2020 Highlights

Solid SiC Products to
Support the Evolution of
Semiconductors
Solid SiC Focus Rings, which are highly regarded by semiconductor device and equipment manufacturers aroundthe world, are flourishing from the strong demand for high-performance semiconductors.

01

Solid SiC Focus Rings enter growth phase

High integration to enhance semiconductor performanceon the outside of a silicon wafer to concentrate the plasma

is expanding from miniaturization in two dimensions to 3D

on the wafer and ensure uniform processing. Traditionally,(stacking) where circuits are stacked three-dimensionally.

focus rings were mainly made of silicon metal or quartz glass.

This development towards 3D accelerates larger demand

However, with the increase in the number of etchings and thefor solid SiC Focus Rings.

boost in plasma power accompanying the transition to 3D

A focus ring is a component used in the etching process,where a plasma-enhanced gas is used to dig grooves insemiconductors, there has been a shift to solid SiC, which has
excellent plasma resistance.

semiconductor circuits. It is an important component placed
Chronological Development of Materials for Focus Rings
The switch to SiC products possessing superior strengthand heat resistance will progress as semiconductor
devices become increasingly miniaturized.

SiC

Silicon or quartz
GlassyCarbon

1990

20

TOKAI CARBON INTEGRATED REPORT 2020

2000

2010

2020

Present

INTRODUCTION

Strategy for Value Creation

Tokai Carbon Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

What is Solid SiC?
This product is a pure CVD-SiC, which features ultra-high purity SiC. This is achieved using the Group’s proprietary
CVD* method to thicken the SiC coating, which is normally about 100 microns (0.1 mm).
As a material with excellent strength and corrosion resistance, it is an ideal material for use in semiconductor
manufacturing equipment.
* CVD (Chemical Vapor Deposition): A method of depositing a film through a chemical reaction by supplying a raw material gas containing the components of thedesired thin film to the surface of a base material heated in a reaction tube.

02

Becoming the leading supplierof solid SiC products

The Group installed a CVD furnace at Tokai Carbon Korea

Business results of Tokai Carbon Korea Co., Ltd. (TCK)Co., Ltd. (TCK) in 2002 and began developing solid SiC(Unit: Millions of won)

Focus Rings in 2006, successfully commercializing themin 2013. Solid SiC Focus Rings have demonstrated theirtrue value under severe conditions of use, and sales havebeen growing steadily as demand has increased. As apioneer in the field of solid SiC Focus Rings, the Group ishighly regarded by semiconductor device and equipment
manufacturers for quality, and is currently the top supplierwith an 80% share of the global market.

250,000

6.5x
Sales
Operating income

200,000

150,000

2013
Commercializationof Solid SiC Focus
Rings started

100,000

20x

50,000

0
2013

2020

ColumnSemiconductor manufacturing equipment market trends and forecast
The semiconductor market is expected to continue to grow briskly due tothe rapid increase in the volume of data distribution, the establishmentof big data analysis and cloud services, the spread of 5G communication
networks, and the spread of CASE in the automotive industry. In order tomeet the increasing demand for semiconductors, capital investment ina wide range of semiconductor manufacturing equipment, from highperformance to general-purpose products, is expected to continue, andthe market is expected to grow at an annual rate of 5-7%.
Dry etching equipment: Cross-sectional view

(Unit: Millions of dollars)

100,000

75,00050,00025,000Freon gas
PlasmaCooling water

Exhaust0
2015

2020 2021

2025 (Year)(As of April 2021. Estimated by the Company based on industry forecasts.)
Solid SiC Focus Ring

Cooling water
Wafer

TOKAI CARBON INTEGRATED REPORT 202021

GRAPHITEELECTRODES

Business Overview

Graphite Electrodes

Generating stable earnings backed by thegreater demand for high-quality electrodes2020 Summary

5.77 billion yen operating loss in the same period with 3.66
billion yen inventory valuation losses (devaluation of book

Global crude steel production in 2020 remained at the samevalue) associated with the deteriorating market conditions.

level as the previous year, driven by the Chinese market,(Millions of yen)which recovered quickly from the COVID-19 pandemic.

