financial results presentation - sanken-ele.co.jp

Sanken Electric Co., Ltd. 0

May 12, 2021

Financial Results PresentationFiscal Year ended March 2021


• Financial Results FY March 2021

• Guidance for FY March 2022

• Management Policy

• Growth Strategies

Financial Results

Medium-Term Management Plan 2021 (New)

Table of Contents


Financial Results FY March 2021


Takeaways

⚫ Full-year sales were 156.8 billion yen, above guidance announced in February.

⚫ 4Q sales by market topped guidance announced in February in the Semi

Devices Business with 4% for Automotive and 9% for White Goods, and

were in line with plan for Industrial & Consumer and Power Systems.

⚫ With the recording in 3Q of listing-related expenses of 5.1 billion yen for

Allegro MicroSystems, Inc. (Allegro), the full-year operating loss came to -

1.2 billion yen. Excluding one-time expenses including those related to the

listing of Allegro, operating profit amounted to 7.8 billion yen on a non-

GAAP basis.

⚫ An extraordinary loss of 3.6 billion yen related to restructuring was posted.


1H 2H Full Year 1H 2H Full Year Amount %

78.3 81.9 160.2 68.1 88.7 156.8 -3.4 -2.1

67.9 70.1 138.0 60.0 77.2 137.2 -0.7 -0.5

10.4 11.8 22.2 8.1 11.4 19.6 -2.7 -12.0

0.3 4.0 4.3 -0.6 -0.6 -1.2 -5.5 －

-0.7 3.4 2.7 -0.7 -2.7 -3.4 -6.1 －

-1.6 -2.8 -4.3 -2.7 -1.1 -3.8 +0.5 －

-4.2 -1.3 -5.6 -4.9 -2.1 -7.0 -1.4 － Loss attributable to

controlling shareholder

Sales

Semi Devices

Power Systems

Operating Profit (Loss)

Ordinary Profit (Loss)

FY Mar. 20 YoY change

Extraordinary Profit and Loss

FY Mar. 21

Exchange Rate (Yen/US$)（Full Year） FY March 2020: 108.71, FY March 2021: 106.11

Consolidated Results for FY March 2021

(Billions of Yen)

* Rates of change are calculated from the values in millions of yen


1Q 2Q 3Q 4Q Full Year

31.6 36.5 41.6 47.0 156.8

-0.1 1.0 2.6 4.3 7.8

-0.1 0.9 1.8 4.0 6.6

-0.8 -0.5 0.5 1.8 1.0

107.64 106.93 106.11 106.11 106.11

FY Mar. 2021

Exchange Rate (Yen/US$)

NI attributable to controlling

shareholder

Sales


Ordinary Profit (Loss)

Consolidated Results: FY March 2021

(Non-GAAP basis) * Business results excluding non-recurring items as determined by the Company and other adjustments

(Billions of Yen)

Main Non-GAAP adjustments (FY Mar. 21)

Operating expenses Allegro listing-related 5.4, Restructuring 3.1,

Overseas COVID-19 response 0.5

Non-operating expenses Allegro dividend-related 1.0

Extraordinary loss Restructuring 3.6


19.4 19.819.2

18.016.9

17.8 17.6 18.0

12.4

14.2

18.0

19.5

9.710.7

9.610.8 10.5 10.4

11.412.1

9.7

11.211.9

13.6

7.48.2

7.76.7 6.2 6.1 6.0

5.06.0

6.6 7.0 7.2

2.93.5 3.6

4.7

2.23.8 3.6

4.9

2.23.2 3.4

5.4

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

FY19 FY20 FY21Exchange Rate

(Yen/US$)109.11 110.27 111.15 110.93 109.91 108.61 108.66 108.71 107.64 106.93 106.11 106.11

4Q results were as follows:

・Automotive: Up 8% QoQ and YoY, reflecting growth in shipments as orders rapidly recovered from 3Q

・White Goods: Up 14% QoQ and 12% YoY, driven by brisker demand in Korea and increased adoption of inverters in China

・Industrial & Consumer: 3% QoQ and Up 44% YoY, owing to growth in shipments for servers and TVs

Consolidated Sales Trend by Market

Industrial & Consumer

(Billions of Yen)

Automotive

White Goods

Social Systems


Guidance for FY March 2022


Basis for setting FY2022 full-year forecast and future outlook

＜Rationale＞

⚫ Strong performance forecast to continue in 1H against a backdrop of rapidly

recovering orders at the end of previous fiscal year.

