Business Outline
Mass flow controllers - devices that control gas and liquid flows in the semiconductor manufacturing process - account for around 70% of sales in this segment. As a result, the business is susceptible to trends in the semiconductor industry. HORIBA is therefore targeting stable profits by leveraging our technological resources to respond to demands in the 300mm semiconductor wafer market. Such demands focus on improving yield rates through total solutions relating to the control and analysis of process chambers.

Achieving the Goals of the Mid-Long Term Management Plan
The semiconductor manufacturing equipment market, which moved into a recovery mode in the second half of 2005, enjoyed its best year ever in 2006, surpassing even the IT bubble experienced in 2000. This was the result of rapid expansion centering on large-scale investment in DRAM and NAND flash memory production facilities that began at the start of the year.

The Semiconductor Instruments & Systems segment achieved significantly higher sales during the fiscal period under review. This was partly due to the commencement of operations at the Aso Factory in Kumamoto prefecture, which completed capacity expansion in October 2005 to become the segment’s main production facility. As a result, the segment was able to manufacture significantly higher volumes of its mainstay mass flow controllers and other fluid control devices as well as chemical monitors for cleaning equipment. This expanded manufacturing in combination with market expansion and a higher market share, particularly in the U.S., contributed to the much higher sales.

During 2007, the semiconductor manufacturing equipment market is expected to experience further expansion, particularly in equipment for memory production. The launch of the new Windows Vista PC operating system, together with increasingly sophisticated mobile phones, higher-capacity digital cameras and MP3 players are all expected to fuel this growth. However, prices for semiconductor memories and digital home electronics are falling rapidly, and as a consequence, manufacturers have become increasingly demanding with regard to the performance, cost and lead times of semiconductor manufacturing equipment.

To respond to this market situation, the segment is planning a number of initiatives: in its after-sales service operations it is opening a support center to cover the south of Taiwan, as well as increasing the number of personnel in South Korea and establishing additional support center in Shanghai, China. On the product development front, it is opening up a technology center in Silicon Valley California to augment the existing centers in Kyoto and Nevada in the U.S. The new center will serve as a base for developing measurement techniques that can contribute cutting edge semiconductor technology. In these ways, the segment is implementing a whole host of proactive measures to increase the pace of business development in 2007 and, ultimately, to increase profits.

Results for the Fiscal Year Ended December 31, 2006 and Business Strategies
The segment achieved strong results due to a number of factors, most notably increased demand stemming from the booming semiconductor market and the development of products meeting the specific needs of our customers. A successful ramping up of production at the Aso Factory in Kumamoto prefecture also contributed to the segment’s performance. By product, sales of the segment’s mainstay mass flow controllers, used in semiconductor manufacturing equipment, were significantly higher in Japan and North America. The higher sales resulted from expanded demand and greater market share. Sales of chemical concentration monitors also improved due to the increase in demand from manufacturers of cleaning equipment.

Outlook for the Fiscal Year Ending December 31, 2007
The advent of digital differential pressure-type mass flow modules which enable more precise gas flow control and the move to 300mm semiconductor wafers has created a growing demand for all types of yield-enhancing monitoring systems. In response, the segment aims to take advantage of the booming semiconductor market by launching products necessary for leading-edge semiconductor processes. New hydrofluoric acid concentration monitors for the interconnecting process and ultra-low concentration ammonia monitors for the lithography process will enter the market.

Product Applications
control of gas flows and monitoring of cleaning fluid concentrations in semiconductor manufacturing processes, semiconductor and LCD quality control inspections

Major Customers
semiconductor production equipment manufacturers, semiconductor device makers, semiconductor cleaning equipment manufacturers