Ushio Report
Year ended March 31, 2023

For inquiries regarding this report, please contact
IR Section, Corporate Communication Department
1-6-5 Marunouchi, Chiyoda-ku, Tokyo 100-8150
Tel: +81-3-5657-1007
Mail: ir@ushio.co.jp

Cover Story

What is light?
Ever since its foundation, Ushio has continued to search for the answer.
Because we know that light has the power to change the future.
A future where development is sustainable and safe for our planet.
A high-tech future like we’ve only seen in movies.
A future where lives we couldn’t have saved, can be saved.
With light, the future can go beyond our imagination.
So today, we continue to believe and challenge theendless possibilities of light.

Ushio Report 2023

1

Contents
Ushio Report 2023

4

About Ushio

Section 2

62 	Developing Our Diverse Talent to Get Closer to Our Vision

Section 5

6

Ushio at a Glance

Advancing to a New Stage64 	Creating Working Environments Where It Is Easy toEnhancing Our Management Base

8

Top Message

36 	Long-Term Vision40 	Medium-Term Management Plan

Section 1

Our Value Creation Story
16

Ushio’s Culture

20

The DNA of Ushio—Guiding Us into the Future22 	Value Creation through Implementation of Our
Management Philosophy (History)
24

Our Long-Cultivated Strengths

26

Ushio’s Constant Pursuit of the Potential of Light

28

Ushio’s Value Creation Process30 	Five Management Focuses—Important Issues for
ESG Management46 	CFO Message

Section 3

Connecting Social Value to Economic
Value52 	Creating Businesses with Greater Social Value
54 	Ushio’s Potential for Creating Businesses with GreaterSocial Value

Produce Results

8866 	Sustainably Reducing Environmental Impact

Messages from Outside Directors

92 	Corporate Governance70 	Building a Robust Management Base98 	Directors

Section 4

Data Section

Creating New Markets with “Light”

104 	Financial and Non-Financial Highlights

74 	Industrial Processes

106 	Financial Data

78 	Visual Imaging

108 	Non-Financial Data

82 	Life Sciences

109 	External Evaluation

84 	Photonics Solutions

110 	Stock Information
111 	Corporate Data

56 	R&D and IP Strategies to Create Businesses with GreaterSocial Value
60 	Examples of Business Creation with Greater Social Value

32 	List of Five Management Focuses, Key Challenges,
and Goals

TimelinessComprehensivenessPosition of “Ushio Report” within All of Ushio’s Disclosed Materials
Financial Information

Non-Financial Information
Ushio Report

Medium-Term Management Plan
Presentation Materials
Financial Presentation

Corporate Governance Report*

Financial Results / Annual Securities Report, etc.*
Investor Relations Information (Website)

Sustainability Information (Website)* Materials required for disclosure under regulations such as the Companies
Act and the Financial Instruments and Exchange Act

2

Editorial Policy
The Ushio Report describes the unique business development
model of Ushio that has grown by discovering the functions of lightand giving them form. Presented as an engaging story, the reportsummarizes the information needed for understanding thepossibilities of improving the long-term and sustainable corporate
value of the Company. We hope that this report will enable all of
our many stakeholders to understand the appeal of Ushio.
In this report, all of the information presented refers to thefiscal year ended March 31, 2023, when no other time period is
specifically mentioned. In addition, when the name “Ushio” appears
in the report, it refers to the entire Ushio Group, whereas the name
“Ushio Inc.” refers to the non-consolidated company Ushio Inc.

Ushio Report 2023

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Industrial Processes

Visual Imaging

Life Sciences

Comfort and Convenience

Excitement and Sharing

Safety and Reassurance

Ushio’s technologies are being leveraged in such areas

Ushio’s light technologies are actively being put to use in

Ushio is promoting technological innovation through theas the manufacturing process of semiconductors and flat panel

various settings in the entertainment industry, including digitalutilization and application of light in such fields as environmental

displays (FPDs). To create products that meet global needs, wecinema, virtual reality, projection mapping at amusement parks,

hygiene, medical care, agriculture, security, climate change

will use light to support technological innovation in manufactur-and stage lighting and production. To realize more fulfilling andcountermeasures, and space exploration. By doing so, we will

ing with the aim of realizing more comfortable and convenientabundant lifestyles for people, we will continue to leverage

strive to realize a sustainable society that offers safety andlifestyles for people.

these technologies to deliver extraordinary experiences thatpeace of mind.

inspire audiences and communicate to them the feelings ofartists and creators.

About Ushio

Since its founding, Ushio has been leveraging light as
not only illumination but also as energy in order tocreate new markets for light. Today, Ushio is drawing
on the potential of light to contribute to society in thethree business fields of Industrial Processes, Visual
Imaging, and Life Sciences.

4

Ushio Report 2023

5

Ushio at a Glance
Ushio by the Numbers

Global Business Foundation
Light Source Business

Imaging Equipment Business

Sales Composition

35.3%¥61.8 billion

29.3%¥51.3 billion

by Segment

Optical Equipment Business

Other Businesses

33.0%¥57.7 billion

2.4%¥4.0 billion

FY2022 (Consolidated)
Net Sales

175.0 billion¥15.8 billion
5,357

¥

Operating
IncomeNumber of
Employees(After elimination ofinternal transactions)Three Business Fields
Ushio’s three business segments of Industrial Processes, Visual Imaging, and Life Sciences cover everything from the semiconductor manufacturing process to movie theaters, medicine and environmental health, all over the world. In these three business segments, we will continue topursue the new potential of light in order to support human well-being and societal growth.
Visual Imaging

Semiconductors, FPD, precision equipment,
electronic components, photochemistry, printing,industrial equipment etc.

Projectors, projector light sources, general andcommercial lighting, landscape lighting andproduction, stage and studio lighting, etc.

Group Companies

Ushio Inc.
Ushio Lighting, Inc.
XEBEX Inc.
ADTEC Engineering Co., Ltd.
5 other companies

Europe* Segment before change

Industrial Processes

In the same manner as light, our business fields transcend national borders and span across the world. Our mission is to provide the necessary
type of light source to each country and region at the necessary times. Our global business foundation enables us to fulfill this mission.

Japan

Asia
Ushio Hong Kong Ltd.
Ushio Taiwan, Inc.
Ushio Philippines, Inc.
Ushio (Suzhou) Co., Ltd.
Ushio Asia Pacific Pte. Ltd.

Healthcare, natural environment, agriculture,marine and fishery industry, security, energy,
space development etc.

Japan

Ushio America, Inc.
Christie Digital Systems USA, Inc.
Christie Digital Systems Canada Inc.
12 other companies

Ushio Europe B.V.
Ushio Germany GmbH7 other companies

Life Sciences

North America

North America

Asia

Ushio Korea, Inc.
Ushio Shanghai, Inc.
Ushio Shenzhen, Inc.
14 other companies

Europe21.7% 25.9% 44.7% 6.9%

OthersSales Ratio

0.8%

by Region

Market Share of Major Products
UV Lamps for Semiconductor Lithography

Share:

75%

Our UV lamps for LCD lithography are used in
the exposure process for various LCD displays,
including those of televisions, laptops, andsmartphones. Through their large size andpower, these lamps help increase the size ofpanels and enhance their resolution.

Share:

70%

Large Field Steppers for Cutting-Edge IC Package Substrates*

6

Our photo-alignment equipment is used toarrange the liquid crystal molecules within LCD
panels. The image quality of LCD panels truly
depends on the extent to which the liquid crystal
molecules are arranged in an orderly fashion.
By arranging these molecules in such a fashion,
our photo-alignment equipment helps make LCD
displays more energy efficient, enhances theirresolution, and reduces their cost.

Share:

80%

Lamps for Cinema Projectors

UV Lamps for LCD Lithography

Equipped with ultra-high-pressure UV lamps, ourlarge field stepper for cutting-edge IC package
substrates is a tool used to create circuits suchas semiconductor package substrates andprinted circuit boards (PCBs). In addition tolamps, we develop all the main technologies
used in this equipment in-house, including
optical components, as well as with regards tomaterial handling, power sources, and software.

Excimer Irradiation Units for Cleaning Panels

Photo-Alignment Equipment

The exposure process is critical to enhancing
the performance of semiconductors andelectrical components that are installed in awide variety of products, from digital devices
such as PCs and smartphones, to household
appliances and automobiles. Our ultra-highpressure UV lamps play a major role in thisexposure process.

We develop and produce lamps used in cinema
projectors at movie theaters. On the set ofmovies, video is shot using lighting that issimilar to sunlight. As such, lighting that is
as similar to sunlight as possible is needed
to project images naturally. Our lamps are
sometimes referred to as “artificial suns” inreference to their ability to provide this lighting.

Share:

90%* Cutting-edge IC package
substrate market(stepper market)

Share:95%

UV Curing Equipment for Bonding LCD Panels

Share:

65%

Digital Cinema Projectors
Our digital cinema projectors are large-scale
projectors for movie theaters equipped withxenon short arc lamps and RGB lasers. We also
develop large-scale visual systems and virtual
reality systems that primarily make use of theseprojectors. These systems are used not only atmovie theaters but also at amusement parks
and for large-scale live events.

Lamps for Data Projectors

Our excimer irradiation units for cleaning panels
are tools that use UV rays to clean LCD panels
by removing the organic compounds that
become attached to them during the manufacturing process. These excimer irradiation units
are equipped with excimer lamps, which Ushio
was the first company in the world to develop.

We develop and produce lamps installed in data
projectors used at locations such as conferences,
live events, and schools. Based on superhigh-pressure UV lamps, these compact,
high-intensity, flickerfree lamps achieve highreliability and are used in a wide range ofapplications, from business to professional use.

Share:

20%

Halogen Lamps for OA Equipment

Our UV curing equipment for bonding LCD
panels enables the batch irradiation of UV rays
used in the curing of large-scale LCD panels.
Through the introduction of Ushio’s unique newtechnologies, this equipment provides significant benefits to the LCD manufacturing line, by
significantly reducing the time required for the
curing process—which previously took several
hours—to a period of only several minutes.

Share:

70%

Our halogen lamps for OA equipment are used
to affix toner to paper by utilizing heat to melt
pulverized toner. These lamps are used in suchdevices as printers and copy machines whendrawing text or images on paper.

Share:

80%

DI Lithography Equipment for IC Package Substrates*

Share:

35%

Direct imaging (DI) lithography equipment uses
laser light to create the wiring patterns required
for semiconductor package substrates andprinted circuit boards through direct exposure.
Leveraging proprietary technology, we haverealized a system balance with the quality,
speed, and stability that DI lithography equipment requires.

Share:

50%* IC package substrate market(DI lithography equipment
market)Ushio Report 2023

7

Top Message

Koji Naito

Top Message
Without losing focus, we will steadily cultivate growth in order tobecome a “light” solutions company.
ProfileKoji Naito
President and Chief Executive Officer

A Future in Line With Our Management Philosophy
It may seem like a minor detail, but I make a constant effort to avoid

The third item in our Management Philosophy is “Contribute to society

printing out documents. This is because I want to lead by example inthrough superior products and innovative research and development.”

terms of reducing both the risk of information leaks and our environ-A modern interpretation of this would be that promoting ESG manage-

mental impact. However, I made an exception for one particular piecement is inseparable from business growth. If each of us recognizes thatof paper, which hangs on my wall in an acrylic frame. That paper bears

the provision of social value subsequently leads to economic value, we

our Management Philosophy.

can shape the future of Ushio. This is reflected in “Creating Businesses

In fiscal 2021, the results of our first-ever engagement survey werewith Greater Social Value,” which is one of our Five Management

below the average of other companies in the Japanese manufacturing

Focuses. The second item under our Management Philosophy isindustry. Taking this on board, in fiscal 2022, I traveled to all of our“Deliver products and services that are competitive in the global market.”business sites to engage in direct dialogue. Deepening understanding

Pursuing this has enabled us to establish our current position as aof our Management Philosophy was a key point of focus. Ourleading niche company that can stand toe to toe with massive competi-Management Philosophy is rooted in the four basic principles createdtors by quickly taking on new challenges in the global market, and it isby Jiro Ushio, who passed away on June 13, 2023, a year after healso consistent with our future strategy of focusing on added value

established Ushio Inc. in 1964. While some minor adjustments haverather than scale. It could be said that the path we should follow tobeen made, their essential form carries on to this day. The first item insustainable development was laid down at the time of our founding.

our Management Philosophy is “Build both a prosperous Company andAt the same time, repeated dialogue with employees has also clari-prosperous employees.” To realize this, it is essential that our employ-fied the issues we currently face. Rather than “running away” fromees first understand how the Management Philosophy relates to them.

these issues, I intend to fulfill my responsibility to deepen understand-This is because all of our future-oriented management policies are ining of our Management Philosophy.

line with our Management Philosophy.

Becoming a “Light” Solutions Company

8

During my time in the International Business Division, around myreported to our subsidiary Ushio America, Inc. (UAI) that the problem

fifth year with the Company, there were repeated instances of prod-

was in transportation. Upon hearing this, the UAI President at theucts that were shipped to the United States being damaged during

time rebuked me. They said, “Remember, it’s the customer that pays

transportation. Given the products had passed quality testing, weyour wages, and it’s the manufacturer’s responsibility to makeUshio Report 2023

9

Top Message

Koji Naito

Cultivating Growth for the Future Underthe 2nd Medium-Term Management Planproducts that arrive safely.” I realized that I had lacked a customer-

choice of such customers, we must be highly aware of social issues

first approach and had been quick to shirk responsibility. Thatand contribute to the totality of our customers’ business processes,

moment was a catalyst for a change in my values regarding work.

in addition to providing high-quality products and high performance.

While many of our products have extremely high market shares,

However, such changes cannot be achieved overnight. In order toresting on our laurels in such a position quickly leads to losing cus-

ensure that our efforts are consistent over the long term, we must

Concerns about an economic slowdown have surfaced as a result

dividing our businesses in this way. However, we came to our con-tomers’ trust. On the other hand, if we are diligent in focusing on theset common targets and unite the entire Ushio Group as we moveof global monetary tightening aimed at curbing inflation. However,clusion based on the belief that it is important to present our current

forward together. These unified targets are our Vision 2030,

we will not lose our focus as we continue to advance measuresposition relative to Vision 2030 with transparency internally andbusinesses stable, we can also get an insight into the social value“Become a ’Light’ solutions company,” and our Mission, “Promote

aimed at achieving our unified targets. We will position the 2nd

externally, and to work to resolve issues. This can be seen as athat our customers are aiming to create in the future, enabling us to

the use of light as illumination and energy to support human well-

Medium-Term Management Plan (fiscal 2023 to 2025) as a stage

manifestation of confidence in these businesses.

connect that to our own long-term value creation. Today, our cus-

being and societal growth.” Using a backcasting approach, we haveof cultivating growth based on the solid foundation we establishedtomers are striving to address a diverse range of social issues indrawn up a road map leading to 2030, which will guide us as wethrough the 1st Medium-Term Management Plan. As we build afrom product-centric marketing to market-centric marketing, enhanceareas such as climate change countermeasures, food initiatives,

steadily close the gap between our Vision and where we are today.

structure to provide light solutions through active investment, we

our approach to go from simply selling products to both selling

will cultivate seeds of growth with the aim of reaping the fruits ofproducts and proposing solutions by adding processes and after-

our labor through the 3rd Medium-Term Management Plan (fiscal

sales services, and expand value generation, which had been limited

2026 to 2028).

to customer value, to encompass resolving social issues facing ourcustomer’s point of view and win their trust, not only can we keep

and healthy life expectancy extension. In order to continue being the

Solidifying the Foundation and Beyond
The 1st Medium-Term Management Plan (fiscal 2020 to 2022) was theparts. Nevertheless, we were able to achieve all required targets in thefirst step towards Vision 2030. With “Reattempt to solidify the founda-

final fiscal year. The most significant reason for this is that the newly-tion” as the core theme, it was positioned as a stage for improving ourestablished unifying organization at Head Office appropriately managed

profit structure. We aimed to improve our operating margin, which we

responses to changes in the operating environment from the perspective

set as the most important performance indicator, to 8% or more. Weof the entire Group. Needless to say, we could not have achieved thisapproached this plan with strong conviction to achieve our targets.

without the hard work of all Ushio Group employees, who refused to use

This is because we believe that we cannot inspire shareholders to get on

the challenging business environment as an excuse.

board by explaining our long-term vision alone, commitment to achieving
short- and medium-term targets is also essential.
For nearly 10 years, we made repeated downward revisions wheneverAs shown by our significant improvement in the operating margin
from 4.2% in fiscal 2019 to 9.1% in fiscal 2022, we significantly
improved our profit structure and our defensive strategies havethe business climate diverged from expectations, and a long-term

borne fruit. Furthermore, with regards to our unifying strategies, we

downward trend in profits followed. One major factor behind thisachieved our plan of establishing a foundation for governance andwas inefficiencies brought about by the independent Rempo* manage-

utilization of financial reserves, including through the introduction ofment style. Pursing sales growth through individual optimization andcorporate finance and enhancements of the management of Group-wide

carrying out growth investment led to increasing sales. However, ourconsolidated targets.

operating margin continued to decline. With this plan, we decided on a

However, some issues also remained. In the Imaging Equipment

basic policy of reducing inefficiencies and establishing a robust profit

Business, difficulty in procuring parts offset the impact of management

structure by advancing defensive strategies, proactive strategies andefficiency improvements, and the required targets were missed. The fact

unifying strategies in order to shift from this conventional “additivethat promising products and technologies such as EUV and Care222 didmanagement” style towards a solidarity-based Rempo management

not grow as expected was also a point to reflect on. We will remainstyle, or “multiplicative management” that focuses on realizing overall

conscious of these issues as we take our next steps.

optimization.

* Rempo means “mountain chain” in Japanese. In contrast to independent Rempo management in which each Group company autonomously pursues optimization of individual
performance, solidarity-based Rempo management is based on the idea of uniting all
Group companies as one “mountain chain,” aiming for a unified vision as an entire group.

During the period covered by the plan, we faced various restrictions inour business activities, including travel restrictions as part of measures

Based on these new business domains, our policy is to transition

In line with the expansion of investment, we have establishedcustomers. For example, power semiconductors are a key market

EBITDA as our most important performance indicator, aiming towithin Industrial Processes. In this field, combining the strengths

reach ¥30 billion in fiscal 2025. I am also aware of my responsibilityof the former Optical Equipment Business, which has knowledge

to shareholders to resolve the fact that our share price has contin-of customers’ business processes, and the former Light Source

ued to have a PBR below 1.0 over a long period of time. Accordingly,

Business, which has customers in the power semiconductor heart-with the 2 Medium-Term Management Plan, in addition to fully

lands of Europe and the United States, we can help alleviate con-embracing ESG management, we will work to enhance capital effi-

stant supply shortages by improving our customers’ productivity.

ndciency through effective use of funds, such as active investment andFurthermore, in Visual Imaging, we can provide one-stop solutions

share buybacks, with the aim of achieving ROE of at least 8% andto meet our customers’ needs, with our projectors, lighting solutions

PBR exceeding 1.0.

and maintenance services. Under Life Sciences, the business pur-P.46–49 CFO Message

We are also

pursuing a policy of strengthening our unifying strategy on a global

pose of Care222 is not simply to sell Care222-related products, butlevel. In order to ensure that individual strategies tailored to theto take on the societal challenge of creating a world without infec-

characteristics of each region are not impeded, we will place impor-tious diseases. We believe that putting together solutions that taketance on input from people in the regions concerned.

social issues as a starting point and proving their economic sound-With the 2nd Medium-Term Management Plan, we establishedness can lead to rapid widespread adoption.

Industrial Processes, Visual Imaging, and Life Sciences as market

With the changes to our business segments, we were able todomains to focus on, and have a policy of promoting transformation

integrate our previously disparate strengths into each new businesstoward becoming a “light” solutions company. We also wanted todomain. Going forward, we plan to rebuild our strengths correspond-communicate this strong volition internally and externally, and we

ing to each step on the road to providing light solutions. In R&D,

implemented structural reform under which the previously product-

being able to freely control light source wavelengths and energy

centric Light Source Business, Optical Equipment Business andenabled us to significantly enhance our “power to control light,” andImaging Equipment Business shifted to a market centric approach.

consequently optimize light performance. In terms of solution provi-

One exception is our business relating to solid-state light sources,

sion, we will combine optical technology, software, and peripheral

which it was decided would remain product centric under thetechnologies to enhance our “power to provide light-based solutions”

Photonics Solutions segment.

that resolve our customers’ issues. In terms of after-sales support,

Life Sciences and Photonics Solutions reported operating deficits
in fiscal 2022. It is true that there were also internal concerns about

we plan to strengthen our “power to retain light” in order to provide
light solutions in a sustainable, stable manner.

against COVID-19 and supply restrictions due to difficulty in procuring

Market-Centric Business Portfolio Reform

10With these changes to our business segments, our policy is to clarify the

portfolio management. Industrial Processes is a core business and ispositioning of our new business domains and promote appropriate

positioned as a stable foundation for earnings. While the semiconductor

Ushio Report 2023

11

Top Message

Koji Naito

Fully Embracing ESG Management
There is immeasurable diversity among people. Attempting to group

point to search for applicable technologies. We must also bolster

everyone into a uniform “ideal” image means people lose their indi-

our breadth of talent spanning diverse academic backgrounds andviduality, and the organization’s dynamism is also lost. In order toour pool of talent possessing both technical knowledge and man-build both a prosperous company and prosperous employees, eachagement literacy. I hope to see us realize true diversity by fostering

individual must consider the connection between fulfillment in theira culture and developing systems that enable diverse personnel

own lives, the work in front of them, and the resolution of social

around the world, regardless of gender or nationality, to consider

issues. To that end, it is essential to start by fostering a culture that

their own futures and demonstrate individuality in a manner thatembraces diversity.

transcends national borders. In this, we plan to focus on training

We have established a foundation for ESG management throughUshio Group employees rather than external recruitment. Of course,

the 1st Medium-Term Management Plan. With the 2nd Medium-Termthis will take time, which means that engagement is important. We

Management Plan, we have set non-financial KPI goals for fiscal

will bolster our efforts aimed at achieving our goal of improving our

2025 and will fully embrace ESG management that combines busi-

fiscal 2022 engagement score by 10 points by fiscal 2025. As partness growth with ESG efforts. In our human capital strategy, we willof this, we introduced an employee stock compensation system,emphasize diversity. In order to continue creating new value on astarting in fiscal 2023. By linking incentives for employees to shareglobal basis, we must grow our pool of talent that can understandprices and medium- to long-term performance, we hope to alignmarkets and society from a global perspective, then use that starting

the Company’s prosperity with fulfillment for our employees.

market is currently seeing a trend of deceleration, technological innova-

reorganize into various businesses in fiscal 2030. Rather than quantity,

tions such as DX and AI will continue advancing through to 2030, andwe aim to establish niche leading positions covering applications withdemand for electronic devices is expected to increase in the medium tohigh added value. We intend to leverage our strength in terms of thelong term. We plan to develop a solutions structure covering areas such

power to control light over diverse wavelengths to enter new markets“Expand profits, corporate responsibility, and competitivenessOur outside directors provide us with extremely frank input. We

as offering optical processes that contribute to reducing the environ-

into which lamps cannot expand while striving to differentiate ourselves.

through open and free-thinking business operations.” This is thealso received strong encouragement to improve capital efficiency

mental impact of manufacturing while continuing to ensure stable

Over the next three years, we plan to invest more than ¥40 billion in

Being a Company That Does the Right Thing

final sentence of our Management Philosophy. In line with thisthrough effective use of funds. While some feedback can be toughearnings through key products such as large field steppers for cutting-growth investment, including M&A, as we overhaul our portfolio andphilosophy, I want Ushio to be a company that does the right thing,

to hear, our outside directors possess more extensive management

edge IC package substrates, for which we boast a 90%* market share.

rebuild our strengths. Rather than M&A being an objective in itself, we

a company that its employees can be proud of. This could also be

experience than the internal directors, including myself, and also

In Visual Imaging, which is positioned as a rebuilding business, we plan

plan to position it as a means to enhance our resources, and we will

described as commitment to social justice. For example, strength-serve to represent our shareholders. As such, I always pay diligent

to move forward in areas such as the creation of a one-stop solutions

carefully formulate PMI plans in fields in which we have knowledge,

ening corporate governance is based on the belief that even uncom-

attention to what they say. If we listen to this type of input from ourplatform while also rebuilding the business structure by addressing riskthen carry out diligent investment that mitigates risks.

fortable matters should be disclosed with transparency.

shareholders and investors, our employees, and society at large,

factors for deteriorating business performance identified under the 1st

In terms of R&D, we will move forward with the development

Medium-Term Management Plan. We will position Life Sciences as anof next-generation technologies and products, and plan to invest

steady enhancements in areas such as making outside directors

incubation business from a long-term perspective. The growth of this¥46 billion, an increase of ¥14 billion from the 1st Medium-Termthe majority of the Board of Directors and increasing the number ofI firmly believe that the “light” solutions company that lies beyond

business is predicated on the fact that humanity has yet to find effective

Management Plan. Under the 1st Medium-Term Management Plan,

female directors. In fiscal 2023, we revised our directors’ remunera-

our transformation will also be the embodiment of social justice. In

ways to solve social issues in areas such as food initiatives andwe were able to sprout the seeds of businesses such as battery

tion to align with our strategy, including by deploying ESG bench-order to achieve this, I intend to keep moving forward together withhealthy life expectancy extension without sacrificing our current

manufacturing process development, methane gas decomposition

marks as part of the calculation criteria, increasing the stock

our employees, never losing focus or shirking away from challenges.

convenience and comfort. Non-contact, harmless light holds promise

and recycling, new pulse spectroscopy technology and Organs oncompensation ratio under the stock compensation system andin this regard. By making full use of our world-class light technology

Chip. With the 2nd Medium-Term Management Plan, integration

incorporating key performance indicators for reaching Medium-and global network, we can open up vast possibilities.

between the Marketing Division, Research and Development Division

Term Management Plan goals into the calculation criteria. In addi-

and Intellectual Property Division within the Business Creation

tion, we have appointed an outside director to chair the Board ofous candidates for commercialization, make preparations by securing

Division will accelerate new business creation.

Directors, and have strengthened the supervisory function of discus-

the required resources, and produce results looking to fiscal 2030. Under* Cutting-edge IC package substrate market (stepper market)

sion topics relating to core management.

Going forward, we intend to select promising businesses from numer-

Photonics Solutions, we plan to quickly establish competitiveness and

12

In terms of the corporate governance framework, we have madethen properly reflect that in our management, we will be able toachieve steady transformation.

President and Chief Executive Officer,
Ushio Inc.

Ushio Report 2023

13

Section 1

Our Value Creation Story

Since its founding, Ushio has contributed
to societal growth by fully leveraging the power of light.
Going forward into the future, Ushio will create even greater social value and achievesustainable enhancement of its corporate value as a “light” solutions company.

14Section 1

Ushio’s Value Creation Story

Ushio’s Culture

Message 3

At Ushio, we share a common desire as we move toward becoming a “light’’ solutions company.
Read on to learn about the activities that employees in various divisions are engaged in.

Message 1

Stable Production of High-quality Products

I work with halogen lamps on the prototype line. I examine whether
it is possible to manufacture products as designed by theEngineering Division and identify issues that may arise when shifting
to mass production. Our customers expect high quality, and it isimportant to consider the entire production process, including elements such as whether stable production without fluctuations inquality can be achieved. If something seems even slightly off with aprototype, we consult with designers from the Engineering Division.
Some of the points we put forward can seem overly meticulous, but
the fact that whatever we come up with will be mass produced
overseas is a constant reminder that we cannot afford to compromise on quality. When I learned that the products I am involved withhave a worldwide market share of over 60%, it inspired me to takeeven greater pride in my work. I am taking on the challenge of collaborating with various departments within the Company in order toachieve evolutions that can further improve precision and our manufacturing processes. (Junko Hirayama)

Message 2

Working to Bring Customers Reliable Products

I am involved in inspection work relating to products used in the
Industrial Processes business. Inspection is the final confirmation
process before products are shipped, and we are dedicated to carrying out thorough checks to ensure that faulty products cannot makeit onto customer shipments. In order to carry out more accurate
inspections, it is important to understand the manufacturing process. I try to take the initiative to go and see the actual productionlines. Seeing where various products are made gives me awarenessthat I can make use of in my own work, and I strive to reflect this inareas such as our procedure manuals as we make daily improvements that enable more accurate, more consistent testing.
Factories as a whole are becoming increasingly automated, butthere are some processes that only humans can do, and manufacturing is becoming increasingly multi-skill overall. Through lively
discussions between team members, I hope we can provide more
opportunities for everyone to improve their existing skills and learn
new ones. (Emiko Iwakiri)

Resolving Social Issues as a TeamI work on promotion and branding in the Life Sciences market, which includes
Care222 technology for disinfection and the UV purification technology Clean172.
I am driven to help create a society in which people have safety and peace of mind.
When I joined Ushio Inc., I was initially involved in manufacturing before
taking on the challenge of new jobs in the indirect and sales divisions. The
approach to work in manufacturing and sales is vastly different, so I look totake inspiration from various areas to produce even better output every day. We
exchange information and opinions not only within the sales division, but alsowith people in other divisions, including the technology & engineering division.
Our team works to enhance their sensitivity to constant changes in the environment, including in terms of what customers are looking for and what societyneeds, as we aim to resolve social issues as a “light” solutions company. I feelthat this is one of the great things about Ushio.
I am also involved in a diversity and inclusion project, and hope to help create
an environment of mutual respect and understanding in which everyone canfeel invigorated at work.
ProfileKyoko Saka
Section 2, Sales Department 2, HLS GBU, Life Science Division,
Business Management Headquarters,
Ushio Inc.

Message 4

Delivering Excitement and Joy Around the WorldI spent ten years working in sales promotion relating to xenon short arc lamps
for cinema projectors. I am currently assigned to Ushio Philippines, Inc., where I
provide support for production transfer in addition to my previous duties. Sales
trends in the cinema industry have changed significantly both in scope andspeed as a result of COVID-19. Faced with these circumstances, Group companies and factories have collaborated to collect and share customer information
related to lamp demand and reflected this in production plans. As a result,
we have built a foundation that is even more robust to change than before.
Information sharing between Group companies is essential in order to achieve
stable global supplies, and I feel the importance of that communication everyday. In meetings between Japan and the Philippines, the language barrier
makes it difficult to quickly and accurately communicate intentions and ideas
when discussing production plans and delivery dates, and I make a conscious
effort to increase exchanges outside of these meetings in order to further
enhance communication. (Junko Nagayama)

16

ProfileProfileJunko Hirayama

Emiko Iwakiri

Section 2, Manufacturing Department 2,
Manufacturing Division, Production Division,
Business Management Headquarters,
Ushio Inc.

Section 1, Manufacturing Department 3,
Manufacturing Division, Production Division,
Business Management Headquarters,
Ushio Inc.

ProfileProfileGlady Ramirez

Junko Nagayama

Production Support
Department,
Ushio Philippines, Inc.

Sales Promotion
Division,
Ushio Philippines, Inc.

Ushio’s value and raison d’etre are epitomized by continuing to produce xenon
short arc lamps with stable performance in a timely manner as long as ourcustomers require them. By giving customers the products they need when
they need them, in addition to supporting the stable operation of movie theaters, we can help deliver excitement and joy to people who enjoy movies
around the world. (Glady Ramirez)

Ushio Report 2023

17

Section 1

Ushio’s Value Creation Story

Ushio’s Culture

DialogueWe contribute to the resolution ofissues by looking at society
from customers' perspectives.

Profile(Left)

Keiko Kato
Analysis Group, Fundamental Technology Department,
Research and Development Division, Business Creation Division,
Corporate Headquarters, Ushio Inc.

(Right)Takuma Yokoyama
Optical Measurement System Group, New Technology Development,
Research and Development Division, Business Creation Division,
Corporate Headquarters, Ushio Inc.

Takuma Yokoyama (TY) After I joined Ushio, I was in charge ofdeveloping the initial EUV light sources. My experience after that
includes work overseas, and I currently lead a team developing a
new type of pulse spectroscopy technology. Ushio offers many
opportunities to gain a wide variety of experiences.
Keiko Kato (KK) That’s true. For my part, I have experience inareas such as sales administration and working as an assistant inlamp development, and I am now involved in analysis work. I havebeen able to take maternity and childcare leave while still amassing
a wide range of experiences in various departments.
TY It seems to me that going from working as an assistant toworking in analysis would be a big change, is that what you found?
KK That’s right. When I was an assistant, I had never written a18report before and had no experience of setting up meetings myself,then carrying out work based on what was said during those discussions. However, I was eager to take on difficult challenges.
Together with the help of those around me, that willingness enabled
me to expand the scope of my work.
TY As a team leader, I work in a coordinating role. The teamcomprises people with various backgrounds, and I look to make themost of each team member’s experiences to support them as webuild an even better organization. In addition to internal relationships, our relationships with business partners are also important.
Given the interests involved, it is necessary to strike a balance
between emphasizing what our technology can accomplish andunderstanding what our customers truly need.

