HOYA CORPORATION
Q3 Financial Results Briefing for the Fiscal Year Ending March 2021
January 28, 2021

Event Summary[Company Name]HOYA CORPORATION[Company ID]

7741-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q3 Financial Results Briefing for the Fiscal Year Ending March 2021

[Fiscal Period]

FY2020 Q3[Date]

January 28, 2021

[Number of Pages]

29[Time]

15:00 – 16:00(Total: 60 minutes, Presentation: 46 minutes, Q&A: 14 minutes)[Venue]Webcast[Venue Size][Participants]

300[Number of Speakers]

3
Hiroshi Suzuki[Analyst Names]*

Ryo Hirooka
Eiichiro Ikeda

Representative Executive Officer, President& CEO
Representative Executive Officer & CFO
Executive Officer & CTO

Masahiro Shibano
Ryosuke Katsura
Richard Kaye

Citigroup Global Markets Japan Inc.
SMBC Nikko Securities Inc.
Comgest Asset Management Japan Ltd.

Presentation
Moderator: The Company’s speakers today include CEO Hiroshi Suzuki, CFO Ryo Hirooka, and CTO Eiichiro
Ikeda.
Today’s agenda is as follows. First, Hirooka will present the third-quarter financial results. Then, Ikeda will givean overview of the IT Business. Finally, Suzuki will give an overview of the Life Care Business and an overallsummary. The remaining time will be spent on Q&A, and we plan to end the meeting at 4:00 PM.
For those of you who are joining on your PC today, please see the materials that are shared on the screen.
CFO Hirooka will now give a presentation.

Hirooka: This is Hirooka, CFO. Thanks.
I will explain the results for this three-month period.
For the overall results, revenue was JPY146.9 billion, up JPY0.4 billion YoY. Pretax profit was JPY45.8 billion,
up JPY7.5 billion, or 20%, YoY. Net profit was JPY36.9 billion, up JPY7.3 billion, or 25%, YoY.
The overall result was that revenue was flat, returning to the pre-COVID-19 level, while profits increased.

Next, here is the forex impact.
The impact from forex translation was negative JPY2.5 billion on revenue. Earlier, I mentioned that revenue
was up JPY0.4 billion. On an actual basis, if forex were the same as last year, then revenue would be up JPY2.9
billion with an actual growth rate of 2%.
The impact was negative JPY1 billion for pretax profit and net profit, respectively. If JPY1 billion were added
back to the figures explained earlier, then on an actual basis, pretax profit would be up JPY8.5 billion and net
profit would be up JPY8.2 billion.
As you can see in the key currency table, the JPY appreciated against the USD and THB, while it depreciatedagainst the EUR. Naturally, the JPY depreciating against the EUR would be positive for the Company, but thispositive is more than offset by the JPY appreciating against the USD and THB in terms of profits.

Next, here are the special items.
There are two major items. One of them is other income of JPY2.5 billion, up JPY1.7 billion from last year. Thisis related to a business transfer from many years ago. The transfer had been shelved for a long time, but wereached an agreement this time, so this was booked as a special income.
The other items are a forex loss of JPY1.4 billion, up JPY1.2 billion from last year, indicating that there wasmore forex loss this year.
As for pretax profit, or the profit from normal business activities, please refer to the adjustments indicated on
the bridge chart included in the supplementary materials for financial statements.

Next, here are the results for the Life Care Business.
Revenue was JPY94.5 billion, up JPY2 billion, or 2%, YoY. Pretax profit was JPY20.7 billion, up JPY5.4 billion, or35%, YoY. Therefore, revenue has moved in a positive direction, albeit modestly, and profit exceeded the lastyear level substantially.

