Future Outlook

Copyright © 2017 Harmonic Drive Systems Inc.

Contents
1. Recent orders trends
2. Market trends
3. Important application trends
4. Capacity expansion
5. Expected issues have materialized
6. Long-term vision
7. Changes in the business environment
8. New products and services likely to result fromtechnological innovation25

Copyright © 2017Harmonic Drive Systems Inc.

1. Recent orders trends
Rapid increase in orders from January 2017
Bookings by application(non-consolidated; quarterly value)

Million ¥Oct. 10, 2017

20,00017,98517,50015,00013,853

12,5001,046
140157565624

1,352
205
63
774
424

14,583
1,296
192
97
958
613

10,000

6,884
7,500

5,815

5,000

813
134
231
363
373

2,500

2,722

0

997
94
171
709
607

6,492
5,310
973
80
24
438
253

4,678

304
521

443
699

391
656

855
167
56
443
259
1,634
332
581

14_3Q

14_4Q

15_1Q

15_2Q

2,720

Semiconductor Equipment
Printing Machines
Medical Equipment

2,089

6,927

6,449

918
184
67
398
303

898
216
50
442
342

806
148
8
433
305

3,235

3,458

3,141

371
677

405
742

469
678

15_3Q

15_4Q

16_1Q

Flat Panel Display Equipment
Optical Devices
Aerospaces

Robotics
Transporter
Vehicle

7,795
5,964
870
237
17378
343

909
170
74
450
471

11,754
7,948

8,652

3,557

2,524
511
730

768
896

16_2Q

16_3Q

1,179

1,241

1,151

1,626

1,670

16_4Q

17_1Q

17_2Q

1,029

Gearbox for Motor Manufactures
Measuring Machines
OtherMachine Tools
Excavation System for the Oil

26
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２．Market trends-①
Market for industrial robots to grow 15% annually from 2018

CAGR 15%

Source：IFR Report2017

27

Copyright © 2017Harmonic Drive Systems Inc.２．Market trends-②
Major robot makers: Demand forecast
Our products

Expected demand growth likely to materialize
two years early, by 2018 rather than 2020（Units）
200,000

2018: 180,000 units

100,000

2017: 100 ,000 units
Two years early

2016: 33,000
units

Plan0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

28
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２．Market trends-③
Demand for collaborative robots to grow sharply by 2025
（Thousand units）

Shipments of industrial robots and collaborative robots

Industrial Robots
Collaborative robots～About 50 years

10 years※HDSI, based on IFR Reports and, for the pre-1992 period, on Japan Robot Association data

Collaborative robots to grow as much in just ten years
as industrial robots have in 50 years

29

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３．Important application trends-①
Industrial robots■Growth in demand for smartphone production■Growing worldwide demand for labor saving
Investment in new capacity at robot makers（Units）

Source: Japan Robot Association30

Copyright © 2017Harmonic Drive Systems Inc.

３．Important application trends-②
Collaborative robots

Co-bots:Largestmarket■Increasing use in manufacturing andin the service industries■Set to fuel further growthCo-bots: Market growth forecast+515（Billion yen）
700

615

600
500

400

400

360

334

300
200
100
0100
15'

20'
欧州
Europe

4515'

17
米州

20'

North America

15'

520'
日本
Japan

15'

20'
アジア
Asia

Source：Fuji Keizai “Worldwide Robot Market: Current Conditions and Future Outlook”

31Copyright © 2017Harmonic Drive Systems Inc.

３．Important application trends-③
Semiconductor manufacturing equipment■Higher capacities and quality upgrades have spurred investment in multilayer andminiaturization technologies■Increased demand for semiconductors for artificial intelligence and virtual reality applications■Investment in 5G-related technologies is beginning in earnest■Increased server demand in response to the data explosion—shift from hard drives to solidstate drives

Source: WSTS semiconductor demand forecasts
Sales（Billion yen)

Growth（%)

Source: Semiconductor Equipment Association of Japan projections

32

Copyright © 2017Harmonic Drive Systems Inc.

