COMPANY RESEARCH AND ANALYSIS REPORTRS Technologies
3445Tokyo Stock Exchange First Section

31-May-2018
FISCO Ltd. Analyst

Hiroyuki Asakawa

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Announced entry into prime wafer business in China. .................................................................................

01

2. Entering the enormous Chinese market, which accounts for roughly 40% of global semiconductor
consumption, through the joint-venture with a local company . ..................................................................

01

3. Expect continued strong growth in reclaimed wafer business and skyrocketing earnings
by adding prime wafer business............ ......................................................................................................

01■Business summary and growth strategy--------------------------------------------------------------------------------------------- 02
1. History and business environment ........ ......................................................................................................

02

2. Overview of silicon wafer business..............................................................................................................

04

3. Growth strategy of RS Technologies...... ......................................................................................................

05■Details and outlook for prime wafer business ------------------------------------------------------------------------------ 06
1. Outline of the plan . . ............................... ......................................................................................................

06

2. Conditions in Chinese silicon wafer market.................................................................................................

08

3. Business strategy of RS Technologies Group. .............................................................................................

09

4. Prime wafer business forecast............... ......................................................................................................

10■Growth strategy and progress in reclaimed wafer business ------------------------------------------ 12
1. Growth strategy for the reclaimed wafer business. ......................................................................................

12

2. Plan to increase reclaimed wafer production capacity. ................................................................................

12

3. Development of new market with metal film removal technology.................................................................

13■Earnings trends and outlook ------------------------------------------------------------------------------------------------------------------------- 14
1. FY12/17 results............................................................................................................................................

14

2. Full-year forecast for FY12/18. . .............. ......................................................................................................

15

3. Medium-term performance forecast............................................................................................................

17■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 18■Information security------------------------------------------------------------------------------------------------------------------------------------------------ 19

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/██SummaryAnnouncement of Prime Wafer Business Plan for China
Low risk entry into the market through joint-venture with a local
company
Rising expectations regarding high growth potential over the
medium-to-long term
RS Technologies <3445> (hereafter, also “the Company”) is a top reclaim service provider for silicon wafers, a major
material for semiconductor chips. It has factories in Japan and Taiwan and a global production share of approximately
40% in mainstay reclaimed 12-inch wafers. In 2018, the Company entered the prime wafer business in China toestablish an additional earning base and to increase the 8-inch wafer production capacity.
1. Announced entry into prime wafer business in China
In December 2017, the Company announced its entry into the prime wafer business in China. Until then, theCompany has specialized in reclaimed wafers, but will now become an integrated manufacturing of new wafers.
Integrated manufacturing of prime wafers includes the single crystal silicon ingot making (‘pulling’), which is very
difficult with substantial risks. The company President Nagayoshi Ho, who is originally from China, has taken thefull advantage of joint-venture strategy and minimized the risks. Based on our research, we believe the Company’s
8-inch prime wafer business has a strong chance of success.
2. Entering the enormous Chinese market, which accounts for roughly 40% of global semiconductor
consumption, through the joint-venture with a local company
The Company entered the prime wafer business by adding GRINM Semiconductor Materials Co., Ltd. (GRITEK),a company with extensive experience and track record, as a subsidiary of the Company. GRITEK is a top-level
manufacturer and supplier of 8-inch wafers in China where considerable growth potential lies. In addition to being thelargest market that consumes roughly 40% of the world’s semiconductors, we expect the Chinese semiconductor
market to achieve unparalleled growth because of the Chinese government policy to nurture the industry. We view
the Company’s success in this business very likely owing to its strong connections in China.
3. Expect continued strong growth in reclaimed wafer business and skyrocketing earnings by adding prime
wafer business
RS Technologies continues to steadily develop its reclaimed wafer business, an established earnings driver for theCompany. The Company plans to increase production capacity by roughly 15% in 2019 and it has been developing
new markets by leveraging its metal film removal technology. The Company also plans to sharply increase GRITEK’s
production capacity by 4x (stage 1) and 7x (stage 2). Based on these growth strategies, the company targets
FY12/21 sales of ¥29,000mn and operating income of ¥6,300mn. While the Company has not released a forecast
for FY12/23, the year it plans to finish its prime wafer production capacity increase, we think the consolidated sales
could surpass ¥50bn and the consolidated operating income could top ¥10bn, if it can expand its reclaimed wafer
business through capital investment and M&A and achieve further growth in the prime wafer business.

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01 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Summary

Key Points
In the process of quadrupling 8-inch wafer production capacity in China; aiming to increase the capacity bysevenfold over medium-term• Two-part growth strategy of increasing reclaimed wafer production capacity and opening up new markets• If the Company can smoothly expand prime and reclaimed wafer businesses, we think the sales could reach¥50 billion over medium-term•㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻟㻘㻤㻥㻝㻞㻠㻘㻜㻜㻜

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Source: Prepared by FISCO from the Company’s financial results██Business summary and growth strategy
Started in wafer reclamation processing; developed businesses inJapan and Taiwan
1. History and business environment
RS Technologies was established in December 2010 in order to take over the wafer reclamation business of Rasa
Industries <4022> which had withdrawn from the business. Since then, it has been developing its silicon wafer
reclamation business and currently has two sites, the Sanbongi Factory in Osaki City, Miyagi Prefecture (formerly
Rasa Industries’ plant) and the Tainan Factory in Taiwan, which began operation in February 2014.

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02 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Business summary and growth strategy

Main events in the Company’s history
December 2010

January 2011
November 2011
March 2013

RS Technologies was established, mainly to conduct a silicon wafer reclaim business.
It launched its business after purchasing the equipment that RASA Industries used for its wafer reclaim business and also
concluded a lease agreement with it for the Sanbongi Factory's industrial buildings. Furthermore, it hired some of the employees
who had left RASA Industries.
Sanbongi Factory began operations
Sanbongi Factory acquired the ISO 90001: 2008 certification.
It acquired a used goods dealer’s license and started sales of machinery.

October 2013

It launched a solar power station business at the Sanbongi Factory.

February 2014

It established a consolidated subsidiary in Taiwan.

March 2015

It was listed on the TSE Mothers market

December 2015

It completed the construction of the Taiwanese subsidiary's Tainan Factory.

