KAGA ELECTRONICS
CO., LTD.

KAGA ELECTRONICSEMS Business Briefing Material
March 30, 2022
加賀電⼦株式会社

TSE 1st section 8154

Preface

Business Domains

Sales agent activities for generalelectronic components andsemiconductors for customers inJapan and worldwide

Supplying PCs and peripherals todomestic and international
distribution channels, and serving
the network solutions field

Electronic partandSemiconductors

EMS

Information
Equipment

OthersProviding total support for design,development, and manufacture of
products ranging from semifinished to finished products

Development, manufacture, andsale of amusement-related
products and software2Medium-Term Management Plan 2024︓ Management Targets
Realize sustainable growth by organic growth and further M&A challenges

FY2021 Forecasts

FY2024 Management Targets
Organic growth

Net Sales

JPY

475 bnOperating
IncomeJPY

17.5 bn

JPY

Including new M&As

600 bnJPY

JPY

750 bn

20 bn

With cost of shareholdersʼ equity (7–8%) in mind,
ROE

12.3 %

stable8.5 % or higher

3Medium-Term Management Plan 2024︓Business Portfolio*CSI: Consumer & System Integrator

Electronic Componens

EMS

CSI

Others（Excluding new M&A）
Net sales︓8.1%

1,000

CAGR
800

Initial plan
600

CAGR

Net sales︓20％
Net Sales︓18％

JPY443.6bn
13.9
400

JPY292.7bn
13.9
44.3

200

43.5

Operating income︓32％
JPY422.3bn
12.1

93.3
JPY10.0bn

16.0
54.0

JPY475bn
12.0

99.6

150.0
JPY20bn40.0
110.0
JPY17.5bn

45
40
35
30
25
20
15

JPY11.4bn
380.0
262.3

145.0

New M&As
150.0; Operating income︓20％

48.4

89.5 JPY7.5bn
292.9

Net Sales︓16％
Operating Income︓ 5％
JPY750bn

50

10

313.0
5

0

0

FY2018Results

FY2019Results

FY2020Results

FY2021
Forecasts

Medium-Term Management Plan 2021

FY2024
Management Targets
Medium-Term Management
Plan 2024

4

Medium-Term Management Plan 2024︓Summary

Aim to become a competitive “World classcompany”
Aim to be “Japanʼs No. 1
corporate group in the industry”

Organic
growth+Further M& A
Challenges

Expansion of
trading company business

Increased
Sales

JPY

JPY 1 tn

750 bnGrowth fields

Increased
ProfitRatio

Mobility
Communications
Environment

will lead to
growth of the EMS businessIndustrial
equipment

Quantitative
expansion of trading
company business

Qualitative improvement
through EMS business

Reinforcement and expansion of overseas business, EMS business

MedicalHealth care

（Net Sales）

Medium-Term Management Plan 2024
Further reinforcementof profitability

Reinforcement ofmanagement basePromotion of new
businesses

Promotion of SDGs
management“CHALLENGE 1.60"
Sales of ¥1 tn inyear of 60th
anniversary offounding

5About Kagaʼ EMS Business

The Strengths of Kagaʼs EMS︓Convenience Store-type EMS

加賀電⼦はお客様にとって便利で価値ある「コンビニ型EMS」を展開
Kaga
Electronics globally deploys a “Convenience Store-type EMS” that isconvenience and valuable for its customers.
Global development

Convenience Store-type EMS vs GMS EMS〜KAGA ELECTRONICS:
close to our customers〜＜KAGA ELECTRONICS＞
・ Low initial investment(Land and buildings rented,
Standardized interior construction)
・ Capable high mix, low volume production
・ Local production for local
consumption model（Procurement・ manufacturing・
logistics）

-type

VS

＜Mega EMS Major Competitors ＞
・ Large scale investment
・ Mass production type・ Export model

Closest procurement
Closest production【Suzhou 1】【Czech Republic】【Suzhou 2】【Shenzhen】【Hubei】【Aomori】【Yamagata】

Just-In-Time supply【Fukushima】【Tottori】【Turkey】【Mexico】【India】【Malaysia】 【Indonesia】【Thailand 1】 【Vietnam 1】【Thailand 2】【Vietnam 2】

We have swift production backup systems
between manufacturing bases
to mitigate country risk.
7

The Problem-solving Power of Convenience Store-type EMS(A Case Study from an Existing Customer)
Present problem

Our solution

The manufacturing industry has suffered directly fromdramatic changes in the external environment, including
US–China trade friction, the impact of the COVID-19
pandemic, and shortages in the supply ofsemiconductors.

