DAIHEN : REPORT 2023 Download (12.6MB)

I N T E G R A T E D R E P O R T

2023

CONTENTS

1. Our Management Approach
2. History of the DAIHEN Group

1. Business Overview

1. Financial / Non-financial Highlights

Value Creation

1. Message from the Management

1. Value Creation Processes

1. Financial Strategies

15 Special Feature 1:

Our Green Solutions Initiative

Corporate Information

1. 11-YearData

1. Global Network

1. Corporate Data / Stock Information
2. Disclosure System

Editorial policy

We publish this report to make all of our shareholders, investors, and other stakeholders aware of the value creation of the DAIHEN Group and, by doing so, build trust between us. A lot of effort has gone into editing the layout so that people of all walks of life will find the content

Our Management Approach	(Adopted April 1, 2012)

DAIHEN Corporation (the "Company") and its subsidiaries (collectively, the "DAIHEN Group") are committed to achieving

"simultaneous contentment for all"*1

through appropriate return of profits to stakeholders.

The DAIHEN Group has adopted the goal of "simultaneous contentment for all," which demonstrates our commitment to the happiness of all our stakeholders - customers, employees and their families, shareholders, suppliers, and our local communities. To that end, we have clearly set specific goals - which we refer to as targeted "returns"- for each category of stakeholder. We remain intensely focused on meeting these goals.

One of our business policies is to contribute to the sustainability of society by creating products that help solve societal issues by developing unique products*2 with our distinctive value, which leads to increased net sales and profits as a result. In addition, enhancing distribution of profits in accordance with targeted "returns" strengthens the trust relationship with stakeholders, which is the foundation of our sustainability as a company.

All employees of the DAIHEN Group thus understand our corporate purpose and remain dedicated to working in unison as each individual plays an essential role in realizing it.

1. Special Feature 2:
   Our Tailored Solutions Initiative
2. Special Feature 3: R&D
3. Special Feature 4:
   Production Automation Initiatives Using Our Robots

Sustainability Management

E: Environment

21 Environmental Initiatives

23 Responding to Recommendations Under the TCFD Framework

S: Society

25	Human Resource Strategy /
	Human Resource Development

easy to read and will gain a proper understanding of what we do. Going forward, we will continue to upgrade and improve the

content of this report through constructive dialogue with stakeholders.

Call for feedback

Your opinions and requests are great sources of information that help us to improve not only this report but also our business activities. Let us know what you think.

DAIHEN Website >> Contact Us >> Other inquiries >> Inquiry form Scope of organizations covered

In principle, this report spans the initiatives of the DAIHEN Group, which comprises DAIHEN Corporation and its consolidated subsidiaries, but the scope of some of the activity data may differ. Reporting period

This report covers fiscal year 2022 (April 1, 2022 to March 31, 2023). This report also contains some information from before fiscal 2021 and after 2023.

Reference guidelines

Corporate Objective

Achieving Simultaneous Contentment for All

(Stakeholders)		Customers
	Employees and
		their families
		Shareholders
		Suppliers
		Regional
		communities

Corporate sustainability

Relationships of trust with stakeholders

Targeted "Returns"

• Invest 6% of net sales in development to ensure a pipeline of unique products (products that solve societal issues)
• Ensure our unique products (products that solve societal issues) account for at least 40% of net sales
• Third bonus: Paid when prots increase by at least 5% relative to the preceding scal year

Minimum operating prot 8 billion yen: 1.0-month salary		Distribute
~ 12 billion yen: 2.0-month salary (maximum)

● Achieve a minimum dividend payout ratio of 30%.

● Achieve a 50% return on cost reductions

• Donate 1% of operating income to child welfare and child protection.
• Build a product portfolio comprising a minimum of 80% environment-friendly products

26	Diversity /
	Creating Workplace Environments Where
	People of All Nature Can Enjoy Working
27	Health and Safety
28	Contribution to Community
29	Quality Assurance
30	Materials Procurement

G: Governance

1. Corporate Governance System
2. Corporate Officers
3. Director Compensation
4. Compliance
5. Risk Management
6. Intellectual Property / Information Security

• IFRS Foundation "International Framework"
• Ministry of Economy, Trade and Industry "Guidance for Collaborative Value Creation"

Next issue

The next issue of this report is scheduled for release around September 2024.

Disclaimer

This report includes our plans and prospects as of the date of publication; projections based on management plans and management policies; and past and current data on the DAIHEN Group. The reader is advised that these projections are assumptions or judgments based on the best information available at the time, and the possibility exists that future business performance may differ due to changes in various conditions, unforeseen results, and changes to forecast business activities.

"We are condent our customers will be pleased with	Contribution to the Sustainability of Society	Prots
our products and services, which are valuable and
useful to the world." - Our founder, Aizo Kobayashi

Business	I: Develop unique products	Development aimed at solving societal issues	● Realize decarbonized	EMS for renewable energy
society	EV charging systems
	Invest 6% of net sales in development funds	● Enhance national	V2X emergency power
Policies	resilience
		systems
		shortages	etc
	II. Implement total cost reduction activities		● Eliminate labor	FA Robot systems

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9 Divisions ※3

Policy management (3W1H, PDCA)

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*1 When the Company adopted its corporate philosophy, "Reliability and Creativity" in 1985, our 5th President Keijiro Kobayashi publicly expressed his view that, when we ponder the rationale behind our work, we must come to the ultimate realization that we are committed to simultaneous contentment for all.

*2 Proprietary products offering overwhelming value that also contribute solutions to societal issues *3 9 Divisions

Power Distribution System Division, Power Transformer Division, Industrial Electrical Equipment Division, Energy Management System Division, Charging System Division, FA Robot Division, Clean Robot Division, Welding & Joining Division, Plasma System Division

01 DAIHEN REPORT 2023

DAIHEN REPORT 2023 02

History of the DAIHEN Group

Since our founding, we have continuously pursued technological innovation in order to meet the needs of society. Here are some of the big moments of the DAIHEN Group.