KK I don’t have direct contact with customers, but it seems to me
that the quality of the information we share with divisions thatrequest analysis from us is improving year by year. We don’t simply
report the results of analysis, we provide detailed explanations of
causal relationships, which may help people requesting analysis
from us to think from the user’s perspective and consider ways toresolve issues for their customers.
TY That’s right, seeing things from the customer’s perspective iscritical when considering the reasons for the issues they’re facing.
Having that attitude across all departments at Ushio is more important than ever.
KK Mr. Yokoyama, in your work, it seems to me you don’t justmake products based on customer requests. You also need toactively seek out needs based on resolving social issues, isthat correct?
TY That’s right. We are constantly looking for ways to apply ourbasic technologies. In order to envisage and create devices thathave never been seen before, it is essential for us to be proactivewith customers. Avoiding passivity in that way seems to be similar
to your work, Ms. Kato. Would you agree with that?
KK Yes, I would. I also strive to go beyond simply conveying what
is happening right in front of my eyes. Rather, I strive to understandthe essence of the issue concerned when I talk to people requesting analysis, and to suggest alternative methods when appropriate.
TY When I have an issue and approach someone like you whoworks in analysis, it’s really helpful when they can make suggestions about approaches and elements for consideration that I
would never have thought of. Making the most of that advice andviewing technologies and phenomena from multiple perspectives
makes it easier to come up with ideas to propose to customers.
KK It’s important to be able to put forward a wide range of proposals. I see Ushio’s mission as using light to solve customers’issues and create social value. Have you ever felt that you havehelped resolve a social issue?
TY I worked on one project under the theme of issues relating tosafety and peace of mind for people. We investigated the underlying causes and found that the existing processes did not meet thestandards required to prevent issues from occurring in the firstplace. We are developing equipment that uses the power of light toresolve issues that have arisen in the past through new approaches.
This is an example of the success of a problem-based approach, inwhich we started investigating the causes of various social issues,
then looked for ways to use light to address them.
KK I hope that by providing support for analyzing the causes ofissues and phenomena, I can contribute the future of society.
TY The desire to have a positive impact on society is great sourceof motivation at work. In order to create products that have neverexisted before and set the standard for the wider world, we need tobreak out of our shell and not be confined to a mold. Ushio offers
an environment where we can take on new challenges, and I want
to do that with conviction.
KK That’s true, we have a culture of supporting people from allwalks of life, and we don’t discourage them from trying new things.
We’re able to take on new challenges in various areas.
TY Even if new ideas don’t always come to fruition, taking onchallenges can be rewarding. Above all, it makes work enjoyable.
KK Going forward, I hope we can continue to unite the strengthsof Ushio’s various divisions and take on the challenge of having a
positive impact on society as a “light” solutions company.

Ushio Report 2023

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Section 1

Ushio’s Value Creation Story

The DNA of Ushio—Guiding Us into the Future

Since its founding, Ushio has believed in the potential of “light.” Guided by this belief, Ushio
has contributed to the resolution of social issues and to technological innovation acrossthe globe by utilizing light as a means to provide not only illumination but also energy.

Four Basic Principles
at the Time of Our Founding

1964
Ushio Inc. was established in 1964. In the following year, Ushio
established four basic principles based on the desire to create
an indispensable company for all by drawing on the wisdom of
employees in order to grow. After their establishment, these four
principles continued to be passed down as the guideposts determining the direction in which the Company should head. With theaddition of certain wording to illustrate Ushio’s corporate social
responsibility, these four basic principles were enshrined in the
Ushio Group Management Philosophy, which serves as the foundation for all of Ushio’s corporate activities.

1
2

Deliver products and services that arecompetitive in the global market.

3

Contribute to society through superior
products and innovative research anddevelopment.

4

Show the world the true value of a
medium-sized enterprise and, in doingso, secure stable profits.

Founder
Jiro Ushio

Build both a prosperous Company andprosperous employees.

Culture and Strengths That Have Guided Us Since Our Founding
Leading Niche Position in Global Markets
In accordance with our basic policy, we began to build a business foundation in global markets directly after our establishment, upon which webuilt a global network. With a particular focus on specialized light sources, we fortified our brand power and carved out a unique position as aleading niche company that can compete on equal ground with the world’s best-known companies. We also placed our focus on markets inwhich we could draw on the technological strengths of light based on an awareness of ourselves as a “global medium-sized enterprise” thatemphasizes uniqueness over business scale. By doing so, we provided the world with numerous one-of-a-kind products with high added value.

Decision-Making Criteria That Emphasize Social Necessity More than Profitability
Facing the impact of the rapid decline in overall demand that directly followed the 1973 oil crisis, we were forced to respond in ways such as
narrowing the types of products we offered. Meanwhile, we prioritized our responsibility of supply to our customers over Company sales by
providing customers with replacement products made by other companies. In this way, we adopted social necessity more so than profitability
as the basis of our decision-making. This approach has underpinned the Ushio brand and served as the foundation of our sustainability initiatives. Our Management Focus of “Creating businesses with greater social value” represents the natural extension of this decision-making
approach.

Conviction to Build Both a Prosperous Company and Prosperous Employees
Soon after our founding, we began to pursue various initiatives to build both a prosperous company and prosperous employees, including
formulating long-term plans that adopted polices to raise employee salaries and increase their number of holidays. This management approachof valuing employees remains at the core of the Company to this day and has led to the formulation of two of the Five Management Focusesthat pertain to human capital.

20

Present
The corporate activities that we have consistently promoted in accordance with the four basic principles and centered on “light” havehelped us form our corporate culture and accumulate various
strengths. These corporate activities are also embedded in our current philosophical framework as DNA that we must continue to passon, while adding the perspective of “what needs to change” in orderto realize sustainable corporate value enhancement into the future.

Philosophical Framework

Our Promise

Our Vision“Applying Light to Life” is our promise to our customers, to ourcommunity, and to ourselves. To fulfill this promise, it is essential
for each Ushio Group employee to believe in the possibilities oflight, dream about the future, and live each day with excitement. We
believe that our passion to pursue our dreams is the power that will
enable us to create a future that goes beyond our imagination.
Through the cycle of the Ushio Value Model, we will deliver innovation and fulfill our promise, working together with partners thatshare the same dream.

Our Promise

The Light
Innovation Company

Ushio Value Model

Our Value

Our Mindset

Ushio Group Management Philosophy
10 Action Guidelines as a Member of Society

Our Vision
The Light Innovation Company
We hope to resolve problems faced by our partners and society through light innovation to fulfill our promise of “Applying Light to Life.” As light
professionals, we will support human well-being and societal growth by creating new light markets through further expansion of the functionality and application of light, including ultraviolet rays, visible light, infrared rays,
Sustainability Oriented
Technological Leadershipand the surrounding wavelength range.
Identify and explore ways to
Explore and develop phenomena induced
solve social issues with light

Our Value
Ushio Value Model
In order to resolve social issues (Sustainability Oriented), Ushio takes fundamental elements of cutting-edge light technology developed through R&D(Technological Leadership) and turns them into reproducible technology, creating value for society and its customers (Business Development), while alsooffering proposals to society with our partner companies (Collaborative Partnership).
These are our values.

by light and lead technological progress

Business Development
Develop into reproducible
technology and create value

Collaborative Partnership
Offer proposals to society incollaboration with our partners

Ushio GroupOur Mindset
Ushio Group Management Philosophy
The Ushio Group Management Philosophy represents the foundation for all of our activities as acompany.
We established four basic principles in 1965, the year after our founding, based on the desire tocreate an indispensable company for all by drawing on the wisdom of employees to grow. Our current
Management Philosophy centers on these four basic policies and has had certain wording added to itthat illustrates Ushio’s corporate social responsibility.
Ushio Report 2023

21

00

Section 1
200000Net Sales

Ushio’s Value Creation Story¥175.0

Value Creation through Implementation of Our Management Philosophy (History)

00

Billion

150000Using light as illumination and energy

As light professionals, Ushio has utilized light to resolve issues with00

technological innovation around the world.

100000Note: Non-consolidated sales are shown for the period between fiscal 1965 and fiscal 1980, with consolidated sales shown from fiscal 1981 onward.

00

50000

Background of Each Era
Contributed to the transition from black
and white to color
Office automation trend

0Ushio’s Accomplishments0

Osaka ExpoIncreasing popularization of laptop computers(1980s) apan’s national spaceJdevelopment planDevelopment of digitization in moviesIncreasing popularization of new electronic
devices, including smartphones

Advancements in IoT and AI

Increasing popularization of LCD TVs (1990s)

1960

1970

1980

1990

Development of First Halogen Lamps
in Japan

Development of UV Lamps for Use in
Semiconductor Lithography

Development of the World’s First
Excimer Lamp

Brightening lamps means that they don’t last long.
Extending their lifespan makes them dimmer.
Halogen lamps, which were considered to be themost advanced incandescent electric lamps at thattime, had overcome these contradictory conditions.
The inception of this halogen lamp development
began by acquiring the license for using iodine
lamps, which are the technological base for
halogen lamps, from a U.S. corporation. Following
this, Ushio commenced development of lamps
unrestricted by royalties and was successful in
1966, the second year of the Company’s establishment. This was the beginning of Ushio’s history as apioneer of domestically-produced halogen lamps.

After the oil crisis in 1973, energy conservation
became extremely valuable and a trend emerged
in a shift from a structure emphasizing sheer scale,to one that emphasizes compactness and flexibility.
Japan as a nation promoted the development ofsemiconductor lithography technology. Amid thesechanges, Ushio developed deep-UV lamps for semiconductor lithography in the face of increasing needs
for lamps that use shorter wavelengths and have ahigher output than previous ones in light sources
used for exposure of very large scale integrated circuits (LCIs). The technology for increasing output
has become the base for increasing the illuminationof super-high-pressure UV lamps in the future.

In 1993, Ushio developed the world’s first excimer
lamp. Excimer lamps emit high-energy, shortwavelength vacuum UV (VUV) light throughintense plasma discharge, based on newly­conceived light emission principles not foundin traditional discharge lamps. Ozone cleaning
equipment equipped with these excimer lamps
was introduced mainly for cleaning liquid crystal
display (LCD) panels and today it has taken holdas standard processing equipment in the manufacturing process of LCD panels.

2000

2010

2020

Development of Digital Cinema Projectors

Development of Photo-Alignment Equipment

Christie Digital Systems (CDS), a leading manufacturer of film-based cinema projectors, became one of
the first companies to market digital cinema projectors before the major technological shift from film todigital cinema. Additionally, by developing, manufacturing, and marketing xenon lamps, which are the lightsources for digital cinema projectors, Ushio has
become the only manufacturer with the vital lightsources and projectors for digital cinema.

Smart devices, such as smartphones, are required tobe even higher resolution, even slimmer, even moreenergy saving, and have even faster responses than
LCD TVs. Liquid crystals can be displayed by aligningliquid crystal molecules in the same direction,
however there were numerous issues with conventional alignment, in terms of not only environmental
and cost aspects but also key image quality aspects.
These issues have been addressed through Ushio’s
optical alignment technology. By aligning liquid
crystals in a non-contact state with special light,
Ushio has prevented a reduction in yield rate due tocontaminants or static electricity. At the same time,
Ushio has reduced costs, improved contrast,
enhanced the response speed of liquid crystal
molecules, and significantly reduced electricity
consumption as a result of reducing man-hours.

Expanding Development and Sales of Projection
Lithography Equipment

Digital cinema projector

Photo-alignment equipment

With recent advancements in IoT technology, 5G, andmobility, the quantity of information processed has
increased sharply. As a result, further evolutions insemiconductor technology are essential, an issue that
requires next-generation semiconductor package substrates to resolve. In response to increases in the numberof layers and size of package substrates, high productivity
and high yields are required. Our lithography equipment,
which has a 90% market share among steppers for
cutting-edge IC package substrates, rises to this challenge. Even with recent surges in demand, we haveretained our high market share by developing and introducing next-generation equipment.

Excimer irradiation units for cleaning panels
Halogen lamps

Large field stepper for cutting-edge IC package substrates

Future Possibilities

Impact on Society

Promotion of OA Trends

22

At first, halogen lamps were not used in generallighting and we targeted and rolled out products
into professional markets, including plain paper
copiers, vehicles, and studio lights. Among thesemarkets, there was progress with the technologicalinnovations in the photocopying machine domain,such as the shift from wet printing (blue-printing
photocopiers and blue copies) to dry printing
through UV light, and from photosensitive paper toplain paper. Ushio’s halogen lamps have contributed to the spread of plain paper copiers as a lightsource for original exposure and a heat source forfixing toner. While competitors have adopted astandard strategy, Ushio’s customizable strategy
has produced results and has been adopted byvarious photocopying machine manufacturers.
Accordingly, this became a foothold for promoting
the shift to office automation (OA).

Significant Contribution to theTechnological Innovation of
Semiconductors
Printing substrates, which previously took several
minutes, has been shortened to only a few seconds due to Ushio’s deep-UV lamps for semiconductor lithography. This has greatly increased
productivity.
Shortening the wavelength of light sources andincreasing input contributes to increased intensity
and innovation of production technology, and has
become the cornerstone of today’s development in
the electronics market.

Contribution to the Spread of LCD Displays
Compared to conventional cleaning methods,
excimer irradiation units for cleaning panels provide
higher cleaning capability, higher speed cleaning,
lower power consumption, and lower temperature
treatment which reduces damage to substrates.
Through this technology, Ushio has addressedserious LCD panel manufacturing issues. In addition
to excimer irradiation units, development of UV
lamps for use in LCD color filters that expose large
substrates in line with the increase in size of LCD
panel substrates and development of curing
equipment for bonding large LCD panels has led
to enhanced productivity and lower costs for LCD
panels.
Ushio has greatly contributed to the spread of
LCD displays.

Contribution to the Spread of Cinema
Complexes and Expansion of Market Scope
In 1999, Star Wars: Episode I – The Phantom Menace,
which was at the forefront of digital cinema, was firstreleased in the U.S. through CDS cinema projectors.
The end of 2009 also saw a sudden acceleration to
the digitalization of cinema projectors due to themassive hit 3D movie Avatar. Following this, there has
been an increase in popularity for cinema complexes
and today they have spread around the world as newentertainment bases where customers can enjoy
watching not only movies but also sports and concerts in real time.

Acceleration of Spread of Smart Devices
Ushio’s light, such as photo-alignment equipment,
touch panel bonding equipment, and lithographyequipment for package substrates, supports the
production of smart devices, including smartphones.
As a result, Ushio has enhanced the productivity ofsmart device production and the performance of
panels, meeting global demand for smart devices
and contributing to the increased resolution andfunctionality of panels.

P.54–55

Acceleration of IoT Through 5G and Contribution
to Advancement in AI
Advances in both miniaturization technology, which isprimarily involved in front-end semiconductor processes,
and packaging technology in back-end processes enablehigh-speed processing and management of large amountsof data relating to servers and electronic devices. This is
supported by Ushio’s large field steppers for cutting-edge
IC package substrates. Through this, we hope to accelerate progress towards an IoT society and advancements inareas such as AI.

Deep-UV lamps forsemiconductor
lithography

Ushio Report 2023

23

Section 1

Ushio’s Value Creation Story

Our Long-Cultivated Strengths

As light professionals, we will continue to draw on the five major

Robust Financial Basestrengths we have cultivated since our founding in order to

It is imperative that we expand resources, which we may lack at times, if we are going to be able
to continue to draw on the power to control light and the power to provide light-based solutions.
For example, there are times where we need to leverage external resources, in addition toenhancing internal ones, in order to achieve differentiation not just in terms of hardware but also
the settings in which our light sources and equipment are utilized. Our robust financial baseprovides us with the strength to procure the necessary external resources to do so through suchmeans as M&A, collaboration with business partners, and the promotion of mid-career hires.

enhance corporate value in a sustainable manner. By doing so,
we will contribute to the growth of the society of the future.
Five Strengths

Power to Control LightAt the time of Ushio’s founding, light was primarily only used as a source of illumination and theCompany made it its mission to create new markets by utilizing light not just in this way but also
as a source of energy. Based on this mission, we have harnessed the power of light to realize
products such as light sources and optical and imaging equipment, and also peripheral services
in accordance with the needs of our customers at the time. These products and services enabled
us to resolve various issues impeding the progress of technological innovation. By working toleverage our long-cultivated light technologies and also discover new uses for them, we are­further pursuing the potential of light and creating new technologies and products.

Equity ratio

RobustFinancial BasePower to Provide
Light-based
Solutions

For more details on these initiatives, please see the following pages:
P.22–23 Value Creation through Implementation of Our Management Philosophy (History)
P.26–27 Ushio’s Constant Pursuit of the Potential of Light

Management
企業理念
Philosophy

Core Technologies That Unlock the New Potential of Light

Light source
manufacturing

Power source
development

Machineryand precisioncontrol
technologies

Microfabrication

Opticaltechnologies

Glass and
metal
processing
technologies

Sealing andinspection
technologies

Analysis andsimulation

Power toControl Light

Global Customer
Contact Points andFoundation for
Value Provision

 lobal Customer Contact Points andGFoundation for Value Provision
With the aim of becoming a global medium-sized company, we have promoted global businessdevelopment from a very early stage for a company within the manufacturing industry. Our
overseas net sales already account for 70%-80% of total net sales, with overseas employees
making up roughly 60% of our total employee base. By establishing this kind of global businessfoundation, we have been able to swiftly and accurately grasp the needs of customers andmarkets across the globe and, in turn, develop high-value-added solutions to meet these needs.
Our global foundation has also helped us join forces with various business partners and mitigate the risk of supply chain disruptions.

Japan

21.7%

Japan

Ratio of
Overseas
Sales
FY2022

Power to Provide Light-based Solutions
In addition to the light sources themselves, we develop and manufacture equipment that incorporates them. Our ability to internally manufacture light sources, a key component of such equipment, provides us with a major source for differentiation. Also, engaging in the development,
manufacture, and sale of equipment brings us closer to end users, which in turn helps us acquire
useful information on future trends. As a result, not only are we able to resolve the issues facing
our customers, we are also able to provide them with high-value-added solutions.
Furthermore, by focusing our efforts on core technologies related to light as well as on securing and cultivating human capital with experience in a vast array of academic fields, we areenhancing our ability to foresee issues that may affect our customers in the future. Going­forward, we will draw on this ability to comprehensively resolve social issues through boththe provision of products and peripheral services.
For more details on these initiatives, please see the following pages:
P54–55 Ushio’s Potential for Creating Businesses with Greater Social Value

24

Power to Retain Light

75%

44.7%
Overseas

78.3%

Ratio of
Overseas
Employees
FY2022

Overseas

55.3%

Power to Retain Light

Leading Niche Positionin the Light Market

Through our unique light technologies, we have helped resolve issues impeding the progress oftechnological innovation. In addition, we have been providing not only light sources but also
equipment and after-sales services on a global basis. This has enabled us to work with a diverse
range of customers within the value chain of each market while exploring solutions to various
social issues through our customer contacts. We are also reinforcing our after-sales support inorder to ensure that the light solutions we provide continue to operate optimally for our customers in a stable, and sustainable manner. This approach enables us to offer highly trusted products in each of our business domains over long periods of time, and this is one of our strengths.
In this way, supported by our trust-based relationships with our customers, we strive to identify
customer issues even more promptly and accurately, thereby developing new technologies andenhancing our awareness of social issues.

Ushio Report 2023

25

Section 1

Ushio’s Value Creation Story

Ushio’s Constant Pursuit of the Potential of Light

Seeking the power to control light as light professionals, Ushio develops light sources andtheir peripheral technologies. In addition, Ushio continues to create new technologies andproducts by combining these technologies and developing new applications for them.

Wide Color Gamut /High-output Light
Sources

Optical Technologies

Light Modulation
Technologies

Video Signal Processing
Technologies

Digital Cinema Projectors
Using Lamps as a Source for Energy
After becoming the first company in Japan to successfully develop halogen lamps, Ushio was referred to as the “trailblazer of domestic halogen
lamps.” At the time, rather than use halogen lamps as general lighting, weaimed to use them as a light source for scanning documents and a heatsource for affixing toner within photocopying machines, which were
becoming more technologically advanced. This expanded application of
halogen lamps marked the first step toward realizing our mission ofcreating new markets by utilizing light not just as a source of illumination
but also of energy, which we adopted at the time of our founding.

Digital cinema projectors require the widest possible color gamut andhigh-output light sources. As a specialist light manufacturer, Ushio
boasts the highest worldwide share in the xenon lamp market and has
been an industry leader in the adoption of RGB lasers that can efficiently
extract only the required wavelengths. In addition to continuous enhancements to energy saving and light utilization efficiency, we are working tofurther improve the lifespan of our products. Our RGB laser projectors

Case1

Horizontal Expansion of Technologies

Technology

Excimer Light Source
Technology

Technology

Excimer Light Source
for LCD and OLED
Glass Cleaning(172nm)In 1993, we developed the world’s first excimer lamp, which enabled theemission of high-energy vacuum UV light by applying the light emission
principle to plasma discharge. These lamps realized the non-contact
removal of organic substances that became attached to LCD panels andsemiconductors during the manufacturing process, which had previously
been an extremely difficult task. Compared with conventional wet cleaning using water or chemicals, this non-contact removal via excimer lamp
enabled cleaning that was over 10 times faster and more thorough while
only requiring one-third of the power consumption.
Putting this excimer lamp to use, we went on to develop excimer lamps
with peak wavelengths of 308nm in the UV range. We also internallydeveloped excimer filters that removed wavelengths in which erythema(redness of the skin) can easily occur. By applying this filter to these26

Technology

TheraBeam UV308®
Series of UVPhototherapy
Devices (308nm)

also efficiently concentrate light from the light source and use a proprietary drive method starting from the video signal to enable smoothprojection with depth. In addition, in order to prevent theft of video signal
data through means such as copying, our systems protect the video
signal data with encryption that requires a screening permission key
to decrypt.

Case1

Technological Combinations

Innovation
Care222, Far UV-C
disinfection technology(222nm)308nm excimer lamps, we were able to develop the TheraBeam UV308®
Series, UV phototherapy devices that enable effective treatment of
autoimmune disorders in the dermatology domain, such as vitiligo andpsoriasis. In these ways, we promoted the utilization of light in the Life
Sciences domain. After the development of the TheraBeam UV308®
Series, we pursued the combination of unique optical filters with excimer
lamps that have peak wavelengths of 222nm. By doing so, we were able
to develop Care222, a Far UV-C disinfection technology using 222nm
excimer lamps combined with an optical filter, which blocks wavelengths
above 230nm that can be potentially harmful to human skin and eyes.
Through Care222, we aim to create a world without infectious diseases
by enabling the use of UV rays, which are highly effective at reducing
bacteria, in environments occupied by people.

Case2

Technology

High-Output
UV Light Sources

Technology

Technology

OpticalTechnologies

Material HandlingTechnologies

Innovation
Wafers and Substrate
Control Technologies(Alignment Technologies)

Lithography Equipment

The lithography process, which involves the etching of circuit patterns, isan essential part of manufacturing the substrates and electrical components that are found in all kinds of electrical devices today. Our lithography equipment is actively being utilized in this process.
Our lithography equipment makes use of the solar simulator technologies that we first developed shortly after our founding. Specifically, thisequipment is realized through the combination of technologies such as“high-output UV light sources,” which we develop and manufacture

Case2

completely in-house; “optical technologies,” which comprise mirrors andlenses that effectively concentrate light emitted from light sources andirradiate it in a highly uniform and parallel manner; “material handlingequipment,” which responds to irradiated materials (substrates); and“wafer and substrate control technologies,” which align the light irradiation position to within an accuracy of several micrometers (roughly
one-fiftieth the size of strand of hair).

Ushio Report 2023

27

Section 1

Ushio’s Value Creation Story

Ushio’s Value Creation Process
What Is a “Light” Solutions Company?

We aim to be a “light” solutions company that continues to create both social andShared Targets

economic value by resolving social issues through our unique light technologies.

“Promote the use of light as illuminationand energy to support human well-being
and societal growth” as established in
Our Mission

Concept

Business Model
Resolving the issues facing customers
and society at large by providing comprehensive solutions, including not only
hardware but also processes and services

Provide light solutions focused on
addressing social issues

Understanding of Issues That Serves as the Starting Point for Capital
Circulation and Value Creation

Financial Capital
Unifying strategies andmanagement emphasizing
solidarity• Structural reform investments• Concentrated investment in growthbusinesses• Group financing and infrastructure
investments

Manufactured Capital
Restructuring of supply chain
management systems• Cultivation of future
management candidates• Promotion of global employee
education platform• Fostering of human capital withbackcasting capabilities• Entrenchment of culture emphasizing
diversity and inclusion (transition
from uniformity to individuality)

Intellectual Capital
Combination of knowledge
for resolving social issues• Introduction of platform aimed atreintegrating knowledge to addresssocial issues

Social and Relationship
CapitalInnovation through outsidein approach made possible
by relationships with customers and society• Enhancement of partnerships• Reinforcement of brand power

Natural Capital
Environmentally and sociallyconscious raw material
procurement• Use of renewable energy
and water

28

Explore anddevelopphenomena
induced by lightand leadtechnologicalprogress

Creating
Businesses with
Greater Social
Value

P.52

Developing Our
Diverse Talent
to Get Closer to
Our Vision

P.62

Creating
Working
Environments
Where It Is Easy
to Produce
Results

P.64

Sustainably
Reducing
Environmental
ImpactP.66

Building a
RobustManagement
Base

P.70

Identify andexplore ways tosolve social issues
with light

d
te

g

l
ica

ship
de r
a
Five Strengths
Le

RobustFinancial BasePower toControl Light

Bus
i ne

Power toProvideLight-based
SolutionsManagement
Philosophy

ssIndustrial
Process
Processes

Offer proposals tosociety incollaboration with
our partners

Semiconductor, FPD,Entertainment,
Medical,Environmental
Health, etc.

Comfort / Convenience
Promotion of digital transformation in society torealize greater levels of
convenience and comfort
for people around the world

Contribution to Customer
Manufacturing Activities

VisualImaging ssistance for producing
A
high-performance semiconductors (technicalsupport for manufacturing compatible with IoT,
5G and 6G technologies)

Increase in Added Valueof Customers’ Products
and Services
 rovide total solution
P
services that include not
only hardware such as
imaging equipment but
also software

Power toRetain Light

Collaborative PartnershipSocial Value

IndustryDev

Global Customer
Contact Points
andFoundation for
Value Provision

OUTCOME

Customer Value

Develop into
reproducible
technology andcreate valuent

Human Capital
Global leader cultivation andmindset reforms

OUTPUTme
opel• Base consolidation for improving
production efficiency• Augmentation of production
capacity through utilization of
production bases• Promotion of DX

Five Management
Focuses

Sus
tain
ab
ilit
yO
rie
n
Te
ch
no
lo

INPUT

By continuing a value creation cycle leveraging our five strengths,
we will realize sustainable corporate value enhancement.

Life
Science
Sciences

Support for Customers
Creating New Services
Improvement in qualityof life
Contribution to
improvements inenvironmental hygiene
Reduction ofenvironmental burden

Excitement / Sharing
Supply of entertainment tohelp preserve humandignity and thereby connect people around theworld and help them shareexperiences andinspiration

Vision for 2030
A True “Light”
SolutionsCompany
MissionPromote the use of light as
illumination and energy tosupport human well-being
and societal growth

VisionBecome a“light” solutions company

Safety / Reassurance
Contribution to overcoming
future social issues to help
realize a safer, more reassured, and healthier society

Ushio Report 2023

29

Section 1

Ushio’s Value Creation Story

Five Management Focuses―Important Issues for ESG Management
Ushio promotes ESG management in order to realize its management policy alongside the aim of achieving the shared goal to“support human well-being and societal growth.”
In order to realize our Vision to become a “light” solutions company that resolves the issues facing society,
Ushio has been implementing its Five Management Focuses, centered on ESG management, and has been promoting abalanced management approach that address each of these focuses.

Identification Process of Five Management Focuses

Promotion Structure for the Five Management Focuses
We have established the Corporate Strategy Meeting, chaired by representative director and president of Ushio Inc., which comprises directors,
executive officers, and other members of management. The Corporate
Strategy Meeting determines the details and direction of initiatives
toward ESG management. In accordance with said determined direction,
the ESG Promotion Headquarters, which fulfills an alignment function
between management and the front lines, develops relevant plans andmeasures in collaboration with each business division, business site, andGroup company, and works to promote and instill ESG management
within Ushio Group.
In addition, we disseminate and share relevant information internallythrough individual committees, which share the sustainability initiativesof each specialized committee and business site. Major ESG-related
issues are also reported to the Board of Directors.

Board of Directors

President

Corporate Strategy Meeting(Chaired by the president of Ushio)

ESG Promotion Headquarters

Specialized committees

Ushio Inc.
Business divisions andbusiness sites

Domestic Group companies

Overseas Group companies

Identifying candidate themes for key issues
STEP 1

STEP 2

We investigated media, publicly-disclosed sustainability information, and expert reports. At the same time, we examined the medium- to longterm direction of our management.

Col u mn

ESG Promotion Headquarters Initiatives

Evaluating and mapping out level of importance (order of priority)
We evaluated the importance level of items pertaining to our businesses and mapped these items out based on business and social relevance.

In a highly uncertain business environment, corporations are now required to transition from a management
approach that solely emphasizes profits to one that generates both economic and social value. Ushio has
written a value creation story that enables both sustainable growth and the resolution of social issues though
its business, and we aim to be a company that is chosen by institutional investors who have a high level ofinterest in ESG investment and similar areas.

Evaluating appropriateness
STEP 3We held meetings with external experts to verify our management direction and identified focus points that matched with the expectations of
our external stakeholders.

Tetsuo Nakano

Promoting internal approval procedures
STEP 4The Corporate Strategy Meeting and Board of Directors held discussions on the Five Management Focuses and relevant KPIs and approved
them accordingly.

Five Management Focuses
E: Environmental

1
E

S

G

30

G

: Governance

P.52

Developing Our Diverse Talent to Get Closer to
Our Vision
S

G

3
E

: Social

Creating Businesses with Greater Social Value

2
E

S

P.62

Creating Working Environments Where It Is
Easy to Produce Results
S

G

P.64

Profile4
E

Sustainably Reducing Environmental Impact

P.66
S

G

5
E

Building a Robust Management Base
S

G

P.70

Director
Managing Executive Officer
General Manager,
ESG Promotion
Headquarters,
Ushio Inc.

The ESG Promotion Headquarters implemented the three following initiatives in fiscal 2022.
1. Enhanced engagement: In terms of internal engagement, we conducted analysis based on engagement
surveys (using correlation and factor analysis to identify combinations of questions that strongly impact
engagement) in order to visualize the characteristics of Ushio as a whole and individual departments, thenidentify important areas to focus on. This is leading to improved dialogue and other forms of communication. With regards to external engagement, we have positioned FTSE, an ESG investment index, as our top
priority in terms of external assessment due to its utility from a global perspective. We have set goals basedon our unique perspective on the relationship between FTSE scores and market expectations, and started
working to improve our evaluation results.
2. Understanding of strategies: In consideration of the results of our engagement survey, President Koji Naito
carried out visits to all business sites of Ushio Inc. and Group companies in Japan as an opportunity toengage in dialogue. In fiscal 2023, he is carrying out similar visits to overseas Group companies. This is also
being extended to dialogue on a business division and headquarter level throughout Ushio. Furthermore, in
addition to holding ESG management briefing sessions and distributing ESG concept videos to all Group
companies, we are also gradually rolling out e-learning programs and other resources.
3. Future-oriented initiatives: In addition to continuing to work with the Business Creation Division to analyze
initiatives and make recommendations from an ESG perspective, we conduct analysis based on megatrends
and ESG keywords unique to Ushio in order to explore social issue areas that we should work on from an ultra
long-term perspective, and will continue to examine and make proposals for areas of future growth.
Under our medium- to long-term ESG plan, fiscal 2023 is the first year of the period for instilling the 2nd MediumTerm Management Plan across the Company (fiscal 2023 to fiscal 2025). In collaboration with all Group companies, we will advance activities leading to the realization of Vision 2030 and enhanced corporate value. In linewith this, we have changed the icon of the ESG Promotion Headquarters’ slogan “With!” based on our consciousness of building connections on a global scale.

