15HDS REPORT 2023

HDS Group’s
Values and Aspirations

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information■ Interview With Representative Director
Learning from past experience, we will strive toexpand production capacity and secure humanresources in preparation for the next demand
recovery period, and the entire Company will
work as one to strengthen our competitivenessand achieve our ideal state.

Representative Director and Senior Managing Executive Ofﬁcer
General Manager of Corporate Planning Division
and ICT Promotion Ofﬁce

Akira Maruyama

How do you foresee the future demand environment?
For the HDS Group, factory automation (FA) will be thecornerstone of our business both in the short- and medium- tolong-term. In particular, industrial robots, which are indispensable
for automation and saving manpower, include not only robots
used for welding, etc., but also collaborative robots that support
workers' operations. This is definitely pivotal for our Company,
which handles speed reducers that are essential for robots.
Since 2010, the industrial robot market has been growing at
an annual rate of about 7%. While medium and large robots
are growing at 5-6% per year, small and collaborative robots,

which are our specialty, have been growing at double-digit
annual rates. In addition to industrial robots in the small size
domain, there is still much room for growth in collaborative
robots. Recently, there is also talk of next-generation humanoid
robots. In terms of applications, demand is also expanding
from handling operations in factories to service and logistics
industries. In addition to worker replacement, there is also a
growing need to improve processing quality and production
efficiency. In forecasting the future market, in addition to demand
forecasts from the International Federation of Robotics (IFR) andother sources, we take into account our growth rate from 2010
onward, and assume a 7% annual growth and more for thedemand environment. We are working on the next medium-term
management plan based on this forecast. In addition, while theoutlook for the Chinese market on its own remains a concern,
we believe that the positive demand environment will continue inthe U.S. manufacturing industry, where the need for manpowersaving and automation through the use of robots is extremely
strong. Although economic fluctuations will have an impact,global demand for speed reducers will probably bottom out in
2023 and gradually recover, with the next peak in demand
expected around 2025.

What kind of measures do you have in mind towards
the next demand recovery period, based on reflections
on past experience?
We have experienced a very difficult time during the past
five years, because the demand volatility was extremely
large. During 2016-2017, in addition to automotive
applications, strong demand for semiconductors, organic
electro-luminescence, and electronic devices for smartphones
and other applications became apparent, particularly in the
Chinese market. In 2018-2019, demand sharply decelerated
triggered by the U.S.-China trade friction. Thereafter, the newcoronavirus spread globally, but there was a sharp recovery indemand between 2020 and 2022. Currently, the demand isslowing down in reaction to that. We learned the importanceof production capacities and securing human capital from thepast two demand cycle phases. Since our HarmonicDrive®
is an important core component of robots and has a highmarket share, robot manufacturers, our customers, tend toplace orders in advance. On top of these advance orders, thecombination of stronger demand than expected, our production
capacity shortage and delivery delays, as well as overordering resulted in longer delivery times of up to 10 months
or more. Learning from this experience, we are continuing to
expand our production capacity, mainly in our Ariake factory,
and secure human resources. We are preparing a system tomeet appropriate delivery deadlines no matter how strong thedemand is, if we can secure reasonable production quotas
based on production information from our major customers,
meet customer delivery deadlines, and control over-ordering.
However, due to the decline in net sales and the heavy burden

HDS Group’s
Values and Aspirationsof fixed costs, we anticipate shifting to an operating loss for the
fiscal year ending March 31, 2024.

Which fields do you expect to be the drivers of demandin the medium to long term?
I think the aerospace field will have a particularly large
potential. The Company has been involved in the aerospace
field from the Apollo project in 1971, and this is an area
where we can continue to maximize our extensive experienceand strengths. Especially in the U.S. market, we can expect
to see the development and mass production of manipulatorsand various driving devices used for experiments in space,in addition to satellites. In addition to the development ofmaterials and lubricants that can withstand outside temperaturesof around minus 200℃, maintaining durability is also arequirement. For example, our differentiated technology iseffective in the field of powder lubrication.
As for the humanoid robots that everyone is looking
forward to, I feel that there are many issues to be dealt with,although there is a high possibility that they will become agreat success in the medium to long term. For example, up to
thirty speed reducers are used in the actuators of humanoid
hands (both hands, including fingers). If servo motors, force
sensors, and other components are incorporated into the robot,
the hands alone become quite expensive. We have alreadyreceived several inquiries, but deliveries so far have only been
experimental. Although the robots will probably be used for
applications such as transporting objects at first, I think there aremany issues to be dealt with, including cost, before the robots
can detect with sensors, think, move, carry, and assemble on
their own.
We also have high expectations for eVTOL, so-called flying
automobiles. However, in addition to a license to fly, stations
and other infrastructure must be developed. It appears that there
are many issues to be resolved, including regulations, such as
how many cars an operating company can own. A test flight isplanned for Expo 2025 Osaka, Kansai, Japan scheduled to beheld in 2025, and a vehicle will fly from Kansai International
Airport to the Expo site. The HDS Group’s products are used by
one of the U.S. manufacturers of eVTOLs.

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

The HDS Group is a component manufacturer, but doyou have business opportunities to create your own
demand?
HarmonicDrive®, the HDS Group’s main product, is a precision
speed reducer which is incorporated in industrial robots.
Although there is an increase in the number of units adopted
per robot due to the miniaturization of robots and an expansion
in the number of newly adopting customers, our business isbasically affected by the demand for robots. However, themechatronics business, which we focus on, has nearly doubled
in terms of net sales over the past ten years as a result of thevalue we provide in response to customer needs. We develop
and manufacture special servo motors and actuators that havehollow shafts and are flat. These products are not handled
by major specialized motor manufacturers. Direct drive (DD)motors compete with the Company’s actuators. Compared tocompeting DD motors, our motor is able to offer a significantly
smaller size with high torque which is why it is being usedmainly by major manufacturers of semiconductor manufacturing
equipment for cleaning, exposure, and other front-end
processes. In the U.S., many of them are also adopted in thefield of various medical devices. Although we basically offer
products in which the precision speed reducers and motors areintegrated, we also receive orders for motors alone. In addition,with the emergence of more intelligent robots, there is a
growing need for an all-in-one function that integrates a speed
reducer, motor, torque sensor and driver, and controller into
the arm, giving us a competitive advantage. Our strategy forthe future is to strengthen the mechanical part of our business,
centering on precision speed reducers, which is one of ourGroup's strengths. We also aim to improve the functionality ofour drivers and torque sensors, and to develop our businesswith an emphasis on speed, including the introduction oftechnology from outside through M&A and other means.

Please share your views on the next Medium-Term
Management Plan and the achievement of materiality
issues.
We have begun internal meetings from around September
2023 to formulate the next medium-term Management Plan.
When I asked the directors and executive officers what kind

Data and Company
Information

HDS REPORT 2023
Interview With Representative Director

of company they want the Company to be in 2030, almost
all of them answered that they want the Company in 2030
to achieve numerical targets that surpass the current mediumterm management plan. We plan to announce the details of
the next medium-term management plan in the financial briefing
to be held in May 2024. To achieve our goals, we, including
young employees, continue to discuss various initiatives in threesubcommittees: Management, Development and Sales, andManufacturing and Procurement. Matters such as the method ofcreating high value-added products, appropriate pricing, andhow we should sell our products in each region are discussed
in these subcommittees.
We are also in the process of reviewing our materiality
issues. We are considering materiality items that are moreclosely linked to the long-term vision and the medium-term
management plan than in the past and their realization, and
KPI for these items,while still being in line with our management
philosophy. In the next medium-term management plan, we
believe that our business strategy in the Chinese market willplay a key role in determining the direction of the HDS Group.
In addition to a highly effective external business strategy, we
intend to emphasize the strengthening of our competitivenessand customer response capabilities through the enhancement of
our human capital and management foundation.

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HDS REPORT 2023

HDS Group’s
Values and Aspirations

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information■ Message From Officer in Charge of Financial Affairs
By investing in automation, we will enhance ourbusiness model which generates added value throughmanufacturing. We will continue to use debt to lower
our cost of capital and communicate our growth
initiatives to shareholders and investors throughdialogues.

Director and Executive Ofﬁcer
General Manager of Finance Accounting, Financeand Tax Division

Kazutoshi Kamijoh

Role as Officer in Charge of Financial Affairs and Approachto Corporate Value and Stakeholder Engagement
The HDS Group's business is greatly affected by global capital
investment trends, thus, demand fluctuates considerably, and it isdifficult to determine the level of production capacity that should
be in place. In particular, responding to short-term demand
fluctuations has not been as straightforward as we would have
liked. As the person in charge of financial affairs, one of myroles is to select and implement the most appropriate methodfrom among multiple financing methods in order to secure thefunds that will make it possible to make capital investments at
the appropriate time based on medium- and long-term demand
forecasts.
There are many definitions of corporate value, but as a listedcompany, we consider the market capitalization of our stock to
be the most important. Theoretically, corporate value is defined
as future cash flows discounted to their present value. However,even though we are forecasting a loss in operating income forfiscal 2023, our stock price has received a certain degree offavorable evaluation, and we consider that expectations for
future growth are factored into our stock price. I also believe it
is important to understand the expectations of our shareholders
and investors, and it is my role to link these expectations toappropriate stock prices through engagements. We havereceived valuable opinions in past dialogues (e.g., designing
executive remuneration using treasury stock, inviting female
outside directors, etc.), and these opinions have actually been
applied in our management.

