Sumitomo Chemical’s Strategy

Business Strategy

Energy & Functional Materials
Advanced Polymers BusinessBusinesses

Inorganic Materials Business

Liquid crystal polymer (LCP), Polyether sulfone (PES)High-purity alumina, Low soda alumina, Aluminum hydroxide, High-purity aluminumSpecialty Chemical Business

Battery Materials BusinessResorcinol, Plastic additives, Emulsions

Battery Separators, Cathode materials

We will accelerate R&D that meets theneeds of the times and contribute tosolving environmental and energy
issues through innovative technologies.

Motoyuki Sakai
Representative Director & Senior Managing Executive OfficerStrengths of the Energy & Functional Materials Sector
We believe that our strengths lie in our product lineup that meets diversifying customer
needs, including separators for lithium-ion secondary batteries with the world's highest
level of heat resistance, super engineering plastics used in various applications including
electronic components, and products such as high-purity alumina and resorcinol thatmaintain the top global market share, as well as our R&D capabilities and evaluation,
manufacturing and process technologies that create these product lines.

Initiatives in FY2022
At the Ehime Works we started construction of a new facility for new high-performance grades of high-purity alumina. In addition, the Ehime Works is expanding its
production capacity for LCP, for which demand is expected to grow against thebackdrop of the spread of 5G and EVs. Both of these facilities are scheduled to start
operation in FY2023. Moreover, we have successfully developed “soft solid-typebatteries” in an industry-academia joint research program with Kyoto University andTottori University and have made significant progress toward the early commercialization of safe solid-type batteries. On the other hand, due to the difficulty in securing
stable earnings in the future, we have shut down its dyestuff manufacturing facilities
at the Osaka Works and have withdrawn from this business.Furthermore, we havedecided to withdraw from the S-SBR business in Singapore, and we have also
terminated production of EPDM at our Chiba Works and plan to withdraw from thisbusiness in FY2023. We will allocate management resources to areas where wehave a competitive edge and seek to upgrade our business portfolio.

Future Initiatives
We will concentrate our resources on growth businesses such as battery materials
and super engineering plastics. In separators for lithium-ion secondary batteries wewill respond to diversifying customer needs by leveraging our strengths in highsafety and long life. In cathode materials, we aim to commercialize a highly productive calcination process. On the other hand, we will continue to assess the directionof low-profit businesses with a view to withdrawing from or downsizing them. As fornext-generation businesses, we will develop new technologies for solid-typebatteries, direct recycling of cathode materials, and separation membranes.

67

Sumitomo Chemical Annual Report 2023

Sales Revenues and Core Operating Income /Sales Revenue of SSS designated products（Billions of yen）

600
500

■■ Sales Revenue（left axis）（Billions of yen）
Core Operating Income（right axis）
60■■ Sales Revenue of SSS designated products（left axis）
50

400
300

282.9

200

23.0

1000

54.7
’19/3

255.0

245.2

20.3

20.3

47.8
’20/3

342.5

316.4

39.8
’21/3

4030

15.2

20.1
52.7
’22/3

69.4
’23/3

20
100

Invested Capital・ROI（Billions of yen） ■■ Invested Capital（left axis）

350

ROI（right axis） （%）
20

280

1612210
140

7.8

5.6

5.7

70
0’19/3

’20/3

’21/3

8

3.8

2.8

’22/3

’23/3

40

Transition to dateCore operating income had been stable at around 20 billion
yen per year, but recently declined due to the global
economic slowdown. Invested capital increased due toaggressive investments in super engineering plastics,
battery components, and high-purity alumina, and ROI istrending downward. On the other hand, we are working toimprove our business portfolio by making decisions towithdraw from the low-proﬁt businesses of dyestuffs andsynthetic rubber.

Future Measures and Issues

In super engineering plastics, battery materials, and high-purity alumina, we will leverage our proprietary technologies tomeet growing demand in the EV market and elsewhere,
expand earnings, and ensure that our investments pay off.

Corporate Business Plan Policy & Progress

Concentrate investments
and expand business in growth areas

Decide direction for low-profit business
While giving maximum consideration to the impact on stakeholders,we will downsize or withdraw from businesses that we judge to be

Separators: Development, increase in production capacity

unprofitable in the future due to changes in the business environmentand sales expansion in accordance with advances in battery

and other factors, in an effort to improve the business portfolio.

Introduction■ Battery materials

capacity

Our Initiatives

Demand for lithium-ion secondary batteries is expected to continue
to grow, especially for automotive applications. We will respond to
the rapidly expanding EV society with our accumulated technolo-●increasing our production capacity to meet customer demand.

