Annual report
Page 1
SUMCO ANNUAL REPO RT2025 January 1 to December 31, 2025 Silicon Wafers are the Fountainhead of Technology SUMCO ANNUAL REPORT 2025
Page 2
Editorial Policy Basic Policy on Information Disclosure Financial Information Financial Results Reports, Annual Securities Reports, Presentations, etc. https://www.sumcosi.com/english/ir/library/ Sustainability Reports, etc. https://www.sumcosi.com/english/csr/ Role of the Annual Report SUMCO's basic policy is to disclose information on our website in both Japanese and English simultaneously. We emphasize dialogue with our stakeholders and strive for highly transparent disclosure through a wide range of communication tools, covering everything from financial information to nonfinancial (ESG) information. For more details, please refer to the following: This report is intended to communicate the following to our stakeholders: ●Our competitive advantages in the semiconductor silicon wafer business ●The "invisible assets" that form the core of our value creation story By organically linking financial and nonfinancial information, we publish this report as an integrated communication tool to help readers understand our initiatives for sustainable growth. Reporting Period and Scope Period covered: January 1, 2025–December 31, 2025 (Includes some activities in 2026) Scope: SUMCO CORPORATION and its consolidated subsidiaries Nonfinancial Information (ESG) SUMCO Profile Message from the President SUMCO’s Business The Source of and Road to SUMCO Value Creation 03 05 09 21 Governance Initiatives for Sustainability Financial Information Management Policies, Business Environment, Issues to Address, etc. 41 53 77 83 Business and Other Risks Corporate and Share Information 84 89 The story of value creation by SUMCO 1 SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim 2 3 4 5 INDEX Advances in semiconductors are changing the world. They are changing our era, the landscape, changing you and me. How will semiconductors shape the next century? Silicon wafers are fundamental to semiconductor technology. Innovation in semiconductors will create a better future. It is the mission of the SUMCO Group to be the world’s No. 1 silicon wafer supplier by exceeding the expectations of our customers and stakeholders by recognizing the value of our employees and by being good neighbors in communities. Mission Statement ̨̢̪̘̤ SUMCO Annual Report 2025 0201 SUMCO Annual Report 2025
Page 3
S ili con U nited M anufactur ing Co r por ation 1 World’s Best in Technology 4 Competitiveness in Overseas Markets2 Stable Profitability Even During Economic Downturns 3 Empower Employee Awareness of Profit 46.$0 7JTJPO Global market share in leading-edge fields Patents held Net sales and employees by region More than one out of two of all the world’s leading-edge electronic devices came from a SUMCO silicon wafer. Approx. 3, 600 Semiconductor devices are advancing along with ultraminiaturization technology, also known as nanotechnology. SUMCO works on technological development in the nanoscale world and supplies high-quality wafers to the world's leading semiconductor device manufacturers. Our strengths lie in our stable quality, state-of-the-art technological development capabilities, detailed technical support, and reliable supply of products. We contribute to the development of the semiconductor industry through the supply of high-quality, ultra-clean, and high-precision wafers. Source: SUMCO estimates based on various data Europe, etc. Net sales Employees 48.0 billion yen 29 Japan Net sales Employees 79.5 billion yen 7,163 (China) Asia 51.9 billion yen (Taiwan) (Korea) Net sales 153.2 billion yen 40.4 billion yen Employees 1,809 North America Net sales Employees 36.3 billion yen 713 409 .6 billion yen Net sales 80.6 % Overseas sales ratio No . 1 in the silicon wafer industry Global market share for logic applications in leading-edge fields Other companies (December 31, 2025) 9,7 14 Employees Semiconductors, used in products of all kinds from smartphones and personal computers to consumer electronics and automobiles, are indispensable to our daily lives. Helping also to resolve environmental issues and save energy, semiconductors are continuing to advance with technological innovation, as they create our future. SUMCO specializes in making silicon wafers, the substrates on which semiconductors are fabricated. SUMCO, a front-runner in wafers for leading-edge semiconductors, is a company with a vital role in making semiconductors more advanced. SUMCO Profile SUMCO Annual Report 2025 0403 SUMCO Annual Report 2025
Page 4
Message from the President I was appointed representative director and president of SUMCO on March 27, 2026. Here, I would like to share the Company’s future direction and lay out the kind of management style I intend to adopt. Since joining SUMCO, I have served in many different capacities: in research and development, on the factory floor, in sales, and running overseas subsidiaries. Working in R&D taught me the value of building up technological expertise. Being on the factory floor taught me the importance of quality and keeping operations running smoothly. My time in sales taught me about being committed to customers and addressing their needs head-on. Running overseas subsidiaries taught me how to make prompt decisions and the weight of responsibility. These varied experiences have led me to the conclusion that in business, the answers are always to be found on the front lines—and that what ultimately generates results is candid, open communication with frontline staff, customers, and suppliers. A particularly memorable chapter in my career was turning around an overseas subsidiary. In a challenging business climate, I engaged in repeated dialogue with the people on the front lines, brought issues to light one by one, identified opportunities to remediate them, set priorities, and took systematic action. I thus succeeded in setting the business on the path to recovery. This experience convinced me that the more difficult the situation, the more important it is to face the facts squarely, be honest with each other, decide what must be done, and then do it. This conviction has remained unchanged since I assumed the presidency. Adhering firmly to the growth strategy developed by my predecessor Mayuki Hashimoto, who served as representative director, chairman & CEO, I intend to advance steadily one step at a time, while seeing reality for what it is. At the same time, I will move quickly to keep pace with the rapidly changing. These will be my guiding principles. The semiconductor and silicon wafer markets have entered the recovery phase, but that recovery is uneven. Demand for wafers for leading-edge logic chips and high bandwidth memory (HBM), buoyed by the increasing spread of artificial intelligence (AI), remains strong. In addition to wafers for AI training chips, demand is also expanding to related fields such as data centers, memory, peripheral devices, and power control, fueled by the spread of advanced inference. Areas that play to our strengths are steadily increasing. Yet a recovery will still take time in the market for non-leading-edge wafers, including those for automobiles, industrial equipment, and consumer electronics. This is due to, among other factors, prolonged inventory drawdowns by customers and expanding Chinese supply. Moreover, sources of uncertainty in the outside environment are proliferating: exchange rates, commodity prices, energy security, policy trends in different countries, and geopolitical risks. These changes, in my view, represent not a passing wave but a structural transformation in the market itself. Demand spikes are steeper than they used to be, with greater variations in demand across products for different applications. That makes it more important than ever to gather accurate information, detect nascent trends, and stay ahead of the curve in making the necessary preparations. In this climate, the course we should pursue is obvious. Rather than focus solely on expanding volume, we must achieve quality-driven growth. “Quality” as I use the term here means being chosen on the virtue of our technology. It means winning trust with the excellence of our products, consistently being able to supply what is needed when it is needed, and staying on a growth trajectory while remaining profitable. The first pillar of the SUMCO Vision is to be the “World’s Best in Technology.” To achieve that goal, we will simultaneously expand our lineup of differentiated products, ensure that supplies remain steady, and enhance our cost competitiveness. The same principles will govern capital expenditures. In relation to leading-edge products, a new factory for producing leading-edge 300 mm wafers—a greenfield investment decided in 2021—is being phased into operation in the Imari district. At existing plants, meanwhile, production facilities are to be upgraded in response to the changing structure of demand, enhancing our ability to cater to the market for leading-edge products. On the other hand, in deciding when to invest in the land in Yoshinogari, which was acquired in anticipation of future demand growth, we will carefully monitor market trends. Getting too far ahead of demand would result in overcapacity; falling behind would result in lost opportunities. We are committed to a disciplined approach to investment, which means knowing when to accelerate and when to apply the brakes. On the financial front, cash flow, rather than short-term fluctuations in profits, will remain a prime consideration in the running of our business. Despite higher depreciation resulting from the greenfield investment referred to above, we will maintain our ability to generate steady earnings in the face of significant fluctuations in demand and prepare ourselves for the next growth opportunity. We will strengthen the foundations of our business with the goal of ensuring “Stable Profitability Even During Economic Downturns”—the second pillar of the SUMCO Vision. Our competitive edge is underpinned by our people, our technology, and our ability to work together effectively as an organization. No matter how good your equipment is, it takes the individual abilities of the people working on the production floor to put it to effective use. I believe in creating a workplace that empowers employees to think independently and challenge themselves. Building the future on technology and trust Aiming for quality-driven growth Further developing our talent base and honing our technology Representative Director, President Jiro Ryuta SUMCO Annual Report 2025 0605 SUMCO Annual Report 2025
Page 5
Message from the President When employees fully appreciate the significance of their work and show resourcefulness on the job, it ultimately results in higher quality and greater customer trust. That in turn enhances our technology and our ability to address problems as they arise on the factory floor. One of SUMCO’s strengths is the fact that our factories producing leading-edge 300 mm wafers, our R&D arm, and the AI Promotion Division are all located in the Imari district. That means that when an issue arises, all concerned can promptly gather, discuss the problem on the spot, and take immediate action. The rapidity with which decisions are made and implemented builds trust with customers. To enhance these frontline capabilities, I will strengthen our ability to respond to the customer’s wants as a single unified team with no walls between R&D, production, and sales. In addition, I will take integration between the factory floor and digital a step further. The AI Promotion Division has so far spearheaded the Company’s efforts to utilize quality and process data. Going forward, however, it will be critical to have a cycle proceeding in both directions. Experts in data analysis need a good understanding of the factory floor, and factory personnel need to know how to use digital technology. We will boost productivity and quality by rotating personnel between the AI Promotion Division and our production arm, thus expediting the process of identifying problems and recommending and implementing solutions. At the same time, I will focus on creating a workplace where employees feel safe and secure. One of the most important foundations of trust in our organization is a set of mechanisms encouraging employees to speak up and properly addressing their concerns. These include health and productivity management initiatives, measures to improve the working environment, and a whistleblower program, as well as an anonymous suggestion box. The third pillar of the SUMCO Vision is to “Empower Employee Awareness of Profit.” To achieve that goal, I will cherish our culture of recognizing people for challenging their limits, while ensuring a workplace where everyone can apply their abilities with confidence. Contributing to building a sustainable society, I believe, is inseparable from the growth of our business. We will work in good faith to meet the public’s expectations by steadily improving the way we do business—not to mention delivering value through our products. On the environmental front, we consider cutting greenhouse gas emissions a key priority. We have strengthened our net-zero targets and obtained Science Based Targets (SBT) certification. We are also working to install more renewable energy capacity. In 2025, we began developing renewable energy capacity under a corporate power purchase agreement (PPA) and installed additional solar power generation facilities. Further, we are taking steps to enhance responsible sourcing and better ensure continuity of supply. These are not solely SUMCO initiatives; they also concern the sustainability of our customers and of the entire supply chain. I consider it a testament to these cumulative efforts that SUMCO was selected for the CDP’s 2025 A List in both climate change and water security. As for human resources and the working environment, I value creating a company where everyone can thrive. Besides hiring, training, and developing people from a wide range of backgrounds, we take steps to empower women, provide career development support, and offer generous incentive programs for employees wishing to pursue further studies. We have put in place programs catering to the needs of working parents, including an on-site day-care facility, a childcare support allowance, and the return-to-work program for former employees. As a result of these efforts, SUMCO was chosen for the 2026 Health & Productivity Stock Selection and again named one of the “White 500” corporations under the Certified Health & Productivity Management Outstanding Organizations Recognition Program. As a business rooted in local communities, we continue to make a difference wherever we operate. We conduct educational outreach classes at universities, colleges of technology, and high schools and donate exhibits to them; engage in conservation activities; and assist those with special needs to find work. Working with the local community and helping develop the next generation of talent are key parts of our mission as a linchpin of the semiconductor industry. Going forward, we will continue to cherish our ties of trust with local communities while aligning our social responsibilities with sustainable business growth. Our business environment is opaque and volatile. But instead of going on the defensive from an excess of caution, I believe it is vital to keep moving forward step by step while assessing the facts and not neglecting to make the necessary preparations. The semiconductor industry is essential to society. As a company underpinning it, we will meet your expectations by steadily enhancing our technology, quality, and ability to supply a steady stream of products, the soundness of our finances, the training of our people, and the sustainability of our business. In closing, let me express my deepest gratitude to our shareholders and investors, our customers and business partners, the people of the communities where we operate, and the employees who keep our business running day in and day out. I look forward to your ongoing understanding and support. FY2021 FY2022 FY2024 335.6 441.0 396.6 41.1 70.2 19.8 41 81 21 17 36 15 24 45 6 51.5 109.6 FY2023 FY2021 FY2022 FY2024FY2023 FY2021 FY2022 FY2024FY2023 FY2021 FY2022 FY2024FY2023 425.9 63.8 55 42 13 73.0 36.9 FY2025 409.6 (11.7) 20 10 10 FY2025 FY2025 FY2025 1.3 Note: Amounts in the graphs above are prepared under Japanese GAAP and rounded down to the nearest 100 million yen. Net sales (Billions of yen) Operating profit (Billions of yen) Profit (loss) attributable to owners of parent(Billions of yen) Dividends per share(Yen) Interim Year-end Working with society to enhance sustainability Sights set on steady growth SUMCO Annual Report 2025 0807 SUMCO Annual Report 2025
Page 6