Key Highlights of the FY2023 Business Forecast
The forecast for the consolidated business performance in fiscal
2023 is 55.0 billion yen in net sales, and an operating loss of
0.4 billion yen. Net sales for fiscal 2021 two years ago were57.0 billion yen and the operating income was 8.7 billion yen.
Although net sales are expected to remain at the same level, asignificant decrease in income is anticipated. The main reasonsfor this are a decline in capacity utilization resulting from asignificant drop in net sales in the Japan segment, which is alsoa core segment in terms of earnings, and a rise in fixed costs due
to an increase in production capacity. Meanwhile, the overseas
segments of North America and Europe are expected to achieve
higher net sales and income compared to fiscal 2021, andare expanding in terms of customers and applications. We
are confident of medium- to long-term growth in the Japan
segment as well, with promising inquiries. However, for fiscal
2023, we expect net sales to decline by more than 30% fromfiscal 2022, as we are faced with a deep trough of cyclicaldemand fluctuation. As a result, consolidated earnings for fiscal
2023 are unfortunately expected to be less profitable due tothe underperformance of the Japan segment, which is relatively
profitable compared to the overseas segment. However, theGroup intends to maintain and strengthen its production systemand other business foundations to prepare for the period of
increased demand in the next fiscal year and beyond.

Basic Policy for the HDS Group's Financial and Capital
Strategies
The Key Performance Indicators (KPI) for the financial and capital
strategies are set at over 20% for operating income to net sales
ratio, over 10% for ROE, and over 70% for equity ratio, in our
medium-term management plan (FY2021-FY2023). These figures
are adopted as KPIs so that they can be easily understoodboth internally and externally. In addition, since our Group's
performance fluctuates widely, we pay attention not only toearnings indicators but also to financial stability so that we canmanage our business over the medium to long term even when
the business environment is challenging. Although the profitability
KPI is expected to fall short of the fiscal 2023 performance
forecast, we do not intend to lower the targets mentioned abovefrom a mid- to long-term perspective.
The cost of shareholders' equity is regularly monitored andshared with our board of directors, and we recognize that our
figure, as calculated using the Capital Asset Pricing Model(CAPM), is around 8%. On the other hand, when making
capital investment decisions, the DCF method is used to evaluate
investment economics, with a discount rate of 10%, exceeding
the cost of capital, as the hurdle rate. Although managers andemployees involved in important capital investment projects
are expected to base their plans on finance theory in this way,

HDS Group’s
Values and Aspirations

the concept of cost of capital has not yet become widespreadamong all employees. One reason for this is that, in the past,increase in net sales naturally led to profits and investment
efficiency, so there was not much need for employees to beaware of the cost of capital. I believe that more employees
need to be made aware of the cost of capital. Since capital
expenditures have been increasing over the past few years, I
also feel the need to incorporate performance evaluations thattake into account capital efficiency and cost of capital.
For shareholder returns, our policy is to link dividend payments
to business performance, and we aim for a dividend payout ratioof at least 30%. This is based on our belief that we can meetthe expectations of our shareholders and investors by reinvesting
70% of the profits we generate in capital investment and otheractivities to achieve a return that exceeds our cost of capital,
since we recognize that we are still a company with room for
growth. At the same time, however, we will pay attention to
the execution of a flexible capital policy based on a carefulobservation of the changing business environment.

(%)
100
80

Operating Income to Net Sales Ratio, ROE,
and Equity Ratio for the Past 10 Years
Operating Income to Net Sales Ratio
75.9 73.3 76.1

60

Equity Ratio

71.7 72.5 73.3 73.5

69.0 67.4

54.0
42.8

40
22.1

20 11.0

27.2

26.9

14.7
13.6

26.0

22.7

24.5
15.3

10.1 11.2

0
-20

ROE

2.3
-0.5 -1.1

2013

14.3

6.6
7.5

0.7

2014 2015 2016 2017 2018 2019 2020 2021 2022
(Fiscal year)

Changes in Cash Allocation
Regarding the cash allocation for the medium-term management
plan, we anticipate the underlying operating cash flows (OCF)to total about 34.0 billion yen over the three years. The OCF for

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

the previous medium-term management plan (FY2018-FY2020)
was 35.6 billion yen, so the forecast is to earn the same level ofcash. The other source of funds is debt financing. Interest bearing
liabilities increased by 13.0 to 14.0 billion yen from the endof fiscal 2020 to the end of fiscal 2023. This is due to the lowinterest rates and the need to reduce Weighted Average Cost of
Capital (WACC), but even with increased debt, the Company
maintains an equity ratio of approximately 70%, thus its financial
soundness is well maintained. Considering these factors, thetotal cash inflow for the Group is around 48.0 billion yen for thecurrent medium-term management plan and is expected to be at
the same level as the previous medium-term management plan.
For cash outflow, on the other hand, capital investment isaround 21.0 billion yen (acquisition base) for the current mediumterm management plan, and is expected to be a significant
decrease from the 33.7 billion yen in the previous medium-term
management plan. However, it is expected to be above the15.0 billion yen plan we had at the beginning of the period.
The additional 6.0 billion yen is a result of installation of a new
production line in our Ariake Factory. The investment to increase
production of speed reducers at the Ariake Factory is intended
to increase production by 40,000 units/month for generalindustrial applications and 30,000 units/month for automotive
applications in order to respond to the recent increase inemerging demand. R&D expenses, the Group's lifeline, are also
expected to exceed the initial plan of 9.0 billion yen, and wecontinue to invest for future growth. In addition, we also recorded
a cash outflow of 14.7 billion yen as a result of making
Harmonic Drive SE in Germany a wholly-owned subsidiary,
increasing our stake from 75% to 100%.
We expect a significant increase in shareholder return toaround 12.5 billion yen from 6.3 billion yen in the previous
medium-term management plan. The increased amount of around
6.0 billion yen is a result of share buyback.
As a result, the forecast of cash allocation for the current
medium-term management plan is approximately 44% for capital
investment, around 30% for subsidiary shares, and approximately
26% for shareholder returns. There are three key points. First, wewere able to make investments in preparation for the next phaseof growth. Second, we expanded the use of debt (including
lowering the cost of capital), and third, we maintained ourfinancial soundness in spite of the first two points.

Data and Company
Information

HDS REPORT 2023
Message From Officer in Charge of Financial Affairs

Cash flows from operating activities, Capital investment,
and Interest bearing liabilities for the Past 10 Years(Millions of yen)
30,000Cash flows from operating activities
Interest bearing liabilities

25,000Capital investment

23,876

22,94620,00016,887

15,66615,121

15,00010,85010,9509,555 9,881

9,233

10,0005,494

5,000 3,643
1,304

6,499
4,296

2,475
745

892

7,225

8,757

7,892
6,963

9,236

6,328
5,690

4,576 1,938 2,104
1,959

217
0 20132014 2015 2016 2017 2018 2019 2020 2021 2022

(Fiscal year)

Approach to Balance Sheet for Next medium-termManagement Plan
Our approach to utilizing debt in the event of a shortfall in
OCF inflow will remain unchanged for the next medium-term
management plan starting in fiscal 2024. We believe that
our financial soundness will be maintained even if the current
equity ratio of around 70% is lowered to around 60% in thenext medium-term management plan. With respect to current
assets, while semiconductors and other assets are currently
being strategically accumulated in inventories due to difficulties
in procurement, we expect to be able to lower the turnover
period as procurement normalizes in the future. For tangible fixed
assets, we intend to make aggressive capital investments thatare expected to be necessary in order to ensure a stable supply
to customers and not miss out on business opportunities, basedon an assessment of future demand trends and expansion of
applications. In doing so, we expect to increase our investment
in order to further promote automation, labor saving, and digitaltransformation. However, we intend to allocate management
resources with priority in order to further enhance our ability tocreate added value in terms of production.

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HDS REPORT 2023

HDS Group’s
Values and Aspirations

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information■ Interview With Officer in Charge of Intellectual Capital
When faced with a task set by a customer, ourstrength is to embrace the challenge always
thinking “how we can do this” and making
HDS’s unique technological proposals even
if their implementation is difficult, to “turn theunconventional into the conventional”.

What is the HDS Group’s basic policy on intellectual
capital?
The HDS Group advocates for the pursuit of total motion
control as our long-term vision. We aim to meet our customers’
demands by combining our unique motors and actuators in
addition to speed reducers. We never refuse our customers’
requests, no matter how difficult they are, we consider themand even if they cannot be realized, we can offer uniqueproposals. This attitude has nurtured our strengths. Whenpeople hear the name, HarmonicDrive®, many would probably
imagine a speed reducer for industrial robots. However, wehave commercialized this product for various application
areas including oil drilling equipment and automobiles. Our
experience of turning the unconventional into the conventional,
ability to produce products from hints, and mindset of neverDirector and Executive Ofﬁcer
General Manager of Development and Engineering Division

Executive Fellow Ofﬁcer (Chief Technical Ofﬁcer)(In Charge of Engineering and Quality),
General Manager of Quality Assurance Division

Yo s h i h i r o Ta n i o k a

Yo s h i h i d e K i y o s a w agiving up development are the sources of our strengths andcomprise the HDS Group’s basic policy on intellectual capital.

