SCREEN : Annual Report 2021 (Integrated Report) (A3)

A nnual Re p or t 2 0 21

Year ended March 31, 2021

S C R E E N G r o u p

A n n u a l R e p o r t

（ I n t e g r a t e d R e p o r t ）

Innovation for a Sustainable World

What is SCREEN Holdings?

SCREEN Holdings operates businesses involving semiconductor and display production equipment, printing equipment, and other product areas around three core technologies.

we have developed numerous products that boast

worldwide market share, and we continue to work to create new businesses by applying our core technologies.

Core Technologies

Surface processing	Technologies for modifying surfaces using coating,
technology	cleaning and etching material application devices
Direct imaging	Technologies for directly forming patterns and images on
technology	substrates using lithographic and inkjet devices
Image processing	Technologies for retouching, verifying and converting
technology	image data

Our future begins today…

The SCREEN Group hopes to inspire new ideas,

like drops of water that add moisture to parched earth.

As a solution creator, we are working to resolve many of the issues affecting society worldwide.

Each day, we dedicate ourselves to finding answers that will shape our future. In our quest, we use SCREEN's proven technologies and combined expertise to bring new value to the world.

Our goal is always to create shared and sustainable growth for both business and society.

And, of course, to remain an indispensable force for good in this world...

Corporate Philosophy

"Sharing the Future"

Earning the trust and meeting the expectations of society, while focusing on the future

"Human Resource Development"

Contributing to society by promoting human resource development through work satisfaction

"The Pursuit of Technology"

Developing innovative technologies and combining them with other existing technologies

Founder's Motto

"Shi Kou Ten Kai "(meaning to "expand awareness" in Japanese)

The Founder's Motto guides the SCREEN Group's thinking about how our technologies can help to address the issues facing society and how we can continue to create and develop products and businesses to resolve these challenges

System of Corporate

Philosophy

Corporate	Founder's Motto
Philosophy

Management Grand Design

Medium-term Management Plan

Annual Budget / Plan

CSR Charter / Code of Conduct

CSR Charter / Code of Conduct：This Charter describes the principles of action based on SCREEN's corporate philosophy and establishes the standards for all officers and employees of the SCREEN Group to comply with pursuant to the "Code of Conduct".

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Innovation for a Sustainable World

Contents

1. Introduction

1. Contents
2. About This Report

Vision and Strategies

05 Message from the CEO

Source of Value Creation and Competitiveness

11 Value Creation by the SCREEN Group

1. Identification of Megatrends and Material Issues

1. Invested Capital

1. History of the SCREEN Group

1. SCREEN Group's Core Technologies

1. 'Value Up 2023' Medium-term Management Plan

1. Message from the CFO
2. Value Creation through Our Businesses (SPE, GA, FT, PE, New Businesses)

ESG: The foundation for Value Creation

			45	Environment
E		Environment
			48	Health, Safety and Wellbeing
S		Social
			49	Human Resource Management
			52	Working Together with Our Stakeholders
			53	Message from the Chairman of the Board
G	Governance
			54	Corporate Governance
			60	Message from the	● The following abbreviations are sometimes used for
				New Outside Director
				business segments / company names when they are
			64	Risk Management	mentioned in this report:
			66	Compliance	HD = SCREEN Holdings Co., Ltd.
			SPE = Semiconductor production equipment business /
					SCREEN Semiconductor Solutions Co., Ltd.
Corporate Data		GA = Graphic arts equipment business / SCREEN
	Graphic Solutions Co., Ltd.
67		Performance Highlights	FT = Displayproductionequipmentandcoaterbusiness/
	SCREENFinetechSolutions Co., Ltd.
69 Eleven-year Trends in Key Financial and	PE = PCB-related equipment business / SCREEN PE
Solutions Co., Ltd.
		Nonfinancial Indicators	● The names or abbreviations of the business segments
		are those used as of March 31, 2021.
71 Basic Information / External Assessments
● All years shown are for the accounting year ending

March 31of the year shown. For example, "fiscal year ended March 31, 2021" or "FY2021" means the period from April 1, 2020 to March 31, 2021.

About This Report

Editorial Policy

Since 2010 our Annual Reports have integrated financial and non-financial information for the purpose of more comprehensive reporting of our corporate activities from a medium- to long-term perspective. This year, a special emphasis is being placed on the contents to show the coherence and narrative relevance with value creation process. In compiling this report, we referred to the IIRC＊1 "International Integrated Reporting Framework" and the "Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation" (Guidance for Collaborative Value Creation) of the Japanese Ministry of Economy, Trade and Industry (METI). In addition, GRI Standards of the GRI＊2 is referred to in non-financial reports. And, the Annual Report 2021 Financial Section and the Fact Book for detailed financial information and the Sustainability Data Book for non-financial information, the GRI Content Index＊3 is also available on the website as an index of disclosure items.