Ushio Report 2023

31

Section 1

Ushio’s Value Creation Story

List of Five Management Focuses, Key Challenges, and Goals

Ushio has established its Five Management Focuses. These represent important issues for the Company to address on a daily basis inorder to improve its value as a corporation by working to resolve social issues over the long term. Using a backcasting method,which involves establishing a future vision and thinking in reverse on how to achieve that vision, we determined KPIs with a focus on
2030 and are steadily promoting initiatives toward their achievement.

Five Management Focuses

1
S

We believe our mission is to put the light technologies we haveG

2S

We establish and provide enhanced human capital development

G

By doing so, we aim to develop our talent on a Group-wide basis with

Creating Working Environments Where It Is Easy to
Produce Results
To realize our Management Philosophy and achieve Vision 2030, we
G

4S

From a long-term perspective, we will pursue efforts to reduce ouractions, including selection and concentration

the Global Human Capital Committee (GHCC) and Human

Bolster talent to create new value thatgenerates profits and accelerates growthstrategies

Human capital bolstered, with focus on global /­contribute to the achievement of Vision 2030 and provide

technical / managerial literacy capabilities

systematic training opportunities for further development

Human capital identified through talent map that

Realize global mobility and enable borderless employee activity

meets business needs, with rational management

through human capital management

system in place

Capital Development Committee
Promotion of personnel exchanges within the GroupExpansion of the scope of identification of Group management personnel through the creation of the Global Mobility
Section (building a Group-wide network responsible forhuman capital)Build a corporate culture of mutual respect that embraces diversity

Provide attractive workplaces and work
practices for diverse personnel to boost
engagement and productivity

Proportion of women in managerial positions: 15%

Implement health and productivity management that enables

and 10% on consolidated and non-consolidated

employees to be physically and mentally healthy and enjoy

bases, respectively

their work
Achieve high engagement levels that enable the Company andEmployee engagement score up 10 percentage
points from FY2022

employees to grow together

Strengthen deployment of green productsthat reduce environmental impact

with nature, based on promoting biodiversity conservation activities

More active participation by female employees andemployees with disabilities
Continuous initiatives for wide-ranging workplace environment improvements
Consideration and provision of attractive working conditions(harassment education, compensation system, etc.)

Systematic introduction of renewable energy (Scope 1 and 2)

emissions: At least 30% from FY2017 level

Effective utilization of water resources

Reductions of GHG emissions (Scope 3 cat. 11)

Development of products that contribute to reducing

Resolve social issues by cutting greenhouse gas (GHG) emissions

from company’s products: At least 30% from

Maintain and expand corporate value throughacross the value chain

FY2017 levels

fulfillment of corporate social responsibilities

Offer products and services that lower environmental impact

Measuring and conveying benefits of products

G

environmental impact in society (reducing GHG emissions,reuse/recycling, effective utilization of water resources,
reducing use of chemical substances, etc.)

helping shrink customers’ environmental footprints

Promotion of efforts to extend the lifespan, improve theStarting Group-wide activities to respond to social

Establishment of KPI management

demands and earning recognition from external

Construction of a global risk management systemefficiency and reduce the power consumption of products

Visualize and achieve management, business, and employee goals
Manage business portfolio through timely efforts to identify

Building a Robust Management BaseWe will work to establish a robust management foundation,
management.

32

Enhancement and acceleration of business creation

Practice Group management with diverse personnel who canEstablish a resource circulation model and a model for coexistence

Sustainably Reducing Environmental Impact

which will in turn underpin the four other focus points ofShealthy life expectancy extension, and realizing DX

R&D structure that constantly generates new value,with some themes on track for commercialization

Reductions of in-house GHG (Scope 1 and 2)

5E

Initiatives for FY2023 to FY2025

Promotion of selective human capital development throughfrom and the development of both the Company and its employees

environmental burden, including within the supply chain.
E

new businesses

Create businesses that address the social issues of

the goal of getting closer to our Vision.

aim to be a highly engaged organization that embraces contributions
S

climate change countermeasures, food initiatives,

Developing Our Diverse Talent
to Get Closer to Our Vision

3
EExpand revenue and earnings by creating

Key Performance Indices for FY2025

issues facing society in the future.

programs in order to support the individual growth of our employees.
E

Vision for FY2030

Creating Businesses with Greater Social Value
cultivated as a “light innovation company” to use in resolving theE

Economic Value Connection

Gmanagement resourcesEstablish a stable revenue base
Safeguard corporate valueClarify business risks and deploy Group-wide risk responses
Create a corporate culture and framework for respecting humanrights across the value chain

evaluation organizations and stakeholders throughappropriate disclosure of information

Enhancement of measures to prevent bribery andcorruption

Reinforce and deepen governanceUshio Report 2023

33

Section 2

Advancing to a New Stage
Our Strategies

After reforming its structure, Ushio has embarked on thenext stage of its journey under a new Medium-Term
Management Plan.
Focused on realizing Vision 2030, we will cultivate growthon the road to enhancing economic value by expandingsocial value.

34

Ushio Report 2023

35

Section 2 Advancing to a New Stage

Long-Term Vision

Vision 2030

Transition to Solidarity-Based Rempo Management
Targets

Overview of Rempo Management
Independence for individual optimization

…

Shift

Solidarity for overall optimization

Subsidiary
SubsidiaryCD
Subsidiary
Ushio Inc.
B

We formulated a new Medium-Term Management Plan to serve as a road map toward accomplishing our long-term Vision for 2030. This

SubsidiaryAplan comprises three pillars—management policies, shifts in approach, and changes in mindsets. Also, in order to realize Vision 2030, we
have defined priority issues related to ESG management; Five Management Focuses and KPI targets in relation to these objectives.

Ushio Inc.

We are pursuing the concept of ESG management to contribute to society and fulfill our corporate social responsibility as stated in the
Ushio Group Management Philosophy.

Previous Rempo
Management

MissionPromote the use of light as illumination and energy to support human well-being and societal growth
VisionBecome a “light” solutions company

Comfort / Convenience

Excitement / Sharing

Safety / Reassurance

Support the creation of
comfortable and convenient social
infrastructure via opticalprocessing technologies

Delight people throughimaging and lighting
technologies

Support the health of people andthe planet by applying opticaltechnologies

Industrial Processes

Visual Imaging

Life Sciences

Management Policies
Cultivate growth over three years to become a true “light” solutions company

Build light solutions delivery structure
Shifts inapproach

Solidarity-based
Rempo management (pursuit ofcommon goals)

to maximize future earnings
Reorganize business domains

Subsidiary
B

Individual optimization:
Independence > Solidarity

Concurrent
independence
and solidarity• Pursue organizationaltargets separately basedon a common foundation

Grow the economic value of Ushio by expanding social value

SubsidiaryA

Independent Rempo Management
Prior to 1st Medium-Term
Management Plan
(Fiscal 2020 to 2022)

Independence and Solidarity

Vision 2030

Changes inmindsetsLong-term perspective

Backcasting

Enhance capital efficiency(Growth Investment and in-house stock investment)

Social impact projection

Embrace ESG management

Outside-in approach

Positioning of ESG as
an opportunity

Creating Businesses with
Greater Social Value

36

Developing Our Diverse
Talent to Get Closer
to Our Vision

Creating Working
Environments Where It Is
Easy to Produce Results

Sustainably Reducing
Environmental Impact

Building a Robust
Management Base• Overall understanding across businesses• Unify PDCA (monitoring)

Changes in Mindsets

Past to Present

Past to Present

Amid the rapidly growing and changing operating environment thatbegan in the 1990s, Ushio achieved massive improvements in its
profit margins by practicing Rempo management designed tofacilitate flexible action by subsidiaries. However, the Company’s
profit margins took a downturn after the 2008 financial crisis, andour profit margins today are lower than those seen prior to thestart of Rempo management. We proceeded to conduct M&A
activities in the 2000s while steadily globalizing our operations
and entering new markets. However, these efforts failed to halt the
decline in profit margins, and M&A activities have yet to catalyze achange in the overall trends affecting the Company.

Short-term perspective, forecasting, customer-oriented perspective, inside-out approach, positioning of CSR as a cost

We will adopt a strategic perspective in efforts to optimize Groupwide performance. We have thus decided that our new approach
toward Rempo management should focus on multiplicative management to strengthen solidarity and spur non-linear evolution.

New Rempo Management
multiplicative management

Five Management Focuses• Aim for unified targets for the entire Group

Shifts in Approach

Present to Future(including M&A)

Overall optimization:
Independence < Solidarity• PDCA (monitoring) implemented
for each company separately

Establish management infrastructure to support businesses
Invest strategicallyRempo Management to Aim for• Each company deploys individual
measures and is not linked

Accelerate growth based onmarket-centric approach

Rebuild strengths

Changes in
Mindsets

Present to Future

Five Mindsets Changes and Concrete Measures
Long-term perspective
Identify future risks and opportunities from management
perspective

Backcasting
Formulation of new value-creation narrative based on
Sustainable Development Goals (SDGs)
Social impact projection
Identification of material issues with consideration of outside perspectives and discussions with experts
Outside-in approach
Establishment of strategies and revision of portfolios witheye to 2030
Positioning of ESG as an opportunity
Establishment of new value creation narrative and ESG plan

Enhance solidarity for non-linear evolution

Ushio Report 2023

37

Section 2 Advancing to a New Stage

Long-Term Vision

Ushio’s History to Date

Working to Realize Vision 2030

Positioned as a once-in-30-year major shift

With Vision 2030, we aim to be a true “light” solutions company, and strive to achieve our goals through numerical targets and using a backcasting approach to draw a clear path forward. The 1st Medium-Term Management Plan was a period for reforming the structure. We shifted tosolidarity-based Rempo management, moved forward with structural reform and established a robust profit structure. We have positioned the
2nd Medium-Term Management Plan as a time to cultivate growth, and we will build a structure to provide light solutions and overhaul our business portfolio by expanding growth businesses, revitalizing rebuilding businesses and cultivating new businesses. We also plan to expand
strategic investments with the aim of helping us to achieve these aims. The period covered by the 3rd Medium-Term Management Plan ispositioned as a time for us to deliver results based on the measures taken through the first and second plans.

From 20201990 to 2020

1960 to 1990

Rempo Management
Enhanced solidarity

Rempo Management
Independence and solidarity

Niche top management20%
18%

Become a “light” solutions
company

2nd Medium-Term Management Plan:
Cultivate Growth to Realize Vision 2030

Grow the economic value of Ushio
by expanding social value
1964
FoundedNet sales

1980

1970

1990

2000

2010

2020

(FY)

Operating margin

Operating Margin as a KPILong-Term Financial Results
Long-term vision

17.2%

Also swiftly restore operating
margin to the former level

12.0%
Raised operating margin
20.19

9.1%

30.0

15.8
4.2%
7.26
0.6%

Achievenew record
for operating income

In 2030, operating income of 30
billion yen or
more and
operating marginof 12% or more

Net sales

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2030

1st Medium-Term
Management Plan

2nd Medium-Term
Management Plan

3 Medium-Term
Management Plan

Reform structure

Cultivate growth

Financial results

Financial targets

Net sales ¥175.0 billion
Operating profit ¥15.8 billion

Net sales ¥220.0 billion
Operating profit ¥21.0 billionrdDeliver results

Vision 2030
Become a “light” solutions
company
Grow economic value of Ushio byexpanding social value hift to management thatS
prizes solidarity
Prioritize structural reform

Objectives almost
achieved uild structure to provide lightB
solutionsExpand strategic investments
Overhaul business portfolio· Expand growth businesses· Revitalize rebuilding businesses· Cultivate new businesses
In-house stock investment
Strategic use of assets and liabilities

Achieve 1 and 2
medium-term management
plan goals
stnd¥250 billion

Net sales
Operating profit*¥30 billion
or moreOperating margin* 12% or more

10% or more

ROE*

Backcasting* Operating profit, operating margin and ROE targets
exclude new goodwill amortization.

(FY)

Operating margin

Medium-Term Growth Drivers

Short- to Medium-Term Growth Drivers
Expanding Demand for Semiconductors and Other Equipment and Contributing to Technological Advancements
With the advent of the big data era, which has come alongside the progression of innovations such as AI, 5G, and
IoT, demand for data center servers and other technologies is rising, and progress is being made with new technological development in the semiconductor package substrate market. Against this backdrop, our large field steppers
for cutting-edge IC package substrates and direct imaging lithography equipment, which contribute to this kind oftechnological development, have seen steady sales growth. In addition, the application of our EUV lithography process, a type of next-generation semiconductor technology, is increasing, and we have been working on businesses
that provide EUV light sources for photomask inspection and related maintenance services that make use of thisprocess. Going forward, we will continue to contribute to the advancement of cutting-edge semiconductor technologies. In addition, our UV lamps for lithography, which are used in the manufacturing process of semiconductors andother equipment, have achieved robust sales due to the increase in semiconductor demand.
In imaging-related fields, our business performance has been recovering due to the declining impact of the COVID19 pandemic. Going forward, we expect to see expanded sales of imaging related equipment due to growing
demand for projector replacement at movie theaters and applications at live events, amusement parks, and othercommercial facilities.

38

FY2026–2028

Growth Drivers

6.65 0.76
2002

FY2023–2025

Financial targets(Billions of yen)

2000

FY2020–2022

Large field stepper for cutting-edge
IC package substrates

Digital cinema projector

Long-Term Growth Drivers

Developing New Applications for Light Alongside the Continuous
Growth in Demand for Semiconductors and Other Equipment

Helping Resolve More Future-Oriented Social Issues throughOur Light Technologies

We believe that demand for semiconductors and other electronics willcontinue to grow going forward, and, as such, we will strive to growsemiconductor-related businesses in a sustainable manner. At the sametime, in terms of a new growth driver, we aim to expand the thermal
processing business.
P.61 This business offers us a newopportunity to leverage our light technologies, with a focus on the heating process within semiconductor manufacturing. In addition, we will
strive to expand the application of products
equipped with Care222, a technology thatuses UV light to realize disinfection in environments occupied by people, from their existing
application in building infrastructure to appliLight source for thermal
cation as a medical device. In this manner, we
processing
will promote these products as a new growth
driver over the medium-to long-term.

In conjunction with growth in electronics-related markets, we aim tobuild a business profit foundation that is even more stable by establishing not just hardware businesses but also service and maintenancebusinesses. In addition, we will set our sights on social issues sharedthroughout the globe, such as climate change countermeasures, foodinitiatives, and healthy life
expectancy extension, in a bid
to establish new businesses
that use our light technologies
to resolve more future-orientedsocial issues. We will thenPrototype reactor that uses light to instantaneously decompose low-concentration N2O
work to leverage such busiand CH4
nesses as new growth drivers.
P.54–55
Ushio Report 2023

39

Section 2 Advancing to a New Stage

Medium - Term Management Plan
Medium-Term
Management
Plan

Results by Business Division
In the results for each business division, Imaging Equipment fell short of required targets as a result of being unable to mitigate unexpecteddifficulties in procuring parts. In the Light Source and Optical Equipment businesses, although some issues remained to be addressed, we
achieved our ambitious targets through the steady implementation of various measures.

1st Medium-Term Management Plan
(Fiscal 2020-2022) Results

FY2019results

Business segments
FY2020–2022

FY2023–2025

1st Medium-Term Management Plan

FY2026–2028

2 Medium-Term Management Plannd

Cultivate growth

Reform structure
Financial results

Financial targets

Net sales ¥175.0 billion
Operating profit ¥15.8 billion

Net sales ¥220.0 billion
Operating profit ¥21.0 billion

3rd Medium-Term Management Plan

Deliver results

Light
SourceBusiness

FY2022 targets(required ambitious)

FY2022
results

Results and issues
Operating margin: Reached ambitious targets¥58.5 billion ¥56–66 billion ¥61.8 billion
Results: Undertook structural reforms (3.7 billion yen vs. planned
3.5 billion yen) to change earnings structure, enhancing thestatements of income
Operating
10.3%
10.7–12.1%
14.6%
Issues: Fell short of targets with Care222 in the new environmental hygiene
marginSales

field and solid-state light sources

Operating margin: Reached ambitious targets¥36.1 billion ¥56–60 billion ¥57.7 billion
Results: Steadily captured demand during market expansion period
for promising lithography equipment
Demonstrated effectiveness of measures undertaken
under previous medium-term management plan to enhance
OpticalOperating–1.5%
8.9–11.7%
earnings structure
12.4%
Equipment margin
Sales

Equipment
Business eattempting to Solidify the Foundation for Profit Structure
R
Transformation Over Three Years

Issues: Promising EUV light source business entered demand adjustment
phase, performing below par

Proactive strategies

Deploy fundamental structural reforms

Develop post-pandemic market

Businessstrategy 1

Light Source Business strategies

Businessstrategy 2

Equipment Business strategies

Imaging equipment

Maintain and reinforce structural reforms

Cultivate and invest intensively
in growth businesses

Businessstrategy 3

Creation Business strategies

Identify and launch new businesses

Identify and launch new businesses

Unifying strategy

Optical equipment

Optimize overall performance (Allocate funds efficiently to optimize overall performance)

Results

Sales

ment difficulties offset steps to enhance operating efficiency

Results of Unifying Strategies
The objectives of the 1st Medium-Term Plan have been achieved, and we will continue to strengthen overall performance under the new system.

Reformed governanceUtilized financial reserves

Outcome: Steadily implemented overall optimization measures

Outcomes: Executed defensive, proactive, and unifying strategies as planned and boosted shareholder returns

Completed structural reforms and strategic investments
Preemptively managed prolonged pandemic impact
Embraced ESG management
Enhanced oversight of global management targets
Undertook global human capital development program

Post-reform governance
Unifying functions

FY2022 results

Comparison with required targets

FY2022 targets (required–ambitious)

Net sales¥175.0 billion+¥5.0 billion¥170–190 billion

Operating profit¥15.8 billion+¥1.8 billion¥14–19 billion

Operating margin

9.1%+1.1 points

More than 8% to more than 10%

Corporate Strategy Meeting*Global HR Strategy Department
Global Consolidated Management
Promotion Project

Ushio Inc.

40

Issue: Accelerating shift from financial to business assets
Cash outflow plans and results

Issue: Bolstering risk management

We succeeded in reaching required targets and completing the solidification of the foundation for profit structure transformation.

Annual dividends per share: Increased from ¥26 to ¥50
Share buybacks: ¥5 billion in FY2022

Subsidiary A

Subsidiary B*O versees management planning andreports directly topresident and chief
executive officer

Subsidiary C

Plans

Defensive strategies

Operating margin: Failed to reach required targets¥60.8 billion ¥54–60 billion ¥51.3 billion
Results: Reduced fixed costs by steadily implementing structuralreforms (2.8 billion yen vs. planned 2.0 billion yen)
Imaging Operating
Issues: Failed to improve profitability, as inability to constrain parts procure1.4%
5.6–6.7%–1.3%
Equipment margin
Equipment
Business

Defensive
strategy:
Around¥15 billion

Proactive strategy:
Around ¥20 billion

Dividends: Additional investment
Unifying strategy:¥10 billion resources, M&As, andAround ¥20 billion
or more shareholder returns, etc.

Results

2020 was the first year of the 1 Medium-Term Management Plan and came in the midst of COVID-19, which had a major impact on economic
activity around the world. Under these circumstances, we incorporated three types of strategies—defensive, proactive, and unifying strategies—
into each of our business strategies, and worked to transform our profit structure.
st

Defensive
strategy:¥17.2 billion

Proactive strategy:¥18.1 billion

Unifying strategy:¥23.4 billion

Dividends:¥16 billion

Sharebuybacks:¥5 billion

Next: Cultivate growth

Ushio Report 2023

41

Section 2 Advancing to a New Stage

Medium - Term Management Plan
Reorganize Business Domains
Medium-Term
Management
Plan

2nd Medium-Term Management Plan (FY2023–2025)
Basic policy: “Cultivate growth”

FY2020–2022

FY2023–2025

2nd Medium-Term Management Plan

1st Medium-Term Management Plan

Cultivate growth

Reform structure
Financial results

Financial targets

Net sales ¥175.0 billion
Operating profit ¥15.8 billion

Net sales ¥220.0 billion
Operating profit ¥21.0 billion

By restructuring our business domains to shift from the previous product-centric approach to being market-centric, we will accelerate
the provision of light solutions.
Under the conventional approach, which focused on selling objects, value provision was limited to creating value for customers.
However, through the restructuring of our business domains, we aim to expand our business by reinforcing our solution proposals
and expanding the scope of our solutions to provide value in terms of social issues beyond individual customers.

FY2026–2028

3rd Medium-Term Management Plan

Deliver results

Value Provision Areas and Megatrends up to 2030

Business segments
to dateTomorrow’s business segments

Productcentric

Market-centricLight Source
Primarily lamps (consumables)

Industrial Processes

Visual Imaging

Digitally connected society

Societies that prioritize human well-being

Manufacturing technology innovations andenvironmental impact reductions

Reevaluation of premium experiences
outside homes

Rising and aging populations

Imaging equipment

Quality of life improvements

Incorporating Ushio lamps

Value proposition areas

Value proposition areas

Value proposition areas

Megatrends

Life Sciences

Megatrends emiconductors, electronic devices, andSdisplaysLarge-scale video production and operations
for entertainment spaces (theme parks,
cinemas, and live events)

Electric vehicles

Public facilities, corporate control rooms, andvideo systems

 uilding materials, printing, and other manuB
facturing processes

Megatrends

Climate change

Optical equipment
Incorporating Ushio lamps

Visual Imaging

Life Sciences

Support the creation of
comfortable and convenientsocial infrastructure via
optical processing
technologies

Delight people throughimaging and lighttechnologies

Support the health of people
and the planet by applying
optical technologies

Photonics
Solutions

Food and energy issues

Ushio is establishing this business to swiftly become competitive in thephotonics domain (covering solid-state light sources), which shouldgrow across its three key markets

Climate change countermeasures
 ealthy life expectancy extension (environH
mental hygiene, healthcare, pharmaceuticals,
and drug development)
Food initiatives

Rebuild Strengths
Three steps must be taken if we are to reinforce our light solution proposals moving forward. We will actively pursue alliances andM&As in each business domain in order to reinforce our three strengths.

Basic Policies
Our basic policy is based on three years of cultivating growth with the aim of evolving into a true “light” solutions company. We will reorganize
our business domains and rebuild our strengths in order to build a structure to provide light solutions and accelerate the growth of new business domains based on a market-centric approach.

Rebuild strengths for each light solutions delivery process

Light solutions delivery process (3 steps)

Build light solutions delivery structure to

R&D

maximize future earnings

Reorganize business domains

Rebuild strengths

Strength 1

Accelerate growth based onmarket-centric approach

Power to control light
Develop technology that optimizes andengineers light performance

Invest strategically (including M&A)

Enhance capital efficiency(Growth Investment and in-house stock investment)

P.46–49 CFO Message

Solutions
Strength 2Power to provide
light-based solutions
Identify social issues and propose
light-based solutions

After-sales support
Strength 3Power to retain light
Provide after-sales support to supply
light solutions sustainably

Keep reinforcing strengths with a view to robust alliances and M&As

Establish management infrastructure to support businesses

42

Industrial Processes

Embrace ESG management
P.52–71 Connecting Social Value into Economic Value

For details, please see:P.24–25 Our Long-Cultivated Strengths

Ushio Report 2023

43

Section 2 Advancing to a New Stage

Medium - Term Management Plan

Business Strategy Snapshot
Following the business domain restructuring, the targets and strategic points for each business domain to aim for by 2025 are as follows.

Medium-Term
Management
Plan

2nd Medium-Term Management Plan (FY2023–2025)
Basic policy: “Cultivate growth”

High

NurtureIndustrial Processes

Visual Imaging

Life Sciences

Sales¥105.0 billion

Sales¥91.5 billion

Sales¥5.5 billion

Operating profit*¥17.5 billion

Operating profit*¥3.0 billion

Operating loss*–¥1.0 billion

 aintain competitive edge inMgrowth-driving semiconductor andelectronic device areasKey
strategic
pointsOperating margin*

16.7%

Innovate manufacturing processes,
focusing on heating, surface treatment, and modifications, andexpand applications to cut environmental impact

3.3%

Swiftly establish structures toprovide solutions that meet market
needs by efficiently integrating coretechnologies
 trengthen supply chain
S
management

Operating margin*–18.2%

 reate new businesses that generC
ate long-term solutions to social
issues ecure core competencies andS
sales channels to drive inorganic
growthLife Sciences: FY2030

Grow

Scale of Life Sciences business intended to reflect that 80% of
Photonics Solutions business earnings will be Life Sciencesbusiness-related by FY2030
Life Sciences business to become third key revenue driver

Photonics Solutions

Reinforce and rebuild photonics
areas common to three markets

Reinforcement and rebuilding businessPhotonics Solutions
Industrial Processes

Growth potential

Incubation business

Operating margin*

By accelerating growth in business domains based on a market-centric approach, we have clarified the changes in our vision for ourbusiness portfolio up to 2030. We will clarify the relative position of each business domain, allocate management resources appropriately, and accelerate growth. We will also continually review our business portfolio.

: FY2025

Core (rebuilding) business

FY2025targets

Accelerate Growth by Being Market-Centric: FY2022

Core business

Sales¥14.5 billion

Swiftly establish niche top positions

Operating profit*¥1.0 billion

 uickly reach critical masses in moduleQ
and device businesses

Operating margin*

For details, please see:

6.9%

* Operating profit and operating margin targets exclude new goodwill amortization.

P.74–85 Creating New Markets with “Light”

Numerical Targets
Rebuild business model while expanding existing businesses to boost net sales and operating profit

Rebuild

Low

Under new Medium-Term Management
Plan, prioritize creating and increasing
business opportunities over expanding
business

Visual Imaging
Lamps + Equipment= Overall—Making EBITDA key performance indicator in view of expended investments, including through M&As—

Earnings baseProfitability

Low

High

Net sales

Continuously review the business portfolio for profitable growth toward 2030, and actively utilize held assets and liabilities forthis purpose
Industrial Processes

44

Visual Imaging

Life Sciences

Photonics Solutions

Core businessCore (rebuilding) business

Incubation business

Reinforcement and rebuilding business

Expand semiconductor-related
operations while driving stableearnings growth by developing
solutions for manufacturing
processes

Rebuild business toward 2030
by creating solutions platform

Step up cultivation efforts sobusiness can grow as key new
domainSwiftly become competitivein photonics field (solid-state
light sources) spanning threemarkets

FY2025 targets

FY2030 targets¥175.0 billion¥220.0 billion¥250.0 billion¥15.8 billion¥21.0 billion¥30.0 billion

Operating margin*1

9.1%

9.5%

12% or more

EBITDA*2¥23.6 billion¥30.0 billion

39.0 billion

EBITDA margin

13.5%

13.6%

¥15.6%

ROE*

5.7%

8% or more

10% or more

Cash conversion cycle

6.6 months

5.2 months—

Equity ratio

75.4%

60% or more—

Operating profit*

Business Portfolio Reorganization Policy

FY2022 results

11*1 Operating profit, operating margin, and ROE targets exclude new goodwill amortization.
*2 EBITDA = operating profit + depreciation & amortization and amortization of goodwill

Ushio Report 2023

45

Section 2 Advancing to a New StageThe 2nd Medium-Term Management Plan: A Three-year Plan for Cultivating
Growth to Achieve Our Vision 2030

CFO Message
Aiming to further enhance corporate value throughsteady capital efficiency enhancement andappropriate expansion of strategic investments
ProfileTakabumi Asahi

The 2nd Medium-Term Management Plan (fiscal 2023 to 2025) was

capital to enhance productivity, while working to enhance capitalannounced in May 2023. Under this plan, we established a basic

efficiency at the same time. In addition to setting out a specific ROE

policy of cultivating growth toward the realization of our Vision

improvement road map, we are also implementing major capital

2030. In response to global megatrends, Ushio will accelerate andallocations for in-house stock investment and growth investment. For

expand its provision of light solutions in fields of value provision andthis reason, we adopted EBITDA, which accounts for M&A and othercontinue to grow its economic value. To do this, we will reorganize

increases in investment, as our most important KPI under the 2nd

our business domains, rebuild our strengths and accelerate growth

Medium-Term Management Plan. For fiscal 2025, the final year of thebased on a market centric approach with the aim of cultivating

2nd Medium-Term Management Plan, we set targets of an EBITDA ofgrowth under the 2 Medium-Term Management Plan.

¥30 billion (compared to ¥23.6 billion in fiscal 2022) and ROE of 8% orndDirector
Managing Executive Officer
Chief Financial Officer
General Manager, Corporate Headquarters,
Ushio Inc.

In concrete terms, we will promote strategic investment in growthdomains, which are essential for future growth, and invest in human

Reaching Required Targets and Nearing Completion of Our Reattempt to
Solidify Our Foundation for Profit Structure Transformation
Under the 1st Medium-Term Management Plan (fiscal 2020 to 2022),

increases due to the growth of promising products is one of thethe Ushio Group has implemented various measures in line with aaction plans under our proactive strategies, and while issues

basic policy of working to achieve its goals by solidifying its founda-

remained with regards to some products, we were able to producetion for profit structure transformation through its defensive, proac-

results beyond our initial plans though efforts such as expanding

tive, and unifying strategies. As a result, we achieved an operating

sales of large-field steppers for cutting-edge IC package substrates.

margin, the most important KPI, of 9.1% in fiscal 2022, exceeding

With regard to our unifying strategies, we have steadily implemented

the required target of 8%. This is a 4.9-point increase compared tomeasures aimed at overall optimization, including minimizing thethe 4.2% operating margin in fiscal 2019, the year before the 1st

impact of COVID-19 and promoting ESG management. We were also

Medium-Term Management Plan came into effect, which shows weable to implement various strategies and boost shareholder returns

have been able to steadily increase profitability as we shifted to a

by utilizing financial reserves. This shows that we have largely

more robust structure. Through the structural reform action plansachieved the objectives of the 1st Medium-Term Management Plan,

under our defensive strategies, which are specific measures forand we will build on these results as we shift to initiatives under the

profit structure transformation, we reduced fixed costs by ¥7 billion,

2nd Medium-Term Management Plan (fiscal 2023 to 2025) with theexceeding the original plan by ¥1 billion. The effect of revenue

aim of achieving our Vision 2030.

greater (compared to 5.7% in fiscal 2022) and we will advance various
measures to steadily work towards achieving these targets.

Setting Out an ROE Improvement Road Map and Working to Steadily Enhance
Capital Efficiency
Under the 2nd Medium-Term Management Plan, we will take thealso adopted a policy of reducing shareholders’ equity from ¥244

results of the 1st Medium-Term Management Plan on board as webillion at the end of fiscal 2022 to approximately ¥200 billion by thetake on the long-standing challenges of improving ROE and having

end of fiscal 2025. This will be implemented through aggressive in-

PBR below 1.0 through steady improvements based on strengthen-house stock investment and stable, consistent dividend payments—

ing our two-pronged approach of lifting ROE and fully embracing

and a frame of ¥70 billion to ¥90 billion for in-house stock investment

ESG management. In terms of lifting ROE during the period coveredand dividends over three years has been set. In tandem with this,by the 2nd Medium-Term Management Plan with the aim of realizing

we will also work to reduce capital costs through strategic utilization

PBR exceeding 1.0, we aim to attain an ROE of at least 8%, exceed-of liabilities.

ing capital costs, by the end of fiscal 2025, the final year of the plan,

The cash inflows (the total of operating cash flow, asset sales andby steadily expanding earnings and improving the capital structure.

interest-bearing debt) obtained during the period covered by the 2nd

We then aim to achieve ROE of at least 10% by fiscal 2030. With

Medium-Term Management Plan are on a scale in excess of ¥100

regards to earnings growth, we are working to increase EBITDA frombillion, and we will be bold in allocating this to growth investment¥23.6 billion in fiscal 2022 to ¥30 billion by fiscal 2025 by reorganiz-and in-house stock investments in order to steadily enhance capitaling our business domains and rebuilding our strengths. We haveefficiency.

