ANNUAL REPORT 2006
FOR THE YEAR ENDED MARCH 31,2006

PROFILE
Shibaura Mechatronics Corporation traces its origins back to 1939, when it was established as Shibaura Engineering
Works Co., Ltd. Since that time, the Company has gone through many and diverse changes, including a thoroughgoingreform of its business structure in 1998, when it took its present name and redefined its corporate identity as "TheProvider of Infrastructure for The Digital Age." This clearly reflects the Company's role in providing essential
manufacturing equipment for electronic components that support social progress.
The 21st century is the age of IT and of the environment. In working to fulfill the demands of the century, theCompany is determined to become "e-Shibaura," a truly IT-based enterprise, and "E-Shibaura," an enterprise thatplaces priority on the Earth's environment, and that pursues global business expansion by encouraging innovative
attitudes and thinking among employees.

HISTORY
1932

Tokyo Electric Company

1939

1949

1991 1996

Oct.,1998

Tokyo Shibaura Electric Co., Ltd. (now, Toshiba Corporation)

Shibaura Engineering Works Co., Ltd.

(Industrial Mechatronics Business)

Toshiba Automation Co., Ltd.
Manufacturing automation equipment

Toshiba Mechatronics Co., Ltd.
Semiconductor manufacturing
equipment and others

Shibaura Engineering Works Co., Ltd.
Electric motors

Tokuda Seisakusho Co., Ltd.

Shibaura Engineering Works Co., Ltd.
Motors, flat panel displays manufacturing
equipment and others

Vacuum equipment

CONTENTS
01 Financial Highlights

COVER PHOTO : WAFER INSPECTION EQUIPMENT
In July, 2005, Shibaura Mechatronics took
over the semiconductor inspection

02 To Our Shareholders

equipment business of the former Honda
Electron Co., Ltd. The scope of the05 Topics

business includes equipment for
inspecting both the top and bottom faces

08 Financial Review

of semiconductor wafers, and forinspecting the wafer edge. Wafer face and

11 Five-year Summary
12 Business Overview
12 Fine Mechatronics Segment

edge management is becoming
increasingly important as miniaturization
continues to make advances, and wafer
inspection equipment makes essential
contributions to yield improvement.

16 Electronic & Vacuum Equipment Segment
19 Vending Machines and Systems Segment
20 To be a truly trusted company

FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements concerning Shibaura
Mechatronics' future plans, strategies and performance. These forward-looking

22 Efforts to Protect the Environment
23 Board of Directors

statements are not historical facts, rather they represent assumptions and beliefs
based on data currently available. Furthermore, they are subject to a number ofrisks and uncertainties that, relate to economic conditions, worldwide megacompetition in the electronics business, customer demand, foreign currency
exchange rates, tax rules, regulations and other factors. Shibaura therefore wishes

24 Investor Information

to caution readers that actual results may differ materially from our expectations.

FINANCIAL HIGHLIGHTS

Consolidated

Millions of yen

Thousands of
U.S. dollars (Note 1)

Years ended March 31

Year ended March 31

2006

Net sales¥

2005
88,513$ 637,716

Operating income

5,180

8,824

44,093

Net income

3,393

5,134

28,888

Total assets

75,15170,411

639,743

Total shareholders' equity

74,913¥

2006

27,670Net income per share (yen and U.S. dollars)

22,791

235,547

¥

66.52

¥

101.92$

0.57¥

58,663¥71,674$ 499,388

Non-consolidated
Net sales
Operating income

2,451

5,473

20,860Net income

3,436

3,241

29,248

Total assets

62,027

58,771

528,021

Total shareholders' equity

24,36019,518207,372

Net income per share (yen and U.S. dollars)

¥

67.58

Note 1:

¥

64.11

$

0.58

The U.S. dollar amounts in this report represent
translations of Japanese yen, for convenience only, atthe rate of ¥117.47 = U.S.$1.00, as of March 31, 2006.

Net Sales

Net Income

Total Shareholders' Equity

Net Income Per Share(¥ Billions)(¥ Billions)(¥ Billions)

(¥)

89

72

68

75

23
3.2

55
45

55

3.43.4
19
18
17 17
17
16

59

56

101.9

28

5.1

67.6
66.5
64.1

24

20

44

18.9
16.6

1.0 0.9-1.1 -1.4-1.2 -1.5
'02

'03

'04

Consolidated

'05

'06

'02

'03

-23.4
-22.4 -28.4
-29.2
'04

'05

'06

'02

'03

'04

'05

'06

'02

'03

'04

'05

'06

Non-consolidated

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

01

TO OUR SHAREHOLDERSTO OUR SHAREHOLDERS

Shibaura Mechatronics, building on its businessfoundations as "The Provider of Infrastructure for The
Digital Age," contributes to the realization of a richer
society as an infrastructure provider supporting
digitization and a networked society, and by
delivering manufacturing equipment for essential
electronic components, including flat panel displays,
semiconductors and optical discs.
In promoting business, Shibaura Mechatronics
acts in full accordance with its corporate philosophy:"Innovative in All Things," "Pursuit of Rationality" and"Respect for Humanity," in order to build a global
business group characterized by speed anddynamism. Guided by our management vision andphilosophy, the Company is promoting amanagement innovation movement through anapproach grounded in BCM, or Balanced CTQ
Management; this supports us in identifying key
issues, developing appropriate measures, andachieving high growth and high profit. By combining
this with "ACTIVE," a bottom-up-type of in-house selfactualization program that seeks to boost job
satisfaction and the morale of employees, we aremaking continuous efforts toward being a dynamic
business group.
The Company is committed to the basic principles
of "Achieve continuous growth and reinforce a highly
profitable business structure." In order to achievethis, it is essential to have a solid understanding of
the voices of our customers and of rapidly-changing
market needs, to respond quickly and flexibly, and toensure steady implementation of priority measures.
In this way, we can contribute to society through ourbusiness. Once we share this management vision

02

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

with all employees, we are able to perform
commitment management by setting essential goals
and taking responsibility for the results, and doing so
in full compliance with all legal requirements. Pursuitof fair corporate activities will enable us to achieve
our management vision. We will promote steady
implementation of these measures, so as to becomea truly trusted leading company.