What types of intellectual capital do you have?
Harmonic Drive Systems Inc. in Japan is mainly in chargeof R&D. Its R&D organization consists of three divisions: theDevelopment and Engineering Division that develops standard
catalogue products and develops and designs products basedon customer requests; the New Mechanism Principle Laboratorythat freely explores new principles and mechanisms beyond
the boundaries of existing products; and the Harmonic Drive
Laboratory that investigates deeply the basic technology
supporting HarmonicDrive® to find possibilities for enhancing its
performance. In addition, we have an office in Silicon Valley in
the United States, a region where the world’s most advanced
IT and robot technologies are concentrated, to conduct studies

and research on next-generation products such as humanoid
robots.
In the fiscal year 2022, we spent ¥3.2 billion in R&D
expenditure, an increase of 8.7% year on year. Its ratio to net
sales was approximately 4.6%. In comparison with the fiscal
year 2018 when we posted a record operating income, ourR&D expenditure rose about ¥0.8 billion. Over the past five
years, we spent a cumulative total of roughly ¥13.4 billion
on R&D. We have 137 people working on R&D, making up
10.3% of the total headcount of the entire consolidated group.
The number rose by eight from the fiscal year 2018. As forpatents, we have a total of 1,004 patents including 255 inJapan and 749 overseas. We will more actively apply forpatents going forward. Our U.S. subsidiary has in the pastdeveloped products to meet the local market needs. Our
European subsidiary has also developed products to meet the

HDS Group’s
Values and Aspirations

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

are likewise long due to their special specifications. While
the Development and Engineering Division sometimes directly
receives requests for major development projects, the sales
and design sections are basically our windows for customers
to request major development work. Another characteristicof HDSI is the large number of experiments we carry out.
The Development and Engineering Division has a team that
evaluates our development projects. They conduct various
experiments and evaluations together with customers in ourlaboratory designed to test durability before the actual use of
our products.

Kiyosawa

demands of local users. In recent years, however, we haveshared issues and development themes globally to prevent theoverlapping of development projects. This has enabled us tofacilitate a more efficient global joint development effort.

What are the characteristics of R&D in the HDS Group?
The HDS Group processes highly specialized products on thescale of microns. It is therefore normal for us to have discussions
at the level of a few microns. While the machines we workon are general-purpose equipment, our products are delicate
items whose performance is affected by a difference of afew microns. This means that the machining tolerance of our
products differs from that of other companies. We develop
products under main themes based on the development
roadmap prepared in line with our medium-term businessplan. The three sections choose several main themes andconduct specific development activities for their respective
themes. The development projects to meet specific customer
demands, however, have different timelines. For instance, inthe development project of a bent sub for oil drilling (directional
drilling control module), we spent eight years for development
and a total of 12 years before its actual application. We also
spent five years on a development project for a steering andstabilizer project for a major carmaker. Our products are also
often used for space projects and their development periods

Will the spread of AI impact the competitiveness of
your intellectual capital?
AI is an effective tool in, for instance, combining various
materials. In areas where there is no knowledge, however, it
does not generate new thoughts or answers. AI cannot knowwhat we do not know. It is therefore important that we takethe lead in solving various challenges and experience both
failures and successes. With the appearance of such tools as
3D printers and various measuring equipment, in the current
era, it may only take five years to give shape to what the HDSGroup has accomplished in our history spanning over 50
years. However, even if products look identical on the surface,
it is impossible to copy “the depth rooted in experience.” This
is where a large difference between us and our competitorslies. In particular, HarmonicDrive® achieves high reduction
ratios using a simple three part mechanism where balls inball bearing and a flexible metal gear produce controllable
elastic deformation. This is literally “a product that has turned
the unconventional into the conventional.” Product life normallyends when development stops. We remain committed tocontinuing development that is beyond conventionality while
adding our own unique twists.

HDS REPORT 2023
Interview With Officer in Charge ofIntellectual Capitalsolving. As for our risk, due to the limited range of producttypes we offer, there is a concern that the potential arrival ofa new speed reducer with a breakthrough mechanism that
could replace HarmonicDrive® could make us lose our market.
Another concern is the potential appearance of affordable
products with high quality and performance. Our greatest
business opportunity lies in the development of speed reducers
with new mechanisms such as Abacus®. In the immediate
future, however, our focus will be on lubricants. While wedevelop solid lubrication, in our joint development project with
the Japan Aerospace Exploration Agency (JAXA), we havefocused on powder lubrication and have achieved a lubrication
mechanism that secures long life even at an extremely low
temperature at around minus 200 degrees Celsius. Goingforward, if lubrication oil for speed reducers becomes
unnecessary, oil seals will become redundant and significant
efficiency improvement will become possible. In addition, we
have recently seen our competitors entering the speed reducer
market. We consider that the emergence of competitions
proves long-term business opportunities of the speed reducer
market and will provide opportunities for all of us to grow fromhealthy competition.

Where do your strengths, risks and business
opportunities exist?
The HDS Group’s strength is that our customers consult with us
about their issues and requests. I believe that this demonstrates
their appreciation of our serious efforts on R&D and problem

Data and Company
Information

Tanioka20

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HDS REPORT 2023

HDS Group’s
Values and Aspirations

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information■ Interview With Chief of Harmonic Drive Laboratory
With R&D on motion mechanisms at the core, we focus on developing
technologies to solve problems faced by our customers as well as products
and next-generation mechanisms to adapt to changes in the market while
facilitating development collaboration with our overseas Group companies.

Executive Ofﬁcer
Chief of Harmonic Drive Laboratory

S h i z u k a Ya t a

What is the role of the Harmonic Drive Laboratory andyour background?
The Harmonic Drive Laboratory (HD Laboratory) was created inAugust 2014. Its role is to further cultivate the basic technology
behind HarmonicDrive® and it aims to find solutions throughenhancing our ability to develop fundamental technologies for
improving our products’ competitiveness and contributing to
the development of new products. 70% of what HD Laboratory
currently does is the development of speed reducers centeredon the existing HarmonicDrive®. The remaining 30% isdedicated to the development of new speed reduction
mechanisms. We take a bird’s-eye view of developing speed
reduction mechanisms. At the same time, we conduct R&D on
various motion mechanisms to realize total motion control.
HD Laboratory has eight members including myself.
I joined HDSI in July 2014, one month before theestablishment of HD Laboratory, as a mid-career engineer.
I was appointed as the Chief of HD Laboratory in 2021
and then as the Executive Officer in June 2023. I studied
mechanical engineering and began my career as a CAE

development engineer of automotive parts in the technology
development center of a textile material maker. I then moved toan electric appliance maker that developed and sold robots.
As an engineer, I was in charge of mechanical designing ofrobots and other prototypes, evaluation of prototypes, CAE
analysis, among other things, in development and production
technology. Looking back, I was always interested in motion
through my work. When the electric appliance maker sold thebusiness where I worked, I decided to approach HDSI which
had good technology on motion control and started working
for them. At HDSI, I develop next-generation technologies
centered on CAE analysis, which is a core technology. I am
also currently involved in a customer’s project to create new
solutions.

What types of development staff do you have? Do you
collaborate with overseas offices in development?
HDSI supports its employees in obtaining academic degrees
such as MBAs and PhDs while working by paying part of theircosts. Our Fellow and Chief Technical Officer Kiyosawa was
the first employee to gain a doctorate (Doctor of Engineering)

while working for the company. Some of HD Laboratory’s
staff are working toward a doctorate on their own volition or
acquiring knowledge by enrolling in a one-year technology
seminar. Furthermore, HDSI has a system to provide full support
to employees’ overseas language studies for those who wish
to improve their English skills. I believe HDSI is a very attractive
company for those who are motivated to take on challenges tofurther their expertise. Global development collaboration with
our overseas Group companies is also progressing. In fact,
we are soon going to visit a Japanese research institution that

HDS Group’s
Values and Aspirations

has new technologies, with the development members of ourGerman subsidiary. This was arranged through an invitationfrom the German team. We are excited that we can try
interesting, new technologies.

What development themes are you working on?
Our R&D is based on themes that are chosen in accordancewith HD Laboratory’s policy. In particular, we try to choose
themes related to speed reducers that will contribute to thedevelopment roadmap of the Development and Technology
Division. This development roadmap is updated at the
beginning of each fiscal year for the following three tofive years. In the fiscal year 2022, we worked on the“pursuit of highly efficient HarmonicDrive®,” in addition
to the ongoing theme from the previous fiscal year, which
was the “establishment of a lifespan estimation method for
HarmonicDrive®,” as our main themes. In recent years, wehave been especially stepping up our efforts on the lifespanof HarmonicDrive®. We need to regularly review the lifespanestimation method to estimate how long and under what
conditions HarmonicDrive® can be safely used from the socalled state-of-the-art perspective. This initiative will not only help
reduce environmental footprints on the earth but will also resultin greater cost competitiveness. Given the growing energy
saving needs, raising the efficiency of speed reducers is an
essential factor for industrial robots. With the expansion of themarket for HarmonicDrive®, we are working on R&D factoringin a sustainability perspective such as power saving so that ourcustomers can continue using our products safely.

Do you also run development projects linked to
profitability or business strategy?
The current model of HarmonicDrive® consists of threecomponents. Flexspline, a thin, cylindrical cup-shaped elastic
metal body with external teeth, which is formed by machining
heat-treated forged components. Under the current mediumterm business plan, we began looking into different methods
to manufacture Flexspline as one of our business strategies for
the Chinese market. Development and application for mass

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

production including production automation are progressing
daily. As we need production technology that suits productshapes, HD Laboratory, which is in charge of fundamental
technologies, is preparing for what might happen when shapes
or materials are changed. In addition, to avoid excessive
quality, it is ideal to offer HarmonicDrive® that is compatible
with the lifespan of solutions, such as robots, in which it is used.
On this point, I think it will be possible to control lifespan andcost (= profitability) through the above research themes. And
there are solution proposals beyond this. Another task given
to HD Laboratory is to make proposals to create new demand
beyond customers’ requests while maintaining a structure thatcan solve issues our customers face.