September 2016

Its listing was transferred to the TSE First Section

December 2017

Announced entry into Chinese prime wafer market

Source: Prepared by FISCO from the Company’s securities report, etc.

In FY12/17, the Company had three business segments, the wafer business, the purchases and sales of semiconductor manufacturing equipment, and the others segment. The wafer business consisted of the above-mentioned
reclaimed silicon wafer business. This business is discussed in detail below.
As the name indicates, the purchases and sales of semiconductor manufacturing equipment business involves thepurchase of used semiconductor manufacturing equipment from semiconductor manufacturers around the world
and then their sale to Chinese companies. The Company aims to become a full-fledged, so-called, general trading
company in China in the future. The distribution of used manufacturing equipment is common for liquid crystal
panel manufacturing equipment, and a similar development is expected to emerge in the future for semiconductor
manufacturing equipment. But, the Chinese semiconductor industry is still in its infancy and as yet the distributionof used equipment has not become fully established.
Other businesses include the earnings from technical consulting and solar power generation at Sanbongi Factory.

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Source: Prepared by FISCO from the Company’s financial results

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03 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Business summary and growth strategy

Silicon wafers are an essential material for semiconductor chips
2. Overview of silicon wafer businessIn order to understand the Company's silicon wafer reclaiming business, its roadmap for the future, and its strengths
and growth potential, it is essential to understand the manufacturing process of and role played by silicon wafers aswell as the manufacturing methods used to produce them. We provide an explanation below.
(1) Silicon wafers“A semiconductor” is a substance that has intermediary properties between a conductor, which conducts electricity, and an insulator, through which electricity cannot pass. Integrated circuits (IC) are manufactured to use theseproperties to fabricate highly dense electric circuits. An IC includes the CPU, which is ‘the brain’ of the PC, andmemory to store information (such as flash memory and DRAM). Speaking of semiconductors today, it commonlymeans a “product that applies the properties of a semiconductor,” or in other words IC, and it also refers to theterms like semiconductor chips or IC chips.
There are various substances with semiconductor properties, but presently silicon is widely used for the mass
production of IC. For this usage, an ingot of single crystal silicon is pulled out of molten polycrystalline silicon
and then sliced into thin wafers. These wafers are called “silicon wafers.” Semiconductor manufacturers use
various types of semiconductor manufacturing equipment to fabricate detailed circuits on these silicon wafers to
manufacture semiconductor chips.
Semiconductor manufacturing process

Source: Prepared by FISCO from the Company’s results briefing materials

Silicon wafers come in various sizes, but the trend is for larger sizes. This is because the manufacturing costs per
semiconductor chip can be lowered by fabricating as many semiconductor chips as possible on a single siliconwafer. Currently, 12-inch (300mm) diameter wafers are the largest and the mainstream. There are also smaller
sizes, such as 8 inches, 6 inches, and 5 inches, while 18-inch (450mm) wafer is set to appear in the future. Larger
wafers are more difficult to manufacture and process, and it is important to note that these difficulties are thetechnological barriers to a new entrant.

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04 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Business summary and growth strategy(2) Prime wafers and monitor wafers
As mentioned above, the semiconductor production begins with processing silicon wafers, but not all siliconwafers are used to make semiconductor chips. As previously explained, the semiconductor manufacturing process
is a series of extremely detailed processes, so it is necessary to test and evaluate the processes at each stage.
The silicon wafers used for these testing purposes are usually called “test wafers,” “dummy wafers,” or “monitor
wafers” (in this report, they are collectively referred to as “monitor wafers”). Wafers that are processed all the way
through to make semiconductor chips are called prime wafers.
Silicon wafers are formed by cutting cylindrical silicon crystal ingots into disk-shaped wafers. A single silicon crystal
ingot can be cut into several hundred silicon wafers. Even wafers from the same ingot have subtle differences
depending on where they were cut from the ingot. This can be compared to different parts of a blue-fin tuna as
each part tastes differently. A specific wafer based on its physical properties is chosen to be processed on a given
semiconductor production line, according to the applications it is best suited for.
Currently, approximately 20% of all wafers are used as monitor wafers. Although you initially need new wafers
for testing and evaluation purposes, the need will arise among semiconductor manufacturers to reuse (reclaim)
the used monitor wafers in order to reduce the costs of manufacturing. In response to this need, the Company
provides the silicon wafer reclaim service, in which it polishes and cleans the surfaces of used monitor wafers to
its original condition so they can be used again.
The Company is to produce prime wafers in China. Wafer processing consists of front-end processes, which arebasically silicon crystal ingot pulling, and back-end processes, which include the slicing of ingots into wafers andpolishing and cleaning of the surface of the wafers. The manufacturers that handle both front-end and back-end
processes are called integrated manufacturers and most silicon wafer makers are the integrated manufacturers.
While all these processes require advanced technology, the success of silicon wafer manufacturing businesses
depends largely on front-end process yield. Production yield does not merely refer to the number of units thatcan be produced in a given amount of time. The more important factor is the number of prime wafers that canbe produced from one silicon crystal ingot. There is a large price difference between a prime wafer and a monitor
wafer.

Basic two-pronged growth strategy: expand original reclaimed wafer
business and enter Chinese silicon and semiconductor businesses
3. Growth strategy of RS Technologies
As mentioned above, the Company has decided to enter the prime wafer market, thereby changing its mediumto-long term management strategy. The Company’s new medium-to-long term management strategy consists of
two themes, (1) expansion of market share in the reclaimed wafer market and (2) entering the Chinese silicon andsemiconductor market.