Financial Results in Fiscal 2005
In fiscal 2005, the Japanese economy saw inventory
adjustment in IT-related sectors move toward
completion, growth in corporate profits, and a gradual
upturn in consumer spending. In this economic
climate, capital spending by the Group's major
customers in the LCD, semiconductor and DVD
business fields is expected to rise and to continue a
steady recovery.
In the flat panel display market, there wasrenewed capital investment in Japan, Korea andTaiwan, while the semiconductor market remained
steady on the expanding market for digital home
appliances. However, the optical disc business saw
equipment investment stagnate, a consequence ofissues relating to standardization of next-generation
optical discs and other factors.
In this business environment, Shibaura
Mechatronics Group made securing orders and sales
its first priority. As a result, in fiscal 2005, the Fine
Mechatronics segment saw favorable orders for next
generation LCD panel equipment designed for larger
LCD panel, and the Semiconductor field saw
continued demand for high-speed bondingTO OUR SHAREHOLDERS

equipment. This upturn reflected a recovery in capitalspending in the latter half of the term, as the first fiscal
half period still saw the lingering effects of postponed
capital spending.
As a result of the foregoing and other factors,
consolidated sales in fiscal 2005 were 74.9 billion yen.
In terms of profit, consolidated current profit stood at
4.9 billion yen, reflecting efforts to improve the profit
situation by squeezing fixed costs, promoting cost
reduction activities and other measures. In extraordinary
profit and loss, the Company reported an extraordinary
gain of one billion yen on the disposal of land, andbooked an impairment loss of 100 million yen as an
extraordinary loss under new asset impairment
accounting rules adopted in fiscal 2005. Consolidated
net income after the deduction of tax was 3.4 billion
yen in fiscal 2005.

Future Issues
The Japanese economy remained stagnant in the firsthalf of fiscal 2005. However, and despite concern
about a surge in imports due to sharp rises inmaterials prices, including crude oil prices,
improvements in consumer spending, capitalspending and exports in the latter half of the year
supported a robust economic recovery. The economy
is expected to continue its upward trend in fiscal
2006, and an even stronger recovery than in fiscal
2005 is expected to continue.
All the pointers indicate that the markets for LCD
and semiconductor manufacturing equipment infiscal 2006 will remain on path for recovery, not leastof all because of the broadening range of target

products, such as digital home appliances andmultimedia equipment. Going forward, we can also
expect a sound economic recovery in coming years,
including a gradual increase in consumer spending.
However, price competition for LCD andsemiconductor manufacturing equipment is expected
to heat up, driven by fierce price competition indigital home appliances and increases in component
and material costs. Capital expenditure is becoming
more aggressive, both at home and abroad, we need
to be able to respond to this and must increase
production capacity.
After considering domestic and international
economic trends and the anticipated changes in thebusiness environment, Shibaura Mechatronics Group
formulated a medium-term business plan covering thethree-year period from fiscal 2006. We have set out toachieve consolidated sales of more than 100 billion yen,
an ROS (pretax profit-to-sales ratio) of more than 10%
and an equity ratio of more than 40% in fiscal 2007.
In this medium-term business plan, we will strive toachieve corporate growth; higher profitability; astrengthened financial structure; and enhanced value
for our shareholders. In line with the basic principles
of "Bring continuous growth and reinforce highly
profitable business structure," we have defined the key
issues to be addressed when implementing measures:
1. Secure and expand orders and sales
2. Identify and cultivate new businesses
3. Promote efficiency enhancements
4. Improve cash flows
5. Human resource strategy
Under the medium-term business plan, Shibaura
Mechatronics Group will steadily carry out various

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION03

TO OUR SHAREHOLDERS

measures for clarifying business strategies,
understanding issues from the customers'
perspective, and improving business procedures. Our
aim is to secure profits and to act quickly in rapidlychanging business environment and market for
semiconductors, LCD and media devices.

Corporate Governancein Shibaura Mechatronics Group
Shibaura Mechatronics Group recognizes corporate
governance as a key management concern in respect
to enhancing corporate value for shareholders,customers, employees and society in the mid-to longterm perspectives. The Shibaura Mechatronics"Shibaura Standards of Conduct" clearly defines forthe company officers and employees who areresponsible for creating corporate value just "what weshould do" and "what we should not do." It provides
firm foundations for compliance and risk
management in respect of laws, social norms andethics. The Group promotes business while observing
these guidelines.

Toward the Future
Shibaura Mechatronics defined being "The Providerof Infrastructure for The Digital Age" as the new basisof its business identity in 1998, a decision that has
supported the Company in making deep inroads into
the electronic components manufacturing equipment
business. The Company now aims to achieve
consolidated sales of more than 100 billion yen, an
ROS (pretax profit-to-sales ratio) of more than 10%,and an equity ratio of more than 40% in fiscal 2007,
in addition to a highly profitable business structure.
Manufacturing industry faces continued

04

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

globalization and an increasingly severe market
environment. However, Shibaura Mechatronics willcontinue to cultivate its business proudly aware that
"Japanese manufacturing equipment makers lead
global manufacturing industry" and that"manufacturing equipment is a driving force for IT."
Furthermore, we will grow our business from a broad
perspective that goes beyond simply seeking
business expansion and profit. Drawing on our
corporate philosophy, we will continue to ask
ourselves what we can and should do now to promote
the future development of society.
Japan has all the abilities required to create next
generation IT in the digital information home
appliances segment, including know-how in DVD,
mobile phones, digital cameras and digital TVs.
Shibaura Mechatronics is determined to be among
the first companies to offer the manufacturing
equipment required for next generation IT. We will
enthusiastically engage in wide-ranging businessactivities in good faith, and seek to earn the trust of
all of our stakeholders. We will devote ourselves tobecoming a truly one-of-a-kind company for ourcustomers.
I sincerely hope that you will join me in looking
forward to Shibaura Mechatronics' future growth andsuccess. As we take our next steps forward, yourcontinued support and understanding would begreatly appreciated.
August 2006
Shigeki Morita
President and Chief Executive Officer

