Strategy of each segment

12

3Developing strengths(invisible assets)

Unifying thinking

4
Picturing the desired future

5Growth strategy in the power
semiconductor businessNet sales (in million yen)Power modules

7,791

1,657

5,158

767

8,500
510

452

2,303

300

5,709

5,688
1,433

1,575

4,255

4,134

172

5,629

5,843

2019

2020

2021

2022

2023
Forecast(FY)

2018

2019

2020

2021

2022

(FY)

2023

Forecast

FY2023 forecast

In FY2022, sales of inverters for industrial use and power
modules for welders and various power supplies increased
steadily reflecting capital investment and infrastructureinvestment. In addition, sales of chips remained strong.
In China, the Group’s mainstay market, sales of products
for air conditioners, elevators, and electric bidet toilet seats
decreased due to the lockdown and economic slowdown related
to real estate, which was a result of the COVID-19 pandemic.
However, sales in the business as a whole increased due to thesteady performance of products for the Japanese market. In
Europe and the United States, we will continue to ensure that ourSiC semiconductors appeal to universities, research institutions
and other entities and look for business opportunities in newindustries.

Semiconductor sales by region (by location of sales destination)
Millions of yen

408

670

Europe

1,085

1,030

Asia

2,202

China

679

North
America

3,562

Japan

295
773

277
744

2,461

1,811

1,993

671

601

518

2,208

2,177

3,165

2019

2020

2021

2022

Global market ofpower semiconductors
Silicon(FY)Global market of SiC power
semiconductors(100 million yen)

Next generation*(100 million yen)

9,694

10,4698.4times
8.0times

1.9times
1,249

43,1181,20622,1372022 forecast

2030 forecast

2022 forecast

2030 forecast*SiC, GaN, gallium oxide, diamond
Source: F uji Keizai Co., Ltd., 2023 Current State and Future Outlook of Next-Generation Power
Devices & Power Electronics-Related Markets

While orders remain strong as of the beginning of the fiscal
year, sales are expected to decline due to increases in capital
investment, including automation equipment for streamlining
and increasing production and the installation of solar power
generation equipment at the Okayama Plant, and in R&D
expenses, in addition to an increase in the costs of raw materials,electricity, logistics and other expenses.

Overview of capital
investment

Objective

EstimatedamountUpsizing of wafers

Streamlining the wafer production
process and increasing production

240 millionyenLines for increasing
production

Increasing and automating theproduction of redesigned products

530 million
yen

Solar (PV) power
generation

Streamlining and environmental
measures

150 millionyen
1 billion
yen

Total

Priority measures

0

Business environment analysis

33

2,162

8,146

-368
2018

Review of FY2022

Some silicon carbide (SiC) power
semiconductors are being used atpresent in industry for welders andinduction heating, in addition to theiruse as inverters. It is expected, however,that SiC power semiconductors willsee further growth in demand in fields
such as automobiles and electricalcomponents for improving power
efficiency, reflecting the spread ofelectrified vehicles and charging
infrastructure, in addition to an increasein demand in the field of information
communication equipment, including
server power supplies, and the energy
field such as solar power generation.

Segment profit (in million yen)

Discrete semiconductors and others

6,816

The Sansha Electric Manufacturing Group does not develop or manufacture integrated
circuit semiconductors such as memory or microcomputers. Instead, it develops power
semiconductors. These are used in diverse power supplies for the conversion of highvoltages or currents between direct current and alternating current, for controllingthe current and voltage levels and for other purposes. They are adopted to customers’
different production systems and incorporated into a broad range of power supply
products to play significant roles in them.

Developing strategies, acting andrepeatedly evaluating and improvingEvaluation analysis for achieving the vision

In the semiconductor business, we plan to continue enhancing
the lineup of SiC semiconductors and strive to find newcustomers. Further, with the goal of it becoming a 10 billion yen
business through the development of new products under theconcept of low leakage current, low loss and low environmental
impact and the development and sale of thyristors, diodes andother highly reliable devices for use in infrastructure, which areareas that are expected to expand mainly in emerging countries,
our production, sales and engineering teams will work as one toachieve high profitability.
In addition, we are striving to make semiconductor
products completely lead-free as a part of initiatives to reduce
environmental impact. We are studying manufacturing process
not involving the use of high-temperature lead solder, which wasexcluded from the application of the RoHS2 Directive (directiveon restrictions on use of hazardous substances). We haveintroduced equipment for testing lead-free solder that will enable
the full demonstration of the reliability performance of various
module products. We will continue to expand the lineup ofproducts using lead-free solder.
In the aspect of production, we will enhance productivity
by standardizing materials, increasing the operating rate ofequipment, and further improving work efficiency, addressing theincrease in the cost of materials, electricity, logistics and otherexpenses.

