Progress of Medium-Term Management Plan 2025

Progress of Medium-Term Management Plan 2025

Transform Business Portfolio

Increase growth businesses’ share of consolidated
net sales to over 50%
FY2021-25 Plans

Priorities and Initiatives• Redefine/reorganize growth businesses around thethree themes of electronics, healthcare, and theenvironment, and proceed to move ahead withexpanding them• Chemicals and cement businesses to promoteincreased efficiency while generating sustainable
cash flows

Technology

Pursue added value and promote technologicaldifferentiation by collaborating more withexternal partners

Efficiency
Gains

Pursue Company-wide operational
efficiency, mainly through DX

International
Expansion

Expand operations in growing
overseas markets

Progress in FY2023

International Expansion

While the sales price revisions that we have been working on
since FY2022 to address soaring raw material and fuel prices
triggered by Russia’s invasion of Ukraine have taken hold andearnings from cement and chemical products recovered in
FY2023, sales of semiconductor-related products were sluggish
due to the slowdown in the semiconductor market, whichbegan in FY2022, making it a year of treading water in thetransformation of our business portfolio in terms of net sales.
Even in this context, Life Science has steadily improved its
performance and the expansion of our semiconductor-related
products has steadily progressed overseas, ensuring stable
execution of measures aimed at achieving the FY2025 plan.

The overseas share of consolidated net sales in FY2023
decreased year on year due to the fall in overseas market
conditions for chemicals and the decline in export volumes
caused by the sluggish semiconductor market. Under suchconditions, Formosa Tokuyama Advanced Chemicals (FTAC), a
manufacturing and sales company for high-purity IPA establishedin Taiwan, has completed its factory startup and started thefull-scale shipment of products. Similarly, STAC, established inSouth Korea, has completed its factory and is working towards
the shipment of products to customers. In addition, we havedecided to establish a manufacturing and sales company forpolycrystalline silicon in Malaysia, and are proceeding withpreparations for future expansion. In the healthcare field, thesales area for dental materials and equipment has traditionallybeen mainly in Europe and the United States, but it has also
expanded to emerging countries, and overseas business growthis accelerating.

Breakdown of Consolidated Net Sales by BusinessElectronic & Advanced Materials

ChemicalsLife Science

CementEco Business

Other

Targetingat least¥400 billion

60%

50% or more

Growthbusinesses’
share ofconsolidated
net sales

Overseas Share of Consolidated Net Sales

35％

20%

26%

50%
or moreFY2020(Results)

FY2021(Results)

FY2022(Results)

FY2023(Results)

FY2024(Forecast)

FY2025(Current
Outlook)

FY2030(Target)FY2020(Results)

FY2023(Results)

FY2030(Target)Efforts in FY2023
Technology

p. 32

Efficiency
Gains• Renewed certification as a “DX certified business operator” by the Ministry of Economy, Trade and Industry• Improved efficiency of the method for considering optimal factory operating policies by building the management simulation
model “T-FORCE” for Tokuyama Factory• Improved operational efficiency through the use of AI

p. 30

International • Establishing an overseas production site of the high-purity IPA through subsidiaries in Taiwan and South Korea
Expansion • Decided to establish a joint venture with OCI Company Ltd. in Malaysia for the semiconductor-grade polycrystalline silicon business* NEDO: New Energy and Industrial Technology Development Organization20

Details Page

• Opened the No. 2 Tsukuba Research Laboratory• Accelerated development through joint research with Taiwan’s Industrial Technology Research Institute (ITRI), universities andnational research institutes, and participation in NEDO* projects

TOKUYAMA REPORT 2024

pp. 17, 31

Tokuyama Value Creation

Value Creation Strategy

Management for Sustainable
GrowthProgress of Growth
Strategy

Corporate Data

Contribute to Mitigating Global Warming

Expedite development/commercialization of next-gen energy technologies
Reduce GHG emissions (Scope 1 and 2) 30% by FY2030** Base year: FY2019 GHG emissions of approximately 7.26 million tonnes-CO2e➡ p. 38 Message from the Executive Officer in Charge of Sustainability➡ p. 44 Disclosures Based on TCFD Recommendations

In FY2023, we set a new Scope 3 emissions reduction target to further promote efforts to achieve carbon neutrality and to take on thechallenge of decarbonizing our supply chain. GHG emissions (Scope 1 and 2) were reduced by 13% compared to FY2019 through biomass
co-fire generation and aggressive energy conservation activities.

Main Reduction Targets1

Initiative Policy

Efforts in FY2023

In-house power
generation facilities

Reduce GHG emissions from in-house power generation
by 50% by FY20302

Co-firing of biomass/ammonia
Use of local energy

CementReduce limestone use and coal use

Suspension of one cement kiln line

Carbon offsets

Consider implementing CCUS technology and offsets

Development of carbon negative concrete

1. R eduction targets: Reviewed by origin.
2. B ase year: FY2019

Practice Socially Responsible Management

Step up high-priority CSR initiatives to lay the groundwork forfurther growth and realize our Vision➡ p. 8 Message from the President➡ p.40 Vision and Materiality➡ p. 56 Risk Management

In order to promote sustainability, which has now become inseparable from management, we have formulated a Corporate Governance Policythat explicitly outlines our philosophy on governance and clarifies the roles and responsibilities of directors. We have developed policies forofficers and employees, including the Tokuyama Group Sustainability Principles and the Tokuyama Group Code of Conduct. In addition, we
have increased management transparency through the disclosure of information in the form of integrated reports, annual securities reports,
and TCFD reports, etc.

Progress toward Achieving Targets
KPI

FY2021Results

FY2022
Results

FY2023Results

FY2025
Targets1, 2

Keys to Achieving Target

Net sales(billion)

293.8

351.7

341.9

400.0

Focus on business portfolio transformation
Reflect cost increases

Operating profit(billion)

24.5

14.3

25.6

45.0

Growth toward FY2025
Revised due to change in depreciation method

Growth business net
sales compound annual
growth rate (CAGR3) (%)

19.9

20.1

8.5

10.0 or higher

Strengthen R&D
Accelerate international expansion

ROE (%)

13.2

4.1

7.4

11.0 or higher

Balance efficiency of shareholders’ equity andfinancial baseRevised due to change in depreciation method

1. Due to the change in depreciation method, the targets for operating profit for FY2025 were updated from ¥40 billion to ¥45 billion and ROE was changed from 10% to 11% (announced
April 28, 2023).
2. In consideration of business performance trends and the business environment, we have changed our net sales forecast for FY2025 from ¥320 billion to ¥400 billion (announced on
April 26, 2024).
3. CAGR (compound annual growth rate): The annual geometric mean rate calculated from the growth rate over multiple years

TOKUYAMA REPORT 2024

21

Progress of Medium-Term Management Plan 2025

Quantitative Targets

In FY2023, although we made progress inpassing on the higher raw material and fuelcosts to prices, as can be seen with cement
returning to profitability, growth towardbusiness portfolio transformation came to a
standstill, as sales and profits of Electronic& Advanced Materials declined due to thesluggish semiconductor market.
Meanwhile, in FY2024 we anticipate thatthe semiconductor market will enter a recovery
phase, and we expect increased profits andimproved earnings in all business segments,
based on factors such as the ongoing
improvement in manufacturing costs.

