE, particularly those related to the shift to electrified vehicles, we develop products that utilize Resonac’s weight reduction, electrification, and heat control
technologies. We will transform ourselves into a proposal-based solution business and achieve sustainablegrowth with profitability.
Satoshi Hara

Automotive products:
Molded plastic exterior products (resin rear door modules and resin foam molded products), whose strengths lie in weight reduction anddesign flexibility required for electric vehicles (BEVs)
In composite materials, maintenance of our leading domestic share for mainstay plastic gears while developing heat control products,
such as radiators, for which demand is expected to increase in line with the spread of EVs
Unique aluminum alloy design technology that provides durability and wear resistance not found in general-purpose aluminum alloy
High-level aluminum manufacturing technology that enables the extrusion, joint brazing, horizontal continuous casting, etc., of large
complex shapes that are difficult to manufacture
Provision of high-performance, wear-resistant brake pads that comply with European environmental regulations (EURO7)
Lithium-ion battery materials:
Provision of anode materials that realize lithium-ion batteries with greater capacity and superior charge-discharge load characteristics
VGCF that contributes to increased capacity and battery lifespan

General Manager, Mobility Business Headquarters

Growth strategy for the mobility business

Issues to Be Addressed
Automotive products:
Response to the rapid progress in vehicle
electrification
Structural reforms and strengthening ofprice negotiation capabilities
Lithium-ion battery materials:
Establishment of mass production technology for new anode materials made from
artificial graphite
Stable supply of products through supply
chain management

Fiscal 2023 Net Sales
Net sales for Mobility segment:¥216.1 billion

Consolidated¥1,288.9

Results in 2023

Plans for 2024

Automotive products:
Negotiated price revision or withdrawals
with customers for 32 of our 48 key
products. Achieved price revision forroughly 80% of products, resulting in a
year-on-year rise in profit (profitability
improvement totaled ¥3.4 billion in fiscal
2023)
Accelerated development of EV components
by utilizing the Power Module Integration
Center (PMiC)

Automotive products:
Moderate year-on-year growth of theautomobile market expected as pullbacks indemand ease in various areas
Development of new foam molded products
and new products for the provision of heat
control solutions
Establishment of a solid revenue base byreaping the benefits of structural reforms
Acceleration of co-creation with thealuminum specialty components business inweight reduction and heat control solutions

P68 / R&D and Intellectual Property Strategies

Started construction of a second brake padplant in India. Also developed and started
production of brake pads for EV manufacturers in North America
Lithium-ion battery materials:
Acquired a large-scale project for EVs with
our new artificial graphite anode material
with fast charging performance, etc.
Following China’s introduction of export
permit requirement for natural graphite, we
made a prompt application and are
currently building up inventory
Sales increased due to the expansion of
VGCF production capacity

Lithium-ion battery materials:
Immediate full-scale mass production of
acquired projects and development of
products with even better performance
Multi-source search for graphite, a raw
material, aimed at avoiding impact from the
U.S.-China conflict
Construction of a pilot plant for anodematerials in Europe to respond to market
expansion and local production needs in
Europe and the U.S.

Rising technical needs due to the advancement of CASE technologies including the spread of electrified vehicles
Business
opportunities

Vision for
the future(2030)

Value provided
by Resonac

Automotive products:
Achieve the top share of the global market by actively investing in niche markets for composite materials, a heat control technology
Create new value through the combination of aluminum specialty components with other materials
Lithium-ion battery materials:
Capture markets with rising needs associated with the advancement of electrification and the pursuit ofcarbon neutrality

Weight reduction

Electrification

Heat control

Countermeasures against weight increases causedby heavier batteries required in light of the spreadof electrified vehicles

Countermeasures against spread of 5G andincreases in network connection creating a needto address battery depletion

Heat management measures required in response
to increased performance burdens as vehicles
become smaller and lighter in weight

Resin rear door modules

Anode materials for lithium-ion batteries

Water jacket

Contributions to improved efficiency andreduced CO2 emissions through lower weightContributions to realization of lithium-ion
batteries with greater capacity and superiorcharge-discharge load characteristics

Contributions to weight reduction by allowing
consolidation of functions through an integrated
structure as well as relaxing design constraints for ducts

Plastic gears

Advanced battery materials (SPALF, VGCF)

Aluminum radiators

Contributions to reduced weight, vibration,and noise with high-durability andheat-resistant gears

SPALF: High-insulation, anti-erosive pouch-stylecontainer for lithium-ion batteries
VGCF: Lithium-ion battery conduction additive contributing
to increased capacity and battery lifespan

Precise, low-profile, and highly reliable radiators
realized by applying heat design technologies
accumulated for aluminum products

Contributions to Sustainability

Controlling Physical Properties of Aluminum Alloy and Visualizing CO2 Emission Flow through Computational Science
As part of our efforts to achieve carbon neutrality, we are focusing on the development of aluminum alloy, which is seeing an increase indemand from the automotive industry, with the help of computational science. Aluminum is lightweight and consumes less energy during therecycling process, which can significantly reduce CO2 emissions. In aluminum recycling, it is crucial to better preserve the properties ofaluminum while increasing the utilization of scrap containing impurity elements.
The key to obtaining the properties of aluminum alloy and other metallic materials, which change as the raw materials undergo various
processes, is controlling the material structure. By controlling the behaviors of impurity elements derived from scrap in a sub-micron order,
we have successfully developed aluminum alloy that contributes to carbon neutrality. By collaborating with respective analytical technologies, using computational science simulations that enable us to understand physical phenomena in detail, we are working to clarify themechanisms of property expression and obtain guidelines for mass production processes.
We are also actively working on the calculation and reduction of CO2 emissions associated with aluminum alloy production at manufacturing sites. In addition to building a CO2 emission simulator based on manufacturing processes using computational science, we are establishinga workflow that anticipates fluctuations in CO2 emissions and the possibility of resource recycling throughout the supply chain. We believethat this adds to the significance of us providing recycled aluminum alloys to our customers, and contributes to optimizing CO2 reductions
with an eye to achieving carbon neutrality across the entire supply chain.

billion45

P27 / Overview of Resonac’s Business46

RESONAC REPORT 2024

Contents

Innovation Enabling Materials

Please visit our website for informationon our key contributions to social issues
through our business.

As a platform that contributes to innovation in next-generation businesses and the creation of competitive
products, we will continue to be a business that provides unique technologies and materials by creating innovation enabling materials with new functions through in-house co-creation.

Cooperation
R&D divisions(CTO organization)

Takafumi Sakurada

Consistently create new materials and technologies as a vessel that supports the Group’s innovation andenhanced competitivenessConsistently maintain profitability with an EBITDA margin of 15% or more as a leader in specific sectors
Functional chemicals: Be a leader in specific sectors of the global market that provides value to society
Resin materials: Contribute to solving social issues by evolving our functional materials and technologies invarious ways
Coating: Create new products and businesses that capitalize on our insight into proprietary formulations
Ceramics: Provide ceramic products and services that solve social issues and are chosen by customers

Functional chemicals: Enhancement of our ability to aggregate individual abilities to provide social value
Resin materials: Enhancement of our ability to identify changes in social needs and match them with our existing technologies
Coating: Enhancement and evolution of our capabilities for proprietary formulations in consideration of environmental regulations, etc.
Ceramics: Launch of new products for electronic devices and productivity improvement

Consolidated¥1,288.9
billionP27 / Overview of Resonac’s Business

47

Internal Business
Units

Innovation Enabling Materials
Functional chemicals
Customization capabilities backed bycustomer-based development andmanufacturing capabilities that combine
organic and polymer technologies

Ceramics
Development of products thatmeet customer needs byutilizing particle design
technology

Resin materials

Customers

Anticipation of market needs
and product development
through cooperation with othersegments

CoatingHigh brand power in Europe and the U.S.,
and ability to develop products with low
environmental impact that comply withenvironmental laws and regulations

Creation of Semiconductor Materials Technology using Ceramic Technology (Next-generation CMP Slurry)

In next-generation semiconductor materials and promising domains, strengthen our development and manufacturing capabilities fororganic and inorganic materials to be used as components in these domains
Initiatives to improve profitability, such as the optimization of production lines and fixed costs, and portfolio revision with an eye tobusiness growth backed by our competitive edge

¥93 billion

Data Section

Co-creation Case Study

Issues to Be Addressed

Net sales for Innovation
Enabling Materials segment:

Corporate Governance Reform

Possession of a wide-range of product lineup and material and production technologies, such as for organic materials, polymers, andceramics, which have produced unrivaled and competitive products
Provision of products and services customized to meet customer needs for a wide variety of applications
Anticipation of market needs through our abundant customer base and reflecting them in development
Creation of innovation enabling materials with new functions through integration of core in-house technologies in upstream and downstream materials, turning information into collective intelligence, and in-house co-creation

General Manager, Advanced Functional Materials Business Headquarters

Fiscal 2023 Net Sales

Our Goals and Challenges

Resonac’s Strengths

Business Strategies

Vision for
the future(2030)Who We Are

Results in 2023

Plans for 2024

Developed organic and inorganic corematerials and supplied them to other
Businesses in the Group
Implemented price revisions in response to
declining profitability caused by delays inmarket recovery and rising costs

Maximize value creation through co-creation with other businesses (develop
technology and supply products forinnovation enabling materials)
Maintain and improve profitability throughthorough profit spread management linked
to raw material prices

Functional chemicals: Promoted in-houseco-creation of resins for ACF and insulating
varnishes
Resin materials: Increased the profit margin
through product mix improvement, such as bystarting mass production of new next-generation products (low-melting glass and sew-freeadhesives) and reviewing low-profit
transactions
Coating: Promoted the development and sales
expansion of PFAS-free and environmentallyfriendly products, and implemented reform of
the earnings structure to ensure resilience tochanges in the business environment
Ceramics: CMP slurry and fillers are used in
products of other business units. Securing of
profit spread through flexible pricing
according to the market trend

Functional chemicals: Expand sales ofhigh-value-added products such as specialty
monomers for semiconductors and LIB anodebinders
Resin materials: Launch new high-value-added
products such as low-melting glass andestablish their full-scale mass production, andcontinue to improve profit margins throughproduct mix improvement
Coating: Capture demand for PFAS-free
products/products with low environmental
impact, reap the benefits of earnings structurereforms, and optimize the global production
systemCeramics: Launch new products for electronic
devices and improve productivity

Following the merger of the former Showa Denko and the former Hitachi Chemical, Resonac has
been creating new technologies and value through the fusion of technologies and human resources. By combining the abrasive particle technology of Resonac Ceramics (former Showa Denko
Ceramics) with the semiconductor and electronic material technologies of the Yamazaki Plant(former Hitachi Chemical), we are currently working to develop next-generation CMP slurry forsemiconductor front-end processes. We are creating new value, including polishing technology
compatible with multi-layered semiconductors and finer line pitches.

Mass Production of Nanoparticle Titanium Oxide through Co-creation with Customers
Resonac Ceramics Corporation manufactures titanium oxide for MLCCs (multilayered ceramic capacitors) used in electronic devices such as
smartphones and computers, and commands the top global share of this market (based on Company research).
MLCCs play an important role in stabilizing power supply voltages and data signals in electronic circuits. These electronic components arevital to the normal operation of all semiconductor devices used in IoT, AI, EV, and other applications. With regards to titanium oxide forelectronic devices, the smaller the particles, the thinner the laminated layer of the capacitor itself can be. This makes it possible to produce
smaller electronic devices. Through co-creation with our customers, we resolved the issues faced in producing nanoparticle titanium oxide tosuccessfully achieve mass production.

48

RESONAC REPORT 2024

Contents

Chemicals segments

Please visit our website for informationon our key contributions to social issues
through our business.

Olefins and Derivatives

We will promote green transformation (GX) to achieve carbon neutrality by 2050, and become a green industrial
complex that coexists with the community. We will establish a sustainable business that consistently generates
high profits, and provide chemicals and solutions that are safe and enrich people’s lives.
Hirotsugu Fukuda

Improved profitability and controlled volatility in earnings
Reduction of 30% in CO2 emissions from the Oita Complex in comparison to 2013

Earnings structure of businesses andproducts that is resilient to international
market conditions
Improvement in the competitiveness ofcracker and utility equipment
Shift to low-carbon fuels and technologicalinnovation aimed at achieving carbon neutrality

Results in 2023

Plans for 2024

Year-on-year decrease in sales due to lower
sales prices in line with the price drop for
naphthaYear-on-year increase in operating income
due to a rise in sales volume and spread
improvement, etc.
Acquisition of ISCC PLUS certification, andpromotion of the effort to replace a portionof raw materials with biomass raw
materials

Improve profitability by optimizing plant
operations in line with supply/demand
trends and promoting the sales growth ofhigh-value-added products
Build a stable source of revenue by
expanding technology licenses andimplementing other measures to curb
revenue volatility
Promote initiatives to reduce CO2 emissions(energy conservation, raw materials/fuels
conversion, promotion of green innovation
fund projects)
Initiate deliberation on a partial spin-off
geared toward the establishment of a new
petrochemical company

Gain appropriate market
evaluation
See here for details on
progress with the partial
spin-off
P09 / Message from the CEO
P35 / Roundtable Conversation “Earning Power”

Fiscal 2023 Net Sales¥516.3 billion

Consolidated¥1,288.9
billion¥316.3 billion

P27 / Overview of Resonac’s Business49*Resonac holds the top domestic market share of both ethyl acetate and n-Propyl acetate, and the top global share as an independent allyl alcohol supplierCompetitiveness in high-value-added fields represented by our stable lineup of olefin derivatives (polyethylene, polypropylene, etc.)
Efforts to develop a low-concentration CO2 separation system employing an innovative separation agent to further our quest toward
carbon neutrality in 2050

Participated in a Study for a Carbon Recycling Project—Exploring the Possibility of Recycling CO2 into Chemical Products in Collaboration with Oita City and Neighboring Companies
We participated in a feasibility study exploring the possibility of a carbon recycling project at
the Oita Complex. We will start considering ways to contribute to the reduction of CO2 emissions from the perspective of chemical manufacturing using CO2 as a raw material by utilizing
our knowledge and technologies as a chemical manufacturer.
This feasibility study was adopted on March 11, 2024 by the New Energy and Industrial
Technology Development Organization (NEDO) as a “Feasibility Study on a Carbon Recycling
Project Utilizing Cross-industry Collaboration at the Oita Complex” (hereinafter “the Study”).
In cross-industry collaboration with Oita city and neighboring companies, we will participate in
the Study aimed at reducing CO2 emissions. Our responsibilities mainly involve selecting
carbon recycling products and manufacturing technologies. The Oita Complex is the only
petrochemical complex in Kyushu. We will examine possible options based on the characteristics of the complex, which is a large-scale industrial cluster including steel manufacturers,
power generation companies, petroleum refiners, and chemical manufacturers.

The Flow of Goods at the Oita Petrochemical Complex
At the Oita Petrochemical Complex, naphtha is decomposed at a high temperature of about 800°C in a naphtha cracking furnace, the main
facility in the complex, to manufacture ethylene propylene and other basic petrochemical products.
These products are supplied via pipelines to various derivative plants in the complex, and are used as raw materials for products that canbe found in various parts in our daily lives.

Co-creation Case Study

Together with Kyushu University, Marubeni Corporation, and Sumitomo Mitsui Trust
Bank, Limited, we have established a “knowledge hub” in Kyushu aimed at building acircular economy model. By collecting and recycling waste plastics from the Kyushu
region and converting theminto basic chemical products
Oilthrough a local production for
Chemicalrecycling
local consumption process, we
Basic chemical
Chemicals
products
industry
will contribute to the establishRecycling
ment of a circular economy
model in Kyushu and the
Waste plastics, waste oil,
Polymerand unused biomass
realization of carbon neutrality
Waste
plastic materials
materialby 2050.
DisposalOlefins and Derivatives

Data Section

The highest-level capacities of our equipment and our operating track record in the country that enable us to accommodate a diverse
range of raw materials for crackers. Stable operation with high equipment reliability
A lineup of unique acetyl derivatives (ethyl acetate, vinyl acetate monomer, allyl alcohol, and n-Propyl acetate) that take advantage ofproprietary catalysts and processes

Building a Circular Economy Model in Kyushu

Net sales for Chemicals segment:

Corporate Governance Reform

Contribution to Sustainability

General Manager, Petrochemicals Division

Issues to Be Addressed

Our Goals and Challenges

Resonac’s Strengths

Business Strategies

Vision for
the future(2030)Who We Are

resources

Polymerplastic products

Tsurusaki Kyodo
Doryoku

P67 / R&D and Intellectual Property Strategies

Cracker

Naphtha, LPG, NGL

Ethylene

Propylene

C4 fractions

Hydrogen

Crackedpetroleum

Methane

In Japan andoverseas

Other participatingcompanies
Compressed hydrogen

Ethyl acetate
Allyl alcohol
Vinyl acetate
n-Propyl acetate
Acetaldehyde
Polypropylene
1,3-Butylene glycol
Ethylene-vinyl acetate emulsion
Polyethylene

Various products
ChemicalfibersTires
Adhesives

Industry

Electricity, steam,and water

Plastics

See here for CO2 capture at Oita
Petrochemical Complex and storage off
the coast of Malaysia

Paint

P98

Cosmetics

See here for details on the value instillation
activities carried out by employees of the
Oita Complex

P15

50

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Resonac’s Strengths

Business Strategies

Capitalizing on the advantageous location of the Kawasaki Plant, we provide a timely and stable supply of social infrastructure productsthat support lifelines predominantly in the Tokyo metropolitan area, such as sodium hypochlorite for tap water and dry ice

Chemicals segments

Please visit our website for informationon our key contributions to social issues
through our business.

Basic Chemicals

The Kawasaki Chemical Park enables us to meet the needs for a diverse range of chemical products, from basic chemical products usedin various industrial fields inside and outside the industrial complex to functional chemicals
It is the only gasification recycling plant in the world with a track record of stable operation spanning over 20 years, and produceshydrogen, ammonia, and acrylonitrile from used plastics using chemical recycling technologies
Production of low-carbon ammonia with 80% reduction in GHG emissions compared to conventional production methods

We will continue to contribute to society by providing a stable supply of high-quality and safe products.
We aim to co-create new technologies with stakeholders at Kawasaki Chemical Park for the happiness andprosperity of people and to create harmony with the global environment.

Vision and competitiveness of Kawasaki Chemical Park
Sustainability to

Hiroshi Adachi

Sustainability toinspire the world

Sustainability totransform society

compete in the world

General Manager, Basic Chemicals Business Unit

Stably supply products that support social infrastructure in the Tokyo metropolitan area
Contribute to regional development as an urban chemical park that serves as a model for a decarbonizedsociety (formation of a hydrogen use network with companies near the coastal area of Kawasaki city, fuelconversion of power generation facilities, etc.)
Contribute to the realization of a circular economy and promoting SDG initiatives (significant reduction of
CO2 emissions, 100% use of KPR raw materials)

Vision for
the future(2030)

Business development capabilities to respond to needs of the times

Production foundations / manufacturing capabilities

Development and commercialization of new derivatives
Development and commercialization of high-value-added products[Hardware aspect] Strong infrastructure, including electricity, gas, andwater supply, to support chemical plants[Software aspect] Procurement and logistics, security and disasterprevention, maintenance design, and human resource development
accumulated through many years of experience*KPR is an acronym for Kawasaki Plastic Chemical Recycling. A plastic recycling business operated at the Kawasaki Plant

Co-creation Case Study

Collaboration with ITOCHU Corporation in Textile Recycling in the Chemical Recycling BusinessResonac concluded a memorandum of understanding with ITOCHU regarding the ARChemia recycling project in 2023. The objective is toinclude used textiles, such as clothing, as raw materials for the plastic chemical recycling business at the Kawasaki Plant (KPR), in addition toused plastics. Resonac transforms recycled solid raw materials, a mixture of used plastics and textiles, into raw materials for textiles, suchas acrylonitrile, leading to resolution of waste-related social issues and contributing to realization of a fiber-to-fiber recycling society.
ITOCHU

Net sales for Chemicals segment:¥516.3 billion

Consolidated¥1,288.9
billionBasic chemical products¥86.9 billion

P27 / Overview of Resonac’s Business

51

Related page

Kawasaki Plastic Chemical Recycling (KPR) was certified as the first
Resonac Pride product and service
In order to “change society through the power of chemistry,” itis important to visualize what value our products and service
we have managed to provide to customers and society, and towhat extent. Resonac Pride products and services certification
was introduced as an initiative to visualize our Purpose andValues.
KPR was certified as the first example on the basis that it
has reduced GHG emissions by about 80% compared to theconventional ammonia manufacturing method, and that it
recycles approximately 60,000 tons of used plastics per year
(equivalent to approximately 20% of Japan’s chemical
recycling).

Acrylonitrile

Ammonia

Supply ofrecycled solid
raw materials

Gasification

Fiscal 2023 Net Sales

Industrial waste
disposal companies

Establishment of a transaction network

RetailPlans for 2024
Demand expected to remain strong
Raw material and fuel prices expected toremain at the current levels, logistics costs
to risePromotion of new initiatives for plastic
chemical recycling (collect marine plastics
with Kawasaki city and recycle them atResonac’s KPR plant, etc.)
Plan to expand facilities for sodium
hypochlorite for tap water and liquefied
carbon dioxide, which support the infrastructure vital to people’s daily lives

Apparelmanufacturers

Thorough implementation of measures tostrengthen our supply system with the aimof ensuring the stable supply of productsthat support social infrastructure
Acceleration of cutting-edge initiatives
utilizing our technologies geared towardachieving a decarbonized society
Expansion of our contribution to realizing acircular economy through plastic chemical
recycling

Results in 2023
In production, capacity utilization remained
high, and operating income also remainedrobustRaw material and fuel prices continued torise, but we passed price increases onto
product prices
We acquired ISCC PLUS certification, aninternational certification for sustainableproducts for three products, namely,hydrogen, ammonia, and acrylonitrile, madefrom raw materials derived from usedplastics

Acrylic fiber
manufacturers

Issues to Be Addressed

Supply of Low-Carbon Hydrogen for a Hotel’s Fuel Cells
In November 2023, we began the commercial supply of low-carbon hydrogen derived fromused plastics produced at the Kawasaki Plant. At the Kawasaki King Skyfront Tokyu REI Hotel,hydrogen supplied through a pipeline is converted into electricity using fuel cells, providing
about 20% of the electricity used by the entire hotel.

See here for “KROPIKO, tharcontribute to biodiversity
products

P99

See here for chemical recycling technology thatreusing used plastic which from semiconductormaterials manufacturing processes

P101

Kawasaki King Skyfront Tokyu REI HotelP91 / Resonac Pride Products & Services

52

RESONAC REPORT 2024

Contents

Please visit our website for informationon our key contributions to social issues
through our business.

See here for the Graphite Business
Unit’s sustainability concept movie“Sparking Truth.”Resonac Graphite Business Unit delivers world-class graphite products and technologies with a strong focus onsustainability. We play a vital role in the efficient and environmentally friendly recycling of steel. We believe ourpeople are our strongest asset, and our mission is to drive the sustainable advancement of society acrossmultiple global graphite markets through talented people, strong partnerships, and innovative technologies.
César Castiñeira

General Manager, Graphite Business Unit

We supply industry-leading graphite electrodes and electric arc furnace (EAF) optimization services tosteelmakers around the world, supporting the transformation to sustainable steel production andeconomic growth
We promote decarbonization in the manufacturing process and supply synthetic graphite products foruse in multiple industrial applications

Vision for
the future(2030)

Issues to Be Addressed

Net sales for Chemicals segment:¥516.3 billion

Consolidated¥1,288.9

Results in 2023

Plans for 2024

Due to the impact of the global
economic downturn, demand for steel
and graphite electrodes softened
Successfully promoted ladle furnaceofferings (ΩMEGA), increased thenumber of SSPs, and further
decarbonized our manufacturing
processes
Completed acquisition of 100% of AMI
shares to accelerate the transformation toward a solutions businessContinue business transformation to ensurestability despite industry cyclicality
Promote end-to-end (E2E) strategic partnerships
with customers & suppliers
Achieve cost reductions and diversify raw
material sources
Expand solutions that package Resonac productswith AMI optimization services

billionTopicsGraphite electrodes¥112.9 billion

P27 / Overview of Resonac’s Business

53

Data Section

Global decarbonization will continue to drive increases in electric arc furnace (EAF) steelmaking, which will also increase the demand forlarger diameter graphite electrodes
Our global production platform has six sites and a business continuity framework where we keep significant inventories of key components and raw materials to ensure we can always fulfill our commitments
To maximize supply chain reliability, minimize our carbon footprint, and achieve shorter lead times, Resonac Graphite produces “in theregion, for the region”
Resonac Graphite’s recent acquisition of AMI Automation underscores its dedication to technological advancement and industry leadership. This strategic move enables Resonac to accelerate its internal digital transformation initiatives, while offering technologicalsolutions to enhance customer optimization
Resonac Graphite has been a partner to the electric steelmaking community for more than 80 years. As the first company to produce
750mm and 800mm electrodes, Resonac has grown side by side with the sustainable steel industry
Our business plan and production facilities have achieved the status of “Highly Protected Risk” from our regional insurance providers
based on our strategy to reduce or eliminate the probability of a business interruption
Details of global co-creation
TARGET 6.6
Implementing
sustainable forest
management practices atthe plant in the U.S.

TARGET 17.16
Proposal for consulting and technicalservices for operational conditions of CO2
suppression

TARGET 7.2
RGBU have an eco-conscioushydroelectric power plant
located in Omachi, JapanTARGET 9.4
Converted steam system,
previously fueled by oil, to pellets(chip boiler) in Omachi, JapanTARGET 13.2
Supplying electrodes of the same
quality at the six global plants
reducing CO2 emissions fromtransportation through local
production / local consumption

Evolving value proposition throughsynergies with AMI
AMI Automation is an international automation andcontrol solutions company. Recognized as a world leader
in EAF automation technology, the combination of
Resonac products and AMI services can provide value-added solutions to unique customer needs.

Examples of added value
provided• Reduction of energy
consumption• Reduction of waste and
GHG emissions• Increased productivity• Improved profitability, etc.

Scrap ironElectric furnace

Suppliers

Achieving a stable profit structure
Transforming our traditionally cyclical business model by concluding win-win Strategic Supply Partnership (SSP) contracts
Optimizing product mix in response to expansion of electric furnace market
Plans for new electric arc furnaces are increasing worldwide and those furnaces typically require larger diameter electrodes. Resonac
Graphite is uniquely positioned to meet this growing demand
Evolution to a business model of providing electric furnace optimization services
By combining Resonac’s industry-leading graphite electrodes with AMI’s EAF optimization solutions, opportunities exist to create win-win
partnerships and replace the traditional buyer/seller relationshipFiscal 2023 Net Sales

Corporate Governance Reform

Our six global plants

TARGET 7.2
Utilization of 100% renewableelectricity at the plant in Austria

TARGET 13.2
Reduce CO2 emissions related to
movement within plants converting
forklift vehicles to electric vehicles atthe plant in Austria
TARGET 7.3
Recovering steam generated fromheating pitch for use in the ring
furnace at the plant in Austria

TARGET 7.2
Utilization of solar
power generation
at the plant in
Malaysia

TARGET 9.4
Implementing green hydrogenburners in the incinerator on
two baking furnaces at theplant in Spain
TARGET 7.3
Developed a heat recovery
system for heat generated
during the baking and rebaking
phase of graphite electrodes
at the plant in Spain

TARGET 12.5
Developed a Global Waste Management
Project to harmonize and improve thewaste management practices in all of
Resonac Graphite Business Unit

End users

TARGET 4.4
Implementing OWEx (Our Way to
Excellence) to enhance employee
development through continuous learningand skill-building initiatives in all RGBUTARGET 8.8
Implementing Employer of Choice (EoC)
program to foster a positive workplaceenvironment, prioritize employee
well-being, and ensure fair labor
practices in all RGBU

See here for a video
about Women’s Week

TARGET 5.1
RGBU organized the first Women’s Week
during March, leveraging International
Women’s Day, to highlight and promote
the role of women in the industry

What are graphite electrodes?
Steel is familiar and indispensable in our lives. It is used to makeappliances, cars, machinery, bridges, and buildings. It is also themost reused material in the world and can be recycled infinitely
without losing its properties. Graphite electrodes are an integral
part of this recycling process. To do this, an electric arc furnace (EAF)transfers electric current through the graphite electrode to thescrap steel inside. The current creates an arc that melts the solid
steel into reusable liquid steel. The molten steel temperature in the
furnace reaches temperatures of 1600°C, and the tip of the electrode reaches more than 3000°C.

350 to 800 mm

GE

1800 to 3600 mm

Graphite Electrodes

Our Goals and Challenges

Resonac’s Strengths

Business Strategies
Chemicals segments

Who We Are(electrode
body)

PIN

Graphite electrodes

Furnaceframe

Molten steel

Furnace bottom
tap hole

Cylinder(EBT)

Tiltingequipment

Ladle(joint)Graphiteelectrodes

Three-phase AC electric
steelmaking furnace

54

RESONAC REPORT 2024

Contents

Please also read the “ForInvestors” page on our
website.

Financial and Capital Strategies

In order to realize our long-term vision, which calls for the realization of our growth strategy by concentrating management resources on thesemiconductor materials business, we will continue to pursue capital efficiency to solidify our profitability and cash generation foundations,
allocate cash to growth investments, raise funds with an eye to controlling financial costs and securing financial flexibility, and improving thequality of dialogue to ensure the capital market has an appropriate understanding of these measures.
Financial and capital strategies overview

Core Growth businesses

Stable Earnings
businesses
Fundamental businesses

Cash in
Profitability improvement
Profitability
improvement for eachbusiness unit
Instillation of ROICfocused Management

Conversion of assets
and businesses
into cash

Financing
Controlling
financing cost

Cross-shareholdings

Securing financing
capacity

Idle real estate

Net salesOver¥1 trillion
EBITDA
margin20%ROIC
10% over the
medium tolong term

Cash out
Capitalexpenditures

Growthinvestments

Allocate about
half totwo-thirds ofcash

Maintenanceinvestments
M&A

Shareholder returns
TSR: Rank among
the chemicals
industry’s top 25%
over the medium tolong term

Repayment ofloans
Dividends(income gains)

Normalization ofdebt level

Improve
corporatevalue

Net D/E ratio

1.0x ina stablemannerRise in share price (capital gains)

Dialogue with capital market

Foster expectations
for growth
Trade at high multiples

Pursuit of Capital Efficiency
Until now, our management hasn’t focused enough on generating cash flow, and our efforts to maximize profits through efficient use ofcapital have been insufficient. Following the integration of the two companies, we changed our financial target from ROE to ROIC. At the sametime, we have been pursuing capital efficiency in order to further strengthen our profitability and cash generation foundations.
Conversion of assets and businesses into cash
Amid efforts to convert assets with low return on capital into cash,
since 2020 we have been working to reduce cross-shareholdings
to reduce debt inflated by the integration. In 2021, we agreed on apolicy to sell all of our cross-shareholdings, in principle. In theprocess of reducing cross-shareholdings, we interviewed eachbusiness unit about their reasons for holding them, and worked
together to assess the appropriateness and necessity of theseshareholdings. As part of these efforts, the CFO suggested

55

conducting dialogue with business partners himself as an option.
We accelerated companywide activities by veering away from themindset of business units that we cannot successfully do businesswithout cross-shareholdings. As a result, while we previously heldcross-shareholdings with a market value in excess of ¥50.0 billion,by the end of 2023, we were able to sell almost all of these shares.
With regard to the sale of businesses and converting them into
cash, we sold a total of nine businesses for approximately ¥200.0

Who We Are

Our Goals and Challenges

billion as part of our portfolio reform efforts following the integration. These businesses were sold to the best owners in a mannerthat fully utilized existing technologies, customer relationships,
and other strengths. Amid our portfolio reform efforts, we still
have several businesses that do not conform with our policy but
are difficult to sell. We will implement appropriate turnaroundmeasures for these businesses with an aim of maximizing theirbusiness value, and then work diligently to find the best owners.
In addition, with regard to sale of idle real estates, we transferred part of the land of Yokohama Plant in 2022, and land andbuilding of former Daimon Head Office in 2024 after the consolidation of our Head Office, etc., which generated cash of approximately¥50 billion in total.
Improving profitability to achieve EBITDA margin of 20%
We aim to achieve a companywide EBITDA margin of 20%, and haveset EBITDA margin targets for each business. To achieve thesetargets, we are taking measures to expand sales and improve
profitability.
In the semiconductor materials business, we will make aggressive capital investments in the advanced materials field, which ispoised for high growth and high profitability, to expand sales andlead the improvement of the EBITDA margin on a companywide
basis.
P33 / Roundtable Conversation “Earning Power”

In other businesses, we aim to reach EBITDA margin targets foreach segment by concentrating resources on high-profit products
and improving profitability and returns on capital rather than scale
expansion. Specifically, each business unit calculates the maximum
profit margin for each customer and product and implements
specific action plans, such as negotiating price increase forlow-margin products, withdrawal from products for which priceincreases are difficult, review of raw material suppliers, and costand staff reduction through improved production efficiency. The
progress of these initiatives is managed quarterly and by the endof 2023, 75% of all measures were already completed.
In addition, we are carrying out individual business revitalization
projects for several businesses that urgently required profitability
improvement. In 2023, we optimized capacity and reduced fixed
costs in the HD media business by closing our Taiwan site andsignificantly lowering the break-even point. In the Mobility segment, we tenaciously continued negotiations with customers for 48
unprofitable products subject to emergency measures, which led
to 80% of negotiations being successful. As a result, we achieved a
total improvement in profitability of ¥3.4 billion, which helped movethe segment back into profit.
In order to improve the companywide EBITDA margin throughbusiness portfolio reform, we will continue to steadily consider
business sales, including difficult projects. We are also consideringa partial spin-off of the Olefins and Derivatives business under theChemicals segment. We plan to clarify the schedule and businessstrategy for this going forward, and disclose the progress as
appropriate.

Corporate Governance Reform

Data Section

Cross-shareholdings (listed shares)(Billions of yen)
Listed shares held (converted to market value)

Number of issues

200

700

180

600

54.5

160

500

140

400

120

106

100

27.3

300

80

67

19.5

200

60

35
100

3.5

40

12

0

December 31,
2019

December 31,
2020

December 31,
2021

December 31,
2022

0.3

3

20
0

December 31,
2023*Listed shares held by Group companies are included. The figure as of December 31, 2019 includes
shares held by former Hitachi Chemical.

Improvement of EBITDA margin
(%)
35.0

Semiconductor and Electronic Materials
Mobility
Chemicals
Companywide
Innovation Enabling Materials

30.0
25.0
20.0
15.0
10.0
5.0
0.0

2023 full-year
results

1H 2024 forecast(announced in
February 14)

2H 2024 forecast(announced in
February 14)

Long-term
vision Targets
for 2025

Status of completion of the measures to improve profit

Results(December 31, 2023)

Results(March 31, 2023)

51%

75%

*The Mobility Segment, and the Olefins and Derivatives business which is largely affectedby market conditions, are excluded.
*Completion of measures and their impact on revenue are not necessarily simultaneous.