Corporate history

1919

1920

1940

1960

1970

1980

1990

2000

Since the Company's founding in 1919, DAIHEN has always sought the latest technologies in order to create values that meet the needs of society - those values manifested in the form of transformers, welding machines, industrial robots, semiconductor manufacturing equipment and a plethora of other products. With diligence and commitment, we have helped to improve the electrical infrastructure that powers modern life and elevate manufacturing around the world to new heights.

Going forward, we want please our customers and serve society to even greater degrees by building original values that address society's woes into the products and services we provide.

2010

2020

▲ ▲

December 1919 December 1919

Osaka Transformer Co., Ltd. is established in Nakatsu-cho, Osaka prefecture.	▲November 1973 The Mie Plant is newly established and begins
Dedicated mass-production of pole-mounted transformers begins.	▲full-scale production of high-capacity,extra-high-voltage transformers.
▲	July 1930 The plant is relocated to its current location (Yodogawa-ku, Osaka).	▲May 1980 Sales of arc welding robots begin.
▲November 1982 A robot plant is newly established in the Settsu Plant.
March 1934 Production of electric welding machines begins.
▲		▲December 1985 Osaka Transformer Co., Ltd. is renamed DAIHEN Corporation.
			▲December 1985 Corporate philosophy of "Reliability and Creativity" is established.
			▲February 1986 Production of radio frequency (RF) generators for
			▲semiconductor manufacturing equipment begins.
			▲November 1987 The Company is awarded the Deming Application Prize.
			▲April 1989 Delivery of semiconductor wafer transfer robots begins.

▲ ▲ ▲ ▲

June 2001 Executive officer system is introduced. October 2003 Certification of ISO 14001 registration

April 2003 100 kW power conditioners for solar power generation is developed ahead of competitors in the industry. October 2007 The Rokko Business Office, a base for the welding and mechatronics business, is established at the Rokko Island in Kobe. (The Settsu Plant is closed.)

▲November 2010 MECS (wafer transfer robot) business is acquired. ▲March 2016 Sales of wireless charging systems are launched.

Product development history

Pole-mounted transformer

AC arc welding machine

Net sales

19191920

		▲December 1995
▲July 1961 A welding machine production plant is established in Settsu, Osaka prefecture (the Settsu Plant)	▲	Certification of ISO 9001 registration
▲October 1961	The Company's shares are listed on the 1st Section of the Tokyo Stock Exchange.		Extra-high-voltage
▲December 1967	A pole-mounted transformer production plant is newly established in Chitose-shi, Hokkaido.
	transformer package

		Power receiving and	Pole-mounted automatic vacuum						Power receiving and distribution systems
	Step voltage regulator
	distribution equipment	switch (with sensor)
							Switches
			Remote monitoring and control
								Energy Management
	Pole-mounted		equipment						Power monitoring and control systems
	automatic vacuum							Energy Management
	section switch	Switch terminal unit	Top-runner transformer
								Automated distribution systems
	Pole-mounted amorphous core		Remote monitored and	Emergency power		Solar power generation package with built-
	transformer		controlled step voltage	supply system		in storage battery system	Transformers
				regulator
High-capacity,									Renewable energy generation/storage systems
		Power conditioner for
extra-high-voltage		RF generator for
	solar power generation				Quick
transformer	Cast resin transformer	plasma applications		Wireless charging	Level 1
			(PV inverter)	Substation package for solar	charging
				system for EV	stand for EV	EV charger	EV charging systems
				power generation
			RF automatic matching unit
			for plasma application					RF generators/matching units	Material
	Pad-mounted									Material
	transformer	Fuzzy control inverter							Microwave generators/matching units
	transformer	MIG welding machine	Microwave supply system for plasma application
						Welding machines	Processing	Processing
			Inverter-controlled DC spot
			welding machine					Spot welding machines
			Inverter-controlled compact air		Welbee inverter	High-efficiency arc	Laser-arc hybrid welding
			plasma cutting		welding machine	welding system	system	Air plasma cutting machines
		Inverter controlled super plasma
	Vertical multi-	cutting machine							Arc welding robots
Submerged arc welding
articulated arc		200 kg payload versatile	6-axis vertical multi-articulated arc
machine (Auto melting)
welding robot			handling	welding robot
						Handling robots
							Autonomous Mobile Robot (AMR)
								Factory Automation
							with wireless charging system	Factory automation systems
									Factory Automation
			40 kg payload
		Wafer transfer robot	versatile						In-plant automatic transfer
		for atmospheric	handling robot
		environment							Clean transfer systems
									Clean transfer robots
			LCD panel transfer robot

Wafer transfer		Robots for vacuum environment
robot for vacuum		Large robots for vacuum environment
environment
	Large glass panel transfer robot for
		vacuum environment

1940

1960

1970

1980

1990

2000

2010

2020

2022

1919−1969	1970−1989	1990−2008	2009−

From the foundation of the Company to a period of post- war high economic growth

In 1919, Aizo Kobayashi, driven by a mission to contribute to the industrial development of Japan, founded Osaka Transformer Co., Ltd. based on a spirit of "Superior Quality, Reasonable Prices, and On-Time Delivery." We sold high-quality and reasonable pole-mounted transformers by adopting the Ford production system and a distributor system that were innovate at that time. Subsequently, we expanded the scope of our business to include large transformers and welding machines, responding to the demands of the times.

After World War II, when there was a serious shortage of pole-mounted transformers due to air raid damages and a rapid increase in the power load, we repaired pole-mounted transformers of all kinds of manufacturers. During the period of high economic growth, we mass-produced transformers and welding machines, and contributed to the development of society by supporting the construction of infrastructure, shipbuilding, and automobiles.

Implementation of reforms and establishment of the corporate philosophy

During the 1970s and 1980s, we expanded into new businesses including industrial robots, power supplies for semiconductor manufacturing equipment, and clean transfer robots, while also implementing various reforms including the globalization of businesses and the introduction of TQC.

Keijiro Kobayashi, the President at that time, changed the company name from Osaka Transformer to DAIHEN, adopted a new symbol mark (company emblem), and established the corporate philosophy of "Reliability and Creativity*."