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Business summary and growth strategy

Medium- to long-term management policy
1. Increase share of the market for reclaimed wafers①

Increase production capacity②

Capture growing demand③

Exploit the potential global market for reclaimed wafers①

Increase 200mm prime wafer production capacity②

Increase 300mm prime wafer production capacity③

Enter Chinese market for target materials (semiconductor components)④

Increase sales in China of SPE and related materials

2. Entering into the Chinese semiconductor market

Source: Prepared by FISCO from the Company’s medium-term management plan briefing materials

1) Increase share of the market for reclaimed wafers
In line with the Company’s original management plan, it has expressed its determination to shore up its position
as the top reclaimed wafer manufacturer in the world. Increasing production capacity and capturing growing
demand are side by side. In connection with this, as mentioned above, the Company has announced plans
to invest in increasing its reclaimed wafer production capacity in both Japan and Taiwan. The Company also
views its proprietary metal film removal technology as a key element in the development of untapped markets
for reclaimed wafers. As we discuss below, the Company is making steady progress toward commercializationof this technology.
2) Entering into the Chinese silicon and semiconductor market
This theme is included in the Company’s medium-to-long term management plan which refers to businesses
including the sales of semiconductor production equipment (SPE) and related consumables. However, the decision
to enter the prime wafer market in China have changed the content and priorities of the Company’s businesses in
China considerably. While the investment underway to increase the 200mm prime wafer production capacity is, ofcourse, the top priority, we find it very interesting that the next priority is to enter the 300mm prime wafer market.
The Company’s fourth priority is growth in its Chinese SPE and related materials businesses. We believe theimportance of this business remains completely unchanged and its growth potential might have even increased. In
terms of business growth in China, we advocate looking not only at the prime wafer business, but also examining
all of the Company’s operations closely.

██Details and outlook for prime wafer

business

Entry into Chinese market by adding a major Chinese silicon wafer
manufacturer into subsidiary
1. Outline of the plan
On December 1, 2017, the Company announced that it would enter the Chinese prime wafer market by adding
GRINM Semiconductor Materials Co., Ltd. (GRITEK), a wholly owned subsidiary of Chinese state-owned company
General Research Institute for Nonferrous Metals (GRINM), as a consolidated subsidiary.

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06 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Details and outlook for prime wafer businessThis was accomplished by forming a joint venture Beijing GRINM RS Semiconductor Materials Co., Ltd. (BGRS)
between the Company and GRINM, and by making the operational company GRITEK a wholly owned subsidiaryof BGRS.
The joint venture BGRS was formed with the following ownership arrangement: GRINM (49% ownership), RS
Technologies (45%), and Fujian Kuramoto (6%). When you combine GRINM’s stake with Fujian Kuramoto, a Chinesecompany based in Fujian province, BGRS is 55% Chinese owned, and therefore BGRS and GRITEK are treatedas Chinese companies. At the same time, Fujian Kuramoto is owned by a member of President Nagayoshi Ho’s
Chinese family, giving RS Technologies effective control (51%) and making GRITEK a consolidated subsidiary of
RS Technologies.
Being considered a Chinese company gives GRITEK sizable advantages over foreign companies in terms of capital
investment and business operations and it is eligible for subsidies from the Chinese central government and local
governments.
The abovementioned measures for making GRITEK into a consolidated subsidiary were completed on January 30,
2018. In March 2018, capital was increased by roughly ¥9.1 billion through public offering and third-party allocationand the Company therefore has all of the funds necessary for the prime wafer business over the near term (somemoney was also invested in the reclaimed wafer business).
History of the prime wafer business (December 2017 – March 2018)
Date

Event

December 1, 2017

Announcement of decision to make GRITEK a consolidated subsidiary and plans to establish a related joint venture and enter
the Chinese prime wafer market

January 10, 2018

Borrowed ¥4.0 billion from Sumitomo Mitsui Banking Corporation related to the establishment of BGRSJanuary 30, 2018

Completion of establishment and capital pay-in for joint venture BGRS, making GRITEK a wholly owned subsidiary of BGRS
and a consolidated subsidiary of RS Technologies

March 6, 2018

Announcement of equity financing (total amount to be procured: ¥10.5 billion, with ¥1.1 billion used to increase reclaimed wafer
production capacity and the remainder to be used for the Chinese prime wafer business, including repayment of loans)

March 13, 2018

Determination of issue price (¥7,110) and amount to be procured (¥9.183 billion)

Source: Prepared by FISCO from the Company’s financial results, Company material

Overview of funds procured and applications(¥mn)
Procurement
amountItem
General public offering
Procurement

Applications

Capital increase by third party allocation

Remark8,261

1,220,000 shares/¥6,771.6

921

136,100 shares/¥6,771.6

Approximate amount

9,183

After deducting capital procurement costs

Loan repayment

4,200

Loan for BGRS capital pay-in

BGRS capital increase

2,800

Prime wafer equipment

1,083

Reclaimed wafer plant improvements (Sanbongi Factory)
Reclaimed wafer plant improvements (Tainan Factory)

400
700
9,183

Application total
Source: Prepared by FISCO from the Company’s financial results

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Details and outlook for prime wafer business

Five players in Chinese market supply 8-inch wafers; production
supply chain mostly in place
2. Conditions in Chinese silicon wafer market(1) Status of main players
The Chinese market has grown to the point where it consumes 40% of global chip supplies, but only 10% of theoutput is produced by Chinese companies.
The market for silicon wafers, a major material used in semiconductor production, also resembles the structure
described above. As mentioned above, many sizes of wafers, with the largest being 12 inches, are used forsemiconductor production. The largest and most advanced wafers being produced in China are 8-inch (200mm)
wafers. While some Chinese chipmakers use 12-inch wafers, nearly all 12-inch wafers are imported from overseas(including Japan). We therefore think Chinese domestic self- sufficiency for semiconductor materials including
silicon wafers is even lower than that of semiconductor chips (approximately 10%).
We understand there are currently just over 10 silicon wafer manufacturers in China and roughly five (including
GRITEK) can supply 8-inch wafers. We estimate that each of these five companies has a monthly production
capacity of between 50,000 and 100,000 wafers, making the total monthly capacity roughly 300,000 wafers.
Though not all of these manufacturers are necessarily shipping at full nominal capacity, GRITEK is one of the few
companies producing 8-inch wafers above nominal capacity.
All of these companies are planning aggressive production capacity increases. While the capacity increase schedule is different for each company and the details are not clear, we expect Chinese 8-inch wafer monthly production
capacity to more than triple from its current level of 300,000 wafers to over 1 million wafers by 2020-2021.
Production capacity and expansion plans of Chinese 8-inch wafer manufacturers
Affiliation

Current capacity(wafers/month)

Planned expansion(wafers/month)

GRITEK

Chinese company

50,000150,000

Tianjin ZHONGHUAN Semiconductor
Joint-STOCK Co, Ltd.

