2019 New Year's Address from President Yoshiaki Yoshida (abridged)

Continue Progressing Towards the Future Together

Happy New Year, everyone!

2018 was a wonderful year for Advantest. In 2019, we can expect the continuation of a situation best described as uncertain and unpredictable. The world economy is expected to grow again this year, but the risk of an economic downturn is large, and we need to keep a close eye on US-China trade friction.

It is estimated that the semiconductor market grew by double digits year-on-year for the second consecutive year in 2018. Despite a significant slowdown expected in 2019, positive growth is still predicted. Meanwhile, the semiconductor test equipment market is expected to adjust this year, but the adjustment will be minor and temporary.

Thus, although we should not take our eyes off the global situation in 2019, the environment surrounding Advantest is still bright.

Our Grand Design predicts that the semiconductor tester market will grow over the medium to long term while repeating cyclical ups and downs. The background is that data is taking on a leading role, and when semiconductors, which handle this source of value, become a kind of social infrastructure, higher reliability is required and the importance of test is increased.

Because this trend will not change, even if the market falls in 2019, the decline will not be drastic nor will it last many years. We are now in a process of cyclical growth. There's no need to look down. Let's face forward and get cracking.

Fiscal 2019 is the middle year of our three-year mid-term plan. The goals of the mid-term plan are sales of 250 billion yen, operating income margin of 17%, ROE of 18% and earnings per share of 170 yen, averaged out over three fiscal years. Results for 2018 are expected to exceed these figures, but to achieve the goals of the mid-term plan, we need to secure certain sales and profits in FY 2019, and again put the company on a growth trajectory in FY 2020.

So 2019 is an important year for achieving our mid-term plan goals. Any adjustment in the market is not a reason for us to sit back and do nothing. There are many things to do for the future.

In the past year, orders have bunched up, and we have been continually under pressure to make delivery dates. We will finally get a breathing space this year. The R&D division should prepare everything for product development in line with coming new technologies. In addition, the production group should confirm that our production system is adequate to handle the next increase in orders, and make any necessary additional arrangements.

Last year, in order to evaluate the performance of each business, we introduced the new standard of AVA 2.0, incorporating the idea of ROIC (return on invested capital). You should all be conscious of what you must do in order to achieve AVA 2.0 goals for your business while tackling your daily tasks.

In our mid/ long-term management policy, we feature the phrase "Tested by Advantest". Currently, we are in the midst of a digital transformation which purports to solve various social problems with technology. In other words, the significance of semiconductors will increase. Advantest can further contribute to solving social problems by expanding our business. This is the same idea aimed at by the SDGs (Sustainable Development Goals) of the UN. Already, we have tied the activities of our company to the SDGs. This year we will incorporate the SDGs into our strategy. In this way, we hope to enhance corporate value by strengthening the structures that contribute to people's security, safety, comfort and sustainable future. Everyone, please be conscious of the SDGs as you continue your daily work.

In order to realize the vision of our Grand Design, we have stated that we want Advantest to be the "No.1 provider of test and measurement solutions." Although it is not yet certain, it appears that we recaptured the No. 1 share of the tester market in 2018. To extend our reign in the No. 1 position, we must firmly grasp the needs of customers to ensure we can provide the solutions they require, when they require them.