• A philosophy aiming for healthy growth and contributing to the development of society by placing importance on trust with stakeholders and by constantly creating new value

The Company expands overseas business and achieves net sales of 100 billion yen

In 1997, we established an overseas production base for welding machines in China (Mudanjiang) where economic growth is remarkable, as the second country where we established an overseas plant following Thailand, and we have expanded into China in various businesses. We developed sales and production bases mainly in Asia, an expanding market, and worked on expanding our overseas business, including the establishment of subsidiaries in Taiwan and South Korea.

In 2007, we established the Rokko Business Office to meet the global demand for welding robots, and in the same year, achieved net sales of 100 billion yen for the first time, with the share of international sales growing to 25%.

Establishment of our goal of "simultaneous contentment for all" and promotion of development of "unique products"

In 2012, as our basic management approach, we defined the Company's purpose as making stakeholders feel happier ("simultaneous contentment for all") and clarified specific numerical targets for each category of stakeholders as targeted "returns."

As a priority measure to achieve this goal, we promoted the development of products with our own unique value branded as "unique products" boasting outstanding performance, and also worked on improving the speed of development. As a result, we created many products and technologies that satisfied customers and served the world, leading to the Company's subsequent growth.

03 DAIHEN REPORT 2023

DAIHEN REPORT 2023 04

Business Overview

Business Overview

Today, our products are used everywhere in society, supporting people's lives, including power equipment that contributes to the utilization of renewable energy and the advancement of power system management, industrial robots that enable the seamless automation of entire factories, and welding and joining equipment and plasma generators that provide new processes necessary for technological innovation in manufacturing.

Going forward, we will continue to help reshape human society for sustainable development by creating products that solve impeding societal issues.

	Factory
	Automation
	18.1%
Energy	Net sales
Management	185.3
40.7%
	billion yen
	Material
	Processing
	41.1%

Energy Management

We develop and provide systems and equipment to control and manage diversifying distributed power sources including smart communities, renewable energy, and storage batteries, and develop technologies that contribute to new uses of electricity, such as advanced power system management and electric vehicles.

Power transmission & distribution products

Factory Automation

We achieve seamless automation across entire factories by developing our proprietary robots with high precision and agile movement characteristics, which we developed through our experience with welding robots and clean transfer robots, and providing flexible and easy-to-install systems that combine multiple sensors, monitoring and control software, and peripheral equipment utilizing our proprietary technologies.

FA robots and in-plant automatic transport equipment

Clean transfer robots

Pole-mounted transformer	Pad-mounted transformer	Step voltage regulator	Extra-high-voltage transformer
Our pole-mounted transformers step down the high-	Supports effective underground power	These units support a stable supply of power through	Developed for long service-lives, low power loss,
voltage electricity carried over the power lines to a	distribution as well as landscape	optimal voltage control in order to overcome voltage	low noise emissions and compact sizes, DAIHEN's
practical voltage that people and businesses can use,	conservation in urban areas while mitigating	fluctuations on the transmission lines, such as those resulting	high-quality power transformers are contributing
making them an integral part of stable power supplies.	disasters and securing space for roads.	from interconnection with dispersed power sources.	to stable power supplies wherever they are used.

Arc welding robot

Highly articulate and agile, our welding robots are a big contribution to factory automation and the higher quality welding targeted with that.

Handling robot

Robots are increasing productivity by nimbly and correctly performing simple factory jobs like transferring, assembling and processing parts and materials.

Autonomous mobile robot (AMR)

They are guide-less, and can accommodate narrow aisles while avoiding obstacles. A wide lineup of models specialized for carrier, towing, and forklift operations accommodates various transportation scenarios. It also comes with wireless charging system.

Wafer transfer robot

These robots speedily and accurately transfer silicon wafers in clean environments where not even a speck of dust is tolerable. They are helping to improve the productivity of semiconductor devices that underscore an energy-saving smart society.

Material Processing

Top-runner transformer

Power conditioner

Storage battery system for self- consumption solar power generation

V2X system

By precisely controlling energy sources such as plasma, laser, ultrasonic waves, and frictional heat, we provide new processes necessary for technological innovation in manufacturing, including precise joining, cutting, film formation, surface treatment, and shaping of metals, semiconductors, insulating materials, and plastic materials.

Because it operates very efficiently with minimal energy loss and reduces CO2 emissions, this transformer is classified as a top- runner.

DAIHEN has greatly reduced power consumption compared to conventional air-conditioned systems, by incorporating the industry's first air-heat exchange (HEX) cooling system into these power conditioners. (Awarded the Energy Conservation Grand Prize by the Energy Conservation Center, Japan in 2015)

These are storage battery system for self- consumption solar power generation at business sites and factories. Storage batteries stores surplus electricity for use when needed, maximizing the use of solar power and reducing CO2 emissions. Furthermore, they significantly reduce electricity bills lowering peak electricity consumption.

These systems cleverly integrate EV/ PHEV charging stations and a series of storage batteries. They are helping to make communities more disaster-resilient by supplying electrical power from the EVs and battery set to important loads such as evacuation shelters during outages and other emergencies.

Welding and joining machines

Digital inverter welding machine

Semiconductor-related machines

Electric vehicle (EV) charging systems

Level 1 and quick chargers for EVs

With a product line encompassing both Level 1 and quick chargers, we can meet the charging needs of a variety of customers. As we promote

Wireless charging system for EVs

Imagine simply parking your vehicle in a parking lot and having it start charging automatically. Our Magnetic Resonance System now achieves the highest

Stud welding machine

High-efficiency arc welding system

RF generator

Microwave supply system

the adoption of EVs, we are contributing to the realization of a decarbonized society.

level of charging efficiency in the industry, resulting in greater convenience for users.

Because our welding products are designed to	Mainly used in the construction field, these	These generators stably produce the high-quality
save power and ensure safety on top of delivering	machines efficiently weld studs that serve as	plasma essential to manufacturing semiconductor
the world's highest level of welding and cutting	wedges to integrate steel and concrete. Our stud	devices. They contribute to the manufacturing of
performance, DAIHEN is helping industries to	welding machines are used for construction of	semiconductors that drive technological advances
increase productivity and protect the global	buildings and bridges.	like IoT and AI.
environment at the same time.

