About Kaga Electronics’ EMS Business

September 30, 2019

KAGA ELECTRONICS CO., LTD.

Index Kaga Electronics’ Business Segments

P- 2 – 3

 Overview of Kaga Electronics’ EMS Business
The Strengths of Kaga Electronics’ EMS

P- 4 – 6Main Production Bases

P- 7 – 9Main Products

P-10 – 13

 Growth Strategy for the EMS Business
The Kaga Electronics Group’s Mid-term Management Plan P-14 – 15
Key Measures and Specific Action

P-16 – 17

Overview of Each Action

P-18 – 23

 <Reference> Comparison with Competitors

P-24 – 25

(Ref)Segment disclosure associated withthe New Medium Term Management PlanContinuous disclosure based on current segmentation according to legal financial accounting,along with voluntary disclosure based on segmentation in line with the new Medium-Term
Management Plan

Current segments

Segments in Medium-Term Management Plan

Legal financial accounting

Management Accounting

Components sales businessElectroniccomponents

 Sales of semiconductors
 Sales of general electroniccomponents
 Sales of various kinds ofdevices

EMS business Electronic equipment
manufacture contracting
services

Informationequipment

 Sales of PCs and PC
peripherals
 Sales of home electric
appliances and lighting fixtures
 Sales of photograph andimaging products

Software Production of CG video andsoftware

Others Sales of amusement
equipment Repair and support forelectronics equipment
 Sales of sports goods© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Electronic
components

 Sales of semiconductors
 Sales of general electroniccomponents
 Sales of various devices

EMS

 Electronic equipment manufacture
contracting services

CSI

 Sales of PCs and PC peripherals
 Sales of home electric appliancesand lighting fixtures
 Sales of photograph and imagingproducts

Others Production of CG video andsoftware
 Sales of amusement equipment
 Repair and support for electronicsequipment
 Sales of sports goods
2(Ref) Business segments of Parent company and group companies
KAGA ELECTRONICS CO., LTD.

ElectronicComponents

Electronics Business Division
EMS Business Division
Communication Network Sales Division
Specific Industry Business Division
Strategic Customer Sales Division
Sales Promotion Division●KAGA TECH CO., LTD.
KAGA DEVICES CO., LTD.
KAGA SOLUTION NETWORK CO., LTD.
AD DEVICE CO., LTD.
KAGA MICRO SOLUTIONCO., LTD.
DIGITAL MEDIA LAB., INC.
KAGA SPORTS CO., LTD.
KAGA AMUSEMENT CO., LTD.
KAGA TECHNOSERVICE CO., LTD.
FUJITSU ELECTRONICS INC.
KAGA EMS TOWADA CO., LTD.

●
●Major Affiliates in Japan●●●●●●Major Affiliates Overseas

KAGA TAXAN (SUZHOU) ELECTRONICS CO., LTD.
KAGA (SHANGHAI) ELECTRONICS CO., LTD.
KAGA (SHENZHEN) ELECTRONICS CO., LTD.
KAGA (H.K.) ELECTRONICS LIMITEDKAGA DEVICES (H.K.) LIMITEDKAGA (TAIWAN) ELECTRONICS CO., LTD
KAGA ELECTRONICS (THAILAND) COMPANY LIMITEDKAGA COMPONENTS (MALAYSIA) SDN.BHD.
KAGA ELECTRONICS INDONESIA, PT
KAGA ELECTRONICS (VIETNAM) CO., LTD.
KAGA (SINGAPORE) ELECRONICS PTE LTD
KAGA ELECTRONICS (USA) INC.
TAXAN MEXICO S.A. de C.V.
KD TEC s.r.o.

© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

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3

The Strengths of Kaga Electronics’ EMS (1): Convenience Store GMS
Kaga Electronics globally deploys a “Convenience Store EMS” that isconvenience and valuable for its customers.
Japanese EMS vs Taiwanese / Asian EMS

Focus on High
Reliability

Focus is on Substrate
Installation
Strong areas ofJapanese EMS
SIIXUMCKaga Electronics, etc

Strong areas of Taiwanese/ Asian mega EMS

Low Volume
Focus on Cost

Foxconn、
Pegatron、
Flextronics, etc.

