HOYA CORPORATION
Q4 Financial Results Briefing for the Fiscal Year Ending March 2021
April 30, 2021

Event Summary[Company Name]HOYA CORPORATION[Company ID]

7741-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q4 Financial Results Briefing for the Fiscal Year Ending March 2021

[Fiscal Period]

FY2020 Q4[Date]

April 30, 2021

[Number of Pages]

28[Time]

15:00 – 16:02(Total: 62 minutes, Presentation: 46 minutes, Q&A: 16 minutes)[Venue]Webcast[Venue Size][Participants]

300[Number of Speakers]

3
Hiroshi Suzuki[Analyst Names]*

Ryo Hirooka
Eiichiro Ikeda

Director, Representative Executive Officer,
President & CEO
Representative Executive Officer & CFO
Executive Officer & CTO

Yu Yoshida
Masahiro Nakanomyo
Richard Kaye

CLSA Securities Japan Co., Ltd.
Jefferies Japan Limited
Comgest*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A.

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Presentation
Moderator: Now that it is time, HOYA Corporation will begin the financial results briefing for the fourth
quarter of the fiscal year ended March 31, 2021.
From the viewpoint of preventing the spread of COVID, the meeting will continue to be held via web
conference. Please note that depending on the communication environment, it may be difficult to hear theconversation, or it may be temporarily interrupted.
Today's presenters from the Company are CEO Hiroshi Suzuki, CFO Ryo Hirooka, and CTO Eiichiro Ikeda.
As for today's agenda, Mr. Hirooka will start by explaining the fourth quarter business results, followed by Mr.
Ikeda's overview of the IT business, and finally Mr. Suzuki's overview of the Life Care business and overallsummary. The remaining time will be used for questions and answers, and the session is scheduled to end at
16:00.
For those of you who are participating via PC today, please refer to the document shared on the screen. We
would like to begin with a presentation from CFO Hirooka.

Hirooka: This is Hirooka. Nice to meet you. I will walk you through the results in numbers.

2First of all, revenue was JPY151.4 billion, an increase of JPY16.3 billion or 12% compared to last year. The
pretax profit was JPY41.3 billion, an increase of JPY13.6 billion, or 49%, compared to last year. Net income
was JPY30.8 billion, an increase of JPY11.1 billion, or 56%, compared to last year.
As I will explain later by business unit, we achieved an overall increase in both revenue and profits, mainly
due to an increase in sales of EUV blanks and 3.5-inch HDD substrates.

Next is the impact of foreign currency translation.
This is what would have happened if the rate had not changed at all from last year. In the middle is the impactof foreign currency translation, and the impact on revenue is JPY1.5 billion, which became larger just becauseof the exchange rate. Therefore, the real YoY growth is JPY14.8 billion after deducting JPY1.5 billion. Excluding
JPY500 million of the impact of foreign exchange rates, the real growth in pretax profit is JPY13.1 billion.
Excluding the impact of JPY400 million on net income, the real increase will be JPY10.7 billion.

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I will explain one point about extraordinary factors.
In the total expenses, impairment losses are significantly different from last year. This is an increase of JPY4.8
billion compared to last year. As mentioned in the appendix, we have impaired some of the goodwill frompast acquisitions.
To add a little more, we acquired an ophthalmic treatment equipment-related company a little over 2 years
ago with the aim of entering into areas other than cataracts. It is a very profitable company, and for 1 year
after the acquisition, sales and profitability were going very well. However, due to the stagnation of sales in
the markets of our customers and inventory adjustments triggered by COVID, the recovery has been slow
compared to other medical equipment-related companies in 2020.
The delay in recovery is still continuing, and there are still uncertainties in fiscal 2021, so from an accounting
point of view, we have impaired part of the goodwill at the end of this fiscal year in order to make an earlyprovision.

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Next is the Life Care business.
Revenue was JPY95.3 billion, an increase of JPY6.9 billion, or 8%, compared to last year. The pretax profit was
JPY14.8 billion, an increase of JPY5.8 billion or 65% compared to last year.