SUMCO History SUMCO, which started out in 1999 as a developer and manufacturer of 300 mm silicon wafers, has built up a long history as a specialist silicon wafer manufacturer with a wide-ranging product lineup and diverse technologies. Established Silicon United Manufacturing Corporation through a joint investment as a company developing and manufacturing 300 mm silicon wafers Trends in net sales and operating profit History of SUMCO Established in 1999 2000s 2010s From 2020 ● Mass production of 300 mm silicon wafers begins.2001 ● Formulation of the SUMCO Vision2012 1 Withdrawal from the solar wafer business 2 Restructuring and consolidation of production bases 3 Review of workforce allocation 2012 –14 ● Implements Capital Increase and Restructuring Plan 2015 ● SUMCO Nursery School Imari, an on-site day-care facility, opens in Imari, Saga. ● Transition to a Company with an Audit and Supervisory Committee 2016 ● Disclosure of materiality (key issues) regarding sustainability promotion ● Declaration of carbon neutrality (2050) ● Decided to make greenfield investment to expand demand for 300 mm cutting-edge epitaxial wafers and raised part of the capital through a public offering 2021 ● High-Purity Silicon Corporation joins as a consolidated subsidiary. ● Purchased land for the future mass production plant in Yoshinogari, Saga 2023 ● Production from greenfield investment begins in phases. 2025– ● Merger of the silicon wafer businesses of Sumitomo and Mitsubishi conducted to establish Sumitomo Mitsubishi Silicon Corp. 2002 ● Komatsu Electronic Metals Co., Ltd. (current SUMCO TECHXIV CORPORATION) becomes a consolidated subsidiary. 2006 ● Operations begin at a new 300 mm plant in Imari, Saga.2008 ● Operations begin at a new solar wafer plant in Imari, Saga. ● Silicon wafer demand plunged after the 2008 financial crisis. Together with the heavy burden of the new plant investments, a huge loss was recorded. 2009 Sumitomo Mitsubishi Silicon Corporation Trade name changed in 2002 Silicon United Manufacturing Corporation Established in 1999 Sumitomo Metal Industries Ltd., Sitix Division Mitsubishi Materials Silicon Corp. Listed on the First Section of the Tokyo Stock Exchange in 2005 Trade name changed in 2005 SUMCO CORPORATION Business Reorganization Plan (Billions of yen) 500 400 300 100 200 0 (100) Net sales Operating profit 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2025 2024 SUMCO’s Business SUMCO Nursery School Imari celebrating its 10th anniversary Kyushu Factory (Kubara in Imari, Saga Prefecture), where 300 mm leading-edge silicon wafers are produced SUMCO Annual Report 2025 1009 SUMCO Annual Report 2025
Page 7
900 800 700 600 500 400 300 200 100 0 1990 2000 2005 2010 20151995 2020 1,000 800 900 0 100 300 200 400 500 600 700 1990 2000 2005 2010 20151995 2020 (Index) (B$) PCs and servers Mobile phones and smartphones Consumer products Industrial Automotive Other (Year) 2025 2025 Silicon wafer surface area Nominal GDP Steel Aluminum Copper (Year) (Source: Silicon wafer data from SEMI, Nominal GDP data from IMF, the rest from a research company) (Source: SUMCO, based on published values from a research company) PCs (Memory size per unit) 2MB 32MB 128MB 512MB 4GB Data centers Outsourcing trend Rise of cloud services Rapid demand growth Communications systems 2G 3G 4G 5G Mobile phones and smartphones Mobile email Internet access Video streaming Consumer products (TVs) CRT TVs Large flat-screen TVs High-resolution support (HD,4K,8K) Industrial Factory labor-saving, automation Growth of renewable energy Automotive Microcontrollers in ICE vehicles Practical hybrid electric vehicles (HEVs) Implementation and advance of ADAS Practical electric vehicles (EVs) Growth in HEV/EV use Coming of the digital society Advance of IoT and big data society SUMCO founding SUMCO founding Expanding use of generative AI Rapid expansion of electronic device market 8GB (up 4,000-fold since 1990) Increase in AI servers High-bandwidth streaming IoT arrival, AI advancement Implementation of self-driving vehicles Collapse of IT bubble Lehman Brothers collapse Market growth rate by materialSemiconductor market growth (per application) (1990 –2025) growth in silicon wafer surface area : timesApprox. 7 (1990 –2025) compound annual growth rate (CAGR): 5.8 Silicon Wafer Industry: Undergoing Rapid Growth Semiconductor Growth Trajectory SUMCO’s Business SUMCO Annual Report 2025 1211 SUMCO Annual Report 2025
Page 8
*1 GPU (graphics processing unit): Logic semiconductors that perform ultra-fast computation *2 HBM (high bandwidth memory): Computer memory consisting of stacked DRAM chips for greater capacity and speed Smartphones Servers Personal Computers and Tablets The 300 mm silicon wafer market driven by AI demand SUMCO’s Business AI-related Demand Driving the Semiconductor and Silicon Wafer Markets ●To meet surging AI use, data centers will continue adding AI server capacity. ●Demand for AI use will expand with the advances of edge AI: deploying AI capabilities directly on edge devices such as smartphones and personal computers. ●Underpinning the expanding use and advancement of AI are leading-edge AI semiconductors and the state-of-the-art silicon wafers essential to making them. ●While overall smartphone growth has slowed, the shift toward edge AI will continue. ●Demand growth is expected for wafers for leading-edge logic chips used in the advanced processors that constitute the “brains” of smartphones. ●Demand for use in data center AI servers was the main driver of the semiconductor and wafer markets in 2025. This demand is expected to continue growing in response to the rapid expansion of AI use. ●To enable ultrafast processing of huge amounts of data, AI servers are equipped with large numbers of leading-edge semiconductors, including GPU *1 and HBM*2 chips. ●Not only is an AI server configured with numerous semiconductors, but a bonding process is adopted to achieve higher scaling and functionality, adding up to a large increase in silicon wafer area per server. ●A shift to cloud-independent personal computers and other devices with their own AI capabilities will accelerate, aimed at more efficient AI use. ●Even amid sluggish growth in the overall personal computer market, this trend will drive demand for memory and logic wafers. Outlook for the share of AI semiconductors in the overall semiconductor market The strongest growth in the 300 mm silicon wafer market will come from server use. Thanks to demand growth for AI semiconductors, including leading-edge logic chips such as GPUs and high-performance memory chips, notably HBMs, demand will continue to expand for state-of-the-art silicon wafers. As a leading manufacturer of silicon wafers supporting advanced semiconductors, SUMCO will maintain its dedication to technology development and the stable supply of high-quality silicon wafers. 300 mm silicon wafer 20262024 2025 2027 2028 (Source: SUMCO estimates based on research companies' data) (B$) (%) 1,200 80 60900 600 300 40 20 0 0 Semiconductor Market AI Semiconductor Market AI Ratio (Right Axis) 20262024 2025 2027 2028 (Source: SUMCO estimates based on research companies' data) (Million Units) 20 15 10 5 0 General Servers AI Servers: CAGR (24–28) 19% Large increase AI ServersGeneral Servers (Source: SUMCO estimates based on research companies' data) (Indicators) 4 3 2 1 0 20262024 2025 2027 2028 (Source: SUMCO estimates based on research companies' data) (Million Units) 1,600 1,200 800 400 0 No AI function With AI function: CAGR (24–28) 26% 20262024 2025 2027 2028 (Source: SUMCO estimates based on research companies' data) (Million Units) 600 450 300 150 0 No AI function With AI function: CAGR (24–28) 35% 20262024 2025 2027 2028 (Source: SUMCO estimates based on research companies' data) (Kwafers/month) 3,000 2,000 1,000 0 NAND DRAM/HBM Leading-edge Logic Continued high growth is expected for AI servers Typical comparison by silicon area required per server Demand forecast for 300 mm silicon wafers for servers Semiconductor Market %11 AI Semiconductor Market % 28(24–28)CAGR Unit growth forecast Shifting toward AI capabilitiesUnit growth forecast Rapidly shifting toward AI capabilitiesUnit growth forecast SUMCO Annual Report 2025 1413 SUMCO Annual Report 2025
Page 9
Melting Seeding Rotating and pulling Monocrystalline ingot Smelting and refining Polycrystalline silicon Oxide layer Thin film material Slicing Monocrystalline silicon block Lapping Polishing Polished wafer Specialized processingWafer cleaning Annealed wafers Epitaxial wafers Silicon-On-Insulator wafers UV light Thin film Photoresist Photoresist application Lithography and development Etching Ion implantation Impure ions (dopants) Metal for interconnects Thin film forming (deposition) Glass mask Flattening Dicing Wire bonding Electrode formation Wafer inspection Probe array Molding Packaging and final inspection Epoxy resin Silicon wafer Melting Seeding Rotating and pulling Monocrystalline ingot Smelting and refining Polycrystalline silicon Oxide layer Thin film material Slicing Monocrystalline silicon block Lapping Polishing Polished wafer Specialized processingWafer cleaning Annealed wafers Epitaxial wafers Silicon-On-Insulator wafers UV light Thin film Photoresist Photoresist application Lithography and development Etching Ion implantation Impure ions (dopants) Metal for interconnects Thin film forming (deposition) Glass mask Flattening Dicing Wire bonding Electrode formation Wafer inspection Probe array Molding Packaging and final inspection Epoxy resin Silicon wafer Melting Seeding Rotating and pulling Monocrystalline ingot Smelting and refining Polycrystalline silicon Oxide layer Thin film material Slicing Monocrystalline silicon block Lapping Polishing Polished wafer Specialized processingWafer cleaning Annealed wafers Epitaxial wafers Silicon-On-Insulator wafers UV light Thin film Photoresist Photoresist application Lithography and development Etching Ion implantation Impure ions (dopants) Metal for interconnects Thin film forming (deposition) Glass mask Flattening Dicing Wire bonding Electrode formation Wafer inspection Probe array Molding Packaging and final inspection Epoxy resin Silicon wafer Melting Seeding Rotating and pulling Monocrystalline ingot Smelting and refining Polycrystalline silicon Oxide layer Thin film material Slicing Monocrystalline silicon block Lapping Polishing Polished wafer Specialized processingWafer cleaning Annealed wafers Epitaxial wafers Silicon-On-Insulator wafers UV light Thin film Photoresist Photoresist application Lithography and development Etching Ion implantation Impure ions (dopants) Metal for interconnects Thin film forming (deposition) Glass mask Flattening Dicing Wire bonding Electrode formation Wafer inspection Probe array Molding Packaging and final inspection Epoxy resin Silicon wafer Melting Seeding Rotating and pulling Monocrystalline ingot Smelting and refining Polycrystalline silicon Oxide layer Thin film material Slicing Monocrystalline silicon block Lapping Polishing Polished wafer Specialized processingWafer cleaning Annealed wafers Epitaxial wafers Silicon-On-Insulator wafers UV light Thin film Photoresist Photoresist application Lithography and development Etching Ion implantation Impure ions (dopants) Metal for interconnects Thin film forming (deposition) Glass mask Flattening Dicing Wire bonding Electrode formation Wafer inspection Probe array Molding Packaging and final inspection Epoxy resin Silicon wafer Melting Seeding Rotating and pulling Monocrystalline ingot Smelting and refining Polycrystalline silicon Oxide layer Thin film material Slicing Monocrystalline silicon block Lapping Polishing Polished wafer Specialized processingWafer cleaning Annealed wafers Epitaxial wafers Silicon-On-Insulator wafers UV light Thin film Photoresist Photoresist application Lithography and development Etching Ion implantation Impure ions (dopants) Metal for interconnects Thin film forming (deposition) Glass mask Flattening Dicing Wire bonding Electrode formation Wafer inspection Probe array Molding Packaging and final inspection Epoxy resin Silicon wafer Melting Seeding Rotating and pulling Monocrystalline ingot Smelting and refining Polycrystalline silicon Oxide layer Thin film material Slicing Monocrystalline silicon block Lapping Polishing Polished wafer Specialized processingWafer cleaning Annealed wafers Epitaxial wafers Silicon-On-Insulator wafers UV light Thin film Photoresist Photoresist application Lithography and development Etching Ion implantation Impure ions (dopants) Metal for interconnects Thin film forming (deposition) Glass mask Flattening Dicing Wire bonding Electrode formation Wafer inspection Probe array Molding Packaging and final inspection Epoxy resin Silicon wafer SUMCO’s Business SUMCO’s business fields A silicon wafer is a foundational material, the most important to the semiconductor fabrication process. (Integrated manufacturing system) While a silicon wafer is not something we see in everyday life, it is in fact essential to our daily living. These remarkable wafers are necessary for manufacturing semiconductors, which are found in all kinds of electronic products that enrich our lives. Through technology innovation in many different areas, electronic devices have advanced, contributing to better living and social progress. SUMCO is a company that has continued to take up the challenge of innovating silicon wafer technology, without which these advances could not be made. Polycrystalline silicon process The metal silicon made from silica is smelted and refined to manufacture eleven-nine* polycrystalline silicon. Wafer forming process In the wafer forming process, a monocrystalline silicon block is sliced into disks no more than 1 mm in thickness. These disks are then put through advanced forming processes including lapping and mirror polishing, resulting in an ultra-flat, ultra-clean silicon wafer. Installed in all electronic products SUMCO’s Business Monocrystalline pulling process The polycrystalline silicon is melted in a high-purity quartz crucible and made into a monocrystalline ingot, in an advanced-design pulling process under precisely controlled crystal growth conditions. * Extremely high purity of eleven 9s=99.999999999%. Wafer fabrication processes (Front-end process) Inspection and assembly processes (Back-end process) The surface of a silicon wafer is oxidized, forming an oxide layer, which is then coated with a light-sensitive material (photoresist). After exposing the surface to UV light to transfer a circuit pattern to it from a mask, a chemical process selectively removes unwanted portions of the layers (etching). After ion implantation to enhance performance, the photoresist is peeled off and the surface is flattened by polishing. By repeating the processes from photoresist application to flattening, multiple circuit layers are made. Finally, using tiny needles called probes, the devices (chips) on the wafer are inspected for issues with interconnects and current flow. After the wafer is cut into individual chips with a diamond blade (dicing), the chips are attached to a base and encapsulated in a resin package. Finally, the devices undergo many inspections, including electrical properties testing, before being shipped. SUMCO Annual Report 2025 1615 SUMCO Annual Report 2025
Page 10
Moore's Law is the observation by Gordon Moore in 1965 that the number of transistors on a microchip doubles every two years (giving the chip twice the functions and performance). The Dennard scaling rule, proposed in 1974 by R.H. Dennard of IBM, stated that as transistors become smaller, allowing microchips to shrink, devices will become faster. The combined result of these observed trends is that semiconductor chips have continued to advance through repeated cycles of becoming smaller while their functions are expanded. 20 mm × 20 mm × 145 chips = 58,000 mm2 Effective area 82% 10 mm × 10 mm × 648 chips = 64,800 mm2 Effective area 92% Advances in Semiconductor Scaling Increase in Wafer Size and Precision Technologies for larger size and higher precision Trend for enlargement of wafer diameter Moore's Law and Dennard scaling rule The larger diameters, along with advances in semiconductor device performance and scaling, have increased requirements for higher-precision silicon wafers. SUMCO is working day and night to meet such customer demands through technology development. Making silicon wafer diameters larger means more chips can be obtained per wafer. Silicon wafers have come to be made with improved quality and larger diameters aimed at reducing the process cost per chip surface area. The mainstream products today have a diameter of 300 mm. Bulk contamination Fe, Ni, Cu, etc. Fe, Ni, Cu, Na, etc. Defects formed during crystal growth (COP*) Annealing Oxygen precipitation (BMD*) Flatness (irregularity, waviness, parallelism) Surface contamination (MCL*) Particles Supersaturated oxygen from quartz crucible (interstitial oxygen) MCL COP BMD Metal contamination level Crystal originated particle Bulk micro defect (e.g., oxygen precipitate as gettering site for impurities) Crystal growth Processing Epitaxial growth ●Highly precise control of silicon melt circulation and solidification speed by applying a strong magnetic field from superconducting coils, overcoming the difficulty of obtaining uniform crystals with increase in wafer diameter from 200 mm to 300 mm ●Full shift from single-side to both-side polishing to maintain process precision with bigger wafer size ●Technology for regulating polishing speed at the center and perimeter, precise control of processing shape, and particle deposition and removal by control of wafer surface potential ●Change from batch epitaxial growth to single wafer processing, enabling highly precise control of thickness and resistance ●Development of simulation technology for control of gas flow at the center and periphery of a wafer to achieve thickness control at the wafer edge (technology developed for controlling thickness at the nanometer level) Crystal growth Polishing Processing Epitaxial growth Area A Power use W Area A/4 Power use W/4 Area A/4 Power use W/4 Area A/4 Power use W/4 Area A/4 Power use W/4 Smaller by 1/2 Smaller voltage, capacitance Faster devices Power use per area stays constant Less power use per chip Smaller chip area More chips per wafer (lower chip cost) Typical chip yield from wafer (300 mm wafer) Chip area 1/4 Chip number 4.5X 1980s 1990s 2000s 300 mm 200 mm 150 mm Transition of wafer enlargement in mass production SUMCO’s Business SUMCO Annual Report 2025 1817 SUMCO Annual Report 2025
Page 11