Attain ROE of at Least 8% by FY2025 by Steadily Expanding Earnings and Improving Capital Structure
FY2022 results 〈Businesses〉

Steadily increase earnings in each business

Net Sales

Operating Profit(Billions of yen)

170.0(Billions of yen)

148.8

175.0 target)

13.0

118.5

8.8

2019

2020

2021

2022

（FY）

2019

Cumulative ﬁxed cost cuts

5.7

8.0

0.6
2021

2022

（FY）

2019

6.0
7.0 (Required
target)

2020

1.4
2021

2022

（FY）

2019

2020

2021

2022

（FY）

ROE
* IP: Industrial Processes

46¥244.0 billion

Shareholders’ equity(Requiredtarget)

4.2

2020

9.1

target)0.7¥23.6 billion(Billions of yen)

14.0
15.8 (Required

6.6

EBITDA

Structural Reforms(%)(Required

159.0

Operating Margin

IP*: Expand growth products for cutting-edge IC package substrate technology
VI*: Expand related markets
LS*: Broaden environmental hygiene solutions
PHS*: Expand sales into new areas and improve yields〈Finances〉• Aggressive in-house stock investment•S table and consistent dividend payments•S trategic utilization of liabilities (lower cost of capital)

LS: Life Sciences¥30.0 billion

Approx. ¥200.0 billion

Exceed equity costs

5.7%
VI: Visual Imaging

FY2025 targets

8.0% or more

PHS: Photonics Solutions

Ushio Report 2023

47

Section 2 Advancing to a New Stage

CFO Message
Endeavor to Enhance Capital Efficiency through Major Allocations for In-House Stock Investment and Growth Investment

Cash inflows

Cash Generation
 perating cash flow underO
medium-term management plan:¥60 billion over three years

Asset sales: ¥15–20 billion

Asset sales: ¥15–20 billion

Interest-bearing debt usages¥40 billion + α (lower cost of capital)

Cash outflows

Interest-bearing
debt

Strategic
investments¥40.0 billion + α¥40.0 billion + α

Invest Strategically in Areas with Growth Potential and Invest in Human Capital to Enhance Productivity

Strategic Investments
GrowthInvestment

 uild core system to underpin consolidated management
BBolster production capacity by catering to rising demand for large field
stepper for cutting-edge IC package substrates

M&A Policy

IP*: Reinforce and expand existing business and restructure industry
VI*: Partnerships needed to build one-stop solutions structure
LS*: Strengthen and expand existing and creation businesses
PHS*: Reinforce and expand business by investing in companies in same
industry offering synergies

R&D
Investments

 ndertake advanced development in projection and direct imaging lithography
UInvest in development to broaden EUV light source adoption over medium
and long terms
Develop new solid-state light sources for niche markets
Develop new products from long term perspectives for 2030 target fields inLife Sciences business

Human Capital
Investments

 ecure people to rebuild Group-wide sales, development, and serviceSsystemsDevelop talent and deploy new systems to accelerate diversity andinclusion
Review salary levels to attract talented individuals

Capital Allocations
 trategic investments:
S¥40 billion+

Growth investments (including M&A): ¥40 billion + α

Financial ground

Equity ratio: At least 60%

I n-house stock investment +dividends: Around¥70–90 billion over three years•S table dividends• Undertake in-house stock investment aggressively, factoring inbusiness performance and financial position (resolved to set
aside ¥30 billion for share repurchases in the first fiscal year)

Asset sales¥15.0–
20.0 billion
Operating cash
flow underMedium-Term
Management
Plan

In-house stock
investment +dividends¥70.0–
90.0 billion¥60.0 billion
Target ROE of at least 8% by FY2025* IP: Industrial Processes

Expanding Strategic Investments to Achieve Our Ideal Future Portfolio

VI: Visual Imaging

LS: Life Sciences

Growth investments(Including through M&A)

¥40.0 billion + α(Total over three years)¥46.0 billion(Total over three years)¥14 billion increase from previous
Medium-Term Management Plan

¥17.0 billion(Total over three years)

PHS: Photonics Solutions

Enhancing Corporate Accounting Sophistication to Ensure theRealization of Our Vision 2030

In the 2nd Medium-Term Management Plan, in addition to establish-by the 1st Medium-Term Management Plan. In particular, we will

Through this 2nd Medium-Term Management Plan, we will implementmonitor strategic investments to increase the certainty of achieving

ing our vision for our business portfolio in 2030, we have shifted ourincrease investment in next-generation product development, includ-business strategies and advance financial strategies on an unprec-

an operating margin of at least 12% and an ROE of 10% or higher inbusiness domains along market lines and clarified our positioning

ing large-field steppers for cutting-edge IC package substrates andedented scale in order to achieve PBR exceeding 1.0 and further

order to realize our Vision 2030 while also working to optimize ourand strategy for each new business domain in order to achieve ourdirect imaging lithography equipment, for which market expansion isenhance corporate value. During the period of the 1st Medium-Termbusiness portfolio.

vision. In the future, we will make strategic investments appropriate

expected, and expand investment in development to broaden medium-

Management Plan, business performance was affected by unex-

Moving forward, we will introduce ROIC as an evaluation indicator

to the positioning and issues relevant to each business domain as

to long-term EUV light source adoption. We are also promoting

pected events such as COVID-19, component shortages and thefor this purpose, and will also move forward with the sophistication

we move forward toward realizing our vision for each businessbusiness creation and new product development for medium- tosoaring price of materials and logistics, and other unexpectedof our internal corporate accounting.

domain by 2030.

long-term expansion in the Life Sciences business, which is a newchanges in the business environment may also occur in the future.

business domain. Furthermore, given that new value creation is

We will aim to minimize the impact of these uncertain risks

ing M&A, during the three years covered by the 2nd Medium-Termnecessary for future growth, we must secure talented employees

through enhanced monitoring and governance that enables early

dialogue with our shareholders and other investors, thereby fulfillingManagement Plan. In addition to bolstering production capacity inwhile also attracting new talented individuals, developing global-

detection and implementation of countermeasures while also work-

the responsibilities of my role.

semiconductor-related fields, where growth is expected, we willminded talent and bolstering talent with diverse academic and tech­ing to achieve an ROE of 8% or more, which is our target for fiscal

continue to expand investment in line with M&A policies in eachnical backgrounds, together with management literacy. We have2025, the final year of the 2nd Medium-term Management Plan.

business domain. We also plan to invest ¥46 billion in R&D overset a frame of ¥17 billion over three years for this investment in

From a medium- to long-term perspective, we will carry out andthose three years, an increase of ¥14 billion from the period covered

human capital.

Our plan includes at least ¥40 billion of growth investment, includ-48

As CFO, I will promote management strategies and finance andcapital strategies in an integrated manner, and engage in active

I would like to ask our stakeholders for their continued support
going forward.

Ushio Report 2023

49

Section 3

Connecting
Social Value to
Economic Value​
Strategic Focus

In order to realize Vision 2030, Ushio will continue
to fully embrace ESG management.
Through our Five Management Focuses, we willcontinue to pursue the creation of both socialand economic value.

50

Ushio Report 2023

51

Section 3

Connecting Social Value to Economic Value

Environmental

GovernanceSocialThree-Pronged Structure for New Business Creation
We have established the Business Creation Division, which integrates R&D, marketing,and intellectual property functions, with a view to creating and providing new value.
Through this division, we will accelerate new business creation aimed at resolvingsocial issues.

ColumnMessage from the General Manager of the Business Creation Division
Setting a Business Creation Division MTP

1Creating Businesses
with Greater Social
Value

Process for Creating New Businesses Geared toward
Resolving Social Issues
Vision for FY2030

ProfileNobuhiro Inosako
Visualization of technical capabilities, intellectual property, and theme progress+ Selection and concentration (objective PDCA)
Improvement of success rate of business creation

Business Creation DivisionMarketing Division
Assess social trends andsocial issues on a global basis
Assess global market trends andneeds through Group-wide
collaboration
Create future-oriented products
and services that can help resolve
social issues

Research & Development
Division
Discover and develop
technologies that can pave theway for the futureFully leverage cutting-edge
technologies by promoting
partnerships with external
researchersIntellectual Property Department
Support provision of new value
to the market
Analyze markets from theperspective of IP assets
 upport the realization of buildingShigh-value-added ecosystems

Engage in future-oriented
technological planning and theory
verification

Vision for FY2030

 reate businesses that address the socialCissues of climate change countermeasures, food initiatives, healthy life expectancy extension, and realizing DX

Core technologies cultivated over the 60 years since our founding

Ushio’s Strengths
Diverse technologies, product lineups, and markets
Industrial Processes

Visual Imaging

Life Sciences

Photonics Solutions
Stakeholders
Customers

Shareholders andother investors

Employees

Suppliers

Local communities
and society at large

Social issues
Climate change / Global environment crises / Worsening food shortages / Changing
lifestyles / Labor shortages / Deepening health issues / Advent of a smart society

52

Senior Executive Officer
General Manager,
Business Creation
Division,
Ushio Inc.

The Business Creation Division was established in fiscal 2022, and we have been working towards
our mission to “resolve social issues through the creation and provision of new value.” In order torealize Ushio Group’s Vision 2030, we must add to our current foundational businesses by creating and developing new businesses that can become core businesses to support the next generation. In carrying out this mission, the basic policies of the Business Creation Division remainunchanged from fiscal 2022. However, in fiscal 2023, we have also established the following
Massive Transformative Purpose (MTP) as the Business Creation Division’s decision-making
criteria for concrete implementation of policies. This MTP is, “Through an ongoing organizational
approach with a realistic view of the future, we will generate and provide sustainable value by promoting innovation to solve social issues and improve the lives of people.” Put simply, in businesscreation, it is difficult to predict three years into the future, but by taking the plunge and looking
further ahead, maybe 30 years into the future, the variables and approach can be simplified and it
becomes possible to make general predictions. In this way, having a realistic view of the future andbackcasting from there to the present enables us to make decisions regarding our current activities,
for example, regarding which choices are reliable and will lead to a realistic future.
2022 2023 Moving beyond time

Fiscal 2022 was the first fiscal year
for the Business Creation Division,and in parallel with promoting commercialization action in line with various initiative themes, we visualized
progress in each area using commercialization phases. In order to makeeffective use of resources throughappropriate selection and concentration, we also focused on establishinga PDCA system based on objective
criteria. The fact that it took longer
than expected to obtain consensus
from the people involved is one point
for reflection in this area.

Changes in Number of Themes by Commercialization Phase(illustration)
Phase

Present

2030

A Industrialization
Darwinian Sea
B Commercialization
Valley of DeathC Development
Devil RiverD Research
Selection
E Idea: Ongoing Themes: Themes discontinued based on selection and concentration

After that, we have been working to improve the reliability of new business creation by analyzing
Ushio’s past new business creation activities, then improving on weaknesses and further enhancing
strengths. We visualize trends regarding our technology and intellectual property along market and timeaxes and work to grasp the progress of each initiative theme from three major perspectives: marketing,merchandising and sales dynamics. Through this, we are improving our PDCA cycle based on the aforementioned objective criteria, enabling rotation on a monthly basis. These are just some of the actions
we are taking to achieve the universal goals of the Business Creation Division, moving “beyond time” to“developing human capital and a system for sustainable, continuous business creation.” From the­perspective of a race against time, creating new businesses requires flexible and timely responses tochanges in market conditions, and we are promoting actions such as open innovation in order to proactively incorporate new knowledge and approaches both internally and externally, while also working to
improve the speed with which we can provide new value to the market.

Ushio Report 2023

53

Section 3

Connecting Social Value to Economic Value

Environmental

1

GovernanceSocialCreating Businesses with Greater Social Value

Ushio’s Potential for Creating Businesses with Greater Social Value

Healthy life expectancy
extension

Food initiatives

Environmental
initiatives

Life Sciences field

Ushio has created a vast array of products by leveraging the technologies it has cultivated since its founding.
This product creation has been strongly supported by our core technologies for controlling light, and our keen ability to perceive social issues.
Going forward, we will continue to utilize our core technologies to provide solutions that resolve social issues, thereby supporting
human well-being and societal growth.

ICT

Enhanced performance ofsemiconductor devices

Industrial Processes field

Diverse technologies

Diverse product lineup
 xcimer lampsEXenon lamps
Lasers
LEDs
Plasma ontrolCMedical andbiotechnologies
Optical processing

Through the Business Creation Division, we are drawing on our long-cultivated technologies, together with our various light sources(lamps, LEDs, lasers) and optical design capabilities, to establish a future business pillar through efforts to address issues in the Life
Sciences domain, such as food initiatives, environmental issues, and healthy life expectancy extension.
We are also currently focusing on the Industrial Processes domain, specifically fields such as semiconductors and LCDs, which are
our major businesses. We will contribute to this domain by leveraging our light source technologies, including LEDs, various kinds oflasers, and excimer lamps, thereby establishing it as a foundation for the manufacturing process of new products aimed at the future.

Light source
manufacturing

Power source
development

Opticaltechnologies

Machinery andprecision control
technologies

Glass and metal processing
technologies

Microfabrication

Analysis andsimulation

Sealing and inspection
technologies

Core technologies cultivated since our foundingCore Technologies

New Technologies

Importance of Issues

Social Issues

Owned Technologies

Solutions and ProductsLight source manufacturing /Power source development

Analysis and simulation

Optical technologies

Equipment technologies

Optical processing
technologies

Microfabrication
technologies

Medical / Biotech

Care222

Life Sciences

Healthy Life
Expectancy
Extension

Organs on Chip

P.61

Photo Dynamic Therapy (PDT)
Vision care
New pulse spectroscopy technology

Food Initiatives

Liquid fertilizer analysis system
Land-based aquaculture system

Climate ChangeCountermeasures eduction ofR
GHG emissions

 utomatedA
driving / EVs
LCDs
OLED

Realizing DX

P.60

 irect air capture / N2O decomposition /D
Methane conversion

P.60

Perovskite solar cells

Energy storage
AR/VR

Industrial Processes

P.60

Increased production of plant proteins nhancedE
performance ofsemiconductor
devices

LD / LED
Battery manufacturing process
Excimer lamps
Photo-alignment equipment
EUV light sources for
EUV photomask inspection

P.61

P.77

Package processing

P.76

Thermal processing

P.61

Light sources for lithography

To date, Ushio has expanded its business domains from Visual Imaging to Industrial Processes through the use of light as energy.
Going forward, we will strive to combine our core technologies—light sources and analytical and optical technologies—with newones in an effort to create businesses with greater social value centered on the Life Sciences domain.

54

Ushio Report 2023

55

Section 3

Connecting Social Value to Economic Value

Fundamental Technology Department

Research and Development

This department’s mission is to expand the possibilities of light by deepening Ushio’s technologies andexploring new applications for these technologies inorder to create new value. It is building a fundamental technology development system as part of ourdevelopment processes while working to develop
new analysis, simulation and optical process
technologies as part of the strong technologicalfoundation that will be needed in the future.

R&D and IP Strategies to Create Businesses
with Greater Social Value
We will help address the issues of society bycontinuing to create and provide new value.

AFM
SEM-EDS
XPS

XRF
XRD
ZYGO

EGA

GC-MS

Research & Development System
The development of new business entails closely linking the marketing capabilities (the ability to identify social issues) and the technological capabilities (the ability to conduct R&D and manufacture
products) necessary for creating new value. In order to establish abusiness based on the provision of this new value, we must focus
on developing a sales mechanism based on sales dynamics, andensure the management of intellectual property (IP).
Marketing and R&D are often compared to the wheels of a carwhile IP management is considered the steering wheel. Without
strategic IP management, providing the market with the type ofvalue expected would be extremely difficult, and the potential fordeveloping new businesses is at its highest when these three essential elements are provided to the market in a timely manner.

The Business Creation Division converges these essential basic
functions (marketing, R&D, and strategic IP) and, based on
Marketing & Merchandising + Sales Dynamics (M&M + SD) as theaction guideline, each member spurs the creation of new businesses by teaming up with Group affiliates and business partners.
Generally speaking, the creation of new businesses is not an
endeavor with a high probability of success. However, through theself-help efforts of each team based on M&M+SD, we are working tosteadily create even stronger businesses by refining our ability tocapture the essence of issues, to uncover new technologies that
contribute to resolving issues, and to quantitatively assess andascertain the target market, with a focus on our core areas.

M&M+SD (Marketing & Merchandising + Sales Dynamics)

GRA

Vickers hardness testers
Tensile testing machinery

Analysis and simulation technology is an area of core technology that Ushio has
cultivated since its founding. Understanding the principles of science through technologies for analyzing molecules, atoms and surface conditions on a microscopic
scale is an essential part of new product development and maintaining high quality
standards. By developing proprietary analysis technology tailored to our products, wehave elevated its position as a core technology.
In the field of light sources for EUV photomask inspection, we are currently developing
analysis equipment to simulate the environment inside these light sources and properly
understand the science of what occurs there in order to maintain and enhance ourtechnological superiority in areas such as stable capacity utilization and performance.
Moving forward, we will continue working to develop new analytical technologies
that will be needed in the future with the aim of creating and providing new value toresolve social issues while expanding Ushio’s core competencies.

LM

SurfaceanalysisGas
analysis

Spectralanalysis

Chemicalanalysis

Physicalproperty
analysis

Pretreatment
technology

FT-IR

UV-visBusiness Creation
Division

Steering wheel

Strategic IP

Research and Development
Wheels arketing and
M
R&D

VUV

ICP-MS

Polishing machinery
Ion milling
Cutting machinery apor depositionVmachinery
FIB

Ushio’s analysis devices

Simulation Technology as a Fundamental Technology
In the process from research and development to commercialization, there are four issues that must be overcome:shortening development periods, reducing costs, improving design quality, and enhancing added value. Simulation technology
is one means through which these issues can be addressed. For example, simulating numerous design factors and visualizing
phenomena enables the creation of well-founded design ideas. This can also enhance the performance improvements thatcan be achieved in a short development period.
Ushio has built up a wealth of proprietary technologies by accumulating analysis technologies deployed in response torequests. We convert these proprietary technologies into design tools for provision to business divisions while working todevelop new analysis technologies that provide analysis-based proposals to take on new challenges and issues. In addition
to existing products such as ultra-high-pressure UV lamps and excimer lamps, we will continue to expand the scope of ouranalysis to include a wide range of new products, including light sources for EUV photomask inspection.

Engine embers of theM

Marketing56

Analysis as a Fundamental Technology

Simulation of
convection
inside a lamp

Optical Process Technology as a Fundamental Technology
We develop elemental technologies based on the keywords of surface modification and thin film modification as processing technologies (optical processes) that can maximize the strengths of light. When­setting development themes, resolving social issues relating to climate change countermeasures and therealization of DX is essential, and we emphasize considerations based on science, including photochemistry,in our work. We focus on the environments where light is used and the materials that are irradiated as wework to understand the mechanisms of various phenomena associated with light irradiation and develop
new optical processes. In addition, we actively present our results in academic forums, aiming to promote
open innovation through discussions with a wide range of researchers from both industry and academia.
Through these efforts, we are going beyond providing light sources and equipment to also propose
ways to utilize them, bringing us closer to our goal of being a “light” solutions company.

Major Activity Themes urface modification
S
technology for next-generation(Beyond 5G/6G) highfrequency circuit boards
Thin-film modification
processes for perovskite solar
cellsAtmospheric pressure plasma
reactors and related
application processes

Ushio Report 2023

57

Section 3

Connecting Social Value to Economic Value​​Research and Development

R&D and IP Strategies to Create Businesses with Greater Social Value
Intellectual Property Strategy

IP Landscapes

At Ushio, we are proceeding with IP strategies that are linked to the business strategies of each of our four regions, as described below, towardrealizing Vision 2030.
By making optimal use of both proactive and defensive IP strategies according to the growth stage of each business, we help our customers
realize sustainable growth and expand their businesses.

2023/
1H

IPL Plan

Products under development

New Customers

Growth domain

Growth domain

Products under development × existing customers

Strengthen development of new technologies andproducts in line with market and customer needs

EUV light
sources(for photomask
inspection fornext generation
semiconductors)• Develop a patent portfolio• Strengthen IP clearance

Proactive IP strategies• IP landscape (analyze customer needs)

Existing products

Creation
Business

Exploration and analysis ofpromising areas in linewith SDGs

Phase• IP landscape (propose action plan for M&As and product development)

Existing products × new customers
Existing
industrial lightsources / opticalapplication
devices

Defensive IP strategies• Develop a patent portfolio / Exercise IP rights• Conduct IP due diligence for the purpose of engaging in collaborations and partnerships

Intellectual Property strategies

New businessproposals in the
climate area

1. Climate 2. Food
3. Healthy life 4. Industry

Exploration of new business at
Ushio through IPL

Support for advancement
and realization of
proposed projects

Growth domain

Existing products × existing customers
 limination of competitors to secure profits forE
survivorsAbsorption/integration of competitors

IP landscapes (IPLs) are a useful tool for resolving management issues. Taking patent information with high objective
fairness as a starting point before adding other informationand supplementary analysis, they provide a bird’s-eye view ofindustries and support strategic recommendations, such aslines of attack, based on a company’s position. Ushio has
divided its IPL into two phases with different content andpurposes. Phase 1 aims to deepen existing businesses, while
Phase 2 explores new themes that can generate synergies
with the Company’s core technologies. To advance our use of
IPLs, we have established IPL projects with the IP Department
at the center and the participation of in-house technicaldepartments and external experts. In fiscal 2022, two new
development themes directly linked to resolving social issues
based on awareness of the SDGs were proposed to management, and we are working to explore new themes further infiscal 2023.

2025/
2H

Growth strategy / New business proposals: Activities to enhance Ushio’s corporate value

Proactive IP strategies

Existing domain

2025/
1H

Fixed-point evaluation and future prediction of Ushio’s intellectual property value(patents held by business divisions)

2
Defensive IP strategies

2024/
2H

Candidate businesses: Fixed-point evaluation of future potential andvalue of business themes

1

Products under development × new customers
 trengthen marketing capabilities
SInvest in development oriented venture companies,
M&As
Strengthen industry academia collaboration

2024/
1H

Existing businesses: 1. Handling requests from related business divisions,2. Fixed point observation of important matters

Phase
Existing Customers

2023/
2H

 ddress customer needs and develop markets
AResolve social issues

Defensive IP strategies• Develop a patent portfolio / Exercise IP rights• Strengthen IP clearance

The Ushio Group’s Intellectual Capital
Environmental
hygiene devices

Proactive IP strategies• IP landscape•S trengthen overseas patents

Business strategies

01
The number of patents that Ushio holds in the businessareas of Industrial Processes, Visual Imaging, Life Sciences
and Photonics Solutions is shown in the table on the right.
The percentage of core patents is over 10% in all areas,
and the patent group is structured to cover foundational,
growth, and creation businesses.

Business domain

Core patents / All patents

Core patent ratio

Industrial Processes

70/447

15.7%

Visual Imaging

13/67

19.4%

Life Sciences

44/15528.4%

Photonics Solutions

38/20019.0%

In-House Courses on Intellectual Property
We believe the inspiration behind the strength of our IP rights, which ensure a competitive edge over our rivals, is the method in which weresolve technical issues, which has been shaped through the process of hardships we have endured in pursuit of their resolution. Continuing to
improve the intellectual property capabilities of all technical staff is essential in order to transform problem-solving methods created byresearchers and development staff into impactful patents. Based on this idea, Ushio has established the following intellectual property training
courses, and plans to provide training to approximately 400 technical employees over the three years from fiscal 2021 to 2023.

02

Life Sciences Business
2.50
2023

2.00

Employee Training Sessions

Executive Training Sessions

Why companies file patents

Avoiding risks relating to patents held by other companies

Tips for reading patents quickly

Utilization of rights (in order to make successful legal arguments)

How to derive technical information from patents

Case studies (examples of the Company’s successes and failures)

Introduction to and use of invention and idea creation methods

Applications and fees outside of Japan

Competitive Impact

2022

1.50
2021

1.00

Industry Average

0.50

0.00
0

50

100

150

200

Number of Patent Families
Summarizing inventions from developed products
Tips for presenting arguments to examiners

250

Under the Creation Business,
which has been an area of focus
for Ushio in recent years, thequality of patents as measured
by the Competitive Impact (CI)value in the Life Sciences business, in which environmental
hygiene is a central field, has
increased rapidly over the past
three years and is significantly
above the industry average (CI =1). This indicates that the patentgroup is well-balanced in termsof both quality and quantity.

Based on research conducted by LexisNexis using PatentSight (until March 2023). The size of each circle represents the competitive
advantage and overall strength of the patent portfolio.

Case studies of items that can be patented

58

Ushio Report 2023

59

Section 3

Connecting Social Value to Economic Value

Environmental

1

GovernanceSocialCreating Businesses with Greater Social Value

Examples of Business Creation with Greater Social Value

Climate Change Countermeasures

Food Initiatives

Healthy Life Expectancy Extension

Focus Areas for Contributing to theRealization of DX

Promoting technological development
aimed at reducing GHG

Shift to sustainable food production systems and providing
sufficient stable food supplies for human development

OoC: Providing a platform to speed up drug development

Battery manufacturing processes: Contributing to improved
performance through surface treatment technology

In terms of action against climate change, we have established avision based on creating a world where global net zero carbon emissions and the wellbeing of people are in harmony with each other.
We aim to help mitigate climate change through light and electricaldischarge technologies. We have selected several climate change
countermeasure themes in consideration of carbon and nitrogen
circulation with the aim of reducing greenhouse gas (GHG) emissions. Under each of these themes, we are engaged in co-creation
with numerous companies and organizations as we work towards
their commercialization.

With the global population projected to rise to approximately 9.7
billion by 2050, demand for food is expected to increase significantly. Against this backdrop, serious food shortages due to limited
water supplies and the impact of agricultural land development andchemical fertilizers on global warming are areas of concern. In the
future, the creation of new food production systems that increase
productivity while being eco-friendly will be crucial. Ushio has
started by aiming to produce soya beans, which have high utility as
an alternative source of protein, in plant factories, and we are developing optical technology to improve resource efficiency and cropfunctionality. We will continue working to create systems capable ofproducing large
quantities of food
all year regardlessof the climate in the
country concerned.

Ushio reactor

Exhaust fan
Primary
sedimentation tank

Bioreactor

BlowerFinalsedimentation tank

Installation of gas decomposition reactor in sewage treatment (illustration)

Promoting social application of solar batteries
As part of the social application of cylindrical solar batteries, Ushio
is working with and promoting the Tokyo Metropolitan Government’s
fiscal 2022 University Researcher Business Proposal System. We
are also working to contribute to the creation of next-generation
solar batteries throughresearch on technologythat utilizes light inmanufacturing processes.

Contributing to the establishment of sustainable land-based
aquaculture systems and global food security
The proportion of people who include fish in their diet is growing
worldwide, and there have been continuous efforts to increase
global aquaculture production. At the same time, Japan has seenannual fishing catches decrease due to factors such as aging workforces in the fishing industry. Ushio launched its land-based aquaculture project to do what we can to improve this situation. We
collaborate with large companies considering land-based aquaculture, working to resolve issues they are facing with the aim of counteracting falling catch rates in Japan. By applying our specialist
optical technology, we will continue to contribute to food security
and the widespread adoption of land-based aquaculture in Japan and beyond.

*1 OoC: Organs On Chip
*2 U.S. Food and Drug Administration (FDA) Modernization Act 2.0*3 A service offering dialogue-based joint development of original chips for pharmaceuticalcompanies*4 AMED: Japan Agency for Medical Research and Development*5 Second interim evaluation committee of the Foundational Technology Development
Project for the Promotion of Regenerative Medicine and Gene Therapy Industrialization

GlobalPharmaceuticalcompanies

Open innovation
Ushio

Research on photoresponsivity in fish
Cylindrical solar battery
verification testing60

Modernization of pharmaceutical screening (2030)
Next-generation medicine /Reduction of animal testing

Academia

Product development / Mass production

Basic research / Verification testing

Collaboration with pharmaceutical companies and academia leading to
next-generation drug development

Discharge Capacity [mAh]

Example of improved battery
performance through surface treatment

Semiconductor thermal processing: Contributing to energy
saving in semiconductor manufacturing processes
As semiconductor performance advances, more power is required
to manufacture them, resulting in high demand for energy saving.
In response, we have demonstrated that energy saving in heatingprocesses can be achieved by combining specific materials with
LED heating, and presented our results at an international academic
conference. The graph below shows a comparison of energy consumption in ferroelectric heating processes, which are expected tohave applications in next-generation memory materials. It showsthat using LEDs can lead to significant energy savings compared toconventional halogen lamps (HL). We
will continue to pursue the possibilities of photoheating in areas beyond
energy saving as we aim to contribute to next-generation semiconductor manufacturing processes.
[arb. unit]

Deodorizing equipment

Plant cultivation using 100% artificial light andliquid fertilizer management

Energy consumption per unit area

In order to reduce levels of nitrous oxide (N2O, which has high global
warming potential), Ushio has been working on ways to use its
excimer lights to decompose N2O. In addition to progress in terms of
performance and academic collaboration, this project was selected
as the FY2023 Research Theme for Sewers Application Research by
the Ministry of Land, Infrastructure, Transport and Tourism of Japan.

as the passing of the FDA Modernization Act 2.0*2 in the UnitedStates at the end of 2022, enabling alternative testing methods to be
used for new drug registrations by removing the requirement foranimal testing.
Against this backdrop, our OoC projects are also moving forwardwith development aimed at pharmaceutical companies in Europe,
the United States and Japan. We have received inquiries from several
major pharmaceutical companies, with the potential to lead to significant sales. We are also actively engaged in awareness-raising activities,
such as cosponsoring OoC-related events, in which pharmaceuticalcompanies participate, in Japan and overseas, and holding exhibitionsof the development results and chip workshop*3 initiatives.
In Japan, we are participating in a group led by the Tohoku
Institute of Technology as part of an AMED*4 project related to thepractical application of OoC and have established our position as an
OoC manufacturer. We are working on the social application of OoC
through a system of industry-academia-government collaborationthat includes pharmaceutical companies. Ushio has also been cited
as a domestic OoC manufacturer in a report by Japan’s Ministry of
Economy, Trade and Industry*5, one example that shows how our
OoC initiatives are gaining recognition, including among major
pharmaceutical companies in Japan and overseas.

Lithium-ion batteries are manufactured using a combination ofdifferent materials. One such material is aluminum positive electrode current collector foils, and the graph below shows the resultsof applying Ushio’s excimer vacuum UV (VUV) and atmosphericplasma (AP) surface treatment technologies to this material. It
shows that the discharge capacity after VUV/AP treatment
increases compared to an untreated surface.
This is due to the cleaning effects of VUV/AP treatment and cancontribute to improving the cruising range of electric vehicles. We
will continue to develop
4.2
Untreated
VUV
processes for solid-state
4.0
AP
and other next-generation
3.8
batteries, and will keep
3.6
3.4
improving manufacturing
3.2
technologies and
3.0
performance.
15
0
5
10
Voltage [V]Promoting technological development
to reduce N2O levels

With intensifying competition in new drug development and the shift
to the latest biopharmaceutical products, the challenges faced bypharmaceutical companies in terms of drug development are growing greater year by year. This makes reducing development periods
and efficient drug development testing crucial issues. Conditions for
OoC*1 are also growing more favorable due to developments such

HL

LED

Energy consumption comparison in
ferroelectric heating processes

Ushio Report 2023

61

Section 3

Environmental

Connecting Social Value to Economic Value​​2

Developing
Our Diverse Talent to
Get Closer to
Our Vision

SocialHuman Capital Strategy and Connection to Corporate Value

Revised System for Older Workers

In addition to Ushio’s major businesses of Industrial Processes, Visual Imaging, Life
Sciences and Photonics Solutions, we continue to take on new challenges to resolve
social issues through the creation of new businesses. In order to achieve this, it isessential that our employees adopt a global and logical mindset. We will continue
to create new value through organic connections between diverse personnel.
Specifically, we are aiming to expand our pool of talent with both the technicalbackground and the mind for business to understand Ushio’s strengths and develop
solutions based on knowledge from various academic fields. In terms of educationand training, in addition to our existing selective human capital development program“Ushio College,” we started to offer the self-selected learning program “Ushio Learning
Place” in September 2022 as a way to support employees seeking self-driven
learning.
From a recruitment perspective, in addition to hiring new graduates, we are also
focusing on attracting mid-career hires through means such as direct recruiting. Overthe past three years, we have expanded our diverse talent through a hybrid approach,with our intake comprising 67% new graduates and 33% mid-career hires.