5This is the result of the Life Care business after taking into account the impact of foreign exchange rates.
The impact of foreign exchange rates on revenue was positive JPY1.7 billion. Therefore, in real terms, revenue
increased by JPY5.2 billion, or 6%. The impact of the exchange rate on pretax profit was JPY500 million,
resulting in an actual increase of JPY5.3 billion, or a 59% increase in profit.

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Next is revenue of the IT segment.
It was JPY54.7 billion, an increase of JPY9.1 billion, or 20%, compared to last year. The pretax profit was JPY27
billion, an increase of JPY7.1 billion or 36% from last year.

7This is the impact of exchange rates on IT.
Revenue and pretax profit were largely unaffected. There was just a slight negative impact on revenue.

8I will now explain in more detail by sub-segment and product.
First, there are healthcare-related products, eyeglasses and contact lenses. Revenue was JPY70.5 billion, an
increase of JPY6 billion compared to last year, and the amount in parentheses is the increase excluding theeffect of exchange rates, so the increase is JPY4.9 billion on a real basis, which is an 8% increase on a real basis.
Regarding eyeglasses, there was an 8% increase in real terms compared to last year. Contact lenses grew by
6%. However, in March of last year, both eyeglasses and contact lenses were already affected by COVID, so in
reality, the situation is still on the verge of returning to the level before the impact of COVID.
By country, the Japanese market for both eyeglasses and contact lenses has been stagnant and recovery has
been slower from last year, partly due to the impact of the emergency declaration in Japan.
Medical related products, intraocular lenses, and endoscopes. Revenue was JPY24.8 billion, an increase of
JPY900 million from last year, and an increase of JPY300 million in real terms. Sales of endoscopes haveincreased by 6% compared to last year, and sales in the US have exceeded last year's level.
On the other hand, intraocular lenses have decreased by 3% overall compared to last year. In the year-agoquarter, intraocular lenses were not so much affected by COVID in Japan, but this year, the impact of COVID
is still lingering. Intraocular lenses themselves account for a higher percentage of the market in Japan thanelsewhere, resulting in negative growth overall.
Next are electronics-related products, semiconductors, large flat panels, and HDD substrate business.
Revenue was JPY46.6 billion, an increase of JPY7.9 billion or 20% over last year. Sales of LSIs, semiconductor-

9related products, and EUV continue to be strong, and sales of semiconductor-related products and blanks
have increased by more than 20% compared to last year.
Sales of HDD substrates, especially 3.5-inch HDDs, have increased compared to last year, covering the decline
in 2.5-inch HDDs, and increased by 25% YoY in the fourth quarter.
Looking at the results on a quarterly basis, there seems to have been an extreme increase, but when we lookat the results on a yearly basis, the HDD substrate as a whole has shown a slight increase, so from theperspective of the composition of the business, the 3.5-inch has almost covered the 2.5-inch decline. This is
the result of the past year.
In the Imaging business, the result was JPY8.1 billion, an increase of JPY1.2 billion compared to last year. The
only category in IT affected by COVID was camera-related products. In the fourth quarter of last year, the firsthalf of the year was also very depressed, but there was a slight recovery in digital cameras and surveillancecameras, and sales are growing.

Next is the balance sheet.
There is not much to mention in particular, but the biggest item is the JPY16.8 billion in cash, which will be
explained in the next section on cash flow.

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Next is the cash flow.
Cash flow from operating activities increased compared to last year, and cash flow from investing activities,
including the payment for capital investment, decreased YoY due to the large amount of capital investment
payment in Q4 of last year.
Cash outflow from financing activities was JPY43.5 billion, which was mainly due to share buybacks. In April,
we reached the upper limit of the JPY40 billion share buyback that was resolved in January.
As you can see in today's release, the Board of Directors has resolved to retire all of the treasury stock. That's
all for my explanation on the numbers.
Moderator: Next, Mr. Ikeda, CTO, will give an overview of the IT business.
Ikeda: This is Ikeda. I will walk you through the overview of the IT business.
As for the IT segment as a whole, as mentioned earlier, revenue was JPY54.7 billion, up 20% YoY, operating
profit was JPY25.4 billion, up 30% YoY, and the OP margin was 46.4%, up 3.6% YoY. We achieved a large
increase in both revenue and profits.