Are you also developing next-generation speed
reduction mechanisms?
The Abacus® speed reducer, which we began developing
together with an American research institution, SRI, in
November 2015, is a product that has achieved a high levelof energy efficiency at 96.6% through our effort to make rolling
elements spin like abacus beads instead of a gear. This isan extremely attractive mechanism. However, we are in aquandary about its practical application in terms of its mass andweight because the product has a large number of components
and its mechanism is complex. We are also looking into
adopting new engineering methods or new materials for the
existing HarmonicDrive® products. This, however, will be athorny path considering the need to secure high quality andreliability.
When developing speed reducers, we need to pursue thefollowing fundamental technologies: load capacity, lifespan,
efficiency, stiffness, weight, accuracy, size, ratio coverage,
and manufacturing cost. We are daily working on developing
new speed reduction mechanisms and materials under thedevelopment roadmap we have prepared. There is, however,no clear timeline toward our goals. Abacus® speed reducer
is said to be the first innovative invention in a few decades.
It takes time to develop new speed reduction mechanisms.
Having said that, we want to accelerate our activities to turn

Data and Company
Information

HDS REPORT 2023
Interview With Chief ofHarmonic Drive Laboratory

our ideas into products when we can see a clear outlook. We
want to incorporate one or two new development outcomes
into our products every two to three years with respect to theaforementioned fundamental technologies.

In your view, which market is promising?
Fundamental technologies and components are the sourcesof value creation and competitiveness in any market. I
therefore want to value them. As for research themes, I wantto persistently strengthen the development of fundamental
technologies that are applicable across various fields. If I
may dare to list the specific markets that I expect to grow, I
believe that the use of speed reducers will increase in extreme
environments where lubricating oil cannot be used, such as
space. In addition, with the falling birth rate in recent years,
humanoid robots are appearing as robots working in the
manufacturing industry in addition to multi-axis robots thatwork with humans. In the past, I have seen humanoid robots
disappear from the market because their development was
extremely difficult while the purpose of their use was unclear
and they were expensive to make. At present, however, robots
are being developed as hardware with a clear purpose ofuse. Furthermore, the evolution of the high-speed processing
technology of sensor signals has enabled us to simultaneously
control a few dozen axes. As a result, the scope of tasks
in which robots can replace humans has expanded. I
sincerely hope that this area will blossom with good practicalapplications.

Yata and Kiyosawa

22

23

HDS Group’s
Values and Aspirations

HDS REPORT 2023

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information■ Interview With Officer in Charge of Manufacturing Capital
We are enhancing high-mix low-volume production and our production skills
at the Hotaka Factory and promoting automation and DX at the Ariake Factory
to meet our customers’ demands by maintaining high quality and further
improving productivity through the integration of analogue and digital.

What is the HDS Group’s basic policy on manufacturing
capital?
As the basis of our production activities, we prioritize the safety
and comfort of our production sites. We therefore first aim tohave zero occupational accidents. Furthermore, to have no
product quality issues, no complaints from customers, and no
defective documentation, we set out to have zero product non-

Executive Ofﬁcer (In Charge of Production, Production Planning)
General Manager of First Production Division

Executive Ofﬁcer
General Manager of Production Technology Division

Ts u y o s h i A w a d u h a r a

Hiroki Hanaoka

conformances and zero complaint under our quality reform effort
which the entire company is working on. In respect of production
technologies, we are working on productivity improvement andlabor-saving hrough automation at the new Ariake Factory. We
also naturally aim to maintain high quality by reducing quality
variations. Moreover, we are quantifying the skills of experienced
workers and reflecting them in automation to ensure production
to precise measurements.

What kinds of manufacturing capital does
the HDS Group have?

Hanaoka

The Hotaka Factory is the HDS Group’s mother factory which
flexibly practices high-mix low-volume production while passing
on advanced, expert skills. Meanwhile, the Ariake Factory is
an automated factory specializing in the mass production of thesame types of products through the introduction of automatedand labor-saving production lines. Our current production
capacity for industrial machinery is 90,000 units a month at the
Hotaka Factory and 40,000 units a month at the new Ariake
Factory. Combining the two factories, we have the capacity
to produce 130,000 units of HarmonicDrive® each month.
In addition, our German subsidiary is capable of producing

slightly less than 30,000 units a month and the U.S. subsidiaryslightly less than 10,000 units a month. We therefore havethe capacity to produce approximately 170,000 units ofHarmonicDrive® for industrial machinery combining Japanand overseas. On top of these, we can produce 7,000 unitsof mechatronics products such as actuators and in the Ariake
Factory, 90,000 units of products for automobiles that are
produced each month. The HDS Group’s global production
capacity including these is thus approximately 270,000 units.
Going forward, we aim to secure a production capacity of
200,000 units a month at the Hotaka and Ariake factories
combined, excluding products for automobiles. If we expect
demand for special, small speed reducers for humanoid robots
to grow, we may need a dedicated factory depending on thelevel of demand.

What are the HDS Group’s advantages? Where does
the source of your strengths lie?
One of the strengths of the HDS Group’s production
technologies is our manufacturing insights which havebeen nurtured through the successes and failures we haveexperienced in our history spanning over 50 years. For

HDS Group’s
Values and Aspirations

Awaduhara

instance, our commitment to producing Flexspline by fine cuttingat micron-level is supported by our differentiated technologies.
The Hotaka Factory is an analogue factory where dimensions
are measured for each phase, while the Ariake Factory is adigital factory where micron-level precision is produced on
automated lines. We endeavor to improve our production
technologies by having two factories with different featuresdeveloping and sharing their respective technologies.

What is your view on achieving your long-term vision?
A key component of the HDS Group’s products, cross roller
bearings, are internally manufactured by our Group company,
Harmonic Precision Inc. We also have our own specifications,inspection processes, and conditions for the component
parts we purchase such as ball bearings and steel materials.
By assembling those components using our differentiatedalignment technology, we endeavor to supply high quality
and high accuracy products. Together with the Supply Chain
Division, we try to strengthen collaboration with our suppliers
who are members of the HDS Cooperative Association toensure high technological standards. Meanwhile, we have aflexible production structure that allows us to switch to internal
production if it is difficult to make particular components. I
believe that the source of the HDS Group’s strengths is ourwillingness to try different methods to satisfy the requests ofeach of our customers, constantly thinking about how we cando it.

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

At the Hotaka Factory where we produce custom-ordered
products in small volumes, we put efforts into developing
human resources and promote the multi-skilling of workers toeliminate bottlenecks and to distribute workloads evenly at thetime of production increases. In addition, we are rolling out the
production technologies of the automated Ariake Factory to the
Hotaka Factory to improve the latter’s skill levels that are reliant
on experienced workers and to facilitate the automated andlabor-saving production phases. When I visited our German
subsidiary the other day, they were trying a new methodof high-mix low-volume production, different from ordinary
methods. The Ariake Factory currently mass produces productswith the same model numbers. By adopting the new method,
the German subsidiary will be able to produce a mixture of anumber of different products and to monitor production processprogress in real time. We are also accumulating various data
including the dimensions measured to visualize the production
capacity of each production phase. Going forward, we plan
to use big data to stabilize processing accuracy through the
management of the wearing of tools and coolant temperatures
and to discover and rectify bottlenecks. In the medium- to longterm, we aim to create a smart factory by raising the level ofautomation. We are currently ranking the levels of automationof each phase to understand the automation status. The ultimate
goal is an unmanned factory. We aim to achieve automated,
mixed-flow production ensuring high quality, while promoting
data visualization and the introduction of various systems.

Hotaka Factory

Data and Company
Information

HDS REPORT 2023
Interview With Officer in Charge of
Manufacturing Capital

Main factories producing HarmonicDrive®
Japan

Hotaka Factory

Production line

High-mix
low-volume production

Mass production of
one type

Characteristics

Mother factory withadvanced expert skills

Fully automatedmanufacturing

Monthly
production
capacity

90,000 units forindustrial machines

40,000 units for industrial machines
90,000 units forautomobiles

ー

Power

Overseas
sites
Business activities

No CO2 emissions

HDSE (Germany)
Development/
Production/Sales

Monthly
Nearly 30,000 units
production capacity
Power

Ariake Factory

HDLLC (U.S.)
Development/
Production/Sales
Nearly 10,000 unitsーNo CO2 emissions

Group companies

Production items

Harmonic Winbel Inc.

Mechatronics products

Harmonic Precision Inc.

Cross roller bearings

Harmonic AD, Inc.

Precision planetary speed reducers

SAMDICK ADM CO., LTD.
(South Korea)

Precision planetary speed reducers

Ariake Factory

24

25

HDS REPORT 2023

HDS Group’s
Values and Aspirations

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information■ Interview With Officer in Charge of Domestic Sales
We aim to refine our unique solution sales style that goes beyond what our customers demand from us andstrengthen our capabilities to support our customers through system reforms and other measures to improvecustomer satisfaction.
Executive Ofﬁcer (In Charge of Marketing and Sales)
General Manager of Domestic Sales Division

Naomi Shirasawa
What is the HDS Group’s basic policy on domestic
sales?
To become a company desired by our customers, the basic
policy of our domestic sales is to increase our capabilities to
respond to our customers as the entire company. We will do soby sharing customer feedback with the entire company basedon the lessons we learned in the past from our long delivery leadtimes.

