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HOYA Corporation
ANNUAL REPORT 2011
For the year ended 31 March, 2011
Onwards and Upwards

Table of contents

  • Page 1
    ANNUAL REPORT For the year ended 31 March, 2011 2011 Onwards and Upwards HOYA Corporation

  • Page 2
    ... Achievements: Review of Fiscal 2011 HOYA is pursuing calls for maintaining our competitive edge with the aim of capturing a certain level of revenues in Information Technology, which pivots on our exceptional optical technology, and accelerating growth in Life Care by injecting management resources...

  • Page 3
    ... as Japan's first optical glass manufacturer, HOYA has pursued a basic business strategy of being "a big fish in a small pond." The "pond" is the market and the "fish" is the share of that market. This expresses the basic strategy of gaining a dominant position by capturing the top market share in...

  • Page 4
    ... Officer With burgeoning signs of a recovery in the global economy, in the fiscal year ended March 2011 HOYA actively carried out operations in target markets in its various business sectors. Having converted to a lean, muscular organization in the global financial crisis, the Company promoted...

  • Page 5
    ... intraocular lenses used in cataract surgery, new pre-loaded products enjoyed steady growth, and we increased our share even in our main market of Japan. We were also successful in steadily expanding market share in the U.S. and emerging market countries. In endoscopes for medical use, sales slowed...

  • Page 6
    ...new products by investing in new technologies and partnering with other companies, while also considering M&A deals at the global level. In the Information Technology segment, the other of our two business drivers, we have continually maintained a high share of our markets, but many of those markets...

  • Page 7
    ... are vital to the operation of products large and small that we rely on for our daily activities. These chips control everything from PCs, mobile phones and digital cameras to home appliances and automobiles. Moore's Law symbolizes the remarkable speed of advances in semiconductor performance. The...

  • Page 8
    ... of a millimeter). Today, semiconductor makers use nanometers (one millionth of a millimeter) instead. The switch to nanometers, which are used to express the size of molecules and atoms, demonstrates the exacting demands now placed on semiconductor miniaturization. HOYA Annual Report 2011

  • Page 9
    ... strength. Lasers are used as the light source in steppers, which are machines that project microscopic circuitry on wafers. The most advanced technology is ArF laser immersion lithography, which uses a wavelength of 193nm. This technology can form lines only 40nm to 30nm wide, a level no other type...

  • Page 10
    ... Many problems must be solved before manufacturers can use EUV lithography on their production lines. Interest in EUV first emerged more than 20 years ago. The fact that this technology has not genuinely reached the practical, mass productions stage shows how high the technological barriers...

  • Page 11
    ... facilities at last. As the world's largest supplier of mask blanks, Hoya long ago began EUV research activities. Over the years, Hoya steadily moved closer to commercializing this technology by surmounting one hurdle after another. Mass-production EUV equipment will probably appear after a few...

  • Page 12
    ... in the health care field. MEMS may be used in artificial hearts, inner ears and other organs. As part of a smart grid, MEMS could create a system that precisely oversees power consumption of individual home appliances. The result would be a big contribution to solving problems involving energy...

  • Page 13
    Medical Endoscopes - Clinical Application and Market Opportunity Introduction to medical flexible endoscopes Flexible endoscopes are used by physicians to examine the interior of human organs (such as esophagus, stomach, duodenum, colon, lung, etc.) and to assist in minimally invasive medical ...

  • Page 14
    ... improving both the quality of service provided and the access to superior healthcare. Our aim at PENTAX Lifecare is to serve the evolving needs of the market and grow our annual revenue by at least 10% in the developed countries and by over 30% in the emerging countries. HOYA Annual Report 2011

  • Page 15
    ... the best endoscopic products and services with a focus on QUALITY, CLINICALLY RELEVANT INNOVATION, and SIMPLICITY. Through leading edge R&D and manufacturing, we provide endoscopic imaging devices and solutions to the global medical community under the brand name of PENTAX. We specialize in...

  • Page 16
    ... product quality and reliability Ensuring the optimal durability, usability and quality of products to increase customer productivity Broad portfolio Leading the market with a broad portfolio of product offerings to suit each customer in every clinical field of endoscopy HOYA Annual Report 2011

  • Page 17
    ... Products and technology Focus on enhancing the clinical value proposition ·Address unmet clinical needs ·Increase customer benefit and quality of clinical outcome ·Create and leverage a competitive advantage Lead with "Advanced Application" products and solutions Innovate premium end technology...