Social issues Issue resolution with Semiconductors, Technology, and AI SDGs ●Advances in semiconductors are creating innovation ●Semiconductors: embedded in all electronic devices, indispensable to building the foundations of industry and technology innovation, and a critical infrastructure for processing the vast amounts of data in our digital society ●Boosting productivity and accelerating innovation in every industry by leveraging AI ●Reduction of CO2 emissions from growing use of EVs and HEVs ●Transition from thermal power generation to solar, wind power, and other renewable energy ●Reducing data center power consumption by semiconductor scaling ●Advances in energy efficiency (increased use of inverters in air conditioners and other consumer electronics and in industrial equipment) ●Sustainable electric power supply management with the building of smart grid systems ●Realization of a safe motorized society with ADAS and self-driving vehicles ●Creating safe and secure communities with disaster and crime prevention systems that use IoT technology ●Provision of remote medical examinations and treatment for people unable to travel for clinic visits ●Introduction of remote work for improved work-life balance and labor productivity ●Promotion of work-style reforms by boosting productivity with AI ●Provision of educational opportunities accessible to anyone anywhere in the world over the internet ●Provision of learning opportunities to anyone, anytime, anywhere through online learning ●AI-driven study support in the classroom Silicon Wafers Helping to Achieve the SDGs through Semiconductors Logic Semiconductor device Semiconductor application Technology creating innovation Data centers Big data Cloud AI 5G IoT DX Metaverse Smartphones PCs, tablets Automotive Industrial equipment Consumer electronics Sensors, cameras Memory (DRAM, NAND) Power (MOSFET, IGBT) Analog Sensors (CIS) Measures for preventing global warming Fair and equitable provision of educational opportunities Safety, medical care, better working environments Building the foundations of industry and technology innovation Development and supply of wafers for leading-edge semiconductors ●Leading-edge logic semiconductors are used in servers, personal computers, smartphones, and other devices as high-performance CPUs (central processing units, the “brains” doing the computing). Capable of processing huge amounts of data at high speed, these semiconductors have become indispensable in building the foundations for industrial and technical innovation. ●SUMCO is a leading player in this field, with a global share of more than 50%. 300 mm wafers for leading-edge logic chips1 ●Leading-edge memory semiconductors are used for storing data in servers, personal computers, smartphones, and other devices. As the amount of data communications traffic continues to increase, memory semiconductors play an important role in the race to resolve social issues with technology. ●SUMCO provides wafers for leading-edge memory semiconductors, including those with a stacked structure. 300 mm wafers for leading-edge memory chips2 ●Power semiconductors, used in EVs, solar and wind power generation, and energy-efficient consumer electronics and industrial equipment, are essential for the prevention of global warming. ●By developing crystals for 300 mm leading-edge wafers, SUMCO is supporting advances in power semiconductors. Wafers for power semiconductors3 ●Sensor semiconductors support the advancement of IoT society, being widely used in information detection devices. ●SUMCO develops and supplies 300 mm epitaxial wafers for high-sensitivity image sensing semiconductors. Wafers for CIS (CMOS Image Sensors)4 SUMCO’s Business SUMCO Annual Report 2025 2019 SUMCO Annual Report 2025
Page 12
Continual improvement in corporate value Source of value creation (Input) Output from value creation We aim for ongoing improvement in corporate value by fulfilling our responsibility to stakeholders. Helping to realize a sustainable society through the provision of silicon wafers SUMCO business model Acceleration of sustainability promotion activities Stable Profitability Even During Economic Downturns Competitiveness in Overseas Markets Empower Employee Awareness of Profit World’s Best in Technology 46.$07JTJPO Invisible assets Financial capital Deriving the funds for growth and return Pursuit of technological superiority Employee health and safety Reducing environmental impact Growing together with suppliers and local communities Human resource development and diversity Manufacturing and intellectual capital Human capital Social capital Natural capital Many years of doing business with customers and relationships of trust as a development partner ● Robust supply chain● Passed-down and accumulated wafer manufacturing technology ● AI/DX promotion framework and built-up expertise ● Worldwide quality certification system● 647.7 billion yenNet assets 16 4sites in countriesProduction sites 79.9 17.8 billion yen billion yen 9,714 26% 1,858 20.1 GWh Mm3 (11.7) Net Income (2.0) ROE 7 Total cash dividends 100 Net cash provided by operating activities 409.6 billion yen %billion yen billion yen%billion yen Net sales Supplier surveys of CSR activities billion yencompaniesMore than 200 7.2 Taxes paid Approx. 3,600 Patents held points or higher on average ConsolidatedNon-consolidated 85 Customer satisfaction rating 2.6 Percentage of female managers Accident frequency rate Health & Productivity Management Outstanding Organizations Enhance web-based training Career formation support reduction GHG emissions (Scope 1+2) Water recycling rate % Waste recycling rate 27.4 EBITDA margin %12.0 82.538.9 World’s top share in the field of leading-edge logic applications 8.8% % 0.47 1/3 of all industries average Health & Productivity Stock Selection World’s Best in Technology SUMCO technology base 1 Leading-edge product development 2 Productivity improvement from more advanced use of AI and DX promotion 3 Human resource development 4 Winning high customer acclaim 5 1,000Well over 4 th timethe Selected for 8 consecutive years Recognized Shareholders Customers Employees Supply chain Local and society communities Technology development spending Employees (consolidated) Suppliers Percentage of employees outside Japan Electricity consumption Water consumption Capital expenditures Wafers for power semiconductors are contributing to the prevention of global warming by supporting the spread of EVs, the switch to renewable energy, the development of energy-efficient consumer electronics and industrial equipment, and other initiatives. Leading-edge wafers for processors, memory, and other chips play roles in key infrastructural elements of the digital society, including the data centers supporting the rapid growth in AI applications, thereby fortifying the foundations of industry and technology innovation. (from 2023 levels) Raising shareholder value and returning profits Helping to advance semiconductor technology as the front-runner in wafers for leading-edge semiconductors Creating dynamic workplace environments conducive to a rewarding work experience Building partnerships based on fair business practices and mutual trust Helping to energize and develop local communities by creating employment, paying taxes, and conducting various community contribution activities Pursuing environmentally responsible management The Story of Value Creation by SUMCO The Source of and Road to SUMCO Value Creation SUMCO Annual Report 2025 2221 SUMCO Annual Report 2025
Page 13
Among the key processes for manufacturing semiconductor silicon wafers are monocrystalline pulling, wafer processing, and specialized processing. SUMCO has state-of-the-art technologies for each of these processes and is among the top companies globally in the number of patents obtained. Armed with these technologies, the Group is meeting the high-level needs of the market. Shrunk by 1/2 Shrunk by 1/2 IC chip size Transistor (Source: Survey by SUMCO) SUMCO Company A Company B Company C Company D 4,000 3,000 2,000 1,000 0 (No. of patents) World’s Best in Technology 2 3 4 5 SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim 1 SUMCO's technology Four core technologies holding the key to quality Evaluation and analysis technologies that support high quality A silicon wafer is a product with extremely strict demands for quality and high technologies. Monocrystals are grown to perfection, with their silicon atoms symmetrically lined up and free of crystal defects. Strict quality control is performed so that surface impurities are at a level of 100 ppt = 1/10 billion or less. Flatness is raised to extreme limits (10 nm = 1/100,000 mm) by precisely controlling lapping movement and mirror polishing. Using the latest automated equipment, we are coming as close as possible to zero contaminants (microparticles as small as the 10 nm range). Miniaturization is technology for further shrinking the line widths and line intervals of semiconductor circuit patterns. Today, circuit patterns are being created with line widths as small as a few tens of atoms. As semiconductors continue to shrink in size, performance advancements become possible by packing more semiconductors into the same space. At the same level of integration (function), it is also possible to make each chip smaller and increase the number of chips per wafer, helping to lower costs. SUMCO, aiming to be the “World’s Best in Technology,” holds numerous patents in the field of silicon wafer manufacturing technology. Monocrystalline pulling technology Wafer processing technology Manufacturing of silicon wafers for semiconductors requires monocrystalline silicon with uniform atomic arrangement. SUMCO’s monocrystalline silicon is used in ultra LSIs, such as CPUs and SoCs, as well as DRAMs, flash memories, and power semiconductors. Products can also be given advanced properties by applying strong magnetic fields (Magnetic Czochralski (MCZ) method). As semiconductor devices advance in performance and functions, the demands for silicon wafer surface cleanliness and flatness are at the level of nanometers. To meet the diverse needs of customers promptly and accurately, SUMCO adopts high-precision fabrication technology and a quality management system across all processes, enabling the manufacture of ultra-flat and ultra-clean silicon wafers. One key product supporting semiconductor devices as they advance to new levels of performance and functionality is the high-quality epitaxial wafer. This is a wafer made by forming the surface layer of the polished wafer from monocrystalline silicon using vapor phase growth, or epitaxy. We also make epitaxial wafers with a layer for embedding integrated circuits, formed on part of the wafer surface. Specialized processing technology (Epitaxial chemical vapor deposition) Semiconductor scaling technology High technologies for making monocrystalline structures and for flatness, cleanliness, and elimination of contaminants World's No. 1 in patent holdings ● Quality free of crystal defects, with atoms symmetrically lined up ● Controlled to 1 defect in 500 million silicon atoms Crystal perfection 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J 4J Scanning transmission electron microscopy used for analyzing crystal defects, etc. In the development of crystalline defect-free silicon wafers for making leading-edge semiconductor devices, one essential element is technology to analyze the behavior of molten silicon during crystal growth. To enable detailed investigation of the three- dimensional behavior of molten silicon at temperatures of around 1,500°C—for which direct measurement is next to impossible—SUMCO developed original 3D fluid simulation technology. This has led to the development and manufacture of high-quality silicon monocrystals. Also enhancing our silicon wafer quality are advanced evaluation and analysis technologies, such as solutions for assessing the uniformity, ultra-flatness, and ultra-clean of the crystals so crucial to semiconductor device scaling. Fluid simulation technology for the Crystal Growth Process 1 Monocrystals 4 Elimination of contaminants 2 Flatness 3 Cleanliness SUMCO technology base 1 The Source of and Road to SUMCO Value Creation SUMCO Annual Report 2025 2423 SUMCO Annual Report 2025
Page 14
As semiconductors advance in scaling and functions, greater use is expected to be made of wafer bonding, whereby two or more wafers are joined together. For high-performance semiconductor devices, wafer bonding is a key technique for solving the current scaling limits and problems of heat and noise, by enabling the advancement from conventional flat integration to 3D structures. An advantage of 3D structures is the shorter electrical signal transfer distance, reducing latency and electricity consumption while improving speed and performance. By stacking in 3D multiple circuits or devices in the limited available surface area, chips can be made smaller and be given more advanced functions. Moreover, to meet diversifying market needs, devices fabricated with different processes, such as logic, memory, and sensors, can be integrated to equip products with complex functionality. Wafer bonding technology will solve semiconductor issues on the way to realizing the next generation of high- functionality, high-performance chips. Acclaim from customers around the world is reflected in our high rate of market dominance. Having high market dominance also means we get to hear from more customers, leading to further value-raising. Silicon wafers that are used in a wafer bonding process of semiconductor production must have even higher precision and higher quality properties than before. This is because the wafers need to be aligned to each other with the utmost precision, since even a slight defect or variation will greatly affect product yield and performance. For the precise bonding of silicon wafers, surface flatness at the nanometer level is required, microparticles that can cause poor adhesion must be removed from the surfaces, surface roughness must be completely uniform to minimize electrical connection defects in wafer bonding, and the layers must be of uniform thickness to ensure dimensional accuracy of the entire 3D-device structure. Highly advanced technology goes into the wafer bonding process, for which the quality of the silicon wafers is of crucial importance. SUMCO will continue to work in close cooperation with our customers to fabricate and supply leading-edge wafers. Dec. 2021Dec. 2019 Dec. 2020 Dec. 2022 Dec. 2023 Note: Technology development expenses include process technology development costs, etc. (Billions of yen) (%) 20 15 10.0 7.5 10 5.0 5 2.5 0 0 Dec. 2025Dec. 2024 11.6 14.7 10.3 10.2 10.5 17.8 14.7 2.6 3.43.5 4.3 3.5 3.1 3.7 Technology development expenses (left axis) Technology development spending as a percentage of net sales (right axis) Logic semiconductors have continued to advance, even with scaling technology nearing its limits and the level of development difficulty climbing. As advances progress in scaling, the quality requirements of silicon wafers are becoming more stringent year by year. By partnering with customers on development and becoming the first place they turn to, SUMCO is able to develop products in anticipation of next-generation needs, gain a large share of the global market in leading-edge fields, and maintain high levels of customer satisfaction. Gaining “first call” status Scaling road map of logic semiconductors 2 3 4 5 1 World’s Best in Technology SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim High global market share in leading-edge fields Leading-edge semiconductor devices: Going beyond scaling to 3D integration Development of leading-edge silicon wafers necessary for making 3D semiconductors Technology development spending Semiconductor device Backside power delivery network DRAM 8–12 layers HBM Structure Interconnect/ logic Logic Photodiode Memory device Logic DRAM NAND CMOS Image Sensor Logic Signal interconnect layer 2 Logic 1 BondingBonding Debonding Handle wafer Semiconductor wafer 2Semiconductor wafer 1 Techniques such as 3D integration are being deployed to meet the rapid growth of AI products and go beyond the scaling limits of semiconductor devices. As a result, silicon wafers face demands for more radical evolution rather than simply advancing incrementally. Collaborating with customers on new product development, we provide high- added-value silicon wafer products that meet their needs. At the same time, we leverage AI to raise productivity and work hard to bring new products to market quickly. 2nm 14Å 10Å Nano node Angstrom node 2020 202220182016Year 2024 2026 2028 2030 2032 5nm 3nm28nm 16nm 7nm (Source: SUMCO estimates based on various data) Other companies Global market share for logic applications in leading-edge fields Leading-edge product development 2 The Source of and Road to SUMCO Value Creation SUMCO Annual Report 2025 2625 SUMCO Annual Report 2025
Page 15