TOPICSNew ProductsThis year, we introduced the following new products:
LCD Field
Wet process equipment, VIP Series (cleaning equipment and stripping equipment) for eighth generation LCD panels
substrates (2160 mm x 2400 mm): Transporting substrates in a vertical position significantly reduces cost ofownership (COO) for our customers, and cuts chemical consumption, process time and the space required to install
the equipment in a clean room.
Polyimide (PI) ink jet coater for eighth generation LCD panels: Using ink jet technology instead of a conventional flexo
roller in PI coating during the LCD cell process significantly reduces the required volume of PI materials and the time
taken for coating, advantages that attracted industry attention.
Outer lead bonder for large TVs: In an area where we enjoy the largest market share, we brought to market an outerlead bonder for 46 inch TVs.
Semiconductor Field
Super high-speed bonder: Integration of a multihead into a flip chip bonder made it possible to realize a super highspeed process and a tact time of 0.29 seconds per chip. The market of this equipment is expected to grow on
demand for wireless IC tags.
Media Device Field
Blu-ray Disc and HD DVD vacuum bonding equipment: We marketed vacuum bonding equipment applicable to boththe Blu-ray Disc and HD DVD, the next-generation optical discs. The equipment is the first in the world to achieve
total elimination of air bubbles.
Vending Machine Segment
Ticket vending machine for Suica: We developed and launched sales of vending machines that accept electronicmoney, such as the Suica card managed by East Japan Railway Company. This equipment was introduced as the firstof its kind for non-contact IC cards.

Wet process equipment, VIP Series

PI ink jet coater

Outer lead bonder

Super high-speed bonder

Blu-ray Disc/HD DVD
vacuum bonding equipment

Ticket vending machinefor non-contact IC cards

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

05

TOPICS

Integration of
Vending Machine Business
In April 2005, Shibaura Vending
Machine Corporation, which
Ticket vending machine
undertakes sales and service inthe Vending Machines and System segment, wasthe surviving company in a merger with Shibaura
EMS Co., Ltd., which develops and manufactures
vending machines.
The vending machine market is experiencing along-term downward trend, and the industry is
expected to face an increasingly severe businessenvironment in coming years. The integration unifies
operations ranging from manufacturing through tosales and marketing and service support. It will
enhance competitiveness and promote a more
efficient management style by accelerating the speedof decision making, linking product development
directly to the market, and establishing appropriate
systems from manufacturing to sales and service.

Transfer of Semiconductor Inspection
Equipment Business
As of July 1st, 2005, Honda Electron Co., Ltd., (now
NetIndex Inc.) transferred all aspects of its
semiconductor inspection equipment business,
including manufacturing, sales, maintenance andservices, to Shibaura Mechatronics Group.
The market for semiconductor inspection
equipment is driven by demands for higher levels of
automation, quantifiability and higher throughput
rates. As a result, competition in productdevelopment is becoming increasingly fierce. Bytaking over Honda Electron's semiconductor
inspection equipment business, Shibaura
Mechatronics will seek to expand its semiconductorbusiness by strengthening development capabilities
and product competitiveness.
The scope of the transferred business includes
automatic wafer inspection equipment, automatic
wafer edge inspection equipment, cassette shapechecking equipment, and wafer transfer equipment.
Yokohama Operations is positioned as the
manufacturing base for the business, and undertakes
manufacturing, sales, maintenance and service for the
product line-up.

Shibaura Hi-Tech Corporation
On July 1st, 2005, Shibaura Vending Machine
Corporation transferred the equipment business(from design to production) of its Obama Works to
Shibaura Hi-Tech Corporation. Since the transfer,
Shibaura Vending Machine Corporation has
concentrated on the vending machine business,while Shibaura Hi-Tech Corporation has taken steps
to grow its business by increasing the number ofdesigners, expanding its manufacturing capabilities
and entering into new areas of business. From now
on, Shibaura Hi-Tech Corporation Obama Works will
design and manufacture microwave equipment, in
addition to Shibaura Mechatronics' LCD
manufacturing equipment and related equipment.

Enhancing Business for the Global Market
In anticipation of the globalization of Shibaura
Mechatronics Group's business operations, theEnhancing Business for the Global Market

SHIBAURA MECHATRONICS KOREA CO.,LTD.
SHIBAURA MECHATRONICS CORPORATIONSHIBAURA MECHATRONICS (SHANGHAI) CO.,LTD.

SHIBAURA MECHATRONICS TAIWAN CORPORATION

06

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATIONTOPICS

Company has established overseas subsidiaries in the
US, Taiwan and China, and a joint venture in South
Korea. China remains the most significant overseas
market in terms of growth potential, and since
establishing Shibaura Mechatronics (Shanghai) Co.,
Ltd. in 2001, we have opened offices in Nanjing,
Beijing and Suzhou, to serve as operations and service
bases. In August 2005 we opened another office, inShenzhen. We will continue to promote businessexpansion by establishing business bases in othermajor regions in turn, and by increasing the number of
employees in the service operation.