*1 International Integrated Reporting Council

*2 Global Reporting Initiative

*3 See the GRI Content Index

(www.screen.co.jp/en/sustainability/gri)

Position of This Report

High

Importance for Stakeholders

High

Importance for SCREEN Value (Social Value + Economic Value)

Publication

October 2021 (previously published October 2020, issued once a year)

Reporting Period

Fiscal year ended March 2021 (April 1, 2020 to March 31, 2021)

Note: Some of the information in the report is for the fiscal year ending March 2022

Scope of Coverage

This report covers SCREEN Holdings Co., Ltd. (holding company) and its consolidated companies (as of March 31, 2021).

Note: Data that does not relate to these companies is presented in the form of footnotes.

Disclaimer

• The plans, strategies, and statements related to the outlook for future results in this document are in accordance with assumptions and beliefs determined by management based on currently available information. However, it should be noted that there is a possibility that actual results could differ significantly due to such factors as social and economic conditions.
• All amounts shown in billions of yen are truncated to the nearest billion. Amounts shown in millions of yen are rounded to the nearest million yen.

• Annual Report (this booklet)

Emphasis

Coherence and narrative relevance with the value creation process

• IR website, Annual Report Financial Section, Fact Book
• Sustainability website
• Sustainability Data Book

Emphasis

Comprehensiveness and timeliness of information

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Vision and Strategies

Message from the CEO

Becoming a Higher Grade Corporation toward the

Completion of the Medium-term Management Plan

Pursuing Profitability and Efficiency

Q1	How would you sum up the previous fiscal year, as the first year of our medium-term
management plan?

During the first year of Value Up 2023, our current medium-term management plan, COVID-19 impacted our business performance in ways that are still unclear. For this reason, we have recognized the first year as an abnormal period and extended the three-year term we generally use for these plans to four years. However, during the year, we were able to confirm that certain business operations are possible even under the restrictions on personnel mobility imposed by COVID-19 and moved forward without revising our initial plan.

In terms of business performance, our initiatives to improve both profitability and efficiency, two high-priority areas for us, began to filter down through organizational levels and we substantially improved operating income despite a drop in revenue compared to the previous period. Also in relation to

our finances, we managed to return to a balanced net cash position with virtually no debt and over the course of the year, I truly felt we were moving toward a full recovery.

With regard to the overall business environment, the difference between our companies that have been positively impacted (SPE, PE) and negatively impacted (GA, FT) by COVID-19 became clear. It was definitely a year of stark contrast in this respect.

In addition, for the current fiscal year, ending March 2022, we are forecasting record totals for sales, operating income and dividends. These results are largely due to the strong market environment currently driving our core semiconductor production equipment business (SPE).

Refer to "Value Up 2023 Medium-term Management Plan" on p. 25.

Toshio Hiroe

Representative Director

President

Member of the Board

Chief Executive Officer

	Consolidated Performance Summary (Fiscal year ended March 31, 2021)	（%）
	■ Net sales	● Ratio of operating income to net sales
		11.4	15
	12.6	8.1		7.6		10
（Billions of yen）			3.9		391.5	5
				（Forecast）
400		364.2
339.3	323.2	320.3	0
200
0		Challenge 2019			Value Up 2023
	2018	2019	2020	2021	2022
					(Years ended March 31)

Q2 Can you tell us what personal ideas you have included in Value Up 2023?

The starting point for the plan was to envision how we should	years and by backcasting from this image, I was able to
improve based on the issues I perceived immediately after	formulate Value Up 2023.
becoming president. Fortunately, I had SCREEN's Management	In creating this plan, I relied on the experience and insight
Grand Design, our vision and guideline for SCREEN Value	gained through my own work in development, production and
enhancement, which I inherited from Chairman Eiji Kakiuchi	international sales. For example, I was aware that issues
(formerly president). Once I added my own perspective to this,	occurring upstream in our supply chain management, that is, in
it became much clearer where we needed to be in next 10	our sales and service activity to customer, were not being

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Vision and Strategies

synchronized with related issues in development and production, and with no attempt to achieve overall optimization of operations, this was leading to significant inefficiencies.

as a solution creator* and, two, called for us to improve our corporate value by increasing both our social and economic value.

Using these KPIs, the relevant officer at each business operating company planned and executed activities within their own organization that were connected to improving profitability and efficiency. Measuring the results of these activities allowed us to clearly understand the performance of each department.