Next, here are the results, including the forex impact.
As earlier, there was a slightly negative forex impact on revenue and pretax profit. If the forex impact were
neutralized, then on an actual basis, revenue would be up 4% and pretax profit would be up 39%.
I will give an explanation of each business in more detail by product. Revenue was roughly flat, and profit
increased substantially. There are two major factors, one of which is apparent in the quarterly performancein FY2019 where the profit margin in Life Care was sluggish in Q3.
I’m talking about last year. This was right before the time we launched the Vietnam eyeglass lens factory that
had incurred us consolidation costs in various places. Also, the consumption tax hike happened in Q2 of thatyear, causing rush demand ahead of the hike and a sharp increase in eye care revenue in Q2, which thenpulled back in Q3. This also caused the profit margin to fall. These two major factors were the reasons behindthe very low profit margin in Q3 2019.
Hence, profit increased substantially compared to this depressed year-earlier profit. That is the first point.
The other point is that the profit margin level is unchanged from Q2. However, during the Q2 results
announcement, when I believe this topic was discussed, we mentioned that we had pressed on the brakes in
the first half due to COVID-19, but we must press on the gas again.
Although we increased our activities, the reality of our business in Q3 is that each business was conducting
activities cautiously, especially in Life Care, partly due to the second and third waves of COVID-19.
In that respect, the costs have not fully returned to the normal level yet. Due to those two major factors, wehave made more profit than sales.

Next, here are the results for the IT Business.
Revenue was JPY51.1 billion, down JPY1.6 billion, or 3%, YoY. Pretax profit was JPY23.9 billion, up JPY0.4 billion,
or 2%, YoY. Profit increased, albeit modestly.

Here is the forex impact.
The impact has especially been substantial in terms of HDD. Revenue is denominated in dollars, so it had asignificant negative impact. Excluding the forex impact, on an actual basis, revenue was down JPY0.4 billion,
or 1%, indicating it was roughly flat. Profit on an actual basis was up JPY0.9 billion.

Next, here are the results by product.
First, health care includes eyeglasses and contact lenses. Revenue was JPY69.1 billion, up JPY2.3 billion, or 3%,
YoY. The figures inside the parentheses represent the underlying results, excluding the forex impact. On an
actual basis, revenue was up JPY3.5 billion or 5%.
First, in terms of eyeglasses, revenue was up 3% YoY, indicating that it has firmly returned to the year-earlier
level. Even by region, revenue has exceeded the year-earlier level, albeit slightly, in Asia, Europe, and the US.
Due to the impact of COVID-19, there are fluctuations depending on the country. There are sharp fluctuations
depending even on the week. But, basically, revenue is firm and rising.
The only—well, not the only—but a major factor has been the slightly sluggish recovery in Japan, given that
the Japanese consumers are not visiting eyeglass shops as much as before.
As for contact lenses, revenue was up 12% from last year. Of course, if you only look at the numbers, revenue
has grown by the double digits. However, as I explained earlier, this was because revenue was the mostaffected in Q3 last year because of the pullback following the rush demand ahead of the consumption tax hike.
Revenue increased 12% from that depressed level last year.
The trend in the overall market is the same as Q2, whereby there are most people working from home andless people going out. As a result, the consumption volume of contact lenses as a whole hasn’t fully recovered
to past levels, and this trend has continued in Q3.
Next are the medical products, including IOLs, endoscopes, and artificial bone. Revenue was JPY25.4 billion,
down JPY0.3 billion or 1% YoY. The figures inside the parentheses represent the results excluding forex impact.