56

RESONAC REPORT 2024

Contents

Cash Allocation to Support Growth Investments
In order to realize growth investments, we have set a cash allocation policy in which half to two-thirds of operating cash flow isallocated to capital expenditure as a priority, with the remainder
allocated to shareholder returns and debt repayments. As for the
results for fiscal 2022 and 2023, we compensated for the decreasein operating cash flow caused by deterioration in market conditions
and earnings performance by converting businesses and assets
into cash. While avoiding excessive upfront investments, we havesteadily made step-by-step investments to keep up with theincrease in demand with an eye to the next peak of the semiconductor cycle.
We have introduced rules for investment policies based on theportfolio attributes of each business to concentrate management
resources on the semiconductor materials business, which seeks
to realize high profit margins in the future.
P27 / Overview of Resonac’s Business

For Stable Earnings businesses, in which we focus on stable
cash generation, we will, in principle, limit investment for maintenance (including investments for BCP and profit improvement)
within the scope of depreciation, and allocate surplus cash toinvestments geared toward expanding growth businesses. At theinternal Investment Committee, CFO will serve as the chairman
and members from a management strategy perspective (CSO),
engineering perspective (CMEO), risk management perspective(CRO), and technical strategy perspective (CTO) also participate,and have in-depth discussions at each meeting. We ask the ownersof each investment project to make a commitment to ensuring
returns, in addition to verifying the appropriateness of investments
via numerical analysis.
As for investment discount rates (hurdle rates), whereas
previously we used the same discount rate throughout the Company, in 2023 we introduced hurdle rates based on risk premiums foreach business segment and investee country in an effort toappropriately assess investment risk, improve investment efficiency, and to improve portfolio management. Moreover, in order to
identify risks at an early stage and maximize the benefits of capital
expenditure, we monitor progress after investment decisions havebeen made. Before facilities come on stream, we check whether weare exceeding our budget and if there are any delays with receiving
orders, construction completion, or the start of operations. Afterfacilities come on stream, we check whether there are any discrepancies between actual earnings and our business plan. We havemade investments in the past that resulted in impairment losses
due to returns that did not exceed the cost of capital. By reflecting
on these mistakes, we will continuously review and improve theeffectiveness of our operations so that similar situations do notoccur in post-integration projects in the future.

Focusing on TSR for Shareholder Returns
We place importance on total shareholder return (TSR), and assuch, have adopted a shareholder returns policy that takes into
account the balance between capital gains from medium- tolong-term improvement in corporate value and growth in our stock
price, and income gains from dividend payments. For TSR, we aim
to achieve a yield that exceeds those of industry rivals, and haveset a medium- to long-term target of being ranked at mid-range orhigher, which would mean being in the top 25% of 22 domestic
chemical companies (we selected 22 companies in the chemicaland other materials industries of the same size or larger that haveclose business models to ours and have competing businesses). In
2023, due to the rise in our stock price and the payout of dividends,
we achieved a TSR of 142.3% over the past year, which places us in
the top 20% of the 22 domestic chemical companies. Going forward,
we aim to achieve our TSR target over an even longer span. As

such, in addition to maintaining stable dividends, we will linkbusiness growth achieved through growth investments to capitalgains, and reduce the conglomerate discount to ensure an appropriate stock price and corporate value. To this end, we will engage
in attentive dialogue with investors.
Total shareholder return (TSR)
TSR

Past year

Past 3 years

Past 5 years

Past 10 years

Resonac Holdings

142.3%

136.8%

97.9%

232.2%

TOPIX

128.3%

141.1%

178.9%

227.8%*As of the end of 2023
*TSR: Total shareholder return. The total rate of return on investments, consisting of capital gains anddividend payouts.
*TSR for Resonac is calculated based on accumulated dividends and stock price fluctuations. TSR for
TOPIX is calculated based on dividend included stock index (see Japan Exchange Group’s monthly
statistics report data).

P138 / Stock Information

Financing with a View to Curbing Financial Costs and Securing Financial Flexibility
Our interest-bearing debt increased to ¥1,335.1 billion (including
preferred shares) as of December 31, 2020 due to acquisition
financing in 2020. In order to respond to the increase in financing
costs associated with higher interest-bearing debt, we have beenworking to reduce total debt from 2021 onward, implementing
measures such as the early repayment of LBO loans by issuinglarge-scale corporate bonds, switching from preferred shares,
which are more costly than other funding sources, to subordinated57

loans, and converting loans to fixed interest rates. In doing so, we
have diversified maturity dates, reduced financial costs, andprepared for possible future interest rate increases down the line.
We have also taken measures to improve our capital structure,including equity procurement, with an awareness of the cost ofequity, such as raising ¥83.2 billion through a public offering in
2021, and issuing zero-coupon convertible bonds worth ¥100.0
billion in 2024.

Who We Are

Our Goals and Challenges

We have set a net D/E ratio target of 1.0 as part of our fiscal
discipline efforts in financing activities. In 2023, even amid theweak financial performance, we sold businesses and assets suchas the diagnostic reagent business and reduced working capitaland inventories at each business headquarter/unit to secure funds
to repay borrowings. As a result, we reduced interest-bearing debt
to ¥1,016.5 billion by the end of December 2023. The net D/E ratio
improved to 1.0, owing partly to an increase in shareholders’ equity
and an increase in foreign currency translation adjustments
resulting from yen depreciation. Going forward, alongside moves
to prepare for future investment opportunities, we will continue
our efforts to reduce interest-bearing debt and improve ourfinancial structure in order to maintain a stable net D/E ratio of 1.0.

Corporate Governance Reform

Data Section

Post-adjustment Net D/E Ratio*, interest-bearing debt, and preferred shares
1.84
1,335.1

December 31,
2020

1,125.6(Billions of yen)Preferred shares
LBO loan
Subordinated loan
Bonds
Other interest-bearing debt
Adjusted net D/E ratio (times)

1,062.6

1.15

1.07

December 31,
2021

December 31,
2022

1,016.5

998.2
0.90

1.00

December 31,
2023

March 31,2024

*December 31, 2020 and 2021: {(Loans payable + Commercial papers + Bonds payable + Lease liabilities) - Cashand deposits + 50% of preferred shares} / (Total shareholders’ equity + 50% of preferred shares)
December 31, 2022 and later: {(Loans payable + Commercial papers + Bonds payable + Lease liabilities) - Cashand deposits - 50% of subordinated loan} / (Total shareholders’ equity + 50% of subordinated loan)
50% of preferred shares and 50% of subordinated loan (included in loans payable) are evaluated as equity
capital based on the credit rating by Japan Credit Rating Agency, Ltd. on April 21, 2020 and April 27, 2020,
respectively.

Communication with Shareholders and Investors
Our management team proactively creates opportunities for directcommunication with shareholders and investors, and utilizes the
feedback we receive in management. In terms of direct communication, we resumed overseas IR activities by the CEO and CFO in 2022.
And also, our managemnt have engaged in numerous discussions onsustainability (ESG). We are also actively engaged in non-financial
information disclosure and dialogue aimed at enhancing corporate
value. In 2023, we held our first sustainability meeting (a hybrid
P31 / Co-creation with Stakeholders
in-person/online meeting).
In order to have a place to conduct dialogue with as many people
as possible, we are increasing the number of speakers on the IRteam, establishing a system that allows for consistent information
provision, and working to increase opportunities for small-groupmeetings with investors. As part of these efforts, we have repeatedly communicated our focus on the Semiconductor and Electronic
Materials segment, the key to our growth story, and revised ourdisclosure content in an effort to raise awareness as a player in thesemiconductor industry and minimize the conglomerate discountapplied to our shares, including making changes to our disclosure
segments in 2022.
Opinions and requests from shareholders and investors, andtopics related to the stock price, are continuously addressed andquarterly discussed at Management Committee meetings attended
by CXOs and business unit heads. They are also addressed anddiscussed at biannual forums for exchange of opinions withexecutives including outside executives. In the discussion, we also
consider the difference between the theoretical stock price and themarket price based on the results of correlation analysis withother company stocks and SOTP (sum of the parts) analysis, which
incorporates the perspectives of shareholders and investors.
We will continue to disclose the Group’s vision, strategies, andcorporate information in an easy-to-understand, timely, andappropriate manner, have proactive dialogues with shareholders
and investors, and reflect their feedback in management in orderto further enhance corporate value.

The reforms we have implemented to date have been at the stage of steadily implementing necessary measures,such as converting low-return assets into cash, adjusting product pricing that does not match the value provided,and replacing high-cost funds. The current stage involves implementing more difficult measures, such as therevitalization and termination of non-core businesses that are hard to sell, the withdrawal from customer
relationships with constraints, the complete overhaul of the capital structure, which is used to deal with emergency situations arising from leveraged buyouts, and the partial spin-off of the Olefins and Derivatives business.
Overcoming these challenges is a prerequisite for Resonac to become a company that can compete on the worldstage. I am determined and ready to complete this stage.
And people are the foundation of our business. As such, the CFO organization, which supports our financial andcapital strategies, also promotes the mobility of human resources based on its own human resource development policy. CFO organization actively implements department-wide job rotation, and in 2023, transferredapproximately 25 finance and accounting employees. Meanwhile, there were many cases where it was difficult for
the employee’s original department to make decisions on the matter. As such, we will continue to address
personnel allocation challenges, including measures to fill the gaps in the original departments that arise due tojob rotations. In addition, we will improve the motivation and engagement of members by sharing career trees in
the CFO area, encourage proactive career interviews and one-on-one meetings with superiors, holding thein-house MBA program “Some Lab” for three consecutive years (2022-2024), and creating communication
opportunities across departments through the launch of the mentor-mentee system. Going forward, we willcontinue to give it our all in these endeavors.

Hideki Somemiya
CFO

58

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

02-2 Technology and People
That Generate Profits

59

Roundtable Conversation “Technology and People That
Generate Profits”

65

R&D and Intellectual Property Strategies

71

Corporate Marketing Strategies

73

Digital Strategies

75

Human Resource Strategies“Technologies are Created by People”

Co-creative talent thriving
through their connections
opens up a path to the futurewith their earning power

Hidenori Abe

Deputy General Manager, Electronics
Business Headquarters

To continuously create new technologies and functional materials
that society demands.
That is a vital task for Resonac, and at the heart of it lies fosteringco-creative talent with borderless connections.
Resonac’s CHRO, CTO and Deputy General Manager of Electronics
Business Unit discuss the prospects for raising the base level of
earning power brought about by talent development efforts.

Generating the earning power of the future throughsimultaneous co-creation in the research,development, and manufacturing fields
Imai: As a company with the goal to become a worldclass functional chemical company by 2030, its earning
power is essential. The sources of our value are ourbroad-ranging material technology platform and our
research and development strengths. That said, sophisticated technologies don’t lead to earning power unless weprovide the functions that customers demand. It is vitalthat the people who talk directly to customers—those on
the frontlines—can understand customers’ needs andthat those in the field can respond to those needs. Eachand every person on the frontlines and in the field must

59

Nori Imai

Chief Human Resource Officer(CHRO)

Masato Fukushima
Chief Technology Officer (CTO)

60

RESONAC REPORT 2024

possess a passion to create and work going beyond
boundaries of departments and companies to think,
together, about how to produce solutions. We believe that
personnel who can generate values by integrating diverse knowledge through such alignment is what we callco-creative talent.
One of the challenges of co-creation is dealing with thediffering timelines of areas and departments. The speedof R&D varies tremendously from one business sector toanother. For semiconductor materials, it is extremely
fast. To keep up with such speed, research, development,
and manufacturing must all keep in step.
Abe: The former Hitachi Chemical has passed on its DNA
in the form of the processes used to customize materials
in conjunction with customers in a speedy manner. On theother hand, it lacks research and development processes
focused on raw materials or designs. Those are thestrengths of the former Showa Denko. Through ourbusiness integration, we have connected upstream anddownstream processes, so we are starting to see thesynergistic results of co-creation. Taking into consideration cross-company collaborative creation such as
co-creation with other equipment and material manufacturers, I think we still have a lot of room for growth.
Fukushima: Our frontline members need to be able toadapt to the dizzying speed at which customer demands
change and to continuously improve our products.
Prioritizing the issues at hand may improve final productquality without advancing core technologies. However,there is a limit to what can be achieved through this cycle,
so researcher need to get ahead of these changes andwork on core technologies. In this way, different talent
are assigned to different tasks, but their efforts will come61

Contents

Who We Are

Our Goals and Challenges

to naught unless they are all working on the same timeline. Creating revenue-earning technologies requires
making improvements to existing products, having
frontline staff identify customer needs, and carrying out
research to develop new core technologies, all at thesame time. Of course, in this co-creation, it is absolutely
vital that everyone is working on the same timeline, witha shared understanding of by when new core technologies are needed.

and equipment. We have prepared an environment thatfuses the diverse knowledge of the consortium’s participants to tackle research themes. Normally, semiconductor manufacturers see material manufacturers as
suppliers, but by sharing the same new technology
development goals, our relationships are becoming more
like partnerships. This represents tremendous progress.

Co-creation through a new site that brings together
professionals from inside and outside the company

The capabilities essential for our frontline employee
who connect customers with the field

Imai: We also focus on coordination with outside parties
in our development of co-creative talent. We should be
able to generate greater synergy by bringing in knowledge from other equipment manufacturers, material
manufacturers, and universities.
Fukushima: Indeed. Resonac has been developing spaces
for co-creation with a wide range of stakeholders. The
first of these was the Innovation Center, which we openedin 2017 with the aim of promoting interdisciplinary dialogue and discussion. Then, in 2023, we opened the Stagefor Co-creation. This is a core site for long-term R&D
through collaboration with venture companies, universities, and other organizations, both inside and outside ofJapan. In the process of expanding our network to create
new future business, our own talents will also be able tolearn open innovation methods and strategies, including
what they can create with which partners. This establishment of co-creation spaces is also part of our efforts tobuild new connections, and I think it will secure us a
sturdy foundation a decade or two from now.
The co-creative ability to deal with pressing issues is alsoessential. We put this into practice in our Packaging
Solution Center, which we opened in 2019, and in ourPower Module Integration Center (PMiC), which began
full-fledged operations in 2023. These sites enable us to
deeply understand and respond to our customers’ needs.
They have semiconductor production equipment equivalent to that of our manufacturing customers, which we
use to pre-emptively perform evaluations and simulations. This makes it possible for us to speedily provide
high quality products.
Abe: At the Packaging Solution Center, we have launched
the JOINT2 consortium, joined by 12 manufacturers in thefields of semiconductor packaging materials, substrates,

Imai: Meeting all of our customers’ needs is the very
foundation of Resonac’s business. Market competition is
fierce, so developing products through co-creation withcustomers is vital to Resonac’s survival. One could evensay that our customers and their markets are nurturingus.
Abe: Electronics Business Unit has been rolling out
products with a high global market share. At the heart ofthis strong market share is our motivation—we want towork hard for our customers and to contribute to theworld. In that sense, earning power ultimately boils down
to added value. Our customers pay for the value that we
add, and that added value varies from project to project.
It includes functionality, originality, development speed,
and technical service, to name a few.
True co-creation doesn’t consist of simply taking all
customer requests at face value. Instead, for each project, we must understand our customers’ true intentions
and lead them to solutions. To achieve this, I believe ourfrontline personnel need to have attentive listening
ability, predictive ability, and problem-solving ability.
Fukushima: If you focus on frontline communication
alone, you won’t be able to build relationships of trustwith busy colleagues at Gemba, ultimately leading toprecarious, day-to-day company operation. A person at
the frontline is required to possess a sense of assurance
that makes customers and internal engineers think, “Ifthey say so, it must be true.” A human touch that conveys
the passion they feel for their projects is also vital. I
believe that we are able to develop co-creative talent
thanks to the number of communication sites we havethat connect customers and the field.

Corporate Governance Reform

Data Section

P39 / Front-end / Back-end Semiconductor Materials
P65 / R&D and Intellectual Property Strategies

Strengthening the Technical Management
Department as a development and manufacturinghub
Abe: For our manufacturing customers, too, industry-wide needs are evolving at a dizzying speed. Even the
products currently under mass production are subjected
to frequent requests for quality improvement and specification changes. Speedily accommodating this requires
teams that specialize in the product improvement phase.
The Technical Management Section directly under the
Manufacturing Department was responsible for this in
the past, but to enhance these functions and to secure
new technology development resources, in 2023 we
promoted the Technical Management Section into theTechnical Management Department. It brings together
people with various backgrounds including development,
manufacturing, and quality assurance, serving as a hub
for different departments. Its coordination activities
promote improvements to mass production products.
Imai: The process of transitioning from development tomanufacturing, in particular, is prone to various errors.
The Technical Management Department’s role is to use
co-creation to facilitate this transition and prevent mistakes. When transferring technology to overseas sites, aswell, the Technical Management Department can makeuse of their storehouse of expertise and take charge ofwhat was previously handled by the development division. This alleviates the resource demands placed on
development.
Fukushima: The world’s product specification demands
have climbed far higher than they once were. Our development division listens to customer demands and62

RESONAC REPORT 2024

63

Contents

consistently raise to meet them, but the higher the levelof the products we create, the greater the demands
placed on the manufacturing department. To reduce thisburden on the manufacturing department, we need todevelop products with designs that make the manufacturing process as easy as possible. If, despite these efforts,
manufacturing involves an unreasonable burden, errors
will be inevitable. Strengthening our Technical Management Department enables communication in the form of
consulting with manufacturing departments in the midstof development work and pro-actively promoting the
preparation of production facilities and evaluation conditions. If we provide proper support in areas where problem-free manufacturing is taken as a given, we can set upsmooth, safe production lines. This will ultimately increase our products’ value and Resonac’s earning power.

carrying out research based on new perspectives andcreating environments based on innovative ideas.
Fukushima: Those engineers who have come up with theconcepts that underlie new products must have hadsome ideas in mind before they even announced theresults of their research. If nobody had alighted on theseconcepts, we wouldn’t have the exceptional products wedo today. Of course, we need to devote resources tohighly profitable businesses, as well, so balancing these
two is always a challenge. One possible way forward isthrough our talent portfolio. For example, there arepeople who excel at creating a seed out of nothing, andthere are people who is good at turning seeds into giant
trees. I think they have fundamentally different attributes. Going forward, we will need to keep a close eye onthat as we assign talent and shape our organization.

Striking the balance: assigning resources to highly
profitable products and developing products thatlead the way to the future

Experience, diversity, and management strengths
will raise the baseline of our organization’s cocreation capabilities

Fukushima: The further semiconductor technology
advances, the greater our opportunities to compete will
be. The harder development and manufacturing become,the less room there is for competition. Resonac has used
the power of teamwork to tackle the issues before it,
expanding market share worldwide.
Abe: Right. Our NCF non-conductive film is a great example of that. When we launched the program, people out inthe field combined their efforts to achieve the world’s
highest levels of technologies such as coating and dispersion technologies. We increased sales of NCF as a material for use in AI semiconductors and other products, andwe now have a 100% market share.
Imai: At the same time, one of my concerns is that thereis less free time—less “play time”—that can be used to try
out new things that aren’t directly linked to operations. I
think that new products are the product of technologies
developed during that kind of “play time.” When weannounced the results of our research on TIM thermal
conductive sheets, roughly 15 years ago, many people
were skeptical of their potential for commercialization.
However, now we see that their properties are an excellent fit for the rapidly growing AI semiconductor segment,
and they have become one of our core products. If we are
to increase our corporate value over the long term, we
also need to turn our attention to people who are

Imai: There are two things we are currently focusing on
in our co-creative talent strategies.
The first is providing individuals with greater experience. There are a lot of types of experience available toemployees in our company. They can refine their expertise, diversify their perspectives, and collaborate withothers. Strategic job rotation will significantly boost thegrowth of individual employees.
The other thing we are focusing on is fostering management skills that enable co-creative workstyles. Diversity
is essential to engaging in discussions with people fromdifferent backgrounds and advancing projects. We havedefined five skills that are essential for diversity: theability to provide psychological safety, the ability toeliminate unconscious bias, communication skills, active
listening skills, and facilitation skills. We deliver training
sessions for all management personnel up to Officer levelto bolster their co-creative collaboration capabilities andtheir skills in these areas. At the same time, we also
provide co-creative leadership training across the organization so that participants can gain the talent development skills they need as leaders.
Furthermore, in the R&D field, we are placing particularfocus on improving our talent portfolio. Reflecting these
individual attributes in our role assignments requires asystem for visualizing skills and aptitudes by data and for

Who We Are

Our Goals and Challenges

developing strategies based on quantitative judgments.
We are currently in the stage of attempting data-driven
team creation while leveraging FFS theory.
Fukushima: Managers at Gemba hold the key to all ofthese initiatives. Our organization can grow as a whole
when managers have a deep understanding of the aptitudes of those they manage and give consideration to themost beneficial career paths. Managers need to refine
their abilities through training, leveraging interviews andFFS theory while understanding Resonac’s purpose andsuccession plans. From the perspective of the company’s
CTO, I would say that the key lies in building up experience looking at both technologies and business. If technologies aren’t capable of generating profits, they can’t becalled innovation in a true sense.
Imai: Self-understanding of each employee is also important. In recent years, a certain expression has come into
widespread use in Japan: career autonomy. This means
consciously developing your own career and taking anactive approach to learning in the midst of the ever-changing environment. We are holding events called “Purpose
Exploration Café,” whose theme is to promote autonomy
and to take another step forward. In these events, employees reflect on their own purposes.
P14 / Purpose Exploration Café
Resonac’s Purpose, improving and contributing to theworld through the power of chemistry, resonates withmany of our employees. These employees also happen tobe highly motivated. Employees each thinking autonomously and choosing Resonac as their ideal environment
such a partnership may even be the foundation ofco-creation.
In the past, “career advancement” consisted solely of
being promoted to management positions. But we introduced a dual ladder career structure that also makes it
possible for employees to strive to become exceptional
research and development professionals. We are promoting career autonomy and creating systems that allow
people to work toward diverse career plans. From here
onwards we will be working on better establishing thosesystems.

Corporate Governance Reform

Data Section

The future vision Resonac seeks to achieve throughits human resource strategies
Imai: My vision, through our human resource strategies,
is to create an organization that provides everyone with asense of excitement. Being able to experience growth
while enjoying yourself directly contributes to productivity and corporate value. That is why it is important to keepon contributing to society, to customers, and to ones’
teams. The heartfelt desire to make the world a better
place is, I believe, our driving force as one of the worldclass functional chemical company.
Abe: Furthermore, I want Resonac to be “the first company to turn to when people need help with semiconductormaterials.” In the semiconductor industry, co-creatingwith customers from the very start provides us with atremendous advantage. Our ideal is to generate and build
up trust while expanding our technologies and network.
Achieving this ideal is the mission of our co-creative
talent.
Fukushima: Ultimately, we truly believe that technology
will lead the way to a brighter future. To continue to be anorganization where new technologies are constantly
being created means that we are also being needed bysociety. And we need engineers and technologist, and thepeople who want to become them, to admire the environment we offer, making them want to work with us or join
us as employees.
Imai: I want us to dedicate ourselves to creating talents
who generate earning power so that Resonac remains acompany needed and sought out by society and technicalpersonnel in the years to come.

64

RESONAC REPORT 2024

Contents

R&D and Intellectual Property Strategies

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Please also read the “R&D” page on
our website.

MissionWe will continue to create world-leading technologies and products through co-creative R&D via “Chemistry to Synthesize,” “Chemistry to
Formulate,” and “Chemistry to Think.”
We will strive to accomplish our missions of broadening of technology portfolios to create innovation, promotion of technology development across business headquarters, and changing society through long-term R&D projects.

Resonac’s technologies and offering functions

Vision for the future (2030)

g
ferin

Be a provider of technology and solutions attuned to the needs of society, the market, and customers
Be a driving force of unceasing innovation by addressing and resolving technological issues inside and outside the Company
Be the source of a stream of technologies contributing to a truly sustainable society by enhancing R&D activities from a long-term perspective
Be the source of a stream of leaders and professional-minded human resources for the R&D activities

Of

new

func

Promote co-creative R&D through internal and external open innovationE stablish and operate a R&D system aimed at discovering and verifying newtechnologies
Advance and step-up utilization of companywide common fundamental technologiesC o-create and enhance aggressive IP activities that contribute to management andbusiness

Plans for 2024

Collaboration (vertical and cross-divisional) among business units:P romoted the development of advanced materials in thesemiconductor field and turned multiple themes into business
unit projects to foster co-creative innovationP romote integrated R&D management and cross-business headquarters co-creation, and accelerate, expand and conduct vertical collaboration of material development for the semiconductor field

Companywide common infrastructure technology:T hrough deep-level digital transformation, accelerated R&D
utilizing computational science and data-driven R&DP romote digital transformation by utilizing computational science/
generative AI and data-driven R&D

New technology search:E stablished a dedicated team on the Stage for Co-creation toactively utilize open innovation inside and outside the CompanyR amped up search activities for research seeds and establishedliaison meetings between business units as part of efforts toachieve carbon neutrality

Revitalize the Stage for Co-CreationE stablish and start operation of “Research Gate Island” and “Technology Landmarks” for research centersS trengthen collaboration between business units that carry out R&D
in the carbon neutral field and accelerate R&D activities

Human resource development:F ormulate a plan to develop leaders who will drive R&D
activities and professional-minded human resources to develop
core technologyC reate a global intellectual property network highly effective indeterring other companies through cooperation with business units,
improve the quality of our intellectual property portfolio, and actively
utilize itG ive 360-degree feedback to certain managers that are part of the
CTO organization to identify whether their actions are in line withcompany values, thus providing an opportunity for self-awarenessand behavioral change

High-speed
polishing/
low scratch

Realization of
FunctionsChemistry to Synthesize Chemistry to Formulate
Materials technology

Application technology

Organics/polymers analysis

Molecular dynamics calculation

Inorganics

Interface/surface control

Structure analysis

AI

Polymers

Mixing/dispersion

Quantum chemistry calculation

MI

Aluminum alloy

Materials processing

TechnBusiness creation/
development

Heat management

Innovation Enabling
Materials
Weight reduction

Formulation

Thinning

olog

P84 / Non-financial KPI Results and Targets

Results in 2023

Co-creation and enhancement of aggressive IP activities:C ollaborated with business units to visualize and strengthen theintellectual property portfolio of each business and to actively
utilize rights to secure a competitive business edge

65

Co-creation with internal and external partiesS trengthening of R&D and intellectual property
strategies
Human resource development

Microfabrication

Mobility

Chemistry to Think

Non-financial KPIs

Semiconductor andElectronic Materials

Low dielectric

Evaluation/simulation technology

Issues to Be Addressed

echn

gh t

hrou

st
tion

n

ratio

nteg

yi
olog

y en

han

cem
e

Chemicals

nt th

roug

h bu

sine

sses

Examples of Areas of Focus in New Materials and Technologies
In the creation of new materials and technologies, we will focus on
high-speed communications, power semiconductors, and innovative
materials in fiscal 2024 as we conduct R&D for innovative technologies in fields such as photoelectric fusion, next-generation communications, bonding technology, and environmental protection.

We will also steadily refine our elemental technologies such as
dielectric reduction, dispersion and mixing, heat management, theevaluation processes for these technologies, and our technology for
resolving trade-off characteristics, thereby streamlining our productdevelopment cycle.

Creating new materials and technologies in high-speed communications, power semiconductors,
and innovative materials as focus areas in 2024
High-speed communications

Power semiconductors

Innovative materials

Field

Technology

Innovativetechnology• Photoelectric fusion materials• Next-generation communications materials

Innovativetechnology• Low-cost bonding technology• Technology for bonding
different materials

Innovativetechnology• Environmentally-friendly
technology

Elemental
technology• Low-dielectric technology• Dispersion/mixing technology

Elemental
technology• Heat management technology• Evaluation processes

Elemental
technology• Technology for resolving
trade-off characteristics

ExamplesAdhesives for
New highly thermalphotoelectric fusion
conductive filler

Sintering copperTechnology for bonding
different materials

Low-melting glass

Low-elasticity,
low-shrinkage resin

66

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

R&D and Intellectual Property Strategies

Co-creation with internal and external parties

Place for Co-creation

We are carrying out co-creation efforts in cooperation with eachorganization within business units, internal organizations, andexternal stakeholders with the aim of increasing the probability ofachieving results with our research. In 2024, we established the
Research Institute Strategy Department with the aim of further
collaboration between the Semiconductor and Electronic Materials

Segment and the R&D divisions, the two areas on which we arefocusing our efforts. The department is responsible for formulating
strategies related to semiconductor power electronics, newthemes, and the development of new products and elemental
technologies.

Support for each organization within business units
Packaging Solution
Center Kawasaki &Silicon Valley

Semiconductor andElectronic Materials

Innovation Enabling
Materials

Mobility

Chemicals

Newly established!

Cooperation
with internalorganization

Research Institute Strategy
Department

CMO
organization
Innovation Center

CFO
organization,
etc.

Establishment of
key technologies

R&D Planning Department

Cooperation

Research Gate Island
Institute for Advanced
Integrated Technology
Institute for Polymer
Technology

PMiC
Stage for Co-creationRole of the R&D organization

A model for technology landmarks
Company-wide infrastructure!

Collaboration among
business units

Common development
platform

Material analysis
Development support
Computational sciencefor business units
Power modules
Development of lacking
Battery evaluation
technologies
Securing competitive edge
Synergies between technologies

Collaboration
among
business units(vertical andcross-divisional)

CommonplatformNew
technology(computing
searchand analysis)

Research Center for Computational Scienceand Informatics

Aggressive
New technology intellectual property

searchDevelopment of
Building an IP (Intellectual
elemental technology
Property) network
Short- andIntellectual property DX
medium-term themes
Development of young researchers
Search, exploration, and hypothesis testing

Material Science and Analysis Center

Intellectual Property
Department

TopicsCreating Technologies for Use in Space throughVoluntary Employee Activities
The Japan Aerospace Exploration Agency (JAXA) invited applications for research on “Open Innovation Hub for Expanding Humanosphere and Domain of Human Activity through Solar System
Frontier Development.” We made a proposal for research into aheat storage and utilization system for use on the lunar surface
that utilizes moon sand, which was accepted as a “Challenge Type”
research program. This research was proposed byour employees participating in REBLUC*. We started
joint research with JAXA in April 2024.
* REBLUC: Resonac Blue Creators, an in-house community aimed at nurturing young influencers

67

At PMiC (in Oyama City, Tochigi Prefecture), which we establishedin 2023, we have a lineup of materials, such as high-heat-resistantcoating materials for power modules and high-heat-dissipation
coolers, and conduct material evaluations based on customer
requirements. By sharing verification details, we propose the mostsuitable materials for our customers, thereby providing support
for technological innovation from the material development stage
and helping to shorten development time. We plan to expand thespace for co-creation with customers and introduce new equipment by the middle of 2024.

Cooperation with external parties

P27 / Overview ofResonac’s Business

Enhancing the Development of Materials Related to EV Power Semiconductors
Power Module Integration Center (PMiC) proposes optimal materials for customers

Scenario for Achieving Carbon Neutrality
We have formulated a technology development scenario forachieving carbon neutrality by 2050, and are moving forward with
innovative technology development starting with the petrochemicals and chemicals businesses. In CO2 separation and capture
technologies, we are carrying out efforts to reduce separation
costs by adopting separation agents that have CO2 absorption
characteristics different from those of existing materials. By
spreading the outcome of these efforts in society ahead of the restof the world, we will secure an advantageous position in thegeneralization and standardization of these technologies, pushforward with our intellectual property strategy, and promote thesuperiority of our technologies that cannot be imitated by othercompanies.

Sinteringcopper paste

PMiC is a platform for co-creation from an application perspective. PMiC is a platform for co-creation from an application perspective. We are strengthening cooperation with the relevant business
units with a focus on power modules, battery evaluation, simulation-centric computational science, material element technology,
and analysis. PMiC will support the business units from a researchand development perspective by carrying out proactive proposals
to strengthen module sales, such as for carbon footprint reduction.

SiC epitaxial
wafersHeat-resistantsealing resin

Ceramic heatdissipation filler
xEV
Prototype

Thermalconductive sheet

Heat-resistantcoating agent

Radiator

Resin water
jacketPower control unit
Evaluation

Power modules
Simulation

Improved fuel efficiency and range

Wide range of power module-related materials

Heat management

Proposals offering a combination of materials and components that deliver therequired performance
Shortening the time taken from power module material

development to customer adoption

Examples of co-creation using computational science and infomatics
The Research Center for Computational Science and Informatics isan organization that integrates computational science (molecularsimulation, structural and fluid simulation) and informatics (AI, MI*,
image analysis, natural language processing, and development of
the infrastructure for data utilization) technologies at a single

location. The Center’s mission, as an infrastructure for all businesssegments, is to position Resonac as a world-class functional
chemical company. Here, we introduce examples and results ofco-creation both inside and outside the Company.

Achieved automated material inspection by utilizing deeplearning-based image analysis
Through co-creation between the Research Centerfor Computational Science and Informatics’ image
analysis team and manufacturing sites, who actually
perform the inspection, we have achieved the(In Japanese only)
automation of material inspection and significant
reduction of inspection times.

First semiconductor materials company in Japan to apply
virtual reality (VR) in product development
Experiencing analysis at the molecular level
facilitates communication between material
development experts and computational science
experts, leading to the acceleration of R&D.

Utilizing AI and deep learning to significantly shorten material
development time
Using deep learning technology that utilizes
computational and experimental data accumulated
from past material development made it possible topredict physical properties thousands of times
faster than quantum chemistry calculation.

Materials informatics co-creation: Matmerize and Enthought
Since 2023, we have been collaborating with two startups in the
U.S. to carry out co-creation aimed atexpediting material development byfocusing on the use of computational
science, AI, and MI.

* MI: Materials Informatics(In Japanese only)

68

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

R&D and Intellectual Property Strategies

Initiatives to Enhance the Value of IP
Utilization of IP Landscape in our Businesses and Evaluation of Intellectual Property Value

We are striving to build the most suitable intellectual property portfolio for each business by taking an all-encompassing view of the Company’s entire business portfolio and filing for global patents, among other means. We also formulate and implement intellectual property
strategies that contribute to our management and business, enhance our competitiveness, and achieve sustainable growth, such as thevigorous utilization of intellectual property.

At Resonac, the intellectual property department, business units,
and R&D organizations collaborate and utilize the IP landscape tovisualize the patents held by Resonac and clarify Resonac’s
position in each technological field. In addition to efforts in the R&D
field, we are also exploring new market needs by utilizing the IP
landscape to develop applications and expand functions for
Resonac and customer products. Furthermore, purchasing andprocurement departments also utilize the IP landscape to find new
suppliers and evaluate the technological capabilities of eachcompany.
Our interim goal is to have intellectual property value equal tothat of top-class Japanese companies, with the ultimate goal being
possessing value on par with leading global companies.

The value of our patents (PAI = Patent Asset Index*; registeredtrademark of Lexis Nexis) in the field of materials informatics incomputational information science, one of our core themes, hasbeen increasing significantly in recent years. In 2023, the value of
our intellectual property was 26 times higher than that of rivals,
indicating our competitive advantage (chart on left below).
In addition, the value of our patents of next-generation semiconductor packages has increased since 2002, and has maintained acertain level of value since the 2010s (chart on right below). Goingforward, we will work to increase our market value by refining ourglobal patent filing strategy, in addition to efforts to further
improve our IP portfolio by quickly filing key R&D results in a
multifaceted and multilayered approach.