CompetitivenessHigh Volume

Convenience Store EMS vs GMS EMS＜KAGA ELECTRONICS＞
・ Low initial investment(Land and buildings rented,Standardized interior construction)
・ Capable high mix, low volume production
・ Local production for local
consumption modelVS＜Japanese Major Competitors ＞
・ Large scale investment
・ Mass production type
Export model

Focus is on theAssembly ofFinished Products
4The Group’s Strength‐②：One Stop
Not just contract manufacturing but offer one-stop service fromsales to after-sales support

Planning/Design/Development

Components
Procurement/Kitting

EMS/Contract
manufacturing

Sales/Distribution

KAGA ELECTRONICS

Support/After-sales service

KAGA TECHNO SERVICE

KAGA DEVICES

KAGA MICRO SOLUTIONSANKOH Engineering

KAGA SOLUTION NETWORKKAGA AMUSEMENTAD DEVICE

DIGITAL MEDIA LAB

KAGA TECHKAGA AMUSEMENTKAGA EMS TOWADAKAGA SPORTS

KAGA (Shanghai) / KAGA (H.K.)
KAGA (DAILIAN)
KAGA (TAIWAN)
KAGA (KOREA)

KAGA COMP(MALAYSIA)KAGA (THAILAND)/KAGA(VIETNAM)
KAGA (SINGAPORE)

KAGA（INDIA)KDTEC（Czech）/ KDTEC（Turkey）
KAGA USA
Fujitsu Electronics© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

TAXAN MEXICO

Fujitsu Electronics
5

The Group’s Strength‐③：Global Network
Global EMS production system with 19 bases in 10 countries to respondswiftly and flexibly to customer needs.

∎ Expand sales to local Chinese companies∎ Installed mounting∎ Expand sales to European and the U.S. companies
equipment in Czech and∎ Expand sales to Japanese companies
started European operation
conducting sales in China∎ Increase production∎ Entered into Turkey inin Mexico shifting fromorder to strengthen
China
China
Europe business∎ Expand EMS business∎ Increase sales of components ∎ Established sales officein Chicago to enhancekitting businesssales activities in the U.S.
∎ Develop new customers

EuropeHungary
Czech
Germany

The Americas

Japan

DetroitSuzhouDalian
Korea
Dongguan
Shengzhen
ShanghaiHong Kong
TaiwanIndia Thailand Vietnam
Philippines
Malaysia
Hubei

TurkeyItaly

San JoseSunnyvale

ChicagoBostonMexicoIndonesia

ASEAN
Sales base© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Production base

∎ Further deepening
relationsip with Japanesecustomers∎ Centralize theprocurement
operation to improve
efficiency
6Introduction to Main Production Bases: China
Kaga Electronics (Shenzhen)

Kaga Technology (Suzhou) Electronics

Established

１９９９

Established

２００９

Number of
Employees

９５０

Number of
Employees

３６０

Products

Automotive-related units, industrialequipment, OA equipment,
amusement equipment,
communications equipment.

Products

Automotive-related units, medicalequipment, industrial equipment,
residential equipment, electronic
musical instruments,
communications equipment＜ Shenzhen Factory＞＜Suzhou First Factory (For Export)＞
7

Introduction to Main Production Bases: ASEAN
KAGA ELECTRONICS (THAILAND)KAGA ELECTRONICS (VIETNAM)

Established

２００２

Established

２０１７

Number of
Employees

６９０

Number of
Employees

１２０

Products

Automotive-related units, OA
equipment, air conditioningequipment, industrial equipment

Products

Automotive-related units, airconditioning equipment, businessequipment, medical equipment<Thailand Factory>＜ Vietnam Factory＞
8

Introduction to Main Production Bases: Europe and the Americas
KD TECTAXAN MEXICO

Established

２００９

Established

２０１７

Number ofEmployees

１２０

Number ofEmployees

１６０Products

Air conditioning equipment.

Products

Automotive-related units,business equipment, industrialequipment.

＜ Czechia Factory＞＜Mexico Factory＞
9

Main Products: Various Substrates
Substrate for Office
Equipment

L Size Substrate forCommunications Equipment

Power Supply Substrate

LED-related Substrate

10Main Products: Automotive-related UnitsLighting Units for Automotive

AC Inverter Units

11

Main Products: Various Units

Air Conditioner Unit

FA Equipment Touch Panel
Monitor12

Main Products: Various Finished Products

Automotive-related Products＜Automotive Navigation System＞

Medical Equipment＜Automated Medication Dispensing Cabinet＞

13Positioning of “Medium Term Management Plan 2021”
Organic
GrowthAim to become a competitive “World class+company”
Further M&A
Challenges
Towards the realization of“Japan’s No. 1 corporate group inthe industry”
Kaga
ElectronicGroup+
FujitsuElectronics

Increased
Sales

JPY500 billion

Expansion oftrading company business

Increased
ProfitRatio

JPY1 trillion

Further
expansion ofthe EMS
business
Enhancement
and expansion ofoverseas
businesswill lead togrowth of the EMS business
Quantitative
expansion of tradingcompany business

Qualitative improvement
through EMS businessMedium Term Management Plan 2021

①Enhancement of Revenue Base ②Stabilization ofManagement Base ③Creation of New Business© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

(Net Sales)

Medium toLong TermVision

14EMS Business Growth Scenario
Driven by the growth of in-vehicle, air conditioning, industrial
machinery, and medical/healthcare, we shall aim for drastic growthof business size of 1.5x that of FY2018
140 billion yen

1.5x
89.4 billion yen
19％
9％
12％
14％
23%
23％

Fujitsu Electronics,
M&A

11％

Consumer,Communication etc.