Revenue was down slightly by JPY0.2 billion, but the level is roughly unchanged in terms of the percentagechange.
The content is different for each product. First, we are struggling a little in terms of endoscopes. Revenue wasdown 9% from last year. One of the reasons for this was the sharp growth in Europe last year, and we hadalready anticipated that the growth would not be on par with that level this year.
Last year, there was a significant, one-time revenue that was recorded in a certain country. This was alreadyfactored into our calculations. In addition, hospitals are not making aggressive investments because of COVID19. This trend has continued from Q2. Overall revenue is slightly sluggish for endoscopes.
On the other hand, as for the other medical products, revenue was up 6% from last year for IOLs. Although
this also varies by country, revenue growth has been steady in China. In Europe, revenue has recovered to alevel exceeding last year despite the COVID-19 pandemic.
Next, our electronics products include semiconductor-related blanks, large panels, and HDD substrates.
Revenue was JPY43.1 billion, down JPY0.8 billion, or 2%, YoY. Excluding forex impact, revenue was up slightly
by JPY0.4 billion.
Revenue growth continues to be steady for semiconductor-related products and blanks, as was the case in Q1
and Q2. EUVs have also performed robustly, with a growth rate of around 50% YoY. They are continuing todrive overall revenue and profit.
As for large panels or FPDs, revenue declined slightly due to the contraction of the market. I believe this will
be explained again later, but there is a shortage of panel supply, causing prices to rise. Panel manufacturers
are shifting to mass production and are not very focused on development activities. This has been a negative
factor for our business.
Next are the HDD substrates. On an actual basis, revenue declined 9% YoY. Revenue declined for 2.5-inch
substrates and increased for 3.5-inch substrates. As for the 2.5-inch substrates, like I already mentioned
during the Q2 briefing, they are subject to considerable seasonality. In Q3 last year, there was still some gamerelated demand, but the drop in that demand was larger than the increase in other demand.
We had already anticipated this. On the other hand, revenue for 3.5-inch substrates has increased. Overall, in
this quarter, the increase in 3.5-inch substrates could not offset the decrease in 2.5-inch substrates.
Finally, imaging revenue was JPY7.9 billion, down JPY0.8 billion, or 10%, YoY. The trend has not changed muchhere. The market itself is continuing to shrink due to the dwindling demand for cameras. Revenue has fallen
below JPY8 billion, so the impact on the overall results is small.
I have already stated in the past, but our focus is on how much we can slim down this business, given that themarket itself is shrinking. We have taken measures to this effect during the current fiscal year. In Q3, the profit
margin in the imaging business division improved from last year.

Next is the balance sheet.
There haven’t been any noticeable changes. The only major change is that we repurchased our shares thistime, which is reflected in the decrease in cash and deposits.

Next is cash flow.
This is the same as what I explained in the balance sheet. Net cash used from financing activities was JPY50.5
billion, reflecting the interim dividends paid and share repurchases. These are the reasons for the significant
cash outflows from financing activities.

Next, in terms of the progress in share repurchases, we have issued two press releases today. We have fully
executed the share repurchases announced during the last briefing of up to JPY40 billion in shares. At today’sboard of directors meeting, we have decided to cancel all 3,047,900 repurchased shares amounting to JPY40
billion.
At the same time, during the board of directors meeting, we decided to conduct a new round of share
repurchases up to JPY40 billion. As described here, we have no plans to execute any large M&A over the next
few months, so we would like to return some of the profits to shareholders. As was the case last time, thesecond round of repurchases will also be up to JPY40 billion in shares.

Finally, here is our guidance.
For the full year, we forecast revenue of JPY541 billion, pretax profit of JPY156 billion, and net profit of
JPY124.5 billion.
To give a brief explanation, the most important point is that we anticipate a lower profit level in Q4 than in
Q3. There are two major factors for this. The first one is seasonality. This is particularly true of the IT Business.
I think you can see this if you look at past results trends. Due to factors such as the fewer number of operatingdays at factories during Q4, there is a regular tendency for the IT profit margin to fall. So, the first point is that
our forecast reflects this seasonality.
The second point is what I explained in the overview of the Life Care Business. Like I said, the costs had not
fully returned during Q3, and that was one of the factors that pushed up profit. But, we think that it isimportant for costs to be normalized so that we can drive revenue growth in Q4 and the next year onwards.
Therefore, we factor in this return in costs for Q4.
This concludes my explanation.
Moderator: Next, CTO Ikeda will give an overview of the IT Business.

Ikeda: This is Ikeda. Thanks.
I would like to talk about the IT Segment.
As already stated, the IT Segment posted revenue of JPY51.1 billion. As shown on this slide, when excluding
forex impact, revenue was down 1%, or roughly flat, YoY.
Also, profit from normal operating activities came to JPY25.1 billion. Excluding forex impact, it was up 9% YoY.
Thus, in Q3, revenue was roughly flat, but profit increased.
Looking at each product, as shown on this slide, revenue increased by 11% for LSI and FPD, decreased by 9%for HDD, and declined by 9% for imaging.