Chinese company

50,000100,000

Ferrotec Holdings

Overseas company(Japan)50,000300,000

Wafer Works

Overseas company(Taiwan)

100,000

100,000

MCL Electronic Materials Ltd. (MCL)

Chinese company(America’s
Technology)

50,000100,000

300,000

750,000

Company name

Total of five companies

RemarkConsolidated subsidiary of
RS Technologies

Two plants(Hangzhou and Shanghai)

Source: Prepared by FISCO from the Company material(2) Conditions in the Chinese market
The reason behind these companies’ plans to aggressively invest in capacity increase is that the market is highly
likely to expand rapidly in China due to the supports from the national and local governments. We understandChina’s current total monthly production capacity for 8-inch wafers is 500,000. Some market observers forecast
that this will rise to 1 million by 2021-2022. The ‘Made in China 2025’ project announced by the Chinese
government in May 2105 targets integrated circuit (IC) self-sufficiency of 40% by 2020 and 70% by 2025. If thesetargets come true, the Chinese domestic demand for silicon wafers will rise sharply and the demand for 8-inch
wafers will likely far outstrip 1 million per month.

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Details and outlook for prime wafer business

Silicon wafers produced in China are mainly shipped to Chinese semiconductor plants for several types ofsemiconductor chips. Since the wafers made in China are only 8-inch wafers, they are not used for memory
chips or CPUs which uses 12” wafers. The main customers are manufactures for logic ICs, application-specificintegrated circuits (ASICs), and power ICs.
The manufacture of silicon wafers requires various types of production equipment such as single-crystal pullingmachines, dicers, and polishers, and key parts and materials such as quartz crucible, polishing compounds(polishing powder) and polishing cloth. It is important to develop a supply chain for these materials to increase
the output. We understand that polycrystal silicon for semiconductor may be obtained in China. So is quartz
crucible. Production equipment can be obtained from manufacturers in South Korea, Japan, and China. While
not all materials in the supply chain can be obtained in China, silicon wafer production in China is possible if theremaining items are imported from South Korea or Japan.

Strategy is to quickly expand business scope by quadrupling
GRITEK’s 8-inch wafer production volume
3. Business strategy of RS Technologies GroupRS Technologies decided to enter the prime wafer business by forming an alliance with a top-level Chinese company
rather than going alone. This resulted in the joint venture that made GRITEK a consolidated subsidiary of theCompany. GRITEK (established in 2001) and parent company GRINM (established in 1952) have many yearsof experience in integrated silicon wafer production and they are currently one of the few companies capable ofproducing 8-inch wafers at nominal production capacity.
The Company plans to take the advantage of GRITEK’s strengths and kick off its prime wafer business by increasing
the 8-inch production capacity. The Company plans to increase its monthly 8-inch wafer production capacity by
150,000, from its current level of 50,000 to 200,000 by the end of 2020.
The Company has announced the plans to install production equipment with monthly production capacity of 150,000
wafers at a new plant with building floor space of roughly 50,000 square meters on a 150,000-square-meter plot of
land in Tangshan City, Hebei Province. The building has already been constructed and we understand the purchaseorders for major pieces of equipment such as lifting machines have already been placed. GRITEK has monthly
production capacity of 50,000 wafers in Beijing, but the Company plans to move this capacity to the new site toconsolidate the production in one central location once the new site is up and running.
The Company plans capital investment of ¥9.4 billion to increase the production capacity by 150,000 wafers permonth by 2020. As the Company expects to receive subsidies from the Chinese national government and local
governments for the land and buildings, it plans to use nearly all of the ¥9.4 billion for production equipment. As
mentioned above, the Company completed capital procurement in March 2018 and is ready to go in terms offinancing.
In anticipation of rapid growth of silicon wafer demand in China, the Company is considering a second stage of
production capacity increase (an additional150,000 per month) starting in 2021. This would bring monthly 8-inch
wafer production capacity to 350,000, seven times the current level. However, the Company has yet to decide thedetails, including the implementation schedule.

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies

31-May-20183445 Tokyo Stock Exchange First Section

http://www.rs-tec.jp/

Details and outlook for prime wafer businessLooking at the Company’s roadmap for the semiconductor business, its original reclaimed wafer business is its
base while it has also been developing SPE and consumables businesses, taking the role of a trading company.
The Company has decided to move ahead with the manufactur of 8-inch prime wafers and is considering a step-up
to 12-inch wafers at a proper junction.
Business roadmap for RS Technologies
Semiconductorbusiness

Existing
businesses

Geographicalexpansion plan

Possiblefuture expansion

Growthexpansion

Trading company
function

Other(solar, etc.)
Semiconductors,
electronic components,
consumables
Production
equipment
Semiconductor
production

Manufacturing

12-inchPrime
wafer
8-inch,etc.
Reclaimed wafers
Japan

Sales regions

Asia(other than Japan and China)

China

US and Europe

Source: Prepared by FISCO from the Company’s results briefing materials

Based on GRITEK’s experience and its talented human resources,
we think the prime wafer business is likely to succeed
4. Prime wafer business forecast(1) Earnings forecast
The Company has released earnings forecast for the next five years in the prime wafer business. Five years fromnow, in FY12/23, the Company forecasts net sales of ¥23,390mn and operating income of ¥5,690mn (combined
total for GRITEK, which will handle the prime wafer business, and parent company BGRS).
We believe we need to be cautious on several points with this forecast. First, the forecast factors in earnings
contribution from the second stage of production capacity increase (150,000 per month), but no decisions havebeen made regarding this step. While we think the Company is likely to move forward with the second stageof capacity increase, details such as the scale of capacity increase could be changed. Another factor is theCompany’s price assumptions. We understand the Company’s forecast is based on mid-2017 wafer prices. Whilewafer prices have been on rise since then, wafers have, to some extent, become commoditized and it is possible
for prices to decline. We believe it is more realistic to view the abovementioned earnings forecast as an indicationof the earnings potential of the prime wafer business.

