New Mid-term Management Plan
and Long-term Vision

19
Copyright © 2018 Harmonic Drive Systems Inc.

1. Looking Back at the Previous
Mid-term Management Plan
(fiscal years 2015-2017)20
Copyright © 2018 Harmonic Drive Systems Inc.

Targets and actual results of previous Midterm Management Plans (consolidated)(100 mil. yen)

Achievements well above targets(Target)
204

260

290

350

259

282

543(Actual)
181

210

500
50th anniversary offounding

Long-term Vision
FY2015-17 Plan
FY2012-14 Plan

Established three well-balanced business segments

FY2012FY2014FY2015FY2017FY2018FY202021Copyright © 2018 Harmonic Drive Systems Inc.

Main factors for achieving consolidated sales
above target
1. Business growth: Sharp rise in demand for use in industrial robots and othermain applications
2. M&A benefits: German affiliate made a subsidiary(mil. yen)

EuropeNet sales by region (fiscal 2017)
Results surpassed targets in the three main regions of Japan,
North America, and Europe

30,00020,00010,0000

Plan

Actual

Asia

Japan

North America

30,00030,00030,00020,00020,00020,00010,00010,00010,000

0Plan

Actual0Plan

Actual0Plan

Actual22Copyright © 2018 Harmonic Drive Systems Inc.

Revenue targets and results (consolidated)(mil. yen)

Fiscal 2017
Mid-term management plan

ActualVs. original plan

AmountPercent(%)

AmountPercent(%)

IncreaseamountNet sales

35,000100.054,339100.0

19,33955.3

Operatingincome

9,500

27.1

12,598

23.2

3,098

32.6

Current net
income

7,000

20.0

8,059

14.8

1,059

15.1

Cumulative total for three
years of Mid-term Plan
(Planned for fiscal years
2015-2017)

Rate ofincrease

Cumulative total for three
years of Mid-term Plan
(Results for fiscal years
2015-2017)Capital investment
amount10,00017,630Depreciation andamortization costs

6,000

9,150

R&D costs

4,800

4,902

23

Copyright © 2018 Harmonic Drive Systems Inc.

2. New Mid-term Management Plan
(fiscal years 2018-2020)

24
Copyright © 2018 Harmonic Drive Systems Inc.

Target net sales (consolidated)
New Mid-term Management Plan

1.84X

100,000

100,000

12,50090,00068,50080,00070,00060,00050,00054,33910,3009,695

87,50040,00030,00020,000(mil. yen)

44,64358,20010,0000FY2017FY2018Speed Reducers

FY2020Mechatronics

25

Copyright © 2018 Harmonic Drive Systems Inc.

Net sales targets and main applications in each region(mil. yen)
Europe60,000• Industrial robots• Collaborative robots• Aerospace-related• Semiconductor
manufacturing equipment• Machine tools

40,00020,0000Asia• Industrial robots• Collaborative robots• Machine tools• Semiconductor
manufacturing equipment

North America

20172020

Japan• Industrial robots• Collaborative robots• Semiconductor manufacturing
equipment• FPD manufacturing
equipment• Service robots• Machine tools

60,00060,00040,00040,00020,00020,00060,000040,000• Aerospace-related• Semiconductormanufacturingequipment• Leading-edge medicalequipment• Service robots• Machine tools

020172020

2017

2020

20,0000

2017

2020

26
Copyright © 2018 Harmonic Drive Systems Inc.

Revenue targets (consolidated)(mil. yen)
Fiscal 2018 (forecast)Fiscal 2017 (actual)

Fiscal 2020 (planned)

AmountPercent(%)

AmountPercent(%)

AmountPercent(%)

Net sales

54,360100.0

70,000100.0

100,000

100.0

Operatingincome12,59823.2

17,50025.0

26,000

26.0

Current net
income

8,059

14.8

11,50016.4

17,000

17.0

Cumulative total for three years
of previous Mid-term Plan
(Results for fiscal years 20152017)

Cumulative total for three
years of new Mid-term Plan
(Planned for fiscal years 20182020)

Capital investment
amount17,63071,000Depreciation andamortization costs

9,150

25,500R&D costs

4,902

9,450

27

Copyright © 2018 Harmonic Drive Systems Inc.

Trends in main application fields

28
Copyright © 2018 Harmonic Drive Systems Inc.

1. Industrial robots
 Market expected to expand 15% annually even after 2018 (IFR forecast) Changes in China’s industrial structure with Made in China 2025
Worldwide outlook for number of industrial robots sold2016-2020 (forecast)
Approx. 1.8x

60Annual rate: 15.3%
5043.4

2011-2015
Approx. 1.5x

Units (10,000s)

40

37.9
34.7

Annual rate: 11.2%

30

29.4
25.4

52.1
1.5
5.8
2.5

Other
Rest of Europe
Germany

6.9

North America

4.6

Rest of Asia

5.0South Korea

21.0

China

4.8

Japan

22.1
20

100

16.6
0.9
2.4
2.0
2.4
1.3
2.6
2.3
2.8

15.9

2011

2012

17.8

2013

2014

Source: IFR "World Robotics 2017 Industrial Statistics"

2015

2016

2017

2018

2019

2020

(forecast)（予測）(forecast)（予測）(forecast)（予測）(forecast)（予測）29Copyright © 2018 Harmonic Drive Systems Inc.