Comparison of the value of materials informatics patent assets versus rival

Comparison of the value of Next-Generation Semiconductor PKG patentcompanies

assets versus rival companies

100

1,000

Technology

Stable Earnings
businesses

Fundamental
businesses

New technology

Viewpoints and strategies tobuild IPPF (=IP Portfolio)

Semiconductor
and electronicmaterial-related
technology

Strategy focused oncontributing to management
and business

Mobility-related
technology
Innovation
enabling
materials
technology
Chemicalsrelated
technology

Efficient

Defensive

MaintainIPpositionCore Growth businesses

Focus on creating a starting point
for innovation and co-creation

Drive growthby vigorous
utilization ofIP

Focus on expanding into
growth areas

Focus on environmental
protection co-creation

For Core Growth and Next-Generation businesses, including newtechnologies and semiconductors and electronic material-related
technology, we have built a strong portfolio of industry-leading
intellectual property and are working to objectively improve thevalue of this intellectual property. In addition, we have adopted“aggressive intellectual property” as a policy to vigorously utilize
our intellectual property in a bid to drive the growth of our business, and are striving to increase earnings in a sustainable manner.
In 2023, we filed a lawsuit against four overseas companies
seeking an injunction and compensation for damages based on ourpatent rights for photosensitive dry films. We are also developing
an intellectual property strategy with a view to promoting co-creation to drive Resonac’s growth (see Topics for details).
Meanwhile, for Stable Earnings and Fundamental businesses,
we are implementing intellectual property strategies that contribute to the stabilization of business operations. In Chemicals-related

Focus on building abusiness foundation

Characteristics ofeach technology andbasic IP strategy
Drive innovation
multi-directional
activities
commensurate with theconcentration ofmanagement resources

Maintain andenhanceindustryleading IPPF

Common IP
Vigorous utilization of IP
strategy across Thorough defense of Maximize the value of from both competitive andprocesses
product-specific IP
businesses
co-creative perspectives

69

Next-Generation businesses

Strengthen IP
activities for
growth productlineupsAreas focused on

Develop IP
networks ingrowth areas

strategic IP network
construction

Contribute toco-creation forenvironmental
protection

objective
improvement of
IP value throughValue of owned patents

Businesses

26x

the averageof othercompanies(2023)

50

0

Value of owned patents

Intellectual Property Strategies

500

0

2019

2020

2021

2022

2023 (Reporting
year)

2002

2006

2010

2014

2018

2022 (Reportingyear)*Evaluation of valid patents using Lexis Nexis’ PatentSight+ patent database; PAI is calculated based on Technology Relevance of each patent and Market Coverage.

IP that drives the creation of
new businesses centered on
co-creation and DX

technologies, in addition to defensive activities to protect processes and know-how through the appropriate acquisition of intellectual property rights and thorough information management, we arealso building an intellectual property portfolio that contributes toco-creation in environmental protection activities such as KPR(business that turns used plastics into raw materials). With regard
to Innovation enabling materials technology, we are carrying out
activities to maintain the position of our intellectual properties,
such as filing for improvement invention patents, as well as anintellectual property strategy that supports our entry into growthareas from an intellectual property perspective.
Through these initiatives aligned with our business strategy, we
will endeavor to maximize our technological value and corporate
value.

TopicsEstablishing an Intellectual Property Portfolio froma Multi-directional Co-creation Perspective
We are committed to conducting intellectual property activities that lead to the establishment of a wide-ranging intellectual property portfolio that contributes to co-creation fromthe conception stage of a new business. Thus far, our focus has been on the establishment
and utilization of an intellectual property portfolio with the aim of eliminating competition
and generating earnings. Going forward, in addition to these efforts, we will develop andutilize our intellectual property portfolio from a multi-directional co-creation perspective,
including various companies, regions, customers, suppliers, startups, and academia. The
establishment of an all-encompassing intellectual property portfolio will not only attract
co-creation with various stakeholders involved in new businesses, but will also enable us
to discover new opportunities such as standardization.
In terms of specific initiatives, in 2023 we joined and became a Partner of WIPO GREEN,
a global platform for environmental technologies operated by the WorldIntellectual Property Organization (WIPO), with the aim of promoting co-creation through the registration of intellectual property related to environmental
technologies.

Community

Customers

Startups

Suppliers

Academia

Widerange ofcompanies(including rivals)

70

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Corporate Marketing Strategies
MissionPromotion of Problem-solving Marketing Processes

We will help build a sustainable society alongside the growth of our customers by identifying issues faced by society and our customers, andproposing solutions using our technological strengths. To this end, we will lead the development of skills and human resources related tointernal marketing and business creation.
Vision for the future (2030)
Creating next-generation businesses through co-creation inside andoutside the Company
Utilizing digital technology to carry out efficient marketing activities
Strengthening human resources and organizational capabilities
through cross-organizational rotation

Our value is in proposals that can solve theproblems of the market and our customers.
We will drive activities that create technologies, products, and services, and strengthen
proposals that focus on the needs of ourcustomers and those beyond them.

Through the promotion of problem-solving marketing processes
that identify technological issues faced by customers by anticipating social and market trends, we aim to develop elemental technologies and create businesses that contribute to solving these issues.
We use MGAP*1 to identify technological issues faced by customers, and carry out proposal activities by organizing them in relation
to the value provided by the features of our products, differentiation from competing technologies, and benefits to be gained by

Shigeru Fujita
CMO

Achievement of sustainable growth through the penetration of problem-solving marketing
activities
Creation of internal and external collaborative projects that connect customers (markets),
technologies, and businesses
The corporate marketing departments will provide support to strengthen the marketing
activities of each business unit, and carry out cross-divisional marketing activities including
the promotion of cooperation between business units.
It will also propose value by stepping up collaboration with R&D departments, thereby
strengthening the matching of potential market needs with R&D seeds as a function thatconnects businesses and technologies.
Development of marketers with business development skills that understand customer
needs, market trends, and our proprietary technologies
Improve business development capabilities by implementing marketing and sales development programs in marketing and sales departments and developing human resources withan understanding of the value chain

Results in 2023

Digital platform
Utilize digital marketing in cooperation with business units
Widespread adoption of CRM* tools

Create large-scale projects through the penetration of problem-solving marketing
Digital platform utilization

Providedvalue

P84 / Non-financial KPI Results and Targets

Offer proposals for next-generation themes through co-creation withcustomers
Commercialize new themes
Begin operation of new theme creation processes
Implement marketer development programs

MGAP
Anticipate and visualize society and industry
trends, incorporate them into ideas forelemental technologies and development
themes, and continuously manage themProcess evolution

Problem-solving marketing processes

Information/frameworks

Organization/human
resources

Globally roll out digital marketing and CRM tools

Technology
development

For Resonac’s
corporate
activities

Accounting

Plans for 2024

Create new business opportunities for markets and customers,
thereby contributing to the sustainable growth of society

Organization

PeopleSecuring of anadvantage

Monetization

Co-creation of VP*3
Develop business
opportunities (VPs)
that directly lead tosales together withbusiness units

Business planning
Provide total business coordination
to maximize profit opportunities,
such as the provision of tools andpromotion of collaboration between
organizations

Framework for creating new large-scale themes

Strengthen business strategies and relationships withkey customers(Understanding our company)
Discover and build up corecompetencies(Trends) Insight via MGAP

Marketing automation tools

CRM tools

Projects closely linked tobusiness units

Optimal and flexible
projects

Marketing expertise

Diverse experiences full of
individuality*1: MGAP: Multi Generation Application Planning(Preparation) Innovation Center

Proactively promote vision co-creation
projects conducted by BUs and the CTO

Human resource rotation*2: MA: Marketing Automation*3:VP: Value Propotision

TopicsPlace for Co-creation
As a venue for triggering co-creation and relationship building with stakeholders, the Innovation Center is established on the 29th floor of Pacific Century
Place Marunouchi, just a two-minute walk from the Yaesu South Exit of Tokyo
Station.
The Innovation Center aims to explore new themes through interactive
communication. Hands-on exhibits enable visitors to experience some of ourcore technologies, thus facilitating achievement of our goal of engaging in
co-creation with customers, business partners, and all of our otherstakeholders.

Social needs
Business creation

Marketingprocess*CRM: Customer Relationship Management

71

Propose products and services that solve
technological issues faced by markets andcustomers with the aim of solving social
issuesNon-financial KPIs

Issues to Be Addressed

Market development
Promote co-creation activities with customers
Promote commercialization of new themes
Review processes for creating new large-scale themes

For society

customers. We are also working to improve the efficiency ofmarketing activities and visualize the results through the increased
operation of digital tools such as MA*2 and CRM.
In addition, we are focusing on developing human resources that
can autonomously carry out a series of proposal activities, alongside efforts to build a process foundation that enables the continuous proposal of solutions.

Co-Creation with Customers: Promoting Proposals with an Eye to Next-Generation Power Modules

Innovation Center (Chiyoda-ku, Tokyo)

We endeavor to solve customer-oriented issues. For example, we are working to strengthen our ability to propose power module-relatedmaterials with the aim of developing next-generation power module technology. In order to solve such issues, we carry out co-creation withmajor customers, and also utilize the Power Module Integration Center (PMiC), which possesses material development capabilities and power
module evaluation technology, to conduct module evaluations quickly and efficiently. Through these efforts, the Corporate Marketing
Department, PMiC, and business units work together to solve issues through co-creation by making proposals to customers on the enhancement of individual materials, selecting from a wide range of materials, and combining materials.
P68 / R&D and Intellectual Property Strategies

72

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Digital Strategies
MissionStrategies and Steps to Achieve Digital Innovation

We will evolve and refine our business processes both internally and externally through advanced and thorough utilization of digital technologies and data and lead the transformation of our organizational culture. In addition, through the development of core digital-proficient humanresources and their optimum assignment, we will continue improving and transforming our businesses and contribute to society together
with stakeholders.
Vision for the future (2030)
D igital transformation is promoted in all businesses and operations, and resources are concentrated on core operations that are the source of ourcompetitiveness by 2030. We promote co-creation with stakeholders and contribute to the creation of high social value. The automation of routine
and back-office work is also progressing.

By updating our business systems to an open and secure architecture, we aim to enable efficient data management. First, we willdevelop infrastructure and strengthen systems geared towardutilizing IT and digital technology. We will also strive to improve
our data-based competitiveness.

CDO Organization
Vision2024-2025

2026-2030

Infrastructure development and system enhancement
to support IT/digital technology

Increase competitive edge throughdata-driven operations

Review infrastructure

Issues to Be Addressed
Short term (2024 to 2025)
Optimization of TCO*1 and reconstruction of IT/DX infrastructure
Strengthening of cooperation with business units and plants
Promotion of advanced digital tools usage

Long term (2026 to 2030)
Review of core systems
Increased sophistication of operations through data utilization
Co-creation of new business models

Non-financial KPIs
Data-driven managementP romotion of digital transformation anddevelopment of professional-minded humanresources
Enhancement of IT and digital literacy

Steps/Action for
Achievement

In order to achieve the goals above, we will allocate IT/DX
business partners, connect IT/digital technology with work sites,
and make efforts to solve issues by conceptualizing and planning,
introducing systems, and improving work processes.

• Identify optimal costs andoptimize costs•D evelop system infrastructure• Strengthen collaboration
with IT/DX business
partners, etc.

Strengthen
infrastructure andbusiness structure• Optimize lifecycle costs,
management•E nhance sophistication of
security measures•E xpand the use of digital tools
such as generative AI, etc.

Enhance sophisticationof businesses andoperation•U pdate core systems• Increased sophistication ofoperations through datautilization• Shift to high value-added
operationsC reate differentiationand competitiveness• Transform existing business•C o-create new businessmodels•C reate new businessservices using advanced
technologies

P84 / Non-financial KPI Results and Targets

Co-creation Case Study

Development of Generative AI “Chat Resonac”
Results in 2023

Plans for 2024S tarted using data visualization tools (BI tools) to visualize andanalyze management figures at the Management Committee
Started process planning to visualize and reduce GHG emissionsC ompleted defining role of IT/digital human resources based on
the i Competency Dictionary advocated by IPA*2 for humanresources within the CDO organizationU tilized AMI’s AI-based image recognition technology anddigital-proficient human resources with skills in simulation
technology as company assetsD evelop infrastructure and enhance systems aimed at realizing IT/
digital utilizationS trengthen cooperation with business units and plants through IT/DX
business partners
S upport the use of advanced digital tools (create synergies with AMI,
promote the use of digital tools such as ChatGPT)*1: TCO: Total Cost of Ownership *2: IPA: Information-technology Promotion Agency

Also focusing on developing digital-proficient human resources!
Human resource development for all employees
In order to develop human resources who can utilize IT/digitaltechnology, we have categorized IT/digital literacy into four levels.
In fiscal 2023, we provided a basic IT training program for all
employees as Level 1 (entry level). In fiscal 2024, we will focus on
Level 2 (daily use) and Level 3 (business use), and conduct a
training program that focuses on the utilization of the IT and digital
tools that have already been introduced. We will also focus on
training and human resource development for employees that areleading the use of IT and digital technology in the field.

73

Human resource development for specialist personnel
For IT/digital professionals, we conduct assessments to visualize
their skills. In addition, we provide advanced IT/digital training
programs tailored to their expertise to support further growth. We
also create a talent portfolio and formulate plans to develop the
specialist human resources needed for our businesses.

We have developed a generative AI system called “Chat Resonac,” an exclusive
environment for ChatGPT that allows us to easily retrieve necessary information from a vast amount of data, including handwritten notes related todevelopment and manufacturing. Since it is an in-house system, there is norisk of information leaking outside the company, enabling employees to use it
safely and securely. We also provide appropriate support, such as conducting
training on how to use it and sharing information on utilization, so that
employees can use it efficiently in their day-to-day work.
The close exchange of information and mutual understanding between thedevelopment staff and on-site employees also contributed greatly in establishing this system. In addition to this companywide system, the Research Centerfor Computational Science and Informatics is taking the lead in conducting ademonstration experiment for specialized Chat Resonac that can also utilize
internal documents.
In order to maximize the benefits of generative AI and realize more efficientand creative work, we plan to actively promote the spread and use of Chat
Resonac.

Example of generative AI application
Internal documentsfrom former Showa
Denko

Internal documentsfrom former Hitachi
ChemicalExternal network
Internal
information isprotected

Chat ResonacS upporting document creationA lign rules on safety of production equipmentR eferring material composition and analyticaldata

Applied an AI model to Refine Quality Anomaly Analysis and Started Verification of Production Yield Improvement
At business units, with the growing quality demands from our customers, faster and more detailed customer support are being required. For
example, one business unit faced the challenge of reducing and refining the time needed to analyze the causes of product quality issues. To
tackle this issue, we are leveraging digital technology to co-create with business units in solving problems. This includes developing AI
models that accurately predict product quality by analyzing process, material, and inspection data using machine learning. This model has
the ability to identify parameters that contributed to predicted quality (interpretability), and by providing humans with knowledge, it cancontribute to shortening the time required for factor analysis. At this stage, we have completed a prototype based on this model, enabling us
to achieve high accuracy. We plan to continue verification efforts and determine its usefulness in 2024.

74

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Please visit our website for moredetails on our policies, promotion
system, and activities.

Human Resource Strategies

Resonac’s source of value is its human resources. By using the Company’s diverse rangeof technology platform as a base, these human resources combine differing technologies
to create functions. In this section, we introduce the human resource portfolio strategy for
the Electronics Business Headquarters, which is particularly focused on efforts to develop
co-creative talent.

MissionTo enhance our corporate value, it is essential that we fully align our business strategies (portfolio strategy) with our human resource
strategies. We will strive to foster a culture of co-creation unique to Resonac through the implementation of our Purpose and Values, thereby
achieving further growth of our business by creating “co-creative talent*.”*Co-creative talent: Human resources that can innovate and solve problems creatively through co-creation founded on autonomous bonds with people inside and outside the company in the pursuit of resolving social issues

Issues to Be Addressed (Material Issues for Human Resources) and KGIs

Nori Imai
CHRO

Human Resource Portfolio Strategy Linked to Business Strategy

Four issues are linked to our material issues of “fostering autonomous and creative human resources and cultivating the associated corporate culture” and our business strategy. Based on these four Material Issues for Human Resources that fosters co-creative human resources
talent over the long term, and in the short to medium term, we will promote measures to enable co-creative talent to achieve businessgrowth as a functional chemical manufacturer.

Purpose and Values

In order to realize each of our business vision for the future, we will organize and define the skills and competencies required for eachposition and establish a staffing plan based on the status of fulfillment of the required human resources.
For example, in the Electronics Business Headquarters, which is responsible for the semiconductor materials business, a Core Growthbusiness, the roles of development engineers have been subdivided to formulate a unique human resource portfolio model. Based on this, we
determined the staff structure of the business we should work to achieve in five years’ time, clarified the current gaps, and implemented
measures in each of the areas of recruitment, shifting resources, retention/ engagement, and engineer development.
Examples of Electronics Business Headquarters

Business strategies

Businesses

Financial strategies
Human resource portfolio strategies(establishment of human resource portfolio model)

HR Materiality 1
Hire & Develop talent for the business

Establishment of a functional talent portfolio that cankeep pace with the speed of our operations as afunctional chemical manufacturer
KGI
Future talent portfolio formation
Succession planning readiness rate

Become an Employer ofchoiceEmployer branding to become acompany that is selected by employees
by disseminating our appeal to thelabor market and improving theengagement of internal humanresources
KGI
Hiring plan fulfillment rate
Detrimental voluntary turnover rate
Engagement score

Fostering co-creative
talent to realize businessgrowth as a functional
chemical manufacturer(short- to medium-term plan)

HR Materiality 4

Human resource initiatives aimed at realizing our ideal human resource portfolio

Develop self-driven
professionals

Creation of professional-minded
human resources who can pursue
vibrant and autonomous careers andmaximize their individual abilities
KGI
Internal promotion rate

Recruitment of top talent withhighly specialized skills fromoutside the Company
Recruitment of new graduates,
mainly those specialized in thechemical and IT fields

Cultivate corporate culture conducive
to co-creation

Organization that creates co-creative talent(long-term plan)
Organization

See here for KGIs/KPIs of HR materiality

Shifting resources /Strategic rotation

Recruitment

HR Materiality 3

Cultivating a rewarding corporate culture whereco-creation can occur, in which diverse individuals arerespected with a high degree of psychological safety
KGI
Purpose and Values implementation survey score

75

Personnel vision: Increase the number of R&D staff by 10% or more in 2028 compared to 2023

Employees

Labor Market

HR Materiality 2

Actions linked to business strategy
Strategic workforce planning linked tobusiness direction
Leadership development to drive
businesses
Dissemination of our appeal to the labormarketActions linked tosustainability strategy
Maximization of diverse
individual abilities
Development ofautonomous humanresources
A culture of co-creation

P86 / Non-financial KPI Results and Targets

Proactive acceptance of highly
motivated engineers from otherdepartments (internal
recruitment)
Strategic rotation of humanresources to core growth areasin specific areas of expertise

Retention / Engagement

Engineer development

Onboarding program for new
employees
Mentoring of personnel
transferred from otherdepartments

Fostering a corporate culture ofmutual training and co-creation
in a wide range of technicalfields within the Company
Improvement of problem-solving skills through participationin external co-creation
activities
MOT (Management of Technology)
selection and recurrent education

Strategic rotation with the CTO
organization

Fostering a culture of co-creation
within business units

Skill improvement through cocreation with external partners

We are implementing mutual rotation measures
between CTO organization’s researchers and thedevelopers at the Electronics Business Headquarters’ development center. Researchers gain
experience at the development center to acquire a
deeper understanding of materials and customer
needs, leading to the improvement of research at
the CTO organization. Meanwhile, developers at
development center share more practicalknowledge and experience regarding semiconductor materials within the CTO organization, leading
to more efficient and practical research.

Since combining and aligning laminate
materials until they become products is anextremely complex process, they are difficult
to manufacture without cooperation between
the responsible personnel in business units.
To enable prompt action in these processes,
we have been rotating personnel between
departments. A corporate culture ofco-creation has already taken root, in whichbusiness unit leaders are constantly taking
the lead in communication within theorganization.

JOINT2, a consortium for evaluatingnext-generation semiconductor packaging,evaluates and examines semiconductor
processes in cooperation with professionals
from many companies. This consortium
enables us to obtain knowledge about
facilities and processes that we could not
obtain independently, helping to greatly
improve our ability to propose materials tocustomers.

Even in R&D, this experience, which has brought us closer to our customers, will help us
P59
realize our Purpose: “Change society through the power of chemistry.” Please see
to read the roundtable discussion on these initiatives.
In addition to Business Headquarters, we are also planning for training to gain marketingand other experience.
Masato Fukushima
CTO

76

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Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Human Resource Strategies

We have been speeding up the implementation of various humanresource initiatives aimed at optimizing human resource management on a global scale. In particular, from 2022 to 2023, we carriedout major reforms to key human resource initiatives, such as theintegration of personnel systems, the establishment of the talentmanagement system, and the introduction of a new humanresource system. In line with the business integration, the entire
system was completely revamped in a very short period of time,and operations have already begun.

With regard to measures such as the development of coremanagement personnel, talent reviews, and succession planning,
we have introduced a human resource management system thatmeets global standards to establish a digital foundation for humanresources. We are also building a system that enables datautilization in accordance with these measures.
From 2024, we started rolling out these measures, which had
been implemented mainly in Japan until 2023, on a global scale
across the Group.

Schedule for the implementation of personnel measures
2023

Preparations for introducing new
human resource systemC onsideration of framework forearly selection of core management personnelS tart the introduction of talentreview
Creation of CXO/BU leader
succession plan (implemented
outside the system)
Start the introduction ofco-creative leadership trainingS tart the introduction of training
sessions to bolster the co-creative
collaboration capabilities

Priority Measure (1)Business integration

2022

2024

Integration of personnel
systems (Japan)Introduction of new humanresource system (mainly in Japan)S election and development ofcandidates for core management personnel (Japan)
Implementation of succession
planning / talent review (Japan)Implementation of co-creative
leadership training (Japan)
Implementation of training
sessions to bolster theco-creative collaboration
capabilities (Japan)

Global development• Introduction of global grades• MBO unification•S election and development ofcandidates for core management
personnel• Succession planning / talentreview• Co-creative leadership training• Implementation of training
sessions to bolster the co-creative
collaboration capabilitiesR ealization of a dynamic
portfolio that aligns with ourbusiness strategies
Recruitment and strategic
development of candidates forcore management personnel,
and establishment of a diverse
pool of talentR ealization of autonomous
career development throughinternal recruitment on a global
scale, etc.

To develop leaders that foster co-creative talent: Co-creative leadership training

We have been conducting co-creative leadership training since
October 2022 with the aim of becoming an organization with highhuman resource development capabilities. As of May 31, 2024, 1,448
employees were enrolled in the program. Many managers withsubordinates and employees in non-managerial positions responsible for training the next generation through on-the-job training (OJT)
are also taking this program.
Co-creative leadership training involves re-learning andpracticing basic knowledge and skills in people management basedon the results of the engagement survey carried out prior to
Resonac’s establishment. Employees learn about MBO, key points
for effective on-the-job training, and giving appropriate feedback
and coaching.
Through the extensive group work and role-play activities
provided in the training program, participants not only gain
knowledge, but are also given the opportunity to review practicalsituations. Training is carried out by in-house instructors.
In a survey we conducted among training participants, 92% weresatisfied with the content, 95% found it useful, and 96% said they
Feedback from participants

77

Vision for the future“ There were many training exercises and it was a very meaningfultraining.”“ I experienced coaching on a 1-on-1 basis, which reminded me how
useful it is.”“ The training reaffirmed the importance of communication and how
difficult they can be.”could see how they would immediately apply what they learned in
the workplace.
We started working on global development in 2024, and aretraining in-house instructors in Europe, China, the U.S., andSoutheast Asia, and implementing the leadership training.
Going forward, we will continue to implement these measures
as a foundation for the Resonac Group’s human resource
development.

Priority Measure (2)To implement our unique human resource strategy on a global scale: Global grading andevaluation system

As part of efforts to globally develop various personnel systems,
particularly grading and evaluation systems, we have been taking
measures to unify grades of management staff (global grades) andevaluation systems (MBO) across the entire Group.
By unifying these grade and evaluation systems, we not only
established common standards for roles and evaluations acrossthe Group, but this has also led to the global development of otherpersonnel measures, such as talent management including
succession planning and training. Furthermore, our MBO not only

Priority Measure (3)To develop the next generation of leaders: Talent management

We launched a “company-wide talent review” meeting to give themanagement team an opportunity to openly talk about organizational issues, as well as about succession candidates and the next
generation of leaders. In addition to holding discussions on the
succession plans and the human resource development policies
formulated by business units, we have also been working to build atalent pool (candidates to serve as the next generation of leaders)managed by the entire Resonac Group. In 2023, we conducted abottom-up talent review of all leadership positions in Japan(approximately 1,300), with the CEO as the owner. As a result, more

Talent review

Target positions

Owner/Meeting body

CEO

CEO

(process shared with Nomination
Advisory Committee)

CXO/BU head

CXO/BU head-2

CXO/BU
head

Review meeting for own
organization

CXO/BU head-2 or higher, number of positions:approx. 300

Percentage of line
managers who participatedin management enhancement training

Results in
2023

Targets for
2024

Targets for
2025

70%

85%

90%

CXO/BU head-3

CXO/BU head-3 or below, number of positions:approx. 900

KGIs/KPIs
Succession planning
readiness rate (KGIs)

Example of registration to
the system

Companywide Talent Review
meeting

CXO/BU head-1 or higher, number of positions:approx. 100

KGIs/KPIs

than 90% of the eligible positions have formulated succession
plans and completed system registration, and discussions onhuman resource development have begun at each workplace.
Going forward, we will expand the scope of this review globally,and start considering the visualization of high-potential talent fromoverseas and the adoption of cross-border job assignments. In
addition, the status of talent reviews is regularly reported to theNomination Advisory Committee to confirm the appropriateness ofthe process.

Formulation of succession planand training plan

CXO/BU head-1

Training being carriedout in Europe

evaluates “results against performance targets,” but also emphasizes “action and growth,” and evaluates the degree to which values
are put into practice.
This has made it possible for us to promote the permeation andpractice of values across the entire Resonac Group, realize humanresource/performance management on a common global metric,
and to establish a common foundation for human resource systems.
Going forward, we will take further measures to ensure that theright person is in the right position on a Group-wide basis.

Leaders

Each organization
inputs data

Results in
2023

Targets for
2024

Targets for
2025

135%

150%

180%

CXO

Bottom-up
The manager
reviews thecontent enteredby the incumbent(leader)This content isthen reviewed bya superior
managerDevelopment
periodPotential
performance

1-2
years

3-5
years

3-5
years

Ready
Now

High

High

High

MiddleHigh

High

MiddleMiddleSkills78

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Contents

02-3 Sustainability
79

Message from Chief Sustainability Officer

81

Promoting Sustainability

83

Material Issues and Non-financial KPIs

87

Cross-talk Between the CSuO and On-site
Staff in Charge

89

Toward the Future - Co-creation with Omachi
City, Nagano Prefecture

91

Resonac Pride Products & Services

93

Environment

95

Climate Change Strategies

99

Biodiversity Strategies

100

Toward Circular Economy

101

Response to Environmental Risks

102

Occupational Health and Safety

103

Quality Assurance

104

Chemicals Management

105

Sustainable Procurement

106

Respect for Human Rights

107

Compliance

108

Enhancement of the Group Management System

109

Risk Management

111

Identifying and Prioritizing “Companywide
Key Risks Themes”

Nami Matsuko
Chief Sustainability
Officer (CSuO)Our Goals and Challenges

How to promote sustainability and the role of the
Sustainability Promotion Council
Creating a forum for trial and error in finding ways toovercome challenges
The first step we took in 2022, one year before the official
launch of Resonac, was to identify materialities. From this,we set non-financial KPIs, aligned them with our long-term
vision and linked sustainability with management.
Non-financial KPIs tend to be dry, top-down figures frommanagement that must be achieved. We set aside thetextbook model for the moment and discussed the vision for
the future each department has for 2030. We then compiled
qualitative and quantitative non-financial targets from theperspective of what needs to be achieved by 2025. We aremonitoring our progress regularly and reflecting on whether
the content is what employees can agree to and work on,whether the KPIs are in line with what we originally wanted
to do, what initiatives will strengthen management and allow
Resonac to generate profits, and whether we are responding
to prevent sudden value impairment.
P87 / Cross-talk: “How We Overcome Our Challenges”

How We Change Society

Aiming to make sustainability“everyone's business”

Why does Resonac work on sustainability?

Resonac changes society through the power of chemistry
Sustainability is always at the core of our management“Sustainability is what companies that are alreadygenerating good profits do, after they establish a system fordoing so.” Such view may be the majority in the world.
However, Resonac is currently working on sustainability sothat we can generate more profits. Resonac is a company
that is committed to “changing society through the power ofchemistry.” In order to develop our power to generate
profits in good faith and create the future we all hope torealize based on our stated Purpose, it is essential to placesustainability at the core of management.
While chemistry has a bright side that solves various
social issues, it also has a dark side that burdens theenvironment and society. As such, Resonac cannot address
sustainability with just high-sounding talk. We believe thatgenerating profits and changing society for the better, and79

Who We Are

the bright side and dark side of chemistry, are notcounterparts that conflict with one another but rather
factors that can be brought into agreement across time andspace. When those factors align, both the improvement ofcorporate value and the state of the society andenvironment surrounding us are sure to follow as a result.
With this belief, we engage in our sustainability activities ona daily basis.
On the topic of sustainability, I believe that what ourvalued stakeholders are currently keen to know most about
is not the quantitative results, such as the absolute value of
CO2 emissions or the ratio of female managers, or proof
which non-financial efforts have led to financial results, butrather the background of the issues, how we are trying toovercome them, and whether they can be linked to ourearning power.
In the next section, together with our colleagues, we will
convey our current situation in response to your questions
and the path of our efforts with an eye to the future.

The Sustainability Promotion Council is a forum fordiscussing such themes that should be addressed on aGroup-wide basis. In order to create a common language forsustainability, from 2022, the CEO, all CXOs, BU heads, andsustainability partners from each department discuss awide range of themes every month. Starting in 2023, webegan attaching “frustrating (MOYAMOYA)” or “exciting but
nervous (DOKIDOKI)” marks to each theme. Our idea is totake the opportunities and risks that have not yet become
apparent due to the barriers between department and makethem “everyone’s business” rather than feeling frustrated
alone about them, by discussing them in an open forum
about who should take the lead, how to set priorities among
them and how far they should be addressed currently whilelooking to the future. “Exciting” marks a proposal to share
the requests of advanced customers and leadinginternational regulatory trends, in order to understand thecurrent situation in which addressing sustainability is
directly linked to business competitiveness, and move
forward to the next step.
To begin with, sustainability is not about achieving aperfect score under some predetermined criteria. It is amoving target that should change according to society, thetimes, and our own company’s circumstances. Work ing on
this also means pursuing the “Resonac style,” which has nocorrect answer. In order for Resonac to generate profits ingood faith on a permanent basis and have the power tochange society for the better, we will continue to workthrough trial and error to find better methods with our

Corporate Governance Reform

Data Section

management team, sustainability partners in eachdepartment, and all of our colleagues who aspire to workon sustainability.
As for organizations, in 2022 we established a Sustainability
Department under the Strategy Division, and took an
aggressive stance which includes communicating information.
We started by changing what we do, who does it, and how we
do it, from the traditional organization that merely complies
with laws and regulations and responds to timely disclosure.
In 2024, we started the CSuO Division with the aim offurther integrating sustainability with management andbusiness strategies, rather than separating them. As theChief Sustainability Officer (CSuO) and a member of theManagement Committee, I believe that we must draw on thewisdom of our colleagues in each role in as we consider
measures to change society and generate profits throughsustainability, including proposing changes to thepresuppositions of the question itself, in response to thetough challenge of “generating profits vs. sustainability.”
The future we seek to realize together
Become Resonac of Choice
One of the two pillars of Sustainability Vision 2030 for
Resonac is to be “a company with like-minded partners
throughout the world.”
We aspire to be a company that is chosen by like-mindedpeople, customers, and business partners all over theworld, and for Resonac itself to choose such like-minded
partners. The integrated report and the first sustainability
meeting held in December 2023 were intended to widely
share this concept with our stakeholders.
We are also focusing on “fostering a sustainability
mindset” within the company. We will connect and support
the many colleagues who aspire to change society to besustainability-oriented, and take action with them to makeit a reality. I am certain that these efforts will eventually
bear fruit in the form of products and services such as“Resonac Pride,” thereby further strengthening Resonac’s
earning power.
P89 / Roundtable Discussion: Toward the Future - Co-creation with Omachi City, Nagano Prefecture
P91 / Resonac Pride Products & Services

Resonac’s goal of sustainability is one that we promoteas “everyone’s business.” We hope to increase the numberof people who are able to see sustainability as their own
issue, and together we can overcome organizational andrevenue barriers that one person or department cannot
overcome alone. I am sure that an uplifting and delightfulsociety will await us beyond the frustration and excitement
we currently face. Please join us in the journey as we strive
to realize our aspirations.
80

RESONAC REPORT 2024

Contents

Promoting Sustainability

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Resonac’s sustainability initiatives (history)

Resonac positions sustainability at the core of our management. In order to “change society through the power ofchemistry” and to become a “Co-creative Chemical Company,” we have established “Sustainability Vision 2030,” identified
material issues for sustainability, and we are promoting initiatives linked to these materialities.
P83 / Non-financial KPI Results and Targets

Sustainability Vision 2030
Achieve corporate growth through the resolution of social issues
Develop into a company that realizes its own continuous growth and corporate value improvement, by solving social issues and offering value to society throughits technologies and businesses
A company with like-minded partners throughout the world
Become a “Co-creative Chemical Company” that is the first choice of, and can choose, partners in creating a sustainable and better society, including future
generations of customers, employees, investors, and stakeholders

In January 2022, when the former Showa
Denko and the former Hitachi Chemical
effectively merged, we established theSustainability Department and have beenpromoting our sustainability strategies
ever since. Starting in 2024, under theleadership of the Chief Sustainability
Officer (CSuO), we have been working on
various initiatives to achieve our Purpose.

2024 (Sustainability Division)
2022 (Strategic Division)- 2021

CSR: passive
Activities centered oncompliance andresponsible care
Started proactive
information
communication!

Data Section

Sustainability:
proactive
Positioning Sustainability at
the Core of Management(Feb. 2022 Long-term vision)

Promoting sustainability
more holistically
Improve corporate value
through further integration withmanagement strategy
playing
our role

takingour
responsibilities

Purpose: Change society through the power of chemistry

Major progress and plans
See here for 2023 Sustainability Promotion Council agenda

Sustainability evaluation in executive compensation
We have included sustainability evaluation items in the
short-term performance-linked items for executive
compensation, and linked them to compensation.
Based on discussions on the roadmap to achieving
non-financial KPIs linked to materialities, we evaluateeach executive by setting different evaluation items fortheir respective areas of responsibility.
At the same time, we also set common items such as
safety and successor training, and these items aredesigned to link with employee evaluation throughmanagement by objective (MBO).
Positioning linkage with compensation as animportant measure for promoting sustainability, we
will continue to consider how best to incorporate
sustainability evaluation in executive performance
evaluation.

81

Cultivation of a sustainability mindset among employees
We implement various programs to support employees in gaining the power
and perspective to achieve our purpose of “change society through the powerof chemistry.” We set the necessary information and communication for eachlevel and organization, and are measuring the effectiveness of whether it
leads to behavioral change. Starting in 2024, we launched the “Matsuko
Channel,” in which the CSuO will broadcast monthly videos for all employees
detailing the contents of the Sustainability Promotion Council and otherevents. Our aim is to make the current sustainability initiatives more familiar
to employees by speaking directly to them in both Japanese and English. In
addition, we hold “social issue meetings”
and “workshops to understand Resonac
through the integrated report” acrossdepartments, so that we can explore seedsof business and points of contact withsociety.