Develop next generation business

Our Initiatives
Increase production capacity to meet the increasing demand forautomotive, expand sales to new customers and pursue cost
rationalization.
●Focus on expanding sales for consumer use like home appliances,electrically assisted bicycles.
●Develop new technologies such as solid-type batteries anddirect recycling of cathode materials■ Solid-type batteries

Introduction to Sumitomo Chemicalgies and promote further expansion of our separator business by

FY2021 Decided to withdraw from the EPDM business
FY2022 Decided to withdraw from the dyestuffs business;
decided to withdraw from the S-SBR business in Singapore●Compared to current lithium-ion secondary batteries, solid-typebatteries are safer and are expected to become the next generation of batteries. In an industry-academia joint research program

technology and commercialize

we have succeeded in developing a soft-solid electrolyte, which

By establishing our proprietary high-productivity calcination

had been a challenge. We will continue our development efforts forprocess, we aim to enter the market for high nickel-content

early commercialization.

cathodes, which is expected to grow in the future.

■ Direct recycling of cathode materials

Sumitomo Chemical’s Strategy

Cathodes: Expand sales of precursors, establish calcination

We are developing a technology to recycle recovered lithium-ion

Our Initiatives
Launch validation equipment on schedule and acquire customer
certification.
●Develop cobalt-free cathodes to help achieve a sustainable society.
●secondary battery cathode materials as cathode materials again
without returning them to metal. JERA Co., Inc. and we wereselected for NEDO’s “Green Innovation Fund Project: DevelopMotors”. Both companies will promote development of the■ Super engineering plastics (LCP)
Expand business with increased production capacity. Expand sales
into automotive and 5G high-speed telecommunications connectors
With the shift to EVs, engine parts are decreasing while onboard
connectors and EV motor peripheral parts are increasing. In

recycling technology and social implementation.

Management

ment of Next-Generation Storage Batteries and Next-Generation

Key Points of New Process Construction and Value Creation
Conventional Process

addition, as 5G goes into full swing, demand for LCPs thatmatches the required characteristics is expected to increase.

UsedBattery

Roast

Mechanicalseparation

Blackmass

Metal
extraction

Metalrefining

Precursor
synthesis

Cathode Regenerated
synthesis Cathodes

Corporate Data

We will develop a production regime to meet such robust
demand and focus on expanding sales in growth fields

Development Process
Non-roasting method

New facility to be operational in FY2023

Approx.

9,000 tons

30%
expansion

Used Battery

Direct recycling process
Regenerated
CathodesUsed Cathodes

Key Points for Building
New Processes●●Process simplification
Direct recycling

Our Initiatives●●Considering further increase in production capacity
Respond to automotive demand and expand sales of 5G high-speed
telecommunication connectors

Value Created
Reduced CO2emissions

Lower costs

Less energy

High meta
recovery rate

Sumitomo Chemical Annual Report 2023

68

Sumitomo Chemical’s Strategy

Business Strategy

Status of Global Expansion

Expanding our Business to Quickly Meet Customer Needs
In the Energy & Functional Materials Sector, Sumitomo
Chemical has marketing functions in local group companies■ Strategy and Areas of Focus for Global Expansion

LCP

such as Sumika Electronic Materials (Shanghai) Corporation●and Sumitomo Chemical Europe S.A./N.V., for efﬁcient sales

Develop a value chain in Europe and the US●Maintain and expand our share of the connector

activities with a technical suggestion in order to promptly
respond to the needs of overseas customers. For example,
one of the sectorʼs core businesses is super engineering
plastics, for which over half of shipments are to China andother overseas customers. Using our molecular design
technology and design support technology which leverages
the characteristic of materials, we propose solutions thatmarket, primarily in ChinaPES●Expand share in artiﬁcial dialysis membrane applica-tions, primarily in Asia and the US●Expand use in high-performance membrane applica-

tions, such as for pharmaceutical companies

meet customer needs. In the future, we are considering
further strengthening such overseas sales organization,
including through alliances with other companies.