2. Collaborative robots (co-bots)■ Examples of expanding adoption in manufacturing and service industries■ Becoming drivers of further growthCo-bots market size outlook (sales amount, units)
Sales amount(100 mil. yen)

309

488

800

2,040

2017–2020 (forecast)

6Approx.
4.3x

CAGR: 62.4%

5Units (10,000s)

1,265

0.9

4
1.5
3

0.6

2
1
0

0.1
0.2
0.3
0.1
2016

0.2
0.4
0.4
0.2
2017
(actual)
Japan

0.4
0.6
0.7
0.3

1.0

1.9

1.1
0.5

0.8

Source: Fuji Keizai Group, Reality and Outlook ofWorldwide Robot-related Markets 2018: No.1
Factory Automation Robots Market2018
2019
2020
(forecast) (forecast) (forecast)

AsiaEuropeUSA

30Copyright © 2018 Harmonic Drive Systems Inc.

3. Service robots
 Robotics technology is playing an active role in medical practice Use of power assistance is expanding in physical therapy clinics and foreasing the burden of carrying heavy objects
 Health insurance applicability to surgery assistance robots is growing

Market forecast for surgical robots

Surgical robots

Power assist suits(US M$)
10Forecast

8645mm diameter HarmonicDrive®

202015201620172018~2020

Source: IFR "World Robotics 2017 Industrial Statistics"

31Copyright © 2018 Harmonic Drive Systems Inc.

4. Semiconductor manufacturing equipment■ Investment in layering and miniaturization through capacity increases and highquality■ Growing demand for semiconductors used in artificial intelligence (AI) and virtual
reality (VR)■ Full-scale investment in 5G-related technology■ Increase in server demand due to data explosion, and switch from HDD to SDD(100 mil. yen)

Semiconductor manufacturing
equipment market forecastSemiconductor market forecast

25,00020,000

Actual

15,00010,0005,0000Source: WSTS
Source: Semiconductor Equipment Manufacturing Association of Japan

32
Copyright © 2018 Harmonic Drive Systems Inc.

5. LED and OLED manufacturing equipment■ Slowdown in growth of small and midsize OLED panels(lower demand for smaller OLED panels with scaling back of iPhone-Xproduction)■ Chinese LED and OLED manufacturers continue to invest in production
OLED market forecast

Source: IDTechEX

33
Copyright © 2018 Harmonic Drive Systems Inc.

New Mid-term Management Plan
Basic Policies

34
Copyright © 2018 Harmonic Drive Systems Inc.

Aimed-for corporate structure andindustry position in 2020
Ourbusinessarea

Provision of Total Motion Control

Aimed-forcorporatestructure in 2020

Continue to be without peer in the motion control
industry through provision of high-value products andservices

Aimed-forposition

A trusted actuatormaker having originaltechnology

A leading company inthe precision speed
reducer field

35
Copyright © 2018 Harmonic Drive Systems Inc.

Basic Policies of New Mid-termManagement Plan
50th anniversary of founding
Seizing the rapidly expanding growth opportunities, advance to the next stageMajor increase in global production capacity

Raise the capabilityof each Group
company
Build greater
comprehensive
strength

Improve customer
satisfaction byraising QCDS
capability

Strengthen thebusiness foundation
underlying growth36
Copyright © 2018 Harmonic Drive Systems Inc.

Major increase in global production capacity
1. Roadmap to raising production capacity
1. Strain wave gearing devices
to 2017/01(numeric data is monthly units produced)

Today

to 2021/03
100,000

50,000Japan:
Hotaka Factory (Factory No. 1)
HarmonicDriveSystems Inc.

66,00085,000＋

Ariake Factory (Factory No. 2)

100,000
New Factory (Ariake)

Germany:
HarmonicDrive AG

Limburg Factory

USA:
Harmonic
Drive LLC

Boston Factory

Germany:
Harmonic
Drive AG

30,000 to
50,00010,000＋New Factory

3,000

2. Crossed roller bearings
Japan:
HarmonicPrecision

120,000 to
150,000

Existing Factory

Total 98,000＋

10,000 to
30,000Total 240,000 to
280,000

120,000 to
150,000

60,000＋150,000

New Factory

Limburg Factory

New Factory

10,000＋30,000Total 70,000+

Total 180,000

37

Copyright © 2018 Harmonic Drive Systems Inc.

Major increase in global production capacity
2. Toward capacity of 280,000/month by 2020
We are aiming for higher corporate value by establishing supply capacity to meetgrowing demand and by further building our competitive strength
Plans for boosting production capacity of our precision speed reducers
Approx. 4.4x(monthly, 10,000s)
50.0
Approx. 2.9x40.0

USA:
Harmonic Drive LLC
43.0
43.0s■ Boston Factory

3.0

on Factory
Germany:
Harmonic Drive AG

5.0

Factory

28.0
28.0

30.0

3.0

■ Limburg Factory

15.0Japan: Harmonic DriveSystems■ New plants (Ariake, etc.)