Develop a system to supply our main customers withbases in Romania from Turkey.

• Stretched transportsystems• Soaring logistics costs• Financial pressure• Reduced flexibility• Increasing supply
disruptions

Romania• Reduced transport
times• Logistics cost
control• Financial health• Increased
flexibility• Reduced supply
disruptions

Bulgaria

8Construction of a New Plant in Turkey
A new base for circuit board mounting in Europe【Overview of the new plant in Turkey】▶ Completion: Planned for November 2022
▶ Site area: 15,000㎡▶ Floor space: 11,600㎡▶ Production equipment: Manufacturing
and inspection equipment associated withcircuit board mounting and electricalequipment assembly▶ Number of employees: 330▶ Planned products:
Electrical equipment units for air
conditioners
Mounted circuit boards for electrical tools
Mounted circuit boards for automotive
equipment

9

Priority Strategy for the EMS Business（From 『Medium-Term Management Plan 2024』）

Reinforce and expand our customer base in high quality markets, with shift tohigher value-added areas
Qualityrequirements

Shift in Value
chain to Highvalue-addedareas• Expansion of businesses with highquality requirements and stable longterm demand orientation• Expansion of US, European, and Asiancustomer bases

Large lot,
short lifeoriented• Design/Development + EMS service• Support for software and hardware
design and development• External sales of production
equipment /IT systems developed inhouse

High
Added value

Reinforcementand Expansionof Customer
base

Mega
EMS

Kaga
Elec.

Stablelong-term
demandoriented
Cost
requirements

Development

Equipment/ICT

Manufacturing
Low
Upstream

Dow nstream• Global site collaboration and construction of human resource development structure,with EMS Towada (Production Center) at the core

Reinforcementof Business base

• Fast and flexible launch of new factories with limited initial investment (development of"convenience store-type EMS")• Promotion of smart factories through automation and visualization• Reinforcement of BCP (fast and flexible inter-Group collaboration on
procurement /production/logistics risks)10Strengthening and Expanding our Customer Base:
Long-term Stable Demand + Focus on Quality
Major Products

KAGA ELECTRONICS vs mega-EMS firms

Quality demands

Electrical Compressor
Units

KAGA
ELECTRONICS

Large lot
short lifespan

AC Inverter UnitsLighting Units for
Automotive
In-vehicle Auxiliary
Battery Packs

Air Conditioner Unit

Mega-EMS
firms

Cost demands

Long-term
stable demand

Washing Toilet

Products forElectrical Tools

11Shifting Our Value Chain to High Value-added Domains:
Development/Design + EMS Services
Our present value chain

Development

DesignTesting

Procurement

Manufacturing

Inspection

Analysis

MaintenanceOur future value chain, with the added functions of KAGA FEIHighCost planning andprototype design

Mass-production analysis
and cost improvement

Added value(Hardware and software)(Hardware and software)

Inspection devices andequipment development

Mass-production
designMass production*Our present position

Low

Expand business domains

Expand business domains

12Shifting Our Value Chain to High Value-added Domains:
Internally Developed Production Equipment and IT Systems
Internally developed production equipment

Modularsoldering baths

Surfacemounting
equipment

Testingequipment

Illustration of visualization systems

Vertical hightemperature
furnaces

Concept of coordination with our customersʼ systems
Officeautomation

Big data

Decision-making systems

SAP system

Office system

E-commerceElectronic data exchange

OA platform

External systems (customers/suppliers)
Smart factory

Industrial big data
Development control

MES (IMM) system

Data integration

Smart logistics
Intelligent devices

Infrastructure and networks

13

Strengthening Our Business Base: Production Center
The role of the Production Center
Cross-functional management of information for each EMS plantand standardization of manufacturing at each EMS plantCustomers

Production Center

Establishment
supportTechnical
supportEquipment
selection

LateralexpansionStandardization

RegularauditsManagementat criticalpoints

Production plants

14

The Role of the Production Center
Building coordination between global bases and human resource developmentwith the Towada plant (Production Center) as the core
Towada Plant
Expanding communication andcoordination with Group
production bases

Production Center

Mother Plant

 Promote cross-functional managementof Group production bases
 Promote standardization of Group
production and quality
 Enhance BCP coordination

 Main plant for domestic production

Coordination

 Promote and expand automation and laborsaving, and advance IT
 Support the establishment of overseas
production bases

Each Production Base
 Know-how: production, quality,
automation, etc.