I will give an overview by product.
First, continuing from the previous quarter, revenue from EUV blanks increased by around 50% YoY, showing
steady growth.
In terms of non-EUV optical (DUV), revenue also increased by the mid-single digit YoY. In this quarter, revenue
increases from the same period last year in all categories.
The business environment remains favorable, with customers increasing their EUV-related investments. To
give you a few concrete examples, an EUV scanner manufacturer made an announcement the other day thatthe number of scanner shipments came to 31 units, versus 35 units planned, in 2020. Although the number
was lower than planned, it grew steadily from around 25 units in 2019.
As for the FY2021 plan onwards, it said until a few years ago that the target is 45 or 50 units. This time, theCompany lowered that outlook to 40 units. But, as I already stated, it was 31 units in 2020, and it is 40 units
in 2021, so the growth trend is unchanged. We expect the number of EUV scanners in operation in the field
to increase. We anticipate an increase in demand for EUV blanks under this environment.
From a different perspective, another announcement that was made recently by our main customer, TSMC,
was that the sales composition ratio of 7 nanometers was 29% while 5 nanometers was 20%. This means that,
below 7 nanometers adopting EUV represented roughly half.
TSMC also announced its capital investment plans for next year. In FY2020, it invested USD17 billion. In FY2021,
it plans to invest a record USD25 billion to USD28 billion, indicating a substantial increase in investments. Outof these investments, roughly 80% has been earmarked for the 3-nanometer, 5-nanometer, and 7-nanometerprocesses. We believe that these factors will provide a strong tailwind to EUV blanks demand for some time.
In line with this increased demand, we plan to boost our production capacity.
Next, with regard to large masks or FPD masks, revenue declined YoY. As for the business environment,
shipments were robust for TVs and PCs due to at-home demand stemming from COVID-19. Demand for PC
monitor applications is rising. Due to this, panel prices have increased, and panel manufacturers have shiftedfocus from development to mass production. As a result, their development activities have been scaled backand demand for masks, which are used in development, has declined. In this quarter, we saw the impact of
this decline in the overall demand for masks.
On the other hand, mask demand is robust for OLED applications led by Korean customers. We plan tocontinue to focus on high-functionality, high value-added masks centered on OLED applications.

Next, here is an overview of HDD glass substrates. Overall HDD revenue has decreased by 9%. The decline
includes a sharp slump of nearly minus 30% YoY for 2.5-inch substrates.
The factor behind this is the overall market contraction for 2.5-inch substrates caused by the replacement of
HDD with SSD. HDD substrates used to be used mainly for game consoles. But that game console usage has
switched completely to SSDs. In the past, Q2 and Q3 were quarters where we saw strong demand for use ingame consoles. Thus, when comparing results with last year, we saw a substantial impact in these twoquarters.
This decline attributable to game consoles will no longer apply to YoY comparison from next year onward, butthat doesn’t change the assumption that the overall demand will continue to fall.