05 DAIHEN REPORT 2023

DAIHEN REPORT 2023 06

Financial / Non-financial Highlights

Financial Data

In fiscal 2022, we recorded net sales of 185.3 billion yen and operating profit of 16.5 billion yen, both of which exceeded those for fiscal 2021. We are actively engaged in research and development by continuously increasing development funds*1.

Non-financial Data

We are engaged in product development that contributes to reducing environmental impact. The ratio of net sales of environment-friendly products has been increasing.

While net sales are on the increase, our efforts at business sites keep the total amount of CO2 emissions and other environmental indicators almost flat, reducing emissions per unit of sales year by year.

Net sales / Share of international sales	Operating profit / Ratio of operating profit to net sales
■ Net sales ●Share of international sales	■ Operating prot ●Ratio of operating prot to net sales

（Million yen）				（%）	（Million yen）					（%）
200,000			185,288	40.0	20,000				8.8	8.9	10.0
								8.4
			160,618
										16,568
143,457	145,044	145,144							14,191
	30.0	15,000					7.5
150,000					6.3
			23.1			5.8	12,183
22.7	22.0
20.9
	20.8
100,000				20.0	10,000	8,369	9,065				5.0
50,000				10.0	5,000						2.5

Ratio of environment-friendly products to net sales*1

（%）

100

77.2 78.2 79.6

8070.7

59.3

60

40

20

CO2 emissions / CO2 emissions intensity*2

■ CO2 emissions: Scope 1 + 2 ●CO2 emissions intensity: Scope 1 + 2

（t-CO2）		0.151					(t-CO2/million yen)
	40,000			0.141						0.16
					0.134
						0.125
									0.110
30,000									0.12
		21,616	20,478	19,405	20,057	20,466
20,000										0.08
10,000										0.04

2018

2019

2020

2021

2022（FY）

2018

2019

2020

2021

2022（FY）

2018

2019

2020

2021

2022（FY）

2018

2019

2020

2021

2022(FY)

Development funds / Development funds ratio*1				Profit attributable to owners of parent / ROE
■ Development funds ●Development funds ratio			■ Prot attributable to owners of parent	●ROE
（Million yen）	7,856 （%）	（Million yen）	（%）

Water consumption / Water consumption intensity*2

■ Water consumption ●Water consumption intensity

（m3）	(m3/million yen)

Waste discharged / Waste disposal intensity*2

■ Waste discharged ●Waste disposal intensity

（t）	(t/million yen)

8,000	7,206	6,995
	5.0
	4.8
6,000
4,000

7,344

6.0

20,000

16.0

6,890
4.7	4.6					12.4
					11.5
	4.2	4.5	15,000		11.0	12.0
		13,193
			8.0	8.5		10,985
				9,411
		3.0	10,000			8.0
			6,166	6,672

160,000 146,112			1.6
	126,368	118,726	121,372	126,490
120,000	1.02			1.2

	0.87	0.82
		0.76
80,000			0.68	0.8

1,200

12

	993.8		939.8
	928.0	900.7
		859.7
800	6.93		8
	6.40	6.21

5.35	5.07

400

4

2,0001.55,0004.0

2018

2019

2020

2021

2022（FY）

2018

2019

2020

2021

2022（FY）

40,000

0.4

2018

2019

2020

2021

2022（FY）

2018

2019

2020

2021

2022（FY）

Dividends	/ Consolidated payout ratio
■ Dividends ●Consolidated payout ratio
（Yen）	32.4									（%）
	250	31.6				35.0
												30.1
200								23.6	24.7	28.0
										162
150											21.0
											110
									90
100	80		85					14.0
50											7.0

Interest-bearing liabilities / D/E ratio

■ Interest-bearing liabilities	●D/E ratio
（Million yen）	（Times）
	60,000	0.6
0.53

41,356	0.42
	33,951	0.34	34,268

		0.29
30,000	30,712		0.30	0.3
	28,654

Atmospheric emissions of chemical substances subject to the PRTR*2

（kg）

120,000109,180

99,949

76,928

80,000	67,630
	54,575
40,000

Number of employees

5,000

	3,803		3,876		3,814		3,783		3,732
4,000

3,000

2,000

1,000

2018

2019

2020

2021

2022（FY）

2018

2019

2020

2021

2022（FY）

*1 Development funds include not only research and development expenses but also development-related expenses such as patent fees. The development funds ratio is the ratio of development funds to consolidated net sales.

07 DAIHEN REPORT 2023

2018

2019

2020

2021

2022（FY）

2018

2019

2020

2021

2022(FY）

*1 The ratio of net sales of environment-friendly products to domestic net sales of the products (excluding parts, repair services, etc.) supplied by the nine divisions of the Company

*2 The scope of calculation includes DAIHEN Corporation (Juso Business Office, Rokko Business Office, Mie Business Office, Chitose Plant, and Kanehira Plant), production sites of affiliated companies (Tottori Plant, Oita Plant, Matsudo Plant, Eniwa Plant, Hirosaki Plant, and Kagawa Plant), and production sites outside Japan [Mudanjiang OTC Welding Machines Co., Ltd., OTC Industrial (Qingdao) Co., Ltd., OTC DAIHEN Asia Co., Ltd., DAIHEN Electric Co., Ltd., DAIHEN OTC (Beijing) Co., Ltd., and DAIHEN Advanced Machinery (Changshu) Co., Ltd.]

DAIHEN REPORT 2023 08

Welding &

Mechatronics

Semiconductor &

FPD Related

[Old domains]

Power Products

Value Creation

Message from the Management

To Contribute to

Solving Societal Issues

Shoichiro Minomo

President and Chief Executive Officer

aim for the development and market introduction of products that contribute to solving these societal issues.

In Green Solutions, we are working on developing standardized products and packages optimized for each application, contributing to expanding the use of renewable energy, reducing environmental impact, popularizing EVs, and energy saving. In Tailored Solutions, we are developing equipment and systems that contribute to automation

in confined spaces, reducing the burdens of facility management, and addressing the shortage of instructional workers.