What types of sales capital do you have?
We have five sales offices in Japan, namely the Tokyo Office,Kohshin Office, Chubu Office, Kansai Office, and Kyushu
Office. While there are some customers we directly deal with,
we make sales through our sales agents for major industrial
robot makers to mitigate the impact of demand fluctuations. The
Domestic Sales Division has 42 staff members excluding myself,while the key sales offices in Kanto and Kansai each have ten
members. We recruited four and three career-track employees in
2022 and 2023, respectively. We basically develop our humanresources through training in factories, on-the-job-training in each
office where new employees are paired up with experienced
sales staff, and various group training programs, among others.

What are the strengths of your domestic sales?
We endeavor to conduct our sales activities with the aim ofgrowing ourselves, while strengthening our capabilities tosupport our customers. In cooperation with the Motion Control
Development Department in the Sales Administrative Divisionthat conducts solution sales activities, we research in advancethe themes that our customers will seek next and endeavor
to propose solutions that will meet our customers’ demands.
Building a strong relationship with our customers is also ourstrength. When customers who have strong views about qualityand delivery timing ask to tour our factory, we show them where
we are taking on new challenges such as production automationand multi-skilling. This gives them strong confidence and a senseof reassurance about our supply structure including delivery
schedules during the next demand recovery phase.

What measures do you take to meet delivery
deadlines?
In 2017 and 2018, our supply could not keep up with therobust demand, and our delivery lead time, which was normally
one to two months, was stretched to ten months, causinginconvenience to our customers who suffered from delays intheir production plans. When demand grew in 2021 and
2022, our delivery lead time again extended to ten months dueto the combination of a manufacturing staff shortage and anelectronics component shortage. This, however, did not cause
any problem to our customers’ production plans thanks to close
sharing of information with our customers, sales agents, andfactories. As a result, a number of our customers including asemiconductor manufacturing equipment maker and industrial
robot maker commended us for meeting our delivery schedule.
I believe that our efforts to strengthen our capabilities basedon our previous experience have led to an improvement in ourcustomers’ satisfaction. We are currently in a period of stagnant
demand. To prepare for the next recovery phase in demand, weare enhancing information sharing with our factories to ensuresufficient production capacity. In addition, we are predicting
orders we will receive based on information from our top 20
customers who account for 70% of the orders we receive andmanaging the inventory of key agents every month to build awell-prepared structure for the next demand recovery period.

What are your challenges and initiatives toward thenext medium-term business plan?
I feel that our challenges are digital transformation (DX) andcomputerization of our sales activities. We are therefore
discussing the introduction of new systems for sales expansion.
Based on the vision we want to achieve in the next five to ten
years, we are working on sharing the sales data of each sales
office and on data utilization as well as on management reforms
to build a stronger sales structure.
With respect to the links with the medium-term businessplan, so far, each sales office has accumulated their respective
customer data and has individually dealt with their key customers,
which are major semiconductor manufacturing equipment makers
for the Tokyo Office, industrial robot makers for the Kohshin
Office, and carmakers and industrial robot makers for the Chubu
Office. As a result, there was no strong link with companywide numerical targets set under the medium-term business plan.
Going forward, we will set KPIs including numerical targets
for each business segment and the number of new customers
for sales expansion and will review how we conduct our sales
activities to improve the prospects of success of the next mediumterm business plan which will start in the fiscal year 2024.

HDS Group’s
Values and Aspirations

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information

HDS REPORT 2023

■ Interview With Officer in Charge of Overseas Sales
We will strengthen collaboration with domestic sales sections and factories, in addition toaccurate information sharing with customers and sales agents, to achieve our long-term
vision.
Executive Ofﬁcer
General Manager of Sales Administrative Division and Overseas Sales Division

M i c h i y a Ya s h i r oWhat is the HDS Group’s basic policy on overseas
sales?
Our basic policy is to run optimum operations through sales
support to and the sharing of sales strategy with overseas sales
agents and close collaboration with factories when providing
delivery schedules and price estimates to customers.

What types of sales capital do you have?
The HDS Group has a division of work structure dividing theworld into four sales areas. Our U.S. subsidiary, Harmonic
Drive L.L.C., is in charge of the North America region, ourGerman subsidiary, Harmonic Drive SE, is in charge of theEurope, South America, Middle East, India and Africa region,
our Chinese subsidiary, Harmonic Drive Systems (Shanghai)Co., Ltd., is in charge of the Chinese market, and HDSI is incharge of Japan, Australia and the Asia region. HDSI also
manages coordination and integration of the four poles (Japan,
Germany, the U.S., China). We maintain close contacts withlocal group companies and sales agents. For instance, HDSI’s
overseas sales may join in their meetings with customers. In
Europe, the U.S. and China, we have a sales network of a few
dozen offices underneath our Group companies, while in South
Korea, our sales network consists of around ten offices. The
Overseas Sales Division currently has ten staff members. We
plan to further increase its headcount to enhance collaboration
with overseas subsidiaries and sales agents.

What are the strengths of your overseas sales?
We basically sell HarmonicDrive® directly to our customers
because 90% of our sales are specially tailor-made for eachcustomer. In the U.S., all our HarmonicDrive® units are solddirectly to customers, while we use retailers for precision
planetary speed reducers. In China, we basically sellHarmonicDrive® directly to customers but also use sales agentsto acquire new local customers. In Europe, we also directly sellHarmonicDrive® to major customers, but we adopt a structure
where we have a distributor in each country and relation
managers in our Group companies visit customers. As seen in
the above, our direct sales structure that can gain strong trustfrom our customers is a strength of the HDS Group.

How do you understand regional strategies anddemand forecasts?
We implement our regional strategies with precisely definedtargets. We are focusing on state-of-the-art medical equipment,
semiconductor manufacturing equipment, and the aerospace
field in the U.S., semiconductor manufacturing equipment,
industrial robots, and various automation and labor-saving fields
in China, and industrial robots, aerospace, medical equipment,
and semiconductor manufacturing equipment in Europe.
Our common target across those regions is robots including
humanoid robots, co-bots, and industrial robots. In recent years,
there have been cases where global IT companies developed
humanoid robots for specific uses, especially in logistics. We
are closely monitoring this trend. With respect to demand
forecasts, we endeavor to have close communication with key

customers and sales agents and keep track of the number of our
speed reducers in stock for different specifications of customers
to make forecasts for six to twelve months into the future in aneffort to improve our order prediction accuracy.
Carmakers and European robot makers, among others, havebegun asking for information on our ESG efforts in recent years.

What are your challenges and initiatives toward thenext medium-term business plan?
We, as the sales section, will continue providing informationin an appropriate manner at an appropriate time. In addition,
we raise efficiency of the entire HDS Group including our
supply chain to improve the speed of quoting and to reduce thedelivery lead time so that we can more effectively achieve twoof our five materialities, which are to “provide products andservices that meet customer expectations” and to “establish astable procurement and supply system.”
Regarding the links to the medium-term business plan, theOverseas Sales Division sets goals based on the Group’s
long-term vision and management policy. Going forward, ourcustomers will unavoidably move towards making purchasesfrom two or more companies from the viewpoint of BCP. This
will make it even more important to maintain and increase
the HDS Group’s market share. We need to develop oursales strategy while aiming at total optimization while closely
observing the demand trend. Under the next medium-termbusiness plan, we will prioritize the enhancement of our abilities
to respond our customers with QCDS (Quality, Cost, Delivery
and Service) at the core.

26

27

HDS Group’s
Values and Aspirations

HDS REPORT 2023

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies■ Corporate History and History of Value Creation—Transformation of Organizational Structure, Development of Diverse Products—

Corporate History and Transformation of Organizational Structure
1911–1969

Birthing Period1970 –1978 Foundation Period

Birth of HarmonicDrive®
1911 Kiyoji Hasegawa establishedHasegawa Gear Works, Ltd.
1955 C. W. Musser invented
HarmonicDrive®
Corporate History 1964 Hasegawa Gear Works andUSM (U.S.) signed a technologicalpartnership agreement
1965 Completed the first
HarmonicDrive® unit

Introduced progressive HR measures
Transformation ofOrganizational
Structure

1910−

1960

1970

1975

HAD : Harmonic AD, Inc.
HDLLC : Harmonic Drive L.L.C (U.S.)
WB: Winbel Co., Ltd.
(Currently, Harmonic Winbel Inc.)

HDSE
HDSI
HDCH
ADM

: Harmonic Drive SE (Germany): Harmonic Drive Systems Inc.
: Harmonic Drive Systems (Shanghai) Co., Ltd. (China): SAMICK ADM CO., LTD. (South Korea)

1998–2006 Development Period

2007–2013 Stabilization Period

2014–2023 Investment in Future Period

Expanded a factory and entered the U.S.

Became independent from foreign capital

Listed shares for over-the-countertrading and enhanced supply chain

Enhanced presence in Asian markets
and mechatronics products

Enhanced corporate fundamentals
and supply structure for the future

1998 Listed shares for over-the-counter trading
1999 Established HDL (logistics company)
Established HPI (J/V)(producing cross roller bearings)
2000 30th anniversary
2003 Established HAD(manufacturing ofPrecision planetary speed reducers)
2004 Listed on JASDAQ
2005 Established HDLLC

2007 Formed a capital and business alliance withWB (for developing actuators)
Made HPI a wholly owned subsidiary2008 Formed a capital and business appliance withOme Iron Casting Co., Ltd.
(manufacturing high-strength cast-iron products)
Formed a capital and business alliance with
Soft Servo Systems, Inc.
2010 40th anniversary
2011 Expanded Hotaka Factory and established HDCH
(Chinese sales company)
2013 Established ADM (Korean manufacturing company)

2014 Invested in enhancing production capacity of Hotaka Factory
2016 Opened Taiwan Representative Office2019 Completed HPI’s new factory
Completed new Ariake Factory
2020 50th anniversary
2021 Made HDLLC a wholly owned subsidiary
Made HDSE a wholly owned subsidiary
Made WB a wholly owned subsidiary1989 Established new HDSI as a wholly owned
subsidiary of former HDSI
1990 Completed Hotaka Factory
Established HDS Cooperative Association

Introduced quality-focused business management

1972 Introduced five-day workweeks
1973 Introduced a 60-year-old retirement system

HDSGmbH : Harmonic Drive GmbH (Germany)(Currently, Harmonic Drive SE)
HDL: HD Logistics, Inc.
HPI
: Harmonic Precision Inc.