Deploying DX Tools to Promote Operation Efficiency DX Certification since 2021 SUMCO’s AI Promotion Division dates back to 2018. The term DX was not yet in common use, and generative AI was still in the academic research stage. From the start, the division’s objective was not AI introduction for its own sake; rather, it clearly positioned AI as a means for improving factory productivity. Accordingly, it has a unique organization. In addition to an IT section that serves as its headquarters, the division includes a section that is thoroughly familiar with plant processes and another responsible for quantifying and reducing equipment and human resource inefficiencies. Along with building a plant data platform (RTM*), we worked closely with the production division to reduce capital expenditures in our main 300 mm wafer plants by more than 30 billion yen and achieved more than 4 billion yen in annual profit creation in 2021. Since then, we have continued introducing smart technologies in all our plants and have steadily achieved labor savings equivalent to more than a billion yen per year, preventing human error, and reducing arduous work. We have further devoted efforts to speeding up development and assisting with production of the high-value-added products that are a SUMCO strength. These efforts include providing an AI usage platform for engineers and internally creating and deploying an RTM+AI system that automatically decides which processes need tuning, among other such tools. AI will continue to make strides. By providing the high-quality silicon wafers essential to supporting this progress, SUMCO intends to contribute to society. *RTM: Real-Time Monitoring 1. Business Intelligence (BI) tools: Tools used to collect and analyze various data in support of on-site and management decision-making 2. Robotic Process Automation (RPA): Technology for automating computer-based processes and tasks to replace human labor 3. Workflow system: A system that computerizes various requests in an organization to make the checking and approvals process more efficient 2 3 4 5 1 World’s Best in Technology SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim Using AI to analyze process and quality data from real-time monitoring Making development and manufacturing processes more efficient by introducing AI and data science technology Building an AI-based production control syst em for flexibly meeting customer needs Process log data Quality data Manufacturing equipment uptime dataPlant facilities data AI/DX tools, data science Large Database Cloud Storage Manufacturing Processes DX tools Productivity Equipment/labor productivity; High-value-added production support Agility Agile response to market changes and customer demands; faster development and establishment of a mass production system Adaptability A worker-friendly environment for a new age; evolving to win the race for survival Approx. 184,000 hours a year Mission of the AI Promotion Division Main Aims of Our DX SUMCO receives recognition under a Ministry of Economy, Trade and Industry (METI) initiative as a Digital Transformation Certified Company. This certification is given to companies that are deemed ready to carry out DX of their own business operations. Message from the General Manager of the AI Promotion Division Takeo Katoh Director, Senior Managing Executive Officer, General Manager of the AI Promotion Division Literacy Minimum necessary knowledge of digital utilization; an operation improvement/reform mentality We enhance the agility of the entire organization and our competitive edge through our DX promotion strategies, such as achieving the real-time monitoring and automation of production processes to establish a production capability and production plans capable of flexibly meeting market demand fluctuations; expanding the areas where AI is employed; and realizing rapid data analysis in the technology fields of our leading-edge products to speed up the time from development to mass production. Productivity improvement from more advanced use of AI and DX promotion (1) 3 The Source of and Road to SUMCO Value Creation SUMCO Annual Report 2025 2827 SUMCO Annual Report 2025
Page 16
RPA We accept personnel from manufacturing and R&D departments as internal exchange students into the AI Promotion Division. After conducting practical education and training on IT and DX tools essential for business operations, participants return to their respective departments and divisions and play active roles as key figures in continuing to promote DX. This system was launched in 2021 and has produced over 50 graduates. It is currently welcoming its 9th cohort. AI and DX play roles in all kinds of places in factories, helping to raise productivity, save labor, and reduce costs. The wafers used for leading-edge semiconductors need even higher precision and higher quality properties than before, making it all the more important to devise analysis techniques that can find the slightest defects or quality fluctuations. We are introducing AI-based data analysis systems on our 300 mm wafer production lines, where they help to improve quality while greatly reducing the engineering man-hours for data processing and analysis tasks. ●Preventing quality anomalies by detecting subtle changes ●Eliminating inter-machine variations to minimize product quality fluctuations Ensuring stable production and enhanced quality by conducting faster and highly accurate analysis Division SE SystemThe Smart Factory That SUMCO Aims For Evolution of Data Analysis by AI 2 3 4 5 1 World’s Best in Technology SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim 300 mm Production Line Real-time Data (Quality, Process, etc.) Analysis of Variance (ANOVA) Local analysis Causal effect Contribution analysis by parameter https://www.ipa.go.jp/en/it-examinations/examcategories.html All persons who utilize IT Human resource who promote cyber security All persons who promote safe utilization of IT All business persons Fundamental knowledge and skills for promoting safe utilization of IT Advanced Knowledge/skill Common and basic knowledge for utilizing IT National Examination National Qualification IT Engineer Lv 2 Lv 4 Lv 1 Fundamental Information Technology Engineer Examination(FE)Lv 2 Fundamental Knowledge/skill Applied Information Technology Engineer Examination(AP)Lv 3 Applied Knowledge/skill Dec. 2022 Jun. 2023 Dec. 2023 Dec. 2021 Jun. 2022 Dec. 2024 Jun. 2025 Dec. 2025 Jun. 2024 Cumulative Total of National IT Certification Holders (Highest level only for multiple holders) 250 200 0 50 100 150 Lv1(Persons) Lv2 Lv3 Lv4 34 48 69 95 117 159 193 207 228 ●Automated visual inspection ●Automated pass/fail and sequence determination ●Feedback control ●AI and machine learning integration Decision Automation ●Collaborative robots ●Autonomous transport Transport Automation ●Load reduction in automated transport ●Load reduction in automated warehousing ●Logistics loss reduction ●Scheduling systems Logistics Improvement ●Automated inspection ●Automated verification of production conditions ●Workload reduction ●In-process monitoring systems Process Automation ●Automated equipment data collection ●Auto-aggregation and visualization Automated Utilization Tracking ●In-factory wireless LAN ●Automated data recognition tools ●Tablets Digitization of Forms and Records To user division as division SE New hiringFrom user divisions Training in ICT Promotion Department Training period: 6 months IT Human Resources Development Initiatives We promote DX education as a key human resources development initiative in our efforts to enhance our competitiveness in the digital age. As a result of actively supporting employees in acquiring IT -related qualifications, the number of qualification holders has been steadily increasing each year. We also provide education aimed at raising overall DX literacy and fostering a culture that encourages employees to take on new challenges. Through ongoing human resources development, we will continue to promote the training of highly skilled IT personnel. Team-by-team problem-solving (Final 3 months) Learning about BI and ETL tools Programming training Analysis using multiple AI models ʜModel CModel BModel A Smart Factory Productivity improvement from more advanced use of AI and DX promotion (2) 3 The Source of and Road to SUMCO Value Creation Information Security Management Examination Registered Information Security Specialist (RISS) IT Passport Examination (SG) (IP) Database Specialist Examination (DB) Project Manager Examination (PM) IT Service Manager Examination (SM) Systems Architect Examination (SA) IT Strategist Examination (ST) Embedded Systems Specialist Examination (ES) Network Specialist Examination (NW) Systems Auditor Examination (AU) Registered Information Security Specialist Examination (SC) Registration after passing Education in the basics of IT by e-learning SUMCO Annual Report 2025 3029 SUMCO Annual Report 2025
Page 17
Career-formation programs Key to realizing the SUMCO Vision is for each individual employee to acquire their own high level of value. From the standpoint of educating such human talent, SUMCO makes ongoing investment in human resources and provides extensive career formation programs. SUMCO offers a variety of education and training programs, and during fiscal year 2025, the total number of hours spent taking education and training programs sponsored by the Human Resources Department increased year on year by 2,223 hours. Separate from these Human Resources Department programs, each Company site also provides numerous education and training programs of their own. Moreover, in the conviction that a free and open R&D environment will raise the motivation of engineers, SUMCO encourages presentation of research results at academic societies and by other means. Employees also have available a wide range of career-formation programs, including an initiative aimed at developing data scientists by having them study at a technical graduate school, as well as support for earning a degree in a mid-career doctoral course and for study at universities abroad. In addition, we are taking steps to create an inclusive environment where people from all backgrounds can work with confidence. These include holding training programs that support female employees' career development, providing diversity management training for managers, and conducting an e-learning program on diversity for all employees to complete. In 2025, the presentation session for young engineers was held at the Kyushu Division (Imari). With the Chairman, Vice-Chairman, President, and senior management attending, presentations were given by engineers from manufacturing sites in Japan and abroad. In response to these presentations by young engineers, supporting diverse technologies as our Company seeks to be the “World’s Best in Technology,” advice and questions were offered. One participant was then selected to receive an Award for Particular Excellence, two won Awards for Excellence, two won Special Awards, and six were chosen for honorable mentions. Presentation of the awards took place later at each manufacturing site. SUMCO contributes to technological progress across society by releasing and sharing the results of its research at academic conferences and workshops. Our engineers also present academic papers as part of their technical training, allowing them to engage in exchanges and discussions with university researchers and engineers at other companies. Not only does this help develop their ability to think logically and explain their ideas, but it also provides them with new R&D topics to pursue and fresh insights. In 2025, our people again gave numerous academic presentations, including many online. 2 3 4 5 1 World’s Best in Technology SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim Note: In-house trainings are conducted online, as a general rule. Presentation session Presentation of awards Presentations by young engineers Academic society presentations 40,000 30,000 20,000 10,000 0 (Hours/year) 2020 2021 2022 2023 2024 2025 Total hours of company-wide training held by Human Resources Dept. Level-specific education Objective-specific training Knowledge and skills Specialized education Re-skilling Career development Diversity Managers Assistant Managers Mid-level employees Young employees New employees Mid-level employee training Support through on-the-job training Follow-up training (3rd year) Follow-up training (2nd year) Follow-up training (1st year) Practical training in manufacturing Introductory training for new employees Basic management training Leadership development training Evaluator training Program for newly promoted managers English conversation lessons Language training Language training Career development programs for female employees Technology lectures Participation in outside lecture meetings/encouragement to acquire certification Academic society presentations and paper submission Diversity management training Semiconductor devices and fabrication process training Presentations by young engineers Career design seminars Follow-up training for managers Quality/intellectual property/system education Business accounting training E-learning-based re-skilling support (including DX training) Sending for study at universities, etc., in Japan and abroad Diversity training Human resource development (1) 4 The Source of and Road to SUMCO Value Creation SUMCO Annual Report 2025 3231 SUMCO Annual Report 2025
Page 18
2 3 4 5 1 World’s Best in Technology SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim Study in a Mid-career Doctoral Course Sending Employees to Overseas Universities Engineer Education Engineer Education I knew that SUMCO had affiliated companies with offices overseas, and I had dreams of working at one of them. But then I discovered that, being with the Advanced Evaluation & Technology Development Department, I had little chance of working at an affiliate. The director of the department at the time then told me about the overseas study program. I was interested, so I ended up applying. I was interested in acquiring more extensive academic expertise to enhance the quality of the development work I was conducting at the time. Then I took part in an international conference on a specialized field of knowledge that related to my job; I had applied to present a paper at the conference at the encouragement of my supervisor. There, I met someone who knew the professor who would later be my thesis supervisor, and that person recommended me. At universities in the United States, there are many international students from around the world, including China and India, and they all swap information with each other—regardless of what research lab they are with—as they do their research. That is the impression I got. Seeing that, I realized that America’s technological prowess in semiconductor devices comes in part from how the diversity of its talent leads to broader perspectives. I had previously believed that the main factor behind America’s position in the field was the sheer difference in the quality and quantity of technologies it develops. So the experience altered my perception. As for day-to-day life, there were many people around willing to help me out, so I stopped worrying too much when I had problems. I got into the habit of thinking The biggest advantage was having time to discuss things in depth with academic specialists. While there’s time to ask questions about a paper at a conference, it’s limited. At a university research lab, though, you can engage in debate anytime—and that was a great learning experience. On the other hand, I had to write a thesis to obtain my doctorate. Academic writing has distinctive turns of phrase and specialized terminology, which I really struggled to master. I would pore over past papers in the same field and repeatedly got my university professors to correct papers I had written. There is a big difference between being told what a foreign country is like and actually seeing it for yourself. Everything you experience studying abroad will be an eye-opener. I imagine there are people out there who are interested in studying abroad but are hesitant to apply because they feel uneasy about living overseas. You don’t need to be overly worried, though. The Company is there to support you, and in my case, the local students helped me out. If you think you might want to take the plunge, I would definitely urge you to apply. If you have the opportunity to pursue an advanced degree while you are still young, you should seize it. Sure, it takes courage to put your name forward. You may wonder what you might do if you fail to complete the degree. But if you have the opportunity, go ahead and seize it. Even if you fall short, you can easily bounce back, especially if you are still young—and you will learn a lot. Interacting with people from various career backgrounds and walks of life will expand your horizons, too. I would strongly recommend it. Part of my research involved evaluating the performance of semiconductor devices. There are not that many opportunities to learn about semiconductor devices in-house, so the knowledge I gained from my research has served me well on the job. In addition, my time as a researcher improved my language skills. When using English on the job, I now have a better understanding of what people are saying. positively, telling myself that things would work out. I suppose I became more flexible in my thinking. My field of research was closely related to the development work I was conducting at the time, and what I learned made a difference right away. Writing a thesis also taught me how to organize my thoughts on the page, and presenting papers in settings such as academic conferences honed my ability to prepare documentation that would make sense to anyone. These are the kinds of skills that I intend to apply on the job going forward, both in-house and beyond. Q You spent two years conducting research at SUNY. How did you end up applying to study abroad? Q You earned your doctorate from Kyoto University. What made you decide to obtain an advanced degree? Q How has being sent overseas changed you? Q What were the advantages of studying to get a degree? Did you struggle at all? Q What message do you have for younger engineers who may be thinking of applying to study abroad? Q What message do you have for younger engineers following in your footsteps? Q How have you applied what you learned at SUNY? Q How have you applied what you learned earning an advanced degree? How do you plan on applying it going forward? As a manufacturer conducting business worldwide, we offer programs that send young engineering personnel, responsible for the future, to overseas universities for opportunities to take part in leading-edge technology research while also coming to understand and experience other cultures and ways of thinking in various parts of the world. SUMCO trains engineering personnel by making use of the degree-earning process at Japanese universities, with the aim of meeting customers’ increasingly challenging needs. Engineering personnel selected by the Company study in a university mid-career doctoral course, with tuition and fees paid for through an internal funding program. Studied at State University of New York (SUNY) Studied at Kyoto University Advanced Evaluation & Technology Development Department Shun Sasaki Customer Product Engineering Department Ryo Hirose VOICEVOICE Human resource development (2) 4 The Source of and Road to SUMCO Value Creation SUMCO Annual Report 2025 3433 SUMCO Annual Report 2025
