Hitachi Chemical Co., Ltd. Business Report FY2012

Business Highlights

Financial Overview

(in millions of JPY)
  FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 Rate of
Change (%)
Sales 473,069 497,452 (4.9) -
Operating profit 24,495 43,471 (43.7) -
Ordinary income 27,799  45,042 (38.3) -
Current net income 16,427 18,943 (13.3) -
Functional Materials
Sales 240,411 251,984 (4.6) 1)
Operating profit 20,004  31,075 (35.6) -
Advanced Parts and Systems
Sales 232,658 245,468 (5.2) 2)
Operating profit 4,511  12,387 (63.6) -


Electronics Materials
-As a result of lower demand in personal computers, this sector's performance was lower year-on-year due to slow sales of epoxy encapsulant used in semiconductors.
-Sales of die-bonding materials used in semiconductors were lower year-on-year due to the stagnating semiconductor-memory market.
-In the sector of polishing materials used to smooth-out semiconductor circuits, sales of products designed to meet more refined design-rules of semiconductors increased.
-Sales of varnish used for electric insulation were lower year-on-year because of the fall in demand in the automotive industry.

Inorganic Materials
-Performance improved year-on-year for carbon cathode materials used in lithium-ion batteries because of greater demand for smart-phones and hand-held tablets, and because of increased sales of environmentally friendly (green) vehicles.
-Sales of carbon products significantly decreased year-on-year because of the horrendous impact that the Fukushima nuclear-power-plant disaster had on operations. Basically, the Company's launch of production at new production facilities, which were set up to respond to the cease of production at the facilities within the nuclear hazard zone, could not offset the degree of reduced production volumes that had already affected business.
-Sales of ceramics increased year-on-year due to the rise in demand of semiconductor manufacturing facilities and equipment.

Plastics Materials
-Sales of plastics used for coloring were lower year-on-year due to the fall in demand for these plastics in the automotive industry.
-Sales of adhesive film were lower year-on-year because of the drop in demand of protective optical sheets used on LCD panels.
-Sales of circuit-connection film for display panels were lower year-on-year due to the fall in demand of LCD TVs and PC monitors.
-Sales of non-contact IC cards and tags increased year-on-year due to the rise in demand by the amusement-park sector.

Circuit-board Materials
-Due to a drop in demand of PCs, sales of copper-clad laminate fell year-on-year.
-Sales of photosensitive film increased year-on-year as a result of greater demand for smart-phones and PCs.
-As a result, overall operating revenue for the sector fell 4.6% year-on-year to 240.4 billion yen; while operating profit significantly decreased, by 35.6% year-on-year, to 20.0 billion yen.

Automotive Parts
-Sales of interior and exterior molded-products and powder metallurgy products were lower year-on-year due to lower vehicle-unit production levels at OEMs due to the Great East Japan Earthquake and flooding in Thailand.
-Sales of friction materials were significantly lower year-on-year. This was the result of several negative factors that impacted operations. One was the overall decline in production volumes, which could not be made up by new production facilities that were set up to take over production at idled facilities where operations had ceased because they were within the hazard zone of the Fukushima nuclear-power-plant. Even though production at the new facilities eventually started, too much time had been lost during the down time. Another negative factor was the flooding in Thailand that caused production to cease at the Company's facilities located in the country.

Electronics Products
-Sales of circuit boards were lower year-on-year due to a drop in sales of circuit boards destined for mobile phones, and due to the fall in demand in the automotive industry.

-Sales of batteries increased year-on-year due to greater new-car sales of environmentally friendly vehicles such as those equipped with idling stop. Battery sales also rose due to a greater number of batteries sold in the after-sales market.
-Sales of condensers were lower year-on-year in Europe due to the reduction in subsidies for solar-power generating facilities.
-Sales of diagnostic pharmaceuticals were lower year-on-year because the Company sold off all the stockholdings in its subsidiary manufacturing and selling medical-equipment parts, although the Company experienced strong sales in diagnostic pharmaceuticals for allergies.


-The Company announced the outcome of the tender offer for shares of Shin-Kobe Electric Machinery Co., Ltd., which commenced on December 1, 2011, and ended on January 19, 2012. After completion of the tender offer, Hitachi Chemical will hold 97.78% voting rights of Shin-Kobe Electric. (From a press release on January 20, 2012)

-The Company announced that it will acquire all shares of its consolidated subsidiary Shin-Kobe Electric Machinery Co., Ltd. by way of the Tender Offer, to make Shin-Kobe Electric a wholly-owned subsidiary. Hitachi Chemical currently holds 58.26% of the total number of issued Shin-Kobe Electric shares. The tender offer period will run from December 1, 2011 to January 19, 2012 and the tender offer cost will be approximately 36 billion yen. In accordance with this, the shares of Shin-Kobe Electric will be subject to delisting. Collaboration between the companies has grown mostly in the field of research and development concerning resin and other materials for batteries, electric equipment, capacitors and plastic products. Hitachi Chemical's acquiring full ownership in Shin-Kobe Electric will contribute to accelerating the globalization of their automotive business and expansion of the industrial storage battery business, including large scale industrial lithium-ion batteries. In addition, it also aims to increase the production capacity of plastic products and to speed-up joint development. (From a press release on November 25, 2011)