Operating income

ROS

Electric arc furnace steel production, which directly affects

201991,31739,38843.1%

graphite electrodes demand, dropped by 5% YoY excluding

2020

37,879-5,766-15.2%

the Chinese market. Graphite electrode sales dropped

2021 plan

40,900

1,300

3.2%

58.5% YoY as the excessive inventory in the market took time

Reference
figures for 2023

82,40023,3302.8%

to come down to a normal level. The division recorded a

22

Net sales

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Strategy for Value Creation

Tokai Carbon Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Medium-Term Management Plan andEarnings Forecast
In 2021, both crude steel production and electric arc
furnace steel production are expected to return to 2019
levels backed by the fiscal stimulus measures taken in majorcountries. Graphite electrode demand will significantly
improve from the previous year following the reduction ofgraphite electrode inventory in the market. The Graphite
Electrodes business is expected to return to profitability in
2021, and furthermore we will aim for a fair profit that will let
us reinvest for stable production and supply.
Looking ahead to the next three years of our mediumterm management plan, T-2023, the business environmentis expected to improve further. One reason is the shift in

Kenji Enokidani
Executive Officer
General Manager of the Graphite Electrodes Division

the steel making process from blast furnaces to electric arc
furnaces to achieve the lower CO2 emissions. In fact, plans
for the construction of several new large-scale electric arc

Although the performance of the graphite electrodes

furnaces have been announced, and in China, the shift frombusiness in 2020 was significantly downwardly affected byblast furnaces to electric arc furnaces is expected to proceed

the COVID-19 pandemic, graphite electrodes will growrapidly. As a result, demand for graphite electrodes, which

in importance as the environment problem comes to be

are essential for electric arc furnace operation, is expected

recognized as a shared global issue. In view of how the tide

to increase significantly. Based on this forecast of an upturnis changing, the Company is committed to fulfilling its supply

in demand, we will strengthen our long-term relationshipresponsibilities, thereby contributing positively to solvingof trust with our customers by providing a stable supply of

the global environmental issues. Under T-2023, we intend tohigh-quality electrodes, taking advantage of our strength

take advantage of this opportunity to expand the electrodein covering the global market with our production plants inmarket in order to strengthen our business foundation toEurope, Asia, and North America.

generate stable earnings over the next three years.

Shift to electric furnace steel production• Strengthening environmental regulations(CO2 emissions control)

Build long-term stable supply relationships
Mitigate transportation and physical risks• Increased scrap recycling demand

Signs of increasing steel productionin Europe and the United States• Carbon border tax inEuropean countries• US infrastructure investment

Increased demand for high-quality electrodes
Tokai Carbon’s response
1. Procurement and supply of raw materialsof local production for local consumption
2. New high-performance electrodes
3. Technical services that increase productivity

Innovation in electric furnace technology• Production of high-grade steel in electric furnaces• Increase in the size of electric furnaces

Growth in global crude
steel production• Rapid recovery and growth of GDP• Growing demand for steel in Asia
Increase productivity in high-load
operations 10% improvement per unit
(compared to our company’s products)
Expertise as a pioneer of electrodes forlarge electric furnaces
Support for optimization ofoperating conditions

TOKAI CARBON INTEGRATED REPORT 202023

Business Overview

Carbon Black

Align production withmarket growth at a fair margin
2020 Summary

Medium-Term Management Plan andEarnings Forecast

Net sales declined 30.5% YoY due to the US-China trade

With the recovery of automobile production, sales volume

friction and the COVID-19 pandemic, which caused ain 2021 is forecast to exceed that of the previous year. On

significant stagnation in production by tire manufacturers,

the other hand, the significant increase in costs due towho are our main customers, in the first half of the year.

the rise in raw material oil prices has reached a level that

In addition, operating income declined by 62.5% as lower

cannot be absorbed by means of the Company’s efforts

sales prices and lower capacity utilization drove an increase

alone. We therefore intend to improve our profitability byin costs as a percentage of sales. On the other hand, salesraising prices.

volume in the second half of the year increased by 30%

Tire production, which is said to be proportional to thecompared to the first half thanks to the rapid recovery ofgrowth rate of the world economy, is expected to growautomobile production, reflecting the unpredictable impact

at an annual rate of 7% during the period of the medium-of the COVID-19 pandemic on market conditions in 2020.

term management plan, T-2023, with its rebound from theprevious decline. Given that 80% of our carbon black is(Millions of yen)

Net sales

Operating income

ROS

used for tires, we expect to maintain a high rate of capacity

2019

101,751

8,512

8.4%

utilization by aligning production with market growth.