Enhancing Business in South Korea
In a major move to enhance business in South Korea,
Shibaura Mechatronics Corporation increased its
holding in SCK Co. Ltd. (South Korea) to 80%. In
January 2006, we appointed Choichi Kimura, an
Executive Vice President of the parent as president of
the company, and the name of the company waschanged to Shibaura Mechatronics Korea Co., Ltd. In
March 2006, we reinforced the company's financialbase by raising its capitalization to 3 billion won.
The scale of Shibaura Mechatronics' business inSouth Korea has increased consistently, year by year,with particularly rapid growth in demand for flat panel
display manufacturing equipment. But it is also a very
demanding business environment, where the Company
faces intense competition from Korean manufacturers
in terms of performance, price and service support.
Shibaura Mechatronics realized that, in order toovercome this fierce competition and further expand
business in South Korea, it was necessary to transform

SCK into the "Korean Shibaura" and to promoteconsolidated business operations as Shibaura
Mechatronics Group.
In order to reinforce its capabilities to manufacture
Shibaura Mechatronics' products, the new organization
is initiating improvements in its manufacturing, sales
and service operations. The new subsidiary will seek toexpand sales and develop its business by promoting
business operations directly linked to the market andraising customer satisfaction among Korean users.
Finally, at a time when LCD manufacturers are
releasing capital investment plans one after another,and LCD panels continue to grow bigger, Shibaura
Mechatronics Korea is carrying out an expansion thatwill almost double its production space, by adding asecond floor to the current manufacturing facility.
Construction will be completed in October 2006.

Advanced Display of the Year (ADY) 2006
Grand Prix
Every year, Finetech Japan, the world's leading FPD
industry exhibition, recognizes the best new FPD
products. This year, our VIP series Vertical Integrated
Processor took the Advanced Display of the Year, in
the Display Manufacturing Equipment Category. The
award citation noted the equipment's contributions torealizing significantly high efficiency, bringing energysaving technology to the cleaning and stripping
processes, and boosting productivity for manufacturing
Large-area LCD-TFT for sixth generation and beyond
by introducing a vertical transportation system for
FPDs. The awards ceremony was held at Finetech on
April 19, 2006.

Enhancing Business in South Korea
Paju
Seoul

SHIBAURA MECHATRONICS KOREA CO.,LTD.
Tangjeong
Gumi

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

07

FINANCIAL REVIEWSales
In the fiscal 2005 business environment, Shibaura
Mechatronics witnessed renewed capital investmentin the LCD market, on the ending of an investment
freeze and enhancement to existing lines in Taiwan,
and proactive capital expenditure in Japan and South
Korea. In the semiconductor manufacturing
equipment market, capital investment remained
steady, due to continuing expansion of the market for
digital home appliances, including mobile music
players, digital cameras, mobile phones and DVD
players. However, the optical disc industry entered aphase of adjustment in supply and demand for DVDs
that combined with concerns over standardization of
the next generation optical disc to inhibit capital
investment. In the Vending Machines and Systems
Segment, including cigarette vending machines,
ticket vending machines and others, capital
investment slowed from the latter half of the year,
after a round of procurement of machines able tohandle new bills.
In this business environment, sales reached
74,913 million yen, a decrease of 15.4% from theend of the previous fiscal year.

promote cost reduction activities. In extraordinary
profit and loss, the Company posted an
extraordinary profit of 955 million yen from the saleof land, and an extraordinary loss resulting from an
impairment loss of 111 million yen from assetimpairment accounting applied from this fiscal year.
As a result, consolidated net income totaled 3,393
million yen, a decrease of 1,741 million yen fromthe end of the previous fiscal year.

Segment Information

Consolidated ordinary income stood at 4,907 million
yen, a decrease of 2,383 million yen from the end of
the previous year, despite efforts to improve profits,
including measures to squeeze fixed costs and1. Fine Mechatronics Segment
Consolidated sales totaled 53,826 million yen, a
13.2% decrease from the end of the previous
fiscal year. Consolidated operating income was
3,328 million yen, a 1,958 million yen year-onyear decrease.
At a time of active investments in LCD panel
manufacturing equipment in Japan and overseas,
the Company sought to improve operating
performance by introducing new products, including
vertical cleaning equipment and stripping
equipment for larger LCD panel that support
reduced Cost of Ownership (COO), and a PI ink jetcoater. An abrupt shift in the size of panels for the
LCD TV market resulted in delayed investment inback-end process equipment, but a recovery incapital outlays started to become apparent in thesecond half of the year
There was active investment in semiconductor

Net Sales

Operating Income

Sales by Segment(¥ Billions)(¥ Billions)(¥ Billions)

Profit and Loss Analysis

8.8
88.5

88.5
74.9

74.9

67.5

67.5

5.2

54.9 54.8

54.9 54.8

3.2

Fine mechatronics
Electronic & vacuum equipment
Vending machines & systems
Real estate leasing-1.5 -1.5
'02

08

'03

'04

'05

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Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

'02

'03

'04

'05

'06

'02

'03

'04

'05

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FINANCIAL REVIEW

manufacturing equipment for flash memory, essential
for mobile music players and digital cameras. Thiswas reflected in demand for single-wafer cleaning
equipment for the 300mm wafer manufacturing
progress. The Company launched back-end processequipment for liquid crystal driver ICs offering
improved tact and precision, and a newly developed
high speed flip chip bonder and die bonder for
memories did well.
2. Electronic & Vacuum Equipment Segment
Consolidated sales totaled 12,155 million yen, a 19.2%
decrease from the end of the previous fiscal year.
Consolidated operating income was 539 million yen, a
697 million yen year-on-year decrease.
Media device manufacturing equipment began a
relative recovery in Japan, but capital investment
slowed as a whole, the result of adjustment in the
supply and demand balance for DVDs, restraint on
capital investment by manufacturers in Taiwan as aconsequence of the sharp rise in crude oil prices, andthe uncertainty that competition between the Blu-ray
Disc and HD DVD brought to standardization of thenext generation optical disc.
In addition to the foregoing, the secondary battery
business received orders for new secondary battery
manufacturing facilities.
In laser equipment, demand for laser marker for
semiconductors and laser equipment for welding
electronic components remained steady.

3. Vending Machines & Systems Segment
Consolidated sales totaled 7,054 million yen, a 25.7%
decrease from the end of the previous fiscal year.
Consolidated operating income was 1,095 million yen,an 881million yen year-on-year decrease.
The cigarette vending machine market continued
its long term shrinking trend, and a fall off in demandfollow fiscal 2004 round of special procurement formachines able to handle new bills affected thesegment. The Company made efforts to expand market
share by enhancing operating activities.
4. Real Estate Leasing Segment
Consolidated sales totaled 1,878 million yen, a 5.4%
decrease from the end of the previous fiscal year.
Consolidated operating income was 668 million yen, a
55 million yen year-on-year decrease.