Business Partnership

-The Company has announced it will commence discussions with Taiwanese high-grade specialty steel manufacturer Gloria Material Technology Corporation (GMTC). The talks will focus on the cooperation in production, sales, technology and investment regarding high-grade specialty steel, and the acquisition of a portion of stocks in GMTC by Hitachi Metals. The companies will reach a final decision on the definitive agreement within the first quarter of 2012. (From a press release on December 20, 2011)

New Company

-The Company and Japan Brake industrial Co., Ltd. established Allied JB Friction Pvt. Ltd. (AJF), a subsidiary to manufacture friction materials for motorcycles and automobiles in India jointly with Allied Nippon Limited (ANL), a joint venture company in India. The new company, which is invested 51 percent by the Hitachi Chemical group consisting of Hitachi Chemical and Japan Brake and 49 percent by ANL, will manufacture non-asbestos friction materials dedicated to the OEM market. At a cost of 1.5 billion yen. AJF will construct a new plant so that it will go into full operation in December 2012. It plans to generate 4 billion yen in sales in fiscal 2015. (From a press release on May 10, 2011)

-The Company announced it will establish a wholly-owned subsidiary for manufacturing plastic molded products for automobiles in China. The new subsidiary will produce rear door modules for Japanese-affiliated automakers, a first outside of Japan. The products have hitherto been sourced from the company's two production facilities in Japan. The new company called "Hitachi Chemical Automotive Products (Zhengzhou) Co., Ltd. will be constructed in the Zhengzhou Eco. & Tech. Development Area, Henan with a total investment of approximately 1.9 billion yen. It is scheduled to go into operation in October 2014 employing about 220 workers at the startup. (From an article in the Nikkan Jidosha Shimbun on May 2, 2011)

-The Company announced that it will establish a wholly-owned subsidiary in Zhengzhou, Henan province, China in May 2011. The new company, Hitachi Chemical Automotive Products (Zhengzhou) Co., Ltd., will manufacture and market automotive interior and exterior plastic molded products. The subsidiary is expected to start production in January 2014, with approximately 220 employees. The amount of investment is approximately 1.9 billion yen. (From a press release on April 26, 2011)

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)


R&D Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 FY ended Mar. 31, 2010
Overall 25,700 26,400 25,400
Advanced Components and Systems 6,800 18,400 -
Functional Materials 18,900 8,000 -

R&D Facilities

Tsukuba Research Laboratory Ibaraki Pref., Japan
Tsukuba Research Laboratory (Yamazaki) Ibaraki Pref., Japan
Tsukuba Research Laboratory (Shimodate) Ibaraki Pref., Japan
Hitachi Chemical Research Center, Inc. California, USA
Hitachi Chemical - SJTU Research & Development Center Shanghai, China

R&D Activities

<Functional Materials>
-The Company is conducting R&D activities mainly on its core products in this sector, which are electronics materials, inorganic materials, plastics materials, and circuit-board materials. It is working on developing, among other products, copper-clad laminates for package substrates/circuit boards and a transparent adhesive for display-panel components for smart-phones, etc.

-The Company announced it had developed a high heat conducting metallic substrate "High set HT-5100M." Hitachi Chemical has started its sample shipment and is planning to start its volume production later in this fiscal year. Use of unique epoxy material has achieved heat conductivity as high as 5W/m・K. In comparison with conventional metallic substrates, the new material can substantially reduce temperature of the LED package installed on the substrate. It is ideal for use in the area where the LED package is used, as for automobile headlamps. (From a press release on September 27, 2011)

<Advanced Parts & Systems>
-The Company is conducting R&D activities mainly on its core products in this sector, which are automotive parts and electronics parts, developing modular circuit boards for smart-phones, and lead-storage batteries for vehicles equipped with idling stop.

Technology licensing-out Agreement

(As of Mar. 31, 2012)
Company Other company Contract Details Period
The Company
Japan Brake Industrial Co., Ltd.
Federal Mogul Corp. (USA) Granting the working rights to the patent for disc pads. Providing technical information on disc pads 2007.3.31-
Until the time production of vehicle models that use the subject products is stopped
The Company Brembo S.p.A. (Italy) Granting the working rights to the patent for disc brake pads.
Providing technical information on disc brake pads
(The contract is scheduled to automatically renew every five years after the initial period ends.)