Electronic & Advanced Materials
Net sales(Billions of yen)

19%

100.0

Electronic& Advanced
Materials

74.9
7.2

50.0

91.5

77.9

5.0

0

0

Net sales(Billions of yen)

22%

15.0
10.0

7.0

7.0

FY2022
results

Net sales

FY2023
results

6.0

37.5
7.3

FY2024
forecast

Operating profit

50.0

Life
Science86.5

3.3
FY2021
results

Electronic &Advanced Materials

12%

Operating profit(Billions of yen)

25.0

25.0

Other

Operating profit

20.0

33.5

CementNet sales

150.0

41.4

43.0

8.4

9.0

FY2023
results

FY2024
forecast

FY2025targets

Operating profit(Billions of yen)

12.0

6.0

0

0

FY2021
results

FY2022
results

FY2025targets

その他の地域153億円

Growth businesses

Net sales(Billions of yen)

Consolidated
Net Sales(FY2023)¥341.9 billion

Net sales

Operating profit

Operating profit(Billions of yen)

20.0

5.0

15.0
10.0

10.3

3.0

7.3

5.0

Eco Business

4.0

13.8

0.0

0

(0.4)
FY2021
results

Net sales(Billions of yen)

FY2022
results

Net sales

2.0

6.0

1.0

0.0
(0.1)
FY2023
results0(1.0)

FY2024
forecast

FY2025targets

Operating profit

Operating profit(Billions of yen)

120.0

20.0

150.0
100.0

Chemicals

2%

Life
Science

Chemicals

12%

22

TOKUYAMA REPORT 2024

50.0

101.4

115.5

15.0

14.2

11.5

10.0

13.5

5.0

6.8

0

FY2021
results

Traditional businesses

33%

Eco Business

25.0

116.2

Net sales(Billions of yen)

FY2022
results

Net sales

0

FY2023
results

FY2024
forecast

Operating profit

FY2025targets

Operating profit(Billions of yen)

100.0

50.0

Cement

15.0

50.3

58.5

67.1

6.7

0

(1.9)
FY2021
results(3.7)
FY2022 FY2023
results
results

67.0

10.0
5.0

8.0

0
(5.0)

FY2024
forecast

FY2025targets

Tokuyama Value Creation

Priority Measures• Aggressive expansion into overseas
markets• Expansion of new applications andproduct lineup

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Strategy Progress by Product Area
Product Area

FY2023 Results

Silicon• Decided to establish a joint venture in Malaysia and a subsidiary in
Vietnam for the semiconductor-grade polycrystalline silicon business• Increased capacity of semiconductor-grade high-purity chlorosilane•E stablishment of second location for semiconductor-grade
polycrystalline silicon•G lobal expansion of high-purity chlorosilane at two locations inJapan and China

IC chemicals• Expansion of supply of high-purity IPA for electronics manufacturing
by the Taiwan JV•D evelopment of a system for supply of high-purity IPA for theelectronics manufacturing by the South Korea JV•S tart of supply of high-purity IPA for the electronics manufacturing
by the South Korea JV•E xpansion of global bases• Increased production capacity of hydrophobic silica•E xpansion of case and personal care applications
• E
 xpansion of sales of hydrophobic silica•E ntry into the field of organic silicone•E xpanded lineup of aluminum nitride/boron nitride fillers•L aunch of silicon nitride•E xpansion of sales of boron nitride fillers•A pplication development and expansion into downstream fields• Pursuing high-grade production andanalysis technologies
SilicaThermalmanagement
materials

Future Plans and Investments• Strengthen sales structure andaccelerate increase in production
capacity to further increase share of theoverseas dental materials andequipment market

Product Area

FY2023 ResultsFinechemicals•S ales performed well due to recognition of the quality ofgeneric APIs•S
 teady increase in global market share due to high photochromic
performance for eyeglass lenses•D evelopment of rare APIs and strengthened competitiveness•M ake further performance improvement and obtain overseas
market share through the introduction of next-generation
photochromic materials• Strengthen new product development
and sales activities to further expand thephotochromic market overseas

Dentalmaterials andequipment•T okuyama Dental built new production building•G lobally expanded composite resins due to increased shipments
to overseas markets, and increased sales to Europe, the UnitedStates, and emerging markets•C ontinued increase in sales of blocks for dental crowns•S trengthen sales structure and accelerate supply systems tofurther increase market share•A ccelerate material development to expand the digital dental field

MedicalDiagnosis
Systems• Increased sales of laboratory information systems and laboratory
automation systems in the domestic market, and had strong salesof electrolyte analyzers in the Chinese market• In conjunction with the expansion of the electrolyte business, start
construction of a production building to meet the increasing
demand for electrodes

Product Area

FY2023 Results

Future Plans and Investments

Environment•W aste gypsum board recycling: Started operations at the third
domestic site in Muroran City, Hokkaido• PV1 panel recycling: AGC succeeded in testing the production of
float glass using our recycled cover glass as a raw material•W aste gypsum board recycling: Secure stable operations andrevenue at three domestic plants•P V panel recycling: Further improve recycling quality and build abusiness model

Ion-Exchange
Membranes• Improved productivity in response to replacement demand forexisting customers• Cultivate environmental-related demand such as for organics
recovery and decarbonization• Strengthen the medical diagnostic
system business• Respond to expanded demand forwater treatment membranes due tostrengthened environmental regulations• Expansion of recycling business for
waste gypsum boards and PV
panels, etc.
• Commercialization of next-generationenergy technologies that have beendeveloped

Future Plans and Investments

1. PV: photovoltaic panels for converting sunlight into electricity• Strengthen business and increase
efficiency to maximize revenue• Reduce CO2 emissions and waste byimproving manufacturing processes

Product Area

FY2023 Results

Soda Ash andCalcium
Chloride•L aunched a business model transformation project for the soda
ash business•M aintenance and renewal of equipment necessary for stablebusiness continuity•E nergy saving and rationalization in response to environmental
issues• Improve the supply chain through thepromotion of DX
Chlor-alkali
and vinyl
chloride

Product Area

• Introduction of energy-saving facilities toreduce CO2 emissions•R eduction of coal consumption byincreasing the acceptance of a thermalenergy alternative such as waste plastic

Future Plans and Investments•A cquired Shin Dai-Ichi Vinyl and developed manufacturing
technology package for general purpose PVC resin

FY2023 Results

Cement• Revised sales prices• Improved energy efficiency through the introduction ofhigh efficiency coolers• Considered the suspension of one kiln line

Recycling• Enhanced collection of waste plastic•P repared for the receipt of liquid fuel from waste and byproducts

Future Plans and Investments• Suspension of one kiln line and the establishment of an optimal
production system• Maintenance and renewal of the equipment required for stablebusiness continuity• R&D and introduction of technology aimed at environmental
issues and carbon neutrality• Expansion of waste treatment that contributes to a closedloop society

TOKUYAMA REPORT 202423

Progress of Strategy by Business Segment

Electronic & Advanced Materials
Business
Goal

S

Strengths

Growth businesses

Push forward with globalization, and capture the top market share in
the high-purity and thermal management materials fields supporting
the miniaturization and stacking of semiconductors• Superior quality in semiconductor-related products• Differentiation through such proprietary technologies as reductive
nitridation method (thermal management materials) and direct
hydration (IPA)• Lack of marketing strengths for global expansion• High market share in aluminum nitride powder in thermal management
materials

W
Weaknesses

SWOT Analysis

O• Promotion of 5G and IoT, increased demand for data centers• Growth in semiconductors due to increased functionality ofelectronic devices, larger memory capacity, and electrificationof vehicles• Entry of overseas manufacturers• Technological innovation in semiconductor market

level of quality requirements from users associated with
Opportunities • IncreasedT
Threats

advancements in miniaturization and stacking

Message from the Executive Officer in Charge

Katsumi Nagase

Improve our market presence throughtechnological innovation and increase
capacity to lead to the establishment of atimely supply system
FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationTA

he Advanced Materials Business Division consists of two segments:
Silica and Thermal Management Materials. Shipments of silica forsemiconductor chemical mechanical polishing (CMP) were sluggish due tothe downturn in semiconductor market conditions, whilst shipments forsilicone and other products were on a recovery trend from around the endof the fiscal year. However, shipments of silica decreased mainly due to theeffects of the stagnation in the Chinese economy.
In order to expand the new applications set forth in Medium-Term
Management Plan 2025, Tokuyama Chemicals (Zhejiang) Co., Ltd. hascompleted expansion of surface-treated silica production capacity to meet
the wind power blade adhesives and paint ink markets, which are expected
to grow in the future. We will be proceeding with customer evaluations after
the trial operation of the expanded line. New grades for food products havealso begun to be evaluated by leading North American companies, and wehave started to expand sales of spherical silica as an alternative material for
microplastic beads in the United States and Europe. Shipments of thermal
management materials were sluggish due to the decrease in actual demand
for aluminum nitride powder for semiconductor materials and excessive
customer inventories. However, we have been working to expand sales ofaluminum nitride and boron nitride fillers by providing differentiated quality.
We recognize that the future challenge for thermal management materials
will not only be to improve our presence but also to establish a timely supply
system in response to the speed of growth and technological innovation in
the semiconductor and mobility industries.