Research and Development Expenses
Full term research and development expenses for thegroup as a whole amounted to 2,851 million yen,including 618 million yen for the development of basic
technology common to Group companies.
Proactive R&D activities range from basic
technology to product development, and involve theCompany's corporate R&D department, development
and design departments in operating divisions, andconsolidated subsidiaries.
Research results and R&D expenses in eachsegment are described below:

Overseas Sales by Region

ROS

ROE

ROI

(¥ Billions)

(%)

(%)

(%)

45.2

25.9

8.2

24.0

'02

*

25.1

6.6

32.9

29.6

26.6

3.1

'03

'04

'05

Northeastern Asia – Taiwan, Korea, China-5.9-3.4 -3.9
'02

'03

'04

6.3

5.6

'06

Major countries or regions
included in each geographical area;

16.5
13.4

'05

'06

'02

-4.4 -5.0

-8.0
'03

'04

'05

'06

'02

'03

'04

'05

'06

Other regions – U.S.A., Hungary, etc.

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

09

FINANCIAL REVIEW

Total assets at the term end, including changes in

consolidated subsidiaries amounted to 75,151 million
yen, an increase of 4,740 million yen from the end of
the previous fiscal year.
Current assets stood at 56,604 million yen, an
increase of 5,643 million yen from the end of theprevious fiscal year. The main contributory factors
were an increase in accounts receivable from higher
sales at the end of the fiscal year, an increase
resulting from the change in the number ofconsolidated subsidiaries, lower inventory as theresult of a year-end sales increase, an increase in
cash and deposits from the sale of land andcollection of credit accounts.
Fixed assets decreased to 18,547 million yen,down by 903 million yen from the end of the previous
fiscal year, due to the sale of some securities anddepreciation, and despite an increase from theacquisition of tangible fixed assets and the goodwill
resulting from the acquisition of the semiconductor
inspection equipment business.
Total liabilities including changes in consolidated
subsidiaries at the end of the fiscal year were 47,153
million yen, 467 million yen lower that at the end of
the previous fiscal year.
Current liabilities increased to 32,049 million yen,a rise of 2,369 million yen, from the end of theprevious fiscal year, due to an increase in notes
payable and accounts payable resulting fromchanges in consolidated subsidiaries; an increase
from production concentrated at year end; and an

R&D Expenses

Capital Expenditures

D/E Ratio

Free Cash Flows(¥ Billions)(¥ Billions)(%)(¥ Billions)1. Fine Mechatronics Segment
The segment's R&D expenses amounted to 1,559
million yen. Development of LCD manufacturing
equipment including wet process equipment and cell
assembly equipment for larger LCD panels, and outerlead bonders (OLBs) for large LCD TVs. Developmentof semiconductor manufacturing equipment
including cleaning equipment and etching equipmentfor next generation devices, and high-speed flip chipbonders (FCBs).
2. Electronic & Vacuum Systems Segment
The segment's R&D expenses amounted to 468
million yen. Projects included development of
sputtering equipment and vacuum bonding
equipment for next generation discs, sputtering
equipment for photo catalyst in the vacuum
equipment field, and laser marker for wafers in thelaser equipment field.
3. Vending Machines & Systems Segment
The segment's R&D expenses amounted to 206
million yen. Work included basic development ofcigarette vending machines equipped with an adultrecognition function, and development of ticket
vending machine able to read non-contact cards in thevending machine and ticket vending machine field.

Financial Condition

7.2

114.8
2.9
2.3

1.0

99.0
4.5

79.7

2.3

5.1
3.7

0.7
55.8

0.6
1.4

1.4

'03

'04

0.5
35.7

0.4

-4.2
'02

10

'05

'06

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

'02

'03

'04

'05

'06

'02

'03

'04

'05

'06

'02

'03

'04

'05

'06

FINANCIAL REVIEWCash Flow

increase in short-term loans resulting from transferfrom long-term loans; and despite factors including
payments made against short-term loans, reduced
income tax payable resulting from interim payments,
and increases in advance payment received.
Fixed liabilities decreased to 15,104 million yen
down by 2,836 million yen from the end of theprevious fiscal year, due to reduction in share warrant
corporate bonds resulting from conversion of stock,and despite an increase in consolidated adjusted
accounts in accordance with the increase inconsolidated subsidiaries, a reduction in long-termloans due to payment and transfers to short-termloans, and so on.
Total shareholder equity, including the increase inaccordance with the higher number of consolidated
subsidiaries at the end of the fiscal year, rose to27,670 million yen, an increase of 4,879 million yen
from the end of the previous fiscal year. Although
equity decreased due to dividend payments, the major
contributory factors to the increase were net profit andan equity allocation resulting from conversion of stockfrom some share warrant corporate bonds.

The total cash and cash equivalents at the end of the
fiscal year stood at 14,337 million yen, an increaseof 6,882 million yen from the end of the previous
fiscal year.
Cash flow from operating activities increased by
6,166 million yen. The primary reason for thisincrease, and despite higher debt payments andcorporate payments cutting into funds, was a highlevel of net income before income taxes, fewer
accounts receivable, and inventory reduction.
Cash flow from investing activities increased by
1,055 million yen. This primary source of this increase
was income from the sale of land in the Obama
district to Obama City, which outweighed payments forthe acquisition of shares in a subsidiary shares andthe acquisition of the semiconductor inspection
equipment business.
Cash flow from financing activities decreased by
1,449 million yen. The underlying reasons wererefinancing of and payment toward long-term loans,payment of short-term loans, and payment of dividends.