15

The Function of the Production Center
Coordinating between global production bases, centering the Production Center
Strengthen global
function and crossfunctionality

Japan

China

ASEAN

Americas

EuropeProduction Center

Aim to achieve the same standards and the same level ofquality and customer service through standardization
Technical Group
Quality Group
Production Group・Establish and develop the KAGA Production Method (KPM* and TTS**)・Promote higher quality, greater efficiency, and standardization at eachproduction base
*KPM: KAGA Production Management**TTS: TAXAN Technical Standard

Procurement
Group

Optimize procurement Group-wide

IT Group

Shift to Group-wide common systems and Smart Factory systems

16

The EMS Business Portfolio by Industry
Through our key strategies of “strengthening and expanding our customer base,” “shifting ourvalue chain to high value-added domains,” and “strengthening our business base,” we aim to
rapidly grow the business scale to 1.4 times the level of fiscal 2021.

JPY150 bn

1.4×
JPY110 bn

OthersConsumer
Office Equipment

5％
5％
5％

3％
6％

Medical

10％

7％
8％

Air
conditioning

15%

Industrial

20％

In-vehicle

40%

18％
18％
40％
FY2021 Forecasts

FY2024 Image
17

The EMS Business and SDGs

Utilizing renewable energy
As part of our efforts to utilize
clean energy, we plan to use
electricity generated from solar
power at some of our plantsfrom fiscal 2022.

Initiatives for a work-friendly environment
At our Shenzhen plant (China),
we held an event inviting thechildren of employees toexperience the workplace atthe plant.

*The photograph is for illustrative purposes only.

18

An Introduction to
KAGA EMS TOWADA

Introduction to KAGA EMS TOWADA KAGA EMS TOWADA CO., LTD.
Site area

30,564 m2

Building
area

13,264 m2

Number of
employees

290

Approval・ISO 9001
・ISO 14001
・ISO 13485
・License for
manufacturing general
medical devices
・IATF 16949 (to beacquired in FY2022)

20

1. Main Production Items and Production Lines
Main production items

Circuit board mounting and electronic equipment assembly and inspection
Automotive
relatedMedical device
related

Consumer product and industrial
equipment related, food processing
equipment related, etc.

Main production lines❶ Automated surface mount ❷ Dual in-line package (DIP)❸ Finished product assembly lines

technology (SMT) lines

lines

Flow production lines: 4 lines

5 lines + exclusive use of
5 lines at partner factory

3 lines + exclusive use of 1line at partner factory

Cell production lines: 8 rooms(clean room available)21

2. Automated Surface Mount Technology (SMT) Lines
QFP, etc.

 Process to solder components to board surface(densification, IC, fine chip components)

SolderIC

Chip component
Board

Board pattern copper foil

▼Automated surface mount technology (SMT) lines▼Component mounter▼ Reflow oven22[Basic Flow-(1)](1) Print solder with a printer▼Board with designed circuit wired
Sample of printed board

Place the metalmask aligned withthe pattern
Solder Metal mask openings
Squeegee

Move the squeegee
to transfer the solder
onto the printed
wiring board

Separate themetal mask

Solder
Metal mask
Squeegee

Solder paste▼Copper foil pattern forsoldering components

Pattern

Printed wiring board

Solder application
complete

Typically
0.1 to 0.2
mm

Print board with solder
paste printed

Solder paste printed on
printed board
23

[Basic Flow-(2)](2) Precisely inspect state of printed solder paste using a printing inspection
machine (inspect volume, bleeding, dimness, position deviation, averageheight, etc. with 3D precision)
Sample of board after printing▼State of printed solder

24[Basic Flow-(3)](3) Mounting: Install the components using a component automatic mounter
Sample of board after mounting