Page 19
2 3 4 5 1 World’s Best in Technology SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim I work on improving the quality and productivity of the epitaxy process and developing testing equipment to facilitate that task. Epitaxial growth is a technology that’s been developing over decades, but there are still many mysteries in the field that no one has yet managed to explain. The most rewarding part of the job for me is when I succeed in boosting quality by figuring out an unknown phenomenon and making improvements accordingly. I apply machine learning to R&D and simulate crystal growth. I joined the Company mid-career, When I run into a problem, I try to track down the cause by gathering one piece of evidence at a time, starting with what I know. If I still can’t solve the problem, I turn to more experienced colleagues for advice. Once, there were some odd results in the measurement data, so I synthesized the relevant information as a jump-off point for discussion and then took it to a senior colleague and asked for their advice. They pointed out that while the things in question looked like they were the same material, they were manufactured differently and had different properties. That was the clue I needed to solve the problem. I once changed the process conditions and ran into a phenomenon that the knowledge available in-house couldn’t fully explain. So I read through scientific papers and systematically assessed and reanalyzed the phenomenon, and as soon as I took my position, they told me that they would leave machine learning to me. I was amazed. It’s exciting to venture into a new field for the department, and I’m enjoying the challenge. I work on developing process technology for the polishing process. For me, it’s gratifying when a decent product comes out of processing under conditions developed on equipment I’ve worked on. It takes a lot of hard work by a lot of people to get a product from planning to mass production, so I love to be able to share in the joy with them all when we succeed in mass producing something. Ever since joining SUMCO, I’ve been involved in performing simulations and developing and testing manufacturing conditions. Currently, I’m working on automating the crystallization process. In order to automate tasks that have depended on the operator’s intuition, I study new technologies such as image processing and machine learning and figure out how to apply them on the factory floor. That process is a lot of fun. It makes every day fulfilling. which allowed me to determine the mechanism behind it. I succeeded in gaining a more in-depth understanding by actively drawing on outside knowledge. The factory staff’s many years of experience working on the production floor, along with their insights from an operational perspective, have come in very handy. Once, a glitch came up when we were getting some equipment up and running, and we couldn’t make any headway on the issue. Then a factory worker who knew the equipment’s features inside out pointed out something that led to a solution. The advantages of working as a team are tremendous. You can share problems and get advice rooted in different perspectives from people specializing in different fields, which can lead to solutions. When you’re deploying a technology that you’ve developed to multiple factories, the cooperation of every site is indispensable. One thing I always keep in mind is that you can’t get a product into mass production without the help and advice of so many people. So the combination of relentless verification and accumulated knowledge, plus teamwork, are the keys to overcoming challenging situations. With technology advancing more rapidly than ever, what goes on in the minds of SUMCO’s next generation of leading engineers as they take on difficult technical challenges? Here, four young and mid-career engineers from SUMCO’s R&D arm come together for a TECH TALK. Their discussion ranges from process optimization to leveraging AI and digital transformation (DX) to their vision for the future—and their thirst for knowledge and passion for engineering come through loud and clear. Kobashi Kobashi Sugimura Muramatsu MuramatsuKuramoto Kuramoto Yamada Yamada You all work on the cutting edge of R&D. What goes on in your mind as you strive to develop technology? What aspects of the job do you find most rewarding? The tangible rewards of working on the cutting edge of R&D Unexpected problems must come up quite often when you’re working on the front lines of R&D. How do you address the problems that you run into? How do you go about solving them? Integrated knowledge and teamwork: The keys to overcoming obstacles TECH TALK On the R&D Front Lines Forging the future of manufacturing with AI, DX and insights from the factory floor Wafer Engineering Department Ryo Kuramoto Crystal Engineering Department Atsuhiro Yamada Advanced Evaluation & Technology Development Department Yu Muramatsu Moderator Engineering Planning Department Wataru Sugimura Epitaxial Engineering Department Kazunori Kobashi Discussion participants (from left) Human resource development (3) 4 The Source of and Road to SUMCO Value Creation SUMCO Annual Report 2025 3635 SUMCO Annual Report 2025
Page 20
I actively incorporate generative AI into my job. It dramatically speeds up things such as code generation, but I also feel it makes information management more important. Eventually, we’d like to develop a framework where AI manages SUMCO’s enormous pool of technological knowledge in a centralized way, enabling anyone to find the optimal answer when they need it. We’re consciously working to pass the results of our development work on to the next generation in a detailed, easily reusable form. Turning our knowledge into an asset is, I believe, the way to accelerate development. We’re also taking steps to make AI accessible to everyone. But AI isn’t always 100% right. That’s why it’s essential for people to possess the basic knowledge to accurately understand what AI is saying and then make corrections and decisions based on that understanding. We currently use AI to plan experiments, too. We see a path forward to obtaining results with fewer iterations by clearly defining objectives and getting AI to recommend the experimental parameters. We’re currently rolling out an AI-based automated assessment system to increase cost competitiveness. The goal is to standardize assessment criteria, not to mention reduce man-hours. It’s not enough simply to install the system; I feel it’s also important to concurrently train people capable of interpreting AI-derived evaluations and develop guidelines for the factory floor. We’re also working on and action will still be indispensable to developing technology. I want to be the kind of person who can lead a development team to spearhead new technologies. In terms of operations, I’d like to use machine learning to reduce defect-related losses caused by the time lag between production and inspection. I have an idea for a technology that would assess quality in real time based on parameters that can be measured during production. I would also like to cut the time spent on development by making effective use of machine learning. I want to create a development environment where all it takes is a day to do what used to take a year. My goal is to foster the growth of everyone on the team by sharing my experience as a shared asset for the whole team. To that end, I want to learn to see the big picture by personally studying the entire production process and our customers’ needs. Developing leading-edge products makes me feel that I’m contributing to society through our links with world-class customers and the semiconductors they make. That’s something I take pride in. streamlining experiments as a way to speed up the development cycle. Because equipment for experimentation is only available for a limited period, we’re trying to find ways to use time more effectively—for example, by doing the experiment and evaluating the data simultaneously. We’re working with the division’s systems engineers on automating the routine tasks of analyzing data and preparing documentation. We’re thus creating an environment where personnel can focus on more creative development tasks. We also engage in joint development with partner companies from the test stage on. Doing the job together enhances understanding and fosters solidarity, so development proceeds faster than ever. For me, it’s clear that collaborating with others inside and outside the Company and generating synergies are vital to accelerating development. Achieving greater efficiency by leveraging AI, turning our knowledge into an asset, and co-creating with others inside and outside the Company—these varied approaches have combined to boost SUMCO’s development capabilities. Let’s keep ratcheting up our development speed without ever letting up on learning and applying those insights. I find it fascinating to bring about quality improvements by unraveling unknown phenomena. For me, a big motivator is people’s appreciation for solutions that lighten the load on factory staff. While the spread of AI will increasingly streamline operations, human decision-making The kind of engineer I want to be is one who knows the factory floor better than anyone. The most important aspect of automation is developing a system that aligns with actual operations. I want to be the best development engineer out there: one who surveys every inch of the factory floor, constantly talks with the people working there, and factors in their input. This Company offers a workplace where you can take on big challenges that one person could never achieve alone. For me, a major motivation is the excitement of wondering what new things I can do next. 2 3 4 5 1 World’s Best in Technology SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim Finally, what are your ambitions for the future? What dreams do you hope to achieve through your work? What drives SUMCO’s development engineers AI and DX are radically changing our world. How do they help accelerate the pace of development? What challenges do you face in using them, and what have you achieved so far? Taking development to a new stage with AI and DX A word from the moderator The dedication that these engineers show in developing new technologies—and their agility in adopting AI and DX while constantly challenging themselves—are truly inspiring. Their embrace of new challenges, I expect, will continue to drive growth across the entire organization, helping us achieve SUMCO Vision’s goal of becoming the “World’s Best in Technology.” TECH TALK On the R&D Front Lines Forging the future of manufacturing with AI, DX and insights from the factory floor Sugimura Kobashi Kobashi Muramatsu Muramatsu Kuramoto Kuramoto Yamada Yamada Human resource development (3) 4 The Source of and Road to SUMCO Value Creation SUMCO Annual Report 2025 3837 SUMCO Annual Report 2025
Page 21
2 3 4 5 1 World’s Best in Technology SUMCO technology base Leading-edge product development Productivity improvement from more advanced use of AI and DX promotion Human resource development Winning high customer acclaim In fiscal 2025, SUMCO received a Best Partner Award. Our development and supply of high- quality 300 mm silicon wafers for leading-edge logic use, along with our success in raising our quality competitiveness, won high acclaim. KIOXIA held its inaugural Partners Day, honoring 19 suppliers with a Best Partner Award. The superior quality of our 300 mm wafers for memory use, along with our supply support, garnered high praise. SUMCO received a Platinum Partner award recognizing seven consecutive years of contributions. Winning high marks was our technical support in the field of image sensor technology development. The Excellent Performance Award was given to 30 suppliers from around the world at Year 2025 TSMC Supply Chain Management Forum. SUMCO was awarded by the two categories. SUMCO has been working to develop technologies for its high-precision silicon wafers and committed to steadfast support in mass production. SUMCO received high praise for its efforts in reducing greenhouse gas emissions and was the sole silicon wafer supplier to be honored in the area of green manufacturing. As a leading silicon wafer manufacturer that supports cutting-edge semiconductors, SUMCO received supplier awards from its customers, top semiconductor manufacturers, in 2025. Amid accelerating innovation in semiconductor technologies accompanying the evolution of AI, SUMCO will continue to focus even more on technology development and respond swiftly to customers’ requirements as a development partner for increasingly sophisticated and diverse next-generation products. We will also continue our efforts to contribute to environmental issues, such as the prevention of global warming, as a member of the semiconductor supply chain. Honored with awards from customers in 2025 TSMC 17th times in 12 consecutive years Samsung Electronics 19th times in 5 consecutive years Sony Semiconductor Solutions 11th time KIOXIA 1st time Excellent Production Support Excellent Contribution in Green Manufacturing Best Partner Award Best Partner PARTNER AWARD Winning high customer acclaim 5 The Source of and Road to SUMCO Value Creation SUMCO Annual Report 2025 4039 SUMCO Annual Report 2025
Page 22
SUMCO has appointed six Independent Outside Directors. One is a person with wide experience and knowledge cultivated through experience in the public sector as well as many years of experience in corporate management; one is a person with expert knowledge and experience in data science, etc., cultivated through experience in the public sector and education fields; one is a person with expert knowledge and experience related to the capital market, cultivated through experience in pension investment institutions and institutional investors; one is a person with expert knowledge and experience related to management analysis in the semiconductor and IT hardware industries, cultivated through her duties as a securities analyst; one is a certified public accountant with many years of experience in corporate management; and one is an attorney. Each Outside Director satisfies SUMCO's "Criteria of Independence" established in accordance with Tokyo Stock Exchange standards on the independence of Independent Directors, and has been verified to be free of potential conflicts of interest with general shareholders. In an effort to ensure the sustained growth of the SUMCO Group and increase its corporate value over the medium- to long-term, the Independent Outside Directors provide advice on important matters related to management based on their own individual knowledge and take the perspective of minority shareholders and other stakeholders in supervising management. They participate in the appointment of candidates for Director and other important decision-making by the Board of Directors, and supervise business execution by the Board of Directors, senior management and others, as well as conflicts of interest between SUMCO and senior management and others. The effectiveness of the Board of Directors is assessed each year in order to continually enhance the effectiveness of corporate governance. The assessment process and the results for fiscal year 2025 are outlined below. Beginning in fiscal 2026, an external agency was engaged to implement the survey and analyze the results with the goal of ensuring objectivity. Corporate Governance Structure SUMCO is organized as a company with an Audit and Supervisory Committee. By adopting this system, the effectiveness of supervision and auditing has been enhanced through audits conducted by Directors who are Audit and Supervisory Committee Members and have voting rights at Board of Directors meetings. In addition, the effectiveness of internal controls has been enhanced through audits conducted in cooperation with the Internal Audit Department. Independent Outside DirectorsBasic Stance on Corporate Governance Structure Self-Assessment of Effectiveness SUMCO's Board of Directors comprises internal Directors with a proven record of performance in their respective areas of responsibility and outstanding management abilities, along with Outside Directors with expert knowledge and extensive experience, based on the basic stance of SUMCO to ensure an overall balance and diversity in knowledge, experience, and capabilities of the Board of Directors. The Board of Directors comprises six Directors (excluding Directors who are Audit & Supervisory Committee Members) and seven Directors who are members of the Audit & Supervisory Committee (six of whom are Independent Outside Directors). In accordance with legal statutes, the Articles of Incorporation, and the Rules of the Board of Directors, the Board of Directors makes decisions on management strategy, management plans, and other such important matters relating to business. It receives reports from every Director on the status of the execution of duties and it exercises supervision of compliance, internal controls, risk management, and important business execution at affiliated companies. With the participation of Independent Outside Directors, the Board of Directors also engages in the free exchange of opinions regarding the appropriate evaluation of company performance and related matters, and reflects that evaluation in the personnel administration of senior management members. It is also our basic company policy that matters relating to financial results and so on, matters relating to management plans, and the execution of other such important operations should be decided after adequate discussion by the Board of Directors, including the Independent Outside Directors. For this reason, the Articles of Incorporation do not stipulate that decisions on the execution of important business can be delegated to each Director. The effectiveness of the Board of Directors is evaluated each year in order to continually enhance the effectiveness of corporate governance. In fiscal year 2025, the Board of Directors met 16 times to discuss important matters concerning management, address issues identified in the Board of Directors effectiveness evaluation conducted in the previous fiscal year, and discuss the remuneration policy and method for determining remuneration of Directors (excluding Outside Directors and Directors who are Members of the Audit & Supervisory Committee) and the amount of remuneration for individuals. Board of Directors Governance ●Assessment Process (1) Effectiveness of the Board of Directors The respondents felt that the effectiveness of the Board of Directors was largely ensured. (2) Response to issues identified in the previous fiscal year It was found that some progress had been made on raising the understanding of the business environment and other such matters by outside directors, an issue that was identified last year. Action taken included providing information at more appropriate junctures, implementing operational adjustments designed to foster exchanges of views, and holding open discussion sessions attended by all directors twice a year. (3) Issues identified in fiscal 2025 ① The need for enhanced reporting of the Nomination and Compensation Committee’s activities to the Board of Directors was identified. ② Directors recognized the need to further enhance discussions of medium- to long-term management strategy. ●Assessment Results in Fiscal 2025 (1) Reporting of the Nomination and Compensation Committee’s activities to the Board of Directors will be enhanced. (2) Discussions of medium- to long-term management strategy will be further enhanced by making more extensive use and improving the quality of open discussion sessions attended by all directors. ●Action to Be Taken on Issues Identified Based on This Year’s Assessment Results An external agency conducted written surveys of all directors regarding the composition and operation of the board, management strategy and business strategy, risk management, nomination and compensation, and dialogue with shareholders and other stakeholders. 