To Our Shareholders

Hitoshi YOSHIDA

Enhancing value in capital markets to sustain maximum shareholder return.

First and foremost, I would like to express my utmost appreciation for your unwavering support of ACCRETECH (Tokyo Seimitsu).

An integral element of our philosophy is to build WIN-WIN relationships, which extend beyond mere associations with business partners and customers. We believe that it is essential to create deep, enduring ties, based on mutual trust, with all our shareholders. To meet their expectations, the entire company strives to maximize corporate value in our capital markets, while steadily boosting equity per share (EPS), which we view as a vital financial indicator.

The business environment surrounding our operations is becoming increasingly unpredictable. In particular, the semiconductor market, after peaking in 2000, has slumped into unprecedented severity. Our strategic objectives and business goals, however, remain unchanged. We will continue to aggressively invest in the RD of new products and technologies, even in the sluggish semiconductor market, in line with the basic strategy of our Strategic Principles for Our RD. With this stance firmly entrenched in our psyche, we aim to expand our business by targeting large-scale markets.

A consistent demand in the semiconductor industry, which has high future growth potential, is to develop smaller and smaller chips. We possess the technological prowess in key processes necessary to accomplish this miniaturization, giving us a clear competitive edge. This is manifest in both established products, such as wafer probing and dicing machines, and new entrants, including wafer inspection systems, CMPs and polish grinders. Furthermore, low-energy e-beam proximity projection lithography (LEEPL) technology will drive the creation of a whole new generation of lithography processes. These technologies will be the catalysts for corporate growth in the coming years.

ACCRETECH is managed with shareholders' interests foremost in mind. For 25 years, from the end of 1977 to July 1, 2003, the Nihon Keizai Shimbun newspaper ranked us fourth in terms of rate of return on stock, from among 1,122 companies registered on the first and second sections of the Tokyo Stock Exchange. This feat was only made possible, however, on account of the long-term commitment of our shareholders.

Management constantly seeks to raise sales and profits by leveraging our unique strengths, eliminating the need to rely on mergers and acquisitions. We also endeavor to overcome potential risks as we approach new challenges by enhancing our leading-edge technologies. Through the optimum utilization of these strengths, we will generate even higher shareholder value.

We kindly ask all Tokyo Seimitsu shareholders and other stakeholders for their continued guidance and support.

Interview with CEO

What are the characteristics of ACCRETECH-TOKYO SEIMITSU's markets?

Our key business area is the production and sale of semiconductor manufacturing equipment and precision measuring systems. Both of these markets are affected similarly by corporate capital investment, but differ in their long-term growth potential and susceptibility to economic change.

The semiconductor manufacturing equipment market is influenced by the silicon cycle and general economic fluctuations. The silicon cycle refers to the business cycle of the semiconductor industry. Although newly launched next-generation products quickly increase in price, as investment and production expands, the balance of supply and demand shifts, causing a price collapse. Players look to mass-produce cutting-edge products ahead of their rivals to stifle cost competition.

This industry is expected to continue growing steadily in the mid- to long-term. The consistent nature of the silicon cycle, however, means that severe business fluctuations may repeat. ACCRETECH-TOKYO SEIMITSU has introduced a production system that can respond quickly to market downturns, minimizing loss during tough economic periods.

In contrast, the precision measuring systems market is affected by ordinary economic trends, although there are few of any major consequence. We can therefore sustain relatively stable sales and profits by providing products that meet customer needs. The domestic market has now reached maturity, so we are aiming to bolster our overseas operations and challenge new fields to precipitate business expansion.

What are ACCRETECH-TOKYO SEIMITSU's competitive advantages in this high-tech industry?

First, we have the will and determination to survive in the modern era, embodied in our ability to develop and deliver pioneering, top quality products to the global market. We have made this a reality by transcending organizational and national borders to successfully integrate the necessary technologies and talented personnel. This resolve is inherent in all our employees and is one of the Company's most valuable assets.

Second, quality personnel are critical for any organization to function efficiently. We have created a corporate culture that allows individuals to realize their full potential, which in turn attracts people of the highest quality. We will continue with our policy of recruiting "mid-career" personnel. The slump in the IT industry in the past few years has caused an influx of outstanding technical experts to the Company, including people from countries such as Israel and Russia.

Third, we have engineered a creative work environment so that personnel can effectively utilize their talents. This environment is possible due to:

  1. A flexible corporate culture that drives the creation of the ultimate equipment.
  2. A corporate structure in which management resources can be utilized in both horizontal and vertical directions.
  3. A flat organization to ensure fast decision-making and that the opinions of engineers are heard.

Finally, we have a clear direction as a technology-focused enterprise . Our main priority is not profit margins but to continually develop groundbreaking technologies. A profit-driven orientation severely impinges on motivation levels. We believe that we can sustain stable profits by consistently generating top quality products that will lead the global market.

These attributes give us a clear competitive edge.

Can you explain what a flat organization entails?

One of the most important management challenges over the years has been to streamline structure and delegate authority. By eliminating superfluous middle layers, we have smoothed communication between management and personnel. We have also employed a Group Leader System, organizing technical development teams according to product type. Every division inside the organization therefore has a considerable degree of independence. A technical expert heads each group and is responsible for all operations, from RD to customer service. These leaders make their own judgment calls, vastly speeding up the decision-making process. They are ultimately accountable for performance also.

What are the future aspirations and strategies of the Company?

Our fundamental business stance is unchanging. Based on Strategic Principles for Our RD, we will consistently create new, technologically advanced products that match market needs. We will also strive to develop products that command top global share in high growth potential markets that have high technological barriers to entry. In line with this strategy, we have continued to invest heavily in development, releasing new, innovative products and achieving steady growth in even the depressed semiconductor market.

Nevertheless, it has become necessary to create a framework that can cope with a deflationary economy. Further, it is imperative that we reduce costs and boost quality in response to increasing competition from Chinese suppliers in the semiconductor manufacturing equipment market. Our competitive edge, however, is not based on price, but rather creativity. We thrive on our ability to churn out innovative creations with top global performance.

What is your basic policy on profit distribution?

First and foremost, ACCRETECH-TOKYO SEIMITSU is the property of our shareholders, so we are committed to ensuring maximum returns. At the same time, we must sustain a stable, long-term shareholder dividend.

There are a number of elements that need to be taken into account in order to achieve this. First, we must maintain the balance of all parties that have an interest in the Company, as we are able to generate profits only through the cooperation of all stakeholders. That is why we place so much importance on creating "WIN-WIN" relationships.

Next, we must focus on expanding sales to drive growth. If we try to generate profits without increasing sales, we are forced to rely on cost reductions. This will lead to a negative return for certain stakeholders. Sales expansion, on the other hand, will inevitably raise shareholder value. Our strategy is to bring about sustainable growth, shrugging off temporary lapses in market buoyancy and dips in performance. Such a stance will ensure the greatest return for all our shareholders over the long-term.

Minimizing RD costs is also important. At ACCRETECH-TOKYO SEIMITSU, we are able to raise corporate value by incorporating innovative ideas into our products. This generally requires a massive cash injection, which erodes profit. We have endeavored to counter this problem by collaborating with consortiums in the development of LEEPL lithography technology, as one example. By sharing RD costs, the amount of capital each company has to expend is kept to a minimum. Companies in the semiconductor industry that successfully implement this kind of business model will be highly profitable in the 21st century.