Trial and Error Period ( - 2025)

The CEO supervises Resonac’s sustainability and the CSuO is responsible
Board of Directors
for the promotion of sustainability. The Management Committee deliberates
Management Committee
and decides on important items such as policies and plans and thenEach department of the Resonac Group
consults with and reports to the Board of Directors.
Sustainability Promotion Council
Sustainability
Chairperson: CEO
Leaders of
The Sustainability Promotion Council convenes a monthly meeting that
Partners
each project
Members: CXOs, BU heads
Sustainability(ex.)
Responsible forGroup CXOs, including the CEO, attend, and quarterly expanded meetings,
Carbon neutrality
cross-organizational
Department
Carbon Neutrality
Carbon footprint calculation
collaboration,
which is also attended by the business managers (BU heads), as forums for
Resonac Pride productsrole adjustment
Project
discussing wide-ranging agenda items of sustainability-related topics andand services
within the organization,
Social contribution activities
information transmission,
Human Rights Project
fostering a common understanding. In addition, to address specific issues
Information disclosure,appropriate assignment,
etc.
etc.
with agility and on a cross-organizational basis, several projects have beenSocial Contribution
established, which report to the council.
Working Group, etc.
In order to link the discussions in the council to organizational
operations and share them with employees, we have appointed sustainability partners (promotion managers) in the business units and
CXO organizations, and we are promoting sustainability initiatives in each department while understanding the current status, issues,and interests of each unit. Moreover, by creating opportunities for horizontal communication among Sustainability Partners, we
encourage active exchange of information on changes in customer requirements and other issues that transcend differences among theindustries we serve.

Preparationand Launch

Sustainability management2022

We started monthly Sustainability Promotion Council
meetings (attended by CEO and other executives),
set materialities and non-financial KPIs, and beganorganizing data within the Group. We began strategic
information communication, including the integrated
report.

2023

We positioned the year as the first year of carbon
neutrality and launched a company-wide project.
We brushed up on non-financial initiatives. We
appointed sustainability partners in eachdepartments. We held the first sustainability
meeting.

Established the Sustainability Department in theStrategy Division
Launched the Sustainability Promotion Council
Set the Sustainability Vision 2030
Identified materialities
Set company-wide non-financial KPIs
Established “Our Code of Conduct”
Strengthened environmental initiatives
Set HR materiality, KGI, and KPIAppointed sustainability partners
Incorporated sustainability evaluation items into
executive compensation
Started global human rights training
Released Sustainable Procurement Guidelines
Held first sustainability meeting for investors
and stakeholders

See here for materials and videos from thesustainability meeting.

2024

Business Units: Promote carbon neutrality, humanrights initiatives, Resonac Pride products andservices certification, etc.
Functions Divisions: Promote initiatives throughnon-financial KPI management, launch projects in
new domains that require lateral responses
Environmental field: Started initiatives toward a
circular economy and biodiversity
Communication: Continue to improve stakeholder
evaluation through strategic communication andengagement, and strive to foster employee
mindsets and motivation

Newly appointed CSuO, started to take holistic
approach, joined by Compliance andAdministration Department(community contribution, environmental risk
response, etc.)
Launch of Resonac Pride products and services
certification
Registered as a TNFD Adopter, participated in
the Ministry of the Environment’s 30by30 alliance
Launch of “Sustainability Day,” a mindset-building
program at business sites, etc.
Identified important company-wide risks throughcollaboration with Risk Management
Accelerating governance reforms

P91 / Resonac Pride Products & Services

2026 - : Blossoming of "Resonac Style"82

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Material Issues and Non-financial KPIs
Resonac’s material issues consist of management issues that contribute to realizing its long-term vision in terms of bothsociety’s expectations and degree of importance to the Company, with the Purpose as a starting point. Material issues, theopportunities and risks associated with them, and non-financial KPIs, are determined by reflecting the intent of the frontlines
in each CXO area (function) and feedback from the entire management team at the Sustainability Promotion Council.
Material issues are reported to the Board of Directors and continually reviewed while exchanging opinions with internal andexternal stakeholders. We will work to maximize corporate value by developing an environment that fuels long-term growth
while contributing to the sustainability of society and the environment.
Material issues

Gain credibility throughresponsible business
management

Economic value

Improvement of motivation, raising ofproductivity, reduction of costs, andenhancement of brand value througheradication of all types of accidents andother incidents and increased efﬁciency ofinternal processes

Socialvalue

Balancing of our contribution to theresolution of social issues and duty as achemical manufacturer throughresponsible business management

Environmental
value

Reduction of environmental impact
through reduction of GHG emissions,waste reduction, and improved recycling
rates

Strengthen co-creativity &competitiveness andcreate social value throughinnovation and business

Enhancement ofcorporate value byachieving businessgrowth through theprovision of socialand environmental
value

Enhancement of
employee motivationby helping
employees to gain asolid sense that weare realizing our
purpose through ourbusinesses

Maximization of our positive impact andminimization of our negative impact onsociety and the environment through thethorough implementation of responsible
consumption and production as achemical manufacturer that serves as
the basis for a variety of industries

Develop autonomous, creative,
and active human resources
and culture

Active involvement of employees andhigher employee motivation throughstrategic job rotations and development ofleaders from the perspective ofCompanywide optimization and realizationof high productivity

Resolution of social issues by cocreation and innovation through thegrowth and active involvement ofautonomous and creative co-creative
talent and the nurturing of a corporate
culture conducive to the attainment ofsuch objectives

Risks

Weakening of the managementfoundation due to lack ofunderstanding of potential risks andlack of appropriate risk-taking
Decline in co-creation capabilities andcompetitiveness due to delayed
response to regional and national laws
and regulations and soft law, includinginternational norms

Opportunities

83

Obsolescence of material
manufacturers’ technologies due todevelopment of digital and AI
technologies
Decline in co-creation capabilities andcompetitiveness due to delayed
response to environmental and social
issuesDecline in co-creation capabilities andcompetitiveness due to delays inindustry restructuring and portfolio
reformHelping customers ensure quality byoffering safe and secure products andservices

Creation of social value based on
applicability to resolution of wideranging social issues

Increased added value throughrealization and maintenance ofadvanced manufacturing processes

Enhancement of corporate value by
flexibly responding to changes incustomers and capital markets and totheir expectations

Constituent elements

Creation of social value
through our businesses

Key items (KPIs)

2025 Targets

Resonac Pride Products andServices(Achievement of our purpose =Accreditation of products andservices that change society)Accreditation for major products by open
process at each business unit

Renewal of SDGs-contributing products as
Resonac Pride Products and Services, andreview of the concept and selection criteria/
conducted discussions with experts​

CFP*1-related initiatives

Calculation of CFP of major products

We established systems for each business
unit and carried out calculations. About halfof the calculations progressed as planned

Create large-scale projects
through the penetration ofproblem-solving marketing

Enhancement of product pipeline that
contributes to customer value

Received demand prospects for multiple new
projects

Use of digital platforms

Strengthening of overseas and regional
information dissemination using digitalmarketingCentralized Companywide pipelinemanagement

Started to automate digital marketing incooperation with business units

Strengthening of customer strategies ofbusinesses, utilizing customer database

Widespread adoption of CRM*2 tools(Salesforce) and start of operation

Co-creation with internal andexternal parties
Promotion of open innovationand increase of the ratio of
external cooperation themes
Number of papers andexternal presentations
Increase in the number ofcross-organizational theme

Promotion of open innovation andincrease of the ratio of external themes /year on year increase in the number of
papers and external presentations, andthe number of cross-organizational
themesPromotion of open innovation / Cooperation
outside the Company: 59
Number of papers and externalpresentations: 192
Number of cross-organizational themes: 317

Strengthening of R&D andintellectual property strategies
Increase of the ratio of
introduction of LCA*3
MC (market value)
TR (technological value)

Increase of the ratio of introduction of LCA(50% or more)
Enhancement of intellectual property
indicators, such as Market Coverage (MC),which indicates market value, andTechnology Relevance (TR), whichindicates technological value

LCA introduction 31%
MC：0.75, TR：1.02

Human resource development
Assignment of leaders andprofessional-minded humanresources at an appropriate
ratio / Completion of a venue
for co-creation

Assignment of leaders and professionalminded human resources at an
appropriate ratio / Completion of a venue
for co-creation

Completion of guidelines for appointing
professional position
Stage for Co-Creation / Activities to foster aculture of co-creation / Opening ceremony
for the Stage of Co-creation, the launch ofworking group activities, and the creation ofopportunities for in-house and external
visitation and use

Data-driven management

Completion of preparations for level-one
master data for financial KPIs that can be
automatically accumulated
Completion of creation of GHG
visualization and data acquisition process

Realization of Management Committee
dashboard via BI tools
Start of process design for the visualization
and reduction of GHG (greenhouse gases)

Promotion of digitaltransformation anddevelopment of professionalminded human resources

Horizontal deployment of IT/DX business
partners’ activity knowledge and start ofbusiness units’ self-led BPR project
promotion activities
Optimization of personnel allocation by
utilizing the skills and competencies oftalent in the CDO organization

Strengthening of the pool of humanresources by hiring personnel who can work
effectively to promote IT/digitaltransformation right away
Assignment of IT/DX business partners at
plants and business units

Enhancement of IT and digital
literacy

Entrenched use of IT and digital tools in
operations

IT training program rolled out to andcompleted by Resonac Group employees inJapan and overseas

MarketingOpen innovation

R&D and Intellectual
Property Strategies

Opportunities and risks
Loss of trust in society due toenvironmental, safety, quality
incidents and compliance violations

Strengthen co-creativity & competitiveness and create social value through innovation and business

Personnel retention risk due toinability to cultivate and maintainorganizational culture andengagement
Stagnation of innovation due to lack ofpsychological safety
Digital transformation

Facilitation of innovation throughdevelopment and creation of cocreative human resources

2023 Results

P 91

P 71

P65

P73

*1 Carbon Footprint of Products (CFP): Calculated by converting the amount of GHG emissions emitted across the entire lifecycle of a product or the GHG emissions associated with it into the equivalent amount of CO2*2 CRM: Customer Relationship Management*3 Life Cycle Assessment (LCA): a means of quantitative assessment of the environmental impacts of products and services throughout their entire life cycle, or within a specified portion of the life cycle.

84

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Material Issues and Non-financial KPIs

Gain credibility through responsible business management
Constituent elements

Key items (KPIs)

Fostering of a cultureemphasizing safety2025 Targets

 stablishment of a culture emphasizingEsafety to eliminate occupational accidents

SafetyQuality Assurance
ChemicalsManagement

Environment

Human rights

Procurement

Compliance2023 ResultsI mplementation of Safety Communication
Program (SCP) at all domestic plants andlocations in China as a program aimed at
nurturing a safety culture of mutual
enlightenmentI ncorporating safety activities into evaluation
system haring of good practices and presentingS
awards at the Global Safety Activities
Presentation

Constituent elements

Key items (KGI⁄KPI)
KG I

Hire & Develop talent
for the business erious occupational accidents (consolidated,
S
including partner companies): 0 erious occupational accident (consolidated,
S
including partner companies): 1

Lost time incident rate

0.1 or less (consolidated in Japan)0 .36 (consolidated in Japan)

Number of equipmentrelated accidents

 erious equipment-related accidents: 0
S(consolidated) erious equipment-related accidents: 1
S(consolidated)

Number of product-related
accidents*1

 ero product-related accidents (consolidated)Z0 (consolidated)

Number of quality
compliance violations

 ero quality compliance violations
Z(consolidated)0 (consolidated)

Product stewardship1 00% execution of risk assessment*2 ofpriority risk assessment substances(consolidated in Japan)

1 00% execution of risk assessment of 21priority risk assessment substances(non-consolidated)

Reduction of greenhousegas emissions

3 0% reduction (Scope 1 + Scope 2) from fiscal
2013 (consolidated) (2030 target)8 .8% reduction from the level of 2013(consolidated)

Reduction of waste sent tolandfills

 eduction of waste sent to landfills comparedR
to 2024 (consolidated)0 .1% of industrial waste generated(consolidated in Japan)

Number of environmental
accidents

Zero environmental accidents (consolidated)1 (consolidated)

Respect for human rights

 stablishment of a human rights due
Ediligence process and operational structureI mplementation of global awareness surveys
and training for employees
 onducted an investigation into overseasChuman rights risks, including within our
supply chain

P 10 6

Improvement of quality ofcommunication with
suppliers aintain a response rate of at least 90% forM
CSR questionnairesI mprovement of the ratio of suppliers above
the satisfactory threshold 85% or more (2028target: 90% or more)I ntroduction of a new survey tool to promote
communication with suppliers uestionnaire response rate: 91%
Q uppliers above the satisfactory threshold:S
89%

P 10 5

Inculcation of “Our Code of
Conduct”I ncrease the degree of inculcation (survey)

 tart of survey
S

Thorough implementation ofGroup global compliancestandards

 eduction in number of serious legalR
breaches ero serious legal breaches (consolidated)
Z

Increase in number ofwhistleblowing reports

I ncrease in number of reports through thewhistleblowing systemI ncrease in the number of whistleblowing
cases through raising awareness of thesystem (81 in 2022 → 97 in 2023)

Operation of comprehensive
risk management systems

 evelopment of a new comprehensive riskDmanagement system evelopment of policies for handling overallDrisks, including methods for assessing
strategic risks

Reinforcement of the secondline of defense

 xpansion of the Group’s internal control
EframeworkL aunch of expansion outside Japan andcentralization of risk data stablishment of Risk Control Standards, andE
performance of checks and assessments ofthe status of control implementation in theimplementing departments

2025 Targets
Portfolio formation fortarget divisions

First target division
formation*Calculated by (the number of people in succession pool/thenumber of general managers of business units/CXO-1 andhigher positions) x 100

180%

135%

Establish portfolio role models, positions, anddevelopment plans

Formulate role models fortarget divisions

First target division
formation

Employee engagement score

Improved year on year

54%

Engagement survey response rate

Improved year on year

83%

Rate of male employees taking childcare leave andnumber of days taken

Acquisition rate: 100%
(non-consolidated)
Number of days: Target of
60 days or more by 2030,
with no annual targets set

Acquisition rate: 100%
(non-consolidated)
Number of days: 29.9
days

Percentage of line managers who participated inco-creative leadership training

90%

70%

Purpose and Values implementation survey score

Purposeimplementation:55%
Valuesimplementation:60%

Purposeimplementation:48%
Valuesimplementation:51%

Purpose and Values empathy survey score

Purpose empathy:70%
Values empathy:75%

Purpose empathy:63%
Values empathy:64%

Positive evaluations from global award AHA!
participants

Improved year on year

70%

Future talent portfolio formation

KG I

Become an Employer ofchoiceP 10 3*1 Definitions are based on the Company’s accident standards.
*2 Assess substances stipulated by the Company by issuing safety summary reports

2023 Results

Succession planning readiness rate
KG I

P 10 2

Number of occupational
accidents

Risk management

85

Develop autonomous, creative, and active human resources and culture

Develop self-driven
professionals
P 10 4

KG I

P93

Cultivation of corporate
culture conducive toco-creation

P 13
P75

Psychological safety survey score

64% (up 2% year on year)

59.5%

Inclusion safety survey score

63% (up 3% year on year)

57.1%

Ratio of female managers

Consolidated in Japan: 7%
Consolidated: 13%

Non-consolidated: 6.5%
Consolidated in Japan: 5.7%
Consolidated: 12.4%

Diversity at the decision-making level

Under consideration

9.8%

Employment rate of persons with disabilities

2.70% (non-consolidated)

2.50% (non-consolidated)*KGI and KPI are excerpts (actual figures for other items are not disclosed externally and progress is managed internally)

P 10 7

Diversity Equity & Inclusion (DE&I) Initiatives
Resonac is implementing the following DE&I initiatives to create a working environment where a diverse human resources can demonstrate theirabilities and individuality.
Establishment of KPI for ratio of
female managers anddevelopment of female leaders

P 10 9We use the percentage of female
managers as a KPI and promote thehiring and promotion according toability and without regard to gender.
We also manage and develop female
candidates for leadership positions
through talent management, which isdesigned to develop future leaders.

Career development support
project for female engineers

Internal community activities

Since 2022 supporters transcendingorganizational boundaries have beenworking to support the careerdevelopment of female managers intechnical fields. In an effort to resolve
career concerns and answer
questions, we hold roundtablediscussions among female engineers
and support the use of external career
consulting interviews.

We promote internal community
activities to “cultivate a corporate
culture conducive to co-creation.” This
year, the department promoting DE&I
has established new internal
communities focusing on “career,”“childcare,” and “nursing care.” Thedepartment also implements projects
in collaboration with the internal
community.

Photo taken at “Diversity Cafe,” anemployee networking event at our head
office in Shiodome. We introduced the“Femtech Project” activities, an in-housecommunity focusing on women’s healthissues86

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Cross-talk Between the CSuO and On-site Staff in Charge - How We Overcome Our Challenges
One of the materialities, “Gain credibility through responsible business management,” conveys the belief that a company
that cannot gain the trust of its customers or investors and society cannot “change society” (purpose), much less “compete
on the world stage” (long-term vision). So, does gaining credibility contribute to “earning power”? We consider non-financial
initiatives to be the minimum condition for generating profits and have also identified them as our A-ranked risks
P 112 . If we can turn risks into strengths and opportunities, then(compliance, environmental/human rights regulations)trust will directly lead to “earning power.” In order to grow sustainably by generating profits in good faith, we will solve theissues we face one by one while demonstrating our value.
Cross-talk Between the CSuO and On-site Staff in Charge

Issues of product stewardship
Corporate planning staff: Takahiro Tokuyasu and Kensuke Sato
Chemical managements staff: Takashi Kumaki and Tomoaki Aoki
Related KPI: Promoting product stewardship

Demonstrating
Our Values
Open Minds &Open Connections
Solid Vision &Solid Integrity

PFAS are organic fluorine compounds widely used in everyday items such as non-stick frying pans, automotive parts, andsemiconductor materials. While PFAS are suitable for industrial use, they have attracted attention for their harmful properties,
and strengthening of international regulations is expected to have a major impact on business.
Responding to PFAS regulations is different frompast experiences such as the conventional REACH
regulations. While it is difficult to determine theharmfulness of PFAS and the scope of theTokuyasu regulations may be broad, it is difficult to receive
direct requests from end customers, and our response has
been delayed. We also lacked horizontal cooperation amidst
the company integration. Last year, we accelerated
initiatives by having each department bring their situation
to the Sustainability Promotion Council, and creating acommon understanding. With the Corporate Planning
Department serving as the secretariat, we are monitoring
and taking response measures from a company-wide
perspective, such as by investigating the actual use of PFAS
in the Group, estimating the approximate scale of the
impact, collecting and analyzing information on customer
trends and regulatory trends, and also developing andsearching for alternatives.
The importance of responding to this issue has
increased with the reform of our businessportfolio after the merger. There is not only risk,
but also businesses such as coating materials
Kumaki that can turn PFAS regulations into future profit
opportunities. There should still be plenty of room for theentire Group to share elemental technologies andstrengthen synergies.
Currently, we have not been able to fully utilize
the region- and business-specific technologies,
know-how, and experience of our 24,000 global
87

Sato

employees as collective knowledge. Corporate departments
must work together to establish a system that visualizes
internal information, controls risks, and connects them toopportunities.
This sort of global regulatory compliance is theminimum condition for generating profits. If weremain passive about regulations that could be agame changer, we will lose both the expectations
Tokuyasu of investors and opportunities for co-creation
with customers. We will approach it from both the businessrisk and opportunity perspective.
While PFAS are suitable for industrial use, theyremain mostly undecomposed when released into
the natural environment, accumulating in thebodies of living organisms. As such, there are
Matsuko concerns about their impact on biodiversity.
There are potential health and environmental risks, and it is
our responsibility as a chemical company to view them as ahuman rights issue in the value chain.
Resonac is gradually working on standardizing
safety labeling for chemicals. We are also
undertaking the technical challenge to screen for
harmfulness in collaboration with the Research
Aoki Center for Computational Science andInformatics, and we are engaged in a process of trial anderror with a future-oriented approach to productstewardship.

Who We Are

Gain credibility
through responsible business
management

Our Goals and Challenges

Corporate Governance Reform

Strengthen co-creativity & competitiveness and create social value
through innovation and business

Data Section

Develop autonomous,
creative, and active humanresources and culture

Cross-talk Between the CSuO and On-site Staff in Charge:
We have posted “Taking on the challenges of comprehensive risk management” on the web.

Cross-talk Between the CSuO and On-site Staff in Charge

Issues on compliance

Demonstrating
Our Values

Quality Assurance Department: Tomoaki Aoki and Kazuyuki Kasamaki
Related KPI: Zero quality compliance violations

Passionate &Results-Driven

Sustainability Department Compliance Group: Daisuke Yoshida,

Solid Vision &Solid Integrity

Hiroshi Ukita and Mariko Isota

Related KPIs: Instilling compliance-related regulations, number ofwhistleblowing reports

Six years have passed since the former Hitachi Chemical’s inappropriate product testing issue in 2018. We discussed thecurrent status of recurrence prevention measures, current initiatives, the post-merger structure, and how complianceshould be promoted in the future.
The inappropriate inspection incident cost us thetrust of our customers. We have implemented therecurrence prevention measures almost asplanned, and are currently focusing on the
Aoki ongoing challenge of building an automatedsystem P 10 3 , as well as education and audits. It is
important to continue to prepare systems and mechanismsthat allow us to say, “It is 100% secure,” and to keep moving
forward. Even in this process, we must always ask
ourselves, “Are there any risks?” and keep a vigilant stanceto never let the incident fade away.
Through education and training, we thoroughly
emphasize quality compliance throughout theGroup. In 2023, we conducted our first employee
awareness survey after the merger. While we
Kasamaki were able to confirm that employees areproactively working to ensure quality on a daily basis, theresults showed that there is room for improvement in somedepartments with regard to resources such as systems andhuman resources. We are currently exploring the ideal
state of our system after the merger.
It is important that each department on the value
chain strive as a team to achieve the quality that
customers require, including development,
manufacturing, and quality assurance, which are
Aoki the keys to manufacturing, as well as sales andprocurement SCM. The perspectives of business units,
production technology, and head office members are alsoessential. I am keenly aware of the importance of career
paths that allow experience in multiple functions, teamdiversity, and the necessity of ensuring an openorganization. We are now building a system that ensuresboth internal cooperation for rapid response to customers
and the independence of our quality assurance function. I

believe that we can build earning power by restoring andfurther strengthening the trust of our customers.
It is self-evident that we cannot continue
business if we lose the trust of our stakeholders.
Rather than responding after a problem occurs,
we must prevent it from occurring in the first
Yoshida place by not only complying with laws andregulations, but also making appropriate judgments with
foresight and ethics, even if we are not violating current
laws. If we cannot act based on this concept of soft law, we
will not be able to prevent future damage to our corporate
value. As with quality assurance, we must constantly ask
ourselves, “Are there any risks?” and foster a culture where
we can point them out to each other. Our company-wide
effort to “ensure psychological safety” is a prerequisite forstrengthening whistleblowing functions and eliminatingcompliance violations.
“Our Code of Conduct” clearly states the soft lawsthat the Company must follow. The instilling activityof it needs to be repeated until it becomes
corporate culture, and there is no end to it. After the
Ukita integration, we established a Global Compliance
Committee. We will continue to communicate and make
improvements to the rules in order to implement them in amanner that suits each organization, region, and country.
It is also necessary for each department to stay
vigilant of the latest rules and legal reforms, toprevent unintentional violations due to a lack ofunderstanding of work-related rules or the
Isota ignorant belief that it will be okay because we arefollowing precedent cases. We must also not be confined to
traditional methods and come up with educational methods
that get information across.
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Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Another delight of co-creation at play!

Semiconductor materials thatchange society

Toward a future 100 years from now
The Beginning of Co-creation and the Delight that Awaits Us
Resonac Graphite Japanand Omachi City, Nagano
Prefecture

Omachi City in Nagano Prefecture and Resonac Graphite Japan have forged a close bond for over half a century,
focused on the hydroelectric power plant and a water supply system built by Nobuteru Mori, the founder of theformer Showa Denko. Today, new co-creation projects are being launched, including projects aimed at utilizing
unused local materials (branches and leaves) for boilers and collaborating on SDGs education.

1
Q

2
What issues are you working to solve with Omachi City andNagano Prefecture, our partners with whom we have beenworking to change society together?

In the production of graphite electrodes at our Omachi Plant,
the reduction of CO2 has been an issue. To resolve this, westarted considering the introduction of a boiler that uses
wood chips in 2022. Aiming for local production andconsumption of unused wood in the region, we held many
discussions with Mr. Harada of Yamashigoto Sozosha andlocal residents, and gradually came up with concrete
proposals which included resolving technical issues
related to turning unused wood into fuel.

Hayate Murakami
Engineering Section and SDGs Promotion Section
Resonac Graphite Japan

Resonac Graphite Japan“We want to support the iron recycling using theelectric furnace method, which is a clean, highly energy efficient, andenvironmentally friendly manner of manufacturing, while creating newvalue through co-creation with the local community.”
Yamashigoto Sozosha“With the people involved in forestry getting older,we are committed to developing forests with the cooperation of various
stakeholders in order to make sure the rich forest land remains protected. ”

Above all, I was happy that a company that leads Omachi
turned its attention to the mountains. Mr. Murakami has
visited the mountains countless times, and with a keen
attitude to grasp our situation, he proposed to turn unused,
dumped wood into value. Forestry is posed by many
challenges, but we feel very encouraged to be able tocollaborate with a company that has such a flexible
mindset.

Mr. Harada

Omachi City, Nagano Prefecture“Amid population decline due to the lowbirthrate and aging population, we want to promote the management of
the natural environment and spread the appeal of our unique water
resources as an SDGs Future City, in order to realize a sustainable local
community. We want the government and companies to work together tocontribute to the development of the region.”

Shinano Omachi
Mizunowa Project(In Japanese only)

89

Omachi “Water School
SDGs Exploration
Educational Trip”(In Japanese only)

Nagano Prefecture“Forestry Foster
Parent Promotion
Project”(In Japanese only)

Yamashigoto Sozosha

Yamashigoto
SozoshaA group of forestry
professionals(In Japanese only)

Resonac Graphite Japan
Corporation

Semiconductors are becoming increasingly sophisticatedand functional. The rapid expansion of generative AI,
logistics, smart agriculture, demand forecasting, finance/
insurance, office work, autonomous driving, shopping andbeauty are some of the dramatic changes our lives areundergoing. This is where semiconductor materials play anessential role. With a high market share particularly inpost-processing materials, Resonac is involved in cocreation activities represented by the Packaging Solution
Center and JOINT2, and has also launched US-JOINT in
Silicon Valley. Wherever there are semiconductors, in every
scene, Resonac will contribute to people’s happiness andprosperity.

One point is that we visited the mountains for survey and observed the actual situation firsthand while developing the proposal for utilizing unused wood. We were able to create a sustainable initiative that was meaningful to all stakeholders bydeepening our understanding together with our co-creation
partners from the same perspective.
Another point was that we established the SDGs Promotion section. We valued the ideas that emerged in the field and supported their initiatives under the supervision of the superiors. The
creation of an environment where opinions could be shared
openly gave rise to more ideas, and brought us closer to solving social issues through co-creation with the local community.

Inspired by Murakami’s proposal, we considered further initiatives beyond usingwood chips that contributes to the mountains themselves. As such, we participatedin the Forestry Foster Parent Promotion Project. We have been engaging in deeper
communication with local residents through information sessions andother events, and are currently undertaking an initiative to develop theforest owned by the Company near the Tokiwa Power Station and makeit a place that everyone in the community can enjoy.

3

Hiroshi Ohta
Human Resources & General Affairs Section
Resonac Graphite Japan

Omachi City was the first municipality in Nagano Prefecture to be certified as anationally recognized SDGs Future City. The hydroelectric power generation andwater supply system that Resonac has provided for nearly 80 years are essential
to the development of the region. The Aoki Power Station and water intake facility
have been cooperating with us in our effort to promote SDGs Exploration
Educational Trips related to water. We ask for the continued
cooperation in promoting our city plan “SDGs Future City Plan:
Shinano Omachi, where water is born.”

Mr. Sakai
Planning and Finance Division, General Affairs
Department, Omachi City, Nagano Prefecture

We find Resonac’s shared water supply system for power generation and for
agricultural use very unique. With the declining birthrate and aging population inrural areas nationwide, and the agricultural population also decreasing, it is very
difficult for farmers to maintain such water systems. As such, we are very gratefulfor the support, but we are also concerned about whatmight happen in the future. In order to increase the appealof the region, it is very important that people connect
with each other and spread the efforts to promote theappeal of local water facilities.

Mr. Okamoto

Mr. OmeAgricultural Land Management Division, Northern
Alps Regional Promotion Bureau, Nagano Prefecture

Forestry Division, Northern Alps Regional Promotion
Bureau, Nagano Prefecture

Resonac Graphite Japan“We hope to go beyond usingwood chip boilers that utilize local forest resources, andcreate a place of co-creation, such as for working withthe locals to conserve the local forest green spaces, andshare these efforts with the world, along with Omachi’s
remarkable water supply system. We would also like toincrease interactions with young people who will lead thenext generation, and support them in taking action.”
Yamashigoto Sozosha“We would also like support inensuring the forests’ multifaceted functions beyond
timber production, in order to continue creating strong,rich forests. We dream of beautiful forests that sootheand relax people wherever they look in this region.”
Omachi City, Nagano Prefecture“We have launched the
Shinano Omachi Mizunowa Project, a collaboration
between Industry-Academia-Government and Finance,and have begun urban development centered on water.
We would like to create a place where we can exchange
ideas with various partners and build together our future
100 years from now.”

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Contributing to Society and Customers by Fulfilling
Our Purpose throughResonac Pride Products and Services
Resonac Pride Products and Services are initiatives to demonstrate
our Purpose and Values through our business. In order to achieve
our Purpose “Change society through the power of chemistry,” it isimportant to visualize how much value our products and services,which we provide in a wide range of areas from upstream todownstream in the value chain, have provided to customers andsociety. These initiatives are positioned as a KPI and efforts are being
made to achieve the material issue “Strengthen co-creativity &competitiveness and create social value through innovation andP84 / Non-financial KPI Results and Targets
business.”

Our Goals and Challenges

Corporate Governance Reform

The first certified Resonac Pride Product and Service

Points of certification

What is the value provided tocustomers and society? (quantified
as much as possible)

Appropriateness

What kind of Values aredemonstrated?

Risk assessment

What kind of risks are there whenevaluated from various perspectives
such as product environmental
assessment and reputation?

Risk perspectives fromthird party points ofview

Sales plans

Sales plans and market share

Future potential andimpactRelevance to SDGs

How does it contribute to the 17 goals
and 169 targets, and is it related tothe essence of the SDGs?

Relevance to sharedglobal goals (including
future potential)

Points of screening

Kawasaki Plastic Chemical Recycling Business (KPR) was
certified as the first Resonac Pride Products and Services.
KPR is a gasification chemical recycling plant that started
operation in 2003, and it gasifies used plastics at hightemperatures and breaks them down to the molecular level toextract hydrogen and CO2.

Data Section

Primary uses of ammonia
Detoxifying agent of NOx
Nitrogen fertilizers
Fiber materials
Adhesives/ Resin materials

Kawasaki Plastic Chemical Recycling Business (KPR)

Main items of confirmation for certification

Implementation of
Purpose and Values

Who We Are

Used plastics

195t /dayHydrogenproduction
facilities

Gasification
plant

Collect frommunicipalities

30t /day

Points of certification (excerpt)
 ince it does not use fossil fuels or fossil-fuel-derived energy even in theS
manufacturing process, the GHG emissions is approximately 80% lesscompared to conventional ammonia production methods
Recycles about 60,000 tons of used plastic per year (equivalent to about
20% of Japan's chemical recycling)

In terms of certification, we aim to integrate the points of view of third parties in evaluation from the perspectives of value provided to customers and society by

Ammonia
production
facilities

175t /dayHydrogen station

Dry ice

CO²

Carbondioxide gas

Carbonated Modified
drinks atmospherepackagingchanging society based on our Purpose as well as the appropriateness of Resonac’s four Values, risk assessment such as product environmental assessment
and reputation, future potential and impact such as sales plans and market share, and relevance to shared global goals (SDGs).

Comments from stakeholders

Steps of screening
Until 2023, product and service certification was carried out in-house, but from 2024, we included third party participation such as government bodies, business
partners, investors and experts, customers, and next-generation members to increase objectivity and transparency.

STEP

1

Application forcertification bybusiness units

STEP

2

Initial screening
conducted by thesecretariat

STEP

3

STEP

Comments from
witnesses andadvisors

4

STEP

Internal screening

5

91

6

Report to witnesses andadvisors and disclose to
stakeholders

Supplier: JGC HOLDINGS CORPORATION
Currently, KPR is the only plant in the world thathas achieved this level of commercial operation inchemical recycling. Good example where
foresight, the power of chemistry, and technicalcapabilities are utilized

The issues we will identify and solve thatare not expressed in SDGs 1 to 17:

Local resident: Neighborhood association
Resonac contributes to raising awareness ofrecycling through factory tours and explanations
about recycling for local residents and children. We
request continued development of newtechnologies to solve environmental and otherproblems, and the ensured safe operation of plants

Customer: JERA Co., Inc.
We have been able to receive a stable supply ofammonia because the KPR Plant has been able tooperate stably for a long time. I am very thankful
to the efforts of Resonac employees.

Investment fund: Mr. Matsubara of Resona AssetManagement Co., Ltd.
It is still not large enough to meet the fundamental
demands of society. If we have a world view toexpand the adoption of chemical recycling, itshould be a good example of sustainability for boththe company and society.

Next Generation: Students
It's great that this business has continued for 20
years. If we could demonstrate more that plastic
leads to chemical recycling, it would promotemunicipal sorting and improve the collection rate.

Certification as
Resonac Pride
Products andServices

Contribution to the SDGs through businesses
As a Co-creative Chemical Company
that seeks to create a recyclingoriented society, we have madecontributing to SDGs 12 and 17 thefocus of our corporate activities, andpositioned goals that we contributeto through businesses and products
as well as goals that we contributeto through our business foundation
as shown on the right. In addition to
the areas we are already working
on, we are looking ahead with theaim to contributing to the creation ofa future that we seek to realize
through the power of chemistry.

STEP

The future we seek to realize throughthe power of chemistry

Provision of highly
recyclable
components

Development oftechnologies such as
next-generation
semiconductor materials

Development ofmaterials for
low-power
semiconductor
applications

Provision of
products that help
to reduce
greenhouse gas(GHG) emissions“Co-creative
Chemical Company”

Through the questionnaires before the internal screening and the screening report held after the certification, we received commentsfrom a wide range of stakeholders about contributions to the community and society, points for improvement, and expectations andencouragement for the Company in the future. We will further develop chemical recycling for society based on this feedback.

Development ofmaterials that contributeto increasing theperformance of electricvehiclesExpert: Professor Itsubo of WASEDA University
It would be better to clarify and simplify thescreening criteria further, and to present a future
vision of KPR that matches the actual conditionsof each region 20 years from now.

Government agency: Official from Kawasaki City
The pillars of the Carbon Neutral Industrial
Complex Concept promoted by Kawasaki City arehydrogen, carbon cycle, and regional optimizationof energy. KPR is involved in all of these pillars.

Customer: TOKYU HOTELS & RESORTS CO., LTD.
As power generation using hydrogen supplied by
KPR of Resonac is at the core of hotel operations,
we will continue spreading awareness of this insociety, including overseas.