Furthermore, in order to strengthen and accelerate development, in addition to internal activities such as collaboration between our business divisions and the Research

& Development Division , and thorough front-loading

development to promote product and elemental technology

development, we are also actively utilizing alliances with

universities, research institutions, and partner companies to

increase the number of partners who are capable of tackling

target under the plan as the semiconductor-related market has entered a correction, but we expect sales of EMS and FA robots to increase against a backdrop of increased investment in decarbonization, production automation, and EVs. We will continue to implement various measures for the future development of our business, without slowing our efforts.

The key driving force for our efforts is human resources. In fiscal 2022, we have once again clarified our human resource development policy and internal environment policy, which are described separately in this report.

The Company has long adopted the goal of "simultaneous contentment for all," which demonstrates our commitment to the happiness of all our stakeholders - customers, employees and their families, shareholders, suppliers, and our local communities. To that end, we have set specific goals - which we refer to as targeted "returns" - for each category of stakeholders, and we will continue to achieve them as our management approach.

We aim to be a development-focused company that actively helps to solve societal issues. To clarify this stance, we changed our reporting segments in the financial statements effective fiscal 2023 to Energy Management, Factory Automation, and Material Processing based on our three technology domains.

The new segments redefine our unique technologies, which are our strengths, and the direction of their development as new business domains, based on the belief that creating unique products with our own value, and contributing to the world is our role and reason for existing in society.

In "Step Up 2023," our current Medium-term Business Plan , we recognize the need to intensively invest our limited management resources

(people, goods, and money) to improve capital efficiency. Based

on this recognition, we have positioned global environmental protection

and CO2 emissions

reduction, the elimination of labor shortages, and support for diverse work styles as our top priority areas, where we can leverage our strengths in the domains of Energy Management, Factory Automation, and Material Processing, and where we can expect market growth due to their high importance as societal issues. We aim to achieve both economic and social value by promoting Green Solutions & Tailored Solutions, which

[New domains]

Self-consumption	EV charging system
package for solar	that supports energy
power generation	management

		Teaching-less
		programming	Energy					Plasma
			system
	AMR						source Solid phase
			Management
"AiTran"							resistance
											spot joining
		Factory						Material
		From individual control to
		Automation	cooperative control	From		Processing
							equipment
			autonomy				to
							creation
			to
									processesdevelopment
			teaching							of	innovative
		From

societal issues that are difficult for us to solve alone, and
working on increasing research and development expenses,
while considering the construction of new development centers
that are necessary for this purpose.
Moreover, we are building relationships with optimal
partners who can speedily and strongly expand the sales of
new products, in new business domains such as EV charging
systems and EMS for renewable energy power producers. We
are also working to improve our sales network by consolidating
and closing sales subsidiaries, while building relationships
with these partners and strengthening our ability to reach out
to government agencies, industry associations, and major
customers, as well as our ability to disseminate and collect
information.
Now that two years have passed since we began the
current three-yearMedium-term Business Plan, we have made
steady progress in developing and launching Green Solutions
& Tailored Solutions products. In fiscal 2022, we achieved
record-high sales and profits, overcoming the constraints on
economic activities caused by the COVID-19 pandemic and
difficulties in	procuring parts.
In fiscal	2023, the final year of the Medium-term Business
Plan, we do not expect to reach the 200 billion yen sales

As a manufacturer, we have a mission "to please our customers and contribute to the world through our valuable products and services," and we will continue to develop and provide unique products that meet the essential needs of society and our customers at a higher level, by eliminating waste in operational processes through total cost reduction activities and investing the generated funds in development, and by integrating our proprietary technologies with cutting- edge technology. Satisfying society and our customers will lead to growth in sales and profits, and achieving an enhanced return of profits, in line with the target values of each of our stakeholders.

Based on this approach, in order to continue our development as a company that actively contributes to solving societal issues in the priority areas set forth in the Medium- term Business Plan, we will actively work on new policies

so that we can share the DAIHEN WAY, which sets forth the Company's values, and will carry out these policies among our employees, in order to generate powerful momentum, and continue to create valuable products and services.

We are committed to fulfilling our role toward the realization of a sustainable society, and we look forward to your continued support as we pursue these future objectives.

09 DAIHEN REPORT 2023

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10

Value Creation

Value Creation Processes

Under the Medium-term Business Plan "Step Up 2023," we aim to become an R&D-focused company dedicated to addressing societal issues head-on. With the commitment to ESG (environment, social, and governance) issues as the foundation of our business activities, we focus on the domains of Green Solutions and Tailored Solutions for strengthening development, creating and introducing products with our own unique value to the market, thereby contributingto the sustainability of society.

Contribution to the

Green Solutions		Value
>>P.15

Sustainability of Society

We Provide Tailored Solutions

>>P.18

Contribution to the realization of a decarbonized society

We develop standardized products and packages optimized for various applications that contribute to the expansion of use of renewable energy, reduction of environmental impact, popularization of EVs, and energy saving to contribute to the realization of a decarbonized society.

Providing means to resolve challenges that manufacturers are facing

We provide optimal solutions to the challenges faced by those employed in a wide range of manufacturing positions. We are devising solutions to the labor shortage and other societal issues, liberating people from dirty, difficult, anddangerous tasks, and adopting varied work styles for an increasingly diverse workforce. As well, we are developing equipment and systems that contribute to automation in confined spaces, reducing the burdens of facility management, and addressing the shortage of instructional workers.

Transitioning to an R&D-focused company

dedicated to addressing societal issues head-on

Business

Policies

2023 Medium-term

Business

Develop unique products

To please our customers and contribute to the world,

we develop DAIHEN products that offer unique added value

Business Plan "Step Up 2023"

Activities

Total cost reduction activities

We internally generate the funds necessary for strengthening development by thoroughly eliminating unseen waste throughout the business process.

