Ushio Inc. Financial Results Briefing for the Second Quarter Year Ended March 31,
2024
Major Questions and Answers
Date/Time:

November 6, 2023 / 17:30-18:20

Method:OnlinePresenter:

Takabumi Asahi,Director, Managing Executive Officer, CFO,
General Manager of Corporate Headquarters

Note: The "Major Questions and Answers" is provided for reference purposes for those who did
not attend the financial results briefing. Please note that the information contained herein is aconcise summary at the Company's discretion. Please also note that the forward-looking
statements, including earnings forecasts, contained in this document are based on information
currently available to the Company and on certain assumptions deemed reasonable by theCompany, and actual results may differ materially due to various factors.
◆ Questioner: Mr. Toru Sugiura, Daiwa Securities Co. Ltd.
Q: Regarding the Industrial Processes business, sales from Q1 to Q2 are increasing, but
the profit margin has been declining. I would like to confirm this point. In addition, sales
plan for the current fiscal year has been lowered by about JPY6.5 billion, including theadjustments between segment. I think that large field stepper for cutting-edge IC
package substrates, direct imaging lithography equipment, and EUV are the three major
factors of that. Let me confirm how much each affects.
A: Regarding the decline in profit margin from Q1 to Q2, the main reason is that there weremore unprofitable sales, not in the UV equipment but in the equipment for LCD panels. Other
than that, due to the postponement of investment caused by the low-capacity utilization of EUVand UV equipment, some service parts inventories are in a trend toward longer inventoryperiods, resulting in a certain amount of provisions to be recorded on an accounting basis. Inaddition, temporary increase in service parts costs occurred for some of the EUV models.
The major factor of the revision of sales plan lowering by JPY6.5 billion is sales related to theUV equipment, especially DI lithography equipment. The impact of sales related to EUV is small.
The factor after the DI lithography equipment is large field stepper for cutting-edge IC package
substrates.
Q: I would like to ask you to follow up on the EUV. In your explanation, you mentionedthat you have made progress in acquiring new customers. I would like to know what
progress has been made in the past three months, or maybe even six months, to theextent possible. Also, if possible, could you tell us how much of your company's
inventory includes this EUV-related item?

A: I cannot tell you specifically what kind of progress we have made because of our relationshipwith the customer, but we are in the process of developing new business opportunities,
including exchanges of opinions and, of course, discussions about various technical matters,specifications, and so on. I cannot say more than this.

Questioner: Mr. Masahiko Ishino, Tokai Tokyo Research Institute Co., Ltd.

Q: On page 14 of the financial presentation, the industrial processes and visual imaging
segments have a profit margin of -JPY2.0 billion and +JPY2.5 billion, respectively. Could
you explain the extent to which each business segment fell short or exceeded in H1 ofthe fiscal year?
A: The result of the industrial processes business for H1 was as expected. However, some ofsales of UV equipment expected in H2 will be postponed into the next fiscal year, resulting in
the decrease in sales forecast. In the visual imaging business, a portion of the sales is higher in
H1 and this had an impact on the overall plan. The operating profit was actually slightly better
than we had expected. Accordingly, the result and expectation for the visual imaging businessis higher for H1 and H2 of the current fiscal year.
Q: Is it about JPY1.0 billion more than initial plan in H1 of the year?
A: About a half of the changes in the plan of visual imaging business is based on the result for
H1.
Q: I would appreciate it if you could give me some indication of what is happening in
the area of semiconductor-related IC packaging substrates, especially in direct imaging
lithography equipment, whose acceptance inspection for this fiscal year will be delayed
and may be delayed even in next fiscal year. How the situation might improve?
A: We expect to see a great impact on the semiconductor investment in the market as a whole,and I think a big part of this depends on when the investment in the back-end process will beresumed for UV equipment, including direct imaging lithography equipment. Accordingly, once
market conditions improve and a certain amount of time passes, investment will gradually
return. We expect that investment will again increase when the market for semiconductors itself
recovers and the production of products that require cutting-edge IC packages grows.
Q: I'm sorry if this is an out-of-the-box question, but I understand that some othercompanies are receiving very strong inquiries about back-end exposure equipment. I
have a feeling that there is a similar kind of demand for your large field stepper anddirect imaging lithography equipment, but you are not under such situation. What I'm
not sure is how I should recognize the difference from the situations in other companies,
since the number of competitors is increasing, so please let me know.
A: This is just our point of view, but in terms of the large field stepper, when demand for large
IC package substrates used in data centers starts to increase, investment increases and so does
the demand for our UV equipment. However, I have heard that the demand recovering is notfor such things but for others. When the demand for those used in data centers and PCs will
recover is important for our products.

Q: Some customers are saying that the demand for PCs will increase from 270 million
to 300 million units in the next two years, because 100 million units for generation AIs
will be shipped. They say that, as the area of so-called interposer is increasing in relation
to generation AI, the demand for back-end lithography equipment is also increasing.
Based on what you have said, is it correct to say that the impact of the drop in demandfor datacenters and PCs is significant, and that of the increase in demand for generation
AIs is not so significant for your customers?
A: In terms of our customers, we recognize that the current situation has some of points you
have just mentioned.
Q: So, each customer has a slightly different nuance, and the customers who have alittle bit postponed demand are more likely to be your customers. Is that correct?
A: That is what I understand.