A scene from the screening report
Expert: Professor Hasegawa of HOSEI University
It's important to communicate information
together with stakeholders you are co-creatingwith to gain the understanding of investors.
Resonac Pride should work toward becoming
Social Pride and Japan’s Pride.

Expert: Professor Nakatani of the University of Tokyo
I hope that items that are difficult to dispose of,such as textile waste, are also recycled in the
future. In addition, I look forward to future
developments such as the effective use of carbon
as a raw material.

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Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Please visit our website for more details on ourpolicies, promotion system, and activities.

Environment

P95/Climate Change Strategies

P99/Biodiversity Strategies

P100/Toward Circular Economy

P101/Response to Environmental Risks

MissionIssues to Be Addressed

Although we use fossil raw materials and fuels in our product manufacturing processes and emit greenhouse gases (GHG), we have many
products and services that contribute to energy conservation, resource recycling and biodiversity. To this end, we regard addressing theenvironment as a crucial management issue in terms of both opportunity and risk, and under the supervision of the Board of Directors, we will
make medium- to long-term efforts to enhance our corporate value.

Approach to InitiativesWeb
as the Resonac Group, which outlines the key environmental issues thatIn June 2024, we established a new Environmental Policy
warrant addressing and action guidelines for solving these issues.
With regard to climate change, we endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in
May 2019. As for biodiversity, we were registered in June 2024 as a TNFD Adopter of the disclosure recommendations published by TNFD* in
September 2023. Accordingly, we are conducting information disclosure in alignment with the TCFD and TNFD and holding dialogue withstakeholders.

*T NFD (Taskforce on Nature-Related Financial Disclosures): A task force established in June 2021 to provide a framework for nature-related risk management and disclosure.
In September 2023, as its final recommendations (v1.0), the TNFD released a framework for companies and financial institutions to identify, assess, manage, and disclose
nature-related issues.

Overview of Resonac’s environmental initiatives
The four pillars of our environmental initiatives are “Measures to Combat Climate Change,” “Efforts for Preservation of Biodiversity,” “Toward
Circular Economy” and “Response to Environmental Risks.” As each of these initiatives relate, “Efforts for Preservation of Biodiversity” and“Toward Circular Economy” must be addressed simultaneously in order to implement “Measures to Combat Climate Change,” which is anurgent matter. We will view the entire environment as a social issue more than ever, and as such, we will take on the challenge of changing
society through the power of chemistry. We will strengthen our efforts to manage risks and seize opportunities through “Response toEnvironmental Risks” spanning across all of our environmental initiatives.

Response to Environment Risks
Environmental load reduction
and global environmental
conservation activities based on
appropriate assessments of ourimpact on the environment andsubsequent results

Zero environmental
accidents

Compliance with laws andregulations

Efforts for Preservationof Biodiversity
Widespread adoption of liquid
fertilizers derived fromnatural products

Ecological conservation
activities at our plants, etc.
(OECM registration, etc.)

Thorough chemicals
management

Widespread use of powdered
metal-free friction
materials

Reductions inresource use

Reductions in water
consumption

Toward Circular
EconomyIncreased use ofrecyclable raw materials

Conversion of waste produced
from in-house manufacturing
processes into raw materials

Establishment of resource
recycling processes in cooperation
with local communities
Improve ease of recycling

93

Measures to Combat
Climate Change
Achieve energy conservationand high efficiency
Switch from fossil fuels to
renewable fuels

Promotion of chemicalplastic recycling
Reduction and recycling ofwaste generation
Development of CO2
capture and utilization
technologies (CCU)

Promotion of the use of renewableenergy power sources
Implementation of
in-house CO2 captureand storage business(CCS)

Extend product life

*Orange: Business opportunities*Avoid trade-offs: For example, we will not adversely affect the ecosystem in order to install solar panels

Non-financial KPIs

Short to medium term (2024-2026)
Improved data preparation and accuracy through consolidation and portfolio changes
Calculation of Scope 3 emissions/exploration of reduction measures on a global scaleRe-verification of target levels (evidence-based target level verification)
Short to long term (2024-2030)
Development of technologies for carbon neutrality and increase in reduction
measuresPromotion and disclosure of biodiversity initiatives based on TNFD recommendations
Shift to businesses and corporate value that contribute to a circular economy
Consistent response to and disclosure of environmental risks

Reduction of greenhouse gas emissions
2030: 30% reduction from the level of 2013
(Scope 1 and 2) (consolidated)Reduction of industrial waste sent to landfills
2025: Reduction compared to 2024
(consolidated)Zero environmental accidents
2025: Zero environmental accidents(consolidated)
P85 / Non-financial KPI Results and Targets

GovernanceRole of the Board of Directors and monitoring system
The CEO supervises the risks and business opportunities, targets,and specific initiatives associated with the environment including
climate change, while the CSuO takes responsibility for promoting
actions. These issues are deliberated at the Sustainability
Promotion Council and the Management Committee. The progressof each initiative is regularly monitored, and remedial measures
are discussed when needed.
The Board of Directors receives periodic reports of what the
Sustainability Promotion Council and the Management Committee
discussed, and on which points they made decisions anddeliberates and supervises them from the perspective of
maximizing corporate value. From 2022, we have aligned theevaluation indexes for inside directors and executive officers with
the initiatives in the long-term vision and countermeasures againstsustainability issues, including climate change, with the aim tostrongly incentivize them to manage the Group from a long-term
perspective and promote the sustainable growth of the Group. In
March 2024, we revised our Corporate Governance Basic Policies to

Risk Management
Process to assess, identify, and manage risks
The Group conducts climate change and biodiversity risk
assessments for each business, assesses “transition risks” and“physical risks” arising from climate change, as well as
dependency, impact, and risks related to nature. We then identify
material risks for the Group and develop countermeasures against
them. Material issues in identifying risks and developing
countermeasures are reported to the Board of Directors. We willcontinue to conduct the risk assessments to update risks andcountermeasures, along with monitoring the progress of theexisting countermeasures.

clarify the role of the Board of Directors in addressing climatechange and protecting biodiversity.
The Carbon Neutrality Project is led by the Sustainability
Department and involves all CXOs and business units.
M onitoring system for environmental initiatives by the Board of
Directors (as of June 30, 2024)
Board of Directors
Management Committee
Sustainability Promotion Council
Carbon Neutrality Project
Biodiversity Preservation Project
Human Rights Projectetc.

Integration into enterprise risk management
Given the importance of building an enterprise risk management
system, the Group pursues integrated risk management using acommon framework across the Group. Information on climatechange, biodiversity and other risks with the potential to impact theGroup’s management is registered in an integrated manner into
our risk management system via companywide risk identification
activities (as part of risk assessment procedures). Key risks, which
are deemed to have a particularly high frequency or degree of
impact, are deliberated by a dedicated committee (RiskManagement Committee). Important matters examined by the
Sustainability Promotion Council and the Risk Management
Committee are submitted to the Management Committee fordeliberation and decision before being reported to the Board of
Directors.
94

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Environment

Climate Change Strategies (Disclosure in Line With the TCFD Recommendations)Short-, medium- to long-term climate change-related risks and opportunities and responses to them
disclosures on this front starting with the segments for which
impact assessments have been completed.
Transition risks affecting the Group businesses include
increased operating costs due to a rise in energy taxes including
carbon pricing. We aim to reduce CO2 emissions to about 3.24
million t-CO2 by 2030, or a 30% reduction from 4.63 million t-CO2 in2013. Assuming that Scope 1 and 2 emissions in fiscal 2030
resulting from sales growth are estimated to be about 5 million
t-CO2, the carbon pricing is set at ¥10,000/t-CO2 based on the IEA’s
2°C scenario (SDS)* and others, and we need to offset the portion
that falls short of reduction target through emission trading. In thatcase, if we fail to reduce emissions by 30%, the operating cost will
increase by about ¥18 billion per year, implying that hitting the
reduction target will lead to reducing operating costs. As acompany that interrelates with society, we will continue to use
other scenario analyses to contribute to realization of a carbonneutral society in various ways, take measures against climate
risks, and achieve a sustainable growth.
*2°C scenario (SDS): Sustainable development scenario

Assumptions for scenario analysis
Estimated Duration: Until fiscal 2030
Adopted scenarios: 4°C scenario: IPCC/RCP8.5, IEA/STEPS 1.5/2°C scenario: IPCC/RCP2.6, IEA/SDS (partly IEA/NZE)
Timeline definition: Short-term = less than three years, medium-term = three to less than ten years, long-term = ten to thirty years
Scenario analysis target: Existing businesses

Opportunity/
Risk category

Transition opportunities and risks

Amid the successful transition to a carbon-neutral society, theGroup sees climate change as both a risk and opportunity. The
Group will exercise its social responsibility as a company and build
further competitive advantages to reduce GHG emissions acrossthe value chain by providing products and services that contributeto decarbonization, achieving co-creation with partners, improving
energy efficiency, and increasing usage of renewable energy. Given
the above, the Group analyzes risks and opportunities to evaluate
the impact of climate change on the Group businesses under thefollowing two scenarios: (1) The average global temperature will
increase by 4°C or more and (2) The average global temperaturerise can be kept well below 2°C and continue efforts to limit it to
1.5°C based on the Paris Agreement, which were released by theIntergovernmental Panel on Climate Change (IPCC) or theInternational Energy Agency (IEA). Based on the analysis, we
determine the necessary countermeasures. Business impact
assessments were conducted in the Semiconductor and Electronic
Materials segments in 2023, followed by the Mobility and Innovation
Enabling Materials segments in 2024. Assessments are scheduled
to be completed for all businesses by 2025. We will makeClimate-related risks and opportunities and main response
DomainTime frame

Impacts on the Company

Physical risks

95

Large

Large

Small

None

Mediumterm

Increase in tax (cost) due to theintroduction of carbon pricing
(ICP)

Risks

Short tomediumterm

Shift to renewable energy due
to tighter regulations on GHG
emissions / Increase inprocurement costs

Introduction of solar power generation and utilization of hydroelectric power
generation facilities

Opportunities
and risksAllbusinesses

Short tomediumterm

Government support under thepolicies for decarbonization
initiatives of companies

Development of eight-inch SiC wafers for next-generation green power
semiconductors (adopted as part of the NEDO Green Innovation Fund project)
Development of a low-concentration CO2 separation system employing an innovative
separation agent (adopted as part of the NEDO Green Innovation Fund project)
Reinforcement of the global semiconductor material supply chain (adopted under the
Ministry of Economy, Trade and Industry subsidiary program for overseas market
survey projects for building resilient supply chains in the Indo-Pacific area)

Opportunities
and risks

Short tomediumterm

Increases/decreases in sales
due to changes in consumer
behavior and awarenessPromotion of products, development of new products, and improvement ofcompetitiveness in response to the needs of a decarbonized society
Advancement of R&D based on long-term themes at the Stage for Co-creation

Risks

Short term

Greater request for ini tiatives
and disclosure related todecarbonization from
customers

Establishment of life cycle assessment (LCA) and carbon footprint of products (CFP)
calculation frameworks, tracking of CO2 emissions, and formulation of reduction plans

Opportunities
and risks

Short tomediumterm

Re-evaluation by investors
depending on how effectively
the Group captures needs fromsociety and customers to solve
environmental issues

Adding value to our products/services (Resonac Pride products/services) to help
solve the problems that society and customers face
Attracting investments through proactive measures against climate change andpromotion of a circular economy

Short tomediumterm

Increase in procurement costs
due to soaring prices of raw
materials and switchingmaterials

Diversification of raw material suppliers and resources
Consideration of using recycled raw materials
Shift to in-house production and local production for local consumption of raw
materials with unstable supply
Collaboration with upstream supply chains to reduce GHG emissions
Set standards for BCP measures for when new raw materials are adopted
Adoption of a formula system to respond to fluctuations in major raw material prices(changes in raw material prices are automatically reflected in product prices)

Small

Small

Short tomediumterm

Decrease in sales due tochanges in consumer behavior
and awareness

Reduce GHG emissions in manufacturing processes and information disclosure tocustomers
Quantitatively and scientifically calculate the amount of GHG reduced by society
through the utilization of our products and technologies (calculate avoided GHG
emissions/CFP)
Participate in working groups of the Semiconductor Climate Consortium (SCC)
Explore environmentally friendly manufacturing processes
Conduct customer satisfaction surveys
Strengthen cooperation with sales departments to understand customers’
environmental needs
Strengthen systems for sales/marketing and new product development in anticipationof demand changes in our target markets
Strengthen customer response management to immediately reflect customer
requests in products and services

Mediumto large

None

Opportunities

Short tomediumterm

Increase in sales due to
growing demand for EVs/
autonomous driving

Response to increased demand for SiC power semiconductors
Develop materials that contribute to smaller and lighter parts

Large

MediumOpportunities

Short tomediumterm

Increase in sales due to
growing demand for low-power
semiconductors andenvironmentally friendly
products

Large

None

Opportunities

Short tomediumterm

Increase in sales due todecarbonization of serverrelated facilities and data
centers through the spread of
remote work, automation, anddata usage

Large

None

Short term

Suspended operation of
manufacturing sites due tonatural disasters caused byclimate change, and decreasein profit caused by an increasein the equipment repair cost

Small*2

Small*2

Impact Assessment of Electronics Business Headquarters

Mayumi Hatakeda

4°C

Risks

Risks

Sustainability Partner,
General Manager,
Business Strategy Department,
Electronics Business Headquarters

Impact*1
1.5/2°C

Revision of GHG emission reduction targets for 2030 and establishment of theroadmap
Set targets and implement reduction initiatives for each business
Expand the introduction of renewable energy
Raw materials/fuels conversion
Participation in the GX League

Semiconductorand Electronic
Materials

Although we recognize the importance of taking on the challenge of achieving carbon neutrality, wewere grasping at straws to see how we could visualize business opportunities and risks, and whether
our current measures were able to sufficiently cover all opportunities and risks. The Electronics
Business Headquarters conducted an in-depth analysis of the TCFD scenario, which I think produced
three good points. First, we were able to quantitatively grasp the impact of opportunities and risks on
our businesses. Second, we were able to reaffirm that our strategy sufficiently addresses
opportunities and risks. And third, we now think even more about whether the strategy we formulated
can be an effective measure against climate change, making it easier to link them and explain tomembers of the Electronics Business Headquarters. In cooperation with the Sustainability
Department, we would like to continue our efforts to regularly scrutinize our strategies and measures
based on TCFD scenario analysis.

Response measures

Risks

All businessdomains

Assess the environmental standard conformity of product designs
Develop etching gas for semiconductors with low GWP
Develop sealing materials that contribute to GHG-reducing processes
Take measures to produce thinner adhesive film for memory applications
Participate in working groups of the Semiconductor Climate Consortium (SCC)
Packaging Solution Center in Silicon Valley, U.S. (scheduled to be established in 2025)
Participate in the Texas Institute for Electronics (TIE), a consortium for advanced
semiconductor

Analysis of flood risks at manufacturing sites
Regular risk identification and reduction activities, and enhancement of business
continuity planning*1: The financial impact of climate-related opportunities and risks is being calculated sequentially, and will thus be disclosed in stages. Impact indicates the scale of impact on the Group should we address the identified climatechange opportunities and risks.
Large: We expect regulations and policies to tackle climate change to continue impacting the Group going forward. As a result, we estimate the annual impact on our operating income to be ¥10.0 billion or higher.
Medium: Moves to address climate change are already underway, and we expect this to continue impacting the Group going forward. As a result, we estimate the annual impact on our operating income to range from ¥3.0
billion to less than ¥10.0 billion.
Small: There are moves to address climate change. As a result, we estimate the annual impact on our annual operating income to be less than ¥3.0 billion.
*2: Physical risks were analyzed using hazard maps and AQUEDUCT at 36 major sites in Japan. In the event of a once-in-a-century disaster, it was discovered that 13 sites are exposed to risks. However, we set the impact as “small”
because the annual impact taking into account the recurrence interval is small for both the 1.5/2°C and 4°C scenarios. Going forward, we will gradually move forward with the analysis of overseas sites and supply chains.

96

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Environment

Indicators and Targets Related to Climate Change

Examples of Initiatives Aimed at Achieving Carbon Neutrality

GHG emissions reduction targets and results
We are pursuing carbon neutrality leading up to 2050, toaccomplish the goal of becoming a company that contributes to asustainable global society as put forth by our long-term vision. We
have also set a milestone target of reducing Scope 1 and 2 GHG
emissions by 30% (compared to 2013) by 2030.
In 2023, Resonac Graphite Austria GmbH switched 100% of its
electricity usage to electricity derived from wind power, and theentire Resonac Group purchased 115MWh of electricity derived
from renewable energy. We reduced GHG emissions by 8.8%
compared to 2013 by switching to non-fossil fuel energy sources
such as solar power generation.
Going forward, we will accelerate our efforts to achieve ourtargets and further promote information disclosure. For Scope 3,
we are gradually disclosing figures on our website for categories
where calculations have been completed.
We will continue to improve the accuracy of these calculations
while working to reduce our GHG emissions.

Roadmap to GHG emissions reduction
Toward carbon neutrality in 2050, we will streamline ourbusinesses, increase efficiency, save energy, switch to gas fuels(high-efficiency co-generation system), and product manufacturingthat utilizes our own hydroelectric power generation andrenewable energy until 2030. From 2030 onward, we plan toactively promote fuel conversion and mixed combustion toammonia and hydrogen, aiming toward 2050. To achieve thesetargets, we will set targets and formulate and implement reduction
measures in each business unit. We will also implement companywide measures led by the Carbon Neutrality Project, and set
reduction targets based on scientific evidence. In addition, we havecreated a new roadmap for switching to renewable energy, with thegoal of covering 100% of the electricity used in our businesses withrenewable energy. In addition, we will achieve carbon neutrality
through CO2 separation and capture technologies and the use ofrecovered CO2 as raw materials for chemical products.

*1. Carbon dioxide (CO2 ) Capture and Storage*2. A CO2 storage site off the coast of Malaysia that we have been jointly developing since June 2023 with Petronas CCS Solutions Sdn Bhd, the CCS subsidiary of Petroliam Nasional Berhad, Malaysia’s state-owned
oil company, and TotalEnergies Carbon Neutrality Ventures, the CCS subsidiary of TotalEnergies, a French integrated multi-energy company. Storage operations are scheduled to commence by around 2030.

Road to carbon neutrality
Non-financial KPI Results and Targets Reduction of GHG Emissions : 30% reduction from the level of 2013 (Scope 1 and 2) (2030 target)(kt-CO2 )

5,000

(%)

from 2013 from 2013
Down 5.9% Down 8.8%

4,634

4,000

4,360

GHG emissions (Scope 1 + Scope 2)(consolidated)from 2013
Down 30%

Ratio of renewable energy use (target)

Decrease due to thereform at Oita Petrochemical
Complex and Kawasaki Plant,
and other businesses

4,226

60

3,244

2,000

Solutions foundthrough an innovative,
new technology system

20

Net zero0Base year*Revised due to recalculation

Results in Results in
2023
2022

Targets for2030

Present

Targets for
2040

Targets for
2050

2030 (low carbonization)

2050 (carbon neutrality)

Taking on the challenge of achieving 2030 targets

Tackling carbon neutrality

Implement/expand chemical recycling

Emissions intandem with
proprietaryproduction
activities(Scope 1)
Outsourcedenergy(Scope 2)

97

Processes

Thermalpower plant

Electricity
Steam

Achieve energy conservationand high efficiency via innovativetechnologies• Raw materials/fuels conversion• Streamlining/high efficiency• Energy saving
Fuel conversion(gas fuels, renewable energy)

CO2 separation,
capturing, and use

Improve electrification rate
Fuel conversion andmixed combustion(using ammonia and hydrogen)• Reduce usage through energy conservationand efficiency improvement• Switch to renewable energy power sources

CO2 separation,
capturing, and use

Consider switching to outsourced energy• Switch to CO2-free power generation,
including renewable energy• Use hydropower facilities*We consider starting the calculation and disclosure of Scope 3 emissions from upstream activities before setting a reduction target.

Scope 3: Switch from gasoline to non-fossil fuel-powered company-owned vehicles
In addition to reducing emissions produced from our own business activities (Scope 1 and 2), we are also working to reduce GHG emissions
throughout the entire supply chain, including Scope 3 emissions.
In 2023, we decided to switch all company vehicles (gas-powered cars) to eco-friendly cars. Over the next three years, we expect tocomplete the switch for 60% or more of the applicable vehicles in Japan.
From 2024, we will ramp up efforts to reduce the GHG emissions derived from the use of company vehicles, such as by considering theswitch to fuel-cell vehicles (FCVs), and plan to work on shift to EVs/FCVs at our sites in Japan and overseas by 2030. We will also switch theforklifts used at our plants to electric vehicles and we will work to reduce our GHG emissions derived from fossil fuels.

40

1,000

Emission source

100
80

3,000

Results in
2013

Exploration of CO2 capture at Oita Petrochemical Complex and storage off
the coast of Malaysia
Resonac and MITSUI & CO., LTD. (“Mitsui”) signed a memorandum of
understanding (MOU) regarding the joint study of CCS*1, in which Resonac and
Mitsui will conduct a joint study on the capture of CO2 emitted from the Oita
Petrochemical Complex and underground storage off the coast of Malaysia.
Mitsui has been jointly working on a CCS project in Malaysia with Malaysia’s
state-owned oil company and others. The signing of this MOU will allow thesaid project to be explored as a storage site. Through this project, we aim tobuild a value chain that includes CO2 capture and storage (CCS) at CO2 storagesites*2 and CO2 transportation.
Resonac will be responsible for the separation, capture, liquefaction, andstorage of CO2 emitted from the Oita Petrochemical Complex, as well as thedelivery of CO2 to transportation companies, while Mitsui will be responsible
for the ocean transport of liquefied CO2 to Malaysia and the undergroundstorage off the coast of Malaysia. We will examine the technologicalrequirements and estimate the costs needed for each party to fulfil their role.

Convert CO2 intoa raw material

0

Implementation of exchange meetings on carbon
neutrality for young employees
At our Oita Petrochemical Complex, Kawasaki Plant,
and Stage for Co-creation (Yokohama), we are conducting
R&D on technologies that contribute to carbon neutrality(CN). As part of these efforts, we have been holding
regular CN exchange meetings with young engineers intheir twenties and thirties since 2023. These meetings
aim to conduct CN study sessions and deepen theirunderstanding of CN-related development activities andtechnologies at each location. In June 2024, we held aplant tour and poster discussion at the Oita Petrochemical
Complex, where employees actively exchanged opinions
on technologies for utilizing CO2 and waste plastics,
among other topics. We will continue to develop
innovative technologies that contribute to CN byfacilitating co-creation both inside and outside theCompany through the CN exchange meetings with young
employees.

98

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Environment

Biodiversity Strategies (Information Disclosure in Line with the TNFD Recommendations)

Toward Circular Economy

We plan to make efforts to tackle climate change and achieve a circular economy through our business activities. At the same time, we willconsider our dependence on nature and the impact this has, and carry out activities to reduce and manage our impact, and conserve nature.
In our efforts, we will be conscious not only of our own business areas but also our value chain and we will promote ecosystem conservationand considerations for raw material suppliers.

We work hard to recycle waste and use resources efficiently. To thisend, our business and R&D divisions promote their activities bypaying attention to the entire product life cycle from product designand development to disposal. Toward circular economy, we focus on
the agendas on the right, while considering setting specific goals and
KPIs going forward.

Initiative Roadmap (excerpt)

Vision for the future (2030)
 ssess impact of Group’s businessA
activities on ecosystems and partner withvarious stakeholders to use natural
resources in a sustainable way, while
preserving, restoring, and improving themResults in 2023

Formulate basic policies

Revise Corporate Governance Basic Policies
Formulate Group environmental policies and roadmaps

Conduct simple assessment ofdependency and impact

Use external reports to organize the relationship between
the Group and nature

Assess priority regions

Organize priority regions for evaluation and response basedon geographical location information and external tools

Assess dependency and impact

Identify key dependencies and impact on nature and assess
this magnitude for areas subject to assessment

Present

Roadmap development and impact
assessmentD eveloped a biodiversity preservation
roadmap that is aligned with oursustainability strategy roadmap based on
TNFD’s disclosure recommendations andapproachC onducted impact assessments at major
plantsPlans for 2024
Implement an impact assessment basedon the roadmapC onduct a detailed investigation based on
past investigations and a detailed risk
assessment at priority sites, and explore
response measuresO rganize environmental data and apply it tocore global indicatorsC ollaboration with social contribution
activities and apply for OECM registration
Register as a TNFD Adopter

Assess risks and opportunities

Identify key nature-related risks and opportunities andassess this magnitude for areas subject to assessment

Explore and implement
response measures

Compare the assessment results with our initiatives andexplore and implement response measures

We are implementing a number ofco-creation initiatives with stakeholders in
relevant supply chains to realize a circular
economy through the power of chemistry(targets and KPIs currently underconsideration). Improve traceability andvisualization of recycling toward a circular
economyKPIs and results
Ratio of industrial waste sent to landfills
Resonac (consolidated in Japan) andformer Hitachi Chemical subsidiaries (outside Japan)
(%)
3.0
2.5
2.0

Key items and results
Water intake (excluding marine water)■ Resonac (consolidated in Japan) andformer Hitachi Chemical subsidiaries (outside Japan)

(km )
3

80,000■ Consolidated

68,06067,52264,261

68,29273,361

1.5

1.0

1.4

2019

2020

2021

2022

2023

Results in 2023
Resources
Reinforce global environment
management systems
Increase product-related initiatives
Boost up production capacity of lithium-ion
battery conduction additives to contributeto extending battery lifespan and reduce
CO2 emissions
Conduct a joint study for recycling
businesses of used plastics and fibers

40,000Plans for 2024
(Year)

TopicsLaunched KROPICO, a Product that Contributes to Biodiversity

Register as a TNFD Adopter

We have commenced a full-scale launch in Japan of
KROPICO (*fertilizer registration number: 105862), a
biostimulant material that promotes growth andalleviates stress in plants. It contains zero synthetic
chemical substances, and is the first biostimulant in theworld to contain several types of oligosaccharides withdifferent functions. Using this product helps to achieve
healthy crop growth and reduce the use of fertilizers
and pesticides, thereby reducing CO2 emissions related
to crop production and lowering environmental pollution
caused by excessive use.

We endorsed the recommendations published by theTaskforce on Nature-related Financial Disclosures (TNFD)
in September 2023, and registered as a TNFD Adopter andjoined the TNFD Forum in June 2024.
Going forward, we will promote initiatives based on therecognition that the continued protection of biodiversity isimportant for the natural resilience of ecosystems, while
also exploring the identification and assessment of
nature-related issues (dependencies, impact, risks andopportunities) in accordance with the TNFD
recommendations, and disclose information on this front.

1.2

1.0

60,00020,000Consolidated in Japan

2.5
1.8

0.5

0

99

Vision for the future (2030)

Design and development: Reduce consumption of minerals, fossil fuels
and other resources; Use recyclable materials; Control waste generation;
Improve recyclability; Extend product life; Quantify environmental
impact of products through the life cycle assessment
Manufacturing: Minimize consumption of energy, water, and otherresources throughout the product life cycle
Value chain: Pursue co-creation with diverse stakeholders such as
suppliers, customers, government agencies, municipalities, andinternational bodies

Resources
Promote global environment management
systems
Increase product-related initiatives
Develop binders that contribute to higher
input/output characteristics and longer
life of lithium-ion batteries
Provide environmentally friendly productswith a view to customers’ manufacturing
processes, etc.

0

2019

2020

2021

0.2

0.1

2022

2023

(Year)

Initiatives for achieving zero emissions
By defining zero emissions as the state in which the ratio of industrial waste sent tolandfills to total waste generated is 0.5% or less, we reduce the generation of waste
and promote the effective use and recycling of resources. We also inspect our
sub-contractors for intermediate treatment and final disposal of waste to confirm
that they appropriately treat and dispose of our waste. In 2020, the government
mandated companies that generate specially controlled industrial waste in theannual amount of 50 tons or more to use the electronic manifest for the reporting of
their wastes. Since then, the Resonac Group’s relevant sites have started producing
reports using the electronic manifest.
Started demonstration experiments of marine plastic waste recycling with
Kawasaki City
In cooperation with Kawasaki City, we started a demonstration experiment under“Kawasaki Plastic Chemical Recycling (KPR)” operations at the Kawasaki Plant torecycle marine plastic waste collected from the ocean surface of Kawasaki Port,and turn it into carbon dioxide gas and raw materials for chemicals such ashydrogen and ammonia. Most marine plastic waste is currently incinerated
instead of being recycled. Resonac and
Kawasaki City are exploring ways to recycle
marine plastic waste, which is a challenging
task. We are aiming to solve this problem as afirst step toward plastic recycling.

100

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Environment

Occupational Health and Safety
TopicsMissionTurning Waste from Semiconductor Materials Manufacturing Processes into Raw Materials
for Semiconductor Gases

Safety qualifies us to remain in the manufacturing business. The Resonac
Group will work as one to build a safety infrastructure and safety culture,and globally promote safety activities to eliminate occupational accidents.

—Reusing used plastic with chemical recycling technology
We have begun to consider recycling used plastic
generated in the manufacturing process ofsemiconductor materials into hydrogen and carbon
dioxide gas using our proprietary chemical recycling
technology. Hydrogen is used in high-purity gases,
etc. for semiconductor manufacturing as a raw
material for ammonia. We conducted the first
verification test at the end of January 2024 andconfirmed that gasification can be achieved without
any technical problems.

Used plastics

RPF* conversion

Incineration

If we gastify
plastic waste

RPF conversion Chemical recycling

CMEO/CQO

Reuse
HydrogenCarbondioxide gas

Semiconductor gas
Ammonia
etc.

Issues to be addressed (long term)Targeting zero occupational accidents andaccidents by training our personnel to havehigh safety awareness and skills

Recent issues and problem awarenessEstablishing Resonac’s safety culture andinfrastructure
Clarifying the requirements for a zero-accident
and zero-disaster workplace and building themeans to achieve it

Non-financial KPIs

Fostering a culture emphasizing
safetyN umber of occupational accidents
L ost time incident rate
N umber of equipment-related
accidents*A bbreviation of refuse derived paper and plastics densified fuel.
RPF is solid fuel made mainly from used plastics and other industrial waste that are difficult to be used inmaterial recycling.

P85 / Non-financial KPI Results and Targets

Response to Environmental Risks

Vision for the future(2030)

We appropriately assess the impact of our business on the environment and work to reduce our environmental load and implement measures forpreserving the environment based on the findings of such assessments, while contributing to achieving a sustainable society. The Group CEO is
the highest authority for environmental preservation activities and environmental risk measures. Information on the environment discussed at
Management Committee and other meetings is shared at each business division and site through environment & safety managers appointed forbusiness division and site. At each site, the head of the site and the environment & safety manager lead environmental preservation activities
based on their environment and safety action plans.
Vision for the future (2030)
 n integrated environment management system is inA
place on a global scale.
The environment management status is visible on a global
scale so that we can understand issues and takecountermeasures against them promptly

Results in 2023
 stablishment of a system to manage environmental riskE
eventsEstablishment and global rollout of Group environmental
safety management regulations
Establishment of a global legal compliance system (use ofchecklists for environmental laws and regulations,training sessions for environmental laws and regulations,and environmental audits)

Plans for 2024
 stablishment of guidelines for environmental riskE
assessments and roll them out globallyVisualization of environmental risks at plants andconsistent improvement of risk measures

Environmental measures in Kitakata City, Fukushima
At our Kitakata Plant in Fukushima, substances including fluorine
attributable to our business in the past were detected in an amountexceeding the regulatory standards in the groundwater flowing
beneath the premises. In response, we have implemented remediation
measures in line with the Soil Contamination Countermeasures Act
and the measures were completed in October 2023.
Niigata Minamata disease
Regarding the Niigata Minamata disease, the outbreak of which was
officially confirmed in 1965, we acknowledge that former Showa Denko’s
wastewater polluted the Agano River, causing great inconvenience tovictims and people living around the site. Resonac, in cooperation with
the national and local governments, will continue to respond in goodfaith to the victims of the incident and work to solve the related
problems in line with the laws and regulations that provide forcompensation to be paid for the damage caused by the pollution.

Fostering of aculture emphasizing
safetyEstablishment ofsafetyinfrastructure

Invigoration ofsafety activities

Results in 2023

Plans for 2024

A mutual-enlightenment
safety culture has been
instilled based onleadership from the top

Held exchange meetings and global
activity presentations for learning
about initiatives at other business sites
Rolled out the Safety Communication
Program (SCP*)
Incorporated safety activities into
evaluation systemIncorporate safety performance in executive
evaluations
Implement safety declarations, bonuses foractions, and positive evaluations for
performanceE xpand and enhance Safety Communication
Program (SCP) activities

Globally consistentrisk-based safety
management system isworking effectively toprevent accidents anddisasters

Started operation of theenvironmental and safety
management system integratingprocess safety
Clarified the requirements for thesafety data management systemD evelop global safety standards and safety
guidelinesB uild an environmental and safety support
systemAll employees maintainhigh safety sensitivity
and skills and all sites
actively carry out safety
activities

Started building safety model lines
and creating guidelines for safety
activities
Conducted training sessions on oursafety code of conduct and 10 safety
principlesA nalyze accident-free and disaster-free sites
and develop best practices
U se safety model lines to create opportunities
for improvement and learningP romote mutual enlightenment activities
between manufacturing sites for raisingsafety awareness

TopicsSCP activities and regional exchange meetings
Having started SCP in 2023 in Japan, in 2024 we expanded it to the Greater China. To support this, we
produced a video aimed at deepening the understanding of patrol officers and reviewed the contents of the
training sessions. We also created a certification system for SCP instructors and improved the quality ofpatrols by training highly skilled instructors.
In 2023, we held regional exchange meetings in North and Central America, the Greater China, and theASEAN region, where environmental and safety representatives from Resonac’s headquarters and local
plants gathered and talked. This initiative aims to foster a culture of mutual enlightenment based on learningfrom each other’s safety activities. As well as getting to know each other, participants shared best practices
and problems.
*S CP (Safety Communication Program): A mutual enlightenment activity where managers and supervisors
carry out site patrols, flag unsafe behavior while praising good behavior, and resolve issues together.

101

Naobumi Shimpo

Strategy for Realizing the Long-Term Vision

At present

Used plastics

We are working with our colleagues to build thefoundations for improving corporate value,
step by step, by putting the frontlines andpeople first in our safety and othermanufacturing-related operations, technology,
and quality assurance operations.

Please visit our website for more details on ourpolicies, promotion system, and activities.

102

RESONAC REPORT 2024

Contents

Quality Assurance

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Chemicals Management

MissionMissionWe supply products and services that are safe and provide peace of mind through our quality assurance activities based on relationships of trustwith our various stakeholders including our customers and suppliers.

Strategy for Realizing the Long-Term Vision
Issues to be addressed (long term)E stablish global quality assurance governanceand foster a culture of quality complianceS trengthen on-site capabilities to respond tochanges and increased sophistication incustomer requirements

We are dedicated to ensuring chemicals management compliance and providing safety and peace of mind throughout the entire product lifecycle.
We will strive to create new value through safety and contribute to the realization of a sustainable society and the enrichment of people’s lives.