1989–1997 Independence Period

1985 Expanded Matsumoto Factory(currently, Toyoshina Factory)
1987 Established HD Systems, Inc. in the U.S.

1970 Established a J/V company, HDSI
Established HDSGmbH in Germany
1976 Joined the umbrella of USM (U.S.)
1977 Began manufacturing and sellingmechatronics products

Data and Company
Information

Expansion Period

1979–1988

Established Harmonic Drive Systems Inc.

Sustainability
Management

1980 Introduced Total Quality Control (TQC)
1982 Introduced the concept of marginal profit
1986 Campaign to eliminate defective products

1980

1985

Promoted operation reforms
1996 Began Heart Max (HM) Project(data-driven operation reform)

1990

Introduced a new core system
2001 Began HMII Project2003 Introduced the Executive Officer system
Introduced the outside director system

1995

2000

Enhanced development/production structure

Realized integrated group management

2009 Created a tri-base development structure
Moved from a product-based to function-based
headquarters structure (newly establishedthe Production Division and Development Division)2012 Launched a new structure for HAD’s planetary
speed reducer

2021 Made all overseas subsidiaries wholly owned subsidiaries

2005

2010

2015

2020

2023−

Growing product offerings and expansion to mechatronics products
Strain-wave gearing

Diverse productgroups1965 ・Completed first unit
made in Japan

1972 ・Launched FD series

differential unit for phasefine-tuning

1977 ・Birth of R series(initial product)

Mechatronics products

1985 ・Launched model number 5 products

1992 ・Launched CSF series
1995 ・Launched silk hat

1988 ・Launched CSS series with a
new IH tooth profile

type SHF series
・Established production technology ofcross roller bearings
1999 ・Developed units with areduction ratio of 1/30
・Launch larger torque capacity,
longer life CSG series

1984 ・Launched high power DC servo actuator 1990 ・Launched FHA-25A
RH series

1978 ・Commercialized Hi-T Drive
1987 ・Launched DC servo actuator
RH mini series
1989 ・Launched LA-30
linear actuator

Precision planetary speed reducers

1988 ・Launched
BP series

FH2000 series
servo actuator

1994 ・Launched LSA-50A
for laser scanners

2001 ・Launched ultra-thin®

2015 ・Launched CSF-mini ultra flat,

2002 ・Launched larger torque capacity,

2020 ・Launched ultra-light ULWHarmonicDrive
CSD series

longer life SHG series
2006 ・Launched CSF-3 micro precision speed reducer

high stiffness type (2UP)2023 ・Added model number 7 tosmall unit types

2006 ・Launched RSF-3

2018 ・Launched FLA series

2009 ・Launched new SHA series

2018 ・Launched HMA series

2007 ・Added right angle type2015 ・Launched HPG series

micro AC
servo actuator

flat hollow
actuator

2023 ・Launched CSD-ULW

ultra flat brushless
DC actuator

2023 ・Added ULW typeto FHA-C mini series

flat and hollow
AC servo motor

2000 ・Launched FH2000 series C type1990 ・Launched HP series
1999 ・Launched HPG series

to HPG series

helical gear type2017 ・Launched HPN series

2023 ・Added model number 40
to HPG series
helical gear type

HDS Group’s
Values and Aspirations

Sustainability
Supporting Action
Strategies

Materiality to Achieve
Aspirations

Market Size of Semiconductor Manufacturing Equipment and Industrial Robots, and Consolidated Net Sales
Semiconductor manufacturing equipment sales by SEAJ

Data and Company
Information

HDS REPORT 2023

(Millions of yen)
80,000Consolidated net sales（right scale)Industrial robots sales by JARA

70,0006,000

60,0005,000

50,0004,000

40,0003,000

30,0002,000

20,0001,000

10,0000Medium-Term
Management Plan

Net Sales
Composition
by Application

2006

2007

2008

Strengthening
Mechatronics
Business

FY2006-2008(Non-consolidated basis)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Back onStrengthening Competitiveness
Growth Trajectoryof Three Main Products

Reinforcing
the Asian Market

25.0 %
15.1 %

Semiconductor
manufacturing equipment

59.9 %

Other

Industrial robots
FY2012-2014

37.4 %
10.6 %
52.0 %

2019

FY2018
-2020

Other

0

2022〜 2024〜2026 〜2050

2021

Towards the Next
50 Years

Expanding
Capacity

Industrial robots
Semiconductor
manufacturing equipment

2020

Current Medium-Term Management Plan

50.8 %
11.5 %
37.7 %

Collaborative
robots

Semiconductor
manufacturing equipment

Achieving

Next Medium-Term
Long-termManagement Plan

VisionSales ratio ofindustrial robots

Industrial robots
Semiconductor
manufacturing equipment

grew from
25% to 50% in
the past five Medium-Term
Management Plans

Other
Humanoid robots
eVTOL, etc.

Leading-edge
medical equipment

Expansion ofApplications

Mobility/Aerospace

Industrial robots
Machine tools
FY2009Net salesby productHistory of Growth
Strategies

Reducers
Mechatronics products

Composition
by product

Reducers
Mechatronics products

¥

9.6
¥2.4

80%

FY2015billion20%

billion¥28

Company History and Historyof Value Creation

Source: Order statistics by Japan Robot Association (JARA)
Sales statistics by Semiconductor Equipment Association of Japan (SEAJ)(Billions of yen)
8,000
7,000

Sustainability
Management

22.3

FY2022billion79%¥

Net sales of Reducers expanded 2.5X in the last 7years

5.9

¥

57.0

Net sales of mechatronics products expanded 2.4X in the same periodbillion21%

80%

billion

¥

14.5
20%

billion29

HDS Group’s
Values and Aspirations

HDS REPORT 2023

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information■ At a glanceControllers

0.5%M

Actuators
Precisionplanetary
speed reducershec

HarmonicDrive® Speed Reducers
Production base Hotaka Factory/Ariake Factory (Azumino-shi, Nagano)

at ro

nics

HarmonicDrive®
component type

The HarmonicDrive® consists of only three basic components. Unlike motions of ordinary gearing, the unique
tooth behavior (operating principle) of HarmonicDrive® achieved nonbacklash motion, infinitesimal angularfeeding (one-pulse feeding) and high positioning repeatability.

11.7% 16.4%
5.9% Sales
composition ratio
by productin FY2022(Non consolidated basis)

HarmonicDrive®
(Unit type)

65.5%

Speed

u
red

ce

rs

Wave Generator

Flexspline

Circular Spline

The wave generator consists of a thin ball andbearing that fit into the outer circumference of theelliptical cam. The inner ring of the bearing is fixed
to the cam, while the outer ring deforms elastically
via the ball. Normally, this is installed on the input
shaft.

This is the thin, cup-like, metallic, and elastic
body. The outer circumference of the
opening has the teeth. The bottom of the flex
spline (bottom of the cup shape) is referred toas the diaphragm, and is installed on the
output shaft in the normal fashion.

This is the rigid and ring-shapecomponent. The inner
circumference has the teeth, andthe number of teeth is higher than
the flex spline by two teeth.
Normally, it is fixed to the casing.

Mechatronics products

Precision planetary speed reducers
Production base Harmonic AD, Inc. (Azumino-shi, Nagano)

Production base Komagane Factory (Komagane-shi, Nagano)HarmonicPlanetary is a Precision planetary speed reducers that utilizes the accumulated
precision machining expertise of HarmonicDrive® at lower reduction ratios. With a uniquebacklash elimination function, it achieves high rotational precision.

In order to take advantage of the excellent angle transmission precision and positioning precision ofHarmonicDrive®, we offer total motion control, including AC, DC, and step actuators capable of ultra-highresolution and high-precision rotary motion, and linear actuators capable of ultra-fine volume andhigh-precision linear motion.

®

HPG-R series
Gearhead

SHA series
AC servo actuator
Flat hollow shaft type

RH series
DC servo actuator

LA series
AC servo linear actuatorHDS Group’s
Values and Aspirations

Net sales

EBITDA¥71.5billion ¥18.7billion

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information

HDS REPORT 2023

At a glance

Profit attributableto owners of parent

Earnings per shareROE¥7.5billion¥79.67

7.5%

Total assets

Equity ratio

Cash flows fromoperating activities

Capital investment

Ratio of R&D
expenditure to sales¥154.3billion

67.4%¥10.8billion¥9.2billion

4.6%

No. of employees

Percentage of male
employees taking
childcare leave

No. of patents held

GHG emissions(Scope 1+2)

Ratio of Independent
Outside Directors

1,324

56.3% 1,004 18,937

t – CO250.0%

Note 1: The data shown above are actual results for the fiscal year ended March 31, 2023, excluding the ratio of Independent Outside Directors.
Note 2: Percentage of male employees taking childcare leave is on a non-consolidated basis.

