Kokusai Electric (6525) Investor Day 2024 summary

Market outlook and industry trends

• Semiconductor device market projected to reach $1 trillion by 2030, driven by AI, IoT, EV, and renewable energy trends.

• Equipment market expected to grow at a 7.5% CAGR from 2023 to 2028, with a strong recovery anticipated from late 2024.

• NAND, DRAM, and logic markets forecasted to expand, with NAND recovering to near 2021 levels by 2026.

• Industry-wide trends such as HBM, silicon interposer, SiC power devices, and supply chain localization are key growth drivers.

• Aiming for a balanced portfolio: 50% Logic/Foundry, 25% DRAM, 25% NAND in mid-term, with increased market share in GAA and HBM.

Strategic priorities and business model

• Focus on expanding batch ALD and treatment systems to address complex, 3D device structures in NAND, DRAM, and logic.

• Growth strategy includes expanding batch deposition for mature nodes and SiC power devices, and strengthening high-value R&D.

• Service business targeted for expansion, aiming for recurring, higher-margin revenue and global network growth.

• Global production capacity to nearly double by 2026 with a new smart factory in Toyama/Tonami, emphasizing efficiency and sustainability.

• Procurement and supply chain strategies focus on resilience, sustainability, and strong partner engagement.

Financial guidance and capital allocation

• Medium-term targets: net sales of JPY 330 billion+ and adjusted operating margin of 30%+ within 3-4 years.

• ROE target of 25%+ and ROIC of 23%+, aiming for at least twice the WACC.

• R&D investment to remain at 6% of sales, with absolute R&D spending rising as sales grow.

• Capital allocation prioritizes growth investments, with regular capex of JPY 4-6 billion/year and potential for M&A.

• Shareholder returns include a 20-30% dividend payout ratio, flexible share buybacks once net cash is positive, and a total payout ratio of about 50% at mid-term.