SEMI ANNUAL REPORT2018

For the six months ended September 30, 2018

Connection
SystemDivision
USB Type-C™
Receptacle

Functional
Components
Division

2 Million-Pixel
Automotive Camera
ModuleResearch &Development
CenterBluetooth®
low energy Module“BTS05 Series”

Touch Panel
Division
CapDuo Touch-2

LGMCard

SMK CORPORATION

Financial Highlights

SMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended September 30
2017

Operating Results
Net sales
Operating income (loss)

Six months ended September 30
2018¥29,393
598¥ 28,101(869)$ 247,433(7,652)

900

122

1,074

Profit attributable toowners of parent

Financial Position
Total assets
Total net assets

Six months ended September 30
2018

As of March 31
2018

As of September 30
2018

As of September 30
2018¥61,474
30,637¥ 61,566
30,449$ 542,097
268,108

Six months ended September 30
2018

Six months ended September 30
2018

Yen
Six months ended September 30
2017

U.S. dollars

Per Share Data
Profit attributable toowners of parent
Basic¥136.15

¥

18.52

0.16

$

Note: 1	The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥113.57 = U.S. $1.00.
2	The Company conducted a share consolidation of its common shares at the ratio of 10 shares to 1 share effective October 1, 2018. Profit
attributable to owners of parent has been calculated on the assumption that the share consolidation was conducted at the beginning of
the previous fiscal year.
3	The Company’s shares owned by the trust account for the Board Benefit Trust (BBT) introduced in the second quarter of the consolidated
fiscal year ending March 31, 2019 have been included in the treasury shares deducted from the calculation of the average number of shares
during the year.

Net sales■ Full year

■ ■ First half

90,000Millions of yen■ Full year

■ ■ First half

5,000

77,206

Millions of yen

62,97160,00059,786

3,000
2,000

39,31532,171

31,70830,0004,171

29,393

28,101

2,113

598
485

2017

2018
Mar.

2018
Sep.

■ First half

300

yen

379.38

400

122
0

(288)

2017

2018
Mar.

2018
Sep.

（1,500） 2015

Total assets■ Full year ■ First half

67,606

Millions of yen

62,318

2016

2017

2018
Mar.

2018
Sep.

Total net assets■ Full year ■ First half
40,00065,029200

2016

80,000276.05900(1,079)（2,000） 2015

Basic profit attributable to ownersof parent per share■ Full year

1,017

(869)

（1,000）
2016

2,077

1,500

747
630

1,000

Millions of yen

2,678
1,982
1,678

2,572

1,125

■ ■ First half

3,000

0

2015

■ Full year

4,000

66,2300Profit (loss) attributable toowners of parent

Operating income

61,47434,18761,56660,00030,00040,00020,00020,00010,00033,287

Millions of yen

31,31830,63730,449

2017

2018
Mar.

2018
Sep.

151.6510018.52
0(43.63)
(100)

2015

2016

1 SEMI ANNUAL REPORT 2018

2017

2018
Mar.

2018
Sep.

0

2015

2016

2017

2018
Mar.

2018
Sep.

0

2015

2016

To Our Shareholders and Investors
We are obliged to you for your continued
support and good patronage.
We would like to report on the outline andresults of the SMK Groupʼs businesses for the
first half of the 97th fiscal year (from April 1,2018 to September 30, 2018).
We look forward to your continuing supportand encouragement.
November 2018
Yasumitsu Ikeda
President, CEO and COO