  • Page 18
    Sales Strategy Focus on customer satisfaction. Strengthen our brand. Expand rapidly into emerging markets and broaden global reach with local distributors. Physician training. HOYA Annual Report 2011

  • Page 19
    ...digital information and communications technologies, and optical technology-based imaging related products that are necessary to import pictures and video images as digital information. The Life Care business produces and sells health care related products for daily use in the healthcare and medical...

  • Page 20
    ...result, sophisticated technologies and highly reliable quality control systems are critical for smooth business operation in this sector. The Other Businesses segment mainly offers information system services, and takes charge of new businesses. Net Sales In the fiscal year under review, the global...

  • Page 21
    ... this. In the Life Care business, healthcare related products (eyeglass lenses and contact lenses) fared well, while in medical related products (endoscopes for medical use), profitability improved year on year amid a recovery in the market. On April 28, 2010, moreover, Hoya Corporation completed an...

  • Page 22
    Profit before tax/Net income Profit Ratios Profitability

  • Page 23
    ... products, primarily in the medical field, while also making timely investments in corporate mergers and acquisitions and R&D for future growth, as well as investing to ensure sufficient production capacity and to develop nextgeneration technologies and new products. In the fiscal year under review...

  • Page 24
    ... per share Financial Position Total assets as of March 31, 2011 stood at ¥578,641 million, an ¥18,351 million or 3.3% increase compared with...part to an increase of ¥31,703 million in retained earnings. Equity attributable to owners of the Company, which is obtained by deducting non-controlling...

  • Page 25
    ...-related products and glass disks for HDDs. In the Life Care business, the company invested to boost production capacity, centering on Asian production plants, with a view to expanding eyeglass lens production volume. Depreciation and amortization costs for the fiscal year under review decreased...

  • Page 26
    ... (a decrease of ¥5,808 million). As a result of the above, the balance of cash and cash equivalents as of March 31, 2011, was ¥185,252 million, a year on year increase of ¥17,313 million. Cash flow provided by operating activities Subsequent Events Nothing of note. HOYA Annual Report 2011

  • Page 27
    ... its corporate value in each of these domains, the Group continues to make decisions with respect to the allocation of management resources while monitoring operating results. In this context, the HOYA Group has further identified three reportable business segments: Information Technology; Life Care...

  • Page 28
    ...in the digital camera market. This was largely attributable to the positive turnaround Sales in global demand particularly in emerging countries. Shipment volumes of camera modules incorporating interchangeable lenses were also strong. In its finished stock lens lineup, HOYA's Pentax brand digital...

  • Page 29
    ... with the previous year. Profit for the year before tax amounted to 36,743 million yen, up 12.4% year on year. Health Care related products Eyeglass Lenses Contact Lenses and Eyecity Medical related products Endoscopes for Medical Use Intraocular Lenses (IOL) New Ceramics ANNUAL REPORT 2011

  • Page 30
    ...mask blanks business in the volume shipped. In value terms, however, sales declined year on year as a consequence of falling unit prices and unfavorable exchange rates. Hoya faces continued competition in both cutting-edge and generic products, but maintains a high share of the mask blanks market by...

  • Page 31
    ... therefore holds promise. In fiscal 2012, the Company will endeavor to increase its exposure to these segments of the market, with a view to steadily growing earnings. In addition to cementing its position in this manner, Hoya remains committed to supplying high-precision photomasks as well. The...

  • Page 32
    ... also working to share information and integrate functions across its bases in all three countries. Concurrently, the Company is analyzing the medium-term market outlook with a view to creating a clearly defined roadmap and manufacturing products that accurately meet market needs. ANNUAL REPORT 2011

  • Page 33
    ...Outlook for Fiscal 2012 Fiscal 2011 Business Overview and Results Hoya develops and manufactures glass disk substrates for 2.5inch memory disks in hard disk drives (HDDs), which are used mainly in notebook PCs and external hard drives. During the fiscal year under review, the market for these HDDs...

  • Page 34
    ... mainstream, mass Mold for Discrete track recording media production of the next generation of media is projected to begin in around 2013. As a leading glass disk company, Hoya is working actively to develop materials and processing technologies for next-generation media. 1:In this method, channels...