	Strengths of the DAIHEN Group		×			Latest
	Power conversion technology, high-frequency technology, autonomous
			technology
	distributed cooperative control technology, joining process technology,
	high-precision and high-speed robot control technology
						Business	domains
	Energy Management					Factory	Automation
		>>P.05						>>P.06

Material Processing

>>P.06

Business capital (as of the end of fiscal 2022)

Foundation that supports

sustainable growth

Financial capital
	Human capital
Interest-bearing liabilities:		Number of employees on a
34,268 million yen
	consolidated basis: 3,732
Equity: 113,800 million yen
	Number of employees at
		domestic bases: 2,222
		Number of employees at
		overseas bases: 1,510

Production capital

Capital investment:

4,872 million yen

Domestic production bases: 14

Overseas production bases: 10

Intellectual capital

Research and development expenses: 6,311 million yen Number of patents (Japan): 1,351 Number of patents (Overseas): 849

Natural capital

CO2 emissions: 20,466 t

Water consumption: 126,490 m3

11 DAIHEN REPORT 2023

E: Environmental Initiatives

>>P.21

S: Social Initiatives

>>P.25

G: Governance Initiatives

>>P.31

DAIHEN REPORT 2023 12

Value Creation

Financial Strategies

Through balanced return of profits to stakeholders and proactive investment in line with targeted "returns," We will achieve both an improvement in ROE and an enhancement of equity

Review of fiscal 2022

		Net sales		200.0 billion yen or more (including 35.0			Net sales		185.3 billion yen
			billion yen or more from G&T*1)				(including 17.8 billion yen from G&T*1)
Financial		Ratio of operating		10% or more			Ratio of operating	8.9%
targets for		profit to net sales				profit to net sales
					Fiscal 2022
the 2023		ROE		12% or more		ROE	12.4%
			results
Medium-term
	Development		6% or more			Development		4.2%
Business Plan
	funds ratio*2				funds ratio*2
		Payout ratio		30% or more			Payout ratio	30.1%

*1 Green Solutions & Tailored Solutions

*2 The ratio of development funds to consolidated net sales: Development funds include not only research and development expenses but also development-related expenses such as patent fees.

Cash flows under the 2023 Medium-term Business Plan

Fiscal 2022 results

The performance of the DAIHEN Group was net sales of 185.3 billion yen (up 15.4% year-on-year) and operating profit of 16.5 billion yen (up 16.7% year- on-year) due to factors such as generally strong semiconductor-related investment. Both net sales and income results reached an all-time high.

Factors for the change in operating profit from the previous fiscal year included a negative impact of 7.5 billion yen due to soaring material prices, but positive impacts were 2.4 billion yen from price pass-through, 0.8 billion yen from the foreign exchange impact, 2.7 billion yen from expanded cost reduction effects, and 4.8 billion yen from increased profits due to higher net sales. After investing 0.8 billion yen to increase spending on research

Factors for changes in operating profit for fiscal 2021 and 2022

				Increased spending on research and
(Billion yen)					development expenses, etc.
Soaring			-0.8	+2.4
material prices
	+4.8	YoY
		Impact of
-7.5	Price	foreign	+2.7
exchange		Operating
pass-through
Operating	+2.4	+0.8				profit
profit		Expansion of		16.5
14.1
	cost reduction effects
				Increased profits
				due to higher net sales

We plan to make aggressive investments that exceed the operating cash flows in the 2023 Medium-term Business Plan.

An overview of cash distribution (3-year cumulative total)

Effective use	M&A
investments
of assets /
10.0
Borrowings
billion yen
15.0
billion yen	Growth
	investments
	10.0
	billion yen
Cash flows	Ordinary
from	investments
operating	15.0
activities
billion yen
30.0
billion yen
	Shareholder
	return

Growth investments

We plan to invest a total of 10.0 billion yen in the expansion of the plant of DAIHEN Industrial Machinery Corporation, which serves as a production center for RF generator systems used for semiconductor manufacturing equipment with significantly increasing demand, and in installing renewable energy utilization equipment at the DAIHEN Group's bases as model plants for promoting Green Solutions. We are also considering to construct a new development center to strengthen development.

and development expenses, we achieved a net increase of 2.4 billion yen in operating profit, resulting in a ratio of operating profit to net sales of 8.9%.

Financial position

Total assets at the end of fiscal 2022 increased by 17.9 billion yen from the end of the previous fiscal year to 212.7 billion yen. This is primarily attributable to an increase in inventories due to supply shortages of parts. Total liabilities increased by 3.6 billion yen to 92.8 billion yen. This is primarily attributable to increases in notes and accounts payable - trade and borrowings. Total net assets increased by 14.3 billion yen to 119.9 billion yen. This is partly attributable to an increase in foreign currency translation adjustment in addition to an increase in retained earnings. The equity ratio was 53.5% (up 2.3 percentage points from the end of the previous fiscal year), exceeding 50%, our benchmark.

Fiscal 2021	Fiscal 2022
results	results

Equity ratio

（%）

56.0

53.5

54.0				52.1
				51.2
52.0
		49.3
50.0
48.0	46.2
46.0
44.0
	2018	2019	2020	2021	2022(FY)

	10.0
	billion yen
Inflow	Outflow

M&A investments

We are considering M&As more than ever to acquire new customers and accelerate the expansion of peripheral businesses in the existing businesses, seeking to expand our business through capital participation in current partner companies or making them subsidiaries, as we did with M&As in the past. In fiscal 2022, we acquired the German robot system integrator Femitec GmbH, which specializes in small and medium-sized systems, to strengthen our European business. In October 2023, we acquired shares of Tohoku Electric Manufacturing Co., Ltd. to add it to the Group, aiming for sales expansion in the Tohoku region and strengthening the production system through synergies with the group company.

DAIHEN Industrial Machinery Corporation (Planned expansion is outlined in red.)

Ordinary investments

Ordinary investments are generally within the scope of depreciation, and we are steadily making progress in improving productivity and renewing aging equipment.

Shareholder return policy

As part of our policy of returning profits to stakeholders, we aim to increase returns in line with profit expansion with a dividend payout ratio of 30% or more as a basic policy.