Following the introduction of ROICs, businesses with inefficiencies have become apparent. I believe the introduction of appropriate structural reforms, will become an important principle for our operational strategy during the period of Value Up 2023. I now recognize that this process is also crucial as a business portfolio strategy and one that management must clearly understand going forward.

These types of discussions have led to a shift in thinking at management level that has spread to all employees, producing a similar change. I feel this is a key reason why we were able to improve our financial performance in the first year (ended March 2021) of Value Up 2023.

So employees can better understand the essence of the plan, I always focus on communicating my thoughts as CEO, including why each aspect is necessary, what I (as president) am asking of them and how they should respond. In doing this, I make full use of our Group's in-house magazine (intranet and print versions) and also distribute videos with high messaging value t hat, for example, include comments f rom my perspective as CEO on the figures achieved in quarterly financial results or explanations of management aims for themes implemented during a period.

In addition, after this type of information delivery, I follow a procedure whereby I first gather feedback from employees using a questionnaire format. When points that are unclear or require answers are identified in these responses, I create opportunities to provide quick and detailed explanations in order to facilitate two-way communication.

If we look back at the Group's history, we have had an internal problem whereby our performance grow quickly while the market is in an upward phase but once there is a downturn, it takes some time to recover. I have realized that in the downward phase, we pay the price for the inefficient operation we usually pursue during the upswing and, also, that this inefficiency means we cannot invest enough cash in our future growth.

It is essential to eliminate such problems and during the creation of the plan, I assembled a special project team with the Corporate Planning Department of SCREEN Holdings (HD) as its secretariat. Its members were drawn from the

Personally, I hope that every one of our employees will become "a solution creator". Developing solutions involves more than responding to customer requirements in areas such as sales, production and after-sales services. It also includes solving the issues each organization is facing to improve corporate value. I believe that if each person can adopt the mindset of a manager while creating solutions, our SCREEN Value will improve definitely. I am currently working to promote this approach throughout the Group.

I have also organized and specified the issues included in Value Up 2023 in terms of their materiality based on my recognition of their importance as CEO. This method should

SCREEN Group in-house magazine, NIJI Special Issue

Q4	Can you explain the idea of generating innovation,
which is designated as a priority area in Value Up 2023?

frontlines of each business operating company and were mainly young people who will lead the next generation of employees. We met repeatedly to discuss key topics including the type of reforms necessary to overcome the challenges faced by the Group and create a path for future growth.

As a result of these discussions, we decided on a basic policy that, one, advocated us establishing a presence in the industry

help me to better visualize the priority of each one and use them effectively in communication with our stakeholders.

*A Solution Creator refers to a company that enhances corporate value by contributing to the development of society and providing customers around the world with technologies, products, and services that solve social issues and needs. (Please refer to p. 25 in this report for further details.)

Refer to "Identification of Megatrends and Material Issues" on p.13.

The business environment in which our Group operates is changing very rapidly in all fields, and this requires both speed and innovation from us. This is also precisely why I believe business opportunities will always exist and the markets themselves will continue to grow.

Demand for semiconductors is expected to continue its present growth even after the situation created by COVID-19 returns to normal. This rise is associated with, in particular, the increasing utilization of 5G and AI and their expanding applications for the Internet of Things (IoT) and electric vehicles, as well as the rapid adoption of remote working and

investment based on forecasts of market and technological changes.

In fiscal year ended March 31, 2021(FY2021), based on market signals and technological trends identified within such an approach, we launched several projects inside HD and started various new initiatives that we plan to commercialize. At the same time, we also established and then strengthened a marketing department designed to handle this function for HD. As well as implementing strategic investments based on the identification of market and technological shifts, I would like to promote collaborate with external parties with whom we

Q3	What measures are being used to improve economic value and
how do you communicate them to employees?
We have introduced return on invested capital (ROIC) as an	profitability but also our efficiency. In addition, we have set
indicator for tracking the improvement of our economic value.	GEMBA KPIs , tailored to each workplace. By linking these
As well as helping us to achieve continuous and irreversible	indexes to ROIC values, we have been able to build a system for
gains, it provides an effective way to visualize not only our	measuring the results of our activities.

acceleration of the current digital transformation (DX).

As a result, significant advances will be required in the semiconductor technologies that underpin these trends and I expect the entire electronics industry will progressively transform itself in conjunction with this evolution.

In this case, innovation management will be highly meaningful due to its capacity to swiftly detect these types of changes and produce the necessary solutions. This is because management needs to be aware of areas for strategic

can expect synergistic effects or utilize mergers and acquisitions. This should enable us to create powerful solutions and build a solid business portfolio.

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