FIVE–YEAR SUMMARY
Consolidated

Millions of yen

Thousands of
U.S. dollars

Years ended March 31

Year ended March 31

2006¥ 74,913
58,015
5,180
5,752
3,393

2005
¥ 88,513
67,492
8,824
8,260
5,134

2004
¥ 67,521
54,308
3,168
1,958
979

2003
¥ 54,761
45,428(1,502)(2,172)(1,416)

2002¥ 54,917
44,519(1,536)(1,810)(1,118)

2006$637,716
493,868
44,093
48,96528,888

1,133
2,851

1,255
2,337

1,756
1,415

2,080
1,409

2,144
2,313

9,643
24,26966.52¥ 101.92

18.88¥ (28.40)(22.46)$

Total assets
Total shareholders' equity

75,151
27,67070,411
22,791

69,24518,091

63,615
17,066

67,647
18,514

639,743
235,547

Number of employees

1,735

1,441

1,486

1,586

1,719

1,735

Net sales
Cost of sales
Operating income (loss)
Income (loss) before income taxes
Net income (loss)
Depreciation and amortization
R&D expenses
Net income (loss) per share (yen and U.S. dollars)

¥

¥

0.57

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

11BUSINESS OVERVIEWFINE MECHATRONICS SEGMENTFPD MANUFACTURING EQUIPMENT
Main Products
Wet cleaning equipment
Stripping equipment
Etching equipment
Developing equipment
Polyimide (PI) ink jet coater
Cell assembly equipment
Outer lead bonder

FPD Manufacturing Equipment
The flat panel display market continues to expand,with the main focus on LCDs, and is expected to growfurther. Price reductions, the key to development
along with improvement in image quality, cannot be
achieved simply by enlarging the mother glass size.
The solution lies in manufacturing equipment that
supports process innovation free from the restrictionsof established concepts.
Shibaura Mechatronics meets customer
requirements with manufacturing equipment for the
TFT, color filter, cell and module processes that halve
the cost of panel production.

Wet process equipment, VIP Series

PI ink jet coater

12

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATIONBUSINESS OVERVIEWFINE MECHATRONICS SEGMENTFPD MANUFACTURING EQUIPMENT

January 2006, as a manufacturing base serving the
Korean market. That role will be bolstered by the
October 2006 completion of an increase in the
production floor space.

Business Strategy
In addition to cultivating Vertical Integrated Processor
for Large-area LCD panels, wet cleaning equipment
and stripping equipment, we will develop equipmentwith new manufacturing technology for small-medium
LCD panels. We will promote efforts to extend theapplication of coating techniques based on ink jettechnology. We will also continue to market outer leadbonders (OLB) for large screen TVs with a screen sizeof 50 inches and more, including OLB for Chip on
Glass (COG).

The fast growing Chinese market shows promise,
and we anticipate capital investment with a focus on
the module process. In Taiwan, panel manufacturers
are promoting business reorganization, and we expectthat to be followed by large-scale investments. We willcontinue to promote business there, with an eye
toward a local production presence.

In flat panel displays other than LCD, Shibaura alsoplans to develop and market equipment for SED(Surface-conduction Electron-emitter Display) and
OLED, promising display technologies that are
expected to see future growth.

In Europe and the Americas, where investment
related to FPD has been limited until recently, we haveseen a series of new equipment programs, centeringon the module process. We are responding to this withmeasures to reinforce our service and support system.

Shibaura Mechatronics Korea made a new start inOuter lead bonder
LC dispenser

Seal dispenser

Cell assembly in vacuum machine

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

13

FINE MECHATRONICS SEGMENTSEMICONDUCTOR MANUFACTURING EQUIPMENT

Semiconductor Manufacturing Equipment
Semiconductor devices achieve higher levels of
integration through miniaturization. Shibaura
Mechatronics develops equipment that
supports continued technology advances, that
promotes improved performance and economic
efficiency, and that contributes to moreenvironmentally friendly products. From frontend processes to back-end processes, we meeta wide range of customer demands withequipment for 300mm wafers.

Main Products
Wet cleaning equipment
Etching equipment
Ashing equipment
Die bonder
Inner lead bonder
Flip chip bonder
Semiconductor inspection equipment

Single wafer wet cleaning equipment
for 300mm wafer

Etching/Ashing equipment for 300mm wafer
Wafer inspection equipment

14

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATIONBUSINESS OVERVIEWFINE MECHATRONICS SEGMENTSEMICONDUCTOR MANUFACTURING EQUIPMENT

Business Strategy
Semiconductor manufacturers constantly seek to pushdevice performance through miniaturization, and by
exploring new structures and new materials. As the
manufacturing process grows in scale, they also focus
on refining each of its stages, in order to boost yields.
Shibaura supports the front-end process with dry
process equipment and wet process equipment, andlast year we added wafer inspection equipment to our
product line-up. Used in combination, these different
items of equipment achieve a synergistic multipliereffect that offers customers new functions in the
manufacturing system. Our integration of dry and wet

process equipment has already won recognition in themarket, and we will build on this by marketing new
integrated equipment.
The semiconductor back-end process market is
now witnessing increasing demand for new packages,
including LED, IC tags and MEMS. As a result, thebonder field will see demand for advances intechnologies for miniaturization, higher speeds andfiner pitches. Shibaura Mechatronics has developed
and brought into market, in order to meet the move to
Chip on Film (COF), high-speed, high-precision flip
chip bonders, ultra sonic flip chip bonders and die
bonders for multi chip packages.

Flip chip bonder

Die bonder

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

15

ELECTRONIC & VACUUM SYSTEMS SEGMENT

MEDIA DEVICE MANUFACTURING EQUIPMENTVACUUM EQUIPMENT & VARIOUS EQUIPMENT
Main Products
Media Device Manufacturing Equipment
DVD sputtering equipment
DVD vacuum bonding equipment
Vacuum Equipment & Various Equipment
Industrial vacuum evaporation equipment
Secondary battery manufacturing equipment
OLED vacuum bonding equipment
Precision parts manufacturing equipment
Other automation equipment

Media Device Manufacturing Equipment
DVD and other recording media continue to winhigher densities for storing text, sound and image
data. Shibaura Mechatronics keeps pace with thisfast changing market by pursuing high productivity,
high availability and low running costs, and provides
the world market with sputtering equipment andvacuum bonding equipment that minimizes
manufacturing unit costs. This proactive approach
extends to development of next generation media.