Strategy for Realizing the Long-Term Vision

Recent issues and problem awarenessStrengthen global governance functions (audit/
quality risk diagnosis)
Continue reinforcing mechanisms forpreventing misconduct
Strengthen education systems for global
human resource development

Non-financial KPIs

N umber of product-related
accidents
N umber of quality complianceviolations
P85 / Non-financial KPI Results and Targets

Issues to be addressed (long term)Unification of global management
standards and establishment of a legal
compliance system
Development of global humanresources that can carry out the abovemeasures amid the ever-changing
demands of society

Recent issues and problem awarenessGlobal governance: Establishment of an RHQ structure andunified regulations
Chemicals management systems: Data preparation for thethorough utilization of existing systems
Recruitment/development of human resources: Enhance
training content and programs for the development of global
human resources

Non-financial KPIs

P romotion of productstewardship
P85 / Non-financial KPI Results and Targets*RHQ: Regional Headquarters (regional oversight companies)

Vision for the future (2030)

Results in 2023

Plans for 2024

 uality assurance governance andQquality-focused culture are establishedglobally, earning high levels of trustfrom stakeholders
Through the safe and secure products
and services we provide, we contributeto continuous business growth and thesustainability of societyE stablished a foundation for global quality
assurance governance (implementation in
Japan of unified rules, centralized
management of quality-related
information)Implemented quality compliance culture
development measures (awarenesssurveys in Japan, quality education)

Globally expand unified regulations, quality
education, and quality compliance awarenesssurveysStandardize assessment of on-site capabilities
in quality assurance and quality control
Systematically rotate personnel to prevent
misconduct

Vision for the future (2030)

Results in 2023

Plans for 2024

Establish a global chemicals management
system and governance to competeinternationally and earn high credibility
among stakeholders
Contributing to enhancing thecompetitiveness of our business byproviding safety and peace of mind
through co-creation with stakeholdersM aintained and enhanced legal
compliance and chemicals management
systems at domestic sites by conducting
audits and launching a portal siteS elected priority risk assessment
substances and issued safety summary
reports

Start early operation of RHQs in China andEurope. Consider starting the operation of
RHQs in the U.S. and Southeast Asia from 2025
Expand cooperation with overseas sites
through multilingual portal sites (strengthen
head office support and issue educational
content) to improve manager skills

Features of Portal Site
The site provides useful information, including the latest
regulatory information, various search tools, andlearning materials in an easy-to-understand manner.
We have also established a system in which issues
related to chemical management raised by employees
can be promptly dealt with by representatives throughan inquiry form.

TopicsAutomated inspection system
To prevent quality compliance violations, Resonac is introducing a system that
automatically issues shipment inspection reports based on inspection
instructions, quality standards, inspection result information, and the resultsof their judgments. The system is being rolled out sequentially to eachbusiness site. Until now, depending on the inspection item, the measured
inspection data was recorded on a handwritten document and then manuallyentered into the system. At one business site, an average of 40,000 pieces ofdata were being entered manually each month. This situation meant thattranscription or data entry
After system deployment
Conventional Processes
errors could arise, as could
improper work. To improve(1) Inspection work
(1) Inspection work
this, inspection equipment
Automatictransfer
was connected directly to(2) Inspection result record
the system, enabling(handwritten)
Automated approach toinspection results
inspection data to be(3) Excel creation
automatically transferred.
New system(manual keyboard input)
This minimizes human
Data uploads
involvement in the(4) Data uploads
judgments of inspection
QC judgment
results and all other data,
QA approval(5) Judgment
preventing human error
and misconduct while(6) Issuance ofsaving labor.
Issuance of inspection reportinspection report

103

Implementation of quality complianceawareness survey
In August 2023, we conducted a quality complianceawareness survey of over 13,300 all employees of theResonac Group in Japan.
Through questions about the Company as a whole,
employees’ own workplaces, and individuals, the survey
examined employees’ attitudes to and psychological states
about quality compliance. Questions included whether the
climate, system, and resources were adequate for ensuring
quality and attitudes to learning without hiding mistakes,
communication, and open discussion, etc.
Although there were many positive responses noting thethorough status and culture of quality compliance at anindividual or department level, the overall result was a callfor improvements in enterprise-wide system development
and resource allocation. With our two companies having
merged and expanded in scale, we have identified the needto promote integrated Group measures, and will further
strengthen these efforts.
Please visit our website for more details on ourpolicies, promotion system, and activities.

P108 / Enhancement of the Group Management System

Topics

Received the JIPS Award for the Third
Consecutive Year
We have received the 2023 JIPS* Award for the third
consecutive year. Continuing from the previous year,
we selected priority substances, conducted risk
assessments, andpublished 20 safetysummary reports. The
systematic increase in
the number of oursafety summary report
registrations has beenhighly regarded.
*T he JIPS award is presented by the Japan Chemical Industry
Association (JCIA) to member companies that have conductedsuperior initiatives in disclosing their safety summary reports
as part of the autonomous/self-motivated initiatives inchemicals management.

Formulation of Green Procurement Guidelines
In our material procurement activities, we have established the Green Procurement
Guidelines to promote the procurement of goods and services with reducedWeb
The guidelines select andenvironmental impact (i.e. green procurement).
classify the chemical substances prohibited from being included in procured products
and those that require control (containment controlled substances) into two
management categories (Level 1: Prohibited Substances, Level 2: Controlled
Substances), and clearly outline the survey and measuring methods and reporting
standards for contained substances. These guidelines accompany the items related to“3. Activities that we request our business partners to endorse and implement” of the“Resonac Group Sustainable Procurement Guidelines.” We will continue to updatethem so that we can share our views on voluntarily controlled chemical substanceswith our suppliers and take action together.
Please visit our website for more details on ourpolicies, promotion system, and activities.

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RESONAC REPORT 2024

Contents

Sustainable Procurement

Corporate Governance Reform

Data Section

MissionIn order to realize a sustainable society with consideration for the environment and society, we aim to conduct fair, impartial, and stableprocurement activities in a responsible manner through long-term relationships of trust with our suppliers.

Strategy for Realizing the Long-Term Vision
Issues to be addressed (long term)E stablishment of a global governanceframework and management systemS ophistication of procurement andsupply chain management methods
and systems based on DX

Recent issues and problem awarenessRaising the level of fairness and transparency in procurement
operations by fostering compliance awareness throughout
the GroupEnhancement of communication with suppliers to step up
collaboration

Non-financial KPIs

Vision for the future (2030)

Results in 2023

Plans for 2024 he supply chain functions efficiently,Tstably, and appropriately through globallycontrolled management frameworks andsystems
Practicing sustainable procurement in theform of responsible procurement activities
based on a fair and open framework while
holding high ethical standards

Enhanced communication with suppliers
through CSR questionnaire surveys
Gained insight into suppliers’ CSR efforts
through CSR questionnaire surveys
Set evaluation standards for suppliers
89% of suppliers had an overall scoreabove the satisfactory threshold. For
suppliers who did not meet this threshold,we formulated a dialogue plan aimed at
improving their efforts through CSR visits
and other means

Enhance communication with suppliers
based on the results of CSR questionnaire
surveyP romote collaboration and improvementwith suppliers facing issuesE xpand implementation of CSR
questionnaire surveys to overseas suppliers
Implement audits of procurement
operations at Group companies(Japan + the Greater China)

CSR Questionnaire Surveys and CSR Visits
100.0
80.0

B. Human rights

60.0
40.0

H. Supply chains

20.0

C. Labor

0.0

G. Information
security
F. Quality and safety

D. Environment

E. Fair business activities

Results of CSR questionnaires for our suppliers
conducted in 2023 (average score percentage by item)

Issues to be addressedI mprovement of quality ofcommunication with suppliersFurthering employee understanding and implementation of our human rights policyU nderstanding the potential and existing risks of harassment, conducting training
and fostering a corporate culture to prevent harassment
H uman rights due diligence in the supply chain

P85/Non-financial KPI Results and Targets

Addressing the 2024 Logistics Issue
in Japan

A. Corporate governanceI. Co-existence withlocal communities

Respecting human rights and creating an environment with high psychological safety are prerequisites for employees to work
autonomously and creatively.
In order to realize a society in which everyone is respected equally, we will cooperate with all stakeholders, including suppliers, andconduct business activities in consideration of human rights on a global scale.

Strategy for Realizing the Long-Term Vision

Topics105

Our Goals and Challenges

Respect for Human Rights

MissionIn the Resonac Sustainable
Procurement Guidelines,Web
all new suppliers are
asked to complete a CSR
questionnaire survey when we
start doing business with them,and important existing suppliers
are asked to complete a CSR
questionnaire survey once
every three years. We also
conduct “CSR visits” to around40 companies every year to
confirm the status of CSR
activities and introduce good
examples.
In addition to assessing the
suppliers’ risks, these areimportant activities that enable
us to build close and faircooperative relationships with
suppliers.

Who We Are

With regulations capping overtime hours for truck
drivers coming into force in April 2024, there areconcerns about a shortage of transportation
capacity. In June 2023, a chemicals working group
was established in the Physical Internet
Realization Council, comprising ministries andagencies related to the Ministry of Economy, Tradeand Industry, chemical-related companies, andlogistics companies in order to tackle the “2024logistics issue.” Resonac is also participating inthis chemicals working group. We haveformulated a concrete action plan to realize
sustainable logistics (stability, safety, carbon
neutrality, and efficiency), and are carrying out
initiatives, including the reform, standardization,and digitalization of logistics business practices.

Please visit our website for more details on ourpolicies, promotion system, and activities.

Non-financial KPIs

Respect for human rights
P85/Non-financial KPI Results and Targets

Vision for the future (2030)

Results in 2023

Plans for 2024

To have established a corporate culture
in which all Group employees, including
those overseas, respect human rights
and are able to transform diversity into
co-creative and competitive strengths
To have implemented measures forprevention and mitigation against
identified human rights risks, as well as
established a series of processes toevaluate their effectivenessConducted harassment training forexecutives
Identified issues to be addressed throughhuman rights awareness surveys (humanrights surveys) for employees
Implemented human rights training on a
global basis
Conducted a preliminary investigation into
overseas human rights risks, including
within our supply chainE xpand scope of harassment training to all
managersM onitor status through continued humanrights surveys
C ontinue human rights training on a globalbasisS tart surveys for suppliers, focusing on
high-risk regions and businesses (including
compliance with European Batteries
Regulation)

Human Rights Awareness Survey 2023
Resonac formulated the Group human rights policy in 2021 andconducted training and awareness-raising activities, thenconducted the first human rights awareness survey for employees
in 2023 globally. As a result, it was found that awareness of humanrights initiatives and positive sentiment among employees tended
to be high in general. However, the issues listed on the right wereidentified as human rights issues. With regards to harassment, we
will expand the scope of training to all managers in 2024.

(1) T here is room for further instilling the human rights policy
and the need to respect human rights among employees.
(2) A lthough awareness of our whistleblower system isincreasing, there is room for improvement in eliminating
concerns about anonymity and the disadvantageous
treatment of whistleblowers
P107/ C omplianc e(3) I dentify potential and existing harassment risks as humanrights issues

Human Rights Due Diligence Process for Harassment(1)
Identify the impact onhuman rights(2)
Prevent and mitigate
adverse effects(3)
Verify that the response
was effective(4)
Disclose the details of
our initiatives bothinternally and externally

(ex.)

2023

I dentified harassment as a humanrights risk based on the analysis ofhuman rights survey results
C onducted harassment training forexecutives2024

 xpanding harassment prevention
E
training to all managers

2025 onward lan to check the effectiveness byPhuman rights surveys andengagement surveys in the next
year and beyond

In a timely

 isclose the details and results ofD
our initiatives both internally andexternally, such as on our website

Human Rights Due Diligence in the Supply Chain
In order to identify human rights issues outside the Group, we believe it is necessary to consider the entire value
chain—from raw material procurement, product design and development to production, sales, collection anddisposal. We will remain aware of the unique context of a chemical company, including environmental risks andoccupational safety, and will prioritize our responses based on their impact on stakeholders and the severity of
the impact.

Please visit our
website for moredetails on our policies,
promotion system, andactivities.

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RESONAC REPORT 2024

Contents

Compliance

Our Goals and Challenges

Corporate Governance Reform

Data Section

Enhancement of the Group Management System— (RHQ [Regional Headquarters] Functional Design Initiatives)

MissionBasic Approach to Group Management

Thorough implementation of soft-law-based compliance going beyond legal and regulatory compliance is the key principle for business continuity.
We will gain the trust of international society and people involved in our business activities through thorough compliance.

Strategy for Realizing the Long-Term Vision
Issues to be addressed

Foster a sense of ownership for a wide range of compliance areas among themanagement team and employees
Further entrench and implement the Code of Conduct among employees
Autonomous operation of Global Compliance Standards (GCS)
Accelerate our response to whistleblower reports and foster trust from users

Non-financial KPIs

Inculcation of Our Code of Conduct
Penetration of Global Compliance Standards (GCS)
Increase in number of whistleblowing reports
P85/Non-financial KPI Targets and Results

Results in 2023

Plans for 2024

Each organization in thegroup acts autonomously
toward compliance

In Corporate Ethics Month, implemented
e-learning and workplace discussion
regarding our Code of Conduct
Introduced GCS and related regulations toeach organization, overseas bases, and majorGroup companies in Japan and abroad
Assigned compliance officers to overseas
bases and major Group companies in Japanand abroad, and began holding quarterly
meetings of the Group Compliance Committee
and Departmental Compliance Committees
Increased in number of reports as thewhistleblowing system penetrated more deeply

Start sharing information with the management teamand the entire company regarding compliance mattersof the Company (response after whistleblowing andvarious incidents, efforts to prevent recurrence, etc.)
Translate “Our Code of Conduct” into 14 languages topromote understanding in native languages of employees
Start compliance self-audits in each organization
Accelerate coordination and response with related
departments, having thoroughly ensured the anonymityof whistleblowers
Share compliance matters and stimulate discussion
aimed at preventing recurrence in quarterly meetings of
the Compliance Committee

GCS formulation/rollout

Actual compliance matters are wide-ranging, from manufacturing
related matters such as quality and products, to sales relate matterssuch as Competition Law and preventing corruption, to workplace issues
such as harassment. We are fostering common understanding ofcompliance, promoting coordination between departments to reduce
occurrence of issues to zero, and making opportunities for information
sharing and discussion on each level.

Group companies overseas

Compliance Officers (188 officers globally)• Entrenchment of the Code of Conduct• Autonomous operation of GCS• Raising awareness of whistleblower system• Holding meetings of Departmental
Compliance Committees

Breakdown of whistleblower reports in 2023 Number of reports
Sexual harassment, power
30
harassment, etc.
Compliance violations
10
Labor relations and other matters

57

Total

97

Daisuke Yoshida
Employee in chargeof compliance

TopicsCompliance with Competition Law
In regard to compliance with competition laws in each country, we
appropriately control cartel risk in our daily operations byimplementing “Rules for Interactions with Competitors.” Every year wehold a “Competition Law Compliance Hearing” in which we conduct a
voluntary audit of our law-compliant business, and report the results
to the CSuO and CRO. With regard to the former Hitachi Chemical
cartel problem which received judgment in 2016, we submitted a

Support axis

Head office business units

Head office corporate (CXO organizations)

Responsible for control and operation ofbusinesses and functions

Business axis
Business
Headquarters A

Business
Unit B

Stake: Over 50%

Stake: 50% or less

Functional axis
Group
Management
Regulations/
Head officeregulations

Subsidiary

Related company

Company SubsidiaryAA
regulations

report to the DOJ (U.S. Department of Justice) about the Company’s
measures to prevent recurrence during the probation period from2017 to 2021 under the U.S. plea agreement, and we received a noticeof completion from the Probation Office in June 2021.
Please visit our website for more details on ourpolicies, promotion system, and activities.

Cross-functional collaboration system

Internal audit

Finance and accounting

Legal and compliance

HR

Information system

Export management

Check compliance with regulations and manuals /operational support

Affiliated company
Company B Merger

Subsidiary
regulations

agreements, etc.

Company SubsidiaryAB
regulations

Supervision and support
for regional subsidiaries

Coordinate in management ofoverseas subsidiaries

RHQs (regional headquarters)
Regional axis

Arrangement of “defense” function

North and Central America

EuropeSoutheast AsiaCentral America

China

Business instruction
and supervisionRoadmap for designing RHQ functions

Number of whistleblowing reports
Group companies in Japanthem as the cornerstone of overseas subsidiary management.
Through activities conducted by RHQs in cooperation with the head
office, we will strengthen global governance by understanding thelaws, regulations, and business practices of each country andregion, and grasping and responding to them in a timely andcomprehensive manner. At the same time, we are working to grasp
the operational status of affiliated companies, establish a systemfor early risk detection, define the roles of directors and auditors ofaffiliated companies, and share information with the Internal Audit
Department, among other measures. Through these efforts, we aim
to stabilize the Group’s management foundation.

Main axis

Company A

Head officecompliance department

Business sites in Japan

We have established the “Rules on Group Management” as a basic
policy for the management of affiliated companies, which is to befollowed for maintaining control over the entire Group. Under thispolicy, CXO organizations have established regulations andmanuals that define the rules and business operations related toeach function. While business units are responsible for the control
and the operation of affiliated companies under their supervision,
we have also established a system that enables CXO organizations
to check compliance with regulations and manuals and support
operations in a cross-functional manner. As part of these efforts,
we established regional headquarters (RHQ) functions in North andCentral America, Europe, Southeast Asia, and China, and positioned
Framework for managing affiliate companies

Vision for the future (2030)

Assignment of compliance managers

107

Who We Are

Functional instruction
and supervision

Functional instruction andsupervision (support)

TopicsIn 2023, we built the common understanding between the CXO
organizations and RHQs, adjusted the number of required
personnel, and formulated a framework for recouping RHQ costs
in preparation for the operation of RHQ functions in 2024 onward.
After examining these measures, we started operation in January2024, focusing on functions related to “defense.” In 2024, some ofthe high-priority functions will be put into operation in the three
regions other than China. We will then work to monitor theoperation status of these RHQs and establish a management
system for activity records. We aim to officially launch thefour-region structure in 2025, and to have the RHQs function
operate independently as regional hubs in 2026 and beyond.
2023

2024

2025

2026 onward

FunctiondesignPartialcommencementof operations

Official start

Independent
operation asregional hubs

Global Kickoff Meeting 2024
We hold “Global Kickoff Meeting” every year. In 2024, a total of 191
executives from the head office and representatives of major groupcompanies from 15 countries world-wide attended the meeting todeepen their understandingof the current priority issues
faced by the entire Group.
Additionally, interactive
sessions among theparticipants fostered lively
discussions and networking,enhancing the sense of unity
among the Group.

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RESONAC REPORT 2024

Contents

Our Goals and Challenges

Corporate Governance Reform

Data Section

Please visit our website for more details on ourpolicies, promotion system, and activities.

Risk Management
MissionRisk management processesD evelopment and operation of comprehensive risk
management systems
Reinforcing the function of the second line of defense
P85 / Non-financial KPI Results and Targets

Vision for the future (2030)

Results in 2023

Plans for 2024

 nderstand and practice risk manageU
ment principles and approaches (allemployees)
Achieve world-class management by
establishing and improving risk
management structure and system that
support the three lines of defenseD evelop and operate an effective
administrative structure that also
covers BCM&BCP formulationI ntroduced control implementation andassessment processesB ased on BCM&BCP guidelines, fully
revised and established BCPs for
products for which BCPs have been
establishedI dentify companywide key risks and develop amonitoring (management review) process
Advance risk plotting (visualization tools) using generative AI and more standardized risk control throughthe control implementation and assessment processesB egin preparation for overseas deployment of risk
assessment
C omplete revision and establishment of productselections for which BCPs are to be establishedS tart preparations for companywide deployment ofsimulation training to study BCP effectivenessManagement

Crisis management system
If a situation arises that could pose an existential
threat to the Group, or if there is a risk of asituation developing that could seriously hinder
the normal business operation of the Group, we
will establish a crisis response headquarters led
by the CEO. By assessing the situation and its
impact on our business operations, issuing
instructions to prevent any escalation of damage,and considering what information to provide toexternal parties, among other operations, thecrisis response headquarters will ensure a swift
and appropriate initial response.

Board ofDirectors

Management
Committee
Risk Management Committee
CSO/CRO

Resonac
Holdings

Risks(1) Strategy risks, (2) operational risks, (3) hazard risks

Risk Management Department(strategy risks are coordinated with CSO/CRO, CSuO,
and CFO organizations)CXO organizations(head ofﬁce corporate departments)

Operating companies

Risk management system
The Group’s risk management system wasresolved by the Board of Directors as a key
function of the internal control system, and areporting and monitoring system is established.
Our Group’s Risk Management Rules are designed
to comprehensively and individually address management risks affecting our business. In theserules, we have established executive bodies andresponsible departments and provided for
management methods that comply with ISO 31000
and other standards.

Second line of defense
Overall responsibility for controlling risks underpurview. Identiﬁcation of cross-departmental Groupwide
risks and monitoring/support of operations

Business units(business units, business sites, subsidiaries)

First line of defense
Risk exposed entities. Recognition/assessment of risks
and implementation of countermeasures

Internal audit
departments

Third line of defense
Assessment,
monitoring and advice
from an independent
standpoint

Risk setting from an internal perspective

Deliberation at
management level

Top-down type: CXO organization-led

Alarm-level risks

EX: Risks based on an organization-wide perspective, including
economic security, response to new regulations, etc.

Bottom-up type: Business unit-led

Information
gathering

Report-level risks

EX: Day-to-day risks such as those relating to the industry,
customer data, laws, safety, etc.

Identification of bottom-up type report-level risks
The process for departments to identify and evaluate risks is implemented through a centralized data-intensive management using a standardized Enterprise Risk Management (ERM) system. Personnel in positionsof manager or above throughout the Company continually share resultson the system, enabling day-to-day risks to be reduced at on-site level.
The oversight divisions (CXO organizations) in charge of each risk
area review the identified risk events and evaluation results from eachdepartment as well as related data such as current responses to risks
and plans for addressing them. They also promote communication onmatters such as the need for support. Individual risk events that arehighly significant from the viewpoint of frequency of occurrence anddegree of impact are positioned as top risks, and they are shared withand verified at each department, while being deliberated at management level. The total number of registered risks in 2023 was 5,976. Of
these, 15 were subject to individual deliberations by the Risk Management Committee.

Risk database

Interviews
concerning
degree ofimpactSupplemented by
ChatResonac internal
generative AI
Risk verification from anexternal perspective

Creation of management agenda

Non-financial KPIs

 onduct risk management and strengthen management systems amid highC
uncertainty
Make BCP more effective and standardized

Identification of major risks bymembers of the Management
Committee

Issues to be addressed

Creating a companywide risk map

Strategy for Realizing the Long-Term Vision

Our business environment is constantly evolving and increasing in complexity amid technological innovation, market changes, andchanges in policy. We believe that to maximize corporate value under such circumstances it is best to combine two approaches.
Through bottom-up activities, we minimize day-to-day risks by tapping into on-site wisdom and experience. Through top-down activities, senior management takes the viewpoint of the entire organization and its goals, ranking business risks in order of priority andoptimizing resource allocation.
After companywide risks are identified through these two approaches, they are visualized by being entered into a heat map. Afterverifying and analyzin risk data using generative AI, the Risk Management Committee reports its findings as companywide key risk
themes. These are later discussed intensively in a deep dive at senior executives study sessions.
Business operations aligned tochanges in the external environment

While recognizing the various risk factors that hinder the sustainable growth and development of the Group and society, clarify risks
and opportunities in the formulation and implementation of management strategies, and help optimize the allocation of resources byconnecting them to management decisions

109

Who We Are

Identification of top-down type alarm-level risks
The outlook has become highly uncertain in recent years
due to changes in the external environment that have rapidly become more diverse and complex. These include
elevated country risks, changes in economic security policy
in countries around the world, countries’ responses toclimate change, and rapid advances in digital technology.
In 2023 we launched a project to identify among thesemegatrends the external environmental factors andchanges that the Group should focus on. The project is run
as a joint initiative between the Corporate Planning
Department, the Sustainability Department, and the Risk
Management Department. Using a scenario-based approach that takes into account external perspectives andenvironmental changes, we will improve risk awarenessand reflect it into our management strategies.
Visit our website to read the Cross-talk Between the CSuO andOn-site Staff in Charge: Challenges for Integrated Risk Management.

BCM Promotion
In accordance with the BCM&BCP guidelines we formulated in 2023, we set target recovery times
and target recovery levels using BIA (business impact analysis), and are preparing a BCP. Each year
we review the products for which BCPs are to be established based not only on sales and profit, butalso on whether the products are needed for social infrastructure.
We have also begun considering formulating BCPs not only for responding to conventional hazard
risks and operational risks, but also for strategic risks caused by changes in the external environment, such as an incident in Taiwan.
In addition, we have begun piloting using a new method of BCP training. By 2025. we aim to prepare
BCP training guidelines, with a system to support the implementation of training at each site.
We will be periodically reviewing our BIA and BCPs, while following BCM’s PDCA cycle by verifying
effectiveness through trainings, as we endeavor to deepen employees’ understanding of BCP tomake them more effective and standardized.

BCP training

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Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Risk Management

Identifying and Prioritizing“Companywide Key Risks Themes”
Resonac has organized the Risk Management Committee chaired by the CEO. The Committee facilitates cross-organizational deliberations by senior executives on the risk management system, key risks facing the Group, and countermeasures for addressing them.
Based on the deliberations of the Risk Management Committee, at a senior executives study session held in June 2024, companywide
key risk themes were identified and ranked in order of priority.

Goals
Goals

2

1. Method for identifying risks arising from the external environment(top-down type x bottom-up type)2. Detailed explanatin and discussion of external environmental events
3. Confirmation of BU countermeasures status and countermeasure gaps for each risk
Redefined companywide key risk themes after reflecting the insights of senior
executives
Assessing the significance and urgency of each risk and set an appropriate level ofmonitoring

Approach1

Understanding individual risk events arising from the external environment andexamining risks and countermeasures side by side
Reexamining areas of corporate support

ApproachMatters discussed by senior executives (June 2024 senior executives study session)

1. Alignment discussion on the eight risks and risks arising from the external environment
2. Identifying risks related to the concerns of senior executives
3. Plotting risks on a bubble chart
4. Setting the monitoring level
5. Determining the flag-bearer for each risk

Implementation:
The Risk Management Committee held preliminary discussions
based on its meetings with the CXO organization and with thebusiness side. Based on these discussions, risks arising from theexternal environment that are significant to Resonac wereidentified, such as concerns about country risks, concerns about
the protection of corporate secrets, and further heightened
environmental awareness. The status of countermeasures andconcerns about each risk were identified, and the direction ofcountermeasures was shared with senior executives.
Implementation:
Key risks such as operations and hazards were added. A fulloverview was presented again based on a tentative plot diagram ofthe eight key risks, and a question and answer session was held.
Each member of senior executives then plotted risks of concern ona risk map. The discussion then focused on which of these risks
could be incorporated and which should be eliminated. Regarding
the risks left on the map, the possibility of occurrence and theimpact of the business were re-examined, monitoring levels wereset, and future flag bearers (CXO) were determined.

Senior executives’ opinions on identified companywide key risks
S rank risks: The most significant risks
to the Company’s operations (requires the strictest
monitoring and/or immediate countermeasures)

A rank risks: Key risks to the achievementof company goals(regular review and preparation of a rapid response plan)

Risks related to human resources management and loss of talented employees(flag bearer: CHRO)Country risks (flag bearer: CSO/CRO)
AI-driven technological innovation, risks arising from market changes (flagbearer: CTO)

Risks related to supply chain instability (flag bearers: CMEO/CQO)
Information leakage and cyberattack risks (flag bearer: CDO-IT Supervisor)
Misconduct, corruption, compliance issues, or scandals risks (flag bearer: CSuO)
Human rights/environmental regulations risks (flag bearer: CSuO)

Human resources risks are linked to everything. In particular, with regard
to risk of brain drain, amid intense competition for talent around theworld, we are investigating what reasons and conditions lead employees
to quit, and planning to strengthen countermeasures (CHRO)
Even if each business deals with country risk, preparing adequately is
hard and business could be halted immediately. It should therefore betackled one of the most significant risks (CMO)
Market changes due to AI-driven technological innovations could have adramatic and significant impact on Resonac’s business. We must
constantly monitor what is happening (CTO)
When considering information leakage, we need to consider not only
cyberattacks, but also that individual employees could be poached byother companies or other countries. Many risks have human resourcesat their root, so a coordinated response is necessary (CSO/CRO)

Supply chain risk is a critical issue that we deal with in our daily
operations. While various perspectives have been included, I expect
continued and coordinated responses (CEO)In terms of information leakage risks, we need to reinforce our countermeasures for human resources as well as working to prevent cyberattacks. (General Manager of the IT Department)
Incidents related to misconduct or corruption, including product quality
irregularities, must not be allowed to occur. In light of the productquality labeling irregularities that the Company has had in the past andrecent misconduct issues at other companies, we must work together as
one team to take countermeasures (General Manager)
Human rights risks and environmental risks pose challenges both in termsof our future response to changes and our existing responsibilities,
including the supply chain. We will make plans, and respond to both opportunities and risks at Sustainability Promotion Council meetings (CSuO)The Resonac companywide key risk map developed through this process
Following the discussions by senior management, companywide key risks were plotted based on their likelihood of occurrence (verticalaxis), impact on business (horizontal axis), and degree of impact (size of the bubble), as shown in the figure on the right.
AI-driventechnologicalinnovation,risks arising frommarket changes

Likelihood of occurrence

Information leak
Cyberattacks

Internationaltax riskInternal collapse
due to teammanagement issues

Instability ofsupply chains

Lack of IT
InfrastructureInterest rate
fluctuation risk
Delay in
capitalexpenditures

Human resourcesmanagement
Loss of talented employees
Delays in technologicalinnovation due totalent shortage
Environmental
regulations
Sustainability

Other
opinions

Risks were identified by a bottom-up approach basedon working level perceptions of risk and a top-down
approach from the viewpoint of the entire organization.
We were able to use generative AI for verification andanalysis and conduct in-depth deliberations atmanagement level, and I think this was one step
forward in a groundbreaking initiative.

Unpredictable
markets

Country risks
Economic
security
Misconduct andHumancorruption
Intellectual property
rightsCompliancelitigation
scandalsAgingfacilities

As times have changed, the risk events that could occur have also changed dramatically. We need to prepare by understanding the risks inadvance and take countermeasures. (CSO/CRO)
Risks must be assessed and dealt with at two levels: surface phenomena and their underlying causes. (CHRO)
There are various reasons behind the unpredictable market changes. We will analyze the underlying factors from various angles and respondaccordingly (CMO)
I would like to take into account issues in areas such as reputation risk and strive to prevent them before they occur, bearing in mind that theywould have immediate impact on the stock price (CFO)
We would like to collaborate with business units, business sites, and CXO organizations to manage and respond to each risk (CEO, General Manager)

Tomomitsu Maoka
CSO/CROTo manage business risks, the working level
perspective and the management perspective areboth essential. Going forward, we should use
continuous monitoring to make our risk management system more effective.

Tomotaka Tsutsuzaki

General Manager, Risk Management Department

Quality issues
Decline in business
operations(inadequate manuals)

Lack of IT
literacy

Industry
restructuring

Impact on business
Legend111

S rank: The most significant risk to company's operations (requires the strictest monitoring and/or immediate countermeasures)
A rank: Key risks to the achievement of company goals (regular review and preparation of a rapid response plan)
B rank: key risks to business operations (regular monitoring and preparation of countermeasures)112

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03

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Corporate governance reform

113 ——— Governance Roundtable

Here we report on the progress of governance reforms aimed at enhancing Resonac’s corporate value.

119 ——— Directors, Audit & Supervisory
Board Members, Corporate
Officers, Skill Matrix
124 ——— Corporate Governance03

Governance Roundtable

Corporate governance reform

The approach the Board of Directors will take to maximize corporate value
How is the Board of Directors meeting the challenges Resonac must overcome?
Members of the Board discussed corporate governance reforms following the company merger, and the monitoring functions that the Board must perform.

<Reflections on discussions regarding portfolio reforms>

Resonac is entering its second year andstill halfway to generating value as a new company
We must step up our monitoring efforts
K. Morikawa We create action plans based on the Board of
Directors’ evaluation of its own effectiveness. The action planfor fiscal year 2023 includes (1) Taking specific measures toaccelerate separation of execution and supervision, (2)setting an agenda for the Board of Directors in the future
based on its objectives and roles, and (3) securing additional
communication opportunities. The Board concluded that it113

was successful in devoting a greater share of its discussions
to essential strategies. Revising the criteria for referring
matters to the Board changed the structures of Board of
Directors discussions significantly. Discussions regarding
individual projects went from accounting for 39% of
discussions in fiscal year 2022 to 13% in fiscal year 2023,
while strategy and company-wide discussion shares rosefrom 41% to 63%. The Nomination Advisory Committee andthe Remuneration Advisory Committee also began making
corporate governance reforms, such as launching
discussions regarding successors and executive
compensation linked to KPI. Board members with diverse

Names of speakers are shown in blue font for inside Directors and inside Audit & Supervisory Board Members.

experience and expertise in specialized areas are monitoring
Resonac from a range of different perspectives.
N. Morikawa I was appointed Outside Director of Showa
Denko in March 2020, after the Hitachi Chemical acquisition
decision was made, and joined discussions. With respect to
PMI reasonableness, which was the main topic of interest at
the time, I think our plan was appropriate, and I also highly
regard the fact that the merger was viewed as a crisis, andthat a new management system was created and Team
Takahashi was formed based on this understanding.
Since becoming Resonac, we have focused on monitoring
if PMI is being implemented. I have high praise for the way

the portfolio reforms have gotten off to a solidly based
start. In particular, I find the portfolio analysis approach oflooking at whether or not Resonac is the best owner to be ahighly persuasive one. However, shareholders won’t wait
forever. I think the next two or three years will be critical
years in terms of getting results of our portfolio reforms,
and we will need to monitor even more closely.
Tsuneishi Mr. Takahashi has a very clearly defined
strategy for portfolio management and a straight,
consistent message. I think the direction of that strategy isa valid and correct one. That said, even now Resonac has anextremely large number of business units, and I look

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NorikoMorikawa
Outside Board Director

forward to greater investigation at the Board of Directors
level of whether or not our plans are well-suited toincreasing profitability in each business segment, alongwith more detailed and deeper discussions.
Miyasaka While the amount of time spent discussing
individual projects has been reduced to achieve the targetof transitioning to a monitoring board, one also has torecognize that discussions have grown more abstract.
Maoka That’s one of the problems of separating execution
and supervision: it can lead to discussions becoming too
vague. In a company like ours, with such a wide-ranging
business portfolio, over-abstracting discussions can resultin no longer being able to see what exactly is going on. We
need to keep exploring how to maintain the right balance.
Toda I have only recently been appointed Outside Audit &Supervisory Board member, in March of 2024. The impression
I have based on what I have heard is that monitoring has been
focused on the integration process and cultivating thecorporate culture of the newly formed company. Goingforward, we will perhaps enter the stage in which we discuss
how to bring in revenue. One of the key points of auditing is the
maximization of corporate value, but society demands that weearn money through appropriate means to the eyes of all
stakeholders. We need to closely monitor to make sure that
there are no factors that could harm our corporate value andthat we are properly putting our decisions into practice.
Isshiki Looking at the composition of the outside directors,
I am the only one with extensive expertise regarding financeand investment. I think it would be advantageous if we had
a young outside director with experience in international
finance, in particular.

