Information Technology Segment

Impact of COVID-19

  • There has been no significant impact on demand overall, although the intensity of the impact has varied from business to business.
  • Even after the end of the COVID-19 pandemic, the increase in demand for mask blanks for semiconductors and substrates for hard disk drives (HDDs) is expected to continue along with the continuation of Work From Home (WFH), homeschooling, etc. to a certain extent.
Customer demand Changes in the market structure due to COVID-19
Current status Future prospect
Mask blanks for semiconductors Mask blanks continue to perform well, as there has been no impact on EUV research and development activities—the driving force behind the demand for mask blanks. Strong growth will continue due to brisk EUV research and development activities. There has been no change in the market structure due to COVID-19. Semiconductor manufacturing sites are expected to undergo geographic diversification due to friction between the U.S. and China and the global shortage of semiconductors.
Photomasks for FPD/LSI As panel manufacturers have focused their efforts on mass production activities in response to rising panel prices, demand for photomasks for research and development purposes has fallen. Research and development demand is expected to recover along with the normalization of the supply and demand relationship and the price of panels. None in particular
Substrates for HDDs Demand for 3.5-inch substrates for data centers has increased due to WFH, homeschooling, etc. Momentum for strong growth will continue. None in particular
Imaging-related products Due to fewer opportunities to take photos in conjunction with restrictions on movement, etc., demand for digital camera-related items for compact digital cameras and for interchangeable lenses decreased but is currently on a recovery trend. The market is expected to recover along with the resumption of travel, etc., but the digital camera market is not expected to expand again due to the continuation of market erosion by smartphone cameras. The market of products for security cameras will continue to grow. Despite the short-term acceleration of the contraction of the digital camera market, there are no changes in the market structure. On the other hand, new applications are expanding, e.g., security cameras are being used as a measure to curb the spread of COVID-19 infections.

Electronics

(Information on HOYA’s products may be found in the “Business Domains” section of its website. Please refer to this section for further information.)

Mask Blanks for Semiconductors

Business Overview

In this business, we perform research and development, manufacturing, and sales of mask blanks for semiconductors.

Critical in the semiconductor fabrication process, photomasks are the master plates used to transfer a semiconductor’s intricate and complex circuit pattern onto a semiconductor wafer, and mask blanks are the raw material used for photomask manufacturing.

Because photomasks are created for each individual circuit pattern, mask blanks are essential to new products developed by semiconductor manufacturers, foundries, and other HOYA customers, and in the R&D stage of new manufacturing technologies such as those of extreme ultraviolet (EUV) lithography.

Supply Chain

Raw material manufacturer→Mask blanks manufacturer→Semiconductor manufacturer, foundry

Note: In some cases, product goes via photomask manufacturer

Market Conditions

In 2020, the electronics market experienced an increase in demand for computers and data center-related equipment due to the launch of the 5G smartphone market and the increase in Work From Home (WFH) and homeschooling opportunities because of the COVID-19 pandemic. This led to an increase in memory and logic device demand, resulting in 5% growth of the semiconductor market overall in 2020. In 2021, the growth of the semiconductor market is expected to accelerate on the back of such factors as the recovery of demand for automobiles and other final products that had fallen in each country and the further increase in sales of 5G smartphones.

Going forward, the growth of the market for mask blanks is expected to continue, given that semiconductor manufacturers and foundries are briskly conducting research and development activities aimed at the further miniaturization of electronic circuits using extreme ultraviolet (EUV) lithography—a cutting-edge manufacturing technology—and that customers' research and development demand is the key driving force for the demand for mask blanks.

HOYA Position and Market Share

We have maintained a large share of the market over the long term by leveraging our strength, that is, our ability to mass-produce high-quality products in a stable manner.

Moreover, we have continued to conduct EUV blanks research for nearly 20 years, and have demonstrated a firm presence in this field which has exceptionally high hurdles to clear for entry.

HOYA is enjoying an ever-growing presence as the only manufacturer that has rolled out both EUV and optical (existing non-EUV lithography technology) products.

HOYA Outlook

Along with the advance of miniaturization in semiconductors, it appears that demand for mask blanks for EUV lithography will continue to be strong in the future.

Market Share (Optical)
(FY2020)
Market Share (Optical) (FY2020)
[HOYA estimate on a value basis]
Market Share (EUV)
(FY2020)
Market Share (EUV) (FY2020)
[HOYA estimate on a value basis]
Semiconductor Market and HOYA's Growth Rate
Semiconductor Market and HOYA's Growth Rate

Reference: WSTS

Sales of HOYA Mask Blanks for EUV Lithography and Number of EUV Scanners Installed (Volume)
Sales of HOYA Mask Blanks for EUV Lithography and Number of EUV Scanners Installed (Volume)

Mask blank sales are difficult to accurately predict due to the dramatic fluctuations that occur in line with customers’ development speeds, and also because they are not consumables and are not necessarily linked to movements in the semiconductor industry as a whole. However, in regards to products for EUV applications, the cumulative number of EUV lithography machines installed is deemed as one of the indicators of growth of the EUV market.