Development funds*

Aiming to create and introduce products with our own unique value (DAIHEN Value) to the market, we are actively conducting joint research with universities and other research institutions as well as with our customers while mutually coordinating with development divisions within the Group to accumulate technological seeds and promote commercialization.

In fiscal 2022, we mainly engaged in the development of products and systems related to Green Solutions & Tailored Solutions in the Medium-term Business Plan. Development funds reached 7,856 million yen, and they have been increasing every year since fiscal 2020.

• Development funds include not only research and development expenses but also development-related expenses such as patent fees.

Shareholder return

The dividends for fiscal 2022 were 162 yen per share (interim dividends of 75 yen, year-end dividends of 87 yen), which ensured a dividend payout ratio of 30% in line with the policy of returning profits, reporting an increase in dividend per share for a sixth consecutive year since 2017.

Development funds / Development funds ratio

■ Development funds ●Development funds ratio

(Million yen)

7,856 （%）

8,000	7,206	6,995	6,890	7,344	6.0
6,000	5.0	4.8	4.7	4.6	4.5
					4.2
4,000					3.0
2,000					1.5
	2018	2019	2020	2021	2022(FY)

Dividends / Consolidated payout ratio

■ Dividends ●Consolidated payout ratio

(Yen)	32.4										（%）
250	31.6						30.1	35.0
								24.7
200					23.6			162	28.0
150							110			21.0
					90
100	80	85								14.0

50				7.0
2018	2019	2020	2021	2022(FY)

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14

Value Creation

Special Feature 1

Our Green Solutions Initiative

As part of our effort to contribute to the realization of a society committed to decarbonization, we are focused on expanding sales and strengthening the development of various energy management systems (EMS). These comprise control technologies and devices that contribute to the growing introduction of renewable energy as well as the charging infrastructure that is essential to the adoption of EVs.

Energy management systems that contribute to the greater adoption of renewable energy

Charging infrastructure equipment and systems that contribute to the adoption of EVs

Launch of Japan's first project to verify the operation of automatic wireless charging in a mechanical parking structure

Batch delivery of grid storage battery systems

Renewable energy output can change dramatically depending on the season or the weather, disrupting the balance of electrical supply and demand for power grids. This can interfere with their ability to supply power. Effectively utilizing surplus power is a challenge facing our society. To solve these problems, the Japanese government is leading efforts to install energy storage facilities.

We delivered a batch of grid storage battery systems, the first in Japan to use domestically-manufactured storage batteries, for use in the Eurus Shiratori Battery Park energy storage facility in Fukuoka Prefecture. The

Grid storage battery systems

Commercial launch of reuse battery packages

Working with GIKEN, we have launched a project to verify the operation of automatic wireless charging in a mechanical parking structure.

The wireless charging system is employed for this verification, with power receiving units installed in Toyota C+ pod ultra-compact battery electric vehicles and power transmitting units installed in GIKEN's EV ECO ParkTM. When employees use the EVs for commuting, etc., and park them in the parking structure, the vehicles will be charged wirelessly.

The data from the verification project will be analyzed to improve the system and provide users with greater convenience.

In the future, there are plans to extend the system, going beyond

ultra-compact EVs to mini and full-sized EVs.

Wireless charging in the mechanical parking structure

systems use DAIHEN's unique Synergy Link control technology to maximize the use of electricity generated from renewable energy while significantly reducing installation and operation costs.

For the first time ever in Japan, we have launched reuse battery packages for self-consumption solar power generation equipment. These packages, made with used EV batteries, integrate industrial storage batteries and storage battery power conditioners.

They not only reduce CO2 emissions compared to emissions from new battery manufacturing, but also solve issues such as the difficulty in procuring raw material and a surge in their prices. Also, by reusing used batteries, they cut deployment costs by roughly 30% in comparison to new batteries. Furthermore, switching from an air conditioner to a fan to cool the device reduces power usage, cutting costs by roughly 90%.

Automatic charging system for delivery EVs (conceptual image of system operation)

Commercial launch of Japan's first automated charging system for delivery EVs

In the transportation industry, there is an accelerating shift to the use of EVs such as compact trucks and vans for the last one mile. However, to prevent delivery operations from being interrupted, it is important for vehicles to operate without ever running out of charge.

This system is equipped with AI functions to automatically set demand targets, optimizing charging control to ensure sufficient charge for a full day of deliveries. Furthermore, our proprietary Synergy Link control technology automatically limits and normalizes maximum power usage based on vehicle operating conditions, minimizing basic electricity costs.

Efforts related to in-motion EV charging system

Reuse battery packages

Reuse battery

Used batteries from Nissan Motor electric vehicle LEAF, which have exceptionally high levels of reliability and durability, are used for our industrial storage batteries.

They offer the performance required of industrial storage batteries for self- consumption solar power generation equipment.

We are conducting a technical verification project together with the Kansai Electric Power Company, Osaka Metro, Obayashi Corporation, and the East Nippon Expressway (NEXCO EAST) in which our in-motion EV charging system is being used as charging infrastructure. In the project, 100 EV buses will be used to provide access to and from the Expo 2025 Osaka, Kansai, Japan for visitors from Japan and abroad, as well as to provide transportation within the site. The project will also include the creation of an EMS integrated with an operation management system.

Through this verification project, we will seek to further improve our in-motion EV charging systems and promote their early adoption in real-world systems.

This project is being conducted as a Green Innovation Fund "Smart Mobility Society Construction" project by the New Energy and Industrial Technology Development Organization (NEDO).

Synergy Link, DAIHEN's proprietary autonomous distributed cooperative control technology

Solar power generation	Acquire
information on	Administrator

Conventional control method

Telecommunications Central monitoring and			TM
equipment	control equipment
						Synergy Link
						module
Incoming panel				Bi-directional	Incoming panel	System-wide
			communication	guidance
Data	Data	Data	Data	with devices			commands
Commands	Commands Commands	Commands
Storage	Solar power V2X (EV)		Air	Storage	Solar power	V2X (EV)	Air
battery	generation	conditioner	battery	generation	conditioner
	equipment				equipment

• Each device autonomously optimizes its output based on system-wide guidance commands, maximizing power availability.
• Synergy Link dramatically reduces the cost involved in deployment and operation in comparison to conventional centrally monitored control equipment.
• The system can be expanded easily by adding or replacing devices at a later date.