The automotive and white goods markets appear bullish, but there are inventory

buildups in customers’ supply chains and entry into an adjustment phase is

projected for 2H.

⚫ Both automotive and white goods have received orders beyond their production

capacity, making chip production capacity and wafer supply tight.

⚫ The operating profit forecast has been calculated on a production level based on

the sales forecast and accounts for the impact of halting operations

accompanied by the transfer of equipment ahead of factory closures.

⚫ For ordinary profit and other items under ordinary profit, consideration was made

regarding matters such as temporary costs for structural reform in its final stage.



• Global auto production for 2021 was assumed to be around 87 million units, but

there are increasing risks to push that figure down due to the impact of

semiconductor shortages.

• Our customers are reviewing the supply chains. Inventory turnover is accumulating

for OEMs and Tier 1 is moving ahead with securing parts for the BCP.

• Sanken’s recent orders have been strong. The forecast includes a rebound against

advance orders in 2H, although the impact of decreased auto production is not

directly visible at this point in time.

• In spite of a rapid recovery in auto production since the end of the previous fiscal

year, semiconductor manufacturers’ production has been unable to meet demand

and although circumstances differ among companies, at this point in time, it is

projected that it will need until at least the latter half of 3Q for that to be resolved.

Semi Devices: Market-by-Market Outlook

Automotive Market


• All air conditioners produced for the Chinese market finished shifting to inverters in

July 2020 due to the unification of energy-saving standards. From July 2021 only

products complying with the new standards can be sold, so each company has

finished adjusting inventories.

• China’s four major air conditioner companies are expanding their use of inverter

technology in export models.

• In washing machines, inverter model sales were strong mainly in Europe and the

U.S. on the back of expanded demand for larger models and lifestyle changes

under the COVID-19 pandemic. Sanken’s main customers, Korean manufacturers,

are moving ahead on maximizing production as strong demand continues.

• Recent demand is forecast to continue at a high level, although there is some

seasonality. There is extremely strong demand for Sanken’s products due to shifts

to inverter and DC motor technologies and responding to deadlines has become an

urgent challenge.


White Goods Market


• The industrial market has reached a recovery stage on the back of a trend toward

increased capital expenditure. In addition to demand for servers continuing from the

previous fiscal year, demand and orders for factory automation are increasing, but

the Company envisages a certain level of inventory adjustment in 2H.

• With remote working having taken root, Sanken projects a strong performance with

demand for small printers continuing in addition to a trend for increasing applications

in small multi-function printers.

• The trend for increasing demand for high-definition TVs continues as demand

spreads from people spending more time at home. Furthermore, demand for new

parts used in large models is increasing and orders remain at a high level. Sanken

forecasts sales this year on a par with the second half of the previous fiscal year.

• Similarly, demand for audio continues and has entered a deadline adjustment phase.

Industrial Market

Consumer Market



Exchange rate (Yen/US$): FY21 106.11, FY22 105.00

1H 2H Full Year 1H 2H Full Year Amount %

68.1 88.7 156.8 80.8 75.2 156.0 -0.8 -0.5

60.0 77.2 137.2 79.3 73.7 153.0 +15.8 +11.5

ーーー 1.5 1.5 3.0 ーー

8.1 11.4 19.6 ― ― 　― ーー

-0.6 -0.6 -1.2 5.9 5.6 11.5 +12.7 ー

-0.7 -2.7 -3.4 5.4 5.1 10.5 +13.9 ー

-4.9 -2.1 -7.0 0.8 1.7 2.5 +9.5 ー

FY Mar. 22 Y on Y ChangesFY Mar. 21

　 NI attributable to controlling

shareholder

　 Sales

Semi Devices


　 Ordinary Profit (Loss)