Revenue from 3.5-inch substrates grew in the double digits YoY. However, the growth rate slowed somewhat
compared to the previous quarter, partly because of the timing of data center demand. As a result, in thisquarter, revenue growth for 3.5-inch substrates could not offset the decline for 2.5-inch substrates.
The current HDD mass production product is a 16-terabyte product. Until the next 18-terabyte product, thenumber of installed substrate units per drive will not change compared to the current 16-terabyte products.
Therefore, there is no change to the adoption status of glass substrates by customers.
During the last briefing meeting, we stated that each company expects to handle up to 20-terabyte products
without increasing the number of glass substrates. This policy hasn’t changed yet, but some difficulties havesurfaced in realizing 16, 18, and 20 terabytes with the same number of substrates. As such, if customers
struggle to improve the recording density, then there is a possibility that they will bring forward their plansfor 22 and 24 terabytes and use the model with a greater number of substrates for 20 terabytes in advance.
In any case, all HDD manufacturers have set out a product roadmap in which they intend to either increase
the number of substrates or increase the recording capacity by adopting HAMR. There is no change to the factthat we are working together with all of our customers in their development activities toward this end.
Although the implementation period of HAMR at our customers has continued to be delayed, the alternative,
which is MAMR, can’t be expected to yield a significant improvement in recording density. As such, allcustomers are advancing development of HAMR. And, as I stated earlier, development is conducted in the
direction of using a larger number of substrates.
Therefore, our scenario for glass substrates to be advantageous is unchanged, both in terms of HAMR to
improve recording density and increased installed units for a larger surface area toward higher-capacity HDD.
Lastly, the demand for imaging products decelerated in the past several quarters. Substantial declines inrevenue of 20% to 30% YoY continued, partly aggravated by production adjustments.
Compared to that, revenue declined by 9%, so the numbers have improved significantly. In fact, we have seen
an increase in orders for lens used in cameras and CCTVs.
However, we think that this business needs to be slimmed down continuously, premised on the overallmarket’s ongoing contraction, insofar as there isn’t a new application that replaces camera demand. This
industry has always repeated a cycle of producing too much inventory and then adjusting it later.
During this fiscal year, we implemented a business structure reform to slash fixed costs. As CFO Hirooka statedearlier, this bore some fruit, and we were able to improve the profit margin in this quarter compared to lastyear, even under this environment of decreased revenue.
Moderator: Next, CEO Suzuki will give an overview of the Life Care Business followed by an overall summary
including the IT Business.
Suzuki: Hi, everyone. I think most of you are joining this call from home. Or maybe you are in all kinds ofplaces. Well, I’m in Shinjuku, and it just started snowing. I want to get back home early, so please refrain fromasking questions.
On page 13, it talks about the second round of share repurchases. It says “NEW” next to the second round. Is
this some kind of pressure from the IR department so that we also do a third round of buybacks?
Moderator: Yes, that’s right. As IR, we wanted to put some pressure on the management team.

Suzuki: I thought calling it a second round would have a big impact. But, oh well. That’s fine. Enough with thegibberish.

Let me talk about eyeglass lenses. Throughout the third quarter, or it may be more accurate to say it was up
to the third week of December, the poor performance was only seen in Japan in the Q3 period through theend of December. Surprisingly, the market environment in Europe and the US was on par with last year or
better.
The same can be said anywhere, but recovery is typically faster at small independent eyeglass shops thanmajor chain stores. More importantly, although the sales volume has not returned to the year-earlier level,
the sales amount has returned or exceeded that level, in part due to the hard work of eyeglass shops to sellrelatively high-priced eyeglasses. This was evident across all regions except Japan. Performance was sluggish
throughout Q3 in Japan. But, the situation has changed from around Christmas.
Performance has turned worse across Europe and in the US. The situation hasn’t improved at all in Japan. So
far, I only have the data up to the third week of January. But, as far as I see from the data from the latter halfof December to the third week of January, performance is weak in all regions except China. This is strange,
but the impact of the lockdown wasn’t felt much in Q3 but is starting to be felt in Q4. I see the current situation
as being a little tough.
In Japan, performance has been consistently bad. This isn’t only about eyeglasses, but also IOLs, artificial bone,
and contact lenses. There has been no change to the prolonged sluggishness in Japan.
The sales weighting of eyeglasses in Japan is lower than in the past. That’s why the overall Q3 results were
good. But, when I look at the current status in Q4, I feel a little concerned.
As for contact lenses, the results look good compared to the same period last year. But that’s because sales
slumped last year from the impact of the consumption tax hike. So, compared to what the business should be
generating, I think that overall, the decline is around 10%.