2020

70,754

3,192

4.5%

With respect to increasing our sales prices, our intention

2021 plan

78,000

5,400

6.9%

is to secure an appropriate margin by allowing not only

Reference
figures for 2023

100,600

9,900

9.3%

rising raw material prices to be passed on, but also costs
for investments, including environmental investments.
Meanwhile, we aim to increase the ratio of next-generation
products that extend tire life, as well as high-value-added
non-tire products that take advantage of special raw
material characteristics. We will also continue to createsynergies through measures to reduce raw material costs
and the sharing of production technologies and know-how
in our global 5-country production structure, including Tokai
Carbon CB Ltd., which we acquired as a subsidiary in 2018.
We will also focus on environmental contributions. In
addition to promoting efforts to recycle used tires to
produce carbon black, the Company is also researching
the production of carbon black from vegetable oil insteadof fossil fuels such as petroleum and coal. We also plan toHirofumi Masuda
Member of the Board
Executive Officer
General Manager of the Carbon Black Division

24

TOKAI CARBON INTEGRATED REPORT 2020

develop advanced technologies to recover and reuse CO2
generated in the production process.

INTRODUCTION

Strategy for Value Creation

Tokai Carbon Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

CARBONBLACK

Global Tire Production

Initiatives during the T-2023 period(Millions)

3,000

1. Align production with market growth and maintain highcapacity utilization

Expect to maintainannual growth of 7%*

2,500

2. Ensure an appropriate margin• Incorporate fluctuations in raw material prices andcosts for investment into the sales price

2,000
1,500

3. Increase the ratio of high-value-added products(ongoing effort)• Promote certification of developed products andincrease the sales ratio of high-value-added products

1,000
500
0
2009

2014
Actual2019

2024
Forecast

Our estimate based on automobile market forecasts and research company reports* Annual growth forecast: 7% during T-2023, 3-5% after 2024

2029

4. Sustainability initiatives• Recycling of used tires• Production of carbon black from vegetable oil• Research on technology for CO2 recovery and reuse

TOKAI CARBON INTEGRATED REPORT 202025

Business Overview

Fine Carbon

Boosting our production capacity of
CVD-SiC products to meet the strong
growth of the semiconductor market
2020 Summary

manufacturing. Tokai Carbon enjoys a global market shareof about 80% for this product. In addition to the growing

The COVID-19 pandemic negatively affected sales fordemand for semiconductors, the company is also benefiting

general industrial applications. On the other hand, productfrom the semiconductor industry’s switch of ring material

shipments for semiconductor devices continued to performfrom conventional silicon or quartz focus rings to morewell throughout the year with the expansion of markets suchdurable SiC focus rings as the devices become increasingly

as 5G, IoT, and DX (digital transformation). We experienced

miniaturized and multilayered.
(Millions of yen)robust sales in the photovoltaic application market as well.

Operating income

ROS

As a result, net sales in this business increased by 4.6% YoY

201930,369

6,107

20.1%

and operating income increased by 8.8% YoY, exceeding

2020

31,775

6,647

20.9%

the forecast at the beginning of the year. In particular, there

2021 plan

33,700

5,700

16.9%

was a significant increase in sales of Solid SiC Focus Rings,

Reference
figures for 2023

41,900

8,700

20.8%

which are used in the etching process of semiconductor

FINE
CARBON26

Net sales

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Medium-Term Management Plan andEarnings Forecast
The Tanoura Plant, which produces graphite materials forfine carbon, was damaged by the torrential rains of July
2020, but thanks to measures such as utilizing the heat
treatment facilities at other group sites, the plant has now
been restored to full production. We are also in the processof redoubling our preparedness for anticipated natural
disasters in the future. In 2021, the expansion in production
capacity is underway for further growth.
Under our medium-term management plan, T-2023, we
expect the semiconductor production equipment market
to grow by 5-7% per year, and demand for solar power
generation to grow by around 10% per year in line with the

Hideo Shin
General Manager of the Fine Carbon Division

global shift to renewable energy. Given these conditions,in our fine carbon business, we plan to increase production

reorganization, such as consolidating the production of

capacity of isotropic graphite materials in 2021. Similarly, we

extruded graphite materials at Tokai COBEX Savoie inplan to increase production capacity of solid SiC Focus Rings

France, which joined the Group in 2020. In addition,

in Korea by 50% compared to 2019. We are also building

while striving to control CO2 emissions in the supply chain,

new high-purity processing furnaces in China and state-of-

we will contribute to reducing the environmental burden

the-art CVD-SiC furnaces in Japan, aiming to increase theby producing and supplying high-quality fine carbon

ratio of high-value-added products to achieve sales growth

products that are essential for the production of energy

above and beyond the boost from the increase in scale.