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Details and outlook for prime wafer business

The Company forecasts a decline in operating income in FY12/19 and we believe this is attributable to depreciation
costs and the costs associated with moving the operations. The Company plans capital investment of ¥9.4
billion for the first stage of production capacity increase and plans to begin full depreciation in FY12/19, using a
conservative accounting method. The company plans to gradually install and start operations of equipment and it
will begin posting depreciation costs in advance starting in FY12/19. This is expected to have a negative impact on
profits. Moving expenses will be posted when GRITEK transfers equipment from the Beijing plant to the new plant.
We believe that, depending on trends in the reclaimed wafer business, the abovementioned profit decline could
shrink considerably. This is because we expect a roughly 15% increase in reclaimed wafer production capacity
in 2019. We expect the ramping up of the additional capacity to be smooth and the prices to remain steady orrise based on the current supply-demand balance. We think this scenario looks likely if the Company can install
the equipment in 1H.
(2) Our view of the prime wafer business and focus points going forward
We think the Company's entry into the prime wafer business has a high probability of success. In entering thebusiness, the Company has prioritized risk reduction and we view this as the most important aspect of this move.
The crystal pulling process is an important aspect of production and, in the course of our discussions with
Company representatives and further research, our concerns in this area were substantially alleviated. This isdue to two factors. The first is the conversion of GRITEK into a subsidiary. GRITEK has an established pulling
operation which includes 8-inch wafers. We believe the conversion of GRITEK into a subsidiary lowers risk
considerably compared with a scenario wherein the Company would attempt to enter the Chinese market on its
own. The other factor is that the Company has been independently preparing to enter the prime wafer businessfor quite some time. The important aspect of this preparation is its measures to secure engineering and humanresources. While the Company has not provided details regarding this issue, we understand that it has hired
multiple highly experienced engineers in Japan and sent them to China in order to consider and prepare for entry
into the Chinese prime wafer market. We believe the confirmation by these engineers that the Company could
succeed in the prime wafer business in China was the direct catalyst leading to the decision to move ahead withthe launch of the business.
We have few concerns regarding business risk on the sales side. The main reason is that the market has the
support of the Chinese national government. As one aspect of the its efforts to increase China’s self-sufficiency
ratio in terms of semiconductor production, government grants subsidies equal to 20% - 30% of the price of
wafers to domestic corporations. We believe this will directly improve the cost competitiveness and margin of
GRITEK’s products. In addition, GRITEK already has a solid customer base. GRITEK currently has roughly 30
customers, some of which we understand have very close ties to Chinese semiconductor manufacturers. As
mentioned above, owing to strong growth in demand for wafers in China, we see little risk on the sales side if
production goes smoothly.
Our focus going forward is the start of production for the first stage of capacity increase (150,000 wafers permonth). At the earliest, we think the Company could gradually begin installing equipment in 1H 2019, followed bytest runs and the start of commercial production. If equipment ramps up smoothly at this early stage, we would
see a much higher chance of success for subsequently installed equipment. On the other hand, if the Company
has trouble at this stage, the ramp up to capacity of 200,000 wafers per month may be delayed. We need tomonitor the progress.

We encourage readers to review our complete legal statement on “Disclaimer” page.

11 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/██Growth strategy and progress inreclaimed wafer businessTwo-part growth strategy: increasing production capacity andcreation of new markets
1. Growth strategy for the reclaimed wafer business
Even after the Company’s decision to enter the prime wafer market, its reclaimed wafer business remains very
important. The reclaimed wafer business is positioned as a growth engine along with the prime wafer business.
We believe the Company has a two-part growth strategy for its reclaimed wafer business. The first part is growththrough expansion of the Company’s production capacity. The Company’s quantitative target in this area is tocapture 40% of the global market share. The second part is development of untapped markets, in other words,
growth through creation of new markets. The key to achieve this objective is the Company’s proprietary metal film
removal technologies.
Below, we discuss the Company's progress on both parts of its strategy.

15% increase (50,000 wafers/month) in planned capacity in 2019; we
expect an even greater increase in actual production capacity
2. Plan to increase reclaimed wafer production capacity
The Company has announced plans to increase reclaimed wafer production capacity at the Sanbongi Factory and
the Tainan Factory. The Company mainly handles 12-inch reclaimed wafers and the additional production capacity
will also be for 12-inch wafers.
Currently, the Company’s 12-inch monthly reclaim capacity is 300,000 wafers (200,000 at the Sanbongi Factory and
100,000 at the Tainan Factory). The Company plans capital investment of ¥400mn to increase monthly capacity at
the Sanbongi Factory by 20,000 wafers and ¥700mn at the Tainan Factory to increase capacity by 30,000 wafers.
The Company expects the new capacities at both factories to become operational in 2019.
12-inch reclaimed wafer production capacity
Factory
Sanbongi Factory
Tainan Factory

Size

Monthly production capacity at term-end
2016

2017

2018

2019

12-inch wafer

180,000

200,000

200,000

220,000

8 inches or less

120,000

120,000

120,000

120,000

12-inch wafer

100,000

100,000

100,000

130,000

Source: Prepared by FISCO from the Company material

We encourage readers to review our complete legal statement on “Disclaimer” page.

12 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Growth strategy and progress in reclaimed wafer businessWe view the scale and timing of this production capacity increase as appropriate. Both the Sanbongi and Tainan
factories have been operating at full capacity and are finding it increasingly difficult to keep up with demand from
customers. Normally, when production capacity is ramped up gradually, capacity utilization could temporarily decline,
resulting in lower profit. We think, however, a monthly capacity increase of 20,000 to 30,000 strikes a favorable
balance between responding to customers’ needs and maintaining high capacity utilization and profit margins.
Over the past few years, the Company has achieved production levels above its nominal capacity through measures
such as increasing productivity by removing bottlenecks and optimizing its process capabilities. While the planned
capacity increase will require substantial investment to install new production equipment, we think the actual increasein capacity could surpass the plan announced by the Company. If our view is correct, we think that by around theend of 2019, monthly production capacity for 12-inch reclaimed wafers could be 250,000 – 270,000 at the Sanbongi
Factory and 150,000 – 160,000 at the Tainan Factory.
Global monthly demand for 12-inch wafers is estimated at 5.5 million – 6.0 million units and roughly 20% of these(1.1 million – 1.2 million) are the reclaimed wafers. The Company has targeted a global market share of 40% forsome time, and we view this production capacity expansion plan as a major step toward achieving the goal.

