Yokowoʼs Value Creation

Top Message

More than a century after
our founding,remaining relevant for
the next 100 years
GO BEYOND~Challenge the Next Stage~

Takayuki Tokuma

Representative Director,President and Executive Officer
YOKOWO CO., LTD.

structure (industry, customers, technologies, supply chains, andother layers).
By promoting this sustainable evolution of business
management and a multi-layered business structure, we hope toachieve our “Minimum 10” medium-term management index(secure at least 10% in operating profit growth rate, operating
profit margin, return on equity (ROE), and return on invested
capital (ROIC)).
For the fiscal year ending March 31, 2024, areas ofparticular focus are human capital management and capital
cost management. In human capital management, we aremethodically implementing initiatives to respect human rights,
such as the establishment of the Yokowo Group HumanRights Policy (see p.47), and under the leadership of the newly
established Human Resources Development Center, we areworking to both develop superlative human resources, andraise their operational abilities and skill levels. In capital costmanagement, in the medium term we hope to achieve aROIC of 10% after calculating the Groupʼs cost of capital withreference to competitors and comparable companies. We have
moved from a profit-and-loss bias toward a focus on capitalefficiency, and are concentrating efforts on maximizing returns
with methods such as the so-called reverse ROIC tree.

Yokowo will work towards achieving its new “Minimum 10” medium-term
management index, to ensure that it is a constantly evolving company.
Constantly evolving, advancing to the next level.
Performance and earnings forecasts, along with our vision for the future are presented below.

Basic Management Policy
In 2022, on the occasion of our 100th anniversary, we set forth
Purpose, Vision, and Values as our new corporate philosophy
looking towards the next 100 years (see p.2). To this end, Yokowo
has instituted two management policies̶the sustainable evolutionof business management, and a multi-layered business structure.
As per our slogan of “Constantly on the cutting edge”
put forward since our founding, sustainable evolution ofbusiness management refers to constant evolution andprogress. Measures for realizing the sustainable evolutionof business management are product innovation (including
business model, product and business structure innovation),process innovation (the innovation of business processes) andpersonnel innovation (human resources innovation). In otherwords, these measures aim to substantially change the businessstructure, including products, technologies, and markets andbusiness operating process through the optimal placement

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Yokowo 2023 Integrated Reportof business sites and the active introduction of production
processes, processing technologies, and IT. The diversity of
the human resources who operate the above will expand toensure the development of highly professional teams. In linewith management innovation (the innovation of corporate
management and business operations), substantial changes will
be made to how the elements and systems involved in thesethree innovation measures, as well as how these measures
themselves are managed, in order to accelerate the evolutionof business management.
The other management policy of the multi-layered businessstructure aims to enhance the stability of our corporate
management and our companywide earnings structure. In otherwords, we aim to improve sustainability. As the managementenvironment surrounding Yokowo is changing drastically, thismanagement policy aims to establish a tenacious businesssystem capable of responding flexibly to these changes in thebusiness environment by creating a multi-layered business

Recent Operating Results and Forecasts
Performance in the Fiscal Year Ended March 31,2023, Current Status and Forecasts
The fiscal year ended March 31, 2023 saw a general slowing in
new COVID-19 infections, however the global economy has still
not fully recovered from its impact. In particular, the automotiveand other industries which depend on complex global supply
chains have needed a long time to normalize their procurement
and logistics operations.
In addition to the situation in Russia and Ukraine and thedeepening friction between the United States and China,
rapidly rising prices in countries around the world have caused aslowdown in the global economy. The semiconductor industry saw
booming demand from stay-at-home and teleworking demandduring the COVID-19 infections, however this slowed sharply inthe second half of the fiscal year due to the economic downturn.
Under these circumstances, the Yokowo Groupʼs consolidated
net sales reached a record high of 77,962 million yen (up 16.6%
from the previous year) thanks to steady growth in overseas
sales, due in part to the continued significant depreciation ofthe yen. The Wireless Communication Equipment segment
saw sales decline slightly from the previous fiscal year, however

New Corporate Vision● Purpose: Be a good company by employing people and technologies that work for the benefit of society today and tomorrow.
● Vision: As an ever-evolving company, we seek to develop new ideas that challenge our people and our technologies while

anticipating and addressing the changing needs of society.
● Value: Respect, Fairness, Ownership, Challenge, and Innovation

Evolution of Business Management

Multi-layered Business Structure● Multi-layered business structure● Product innovation(industry, customers, technologies, supply chains and other layers)● Process innovation● Personnel innovation

Global paradigm shift/Establishing a business systemcapable of responding to drastic changes in businessenvironment and competitive environment● Management innovation

Realization of Minimum 10● Operating profit growth rate
● Operating profit margin● Return on invested capital● Return on equity

10% or more
Yokowo 2023 Integrated Report12Yokowoʼs Value Creation

both the Vehicle Communication Equipment and Circuit Testing
Connector segments recorded record highs. Operating profit
increased 1.2% year-on-year to 4,739 million yen, a significant
drop from the target of 7,200 million yen in the medium-term
management plan. This was due to the Circuit Testing Connector
segment posting remarkable profits in the first half, but seeing
a sharp drop in the second half due to reduced demandin semiconductor testing, and the Vehicle Communication
Equipment segment posting a large operating loss.
In the current fiscal year ending March 31, 2024, the 101styear since our founding, we are continuing to face an adverse
business environment. As of November 2023, we are projecting
a very difficult situation with consolidated net sales at 75 billion
yen (down 3.8% from the previous year) and operating profit
at 200 million yen (down 95.8% from the previous year). The
VCCS (platform business split off from Vehicle Communication
Equipment in the previous fiscal year) segment returned tooperational profitability because of fluctuations in orders,normalization of ocean freight rates, and business structurereforms, however the CTC (until last fiscal year, Circuit TestingConnector) segment is expected to see a halving in sales due tothe ongoing recession in semiconductors, making an operating
loss unavoidable. Sluggish sales in the Fine Connector (FC)business meant that the FC/MD (advanced devices business split
off from Wireless Communication Equipment in the previous
fiscal year) segment is also expected to post an operating loss.