　　　Power Systems

Former Units


(Billions of Yen)

*Y on Y changes are calculated from the values presented

here in millions of yen


16.917.8 17.6 18.0

12.4

14.2

18.0

19.5 19.5 19.418.1 18.1

10.5 10.411.4

12.1

9.7

11.211.9

13.6 13.512.5 12.0 12.5

6.2 6.1 6.05.0

6.06.6 7.0 7.2 7.2 7.2

6.5 6.5

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

FY20 FY21 FY22 (P)

・Automotive is conceived to continue strongly in 1H. 2H includes modest adjustment risk.

・White goods for Korea will continue strongly and China is forecast to firm as the inverter conversion rate rises.

・For industrial and consumer, 2H adjustment is projected, but servers and printers will be stable.The increasing trend for TVs is expected to continue.

109.91 108.61 108.66 108.71 107.64 106.93 106.11 106.11 105.00 105.00 105.00 105.00

Semi Devices Guidance by Market

Automotive

White Goods


Exchange

Rate (Yen/US$)

(Billions of Yen)


Medium-Term Management Plan 2021 (New)


New Medium-Term Management Plan’s Concept and Premise for Disclosure

⚫ With regard to consolidated numerical targets, the medium-term plan

establishes KPIs focusing on profitability, growth potential, and capital

efficiency.

⚫ In terms of enhancing corporate value, the plan recognizes improving the

profitability of the “Sanken Core” and the further growth of Allegro as key tasks.

⚫ As for business strategies and future numerical targets specific to Allegro,

information is disclosed to the extent that it does not infringe on the information

controls of the US Securities and Exchange Commission (SEC), etc.

⚫ In presenting the new medium-term plan, we will start by explaining the

consolidated numerical targets from the above, spotlighting the initiatives for

the Sanken Core to attain those targets.

New Medium-Term Management Plan: Premise for Disclosure

* Sanken Core: Sanken semiconductor business excluding Allegro.


Overview of Medium-Term Management Plans

Medium-Term

Management Plan 2018

⚫ Execute restructuring

⚫ Launch development

reforms and growth

strategies

⚫ Allegro IPO

Medium-Term

Management Plan 2021

⚫ Complete restructuring

⚫ Realize growth

StrategiesA three-year period for completing

restructuring, including production

base reorganization, and

demonstrating results from

development reforms

2017

⚫ Begin restructuring

⚫ Capital increase

via third-party

allocation at

Allegro

• Medium-Term Management Plan 2018 and Medium-Term Management Plan 2021

continue with an integrated management strategy. Aiming to realize a recovery of the

Sanken Core over the six years they cover.

• Allegro continues to collaborate with technologies, development, and sales as a

consolidated subsidiary


FY18 FY19 FY20 FY21 FY22 FY23 FY24

MTMP 2018

Restructuring Phase 1

・Exit unprofitable device products・Exit non-strategic markets in unit products

・HQ early retirement program・Capital increase via third-party allocation at Allegro

・Domestic plant and overseas

subsidiary closures

・Transfer infrastructure business

・Exit LED lighting business

・Allegro IPO

Restructuring Phase 2

Development Reforms・Develop Sanken Power-electronics Platform (SPP)

・Establish overseas development bases

・Strategic partnership with STMicroelectronics

・Ishikawa Sanken: Start operations at new module plant

Finish restructuring, optimize production and realize growth strategies

via Medium-Term Management Plan (MTMP) 2021

・Complete domestic

production base

reorganization

◆

・Start of operations at Production Development Center

MTMP 2021

・Dalian Sanken: Start operations at new module plant

Production Strategies

Initiatives to Enhance Corporate Value

Restru

cturin

gG

row

th S

trategies


Management Vision: Our Goal


Core Elements of Medium-Term Management Plan 2021

Business Portfolio

Sales growth outpacing semiconductor market growth

Growth

Power Modules, Power Devices, and Sensors

KPI

FY March 2024 Consolidated Targets

• Operating profit margin: At least 13%

• Net Sales: At least 170 billion yen

• ROE: At least 12%


⚫ Growth in the three pillars of power modules, power devices, and sensors.