Vacuum Equipment & Various Equipment
Fusing automation equipment offering speed andreliability with the vacuum technology that has madethe Company a pioneer among vacuum pump
manufacturers allows Shibaura Mechatronics to
deploy time-tested manufacturing know-how and todeliver value-creating equipment in fields as diverse
as electronic components automotive parts andsemiconductors.

Single wafer multi layer sputtering equipment

Next generation DVD-ROM in-line equipment

16

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATIONBUSINESS OVERVIEW
ELECTRONIC & VACUUM SYSTEMS SEGMENT
MEDIA DEVICE MANUFACTURING EQUIPMENTVACUUM EQUIPMENT & VARIOUS EQUIPMENT

Business Strategy
In the media device field, Blu-ray Disc and HD DVD,the next generation optical discs, are expected toachieve significant market penetration from 2007,
preceded by increased capital investment from fiscal
2006. These advanced optical discs seek to double
and triple capacity. In the same way, with our DVDDual sputtering equipment, vacuum bonding
equipment and other equipment, we aim to realize
higher levels of performance, lower prices and lower COO.
In vacuum equipment and various equipment, we
will provide a constant stream of products derived fromvacuum technology. In vacuum coating equipment(sputtering equipment, evaporation equipment), we
have marketed high performance photo catalyst
sputtering equipment for automobile mirrors. We are
already supplying products to a major mirror
manufacturer and anticipate future growth in this area.
We have already supplied vacuum bonding
equipment for production of OLED, the highly
promising next generation display. In future, we will
market vacuum bonding equipment for large
substrates, allowing us to meet diverse requests fromour customers.

Photo catalyst sputtering equipment

OLED vacuum bonding equipment

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

17

ELECTRONIC & VACUUM SYSTEMS SEGMENTLASER EQUIPMENT
MICROWAVE EQUIPMENT
Laser Equipment

Main Products
Laser marker
Laser welder
Pattern cutting equipment
Microwave heating/drying equipment

As a manufacturer of laser equipment, we have made efforts to improve
productivity and promote automation. By drawing on 40 years ofexperience in micro-level fabrication and optical application technology,
we have brought laser processing to new areas of application, and indoing so delivered compact, easy to use equipment that offers highlevels of efficiency while minimizing environmental loads.

Microwave Equipment
Microwave technology finds wide application in industry, both as anenergy resource for industrial heating devices and in plasma processing
equipment. Microwaves possess the superior characteristics of a shortheating time, uniform heating, and high energy-absorption efficiency.
We will make full use of these features in developing new applied
technologies that meet our customers' needs.

Business Strategy
In the laser equipment field, we will cultivate business centering on
laser markers for semiconductor, laser welders for electronic
components, patterning equipment for solar cell electrode formation,and on patterning equipment and repairing equipment for FPD.
Additionally, in the microwave equipment field, we aim to develop
business in the environmental market and automobile segment.

Laser marker for TAB-IC
LCD laser short-ring cut system

18

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATIONVENDING MACHINES AND SYSTEMS SEGMENTCIGARETTE VENDING MACHINES
TICKET VENDING MACHINES
Main Products
Cigarette vending machine
Ticket vending machine

Shibaura Vending Machine Corporation develops,
manufactures and undertakes sales and service of various
types of vending machines, and will draw on thesecapabilities, and make full use of networking technology, toestablish its leadership in the industry.

Business Strategy
We will market cigarette vending machines incorporating anadult recognition function, promote replacement of cigarette
vending machines with new machines with this capability.
We will increase the range of ticket vending machines for
non-contact IC cards, such as Suica, and promote sales ofsystem products, such as machines integrating an orderingsystem. Our strategy is to provide customers with high valueadded products.

Ticket vending machine for non-contact IC cards

Adult recognition function unit for cigarette vending machine

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

19

TO BE A TRULY TRUSTED COMPANY

What is CSR?
in mind, Shibaura Mechatronics Group has drawn up
a "Shibaura Standards of Conduct" that clearly
defines how we meet our social responsibilities andclarifies "what we should do" and "what we should
not do". We make sure that all company officers andemployees are familiar with the content.
Another concern is "Safety & Health." Our mainemphasis here is on the safety of our customers,
employees and business partners, and we also givefull consideration to health.
We ask each and every individual to give their full
attention to legal compliance and safety and healthas they carry out their duties and the company's
business.

We believe the essence of CSR is an understandingof "What is required of us?" and "What should we do?"in our dealings with stakeholders, including
customers, suppliers, shareholders and investors,
employees and local communities, combined with theability to act with sincerity and enthusiasm. Achieving
this approach generates trust and provides thefoundations for the company's continuing survival
and development.
Expanding business and pursuing profit are
essential business activities; however, before that, wehave to give priority to legal compliance. Moreover, inareas where there are no legal stipulations, it isessential that we act independently and make ourown determinations on what is appropriate. With thisCSR Management
Mechatronics Group, and gives direction to activitiesof the Environmental Management Committee, Social& Employee Satisfaction (ES) Activities Committee
and Risk Compliance Committee.

We established the CSR Committee in April 2005, to
improve and bring a systematic approach to activities
previously carried out by individual departments andindependent committees. The CSR Committee frames
and promotes CSR policy and activities for Shibaura

CEO*CSR Committee

Risk Compliance Committee

Social & ES Activities Committee

Environmental Management Committee* CEO (Chief Executive Officer)

20

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATIONTO BE A TRULY TRUSTED COMPANY

Corporate Governance
The Company's Board of Directors consists of twelve
directors and the audit system consists of four auditors(three outside auditors), assuring proper exercise of
the decision-making and audit functions. The current
system is constantly examined in order to identify ways
in which it might be improved.
Status of implementation of corporate governancepolicies is as follows.
1. The company appoints three outside auditors,
and they are supported by the General Affairs
Department.