Performance Overview
During the first half of the 97th fiscal year ended September 30, 2018, the global economy maintainedmoderate growth, despite heightened concerns over trade friction due to the implementation of
additional tariff measures by the U.S. and China. The Japanese economy also maintained moderate
growth, partly due to the recovery of exports and personal consumption.
The SMK Group enjoyed steady growth in sales of connectors for automotive cameras and highspeed transmissions in the car electronics market; however, sales growth of connectors in thehealthcare market slowed. We succeeded in winning orders for new products of remote control units
for set-top boxes for U.S. customers, and these are expected to contribute to business results in the
future. On the other hand, sales of products such as connectors for smartphones for Chinese and U.S.
customers in ICT market and touch panels for car electronics were sluggish due to intensifiedcompetition.
Both net sales and profit for the first half decreased year on year due to negative factors such as
the impact of the product mix and increased development costs associated with new products, despite
initiatives to expand sales in our growth markets and efforts to reduce fixed costs.
In such an environment, with the aim of achieving sustainable growth, the SMK Group will proceed
proactively with efforts to continuously expand our mainstay businesses and develop new markets, aswell as create new businesses by cooperating with partner companies and promoting Open Innovation.
Under our Business Strategy slogan of “CREATIVE CONNECTIVITY,” we will maintain a spirit ofchallenge to solve the apparent and potential issues which society and customers face, the creativity
to generate ingenious ideas, and the capability to come up with solutions to these issues, aiming tocontribute to the creation of a better society and future.
SEMI ANNUAL REPORT 2018 2

Overview of Consolidated Results by Division(April 1, 2018 to September 30, 2018)

Touch Panel Division

Others¥4,635 Million
16.5%¥197 Million
0.7%

Net sales¥ 28,101
MillionConnection System
Division¥11,436 Million
40.7%

Functional Components
Division¥11,832 Million
42.1%*Others: businesses of other electronic parts, lease, real-estate rental, and worker dispatching undertakings.

Connection System Division
Sales of connectors in the car electronics market continued toshow steady growth with the accelerating development of car
electronics serving as a tailwind. Sales of connectors forautomotive cameras, which are maintaining a high market
share, and those for high-speed transmissions also expanded
FPC to Board Connectors FB-9
Series for Battery Connection
Applications:
Smartphones, tablet PCs,
wearable devices

steadily. In the ICT market, however, sales of connectors for
smartphones struggled due to intensified competition withother connector manufacturers for supply to customers in
China and the U.S., and fell year on year. Sales of connectors

Major Products

for the industry market decreased year on year, as connectors● Coaxial Connectors

for healthcare-related products, which had enjoyed steady● Board to Board Connectors● FPC Connectors● Jacks

3 SEMI ANNUAL REPORT 2018

growth, saw a sufficient spread in its mainstay market to slow
the growth in demand.

Functional Components Division
Sales of remote control units, our mainstay products,
increased year on year, as we succeeded in winning orders
from U.S. customers for new products for set-top boxes, inaddition to the continued solid expansion of those for sanitary
ECHONETLite™ Adapter (Wired)
Applications:
Air conditioners, water heaters,
underfloor heating, entrance doors,
shutters, windows, etc. in detachedhouses and condominiums

and home equipment. As for units, sales increased sharply
year on year as sales of units for home equipment andautomotive camera modules expanded steadily. Sales ofswitches increased year on year due to expanded sales of
those for smartphones and car electronics.

Major Products● Remote Control Units● Wireless Device Units● Switches● Camera Modules

Touch Panel Division
In the touch panel business, the market environment ischanging significantly as demand sharply shifts from resistive
touch panels to capacitive touch panels not only for ourmainstay car electronics market but also for other markets.
Amid such changes in the market environment, although sales“D2 F/G-CNT” Resistive Film/
Glass Touch Panel
Applications:
Office equipment, machine tools,
hand-held terminals, etc.

in our mainstay car electronics market remained steady inNorth America mainly for capacitive touch panels, demanddecreased slightly for touch panels for European vehicles. In
markets other than the car electronics market, however, salesof resistive touch panels for machine tools and office

Major Products● Resistive Touch Panels● Capacitive Touch Panels

equipment, and sales of capacitive touch panels for wearable
devices showed a steady increase year on year, resulting in aminor drop in overall sales from the previous year.