  • Page 35
    ... distinguishing itself from rivals. Hoya's unique competitive strength is its integrated production system, from optical material development to lens manufacturing, which it will continue leveraging to meet demand for optical lenses supporting ever more advanced digital products. ANNUAL REPORT 2011

  • Page 36
    ... spot light source including industry and medicine, a glass melting joint venture in China began operating in the first half of 2011. The Company expects this joint venture to enhance its cost competitiveness, affording it an extra edge over global rivals. Hoya's polarized glass is used in optical...

  • Page 37
    ... irradiation from spot to area exposure, Hoya has gained access to new markets, one such application being UV curing of industrial inkjet printer inks. Broad surface UV irradiation will enable the ink to be cured rapidly, which in turn contributes to good print quality. ANNUAL REPORT 2011 Line-type...

  • Page 38
    ... the new models would be as groundbreaking and equipped with new technologies they sought. PENTAX began the year in review with momentum from the PENTAX K-x launched in 2009, which was a huge hit, setting the record in volume sales for the company's line of digital SLR cameras. The uniqueness...

  • Page 39
    ... SLR cameras from the onslaught of mirrorless models. With no groundbreaking technologies on the horizon, the market as a whole moreover is expected to remain in deadlock. Under these circumstances, Hoya has decided to transfer the PENTAX Imaging Systems Business to Ricoh on October 1, 2011. ANNUAL...

  • Page 40
    Fiscal 2011 Business Overview and Results Outlook for Fiscal 2012 Fiscal 2011 Business Overview and Results Hoya manufactures and sells DVD/CD-compatible hybrid lenses, plastic Blu-ray pickup lenses, and plastic lens units for digital cameras. We were the first company in the world to successfully...

  • Page 41
    .... Meanwhile, eyeglass retail markets in the BRIC countries expanded at a rate of around 20%. FFS lenses Wholesale markets for eyeglass lenses saw competition intensify because of the entry of lowpriced, single-vision commodity eyeglass lens suppliers from China, India, Eastern Europe and elsewhere...

  • Page 42
    ... in excess of the average market growth rate. As a new initiative, Hoya opened specialized and dedicated training centers in Budapest, Hungary and Shanghai, China, for sales optometrists of eyeglass retailers. Hoya believes that such training centers will play an increasingly important role in the...

  • Page 43
    ... locally. The economies of scale as the largest contact lens chain in Japan made Eyecity to execute competitive pricing strategy. As a strategy, it proved highly effective in acquiring new customers for existing stores. On the advertising and sales promotion front, we continued to convert from paper...

  • Page 44
    ... the service-oriented brand image of Eyecity. The contact lens industry tends to primarily promote location and price. But, through out mass media advertising, we hope to bring our superior service orientation as a new rule of games in the market competition. Mass media advertising has been an issue...

  • Page 45
    ... India. These changes were also directed at increasing the market share in Japan. (3) Product development A new product development process in the endoscope business is in the process of being implemented, where the objective is now to combine the best-in-class products expected of a large company...

  • Page 46
    ... will work on further strengthening the PENTAX brand, along with its launch of global Website. In terms of organization, the endoscope business aims to transform its corporate culture toward more focus on accountability and results, through a still-greater emphasis on speed, execution, and customer...

  • Page 47
    ... and reports published in various medical journals, among other tactics. The fiscal year in review was also the year in which Hoya's IOL business truly began to globalize. In the U.S., the single largest IOL market in the world, a business Hoya launched in 2009 with the iSertâ„¢ preloaded IOL system...

  • Page 48
    ...new markets. Hoya will continue to focus its R&D and Commercial teams into two key areas; the development of lens optics that provide enhanced vision and lens delivery systems that minimize patient recovery thru micro-incision surgery. Hoya will leverage these technologies to promote global business...

  • Page 49
    ...this business going forward. Against this market backdrop, New Ceramics saw earnings increase on flat sales, as a result of initiatives the business took to improve operational efficiency. A prosthetic filler for bone defects, APACERAM, Hoya's mainstay in the apatite product category, is used mainly...

  • Page 50
    ... of new products that use metal alternatives. Entering the metallic implant market will continue to be a goal, and the business will target the European market in particular. The market for chromatography media is expected to continue to grow steadily in fiscal 2012 as well. ANNUAL REPORT 2011

  • Page 51
    ...and cultivating new businesses and technologies from a long-term perspective. Hoya reorganized its Corporate R&D Center in fiscal 2011, with a view to strengthening the optical technology and technical planning departments. The objective is to provide technical support to each business division, all...

  • Page 52
    ...-type diffractive lenses, improving surface profilometry resolution with digital holography, and for measuring transmittance in microscopic thin films. The department is also working to develop new optical products. Nanoimprint Technology: Hoya is putting its lithographic technologies to use in the...