In such an environment, we expanded the manufacturing line for mask blanks for EUV lithography and launched the operation of a new manufacturing line in a phased manner in 2020. As demand is expected to expand further, we are also re-expanding the manufacturing line with the aim of launching its operation in 2023.

Photomasks for FPD

Business Overview

HOYA conducts research and development, manufacturing, and sales of photomasks used for manufacturing FPDs*1 such as LCD*2 and OLED*3.

When manufacturing FPDs for TVs, smartphones, laptop computers, and other devices, photomasks for FPD manufacturing are used as the master plates to transfer the circuit pattern onto the substrate.

  • *1 FPD: Flat Panel Display
  • *2 LCD: Liquid Crystal Display
  • *3 OLED: Organic Light-Emitting Diode

Supply Chain

Raw material manufacturer→Photomask blanks and photomasks manufacturer→Panel manufacturer

HOYA sources the substrate from raw materials manufacturers, and on that substrate performs polishing, deposition, and resist applications (blanks manufacturing). When the manufacture of the blanks is completed, HOYA conducts circuit pattern drawing, developing, etching, and resist stripping and cleaning, and delivers it to panel manufacturers (photomask manufacturing).

Sales Composition by Application

The ratio of sales by application is stated as follows. The end-product market for smartphone applications continues to grow, accounting for the largest proportion.

Market Conditions

In the fiscal year ended March 31, 2021 (fiscal 2020), panel prices rose due to the increase in display demand arising from the COVID-19 pandemic. As panel manufacturers focused their efforts on mass-production activities, demand of research and development activities for photomasks decreased. As a result, the FPD photomask market shrank.

Sales Composition by Application (FY2020)
Sales Composition by Application (FY2020)

Going forward, the market is expected to grow due to such factors as the recovery in panel manufacturers' research and development demand in line with the normalization of the supply and demand relationship and the price of panels, as well as the increase in demand for FPD photomasks for small- and medium-sized OLEDs used in smartphones, etc.

HOYA Position and Market Share

HOYA possesses expertise in high-precision products, and holds the top-class market share.

HOYA Outlook

We will strive for steady business growth focusing on high-precision Gen. 6 products where there are future prospects for growth and on the Chinese market in term of geographic region.

Market Share (FY2020)
Market Share (FY2020)
[HOYA estimate on a value basis]

Panel Generations

FPD (LCD, OLED, etc.) manufacturing lines are categorized by generation, which corresponds to mother glass size. The size of mother glass has become progressively larger year by year not only because TV screens have become bigger, but also for the purpose of enhancing productivity by increasing the number of panel configurations per sheet. Growth is expected to continue going forward also with respect to small- and medium-sized panels centering on Gen. 6, in which HOYA has an edge, driven mainly by demand for OLEDs for smartphones.

Glass Substrates for HDDs

Business Overview

In this area, HOYA conducts research and development, manufacturing, and sales of glass substrates for hard disk drives (HDDs). HDDs are used as recording media in laptop computers and servers.

Since HOYA’s full-fledged entry into the market of 3.5-inch substrates for data center servers in 2017, the business has continued to undergo high growth to the extent that it accounted for at least half of the sales of the business segment in terms of amount in fiscal 2020.

Supply Chain

Raw material manufacturer→Substrate manufacturer→Media manufacturer→HDD manufacturer

From raw materials manufacturers, HOYA sources substrate raw materials, which we process in ways such as making it into a disc shape, enhancing its shock resistance, and polishing. After processing, we deliver this substrate to the media manufacturer where magnetic film is applied, among other film-forming processes, and it undergoes burnishing (final polishing) and other treatments before being shipped. In hard disk manufacturing, the HDD manufacturer assembles the hard disk, head, and other components, tests the completed product, and then ships.

Note: Hard disks may also be manufactured by the HDD manufacturer.

Sales Composition by Application

The sales composition ratio of our 2.5-inch substrates, by application, is as the right figure.

HOYA’s 3.5-inch substrates are used in HDDs for near line (NL) servers used for backup and other purposes at data centers.

Sales have been growing steadily and accounted for approximately 60% of sales of the business segment in the fourth quarter of fiscal 2020.

2.5-Inch Substrates Sales Composition
by Application (FY2020)
2.5-Inch Substrates Sales Composition by Application (FY2020)

Market Conditions

In the fields of laptop computers, external HDDs, mission-critical servers, and games, the market for 2.5-inch HDDs is shrinking, as they are being replaced by solid state drives (SSDs), which have faster data read/write speeds.

On the other hand, in the 3.5-inch HDD market, NL servers, having a comparatively low access frequency with backup applications, predominantly use HDDs due to their cost advantages over SSDs. Although investments in facilities associated with data centers by large-scale cloud service vendors fluctuate significantly even in the short term, a significant market expansion is expected in the long term as data generation volumes expand throughout the world.

HOYA Position and Market Share

Currently, all 2.5-inch substrates are made of glass. As the sole glass substrate manufacturer in the market, HOYA supports the HDD industry behind the scenes.