SEMI ANNUAL REPORT 2018 4

New Products

Connection System Division: Waterproof FAKRA Connector
This is a FAKRA-compliant coaxial connector developed for antennas,
automotive cameras and vehicle-side electronic control units (ECU). The
product boasts excellent waterproof performance, yet is compact in design
with highly consistent, high-frequency characteristics. We intend to continue
to expand our business in response to the increased demand for use inautomotive devices.

Applications:
Automotive devices (for antennas
and camera modules)

Functional Components Division: Temperature Sensor
We developed temperature sensor in response to the need to collectenvironmental data due to the expansion of the HEMS/BEMS market. As SubGHz wireless communication covers a long distance, it is possible to transmit
temperature information measured over wide areas, including detachedhouses, factories, offices and stores. Featuring low power consumption, thesensor operates for over five years (depending on the usage environment) ona single coin battery. We will continue to develop products that contribute to
the advancement of smart homes and smart offices.

Applications:Home/Building Energy Management
Systems (HEMS/BEMS)

Touch Panel Division:

Controller for Compact (Below 2-inch) Capacitive Touch Panel witha Single Film Layer Structure
New information terminals other than smartphones, such as smartwatches andAI speakers, have appeared due to the spread of the Internet of Things (IoT).
As a result, there is a growing demand for small, round touch panels due to theincreasing number of devices requiring touch operations. In order to meetthese market demands, we have developed standard controllers for small,circular touch panels and for touch panel control, and started sales activities.

Applications:
Smartwatches, wearable devices, AI
speakers

Research & Development Center:

Bluetooth® low energy Module“BTS05 Series”
SMK has developed a small Bluetooth® low energy module “BTS05 series”
supporting Bluetooth® Version 5.0. It is compliant with 2M PHY for LE, thephysical layer specification which is added as part of Bluetooth® Version 5.0,
contributing to an improved transmission speed compared to SMK’s previous
products.

Applications:Home automation-related equipment,
mobile printers, hand-held terminals,
and other office equipment

SMK-LOGOMOTION: SLC NFC Small Antenna
SMK-LOGOMOTION has developed a miniature antenna, in addition to microSD
cards, for use in Near Field Communication (NFC) and started sales activities.
This miniature antenna is ideal for small devices thanks to its reduced size
(9 mm×0.95 mm×0.8 mm) which occupies less than one-tenth the area of
conventional antennas with similar capabilities (ca. 15 mm×15 mm). We willcontinue to expand the lineup of miniature NFC antennas.

5 SEMI ANNUAL REPORT 2018

Applications:
NFC-equipped devices (e.g.
smartphones, smartwatches andpayment terminals)

Consolidated Balance Sheets

SMK Corporation and Consolidated Subsidiaries
Thousands of
U.S. dollars

Millions of yen
As of March 31

As of September 30

As of September 30¥ 10,482¥ 9,014$ 79,370

117

124

1,092

15,251

15,304

134,754

(56)

(59)

(520)

Inventories

8,775

9,016

79,387

Other current assets

1,439

1,083

9,536

36,00934,482

303,619

2,460

2,590

22,805

93

88

775

1,440

1,514

13,331Other investments

599

641

5,644

Allowance for doubtful accounts

(87)

(87)

(766)

4,506

4,747

41,798

Land

6,615

6,616

58,255

Buildings

19,32019,872

174,976

Machinery and vehicles

22,077

24,166

212,785

Tooling and office furniture

23,05023,230204,543

327

425

3,742

71,39074,312

654,328(51,265)(52,888)(465,686)

20,124

21,423

188,633

Deferred tax assets

618

725

6,384

Intangible assets

215

187

1,647

834

912

8,030

¥ 61,474¥61,566$542,097

Assets

2018

2018

2018

Current assets
Cash and cash equivalents
Time deposits
Notes and accounts receivable, trade
Allowance for doubtful accounts

Investments and long-term loans
Investment securities
Long-term loans receivable
Asset for retirement benefits