efficient power semiconductors and photovoltaic power

At the same time, we will improve cost competitivenessgeneration equipment.

and production efficiency through cross-divisional

Business Environment
The semiconductor and photovoltaic markets arebooming and expecting further growthWith the semiconductor supply shortage,
continued growth is expected in the
manufacturing equipment market
Semiconductors(5-7% per year)

Strategy
1. Expand scale in line with market growth• Increase production capacity of isotropic graphite materials

2. Focus on the high-value-added product market• Increase SiC ring production capacity(Korea: 2nd half of 2021)• Introduce state-of-the-art CVD-SiC furnaces(Japan: 1st half of 2021)• Install new high-purity furnaces (China: 1st half of 2021)

Demand is expected to grow in line withthe global shift to renewable energy
Photovoltaic
generation (PV)(10% per year)

Source: Semiconductors: Our estimate based on WSTS, Gartner, and others;
PV: Our estimate based on RTS Corporation and others.

3. Overall optimization• Consolidate extruded material production to France(Tokai COBEX)• Make effective use of heat treatment facilities within the Group• Reduce costs by reorganizing processing sites in Europe

TOKAI CARBON INTEGRATED REPORT 202027

Business Overview

Smelting and Lining

Integration of TCX and TCS will
significantly enhance sales and productivity
2020 Summary

the previous year. In addition, we were able to secure operating
income of 1.16 billion yen despite recording 9.69 billion yen in

Tokai COBEX (TCX), which became a subsidiary in July 2019,amortization expenses associated with M&A.

contributed to the Group’s consolidated financial results
throughout the year, and in July 2020, Tokai COBEX Savoie(TCS) in France was added, further expanding the scale of ourbusiness in cathodes used in aluminum smelters. The aluminum
market was sluggish in the first half of the year due to the global
economic slowdown caused by the COVID-19 pandemic. In
the second half of the year, however, the situation improved
due to the recovery in automobile productions. Shipments of

Medium-Term Management Plan andEarnings Forecast
Due to the need for lighter materials in EVs and other products
and the increasing demand for urban housing in emerging
countries, global aluminum demand is increasing. On topof that, the demand for high-end graphite cathodes for
efficient smelting is increasing mainly in emerging countries.

blast furnace blocks, which are materials used to line the inner

We therefore forecast a 25% increase in sales in 2021 withpart of blast furnaces, were also at a high shipment level due

Tokai COBEX Savoie acquired in July 2020 giving a full year

to strong replacement (upgrade) demand in China. Despite

contribution to financial results for 2021. We are currently insome logistical delays caused by COVID-19, net sales from thethe process of integrating the sales, production, engineering,

Smelting and Lining business increased almost 1.5 times overhuman resources, and other organizational units of the sites in(Millions of yen)

Net sales

Operating income

ROS

Poland and France, and will continue to improve profitability
going forward.

2019

14,662-1,600-10.9%

The first action item in the medium-term management plan,2020

36,421

1,161

3.2%

T-2023, is to integrate operations in Poland and France in order2021 plan

45,600

2,200

4.8%

to significantly enhance sales and productivity. Specifically, weReference
figures for 2023

61,20010,10016.5%

will consolidate high-strength graphitized cathodes in Germany
and consolidate pastes and sidewalls in France. Furthermore,as part of our efforts to create synergies across the entire
Group, in addition to the production of extruded specialty
graphite materials for the Fine Carbon business at our French
operation, we are considering transferring the battery anodematerials produced in Japan to our French site, where the EV
market is expected to grow rapidly.
Secondly, we will accelerate market development with ourinnovative product, RuC (Ready-to-Use Cathode). Aluminum
smelting furnaces, which consume large amounts of electricity,
are increasingly switching to graphitized cathodes that canwithstand high currents in the pursuit of production efficiency.
We developed the RuC, which features a copper bar attachedto the cathode, as a way to further reduce the environmental

Takashi Masaki
Executive Officer
General Manager of the Smelting and Lining Division

28

TOKAI CARBON INTEGRATED REPORT 2020

burden. In addition, as part of our goal of achieving adecarbonized society, the French plant will use hydroelectric
power generation and the Polish plant will be powered byrenewable energy.