Some customers have certified the use of the Company’s proprietary
metal film removal technology; moving toward full-scale start ofbusiness
3. Development of new market with metal film removal technology
When customers are using monitor wafers for testing and evaluation purposes, some chip makers actually use
metals such as copper to form a test circuit on wafers. Currently, such monitor wafers with metal circuit are discarded
and not reclaimed. The reason is that when metal circuits are formed, the metal sometimes permeates into theinterior (bulk) of the wafer and cannot be completely removed by polishing the wafer surface.
It is estimated that, of all monitor wafers produced (5.5 million – 6.0 million per month), a roughly 5% (approximately
280,000 per month) of wafers are discarded because they have metal circuit on them. This is a sizable volume
roughly equal to the Company’s total production capacity for 12-inch wafers. The Company developed technologythat allows monitor wafers with metal circuits to be reclaimed. We believe RS Technologies is currently the only
company with this type of technology and it could therefore dominate the new market with approximately 280,000
wafers per month.
However, for this technology to be used, it must be certified by customers. The Company has taken measures
to receive certification from a number of its key customers and has received certification from some of its major
customers. We believe wafer reclamation using metal film removal technology will begin in FY12/18 and we will becarefully watching the opening of this new market.

We encourage readers to review our complete legal statement on “Disclaimer” page.

13 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies

31-May-20183445 Tokyo Stock Exchange First Section

http://www.rs-tec.jp/██Earnings trends and outlook
Strong growth in sales and income on higher reclaimed wafer
volume and price
1. FY12/17 results
The results of FY12/17, net sales rose 24.2% YoY to ¥10,988mn, operating income climbed 97.4% to ¥3,075mn,
ordinary income advanced by 122.2% to ¥3,223mn, and profit attributable to owners of parent company jumped
154.1% to ¥2,210mn.
After announcing its initial forecast, the Company raised its forecast twice (in August 2017 and January 2018) andresults surpassed even these upwardly revised forecasts.
FY12/17 results(¥mn)
FY12/16
Full-year

FY12/17
YoY

Initial forecast

Revisedforecast
August 2017

Revisedforecast
January 2018

Full-year
resultYoY

Net sales

8,849

59.6%

8,556

9,450

10,75010,98824.2%

Gross profit

2,516

34.4%

-

-

-

4,345

72.7%

28.4%

-

-

-

-

39.5%

-

958

21.3%

-

-

-

1,269

32.4%

Gross profit margin
SG&A expenses
Ratio of SG&A
expenses to net sales
Operating income
Operating income ratio
Ordinary income

10.8%

-

-

-

-

11.6%

-

1,557

44.1%

1,939

2,550

3,000

3,075

97.4%

17.6%

-

22.7%

27.0%

27.9%

28.0%

-

1,450

54.7%

1,825

2,650

3,100

3,223

122.2%

869

185.8%

1,177

1,630

1,950

2,210

154.1%

Profit attributable toowners of parent

Source: Prepared by FISCO from the Company’s financial results

In the core wafer business, the Company achieved strong growth in sales and income, as net sales were ¥9,513mn(up 33.2% YoY) and operating income was ¥3,461mn (up 101.4%). Operating margin of 36.4% was well above the
FY12/17 level of 24.1%. As mentioned below, rising prices and sales volume resulted in sales growth, which drove
growth in operating income.
Expectations for price increase for reclaimed wafers have also risen, following the rise in prices for prime wafers in
1Q of 2017. While the Company has adopted a conservative stance regarding price increases, we understand it
raised prices for reclaimed wafers by roughly 5% in 4Q 2017 in response to strong overall demand.
The Sanbongi Factory has been operating at full capacity for quite some time and the Tainan Factory has been
operating at full capacity since early 2017. Monthly designed capacity is 200,000 units for the Sanbongi Factory(for 12-inch wafers, additional capacity for 8-inch wafers and smaller) and 100,000 units for the Tainan Factory(12-inch wafers only). However, both factories are operating above designed capacity by removing the bottlenecks
and improving the yields (through re-evaluation of over specification). This has resulted in production-volume-driven
sales growth.

We encourage readers to review our complete legal statement on “Disclaimer” page.

14 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Earnings trends and outlook

In the business of purchases and sales of used semiconductor production equipment, net sales declined by 13.4%
YoY to ¥1,395mn and operating income fell by 41.3% to ¥129mn. We view this as a reactive decline from unusuallystrong sales and income in FY12/16 when there was a temporary demand for LCD modules. For the continuingbusiness basis, transaction volumes for SPE and consumables have been rising steadily.
Breakdown by business segment(¥mn)
FY12/162H
4,200

Net sales

1H
Full year
Wafer business
2,944
7,144
Purchase and sales of semiconductor
885
725
1,611
manufacturing equipment business
Other business
47
45
93
Subtotal
3,877
4,971
8,849
Adjustments
0
0
0
Total
3,877
4,971
8,849
Wafer business
511
1,206
1,718
Purchase and sales of semiconductor
168
53
221
manufacturing equipment business
Other business
33
33
66
Subtotal
713
1,293
2,006
Adjustments
-206
-242
-448
Total
506
1,050
1,557
Source: Prepared by FISCO from the Company’s quarterly securities report

FY12/17
3Q
4Q
2,339
2,820

Operating income

1Q
2,102

2Q
2,250

Full year
9,513

YoY
33.2%

430

152

537

20
2,552
0
2,552
790

30
2,434
-14
2,419
766

25
2,902
0
2,902
725

275

1,395

-13.4%

18
3,114
0
3,114
1,178

94
11,003-15
10,988
3,461

1.2%
24.3%
24.2%
101.4%

59

25

68

-23

129

-41.3%

12
863
-130
733

24
816
-145
671

18
812
-147
664

11
1,165
-159
1,005

67
3,658
-583
3,075

1.3%
82.3%
97.4%

Forecasts sharp rises in sales and profit as GRITEK is consolidated;
firm earnings in 1Q
2. Full-year forecast for FY12/18
For FY12/18, the Company forecasts net sales of ¥20,993mn (up 91.0% YoY), operating income of ¥3,891mn (up26.5%), ordinary income of ¥3,897mn (up 20.9%), and net income attributable to owners of the parent of ¥2,585mn(up 17.0%).
On May 14, 2018, the Company announced 1Q FY12/18 net sales of ¥5,204mn (up 103.9% YoY) and operating
income of ¥1,189mn (up 62.2%). In 1Q, the Company made strong 24.8% progress toward its forecast full-year
net sales and 30.6% progress toward its operating income target.
Overview of full-year forecast for FY12/18(¥mn)
FY12/17
1Q