10％

OfficeEquipment

10％
10％IndustrialMachinery

14％

Air Conditioning

20%

In-vehicle

25%

Healthcare

FY2018Results© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

FY2021 Image

PointsOrganic
GrowthFujitsuElectronics

EMS Shift

FurtherM&A In addition to our existing production capacity in China, ASEAN,and Europe, we shall aim to expand business in growth areas suchas in-vehicle, air conditioning, and industrial machinery, throughfull scale investment in new bases in Vietnam, Mexico, Turkey, andIndia.
 We shall develop a “Key Device + EMS” approach for the major
customers of Fujitsu Electronics.
 We shall aim to further expand the size of the EMS business, andsearch for new M&A opportunities inside and outside of Japan.
15

Key Topics for EMS Business Growth
In parallel with the EMS shift of leading European and American
customers of Fujitsu Electronics, strengthening volume, quality, andcost, and comprehensively increasing business competitiveness incomparison with competitors.
Increasing of Production Capacity
 Responding flexibly to moves towards theshifting of production away from China inconjunction with the continuing US-China
trade issues, as well as moves towards areturn of the overseas production to Japandomestic in order to avoid exchange rate
fluctuations and soaring labor costs.

Strengthening of Engineering Capabilities No longer relying on general-purpose
equipment, using in-house engineering
capabilities, and internally developing
production equipment at an optimal cost for“convenience store EMS”, and increasing costcompetitiveness through this.

Strengthening of Manufacturing Capabilities Through the acquisition of Towada Pioneer,
the manufacturing know-how accumulated
over many years as an electronics specialist,
exceptional production personnel andproduction equipment. Further improving thequality level of the EMS business andstrengthening competitive advantage against
competitors by sharing resources including jig
design and quality assurance systems.
 Positioning the Towada Pioneer andFukushima New Plant as the "Mother
Factory", partnering with overseas bases, andpromoting overall optimization to strengthen
the management structure and to improvebusiness efficiency.

16

Major Initiatives

Enhancing of Production
Capacity

・ Capturing increased demand in conjunction with thereturn to domestic production

Strengthening ofManufacturing Capabilities

・ Sharing of production know-how and excellent
production personnel
・ Mother plant for substrate installation

Strengthening of Engineering
Capabilities

・ Sharing of resources, such as production equipment
designs and jig production
・ Verifying own developed production equipment

Enhancing of Production
Capacity

・ Capturing increased demand in conjunction with thereturn to domestic production

Strengthening ofManufacturing Capabilities

・ Mother plant for assembly of finished products

Construction ofThailand Second
Factory

Enhancing of Production
Capacity

・ Capturing the shift from Chinese production to avoid theeffect of US-China trade disputes

Joint Venture inChina

Strengthening of Engineering
Capabilities

・ Differentiation through internally developed production
equipment that is suitable for small sized lots of a varietyof products

Acquisition ofTowada Pioneer

Construction ofFukushima New
Factory

17Overview of Acquisition of Towada Pioneer
KAGA EMS TOWADA

Acquisition Format
Conversion to group company throughacquisition of Towada Pioneer shares fromPioneer on October 1, 2019.

Name After Acquisition
KAGA EMS TOWADA CO., LTD.

Address
Towada City, Aomori Prefecture

Business Content
Automotive electronic equipment,
installation of substrates in medicalequipment, assembly of finished Products© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Number ofEmployees

Acquisition Price

165 (full time staff)

Undisclosed18

Construction of New Fukushima Factory
Fukushima Factory

Name
KAGA MICRO SOLUTION CO., LTD.
Fukushima Factory

Address
Sukagawa City, Fukushima Prefecture

Scheduled Launch
October 2019

Business Content
Manufacture, repair, reuse, and recycling ofcommunications equipment, PCs, and PC
peripherals© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Number ofEmployees

Investment Amount50(full time staff)

Approx. JPY 1.2 bn(Incl. land acquisition,buildings, machinery andequipment)
19Construction of Thailand 2nd Factory
Amata Nakhon 2 nd Factory

