2018 New Year's Address from President Yoshiaki Yoshida (abridged)

A Year of Dramatic Gains for the Next 10 Years

TOKYO, Japan, January 5, 2018 - Yoshiaki Yoshida, president and CEO of Advantest Corporation (TSE: 6857), recently delivered a New Year's address to employees, outlining the company's major goals for 2018:

Happy New Year, everyone.

2017 was a busy but very satisfactory year for Advantest.

The global economic growth phase that began in the middle of 2016 is still gathering momentum. However, it is thought that central banks will increasingly shift from monetary easing to tightening. We must not forget that depending on the timing and speed of these moves, they may boomerang and cause geopolitical tensions, among other risks.

The semiconductor market gained more momentum than expected in 2017, with the memory market showing particular strength. It is likely to continue expanding this year.

The semiconductor test equipment market also grew strongly last year, led by the memory sector, and I expect further solid growth this year.

So I think our business environment will continue to be bright in 2018.

We must build, as soon as possible, a production system that can respond to the strong levels of demand I’ve just mentioned. Our efforts in this direction are continuing, but as the market is expanding beyond our initial expectations, we have not yet managed to catch up with demand. However I believe we can accelerate these activities so as not to lose business opportunities.

If production can be smoothed out, sales will further increase. Regardless, we do foresee achieving a comfortable level of sales in 2018, so I would like to focus on growing our profits.

Each business and product will have a profit ratio goal, and the team responsible will focus on achieving it by thinking seriously about how to improve profit margins and executing their strategies on the premise that it is essential to achieve their goals.

I have often spoken about the signs of change in the tester market. The digital revolution is progressing with technologies such as the IoT, self-driving cars, AI, huge data centers, 5G communication, etc., all heading towards widespread adoption. This means that semiconductors will be used in more and more places. Not only will the number of semiconductors shipped grow, so will the other demands on them. The importance of reliability will increase in step with performance-related demands for higher speed, power saving, process shrinks, larger capacity, and miniaturization. On the other hand, it will become more difficult to guarantee reliability with conventional methods. That means testers will have to become more sophisticated and optimize the entire testing process.

I believe 2018 will be a year when "signs of change" become actual changes. These major changes in this tester market will continue not only in 2018 but also in the medium term.

We will make the necessary investments so that Advantest's test solutions can continue to support semiconductor innovation, whether this means recruiting new talent, making alliances with other companies, or M&A. To ensure we are not left behind by change, and in fact can anticipate it, we will need everyone’s input. I have asked all employees to pool their knowledge and examine the situation from various viewpoints.

In order to "support technology on the leading edge", each and every Advantest employee and the company as a whole needs to constantly learn. To support the world's most advanced technology, our employees must work together worldwide.

Last year there were several incidents of high-profile fraud involving well-known Japanese companies. Advantest is treating these incidents as object lessons in what could happen if stringent controls are not maintained. There are many things we have to do to expand our business and grow our company. But that does not mean anything goes. There are rules we must all abide by, and I take it as my personal responsibility to ensure that all Advantest employees remember them.

50 years have passed since Advantest, at that time known as Takeda Riken Industry, first undertook the development of a tester in 1968. That initial project team had only 5 members. The testers that they worked so hard to develop soon grew into a business, and became a pillar of our company as the semiconductor industry took off. Now, 50 years later, the tester market is changing and is poised to make a major leap forward. In honor of our predecessors, we aspire to emulate their can-do spirit and develop Advantest further, so that employees in the future can look back and say that 2018 was a wonderful year.

Advantest was a shining example of profitability from the late 1990s through the middle of the 2000s. After that, unfortunately, we became an ordinary company in terms of profit. But we have a good chance of recovering our stellar profitability in 2018. Either way I am sure that 2018 will be a year of reinvigoration for Advantest, and a year of dramatic gains for the next 10 years.

Note: All information supplied in this release is correct at the time of publication, but may be subject to change without warning.