30

31

HDS Group’s
Values and Aspirations

HDS REPORT 2023

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information■ Financial Highlights
Net sales, Operating profit, and Ratio of operating profit to
net sales
Net sales(millions of yen)
100,000

Ratio of operating profit to net sales (right scale)Operating profit

80,00020,00057,08760,00037,034

15.3

16,6242.3

050

23,876

40

35.2

30

15,00037,48720,000

Ratio of capital investment to net sales (right scale)
Capital investment
Depreciation and amortization
Ratio of depreciation and amortization to net sales (right scale)
(%)

30

24.5

40,000(millions of yen)
25,00040

71,52767,809(%)
50

Capital investment, Depreciation and amortization, Ratio of capital investment
to net sales and Ratio of depreciation and amortization to net sales

8,739

14.3

10,224

865

20

10

20.0
8,254

7,389
5,000

7,892

5,690 14.5

7,730
5.3

9.2

9,236 9,574

FY2018FY2019FY2020

FY2021

FY2022– 20

0FY2018FY201912.9

0FY2021

FY2022

Total assets, Net assets, and Equity ratio

Cash flows, and Cash and cash equivalents

Net assets

Equity ratio (right scale)(%)
100

Cash flows from operating activities
Cash flows from financing activities(millions of yen)
25,00017,600160,000

72.5
142,872

120,000

113,277

73.3
131,848
106,71873.5
140,028
110,05980
69.0
143,289
98,856

154,336
67.4
103,995

40,000FY2018FY2019FY2020

FY2021

FY202220– 15,000

0– 25,000At the end of fiscal 2022, total assets increased ¥11.0 billion from the previous fiscal
year to ¥154.3 billion and net assets increased ¥5.0 billion from the previous fiscal yearto ¥103.9 billion yen. Equity ratio dropped 1.6 percentage points from the end of theprevious fiscal year to 67.4%, which was a 6.1 percentage points decrease from thelevel in fiscal 2020. This was mainly attributable to a decrease in capital surplus resulting
from acquisition of shares in a consolidated subsidiary and a decrease in equity resulting
from factors including a decrease in valuation difference on available-for-sale securities.

8.1

18,767

9,881

9,555

0.7

‒6,561‒ 4,703‒6,663

0.5
0.4

-0.8
-1.1 -1.0-3FY2018FY2019FY2020

FY2021

FY2022Return on equity (ROE) improved by 0.9 percentage point to 7.5%, return on assets (ROA)
0.4 percentage point to 5.1%, and return on invested capital (ROIC) 0.7 percentage
point to 7.0%, all from the previous fiscal year. In relation to ROE, profit attributable toowners of parent increased 14% from the previous fiscal year to ¥7.5 billion, while
equity over the past two fiscal years averaged just ¥101.4 billion, a 0.5% increase fromthe previous fiscal year.

Dividends per share

（%）
100

Total payout ratio (right scale)

Dividend payout ratio (right scale)
290.6

290.6

38.0

200

10,85020.0‒1,599

32.3

20.0

32.3

21.0

30.4

0

28.0

101.2

30.4

0

‒ 8,663– 100‒ 175.7‒ 22,399

FY2019100

35.1‒ 12,537

FY2018(%)
300

19,92120‒ 1,230

5.1

4.7

(yen)
60

2,362

‒3,271

7.5
7.0

6.6
6.3

40
10,9505,000– 5,000

9

Dividends per share, Dividend payout ratio, andTotal payout ratio

Cash flows from investing activities
Cash and cash equivalents
19,996

11.2（百万円）
100,000

15,121040

80,000060

15,00018,342

12.5

12

0

The capital investment increased 12.9% compared with the previous fiscal year to ¥9.2
billion (12.9% to net sales). The regional breakdown is ¥8.1 billion for Japan, ¥0.7
billion for North America, and ¥0.4 billion for Europe. Domestic production capacity
increased 40% from the level in fiscal 2021. Depreciation and amortization, including
intangible, increased by ¥1.3 billion to ¥9.5 billion (13.4% to net sales). For fiscal
2023, we plan ¥6.3 billion in capital investment and ¥9.9 billion in depreciation andamortization.

Total assets

ROIC

10

The net sales for fiscal 2022 reached a record high of ¥71.5 billion, increase of 25%
from the previous fiscal year, as an abundant order backlog steadily was steadily
cleared. Operating profit increased 17% compared to the previous fiscal year to just
¥10.2 billion, underperforming the all-time high reached in fiscal 2018. Meanwhile, theratio of operating profit to net sales came to 14.3%, down 1.0 percentage point fromthat of the previous fiscal year. This was mainly attributable to an increase of ¥3.3 billion
in depreciation and amortization compared to the level in fiscal 2018 as a result of
aggressive capacity expansion investment.

(millions of yen)
200,000

ROE

3

10.0

FY2020

ROA

20

13.4

1,959
– 20,000

(%)
15

6

10,0006,247

0-0.5 -19521.1 20.6

ROA, ROE, and ROIC

FY2020

FY2021

FY2022In terms of cash flows, operating activities provided net cash of ¥10.8 billion, increasingby ¥0.9 billion from the previous fiscal year, investing activities used net cash of ¥8.6
billion, up ¥3.9 billion from the previous fiscal year, and free cash flow came to a
positive ¥2.1 billion. Financing activities used net cash of ¥1.5 billion for purchase oftreasury shares, etc., and cash and cash equivalents at fiscal year-end came to ¥19.9
billion.

FY2018‒ 175.7

FY2019– 200

FY2020

FY2021

FY2022

Dividends per share increased ¥7 from the previous fiscal year to ¥28 (¥11 interim and¥17 year-end), and dividend payout ratio was 35.1%, while ratio of total amount ofdividends to net assets was 2.6%. As we purchased treasury shares worth ¥5.0 billion(1,215,400 shares), total payout ratio reached 101.2%. Our dividend policy is to takecapital measures flexibly, targeting a dividend payout ratio of about 30%.

HDS Group’s
Values and Aspirations

Sustainability
Supporting Action
Strategies

Materiality to Achieve
Aspirations

Sustainability
Management

Data and Company
Information

HDS REPORT 2023

■ Sustainability Information Highlights
Greenhouse gas (GHG) emissions (t-CO2)
Scope1

Number of employees on consolidated basis by region andPercentage of those in Europe and North America

Scope2(persons)
1,500

286

North America
EuropeCommon to all regions
Japan
Percentage of employees in Europe and North America (right scale)

1,324

1,200

18,650

300

0

129

1,097

1,104

117

119

395

354

330

344

42.7

43.2

43.4

141

151

514

530

FY2020

FY2021

48.3

600

1,145

1,111
75

900

(%)
100

45.3

142

143

499

483

FY2018FY2019

120

377

80

Historical numbers of Directors
Internal Directors(persons)10

Outside Directors

Percentage of Outside Directors (right scale)
(%)
100

9

9

9

9

9

3

3

4

4

4

80

8

60

6

197

40

4

33.3

33.3

621

20

2

6

6

5

5

5

0

0

FY2018FY2019FY2020

FY2021

FY202260

44.4

FY2022

44.4

44.4
40

20

0

We began disclosing GHG emissions on a consolidated bases with the figure fromfiscal 2022. The Scope 1 emissions totaled 286 t-CO2, while Scope 2 emissions(location-based) totaled 18,650 t-CO2, with a combined total of 18,936 t-CO2.
Scope 3 emissions totaled 6,595,000 t-CO2, with emissions resulting from the useof sold products (Category 11) totaled 6,190,000 t-CO2, or 93.8% of the overall
Scope 3 emissions.

On a consolidated basis, the number of employees increased 179 from the end of
the previous fiscal year to 1,324. The figure includes 621, up 91 from the previous
fiscal year in Japan; 197, up 46 from the previous fiscal year in North America; 377,
up 33 from the previous fiscal year in Europe; and 129, up 9 from the previous fiscal
year for employee common to all regions. The combined total of the numbers in North
America and Europe increased 79 to 574, representing 43% of all employees on aconsolidated basis.

In fiscal 2022, the Company’s Directors totaled nine, including four Outside
Directors (all males). Outside Directors represented 44.4% of all Directors in threeconsecutive years to fiscal 2022. A female took office as Outside Director on July 1,
2023 and the figure rose to 50% with the addition of one in fiscal 2023.

Number of patents held

Number of employees who took childcare leave andPercentage of paid leave taken

Number and percentage of female employees, andPercentage of female Executive Officers

In Japan

Overseas(number of patents)
1,200(persons)
20

1,000

800

912

477

658

(persons)
100

80

80

69.6

73.2

60

60

40

40

20

20

0

0

Percentage of female employees (right scale)
Percentage of female Executive Officers (right scale)

4

8

10
4

234

244

254

255

255

FY2018FY2019FY2020

FY2021

FY2022The Company held patents totaling 255 in Japan and 749 overseas totaling 1,004
at the end of fiscal 2022 on a non-consolidated basis. These numbers are up 21 inJapan and up 272 overseas from fiscal 2018.

(%)
100

80

56

749

200

0

74.6

12

553

Number of female employees

(%)
100

86
16

711
696

Number of females who took childcare leave

1,004

797

600

400

951

Number of males who took childcare leave
Percentage of paid leave taken (right scale)

0

3

9

2
FY2018FY2019FY2020

FY2021

FY2022The number of employees who took childcare leave on a non-consolidated basis
was 14 (four females and 10 males) in fiscal 2021 and nine males in fiscal
2022. Male employees who took childcare leave represented 56.3% on a nonconsolidated basis. Percentage of paid leave taken on a non-consolidated basis
represented 73.2%, a 3.6 percentage point improvement from the previous
fiscal year. We are improving the workplace environment of the Company andencouraging employees to actively use our leave system.