With a super-aging society and a shrinking working population, circumstances for older workers
in Japan are changing significantly.
Ushio has enhanced conditions for employees aged 60 and over, and in April 2023, we also
introduced a system to further support the activities of these employees, based on the twinpillars of “contributing to organizational goals,” and “succession, handing down, training, andsupport (succession and handing down of technology, skills, know-how, etc., and training andsupport of younger employees based on abundant experience and knowledge.)”In order to support the diverse working styles and values of these employees and enable themto allocate time to activities such as nursing care and volunteering, we have also introduced adual-track employment system and a selective system specifically for older employees. This enables
employees to choose to work three days a week or take on side jobs under certain conditions.

Human Capital Strategy to Realize Vision 2030
GlobalManagement Literacy
The clear thinking toestimate future risks andopportunities based on past data

Understanding of diversity and inclusion,and the volition to put it into practiceConcrete measure

Concrete measure
Providing opportunities to acquire knowledge about
corporate management necessary for promoting
strategies, including finance, accounting,and legal affairs

Promoting global mobility measures toenable borderless employee activity

Vision for FY2030

Governance

A career seminar for mid-career employees

Launch of Human Capital Development Committees
Starting with the 2nd Medium-Term Management Plan, Ushio has transitioned from the term “human resources” to “human capital,” positioning
employees as important assets that enhance the Company’s corporate value. Among this work, selective human capital development is aparticularly important initiative, and Ushio College, which was introduced during the 1st Medium-Term Management Plan, is playing a central
role in our systematic approach to developing the talent who will shape Ushio’s future.
Under the 2nd Medium-Term Management Plan, we established five Human Capital Development Committees within our headquarters andbusiness divisions, based on two priority issues: visualizing the effects of training and connecting to business needs. These committees arechaired by the general managers of each headquarters and business division. The HR Department acts as a business partner to each department’s Human Capital Development Committee, promoting the development of selected talent in line with the nature of their work. Human
capital development policies in each division are discussed by Human Capital Development Committees and shared at the Global Human
Capital Committee (GHCC), which discusses Company-wide human capital strategies, and are connected to human capital initiatives such as therotation of talent between headquarters.

Ideal Human Capital ractice Group management with diverse
P
personnel who can contribute to theachievement of Vision 2030 and provide
systematic training opportunities forfurther development
 ealize global mobility and enableRborderless employee activity throughhuman capital management

Technical Backgroundfor Realizing Vision 2030

The technical background to understand
Ushio’s strengths and develop solutions
based on those strengths

DX Mindset

The clear thinking totranscend heuristics anddesign business in a data-driven way

Concrete measure

Concrete measure
DX training and bolstering of talent toenable improved productivity andcreative initiatives

Enhancing recruitment ofprofessionals in diverse academic fields

Vision for 2030

Vision 2030: A ‘light’ solutions company

62

Establishment of Global Mobility Section
Visualizing human capital within the Group and creating truly rewarding work environments inline with each person’s career vision is crucial if we are to take on the challenges posed by social
issues around the world.
In order to identify and resolve social issues that differ between regions, it is important for
Ushio employees around the world to express their own opinions while ultimately finding ways tomove in a unified direction.
In addition, the fact that using the Internet to connect and work with colleagues around theworld has become the norm could be considered a positive byproduct of COVID-19. The impleMembers of the Global Mobility Section
mentation of working styles whereby an employee can be based in the United States while working
as a business leader for the Group and connect with teams in Japan and other countries has
begun, and we hope to promote global personnel transfers that do not involve relocation in future.
To accelerate these activities, we established a new Global Mobility Section within the Human Resources Department of Ushio Inc. in April
2023. Online networking between human resource personnel from Group companies in Japan and overseas has begun, and our talent visualization efforts have commenced.

Ushio Report 2023

63

Section 3

Environmental

Connecting Social Value to Economic Value

3

Creating Working
Environments Where
It Is Easy to Produce
Results

Build a corporate culture of mutual
respect that embraces diversityImplement health and productivity
management that enables employees tobe physically and mentally healthy andenjoy their work
 chieve high engagement levels thatA
enable the Company and employees togrow together

Governance

D&I

Introduction of Employee Stock Compensation System

Promoting Diversity and Inclusion (D&I) is an important initiative in order to achieve“Creating Working Environments Where It Is Easy to Produce Results,” the third of ourFive Management Focuses. We have stated that we will aim to create “a global workplace culture in which a diverse range of background and values, in addition todiverse attributes, are acknowledged and respected.” As part of our work to achievethis, we are carrying out the D&I Project through the support of volunteer employees,
and initiatives are being developed in collaboration with relevant departments. In
fiscal 2022, we carried out activities to align with the needs of employees in the field,
such as career- and nursing care-related seminars and surveys of employees who
work from home and employees with disabilities.
In addition, in the fiscal 2022 Annual Securities Report, we disclosed the proportionof women in managerial positions, the rate of men taking childcare leave, and differences in remuneration between men and women. The proportion of women in managerial positions was 16.7% for the Group and 4.3% for Ushio on a non-consolidated
basis. In response, we have set 2025 targets of maintaining a proportion of 15% ormore as a Group and 10% on a non-consolidated basis. We are making efforts toraise this ratio at Ushio while maintaining Group-wide levels.

We are taking various measures with the aim of achieving high engagement levels that enable the Company and employees to grow together inline with Vision 2030.
In fiscal 2023, we introduced an employee stock compensation system through an employee stock ownership plan covering Group
companies in Japan. Under this system, employees receive shares in the Company as compensation for the positive impact of achieving therequired targets of the 1st Medium-Term Management Plan and as a means of supporting collaboration between management and employees
under the 2nd Medium-Term Management Plan, which started in fiscal 2023.
In addition to further increasing employees’ investment in business performance and enhancing motivation to work with management toimprove medium-to long-term corporate value, we will look to encourage uptake of the employee stock ownership plan as a means to help
employees build assets.

Please see the following URL for
more details.
https://www.ushio.co.jp/en/sustainability/
society/employee/diversity.html

Health and Productivity Management

Vision for FY2030

SocialWe believe that “human capital” is the most important asset underpinning the sustainable growth of the Company. To that end, we are striving to create safe, secure,and employee-friendly work environments through such means as adjusting work
hours, promoting a work–life balance, supporting employees returning from childcare
leave, and promoting measures for balancing work with medical treatment.
We were certified as a 2023 Health & Productivity Management Outstanding
Organization (Large Enterprise Category) in recognition of such efforts, the second
consecutive year in which we have received this distinction.
We have received particularly high praise for our efforts in supporting employees
returning from leave and balancing work with medical treatment, adjusting work
hours and promoting a work–life balance, and effectiveness and verification in
response to issues.
Moving forward, through our strategic map for health and productivity management, we will visualize management issues and the health issues that must be
resolved to tackle them, maintain and improve the physical and mental health of all
employees, and further develop work environments that allow employees to continue
to take on challenges with a sense of fulfillment and feeling of growth. To achievethis, we have set specific numerical indicators for each of
the three health goals of “improving lifestyles (physicalhealth),” “improving mental health,” and “increasing productivity (work-related health)” and will promote data-driven
quantitative goal setting and awareness, raising activities.

Please see the following URL for more details.

Engagement Survey
Survey Implementation and Taking Results on Board
We have carried out engagement surveys since fiscal 2021 as a means to visualize employee engageEngagement Scores for Fiscal 2022
ment. At Ushio, we define engagement as “a state of feeling valued through relationships with theCompany and co-workers and feeling motivated to make an active contribution.” The engagement scoreindicates the percentage of employees who answered affirmatively to questions indicating that this is thecase for them. This was carried out for Ushio Inc. in fiscal 2021 and was expanded to domestic and%overseas Group companies in fiscal 2022. Based on the survey results in the first fiscal year, we havecome to understand that “understanding of strategies,” “provision of growth opportunities,” and “embracing of diversity” are three key themes strongly correlated with employee engagement. Our efforts toenhance understanding of strategies with the aim of further improving engagement have included town
hall meetings with the president and the development of e-learning and other tools.
Ushio’s engagement score for fiscal 2022 was 52%. There is still progress to be made in our efforts to improve engagement, and we willcontinue our activities as we work to achieve our target of a 10 point increase compared to fiscal 2022 during the period of the 2nd MediumTerm Management Plan.

52

Initiatives of fiscal 2023
1. Enhancement of strategy-related communication
We continue to hold town hall meetings with the president, have expanded their scope beyond Japan toinclude overseas locations, and now also hold town hall meetings with other top management personnel
in addition to executives. Through this, we aim to foster closer communication over a wide range of areas.
2. Understanding of and empathizing with strategy and Five Management Focuses
We have created a workbook as a support tool to encourage employees to take ownership of our strategies,
and are using this workbook as a basis for workshops within each department. We are developing asystem and tools that help employees to consider their own careers and feel the connection between
their own work and the Five Management Focuses.

An overseas town hall meeting

3. Connection between our Vision and careers
As part of efforts to promote autonomous career development for employees, we have introduced
workshop-based talent support and Self-career Dock System.

Building Together
Ushio Group 2030 Workbook

https://www.ushio.co.jp/en/sustainability/society/employee/health_and_productivity.html

64

Ushio Report 2023

65

Section 3

Connecting Social Value to Economic Value

Environmental Policy

Sustainably
Reducing
Environmental
ImpactAt Ushio, we have promoted initiatives to reduce our environmental impact based on
the aforementioned basic philosophy and periodically review our efforts in consideration of the global situation and business environment. Reducing our environmental
impact is one of the important issues covered by our Five Management Focuses.
We have established a vision for 2030 and work to achieve it by setting short- andmedium-term goals through backcasting.
The impacts of climate change extend across all businesses. In terms of activities
at business locations, we are making concerted efforts to mitigate these impacts inconsideration of Japanese government policy and global trends. As part of this, weare furthering our efforts to improve productivity and use renewable energy.
In addition, for manufacturers providing products that use energy, including Ushio,
the proportion of climate change impact that results from product use tends to behigh, which poses a significant risk. However, while various companies are working
to combat climate change, we believe that this is an opportunity to become the company that customers choose if we can develop products that reduce the impact on
the environment.
We have expanded our theme of creating safe, secure, and green solutions

Vision for FY2030

to cover all business areas, including products, development, and services. To promote green design and development that contributes to energy saving, we haveestablished energy saving as one of the certification criteria for our proprietary supergreen products. We will continue to contribute to energy conservation by promoting
the sale of these products.

 stablish a resource circulation modelEand a model for coexistence with nature,
based on promoting biodiversity
conservation activities esolve social issues by cuttingR
GHG emissions across the value chain ffer products and services that lowerO
environmental impact

GovernanceEfforts to Realize a Carbon-Free Society

Basic Philosophy
We at Ushio recognize symbiosis with the global environment to be one of today’s
most important challenges for enterprises. We pledge to contribute to the creationof a sustainable society by incorporating measures for environmental protection
into every aspect of our business activities.

4

SocialEnvironmental

Efforts to address climate change are an important aspect ofachieving our Five Management Focuses. To that end, we havecreated a vision to work toward with a view to 2030, and have established targets accordingly. However, revisions to these targets havebecome necessary due to the constantly changing global environment. We have set targets for reducing CO2 emissions from ourbusiness sites (Scope 1 and Scope 2) that have been certified by the
Science Based Targets initiative (SBTi) and have formulated longterm plans to realize these reductions. In 2018, we set a target of a
21% reduction in Scope 1 and Scope 2 emissions by 2030, comparedwith fiscal 2017. This is in accordance with the SBTi guidelines, andsubsequently received SBTi certification. In 2020, we revised thistarget to a 33% reduction by 2030, compared with fiscal 2017. Thisnew target aims to limit the increase in global temperature from theprevious 2°C level to well below 2°C. However, giving consideration
to the Special Report on Climate Change of 1.5°C, issued by theIntergovernmental Panel on Climate Change (IPCC) in 2018, thediscussions held at the 2021 United Nations Climate Change
Conference (COP26) in 2021, the revisions to SBTi certification
standards, and the Net-Zero Standard of the SBTi, we raised thistarget to a 45% reduction by 2030, compared with fiscal 2017, withthe overall goal of becoming carbon neutral by 2050. With the establishment of this target, we have been steadily implementing initiatives to reduce GHG emissions on Group-wide, aiming to realize acarbon-free society.

Path to Becoming Carbon Neutral by 2050

Expected Emissions Reductions through the Introduction of
Renewable Energy

Establishment of Targets for Renewable Energy
Introduction

GHG emissions
Expected reductions comparedwith base year throughrenewable energy introduction

Selected as a Modal Shift Initiative Excellent Business Operator
Our Gotemba Division was selected by the 2022 Eco-ship Modal Shift Business
Execution Committee as an Excellent Business Operator, being recognized by the
Eco-ship Mark Certification program for the first time.
The Eco-ship Mark Certification program was launched in fiscal 2008 to promote
the switch from land transport to sea transport, which has lower CO2 emissions andis highly energy efficient. The Eco-ship Modal Shift Business Execution Committee,
comprising members from organizations such as the Maritime Bureau of Japan’s
Ministry of Land, Infrastructure, Transport and Tourism and ferry operators, certifies
shipping and logistics companies that use sea transport at or above a certain ratewith the Eco-ship Mark as proof of their contribution to environmental efforts.
Where transportation had only been carried out withtrucks, we succeed in creating an integrated system that
also incorporates sea-based transportation. We also reduced
the number of shipments by consolidating lots, resulting inlower CO2 emissions and transportation costs.

100% introduction ofrenewable energy atdomestic business sites
2017

2020

2025

2030

2035

2040

Re

du

cti

on

tar
ge

ts

2045

2050

(FY)

GHG emissions

Energy conservation

Targets
Renewable energy

Carbon neutrality of the
Ushio Group
Carbon neutrality ofdomestic business sites
2017

2020

2025

2030

2035

2040

2045

2050

(FY)

One extremely important initiative in order to become carbon neutral
by 2050 is the introduction of renewable energy. To that end, we
have established targets for renewable energy introduction and areworking to accomplish these targets in tandem with our other environmental initiatives. As one of these targets, we aim to realize the
100% introduction of renewable energy at all domestic businesssites by 2030, and we are examining the formulation of similartargets at our overseas business sites.
Specifically, we are continuing to gradually introduce solar power
generation through measures such as installation on the roofs ofbuildings at our Harima and Gotemba divisions. We are moving to
replace existing purchased electricity with renewable energy, andour Harima Division has switched its purchased electricity to
CO2-free electricity.
In addition, we continue to monitor GHG emission reduction
targets for the entire Group. In particular, we will promote initiatives
with the aim of realizing the 100% introduction of renewable energy
at all domestic business sites by 2030.

Eco-Ship Mark66

Ushio Report 2023

67

Section 3

Connecting Social Value to Economic Value

4

Sustainably Reducing Environmental Impact

As a result of analyzing the financial impacts of risks and opportunities of high importance, we identified that flooding and other natural disasters would have a significant impact on our production bases, especially under the 4°C scenario. Meanwhile, we confirmed that we could mitigate the impact of climate change-related risks by making appropriate insurance arrangements at the applicable production bases.
Time
Frame

Financial Impact of Climate Change-Related Risks and Opportunities

Mediumterm

Enactment of a carbon tax on GHG emissions would increase operating costs by ¥200 million underthe 1.5°C scenario and by ¥160 million under the 2°C scenario.*Long-term

Demand for minerals could tighten following the increased demand for low-carbon technologies(solar power, EV batteries, etc.). As a result, mineral prices and raw materials prices could rise.

Profit losses due todrought

Mediumterm

Product production could be delayed or suspended due to restrictions on water intake in the wake ofwater shortages, and profit losses could occur as a result.

Property damage andprofit losses causedby floods

Short-term

Product production could be delayed or suspended due to damage to our production bases causedby floods. The related property damage costs and profit losses would total ¥6.68 billion under the
4°C scenario. However, ¥6.67 billion of this amount could be covered by insurance.

Increased insurance
rates

Short-term

Insurance rates and costs could increase due to greater risk of damages at production bases resulting from the intensification of floods and typhoons.

Carbon pricing, carbon
emission reduction
targets, and policies ineach country

Information Disclosure in Accordance with the TCFD Recommendations

Transition
risks andopportunities

Ushio declared its support for the aims of the Task Force on Climate-Related Financial Disclosure (TCFD)
recommendations in 2021 and recognizes that climate change will impact the Company’s sustainablegrowth. Moving forward, we will continue to use the TCFD recommendations as a basis for analyzing therisks and opportunities that climate change poses to our business and reflect this in management strategies
while continuing to disclose relevant financial and management information.

Corporate Strategy Meeting(chaired by the president)

Climate Change Action Committee
Green Products Committee

Copper price
Rise in cost of raw
materials

Water shortages

PhysicalrisksWith regard to the climate-related issues examined by
the ESG Promotion Headquarters and relevant committees, the Corporate Strategy Meeting, chaired by
the president, meets more than four times a year to
discuss such issues. It reports the results of these
discussions to the Board of Directors at least once ayear. In addition, the Board of Directors establishes
targets for climate-related issues and monitors the
progress the Company is making toward achieving
those targets.

Board of Directors

Carbon tax

Zinc price
Molybdenum price

Governance
Structure for Promoting Environmental Activities

Intensification ofabnormal weather* Estimation based on forecasts for carbon pricing by the IEA and the amount of GHG emissions in each country

Risk Management
In terms of risk management, the Company appoints a responsible division as well as a responsible director or executive officer to manage
individual risks. Climate-related risks are identified, evaluated, and monitored on a regular basis under a Company-wide risk management structure. Risks deemed to be significant under quarterly Company-wide risk assessments are reported to the Board of Directors.

Material Procurement Committee

Indicators and Targets

Resolution of issues and sharing of information related to Group environmental activities

Strategies

Selection of Climate Change Scenarios
We have selected the 1.5°C to 2°C scenarios and the 4°C scenario from among the climate change scenarios disclosed by the International Energy
Agency (IEA) and other organizations. Based on these scenarios, we analyzed the impact of climate change on our business up through 2050.

Analysis Process
We organized the major climate change-related risks and opportunities that impact our businesses based on external information, andcollected data on future forecasts pertaining to each of these risks and opportunities. In accordance with this organization, we estimated thebusiness impacts of transition risk and opportunities associated with the shift toward a carbon-free society, and physical risks stemming fromclimate change. We then identified important risks and opportunities that could impact our business up through 2050.

Identification of risks andopportunities

68

Collection of data on futureforecasts

Governance

Results of Scenario Analysis

Major Climate Change-Related Risks and Opportunities

ESG Promotion Headquarters

SocialEnvironmental

Estimation of business impact

Indicators

Targets

We have established the following two indicators and are monitoring ourprogress on climate change-related initiatives accordingly.

In consideration of recent global trends related to climatechange, we set targets in 2018 that were approved by the
SBTi. Since then, we have made several revisions to thesetargets, and we currently aim to achieve a 45% reduction in
Scope 1 + Scope 2 emissions by fiscal 2030, compared withfiscal 2017, and a 33% reduction in Scope 3 emissions.
Additionally, we are examining specific issues we need totackle in order to reach our target to become carbon neutral
by 2050. In order to achieve these targets going forward, we
will not only reduce CO2 emissions from the activities at ourbusiness sites but also pursue the development of green
products. By doing so, we will actively reduce Scope 3 emissions during the product use stage.

 HG emissions (Scope 1, 2, and 3)*1
G
Net sales of green products and super green products*2*1 The Company’s GHG emissions are displayed on its corporate website on a consolidated basis andby region and scope. Amounts have been calculated based on the GHG Protocol.
*2 We certify products with enhanced environmental performance as “green products.”
Among these products, we certify those that make use of innovative green technologies that setsthem apart from existing products as “super green products.”

Certified as a “super green product,”our HL63520HD high-output red laser diode hasreceived an Encouragement Award fromthe Laser Society of Japan.

Examination of countermeasures

Ushio Report 2023

69

Section 3

Environmental

Connecting Social Value to Economic Value​​

Strengthening Solidarity-Based Rempo Management

5

At Ushio, we aim to build a system that enables us to allocate resources and ascertain cost structures on a consolidated basis and supports optimized Group-wide
management decision-making, including the generation of synergies, and businessportfolio management. We are also working to establish mechanisms that visualize
the contribution of all Group company employees to the achievement of Group-widetargets and enable us to work as one to achieve targets for overall optimization. To
achieve these goals, we have introduced and are operating a system that allows forGroup-wide consolidated accounting.
In fiscal 2022, this enabled us to improve the accuracy of data from Group
companies and enhance our analysis, contributing to the multifaceted understandingof business plans, including product-based and business-based perspectives, when
formulating the 2nd Medium-Term Management Plan.
In fiscal 2023, we will create a balance sheet management system and enhance ourbusiness portfolio management. In these ways, consolidated Group accounting will
help Ushio Group become more unified and provide a foundation for improving profitability and management efficiency, thereby leading to the realization of Vision 2030.

Targets

Subsidiary
SubsidiaryCD
Subsidiary
Ushio Inc.
B

Ushio Inc.

Concurrent
independence
and solidarity

Clarify business risks and deploy
Group-wide risk responses
Create a corporate culture and framework for respecting human rights
across the value chain
Reinforce and deepen governance

70

Changes in
Mindsets

SubsidiaryA

Previous Rempo
Management

Manage business portfolio throughtimely efforts to identify management
resources

…

Shift

Independence and Solidarity

Visualize and achieve management,
business, and employee goals

Governance

We will also take measures to protect against ransomware, including strengthening information security by adopting endpoint detection and response (EDR) tools with high detection rates andmonitoring services.

Strengthening Compliance
Enhancing Tax Transparency
As tax-related duties are significantly impacted by the tax regulations ofeach country, these duties are primarily handled on an individual Group
company basis, with Ushio Inc. working to ascertain Group-wide tax
costs and establish tax management systems. We position global tax
governance as a key issue for enhancing our corporate governance andare working to enhance Group-wide tax transparency.
In fiscal 2022, we strengthened the application of our Group-wide tax
management regulations. Specifically, we collect and check informationon the status of tax returns, trends in tax audits, and responses to tax

system revisions at all Group companies. In addition, transfer pricing
documentation for each Group company is now managed at Ushio Inc.
In fiscal 2023, in addition to strengthening cooperation with Group
companies and appropriately managing tax risks through the establishment of a management cycle, Ushio Inc. will take the lead in ensuring
appropriate compliance with the transfer pricing tax systems in eachcountry, and strive to optimize tax costs through appropriate compliancewith the preferential tax systems of each country.

Monitoring Cycle of Tax Status Management

Building a
Robust Management
Base

Vision for FY2030

In fiscal 2023, we will carry out training and awareness-raising
activities in line with each Group company’s security level in order toenhance understanding of the integrated Ushio Group Information
Security Policy and will work to improve information security literacy.

Social• Pursue organizationaltargets separately
based on a common
foundation

SubsidiaryA

SubsidiaryB

Independent Rempo
Management Prior to 1st
Medium-Term Management Plan

Individual optimization:
Independence > Solidarity• Each company deploys individual measures and is not linked• PDCA (monitoring) implemented foreach company separately

Rempo Management to Aim for

Overall optimization:
Independence < Solidarity

Importance placed on establishing and operating a monitoring cycle that analyzes and responds to collected information to ensure sustainable managementof tax status
Periodic collection of information from subsidiaries byUshio Inc.
Ad hoc reports made by subsidiaries

Example: eview questionnaires and other relevant documents collected
Rfrom a subsidiary and identify potential tax-related risks

Collection of
information

 omprehensively ascertain Group-wide risks and implement
C
monitoring in accordance with level of importance and priority• Aim for unified targets for the entire Group•O
 verall understanding across businesses•U nify PDCA (monitoring)

Monitoring
Cycle

Overview of Rempo Management
Independence for individual optimization
Solidarity for overall optimization

Examine and implement measures to address
issuesResponse

AnalysisAnalysis of information collected
Establishment of an order of priority on issues identified

Bolstering Group Information Security GovernanceWe understand that information assets are extremely valuable business assets that
help us maintain and enhance our competitiveness as a company. To build strong
trust-based relationships with all of our stakeholders, we aim to utilize and manage
information assets in a safe and appropriate manner. Accordingly, we have formulated an integrated Ushio Group Information Security Policy and are working to establish and reinforce information security governance based on a system of Group-widemonitoring and management.
We carried out security assessments of each Group company, which werecompleted in the fiscal 2022. This enabled us to properly assess andobjectively evaluate the current status
of information security governance at
Ushio
each Group company as well asGroupidentify issues. Based on the results,
Information
Security Policy
we are carefully examining common
Regulations on information
Group-wide issues and issues faced
security management(methodology, means of
by individual companies, and are
realization, etc.)
working on organizational, technical,
Various standards and implementation
procedures (specific methods and procedures)personnel, and physical security
measures.

Preventing Corruption
We have established enhancement measures to prevent bribery andcorruption as a theme under “Building a Robust Management Base,”
the fifth of our Five Management Focuses. Our Vision 2030
describes “a state in which the entire Ushio Group remains highly
aware of issues such as bribery and corruption prevention andensures fair, just transactions,” and this theme is intended to create
concrete initiatives to achieve this goal.
As stated in our 10 Action Guidelines as a Member of Society,
Ushio conducts business transactions in a fair, impartial manner,
and we take thorough measures to prevent bribery and corruption.
We also signed the Ten Principles of the UN Global Compact, which
includes anti-corruption principles, in 2010 and support the prevention of bribery and corruption in various business activities.

Ushio has formulated a new Ushio Global Anti-corruption Policy,
which was announced in February 2023 as a specific code of conduct that complements our 10 Action Guidelines as a Member ofSociety. Through this, the aim is to further strengthen our anticorruption efforts, ensure more thorough Group-wide bribery andcorruption prevention, and continue fulfilling our social
responsibilities.
The Anti-corruption Policy is intended for executives, employees,
and other business personnel of all Ushio Group companies worldwide, and is provided in English and Chinese in addition to
Japanese. We are also working to promote awareness of the policy
within the Group through briefing sessions for Ushio Group companies in Japan and overseas.

Ushio Report 2023

71

Section 4

Creating New Markets
with “Light”
Our Business Strategies

In order to achieve a market-in approach, Ushio has
implemented a market-centric reorganization ofits business domains.
Through rebuilding centered on the power tocontrol light, the power to provide light-based solutions
and the power to retain light, we will put forward solutions
based on social value with even greater speed.

72

Ushio Report 2023

73

Section 4

Creating New Markets with “Light”

Segment

Our Vision for 2030

Industrial Processes
We have integrated our light source and optical equipment businesses, bringing thepower to create, control, and maintain the value of light together in one place. We will
create business opportunities and work to steadily increase earnings throughgrowth centered on the semiconductor field and by proposing light-based solutions.
ProfileWe are advancing various measures in line with our wish to support
technological innovation in our customers’ manufacturing throughlight and peripheral technology, thereby contributing to society. To
achieve this, in addition to our desire to resolve future social issues
faced by our customers, we must reaffirm our core competencies

Support the creation of

Kenkichi Abe
General Manager,
Industrial Process Division,
Ushio Inc.

relating to light and maximize those strengths. By leveraging across-organizational structure within the business division andUshio’s expansive global network, we will create an environment thatenhances our ability to understand social needs and put forward
solutions.

comfortable and convenient social infrastructure via optical processing technologies
Trajectory of light solutions to materialize vision

Focus on providing manufacturing process solutions to customers andoffering subsequent services (maintaining value)

Strengths

R&D (Power tocontrol light)

Solution capabilities consisting of three powers: the power to create light, the power to control light, and the power to maintain the value of light ossession of various light source types (LED, lamp, laser and EUV) over a wide range of wavelengths, from ultraviolet rays to visible light andPinfrared rays, and the power to change their shape into point, line and surface light sources

Develop products for advanced
processes

Solutions (Power to provide
light-based solutions)
Strengthen ability to offer
solutions for diverse factory issues

Value generated in market
Customer value
At customer factories● Reduce bottlenecks in advances in semiconductor miniaturization and othertechnological innovations● Help enhance quality, cut costs (such as through energy savings), shrink
environmental footprints, and reduce emission of hazardous substances

After-sales support(Power to retain light)

Social value

Better retain light solutions forcustomers by extending replacement
parts’ service lives and enhancing
after-sales service

Through customers● Help achieve SDGs overall, such as by offering convenience and comfort
worldwide and tackling environmental, poverty, and medical issues

The power to retain light by leveraging support locations around the world

Strategy Overview

Review of Fiscal 2022
With regards to UV lamps for lithography, although production for
LCD panels remained strong due to stay-at-home demand, sales
decreased as demand waned in the second half of the fiscal year. At
the same time, against the backdrop of increasing demand due tothe development of technologies such as IoT and 5G, unit sales oflarge field steppers for cutting-edge IC package substrates
increased, and maintenance services also remained solid as aresult. This led to a year on year increase in net sales and earnings
from the previous fiscal year.

We also advanced initiatives such as reducing fixed costs throughstructural reforms, growing promising products and creating a
global customer support system, and we were able to create thebusiness environment necessary to cultivate growth, which we will
promote in the 2nd Medium-Term Management Plan. Moving forward, we will further enhance these activities and expand them on a
global basis.

Initiatives Relating to the Five Management Focuses

1
2
3

74

 iming to create new businesses by reaffirming Ushio’s core competencies and linking these competencies with initiatives required to resolve social issues
ABeing aware of social issues from a global perspective, including perspectives beyond Japan, and seeking active participation from Group companies, andestablishing functions to enable collaboration with Group companies at major locations and exploring seeds for new business creation based on social issues
and trends in each region
Globalization, together with securing and developing interdisciplinary human capital and promoting initiatives such as job rotation
 stablishing systems and environments in which employees both in Japan and at overseas Group companies can actively participate in the formulation ofEbusiness division and Global Business Unit (GBU) policies

4 eveloping and proposing products that contribute to reducing the environmental impact of society, including through the development of energy-efficient lightD
sources, the adoption of solid-state light sources, and high-performance, low-power consumption products with customers in mind
Collaborating with the Production Division and working to reduce the environmental impact of production processes and logistics through measures such as
improving productivity, using renewable energy and optimizing transportation trucks

5

 ontributing to Group profits with a focus on ROIC management by implementing strategies that maximize profitability through efficient utilization of invested
C
capitalStriving to establish a strong and stable earning structure that balances the equipment, maintenance, and light source businesses. To this end, the newly
integrated Industrial Processes business division will upgrade efforts to improve profitability through structural reforms that have been promoted in the lightsource and optical equipment

Growth Centered on the Semiconductor Field and Business Opportunity
Creation Born from Proposing Light Solutions

Financial Targets(Billions of yen)

In the period covered by the 2nd Medium-term Management Plan, our efforts togrow our business will be centered on the semiconductor market, which is
expected see medium- to long-term growth. We will also aim to create business
opportunities by proposing light solutions for manufacturing processes, including those not related to semiconductors.
While the semiconductor market is undergoing a temporary slowdown, it isexpected to see expanded growth in the medium to long term due to factors
such as IoT and DX. Miniaturization and performance improvement of semiconductors are essential in this regard, and the trend of cutting-edge IC package
technology to support this progress is expected to continue.

Action Plan 1
Secure earnings
with growth
products forsemiconductor IC
package market
 oosting productionB
capacity to cater toexpanding demand aintaining andM
improving competitive edge (highmarket share)

Action Plan 2
Bolster efforts to expand opportunities
for EUV light sources for photo mask
inspection over medium and longterms
 ddress total costs of ownership*A
reduction
 easure: Expand recruitment opportuniMties by extending competitive edge
* Indicator obtained by dividing the sum ofequipment installation costs and running costsby those obtained by operating the equipment.

(%)
Revenue
CAGR
6.1%

125
100

88.1

75
25
0

20

16.7 Operating
marginIncrease investments instrategic development andhuman capital

2022*1
Net sales (left)

40
30

19.6

50

50

105.0

10
0

2025*2(FY)

Operating margin (right)*1 FY2022 values for each segment are reference values prepared by
the Company for comparison purposes*2 Operating income margin for FY2025 is calculated excluding
amortization of new goodwill

Action Plan 3
Establish new
businessfoundations byoffering opticalprocesses for
manufacturing
Strengthen lightsolutions structure tooffer processes

Action Plan 4
Ensure consistent earnings
by steadily capturing
demand for lamps

Keepinvesting to enhancelamp performance tomaintain competitiveness inexisting markets
 apture demand byC
strengthening sales
capabilities andcustomer service

Ushio Report 2023

75

Section 4

Creating New Markets with “Light”

Segment

Industrial Processes

Growth Business

Lithography: Large Field Steppers for Cutting-Edge IC Package Substrates

Growth Business

EUV

Achieving World-class Resolution and High Overlay Accuracy

Contributing to Semiconductor Miniaturization Through Cutting-Edge Technology

In line with the evolution of semiconductors, IC package substrates are undergoing miniaturization andmulti-layering. Ushio’s large field steppers for cutting-edge IC package substrates are contributing to theevolution of package technology by improving resolution and overlay accuracy and by achieving highproductivity through large-field lithography. In-house, we develop not only light sources but also maintechnologies, such as stages, material handling, power supplies and software compatible with opticalcomponents and organic substrates.