Property, plant and equipment

Construction in progressLess-accumulated depreciation

Other assets

Total assets

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥113.57 = U.S. $1.00.
SEMI ANNUAL REPORT 2018 6

Thousands of
U.S. dollars

Millions of yen
As of March 31

As of September 30

As of September 30¥ 12,731¥13,959$122,911

6,807

6,126

53,940Accrued income taxes

542

395

3,478

Accrued bonuses

668

639

5,626

1

ー

ー

Accounts payable, non-trade

1,919

1,479

13,023

Other current liabilities

1,688

1,755

15,45324,35824,355

214,449

Long-term debt

4,526

4,721

41,569Deferred tax liabilities

1,000

1,052

9,263

Accrued directors’ and officers’ retirement benefits

171

184

1,620

Liability for retirement benefits

40

50

440

Other long-term liabilities

738

751

6,613

6,478

6,761

59,532

Issued : 75,000,000 shares

7,996

7,996

70,406

Capital surplus

12,057

12,057106,164Retained earnings

15,73015,554

136,955

Treasury stock(4,001)(3,973)(34,983)

31,783

31,634

278,542

331

380

3,346

(9)

(7)

(62)

(1,907)(1,914)(16,853)

440

356

3,135

(1,145)(1,184)(10,425)

30,63730,449268,108¥61,474¥61,566$542,097

Liabilities and net assets

2018

2018

2018

Current liabilities
Short-term loans payable
Notes and accounts payable, trade

Accrued directors’ and officers’ bonuses

Long-term liabilities

Net assets
Shareholders’ equity
Common stock
Authorized : 195,961,274 shares

Accumulated other comprehensive income
Net unrealized gains (losses) on other securities
Net unrealized gains (losses) from hedging instruments
Foreign currency translation adjustments
Retirement benefits asset and liability adjustments

Total liabilities and net assets

Note:	The Company conducted a share consolidation of its common shares at the ratio of 10 shares to 1 share effective October 1, 2018. The
numbers of authorized shares and issued shares represent the figures prior to the share consolidation.
7 SEMI ANNUAL REPORT 2018

Consolidated Statements of Income
SMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended
September 30

Six months ended
September 30

Six months ended
September 30¥29,393
23,8394,954
598¥28,101
24,1734,797(869)$247,433
212,847
42,238(7,652)Other income
Interest and dividend income
Rent income
Foreign exchange gain, net
Gain on sales of fixed assets
Gain on sales of investment securities
Gain on redemption of investment securities
Other
Total other income

48
614
72
41
ー
46
151
974

49
545
759
15
195
ー
174
1,740

431
4,799
132
1,717
ー
1,532
15,321Other expenses
Interest expense
Rent expense
Loss on disposal of fixed assets
Loss on valuation of investment securities
Loss on impairment of fixed assets
Other
Total other expenses

55
280
58
178
271
54
899

47
282
69
ー
ー
51
451

414
2,483
608
ー
ー
449
3,971

674

420

3,698

380
(591)
885
(14)
¥900

308
(10)
122
ー
¥122

2,712
(88)
1,074
ー
1,074

2017

Net sales
Cost of sales
Selling, general and administrative expenses
Operating income (loss)

Profit before income taxes
Income taxes
Current
DeferredProfitLoss attributable to non-controlling interests
Profit attributable to owners of parent

2018

2018

6,683

$

Yen

Per share data
Profit attributable to owners of parent
Basic¥136.15

U.S. dollars¥ 18.52$

0.16

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥113.57 = U.S. $1.00.