For more details, visit our website. https://www.daihen.co.jp/decarbonization/ems/ (only in Japanese)

and other sources of	renewable energy
renewable energy	generated	Control		: In-motion EV charging system
			commands
Supply	Acquire location	Charging			Acquire location
surplus
renewable	information, etc.	commands			information, etc.
energy
		Battery	Battery	Charging	Battery	Battery
Overview of the demonstration project for an	level: 70%	level: 90%	commands	level: 50%	level: 30%
in-motion EV charging system

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16

Welding performed by the PLASMA JET TIG

Example of robot mounted on a trolley

Value Creation

Special Feature 1

Joining machines that contributes to the greater adoption of EVs

Development of Cold Spot Joining, the world's first solid phase resistance spot joining system

As a shift to using EVs accelerates around the world, vehicle cruising ranges (the distance that can be driven on a single charge) need to be extended, and reducing vehicle weight is a key challenge in achieving this. As a solution, lightweight materials such as ultra-high-strength steel and aluminum alloy are increasingly being used to address this issue. However, these materials are considered difficult to join, and the high temperatures reached during welding often causes weakening or quality degradation of the joint, so there are many cases where welding is not an option. In other words, the key to extending cruising ranges is joining at low temperatures.

To solve this problem, we turned our attention to solid phase resistance spot joining, one of the results of research by the Joining and Welding Research Institute Osaka University. Through collaborative research between the industrial and academic sectors, we have developed the Cold Spot Joining (CSJ) system, the world's first system for creating stable joints between materials at low temperatures, while still solid, without melting the material.

	Not only does CSJ make it possible to stably join
	difficult-to-join materials, but it can also be used to join
	dissimilar materials. Moreover, it dramatically reduces
	energy consumption by up to 50% compared to
	conventional welding, so it holds excellent promise for
	use in the manufacturing industry for various products.
	In fiscal 2023, in addition to our stationary system,
	we plan to introduce a gun-type system for use by
	robots to the markets. This system can be used in place
	of the spot welding that is widely used on conventional
	automobile body manufacturing lines and the like.
Stationary Cold Spot Joining system	Robot gun-type Cold Spot Joining

Development of PLASMA JET TIG welding system for EV motor stator coils

With the expansion of EVs, demand is expected to increase for motors used in them. We have developed PLASMA JET TIG (PJT), a welding system optimized for welding copper motor stator coils, one of the key components of these motors.

Motor stator coil manufacturing requires high precision, high efficiency, and high quality welding. Although laser joining systems are known for their precision and high efficiency, their energy density levels are too high, causing problems related to welding residue and cost.

PJT uses an arc with an even higher energy density than conventional

TIG welding, so it is capable of fast, high quality welding of materials with high levels of thermal conductivity, such as copper. Furthermore, it has a wider heat input range, so it has a greater tolerance for unevenness and gaps in joint areas, producing sturdy welds without joining residue.

With its simple structure, which combines our Welbee-TIG Series with a controller and a dedicated torch, deployment costs roughly 60% less than laser joining systems, and its running costs such as power consumption costs are significantly lower (approx. 80% lower).

Motor stator coil

Value Creation

Special Feature 2

Our Tailored Solutions Initiative

We seek to provide optimal solutions to the challenges faced by those employed in a wide range of manufacturing positions. We are devising solutions to the labor shortage and other societal issues, liberating people from dirty, difficult, and dangerous tasks, and adopting varied work styles for an increasingly diverse workforce. As well, we are developing equipment and systems that contribute to automation in confined spaces, reducing the burdens of facility management, and addressing the shortage of instructional workers.

Industrial equipment and robots that contribute to factory automation

Developing a collaborative robots ideal for arc welding applications

Industrial robots are increasingly being used in a range of fields to address societal issues such as labor shortages and diversifying work styles, as well as to further improve productivity.

However, it is not uncommon for companies considering using industrial robots to abandon those plans because of difficulties in finding the space for them or the cost of installing safety fences. This is why attention is being turned to collaborative robots, which can be used in the same areas as human staff, without the need for safety fences.

Our robots are designed for collaboration in close proximity to people and have safety functions that shut them down if they come in contact with a person, while at the same time offers the high tracking accuracy, sturdiness, and

durability of conventional industrial robots, making them optimal as arc welding robots. They have compact bodies which can be placed on trollies to be transferred and used in a wide range of worksites, such as welding ships and other large objects.

We will continue to expand our lineup, extending

Collaborative robots it to applications other than welding as well.

Developing AMR "AiTran," suitable for a variety of transportation scenarios

Manufacturing sites see a growing need for the automation of not only manufacturing processes but also transport within factories, such as transport between processes of manufacturing. In recent years, in particular, a great deal of attention has been turned to AMRs. Unlike automated guided vehicles (AGVs) and automated guided forklifts (AGFs), which require guide tape to be installed, AMRs operate without a guide, and their operation routes can be easily configured. However, most conventional AMRs have specifications customized for specific applications, and their scope of automation is limited.

AMR "AiTran" we developed, is the first AMR in the industry that serves as a carrier, a towing AMR, and a forklift AMR, so it can be used in a wide range of applications. It is highly maneuverable and can avoid obstacles in narrow hallways.

	Carrier model			Towing model			Forklift model
	AiTran Lift			AiTran Trailer			AiTran Fork
• Pallets loaded with items for transport as well		• This model transports items by towing		• This model can lift and transport
	as processed metal products can be placed on			a basket trolley or the like loaded with			packages and pallets placed directly on
	the platform of the main unit and transported.			items to be transported.			the floor.
• The AiTran Lift comes standard with a lift		• The AiTran Trailer uses camera-based		• The AiTran Fork can move in every
	mechanism that raises and lowers the			precision positioning to accurately and			direction, handling cargo in ways that
	top plate.			automatically connect to basket trolleys.			conventional forklifts cannot.

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