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By product, as you can see in the slide, we achieved double-digit percentage increases in sales in all segments:
plus 18% in LSI and FPD, plus 25% in HDD glass substrates, and plus 15% in imaging products.

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I will continue with an overview of each business segment.
First of all, in terms of blanks for LSIs, EUV sales was approximately 180% compared to the same period of thelast fiscal year (+80% YoY). The new EUV line in Singapore, which was just installed but not yet in operation in
the same period of the previous year, made a significant contribution to this increase in sales.
Optical, on the other hand, saw a decline in sales of about 5% YoY. The reason for the decrease in optical sales
is due to the impact of COVID, which caused customers to raise inventory levels in the first half of last fiscal
year due to procurement concerns, but inventory levels were restored from the end of last year to this quarter.
The impact of this adjustment is expected to last until the next quarter or so in YoY comparison, but this isdue to the intentional adjustments of inventory levels held by customers and not due to changes in actual
demand.
Also, as mentioned in the comments on this slide, EUV is expected to continue to grow in FY2021. The growth
driver is advanced development, and the current demand is for development of the 3nm/2nm generation.
The new line in Singapore is now entering full-scale operation, and we will make additional investments asappropriate to meet further increases in demand.
Also, as a guide to the EUV market environment, as we always mention, according to a recent announcementby an EUV scanner manufacturer, the actual shipments for 2020 were 31 units, while 40 units are planned for2021 and 55 units for 2022.

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Also, a Taiwanese customer announced that they will further increase their capital investment in FY2021, andthat about 80% of that will be for advanced processes such as 3nm, 5nm, and 7nm. Given this environment, I
think it is fair to say that demand for EUV blanks is expected to continue increasing in FY2021 and beyond.
Sales of FPDs were slightly down by a low single-digit percentage compared to the same period last year. As
in 3Q, the quarter was affected by a decrease in overall demand for masks due to less demand fordevelopment purposes, as panel manufacturers shifted from development to mass production in response toincreased demand for TVs and PC monitors for use at home caused by COVID.
On the other hand, demand for OLED masks for flagship smartphones, including foldable devices, is strong,
especially from Korean customers, and we will continue to focus on high-performance, high-value-added
masks centering on OLEDs.

Next, HDD glass substrate.
Revenue increased by 25% in overall HDD. Looking at the breakdown of the 2.5-inch and 3.5-inch models, the2.5-inch model was 80% compared to the same period of the last fiscal year (-20% YoY). This is due to the factthat 2.5-inch HDDs are being replaced by SSDs in mobile applications, which is as expected. We expect thatthe 2.5-inch market will continue to see a decline in demand as SSDs replace all applications.
On the other hand, 3.5-inch HDDs, as you can see in the slide here, grew significantly. It was about 190%
compared to the same period of the last fiscal year (+90% YoY) this fiscal year due to the investment cycle fornear-line HDDs for data centers. In the next fiscal year and beyond, we would like to make up for the 2.5-inch
decline with 3.5-inch growth and continue to achieve revenue growth.