1H

Net sales
2,552
4,971
Gross profit
999
1,960
Gross profit margin
39.1%
39.4%
SG&A expenses
265
556
Ratio of SG&A expenses to net sales
10.4%
11.2%
Operating income
733
1,404
Operating income ratio
28.7%
28.3%
Ordinary income
919
1,598
Profit attributable to owners of parent
605
1,069
Source: Prepared by FISCO from the Company’s financial results

FY12/18
Full-year

1Q

YoY

1H (E)

YoY

10,988
4,345
39.5%
1,269
11.6%
3,075
28.0%
3,223
2,210

5,204
1,656
31.8%
467
9.0%
1.189
22.8%
934
471

103.9%
65.8%
76.2%
62.2%
1.6%
-22.2%

10,043
1,763
17.6%
1,681
1,106

102.0%
25.5%
5.1%
3.4%

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 19

Full year(E)
20,993
3,891
18.5%
3,897
2,585

YoY
91.0%
26.5%
20.9%
17.0%

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Earnings trends and outlook

The main reason for the FY12/18 net sales to be expected to rise sharply, nearly doubling YoY, is the consolidationof GRITEK, which handles the prime wafer business. Starting in FY12/18, the scope of consolidated accounting
will consist of businesses consolidated as of FY12/17 (mainly the reclaimed wafer business) plus GRITEK’s prime
wafer business.
In FY12/18, the Company forecasts net sales of ¥20,993mn. As it forecasts net sales at GRITEK of ¥9,070mn, we
infer that it expects net sales from existing businesses of ¥11,923mn, which is 8.5% higher than FY12/17 net salesof ¥10,988mn.
We believe net sales from existing businesses are likely to surpass the Company’s forecast. This is because somesales in the business of purchases and sales of used semiconductor production equipment are not factored into
the Company’s forecast. The Company commented that it did not factor in these sales because the nature of theequipment business makes it difficult to forecast results.
For this reason, we believe nearly all of the forecast net sales of ¥11,923mn is attributable to the reclaimed wafer
business and this is 25.3% higher than the ¥9,513mn in sales posted by the reclaimed wafer business in FY12/17.
We view this growth rate forecast as reasonable. In response to rising prices for prime wafers in FY12/17, theCompany raised prices on reclaimed wafers by roughly 5% in 4Q FY12/17. While we do not expect anotherprice increase in FY12/18, the price hike implemented in FY12/17 will contribute fully to earnings in FY12/18.
Also, while we do not think full-scale increases in production capacity will contribute to sales volume growth until
FY12/19, we expect growth in actual production volume resulting from steady increases in productivity and further
yield-enhancement to result in increased revenue.
The Company forecasts FY12/18 companywide operating income of ¥3,891mn, with GRITEK accounting for¥1,280mn. The Company also expects an increase in costs of roughly ¥200mn related to employees seconded
to GRITEK. Adjusting for these two factors, we believe the Company expects operating income from existing
businesses of ¥2,811mn, which is 8.6% lower than in FY12/17 (¥3,075mn).
We think the Company is likely to surpass its forecast of YoY decline of operating income in existing businesses,
because we think its net sales forecast looks low. As mentioned in the discussion on sales above, very little earnings
contribution from the trading company business has been factored into the Company’s forecast. Another reason
is that the Company’s forecast for operating margin is lower than the previous years. The Company’s forecast for
operating margin in existing businesses is 23.6%. As very few earnings from the trading company business arefactored into the forecast, we assume this operating margin is mainly for the reclaimed wafer business. In FY12/17,
operating margin in the wafer business segment was 36.4%. Looking at 1Q-3Q FY12/17 (to adjust for the one-off
positive impact from price increases implemented in 4Q), we note that operating margin was 34.1%. When considering that, as mentioned above, price increases implemented in FY12/17 will have a full-year impact in FY12/18.
Even if the operating margin declines, we do not think the YoY decline will be 10 percentage points or greater.
We believe the Company’s operating income forecast for GRITEK is based on previous years’ results and we think
results are likely to be in line with the Company’s forecast. As prime wafer prices in China are on an uptrend, we
think operating income could surpass the Company’s forecast if production goes smoothly as it did in FY12/17.

We encourage readers to review our complete legal statement on “Disclaimer” page.

16 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Earnings trends and outlook

Net sales likely to reach ¥50bn over medium-term on contribution
from smooth startup of prime wafer business and steady growth ofreclaimed wafer business
3. Medium-term performance forecast
The Company's forecast for the prime wafer business is discussed above, but it has also announced companywide(including the prime wafer business) medium-term targets. In FY12/21, the final year covered by the medium-term
earnings forecast, the Company forecasts net sales of ¥29,000mn and operating income of ¥6,300mn. These targets
include both existing businesses and GRITEK (and BGRS). Subtracting forecasts for GRITEK from companywide
forecasts gives us forecasts for RS Technologies. However, it is important to note that this forecast includes almost
no sales from the purchases and sales of semiconductor manufacturing equipment business.
For performance from FY12/19 onward, the Company forecasts sizable YoY income growth in FY12/20. We believe
this is because the Company expects reclaimed wafer production facilities scheduled to be completed in 2019 to
begin operation at full-production scale in 2020. While we also expect strong YoY growth in FY12/20, as mentioned
above, we view the Company’s FY12/18 income forecast as overly conservative. If our view is correct, income
could start at a higher level in FY12/18 and rise to even higher levels in FY12/19 and beyond. Also, if the production
capacity increase scheduled in 2019 is completed in the first half of the year, we think the profit growth in FY12/19
could exceed the Company’s forecast.
FY12/21 is the final year covered by the Company's consolidated medium-term earnings forecast and the forecast
therefore does not include second stage of capacity increase scheduled to be completed in FY12/23. If the Company
can achieve further growth in the reclaimed wafer business and the prime wafer business through capital investment
and M&A, we think consolidated net sales could reach around ¥50bn in FY12/23. Also, based on past financial
disclosure, we note that the Company’s cost of capital is lower than that of rivals and we therefore think FY12/23
consolidated operating income could surpass ¥10bn (as we think GRITEK’s forecast is likely to change, we think itshould be viewed simply as an indication of the company's earnings potential).