1 The survey results were reported to the Board of Directors, which, following an analysis and assessment of the overall effectiveness of the board, deliberated on issues that needed to be dealt with and how to address them. 2 Accounting Auditor Company-wide committees •Business Security Committee •Budget Committee etc. Appointment & dismissal Appointment & dismissal Proposal & report Board of Directors Directors who are not Audit and Supervisory Committee Members Audit and Supervisory Committee Office [ Advisory Committee ] Report CollaborationAudit Collaboration Collaboration Internal audit InstructionAssistance Audit and Supervisory Committee Appointment & dismissal Audit report Accounting audit, internal controls audit Execution of business ConsultationReport Selection, discharge, supervision Internal Audit Department Nomination and Compensation Committee Management Conference Executive Officers Departments Subsidiaries Executive Directors General Meeting of Shareholders Corporate Governance Structure SUMCO Annual Report 2025 4241 SUMCO Annual Report 2025
Page 23
Governance Directors Executive Officers Directors' Skills Matrix (As of March 27, 2026) (As of March 27, 2026) (As of March 27, 2026) *1 Representative Director *2 Independent Outside Director *1: Representative Director *2: Independent Outside Director Director *1 Naruya Hirota Director Mayuki Hashimoto Director *1, Chairman of the Board Jiro Ryuta Director, Full-time Audit and Supervisory Committee member Hiroshi Itoh Director *2, Audit and Supervisory Committee member Hyo Kambayashi Director *2, Audit and Supervisory Committee member Shinichiro Ota Director *2, Audit and Supervisory Committee member Masahiko Sue Director *2, Audit and Supervisory Committee member Amy Shigemi Hatta Director *2, Audit and Supervisory Committee member Anita Killian Director *2, Audit and Supervisory Committee member Kishiko Wada Director *1 Shinichi Kubozoe Director Ginji Yada Director Takeo Katoh 46.2% Ratio of Independent Outside Directors 3 Female 10 Male Name Position in the Company Skills (expertise, experience, capability, etc.) possessed by each Director Corporate Management Finance/ Accounting Legal Affairs/ Compliance Sales/ Marketing Internationality/ Globality Technology/ Manufacturing/ IT Human Resources Management/ Human Resources Development Jiro Ryuta Director* 1 Chairman of the Board ● ● ● ● ● Shinichi Kubozoe Director* 1 ● ● ● ● Naruya Hirota Director* 1 ● ● ● Takeo Katoh Director ● ● ● ● ● Ginji Yada Director ● ● ● Mayuki Hashimoto Director ● ● ● ● ● Hiroshi Itoh Director Full-time Audit and Supervisory Committee member ● ● Shinichiro Ota Director* 2 Audit and Supervisory Committee member ● ● ● ● Masahiko Sue Director* 2 Audit and Supervisory Committee member ● ● ● Amy Shigemi Hatta Director* 2 Audit and Supervisory Committee member ● ● ● ● Anita Killian Director* 2 Audit and Supervisory Committee member ● ● ● ● Hyo Kambayashi Director* 2 Audit and Supervisory Committee member ● ● ● ● Kishiko Wada Director* 2 Audit and Supervisory Committee member ● ● Masayasu Hara Kazuhito Matsukawa Kouki Kato Satoru Matsuo Shunichi Imao Hideaki Kinbara Toshimichi Kubota Managing Executive Officer Managing Executive Officer Managing Executive Officer Managing Executive Officer Managing Executive Officer Managing Executive Officer Executive Officer Toshinobu Miura Chiaki Kato Haruo Hiraoka Yasuyuki Hashimoto Hirokazu Tamura Hirotaka Kato Kazumi Tanabe Executive Officer Executive Officer Executive Officer Executive Officer Executive Officer Executive Officer Executive Officer Toshiaki Ono Yoichi Nishioka Naoki Ueba Masaki Fuchigami Executive Officer Executive Officer Executive Officer Executive Officer Jiro Ryuta Shinichi Kubozoe Naruya Hirota Takeo Katoh Ginji Yada Tomoaki Tajiri Fumihiko Yoshida President Executive Vice President Executive Vice President Senior Managing Executive Officer Managing Executive Officer Managing Executive Officer Managing Executive Officer SUMCO Annual Report 2025 4443 SUMCO Annual Report 2025
Page 24
a. Persons eligible for stock remuneration Executive Directors b. Maximum amount of money that the Company will contribute as funds for the acquisition of shares of the Company necessary for distribution to persons eligible for the plan in a. The maximum amount is 225 million yen per year. c. Method of acquiring shares of the Company Through the disposal of the Company’s treasury stock or through the exchange market (including off-auction trading) d. Maximum number of points granted to persons eligible for the plan in a. 210,000 points per fiscal year e. Criteria for granting points ● Points are granted based on position, degree of achievement of performance targets, etc. Performance targets are set as ROE, EBITDA margin, and GHG emissions reduction rate, as they have been regarded as conducive to the enhancement of corporate value. ● If profit attributable to owners of parent, etc., does not meet certain criteria set by the Board of Directors, points will not be granted. f. Time of distribution of shares of the Company to persons eligible for the plan in a. In principle, when the Company’s Directors retire g. Voting rights pertaining to shares of the Company in the trust Not exercised uniformly h. Dividend income from shares of the Company in the trust Used for the acquisition of shares, payment of trust fees, etc. Notes: 1. The composition ratio of indicators used for calculating the granting points is as follows: ROE at 45%, EBITDA margin at 45%, and GHG emissions reduction rate at 10%. 2. The objective values and actual values of ROE and EBITDA margin used for calculating the granting points in fiscal year 2025 are as follows: (ROE: calculated excluding subsidy income (amount after tax: 572 million yen)) SUMCO's Audit and Supervisory Committee is made up of seven Directors who are Audit and Supervisory Committee Members (six, a majority, of whom are Independent Outside Directors). In order to ensure the effectiveness of Audit and Supervisory Committee activities, permanent Audit and Supervisory Committee Members are put in place by resolution of Audit and Supervisory Committee. In addition, it is SUMCO's basic policy to take steps to ensure that at least one Audit and Supervisory Committee Member has considerable knowledge and experience pertaining to finance and accounting. Currently, this is Mr. Hyo Kambayashi, who is also a certified public accountant. Additionally, SUMCO has established the Audit and Supervisory Committee Office and assigns staff to support the activities of the Committee and facilitate the smooth performance of its audit and supervisory functions. The Audit and Supervisory Committee exercises its statutory right of investigation and audits the Directors' execution of their duties from the viewpoints of appropriateness and conformance with laws and regulations and the Articles of Incorporation by inspecting and confirming the status of compliance with laws and regulations, Articles of Incorporation, and so on, and by monitoring and otherwise supervising the development of and operational status of the system of internal controls, including the internal control of financial reporting. In an effort to further enhance its corporate governance, SUMCO has established a Nomination and Remuneration Committee composed of two Internal Directors (Directors Jiro Ryuta and Mayuki Hashimoto) and three Independent Outside Directors (Directors Shinichiro Ota, Masahiko Sue, and Amy Shigemi Hatta) to serve as a discretionary advisory body for the Board of Directors. The Nomination and Remuneration Committee receives requests from the Board of Directors for advice on the process for selection of candidate Directors and Executive Officers of SUMCO, their qualifications, the reasons for their designation, the structure of remuneration for Directors (excluding Directors who are Audit and Supervisory Committee Members) and Executive Officers, and related matters. The committee deliberates on the appropriateness and other aspects of the matters referred, including the perspectives of gender and other diversity as well as expert knowledge and experience, and, also taking evaluations of SUMCO’s performance into account, delivers its advice. The Board of Directors, receiving the findings of the Nomination and Remuneration Committee, designates candidate Directors and Executive Officers, and decides on the remuneration and other payments for Directors (excluding Directors who are Audit and Supervisory Committee Members). During the fiscal year 2025, SUMCO held the Nomination and Remuneration Committee five times in total, and deliberated on the selection of candidate Directors and personnel matters concerning Executive Officers, the systems for remuneration of Directors (excluding Outside Directors and Directors who are Audit and Supervisory Committee Members) and Executive Officers, and individual remuneration amounts of Directors (excluding Outside Directors and Directors who are Audit and Supervisory Committee Members). The Company’s basic policy for the remuneration of Executive Directors stipulates that the remuneration of Executive Directors comprises a basic remuneration, performance-linked monetary remuneration based on short-term performance, and performance-linked stock remuneration based on medium- to long-term corporate value, which are set within the total remuneration amount determined by resolution of the General Meeting of Shareholders and according to their office and rank. This policy aims to allow Executive Directors to share the interests and risks with shareholders and encourage them to contribute to the improvement of business performance and the medium- to long-term enhancement of corporate value. Outside Directors and Directors who are Audit and Supervisory Committee Members receive basic remuneration that is only fixed remuneration from the perspective of ensuring the appropriate conduct of their duties such as auditing and the supervision of the execution of business operations. Remuneration for Directors who are Audit and Supervisory Committee Members is determined through deliberations of the Audit and Supervisory Committee Members within the total amount determined by resolution of the General Meeting of Shareholders, and by taking into account the role and duties of each such Member and whether they are a full-time or part-time Member. The total remuneration for all Directors (excluding Directors who are Audit and Supervisory Committee Members) is set to be within 460 million yen annually (of which, the total remuneration for Outside Directors is within 50 million yen annually, excluding employee Matters regarding policy on amounts of remuneration and other payments to officers and determination of calculation method salary) and the total remuneration for all Directors who are Audit and Supervisory Committee Members is set to be within 110 million yen annually pursuant to the resolution at the 17th Ordinary General Meeting of Shareholders held on March 29, 2016. In addition, the introduction of a performance-linked stock remuneration plan for the Company’s Executive Directors was resolved at the 24th Ordinary General Meeting of Shareholders held on March 29, 2023. This stock remuneration plan includes malus system and clawback system. The outline of each remuneration plan is as follows. Governance Audit and Supervisory Committee Nomination and Remuneration Committee Executive Remuneration ●Details of the remuneration policy Indicators ROE EBITDA margin Objective values 10.0% 40.0% Actual values in FY 2025 (2.1%) 27.4% We have introduced a similar stock-based remuneration plan for the Presidents of our major domestic subsidiaries and for Executive Officers and other management-level employees of the Company. In addition, a policy on the determination of the ratio of basic remuneration to performance-linked monetary remuneration paid to Executive Directors was resolved at the meeting of the Board of Directors held on February 19, 2021. As performance-linked monetary remuneration and performance-linked stock remuneration is not paid for the fiscal year under review, the ratio of basic remuneration, performance-linked monetary remuneration, and performance-linked stock remuneration is 1:0:0. In principle, the basic remuneration for Directors is a fixed amount determined for each office and rank, and paid in cash each month. For Executive Directors, the Company has judged that it is appropriate to use the semi-annual profit attributable to owners of parent as an index for remuneration, and performance-linked monetary remuneration is paid annually according to the calculation method multiplying a coefficient for each office and rank. However, if profit attributable to owners of parent does not meet certain criteria set by the Board of Directors, performance-linked monetary remuneration will not be paid. The result of the index pertaining to performance-linked monetary remuneration of Executive Directors for FY2025 is 2,584 million yen in total for the first and second quarters (calculated excluding subsidy income (amount after tax: 496 million yen)) and (14,908) million yen in total for the third and fourth quarters (calculated excluding subsidy income (amount after tax: 75 million yen)). As a result, performance-linked monetary remuneration is not paid for the fiscal year under review. The plan is a stock remuneration plan in which a trust set up by the Company through money contributions acquires shares of the Company, and the number of shares of the Company corresponding to the number of points granted to each Executive Director by the Company will be distributed to each Executive Director through the trust. The outline of the plan is as follows. Basic remuneration (monetary remuneration)1 Performance-linked remuneration (monetary remuneration)2 Performance-linked stock remuneration3 SUMCO Annual Report 2025 4645 SUMCO Annual Report 2025
Page 25