◆ Questioner: Mr. Tetsuya Wadaki, Mitsubishi UFJ Morgan Stanley Securities
Q: Regarding expected customers for EUV, there are so many different inspection lightsource manufacturers, including European manufacturers. Customers for inspection
light sources are not limited to inspection equipment manufacturers but include
material manufacturers and many others. Is your inspection light source also
marketable not only for inspection, but also for evaluation and development purposes?
A: We are developing it to be widely used for inspection purpose in the future, so not limited
for mask inspection.
Q: Is it safe to assume that the response you are getting from customers about theinspection light source is not only the use for mask inspection?
A: I cannot tell you at this moment, but I would say that we are strong in applications, and webelieve that we can build technological superiority in the area of those, so we think that ourtarget customers can be those related to the area .
Q: I understand that you have currently more customers similar to the target that had
ever been than those targeting for the future.
Second question, regarding the large field stepper for cutting-edge IC package
substrates, I understand that although it was not your company's fault, but there wasa mass cancellation from a certain package company, and caused many troubles invarious companies. How big was the sales impact of this one specific company to yourdownward revision in your plan?
A: I cannot say much about this because it concerns our customers. We believe that thestructure is such that the large customer is not doing so well, and the impact of this is spreading
to others. In terms of the monetary impact, for example, in this fiscal year, if you look at its
impact on large field stepper for cutting-edge IC package substrates, it is not enough to accountfor half of our downward revision related to the large field stepper. The downward revision ofJPY5.0 billion in the sales plan for the Industrial Processes business includes the expected impact
from the sales of the DI lithography equipment, so if we look at large field stepper for cuttingedge IC package substrates alone, the amount affected the downward revision is much less.
Q: Looking to the future, it may or may not be realized yet, but I hear that your company
has been working hard on, for example, glass and panel level packages.
A: In this area of the package, we have a roadmap in place, and we are looking ahead to see
how advanced technology will evolve, and we are basically moving forward with the goal of
becoming number one in this area. We are developing technologies that will enable us toestablish a good position in these areas.

Q: You don't seem to be at the stage yet where it will blossom as a business?
A: I think some of it will come out gradually, and how and when we can respond to it will be
an important part of the process. For example, I don't think that it will have an impact on ourperformance in one year or two years.

◆ Questioner: Mr. Masahiro Nakanomyo, Jefferies Japan Limited

Q: Regarding digital cinema projector, you have not changed your full-year forecast of
90% increase in unit volume over the previous year, but what were the results for H1of the year?
A: If we look at the progress of digital cinema projector, H1 progress was quite good. As I
mentioned earlier, it is the field of digital cinema that is driving the upward revision in the visualimaging business. The general imaging market is getting better, but the situation is generallyin line with our plan.
Q: Was there a large deal in Q2 general imaging market?
A: Yes, that's right. We had a large order in Q2, which boosted this particular quarter, but on
the other hand, Q1 was not so good.
Q: Did you originally expect these large deals on an annual basis?
A: The success rate of projects is not always 100%, so we determine the estimation considering
the success rate. I would say that it was a part of the initial plan.
Q: Can you give us your estimate of the annual breakdown of JPY90.0 billion of in thevisual imaging business?
A: I cannot tell you the amount, but the light source itself is not that much. Digital cinema
projectors and projectors for general imaging are the two largest portion.
Q: How much would the sales related to imaging equipment increase from H1 to H2 ofthe year? I think the sales in the visual imaging business as a whole will increase by
JPY12.0 billion, but I wonder whether that is mostly from imaging equipment, such as
about JPY10.0 billion.
A: Sales related to imaging equipment in H2 of the year will be 10% to 15% stronger thanthose in H1.
Q: I understand. I asked you a lot, because I think you said at the last briefing that
China probably accounts for about 40% of the sales total related to the cinema. Was
there anything like a macro influence from China H1 of the year? How concerned should
we be there in H2 of the year?
A: We have not included the economic slowdown in China in our forecast at this time. Although
it is a cause for concern, but our current business negotiations have not yet seen any direct
impact related to Chinese economy.
Q: To some extent, sales in H2 of the year are already confirmed in terms of the orders?
A: We have not yet received all orders, but we are in a situation where some businessnegotiations are going be finalized.

Q: In the revised plan for the Industrial Processes business, how much do you plan toincrease or decrease for UV equipment?
A: Originally, sales are biased toward H2 of the year, so we are looking at a 20-30% increasein H2.
Q: Is this like that for both DI lithography equipment and large field stepper?
A: The sales of the large field stepper will be a bigger stretch and DI lithography equipment will
be flat as H1 for H2.

◆ Questioner: Mr. Yoshitsugu Yamamoto, Mizuho Securities Co., Ltd.
Q: Regarding the EUV light source, are you developing a Xenon-based light source with
output high enough to be used for APMI? I have the impression that you have beenworking on tin-based EUV light source for APMI. You have Xenon technology itself, so I
am wondering if you can comment on whether you are working on increasing the output
power of the light source.
A: I cannot talk about that matter because it is a confidential trade secret.
Q: The bar graphs of the large field stepper on the top of page 18 of financial
presentation shows an increase in the next fiscal year and the year after, which arehigher than in FY2023. I believe that two Japanese companies, as well as Europeancompanies, have stopped their investment. Am I correct in understanding that you are
currently reviewing the situation to see if there will really be an increase?
A: Yes, as for the impact of the semiconductor market, we are in the process of reviewing thisissue while checking market information.
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