24

Managing Executive Officer
General Manager, Electronic &Advanced Materials Business
Headquarter, Advanced Materials
Business Division, and New
Business Division

TOKUYAMA REPORT 2024

t the Center for Commercialization of Advanced Technology,
we are working to commercialize silicon nitride, which is
expected to be an insulating substrate for power semiconductors
in vehicles and other applications. We are brushing up quality levels
to satisfy our customers and are developing mass-production
technologies to stabilize quality and to ensure more stableproduction. Aluminum nitride and boron nitride fillers also haveexcellent fluidity in resin, which increases the filling amount andsignificantly increases the thermal conductivity of the resin whenfilling the resin, and we have received a high level of support from
customers. By offering these products in the lineup, we will be able
to provide a range of green energy sources, such as automotive,
industrial machinery, railways, solar cells, and wind power. We will
enhance our presence in thermal management materials for power
semiconductors used in a wide range of fields such as powertransmission, as well as in advanced semiconductor packages that
support HPC (High Performance Computing) and AI. As electronic
devices used in these fields become more compact and dense, theamount of heat generated by the devices continues to increase,and heat dissipation measures are becoming an urgent issue. As
new social infrastructure is being built while advances are being
made with electronic equipment, we will contribute to the developmentof the semiconductor and information communications industry by
expanding our lineup of highly efficient thermal management
materials to meet customer needs.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Message from the Executive Officer in Charge

Seiji Teranishi

Honing our technology and adding value
to remain the company of choice among
semiconductor industry leaders

Executive Officer
General Manager, Electronic
Materials Business

FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationTS

he Electronic Materials Business Division includes two
subsegments: Silicon and IC Chemicals. With regard to silicon,sales of polycrystalline silicon, a major product, were sluggish dueto the strong inventory adjustments caused by the slow
semiconductor market, but we have launched a new etching line torespond to the higher quality required by our customers. Customer
feedback has also been good, and we will continue to improve
quality to ensure that our products can be used in the latest siliconwafers with peace of mind.
For IC Chemicals, on the other hand, there has been major
growth in demand for high-purity IPA used in cleaning processes
due to increased miniaturization of semiconductor chips in recent
years. In Taiwan, which is the largest demand area, we haveestablished an integrated production plant for raw materials, andhave received certification from our largest customer on all
production lines. In the past, we exported high-purity IPA fromJapan, but we are currently switching to mostly locally produced
products for our largest customer.
Both polycrystalline silicon and high-purity IPA are used instate-of-the-art semiconductor plants, so high purity must be
maintained in every process until used by the customer. A futureissue will be to ensure that we generate revenue as a growthbusiness by making sure that customers recognize the value.

TOPICS

ince the second half of 2022, the semiconductor market has
been in the longest stage of inventory adjustment in its history,
but looking from a medium- to long-term perspective, thesemiconductor market will definitely continue to grow. Despitesome planned delays, new factories are under construction in allareas, including silicon wafers, memory and foundries, and we havealso been working to support our customers’ growth strategies byproceeding with new plans for polycrystalline silicon and high-purity
IPA. In particular, a new plant was constructed in South Korea forhigh-purity IPA, as in Taiwan, and samples began to be supplied tomajor customers this year. As we are making a somewhat late entry
into the Korean market, we will carefully study the stable production
technology, quality control technology and trace analysis technology
cultivated in Japan, Taiwan and Singapore, and take action to
enable mass production as soon as possible. In addition, ourhigh-purity IPA will be mass-produced at our Taiwan plant to be
used at a 2-nm plant for the first time in the world. Although thequality requirements of our customers are extremely demanding,we will work with them to pursue quality, create added value,
differentiate ourselves from price competition, and continue tosurvive in this growing market.

Semiconductor Market Conditions

The semiconductor industry, which had been ina prolonged slump, is expected to see a recovery
and further expansion in demand, especially formemory and logic products, against the
backdrop of investments related to AI and otherareas from FY2024. In our Electronic & Advanced
Materials business, we expect products used in
the front-end processes of semiconductor
manufacturing to recover first, followed by arecovery in upstream components and products
used in back-end processes. Although the timingof recovery will depend on inventory conditionsin the supply chain, we will secure an appropriate
supply system to reliably meet demand.

Semiconductor Manufacturing Process and Market Recovery by Product
Polycrystalline Siliconsiliconwafers

Deposition Lithography

Wafer fabrication
process

Polycrystalline silicon

Etching

CMP

Washing

Front-end process

Thermal management
materials

SilicaPackaging Semiconductors

Back-end process

High-purity IPA

Market recovery (image)
Late
Polycrystalline silicon

Chips

Thermal management
materials

Early
Thermal management
materials

SilicaHigh-purity IPA

TOKUYAMA REPORT 202425

Progress of Strategy by Business Segment

Life Science
Business
Goal

S

Strengths

Growth businesses

Use unique technology to capture top niche market share in areas
where differentiation is possible: vision, dental, and diagnostics• Highly unique product and technology development capabilities
based on chemical technology• Lack of marketing strengths and weak sales system inoverseas markets• Close collaboration between sales, manufacturing anddevelopment to enable a rapid and detailed response touser requests

W
Weaknesses

SWOT Analysis

O

Opportunities• Rise of emerging manufacturers centered on South Korea
and China• Growth of healthcare due to advent of super aging society
and heightened health awareness• Destabilization of supply chain such as in procuring raw materials,
outsourcing production overseas, and exporting products due toglobal instability• Expansion of emerging markets in the Middle East, Asia, andSouth America

T
Threats

Message from the Executive Officer in Charge

Strengthening production capacity in response toincreased demand.
Increasing the speed of new product development
will lead to increased revenue

Director, Senior Managing
Executive Officer,
General Manager, Research &Development Division andLife Science Business Division

FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationII

n FY2023, the Life Science Business Division recorded anincrease in revenues and profits over the previous fiscal year.
In the dental materials and equipment business, overseas salesof composite resin, including OMNICHROMA®, performed well, andthe impact of the weaker yen also resulted in increased revenues
and profits. In APIs and intermediates of the fine chemicals
subsegment, APIs for generic drugs were strong, and thephotochromic materials for eyeglass lenses in the same
subsegment also performed well, resulting in increased revenues
over the previous fiscal year. In addition, the development of
next-generation products is progressing steadily toward the launchof new products in FY2025.
For medical diagnosis systems, sales of laboratory Information
systems and laboratory automation systems increased in theJapanese market, and sales of electrolyte analyzers were strong in
the Chinese market, resulting in increased revenues and profits.

