Yokowoʼs Value Creation

Top Message

changing drastically, this management policy aims to establish
a business system capable of responding to these changes bycreating a multi-layered business structure (industry, customers,
technologies, supply chains and other layers).
By promoting the sustainable evolution of business
management and a multi-layered business structure, we hopeto achieve Minimum 8 (secure at least 8% in sales growth rate,
operating profit margin, and return on equity) in a consistentand stable way.

Challenge the next stage
by promoting the new
medium-term
management plan

The New Medium-term Management
Plan and the Current State ofOperational Performance Under the
Impact of the COVID-19 Pandemic

GO BEYOND~Challenge the Next Stage~

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

In November 2020, Yokowo announced its new medium-term
management plan, around six months later than originally
anticipated. The new plan covers the three-year period from the83rd fiscal term (the fiscal year ended March 31, 2021) to the85th fiscal term (the fiscal year ending March 31, 2023). As far
as possible, the spread of the COVID-19 pandemic was taken
into account when formulating the plan.

Yokowo will drive forward with its new medium-term management
plan, to ensure that it is a constantly evolving company.
The new medium-term management plan began in fiscal year 2020.
An outline of the new medium-term management plan and the success stories for the next stage Yokowo will takefrom here are described below.

New Medium-term Management Plan
With the 100th anniversary of our founding coming up
in September 2022, the title of the new medium-term
management plan is “Go Beyond: Challenge the Next Stage,”to evoke our belief that our goal is to transcend the present
situation and advance to the next stage.
The outline of the plan is as follows.

1. Promote management innovation company-wide■ Realize business operations that are directly linked to theneeds of our customers■ Strengthen our capabilities to manage manufacturing

proficiencies and integrate responsibilities for business income
and expenditures and the authorities for achieving the income
and expenditure plans■ Realize the visualization of profit performance by product andimprove capital efficiency

2. Product innovatoin that transforms the risksof changes in industries and markets into
opportunities for business■ Revitalize our business structure through sustained effort todevelop new markets and introduce new technologies andthrough strategic withdrawals from unprofitable businesses

3. Strengthen systems that support productinnovation■ Intellectual property strategy■ Establish elemental technologies■ Strengthen cooperation between the business divisionʼs

technologies and research and development (including
external networks)

4. Evolve process innovation to meet customer
expectations■ Develop product innovation based on the new 5S* principle

using AI and other advanced technologies in all businessprocesses* Simple, Slim, Small, Short and Smooth

Corporate Vision

Basic Management Policy
Yokowo has instituted two management policies to realize its
corporate vision. One is the sustainable evolution of business
management and the other is a multi-layered business structure.
The sustainable evolution of business management isconstant evolution and moving forward as Yokowo has
advocated in the slogan it has out forward since its inception,“Constantly on the cutting edge.” The measures for realizing
the sustainable evolution of business management are productinnovation (including business model, product and businessstructure innovation), process innovation (the innovation ofbusiness processes) and personnel innovation (human resources
innovation).
In other words, these measures aim to substantially change

the business structure, including products, technology andmarkets, and business operating process through the optimal
placement of business sites and the proactive introduction of
new production processes, processing technologies and IT. The
diversity of the human resources who operate the above will
expand to ensure the development of highly professional teams.
In line with management innovation (the innovation of
corporate management and business operations), substantialchanges will be made to how the elements and systems involvedin the above three innovation measures and these measures
themselves are managed, in order to accelerate the evolution ofbusiness 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 management environment surrounding Yokowo is

Evolution of Business Management● Multi-layered business structure (industry, customers,● Product innovation

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 8● Sales growth rate
● Operating profit margin● Return on equity

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Multi-layered Business Structure

8%
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Yokowoʼs Value Creation

By steadily promoting the corporate priorities, we aim toensure the achievement of the medium-term basic managerial
objectives and consolidated performance objectives.

Medium-term Basic Managerial Objectives
Stable realization of Minimum 8

Consolidated Performance Objectives
in the New Medium-term Management Plan
(Fiscal year ending March 31, 2023)

Consolidated net sales: ¥ 72 billion
Operating income:Ordinary income:¥ 7.2 billion (operating margin: 10%)
¥ 7 billion

Profit attributable to owners of parent: ¥ 5 billion

Moreover, we are determined to drive forward initiatives in thefollowing three areas as measures to be enacted over a period
longer than the period of the medium-term management plan.

1. Basic researchCentering on micro precision processing technology andmicrowave technology, the core strengths of the Yokowo
Group, we will work to invest in and enhance the system forbasic research, a key driver of long-term growth.

2. Digital transformation (DX)By improving productivity and efficiency at each site fordevelopment, procurement, production and marketing, we
will promptly provide value to customers. Moreover, we aim tocontinue to improve the speed of management decision-making
and our responsiveness to change by reinforcing real-timecooperation between these sites and the headquarters.

3. The SDGs
We will work on the three top-priority issues of the environment,
local communities and diversity and inclusion, which have been
extracted through a materiality identification process and aim toachieve KPIs set for each measure (see p.19 to p.22, “YokowoʼsMateriality”).
By steadily and vigorously pushing ahead toward these goals,
we will establish resilient strength that does not waver during
upheaval and that enables appropriate and prompt responses tosuccessive and drastic changes. We will strive to collaborate with
our stakeholders in our efforts to create new value.