EUV lithography technology is seeing growing deployment in cutting-edge semiconductor manufacturing processes. EUV light sources, which have extremely short wavelengths, are being used toreplace conventional semiconductor processes and are contributing to semiconductor miniaturization. Ushio has a long history of research and development relating to high-brightness EUV lightsources, and we started their full-fledged introduction into mass production processes in 2019.
We launched TinPhoenix as a brand of EUV light sources for high-precision mask inspection andfor research and development, covering development, manufacturing, sales, and after-sales service.

1 Business Overview
As the amount of data processed increases due to advancements in AI and IoT, evolutions in semiconductor technology are mainly being driven
by the needs of data centers. Chiplets and other packaging technologies are garnering particular attention, and the evolution of package
substrates is becoming indispensable. In spite of the impact of current semiconductor inventory adjustments, this market is expected to growsignificantly over the medium to long term. Technological innovation is also progressing rapidly, and various packaging formats are underconsideration.

2 Future Initiatives and Outlook
In fiscal 2023, we have responded to the evolution of package substrates by launching a new model of lithography equipment with significantly
improved performance, the UX-58112SC. It is designed with a view to future mass production of cutting-edge package substrates. We havereceived numerous customer inquiries, and some of these customers have already decided to work with us. We will also deepen our collaboration
with Adtec Engineering, our Group company that handles direct imaging equipment, and will put forward
equipment compatible with various package formats that takes advantage of their respective characteristics.
Profile1 Business Overview
Ushio’s EUV light sources have made a contribution as light sources used in photomask inspection for EUV lithography technology, which isessential for cutting-edge semiconductor production. As cutting-edge semiconductor miniaturization progresses, the need for photomask
inspection using EUV light sources is expected to increase further. In addition, Ushio’s EUV light sources are expected to see deployment ineven more areas as semiconductor manufacturing processes using EUV lithography gain widespread traction.

2 Future Initiatives and Outlook
Our EUV light sources for EUV mask inspection in mass production will continue to make a contribution to lowering the TCO by maintaining
high operating rates, thereby becoming highly trusted within the market. Furthermore, in order to expand deployment opportunities by improving our competitive advantage, we will continue developing and enhancing EUV light sources to support moreadvanced, higher-resolution inspections while also exploring various applications for them. Through these activities, we will continue to be a light source
Profilemanufacturer that contributes to the entire EUV lithography ecosystem.

Yoshihiko Sato

Yuri Habuto

General Manager,
EUV Global Business Unit,
Industrial Process Division,
Ushio Inc.

Manager, Sales Section, Sales Department, UV Lithography GBU,
Industrial Process Division,
Ushio Inc.

Growth Business

Surface Treatment & Curing (STC)

Deepening and Exploration Relating to Optical
Processes (Light-based Surface Treatment,
Heating, Curing and Bonding)
UV curing technology was developed as a printing technology formaterials such as metals and plastics, on which ink is difficult to dry.
Its uses have expanded to paint drying and protective coatings, and
it is now utilized for a wide range of applications, such as bonding
FPDs and miniature precision parts. This curing and bonding
technology is an optical technology that is indispensable for thefurther evolution of electronic products. Our customers are facing
issues relating to surface treatment, curing, and bonding processes,
and we are working to develop applications in various fields in orderto resolve these issues through our light sources.

76

Main Products

Excimer irradiation unit

Halogen lamp heaterFlash lamp annealer forheating

1 Business Overview

2 Future Initiatives and Outlook

The FPD and semiconductor market was on a downward trend in 2023 due to theend of telework-related demand, global inflation, and growing geopolitical risks.
Device manufacturers are adjusting their inventories, and investment in production
equipment is relatively modest. However, starting in 2024, this period of inventory
adjustment is expected to end, and production equipment investment is expected
to recover due to the full-fledged adoption of OLED in IT products and rapid
growth in demand for semiconductors in areas
such as electric vehicles and generative AI.

We will continue to learn about and meet customer
needs in the FPD, semiconductor, and printing
markets, while exploring new processes and applications in the cutting-edge semiconductor, automobile and battery markets. In particular, regarding
research and exploration, where we have disseminated information from Japan to the world up tonow, we will build a system that enables us to grasp
and resolve needs and issues in each region. We
will continue working to help our customers boost
productivity and to reduce environmental impact
through our products.

ProfileYuma Yamaguchi

LED

UV-LED

Spot UV irradiation unit

General Manager, Sales Department 1,
Photon Process Global Business Unit,
Industrial Process Division,
Ushio Inc.

Ushio Report 2023

77

Section 4

Creating New Markets with “Light”

Segment

Our Vision for 2030

Visual Imaging
The Visual Imaging Division’s mission is to “delight people.” To achieve this,
we aim to be a group of professionals in which each team member can propose
solutions to create premium spaces based on customers’ perspectives.

The Visual Imaging Business aims to establish a position as theleading company in niche markets by building video and lighting
platforms based on proprietary core technologies and services. In
order to contribute to our customers’ success, we will transform into
an organization in which teams collaborate and connect verticallyProfileand horizontally based on free, open-minded thinking. We will also
ensure a certain level of profitability (based on an operating margin
target of 8 to 12%), while continuing to invest in the future of society
and markets. Above all, we will do our utmost to ensure that eachand every team member finds their work rewarding.

Delight people through imaging and lighting technologies

Takenori Watanabe
General Manager,
Visual Imaging Division,
Ushio Inc.

Trajectory of light solutions to materialize vision
Provide solutions to create premium space experiencesdelivering a greater sense of presenceStrengths
 ower of brands with extremely strong market presence: Christie Digital Systems (CDS) for video, Ushio Lighting for lighting, Ushio Inc. forP
projector light sources, and XEBEX for theater solution providers

R&D (Power tocontrol light)

Solutions (Power to provide
light-based solutions)

After-sales support(Power to retain light)

Drive core technology advancesand keep developing technologies for competitiveness

Provide one-stop solutions todeliver premium experiences that
customers seek

Reinforce support structure to
maintain optimal conditions forcustomer operations

Value generated in market
Customer value● Cut costs by streamlining operations (including by making cinemas completely
unmanned)● Materialize stable and sustainable operational structure● Increase added-value services for customers through advanced video
production

Social value
Help maintain a positive social environment by delighting and fulfilling
people through video and light ossession of digital-compatible devices and peripherals: Demonstrating the ability to control and resolve issues through light usingP
proprietary core technologies
Possession of a customer-oriented mindset in sales and support activities: Achieving a high global market share

Overcoming a Decline in Lamp Earnings to Rebuild Our Business Structurewith a View to 2030 and Create a Stable Base for Business Operations

Review of Fiscal 2022
The visual imaging market has generally recovered following the
upturn of economic activity in various countries. Accordingly, orders
for visual imaging products have improved significantly due tofactors such as movie theaters reopening and events restarting.
However, movie theaters have faced difficult financial conditions
due to the long pandemic, and movie theater-related capital expenditure was carried over to 2023 or later in many cases. There werealso serious shortages of some parts, including rare parts andsemiconductors, and various costs rose over the course of the fiscal

Strategy Overview

year. Under the circumstances, positive factors relating to projector
replacement lamps and entertainment imaging equipment were
better than anticipated, and sales and operating income exceeded
expectations. At the same time, while movie theater imaging equipment saw significant year on year growth, results were still lower
than expected due to the significant impact of negative factors. As
the market opens up further and business opportunities expand in
fiscal 2023, we will work to seize the possibilities that this situation
presents.

In the Visual Imaging business, while lamp revenues are on the decline, demandfor DCP replacement continues. There is also growing need for advanced video
production in the post-pandemic period. Looking to 2030, over the period coveredby the 2nd Medium-Term Management Plan, we will aim to build a structure toprovide one-stop solutions as a stable earnings base, address risk factors fordeteriorating business performance, emphasize balance sheets in continuing toevolve the business, and reform our business structure.
We intend to further enhance the value we provide by continuing to add value
to customer-facing services while utilizing the know-how we have built up relating
to advanced video production and making the most of partnerships.

Financial Targets(Billions of yen)

(%)

125.0

Revenue
CAGR
10.6%

100.0
75.0

67.7

50.0

4.5

25.0
0

15
12

91.5
3.3

9
6

Operatingmargin3

Increase in investment in human capital, etc., and decrease in demand forlamps due to shift to solid-state light sources2022*1
Net sales (left)

2025*20(FY)

Operating margin (right)*1 FY2022 values for each segment are reference values prepared by
the Company for comparison purposes.
*2 Operating income margin for FY2025 is calculated excluding
amortization of new goodwill.

Initiatives Based on the Five Management Focuses
Action Plan 178

1

 ontinuing to provide premium spaces that delight people through our hard (imaging/lighting equipment) and soft (system peripherals) products, experienceCbased production design, and services to support stable operation
Being recognized as a one-stop solution provider for video and lighting production by customers

2 eveloping human capital that can play an active role on a global basis and that can develop new business models through DX
D
Promoting mutual understanding and increasing psychological safety by holding “town hall” and 1-on-1 meetings3Creating an environment that facilitates the creation of new ideas by promoting diversity and inclusion

4

 educing the Company’s direct and indirect GHG emissions by promoting use of renewable energy
R
Working to reduce environmental impact by developing and launching green products and through recycling and reuse of products5 uilding a stable foundation for business operations by enhancing supply chain management
BBuilding a robust management base through management that enhances solidarity with Group companies

Action Plan 2

Build structure to provide one-stop solutions
and solidify high value-added proposals

Address risk factors for deteriorating businessperformance evise product lineup and sales structureRProvide solutions (strengthening maintenanceservices through content management and IoT
network)
Strengthen display products
Strengthen service and support system by connecting through networkDeploy solutions by utilizing next-generationtransmission technologies

 estructure supply chain management inRresponse to parts shortages
Soaring xenon gas prices: Collect used lamps
and promote multi-company purchasingDecrease in demand for lamps due to the shift
to solid-state light sources: Increase market
share by strengthening sales and service, andimprove efficiency by consolidating production

Action Plan 3
Emphasize balance
sheets in continuing toevolve business educe product cost andRloss costOptimize inventory byrefining PSI planning

Ushio Report 2023

79

Section 4

Creating New Markets with “Light”

Segment

Visual Imaging

Cinema Business

General Imaging Business

Providing Surprising and Exciting Experiences through Total Solutions

Sharing Excitement and Experiences through Imaging Solutions

Methods for delivering cinematic content are diversifying, but the need for the richness of presenting compelling stories and video
expression has firm roots. In recent years, movie theaters have been developing into spaces to enjoy other forms of entertainment
aside from films, such as e-sports and live performances. Ushio supports such movie theaters around the world through solutions
including the provision of high-brightness and high-resolution digital cinema projectors, the xenon lamps and lasers inside theseprojectors, and managed services that support the operation of movie theaters and provide surprising and exciting experiences.

Ushio fascinates people with light in various gathering spaces, including amusement parks, commercial facilities, meeting rooms,
classrooms, and public facilities. We provide social value by sharing excitement and experiences with others. Demand for projection
mapping in large spaces has been increasing and solutions from Ushio are being utilized in numerous places in order to produce
dynamic visual experiences and excitement.

1 Business Overview

1 Business Overview
As box office revenues bounce back around the world, we expect our business performance torecover in turn. 2023 was predicted to be a year of recovery for the global entertainment business,and this is borne out by the fact that box office performance is anticipated to reach at least 85% of
pre-COVID-19 levels. Accordingly, in addition to the provision of low-cost solutions, the latest products
designed to enhance the in-theater viewing experience continue to be in high demand. In a highlycompetitive environment, movie theaters must make additional investment to improve the quality ofthe experience in order to capture the attention of audiences and get customers to spend time andmoney at their establishments. CDS will provide suitable solutions to entertainment organizations
looking to transition to next-generation presentation technology using solid-state light sources.

2 Future Initiatives and Outlook

Outlook for Cinema Projector Demand (units)
Increase
Growing demand for projector replacements toimprove longevity and quality

New Installations
will be centered in
the Chinese market

2019

2020

2021

2022

2023

2024

2025

(FY)

Based on Ushio research

Replacements

CP4435-RGB RGB laser projector for cinemas

New installations

For movie theaters, it is no longer enough to simply
provide an engaging audio-visual experience. While thequality of the visitor experience is the key focal point,
environmental considerations are also becoming more
important. Energy prices have changed significantly overa relatively short period of time. In line with this, we arecontinuing to focus on finding the most efficient ways toconvert energy into light, provide illumination and create
captivating viewer experiences. Furthermore, through theintroduction of additional technologies such as data
analysis and system management, we will continue toprovide effective tools for low-cost operations that arealso considerate towards the environment.

In the entertainment market, which is our target market, we are continuing to see a strong recovery in business performance, including the expansion of our market share and winning several new large-scale projects. In the flat panel
business, shipments are recovering and there are signs of a return to pre-COVID-19 levels. Our recovering performancein the entertainment market can be attributed to the high competitiveness of the Griffin and M Series pure RGB laser
projectors, which have a small footprint and are energy efficient. In addition to the advancement of this technology,
CDS’s products are contributing to the Ushio Group’s earnings through their superior color and image performance.
Furthermore, the expansion of the MicroTiles LED platform has led to continued growth in LED profits. With theaddition of the new 0.75 pixel pitch, MicroTiles products have gained a worldwide customer base.

RGB laser projector Griffyn
4K35-RGB

2 Future Initiatives and Outlook
We will continue to work closely with key customers and strive to understand their future direction as part of our efforts to develop innovative
products in line with customers’ needs moving forward. This also provides the Engineering Division with opportunities to explore new solutions,enhancing competitiveness while also fostering the development of intellectual property.
We have already established a widely-recognized position as a leader in pure RGB laser projection andare also actively developing specialized software and image processing solutions. Our research anddevelopment team are currently exploring technologies to bring tomarket while sharing common technology blocks across platProfile
forms. Through this strategic approach, we will work to increase
Michael Bosworth
earnings while keeping development costs down.
Executive Vice President, Enterprise,
Christie Digital Systems

Solution Case Studies
IVEX Studio is part of U-PLANET, a mixed-use cultural complex in
Gwangmyeong, South Korea. Through an integrated solution featuring CDS’s laser projectors, the facility provides visually appealing
interactive experiences for customers.

ProfileBrian Claypool
Executive Vice President, Cinema,
Christie Digital Systems

LEGOLAND® Windsor Resort

The Flight of the Sky Lion attraction in London’s LEGOLAND® Windsor
Resort utilizes a D4K40-RGB from CDS, and CDS is also playing acentral role in technical areas such as putting forward new solutions.

80

Ushio Report 2023

81

Section 4

Creating New Markets with “Light”

Segment

Our Vision for 2030

Life Sciences
By using our optical technologies to resolve social issues related to healthy life
expectancy, which in turn helps people live fulfilling lives, we contribute to therealization of lifestyles that enable people to live free lives with safety andreassurance and improve their quality of life (QOL).
ProfileMoving forward, we will work to use our optical technology toresolve social issues such as climate change, food shortages andthe extension of healthy life expectancies while also striving toeliminate causes of disease and maintain and promote good healthby providing consistently better living environments. We aim to

SupportKazuhisa Kamiyama
General Manager,
Life Science Division,
Ushio Inc.

contribute to the realization of a society in which people can live
happy, fulfilling lives every day by supporting the health of people
and the Earth, by ensuring people have safety and reassurance intheir living environment at work, at home, and in their communities,
and by helping to improve their quality of life.

the health of people and the planet by applying optical technologies
Trajectory of light solutions to materialize vision

Focus on greater social issues and build a unique structure to resolve themwith proprietary light technology
R&D (Power tocontrol light)

Strengths
 ore light-related technological capabilities enabling contribution relating to three key areas: climate change countermeasures, food initiatives,Cand healthy life expectancy extension

Combine core technologies andfocus on future in cultivating
optical technologies

Solutions (Power to provide
light-based solutions)

After-sales support(Power to retain light)

Secure resources and strengthen
partnerships needed to offer lightsolutions

Strengthen support structure(encompassing alliances) withview to expanding business

Value generated in market
Customer value
Contribute to sustainability management of customer companies
Social value● Help combat climate change● Help extend healthy life expectancies, contributing to:• Consistently better living environments• Disease eradication and good health• Enhanced drug discovery processes and pharmaceutical quality● Contribute to food security

 isinfection technology and UV purification technology enabling the provision of living environments that offer safety and reassurance in theDenvironmental hygiene field
Ability to develop solutions to pursue “healthy life expectancy extension” in the healthcare field

Review of Fiscal 2022
The risk of a global spread of COVID-19, which had existed until 2022,
has gradually subsided, and economic activity is progressing to a stateof “living with COVID-19,” particularly in developed countries. People’s
lives are now showing signs of returning to the calm of the preCOVID-19 period. At the same time, the environmental hygiene field is
continuing to see a pressing need for safety and reassurance. To meetthis need, we have made progress towards eliminating the worries of
end users regarding the use of UV light by continuing to gather evidence of safety and achieving safety standards.

Furthermore, we believe that there is a global market for Care222,
which has the ability and potential to resolve various social issues in
addition to its disinfection application. We have created a system forsharing resources and information regarding issues to be resolved bothin Japan and across the Group, and to promote Group-wide development of secondary and tertiary applications, which is one of the major
themes of the 2nd Medium-Term Management Plan.

Initiatives Based on the Five Management Focuses82

1

 pproaching the launch of new businesses with speed, passion, and willingness to take on challenges
AIdentifying missing parts required to achieve the quantitative and qualitative targets of Vision 2030 and strengthening measures to address these deficiencies

2 chieving speedy management by transferring authority to worksites, and aiming to develop human capital such that employees have a high degree ofA
independence and decision-making ability

3

 triving to create open workplaces while promoting diversity and innovation
S
Avoiding starting discussions with negatives and approaching matters with a perspective focused on how things can be done4

 learly demonstrating the quantitative effects of environmental hygiene solutions in areas such as ROI to customers in addition to collecting evidence of theirCefficacy in terms of environmental hygiene

5Clarifying issues and working based on a medium- to long-term perspective looking to 2030 and beyond, and avoiding thinking overly focused on the short term

Strategy Overview
Understanding Social Issues from End Users’ Perspectives and Cultivating
Development to Reach a Scale Comparable to Industrial Processes andVisual Imaging Businesses
As a development business, Life Sciences is a domain in which we view growthfrom a long-term perspective.
During the 2nd Medium-Term Management Plan, our activities will extend beyond
Japan to reach a global scale, and we will strive to raise awareness and obtainevidence of safety as we look to make leaps forward under the 3rd Medium-Term
Management Plan and beyond. Beyond the environmental hygiene business,in addition to development of secondary and tertiary applications, investment intechnology, production and development, and expansion of sales channels, wewill also utilize means such as partnerships and M&A with other companies
and institutions to resolve resources deficiencies as we advance our activities.
Action Plan 1
Grow and expand current business domainsInfectious disease control: Secure business primarily in
medical and elder care and mobility as a service markets
 tep up marketing overseas and acquire evidence for value
S
propositionIndoor environment improvements: Leverage light to create
deodorization and toxic substance removal technology andsecure projects for use in products
 xpand lineup and distribution of UV therapy (immunoEcontrol) equipment

Financial Targets(Billions of yen)
6.0

Revenue
CAGR
10.6%

4.6

4.5

(%)
240

5.5

180

3.0

120
Concentration/control of sales
investment, reduction of losses
on valuation of inventory

1.5
0
–1.5
–3.0

‒106.0‒18.2

2022*12025*2

Net sales (left)

Operatingmargin

60
0
–60
–120
(FY)

Operating margin (right)*1 FY2022 values for each segment are reference values prepared by
the Company for comparison purposes.
*2 Operating income margin for FY2025 is calculated excluding
amortization of new goodwill.

Action Plan 2
Realize sustainable business creation through an autonomous approach
cycle and the creation of a monitoring environment
Approach
1 Identify social trends and social issues globally
2 Explore and develop tomorrow’s technologies
3 Develop reproduceable technologies that become assets
4 Collaborate with partners to drive business

Monitoring and selection process
Integrate and update trees, market trends, and proprietary technology map
Monitor changes in focus markets over time and manage project milestones

For details, please see:P.60 Examples of Business Creation with Greater Social Value

Ushio Report 2023

83

Section 4

Creating New Markets with “Light”

Segment

Our Vision for 2030

Photonics Solutions
We provide cutting-edge photonics solutions and make full use of strategic
partnerships, including those outside the Company, to promote the developmentof our three businesses—Industrial Processes, Visual Imaging, and Light
Solutions—as we aim to resolve social issues and realize a better future.

By leveraging our experience in vertically-integrated businesses
from device manufacturing to modules to solutions, we will work tocreate innovative photonics technology that improves people’s lives
by resolving complex issues while also providing value to businessstakeholders (employees, customers, suppliers, shareholders andsociety).

We will aim to be a leader in the development, manufacturing andcommercialization of innovative photonics solutions, and to be acatalyst for positive change in the world through our dedication to
excellence, innovation and social responsibility.

Contribute to improving people’s lives and provide value to our stakeholders

ProfileWilliam F. Mackenzie
General Manager,
Photonics Solutions Global Business Unit,
Ushio, Inc.

Trajectory of light solutions to materialize vision
To be a driving force for positive change in the world through therealization of innovative technologies that enrich people’s lives

Value generated in market
Customer value● Contribute to technological innovation• Development and provision of products with unprecedented specifications/characteristics•V isualization of previously unseen issues

R&D (Power tocontrol light)

Strengths osition as a leading supplier of red lasers and fiber-coupled modules, and one of the few manufacturers in the world capable of handlingPeverything from LD/LED devices to module/system development and production, together with development of vertically-integrated
businesses to capitalize on this distinction

Solutions (Power to provide
light-based solutions)

Develop devices and modules
that enable the creation of newmarkets and products

Propose solutions to issues facedby the market and customers’ products
by taking advantage of our verticallyintegrated business● Reduce the environmental impact of customers’ products

After-sales support(Power to retain light)

Social value● Contribute to QOL improvement (AR/MR, in-vehicle, machine vision)● Contribute to medical issues (remote medicine, endoscope, microscope)● Contribute to climate change countermeasures and environmental issues (PVinspection light sources, recycling sorting)● Improve convenience (devices and modules for semiconductor production and inspection)● Food safety and security (food sorting)Long-term stable supply
to customers

Possession of locations and bases worldwide to put forward solutions in Japan, the US, Europa, and Asia
Possession of connections with industry-leading companies in various business domains

Review of Fiscal 2022
Companies had overprocured parts in response to the effects of
COVID-19 and geopolitical risks, which led to a reaction in the formof sluggish demand. There were also difficulties in procuring semiconductor parts and other materials. As a result of these factors,
sales and business profits in the LD/LED devices business both fell
short of targets. Despite these circumstances, the laser solutions
business, into which lasers and module systems are integrated,reached its targets as a result of factors such as new orders forscientific equipment.

Strategy Overview
Co-creating Value with Customers and Swiftly Establishing Niche Top Positions

In the LD/LED device business, we are shifting development
resources from our current fields of focus (projectors, show lasers,etc.) to next-generation fields that are expected to grow (AR/VR,
in-vehicle technologies, LDI*, etc.), and we are making preparations
for mass production.
In the laser solutions business, we are working with leading customers to resolve issues, put forward designs and provide value
tailored to customer needs. We expect to launch mass production
within the next few years.

The solid-state light source market has already exceeded ¥10 trillion in size andis expected to continue growing at an annual rate of 7 to 11% over the medium
to long term against the technological backdrop of expanding optical applications
and improving energy efficiency. Under the 2nd Medium-Term Management
Plan, in addition to developing new device products and providing modules andsubsystems with high added value that meet the quality required by customers,
we will also make active use of inorganic investments as we aim to swiftly
establish niche top positions through co-creation with customers, starting fromthe development stage.

* Laser Direct Imaging: Fiber-equipped light sources with multiple semiconductor laser elements

Initiatives Based on the Five Management Focuses
Action Plan 1

1

Continuing to create innovative products, services, and solutions to resolve issues for customers and society

2Building an organization and systems that can grasp social changes and technological trends, then propose light-based solutions3

 uilding an organization in which diverse personnel can play an active role and building teams in which young people can develop and experienced employees
B
can make an active contribution

4

Contributing to reducing the energy consumption and CO2 emissions of customers’ products

5 onstructing a portfolio of core businesses and strategic businesses, and achieving supply chain management and co-creation both within the group and withC
external partners(Billions of yen)
15.0
12.0

10.1

9.0
6.0
3.0
0
–3.0

Revenue
CAGR
12.8%

(%)

14.5

15
12
9

+ Yield reduction (devices)+ Changes in mix (Increases in value-added
module products)

6.9

6Operatingmargin3–32022*1
Net sales (left)

2025*2*1 FY2022 values for each segment are reference values prepared by
the Company for comparison purposes.
*2 Operating income margin for FY2025 is calculated excluding
amortization of new goodwill.

Action Plan 2
Growth and expansion of laser solutions business xpand target applications
E
Carry out exploration and deepening in relation to potential
customers
Promote platform product development in harmony with target
applications
Maximize the effect of synergies through Group-wide collaboration
Enhance solutions business awareness (online media and tradeshows)

VI: Gaining adoption of AR/MR and in-vehicle embedded applications
LS: Expansion of the number of sensing application projects acquired(FY)

Operating margin (right)

 ocus on niche and growth applications in upstream areasFof IP*/VI*/LS*
Discover lighthouse customers for each application and promote
product development through co-creation
Contribute to earnings through improved product yields
IP: Reduction of cost of LDs for semiconductor manufacturing equipment andenhancing semiconductor inspection device production capacity

0

‒2.9

Growth and expansion of devices business

IP: Development of new fields, including particle monitoring
VI: Development of new non-projector fields, such as AR/MR and in-vehicle products
LS: Expansion of projects acquired in the medical field, including gene sequence
determination and microscope illumination* IP: Industrial Processes

84

Financial Targets

VI: Visual Imaging

LS: Life Sciences

Ushio Report 2023

85

Section 5

Enhancing Our
Management Base
Our Corporate Governance System

On our path
to becoming a “ light ” solutions company,
we lay an even stronger foundation,
supporting astute resource allocation
and agile decision-making.

86

Ushio Report 2023

87

Section 5

Our Corporate Governance System

Messages from Outside Directors

Messages from Outside Directors

Directors. Other outside directors recommended me because I had
experience of chairing the Board of Directors as an outside director
at other companies, and I accepted the position.

ProfileMasatoshi Matsuzaki
Outside Director

Taking Office as Chair of the Board of Directors

At one of our executive sessions, which are meetings comprising
only outside directors, the opinion that I, as an outside director,
should be Chair of the Board of Directors in order to strengthen
Ushio’s corporate governance was expressed. With the blessing of
the internal directors, I was elected to this position after the Boardof Directors meeting following the Annual General Meeting of
Shareholders in June this year (2023).
Since I joined Ushio Inc. as an outside director in June last year
(2022), I have taken in elements such as how board meetings areconvened, how agendas are set, how proceedings are managed, andhow minutes are created. On several occasions, I felt that governance was not in a desirable state and that outside directors were
not able to perform their functions adequately, despite being large innumber. This may be a result of the fact that the style from when the88

founder led the Board of Directors had continued to be followed by
the internal directors and the secretariat of the Board of Directors asa matter of course.
Starting with the premise that approval cannot be given without areasonable explanation, I have taken actions such as requesting
opportunities for deliberation during the formulation of executionplans when approving important matters like the Medium-Term
Management Plan. In order to establish the transparent, fair, timely
and decisive decision-making process in consideration of the perspectives of shareholders and other stakeholders set out in Japan’s
Corporate Governance Code and achieve the Code’s objective ofsustainable corporate growth and increased corporate value overthe medium- to long-term through the perspectives of diverse outside directors, I also came to the conclusion that it would be betterfor Ushio to have an outside director serve as Chair of the Board of

As Chair of the Board of Directors, I will start by establishing transparent, fair, timely and decisive decision-making processes. To that
end, I will demand the provision of information and rational explanations necessary for decision-making. This is necessary for decisionmaking that is not only transparent and fair, but also timely anddecisive, because it is impossible to act quickly and definitively
if information and explanations, including those with regards torisks, are insufficient. We must also share our framework for
decision-making.
Next, I will select agenda items that I believe merit discussion
based on my standpoint as an outside director, focusing on improving Ushio’s corporate value in the medium to long term, and usethat as a basis for effective deliberation by sharing issues to beaddressed. Having an outside director serve as Chair of the Board of
Directors is highly significant in terms of being able to include asupervisory perspective in setting the agenda and leading proceedings in a way that enables effective discussions to be held. I would
like us to keep in mind that corporate value is purely economic value,that is, the present value of the cash flow that a company will generate in the future.

business segments were launched in parallel, which was regrettable.
It has been agreed with the internal directors that we will continue
to deliberate business strategies, and handle them as important
agenda items for the Board of Directors in this fiscal year. Ushio
can compete globally only in specific businesses within Industrial
Processes (lamps, equipment, and related solutions), and I hope to
see us reexamine and deliberate this distinction and how we cangrow these distinctive businesses, then show that externally.
I have been an outside director for several Japanese companies,
and I believe that in order for the Board of Directors to function
effectively, it is important to align our understanding of oversight,
which is the role of outside directors, how it differs from monitoring
and the significance of being subject to oversight from the perspective of internal management.

For example, in 2nd Medium-Term Management Plan, which Ushio
announced in May this year, we stated our intention to work evenharder on ESG (non-financial factors) issues, and I would like us to
examine how we can tie them to improving economic value andwhether we are working with the story we have set in mind while
examining both risks and opportunities for growth.
In terms of focusing on improving Ushio’s medium- to long-term
corporate value, we recognize the extreme importance of following
through on the Medium-Term Management Plan. With regards tocapital policy, when the current Medium-Term Management Plan
was created, the other outside directors and I pointed out that Ushio
had not made strategic and effective use of capital. We asked thattime be allocated for deliberation, and offered some guidelines as
we discussed and formulated such a policy. In terms of businessstrategy, on the other hand, the Board of Directors did not haveenough time to discuss which businesses should receive strategic
and priority investment, how we should grow those businesses, andthe extent to which we should or can grow them. As a result, three

Ushio Report 2023

89

Section 5

Our Corporate Governance System

Messages from Outside Directors

Messages from New Directors

Message from Chairperson of the Nomination andRemuneration Advisory Committee

ProfileSakie Tachibana Fukushima
Outside Director
Activities of the Nomination and Remuneration Advisory Committee
Ushio’s Nomination and Remuneration Advisory Committee comprises a totalof six members, five outside directors and one inside director. In the fiscal
2022, the committee met a total of 9 times, with a 100% attendance rating by
all members.
Major matters considered by the committee in the most recent fiscal year
are described below.
Recommendations Regarding Remuneration Scheme for Directors andExecutive Officers and Linked KPIs During the 2nd Medium-Term
Management PlanAs Ushio works toward the realization of Vision 2030, in line with the start ofthe 2nd Medium-Term Management Plan (fiscal 2023 to 2025, hereinafter, “thecurrent Medium-Term Management Plan”) in April 2023, which is based on thepillars of building a structure to provide light solutions, overhauling the business portfolio and expanding strategic investments, the Nomination andRemuneration Advisory Committee has worked to change the evaluation andremuneration system to improve linkage with this plan, further increase themotivation of directors and executive officers to contribute to improving
corporate value, and encourage the steady implementation of the current
Medium-Term Management Plan. We have been proactively working in thisarea as our most important theme.
As a result of these activities, the following recommendations regarding
improvements to the evaluation/remuneration system were made to theBoard of Directors and were approved.
1. Financial targets for short-term performance-linked financial remunerationand medium- and long-term performance-linked stock remuneration werelinked to key KPIs from the current Medium-Term Management Plan, andROE (calculated excluding new goodwill amortization) and consolidated
EBITDA were adopted.
2. ESG benchmarks were introduced as common KPIs linked to medium- andlong-term performance-linked stock remuneration for all directors andexecutive officers.
3. In order to further increase motivation for directors and executive officers
to enhance corporate value and promote the steady implementation of
the current Medium-Term Management Plan, the remuneration composition ratio was reviewed and the proportion of medium- and long-term
performance-linked stock remuneration was increased.
4. In order to promote the steady implementation of the Medium-Term
Management Plan, with regards to medium- and long-term
performance-linked stock remuneration, the base number of stock points
set for different director and executive officer positions was weighted
toward the final year of the Medium-Term Management Plan period.
5. The adoption of malus and clawback provisions for medium- and long-term
performance-linked stock remuneration has continued.
Recommendations Regarding the Governance System in the Next Fiscal Year
Examination of Board of Directors composition: With regard to the selection of
director candidates for fiscal 2023, we held examinations on the number of
directors (both outside and inside) appropriate for enhancing the effectiveness of the Board of Directors. At the same time, we determined the numberof new candidates for outside and inside directors based on the number andskills of directors scheduled to retire in accordance with Ushio’s criteria fortenure and other standards.