26

Fumiaki Iwasaki

TOKUYAMA REPORT 2024

n a year where the semiconductor recession continued longer
than expected, we felt the expectation for a Life Sciencebusiness that is not susceptible to economic trends. In order toexpand the Life Science business, we will continue to improve
production efficiency through the promotion of DX at the Kashima
Factory, strengthen overseas networks, and introduce new products
and services into the market.
In the dental materials and equipment business, the constructionof the production building, which was started in FY2023, wascompleted in April 2024. Going forward, we will increase production
capacity and meet customer demand by increasing production
facilities and improving efficiency. In the area of APIs andintermediates, we will continue to embrace challenges in new areas
such as the development of processes for highly active APIs while
maintaining the current business scale. In photochromic materials
for eyeglass lenses, we will continue to focus on sales activities that
respond to customer needs and market changes, and will speed up
the development of new products for FY2025. In the diagnosis
systems business, A&T Corporation has begun construction of a
new building at the Shonan Site to meet the increasing demand forelectrodes, which are consumables for electrolyte analyzers. With
operation planned to start in May 2025, A&T will supply highperformance, high-quality electrodes to medical facilities around theworld. The company will also work with Tokuyama to develop
medical diagnostic reagents.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Progress of Strategy by Business Segment

Eco BusinessBusiness
Goal

S

Strengths

Growth businesses

Serve as a new business pillar for the future• Unique technologies such as continuous large recrystallization
technology for gypsumW• Weak synergies among businesses• Ion-exchange membrane water treatment• Decreased competitiveness due to rising energy costs• Unique technologies, such as PV panel recycling using thermal
decomposition treatments

Weaknesses

SWOT Analysis

O• Increased wastewater treatment demand due to tougher
environmental regulations in China and emerging countries• Rise of emerging manufacturers centered in China• Growing global environmental consciousness• Rampant competition as end-of-life PV panels become asocial issue

Opportunities • Global awareness for creating a recycling-oriented societyTThreats

Message from the Executive Officer in Charge

Promote sales expansion and the commercializationof distinctive products and technologies against
a backdrop of growth potential in environmentrelated markets
FY2023 Summary (Results and Issues)B

oth revenue and profit in the Eco Business decreased over theprevious fiscal year in FY2023, but this was due to a special
factor of Excel Shanon Corporation, a plastic window sash
manufacturer, being excluded from our consolidated subsidiaries asa result of an increase in the investment ratio of our partner(Panasonic Corporation). Across the division as a whole, we havedeveloped PV panel recycling technology in Nanporo, Sorachi-gun,
Hokkaido, and started operation of the third plant of Tokuyama
Chiyoda Gypsum Co., Ltd., which has waste gypsum board
recycling technology, in Muroran City, Hokkaido, to provide a solid
foundation for future growth.
In the development of PV panel recycling technology, ourcontinuous operation verification testing to process and extract thematerials that make up obsolete PV panels at a high level of quality
was successful. In addition, the cover glass, which is approximately
60% of the total weight, is separated and processed to be supplied
as a recycled material for float glass, and AGC Inc. was successful
in conducting the first recycling test with the material in float glass inJapan. We will continue our joint research with NEDO in FY2024,
and will promote the recycling of other materials, including silicon,
which is our strength, and build a business model for realizing acircular economy for solar panels.
Tokuyama Chiyoda Gypsum Co., Ltd., which possesses
technology that enables the complete recycling of waste gypsum
board into gypsum board raw materials, has launched operations at
its third plant in Muroran City, Hokkaido, a region where therecovery of gypsum board had been undeveloped. In FY2024, thesecond year, we aim to make the Muroran Plant profitable. While
this company is facing a harsh business climate, we will secure

Naoki Tamura
Executive Officer
General Manager,
Eco Business Division

earnings and stable operations at our three locations as we goahead with several initiatives, including revising our prices.
ASTOM Corporation achieved major improvements in bothrevenue and profit with continued demand from the use of
specialized membranes with distinctive characteristics to recover a
valuable resource, lithium (Li). There was also firm demand forion-exchange membranes used in the production of salt, foods,
and potable water. In addition to the extremely strong demand fromboth Japan and overseas, the demand for technologicalimprovements is likely to remain strong. We will further promote
development, and will establish and strengthen our supply system
in order to respond to robust demand as much as possible.

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business Implementation

Although certain progress has been observed in terms oftechnology development, it will take time for this to lead to sales
and profits, and in terms of business, we have not yet met our
expectations as a division that plays a part in the areas of electronics,
healthcare and the environment that we have positioned as growthbusinesses. We are also showcasing technologies that contribute to
the environment at exhibitions, and have received strong interest
from both Japan and overseas, so we feel the potential for thegrowth of the market as well as the high expectations of ourcustomers for our technologies. We will strive to further improve ourbusiness value by contributing to the formation of a sustainable
society with a high awareness of the commercialization of technologythat contributes to the environment.
TOKUYAMA REPORT 2024

27

Progress of Strategy by Business Segment

Chemicals
Business
Goal

S

Strengths

Traditional businesses

Ensure stable earnings in the existing business• Weak sales network overseas• Only domestic manufacturer of soda ash• Sales volume of calcium chloride for antifreeze fluctuates
depending on weather conditions• Electrolyzer, electrolysis and manufacturing technology with extensive
operating record• Coal-based in-house power generationW

Weaknesses

SWOT Analysis

O• Decreasing domestic demand due to customers relocating overseas, etc.
• Easing supply and demand balance due to higher production atcompetitors using expanded electrolysis and vinyl chloride
production plants• Spread of fuel cell vehicles and promotion of hydrogen society• Increase in demand for caustic soda and PVC resin due toeconomic growth in Southeast Asia and India• High raw material prices associated with the Russian invasion of
Ukraine and unrest in the Middle East

Opportunities

T
Threats

Message from the Executive Officer in Charge

Aiming to maximize profits by strengthening sales
capabilities through a new sales structureManaging Executive Officer
General Manager, Chemicals
Business Division

FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business Implementation

ISn order to achieve Medium-Term Management Plan 2025, wehave worked to strengthen the chloro-alkali and PVC chloride
chain with the aim of maximizing income in the electrolysis
business. In FY2022, Shin Dai-Ichi Vinyl Corporation became awholly owned subsidiary, and in order to further integrate the PVC
business, we established a system for absorption into Tokuyama
Corporation, which was realized in April 2024. This will allow us tomaximize profits by making more flexible decisions about how
chlorine generated from electrolysis process is distributed bylooking at the market conditions for PVC resin. In addition, we
intend to continue the PVC business into the future by creating
technology packages based on our expertise in the production of
PVC resin. In FY2023, the technology packaging of generalpurpose PVC resin was almost finished, and we will proceed withthe technology packaging of paste PVC resin in the future.
The Company was founded to provide soda ash in 1918 and iscurrently the only manufacturer in Japan. In order to maintain stablesupply and production for the next 100 years, we launched a
project in FY2023 to carry out fundamental modifications to the
manufacturing process. In FY2024, we will proceed withpreparations to implement more specific measures, as the
improvement of this process is expected to have a significant effecton energy savings. In the sodium silicate and cullet business, likesoda ash, as one of the largest manufacturers in Japan, we will
carry out various studies including fuel conversion to improve andstabilize quality in order to continue to provide stable supply andproduction.

28

Hirotaka Nishihara

TOKUYAMA REPORT 2024

ince FY2024, we have significantly changed our chemical salesorganization to become a more customer-orientedorganization. Except pharmaceutical-grade baking soda andhydrogen, which were previously excluded from soda and calcium
chloride, sales of all products, including chloro-alkali products suchas caustic soda and PO, have been transferred to Tokuyama Soda
Trading Co., Ltd. (TST), a wholly owned subsidiary of Tokuyama. In
addition, sales of Sun Arrow Kasei Co., Ltd., a PVC compound
manufacturer, and sales of METACLENE, a chlorine-based solvent,
have also been incorporated into TST’s Chemical Sales Division,
aiming for more functional sales. Also, the sales of the merged Shin
Dai-Ichi Vinyl Corporation will be reorganized as the PVC Sales
Department of the Company, and the Chemical Sales Control
Division will be established as its upper level organization. The
decision-making for chemicals sales as a whole, including TST, will
be swiftly conducted at the Management Office, with the aim of
maximizing profits in terms of sales toward achieving the MediumTerm Management Plan 2025.
Furthermore, as an environmentally friendly product, we havealso started the pilot production of magnesium hydride using ourhydrogen. Looking ahead, we will work with our technology partner
Biocoke Lab. Co., Ltd. to develop applications with the aim ofbringing them to market early.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Progress of Strategy by Business Segment

CementBusiness
Goal

S

Strengths

Traditional businesses

Become the domestic industry leader in energy efficiency• Contribute to environmental preservation by accepting waste frominside and outside the Company for cement feedstock and as athermal energy alternativeW• Increase in repair costs due to aging of facilities• Technological development capabilities from a chemical standpoint
based on chemical manufacturing