Wide variety of components supported

HeightTransformer▼State with components
mountedLength

Vacuum pickup and placement at specified position on board

Component
Component

Solder paste
Board

Board

25

[Basic Flow-(4)](4) Mounting: Melting, cooling, and bonding of solder by reflow (oven)
Sample of board after mounting

Board passes through a number of baths of different temperatures
along a conveyor
Temperature

Reflow heating
Preheating

Solder bonding

Cooling▼ State with components
mounted

Heat
Heat

Heat
Heat

Solder paste

26

SMT Line
Features of our configuration
Specialized manufacturer
Equipment developed inequipment
house (pursuit of(high quality, high reliability, ＋
productivity and low cost)and high speed)

Improves
traceability andsaves manpower

Basic configuration of one of our lines(8) Component mounter (high speed  2, multifunction  1)
(1) Board automatic loader(11) Board automatic unloader
Equipment to place components at high speed at(4) Solder printerpredetermined coordinates on the board(3) Board cleaner(5) 3D printing(9) Conveyor with operator
inspection machinecrossing(2) Laser marking system
Marks serial numbers on
boards with high resolution(6) Conveyor with operator crossing
Equipment allowing operator to crossover part way along the conveyor
line ⇒ saves manpower andimproves work efficiency(7) Joined production equipment (10) Reflow oven (12-bath type)and unjoining equipment
Equipment to melt solder
Equipment to reduce component
mounting time of mounter by pseudojoining two boards ⇒ improves
productivity

between the components andboard by heating, and then bondby cooling(12) 3D optical solder
appearance imaging
inspection machine
High-precision inspectionof the soldered state27

[Video (Japanese only)][Laser marking → Board cleaner → Solder printing → 3D printing inspection](1 minute 20 seconds)

28

[Video (Japanese only)][Component mounting](0 minutes 46 seconds)

29

[Video (Japanese only)][Reflow (joining by melting and cooling solder) → 3D optical solder appearance inspection](0 minutes 36 seconds)

30

3. Dual In-line Package (DIP) Lines
 Process to insert leads of components into copper foil holes in the board andsolder them (large components, connectors, coils, transformers, etc.) (higher
strength than surface soldering)
The terminals ofcomponents are inserted
into the through holes(circuit conduction
pattern holes) in theboard.

Insertion error imaging
inspection machine developedby Kaga Electronics Group(prevents component, missing,polarity, tilt, height, and otherhuman errors)

Terminals of a component
inserted into the soldering
surface of the board are
soldered by jet-flowing molten
solder at a high temperature

Board

Solder is jet flowed31Basic Configuration of Our Dual In-line Package (DIP) Lines
Developed by Kaga Group (made by HATTEN)(1) Lead cut and clinch(3) Spray fluxer(5) In-circuit tester(6) ROM writing

Automatically cutting andbending of component leads

Flux application equipment

Soldered circuit
conduction inspection

ROM writing equipment

Components
inserted by hand

OUT

Visual appearance
inspectionIN

Tray transportation

Tray cleaning

Automatic detection of insertion
problem before soldering

Flow solder machine

DIP tray automatic transporter

DIP tray cleaning(2) S-AOI(4) Solder bath

(7) AGV(8) Ultrasonic bath

Developed by Kaga Group (made by HATTEN)

32

[Video (Japanese only)][Dual in-line package lines (flow solder)](0 minutes 50 seconds)

33

4. Finished Product Assembly Lines
 Module assembly in clean room Finished product assembly line

34

[Video (Japanese only)][Flow production assembly line](0 minutes 34 seconds)

35

Our own developed Production Equipment
Developed and manufactured by KAGA: Automatic pressure
feeding screw fastener and automatic horizontal screw fastener

BeforeAfter

Commercially available
screw fastener[Speed improved] Pressure

feeding screw fastener

Developed
by
KAGA

Reference model
Screw fastening time
22.9 sec for screws at 13 points

screw mechanism installed

Developed rotation
mechanism
Sc rew
feeder[Basic specs]
Manufacturer: IAI
3-axis robot[Versatility improved] Horizontal

ー Screw fastening time
improvement effect ー
22.9 sec

14.5 sec (8.4 sec shorter)Work time shortened by
36.6%

Versatility
improved

As a result of providing
horizontal screw support
ー Manual screw fastening process ー
4 screws  500 units/day
ー Automated ー
2,000 screws  3.6 sec = 120
min/day