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Yokowo 2021 Integrated Report

Performance in the Fiscal Year Ended March 31,
2021 and Current Situation
The main markets for the Yokowo Group include theautomotive, semiconductor testing, mobile communications
device and advanced medical equipment markets. These
markets are experiencing a dramatic transformation due tothe widespread adoption of CASE*, MaaS, 5G, AI and IoTtechnologies, and this presents major business opportunities for
Yokowo. However, the spread of the global COVID-19 pandemic
has had a major impact on our Company.
Specific examples of the negative impact of COVID-19
include a reduction in the capacity utilization rate of ourCompanyʼs production bases due to lockdowns and restrictions
on movement, etc., a substantial fall in the volume of orders
received from customers due to semiconductor shortages, andincreased freight charges and longer shipping times for marinetransport. On the other hand, the dramatic transformationin lifestyles caused by the pandemic has also had some morepositive impacts, such as the global increase in demand forsemiconductors resulting from people staying at home more
and working from home, and the shift away from using public
transportation towards using private cars, etc. As a result,examination of the Companyʼs performance in the fiscal year
ended March 31, 2021 shows that sales fell only very slightly
year-on-year (by 1.0%) to 59,976 million yen, while operating
profit rose 5.3% year-on-year to 5,179 million yen, ordinary
income rose by 16.1% year-on-year to 5,320 million yen, andprofit attributable to owners of the parent company rose by
11.0% year-on-year to 3,818 million yen. All of these profit
indicators represented record highs for the Company.
* CASE: An acronym for the new trend in automobiles:
Connectivity, Autonomous, Shared, Electric

Performance Forecast for the Fiscal Year Ending
March 31, 2022
In the fiscal year ending March 31, 2022, the scale of the impactsof the COVID-19 pandemic outlined above has expanded. In
particular, the spread of COVID-19 variants in the Asia region
has become a severe problem, with an impact on the production
operations not only of Yokowo but also of our customers andsuppliers that has been more pronounced than in the previous
fiscal year, and the outlook for the future is becoming even more
uncertain. Although the Yokowo Group is expected to see anincrease in whole-year sales year-on-year, a fall in profits will be
unavoidable due to the significant decline in order volume, therising cost of raw materials and the increase in logistics costs.
As of November 2021, it appeared unlikely that this fiscal year
would see record earnings. At the same time, however, enduser demand remains strong in Yokowoʼs main markets, which
include the automotive and semiconductor markets. We believe
that, if the pandemic is brought under control and economic
activity gets back to normal, then performance could improveagain in the fiscal year ending March 31, 2023, partly as aresult of a rebound effect. We will continue working towards
achieving the performance targets set in the new medium-term
management plan for the fiscal year ending March 31 2023.

My Desire to “Make Yokowo a Good
Company”
Since being appointed as President in 2007, I have constantly
conveyed my desire to make Yokowo a good company to ouremployees in and outside Japan. As I wrote in the section aboutmateriality, I think that a better company is:■ 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,” and about which people in thelocal community say, “It is good that we have Yokowo in our
town. We are happy to have our children work there.”■ And most importantly, a company where the employees of the

Yokowo Group think, “I am very satisfied with to be working
for this company. I will work harder to make it an even better
company.”
I think that a company such as that is truly a good company.
To make Yokowo a good company, we should ensure that theofficers and employees of the Yokowo Group in and outside
Japan, regardless of nationality, gender and other differences,are content and fulfilled in their work, and have a foundation ofreliability and trust.
Through the evolution of our technology, we will continue
to offer quality products and services to improve customer
satisfactions. We will contribute to local communities which werely on to ensure that we are welcomed by them and to bringsatisfactions to our neighbors. As a resident of this world, we willcontribute to solving climate change and other issues to preserve
the natural environment that sustains lives of people around theworld, including our stakeholders. Based on the above, we havethe three top-priority issues: the environment, local communities
and diversity and inclusion.
Recently, we have introduced new measures to address theseissues, and have begun implementation of new initiatives. For
example, with regard to the environment, at a meeting of theBoard of Directors held in October 2021 it was decided thatYokowo would express its support for the recommendations of
the Task Force on Climate-related Financial Disclosures (TCFD)(see p.41, “Environment”). In regard to diversity and inclusion,
besides the Tomioka International Specialist Park (TISP) projectthat was launched several years ago, and which has alreadybegun to produce results, we have also organized round-tablediscussion meetings that provide a venue for a wide rangeof employees – including female, foreign, veteran and new
employees – to engage in free discussion and exchange ofviews; the ideas raised during these meetings are reflected in
the Companyʼs human resources system and employee welfare
measures (see p.34 “Employees”).
One mission of the Yokowo Group is to operate our businessand make a profit as a group engaging in commercial businesses.
We recognize that now, it is not simply the volume of profits
generated from our growth potential and the profitability ofour business that is strongly demanded, but also the quality ofthe profits that should reflect equal, fair and proper business
operations, and together, the results of a business operated inthis way should lead to social contribution.
While working to achieve the new medium-term
management plan and the long-term measures, we hope tobecome a good company for our shareholders and investors byincreasing both the volume and quality of profits, expanding
profit distribution and by improving our quality and dignity as acompany.
We offer our appreciation to all of our stakeholders and lookforward to your continued understanding and support in the
future.

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