I think it’s safe to pretty much link this decline to the rise in teleworking. We already know that sales havedeclined at shops located inside commercial facilities in the Greater Tokyo area. Furthermore, it shows that
there is a relatively large drop in younger female consumers. Thus, it’s fairly clear that the decline is linked toteleworking. What we see for contact lenses is roughly the same as the trend for cosmetics.
Against this backdrop of a shrinking overall market, we still need to capture a greater market share. Therefore,
one thing we are eagerly looking into is M&A. If the business environment is poor, then it also means that it’seasier to acquire other businesses. This won’t be a big M&A. We’re looking to buy contact lens shops, sothey’ll be small ones. But we intend to do so eagerly.
We’ve acquired a few shops in the past, too. The next 6 months to 10 months will probably be an opportune
timing. We want to move a little bit aggressively. And I think this would also be a good timing to run
promotions aggressively.
We would probably need to allocate a fair amount of capital, including advertising, to attract customers. Goingforward, we will likely be moving to secure revenue over profit.

Unlike eyeglasses, IOL sales are decent in Europe even right now in January. Sales remain sluggish in Japan.
But the reason for the performance in Japan is clear. Results are bad for hospitals, but fairly good for clinics.
Patients are going to clinics, but they’re not going to hospitals. It may also be the case that hospitals aren’t
really focusing too much on cataract surgery right now. The results in Japan can more or less be explained by
the drop in demand at hospitals.
For some reason, there hasn’t been a drop in the number of IOL surgeries so far. Obviously, the number ofsurgeries hasn’t dropped in China, either. So, my impression is that our Q4 numbers are shored up by sales in
China, India, and Europe.

Next, I’ll explain about endoscopes. Some inventories needed to be shipped in December of Q3, but we ended
up stockpiling them. That’s why the number for December in Q3 looks somewhat low. However, that backlog
will be included as sales in Q4, meaning that even though the numbers look weak, if you discount that factor,
it’s not that bad though it’s also not good. The sluggish results can be explained more or less by the halted or
curbed capital investments by hospitals throughout the overall market. I don’t think the results reflect any
particular signs of our market share being siphoned or, conversely, expanding.
In terms of disposable endoscopes, we finally expect to be able to obtain approval, and I think sales ofdisposables will start in Europe by June at the latest. That is the pace at which it has begun to move.
This can be said of IOLs, contact lenses, and endoscopes alike. The biggest negative factor resulting from thepandemic has in many senses been the stoppage of all kinds of clinical trials.
This has especially been the case for clinical trials in the UK, where all clinical trials have been affecting,including trials that need to be redone. Even if we wanted to conduct a trial, it’s hard to gather the required
number of patients. These sorts of things have made it difficult to make progress on trials. In all kinds of ways,
these delays in medical-related clinical trials have pushed back development in various places. Counter tocommon perception, I think these delays are what will ultimately have the greatest impact on our business.
As for the overall summary, this was already mentioned by Hirooka, but we stated that we need to spendsome money in Q3 to capture market share. Still, our spending activities didn’t go as planned because of
remote operations.
But the problem is the same. To make sure we can deliver on the numbers next year, we need to sow theseeds for them through sales activities in Q4. Otherwise, we wouldn’t be able to achieve the numbers for thesecond half of next fiscal year. We are going to whip our sales team into action and make them increase
communications with customers. Unless we take the initiative to capture market share from competitors
during Q4, we can’t achieve the numbers for the next fiscal year. Therefore, that is what we are planning todo.
Whether it be IOLs, endoscopes, or eyeglass, the same can be said of all businesses that as long as we cancarry out these activities, we would somewhat have next year’s numbers in sight and have some peace ofmind. In that sense, this Q4 and Q1 next year will be crucial to conduct those activities so that they bear fruit.
Another recent trend that I think needs to be watched with caution is that we may be nearing the time when
EUVs start to cannibalize demand for cutting-edge optical (DUV) blanks.
Essentially, it reduces the number of lithographic printing from three times to one time, and that’s the whole
point of an EUV lithography. Up to now, the focus of EUV was centered on development. My impression isthat not much of it was moving in terms of actual production.
Although it’s a net increase right now, at some point down the road, EUV lithography is going to cannibalize
the cutting-edge optical demand. Well, it’s not necessarily the cutting-edge aspect, but the part where blanks
were used in optical. Thus, I think we’re approaching the point where we start thinking of it not as a simple
net increase, but also factor in this cannibalization. I have such concerns in this regard.
At the same time, what is happening right now is that customers are looking for the next nodes after 2
nanometers and 3 nanometers. Although it’s all haphazard and confounding right now, they are pretty much
beginning the qualification for the next node.