We encourage readers to review our complete legal statement on “Disclaimer” page.

17 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies

31-May-20183445 Tokyo Stock Exchange First Section

http://www.rs-tec.jp/

Earnings trends and outlook

Details of medium-term earnings forecast
Earnings(¥mn)
FY12/17

FY12/18

FY12/19

FY12/20

FY12/21

FY12/22

FY12/23-

RST

Net sales

10,988

11,923

12,07012,68014,010-

RST

Operating income

3,075

2,811

3,160

3,890

4,030

-

-

GRITEK

Net sales

-

9,070

8,930

12,32014,99018,42023,390

GRITEK

Operating income

-

1,280

640

1,110

2,470

2,950

5,690

-

-200

-200

-200

-200

-

-

Labor costs
Consolidated

Net sales

10,98820,99321,00025,00029,000--Consolidated

Operating income

3,075

3,891

3,600

4,800

6,300

-

-

FY12/17

FY12/18

FY12/19

FY12/20

FY12/21

FY12/22

FY12/23

Sanbongi Factory

Reclaimed wafer processing
12-inch

20

20

22

22

22

22

22

Tainan Factory

Reclaimed wafer processing
12-inch

10

10

13

13

13

13

13

GRITEK

Prime wafer
8-inch

5

5

5~10

20

20

20~35

20~35

5

5

5

5~10

10~15

15~20

20~25

FY12/17

FY12/18

FY12/19

FY12/20

FY12/21

FY12/22

FY12/23

28.0

23.6

26.2

30.7

28.8

-

-

-

14.1

7.2

9.0

16.5

16.0

24.3

28.0

18.5

17.1

19.2

21.7

-

-

Production capacity at term end(10,000 units/month)

Prime wafer sales volume
8-inch (forecast basis)
Operating margin

(%)

RST
GRITEK
Companywide

Source: Prepared by FISCO from the Company’s results briefing materials██Shareholder return policy
FY12/17 annual dividends flat YoY on adjusted basis, ¥5 per share
Making fair returns to shareholders is an important concern of Company management, and the Company’s basic
policy is to return value to shareholders by paying dividends. The Company decides on its dividends after considering
a comprehensive range of factors, including current profits, the targets of its medium-term management plan, andits financial strength.
Through FY12/15, the Company paid no dividends because it prioritized the accumulation of funds to invest
regularly in new plant and equipment. However, the Company began paying dividends in FY12/16, paying annual
dividends of ¥10 (regular dividends of ¥5 per share and commemorative dividends of ¥5 per share). In FY12/17, theCompany conducted a 2-for-1 stock split on July 1, 2017 and paid year-end dividends of ¥5 per share. Dividends
were therefore unchanged YoY on an adjusted basis.

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RS Technologies
3445 Tokyo Stock Exchange First Section

31-May-2018
http://www.rs-tec.jp/

Shareholder return policy

As in previous years, the Company did not announce a plan for shareholder returns in its initial FY12/18 forecast.
We expect the Company to announce a dividend forecast after its full-year earnings picture becomes clearer. As
mentioned above, the Company has decided to enter the prime wafer business in China. We believe the Company iscurrently able to maintain dividend levels while investing in the prime wafer business. Even if the Company prioritizes
investment in the prime wafer business, we believe this would eventually lead to maximization of shareholder returns
because the business has very high growth potential.
The Company has a shareholder benefits system. The Company will present shareholders holding 100 shares ormore as of December 31, the end of the Company’s fiscal year, with a QUO card worth ¥3,000.

㻱㼍㼞㼚㼕㼚㼓㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻘㻌㼐㼕㼢㼕㼐㼑㼚㼐㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻘㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻱㼍㼞㼚㼕㼚㼓㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕㻔¥㻕㻰㼕㼢㼕㼐㼑㼚㼐㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕㻝㻥㻥㻚㻟㻡

㻞㻝㻜㻚㻜㻜㻣㻚㻜㻑㻢㻚㻟㻑㻝㻤㻜㻚㻜㻜

㻢㻚㻜㻑㻝㻡㻜㻚㻜㻜

㻡㻚㻜㻑㻝㻞㻜㻚㻜㻜

㻠㻚㻜㻑

㻣㻥㻚㻥㻥

㻥㻜㻚㻜㻜

㻟㻚㻜㻑

㻢㻡㻚㻥㻡

㻞㻚㻡㻑

㻡㻞㻚㻠㻤

㻢㻜㻚㻜㻜

㻞㻚㻜㻑
㻞㻤㻚㻟㻢

㻟㻜㻚㻜㻜

㻠㻚㻥㻣 㻜㻚㻜㻜

㻜㻚㻜㻜

㻜㻚㻜㻜

㻲㼅㻝㻞㻛㻝㻞

㻲㼅㻝㻞㻛㻝㻟

㻲㼅㻝㻞㻛㻝㻠

㻜㻚㻜㻜

㻡㻚㻜㻜

㻡㻚㻜㻜

㻲㼅㻝㻞㻛㻝㻢

㻲㼅㻝㻞㻛㻝㻣

㻜㻚㻜㻜

㻝㻚㻜㻑
㻜㻚㻜㻑

㻲㼅㻝㻞㻛㻝㻡

Source: Prepared by FISCO from the Company’s results briefing materials

██Information security
High level of awareness of information security
RS Technologies is involved in the leading-edge field of semiconductors and therefore manages important informationsuch as technical data and customer data with a high level of awareness regarding information security. The
Company has established information security systems necessary for listed companies including passwords settingsand limited access to information. In addition, the Company is involved in B-to-B businesses and, unlike companies
involved in B-to-C businesses, does not handle large volumes of customer data or credit card data. We therefore
think the Company faces relatively little risk from cyberterrorism targeting such information or the leaking of suchinformation from inside the Company.

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 19

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