INTRODUCTION

Tokai Carbon Value Creation

Proposal of
an innovative cathode

Strategy for Value Creation

Foundation that Supports Corporate Value

Two plants in France (formerly Carbone Savoie)
FranceVenissieux plant

FranceNotre Dame de Briançon plant

Financial Section & Corporate Data

Two plants in Poland (formerly COBEX)
PolandNowy Sacz plant

PolandRacibórz plant

RuC®
Ready to Use Cathode• Reduces CO2 emissions by
reducing energy per unit
(approx. 5%)• Extends cathode life by
1-3 years• No need for rodding ofconducting bars by customer

Integrated both in name and reality starting in 2021

Integrated as TOKAI COBEX
Sales benefits• Unify sales brand names• Improve ability to propose
solutions to problems• Centralize customer database

Production technology benefits• Consolidate 100 years oftechnical expertise• Six Sigma approach to cost
reduction

Management benefits• Production, sales, andaccounting management on
unified databases through
ERP system integration(January 2023)

Smeltingand Lining
TOKAI CARBON INTEGRATED REPORT 202029

Industrial
Furnace andRelatedProducts

Business Overview

Industrial Furnaces and Related Products

Aim for continuous high profits
focusing on the development of
next-generation furnaces
2020 Summary

growth markets and focus on winning new orders by

The growth in 5G base stations and the transition to EV

capabilities. In particular, we will strive to respond quickly

lead to robust capital investment in the MLCC (monolithic

to our customers’ next-generation products and promoteceramic capacitor) industry, which drove the sales increase

the development of industrial furnaces with energy-savingin the industrial furnace business. EREMA (silicon carbide)and waste-heat recovery systems. We will also differentiate

heating elements and other products sales declined as

our consumables, such as our EREMA heating elements, bya result of the COVID-19 pandemic, although the overall

developing and launching environment-friendly products,

business sales were up 9.8% YoY and operating income

and gradually increase our production capacity in anticipation

increased 16.6% YoY to a record high level.

of a recovery in demand. Meanwhile, looking ahead to theleveraging our track record, know-how, and development(Millions of yen)

Net sales

Operating income

future, securing technical personnel is another priority task.

ROS

2019

12,641

3,227

2020

13,873

3,765

25.5%
27.1%

2021 plan

18,300

4,400

24.0%

Reference
figures for 2023

19,800

5,100

25.8%

Medium-Term Management Plan andEarnings Forecast
We are experiencing steady orders intake for industrial
furnaces, which should support an increase in sales andprofit in 2021. Our end user markets in MLCCs and lithiumion batteries are growing in the range of 5-10% and 20-30%
respectively on an annual basis. Under our medium-term
management plan, T-2023, we will concentrate on these30

TOKAI CARBON INTEGRATED REPORT 2020

Akihiko Sato
Tokai Konetsu Kogyo Co., Ltd.
President

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Other
Businesses(Friction materials,
Anode materials)

Business Overview

Other Businesses (Friction Materials, Anode Materials)

Aiming to improve profitability bypromoting automation

2020 Summary

profits in the Other Businesses category to increase in 2021.

Net sales of friction materials declined by 13.0% YoY due

harsh price competition among the emerging new players.

to the impact of our exit from the four-wheel automotive

Under our medium-term management plan, T-2023, whichmarket and the sluggish market for construction machinery,prioritizes improving profitability, we plan to thoroughly

agricultural machinery, and motorcycles caused by the

reduce inventory and gradually automate our labor-

COVID-19 pandemic. Net sales of anode materials rose byintensive production systems. At the same time, we will

14.3% as sales volumes for EVs increased, mainly in Europe.

focus on improving quality and developing next-generation

Revenue from real estate rentals and other items decreased

products by leveraging our strength in materials technology.

The friction materials business has become fierce due to

2.6%. As a result, overall net sales in these businesses
declined by 4.0% from the previous year, but operating
income returned to the black.
(Millions of yen)

Net sales

Operating income

ROS

2019

11,286-21

2020

10,837

298

-0.2%
2.8%

2021 plan

11,400500

4.4%Reference
figures for 2023

14,100

1,400

9.9%

Medium-Term Management Plan andEarnings Forecast
At present, sales of friction materials for construction
machinery, agricultural machinery, and industrial robots
are picking up in China, and sales of touring and sports
motorcycles are growing in Europe, so we expect sales andYoshiharu Tachibana
General Manager of the Friction Materials Division

TOKAI CARBON INTEGRATED REPORT 202031