Technology licensing-in Agreement

(As of Mar. 31, 2012)
Group company name Other Party to the Agreement Contract details Period
The Company Hitachi, Ltd. Acquisition of patent rights and license to use technical expertise on μ-Chip tags. Apr. 20, 2007 to
Apr. 19 2019
Shin-Kobe Electric Machinery Co., Ltd. Panasonic Storage Battery Co., Ltd. (Japan) Acquisition of patent rights and license to use technical expertise on lead storage batteries July 1, 2004 to
June 30, 2014

Investment Activities

Capital Investment

(in millions of JPY)
  FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 FY ended Mar. 31, 2010
Overall 37,300  30,400 21,000
Electronics Products 19,600 16,300 -
Advanced Performance Products 17,700  14,100 -

Investments in Japan

-The Company announced that it has decided to add third and fourth production lines manufacturing carbon anode materials for lithium ion batteries for vehicles (anode materials for vehicles) at Yamazaki Works (Katsuta: Hitachinaka-shi, Ibaraki) with the investment of about 3.5 billion yen. This is in response to increasing demand for anode materials for vehicles in line with the expansion of markets for hybrid electric vehicles (HEVs), electric vehicles (EVs), and plug-in hybrid electric vehicles (PHEVs). Hitachi Chemical aims to begin operating these new lines in September 2012. For use in motor vehicles, Hitachi Chemical has developed graphite-based anode materials with high capacity density and high discharge efficiency for EVs and PHEVs with focus on extending driving distance. It has also developed amorphous carbon anode materials with excellent input characteristics for HEVs. Hitachi Chemical's anode materials for vehicles have been adopted by Nissan Motor Co., Ltd. for use in lithium ion batteries mounted in the EV called "Nissan LEAF" launched in December 2010. (From a press release on July 26, 2011)

Investments Outside Japan

-The Company said it will build a new facility to produce automotive carbon brushes at Hitachi Powdered Metals (Thailand), its Thai subsidiary to manufacture powder metallurgy products for automobiles, to avoid the risk of parts supply shortages that might be caused by natural disasters like an earthquake. Production will get started in late April. Hitachi Chemical wishes to enhance its parts supply capability by dispersing production at various locations, especially in Asia where demand for vehicles is rapidly growing. (From an article in the Nikkan Jidosha Shimbun on March 19, 2012)

-The Company announced that it will establish a second plant in the growing automotive market of Thailand to double its capacity to produce powder metallurgy products. The new plant will be constructed by Hitachi Powdered Metals (Thailand) Co., Ltd. (HPMT) at the Gateway City Industrial Estate. Operations are scheduled to begin in July 2013. HPMT has been operating in full throttle to cope with rising demand for powder metallurgy products in the growing vehicle market. Having no extra space to add a new facility at its existing production base, the subsidiary is locating the second plant at the new site, which will manufacture complex powder metal parts as well as those that are highly resistant to heat and wear. (From an article in the Nikkan Jidosha Shimbun on March 12, 2012)

-The Company announced on February 28 that Sintering Technologies, Inc. (STI), its subsidiary producing powder metal products in Indiana, U.S.A., has increased its capacity to make components of variable valve timing mechanisms by 50 percent. The company is expecting that requirements for the components will grow in North America, where demand for automobiles is increasing. The company aims to increase sales in the market by expanding its capacity. Effective April 1, STI will adopt a new company name, Hitachi Powdered Metals (USA), Inc. The subsidiary will thereafter strengthen its initiatives to further increase its presence in the market, capitalizing on the Hitachi Chemical brand. (From an article in the Nikkan Jidosha Shimbun on February 29, 2012)

-The Company announced that it will build a new plant for powder metallurgy products in India. In response to growing demand for powder metallurgy products in the market where production of automobiles and motorcycles is increasing, Hitachi has decided to shift its production to a local facility to assure stable supply. A wholly-owned subsidiary "Hitachi Chemical India Private Ltd., " which is capitalized at 1,842 million yen, will be set up at the Neemrana Industrial Area in the suburbs of New Delhi at a cost of about 1.9 billion yen. The plant is scheduled to go into full operation in April 2013 hiring about 90 employees. (From an article in the Nikkan Jidosha Shimbun on August 29, 2011)

-The Company announced that it will double production of disc brake pads in Mexico. Hitachi Chemical Mexico, S.A. de C.V., the company's production subsidiary in Nuevo Leon, will raise its yearly production capacity to 10 million units by August 2012, two times of the current level. Construction work started in April 2011 and the company is investing approximately 2 billion yen in the project. By conducting additional expansion programs, the Hitachi Chemical is looking to expand the capacity further to 15 million units by 2015. (From an article in the Nikkan Jidosha Shimbun on May 14, 2011)

Planned Capital Investments

(As of Mar. 31, 2012)
Location Equipment to be installed Estimated amount of investment (million JPY) From To
Hitachi Chemical (Nantong) Co., Ltd. China Facilities for producing plastics materials 5,100 Oct.
Namie Japan Brake Co., Ltd. Japan Equipment for manufacturing friction materials 3,500 May
Hitachi Chemical India Private Limited India Facility for producing powdered metallurgy products 1,900 Jan.