Reaffirming our original corporate DNA,and having this guide our actions
While we may be facing difficult times, I am not in myself
pessimistic. Rather, I feel this is a good opportunity to reaffirm
the corporate DNA that we have inherited since the companyʼsestablishment, and by using this in our activities, further embed

it into our culture. Our corporate DNA comprises a spirit ofchallenge in leveraging our strengths to boldly explore new fields
and markets, along with a flexibility to strategically withdraw
from businesses that no longer appear to present prospects
for profitability and growth and to consistently develop newbusinesses, combined with the tenacity and determination tounderpin these. When looking back at our companyʼs history,
the most serious periods were the business crunch at the end of
the 1970s, and the Global Financial Crisis (GFC) following thecollapse of the Lehman Brothers in 2008. The former resulted
in us carrying out a major transformation̶within the company
we referred to this as our second founding. We started our CTC
and FC businesses at this time, and these became driving forces
behind a major transformation of our business structure. Afterthe GFC, incoming orders dropped to 70% of previous levels. As
well as making drastic cuts to our fixed cost structure that had
previously ballooned due to our expansion policy, we enhanced
the stability of our business operations and performance throughmulti-layered business structure measures. These were achievedby creating new sales and rebuilding our earnings structurewith the three innovation measures that make up sustainableevolution of business management.
Demand for semiconductors and semiconductor testing iscurrently declining, but it is expected to return to growth in thenear future, given that more advanced and higher numbers ofsemiconductors will be used in CASE*1 / MaaS*2 / AI / 5G / IoT, for
cutting-edge applications, which are seeing further developments.
Until that point, we will prove our worth by tenaciously enduring
and taking the next bold steps, thus ensuring we seize theopportunities for recovery and advancement.

■ New medium-term

Net Sales

Net sales (million yen)

■ Full-year

management plan

performance¥72 billion¥

77.9 billion

Operating profit (million yen)

90,0008,000

80,0007,000

70,0006,000

60,0005,000

50,000Operatingprofit13¥

7.2 billion¥

4.7 billion

Ordinary
profit¥

7.0 billion¥

5.6 billion

Profit attributableto owners of parent¥

5.0 billion¥

3.1 billion

Yokowo 2023 Integrated Reportissues: the environment, local communities and diversity andinclusion.

Since being appointed as President in 2007, I have constantly
conveyed my desire to make Yokowo a good company to ouremployees. I think that a better company is:

Confronting sustainability issues is a part of our business
operations, and we must continue these without interruption.
Accordingly, we are focusing on our succession plan. We areworking on a succession plan that covers not only top management
but also officers and general managers, and we believe that this willlead to our company becoming sustainable, and thus bring about
the realization of our goal̶becoming an ever-evolving company.

■

■

■

*1 Acronym for Connectivity / Autonomous / Shared / Electric, new trends inautomobiles.
*2 Mobility as a Service▼ Earnings trends during the period of thenew medium-term management plan
<Fiscal year ending March 31, 2023>

So we can achieve sustainability withour stakeholders

4,000

40,0003,000

30,00020,0002,000

10,0001,000

0FY ended
March 2020
Performance

FY ended
March 2021
Forecast at
start of term/Performance

Personal Communication Equipment
Circuit Testing Connector
Vehicle Communication Equipment

FY ended
March 2022
Forecast at
start of term/Performance

FY endingMarch 2023
Medium-term
objectives/
Full-year performance

0Operating profit
Operating profit forecast at start of term/Targets

A company about which customers say, “It was good that wehave conducted business with Yokowo. We will expand ourbusiness relationship with Yokowo.”
A company about which contractors say, “It was good that
we performed business operations for Yokowo. We will work
harder to contribute more.”
A company about which local communities say, “Iʼm glad
Yokowo is in our town. Iʼd be very happy for my children tojoin Yokowo.”

And most importantly, a company where the employees of theYokowo Group think, “I am very satisfied with to be working
for this company. I will work harder to make it an even bettercompany.”
I think that a company such as that is truly a good company.

■To make Yokowo a good company, we should ensure thatofficers and employees of the Yokowo Group both within
Japan and overseas, regardless of nationality, gender and other
differences, are content and fulfilled in their work, and havea foundation of reliability and trust. Through the evolution of
our technology, we will continue to offer quality products andservices to improve customer satisfaction. We will contributeto local communities which we rely on to ensure that we arewelcomed by them, and to bring satisfaction to our neighbors.
As a resident of this world, we will contribute to solving climatechange and other issues to preserve the natural environmentthat sustains the lives of people around the world, including of ourstakeholders. Based on the above, we have the three top-priority

The Yokowo Group will continue to enhance our governancesystem, a foundational, basic part of our corporate activities, inorder to achieve Purpose, Vision, and Values in our actions.
Further, so that we can be a Company needed over the next
100 years, we will confront sustainability issues such as climatechange through our business activities, and contribute to thesustainable development of our global society.
In the years to come, we look forward to the ongoingsupport, guidance, and encouragement of our shareholders andother stakeholders.

Yokowo 2023 Integrated Report

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