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The percentage of 3.5-inch revenue exceeded 60% in this fiscal year. In addition, since we have started
production of the 3.5-inch at our new plant in Laos, depreciation will also be incurred. We will continue towork on continuous reduction of production cost as a priority issue to manage profitability.
Going forward, the current mainstream of mass-produced HDDs is 16 TB products, and there is no change in
the number of glass substrates used as the base compared to 16 TB for the next 18 TB, so there is no change
in the situation of glass substrate adoption by customers. I told you about 2 quarters ago that the companies
are managing without increasing the number of substrates up to the next 20 TB. But since the improvement
in recording density has not been satisfactory, it has become more likely that the model with a further increasein the number of substrates planned for 22 and 24 will be applied for 20 TB ahead of schedule.
For that model, there has been no change in the adoption of glass substrates yet, but additional glass is on
the roadmap for increasing the number of substrates beyond this, so we think it is positive for us that thisincrease will be brought forward. In any case, all HDD manufacturers have a roadmap to achieve higher
capacities either by increasing the number of substrates installed to increase the recording media area or by
improving the recording density by adopting HAMR.
Glass has an advantage in both thinning for the large number of substrates and heat resistance for HAMR,
and we continue to work on development with our customers.
Lastly, in the imaging business, the quarter under review was the first quarter in which there was a YoY
increase. There are 2 reasons for this: as this slide shows, demand for interchangeable lenses for mirrorlesscameras has become stronger, and surveillance cameras are gaining momentum since the last quarter.
However, we believe that the digital camera market will continue to shrink, and although we are making
products in this quarter, we may repeat the cycle of overproduction and inventory adjustment. Therefore, we
think it is necessary to properly control fixed costs on the assumption that demand will basically continue todecrease until new applications are expected to replace cameras.
The quarter saw a significant improvement in profitability compared to the same period of the previous year,
due in part to the increase in revenue and the effects of structural reforms implemented last fiscal year. Thatis all from myself.
Moderator: Next, Mr. Suzuki, CEO, will give an overview of the Life Care business and summarize the overallsituation.

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Suzuki: Starting from eyeglasses. As Hirooka said, somehow it is only Japan that is performing poorly. This istrue for eyeglasses, and intraocular lenses as well. While both India and Brazil are growing, only Japan isshrinking, which makes me wonder what is going on. Basically, in 4Q, the US, Europe, and China all posted
positive YoY and QoQ results to a certain extent, but only Japan posted a negative result. Such is the situation.
In the midst of the positive growth, a large European chain called GrandVision was acquired by EssilorLuxottica,
and we are in the process of working with the customer to reduce sales with the assumption that we will lose
this business. Even so, the reason why we are seeing positive results is that other markets are relatively active,
and I don't think we are capturing additional share of those markets, so the markets are booming, but forsome reason Japan is not.
I think that department store channels are to blame for Japan's poor performance, but the difference between
Japan and Europe/US is that in Europe and the US, chains are recovering more slowly.
Individual stores are recovering much quicker, while in Japan, it's quite the opposite, with individual stores
shrinking and not coming back at all, and chains making a small comeback. If chains grow and independent
stores shrink, the overall sales will shrink. I don't know why Japan is structured like that, and why Japan was
the only market that moved differently, but that was how the quarter was.
Sales of PENTAX (endoscopes) in Europe were roughly on par with the previous year if you just look at 4Q, but
in the US and Asia, sales basically saw double-digit growth YoY. Regarding capital investment, each deal israther large, and depending on the timing they may happen or not, so there is some sharp rise on a one-timebasis, which I am not sure if it will continue.

16Basically, in terms of revenue, a reasonably good situation was created in the fourth quarter. In addition, we
have finally reached the point where we can start selling single-use endoscopes, or disposables, in Europe
next month.
Ambu is probably the largest company in the space, which has significantly expanded the market base, so wecame to the point where we are attempting to sneak in as the second player.

Intraocular lenses.
Looking at this period alone, as I said before, Japan is doing poorly. Japan is doing badly, and this is definitely
because of big hospitals. Small clinics, or clinics that specialize in intraocular lenses and perform a large volume
of cataract surgeries, have not experienced such a decline, but cataract surgeries at ophthalmology clinics in
so-called general hospitals have dropped drastically.
I think people don't want to go to big hospitals, setting aside whether they are accepting COVID patients ornot. But the number of IOLs is increasing in India, Brazil, and the UK, but not in Japan, this is the situation we
don’t fully understand.
The other thing is that up to now we have mostly focused on single focal length lenses, which is fine in Japanbecause it fetches a certain level of unit price, but as we work hard to expand our business outside of Japan,
the unit price of single focal length lenses will only continue to decline in the future.
Even so, there are some countries where single-focus lenses sell well, such as Japan and China, and we havebeen increasing our business there, but if we want to increase our business from here on, we will have toexpand in places where single-focus lenses are inexpensive.