Technology• Enhancing the lineup of SiC semiconductors• Enhancing the lineup of products under the conceptof low leakage current, low loss and low environmental
impactProduction• Standardizing materials and improving design efficiency• Introducing automated equipment

Sales• Finding new SiC semiconductor customers• Accelerating the market penetration of new products

SanRex REPORT 2023

34

Strategy of each segment

12
Unifying thinking

3

Developing strengths(invisible assets)

4
Picturing the desired future

5
Evaluation analysis for achieving the vision

Growth strategy of power
supply business

Developing strategies, acting andrepeatedly evaluating and improving

Net sales (in million yen)Segment profit (in million yen)

22,0001,700

19,941
17,553Since we developed a power supply for projectors ensuring the projection of stable
images onto movie theater screens in 1933, we have been utilizing technologies that
freely transform and efficiently convert electricity to develop and manufacture awide variety of power supplies supporting the environmental and energy sectors, theinfrastructure and facility equipment sectors and entertainment-related sectors.
As we engage in integrated production including development, design andmanufacturing, we are able to provide standard products and also customized products
tailored to customers’ requests with short delivery lead times. After delivering products
to customers, we consistently provide maintenance and other support services.

13,727For surface treatment,
welding machines andcutting machines

1,118
624

Small power supplies

548
244

Other power supplies
and services

2018

2019

2020

2021

2022

2023 (FY)Forecast

2018

2019

2020

2021

2022

2023(FY)

Forecast

FY2023 forecast
sales of the entire business, due to the remarkable recovery ofthe demand for small embedded power supplies for medical
equipment and other products. By region, overall performanceremained strong both in Japan and in other countries.
Meanwhile, on the production front, the procurement of raw
materials (semiconductors, electronic components, resin moldedproducts, etc.) has remained difficult. Further, soaring raw
material prices and the weak yen put pressure on profit.

Business environment analysis
In 2022, demand for power storage systems increased, mainlyreflecting the expansion and ubiquitization of renewable energy,
robust investments in data centers and 5G communications,and preparations for natural disasters. Demand for power
storage systems is expected to grow in the future as countries
set decarbonization and carbon neutrality targets and theintroduction of renewable energy accelerates.

14,884For light sources anddimming
Inverters

Review of FY2022
In FY2022, we achieved steady performance in the areasof power supplies for general industries, including those forprocessing materials used for lithium ion batteries, printed circuitboards and other products, seawater electrolytic processes,
silicon pulling and other areas, as well as the high-precision
power supplies for surface treatment, an area in which weexcel, reflecting the growing demand for substrates that require
high-precision surface treatments that are used in PCs, datacenters and other places. Further, sales of small power supplies
increased significantly and contributed to the growth of the1,381

For industries

16,186

As of the beginning of the fiscal year, orders are strong andsales are expected to increase. In FY2023, sales are expectedfrom major projects, including power supplies for the evaluationof power conditioners and power supplies for fine surface
treatment. While we will continue to be impacted mainly byrising costs, including the costs of raw materials, electricity, andlogistics, capital investment for replacing and building production
systems and other systems, and an increase in development
expenses, profits are expected to improve due to an increase insales.

Overview of capital
investment

Objective

EstimatedamountEquipment for
streamlining processes

Process streamlining and increaseof production

310 million
yen

Equipment related toquality assurance andinspections

Quality improvement and legalcompliance

160 millionyen
470 million
yen

Total

Priority measures
The size of the power storage device market in the field of energy
storage systems (ESS) and stationary storage batteries
Lithium ion batteries

Other12,570

100 million yen

11,6098,72341,848
36,267
4,373
26,142In the power supply business, we will work on the developmentof products related to new energy and renewable energy which
are growth fields. We will also develop power conditioners forfuel cells, which use hydrogen, leveraging the technologies
for solar inverters that we have cultivated. In the fundamental
business, we will develop new products with higher power
conversion efficiency. Further, we plan to propose not only
standalone inverters but also systems that also include storage
batteries, network functions and other features. In addition,
we will enhance the maintenance services of Sansha Solution
Service Co., Ltd., our subsidiary, aiming to increase our market
share for uninterruptible power supplies and other products.
On the manufacturing front, we will introduce automatedequipment, increase the use of outsourced services, increase
efficiency through the improvement of business and implement
other initiatives to be ready to increase production.

Technology• Enlarging the hydrogen and new energy andenvironmental sectors• Collaborative projects with business alliance partners• Strengthening the fundamental business (new products,improvement of existing products)

Production• Design standardization• Introducing automated equipment

Sales• Expansion from sales of standalone inverters to salesof systems• Proposing high value-added products• Accelerating price pass-through

9,782
2021
Inverter for storage battery

352025 forecast

2030 forecast

2035 forecast

Source: Fuji Keizai Co., Ltd.: Future Outlook of Energy, Large Secondary Batteries and Materials
2022 — ESS and Stationary Storage Batteries

Maintenance and inspections by Sansha Solution Service

SanRex REPORT 202336