90

In the case of selection of outside directors, we established a process fortapping candidates for appointment as outside director after making a list of
candidates and narrowing them down not only to ensure compliance with theCompany’s standards of appointment and independence but also to gain
optimal skill matrix coverage in terms of corporate strategy. Based on thisprocess, we selected Mr. Tetsuo Nakano and Mr. Naoaki Mashita as new
candidates for director and made a recommendation for their appointment to
the Board of Directors. They were subsequently appointed in June 2023.

Tetsuo Nakano

After having worked in the sales division of our Light Source Business for many
years and directed the management of China Group Companies, Mr. Tetsuo Nakano
assumed the position of General Manager of the Light Source Business in April 2019.
Since April 2022, he has been serving in the position of General Manager responsible
for the promotion of ESG management. With such extensive experience andknowledge, we judged that he could be expected to perform an appropriate role inoverall management toward further improving corporate value.

Naoaki Mashita

As the founder and manager of an information and telecommunications and DX
business company, Mr. Naoaki Mashita has been engaged in global corporate
management with offices in Asia and North America, and possesses global values
along with a wealth of experience and in-depth knowledge in the field of IT. With
such strengths, we determined that he would be able to provide useful supervision
and advice to the Company.

ProfileTetsuo Nakano
Director and Managing Executive
Officer

Appointment of outside director as chair: In order to enhance the supervisory
functions of the Board of Directors, we recommended to the Board thatoutside director Masatoshi Matsuzaki, who has extensive experience chairingboards of directors, be appointed as Chair of the Board of Directors.
Executive Officer Monitoring and Recommendations Regarding Management
Structure for Next Fiscal YearIn addition to examining the internal executive structure and the Company’s
management succession plans, the Nomination and Remuneration Advisory
Committee has also monitored and made recommendations regarding theappointment and training of next-generation management candidates as partof the Company’s medium- to long-term succession plans.
Activities of the Nomination and Remuneration Advisory Committee
Applicable to:

1. All executive officers, including the CEO
2. Candidates for the next generation of Ushio’s management(executive officers) based on the recommendations of the CEO

Assessment

Interviews held by all of the outside directors

Recommendation
content

As outside directors, we collected opinions on ways to cultivate individual
candidates in the future such as through the assignment of difficult tasks, andmade recommendations to the CEO accordingly.

The current CEO has respected and reflected the opinions and instructionof the Nomination and Remuneration Advisory Committee in terms of
appointments and training. Furthermore, we will oversee the PDCA cycle formedium- to long-term succession, including 360-degree evaluation. By doing
so, we will make recommendations that can be utilized for the further discovery and development of talent for the next generation and the generation after.
Redefinition of Selection Process for Candidates for Directors Who are Audit& Supervisory Committee Members
Ushio uses an Audit & Supervisory Committee system. As such, the selectionof candidates for directors who are Audit & Supervisory Committee members
is determined by the Audit & Supervisory Committee. However, as some
aspects of the relationship and information sharing with the Nomination andRemuneration Advisory Committee were unclear, we held discussions with the
Audit & Supervisory Committee to clarify the process of selecting candidates
for directors who are Audit & Supervisory Committee members as part ofinternal regulations.

ProfileNaoaki Mashita
Outside Director

I joined Ushio Inc. in 1988 and am now in my 35th year with the Company. When I joined Ushio Inc.,
I was involved in light source sales first, then, I was assigned to Ushio Shanghai, Inc. in 2007, andwe established sales bases and customer service locations across China over the 12 years that
followed. Starting with the establishment of the ASIA Strategy Executive Committee (ASETT) in
2016, we have promoted consolidated management with seamless cross-border connections
with group companies in charge of manufacturing and sales in China, South Korea, Taiwan, andSoutheast Asia. We aimed to achieve consolidated management with an awareness of reinforcing
governance alongside this business expansion.
I have been responsible for operations as General Manager of the ESG Promotion Headquarters
since 2022. In terms of promoting ESG management in a manner as befitting of “Ushio” as possible, one particularly important aspect is that, based on my past experience, it is easy for an
expanding business to be preoccupied with immediate action and neglect governance. However,strong governance means effective governance, and establishing a thorough management system
will enable us to take control and ensure continued sound management. I believe that reinforcing
governance will lead to three outcomes:
1. Improvement of the Company’s social value (external trust, brand power as an outstanding
company, etc.)
2. Creating employee-friendly work environments (organizing the internal management systemenables highly-transparent workflows, making it easier to eliminate unreasonableness, waste,
and disparities within the Company)
3. Expansion of long-term profitability (leading to more efficient business operations results in
expanding long-term profitability and also enables exploration of measures to further enhance
corporate competitiveness by reinvesting profits)
Reinforcing governance in this way will lead to improvements in organizational competitivenessand resilience. Finally, I am sure many people have heard this before, but faced with the uncertain
future of the VUCA era, I believe that Ushio must take a frank and bold approach. By working toreinforce Ushio Group’s governance system in my role as director as mentioned above, I hope tocontribute to the Group’s development.

I founded a software startup called V-cube, Inc. in 1998, when I was still in college, and have now
been running the Company for 25 years. I have experience of overseas expansion, domestic andoverseas M&A, stock listing (listed on Mothers in 2013, listed on the First Section of the Tokyo
Stock Exchange in 2015), the starting of numerous new businesses, open innovation with large
companies, and establishing multiple start-ups as a serial entrepreneur. Over the past few years,
as a Vice Chairman of the Japan Association of Corporate Executives, I have been actively working
on startup promotion, regulatory reform, and cooperation with ASEAN from the standpoint of thebusiness world.
Founded by Jiro Ushio, a greatly respected founder as well as chairman of the Japan
Association of Corporate Executives, Ushio Inc. has seen significant global growth as an innovative
leader in optical technology. However, I recognize that the time has come for us to make majorchanges in order to achieve sustainable growth. While I have been appointed as an outside director,
I still have relatively little experience in this role, and the startups I have been involved differ from
Ushio in terms of scale and the industries they work in.
Nevertheless, I hope to make a contribution as an outside director through my experience ofworking in new areas, facing constant change, digitalization and global expansion. Taking advantageof the fact that I am a similar age to Ushio’s mid-career employees, I will strive to contribute to
Ushio’s long-term sustainable growth through dialogue with the people responsible for shaping
the Company’s future.

Ushio Report 2023

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Section 5

Our Corporate Governance System

Corporate GovernanceUshio recognizes that realizing its Management Philosophy, as well as promoting the sustainable growth of Ushio andOutline of Governanceincreasing corporate value over the medium-to long-term, will bring satisfaction to all stakeholders.

General Meeting of Shareholders

To achieve this goal, Ushio strives to ensure the transparency and efficiency of corporate management and to reinforce

Election and dismissal

Election and dismissal

Election and dismissal

corporate governance in order to realize speedy and resolute decision-making.
Four directors who are Audit &Supervisory Committee Members(including three outside directors)

Ten directors who are not Audit &Supervisory Committee Members(including five outside directors)

Initiatives Relating to Governance at Ushio
2006

2011

2016

2021

2nd Medium Term Management Plan

Outside directors became majority on Board (2016)
1 (2016)

Voluntaryadvisory
committee

Compensation
systems

Programs andpolicies

Other

2030

Appointed outside directors (2012)

Female directors

3 (2020)

Future initiatives

Nomination and Remuneration Advisory Committee (2019) xecutive compensationE
revised (2020)
 dopted stock compensation
A(2015)

 evised executiveRcompensation– Deploying ESG
benchmarks
 evised stockR
compensation plan
– Adopting key performanceindicators for reaching
Medium-Term
Management Plan goals
and increasing stockcompensation ratio

Shifted to delegating authority for executives (2008)

Use and enhanceexisting structuresand systems

Selection andconsultation

Nomination and Remuneration
Advisory Committee

Appointments andremovals
Supervision
Reports andsuggestions

Cooperation

Cooperation

Accounting Auditor

Reports

Audit
Instruction andsupervision

Representative Directors
Consultation

Reports
Reports

Corporate Strategy MeetingGroup Coordination Council(Discussions, etc. on important items)
Instruction andsupervision

Reports

Internal Audit Department(including evaluation of the internal
control system)
Reports

Instruction andsupervision

Reports

Reports about
important matters

Cooperation
Audit

Compliance Committee
ESG Promotion Headquarters
BCP Committee, etc.

Submitting policy
proposals and plans, etc.

Authorization of policy
proposals and plans

Business Divisions, Headquarters, Group Companies

 nhance Board ofE
Directors' disclosureReinforce Group
governanceStrengthen internal
controls
B olster risk
management

Shortened terms for directors and executive officers to one year (2015)
 stablished Audit & SupervisoryE
Committee (2016)

Reports andsuggestions

Instruction andsupervision

4 (2022)

Remuneration Advisory Committee (2015)

Abolished retirement
benefits for directors
and corporate auditors(2005)

Auditing,etc.

Board of Directors

VisionOutside directors

Audit & Supervisory
Committee

 ppointed outside director toA
chair Board of Directors

Activities of the Board of Directors
Ushio’s Board of Directors met 11 times in fiscal 2022. The main
items for examination by the Board of Directors included the status
and appropriateness of the implementation of the Medium-Term
Management Plan up to March 2023 and related measures, strategies and issues relevant to each business and the implementationof related measures, the formulation of the Medium-Term
Management Plan commencing in April 2023, the formulation offinancial capital strategies, the operational status of risk­management and internal control systems, the promotion of

personnel-related measures such as talent development and­recruitment, the promotional status of ESG management, dialogue
with institutional investors, and examination of the propriety ofcross shareholdings. In addition, meetings attended only by outside
directors, known as executive sessions, are held on a regular basis
to ensure a forum for information exchange and to establish
common understanding based on independent, objective perspectives. A total of 6 executive sessions were held in fiscal 2022.

Corporate Governance System (As of June 29, 2023)
Ushio uses an Audit & Supervisory Committee system, which fosters prompt decision-making by delegating decisions for certain
important business matters from the Board of Directors to the
executive directors. It has also strengthened the supervisory function of the Board of Directors by ensuring that the majority of its
members are outside directors. The system has also been reinforcing audit and supervisory functions by having established an Audit &Supervisory Committee with the authority to assess the legality andvalidity of board members in performing their duties.
In addition to establishing a system for more accurate andprompt business execution through the executive officer system,
Ushio has established a Corporate Strategy Meeting and Group92

Coordination Council to discuss and report on important matters.
Furthermore, there is a Nomination and Remuneration Advisory
Committee for the purpose of ensuring the fairness and appropriateness of the nomination and remuneration of directors. The
Nomination and Remuneration Advisory Committee is chaired byand comprises a majority of outside directors. The committee ischaired by Sakie Tachibana Fukushima (independent outside director) and its responsibilities as advisors to the Board of Directors andthe representative directors consist of advice and recommendations
concerning the structure and level of remuneration for directors,
evaluations of the contributions of individual directors to businessperformance, and the nomination of director candidates.

Evaluation of the Effectiveness of the Board of Directors
Ushio conducts questionnaires and interviews regarding individual
directors concerning the composition of the Board of Directors, thestatus of operations, matters discussed, and more, and analyzes
and evaluates the effectiveness of the Board of Directors once per
year. As a result of the analysis and evaluations conducted in fiscal
2022, the Company judges that the effectiveness of the Board of
Directors has been generally secured.

Meanwhile, the Board of Directors has identified and shared theneed for measures relating to setting agendas in advance in order topromote effective deliberation given the limited time and opportunities for meetings and the need to further enhance the content ofmaterials as issues that need to continue being addressed going
forward. The Company will continuously engage in improving theseprocesses.

Ushio Report 2023

93

Section 5

Our Corporate Governance System

Corporate Governance

Audit & Supervisory Committee
The Audit & Supervisory Committee comprises four directors who
are Audit & Supervisory Committee members, and has been established to oversee the directors’ performance of duties. Ushio has
also appointed a full-time Audit & Supervisory Committee member
to enhance the efficacy of audits by collecting information fromdirectors (excluding those who are also Audit & Supervisory
Committee members) and employees, and coordinating smoothlywith the internal audit department and Accounting Auditor.
The full-time member Nobuyuki Kobayashi has experience working in the finance departments of the Company, and therefore possesses a high level of expertise regarding finance and accounting.
The outside member Akemi Sunaga is a certified public accountant
and certified public tax accountant and also possesses a high levelof expertise pertaining to finance and accounting. The outside
member Chiaki Ariizumi has years of experience working at a publicfinancial institution and therefore possesses a high level of expertise
regarding finance and accounting.
The Audit & Supervisory Committee meets once a month, inprinciple, to supervise the management of the Company andconduct audits on the appropriateness of business execution by the
directors. In fiscal 2022, the committee met 13 times.
Specific items for examination by the Audit & Supervisory
Committee include formulation of annual audit plans, which include
key audit matters and the division of roles between each member ofthe Audit & Supervisory Committee; the status of directors’ performance of duties through regular interviews with the representative
directors; the status and appropriateness of the implementation of
the Medium-Term Management Plan and related measures; thestatus and appropriateness of accounting audits and internal control audits in accordance with audit plans by the Accounting Auditor;
the establishment and operational status of Group internal control
systems; the monitoring of the management status of Group companies; the status of the Company’s compliance and risk management and audit activities of full-time Audit & Supervisory Board
members; and other key audit matters (KAM). The audit and supervision of these various factors are carried out from the perspectivesof legality and validity.

Policy on Determining Officer Remuneration Amounts and Remuneration Calculation Method from
Fiscal 2023
As Ushio works toward the realization of Vision 2030, in line with thestart of the 2nd Medium-Term Management Plan based on the pillarsof building a structure to provide light solutions, overhauling thebusiness portfolio and expanding strategic investments, it was
decided to move to an evaluation and remuneration system that ismore closely linked to this Medium-Term Management Plan, startingin April 2023. From the next consolidated fiscal year onwards, thecontent of the policy on determining matters such as individual remuneration for directors (excluding directors who are Audit & Supervisory
Committee members; the same shall apply hereinafter) and executive
officers who have entered into an delegation agreement with theCompany (hereinafter, directors and applicable executive officers arereferred to collectively as “Directors, etc.”) shall be revised as follows.
Ushio’s Board of Directors made resolution on this policy at a meeting
held on May 11, 2023. When making this resolution, the Board of
Directors consulted with and received reports in advance from theNomination and Remuneration Advisory Committee.
Also, remuneration for directors who are Audit & Supervisory
Committee members has been determined through discussions
among such members.
1. Basic Policy on Remuneration
The remuneration should increase motivation to realize Vision
2030 and the targets of the Medium-Term Management Plan thatcommenced in fiscal 2023.
Remuneration should lead to continuous improvement of businessperformance and corporate value over the medium- to long-term.

94

Remuneration should be closely linked with the Company’s performance / Company values, and also be highly transparent andobjective.
Remuneration should be at a level that enables recruitment andretention of diverse and talented personnel, considering the levelof companies listed on TSE Prime and companies of the same
size in the same industry.
Remuneration should be determined through a transparent process to ensure the trust and support of the stakeholders.
2. P olicies on the Composition and Composition Ratio of
Remuneration
Remuneration for Directors, etc. consists of fixed monetary remuneration, short-term performance-linked monetary remuneration,and medium- to long-term performance-linked stock remuneration.
The remuneration level and the ratio of remuneration of the
Directors, etc. are determined based on the basic policy, objective
comparison with officers’ remuneration data of external researchorganizations before, and subsequent deliberation by the Nomination
and Remuneration Advisory Committee. The percentage of fixedmonetary remuneration, the short-term performance-linked monetary
remuneration, and medium- to long-term performance-linked stock
remuneration, which are configured according to the positions for
Directors excluding Outside Directors, are set approximately at thelevels shown in the following table when standard targets areachieved.

Position

Percentage of
Fixed Monetary
Remuneration

Percentage ofShort-term
Performancelinked Monetary
Remuneration

Percentage ofMedium- to LongTerm Performancelinked StockRemuneration

Representative
Director

50%

25%

25%

Directors

55%

25%

20%

3. P
 olicies on Short-Term Performance-Linked Monetary
Remuneration
The short-term performance-linked monetary remuneration will be
determined, based on the Basic Policy, according to the position andthe degree of achievement of performance targets (consolidated
performance evaluation and performance evaluation of the divisionin charge) of the fiscal year in order to further increase the motivationof Directors, etc. to contribute to the enhancement of corporate value
and to drive the steady implementation of the current Medium-Term
Management Plan. Evaluation indicators are linked to the important
indicators of the Medium-Term Management Plan. The indicators,
ratios, and target values are set as shown in the table below.
This type of remuneration is paid in a lump sum after the end of
the fiscal year in an amount determined by multiplying the baseamount set for each position by a coefficient set according to thedegree of achievement of each evaluation indicator. Short-term
performance-linked monetary remuneration varies from 0 to 200%.
Director Portion

Executive Officer Portion

Indicators

ROE*

Consolidated Achievement ratio of the target
EBITDA
of each department in charge

Ratios100%

50%Linked to the consolidated
Target Values performance target values ofthe fiscal year

50%
Linked to the performancetarget values of the fiscal yearof each department in charge* The target value of ROE will be calculated excluding new amortization of goodwill.

4. P olicies on medium- to long-term Performance-Linked StockRemuneration
Medium- to long-term performance-linked stock remuneration will
be determined, based on the basic policy, according to the position,
degree of achievement of the performance targets and ESG targets
in the relevant fiscal year, with the aim of further enhancing the
motivation of Directors, etc. (excluding non-residents of Japan) tocontribute to the improvement of corporate value and driving thesteady implementation of the current Medium-Term Management
Plan. Evaluation indicators are linked to the important indicators of
the Medium-Term Management Plan. The indicators, ratios, andtarget values are set as shown in the following table.
The stock points*1 for medium- to long-term performance-linked
stock remuneration granted to Directors, etc. (excluding non-residents
of Japan) at a fixed time each year are calculated by multiplying thebase stock points*2 set for each position by a coefficient set

according to the degree of achievement of each evaluation indicator,
which varies from 0 to 200%. When a director resigns, the Company
will deliver to him/her the number of Company shares determinedby multiplying the cumulative number of stock points granted tohim/her during his/her term of office by one share per stock point.
Director Portion

Executive Officer Portion

Indicators

ROE *3

Consolidated
EBITDA

Engagementscore *4

ESG ratingscore *5

Ratios

100%

70%

18%

12%

Linked to the consolidated
Target Values performance target values ofthe fiscal year

Linked to the ESG targets*1 In order to drive the steady implementation of the Medium-Term Management Plan, thebase number of stock points set for different positions is weighted toward the final fiscal
year of the Medium-Term Management Plan. Therefore, the maximum of the total
number of share points per year that Directors, etc. (excluding non-residents of Japan)
can receive is 165,000 share points in the last fiscal year of the evaluation period and127,500 share points in other fiscal years subject to the evaluation.
*2 The base stock points for medium- to long-term performance-linked stock remuneration
are calculated by dividing the amount of medium- to long-term performance-linked
remuneration for each position set in advance by the average closing price of theCompany’s shares between January 4, 2023, and March 31, 2023.
*3 The target value of ROE will be calculated excluding new amortization of goodwill.
*4 The Company defines engagement as a “state of feeling that relationships with theCompany or colleagues at the workplace are valuable and feeling motivated to make anactive contribution” and uses as an engagement score the percentage of employees who
have given an affirmative answer to a question indicating such state.
*5 FTSE Russell ESG Ratings are used as the indicator.

5. Policies on the Timing and Conditions for Granting Remuneration
Fixed monetary remuneration is paid as a fixed monthly amount.
Short-term performance-linked monetary remuneration is paid in alump sum after the end of the fiscal year. As for medium- to longterm performance-linked stock remuneration, Company sharescorresponding to the accumulated stock points granted individuallyare delivered, and the cash equivalent of the conversion value of
said shares is paid if Directors, etc., fulfill the beneficiary requirements, in principle after retiring their positions, in accordance with
the Rules on Share Delivery for Directors, etc. prescribed by resolution of the Board of Directors.
6. M
 atters Related to Delegating Authority for Decision-Making on
Remuneration
To ensure fairness and appropriateness, the concrete amount of
remuneration paid to individual Directors shall be determined by the
Nomination and Remuneration Advisory Committee, which comprises the committee chair and committee members where no lessthan half of its members are Outside Directors, on the grounds ofdelegation by the Board of Directors, according to the system andlevel of remuneration for Directors, etc., as well as deliberations onan evaluation of the degree of contribution to the performance ofeach Director, etc.

Ushio Report 2023

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Section 5

Our Corporate Governance System

Corporate GovernanceRisk Management

Total Remuneration for Director Categories, Total Amount by Type of Remuneration, and Number of Eligible Directors in fiscal 2022
Total Amount by Type of Remuneration (millions of yen)

Directors (excluding directors who are Audit &Supervisory Committee members or outside directors)
Directors who are Audit & Supervisory Committee
members (excluding outside directors)
Outside directors

Number of
Eligible
Directors

Total Amount of Remuneration(millions of yen)

Fixed
Compensation(monetarycompensation)

248

123

86

37

4

24

24

—

—

1

67

67

—

—

8

Performance-linked
Performance-linked
Compensation
Compensation(monetary(stock)compensation)(Note 1)	Performance-linked compensation (stock) is the amount recorded as expenses in the fiscal 2022 according to Japanese GAAP.
(Note 2)	The remuneration for directors (excluding directors who are outside directors or Audit & Supervisory Committee members) comprises fixed monetary compensation, performancelinked monetary compensation, and performance-linked stock compensation. The remuneration for outside directors and directors who are Audit & Supervisory Committee members
is solely fixed monetary compensation.
(Note 3)	At the Annual General Meeting of Shareholders held on June 29, 2016, shareholders approved a resolution to limit the remunerations (excluding performance-linked stock compensation) for directors (excluding directors who are Audit & Supervisory Committee members) to ¥540 million per year (of which the portion for outside directors is up to ¥84 million). In
addition, the Articles of Incorporation limit the number of directors (excluding directors who are Audit & Supervisory Committee members) to 12.
(Note 4)	At the Annual General Meeting of Shareholders held on June 29, 2016, shareholders approved a resolution to limit the remunerations for directors who are Audit & Supervisory
Committee members to ¥84 million per year. In addition, the Articles of Incorporation limit the number of directors who are Audit & Supervisory Committee members to 5.
(Note 5)	The stock compensation system for directors (excluding directors who are Audit & Supervisory Committee members and outside directors) and executive officers who have entered into
an engagement agreement with the Company (excluding non-residents of Japan) was established by resolutions passed at the Annual General Meeting of Shareholders held on June
26, 2015 and the Annual General Meeting of Shareholders held on June 29, 2016. Furthermore, as stated in the Policy on Determining Officer Remuneration Amounts and Remuneration
Calculation Method from Fiscal 2023 established by a resolution at the Annual General Meeting of Shareholders held on June 29, 2023, the system shall be partially revised from fiscal
2023 onwards.
(Note 6)	The specific amount of monetary compensation paid to individual directors (excluding directors who are Audit & Supervisory Committee members) in fiscal 2022 was determined by
the Nomination and Remuneration Advisory Committee, which is chaired by and comprises a majority of outside directors, based on the authority delegated to them by the Board of
Directors, with the purpose of ensuring the fairness and validity of this decision.
(Note 7)	Remuneration for directors who are Audit & Supervisory Committee members for fiscal 2022 was determined through discussions among such members.

Cross-Shareholdings

Basic Approach to Risk Management
Ushio Group aims to achieve its management goals and realize sustainable growth by accurately identifying, evaluating and responding to risks
that may impede the implementation of its Management Philosophy and the enhancement of its corporate value. We also strive to fulfill our social
responsibilities as a company, ensure that we continue to earn the trust of our stakeholders, and reinforce and enhance our governance systems.

Basic Principles
1 We will establish and implement a comprehensive, all-encompassing risk management system in order to manage risks related to thebusiness activities of the entire Ushio Group.
2 We shall identify, analyze, evaluate and review risks, and shall engage in information sharing and appropriate risk management activi-

ties in order to reduce risks and prevent the materialization of risks.
3 We shall respond with promptness and precision in the event that an incident does occur, and shall implement recovery measures tominimize losses, then make improvements to prevent recurrences.
4 We shall strive to build both a prosperous Company and prosperous employees and work to protect our assets.
5 We shall strive to achieve sound and stable management while supporting happiness for people and the development of society.

Risk Management Systemcross-shareholdings will be exercised after closely examining all bills
from the viewpoint of enhancing the medium- to long-term corporate value of Ushio Group and the business partner with whom theCompany maintains the cross-shareholding and properly judging
our opinion regarding each bill. We will oppose a bill if it would significantly damage value for shareholders or if serious concerns
about corporate governance such as social misconduct surface. If ashareholder of the cross-shareholdings states the intention to sellshares of Ushio, we will never attempt to impede the transaction by,
for example, suggesting they reduce the transaction amount, andwill properly respond to such sales.

Ushio has established a Risk Management Committee chaired by
the Company president and comprising members nominated byexecutive directors and the Company president. Risk management
pertains to the entirety of Ushio Group and is the responsibility of
the company President, who is the Chair of the Risk Management
Committee. Risk assessments are carried out throughout the Group,and reports are submitted to the Risk Management Committee. In
addition to monitoring these activities, the committee conducts
identification, evaluation, formulation of response plans, and monitoring with regards to significant risks across the entire Group.
These measures are reported to the Board of Directors, which confirms the effectiveness of risk management based on the content ofthese reports. In principle, the Risk Management Committee meetsat least three times each year and holds emergency meetings
as necessary. This series of processes carried out by the Risk
Management Committee takes place independently from the
Audit & Supervisory Committee.

Response to Risk
Please refer to the Annual Securities Report for fiscal 2022 (only inJapanese) for information regarding our responses to risk.

96

Board of Directors

Reports

Supervision andInstruction

Reports

Cooperation

Risk Management Committee
Chair
President and CEO
Vice Chair Director of Risk Management Control
Secretariat Risk Management Department
Reports

Audit

Auditing,
etc.

Ushio Inc.
Departments andDivisions

Cooperation

Instruction

Japanese
subsidiaries

Overseassubsidiaries

Audit & Supervisory Committee

Ushio maintains cross-shareholdings with important business
partners aiming to enhance the medium- to long-term corporate
value of Ushio Group through maintaining and strengthening therelationships with such business partners. The cross-shareholdings
are regularly examined by the Board of Directors through comprehensively judging the medium- to long-term economic rationality ofeach shareholding with regard to the dividends and transaction
amounts, and whether it contributes to enhancing medium- to longterm corporate value in view of business strategies etc. of Ushio
Group. Any cross-shareholdings whose significance has waned will
be sold after considering the status, etc. of the business partnerwith whom Ushio maintains cross-shareholdings. Voting rights ofGroup-wide risk management system, we have established risk
management policies and a Risk Management Committee, andare proceeding to carry out Group-wide risk assessments, identify
risks and re-screen important risks. Through a PDCA cycle of risk
management, we aim to enhance trust among all stakeholders,
achieve the Ushio Group’s management targets, and realize sustainable growth.