5.0
20.0
10.0

10.0

8.5

10.0

10.0(Current現在 )By2020 (forecast)2020まで（予測）After2020 (forecast)
2020以降（予測）

9.8
10.0

0.3

6.1
0.8
5.0

■ Ariake Plant

0.3

1.0
■ Hotaka Plant

0.0
2017/138
Copyright © 2018 Harmonic Drive Systems Inc.

Major increase in global production capacity
3. Productivity improvements
1. Enhancement of automated lines
2. Promotion of multi-skilled workers
3. Unflagging pursuit of improvements in fabrication,assembly, and inspection processes
Ariake Factory

39
Copyright © 2018 Harmonic Drive Systems Inc.

Raising the capability of each Group company
and building greater comprehensive strength
Main manufacturing sites
Crossed roller
bearings

HarmonicDrive®

In JapanHarmonic Drive Systems(Hotaka Factory)(Ariake Factory)• New line: equipment
installation completed• By March 2019, monthly
production of 100,000 units• Production started March2018• By March 2021, monthly
production of 100,000 units

Harmonic Precision(Matsumoto Factory)

Harmonic AD(Toyoshina Factory)• New plant building underconstruction• By March 2023, monthly
production of 150,000units• Planning phased
investment in new
production equipment inline with demand growth

Germany: Harmonic Drive AG

South Korea: SAMICKADM

Overseas

USA: Harmonic Drive LLC

HarmonicPlanetary®

• Plan to acquire land for new plant inBeverly, Massachusetts (artistrendition of new plant)• Can expand to land adjoining existing plants• Planning phased
investment in newproduction equipment inline with demand growth

Copyright © 2018 Harmonic Drive Systems Inc.

40

Basic Policies of Mid-term Management Plan

Improve customer satisfaction by raising QCDS capability■ Normalize and reduce lead time from order to shipment■ Actively develop and market new products■ Build technology proposal strength and support capability

Strengthen the business foundation underlying growth■ Acquire and train human resources in line with sound growth■ Enhance business management platform drawing on IT■ Promote business management with the environment, society, andgovernance in mind

41
Copyright © 2018 Harmonic Drive Systems Inc.

3. Long-term Vision(moves aimed at growth to2030 and to 2050)

42
Copyright © 2018 Harmonic Drive Systems Inc.

Our business areas
Provision of Total Motion Control
Fog computing

CloudBig Data/AI

The concept of Total Motion Control
Mechanisms

IoT
Sensors

Speed
reducers

Controllers
ICT

Electric powersources/wirelesspower supplyMotorsOtherelements

Software

Drivers
Rawmaterials
Production andfabrication
technology
43Copyright © 2018 Harmonic Drive Systems Inc.

Expanding business opportunities■ Growth of Total Motion Control business
Our products are small, light, and high precision,features that will become all the more necessary
going toward 2030 and 2050
Mobility/aerospace
独カール・ツァイス社様提供

Innovation in industry

Co-bots/
service robots

株式会社ダイヘン様提供

Leading-edge
medical equipment(units)Flat panel display
manufacturing equipment
Semiconductor
manufacturing
equipment
Industrial robots

Innovation in life style

Machine tools

19701980

1990

2000

20102020

・・・2050 44Copyright © 2018 Harmonic Drive Systems Inc.

Taking on the challenge of change toinnovative technologies
Futureorientedmoves

As the pace of innovation in society accelerates, we will foster
an institutional climate able to meet changes, with ourantenna raised high and even daring to try creativedestruction

 Deepen and expand joint development activities with SRI International Accelerate development of the Abacus drive and bring to market
 Expand the scope of joint development to other transmissions
 Take on the challenge of, and keep a close eye on, new materials andnew principles Promote active access to peripheral technologies
 Promote exchanges with research institutions and other industries
45Copyright © 2018 Harmonic Drive Systems Inc.

Aim for further growth toward 2030 and 2050

Consolidated sales (100 mil. yen)
Planned204
Actual
181

210

260

290

259

282

1,000

350
300

545

Three well-balanced
business segments

50th anniversaryof founding
FY2012-14 Plan
FY2012 to 2014

Previous Mid-termManagement Plan
FY2015 to 2017

New Mid-termManagement Plan
FY2018 to 2020

MTMTADRDRDTo FY2030

ADTo FY2050

46
Copyright © 2018 Harmonic Drive Systems Inc.

The performance targets and other numerical data
presented herein are forecasts based on information
available to the HDS Group at the time this material wasprepared, and are subject to the influence of uncertainties
including those in the economic and competitiveenvironment. Actual performance may therefore differ
materially from the forecasts given in this material.

For more information:
Please contact us as follows for material contents and investor information of all kinds.
Corporate Planning and Finance Division, Harmonic Drive Systems Inc.
Ichigo Omori bldg. 7F, 6-25-3 Minami-Oi, Shinagawa-ku, Tokyo 140-0013 JapanEmail: ir@hds.co.jp
Website: https://www.hds.co.jp/