115

Yasukawa I have gone through a major merger before, so I
have first-hand experience with how difficult a corporate
merger is. I think what Resonac needs from me as an
outside director is the ability to leverage my knowledge,
which I have gained through dealing with various mergerrelated problems. Resonac is enthusiastically striving toachieve world-class levels in every area, be it strategy,
decision-making, compensation systems, or cultivating anorganizational culture. However, it has a large number ofbusiness sites, and it is still in the process of achieving
complete integration, including the penetration of its
culture. Going forward, I hope to continue providing
appropriate advice when it is needed.
<Regarding the partial spinoff of the petrochemical business>

Simply splitting off the petrochemical businesswouldn’t be enough
We are investigating and discussing what the new,post-spinoff company will be about
Somemiya Two major reasons that the Board of Directors
has been able to shift its discussions to medium- andlong-term issues are the decrease in the number of agenda
items for the Board to discuss, as a result of changes to thecriteria for referring matters to the Board, and the creationof spaces for sharing information in advance. In particular,
the executive side viewed the matters related to thepetrochemical business as challenges in business portfolioand shared that view repeatedly and clearly, which I thinkcontributed to the speedy decision by the Board to spin thebusiness segment off.

TetsuoTsuneishi
Outside Board Director

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section<C hanges to criteria for referring matters to the Board,
explanations provided in advance>

Kohei
Morikawa
Board Director andChairman of the Board

Tsuneishi Good point. The fact that information was sharedin advance made it possible for the Board to havemeticulous discussion in Board meetings. Under the
petrochemical business partial spinoff plan, matters I
raised were whether the new company would be capable oflaunching a new business and building up stock value, andwhat kind of support we would be offering to this newcompany. On the execution side, it was explained that wewant the spin-off to play a leading role in the petrochemicalindustry through its technical development, which is why
we went with a partial spin-off approach. Furthermore, wewill continue providing support for carbon neutrality
measures and personnel development, so we plan to keep
under 20% of the stock. I think this is a reasonable plan,for
the time being.
N. Morikawa Another noteworthy point is that
preparations are being made carefully to reduce the impact
on our shareholders and employees.
Isshiki The petrochemical business isn’t one that you canjust split off and be done with. The future shape of theindustry is also important. In that sense, I think it iswonderful that the Company has really thought through theform that new company will take after the partial spinoff,
through the sharing of information before Board of
Directors meetings and through the meetings themselves.
Maoka I think we need to keep the discussion going,
including on how the new company will contribute to society.
Somemiya This partial spinoff is unprecedented in theindustry. Our stance in making portfolio reforms is causing
a stir in the industry, and I think that was possible precisely
because of the support offered by the Board of Directors.

The improved quality of Audit & Supervisory
Board discussions made possible by sharing
information in advance has enabled the Board toserve its own unique roles and function effectively
K. Morikawa You pointed out that revising the criteria forreferring matters to the Board and that sharing informationin advance has improved the quality of Board of Directors
discussions. Going forward, I also hope for input from theperspectives of the effectiveness and the monitoring
functions of the Board of Directors and the Audit &Supervisory Board.
Kato Sharing information in advance means there are no
surprises in Board of Directors meetings, putting us on thesame page and enabling us to start discussions straightaway to really delve into the hearts of matters. This had apositive effect. Changes to the Board of Directors referral
criteria have had benefits, such as enabling discussions on
major topics, but at the same time, the fact remains that
there are important topics that do not meet the referral
criteria. The Audit & Supervisory Board reports on theseimportant matters that do not meet criteria. This reporting
includes discussions in Management Committee meetings
and the contents of Committee decisions. We will leverage
the information-gathering capabilities of the full-time Audit& Supervisory Board members and the solid independence
and expertise of all of the Outside Audit & Supervisory
Board members to improve the effectiveness of the Audit &Supervisory Board and reflect this in Board of Directors

YasuyukiMiyasaka
Outside Member ofAudit & Supervisory Board

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meetings, thereby improving the Company’s supervisory
functions.
Yajima Outside directors and outside Audit & Supervisory
Board members have different roles. While directors talkdirectly with management, one of the important roles of
Audit & Supervisory Board members is to create
opportunities for dialogue. Effective dialogue requires fresh
information, so we also need to thoroughly fulfill our roles
as information-gatherers. I think a good environment has
been established for the Audit & Supervisory Board, but withrespect to the Board of Directors, time limitations are still apressing issue. Simply stating one’s opinions is notcomparable to engaging in dialogue. Sharing information inadvance is an excellent step, but I feel we need to go further.
As an attorney who deals with corporate law, I focus on
my role as a sensor detecting issues that could potentiallynegatively affect the Corporate value. In that sense, weneed to have a thorough understanding of the situation in
the field and what people in the field are saying. I think it isimportant that we have a system whereby topics can besuggested by people with a thorough understanding of thesituation in the field.
Katayose Before being appointed as Audit & Supervisory
Board member in March 2024, I had previous experience asa general manager of a business headquarters and as a
CTO. I felt there was something of a divide between thecorporate officers and the Board of Directors. It is hard for
the Board of Directors alone to make judgments regarding
the execution side, including their skills and experience, so
I think one of the Audit & Supervisory Board’s roles is toperform close monitoring.

Kozo
IsshikiOutside Board Director

Tsuneishi Discussions about how to improve the Board of
Directors’ monitoring functions inevitably tend to be about
the Board of Directors’ systems and mechanisms. Of
course, these are important points to discuss, but in termsof monitoring board’s fundamental significance andfunctions, the most important role an outside director has
is to serve as a representative for shareholders and reflect
their wills in the management of the Company. We need tolook at the management strategies and management
measures from the execution side and determine, from ashareholder’s perspective, if they are appropriate andmeet shareholders’ expectations. We need to determine ifthey are solid strategies, if we have the capabilities andpower needed to implement them, and if there are any
invisible risks. If the executive plans are appropriate andfeasible, the outside directors must serve as supervisors
and, at the same time, as the plans’ greatest supporters,
helping guide them to fruition.
<Pressing issues Resonac must tackle now>

Outside Member ofAudit & Supervisory Board

117

K. Morikawa Mr. Tsuneishi, you said that outside directors
have to be supporters. Resonac aims to be a company thatcan compete on the world stage, so we need to achieve not
only world-class business performance but also worldclass governance functions, and to explain these functions
to investors. What plans does execution side has for
improving the effectiveness of the Board of Directors?

Our Goals and Challenges

Imai With respect to what, overall, is demanded from
Board of Directors monitoring, I think the most important
aspect is the approach taken in looking at the viability ofdecision-making processes.
Within the monitoring performed by the Board of
Directors, the most critical agenda items are portfolio
management, sustainability, and risk management. I think,as was discussed earlier, that the Board of Directors is
adequately monitoring the company portfolio. However,there remain challenges with sustainability and risk
management.
Somemiya The question of how to have the Board of
Directors engage in discussions aligned with shareholders’perspectives is an important one. Sharing feedback fromshareholders, gathered through IR activities, stimulates
discussions.
Maoka With respect to risk, as well, we need to clearly
identify major risks from a company-wide perspective, as
well as discussing risks in individual projects. I think that in
our Board of Directors discussions, we are able to provide
information that is even more useful than before.
Imai It's important to clearly state the scope of discussions
and provide the information necessary for those discussions.
For example, the Board of Directors discusses succession
plans. Instead of discussions about individual succession
candidates, it would be beneficial to define clear themes suchas the division of roles between the Board of Directors andthe Nomination Advisory Committee, and to engage indiscussions about the entire framework, such as what kindsof people the Company wants to develop and what kinds ofskill sets executives must have. I think this is vital.

Portfolio management is the priority agenda
toward improvement of corporate value,
followed by sustainability and risk management

KiyokoToda

Who We Are

Kenji
Yasukawa
Outside Board Director

Corporate Governance Reform

Data Section

MasakoYajimaOutside Member ofAudit & Supervisory Board

N. Morikawa I agree, that is extremely important. To behonest, looking back on the past two years, I feel like theBoard of Directors has been a bit distant from theNomination Advisory Committee and the Remuneration
Advisory Committee. We need to clarify the roles of each ofthese committees, as well as their relationship to the Boardof Directors, to achieve a unified personnel strategy anddevelop future generations. I think there is still a lot that wecan, and should, do.
Takahashi Everything I do as CEO, be it developing future
generations of employees or fostering our corporate culture,
is done with the aim of maximizing corporate value. When I
decide to work on something, I make that decision with resolveand conviction, and I make sure to always maintain cause anddignity. I would like to know whether I am maintaining a properbalance, from a shareholder perspective. I would like people
to share with me whether they think I am making decisions
that contribute to corporate value maximization. I havereceived valuable feedback about past investment projects,
and in the future, as well, I am determined to provide thoroughexplanations about milestone investment and decisions, so I
hope we can discuss these together.
K. Morikawa This discussion has really impressed on me
that Resonac has taken things to the next level. Following
the business merger that was Resonac’s starting point, wehave gone on to reinforcing the Board of Directors’
functions, focusing our efforts on enhancing governance,and really taking things up a notch. There are still many
issues that we have to address, so let’s keep on the right
path, uniting our strengths so that we can maximize
Resonac’s corporate value.

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Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Directors and Audit & Supervisory Board Members
Three Perspectives for Skill Identification
Resonac’s Corporate
Philosophy

Globalbusiness

Medium- to long-term
perspective to realize
Corporate Philosophy
Major issues to be discussed
at the Board of Directors’
meetings

Finance /accounting

Tomomitsu Maoka

Innovationand fusion oftechnology

ESG andsustainability

Personnel
management /development

Legal / risk
management

Term of office: 2 years

Attendance at BoD meetings in
2023: 15/15

Contribution point

Skills possessed
See our website forcareer summary

Strategies, semiconductors

Kohei Morikawa

Board Director, Chairman of the Board
President, The Society of Chemical
Engineers, Japan
Term of office: 8 years

Attendance at BoD meetings in
2023: 15/15

Contribution point

He joined Showa Denko K.K. (currently the Company) in 1982.
After being in charge of the R&D and business units for
specialty chemicals and high-purity gases for semiconductors,
he was appointed as Chief Technology Officer (CTO). From 2017,
he oversaw company-wide management strategy as the Chief
Executive Officer (CEO). He has knowledge and experience inthe technology and markets of functional chemicals that theCompany focuses on. He has been promoting reform of theBoard of Directors to enhance its monitoring function since2022, as the Chairman of the Board.
Skills possessed

Hidehito Takahashi

Representative Director,
President and Chief Executive Officer(CEO)
Term of office: 7 years

Attendance at BoD meetings in
2023: 15/15

Contribution point

Hideki Somemiya

Board Director,
Chief Financial Officer (CFO)
Term of office: 2 years

Attendance at BoD meetings in
2023: 15/15

Contribution point

Finance, semiconductors

Web

He joined the then Mitsubishi Bank, Ltd. in 1986. He has held
management positions at GE Japan Holding Corporation andseveral other foreign companies. Having joined the Company in2016, he has been promoting the Company’s growth strategy
as the Chief Strategy Officer (CSO) since 2020. Since 2022, he
has overseen the company-wide management strategy as
Representative Director and Chief Executive Officer (CEO) andcompleted the integration with Hitachi Chemical. He leads
Team Takahashi with ample knowledge and practicalexperience in business, leadership, and execution skills.
Skills possessed

Board Director, Chief Human Resource
Officer (CHRO)
Term of office: —Newly appointed

Kozo Isshiki

Outside Board Director
Term of office: 5 years

Attendance at BoD meetings in
2023: 15/15

Web

He joined Nomura Research Institute, Ltd. in 1990. He hasadvanced expertise and extensive practical experience incorporate finance and accounting based on his track record asa financial officer at foreign investment banks and Sony. He
also led strategies and business related to semiconductors andsystem solutions at Sony Corporation. Since joining the former
Showa Denko in 2021, he has been implementing financial andaccounting strategies to improve profitability and corporate
value.
Skills possessed

Outside Board Director
Term of office: 4 years

Attendance at BoD meetings in
2023: 15/15

Contribution point

See our website forcareer summary

Web

Skills possessed
See our website forcareer summary

General management, financeWeb

He joined the then Japan Development Bank in 1969. He has
worked in the financial industry for many years, and possesses
extensive experience in long-term financial operations andcommercialization of new technologies through investment
funds. He has been responsible for the chemical industry and agroup of chemical companies as industrial sectors, andpossesses deep insights into the chemical industry. Since
becoming an Outside Officer of the Company in 2019, he has beensupervising overall business execution, and has provided deep
understanding and useful advice on the Company's business.
Skills possessed
See our website forcareer summary

Finance, financial affairs, chemistry

Noriko Morikawa

Web

She joined former Hitachi Chemical in 1995 In addition to sales
experience in the US, she has experience in multiple
businesses and corporate planning. She served as a leader
from Hitachi Chemical during the integration of the twocompanies. Since 2022 after the integration, she has beenleading the permeation of Purpose and Values, integration of
HR systems and personnel systems, and laying the foundation
for cultural transformation as the Chief Human Resource
Officer (CHRO).

Human resource development, strategies

Contribution point

See our website forcareer summary

Strategies, general management

Nori ImaiContribution point

See our website forcareer summary

Chemical technology, strategies

119

Portfolio
management

Board Director,
Chief Strategy Officer (CSO)
Chief Risk Management Officer (CRO)He joined A.T. Kearney, Inc. in 1999. He joined Renesas
Electronics Corporation in 2013 after serving as a strategy andbusiness manager at foreign companies. He has accumulated a
track record in a number of corporate planning and China
business management executive positions, and possesses
advanced expertise and extensive practical experience inmanagement strategy and global management of technology
companies. Since joining the Company in October 2021, he has
been promoting the advancement of management strategy,
risk management, and global expansion.

Web

She joined CHORI CO., LTD. in 1981. After working at a securities
firm and an accounting firm in the US, she was involved inmanagement as a head of administrative departments such asaccounting, finance, and personnel in the information andcommunication industry and the automotive parts industry atboth Japanese and foreign global companies. Since becoming
an Outside Director of the Company in 2020, she has been
providing valuable advice to the Company’s management,
especially regarding the execution of administrative
department operations and global business development.
Skills possessed
See our website forcareer summary

Web

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Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Directors, Audit & Supervisory Board Members

Tetsuo Tsuneishi

Outside Board Director,
Corporate Director, Tokyo Electron
Device Ltd.
Term of office: 1 year

Attendance at BoD meetings in
2023: 12/12

After joining the then Tokyo Electron Laboratories, Inc. in 1976 andgaining overseas business experience, he became Chairman of theBoard of Directors in 2015. His track record of leading companies
to growth as a manager has given him advanced expertise andextensive practical experience in global management and thesemiconductor business. He was appointed Vice Chairman of theJapan Association of Corporate Directors in 2022. Since becoming
an Outside Director of the Company in 2023, he has been providing
important advice on corporate governance reforms aimed at by
the Company, utilizing his knowledge of corporate governance.
Skills possessed

Contribution point

Kenji Yasukawa

Outside Board Director,
Representative Director, Chairman of
the Board, Astellas Pharma Inc.
Term of office: —Newly appointed

He joined the then Yamanouchi Pharmaceutical Co., Ltd. in 1986.
He is currently serving as Representative Director andChairman of the Board of the company. With a background in a
top Japanese pharmaceutical firm that operates globally andhas undergone corporate integration, he possesses
development experience in the US, has been involved inmanagement strategy and sales oversight, and has broad
experience and insights as a manager of a leading company
with diverse human resources.

Toshiharu Kato

Full-time Audit & Supervisory Board
memberTerm of office: 5 years

15/15

Attendance at
A&S Board
meetings:

Attendance at
A&S Board
meetings: 13/13

Web

He has been involved for many years in the corporate planningdepartment as well as in the finance and accounting
departments both in Japan and overseas, and since 2017, hehas served as the Chief Financial Officer (CFO), overseeing thefinance and accounting departments. He has ample knowledge
and extensive practical experience in corporate planning,finance, and accounting.

As an attorney at a law firm that focuses on corporate law, shehandles cases related to crisis management and disputes. She
has experience and a high level of insight as a lawyer withextensive international experience in corporate legal affairs. In
addition to ensuring the appropriateness and legality ofbusiness execution in the globalization of the Company’sbusiness and M&As, she has been providing forward-looking
legal advice utilizing knowledge and experience in preventive
law.
Skills possessed

Legal, compliance

Yasuyuki Miyasaka

Outside Member of Audit &Supervisory Board
President, Yasuyuki Miyasaka CPA
OfficeTerm of office: 2 years

Attendance at
BoD meetingsin 2023: 14/15

Attendance at
A&S Board
meetings: 13/13

As a certified public accountant involved in audits domesticallyand internationally for many years, he possesses advanced
expertise and extensive experience in corporate finance andaccounting. He has served as an Outside Audit & Supervisory
Board Member of the Company since 2022 and provided advice
from the perspective of ensuring the appropriateness ofbusiness execution. From his standpoint as a specialist, heprovides useful advice on how the Company can earn sufficient
returns that exceed its cost of capital.
Skills possessed

Finance, accounting

Kiyoko Toda

Outside Member of Audit &Supervisory Board
Term of office: —Newly appointed

She has extensive business experience and advanced expertisein corporate finance and accounting, and ethical compliancerelated to manufacturing and financial institutions that operate
globally. She has audit experience with Japanese andmultinational companies at an accounting firm in the US, andhas been involved in the management of Japanese subsidiaries
of foreign companies as the head of the finance and accounting
department and the ethics and compliance department.

13/13

Contribution point

Skills possessed

Mitsuo Katayose

Full-time Audit & Supervisory Board
memberTerm of office: —Newly appointed

Contribution point

Creation of new businesses and products

Contribution point

Skills possessed

Compliance

Finance, accounting

121

Term of office: 4 years

Attendance at
BoD meetingsin 2023: 15/15

Contribution point

See our website forcareer summary

Strategies, general management, corporate integration

Attendance at
BoD meetingsin 2023:

Web

Skills possessed

Contribution point

Outside Member of Audit &Supervisory Board
Foreign Law Joint Enterprise Partner,
Nishimura & Asahi

Contribution point

See our website forcareer summary

Governance, semiconductors

Masako Yajima

He joined former Hitachi Chemical in 1987. He was involved in
R&D in the electronics materials area, functional materials
business planning, and the automotive parts business, and led
the creation of new businesses and products as Chief
Technology Officer (CTO). After integration, as General Managerof the High Performance Materials Business Headquarters, hehas promoted the integration of both companies' materials
businesses and the creation of technical synergies. He has theability, knowledge, and broad experience to perform audits ofbusiness operations in an accurate and fair manner.
Skills possessed

Comments from the Board of Directors’ Meetings Reform Secretariat
Our mission is to strengthen the relationship between execution and supervision and to facilitatecommunication with shareholders by assisting in ensuring and enhancing corporate governance,
focusing on secretariat work of the Board of Directors’ meetings, as well as secretariat work of theManagement Committee and shareholders’ meetings. In particular, given that increasing theeffectiveness of the Board of Directors’ meetings is the most effective way to enhance corporate value,
as a secretariat, we have worked to reform the Board of Directors’ meetings, led by the Chairperson, toenhance the operation of the Board of Directors’ meetings and prepare a draft revision to the standards
for bringing up matters for discussion. Following the roundtable discussion introduced here, we are
forging ahead for with plans to hold further discussions in the fall of 2024. Going forward, we willcontinue to support the Board of Directors’ meetings to help strengthen its supervisory function!

Governance Group, Legal Department
Yumiko Tsutsui, Atsushi Doi, Ken Kimura (from left)

122

RESONAC REPORT 2024

Contents

Corporate Officers
Corporate Officers

Executive Officers

Hidehito
Takahashi

Shigeru
FujitaNami
MatsukoYasushi
MakabeMakotoTakedaCésar
CastiñeiraHiroshi
Adachi
Hirotsugu
FukudaHidenori
Abe
Katsuyuki
Tsuji

Executive Vice President
General Manager, Electronics
Business Headquarters

Naobumi
ShimpoManaging Corporate Officers

Hideki
Somemiya

Chief Financial Officer (CFO)

Tomomitsu
Maoka

Chief Strategy Officer (CSO)
Chief Risk Management Officer(CRO)

Nori Imai

Chief Human Resource Officer(CHRO)

Chief Marketing Officer (CMO)
Chief Sustainability Officer (CSuO)
Chief Operations, Manufacturingand Engineering Officer (CMEO);
Chief Quality Officer (CQO)

MasatoChief Technology Officer (CTO)
Fukushima
Satoshi
General Manager, Mobility
Business Headquarters
Hara
Takafumi
Sakurada

General Manager, Advanced
Functional Materials Business
Headquarters

General Manager, Device Solutions
Business Unit
General Manager, Graphite Business
Unit
General Manager, Basic Chemicals
Business Unit

Resonac believes in the importance of continuously enhancing
its corporate governance in terms of supporting efforts to create
the functions required of an advanced materials partner
according to the times; contributing to the sustainable development of global society; and realizing the Group's Purpose of“Change society through the power of chemistry.”
In order to continuously enhance our corporate value, theDecision-making
and supervision

Deputy General Manager, Mobility
Business Headquarters

Innovation andfusion of technology

ESG andsustainability

Portfolio
management

Finance /accounting

Personnel management /development

Auditing

Board of Directors
Consultation /reporting

Remuneration Advisory Committee
6 members (including 1 female member)

Execution of duties

Audit & Supervisory Board
5 members (including 2 female members)

Accounting
auditor

Audit & Supervisory
Board members

Consultation / reporting

President (CEO)Management Committee

Chief X Officers (CXOs)

Legal /
risk management

Internal Audit
Department

Tomomitsu Maoka
Nori Imai

OutsideKozo Isshiki

LegendAuditing

Management control

Operating Company (Resonac)

Hideki Somemiya

OutsideDirector

6 members (including 2 female members)

Risk Management Committee
Compliance Committee
Sustainability Promotion Council, etc.

Hidehito Takahashi

Directors

Nomination Advisory Committee

Executive: 4 members
Non-executive: 5 members(Including 1 female member) (Including 1 female member)

Kohei Morikawa

Reporting
Audit & Supervisory Board members

Board of Directors

Audit & Supervisory Board

Cooperation

Chairperson Inside director not in charge of business execution

Chairperson Inside full-time Audit & Supervisory Board member

Meeting frequency Once or twice a month

Meeting frequency Once or twice a monthNomination Advisory Committee
Priority discussion topics in fiscal 2023: Nomination of candidates forchief executive officer and other management positions
Chairperson Outside director Meeting frequency 3 or 4 times a year

Chairperson Outside director Meeting frequency Once or twice a year

Remuneration Advisory Committee

Management Committee

Kenji Yasukawa
8

4

6

8

5

7

3

President, CXOs, and division heads whose presence on the committee isdeemed necessary by the president
Chairperson President Meeting frequency Twice a month in principle

Toshiharu Kato
Mitsuo Katayose

Ratio of Outside
Directors(Directors, Audit & Supervisory Board members)

Ratio of Outside Officers

Ratio of Directors Not in Chargeof Business Execution(Directors, Audit & Supervisory Board members)

Ratio of Female Officers

44.4%

50.0%

55.6%

28.6%

Masako Yajima
Yasuyuki Miyasaka

OutsideAudit & Supervisory Board Members

InsideDirector

Shareholders’ meeting

Name

123

Company shall ensure soundness, effectiveness and transparency of management and swift decision-making. The Company
shall also build a system that allows us to demonstrate ourcorporate value and fully take advantage of our resources, witha focus on objectives such as strengthening our management
and technological foundations and improving the capabilities
and motivation of our employees.

Corporate governance structure (As of June 30, 2024)

Deputy General Manager, Electronics
Business Headquarters

Based on its fiduciary duty and accountability to shareholders, the Board of Directors strives for the sustainable growth of the Company
and enhancement of its corporate value over the medium to long term through efficient and effective corporate governance. To this end,
we have identified the skills necessary to improve the effectiveness of the Board of Directors and prepared the skill matrix below, which
visualizes the skills and experience of our Directors and Audit & Supervisory Board members.

Global business

Data Section

Please also read the “Corporate
Governance” page on our website.

General Manager, Olefins & Derivatives Business Unit

Skill Matrix

Tetsuo Tsuneishi

Corporate Governance Reform

Basic Policies

General Manager, Hard Disk MediaBusiness Unit

Resonac Holdings

Chief Executive Officer (CEO)Noriko Morikawa

Our Goals and Challenges

Corporate GovernancePresident

Hiroyuki
Yamashita

Who We Are

Kiyoko Toda
5

1

1

1

3

0

3

124

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Corporate GovernanceEvaluation of the Board of Directors’ EffectivenessEvaluation method
The Company evaluates the effectiveness of the Board of
Directors every year, aiming to strengthen corporate governanceand improve effectiveness of the Board of Directors in and after
the next fiscal year. To be specific, in December 2023, the Company
surveyed respective Directors and Audit & Supervisory Board
Members through unidentified questionnaires and free descriptions to evaluate the effectiveness of the Board of Directors infiscal 2023. Then, in March 2024, the Board of Directors held ameeting for all directors and Audit & Supervisory Board members

to discuss the collected self-evaluation results and the monitoring function of the Board of Directors deliberated upon during
the trainings among directors and corporate officers held in
December 2023, create a summary of the evaluation results forfiscal 2023, and formulate an action plan for fiscal 2024. Notethat we have outsourced the questionnaire survey and aggregation of the results to an outside institution in order to ensure its
objectivity and enhance future effectiveness of the Board of
Directors.

Evaluation results (Actions taken in 2023)

Issues recognizedin fiscal 2022T
 he Board of Directors should examine how the Board of Directors should be in order toallocate greater percentage of discussion to that about substantial strategies and future risks.
T he Board of Directors should revise standards for bringing up matters for discussion inorder to give priority medium- to long-term issues over other issues.
T he Board of Directors should continuously improve all kinds of mutual understanding andinformation sharing.

Action planfor fiscal 2023

T
 ake specific measures to accelerate separation of execution and supervisionS et agenda for the Board of Directors in the future based on its objectives and rolesS ecure additional communication opportunities and improve the current methodM ake a new system for sharing information and improve the current method

Actions taken
in fiscal 2023

M
 atters discussed at the Board of Directors’ meetings shifted from matters to be independently
executed to strategic/important matters (since the middle of fiscal 2023).
D iscussed how the Board of Directors’ meetings should be (at the end of the year), including
how the institutional design should be.
W ith regard to matters to be executed, at the Board of Directors’ meetings, Directors received
comprehensive report on matters related to lawsuits, environment, and M&A in the first half ofthe fiscal year, and Directors also received report on strategic matters related to sustainability,
human resource development, technology, and digitalization in the second half of the fiscal year.
U pgraded the whole process of the Board of Directors’ meetings including prior explanations(sharing contents of questions and answers exchanged before the meetings, specifying risks
and alternatives concerning matters to be discussed, early sharing of important matters to
be discussed by utilizing the procedure for receiving report on off-topic matters, etc.)H ad opportunities for Outside Directors to communicate with one another exclusively. (TheCompany plans to prepare exclusive opportunities for Outside Officers [i.e., Outside Directors
and Outside Members of Audit and Supervisory Board] with one another in and after fiscal 2024.)

Changes in the characteristics of matters discussed at the Board of
Directors’ meetings caused by changes in standards for bringing
up matters for discussion to the Board of Directors’ meetings
Matters related to
Annual General
Meeting/Board
5%
Budget/Settlement
15%

Fiscal 2022

Matters related to
Annual General
Meeting/Board
5%

Remuneration

Strategic/
companywide
issues41%

Basic policies on remuneration
The policy for determining the remuneration for respective
directors of the Company is established by the Board of Directors after the Remuneration Advisory Committee, comprising amajority of outside and independent officers, deliberates on theappropriateness of the policy each fiscal year. While deliberating, the Remuneration Advisory Committee considers theevolving business environment, along with feedback fromshareholders and investors. Additionally, it sources essential
information for its discussions from third-party organizations
with extensive global experience and knowledge.
In determining the remuneration for respective directors forfiscal 2023, the Remuneration Advisory Committee, comprising amajority of outside and independent officers, conducted a multifaceted assessment utilizing objective and specialized informationnecessary for deliberation, ensuring alignment with the Policy for
Determining Remuneration for Directors and Corporate Officers.
The Board of Directors generally acknowledges reports made by
the Committee and deems the content to be appropriate and in linewith the aforementioned determination policy.

Strategic/
companywide
issues63%[Strategic/companywide issues]• Business strategies, portfolio reform, and human resource
strategies Strategies for R&D and intellectual properties,
governance system• Material issues for sustainability• Progress in risk management promotion and other important
CXO issues, etc.

Action plan for fiscal 2024 based on the reviews of business execution in fiscal 2023 is as follows.
Issues recognizedin the review ofthe managementof business infiscal 2023

Action plan forfiscal 2024D iscrepancies exist in the skills which are recognized as being necessary for the members of the Board of Directors that aims to be a monitoring board.
Discussion on this matter requires a lot of time. It is also necessary for the Board of Directors to discuss how the Board of Directors will protect its independence.
M any Directors thought there was an improvement in the adequacy of bills. However, some of Directors said we need more thorough discussion on bills.
The Company must have appropriate agenda for monitoring business processes including mechanism for risk management which aims to strengthen
governance of the group.
S ome Directors said it is necessary to improve information sharing with consultative committees. Some Directors also said it is necessary for the Board of
Directors to have substantial discussion about requests from investors.
C ontinue discussion on how the Board of Directors’ meetings should be (including composition of the Board of Directors and skills of each Director) in orderto make it function effectively as a monitoring board.
F ormulate and implement agenda optimized for the Board of Directors to function as a monitoring board.
E nhance effectiveness of the Board of Directors through continuous improvement in various opportunities of communication and information sharing.

Nomination Process
Approach to nomination
Candidates for Directors shall be persons who have the knowledge, experiences and capabilities required to fulfill their duties
as Directors. The Company selects senior management members by considering corporate and individual performance andother factors. Candidates for Audit & Supervisory Board Members shall have the knowledge, expertise and capabilities
125

Implementing a succession plan
The Company is conducting company-wide talent reviews, at theGroupwide and global levels, to cultivate the future leaders whowill be necessary to advancing its growth strategies.
The Nomination Advisory Committee discusses and confirms
the viability of management’s selection of potential successors
and its formulation of development processes. The Board of
Directors continually monitors all succession planning initiatives based on reports from the Committee.

Execution cases
39%

Execution cases
13%

Fiscal 2023
Budget/Settlement
20%

Dismissal of the CEO or other members of management
If there is a fact concerning the senior management, including CEO, that may meet the Dismissal Standards given below, the Nomination
Advisory Committee shall deliberate the applicability of the Dismissal Standards, and report the result of deliberation to the Board of
Directors. Then the Board of Directors shall make a final decision on dismissal of the relevant Director.

required to fulfill their duties, including those with strong
expertise in finance and accounting.
In electing and nominating aforementioned positions, theNomination Advisory Committee, an advisory body to the Boardof Directors, shall deliberate matters related to nomination andreport the results of its deliberation to the Board of Directors.

Composition of the Nomination Advisory Committee
Chairman: Tetsuo Tsuneishi Members: H idehito Takahashi(Outside Director)(Representative Director;
President and Chief Executive Officer)
Nori Imai (Director)
Kozo Isshiki (Outside Director)
Noriko Morikawa (Outside Director)
Kenji Yasukawa (Outside Director)

With the exception of Ms. Imai and Mr. Yasukawa, who assumed office in March
2024, all the aforementioned members, along with Mr. Nishioka, a former
outside director and Mr. Kohei Morikawa, an inside director, were present at
every meeting.

[Directors (excluding Outside Directors)]E stablish a remuneration scheme appropriate for recruiting and retaining talented
human resources from inside and outside Japan suited to a World-class Functional
Chemical Company
Incentivize them to achieve performance targets and increase medium- tolong-term corporate value, thereby driving the sustainable growth of the GroupM
 aintain a transparent, fair, and rational process for deciding remuneration fromthe viewpoint of accountability to all shareholders including stakeholders[Outside Directors]E stablish a remuneration scheme appropriate for the role and responsibility ofsupervising management from an independent and objective standpoint

Composition of the Remuneration Advisory Committee
Chairman: Kenji Yasukawa (Outside Director)
Members: H idehito Takahashi(Representative Director; President and Chief Executive Officer),
Hideki Somemiya (Director),
Kozo Isshiki (Outside Director),
Noriko Morikawa (Outside Director),
Tetsuo Tsuneishi (Outside Director)

Primary roles and authority of the Remuneration Advisory Committee
Matters to be resolved

Matters to be deliberated or confirmedB asic compensation for individual directors
Targets and evaluation of performance indicators associated with short-term
incentives (STIs) for directors, and amounts paid to individual directors
Position-based standard points, TSR evaluation, and the number of earned points
and shares to be delivered to individuals associated with long-term incentives(LTIs) for directors

Policy for determining the remuneration for directors and corporate officers
D etails of remuneration for respective corporate officers (excluding those
concurrently serving as directors), executive officers, and directors
Formulation, amendment, or revocation of significant company rules andprocedures related to remuneration for directors and corporate officers, alongwith descriptions presented in important public announcements and otherrelevant communications

In order to appropriately fulfill its roles and exercise authority indeliberating on matters entrusted or consulted by the Board of
Directors, the Remuneration Advisory Committee carefully considers consistency with the Policy for Determining Remuneration for
Directors and Corporate Officers, while also accounting for the
evolving business environment and feedback from shareholders
and investors. Furthermore, the Committee obtains information,
advice, and other insights necessary for its deliberations from
Willis Towers Watson (WTW), a third-party organization with awealth of international experience and knowledge.
Compensation consultants from WTW were present at fourout of the five meetings of the Remuneration Advisory Committee throughout the period. The Remuneration Advisory Committee reported the matters deliberated upon or resolved to theBoard of Directors in a timely and appropriate manner during
the period. Accordingly, the Board of Directors is confirming thereasonableness and appropriateness of the reported matters.
126

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Corporate GovernanceMatters discussed, etc.

Composition of remuneration for directors for fiscal 2024
Time of meeting and matters discussedD etermined the individual standard compensation amounts and the number of LTI standard points to be granted to each director
for fiscal 2023D
 iscussed the evaluation of performance indicators (consolidated financial results and personal performance) for the fiscal 2022
STI to determine the individual amounts to be paid to each director. The process of personal performance evaluations for each
evaluated director (President and CEO, CTO, CFO, CSO) began with an initial assessment by the President and CEO (including aself-evaluation for the President and CEO). The final evaluations were then conducted through deliberation and confirmation of
their appropriateness.
O pted not to grant shares for the fiscal 2022 LTI to a director who resigned in March 2023, based on the TSR evaluation through theend of the fiscal year immediately preceding his resignationD iscussed the targets of performance indicators for the fiscal 2023 STI, deliberated and confirmed the appropriateness of personal
performance targets after receiving explanations from each director and candidate for reappointment as a director (President andCEO, CRO, CFO, CSO) who were under evaluationC onfirmed the details of remuneration for directors and corporate officers that were to be disclosed in the Business Report andSecurities Report for fiscal 2022

All members(excluding newly
appointed members)

July
2023

D
 iscussed the consolidated financial performance targets (EBITDA) for the fiscal 2023 STI, which were undetermined due touncertainty of the business environment, and decided to apply the performance forecast for the second half agreed upon by theManagement Committee in June 2023. However, considering the delay in target setting and the fact that target values were much
lower than in the previous year, the EBITDA evaluation coefficient was set to a value that was calculated by multiplying the
calculation result based on a predetermined formula by 50%.

All members(excluding newly
appointed members)

October2023

C onfirmed the trend by collecting and analyzing the latest trends in Japan and abroad regarding KPIs for incentive compensation,
including ESGs, as well as examples from other companies.