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It's going to get harder and harder to make money, so we have no way but to sell multifocal lenses going
forward. We've had them as products for a while, and we’re just in the process of soft launching a new formof multifocal product.
The unit price of this multifocal lens is around 4 times that of a single focal length lens, so there is not muchof a market for this type of lens in Japan. In Japan, it is not covered by insurance, or in other words, the amountof money the doctor receives is the same whether they insert a multifocal or a monofocal lens, so the doctor
is not inclined to buy such an expensive lens to use. So basically, the Japanese market is strongly centered on
single-focus lenses.
In Europe, it depends on the country, but the big markets are some European countries and the United States.
For those places, we need to sell multifocal. The same is true for China from now on. We also need to sellmultifocal lenses in China, so we are going to make that our challenge.
In China, even single focal length lenses used to be relatively expensive, but since about half a year ago, there
has been a shift to a volume-based tendering system, in which the local government purchases lenses in bulk
rather than hospitals, and a volume-based discount is being introduced.
Not all cities, but many cities in China are moving in that direction. This is being done under orders from the
Chinese government, which is saying that it is okay to spend money on hospitals for medical care, but totighten up the money that is going out for medical purposes.
There may be Chinese manufacturers, but from the overall point of view, there are a lot of foreign
manufacturers in this space, so they are apparently talking about tightening up this area. Since that ishappening, prices are falling in China as well, so instead of insurance, in the case of China, individuals are still
paying 30% or 40%, and we are looking to sell the type of lens that individuals pay more to insert.

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Then there's contact lenses, retail. This is performing poorly in Japan, of course, and the emergency in Japanwas in January, right? I guess it was more of a request to shorten operating hours that time. I mean, the storesare located in commercial facilities, such as AEON, shopping malls, and station buildings, so if they shorten
their opening hours, the stores have to shorten their hours together with them.
In January, we were hit by such shortened hours, and in the first place, people who work remotely, including
yourselves, are not using contact lenses. Most of us wear glasses when working at home, and when we don't
want to be seen wearing glasses, we take them off and get close to the PC to use Teams and Zoom.
Since there are people who are basically not wearing contact lenses anymore, the overall market has shrunkby over 10%. The number is down by about 10% because people are staying at home instead of going outside.
On top of that, January was about shortened hours, but the current third round, I'm thinking that April will be
impacted even more than January. The first floor of commercial facilities is open, but the second floor andabove are closed, and the elevators are often stopped.
We don’t have money, so we can't go into the big places on the first floor, like next to Uniqlo, so our stance isto go to the second or third floor, typically next to the futon shop or kimono shop. The current situation isthat the elevators have stopped, and it is completely dark in there.
Not all stores, but about 20% of stores are in such a state, so naturally Q4 was not good, and I guess we will
have a hard time from here on out. Here in Japan, it is 100%, so I feel like I will have a bit of a hard time.
We do offer home delivery to customers who have current medical records or prescription records, and we
do extend the prescription period, but I don't think that is enough to generate substantial sales. We are likely
to suffer after all when the stores are closed.

19Summary. Somehow only Japan is bad, is the summary. We’re also worried about Imaging business, the returnof high-priced CCTV or surveillance cameras, digital cameras, and mirrorless cameras in 4Q.
These people never learn, so I wondered if they might have started building inventory again. They may be fineuntil the first or second quarter, but after the summer, they are likely to start saying that they will adjust
production because of inventory buildup, so I am a little worried about that.
One thing that struck me about FPD was that there are many different models of OLEDs that are apparently
foldable, so I wondered if Chinese manufacturers are launching their own foldable models.
Also, LSI, or as Ikeda mentioned earlier, mid-low, or mid-range in particular, 28nm and 14nm, with certain
level of logic are moving reasonably well, but the logic below that, discrete, microcontrollers, et cetera, areprobably at full capacity unless new masks are introduced.
I think it's that the fabs are full, and they're too busy working on the current ones, so there's no room for new
designs. Basically, I don't know if I should call it low, but I feel that that part with relatively thick lines is notmoving recently.
The rest is related to the EUV capital investment, which we talked about around 3 months ago. After all, theitem with the longest leg of capital investment is inspection equipment, so if they don't come in, there's nopoint in adding other things to start up.
If you look only at the current situation, the capital investments made up to now are almost fully depreciated,
so until the next round for inspection equipment, we will continue the current pace of depreciation. It will beat that pace for a year or a little over a year. There will be some others, but that's roughly the depreciation
schedule.
Moderator: Lastly, I would like you to share the outlook or prospects for the fiscal year ending March 31, 2022.