Consolidated Statements of Comprehensive Income
SMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended
September 30

Six months ended
September 30

¥885

¥122

158
(6)
286
(81)
357
¥1,243

49
2
(6)
(84)
(39)
83

2017

ProfitOther comprehensive income
Net unrealized gains (losses) on other securities
Net unrealized gains (losses) from hedging instruments
Foreign currency translation adjustments
Retirement benefits asset and liability adjustments
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests¥1,257
(14)

2018

¥
¥

83
ー

Six months ended
September 30

2018

$

1,074

$

431
18
(53)
(740)
(343)
731

$

731
ー

SEMI ANNUAL REPORT 2018 8

Consolidated Statements of Cash FlowsSMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended
September 30

2017Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Loss on impairment of fixed assets
Increase (decrease) in accrued bonuses
Increase (decrease) in accrued directors’ and officers’ retirement benefits
Increase (decrease) in asset and liability for retirement benefits
Interest and dividend income
Interest expense(Gain) loss on sales of investment securities(Gain) loss on redemption of investment securities(Gain) loss on sales of fixed assets(Gain) loss on revaluation of investment securities
Loss on disposal of fixed assets(Increase) decrease in notes and accounts receivable, trade(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable, trade
Increase (decrease) in accounts receivable, non-trade
Increase (decrease) in accounts payable, non-trade
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from time deposits
Purchases of fixed assets
Proceeds from sales of fixed assets
Payments for disposal of fixed assets
Purchases of intangible fixed assets
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Payments for execution of loans
Collection of loans receivable
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans payable
Proceeds from long-term debt
Payments of long-term debt
Purchases of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of six months and the year

¥674
2,085
271
144
(19)
(166)
(48)
55
(0)
(46)
(40)
178
58
(1,183)
(416)
(105)
250
248
462
2,402
48
(54)
(436)
1,959
(39)
49
(1,821)
62
(29)
(13)
(218)
0
68
(20)
47
ー

(1,914)487
1,950(1,408)
(1)
ー
(329)
ー

697
136
878
10,011¥10,890

Six months ended
September 30

2018

¥

420
1,791
ー
(29)
13
(185)
(49)
47
(195)
ー
(15)
ー
69
474
(87)
(1,083)67(1,059)
114
292
60
(51)
(234)
66

Six months ended
September 30

2018

$

(21)
11
(2,502)
42
ー
(36)
(74)
240
ー
(13)
18
0
(2,335)(185)
97(22,030)
370
ー
(317)
(652)
2,113
ー
(114)
158
0
(20,560)

2,024
1,500
(2,099)
(167)
161
(263)
(4)
1,150
(349)
(1,467)
10,482¥ 9,014

17,822
13,208(18,482)(1,470)1,418(2,316)(35)
10,126(3,073)(12,917)
92,296$ 79,370

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥113.57 = U.S. $1.00.
9 SEMI ANNUAL REPORT 2018

3,698
15,770ー(255)
114(1,629)(431)
414(1,717)
ー
(132)
ー
608
4,174
(766)
(9,536)590(9,325)
1,004
2,571
528
(449)
(2,060)581

Corporate Information

Topics(As of September 30, 2018)

Donations of School Chairs using
Waste Materials
from the Philippines Factory

Corporate Data

SMK Electronics(Phils.) Corporation,
the Group’s
production works in
the Philippines,
continues to donate
school chairs anddrawing books
produced in-housefrom wooden boxes used for packaging andprotective paper for glass to elementary schools
in the region. So far, SMK has provided children
with 635 school chairs and 635 drawing books.
SMK has also started activities to remake
rubbish bins and dustpans from empty cans for
donation. SMK will continue these activities sothat children can learn the importance ofenvironmental preservation.