  • Page 53
    ... high-speed transmission of 1.25-2.5 gigabyte per second over fiber optic lines and networks. Biocompatible Materials: Hoya is researching biocompatible materials for ophthalmological applications. Hoya already has a visual correction lens business that handles intraocular lenses (IOLs) and contact...

  • Page 54
    ...portfolio management activities devoted to the formation of global patent networks that will be coordinated with the moves of its production bases and sales and trading partners into international markets. Cross-Licensing and Out-Licensing Hoya's individual businesses are not large, but the Company...

  • Page 55
    ... efficient in commercializing a product, Hoya takes steps to seek licenses to use third-party patents or introduce their technologies. As just described, respect for the intellectual property rights of the Company and of others is a basic stance of the Hoya Group. Systems Supporting Intellectual...

  • Page 56
    ... Filed During the year under review, Hoya had registered 4,065 patents and utility models in Japan. The main businesses of the ElectroOptics and Vision Care divisions accounted for 29% of these, while PENTAX medicalrelated devices accounted for 38% and camera and optical products for 28%. In 2010...

  • Page 57
    ... for HOYA's corporate governance systems. Board of Directors (As of June 23, 2011) Directors Yuzaburo Mogi* Apr.1958 Mar.1979 Mar.1982 Oct.1985 Mar.1989 Comment from an Outside Director Joined Noda Shoyu Co., Ltd. (present Kikkoman Corporation) Director of Kikkoman Corporation Managing Director of...

  • Page 58
    ... the Company President of HOYA Corporation USA Director of the Company Managing Director of the Company President, Electro Optics Company Executive Managing Director of the Company President and Representative Director of the Company Director, President, Representative Executive Officer and CEO of...

  • Page 59
    ... in Article 2, Item 15 of the Company Law. Executive Officers Hiroshi Suzuki* Hiroshi Hamada* Kenji Ema* Taro Hagiwara *:indicates Director President & CEO Executive Officer & Chief Operating Officer Executive Officer & Chief Financial Officer Executive Officer, Technology HOYA Annual Report 2011

  • Page 60
    ... products related to eye care and medical care. Businesses promoting health will no doubt experience major growth globally, including in emerging markets, and so I expect will Hoya's Life Care segment going forward. Medical businesses are involved in none other than human life, and technological...

  • Page 61
    ... now carried out under a new system headed up by the Hoya Group Director for Environmental Protection, Occupational Safety and Health. Hoya Group Environmental and Occupational Safety and Health (OSH) Organization At the end of March 31, 2010, the Company issued a Hoya Group Facility Standard for...

  • Page 62
    ...and equipped with a dedicated valve for flushing out clogs. Activities to Increase Waste Recycling Recycling Empty Contact Lens Containers Disposable lenses are the most popular contact lens product at the Eye City contact lens specialty chain operated by the Eye Care Division. In fiscal 2010, Hoya

  • Page 63
    ...cases from customers' used lenses for recycling. The empty plastic cases collected from around the country were then sold to a manufacturer of recycled products, and the proceeds were donated, with a matching contribution from Hoya, to the Japan Eye Bank Association. In the first half of fiscal 2011...

  • Page 64
    ... Risk Assessments in Reducing Risk Along with the rising popularity of OHSAS18001 certification, the Company issued the Hoya Group Risk Management Guidelines for Occupational Safety and Health in November 2009. This guideline has since been used to bring more cohesion to the risk assessments among...

  • Page 65
    ... times a year and Hoya Group foreman training is held twice a year. Consulting on the subject matter within the group is provided mainly to the business bases overseas. Each of these activities contributes to raising the level of safety at the Hoya Group. HOYA Annual Report 2011 Employee training

  • Page 66
    ... officer) and healthcare management (occupational physicians) programs. Special Health Checkups and Healthcare Instruction Since 2002, Hoya has run a lifestyle habits improvement program for employees designed to prevent metabolic syndrome. In the fiscal year under review, the Company held special...

  • Page 67
    the Hoya Group scored well in an objective evaluation of its health and hygiene management initiatives. Occupational Health Certification HOYA Annual Report 2011

  • Page 68
    ... of exchange rates and interest rates, international situations, market trends and economic conditions, competition, production capacity and research and development capabilities and so on. Please refer to Business Risk. The information posted on this HOYA Annual Report website is not provided...