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Suzuki: I don't smell any major incidents that may cause us to topple in the first half of the year. Whether it's
glasses or anything else, though, you can say that everything depends on COVID. The vaccine is working to acertain extent, and I don't think we're going to face a big failure, at least not in the first half of the year,
including on the IT side. I think it's possible to imagine it getting a little bit better and appearing a little bit
higher. You can't ask me to predict the 6 months of the second half.
Hirooka: Indeed, it is very difficult to predict, but as I mentioned earlier about vaccines, Life Care is originallynecessary with or without vaccines, whether it is medical equipment or glasses. However, if people start goingout as a result of vaccination, we should aim to recover a little more and go beyond the pre-COVID stage.
This will depend on the vaccination in Japan, but in the second half of the fiscal year for contact lenses, under
the current situation, the vaccine will not be fully available, so it will be difficult for the market to recoverthroughout the year. In the fiscal year ending March 2022, I think contact lenses in the Life Care segment will
struggle a bit.
For our IT Business, the continuing narrative is that there does not seem to be many factors that cause us tolose speed in the first half of the year. However, even if the vaccine becomes available, there is the questionof the economy. Although the Life Care business is not heavily affected by economic conditions, the risk may
be that it may be impacted in the second half.
Looking at the overall economy, money is being supplied at an ever-increasing rate, so I don't think there will
be a sudden recession in the second half of the year. We don't see any factors that will cause huge growth at
the moment, but we don't expect anything to happen in the second half of the fiscal year that would cause asudden drop, including for the IT business. As mentioned here, we have to be realistic about how to overcome
the depreciation burden. I'm sorry for being incomprehensible.

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Suzuki: If anything, our business isn’t affected so much by economic situations. Whether it be medical
products or eyeglasses, I don't know if they are called essentials, but it’s not that demand for them falls
because of a recession, nor will it suddenly increase because of an economic boom.
Basically, the accumulation of money, which would go to income, remains the same, so if the impact of COVID
were to lessen due to a certain effect of vaccines, consumption would expand.
But the supply of goods will not keep up with the demand, including the fact that companies have not been
making capital investment, so my feel is that the prices of goods are likely to rise. I don't know if inflation is
the right word, but that is the kind of environment we could be in.
There is a possibility that costs will go up, so even though our volume won't increase that much, and eventhough sales won't increase at a gargantuan rate, we have to worry about costs going up. Once we smell signsof that rise, we’d like to think hard about ways to pass it on to the price as soon as possible. So, it may be ourview up to 2023 rather than 2022, but would it be good if we are thinking about things like that?
Moderator: Yes, thank you. I would like to add one thing.
With regard to ESG, we will identify materiality as a company during the first half of the year and consider
specific measures to achieve the goals, including those of each business division. We will report on materiality
in the integrated report to be issued in August.