Name

SMK Corporation

Established

April 3, 1925

Registered

January 15, 1929

Primary business

Manufacture and sale ofvarious parts forelectro-communication device
and electronic equipment

Capital¥7,996,828,021

Stock exchange listing

Tokyo Stock Exchange

Administrator of

Mitsubishi UFJ Trust and Banking

shareholders register

Corporation

Independent auditors

Ernst & Young ShinNihon LLC
Tokyo, Japan

Employees (SMK-Group)

5,758

Head office5-5, Togoshi 6-chome,
Shinagawa-ku,
Tokyo 142-8511, Japan
Tel : +81-3-3785-1111
Fax : +81-3-3785-1878

The Introduction of Environmental
Preservation Activities andManufacturing
The SMK Head Office held the Introduction ofEnvironmental Preservation Activities andManufacturing, which was co-sponsored by the
Shinagawa Ward Environmental Information
Activities Center. This is the fourth year that wehave held these activities at our head office, andthis year 20 elementary school students and theirfamily members from Shinagawa Ward
participated.
The program was designed to convey theimportance of environmental preservation andthe joy of manufacturing. To this end, we
introduced environmental preservation activities
that are taking place at domestic and overseas
offices, and offered electronic workshops using
environmentally-friendly materials.

SMK’s Environmental Report can beviewed here.
https://www.smk.co.jp/eco/pdf/e_ecoreport2018.pdf

Shares and Shareholders (as of September 30, 2018)
Authorized shares

195,961,274

Issued shares

75,000,000

Number of shareholders
Major shareholders (top ten)

7,823
Shares owned
Percentage(1,000 shares) of shares (%)

SMK Cooperating Company Share
Holding Association

3,525

5.29

Mizuho Bank, Ltd.

3,287

4.93

Nippon Life Insurance Company

3,241

4.86

Dai Nippon Printing Co., Ltd.

3,200

4.80

MUFG Bank, Ltd.

2,508

3.76

SMK Employees Share Holding
Association

1,868

2.80

Mitsubishi UFJ Trust and Banking
Corporation

1,800

2.70

The Showa Ikeda Memorial Foundation

1,500

2.25

Meiji Yasuda Life Insurance Company

1,379

2.07

Terutaka Ikeda

1,341

2.01

Notes:
1. The Company holds 8,333 thousand shares of treasury stock, butthese are excluded from the above list. Figures for percentage ofshares are calculated excluding the treasury stock.
2. As of October 1, 2018, the Company changed the share unit of its
common stock and carried out a share consolidation. The numbersof shares indicated above represent the figures prior to the shareconsolidation.

SEMI ANNUAL REPORT 2018 10

Corporate Information(As of September 30, 2018)

Officer Introduction
Directors
President, Chief Executive Officer and Chief Operating Officer

Yasumitsu Ikeda

Director and Executive Deputy President, Chief Technology Officer

Yoshiyuki Kaku

Director and Executive Vice President

Mikio Wakabayashi

Director and Executive Vice President

Paul Evans

Outside Director

Toshio Nakamura

Outside Director

Kaoru Ishikawa

Auditors
Auditor and Chairman of Auditors’ Meeting

Tetsuya Nakamura

Outside Auditor

Naru Nakashima

Outside Auditor

Ichiro Shimizu

Outside Auditor

Morikazu Fukui

Corporate Executive Officers
Executive Vice President, Chief Financial Officer

Kohei Ohgaki

Executive Vice President

Shigechika Yanagi

Executive Vice President

Masanobu Ikeo

Executive Vice President

Tetsuo Hara

Vice President

Hideo Matsumoto

Vice President

Hiroshi Miyakawa

Vice President

Takemi Ishibashi

Vice President

Mitsuhiko Goto

Vice President

Mitsuyuki Masubuchi

Vice President, Chief Information Officer

Hiroshi Usami

Vice President

Atsushi Obinata

Vice President

Fumikazu Hata

*The Bluetooth® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc. and any use of such marksby SMK Corporation is under license.
*ECHONETLite is a trademark of the ECHONET CONSORTIUM.
*USB Type-C™ is a trademark of USB Implementers Forum.
*O ther products and company names listed in this report are the registered trademarks or trademarks of their respective
holders.

5-5, Togoshi 6-chome, Shinagawa-ku, Tokyo 142-8511, JAPAN
Telephone: +81-3-3785-1111 Fax: +81-3-3785-1878

https://www.smk.co.jp/