⚫ Strengthen power modules by increasing sales for automobiles and industrial equipment.

FY Mar. 2020 FY Mar. 2024 FY Mar. 2027

Automotive

Industrial

Equipment

Automotive

Industrial

EquipmentWhite Goods White Goods

White Goods

Automotive

Industrial

Equipment

Sensors

Power

Devices

Power

Modules Power

Devices

Sensors

Power

Modules

Power

Modules

Sensors

Power

Devices

Sh

are of S

alesB

y Mo

du

le Market

Business Portfolio


433.1516.9

2020 2023

⚫ Target sales growth outpacing market growth for Santen Group overall

⚫ Power semiconductor market headed for full-fledged uptrend on tailwinds from eco-friendly vehicles and digital transformation

64.0

46.3

26.9

137.2

2021 2024

6.5～8.5%

Automotive

CAGR

9～11%

Growth rate by market envisioned

in medium-term plan

CAGR

4～6%

CAGR

6～8%

White Goods

Industrial &

Consumer

16.920.3

2020 2023

Source: (1) Prepared by the Company based on World Semiconductor Trade Statistics (WSTS) forecast released December 2020

(2) Prepared by the Company based on Power Semiconductor Market 2020 by Yano Research Institute Ltd. .

Power semiconductor market scale (2)

CY

CAGR

6.3%

Semiconductor market scale (1)

CAGR

6.1%

CY

FY March

Growth: Scenario for Consolidated Growth in MTMP 2021

(Billions of Yen)

(Billions of USD)

(Billions of USD)


Sanken Core: Growth Strategies


2021 2022 2023 2024 2025 2026 2027

MTMP 2021: Long-term Sales Growth Outlook by Market

White Goods

Sustainable growth looks

promising via shift to white

goods with inverters

Automotive

New products for xEVs to

grow from FY March 2024

via shift to electric vehicles

Industrial

Expansion of IPM business

via joint development with

STMicroelectronics etc.

Consumer

Expansion of power

semiconductor domain

where high output/high

efficiency is leveragedFY March

MTMP 2021 Long-term outlook

Automotive


White Goods

*IPM: Intelligent Power Module


2021 2024 2027

Comfort

ADAS

xEV

ICE

0

20

40

60

80

100

120

2020 2021 2023 2025 2030

Pure EV

PHEV

HEV

48V MHV

ICE

Automotive Market

ICE

xEV

ADAS

Comfort

ICE

xEV

ADAS

Comfort

ICE

xEV

ADAS

Comfort

FY Mar.

2027FY Mar.

2024FY Mar.

2021

Source: Long-term forecast for EV market growth (2020 autumn report by FUJI KEIZAI CO., LTD.)

(Millions of

vehicles) Global Auto Market Forecast

CY FY March

⚫ Sales growth, mainly for digital ICs for ADASs and modules for xEVs

⚫ Also sustained level of sales for internal combustion engine (ICE) applications

xEV

Auto sales by application


2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Increased adoption

Automotive Market: Power modules for Traction Motors

⚫ For power modules for EV traction motors, move up outlook for peak

sales from orders placed to 2025 as shift to EVs accelerating

⚫ Increased adoption to be major pillar for automotive module growth

⚫ Plan to release in-house modules with SiC in 2025

Orders placed

Volume outlook: Power modules for EV traction motors

Earlier peak

Initial assumption


67%

79% 81% 83%

0

50

100

150

200

2020 2021 2023 2026

25% 26% 28% 31%

0

50

100

150

2020 2021 2023 2026

37% 40%47%

56%

0

50

100

150

2020 2021 2023 2026

White Goods Market⚫ Expect the ratio of inverter-driven air conditioners to rise through 2026, and global market to

keep growing thereafter

⚫ Now expect the ratio of inverter-driven washing machines will rise earlier to meet growing

demand for eco-friendly models and large models

Source: Source: Company forecasts based on 2020 data from FUJI KEIZAI CO., LTD.