Weaknesses

SWOT Analysis

O• Domestic demand due to national resilience, urban
redevelopment, Osaka/Kansai Expo and an IR,* etc.
• Demand for building infrastructure associated with economic
development in emerging countries

Opportunities * IR: integrated resort• Decrease in domestic cement demand due to decline in population• Cost increases due to rising prices and labor shortages• Criticism of cement industry due to issues with CO2 emissions

T
Threats

Message from the Executive Officer in Charge

Takahide Taniguchi

Become the domestic industry leader in energy
efficiency in the two-kiln production system

Managing Executive Officer
General Manager,
Cement Business Division

FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationDA

ue to a significant increase in coal prices since 2021, we haverevised our sales prices on two occasions. However, we havenot been able to absorb the significant cost increases and haveexperienced operating losses in the last two fiscal years. In addition
to self-help efforts such as thermal energy cost reduction andconstraining repair costs, we have continued to vigorously revise
sales prices in order to secure profits, and this fiscal year we havebeen successful in achieving an operating profit.
However, prices for raw materials and supplies and logistics
costs continue to rise. We are also increasingly required to respondto environmental issues, and to make efforts toward carbon
neutrality. Under such circumstances, in FY2023 we installed
the latest high-efficiency coolers and switched to bag filters forelectrostatic precipitators in our manufacturing facilities. We are also
expanding the process of replacing thermal energy, and we havebegun to prepare for the acceptance of liquid fuels from waste andby-products, as well as for the acceptance of plastic fluff1 fromoverseas. In addition, we are conducting joint research on CO2fixing recycle beads to effectively utilize biomass combustion ash
and realize CCS.2 We have conducted test operations at our
Tokuyama Factory.

s priority measures for our business target of being thedomestic industry leader in energy efficiency, we will focus on
introducing equipment that is energy efficient and that reduces CO2
emissions as we cut coal consumption by using more thermalenergy alternatives, such as waste plastic. The Company has
introduced the latest high-efficiency coolers to reduce CO2
emissions, and has increased the purchase of plastic fluff to reducecoal consumption. In addition, we have also started to accept new
liquid fuels from waste and by-products in an effort to diversify andstabilize thermal energy alternatives.
On the other hand, domestic demand for cement has
decreased more than had been expected at the time of theformulation of Medium-Term Management Plan 2025 due to longer
construction periods and the shortage of personnel at contractors
and logistics companies, etc. In this situation, we have been
considering the establishment of an appropriate cement production
system in order to strengthen the profitability of our cementbusiness, and have decided that it would be best to suspend one kilnline and use a two-kiln production system. In the future, we willdevelop our business with the aim of becoming the leader in energy
efficiency in Japan in the two-kiln production system.

1. Fluff: Film or sheet cut finely to about 30 mm.
2. CCS: Carbon dioxide Capture and Storage

TOKUYAMA REPORT 202429

Growth Drivers

DX Strategy
Overview of DX Strategy
Previous Plan

Medium-Term Management Plan 2025

Next Plan(FY2021-FY2025)(FY2026-)(until FY2020)

FY2021

Formulation of
Execution Plan

Progress

Formulation of Basic Policy

FY2020

Number of TDX Participants

In Medium-Term Management Plan 2025, Tokuyama hasstated that it will transform its business portfolio to the growthareas of electronics, healthcare, and the environment, and isactively promoting DX to achieve this goal. Tokuyama DX (TDX)
is not simply the use of digital technology to improve
operational efficiency, but rather structural and operational
reforms to realize Tokuyama’s Vision through the utilization ofdata and digital technology.
The TDX Basic Policy is “building a foundation” and“promoting transformation” in parallel. While aiming for“transformation” such as the advancement of supply chain
management and development of new materials by applying
Materials Informatics (MI), we are also focusing on “building afoundation,” such as the development of a paperless anddigital environment in order to overcome changes in the world
environment and ensure transformation.
Another thing that we emphasize in promoting TDX is thatthe entire Tokuyama Group must be involved. In order to createa highly engaged organization that can adapt to environmental
changes, each employee must think DX as a personal matter.
To accomplish this, DX key persons are assigned to eachdepartment and company to raise the overall level of TDX
activities while building a cross-company network.

Nov. 2020

FY2022

peopleFY2025 ・・・・・ FY2030

FY2024

Promotion of TDX Activities(Implementing 25 measuresin sequence)
Launch Executionof various
andactivities promotion

Apr. 2022
TDX
assignment

2

FY2023150 people(13 measures)

Apr. 2023

Effect realizationand progress oftransformation

Enhancing
initiatives

Apr. 2024

TDX
assignment

270 people(18 measures)

Further expansion
through horizontal
deployment of
measures, etc.

TDX
assignment

400 people(25 measures)

Establishmentof DX Promotion
Preparation Div.

Progress with Major KPIs

30

TOKUYAMA REPORT 2024

Increase speed

Progress

1. Complete installation of SCM system in
Kashima area

●

●

●

2. Complete construction of a digital twinmodel for Tokuyama Factory

●

●

●

3. Complete DX literacy training for all
employees●●●

4. Complete building a foundation for
the utilization of human resources
information

●

●

●

5. Generate over 300,000 hours for theentire Group

●

●

●

6. Realize a factory with double
productivity (Dental)●

7. Reduce paper documents by 50% andstreamline operations●●

8. Train more than 100 DX workplaceleaders●●

9. Share information on 100 DX initiatives
within the Group●10. Expand MI material development by
more than 10 times●●

11. Register 20,000 new members throughnew marketing

●

●

●

12. Reduce budgeting time in Tokuyama
Factory by 80%.

●

●

●

13. Reduce time required for production
planning by 50%

●

●

●

14. Reduce ESG data aggregation time by
90%.

●

●

15. Increase in DX promotion index to 3.5
points (initially 0.8)

●

●

2

Apr. 2023

1

Apr. 2022

0

3

●

4

5

Apr. 2024

15 Main Quantitative Targets

●
●
●
●

●
●

●

Note: Evaluation criteria of 5 levels are set by each project and confirmed and assessed by thesupervising PMO. The fifteen items are also disclosed outside the Company.

6

FY2025-end target

Enhance functionality

Improve productivity

Building a foundation

Category

Total

With TDX, we have established eight categories, including
manufacturing, workstyle, R&D, and business transformation,
and are implementing a total of 25 measures. For these
initiatives, we have set 15 quantitative targets and areworking to achieve them. Our measures are making steadyprogress overall, and we are “building a foundation” fortransformation. As one of the results, in manufacturing DX,
we have built the Tokuyama Factory Optimizer with Rapid
Calculation of Economic efficiency (T-FORCE) from theperspective of the overall optimization of the Tokuyama
Factory. The model is expected to significantly improve theefficiency of the process of considering optimal factory
operation policies, taking into account the balance between
energy, materials, and waste circulation, and to serve as abasis for developing guidelines for GHG reduction and for thetransformation of the business portfolio.
While Company-wide, cross-sectional measures areunderway to “improve productivity,” “enhance functionality,”and “increase speed,” our future challenge is to improve
individual skills and expand voluntary DX efforts at the frontline. While promoting skills development through DX training,which is currently being implemented as a Company-widemeasure, we will also work together to achieve our targets for
FY2025 by raising the level of autonomous activities at theworkplace level through the use of generative AI, citizen
development, and other measures.
In January 2024, our TDX initiatives were well received,with the renewal of our “DX certified business operator”
certification from the Ministry of Economy, Trade and Industry.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Promoting Operational Efficiency Improvement through the Use of AI

Prediction of results by AI

In TDX, we are actively promoting the use of AI in various
business areas, including production activities. The introductionof the system into monitoring and quality control operations,which place a particularly heavy burden on workers, has beenremarkably effective. We would like to show you some examples.
In terms of monitoring operations, we developed andintroduced an application for detecting black smoke, using
environmental monitoring cameras at Tokuyama Factory. In thepast, our response was to have disaster prevention cameras
monitored by people, but the development and introduction of adiagnostic imaging AI with high judgment accuracy has enabledconstant monitoring, contributing to the early detection of blacksmoke and reducing the burden on monitoring staff.
In terms of quality control, AI can now predict the results ofmortar compressive strength tests carried out in the Cement
Production Department. For strength that develops over a long
period of time, as many as 28 days are required for the test
results to be revealed, but by using AI to predict long-term
strength, this can be reflected in adjustments to manufacturingconditions at an earlier stage, contributing to the further stabilizationof quality.
In the area of medical diagnostic systems, we have developed
an in-house AI-based automatic judgment system for quality
inspections, which has dramatically improved inspection quality
and productivity. Compared to conventional inspection systems,
the number of visual image inspections has been reduced by
75%, and the training time for inspectors has also been reduced.
Furthermore, roll-out to other products was also achieved withina short period of four months after introduction.
In order to strengthen and expand the use of AI, we aresystematically implementing “promoting utilization,” “sharing
information,” and “human resource development” throughout the
Tokuyama Group. The first meeting of the Tokuyama Group AI
Promotion Council was held in July 2024 for the purpose of“information sharing” and was attended by DX practitioners fromeach Group company. We aim to expand the use of AI technology,
which tends to be department-specific, to the entire Group, andto take it to new heights through mutual cooperation.