36

10.3

60

60

42

11.3

40

13.8

14.6

17.6

0

0

7.7

7.7

7.7

FY2018FY2019FY2020

FY2021

FY202220

The number of female employees on a non-consolidated basis increased 26
from the end of the previous fiscal year to 86, representing 17.6% of the nonconsolidated total employees of 490. The Company has one female Executive
Officer, representing 7.7%, and two females in managerial positions, representing
2.4%. The Company’s target is to increase the number of women in managerial
positions to five by fiscal 2024.

0

32

33

HDS Group’s
Values and Aspirations

HDS REPORT 2023

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information■ Past Medium-term Management Plans
Medium-term Management Plan (FY2012-FY2014)

Medium-term Management Plan (FY2015-FY2017)Management Policy

Management Policy

Position quality and safety as the foundation of business
operations● Reflect needs of the market (customers) in productdevelopment and expand sale of new products● Become a group that faces the needs of the market (customers)
head-on and responds accordingly● Bolster business of all major products●

Business Strategy
Continuously upgrade technologies and skills (strengthencore technologies)● Enhance product appeal with technologies and skills (expand
product variation)● Raise competitiveness of actuators● Implement sales expansion strategy in the Asian market●

Achievements and Challenges
Net sales for industrial robots showed significant growth, and net
sales for Asia rapidly increased roughly three-fold over the threeyear period. Results fell slightly short of numerical targets, but net
sales, operating income, and operating income to net sales ratio
all reached all-time highs, with operating income to net sales
ratio achieving 27.2%. Also. ROE stood at 14.7%.

Business Strategy
Find new applications for Harmonic Drive® Speed Reducers
and launch new products in the market● Actively launch new mechatronics products● Capture overseas markets for precision planetary speed
reducers● Actively expand sales in the Asian market● Improve organizational strength and develop human resources

Significantly raise global production capacity
Raise capabilities of group companies to strengthen
all-around abilities● Increase customer satisfaction by raising QCDS capabilities● Strengthen management foundation to support future growth● Lay groundwork for growth in the future●●●

Achievements and Challenges
Net sales and operating income have cleared numerical targets
by a wide margin and set new records. A rapid growth indemand globally for industrial robots and the conversion of a
German affiliate company into a subsidiary were contributing
factors. However, the operating income to net sales ratio figure
ended short of the plan. This was mainly attributable to the factthat against a three-year plan for aggregate capital investmentof ¥10 billion, the actual figure reached ¥17.6 billion, and theburden of depreciation and amortization expanded from theplanned ¥6 billion to ¥9.1 billion. Issues remained with regard to
production capacity and stable supply.

FY2014 Results

Net sales¥26.0 billion¥25.9 billion

Operating income¥7.5 billion¥7.0 billion

28.8%

27.2%

Dividend payout ratio and dividends per
share

–

27.2%
(¥29/share)

Dividend payout ratio and dividends per
share

Capital investment (3-year total)–¥5.1 billion

Depreciation and amortization (3-year total)–¥3.5 billion

R&D expenditure (3-year total)–¥3.6 billion

Operating income to net sales ratio

Management Policy

Aim for a business foundation supported by the three products● Reinforce the competitiveness and business foundation of thethree main products● Develop the Asian market and create a business foundation●

FY2014
Management targets

Items

Medium-term Management Plan (FY2018-FY2020)

Business Strategy
Raise production capacity and achieve improvements in
productivity● Carry out greater investment in the main production bases
and bolster comprehensive capabilities● Normalize and reduce production lead times, launch new
products, and strengthen the support system for technology
proposal capability● Secure and develop human resources, utilize IT, promotemanagement that takes ESG into account●Achievements and Challenges
In steadily implementing the business strategy, cutbacks in capital
investment worldwide for manufacturing industry due to factors
such as US-China trade friction, in addition to declining advanceorders as a result, and further, a sharp decline in capital investment
with the global spread of COVID-19 became evident, resulting inconsiderably underperforming against numerical targets. While
keeping the capital investment plan under restraint, the groundworkfor growth looking toward 2030- 2050 is being firmly laid.

FY2017
Management targets

FY2017 Results

Net sales¥35.0 billion¥54.3 billion

Operating income¥9.5 billion¥12.5 billion

27.1%

23.2%

–

31.5%
(¥26/share)

Dividend payout ratio and dividends per
share

Capital investment (3-year total)¥10.0 billion¥17.6 billion

Depreciation and amortization (3-year total)¥6.0 billion¥9.1 billion

R&D expenditure (3-year total)¥4.8 billion¥4.9 billion

Items

Operating income to net sales ratio

FY2020Management targets

FY2020 Results

Net sales¥100.0 billion¥37.0 billion

Operating income¥26.0 billion¥0.8 billion

Items

26.0%

2.3%

–

290.6%(¥20/share)

Capital investment (3-year total)¥71.0 billion¥33.7 billion

Depreciation and amortization (3-year total)¥25.5 billion¥21.6 billion

R&D expenditure (3-year total)¥9.4 billion¥7.1 billion

Operating income to net sales ratio

HDS Group’s
Values and Aspirations

Materiality to Achieve
Aspirations

Sustainability
Supporting Action
Strategies

Sustainability
Management

Data and Company
Information

HDS REPORT 2023

■ Overview of Current Medium-term Management Plan
Basic Policy

Current Medium-term Management Plan (FY2021-FY2023)
Long-term vision “In pursuit of total motion control”- We will aspire to provide products andservices that exceed customer expectations,
toward realizing our long-term vision In November 2020, the HDS Group celebrated its 50th
anniversary. To make even greater strides, the three-year
Medium-term Management Plan for FY2021 (fiscal year ended
March 31, 2022) to FY2023 (fiscal year ending March 31,2024) was formulated under the slogan “Toward the Next
50 Years: Moving to a Solid Growth Stage.” High growth isanticipated medium- to long-term in the market for precision
speed reducers and mechatronics, in which we participate, due
to automation and labor-saving investments in the manufacturingindustry of emerging countries, as well as growth expected indemand for industrial robots and co-bots in developed countries
for measures to address labor shortages and productivity
increase. No matter how dynamic the circumstances, wewill aim to realize a sustainable society and management,
continuing our challenge for new technologies and skills that
capture changes in the external environment, and provide
products and services that meet customer expectations. For theenhancement of corporate value in the medium- to long-term, ourpolicy is to respond flexibly to short-term changes in the businessenvironment, while carrying out a management strategy thattakes into consideration finding a balance between offense anddefense to implement the strategies stated in our long-term visionand medium-term management plan.

Items
Net sales
Operating income
Operating income to net sales ratio
ROE
Equity ratio
Dividend payout ratio
Capital investment
R&D budget

Take on the challenge of developing new technologies and skills that capture changes in the environment● Achieve QCDS that goes beyond customer expectations● Contribute to creating a sustainable society through corporate activities●

Business Strategy

Develop human resources capable of leading businessexpansion, and establish personnel systems and work styles
that enhance diversity● Execute IT enhancement strategy and implement our own IoT
concept● Build a financial base to support growth and strengthen
financing capabilities●(1) Achieve QCDS that meets customer expectations
Q: Quality control (zero non-conformances and zero complaint)
C: Improve productivity and further enhance Value Analysis /Value Engineering
D: Commit to delivery schedule requested by customers
S: Enhance ER activities with speediness(4) Strengthen coordination and maximize synergies withoverseas group companies and institutions● Maximize utilization of management resources at each site
● Maintain and promote proactive research activities withoverseas research institutions● Establish a global production system(2) Expand RD, AD, and MT businesses by developing valuable
products and enhancing services
RD: HarmonicDrive®
● Create and commercialize new technologies and skills to
support next-generation applications
AD: AccuDrive®, HarmonicPlanetary®
● Expand product offerings tailored to regions and various
applications through business restructuring
MT: Mechatronics● Provide products that enable customers to bring their visions tolife and further improve problem-solving capabilities(5) Create new standards that define the next 50 years throughoutside-the-box thinking
Proactively take on the challenges of discovering newmaterials, new principles, new mechanisms, and new
production methods● Make strategic moves toward developing intelligent
mechatronics● Foster a culture that is sensitive to changes in society andaccepts variant perspectives●(3) Build a management foundation that meets the demands of the times● Promote sustainable management (SDGs)

Previous Medimu-termManagement Plan

Current Medium-term Management Plan

FY2020 Results

FY2021 Results

FY2022 Results¥37.0 billion¥57.0 billion¥71.5 billion¥70.0 billion, 24% CAGR

FY2023 (Final Year of Medium-term Plan) Management Targets
Tie market expansion to our growth¥0.8 billion¥8.7 billion¥10.2 billion¥15.0 billion

Improve profitability by providing high value products

2.3%

15.3%

14.3%

20+%

0.7%

6.6%

7.5%

10+%

73.5%

69.0%

67.4%

70+%

Build a financial base that balances growth and stability

30+%

Maintain stable dividends

290.6% (¥20/share)

30.4% (¥21/share)

35.1% (¥28/share)

ROE > Cost of equity¥33.7 billion (3-year total)¥5.6 billion¥9.2 billion¥15.0 billion (3-year total)

Lay out capital investments to support our growth¥7.1 billion (3-year total)¥3.0 billion¥3.2 billion¥9.0 billion (3-year total)

Create new technologies and skills

34