In reality, I think they are eyeing 2024 or 2025 for mass production. But, qualifications for blanks begin at thevery beginning of the process. So, essentially, these qualifications have already started, and will probably becompleted in the next 6 months to 10 months.
Once that happens, the usage of blanks will be fixed. Certainly, that wouldn’t be the case if the processcompletely fails to function. But, insofar as this process is functioning, then demand for blanks will be fixed toa certain degree. In that sense, I think we’ll be able to build a strong advantage. Blanks demand will besomething where competitors can’t simply sprout up and flip over our share.
Another trend that might seem counter to what the results show in Q3 is that, when looking at Q4 and Q1
next year, I think 2.5-inch HDD substrates will do fairly well. I think the demand will probably come from lowend notebook PCs and external drives.
We’ve worked down our inventory more than we expected, so going forward, we are going to enter a
production phase by a little more in the near term, even though the overall trend will probably be unchanged.
This is something that has surprised me a little.
We’ve been working to make the imaging business smaller and leaner with a focus on high-end products. But
then, these camera manufacturers are starting to say that their inventory has dwindled and they’re going toramp up production. Oh my, these people really don’t get tired of this don’t they. They’re once again
increasing their inventories and making a commotion out of it.
It’s almost like working out and cutting down on the fat, but then these people are asking us to go out for adrink. We’re telling them to stop, but if they want it, then we really don’t have a choice but to do so. Therefore,
Imaging sales might look somewhat strong over the longer term, but I don’t think the overall direction willchange. I’m staring at the bullishness of these camera manufacturers with bewilderment. I think that’s aboutit.

Question & Answer

Moderator: We will now move on to the Q&A session for the remaining 15 minutes or so.
When asking your questions, please also state your company name and name.
Please go ahead.
Then, Mr. Katsura, please go ahead.
Katsura: I just have one question. I’d like to ask about capital investment and the number for depreciation &amortization in terms of the expectation for FY20. And also investment on mask blanks. Last time, I believe
you commented that this was something that needs to be done soon. Please tell me your views on this.
Hirooka: First, in terms of depreciation, the amount exceeded JPY9 billion in this quarter, and we think there
will be a little more than that in Q4. Over the full year, the current amount is JPY26.5 billion, so we think we’llfinish in the vicinity of JPY35 billion.
As for your question concerning capital investment, it varies depending on whether you look at it on adecision-making basis or an execution-basis. If you look at it on the execution-basis, then this would bereferred to as tangible fixed assets, and investments have exceeded JPY24 billion over the last nine months.
On an execution-basis, this also depends on the timing, but we think there will probably be a cash outflow ofanother JPY10 billion or so in Q4 under the current capital investment environment.
Ikeda: We are planning to ramp up our EUV blanks production capacity, and we have started making
arrangements starting with the products with long delivery times. However, we are still examining how muchvolume will be necessary and at which timing based on scrutinizing the level of demand from each company.
However, for products with long delivery times, we have already started making arrangements. This is to makesure that we can handle them steadily without falling behind on society’s needs.
Suzuki: The product with the longest lead time is Lasertec’s inspection machines. The pace at which Lasertec
increases its production capacity for inspection machines will, therefore, determine our other capital
investments. That’s the rough idea.
Moderator: Next, Mr. Kaye, please go ahead.
Kaye: This is Richard Kaye of Comgest. I have two questions.
First, I believe you stated that you expect the sales of disposable endoscopes to start from June. Is that a little
faster than what you said previously?
Second, I’d like to confirm about carbon dioxide related to ESG. Please let me confirm your latest targets andprogress rates. So, my questions are about disposable endoscopes and carbon dioxide. Thanks.
Suzuki: The schedule for disposable endoscopes is slightly faster than expected. But it hasn’t been pushedforward significantly. We already have the production structure in place. It depended on the timing when we
could obtain approval. It seems like we might be able to get the green light a little earlier than expected, so
we think sales will start from around June. We’re hopeful that we might even be able to start a little earlier
than that.