AI
Chemical analysis
Mineral composition
Operating conditions
・・・

Various data

Product strength
prediction

Strength prediction in a short period

TOPICS

Accelerate International Expansion
Decided to establish a joint venture with OCI of South Korea in Malaysia for the semiconductor-grade
polycrystalline silicon businessAt the meeting of the Board of Directors held on December 13,
2023, the Company resolved to enter into a joint venture agreementwith OCI Company Ltd. (Seoul, South Korea) concerning the joint
production of semi-finished polycrystalline silicon for semiconductor
applications in Malaysia and to establish a joint venture company.
In anticipation of increased demand associated with the future
expansion of the semiconductor market, we will promote businessexpansion in electronics while limiting increases in GHG emissions
in order to establish a production and supply system for polycrystalline
silicon for semiconductors that uses clean energy. The establishmentof the company is subject to approval from the relevant authorities.

Overview of the Joint Venture (Equity Method Affiliate)
Name

Sarawak Advanced Materials Sdn. Bhd.

Location

Sarawak, Malaysia

Business

The manufacture and sale of semi-finished semiconductorgrade polycrystalline silicon

Capital

US$168 million

Production
capacity

8,000 tonnes * Plans to increase annual production toapproximately 10,000 tonnes in the future

Investment
amount

US$300 million

Investment ratio

OCI Company Ltd. 50％
Tokuyama Corporation 50%

TOKUYAMA REPORT 202431

Growth Drivers

Research and Development“One Tokuyama” to ensure the transformationof the business portfolio
Director, Senior Managing Executive Officer,
General Manager, Research & Development Division andLife Science Business Division

Fumiaki Iwasaki

Medium-Term Management Plan 2025 is now in its fourth year.
As stated in our Vision, we have made continuous efforts torefine and leverage our unique strengths and to take onchallenges in new areas, but we recognize that we have now
entered a period in which we must reap the fruits of our efforts.
In FY2023, we took stock of our R&D themes, taking into
account changes in the market environment and Tokuyama’s
strengths, and reassigned our personnel. In addition, in January2024 we opened the No. 2 Tsukuba Research Laboratory andtransferred 50 researchers in the healthcare domain andenvironment domain from Tsukuba Research Laboratory, which
had become too small, to improve the environment for researchand development activities. Based on the above, we would
like to raise the stage of research and development for two
development themes going into the final year, FY2025, leading
to monetization in the future.
One of these is membranes for AEM water electrolysis in theenvironmental domain, and roll-to-roll equipment has been installedat the No. 2 Tsukuba Research Laboratory, providing a system toenable the shipment of samples. Water electrolysis using anion
conductive membrane is a technology that is anticipated to reducethe cost of hydrogen production because it is expected to reducematerial costs due to the non-use of rare precious metals as
catalysts. In recent years, active research and development has
been conducted both in Japan and abroad, and Tokuyama will
also contribute to activities aimed at social implementation.

TOPICS

The other is porous silica, which is being developed by
Tokuyama Research Laboratory in collaboration with theElectronic & Advanced Materials Business Headquarter, and isbeing considered for use in the electronics field due to its
uniqueness of being a powder control technology that enables
the flexible control of particle hardness. We plan to scale up fromthe lab level in order to meet demand.
In FY2024, in addition to the aforementioned monetization
efforts, we will select themes for the next Medium-Term
Management Plan based on marketing information obtained
from the front lines. In addition to strengthening the electronics
domain, we would like to focus on expanding the healthcare
domain, which is less susceptible to changes in the economic
situation. In the medical diagnostics systems field, we aredeveloping new diagnostic reagents by utilizing our chemical
expertise, and A&T Corporation and Tokuyama will work as one
to bring them to market.
The realization of commercialization from R&D requires a
One Tokuyama response with seamless connections between
the Research & Development Division, the business divisions
and operating companies responsible for future exit, as well as
the engineering personnel responsible for process development.
Everyone involved will work diligently in order to ensure thetransformation of our business portfolio.

Strengthening Research in Healthcare and the Environment, Opening No. 2 Tsukuba Research Laboratory

No. 2 Tsukuba Research Laboratory was opened in January 2024. No. 2
Tsukuba Research Laboratory, located about a 10 minutes away from theexisting Tsukuba Research Laboratory, covers an area of approximately
45,000 m2 and can house up to 100 employees. As part of the organizationof the Tsukuba Research Laboratory, which is responsible for corporate
research, this facility conducts technological and product development in thehealthcare domain, mainly medical materials and diagnostic reagents, and in
the environment domain, including ion exchange membranes for AEM waterelectrolysis for the production of hydrogen. With regard to the developmentof medical diagnostic reagents, we are developing POCT (Point of Care
Testing), a reagent for immediate testing at clinical sites that can be used insituations such as home care, and we will actively promote R&D activities
with an eye toward the next Medium-Term Management Plan.

32

TOKUYAMA REPORT 2024

Tokuyama Value Creation

Value Creation Strategy

Management for Sustainable
GrowthProgress of Growth
Strategy

Corporate Data

R&D Structure Based on Future Predictions forTarget Markets
Much of Tokuyama’s research and development begins with asearch on the theme of technologies needed in the market basedon predictions of future social issues, targeting markets which are
centered on the growth business areas of electronics, healthcare,and the environment. Then, from among a countless number ofthemes, we select themes in which the Tokuyama Group candemonstrate its strengths by combining marketing information
obtained from existing customers and potential markets with theTokuyama Group’s proprietary technologies and knowledge thatcan be utilized from outside the Company.
New themes are brought to market step-by-step throughbasic research, technology development, and productdevelopment within the corporate R&D of the Research &Development Division, while utilizing open innovation in order tospeed up development and receiving support from various
specialist departments within the Company. In particular, thesupport provided by the Analytical Science Department (Shunan
City, Yamaguchi Prefecture), which possesses high-precision
analysis technology, plays an important role in differentiating us
from our competitors in electronics. Furthermore, as part of the
TDX1 initiative, we are also actively utilizing generative AI and MI2
in our R&D activities in order to transform and streamline ourdevelopment operations.
Meanwhile, it is also true that there is a major barrier,known as the “valley of death,” between the R&D phase andcommercialization. In April 2022, we established the New
Business Center (upgraded to a division in April 2023, now the

New Business Division) for the purpose of launching new
businesses in growth business areas with a sense of speed. At
present, we are concentrating various management resources on
the construction of hardware at the Center for Commercializationof Advanced Technology (Yanai City, Yamaguchi Prefecture) inorder to commercialize alkaline water electrolysis technology forthe production of hydrogen and heat dissipation applications thatwill contribute to the improved performance of electronic devices.
The development groups in each business division are
positioned on the front lines of marketing to ascertain market
needs and the latest technological trends, including requests for
improvements from existing customers. The organization can beconsidered the starting point for the aforementioned theme
search, and in addition to promoting improvements to meetmarket needs, it also has the function of promoting new productdevelopment in cooperation with corporate research, etc. In our
traditional business areas of Chemicals and Cement, we are also
working to commercialize unique materials such as magnesium
hydride, which is a hydrogen storage alloy, and roadbed
materials utilizing biomass combustion ash.
Tokuyama’s research and development is conducted incollaboration with corporate research, the New Business Division,and business division development, with the entire company
working as one in order to achieve business growth.
1. TDX: Tokuyama DX
2. MI: Material Informatics

R&D Concept
Customers/Target Markets

Side-by-side support for development
Technology management support
DX technology support
Technology Strategy Dept.