In the 3.5-inch substrate segment, products made of aluminum used to completely dominate the market based on their price advantage. However, our glass substrate products are now being adopted for HDDs as they are highly rigid and can increase the number of mounting disks by thinning the disks, and their market share in volume terms has risen to 40%. As the storage capacity of HDDs expands, our market share is also expected to expand.

3.5-Inch Substrate Used for Near Line Server Market Share (FY2020)
3.5-Inch Substrate Used for Near Line Server Market Share (FY2020)
[HOYA estimate on a value basis]

HOYA Outlook

Sales of 2.5-inch substrate products are expected to decline on an ongoing basis, as the replacement of HDDs with SSDs in computers and mission-critical servers continues into the future.

Sales of 3.5-inch substrates are expected growth in line with the continued expansion of the market. In the medium term, growth is expected to accelerate through the acquisition of new customers; we will switch existing manufacturing facilities and utilize the new plant in Laos to meet the increase in demand.

Potential for Glass Substrates in the 3.5-Inch Market

In response to the expansion of data volume and the storage volume generated worldwide, HDD manufacturers are continually introducing in the market new products with higher data capacity per HDD.
The increase in data capacity per HDD has been realized by increasing the recording density or area of the disk, but, at present, the development of technologies designed to improve recording density is stagnating, and the expansion of the recording area remains key to capacity expansion.

In the 3.5-inch market, the disk material is now mainly aluminum alloy. However, since a further increase in area can be realized by increasing the number of mounting disks by thinning the disks, it is becoming necessary to use glass instead of aluminum alloy as the former has higher rigidity and allows for more thinning. More specifically, after the point where the number of disks mounted in an HDD reaches 10 (substrate thickness: 0.5 mm), glass substrates are required (rigidity of glass and aluminum alloy in terms of Young’s modulus are 95 GPa and 71 GPa, respectively).

In the event that HAMR (Heat-Assisted Magnetic Recording) is realized and commercialized, glass substrates, which have excellent heat-resistance characteristics, would be the only option because HAMR would entail heat at the production process of magnetic film (the heat resistant temperature of glass is 691 degrees Celsius, whereas that of aluminum alloy is 290 degrees Celsius).

Imaging-related Products

(Information on HOYA’s products may be found in the “Business Domains” section of its website. Please refer to this section for further information.)

Imaging-related Products (Including optical glass, optical lenses, camera lens units, and lasers)

Business Overview

In this area, we conduct research and development, manufacturing, and sales of optical lenses for a variety of cameras, as well as for optical glass materials.

Supply Chain

Raw material manufacturer→Manufacturer→Lens manufacturer→Camera manufacturer

HOYA sources materials from optical glass material manufacturers, conducts compound and solution treatments, manufactures lens materials and lens products, and delivers to lens and camera manufacturers.

Sales Composition by Application

The ratio of sales by application is as the right figure.
Digital camera-related items for compact digital cameras, interchangeable lenses, etc. that had previously made up the majority of sales are trending down, and now account for approximately 30% of total sales.

As for products for security cameras, which is a new area of application, sales increased to a scale equivalent to those of interchangeable lenses on the back of growing demand for aspherical glass lenses due to the increasing adoption of higher-pixel imaging.

Market Conditions

Despite trending toward improvement, demand for interchangeable lenses and compact digital cameras substantially decreased in the first half of fiscal 2020, due to fewer opportunities to take photos as a result of the impact of COVID-19. Likewise, demand for security cameras was impacted by COVID-19 in the first half of fiscal 2020, but is undergoing rapid recovery; in our view, the security camera market will become a growth market in the medium term.

Sales Composition by Application (FY2020)
Sales Composition by Application (FY2020)

HOYA Position and Market Share

From research and development of optical glass composition to manufacturing of finished products of lenses, HOYA takes a consistent approach to its activities while building a structure that makes possible the mass production of an array of products.

HOYA maintains a high market share with its exceptional skills in aspherical glass molded (GMO) lenses.

GMOs are formed by directly pressing optical glass that has been subjected to high temperatures to make it malleable. These are optical lens products that require no polishing, and possess an excellent ability to correct distortions. Enabling a high angle design, the number of lenses used in optical systems can be reduced, and this contributes to compact, lightweight, and highly functional end-product cameras.

Share of Aspherical GMO Lenses (Digital Camera-Related) (FY2020)
Share of Aspherical GMO Lenses (Digital Camera-Related) (FY2020)
[HOYA estimate on a value basis]

HOYA Outlook

As for products for digital cameras, the fall in sales of products for compact digital cameras and interchangeable-lens cameras is expected to continue, as higher-quality/multi-lens imaging is increasingly realized by smartphone cameras.

On the other hand, products for security cameras, which are new applications, are expected to grow steadily due to the increasing adoption of higher-pixel imaging and the increasing number of security cameras installed.

On top of this, we are enhancing our sales activities for the adoption of HOYA products in advanced driver assistance systems (ADASs), facial authentication for mobile devices and Augmented Reality (AR) applications. In particular, their potential in the market of car-mounted cameras for image recognition in ADASs looks promising; we expect them to make a significant contribution to our business results when the practical application of this technology goes into full swing in a few years’ time.