In terms of CO2, our goal is to reduce emissions by 5%, and we’re moving in line with the plan. This is a general
viewpoint, but we are a manufacturer, so when a manufacturer tries to reduce CO2, it’s usually by reducing
the CO2 used in machines. The CO2 used in machines is the electricity. Reducing electricity consumption leads
to cutting CO2. In other words, it requires a process of replacing existing machines with energy-saving ones.
But the energy efficiency of recent machines is unexpectedly low.
Surprisingly, it’s the cleanroom that’s eating up the electricity. If you compare the machines with those in thepast, certainly, they have improved a little in saving energy. But the energy efficiency of these machines isastonishingly low. When I ask these manufacturers why these machines aren’t more efficient, they say thatthey have to discard energy efficiency if they wanted to compete with China.
Many people say that energy efficiency requires a lot of costs, and there aren’t customers who would buy themachines at that high price, so that’s why they disregard energy efficiency. Counter to intuition, replacing amachine will not necessarily reduce energy consumption by leaps and bounds, like how it used to be in thepast. We need to rethink what we can do as a manufacturer. If we continue to operate as we do right now,
CO2 will not be reduced. This doesn’t just apply to us, but it’s an issue every manufacturer is about to face.
We’ll achieve the target that we set forth. But we must think a little more about what we’ll do after that. I’ve
recently been worried that, if we continue to operate the same way, we probably won’t be able to reduce
CO2.
Moderator: We have six minutes left, so we would like to make the next person the last one.
Mr. Shibano, please go ahead.
Shibano: Thank you. I have two questions.
First, regarding the HDD substrates, a competitor has decided on increasing investments in aluminum
substrates. But, in what you said earlier, you explained they would ultimately shift to glass.
Some people have raised doubts, or asked me questions, regarding this gap in your view with the competitor
who has invested in increased production at this timing. Could you please update me on your thoughts
regarding the technology and the intention of your customers? That is my first question.
Ikeda: As the number of platter increases, the thickness of the substrate will need to become thinner. Thereis an estimation that aluminum substrate supply is short of demand even for the currently used thickness. It
does not mean that it will not shift to glass in the future. I think it just reflects the problem around the supplydemand relationship of aluminum.
Furthermore, for HDD to survive in the future, it must raise the capacity. When raising the capacity, there will
likely be a need to increase the number of substrates. Even if usage were to be prolonged, when the thickness
per substrate becomes 0.5 millimeters or less, then aluminum materials would prove to be difficult to conduct
fluttering, et cetera, due to their characteristics. I think that is something that will not change in light of thematerial’s characteristics.
Suzuki: Simply put, there isn’t enough capacity for aluminum right now. Both Toyo Kohan and Showa Denko
don’t want to make capital investments at this stage, given that aluminum might ultimately be switched to
glass. There’s an overall tightness in the supply of aluminum. Otherwise, they wouldn’t have enoughaluminum to keep the current program running. They’re sacrificing one thing to save another. Therefore, I
think you can interpret it to mean that they are making capital investments in aluminum because they can’t
fully meet the immediate demand for aluminum.

Shibano: Thank you. My second question is about vision care. It hasn’t been long since the division headchanged. If there is something that might change at this point regarding the future direction, could you please
explain? That’s all.
Suzuki: He’s from this industry, so he has caught on very quickly. He already knows the business really well.
He knows the operations better than our own workers. So, he has picked up everything very quickly, andthings are moving extremely smoothly.
Clearly, he has already decided which market to focus on before taking action. He knows clearly which
segments of the market he wants to capture. And he knows how to follow through on it. At the very least, I
Moderator: Thank you. Do we have a little more time?
Suzuki: It’s snowing.
Moderator: Okay. It’s snowing, so we would like to end today’s financial results briefing.
Thank you for participating despite your busy schedules.
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