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Question & Answer

Moderator: Now, it has become a little long, but let's move on to the Q&A session.
Please provide your company name and your name when you ask us a question.
Then, Yoshida-san, please go ahead.
Yoshida: Thank you. This is Yoshida, CLSA Securities.
I would like to ask about the EUV blanks and the glass substrate 3.5-inch. The growth rates are at high levels,
like 80% and 90%. Please tell us how you see the future growth of this [inaudible].
Ikeda: Regarding the future growth of EUV and HDDs, as I explained earlier, the capital investment in EUV by
our main customers, the customers who mainly use EUV, has reached a record high. In addition, the numberof EUV lithography equipment is expected to exceed that of FY2019, and we believe that the number willcontinue to grow steadily during FY2021.
Our capacity is not yet full, but we expect it to become full. As the CEO mentioned earlier, we are feeling theneed to increase our investment facilities.
As for HDDs, it's a little difficult to say by quarter, as the investment cycle of data centers cause ups and downs.
If you look at it over a longer period, say a year, we assume it will continue to grow at the same pace as it isnow. If you look at it on a yearly basis, rather than this current quarter, we see that it will still grow.
Suzuki: I'm the only one who told you not to ask questions, so feel free to ask the other 2.
Yoshida: Got it. As a follow-up, with EUV, you mentioned your outlook on the capacity of the exposure device
manufacturers, and in addition, I think the processing speed will increase to 160 wafer per hour compared tothe previous specifications. Would it be better to think that the number of blanks would increase, taking that
into account?
Ikeda: The processing capability there will also increase, but right now, there is much talk over using pellicles.
If pellicles are used, which might already be the case in some areas, the transmittance and light intensity will
be reduced, so the throughput will be worse. On whether to still use pellicles or not, I think customers will
make the choice whether to adopt them depending on the layer and considering the decrease in production
capacity.
As for what will happen when pellicles are used, there is the possibility that the number of blanks will decrease,but on the other hand, if EUV technology becomes easier to use, it will spread faster.
There are several factors that come into play, not just 1 or 2, so it's hard to say in general terms what theanswer should be. Throughput, pellicle, and other factors will combine to influence future demand.
Yoshida: Thank you very much. One more question about capital investment and depreciation. If you haveany comments on the overall direction of capital expenditures and depreciation expenses for the current fiscal
year, please let us know. That is all from myself.
Hirooka: Capital investment is still on a decision-making basis, or rather, it is decided but not actually put on
the balance sheet. We have invested quite a bit in the past 2 years, so we are thinking of around JPY25 billion
for this fiscal year.

23However, we are looking at it on a quarterly basis, so it will change depending on the situation. But at the
moment, we are expecting about JPY25 billion for the whole year.
As for depreciation, the fourth quarter was about JPY10 billion. From there, there will be a little bit more of
the EUV-related items that I mentioned earlier, as well as the depreciation of the HDD new factory in Laos, so
I think that the increase will be around JPY1 billion (*JPY 11 billion per quarter).
Yoshida: I see. Thank you very much. That is all from myself.
Moderator: Thank you very much, Yoshida-san. Next, Nakanomyo-san, please continue.
Nakanomyo: Thank you very much.
Yoshida-san asked about EUV, so I'm afraid I'm overlapping a bit. You mentioned that you will increase thecapacity in the medium term, but does this mean that you will need to make further preparations for theblanks inspection system itself at an early stage?
Or is the main idea to use the current inspection equipment as a base and modify the surrounding equipment?
In the medium term, at what point will you need to make a major investment for the next stage when you
have increased your capacity?
Ikeda: First of all, in terms of inspection machines, we have established a new line in Singapore, and of course
we have enough inspection capacity to make it work at full capacity. In addition to that, in order to cope withthe volume that needs to be increased in the future, as the CEO mentioned earlier, the most important longdelivery item is the inspection machine, so we have already made arrangements for the inspection machine
first.
Nakanomyo: In the 3 months period, I understand that the medium-term investment in reserves has becomemuch stronger. Has there been any changes that caused the need for additional measures?
Ikeda: We are now adding one new inspection capacity. We are increasing the number, or rather, we havealready placed an order, although delivery is still in the future. However, of course, the inspection machine
alone will not be able to produce anything, so we will be adding all kinds of process equipment, such as film
forming equipment, to match the capacity of the inspection machine.
Even if we put those in ahead of time, it won't do any good if the inspection machine doesn't show up, so
we're trying to time it right. We are trying to figure out how to do this, or rather, we are trying to take care of
the long-delivery items first.
Nakanomyo: In that sense, when the one unit you are currently working on and its accessories are fully
operational, how much of an increase in sales do you think you will be able to handle?
Ikeda: We have arranged for the capacity of the inspection machine to be about twice as large as the newly
built line in Singapore.
Nakanomyo: I see. Thank you very much.
Suzuki: The increase will be something like 140% or 145% of the current level. Beyond that, we don't know
yet whether our equipment constitution will be fine as it is when it becomes a high-NA device. Beyond that,
including the accuracy of the inspection and the accuracy of the equipment, it is still difficult to know what tobuy without a little more time.
Nakanomyo: Thank you very much.