July 1969 June 1998 September 1999 January 2001 July 2002 June 2005 June 2013 March 2016 August 2017 June 2018 March 2022 June 1987 June 1994 August 1995 July 1997 April 2000 December 2003 December 2007 December 2022 March 2025 Administrator and Lecturer, Department of Earth, Atmospheric, and Planetary Sciences, Massachusetts Institute of Technology Resource Development Officer, Alumni Association, Massachusetts Institute of Technology Resource Development Officer, Lecturer, Sloan School of Management, Massachusetts Institute of Technology Joined Value Quest TA Joined Wellington Management Managing Director, Associate Partner, Wellington Management Senior Managing Director, Partner, Wellington Management Resigned from Wellington Management Outside Director (Audit and Supervisory Committee member), the Company (present post) Officer category Number of officers Total amount of remuneration and other payments by type (millions of yen) Total amount of remuneration and other payments (millions of yen)Basic remuneration Performance-linked monetary remuneration Performance-linked stock remuneration Directors (excluding Directors who are Audit and Supervisory Committee members) 6 239 － － 239 (of which, Outside Directors) （1） （11 ） （－） （－） （11） Directors who are Audit and Supervisory Committee members 7 101 － － 101 (of which, Outside Directors) （6） （73 ） （－） （－） （73） Total 13 341 － － 341 (of which, Outside Directors) （7） （85 ） （－） （－） （85） As an outside director involved in SUMCO's management, what most impresses me about the company is how its officers and employees all share a common knowledge and perception of its operating environment, the challenges facing the company, and other factors. This is a valuable asset and strength unique to a company specializing in silicon wafers. SUMCO's operating environment is set to change more rapidly than ever. Consistently seizing opportunities with the potential for stronger corporate value while simultaneously minimizing risks will require that the entire workforce share a wider range of higher quality information. Everyone at SUMCO must commit fully to that goal. Further, steadily increasing the company’s corporate value will require the understanding and cooperation of its shareholders and many other stakeholders. As the company becomes known to more people, it will receive both encouragement and criticism. That will instill officers and employees with greater confidence and keep them on their toes, driving an increase in corporate value. It will be important to boost name recognition by strengthening the company’s messaging. While its communication efforts are already underway, I believe the company must continue striving to enhance these initiatives further. I look forward to doing my small part. The semiconductor industry is the foundation of modern industrial growth and innovation, a strategic sector that underpins a nation’s long term competitiveness. In an environment defined by rapid innovation cycles, often described as Moore’s Law, and by immense capital requirements, companies must possess exceptionally robust management frameworks. SUMCO, a leader in high-quality silicon wafers, the core substrate technology from which every semiconductor chip begins, has remained competitive through sustained, world-class R&D. Its management team brings decades of experience balancing technological leadership, disciplined investment, and competitive pressure, often through difficult industry cycles. Japanese companies are increasingly aligning with global governance standards, with stronger expectations for transparency, board independence, and shareholder engagement. In this context, I provide an independent perspective on SUMCO's capabilities and have been deeply impressed by the care and openness that shape management’s decision-making process. Management listens closely to the Board’s input on technology, capital allocation, and risk. I also commend recent improvements in information disclosure and the dedicated support provided to me as a non-native speaker, including document translation and interpretation services. There is no room for complacency in today’s competitive environment; success must be continually forged. As an outside director, I am committed to supporting SUMCO's ongoing evolution as an industry leader. The amounts of remuneration and other payments to Directors (excluding Directors who are Audit and Supervisory Committee Members) and their calculation methods are discussed by the Nomination and Remuneration Committee comprising two Internal Director and three Independent Outside Directors and are finalized by a resolution of the Board of Directors. The Nomination and Remuneration Committee, in response to the consultations by the Board of Directors, discusses the appropriateness of the remuneration structure, etc., of the Company’s Directors (excluding Directors who are Audit and Supervisory Committee Members) and Executive Officers, and submits a report to the Board of Directors also taking into consideration an evaluation of the Company’s business results. Upon receiving the report from the Nomination and Remuneration Committee, the Board of Directors determines remuneration and other payments to Directors (excluding Directors who are Audit and Supervisory Committee Members). In fiscal year 2025, pursuant to the above procedures, the Board of Directors meetings held on June 26, 2025 and December 19, 2025 approved the individual amounts taking into consideration the semi-annual business results outlook. Notes: 1. The total monetary remuneration for all Directors (excluding Directors who are Audit and Supervisory Committee Members) is within 460 million yen annually (of which, the total remuneration for Outside Directors is within 50 million yen annually) (excluding employee salary) pursuant to the resolution at the 17th Ordinary General Meeting of Shareholders held on March 29, 2016. The number of Directors (excluding Directors who are Audit and Supervisory Committee Members) as of the conclusion of the said Ordinary General Meeting of Shareholders was eight (including two Outside Directors). 2. Separately from the monetary remuneration amount for Directors (excluding Directors who are Audit and Supervisory Committee Members), the amount of performance-linked stock remuneration for Executive Directors was resolved at the 24th Ordinary General Meeting of Shareholders held on March 29, 2023. The maximum amount that the Company will contribute for the delivery of the Company’s shares to Executive Directors during the three fiscal years from the fiscal year ended on December 31, 2023 to the fiscal year ending on December 31, 2025 is 675 million yen in total, and the maximum total number of points to be granted to Executive Directors is 210,000 points per fiscal year (one share of the Company’s stock per point to be granted to Executive Directors). The number of Executive Directors at the conclusion of the said Ordinary General Meeting of Shareholders was four. 3. The total remuneration for all Directors who are Audit and Supervisory Committee Members is within 110 million yen annually pursuant to the resolution at the 17th Ordinary General Meeting of Shareholders held on March 29, 2016. The number of Directors who are Audit and Supervisory Committee Members as of the conclusion of the said Ordinary General Meeting of Shareholders was six (including four Outside Directors). 4. As of the end of fiscal year 2025, there were six Directors (excluding Directors who were Audit and Supervisory Committee Members) and seven Directors who were Audit and Supervisory Committee Members. Governance Message from Outside Directors●Remuneration Determination Process Amount of remuneration in the recent fiscal year (disclosure by officer category) ●Remuneration for Directors for fiscal year 2025 Career Summary Career Summary Joined the Ministry of International Trade and Industry (the current Ministry of Economy, Trade and Industry) Director-General of Environmental Protection and Industrial Location Bureau, Ministry of International Trade and Industry Director-General of Machinery and Information Industries Bureau, Ministry of International Trade and Industry Director-General of Commerce and Information Policy Bureau, Ministry of Economy, Trade and Industry Commissioner of Japan Patent Office, Ministry of Economy, Trade and Industry Executive Vice President, Electric Power Development Co., Ltd. Senior Counselor, Electric Power Development Co., Ltd. Outside Director (Audit and Supervisory Committee member), the Company (present post) Representative Director and President, New Generation Small Rocket Development Planning Co. Ltd. (the current SPACE ONE Co., Ltd.) Senior Counselor, Electric Power Development Co., Ltd. (present post) Chief Advisor, SPACE ONE Co., Ltd. (present post) Director (Audit and Supervisory Committee member) Shinichiro Ota Director (Audit and Supervisory Committee member) Anita Killian SUMCO Annual Report 2025 4847 SUMCO Annual Report 2025
Page 26
Compliance SUMCO is committed to promoting fair business activities and preventing bribery and other forms of corruption, and the SUMCO Charter of Corporate Conduct clearly provides for legal compliance, prohibition of unfair competition and improper transactions, prohibition of comprehensive anti-corruption measures such as prohibiting any illegal or improper provision of benefits to and acceptance of benefits from public servants and any party who has business relationships, and prevention of insider trading. To promote fair business practice and prevent corruption in particular, the Regulations on Handling the Grant of Benefits prohibit (1) unlawful political contributions and donations; (2) entertainment or gifts in connection with the duties of public servants and others; (3) financial benefits in connection with the exercise of shareholders' rights; (4) providing or accepting excessive entertainment, gifts, or other such benefits that exceed commonly accepted bounds in society to or from customers, suppliers and potential business partners, and the receiving of personal benefits; and any illegal provision and receipt of benefits; and any unlawful benefits as well as the entire range of actions that are recognized as wrongful or improper in light of what is commonly accepted in society. The Regulations also define standards for making donations, providing sponsorship, paying entertainment expenses, giving celebratory or condolence gifts, paying membership dues to external organizations, and outsourcing operations and ensure the implementation of them under an appropriate approval process. SUMCO also requires employees to avoid these behaviors when engaging brokers and other agents. SUMCO makes the Regulations on Handling the Grant of Benefits available at all times on the corporate intranet, and seeks to ensure all employees are fully aware of our policies on promoting fair business practices and preventing corruption. We also provide training on the SUMCO Charter of Corporate Conduct to thoroughly familiarize all officers and employees with it, and the status of compliance with these provisions is regularly reported to the Chief Compliance Officer. Also note that to date, the SUMCO Group has not paid any fines or made any facilitation payments stemming from political contributions or corruption, nor has the Group been penalized in any way relating to corruption. SUMCO has established Internal Reporting Regulations and introduced an internal reporting hotline for reporting any act in violation of the SUMCO Charter of Corporate Conduct, including conduct in violation of laws and ordinances, human rights infringements and harassment, comprehensive corruptive acts such as bribery and unfair competition, and improper transactions. SUMCO accepts internal reports from our suppliers as well as employees. To ensure that whistleblowers can make reports with peace of mind, we have set up an in-house and external (attorney) contact points for internal reports as well as a “suggestion box” that goes straight to top management. Anonymous reports are accepted and all disadvantageous treatment including retaliation against whistleblowers who make reports is strictly forbidden. Information on how to use the hotline and about contact points for consultation are posted at all times on the premises of the SUMCO Group, the corporate intranet and our dedicated procurement website, and these matters are also explained to be known for all employees during training on the SUMCO Charter of Corporate Conduct, which is conducted regularly for all employees. To ensure thorough export control aimed at maintaining international peace and security, SUMCO has clearly laid out compliance with export control rules in the SUMCO Charter of Corporate Conduct. The Company has established an appropriate export control system in accordance with the Security Export Control Rules where it ensures that exports are only executed after the reviews and examinations of all the requirements to be met, and has implemented measures including regular training on export control for employees. The SUMCO Charter of Corporate Conduct declares that the Company denounces any kind of relationship with antisocial forces and rejects unreasonable requests or demands from such forces. This is thoroughly disseminated among all executives and employees of the Company through education and training. As its basic policy, the SUMCO Group attaches importance to intellectual property and utilizes it as a strategic tool for the Group's business, while at the same time respecting the intellectual property rights of not only customers and business partners but also third parties, as explicitly stated in the SUMCO Charter of Corporate Conduct. Based on this policy, we have set forth rules on how we obtain, maintain, utilize intellectual property, and prevent infringements as well as respect the intellectual property rights of others in the Intellectual Property Regulations, and provide regular education on intellectual property matters to employees. We also actively and continually pursue efforts to facilitate the effective utilization of intellectual property, including an inventor commendation scheme designed to encourage invention and improve the quality of patent applications. Obtained intellectual property rights are also reviewed periodically to eliminate obsolete intellectual property so as to keep costs at a reasonable level. Inventor commendation For the Group's further growth while fulfilling its social responsibility, the SUMCO Group has instituted the SUMCO Charter of Corporate Conduct to define the norms that the Group's employees should uphold, not only in terms of compliance with laws and ordinances, but also more broadly in terms of CSR in general. The SUMCO Charter of Corporate Conduct is positioned as the highest level of SUMCO regulations and is placed above the various in-house regulations and compliance programs found within the Group. The SUMCO Group aims to make the SUMCO Charter of Corporate Conduct understood throughout the Group by preparing it in languages understandable to employees at Group companies overseas, keeping it available on the corporate intranet at all times, and providing education on the SUMCO Charter of Corporate Conduct to all employees on a regular basis. In accordance with the SUMCO Charter of Corporate Conduct, the Company appoints a Chief Compliance Officer to embody the highest level of responsibility for compliance. The Chief Compliance Officer monitors the status of compliance with the SUMCO Charter of Corporate Conduct by means of compliance supervisors in each department and Group company, regularly reports findings to the Board of Directors, and undergoes review by the Board. In order to further ensure compliance with laws and ordinances, the Legal Oversight Regulations appoint departments with primary responsibility for continually overseeing those laws and ordinances that are related to the execution of the departments' business. Each responsible department continuously monitors the enactment, amendment, and abolishment of relevant laws and ordinances, while the auditing department confirms the status of legal compliance through internal audits. In the event a problem related to compliance is discovered, the departments involved act in cooperation and under the supervision of the Chief Compliance Officer to immediately investigate the cause of the problem and prevent its recurrence. SUMCO Charter of Corporate Conduct Governance Fair Business Activities / Anti-corruption Internal Reporting System Export Control Renouncing Relationships with Antisocial Forces Initiatives on Intellectual Property SUMCO Annual Report 2025 5049 SUMCO Annual Report 2025
Page 27
Major Risks Recognized in the Basic Rules on Risk Management ❶ Risks Related to General Management ❷ Risks Related to Accidents and Disasters ❸ Risks Related to Discontinuation of Business ❹ Risks Related to Compliance ❺ Ri sks Related to Information ❻ Risks Related to Intellectual Property ❼ Risks Related to Human Resources, Employment, and Human Rights ❽ Risks Related to T axation and Accounting ❾ Risks Related to Products and Services ❿ Risks Related to Safety and Health ⓫ Risks Related to the Environment ⓬ Risks Related to Credit Risk Management The silicon wafer business is a critical industry that supports our IT-oriented society, and the SUMCO Group is responsible for the stable supply of silicon wafers to semiconductor device manufacturers around the world. For this reason, the SUMCO Group regards business continuity as a key management concern. The Business Security Committee (BSC), which is an organization responsible for company-wide risk management, identifies, analyzes, and assesses risks, implements countermeasures, and promotes risk management activities including the formulation of business continuity plans (BCP), with the aim of predicting risks in advance, preventing them from being realized, and minimizing damages when a risk is realized. SUMCO has set forth basic matters pertaining to risk management in the Basic Rules on Risk Management, under which we undertake risk management activities. Our basic approach to responding to risks involves the following two points. 1. Prioritize the handling of risks by likelihood of occurrence and severity of impact from the viewpoints of optimum allocation of management resources and the effectiveness of risk management. 