Sales Revenue Ratio by Region●Japan42%●Asia (including India)●North America

FY2022
Overseas Sales
Revenue Ratio●Europe●Central and South America●Middle East and Africa●Oceania and Others

Super engineering plastics

Q&A

Q : What kind of future developments are you thinking about
for the separator business?
A: Because of the impact of stricter environmental regulations insigniﬁcantly reduce the price of lithium-ion secondary batteries,countries, the scale of the market for environmentally friendly

which account for over half of a vehicleʼs cost. There is also a strong

vehicles is projected to expand to sales of over 40 million vehicles in
2030, and demand for separators will expand accordingly.
There are two main issues to address for environmentally friendly
vehicles to become widespread. The ﬁrst is cruising distance, andlithium-ion secondary batteries are continuing to evolve, primarilywith expanded capacity. Under such situations, the requested
characteristics of separators are being further raised, and there is an

demand to reduce the cost of separators, and competition is
becoming

moreseverewith

theemergenceof

Chinesemanufacturers. Accordingly, we are rethinking the materials used andthe manufacturing process in order to signiﬁcantly reduce costs.
In addition to these initiatives, in order to meet a dramatic expansion in
future customer demand, we are quickly expanding our productioncapacity and promoting an expansion of our separator business.

increasingly broad scope for leveraging the superiority of aramidcoatings. The other major issue is cost, and there is a need toMarket Forecast for Lithium-ion Secondary Batteries（Production（1,000 MWh））

900■Automotive use ■Energy storage use ■Consumer use

750600450300150020Result21

Estimate

22Forecast

232425（FY）(Note) Automotive use: EV/HEV/PHEV applications; Energy storage use: Uninterruptable power supplies and basetransfer stations; Consumer use: Small-scale consumer applications(Source) Fuji Keizai Co., “General Survey of Battery-related Market Conditions – Battery Cells Market,” 2022 edition
Separators

69

Sumitomo Chemical Annual Report 2023

Value Creation Model: Separators
Value Chain
Sumitomo Chemical
Ohe Works

Supplier

Customers 1
Battery manufacturers

Customers 2
Automobile
manufacturers
Appliance
manufacturers

Consumers

SSLM Co., Ltd.

System for Providing Added Value
Sumitomo Chemical’s Competitive Advantages
The use of coated separators has become mainstream for lithium-ion secondary batteries. Among separator coatings, there are mainlyIntroduction to Sumitomo Chemical

Sumitomo Chemical purchases raw materials, and manufactures substrates
for separators and aramid resin. The company produces aramid separators
by coating both substrates manufactured in-house and purchased substrates
with aramid resin. Lithium-ion secondary batteries, which battery
manufacturers make by combining various components and materials, arewidely used in automobiles, home appliances, electrically power assisted
bicycles, etc.

Introduction

Raw material
manufacturers
for base film andaramid resin

ceramic coatings and aramid coatings, and almost all producers of separators are making ceramic coating separators. Compared to othercompaniesʼ products, our aramid coating separators were used earlier in automobiles, and they have a track record for many years as
weighing just kilograms for each electric vehicle, delivering customers added value that is different from other companies. In order tofurther strengthen the superiority of our aramid separator, we are conducting research to enhance the strength of the separators andreduce their thickness.

Major Processes Generating Competitive Advantages
We are not only conducting research and development of separators but also working on improving productivity. We are capable of

Sumitomo Chemical’s Strategy

high-quality and high-performance separators. Besides, they have superior safety (heat resistance), and they have been made lighter,applying a uniform aramid coating with industry-leading speed, while maintaining high quality. Productivity at the plant of SSLM in South
Korea has tripled since 2015 due to factors such as more advanced techniques, accumulated experience, and improvements in coatingequipment. We expect further productivity improvement in the future.

Providing Customer Value
mentally friendly vehicle, it is essential to implement high-quality, high-performance batteries. Our direct customers, the battery manufacturers, seek to manufacture batteries that provide that performance at the lowest possible cost. For that reason, we provide high-safety

Management

Customers and consumers need EVs and other environmentally friendly vehicles with a long cruising range, and for that type of environ-(heat resistant) separators, and we are working to improve productivity to be able to provide products with superior cost competitiveness.
We also periodically communicate with customers to hear what new needs they have, and then work to develop products that can meetthose needs.

Corporate Data

Added Value Provided to Society

Contributing to Realize a Sustainable Society through the Separator BusinessWith more rigorous environmental regulations being put in place all over the world, the shift
to environmentally friendly vehicles like EV is accelerating. Environmentally friendly vehicles
loaded with lithium-ion secondary batteries can reduce CO2 emission while driving as
compared with gasoline cars. Separators are essential components in creating highly safe
lithium-ion secondary batteries, and are indispensable for environmentally friendly vehicles
to gain ground. Sumitomo Chemical contributes to realizing a sustainable society throughits separator business.

Sumitomo Chemical Annual Report 202370