All members(excluding newly
appointed members)

November2023

C onfirmed that the current remuneration aligns appropriately in level and composition with the Policy for Determining Remuneration for Directors and Corporate Officers after verifying the appropriateness of the composition and levels of remuneration for
directors and corporate officers through a comparison with global chemical or other material companies (peer companies) of asimilar scale (No revision would be made in fiscal 2024.)
C onfirmed that the standard compensation amounts for the newly established Executive Vice President to be established in 2024 is
set according to the Policy for Determining Remuneration for Directors, with reference to the remuneration levels of peer
companies.
H aving compared and examined the remuneration level of Outside Audit & Supervisory Board members with that of global
Japanese companies the same size as our company, we confirmed that it is low, and we recommend an increase to the Audit &Supervisory Board.

January andMarch 2023

Composition and levels of remuneration[Directors (excluding Outside Directors)]
T he remuneration of directors (excluding outside directors) consists of basic compensation (fixed compensation) based on the position, a short-term incentive (STI) tied to annual performance, and a long-term incentive (LTI) contingent upon medium- to long-term
performance and corporate value. However, for the Director and chairman of the Board
without right of representation, remuneration consists of basic compensation and LTI, inlight of his/her role and responsibility.
T he ratio of variable compensation (STI and LTI) to total compensation is set at 50% or
higher, with the intention to reinforce management’s commitment to improving businessperformance and other results, as well as corporate value. Given the substantial responsibility for business performance and stock price, the President receives a greater
portion of variable compensation in comparison to other directors. For the chairman of
the Board, the ratio will be individually set according to his/her role and responsibility.
T he levels of remuneration are established at appropriate amounts, aligning withbenchmarks from other companies (comparison with global chemical or other material
companies of a similar scale to the Company) based on surveys conducted by external
specialized organizations.
[Outside Directors]
O utside directors are paid basic compensation (fixed compensation) only.
T he members and chairman of the Remuneration Advisory Committee or the Nominating
Advisory Committee receive additional allowances corresponding to their designated duties.
T he levels of remuneration are established at appropriate amounts, considering the timeand efforts spent by each outside director to fulfill their expected roles and functions, aswell as benchmarks from other companies (comparison with global companies of a similar
scale to the Company) based on surveys conducted by external specialized organizations.

127

Participants

Types of remuneration
Fixed /
variableFixed

All members(excluding newly
appointed members)

Variable

Monetary /non-monetary

LTI
30%

Basic
compensation
40%

President
and CEO
STI
30%

Variable
60%

STI
25%
Variable50%

Outsidedirector

Audit & Supervisory
Board members

—

—

—

—

—

Short-term incentive (bonuses)

Non-monetary

Long-term incentive (stock-based compensation)

Short-term Incentive (STI)
The amounts to be paid to individuals as STI are calculated bymultiplying the position-based standard amount by two factors:(1) companywide performance evaluation coefficient (evaluation
ratio of 70%); and (2) personal performance evaluation coeffi-

cient (evaluation ratio of 30%). This approach aims to enhance
incentives for achieving companywide performance targets. The
performance evaluation coefficient ranges from 0% to 200%,
based on performance results and other factors.

Individual amount granted as STI = Position-based standard amount ×((1) Companywide performance evaluation coefficient + (2) Personal performance evaluation coefficient)

Key performance indicators (KPIs) used to calculate the companywide performance evaluation coefficient and the personal performance
evaluation coefficient are selected from the financial and strategic indicators prioritized by the Company to achieve its Long-term Vision.
Key Performance Indicators (KPIs) for the fiscal 2024 STI
KPIs

Personal
performance
evaluation

Evaluation
weightReasons for selection
Indicators for becoming a World-class Functional Chemical Company
Through business growth centered on electronics/mobility + innovation andstructural reform, we aim for scale and profitability appropriate for a company thatcan compete on the world stage.

EBITDA

20%

EBITDA margin (%)

30%

ROIC

20%

Indicators for maximizing corporate value and profit distribution to shareholders
In addition to fitness for strategy and best owner, encourage management that ismore aware of discipline (profitability and capital efficiency), aiming to further
enhance portfolio management and improve medium to long-term ROE.

Endeavors aligned with the long-term vision,actions to resolve sustainability issues, and more.

30%

Strongly encourage management from a long-term perspective to attain sustainable growth of the Company

EBITDA = Consolidated operating income + Depreciation and amortization + Amortization of goodwill, etc. EBITDA margin (%) = EBITDA ÷ Consolidated net sales
ROIC = (Operating income + Equity in earnings of unconsolidated subsidiaries and affiliates – Income taxes) ÷ (Interest-bearing debt + Total net assets)
Sustainability issues are discussed at the Sustainability Promotion Council

Long-term incentive (LTI)
The LTI system is designed to deliver a certain number of sharescalculated by multiplying the standard points based on theposition-based standard amount by a coefficient corresponding
to the Company’s TSR (Total Shareholder Return) over athree-year period, with the aim of enhancing corporate value inthe medium to long term.
To further enhance value sharing with shareholders, theactual delivery of shares is deferred to the time of resignation ofeach director.

Number of shares delivered to individuals as LTI = Position-based standard points x TSR evaluation coefficient

LTI
25%

Directors

Director and chairman of
Directors,(without right
corporate officers theofBoard
representation)

Composition
Basic compensation

Monetary

Company-wide
performance
evaluation

Composition of remuneration for directors(standard amount) for fiscal 2024

Recipients

Basiccompensation
50%

The TSR evaluation coefficient is decided based on a rank orderof the Company’s three-year TSR evaluation by comparison withcompanies (in the chemical and material industries with similarbusiness models and of the same size of larger). The target for
TSR ranking is set at mid-range or higher to realize the longterm vision of “TSR: Aiming to be in the top 25% in the chemicalindustry in the medium to long term.”

This system has been operational since 2022, and the first TSR
evaluation period (linked with the fiscal 2022 LTI) spanned three
years from 2022 to 2024. Subsequently, the TSR evaluation periodrolls over every year to maintain a three-year evaluation period.
Once the number of shares to be delivered is determinedthrough the TSR evaluation, the equivalent amount of dividends
during the interval until the time of resignation when the sharesare physically delivered is deemed to be reinvested, thereby adding
the count of shares slated for delivery. (see chart on next page)128

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Corporate Governance

TSR evaluation period and timeline for determining the number of shares (points) to bedelivered under the LTI plan per fiscal year
Period of fixing points,
Plan
2022 LTI

2022

2023

2024

TSR evaluation period2023 LTI

2025

2027

TSR evaluation coefficient

Principal position and nameduring fiscal 2023

Share issuance

Fixing of points

TSR evaluation period

Individual remuneration amounts (limited to the President and CEO or those with a total amount of remuneration paid by the Group of ¥100 million yen or more)

200%

Resignation

Fixing of points

TSR evaluation period2024 LTI

2026

Period of share issuance

Calculation method for the TSR evaluation
coefficient for the fiscal 2024 LTI

Share issuance

Fixing of points

Share issuance

100%

33%
0%

Threshold20%ile(17th – 18th)

Target60%ile(9th – 10th)

Maximum
100%ile(1st)

Remuneration of Directors and Audit & Supervisory Board members
Total amount paid
(Millions of yen)

Directors
Outside directors
Audit & Supervisory Board
members
Outside Audit &Supervisory
Board members

Total amount paid by remuneration type (Millions of yen)
Basiccompensation

Short-term incentive(STI)

Long-term incentive(LTI)

Company category

Representative Director andChairman of the Board
Kohei Morikawa

101

66

9

25

Resonac Holdings

Representative Director,
President and CEO
Hidehito Takahashi

134

73

32

28

Resonac Holdings

TSR rank

Adjustment of compensation, request for return of compensation, etc.
In case of deterioration in the Company’s business performance,
be recalculated based on reassessed performance and otheror such problems that could damage its corporate or brandelements with the exclusion of the impact of such factors.
value as quality issues, serious accidents, or scandals, theRegarding the short-term incentive (STI) and long-term
Company reserves the right to temporarily decrease or withholdincentive (LTI), if a director or corporate officer is involved inremuneration and other benefits for directors.
misconduct or if payment was made based on incorrect financial
Regarding the short-term incentive (STI), if temporary special
statements, the Company may nullify the right to receive
factors emerge, which was not anticipated when the targets wereassociated benefits on account of such fact or demand return of
set at the beginning of the period, individual bonus amounts maycompensation already paid to the individual concerned.

Category

Total amount paid
(Millions of yen)

Cross-Shareholdings
Policy on reduction of cross-shareholdings
In principle, the Company adheres to a policy of not engaging incross-shareholdings, and steps are currently underway to
reduce existing cross-shareholdings.

Review on the appropriateness of cross-shareholdings
The Board of Directors verifies each year whether the profitability and business feasibility of holdings are rational given theassociated capital costs.

Holdings for which numbers of shares held increased in fiscal 2023*
Holdings

Acquisition costs ofadditional shares(Millions of yen)

Reason forincrease

Listed stocks

—

—

—

Unlisted stocks

—

—

—

Holdings for which numbers of shares held decreased in fiscal 2023*
Holdings

Sales proceeds associated with
reduction in the number of shares(Millions of yen)

Listed stocks

3

506

Unlisted stocks

7

198

Total amount paid by remuneration type (Millions of yen)
Basiccompensation

Short-term incentive(STI)

Long-term incentive(LTI)

Number of recipients

503

354

82

66

12

69

69

—

—

5

106

106

—

—

5

39

39

—

—

3

Notes:
1. The amounts of basic compensation are the total amount of compensation paid in fiscal 2023 (all monetary compensation).
2. The amount of STI is the total amount of compensation paid in March 2023 (all monetary compensation), based on the performance and other results achieved during fiscal 2022.
 he amount of LTI is the total amount expensed in fiscal 2023. The Company’s LTI represents the number of shares of the Company’s stock determined based on the results of the three-year TSR (Total
3. T
Shareholder Return) evaluation, to be deferred and delivered upon resignation. For the LTI management, we utilize the Stock Benefit Trust of Mizuho Trust & Banking Co.
 he amount of remuneration for directors from fiscal 2022 onward was resolved at the 113th Ordinary General Meeting of Shareholders held on March 30, 2022, and the details are as presented below. The STI
4. T
and LTI amounts are paid to directors, excluding outside directors.

Category

Date of resolution of the General
Meeting of Shareholders

Monetary remuneration(Basic Compensation + STI)

Stock-based compensation (LTI)(Amount of BBT contribution /Points granted)

Number of applicable persons

Directors

The 113th Ordinary General
Meeting of Shareholders held on
March 30, 2022

Up to ¥850 million per year
(Of which, outside directors: ¥100 million)

Up to ¥1.35 billion for 3 fiscal years(Up to 410,000 points per fiscal year)

10 (Of which, 4 outside directors)

Voting right exercise standard
When the Company exercises its voting rights of cross-shareholdings, the company shall decide approval or disapproval ofeach item on the agenda by examining whether the item contributes to increasing corporate value and maintaining/increasing
shareholders’ returns or not.

Numbers of cross-shareholdings and amount on the balance sheet*
Holdings

Amount on the balance sheet(Millions of yen)

Listed stocks

1

190

Unlisted stocks

68

1,927
* Cross-shareholdings held by Resonac Corporation

5. T he amount of remuneration for Audit & Supervisory Board members was resolved at the 96th Ordinary General Meeting of Shareholders held on March 30, 2005 to be no more than ¥12 million per month. The
number of Audit & Supervisory Board Members as of the close of the said General Meeting of Shareholders was four.

129

130

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Financialdata

Non-financial
data

For details of the data, pleaserefer to the relevant website.

Consolidated 11-Year Summary

Resonac made former Hitachi Chemical a consolidated subsidiary, and started on July 1, 2020 to incorporate
Hitachi Chemical’s sales figures and income/losses into its consolidated financial statements.

2013
Financial Highlights (Consolidated)

2014

2015

2016

2017

2018

2019

2020

2022*5

2021

2023

2023

Millions of yen

For the year
Net sales

847,803872,785775,732

671,159

780,387

992,136

906,454973,700

1,419,635

1,392,621

1,288,869

Operating income (loss)

25,953

20,55133,50842,05377,708180,003

120,798(19,449)

87,19861,726(3,764)

3.1

2.4

4.3

6.3

10.0

18.1

13.3

(2.0)

6.1

4.4

(0.3)

9,065

2,929

921

12,30537,404

111,50373,088(76,304)(12,094)

32,422(18,955)

Ratio of operating income (loss) to sales (%)
Net income (loss) attributable to owners of the parent
Net cash provided by operating activities

63,56566,996

61,17068,94967,235

149,785

78,554109,286

115,283

99,376

118,686

Net cash provided by (used in) investing activities(55,203)(46,876)(42,497)(53,754)(29,866)(49,338)(48,156)(930,047)

28,606(54,667)(61,869)

Free cash flow

8,362

20,12018,674

15,19537,369100,447

30,397(820,761)

143,889

44,70956,817

Net cash provided by (used in) financing activities(6,805)(24,856)(21,336)(13,220)(18,370)(61,061)(18,546)896,521(121,741)(103,267)(62,880)

R&D expenditures

20,43520,362

20,28917,313

18,53919,73520,60534,37946,75047,13542,697

Capital expenditures

44,37047,31844,05939,276

41,787

41,72750,216

69,05278,647

107,074

96,633

Depreciation and amortization

39,77940,67342,137

38,761

38,56539,45937,704

68,64397,726

91,96492,516

Total assets

985,771

1,009,843

940,494

932,698

1,026,999

1,074,983

1,076,381

2,203,606

2,142,390

2,093,744

2,031,953

Total net assets

345,811

319,087

308,142

311,231368,994

465,340

519,433

718,080

818,452

574,718

578,668

Shareholders’ equity ratio (%)

30.6

29.7

31.5

31.8

34.3

41.5

46.4

18.4

24.0

26.3

27.2

Return on equity (ROE) (%)

3.2

1.0

0.3

4.1

11.5

27.9

15.5

(16.9)

(2.6)

6.1

(3.4)

353,686

383,124

368,835

359,929

346,726

287,968

303,192

1,060,146

850,603

1,062,637

1,016,532

1.02

1.20

1.20

1.16

0.94

0.62

0.60

1.84

1.15

1.07

1.00

At year-end

Interest-bearing debt*1
Debt/equity ratio (gross, times)*1
Per share*2 (yen)Net income (loss)—primary*3
Net assets
Cash dividends (applicable to the period)

6.06

1.99

6.45

86.27

262.44758.15501.03(523.06)(77.40)179.02(104.65)201.27209.76

2,076.05

2,080.85

2,473.06

3,057.16

3,423.25

2,782.79

2,838.51

3,038.35

3,052.07

3.00

3.00

3.00

—

80.00

120.00130.00

65.00

65.00

65.00

65.00

*1 From the third quarter of 2020, due to former Hitachi Chemical, becoming a consolidated subsidiary, the D/E ratio reflects the following situation: regarding preferred shares issued by HC Holdings K.K., a subsidiary,posted under non-controlling interests on the consolidated balance sheets, the value equivalent to 50% is added to each of interest-bearing debt, and shareholders’ equity, in consideration of the characteristics ofthe capital structure. For interest-bearing debt, net value is indicated after excluding cash and deposits and adding debt on lease. For Determination of the 50/50 allocation for preferred shares in light of thecharacteristics of the capital structure is based on the rating of Japan Credit Rating Agency, dated April 21, 2020. This change in accounting standards for the D/E ratio from 2020 has been retroactively reflected in2019 figures. Furthermore, in regard to the subordinated loans taken out in order to purchase preferred stock, 50% of this amount is deducted from interest-bearing debt and added to shareholders’ equity.
Determination of the 50/50 allocation for the subordinated loan in light of the characteristics of the capital structure is based on the rating of Japan Credit Rating Agency, dated October 4, 2022.
*2 Resonac consolidated every 10 shares of common stock into one share on July 1, 2016. “Per share” indicators for 2015 and 2016 (except for cash dividends) are calculated on the basis of the number of outstanding

Non-financial data

Scope up to 2017

Number of employees (persons)2014-2017: Former Showa
Denko (consolidated)

Ratio of employees working outside Japan (%)
Number of female managers (persons)Ratio of female managers (%)

2014-2017: Former Showa
Denko (non-consolidated)

Greenhouse gas emissions (Scope 1 + Scope 2) (kt-CO2)*
Amount of water withdrawals(excluding seawater; thousand m3 )Ratio of industrial waste sent to landfills (%)

2014-2017: Former Showa
Denko (consolidated in Japan)

2014

2015

2016

2017

10,577

10,561

10,146

10,864

43.9

44.4

40.1

44.0

18

23

26

28

2.3

3.0

3.4

3.7

3,667

3,699

3,818

3,785

*4

shares after this consolidation.
*3 Net income (loss) per share has been computed based on the average number of shares of common stock outstanding during the respective fiscal year.
*4 Resonac resolved payment of dividends of ¥30.00 per share based on the record date of May 11, 2017 at the extraordinary general meeting of shareholders held in June 2017. Cash dividends applicable to 2017
include this amount.
*5 Our subsidiary former Hitachi Chemical (current Resonac Corporation) and its Japanese subsidiaries previously adopted the International Financial Reporting Standards (IFRS), but switched to Japanese Generally
Accepted Accounting Principles (JGAAP) from fiscal 2023. This change has been applied retroactively and the figures for fiscal 2022 have been retroactively adjusted.

2018

2019

2020

2021

2022

2023

33,46533,90833,684

26,05425,803

23,840

54.2

54.5

54.6

51.2

50.8

50.0

162

170

170

148

397

404

7.0

7.1

7.1

7.3

12.6

12.4

Consolidated

4,827

4,657

4,266

4,483

4,360

4,226

67,306

68,06067,52264,261

68,29273,361

1.8

1.8

1.0

1.4

2.5

1.2

Scope in and after 2018
Consolidated
2018-2021: Resonac (non-consolidated) + Subsidiaries of former
Showa Denko in and outside Japan2022-: Consolidated

62,62060,04058,72059,4702018-2021: Resonac (consolidated in Japan) and former Hitachi
Chemical subsidiaries (outside Japan)
2022-: Consolidated

1.08

0.95

0.32

0.38

Resonac (consolidated in Japan) and former Hitachi Chemical
subsidiaries (outside Japan)

Note:
For non-financial data, boundaries (scope of data) differ depending on the item and time period. Upon the integration of the former Showa Denko and the former Hitachi Chemical, we have re-examined boundaries
and figures for past fiscal years, making some adjustments in our disclosures. Additionally, water withdrawals data up until 2017 is expressed in units of 10,000 m 3 .
P97*Actual greenhouse gas emissions (Scope 1 + Scope 2) in 2013 (consolidated) were 4,634 kt.

131

132

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Consolidated Financial Statements
Millions of yen

Consolidated Balance Sheets
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment andvehicles, net
Tools, furniture andfixtures, net
Land
Leased assets, net
Construction in progress
Total property, plant andequipment
Intangible assets
Goodwill
Customer related assets
Other
Total intangible assets
Investments and other assets
Investment securities
Net defined benefit asset
Deferred tax assets
Other
Allowance for doubtful
accounts
Total investments andother assets
Total noncurrent assets
Total assets

133

2022

Millions of yen

2023

2022

2023

Liabilities
186,499
266,093
121,172
34,13095,151
85,248(1,254)
787,037

190,318
266,122
115,123
23,68786,38372,019(1,731)
751,922

138,242

154,659

214,718

218,346

24,28025,021

233,987
15,97350,866

230,806
12,40337,351

678,064

678,586

295,355
133,639
64,695
493,689

285,199
128,908
56,482
470,589

83,341
18,046
16,671
17,51772,50328,038
14,965
16,513(622)(1,163)

134,953

130,856

1,306,706
2,093,744

1,280,031
2,031,953

Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-termloans payable
Commercial papers
Current portion of bonds
Provision for repairs
Provision for bonuses
Provision for bonuses for directors
Provision for stock payments
Provision for businessstructure improvement
Other
Total current liabilities
Noncurrent liabilities
Bonds payable
Long-term loans payable
Deferred tax liabilities
Deferred tax liabilities for land
revaluation
Provision for repairs
Provision for stock payments
Provision for businessstructure improvement
Net defined benefit liability
Other
Total noncurrent liabilities
Total liabilities
Net assets

194,054
72,419177,375
52,48942,67723,552

—
—
19
9,489
47
21

10,00040,000794
10,593
109
81

—

621

140,152
458,877

146,267
461,881

260,000
672,446
51,379250,000
625,840
36,321

29,52528,448

1,260
302

2,430
353

772

577

9,981
34,484
1,060,148
1,519,026

9,961
37,474
991,404
1,453,285

Shareholders’ equity
Capital stock
182,146
Capital surplus
108,140
Retained earnings
165,902
Treasury stock(11,612)
Total shareholders’ equity
444,576
Accumulated other comprehensive income
Valuation difference on
355
available-for-sale securities
Deferred gains or losses on hedges
1,461
Revaluation reserve for land
27,915
Foreign currency translation adjustments
72,008Remeasurements of defined benefit plans
3,980
Total accumulated other105,719
comprehensive income
Non-controlling interests
24,423
Total net assets
574,718
Total liabilities and net assets
2,093,744

182,146
108,140
137,269(11,593)415,963
194
1,196
26,11399,217
10,154
136,875

Millions of yen

Consolidated Statements ofIncomeNet sales
Cost of sales
Gross profit
Selling, general and administrative
expenses
Operating income (loss)
Non-operating income
Interest income
Dividends income
Equity in earnings of affiliates
Rent income on noncurrent assets
Foreign exchange gain
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Miscellaneous expenses
Total non-operating expenses
Ordinary income (loss)
Extraordinary income
Gain on sales of noncurrent
assetsGain on sale of businesses
Other
Total extraordinary income
Extraordinary loss
Loss on sales and retirement of
noncurrent assets
Impairment loss
Extra retirement payments
Loss on sale of businesses
Loss related to the Antimonopoly Act
Other
Total extraordinary losses
Profit (loss) before income taxes
Current
Deferred
Total income taxes
Net income (loss)
Net income attributable tonon-controlling interests
Net income (loss) attributable toowners of the parent

2022

2023

1,392,621
1,087,775
304,847

1,288,869
1,042,252
246,617

243,120

250,380

61,726(3,764)

1,068
766
3,630
1,516
10,632
4,949
22,561

1,840
400
3,589
1,599
1,967
4,859
14,253

15,762
6,815
22,576
61,711

13,37011,89325,263(14,773)

13,578

3,720

251
9,451
23,28024,638
5,976
34,335

6,153

5,889

10,091
434
3,504
5,579
8,303
34,06450,927
18,617(7,377)
11,24039,687

26,183
6,573
—
—
7,100
45,746(26,184)
9,483(17,642)(8,159)(18,026)

7,265

929

32,422(18,955)

Millions of yen

Consolidated Statements ofComprehensive Income

2022

Net income (loss)
39,687
Other comprehensive income
Valuation difference on available(2,035)
for-sale securities, net of tax
Deferred gains or losses on hedges,294
net of tax
Foreign currency translation
32,932
adjustments
Remeasurements of defined(3,895)benefit plans, net of tax
Share of other comprehensive
income of unconsolidated
1,763
subsidiaries and affiliates accounted
for using equity method
Total other comprehensive
29,058incomeComprehensive income
68,745Comprehensive income attributable to:
Owners of the parent
60,319Non-controlling interests
8,426

2023

(18,026)
(255)
(265)
27,695
6,190
887
34,252
16,227
14,003
2,223

25,830578,668
2,031,953
134

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Consolidated Statements of Cash Flows

Consolidated Statements of Changes in Net Assets

Millions of yen

Shareholders’ equity

Balance as at
December 31, 2021
Cumulative effects of changes
in accounting policies
Restated balance as at
December 31, 2021
Changes of items
during the period
Dividends from surplus
Net income attributableto owners of the parent
Purchase of treasury stock
Disposal of treasury stock
Increase by decreaseof consolidated
subsidiaries
Change in treasury shares ofthe parent arising fromtransactions with
non-controlling shareholders
Changes in liabilities
for written put options
over non-controllinginterests
Reversal of revaluation
reserve for land
Net changes of items
other thanshareholders’ equity
Total changes of items
during the period
Balance as at
December 31, 2022

Capitalstock

CapitalsurplusRetainedearnings

182,146

119,772

143,335

Valuation
Total
Treasury shareholders’ difference on
available-forstock
equitysale securities(11,655)847
182,146

119,772

144,182(11,655)

433,598

2,838

847

(415)

434,445

2,423

Accumulated other comprehensive income
Deferred Revaluation
Foreign
Total accumulated
gains orcurrency Remeasurements
otherfor translationof defined
losses on reserve
comprehensive
land
benefitplans
hedgesadjustments
income

1,167

1,167

28,92828,92838,421

38,421

9,036

80,391(1,141)(1,556)

7,896

78,835

135

818,452(709)

304,463

817,743(11,788)(11,788)

32,42232,42232,422

(3)
46

(3)
46

72

72

(29)

(29)

(29)

(11,603)(11,603)(11,603)

1,013

1,013

(3)
46

(0)
72

1,013

(2,068)294(1,013)33,587(3,916)

26,884(280,040)(253,156)—(11,632)

21,72043

10,131(2,068)294(1,013)33,587(3,916)

26,884(280,040)(243,025)

182,146

108,140

165,902(11,612)444,576

355

1,461

27,91572,008

3,980

105,719

24,423574,718

Millions of yen
Shareholders’ equity

Disposal of treasury stock
Increase by decreaseof consolidated
subsidiaries
Change in treasury shares ofthe parent arising fromtransactions with
non-controlling shareholders
Changes in liabilities
for written put options
over non-controllinginterests
Reversal of revaluation
reserve for land
Net changes of items
other thanshareholders’ equity
Total changes of items
during the period
Balance as at
December 31, 2023

304,463

Total net
assets(11,788)Balance as at
December 31, 2022
Cumulative effects of changes
in accounting policies
Restated balance as at
December 31, 2022
Changes of items
during the period
Dividends from surplus
Net income attributableto owners of the parent
Purchase of treasury stock

Noncontrollinginterests

Valuation
Total
Treasurydifference onshareholders’ available-forstock
equitysale securities

Capitalstock

CapitalsurplusRetainedearnings

182,146

108,140

165,902(11,612)444,576

182,146

108,140

165,902(11,612)444,576

Accumulated other comprehensive income
Deferred Revaluation
Foreign
Total accumulated
gains orcurrency Remeasurements
otherfor translationof defined
losses on reserve
comprehensive
land
benefitplans
hedgesadjustments
income355

1,461

27,91572,008

3,980

105,719

355

1,461

27,91572,008

3,980

105,719—

Noncontrollinginterests

Total net
assets24,423574,718

24,423574,718——(11,788)(11,788)(11,788)(18,955)(18,955)(18,955)

(4)
23

(4)
23

309

309

—

—

—

—

1,801

1,801

(4)
23

(0)
309

1,801

(160)

(265)

(1,802)

27,2096,174

31,156

1,406

32,563—(0)(28,632)

19(28,613)

(160)

(265)

(1,802)

27,2096,174

31,156

1,406

3,949

182,146

108,140

137,269(11,593)415,963

194

1,196

26,11399,217

10,154

136,875

25,830578,668

Millions of yen

Consolidated Statements ofCash Flows
Cash flows from operating activities
Income (loss) before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (decrease) in net
defined benefit liability
Interest and dividends income
Interest expenses
Equity in (earnings) losses of unconsolidated
subsidiaries and affiliates
Loss (gain) on sales and valuationof investment securities
Loss on retirement of noncurrent assets
Loss (gain) on sales of noncurrent assets
Loss (gain) on sales of businesses
Loss related to the Antimonopoly Act
Decrease (increase) in notes andaccounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes andaccounts payable-trade
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes (paid) refund
Net cash provided by (used in)operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal oftime deposits
Purchase of property, plant andequipment
Proceeds from sales of property,
plant and equipment
Purchase of investment securities
Proceeds from sales ofinvestment securities
Purchase of investments in
subsidiaries without change inscope of consolidation
Proceeds from sales of investments
in subsidiaries resulting in change inscope of consolidation
Net decrease (increase) inshort-term loans receivable
Payments of long-term loans receivableCollection of long-term loans receivable
Other, net
Net cash provided by (used in)investing activities

2022

2023

50,92791,964
10,091
16,843(26,184)
92,51626,183
16,953(2,383)(10,292)(1,834)
15,762(2,240)13,370(3,630)(3,589)(4,952)

462

6,045(13,470)
3,504
5,579

5,803
(3,634)(24,638)—

23,3771,131(39,961)

28,081(19,894)(16,570)30
137,998
8,686(15,641)(31,667)

34,077
131,429
7,064(12,233)(7,574)

99,376

118,686(1,606)(1,146)

2,570

1,096

(87,857)(87,105)

20,9606,169(1,667)(38)

22,0193,283—(4,552)—31, 692

774

(12)

(410)
251
(9,701)(892)
910(11,274)(54,667)(61,869)

Millions of yen

Cash flows from financing activities
Net increase (decrease) inshort-term debt
Net increase (decrease) incommercial papers
Proceeds from long-term loans
payableRepayments of long-term loans
payableProceeds from share issuance ofbonds
Redemption of bonds
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling shareholders
Purchase of investments in
subsidiaries without change inscope of consolidation
Other, net
Net cash provided by (used in)financing activities
Effect of exchange rate changes oncash and cash equivalents
Net increase (decrease) in cash andcash equivalents
Cash and cash equivalents at the
beginning of the year
Cash and cash equivalents at theend of the year

2022

2023

11,838(20,138)(15,000)

10,000409,600

65,300(285,642)(131,665)

112,536

29,843(20,000)(3)(11,758)—(4)(11,794)(13,025)(1,263)(287,635)—(4,178)(3,159)(103,267)(62,880)

10,027

9,922(48,531)3,859

234,587

186,056

186,056

189,915

136

RESONAC REPORT 2024

Contents

Who We Are

Our Goals and Challenges

Corporate Governance Reform

Data Section

Corporate Data/Editorial Policies
Corporate Data

(As of December 31, 2023)

Company Name

Resonac Holdings Corporation

CapitalHead Office

Tokyo Shiodome Bldg., 1-9-1, Higashi-Shimbashi,
Minato-ku, Tokyo 105-7325, Japan

Consolidated Number of Employee 23,840

FormedJune 1939

Subsidiaries (Japan)

Web

Subsidiaries (Global)

Web

Shareholders (Top 10)(As of December 31, 2023)

Authorized number of shares¥182,146 million

Affiliates

Stock Information(As of December 31, 2023)
Stake in the Company

330,000,000

Name of shareholders

Number ofRate ofshares held shareholding(in thousands)(%)

Number of shares outstanding 184,901,292
Number of shareholders

Consolidated Subsidiaries: 102
Equity method applied: 12

84,100Shareholders by Sector

Editorial Policies

Foreign corporate entities, etc.

63,323 thousand 34.25%

Financial institutions

62,852 thousand 33.99%

The Master Trust Bank of Japan Ltd. (Trust Account)

31,836

17.22

Custody Bank of Japan, Ltd. (Trust Account)

10,365

5.61

KOREA SECURITIES DEPOSITORY – SAMSUNG

9,063

4.90

JPMorgan Securities Japan Co., Ltd.

5,967

3.23

STATE STREET BANK AND TRUST COMPANY 505223

5,578

3.02

SSBTC CLIENT OMNIBUS ACCOUNT

5,200

2.81

Fukoku Mutual Life Insurance Company

4,517

2.44

Publication Date

July 2024

Reporting Period

Individuals

35,716 thousand 19.32%

January 1, 2023 to December 31, 2023. Some information on disclosure items and business activities from after January 1, 2024,
is also provided.

Securities firms

15,246 thousand 8.25%

ScopeJapanese corporate entities

4,208 thousand 2.28%

Resonac Holdings Corporation and its consolidated subsidiaries (including Resonac Corporation)

Treasury shares

3,556 thousand 1.92%

Display Methods inThis Report

Figures and information in this report refer to the Resonac Group. Official names are used when referring to Resonac Holdings
Corporation or Resonac Corporation as a non-consolidated entity. In this report, "non-consolidated" refers to Resonac Holdings
Corporation and Resonac Corporation.

Scope for Results Data

Financial: A total of 115 companies consisting of Resonac Holdings Corporation and its 114 consolidated subsidiaries andaffiliates accounted for using equity method*The aluminum specialty components business changed its segment from Innovation Enabling Materials to Mobility,
effective January 2024. This change has been applied retroactively and the figures for fiscal 2023 have been
retroactively adjusted. These retroactively adjusted figures have not yet been audited.
Others: Resonac Holdings Corporation and its consolidated subsidiaries
Web*Please refer to the relevant website for details on the scope of environmental and safety data.

Payout ratio (%)

—

—

36.3

—

Third-Party Verificationof Environmental and
Safety Data

Data disclosed by the Company are submitted to third-party verification each year to ensure reliability.
Web
For details, please refer to the relevant website.

Total shareholder return (TSR)

Past year

Past 3 years

Past 5 years

Past 10 years

Resonac142.3%

136.8%

97.9%

232.2%

Caution Regarding
Forward-Looking
Statements

Performance forecasts and other forward-looking statements are based on information available as of the time of publication ofthis report and certain assumptions judged to be reasonable. Actual performance may vary materially due to risks, uncertainty,
or other factors.

TOPIX (including dividends)

128.3%

141.1%

178.9%

227.8%

Goldman Sachs Japan Co., Ltd.

3,417

1.85

The Dai-ichi Life Insurance Company, Limited

2,700

1.46

STATE STREET LONDON CARE OF STATE STREET BANK AND TRUST.
BOSTONSSBTC A/C UK LONDON BRANCH CLIENTS-UNITED KINGDOM

2,553

1.38

Note: Each rate of shareholding was calculated after deducting the number of treasury shares (3,556 thousand)from the number of shares outstanding.
Fiscal 2019

Fiscal 2020

Fiscal 2021

Fiscal 2022

Fiscal 2023

Year-end stock price (yen)

2,899

2,197

2,415

2,020

2,810

Dividends per share (yen)

130

65

65

65

65

(Non-consolidated)

40.5

34.8

33.1

35.5

284.2

(Consolidated)

29.9*As of the end of 2023
*TSR: Total shareholder return. The total rate of return on investments, consisting of capital gains and dividend payouts.
* TSR for Resonac is calculated based on accumulated dividends and stock price fluctuations. TSR for TOPIX is calculated based on dividend included stock index (see Japan Exchange Group’s monthly statistics
report data).

Stock Price/Volume

Disclosure Materials Resonac discloses information through its integrated reports and a variety of other communication tools.

Daily average volume(Yen, points)
8,000

Value Creation Narrative

Resonac Holdings Corporation*(Thousandshares)120,000

TOPIX

7,000
100,000

Financial information

Corporate governance reports*

Securities reports
Financial results summaries
Financial results presentations, etc.
Shareholders’ meeting material (Reference materials
for Shareholders’ meeting, business reports, etc.)

Corporate brochures (for a variety of stakeholders)Internal Group magazines (for employees)
Business site CSR reports(for community members and customers)
Sustainability website

IR website

Comprehensive

80,000Financial

Non-financial information

6,000

For shareholders andother investors

Non-financial

Integrated Reports (For institutional investors and other stakeholders)

5,000

4,000

60,0003,000
40,0002,000
20,0001,000

00Jan. 2014

Jan. 2015

Jan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Jan. 2020

Jan. 2021

Jan. 2022

Jan. 2023

Jan. 2024 Jun. 2024

*Figures from before 2022 are from Showa Denko.

137

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