Developing an original mechanism improved productivity byshortening the process time and provided a measure against
tenosynovitis due to tightening by hand36

[Video (Japanese only)][Assembly – Developed in-house by KAGA
(automatic pressure feeding screw fastener + automatic horizontal screw fastener)] (0 minutes 50 seconds)

37

Our own developed Automatic Picking Machine[Features of our equipment] Developed and manufactured by KAGA:
Automatic picking machine for instruction manual and other accessories

Effect: Achieves automation of preparation of accessories (instruction
manual, warranty, etc.) and thus prevents mistakes by workers
38

[Video (Japanese only)][Assembly – Developed in-house by KAGA
(automatic picking machine for instruction manual and other accessories)] (0 minutes 36 seconds)

39

5. Strengths of KAGA EMS TOWADA:
High-Quality and High-Productivity Initiatives
Mechanisms “not to accept, use, make, or allow flow of defective parts” + “not to stop supply”
Mechanism not to accept or use defective parts

Monitoring system developed by KAGA

Developing and deploying part control system resulted inzero erroneous part use
Parts registered whenentering warehouse

KAGA always monitors, analyzes, and provides feedback on
production and quality information acquired from the quality
real-time monitoring system developed by KAGA, and takes
the optimal measures.
KAGA has built a mechanism in this way to ensure defects are
not made and production does not stop.

Solder traceability system

Operation efficiency improvement and manpower saving by
real-time visualization and centralized control
Grasping momentary stops (time and details) and taking
measures

Mechanism not to accept or use defective parts
Thorough static
electricity measures

Thorough foreignmaterial measures

Thorough maintenance＋
Humidification system

Board cleaner＋

Cpk control of mounting
precision

Measures using static electricity removal sheet, shoe cleaner,suction sheet, and clean room

Mechanism not to allow flow of defective parts
Developing and deploying program for appearance inspection
machine enabled automatic inspection up to smallest fillet
Standard

Reduced fillet II＋
Entire land

Reduced fillet III

Production site

OfficeCheckproduction
in real time＋
Lead tip +front + side

Front only

Overseas factory40

KAGA EMS TOWADA Smart System
System developed by KAGA linked with planning, material, and production control

Product planning system

Material control system
Development

Optimal minimum numberof workers

Minimum programmingPart
information

CAD
Shortes t-dis tanc e
pic king

Optimal minimum schedule

Produc tion not affec ted byequipment
・ Z-axis lis t w ork
・ NC data c reation
・ Grouping data

SMT progres s
Material pic k

Flexible produc tion plan
・ Produc tion s imulation
・ Grouping plan
・ Optimal produc tion line plan

Linked w ith
produc tion plan

【Part alarm】
Part shortage warning

Development

Accurate part identification【Digitization of control】
Discontinue use of daily reports
and management tables

Part automatic
identific ation
Automatic label is s uanc e(I D as s ignment)

Production control system
Optimal manhour control

Real-time production progress・CT monitoring
・Switchover monitoring
・Momentary stop monitoring
・Trouble monitoring
Auto ma tic collectio n of
pro ductio n lo gs
・Fa ilure mo nitoring
・Feeder co ntrol
・No zzle co ntrol

Development

Development【Part counter】

Sw itc hover time predic tion

Produc tion progres s

Automatic inventory control【Parts monitoring】
Part shortage warning
・Splicing assistanceB/C check monitoring
Optimal material alloc ation

Pa rt check in rea l time

Pa rt sho rta ge w a rning
Feeder inf o rma tio n

Progres s information

Effect of deploying smart system ➡ workforce reduction of -12.5％
compared with before deployment
41

KAGA EMS TOWADA Smart System Thorough history control and prevention is implemented using
traceability system developed by KAGA.
Process

Outline

Method(1) Parts enter
warehouse(2) Production
preparation

When parts enter thewarehouse, KAGA control
labels are created and linked
with the manufacturer labels.

The standby parts andpicking list are compared
automatically, and the solder
used is registered.
An alarm is issued in theevent of an error.