2. A Management Audit Division that reports
directly to the President was established tooperate and monitor the business oversightsystem and internal control system. Its mission
is to undertake internal audits that gauge
management appropriateness and efficiency,
focusing on performance. In addition, theManagement Audit Division operates a system
whereby each section implements audits of its
own operations. The audit function also includes
legally required audits that are examined andverified by independent auditors.

Shareholders' Meeting
Appoint / Dismiss

Board of Directors / Directors

Appoint / Dismiss
Statutory Audit

Board of Auditors / Auditors

Appoint / Dismiss

CEO
Each Operating Division / Internal Audit

Internal Auditing

Management Audit Division

Risk and Compliance
Shibaura Mechatronics Group considers risk
management an important means for reducing
potential damage from risk and for protecting
corporate value. The company is cultivating a
corporate culture in which compliance provides thebasis for corporate management, winning the trust ofsociety and a positive approach to risk management.
The Company has introduced a "Risk Consultation
Hotline," a whistleblower system, to prevent risk frombecoming a serious issue, and also put in place asystem for delivering appropriate solutions in case ofrisk-related problems.

Emergency Response SystemCEOCSR Committee

Significant Crisis, Risk Response Organization

CRO*1

Risk Compliance Committee

Risk Management Committee
Supervise: General Affairs Division
General Crisis, Risk Response Organization

Risk Owner*2

Person Responsible

Risk Consultation Hotline*1: CRO (Chief Risk-Compliance Management Officer)*2: Risk Owner (head of the department facing the risk issue)
Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

21

EFFORTS TO PROTECT THE ENVIRONMENT

Shibaura Mechatronics Group, guided by its Environmental
Charter, seeks to contribute to a sustainable society byachieving the symbiosis of a rich level of value creation with
the Earth's environment.
Our first concern is to promote concerted efforts to
reduce environmental loads in our own business activities,
including product development and manufacturing, so as topromote harmonious coexistence with the global
environment. Towards this, we promote thorough waste
treatment through separation and processing, and in 2003
we brought emissions down to the zero level of 1% or below,
in terms of cubic volume, a level that we continue to maintain.
Our second emphasis is on developing manufacturing
equipment that enables our customers to use less energy
and fewer materials in their own production programs. For
example, in wet process equipment for manufacturing LCD,
one of our main product areas, we replaced the usualhorizontal carrier system with a vertical system that
improves the efficiency of materials consumption, including
pure water and chemicals, and that supports our customers
in achieving reduced environmental loads.

Zero emission graph
(%)

100

59.3
50

0.2

0.1

0.1

'03

'04

'05

0
'91

(FY)

Graph of consumption rate of pure water per unit area
1.0
Horizontal transferring

0.8

Vertical transferring

0.6
0.4
0.2
0.0

'00

'02

'04

'06

'08

(FY)

Thirdly, we are committed to the development of
products expressly designed to directly reduce
environmental loads. Our equipment contributes to the
manufacture of such environmentally friendly products,
such as exhaust-gas treatment equipment and solar battery.

Toward the Future
Shibaura Mechatronics will continue to promote business with full consideration for what should be done now forsociety and for the global environment, for people today and for the future, and not just pursue business expansion
as an end in itself. We will carry out our business activities with a zealous sincerity and hope that all our stakeholders
will recognize Shibaura Mechatronics as a reliable company worthy of their trust.

22

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATIONBOARD OF DIRECTORSStanding, from left ;Kunihiko Yokoyama, Kazuo Takahashi, Ryoji Miura, Masaji Mito, Tsunemasa Tokura, Nobuyuki Yamaura, Hiroshi Hiraoka, Yasutomo Fujimori,
Satoshi Shimoda, Osamu Watanabe, Tadashi Matsumoto, Ryoso Kawabe, Noboru Tamura

Sitting, from left ;Michiro Ishii, Shigeki Morita, Mikio Haga

Directors

Corporate Auditors

President and Chief Executive Officer

Vice President

Satoshi Shimoda

Shigeki Morita

Yasutomo Fujimori

Tsunemasa Tokura

Nobuyuki Yamaura

Tadashi Matsumoto

Executive Vice President

Osamu Watanabe

Ryoji Miura

Mikio Haga

Masaji Mito
Ryoso Kawabe

Senior Vice President

Kazuo Takahashi

Michiro Ishii

Hiroshi Hiraoka

Noboru Tamura
Kunihiko Yokoyama

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

23

INVESTOR INFORMATIONAS OF MARCH 31,2006

Date Established

October 12, 1939

Capital6,761 Million-Yen

Number of Employees

Consolidated 1,735
Non-consolidated 927

Common Stock

Authorized 100,000,000 shares
Issued and outstanding 51,926,194 shares

Number of Shareholders

4,982

Stock Listings

The Tokyo Stock Exchange (Code:6590)

Transfer Agent for Common Stock

The Chuo Mitsui Trust and Banking Company, Limited
33-1, Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan

Independent Auditor

Ernst &Young ShinNihon

Headquarters

2-5-1, Kasama, Sakae-ku, Yokohama 247-8610, Japan
TEL:+81-45-897-2421 FAX:+81-45-897-2470
http://www.shibaura.co.jp/

Common Stock Price Range (The Tokyo Stock Exchange)
Years ended March 31

2006

2005

2004

2003

2002

High (yen)

1,759

1,081

985

604

710

Low (yen)

864

590

409

201

253

Principal Shareholders
Number of shares hold(thousand shares)

Percentage of total shares
outstanding (%)

Toshiba Corporation

18,977

36.5

Japan Trustee Services Bank, Ltd. (trust accounts)

5,019

9.7

The Master Trust Bank of Japan, Ltd. (trust accounts)

2,747

5.3

Trust & Custody Services Bank, Ltd. (trust account B)

1,882

3.6

24

Annual Report 2006
SHIBAURA MECHATRONICS CORPORATION

2-5-1, Kasama, Sakae-ku, Yokohama 247-8610, Japan
TEL:+81-45-897-2421
FAX:+81-45-897-2470
http://www.shibaura.co.jp/

SEA0307A 00 0608
06015