Support for construction ofquality assurance system
R&D Quality Assurance Section

IP strategy support
Intellectual Property Dept.

Analytical technology support
Analytical Science Dept.

Process technology support
Process Development Dept.

ba

ku

Tsu

Theme transfer

New Business Divisionb.,

Commercialization and productimplementation

a

L
rch

sa
Re
D]
t▶
R& ama
e
en
t
y
ra ku
pm
n
rpo ., To aiwa eveloo[C Lab a T gy d ntham olo mearc okuy Techn velop
e
s
T ▶
de
Re

Ba

sic

Re

se

ct
h
a rc ro d uPTheme selection
Seed technology and information

 Industry-academia-government collaboration
 Startup companies
 IP landscape, etc.
 Tokuyama Group proprietary technology

Quality raising of R&D capabilities
Open innovation(Industry-academia-government
collaboration, collaboration with othercompanies) M&A / acquisition of highly
specialized personnel
R&D Planning Dept.

Healthcare

Chemicals

Theme transfer

Collaboration with business divisions
Development and Sales Dept.
at each Business Div.

Determinationof themes

Electronics
Focused injection ofmanagement resources

Environment Peripheral areas Downstream areas
 Cross-cutting areas

Cement

t]
pmen
iv.,
evelo siness D
ess D
arket
Bu
[Busin t Dept. in idiary nse to the mmen in Subsn in respo
p
lo
e
D
o
ti
R&
Dev
ializa

nd
ent a
lopm
Deve

erc
comm

Strengthening cooperation
Hardware commercialization support/
infrastructure, equipment
Center for Commercialization of Advanced
Technology
Engineering Div.

Valley of Death

For growthbusiness areas:

To businessgrowthSales information
MarketingMarket research
information

Theme search by backcasting from forecasts offuture social issues

Note: This image shows the organizations involved in R&D, focusing on their functions, and may differ from actual activities.

TOKUYAMA REPORT 2024

33

Growth Drivers

Human Capital
Enhancement of human capital vital for achieving
our Vision.
Execute a new human resources strategy in line with
8 strategic axes under the Human Resources Policy
Executive Officer, General Manager,
General Affairs & Human Resources Division

Takashi SatouIn order to respond to changes in the business environment, a
new Human Resources Strategy to be implemented from FY2024
was resolved at the Board of Directors meeting held in April 2024.
The aim of the new strategy is to create diverse and productive
human capital that meets the needs of work styles, with themessage of a “Human Resources Strategy to improve employee
value while contributing to the realization of a management
strategy" the objective is to explain specific stories that will lead tothe realization of a management strategy and the enhancementof the company’s corporate value.

The new Human Resources Strategy is positioned below
the Human Resources Policy, which is our philosophy onhuman capital, and is flexible enough to change according tomanagement strategy and the external environment. Considering
our management strategy, our Human Resources Strategy
requires us to recruit and develop personnel capable ofdemonstrating high performance to enable business portfoliotransformation, while at the same time, we must aim to firmly
improve the labor productivity of the traditional businesses that
support our growth businesses and to ensure the generation of
cash. In addition, to create a system and a culture that values
the diversity where diverse talents can flourish in order to
respond to the ever-changing business environment and the
evolving management of the Group, the realization of humancapital management with a view to the entire Group is also an
important area targeted by this Human Resources Strategy. In
order to resolve these issues, we will define eight strategic axes
in our Human Resources Strategy and implement each of ourmeasures in line with these strategic axes.
Going forward, the approach to human resources ofcompanies must change in the name of human capitalmanagement in response to changes of the management
environment. In order to respond to various changes, we will
increase engagement through solid dialog with our employees,
and each employee will grow in action that embodies thecontent of our strategy, thereby increasing corporate value
and realizing human capital management that our stakeholders
can appreciate.

34

TOKUYAMA REPORT 2024

Positioning of the Human Resources Strategy
Content shown

External and internal
environments• Defines the direction and beliefs
on personnel policy in line withthe management philosophy

Not affected

Human
Resources
PolicyBusiness environment:
Business portfolio transformation(creation of new business markets)
Demand for decarbonization
Stable operation of underlying
businesses
Labor environment Labor market
mobility
Declining birthrate and aging population• Identifying issues forrealizing themanagement strategy
and business strategy,
and key response
policies and strategic
KPIs

Human Resources
Strategy

Measures to realize
the strategy

It is essential for our human resources strategy to be aligned with the overallbusiness strategy, not only based on internal guidelines, and to be sustainable interms of human resources management. Furthermore, it is crucial to communicate
the human resource strategy to investors and the labor market in order to have thecompany's value accurately evaluated. We will proactively advance recruitment
activities, emphasizing the potential for a diverse range of talent to thrive, including
new graduates and experienced professionals.

Eight Strategic Axes Bridging the Gap toward Our Vision[Perspective]
Management
Strategy

Increase operational
productivity

Establishment of a Group
personnel system

Provision of humanresources to growthareas and new
projects

Recruitment andcreation of humanresources to drive thecompany’s growth

Infrastructure/effectivenessmeasurement
Visualization andutilization of humanresource-related data

Setting
Setting
KPIsKPIs

Our Vision
Human Resources Strategy to
improve employee value while
contributing to the realizationof a management strategy

Increasingengagement
engagement
Increasing

Responding to diversity ofvalues and ensuring fairness[Perspective]
ESG
Investment[Perspective]
Labor Market

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Measures for Implementing Strategy
Recruitment

Actively recruiting, retaining, and increasing the strength of strategic personnel

In terms of recruitment, securing personnel from a labor market in which the population is declining and aging, and the needs of working
styles are diversifying, is a pressing issue. We determine the personnel to be hired that are necessary for our business based on the
personnel plan established every year in accordance with our management plan. In this process, we not only establish the number of
employees to recruit but also assess the necessary human resource requirements to be applied to our businesses, such as whether torecruit from the new graduate market, which is centered on personnel who are expected to grow over the medium to long term, or to
recruit mid-career personnel who are expected to be ready for business; we secure personnel according to the characteristics of eachbusiness. In addition, in order to recruit the talented personnel required for business growth in the midst of a labor shortage, we redefine
the characteristics and strong points of the Company and demonstrate the attractiveness of the Company to the labor market througheffective media to develop a multilateral recruitment route that is appropriate for the region, technology, and work experience to ensure
continuous talent retention.

Development

Human resource management in collaboration with business divisions

Given the management environment of the Company, we need personnel who are active globally in growth businesses and have experiencein projects in difficult environments and project management, as well as personnel who can manage M&As. We will develop executive
candidates by identifying the experiences and skills needed for future sustainable growth and managing the careers of our employees.
In addition, in FY2024 a job-based personnel system was introduced in management roles, and in the future, we plan to formulate amedium-term succession plan for posts defined as important positions, and to develop human resources according to strategic staffing
plans and the content thereof.
On the other hand, in terms of overall employee development, the Company conducts training before and after each level of promotion,
as well as training and education to improve the level of knowledge of employees, and bears some or all of the costs to raise the overalllevel of knowledge and skills and to develop human resources that are capable of responding to changing business environments.

Evaluation
In light of the recent significant diversification of work styleneeds, we will consider meeting the needs of employees by
establishing multiple evaluation methods based on the type ofjob function and conducting evaluations based on each work
style, rather than a standardized evaluation of work results. In
addition, we plan to implement appropriate incentives based on
productivity to increase employee motivation toward improving
overall productivity.