Internal Audit Department

Director Category

Up to now, Ushio Group has carried out risk management in an
integrated manner by assigning departments responsible for eachtype of risk and a person in charge of responding to each type ofrisk, then implementing cooperation between the relevant departments at each Group company. However, in light of the increasingly
uncertain business environment, we moved forward with a review ofthis system from fiscal 2022. In order to rebuild and strengthen our

Cooperation

Please see the following URL for more details (available
only in Japanese).https://www.ushio.co.jp/documents/
ir/library/valuable_s/2022/valuable_s_pdf_202303.pdf

Ushio Report 2023

97

Section 5

Our Corporate Governance System

Directors

Directors (as of June 29, 2023)

Name and Position

Koji Naito
President and Chief Executive Officer

Senior Executive Vice President

Kazuhisa Kamiyama

Takabumi Asahi

Tetsuo Nakano

Director and Managing Executive Officer

Director and Managing Executive Officer

Director and Managing Executive Officer

Apr. 1986 Joined Ushio Inc.
Oct. 2014 Executive Officer
Apr. 2015	Senior Executive Officer
General Manager, Light Source Business Division
Apr. 2016 Managing Executive Officer
Apr. 2019 Chief Executive Officer
Jun. 2019	President and Chief Executive Officer (incumbent)

Apr. 1986	Joined Ushio Inc.
Apr. 2015 	Executive Officer
Apr. 2017	Senior Executive Officer
Apr. 2018 	Managing Executive Officer
Apr. 2019	Senior Managing Executive Officer
General Manager, Business Management
Headquarters and General Manager, System
Solution Division, Business Management
Headquarters
May 2019	General Manager, Business Management
Headquarters and General Manager, System
Solution Division, Business Management
Headquarters and General Manager, Business
Development Division, Business Management
Headquarters
Jun. 2019	Director and Senior Managing Executive Officer
Apr. 2020	General Manager, Business Management
Headquarters and General Manager, System
Solution Division, Business Management
Headquarters and General Manager, Incubation
Center, Business Management Headquarters
May 2020	Representative Director and Senior Managing
Executive Officer
Apr. 2022	Representative Director, Senior Executive Vice
President and Chief Operating Officer(incumbent)
General Manager, Business Management
Headquarters and General Manager, System
Solution Division, Business Management
Headquarters
Apr. 2023	General Manager, Business Management
Headquarters (incumbent)

Sep. 1995 	Joined Ushio Inc.
Apr. 2016 	Executive Officer
Apr. 2018 	General Manager, Corporate Headquarters
Jul. 2018 	Group Executive Officer
Chief Financial Officer,
CHRISTIE DIGITAL SYSTEMS INC.
Apr. 2019 	Group Senior Executive Officer
President, CHRISTIE DIGITAL SYSTEMS INC.
Chairman and Chief Executive Officer,
CHRISTIE DIGITAL SYSTEMS USA, INC.
Chairman and Chief Executive Officer,
CHRISTIE DIGITAL SYSTEMS CANADA INC.
Jun. 2019	Director and Group Senior Executive Officer
Apr. 2022 	Director and Managing Executive Officer(incumbent)
Deputy General Manager, Business Management
Headquarters and General Manager, Light Source
Business Division, Business Management
Headquarters
Apr. 2023	Deputy General Manager, Business Management
Headquarters and General Manager, Life Science
Division, Business Management Headquarters(incumbent)

Apr. 2017 	Joined Ushio Inc.
Jul. 2017	Deputy General Manager, Corporate Headquarters
Oct. 2017	Deputy General Manager, Corporate Headquarters
and General Manager, Corporate Planning
Department, Corporate Strategy Division,
Corporate Headquarters
Apr. 2018	Executive Officer
Deputy General Manager, Corporate Headquarters
and General Manager, Corporate Strategy Division,
Corporate Headquarters and General Manager,
Corporate Planning Department, Corporate
Strategy Division, Corporate Headquarters
Jul. 2018	General Manager, Corporate Strategy Division andGeneral Manager, Corporate Planning
Department, Corporate Strategy Division
Apr. 2019	Senior Executive Officer
General Manager, Corporate Headquarters andGeneral Manager, Corporate Strategy Division,
Corporate Headquarters and General Manager,
Corporate Planning Department, Corporate
Strategy Division, Corporate Headquarters
Jul. 2019 	General Manager, Corporate Headquarters
Jun. 2021	Director and Senior Executive Officer
Apr. 2022 	Director, Managing Executive Officer and Chief
Financial Officer (incumbent)
Apr. 2023	General Manager, Corporate Headquarters andGeneral Manager, Group Corporate Strategy
Division, Corporate Headquarters (incumbent)

Apr. 1988 Joined Ushio Inc.
Apr. 2016 	Group Executive Officer
Chairman, Ushio Shanghai, Inc.
Apr. 2017 Group Senior Executive Officer
Apr. 2018 Group Managing Executive Officer
Apr. 2019 	Managing Executive Officer
Deputy General Manager, Business Management
Headquarters and General Manager, Light Source
Business Division, Business Management
Headquarters
Apr. 2022 	General Manager, ESG Promotion Headquarters(incumbent)
Jun. 2023 	Director and Managing Executive Officer(incumbent)

4 years

4 years

4 years

2 years—

100% (11/11)

100% (11/11)

100% (11/11)

100% (11/11)—

Brief profile

Term of office

Naoki Kawamura
Representative Director andIndependent Outside Director
Attendance at Board of Directors’ meetings
Attendance at the Audit & Supervisory Committee
Attendance at the Nomination and Remuneration
Advisory Committee(9/9)

Corporate Management
Global Business

Skill Matrix

Finance / Accounting / M&A
Manufacturing / Technical / R&D / New BusinessIT / DX
Sales / Marketing
Legal / Risk Management
Human Capital Strategy
Sustainability / ESG

98

Ushio Report 2023

99

Section 5

Our Corporate Governance System

Directors

Directors (as of June 29, 2023)

Name and Position

Brief profile

Term of office

Yasufumi Kanemaru

Sakie Tachibana Fukushima

Toyonari Sasaki

Masatoshi Matsuzaki

Naoaki Mashita

Outside Director

Outside Director

Outside Director

Outside Director

Outside Director

Apr. 1979	Joined TKC Corporation
Apr. 1982	Joined Logic Systems International, Inc.
Sep. 1985	Director, NTT PC Communications Incorporated
Nov. 1989	Established Future System Consulting Corp.
(currently Future Corporation) and served as
President and Chief Executive Officer
Mar. 2006	Chairman, President and Chief Executive Officer,
Future System Consulting Corp.
Jan. 2007 	Chairman and Chief Executive Officer, Future
Architect, Inc. (currently Future Corporation)
Mar. 2011	Chairman, President and Chief Executive Officer,
Future Architect, Inc.
Jun. 2015 	Outside Director (incumbent)
Jul. 2015 	Chairman, Future Architect, Inc.
Apr. 2016 	Chairman, President and Group Chief Executive
Officer, Future Corporation (incumbent)
Chairman and Representative Director, Future
Architect, Inc.
Mar. 2022 	Chairman, Future Architect, Inc. (incumbent)

Jun. 1980	Joined Braxton International
Sep. 1987	Joined Bain & Company, Inc.
Aug. 1991	Joined Korn/Ferry International-JapanMay 1995 	Director, Korn/Ferry International
Sep. 2000 	Regional Managing Director, Korn/Ferry
International-Japan
Jul. 2001 	President and Representative Director, Korn/Ferry
International-JapanMay 2009 	Chairman & Representative Director, Korn/Ferry
International-Japan
Jul. 2010 	President & Representative Director, G&S Global
Advisors Inc. (incumbent)
Jun. 2016 	Outside Director (incumbent)
Jun. 2020 	Outside Director, Kyushu Electric Power Company,
Incorporated (incumbent)
Jun. 2022 	Outside Director, Aozora Bank, Ltd. (incumbent)

Apr. 1976 	Joined the Ministry of FinanceJul. 2003 	Deputy Director, General of the Budget Bureau
Jul. 2007	First Deputy Commissioner, National Tax Agency
Jul. 2008	Director, General of the Financial BureauJan. 2010 	Assistant Chief Cabinet Secretary,
Cabinet Secretariat
Apr. 2013	Chief Domestic Coordinator, Governmental
Headquarters for the Trans-Pacific Strategic
Economic Partnership Agreement (TPP),
Cabinet Secretariat
Apr. 2016	Vice Chairman, the Life Insurance Associationof Japan (incumbent)
Jun. 2019	Outside Director (incumbent)

Apr. 1976	Joined Konishiroku Photo Industry, Inc.
(currently Konica Minolta, Inc.)
Oct. 2003	Director, Konica Minolta Business Technologies Inc.
Apr. 2005	Executive Officer, Konica Minolta Holdings, Inc.
(currently Konica Minolta, Inc.)
President and Chief Executive Officer, Konica
Minolta Technology Center, Inc.
Apr. 2006	Senior Executive Officer,
Konica Minolta Holdings, Inc.
Jun. 2006	Director and Senior Executive Officer,
Konica Minolta Holdings, Inc.
Apr. 2009	Director, President, Chief Executive Officer andRepresentative Executive Officer,
Konica Minolta Holdings, Inc.
Apr. 2014	Director and Chair of the Board of Directors,
Konica Minolta, Inc.
Jun. 2019	Outside Director and Chair of the Board of
Directors, LIXIL Group Corporation(currently LIXIL Corporation) (incumbent)
Aug. 2021	Outside Director, SmartHR, Inc.
Apr. 2022 	Outside Director and Chair of the Board of
Directors, SmartHR, Inc. (incumbent)
Jun. 2022 	Outside Director
Special Advisor, Konica Minolta, Inc.
Mar. 2023 	Outside Audit & Supervisory Board Member,Lion Corporation (incumbent)
Jun. 2023	Outside Director and Chair of the Board of
Directors (incumbent)
Honorary Advisor, Konica Minolta, Inc.
(incumbent)

Oct. 1998 	Established V-cube Internet (currently V-cube, Inc.)and served as President and CEO
Jan. 2004 	President and CEO, V-cube Broad
Communications, Inc. (currently V-cube, Inc.)
Oct. 2015 	Director, V-cube Robotics Japan, Inc. (currently
SENSYN ROBOTICS, Inc.)
Director, Wizlearn Technologies Pte. Ltd.
(incumbent)
Nov. 2018 	President and CEO, SENSYN ROBOTICS, Inc.
Aug. 2019 	Chairman and Representative Director, SENSYNROBOTICS, Inc.
Jun. 2021 	Director, SENSYN ROBOTICS, Inc. (incumbent)
Director, Xyvid, Inc. (Incumbent)
Mar. 2022 	Representative Director, Chairman &Group CEO,V-cube, Inc. (incumbent)
Sep. 2022 	Outside Director, MICIN, Inc. (incumbent)
Jun. 2023	Outside Director of the Company (incumbent)
Outside Director, Sumitomo Mitsui Trust Bank,
Limited (incumbent)

8 years

7 years

4 years

1 year

—100% (11/11)

100% (11/11)

100% (11/11)

100% (8/8)—

Independent Outside Director
Attendance at Board of Directors’ meetings
Attendance at the Audit & Supervisory Committee
Attendance at the Nomination and Remuneration
Advisory Committee

(9/9)

(9/9)

(8/8)

(8/8)

Corporate Management
Global Business

Skill Matrix

Finance / Accounting / M&A
Manufacturing / Technical / R&D / New BusinessIT / DX
Sales / Marketing
Legal / Risk Management
Human Capital Strategy
Sustainability / ESG

100

Ushio Report 2023

101

Section 5

Our Corporate Governance System

Directors

Directors (as of June 29, 2023)
Board of Directors
Internal directors

Outside directors

6

8
Board ofDirectors

IncludingName and Position

Nobuyuki Kobayashi

Rei Sugihara

Akemi Sunaga

Director

Outside Director

Outside Director

Outside Director(Full-time Audit & Supervisory Committee Member)(Audit & Supervisory Committee Member)(Audit & Supervisory Committee Member)(Audit & Supervisory Committee Member)

Apr. 1986 	Judge
Apr. 1995	Attorney-at-law (incumbent)
Jan. 1996	Joined Koga Sogo Law Office(currently Kasumi Sogo Law Office)Oct. 2004 	Partner Lawyer, Kasumi Sogo Law Office(incumbent)
Jun. 2020	Outside Director (an Audit & Supervisory
Committee Member) (incumbent)
Jan. 2023	Outside Director (Audit & Supervisory Committee
Member), TOMOE Engineering Co., Ltd.
(incumbent)

Oct. 1989	Joined Auditing Department of Aoyama Audit
Corporation (currently PricewaterhouseCoopers
Aarata LLC)
Feb. 1991	Joined Auditing Department of Chuo Audit
Corporation
Aug. 1993	Certified Public Accountant (incumbent)
Oct. 1994 	Certified Public Tax Accountant (incumbent)
Nov. 1994	Established Sunaga CPA Firm and served as
Representative Director (incumbent)
Nov. 1996 	Established Marunouchi Business Consulting Ltd.
and served as Representative Director(incumbent)
Jan. 2012 	Established Marunouchi Business Consulting Tax
Co. and served as Senior Partner (incumbent)
Jun. 2017	Established Marunouchi Audit Corporation andserved as Senior Partner (incumbent)
Jun. 2020	Outside Director (an Audit & Supervisory
Committee Member) (incumbent)
Outside Director (an Audit & Supervisory
Committee Member), YOMEISHU SEIZO CO.,LTD.
(incumbent)
Jun. 2021 	Outside Audit & Supervisory Board Member,Prima Meat Packers, Ltd. (incumbent)
Jun. 2022 	Outside Director, KYB Corporation (incumbent)
Mar. 2023	Outside Audit & Supervisory Board Member,Lion Corporation (incumbent)

Apr. 1987	Joined the Bank of JapanMay 1998 	Deputy Manager, International Department(Head of Europe and the Americas Group),
Bank of Japan
Jul. 2002	Manager, Nagoya Branch, the Bank of Japan
Jul. 2005	Director, Information Service Department, theBank of Japan
Jul. 2009	Director, Secretariat of the Policy Board (Head of
Economic Organization Negotiations Group),
Bank of Japan
Jun. 2019	Director, Information Service Department,
the Bank of Japan
Jan. 2020	Personnel and Corporate Affairs Department,
the Bank of Japan
Mar. 2020	Retired from Bank of Japan
Outside Audit & Supervisory Board Member,
KOBAYASHI PHARMACEUTICAL CO., LTD.
Outside Audit & Supervisory Board Member,
IDEA Consultants, Inc. (incumbent)
Jun. 2021	Outside Audit & Supervisory Board Member,
Kiraboshi Bank, Ltd. (incumbent)
Mar. 2022	Outside Director, KOBAYASHI PHARMACEUTICAL
CO., LTD. (incumbent)
Jun. 2022	Outside Director (an Audit & Supervisory
Committee Member) (incumbent)

Apr. 1982 Joined Ushio Inc.
Apr. 2007 Executive Officer
Jul. 2011 Senior Executive Officer
Jun. 2013 Director and Managing Executive Officer
Apr. 2014 	General Manager, Corporate Management
Division
Apr. 2016 In charge of Corporate Headquarter
Jun. 2016 	Director (a Full-time Audit & Supervisory
Committee Member) (incumbent)

Brief profile

Term of office

4 femaledirectors

Chiaki Ariizumi

Nomination and Remuneration Advisory Committee
Internal director

1

Nomination
and Remuneration
Advisory
Committee
IncludingOutside directors

2 femaledirectors

5

Audit & Supervisory Committee
Internal director

Outside directors

1

3
Audit &
Supervisory
Committee

10 years

3 years

3 years

1 year

100% (11/11)

100% (11/11)

100% (11/11)

100% (8/8)(13/13)(13/13)(13/13)(9/9)

Including

3 femaledirectors

Independent Outside Director
Attendance at Board of Directors’ meetings
Attendance at the Audit & Supervisory Committee
Attendance at the Nomination and Remuneration
Advisory Committee
Corporate Management
Global Business

Skill Matrix

Finance / Accounting / M&A
Manufacturing / Technical / R&D / New BusinessIT / DX(9/9)

Please refer to the following
website for a list of executive
officers.
https://www.ushio.co.jp/en/company/officer.html

Sales / Marketing
Legal / Risk Management
Human Capital Strategy
Sustainability / ESG

102

Ushio Report 2023

103

Data Section

Financial and Non-Financial Highlights

Financial Highlights

Non-Financial Highlights

Net Sales

Operating Income / Operating Margin(Millions of yen)

(Millions of yen)

200,000
150,000

165,138

18,000175,025

159,009148,821

13,500118,558

100,000

9,000

50,000

4,500

0

0
2018

2019

2020

8.8

2021

2022

(Fiscal Year)

13,068

5.2
8,517

9.1
15,861

764

Operating income (left)(Years)

10

2,000

8

4
0.6

2019

Average Length of Service (non-consolidated)(People)

6

4.2
6,659

2018

Number of Employees (non-consolidated)
(%)

2020

2021

2022

1,500

1,571

1,000

2

500

0

0

(Fiscal Year)

506

508

1,065

1,051

Male

25

1,699

1,697

521

526

534

1,186

1,171

1,165

2019

2020

FemaleProfit Attributable to Owners of Parent

Net Income per Share(Millions of yen)

(Yen)

(%)

10,50012,606

11,326

13,699

125
100

8,967

7,000

75

88.85

104.54100

115.69

80

73.25

0
2018

2019

2020

2021

2022

(Fiscal Year)

100.0

71.8

100.0

100.0

72.6

76.7

(5.70)
2018

2019

2020

2022

(Fiscal Year)

20.9

21.6

21.7

15

18.8

19.4

18.8

19.2

19.3

2018

2019

2020

2021

2022 (Fiscal Year)

5

Male

FemaleCO2 Emissions (consolidated*)(t-CO2)
39,52736,54830,00068.5

38,66633,37832,54820,00010,000
0

0
2021

20.8

40,000

20

0
△25

(687）

72.8

100.0

40

25

△3,500

100.0

60

50

3,500

20.0

10

2022 (Fiscal Years
Ended March 31)

2021

Ratio of Employees Returning to Work after Taking Maternity andChildcare Leaves (non consolidated) / Percentage of Paid
Vacation Days Used (non-consolidated)

14,00020

02018

Operating margin (right)

1,559

1,707

2018

2019

2020

2022 (Fiscal Year)

2021

2017
(Base Year)

Ratio of employees returning to work after taking maternity and childcare leaves

2019

2021

2022 (Fiscal Year)

1,045

1,029

2020

2021

2022

11

11

2020

Percentage of paid vacation days used

Total Assets / Equity Ratio(Millions of yen)
400,000(%)

69.5
306,628

73.0

72.7

73.2
321,09675.4
323,62280

ROE

Water Intake (consolidated*)

Total Waste Output (consolidated*)

(%)

(m3)

(t)

6

60

4

200,00040

2100,000

20

0

300,000

274,904

290,275

00
2018

Total assets (left)

2019

2020

2021

2022

Equity ratio (right)

5.3

5.7

400,000

2018

2019

376,058

300,000(0.3)△2(Fiscal Years
Ended March 31)

5.7

4.3

2020

347,534

312,327

322,371

330,911

2022

1,500

200,000

1,000

100,000

500

0
2021

2,000

(Fiscal Year)

1,392

1,252
881

0
2018

2019

2020

2021

2022

(Fiscal Year)

2018

2019

Dividends Per Share / Dividend Payout Ratio

Free Cash Flow

Number of Patents Held (non-consolidated)

Number of Directors(Yen)(%)(Millions of yen)

(Number of patents)(Person)

80
60
40

60

56.3
47.8
50

35.5
26

20

50

43.2

45

50

26

30
15

0

0
2018

2019

Dividends per share (left)

2020

2021

2022

Dividend payout ratio (right)(Fiscal Year)

2,000

20,00015,00010,000

16,109
11,572

1,500

11,0990(304)△5,000
2018

2019

1,454

1,446

1,389

1,000

5,573

5,000

12

2020

2021

2022

(Fiscal Year)

1,169

9

1,258

3

0

0
2019

2020

2021

5

2022

(Fiscal Year)

6

5
2018

Internal directors

12

Female 1

6

6

7

6

5

5

5

2019

2020

2021

2022

Female 1

6

500

2018

12
10

Female 3

Outside directors(Fiscal Year)

Female 3

Female 4(End ofFiscal Year)* CO2 emissions, water intake and total waste output correspond to consolidated environmental management range established by the Company.

104

Ushio Report 2023

105

Data Section

Financial Data

FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

Net sales (millions of yen)

143,461

157,800

159,365

179,121

172,840

173,497

165,138

159,009

118,558

148,821

175,025

Cost of sales (millions of yen)

95,196

101,809

98,030110,717112,383

111,350

106,611

105,580

78,71994,792

111,809

Gross profit (millions of yen)

48,26455,991

61,33568,40360,456

62,14658,52653,42839,83954,02963,215

Selling, general and administrative expenses (millions of yen)

40,682

43,88150,97755,27351,854

51,99550,00846,76939,07440,96047,353Operating income (millions of yen)

7,582

12,11010,357

13,130

8,602

10,151

8,517

6,659

764

13,06815,861

Ordinary income (millions of yen)

10,53915,904

13,708

14,633

11,001

12,05011,439

8,738

3,407

15,195

20,144

Profit attributable to owners of parent (millions of yen)

7,155

10,77011,279

11,105

7,042

11,001

11,326

8,967

△687

12,606

13,699Operating margin (%)

5.3

7.7

6.5

7.3

5.0

5.9

5.2

4.2

0.6

8.8

9.1

Ordinary margin (%)

7.3

10.1

8.6

8.2

6.4

6.9

6.9

5.5

2.9

10.2

11.5

Net margin (%)

5.0

6.8

7.1

6.2

4.1

6.3

6.9

5.6

△0.6

8.5

7.8

Net income per share (yen)

54.57

82.19

86.40

85.83

55.06

86.11

88.85

73.25

△5.70

104.54115.69Net assets per share (yen)

1,324

1,441

1,654

1,622

1,664

1,683

1,691

1,664

1,750

1,949

2,074

Total dividends (millions of yen)

2,884

3,388

3,139

3,353

3,329

3,329

6,316

3,141

3,141

6,041

5,895

Dividends per share (yen)

22.0

26.0

24.0

26.0

26.0

26.0

50.0

26.0

26.0

50.0

50.0

Payout ratio (%)

40.3

31.6

27.8

30.3

47.2

30.2

56.3

35.5

—

47.8

43.2

Ratio of dividends to net asset (%)

1.7

1.9

1.5

1.6

1.6

1.6

3.0

1.5

1.5

2.7

2.5

Total assets (millions of yen)

228,657

255,338

294,542

294,525

308,430

305,303306,628

274,904

290,275

321,096323,622

Current assets (millions of yen)

140,646

153,004

178,774

170,173

180,334

184,940

200,119

170,835

176,359

201,708

198,519

Property, plant and equipment, net (millions of yen)

36,776

39,12640,01442,31044,80941,57843,05044,242

44,822

46,16250,480Investments and other assets (millions of yen)

48,371

59,04868,65571,256

74,062

72,47358,81556,07965,682

70,234

71,588Current liabilities (millions of yen)

37,95039,95744,88649,46354,592

54,17469,57247,72948,00772,39362,410Interest-bearing debt (millions of yen)

9,427

8,258

14,063

14,512

27,771

26,82328,93822,255

24,634

18,587

5,331

Net assets (millions of yen)

176,784

191,246

218,723

211,296

213,289

215,306

213,254

200,705

211,180

235,202244,105

Shareholders’ equity (millions of yen)

202,922

Earnings Data

Dividends / Per Share Data

Balance Sheet Data

162,609

169,482

178,891

183,057

185,658

193,332

199,408

194,218

190,676

200,129

Total assets turnover ratio (times)

0.63

0.65

0.57

0.61

0.57

0.57

0.54

0.55

0.42

0.49

0.54

Current ratio (%)

370.6

382.9

398.3

344.0

330.3

341.4

287.6

357.9

367.4

278.6

318.1

Equity ratio (%)

75.9

73.5

73.3

70.9

68.9

70.4

69.5

73.0

72.7

73.2

75.4

ROE (%)

4.3

6.0

5.6

5.2

3.3

5.1

5.3

4.3

△0.3

5.7

5.7

ROA (%)

3.2

4.4

4.0

3.8

2.3

3.6

3.7

3.0

1.2

5.0

6.2

Interest coverage ratio (times)

68.5

48.7

51.0

48.1

41.9

26.5

15.1

1.8

33.2

64.9

4.1

D/E ratio (%)

0.06

0.05

0.08

0.08

0.15

0.14

0.15

0.11

0.13

9.30

2.63

Fixed assets to long-term capital ratio (%)

49.9

52.9

55.2

57.4

56.6

52.5

47.7

47.2

51.4

55.9

56.9

Cash Flow Data

106

Cash flows from operating activities (millions of yen)

14,443

10,622

9,876

12,031

12,624

15,567

8,853

1,179

14,517

21,628871

Depreciation and amortization (millions of yen)

6,741

5,021

5,919

6,495

6,587

6,790

6,775

7,182

6,988

6,939

7,615

Cash flows from investing activities (millions of yen)

(8,649)(4,476)(3,710)(10,367)(15,254)

4,322

2,719

4,394

(3,418)(5,519)(1,175)

Cash flows from financing activities (millions of yen)

(7,092)(6,670)1,210(7,849)6,864(3,613)(3,916)(20,363)(784)(10,625)(26,811)

Free cash flow (millions of yen)

5,794

6,146

6,166

1,664

(2,630)19,889

11,572

5,573

11,09916,109(304)

Net increase (decrease) in cash and cash equivalents (millions of yen)

1,676

2,080

11,646(9,176)

3,161

15,061

8,586(15,576)

11,890

11,200(24,103)

Cash and cash equivalents at end of year (millions of yen)

43,26145,342

56,98947,81350,974

66,03574,622

59,04670,41881,61957,516

Cash flow to interest-bearing debt ratio (years)

0.7

0.8

1.4

1.2

2.2

1.7

3.3

18.9

1.7

0.9

6.1

Depreciation to sales ratio (%)

4.7

3.2

3.7

3.6

3.8

3.9

4.1

4.5

5.9

4.7

4.4

Ushio Report 2023

107

Data Section

Non-Financial Data

External Evaluation

Item

ESG

Scope

Japan
Asia (excluding Japan)
Energy (GJ)

North America
EuropeOthersJapan

Water Intake (m³)

Asia (excluding Japan)
North America
EuropeJapan

E

Total waste output (t)Asia (excluding Japan)
North America
EuropeJapan
SCOPE1

Asia (excluding Japan)
North America
EuropeJapan

GHG (CO2)
emissions (t-CO2)

Asia (excluding Japan)
SCOPE2

North America
EuropeOthersSCOPE3

Consolidated

Japan
Asia (excluding Japan)
Number of employees

North and South America
EuropeOthersS

FY2018FY2019FY2020

FY2021

FY2022476,883
164,649
105,401
35,031—226,099
118,373
26,999
4,587
776
195
333
87
2,579
435
638
341
20,199
9,170
2,607
1,330
—
7,819,701

507,142
152,798
105,556
42,338—228,977
93,59819,995
4,964
754
164
304
31
2,588
334
568
402
19,679
8,557
2,641
1,779
—
6,107,661

516,995
94,20785,092
43,227—
222,829
66,14817,536
5,815
712
44
84
41
2,529
202
450
398
19,860
5,988
2,047
1,902
—
4,152,450

561,324
162,282
80,69446,607—
208,80792,85014,673
6,041
749
215
20
62
3,001
246
493
444
21,19910,476
1,308
1,500
—
5,514,770

562,673
151,871
84,00538,311
2,871
228,083
86,296
14,542
1,990
725
215
45
45
2,812
250
528
322
14,515
10,862
1,348
1,733
177
7,337,378

2,480
1,383
1,607
233
—
83
100
18.8
20.0

2,466
1,388
1,500
236
—
86
100
19.4
20.8

2,446
1,251
1,107
249
—
100
100
18.8
20.9

2,387
1,637
1,077
241
—
100
100
19.2
21.6

2,396
1,449
1,288
218
6
82
100
19.3
21.7

Three-year retention rate for new
graduate recruits (%)

Nonconsolidated

Male

Average length of service (years)

Nonconsolidated

Male

Statutory monthly overtime
hours (hours/employee)

Nonconsolidated

10.6

9.4

10.4

14.5

11.63

Percentage of paid vacation
days used (%)

Nonconsolidated

72.8

71.8

68.5

72.6

76.7

Number of people who tookmaternity leave

Nonconsolidated

21

21

18

21

14

Number of people who tookchildcare leave

Nonconsolidated

10
21

8
21

8
18

8
20

9
10

Number of people who took
nursing care leave

Nonconsolidated

0

0

0

1

0

Ratio of employees returning
to work after taking maternity
and childcare leave (%)

Nonconsolidated

100

100

100

100

100

Frequency of work-related
accidents (%) (Number ofwork-related injuries or deaths ÷
Total number of work hours
x 1 million)

Nonconsolidated

0.61

0.61

0

0

0.27

Severity of work-related
accidents (%) (Number of lostwork days ÷ Total number ofwork hours x 1,000)

Nonconsolidated

0.02

0.02

0

0

0.02

Number of patents held

Nonconsolidated

1,454

1,446

1,389

1,169

1,258

FemaleFemaleMale
FemaleUshio has been selected for inclusion in five ESG indices that areused by the Government Pension Investment Fund of Japan, theworld’s largest pension fund. These indices are the MSCI Japan
Empowering Women Index (WIN), the FTSE Blossom Japan Index,
the FTSE Blossom Japan Sector Relative Index, the S&P/JPX
Carbon Efficient Index and the Morningstar Japan ex-REIT Gender
Diversity Tilt Index.

The contribution of ESG investments to increasing risk-adjusted
returns is believed to increase as the holding period of investments
become longer. Ushio’s inclusion in these indices demonstrates thewidespread recognition of its commitment to the environmental,social, and governance activities. Ushio will continue to actively
promote these initiatives to enhance corporate value while contributing to the realization of a sustainable society.

External Evaluation of ESG Management
Ushio has been selected for 20 consecutive years for inclusion in the FTSE-Russell’s FTSE4Good Index Series of socially
responsible companies worldwide. Furthermore, Ushio has been selected for the FTSE Blossom Japan Index and FTSE
Blossom Japan Sector Relative Index of Japanese companies with outstanding ESG programs.
Note: FTSE Russell (a registered trademark of FTSE International Limited and Frank Russell Company) has certified that Ushio meets the requirements of the FTSE Blossom
Japan Index based on a third-party assessment. Produced by the global index firm FTSE Russell, this index is designed to measure the performance of Japanesecompanies with outstanding ESG programs. The index is used as a benchmark for the establishment and evaluation of investment funds and other financial products
focused on sustainable investment.

The MSCI Japan Empowering Women Index (WIN) consists of companies in this top 700 index that have excellent gender
diversity within their respective industries in accordance with a gender diversity score newly developed by MSCI.
Note: THE INCLUSION OF USHIO INC.IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTEA SPONSORSHIP, ENDORSEMENT OR PROMOTION OF USHIO INC. BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI.
MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

Morningstar Japan ex-REIT Gender Diversity Tilt Index is an ESG index created by Morningstar
that evaluates companies’ efforts regarding gender diversity. Under this system, Ushio has beenranked as Group 1, the highest of the five groups under the system. Please see the link below for
details and the applicable disclaimer.
https://www.ushio.co.jp/jp/news/1005/2023-2023/501084.html (available only in Japanese)(available only in Japanese)

The S&P/JPX Carbon Efficient Index is designed to measure the performance of companies in TOPIX, an index calculated and provided by the Tokyo Stock Exchange. Ushio is included in this global environmental stock index that evaluates carbon emissions inrelation to each company’s sales.
Ushio has been selected for inclusion in the SNAM Sustainability Index, which was created by Sompo Japan Nipponkoa AssetManagement Co., Ltd. The SNAM Sustainability Index is used for SNAM Sustainable Investments, an asset management product for
pension funds and institutional investors that targets about 300 companies with superior ESG performance. Ushio has been includedin this index for 12 consecutive years beginning in 2012.

Consistency with International Initiatives
Please refer to the website below for more information on consistency with international initiatives.
https://www.ushio.co.jp/en/sustainability/initiative.html(Notes)1. Greenhouse gases (GHGs) other than CO2 are not emitted.
2. The scope of aggregation for energy consumed, water intake, total waste output, Scope 1, and Scope 2 is on a consolidated basis.
3. For Scope 3, the scope of Category 11 has been expanded from major products to all products. Values for previous fiscal years have been recalculated accordingly.
4. The emission factor of purchased electricity has been used. Where the purchased electricity emission factor is not known, the Emission Factors by Electric Utility Operator published by the Japanese Ministry of the Environment foreach fiscal year are used for cases in Japan. For overseas cases, the CO2 Emissions from Fuel Combustion 2013 published by the International Energy Agency (IEA) are used for fiscal years 2018 to 2020 and Emissions Factors
2021 published by the IEA are used for fiscal years from 2021 onward.
5. The three-year retention rate for new graduate recruits represents the number of employees who reach their third year with the Company in April of the relevant fiscal year. (Example: Data in the column for fiscal 2022 is based on
the number of employees as of April 2023 who had joined the Company in 2020.)

108

Ushio Report 2023

109

Data Section

Stock Information (As of March 31, 2023)

Corporate Data

Total number of shares issued

123,500,000

EstablishedMarch 1964

Number of shareholders

19,082

Capital¥19,556,326,316

ListedTokyo Stock Exchange Prime Market

Fiscal year

From April 1 to March 31

Ordinary general shareholders’ meeting

June

Shareholder registry administrator

Sumitomo Mitsui Trust Bank, Limited

Top Ten Shareholders
Number of shares(1,000 shares)

Shareholding ratio (%)

The Master Trust Bank of Japan, Ltd. (Trust Account)

18,509

15.69

Custody Bank of Japan, Ltd. (Trust Account)

5,980

5.07

Resona Bank, Limited

5,886

4.99

BBH (LUX) FOR FIDELITY FUNDS–GLOBAL TECHNOLOGY POO

4,525

3.83

Aioi Nissay Dowa Insurance Co., Ltd.

4,274

3.62

MUFG Bank, Ltd.

3,398

2.88

Jiro Ushio

2,665

2.26

Asahi Mutual Life Insurance Co.

2,450

2.07

THE USHIO FOUNDATION

2,400

2.03

HSBC BANK PLC A/C M A ND G (ACS)

2,078

1.76

Name

Divisions and Major Group Companies

Parent company

Stock Price and Trading Volume(¥)(Thousands of shares)

2,800

70,0002,400

60,0002,000

50,0001,600

40,0001,200

30,000800

20,000400

10,000Foreign investors

0

0

32.7%

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
2022
2023
2021

Securities companies

Treasury stock

4.8%

4.5%

Himeji, Hyogo Prefecture

Gotemba Division

Gotemba, Shizuoka Prefecture

Yokohama Division

Yokohama, Kanagawa Prefecture

Osaka Branch

Osaka, Osaka Prefecture

Kyoto Division

Kyoto, Kyoto Prefecture

XEBEX Inc.
ADTEC Engineering Co., Ltd.
North
America

EuropeComposition of Shareholders

Chiyoda, Tokyo

Harima Division

Ushio Lighting, Inc.

Japanese
subsidiaries(Notes)1. In addition to the above, the Company owns 5,593 thousand shares of treasury stock. 230 thousand shares of Company’s shares held in the trust introduced with respect to its stock
remuneration plan for directors are not included in 5,593 thousand shares of treasury stock.
2. Shareholding ratio is calculated after deducting 5,593 thousand shares of treasury stock. (As of March 31, 2023)
3. Each of the investment banks listed in the upper portion of the major shareholders table manages securities held primarily by Japanese institutional investors and is also the nominee of theseinvestors. Trust accounts denote accounts that receive trusts such as pension trusts, investment trusts, and designated monies in the trust from the institutional investors concerned.

Head Office

5 other companies

Ushio America, Inc.
Christie Digital Systems USA, Inc.
Christie Digital Systems Canada Inc.

12 other companies

Ushio Europe B.V.
Ushio Germany GmbH7 other companies

Ushio Hong Kong Ltd.

Overseassubsidiaries

Ushio Taiwan, Inc.
Ushio Philippines, Inc.
Asia

Ushio (Suzhou) Co., Ltd.
Ushio Asia Pacific Pte. Ltd.
Ushio Korea, Inc.

Financial

Other Japaneseinstitutions

companies

36.4%

8.5%

Individuals

Ushio Shanghai, Inc.
Ushio Shenzhen, Inc.

14 other companies

Disclaimer
The plans, strategies, and other statements related to the outlook for future results in this Ushio Report reflect the assumptions and beliefs of management based on currently available information.
However, it should be noted that there is a possibility for actual results to differ significantly owing to such factors as changing social and economic conditions.
The copyright to this Ushio Report is held by Ushio Inc. Unauthorized reproduction or conversion is strictly prohibited.

and others

13.1%

110

Ushio Report 2023

111