３．Important application trends-④
FPD/ OLED manufacturing equipment■Latest smartphone models use OLED
■Major Chinese smartphone makers also using OLED panels in their latest models■In addition to Major Japanese and South Korea panel makers, and Chinese companies areinvesting aggressively in OLED panel factories■Japanese panel maker starting mass production using the printing method

OLED : Market forecast

Source：IDTechEX

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４．Capacity expansion-①
Expanding capacity for HarmonicDrive®; new land acquisition for expansion■New lines at the first Hotaka factory■Expansion of existing capacity (adding a second shift, boosting productivity)■Land acquired for a second Hotaka factory, to become a production base ofthe same stature as the No. 1 factory
The Hotaka No.1 Factory（Azumino City, Nagano）

Factory landarea about
20,000 tsubo

The Hotaka No.2 Factory（Azumino City, Nagano）

Factory landarea about
15,000 tsubo

Source: Google Earth

New line equipment investment: ¥1.5bn
Production increase from March 2017
（to 85,000 units/month, from 50,000units/month）



Incremental investment
Output to rise to 100,000/month by March 2021
34
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４．Capacity expansion-②
Main component（cross roller bearing）capacity expansion, new factory construction

New factory—artist’s conception(Matsumoto City, Nagano)・Construction of new factory structures to start in December 2017
・Cross roller bearing monthly capacity to rise to 150,000 units
by March 2023

35

Copyright © 2017Harmonic Drive Systems Inc.

４．Capacity expansion-③
HDLLC／HDAG: Proposed factory site
【HDLLC】
Plans to buy a factory site nearBeverly, MA（New plant conceptualization）【HDAG】
Expansion possible next to theexisting plant

36
Copyright © 2017Harmonic Drive Systems Inc.

４．Capacity expansion-④
Roadmap

Hotaka No.1 Factory

HDSI

2020

Current

2017/01
50,000 units（Monthly units）

85,000 units ＋66,000 units

100,000 units

Hotaka No.2 Factory
100,000 units

Musser E & W
New Factory

Limburg Factory

HDAG

to 50,000 units

10,000 units＋
CRB 10,000 units＋

Boston Factory

HDLLC

New Factory

3,000 units
Total 98,000 units＋
Current Factory

HPI

120,000 to
150,000 units

to 30,000 units

10,000 to
30,000 units
260,000 to
280,000 units

120,000 to
150,000 units

CRB 60,000 units＋
New Factory

150,000 units

37 37

Copyright © 2017Harmonic Drive Systems Inc.

５．Expected issues have materialized◇ Expand production capacity⇐ The second Hotaka plant◆ Don’t count on current record high sales – it’s short term.
Be aware there always involves a certain fluctuating factors –in SEMI, FPD/OLED even Industrial Robot as well.
◆ Serious competition has developed⇐ Competitors have moved into Nagano⇐ A surge among Chinese manufacturers◆ Can not depend solely on long term relationship based upon
mutual trust built on our experiences and QCDS.
◆ Can these risks be absorbed simply through scale expansion?
◇ Continuous effort to diversify applications (medical equipment,
food industry, pharmaceuticals etc.)
Diligent work in R&D; New gear mechanism, New Materials,New production method

38

Copyright © 2017Harmonic Drive Systems Inc.

６．Long-term vision（the next medium-term business plan）
Sustaininggrowth

Realchallenges

Preparing for a new era（Billion yen）
Planed 204sales

234

260

290

300

350

500＋

XXX

YYY

Forecast
Actualsales

181

210

259

282

300

530

50thanniversary
PreviousMid-term
前中期経営計画
Management Plan
FY2012FY2014Current Mid-termManagement Plan
FY2015FY2017

・Meeting quantitativegoals
・Paving the way for growth
between 2030 and 2050
FY2018FY2020A new era brought onby technologicalinnovation

FY2021

FY2030FY205039
Copyright © 2017Harmonic Drive Systems Inc.

７．Changes in the business environment
CloudBig Data/ AI
Fog

Schematic Concept of Total Motion Control
ICTSensors

Speedreducers

Controllers

IoT

Mechanisms

MotorsOtherelements
Power/ Charging
SoftwareMaterials
Drivers
Production and processing
technology
40
Copyright © 2017Harmonic Drive Systems Inc.

The performance targets and other numerical data
presented herein are forecasts based on information
available to the HDS Group at the time this material wasprepared, and are subject to the influence of uncertainties
including those in the economic and competitiveenvironment. Actual performance may therefore differ
materially from the forecasts given in this material.

For more information:
Please contact us as follows for material contents and investor information of all kinds.
Corporate Planning and Finance Division, Harmonic Drive Systems Inc.
Ichigo Omori bldg. 7F, 6-25-3 Minami-Oi, Shinagawa-ku, Tokyo 140-0013 Japan
Email: ir@hds.co.jp
Website: https://www.hds.co.jp/Copyright © 2017 Harmonic Drive Systems Inc.