(3) Production
2D barcode marking is performed to link the parts andsolder used for each individual board with the history ofeach inspection result.
In addition, feedback is made based on the inspection
results, and a system is built to help prevent recurrence.

Registration of parts entering warehouse

Part comparison

2D barcode (minimum 2 ｍｍ ｘ 2 ｍｍ) Visual inspection

Registration of solder entering warehouse

Registration of solder used

Solder printing inspection

Solder appearance inspection

Control of all data history
42

KAGA EMS TOWADA Smart System
 Method: Issue control labels when parts and materials are received and implement
B/C check for each work process.
Traceability information can be acquired, as the results are collected in real time.

Control server

Usage history

Warehousing history

Date / part number / lot /production plan

Date /part number / lot

Each PC terminal

Parts and materials
received

Place instorage

Allocate

Set in feeder

Production

43

KAGA EMS TOWADA Smart System Part alarm (part shortage warning) developed by KAGA improves productivity by
preventing delays due to waiting for parts to be prepared Objective: Avoid machine stops due to part shortages by developing a part alarmfunction to display the order that part shortages will occur on a tablet
Enlarged

Workbench<<Assist splicing work>>

 Save manpower of dedicated workers
 Reduce part-finding manhours to zero
 Provide navigation for splicing order Display until what time splicing isrequired *From October 2019

Added
functions
Part shortage
prediction time
Part for which shortage will
occur within 1 hour isindicated in red

Cassette

Places deployed

Part for which lot cannot
complete without splicing
is indicated in yellow

Grasp the splicing time → Reduce part replacement loss
44

Examples of Awards received for Equipment
 The Commendation for Science and Technology and Prize for Creativity by the Minister of Education,◎自社開発設備の受賞例：
文部科学大臣表彰･創意工夫功労者受賞
Culture, Sports, Science and Technology
Board laser marker

Board joint conveyor equipment

Price reduced by 1/2 or more compared withexisting products of equipment manufacturers

Productivity improved by 6.6% by joining
boards to mount components

Pressure feeding screw fastener

Automatic picking machine for instruction
manual and other accessories

Productivity improved by 36.6% by feedingscrews with compressed air

Automation of preparation of accessories(manual, warranty, etc.) achieved
45

Measures for Static Electricity and Foreign Material<<Static electricity and dust control>> Dry fog and ionizer equipment
Dry fog

Ionizer

Carrierconveyor

HumidityStandard value: 30% to 70%
Actual value: 45% to 50%

ESD

Standard value: 50 V or lessBoard
(component)
staticelectricity
removalAppearance
inspection machine

Inside of mounter

Repair process<<Prevent foreign material from entering production floor>> Install sticky mat and air shower
Production
floor entrance

Cafeteria
entrance

Product
warehouse exit

Shoe cleaner

Sticky mat

Air shower

46

The Role of the Production Center
Building coordination between global bases and human resource developmentwith the Towada plant (Production Center) as the core
Towada Plant
Expanding communication andcoordination with Group
production bases

Production Center

Mother Plant

 Promote cross-functional managementof Group production bases
 Promote standardization of Group
production and quality
 Enhance BCP coordination

 Main plant for domestic production

Coordination

 Promote and expand automation and laborsaving, and advance IT
 Support the establishment of overseas
production bases

Each Production Base
 Know-how: production, quality,
automation, etc.

47

Other IR Information● IR Site
https://www.taxan.co.jp /en/● Integrated Report 2021
https://www.taxan.co.jp /en/ir/ir_library/library_05.html● Registering for “IR MAIL Distribution Service”
https://www.taxan.co.jp /en/ir/irmail /index.html

48

Note

49

Note

50

Note

51

Note

52

Note

53

“Everything we do isfor our customers
20 Kandamatsunagacho, Chiyoda-ku, Tokyo 101-8629
Contact: Investor Relations & Public Relations Office
TEL:+81-3-5657-0106
FAX:+81-3-3254-7133
E-mail︓ webmaster@taxan.co.jp
https://www.taxan.co.jp/en/

■ Forward-looking statements in these materials are based on information available to management
at the time this report was prepared and assumptions that management believes are reasonable.
Actual results may differ significantly from these statements for a number of reasons.
■ Display method in this material
Number : Truncated less than the display unit.
Ratio: After calculation in yen units, Round down one digit of Display unit.