Furthermore, in the evaluation of managerial positions,personnel evaluations will be conducted to assess the degree ofachievement of the duties required in the management plan in
conjunction with the introduction of the job-based system, andevaluations will be conducted in a scientific and fair manner bymonitoring the management status of the organization through a
360 degree evaluation and the results of the organizational
engagement survey.

Work Styles
One of the visions of the Company is to “Be a company withhealthy employees who have healthy families and take pride in
their work at their company” and has been selected as a Healthand Productivity Stock jointly by the Ministry of Economy, Tradeand Industry and the Tokyo Stock Exchange for the second
consecutive year. We will continue to promote management with
an awareness of a work-life balance so that employees can work
vibrantly in good health, both physically and mentally.
In addition, systems and operations for managing humanresources with a variety of wisdom and experience, as well as
women and mid-career hires, will be improved appropriately toensure that these people fulfill their potential, regardless of theconventional framework, to create a highly engaged human capital
structure where employees and the Company work together. In
FY2023, we adopted an open application system for some
employee transfers, and we have started measures that are basedon employees’ preferences.

TOKUYAMA REPORT 2024

35

Dialog with Employees

Aiming to create a corporate culture brimming with freshness in which
employees’ challenges are the driving force for business growth
In April 2024, we designed and introduced a new job-based personnel system for managerial positions,accelerating our efforts to transform the organizational culture and to expand human capital. What are
the thoughts and aims of junior managers at the forefront of business? Three new leaders, who were
promoted to managerial positions during the period from 2023 to this year, were asked to discuss the
future of Tokuyama as well as their own challenges.
Tokuyama Dental Corporation
Tsukuba Research Laboratory

Electronic & Advanced
Materials Planning Dept.

Hiroshi Morisaki

Satoko Yoshimura

Chemicals Planning Dept.

Hisashi So

Department and Responsibilities
Morisaki: I am very pleased to have this opportunity for an
exchange of opinions among junior managers.Since joining
Tokuyama in 2011, I have continued to pursue development
fields, and am now a leader in the Composite Materials
Development Department at Tokuyama Dental Corporation’s
Tsukuba Research Laboratory. As a recent topic,
OMNICHROMA®, a dental filling composite resin for which I
was involved in development, has won three technical awards
in Japan. Driven by OMNICHROMA®, the dental materials andequipment business has become a core part of the Life Science
Business Division. I feel motivated and a sense of mission toplay a role in transforming the business portfolio.
Yoshimura: I am a member of the Electronic & Advanced
Materials Planning Department and work in the procurementof raw materials and supplies. The supply chain for electronicmaterials is becoming increasingly complex every year, andsocial interest in environmentally friendly green procurement
has also risen. We cannot fulfill our mission by simply
purchasing inexpensive raw materials according to the

Our Challenge

TOKUYAMA REPORT 2024

So: After joining the Company in 2005, I worked on logistics
operations, implementation of ERP systems, and operation of
Tokuyama & Central Soda Co., Ltd. (as it was named at thetime), and in April 2024, I was appointed manager of theBusiness Planning Team of the Chemicals Planning
Department. In the past, we have worked on a wide range ofactivities, including sales strategies and business plans for adecarbonized society, with a global perspective of the market
for various chemicals, including soda ash, the business onwhich the Company was founded. At present, we are working
with our partner company to develop the market formagnesium hydride, which has started the pilot production at
the Tokuyama Factory.

As Leaders in a New Era

Morisaki: The important thing to do in R&D is not only tocreate innovative technologies that have never been possible
before, but also to bring them to market as products. In
addition to thinking and anticipating, engineers need to beable to execute the entire R&D process, from establishing
hypotheses to bringing new products to market. What I’m

36

requirements of the Manufacturing Department. In addition todeveloping new suppliers to ensure stable, high-quality
products, we are committed to implementing our medium- tolong-term procurement strategies, including establishing a
global procurement network and building new channels
through alliances.

mindful of now is to develop the future researchers, and to
improve the organizational capabilities of the Development
Division. We will contribute to the development of the Life
Science Business Division while respecting the “workplace
intuition” of each researcher and engineer.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
Strategy

Yoshimura: I worked for a foreign silicon wafer manufacturer
before joining Tokuyama in 2012. Moving from a foreigncompany to a long-established Japanese company with ahistory spanning more than 100 years, it took time for me to
get used to the culture and customs. However, I am gratefulthat I am now entrusted with the important task ofprocurement at the Electronic & Advanced Materials Division.
My challenge is to develop and implement an effective
procurement strategy that incorporates a medium- to longterm market outlook and a sustainability perspective. We are
striving to expand Tokuyama’s profits while optimizing theentire supply chain, from procurement of materials and raw
materials through to product logistics.

Management for Sustainable
GrowthCorporate Data

So: My challenge is to put the business of magnesium
hydride on track, which I mentioned at the beginning.
Magnesium hydride, a hydrogen-absorbing alloy, is receiving
great attention both inside and outside the industry as anext-generation hydrogen carrier that can safely and easily
store and transport hydrogen. I would like to promote theutility and potential of magnesium hydride for industry in awide range of areas, and to enhance the market value of thisproduct by establishing a stable production and supply
system and strengthening cooperation with our partner.

Tokuyama’s Corporate Culture
Morisaki: Compared to other companies in the industry inJapan and overseas, I think there may still be a relaxedatmosphere. However, in the past few years, I feel that more
and more employees have experienced a sense of alarmconcerning the Company’s current situation. At Tsukuba
Research Laboratory, mid-career recruits account for morethan one-third of researchers, and the diversification of humanresources has allowed the organization to become morevibrant. The main actors in research and development are“people,” and I view this change as a great opportunity tofurther accelerate Tokuyama’s value creation.
Yoshimura: Like Mr. Morisaki, I am one of the people who
feel that the organization is revitalized by recruiting external
personnel. I think the feeling varies considerably depending on
the business that people are engaged in, but in the Planning
Dept. I belong to, I think there is an environment in which
employees can express their opinions without hesitation andfreely discuss them with colleagues and supervisors. We haverecently launched a new job-based personnel system. I thinkthat employees will become even more motivated by ensuringthat job descriptions, which are a key part of system design,
fully permeate the organization.
So: I am part of a traditional business, and I sometimes feelthat I am more oriented toward being conservative and stable.
On the other hand, there are also signs of change, such as
the communication of messages by the General Manager ofGeneral Affairs and Human Resources via internal radio, theintroduction of a new personnel system, and the moredetailed recommendation to talk to each other by name rather
than referring to people by their position. However, it is also
true that the old conservative stance of duties and strict
control systems are effective in the operation of the Chemicals
business, where stable operation is a priority. I believe thatchanges to the corporate culture need to be handled in linewith the characteristics of the business and the division.

Aspirations for the Future
Morisaki: Tokuyama is currently focusing on growth areas inorder to transform its business portfolio. To develop products
required by the market and evolve into a value creationcompany, it is essential to develop leaders who will takecharge of the next generation. In addition, if leaders cannot
clearly communicate the business vision and processes forrealizing this, productivity will not increase across theorganization as a whole. I aim to be a leader who can clearlycommunicate my vision and goals in my own words and to
fully draw out the capabilities of my subordinates.

So: For many years, Tokuyama has contributed to industrial
development in Japan and overseas, and has received strong
trust from local communities. In my involvement in the
traditional business of chemicals, when I touch the Tokuyama
logo on a tanker truck, for example, I get a feeling that I willcontinue to cherish the intimacy and pride of the community,
employees and their families. We will promote magnesium
hydride technology as soon as possible, create a world wherehydrogen can be used safely and with peace of mind by
everyone, and will expand the view around the world that
Tokuyama is a positive force for society.

Yoshimura: I think the great joy of working is to feel thegrowth of myself and my team. For people to grow, it isessential that they are not afraid of failure and embrace thechallenge of new issues and themes. I will not only embrace myown business challenges, but will also support the challengesof my subordinates and junior employees, and strive to create adynamic corporate culture full of pioneering spirit.

TOKUYAMA REPORT 202437