Name
KAGA ELECTRONICS (THAILAND) CO., LTD.
Amata Nakhon 2nd Plant

Address
Amata Nakhon Industrial Estate, Chon Buri,
Thailand

Scheduled Launch
December 2019

Business Content
Installation of substrates for multifunction
devices, printers and automotive related units© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Number ofEmployees

Investment
Amount200(maximum of 350)

Approx. JPY 500 mil(Land and buildingsrented)
20

Own Development of Production Equipment(1)“HATTEN” Solder BathInternal Development Format
October 2018: Establishment of a joint
venture by a Chinese production equipment
manufacturer and group company Kaga
Technology (Suzhou) Electronics Co., Ltd.

Name of Joint Venture
SUZHOU HATTEN INTELLIGENTEQUIPMENT CO., LTD

Address
Suzhou City, Jiangsu Province, China

Business ContentDevelopment, manufacture, and externalsale of production equipment for substrateinstallation© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Number ofEmployees

Investment
Amount50Approx. JPY 100 mil21

Own Development of Production Equipment(2)"HATTEN" Substrate Installation
Automation Equipment LineCompany Establishment Scheme
December 2019: Establishment of a jointventure by FAROAD*, a leading Chinese
manufacturer of substrate installationequipment, and group company Kaga
Technology (Suzhou) Electronics Co., Ltd.

Name of Joint Venture
蘇州路遠加賀実装技術開発有限公司

Address
Suzhou City, Jiangsu Province, China

Business Content
Development, manufacture, and external saleof substrate installation equipment sets
(operation to commence in December 2019)

Objectives of the Joint Venture※Official company name: 深圳市路遠智能装備有限公司© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

・In-house development of optimal"automation equipment" for "small lot
production of many products"
・Realization of not only a significant reduction
in initial introduction costs, but also highquality and low-cost operation

22Positioning of “Medium Term Management Plan 2021”
OrganicGrowth
Aim to become a competitive “World class+company”
Further M&A
Challenges
Towards the realization of“Japan’s No. 1 corporate group inthe industry”
Kaga
ElectronicGroup+FujitsuElectronics

Increased
Sales

JPY500 billion

Expansion of
trading company business

Increased
ProfitRatio

JPY1 trillion

Furtherexpansion ofthe EMS
business
Enhancementand expansion ofoverseasbusinesswill lead to
growth of the EMS business
Quantitative
expansion of trading
company business

Qualitative improvement
through EMS businessMedium Term Management Plan 2021

①Enhancement of Revenue Base ②Stabilization ofManagement Base ③Creation of New Business© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

(Net Sales)

Medium toLong TermVision23

(Ref) Comparison：Global Production System of Major Japanese EMS
Players （including partner factory)

Japan
China
Shenzhen
DongguanSuzhouHubei
Shanghai
Guangzhou
ASEAN/Asia
ThailandIndonesia
Malaysia
Vietnam
India
Philippines
Korea
America
MexicoEurope
Czech
TurkeySlovakia
HungaryKAGACompany ACompany B

Company C

10 countries
19 bases●×58 countries
16bases●

５countries
11bases●×6３countries
3 bases

●
●
●
●×2
●

●×2

●

●×2
●×2

●

●
●
●×2
●

●×2●
●
●
●

●
●
●

●
●×2
●

●
●

●

●
●

※Source: Our own survey based on the websites of each company

24

（Ref）Comparison ：Recent Performance and Stock Price Valuation
Gross Profit Margin
13.7

ROE

13.8

12.1

14. 0

KAGA

12. 0

10. 0

8.0

9.5

9.7

6.3

5.8

5.8

5.2

8.5

A

7.5C

5.4

2.0

B

FY2018/3FY2019/3

8.0

5.6A

10.9

KAGA

5.6CB

4.0

3.8
FY2017/3

52.4
46.8

38. 0

29.6

FY2019/3

PBR

54.8

53. 0

48. 0

FY2018/3

Stock Price Valuation as of 27/Sep 2019
（％）

43.9
33.9

40.5
39.4

35.8
33.2

28. 0

23. 0

8.7

8.0

2.0

Equity ratio

33. 0

9.5

10. 0

11.4

0.0

FY2017/3

43. 0

13.1

10.9

6.0

0.0

58. 0

13.3

14. 0

12. 0

6.0

4.0

（％）

（％）

27.4

27.6

FY2017/3

FY2018/3AACCKAGAKAGABB

18. 0© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

PER

FY2019/3
Source: Yahoo Finance25

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＜ｍemo＞

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“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

■ 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.