（M units）

Inverter driven

units ratio

Total volume

No. of inverter-driven units

CY CY CY

Global Forecast for Sales Volumes and Ratio of Inverter-Driven Units Ratio

Room air conditioners

Washing machinesRefrigerators

（M units）（M units）

No. of inverter-driven unitsNo. of inverter-driven units

Total volume

Total volume

Inverter driven

units ratioInverter driven

units ratio


⚫ Launch of SPP development products (platform development) to help raise profitability

・APTC and Headquarters to co-develop new processes that realize chip shrinking

・SPDC and Headquarters to co-develop new packages for next-generation IPMs

・New module plant at Ishikawa Sanken’s mixed production lines to raise investment efficiency

SPP development products’ share of IPM sales

FY Mar.

2021

FY Mar.

2024

FY Mar.

2027

APTC：Advanced Power Device Technologies SPDC: Seoul Package Design Center

White Goods Market: Expansion of SPP Development Products

Air conditioners Air conditioners Air conditioners

Washing

machines and

refrigerators,

etc.

Washing

machines and

refrigerators,

etc.

Washing

machines and

refrigerators,

etc.

SPP Development

Products

61%

SPP Development

Products

78%SPP Development

Products

0%


Industrial and Consumer Markets

4 8

12

17

2020 2021 2023 2025

⚫ Specialize in high-definition, large screen applications,

and other areas where more power is needed

⚫ Aim for a comeback and No. 1 share in the TV market

by lowering digital IC cost and raising sales via growth

in market share and business to other companies.

⚫ Promote joint marketing and co-develop unique products combining both companies’

technologies to expand sales for industrial applications

Global OLED TV Market Forecast

(million units)

CY

Source: Prepared by the Company based on 2020 data from FUJI KEIZAI CO., LTD.

1. Grow via Strategic Partnership with STMicroelectronics

⚫ Expand sales and sales channels via jointly developed products

Commercial air conditioning equipment, robot servo power modules

2. Cultivate New Industrial Markets via Joint Development with Allegro

3. Make a Comeback in the TV Market


New Products’ Share of Sales

⚫ Set a target line of at least 15% for new products’ share of sales.

⚫ To exceed 25% temporarily as the results of development under MTMP 2018 materialize

during MTMP 2021. Even after that, will maintain at 15% or higher.

10%

22%

28%

'21 '22 '23 '24 '25 '26 '27

New products’ share of sales

NewProducts

MTMP 2021

Existing

Products

Keep at 15% or higher

Minimum

target line

15%

FY March

Measures to improve profit

Design

・Chip shrinking

・Standardize/change materials

・Reduce the number of components

Production

・Build mixed production lines

・Promote automation via inspection imaging utilizing IoT

・Raise productivity via equipment management utilizing AI

・Thoroughly automate transport*New products are defined as products released within 3 years for automotive and 1.5 years for other

applications, and include customized products besides SPP development products.

Gross margin: At least 22% in principle

Condition for starting development


Acceleration of Development ReformsAccelerate PDCA Cycle at 3 Centers to Cut Development Cycle in Half

Package Lab Area: Development of elemental technologies for new products and consistent inspection of prototypes

Product Inspection Area: Inspection of newly developed products

Development Area: Development and production departments work together to

design products

ボ

Product evaluation

and analysis

New product planning

and development

Development System

Pilot Line Area: Development of automated production lines for smart factories and high-mix lines, pre-production inspections

Imaging IoT Development Area: Development of automated sensory inspections using AI and highly complex images