24Moderator: Thank you. Kei-san from Comgest, please ask your question.
Kaye: Thank you. Excuse me, thank you for today.
I would like to ask you how much we can expect from the single-use endoscope, which is about to be released.
I understand that Ambu you mentioned earlier is an existing player, and of course you can't be too specific,
but I would like to know how much you expect from company E, and what is the difference between Ambu.
Also, what countries and regions will it be deployed in? A few more details would be very helpful. Thank you.
Suzuki: I said, don't ask questions.
For the time being, the markets that can sell products with the CE mark are basically European countries. It's
not FDA approved, so it can't be sold to the US, and it's not approved in Japan, so it can't be sold in Japan. For
the time being, as the FDA will probably still take a year or a year and a half, for the next year and a half, thefocus will be on European countries.
In terms of what's different from Ambu, Pentax is an endoscope manufacturer and has been working in thefield of image processing for many years, so the basics, including the usability of the tools and the price, are
not much different from what Ambu is doing now.
The biggest difference is that the image processing is well done to a certain level, so the images are good, andsince it's an endoscope, you don't just go to look at things, but you do things like sticking a long stick insideand poking. We call that a channel, and since it is indeed an endoscope company, we have created a channel
that can be used properly.
So, it's not just a matter of going and looking at things, but it’s now better at things like inserting a stick anddoing whatever with it, and the images have become better than Ambu's. The question is how it will sell basedon those 2 features.
So far, there has been dominance of one company, and since most of Ambu's sales are for this application,
perhaps 20% or 30% of those sales, for Europe alone, we’re hoping that about 20% will come to Pentax, forthe time being.
Kaye: Thank you very much. That's a time span of a few years, right?
Suzuki: We see this actually as a consumable item, which might be surprising. They are viewed as consumables.
The hospital also views them as consumables, so when they are replaced, it won't take as long as you might
think. It's not a capital investment, it's a consumable. If the doctors and the hospital, or in this case, theemergency room, approve it, we expect it will proceed quite swiftly.
Kaye: Understood. Thank you very much. I have another question.
The second question, if you don't mind, is about the competition in EUV and mask blanks.
As far as you can disclose, I'd like to know what you're hearing about “Company S's” entry, and I think there’s
a bottleneck related to inspection systems. Can you explain whether or not the competition is likely to change
in this regard?
Ikeda: “S” went to our customer's place. Some of our customers really want to purchase from 2 companies,
but at the moment, we don't see any situation where they are finding anything better than us in the evaluation,
so the competitive situation has not changed that much from the previous fiscal year.

25Suzuki: If you ask me about current products, it's very difficult, so I think it's probably most natural to think offuture density or future design as the most important factor in entering the market. I think the discussion will
be about what “S” can do to get into the "2" or "1" category.
Kaye: Understood. From your company's objective point of view, considering “S's” supply capacity and the
procurement capacity of laser tech inspection equipment mentioned earlier, is it actually realistic?
Suzuki: Last time, I was saying, "No, it's not going to work," and ended up being caught up, so this time wewill take them as a threat and try to avoid that. Tell them I said, "Come on, come on, come on!”Kaye: Got it. Thank you very much.
Moderator: Thank you. We are now running out of time, so we will conclude today's briefing.
Thank you very much for taking time out of your busy schedule to join us today.
Suzuki: Goodbye.
Moderator: Goodbye.
[END]______________

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