Evaluation and

Analysis Center

・Mobilize production staff and

technology

・Realize new products via

platform developmentProduction

Development Center

Technical Center


Acceleration of Development Reforms

・R&D and planning for elemental

technologies for new production lines

and new products

・New production development

・Follow-up on new production line startups・Promote worksite introduction of AI, IoT,

and other digital transformation technologies・Advance steps to improve productivity

・Manage and maintain stable production

・Improve costs and yields

Production Development Center(Headquarters)

Advanced Technology Promotion Center(established on the premises of Ishikawa Sanken)

Brings together production technology engineers to improve SPP development efficiency faster

Established as a headquarters organization to advance steps to reform production lines

Ensure stable production, raise productivity, enhance efficiency of cost reductions

Sanken Group Plants(Ishikawa, Yamagata, Fukushima, Dalian)

・ Put the Production Development Center at the core of further accelerating the finishing up of development reforms

・ Establish a system to maintain a new product ratio of at least 15%

Concrete results from development reforms: Platform development products

・IPMs for motor-driven compressors for car air conditioners

・Power modules for EV traction motors

・Next-generation IPMs for white goods


To Realize Growth Strategies


Reorganization Aiming to Realize Growth Strategies

⚫ Marketing Headquarters

Create new products matching market needs via more marketing-oriented technology development

⚫ Power module Headquarters, Power Device Headquarters

Customer-focused, integrated production and sales framework emphasizing supply chains

⚫ Business Promotion Headquarters

Unifying organization, with shared functions of development and profitability management, quality control, and materials procurement

Marketing Headquarters

Power module Headquarters

Power Device Headquarters

Portfolio rebuilding, organizational frameworks to realize growth and profitability

Sem

iconducto

r

Busin

ess C

orp

ora

te

Headqua

rters

Busin

ess P

rom

otio

n

Headqua

rters


• Expansion of the scope of performance-linked compensation to upper management,

establishment of operating income, ROE, and TSR (total shareholder returns) as KPIs

• Invitation of external director candidates with corporate management experience

Initiatives for ESG and SDGs

Environment

Social

Governance

• Development of technologies and products that help preserve the global environment

-Reduction of CO2 (energy-saving technologies for shift to xEVs, white goods)

-Enhancement of water use efficiency (develop IPMs for water-saving washing machines)

• Promotion of carbon offset via the use of clean energy

• Work style reforms, strengthening of organizational and personnel development

• Development of personnel with digital skills for advancing digital transformation

• Promotion of diversity: -Appointment of female employees, non-Japanese employees, and mid-career

hires to core positions

Key societal issues to which

we contribute (Materiality) Contributions to CO2 reductions through promotion of

main business (energy conservation/greater efficiency)

Efforts to reduce environmental impact


Financial Results Presentation Fiscal Year ended March 31, 2021


This presentation contains forward-looking statements with respect to the Company’s and its group affiliates’ future

results, plans and policies, strategies, performance goals and scheduled targets, and the management’s views and

judgments that are not yet firmly established facts. These forward-looking statements are formed based on the

currently available information and assumptions deemed reasonable at present, and conditional upon known and

unknown risks, uncertainties and many other factors. These risks, uncertainties and many other factors could cause

actual results to be materially different from any future results that may be expressed or implied by such forward-

looking statements. The Company does not undertake any obligation to update or revise any forward-looking

statements, including, but not limited to, revisions of financial result forecast, unless the Company is enforced to do so

by the provisions of applicable laws and regulations.

The electronics industry to which the Company belongs is constantly exposed to rapid changes in business

environment and the Company’s business performance and financial conditions are subjected to risks, uncertainties

and other factors, which include, but not limited to, (i) macroeconomic environment, market demand and supply

situations, and competitive conditions, (ii) fluctuations in the exchange rates, (iii) success or failure to catch up with

technological innovation, (iv) rising prices and availability constraints of parts, supplies and materials, (v) changes in

legal framework of various nations and political sub-divisions or sudden changes of social circumstances, and (vi) any

other contingencies.

Notice on Forward-looking Statement

financial results presentation - sanken-ele.co.jp

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