2. Minimize damage and loss by preventing the suspension or discontinuation of business activities to ensure business continuity in the event of an accident or other emergency situation. Responsibility for each risk is allocated between departments according to the priority established in (1) above, and the policy on risk countermeasures is determined via discussion within a company-wide committee known as the BSC. The committee meets every year, with not only the President and other senior management in attendance but also responsible members of each department, factory, plant, and group companies worldwide. It decides company-wide policy regarding risk management, deliberates and determines risk prevention measures, discusses responses on cross-department risks and new risk phenomenon, and exchanges a broad range of information about risk management in general. Our Basic Rules on Risk Management define business continuity as an important management issue, and we have been working to develop and improve our BCP to ensure business continuity. The details of the BCP and its state of improvements, the results of trainings and drills, and other matters are reported to the BSC, and the BSC verifies the effectiveness of the BCP and determines policies on future action to be taken. Each department and group company improves the BCP further according to the policies. Every year, SUMCO confirms procedures to transfer head office operations elsewhere, the implementation status of drills and exercises carried out by each department, and the issues to be addressed in the future based on the assumption of a large-scale earthquake beneath the Tokyo metropolitan area that leads to the disfunction of Tokyo Head Office. We continue with activities aimed at further enhancing the readiness of the head office's BCP. We also conduct integrated emergency response drills at each plant, which include activities such as evacuation, firefighting, reporting, rescue, emergency relief, and transportation in the event of a disaster such as an earthquake. In addition to those drills above, we also conduct regular BCP training to confirm procedures and the contents of the BCP and enhance our response capabilities. Continuous improvements are made by reviewing the training results, identifying issues, and revising procedures and other contents after conducting the drills. For example, at the Miyazaki Plant of SUMCO TECHXIV Corporation, practical simulation training was conducted in anticipation of the Nankai Trough Earthquake, leading to the confirmation and improvement of disaster BCP procedures. Furthermore, at each site, we are implementing measures to minimize damage and ensure swift recovery in the event of a disaster such as an earthquake. This includes facility improvements such as installing earthquake-resistant measures for seismic reinforcement and stockpiling necessary tools, materials, and equipment to promptly resume production. The Company understands the importance of information in business operations and clearly stipulates the appropriate use and management of our trade secrets and all other information including confidential information received from others in the SUMCO Charter of Corporate Conduct. We have also established the Rules on Information Management along with related regulations, guidelines, and other materials. We make every effort to appropriately manage and prevent leaks of our trade secrets and confidential information received from customers, suppliers, and other parties by conducting regular training for all employees on these information management rules and information security. In an effort to prevent computer system-related leaks and stop information from leaking outside the Company, the Company also implements a range of measures, under the supervision of the General Manager of the AI Promotion Division who is responsible for information security, to address various risks, such as external attacks on our computer systems via the internet, the unauthorized use of computer systems, and viruses that target computer systems. Regarding security incidents, we have established a Computer Security Incident Response Team (CSIRT) and implemented a system to ensure appropriate response, including the establishment of a countermeasure manual. Additionally, we conduct regular CSIRT training exercises to prepare for potential security incidents. Furthermore, SUMCO has established the Rules on Personal Information Management in accordance with the Act on the Protection of Personal Information to ensure that personal information is managed appropriately. The Company has ensured redundancy for mission-critical and peripheral systems used on a company-wide basis, establishes equivalent backup servers and performs data synchronization in order to continue business operation even in the event that a server installation location is damaged by a large-scale disaster such as a major earthquake. We conduct regular drills on switching to backup servers to confirm our switchover procedures and other details. Governance Why SUMCO Addresses Risk Management Risk Management Basic Policy Business Security Committee (BSC) Ensuring Business Continuity Information Management and Security Computer System-related Disaster Countermeasures ●BSC's Structure and Objectives BSC Departments Group companies in Japan Overseas Group companies Chair Members Secretariat President Executive Vice President; Managing Executive Officers in charge of a division; Executive Officers in charge General Affairs Dept. Structure 1 The BSC undertakes the following risk management activities. Discuss and decide on company-wide risk management policies. Discuss and decide on risk prevention measures. Discuss how to respond to new risk events. Share information on risk management. Promote risk management awareness across the Company. Assess and follow up on the progress of risk management. a. b. c. d. e. f. Objectives 2 SUMCO Annual Report 2025 5251 SUMCO Annual Report 2025
Page 28
SUMCO CSR Policy To contribute to the SDGs through our products, we stably supply wafers for products such as leading-edge logic and power semiconductors, in which we have a competitive edge. This enables us to support the social implementation of more energy-efficient devices that perform increasingly advanced and complex AI processing, electric vehicles (EVs) and hybrid electric vehicles (HEVs/PHEVs) with improved energy efficiency devices, and of renewable energy power management. To continue making these contributions, it is essential that we pursue “World’s Best in Technology,” one of the objectives of the SUMCO Vision. As for our contributions to the SDGs through business processes, some of the initiatives are introduced below. Since the semiconductor silicon wafer market is expected to continue growing, reducing greenhouse gas (GHG) emissions is one of our Materiality themes. In February 2025, we raised its net-zero targets and subsequently obtained Science Based Targets (SBT) certification in June 2025, and worked to strengthen reduction efforts throughout the domestic and global supply chain. Progress in reducing energy use at production sites undergoes monthly reviews by senior management, by way of an in-company Energy Efficiency Committee. We further employ data science, IoT, and AI technology to improve productivity, which not only helps improve profitability but leads to the reduction of energy consumption intensity in our production activities. In April 2025, we began sourcing renewable energy from a land-based wind power generation facility in the Abukuma district of Fukushima Prefecture via a Corporate power purchase agreement (PPA). Furthermore, we plan to introduce additional renewable energy from an offshore wind power plant off the coast of Enoshima Island, Saikai City, Nagasaki Prefecture from 2029. Additionally, in December 2025, we installed a supplemental solar power system with a capacity of 1.0 MW at our Kyushu Factory to facilitate the self-consumption of renewable energy. Since these uses of renewable energy power will not only help reduce our GHG emissions but will lead to the realization of net-zero for customers who purchase our products and the entire value chain, we will further step up our efforts toward the prevention of global warming. The SUMCO Vision calls for making the Company one that can “Empower Employee Awareness of Profit.” Creating a working environment in which anyone can thrive, both in body and mind, is essential for ensuring employees can continue to be actively involved. Along with expanding measures that promote active participation by women, local hiring at overseas sites, and the mid-career hiring of people with a variety of life experiences, we are seeking to ease the burden on employees at each production site as the working population ages, by introducing more automation and smart technologies. We will continue to push specific initiatives aimed at hiring, training, and utilizing diverse human resources. Since technology innovation will continue in the semiconductor industry of which SUMCO is a part, the growth of employees is the source of the Company’s growth. In addition to career formation programs in the Company, we will continue working to improve human resources development programs, such as expanding study opportunities at universities in Japan and overseas, partnerships with universities, and incentive programs supporting employees’ studies, extensively incorporating suggestions from outside directors with rich experience. Since the health of employees is the cornerstone of all these efforts, SUMCO has long emphasized health management. As a result, SUMCO has been selected by the Ministry of Economy, Trade and Industry (METI) and the Tokyo Stock Exchange (TSE) as a constituent of the “2026 Health & Productivity Stock Selection,” marking its fourth selection overall. Going forward, we will continue to respond to the demands of our stakeholders as good corporate citizens. SUMCO has established a Sustainability Promotion Council chaired by the President of the Board and has appointed an Executive Officer Responsible for Sustainability Promotion. Against the backdrop of rising demands from various stakeholders for action in this area, in November 2024 the Sustainability Promotion Department was established as a dedicated organization under direct control of the management of the Board for ensuring that our sustainability activities are carried out efficiently. The council, in principle, meets twice annually, for reporting and deliberation on concrete actions in each division, centering around the Materiality (key issues) identified in each of the ESG (Environmental/Social/ Governance) areas. It then reports a summary of the matters taken up in the meetings to the Board of Directors, where active discussions take place involving also the outside directors. To fulfill our responsibilities to our stakeholders, SUMCO, recognizing the SDGs as indicators of the medium- to long-term demands of the international community, endeavors to realize a sustainable society. We promote contribution to the SDGs on two main axes, through our products and in our business processes. Message from the Executive Officer Responsible for Sustainability Promotion Supported by its cutting-edge technology, SUMCO shall steadily provide products and services with excellent quality, ability and safety, shall win customers' satisfaction and trust, and shall contribute to the sustainable development of society. 1 SUMCO shall comply with law and regulations, international rules, and social norms, shall implement risk management, and shall maintain business continuity. 3 SUMCO shall manage environmental activities, make use of resources and energy efficiently, and control emissions.5 SUMCO shall produce legitimate profits, grow corporate value, proceed with timely and appropriate disclosure to the public, and aim at returns to its shareholders and investors. 2 SUMCO shall choose its suppliers by fair and rational standards, establish mutual confidence, and prosper together.4 SUMCO shall maintain safe, healthy, comfortable and appropriate workplaces for everybody working in SUMCO, shall have a high regard for human rights, ability and personality, and shall realize fair and diverse ways of working.6 SUMCO shall respect various cultures and histories, and shall interact with society and local communities.7 CSR and Sustainability Promotion Structure SUMCO Contributions to the SDGs Initiatives to Address Global Warming Creating Workplaces Where Everyone Can Thrive Initiatives for Sustainability For the sustainable growth of society and business Our products, silicon wafers, are essential to the semiconductor devices on which modern civilization depends. The technologies involved will continue to advance, and the market size will continue to expand. We therefore have a major responsibility in conducting our business to achieve both technological advances and environmental protection, toward realizing a better society and preserving the irreplaceable Earth. Having drawn up the SUMCO CSR Policy, we recognize as the core of our business management this responsibility to all stakeholders, from shareholders and investors to customers and suppliers, employees, and all of society including the global environment. Naruya Hirota Representative Director, Executive Vice President A company that finds its calling in an essential material on which modern civilization depends SUMCO Annual Report 2025 5453 SUMCO Annual Report 2025
Page 29
Materiality Material Issue Themes Targets Initiatives and Achievements in 2025 Combatting global warming Net-zero By 2030, reduce GHG emissions (Scope 1+2: domestic and overseas) by 42% compared with 2023 levels (6.0% annual reduction); and by 2050, reduce by 100% (net-zero) ● A 12.0% reduction (from 2023 levels) was achieved in fiscal 2025, exceeding the 12.0% target for that year. Resource conservation activities Effective utilization of water resources High and stable water recycling rate ● A water recycling rate was maintained at the level in previous years of 38.9% Contributing to the creation of a recycling-oriented society Waste management Conversion of waste into valuable resources and improved recycling rate ● The recycling rate of industrial waste was 82.5%, a slight increase from the level in the last year. Materiality Material Issue Themes Targets Initiatives and Achievements in 2025 Enhancing risk management Initiatives to develop BCP Implementing BCP training ● Again in 2025, we worked on further developing BCP based on the findings in the previous year by the Business Security Committee (BSC). We also held drills to prepare for the loss of headquarter functions in the event of an earthquake directly under Tokyo, as well as conducting comprehensive disaster prevention drills and BCP drills at each plant to prepare for accidents. Promoting compliance Ongoing enhancement of compliance awareness Implementing compliance education ● Again in 2025, we conducted training for all employees on the SUMCO Charter of Corporate Conduct, by e-learning and other means. Materiality Material Issue Themes Targets Initiatives and Achievements in 2025 Health, hygiene, and safety initiatives Prevention of occupational accidents Accident frequency rate of 0.2 or lower ● Although we carried out several regular safety education and training, working to raise safety awareness, the lost workday accident frequency rate was 0.47 compared to the target of 0.2. Maintenance of health and productivity management Maintaining effort-reward imbalance (ERI)-adjusted general health risk at 100 or lower ● Our ERI-adjusted overall health risk for fiscal year 2025 is 90, and we have remained in a favorable situation. ● Aware that the good health of employees is a key management resource, we took initiatives toward maintaining and promoting health and improving the working environment. Human resources development Enhancement of training Increasing training time compared with the previous year including web-based training time ● Time devoted to training in 2025 rose by around 2,223 hours, or 7.6%, from the previous year. ● We sought to make training more effective, with online training as the norm. Promotion of women’s active participation Raising the percentage of women in management positions (SUMCO*) the end of December 2021: 1% → 2030: 10% (Group) the end of December 2021: 6.5% → 2030: 12% ● In 2025, we achieved a 2.6% increase in SUMCO* and an 8.8% increase on a consolidated base. ● Besides enhancing diverse working arrangements that support women’s active participation, we actively promoted mid-career hiring of women. R&D and technological capabilities supporting customer value creation Contributions as a development partner Maintaining a worldwide share of over 50% in leading-edge fields ● We continued to boast a worldwide share of over 50% in wafers for leading-edge logic chips. ● We maintained our top supplier position, winning customer recognition as a development partner for our high technology development capability and consistent quality. Increasing customer satisfaction Maintaining high evaluation with the leading customer satisfaction score ● We again achieved an overall average rating of 85 points or higher (100-point scale) in supplier evaluations by customers. ● By sharing the supplier evaluations throughout the Group and reflecting them in improvement activities in each division, we won high ratings from customers in quality and technology. Promoting CSR procurement and mitigating procurement risks Promoting firm establishment of the CSR Procurement Policy Holding briefing sessions for suppliers and conducting CSR audits ● We explained our CSR Procurement Policy in briefing sessions for suppliers, and worked to further instill the policy. CSR audits of suppliers were conducted. Strengthening BCP in materials procurement Continuing to maintain multiple procurement sources and implementing supplier safety training ● We sought to diversify our procurement sources as a hedge against the risk of disasters and accidents. ● We held supplier safety education sessions for each of the plants. Communication with shareholders and investors Enhancement of IR activities Maintaining and continuing the number of IR activities for investors ● Through continuous dialogue with investors, we have made efforts to provide any information that contributes to enhancing our corporate value. E G S In pursuit of medium- to long-term targets, SUMCO works on continuous improvement. Our initiatives and achievements in 2025 are as outlined below. Fiscal 2025 Materiality Initiatives and Achievements * Total figures include the number of SUMCO employees assigned to other companies and exclude secondees to SUMCO Corporation from other companies. Initiatives for Sustainability For the sustainable growth of society and business SUMCO Annual Report 2025 5655 SUMCO Annual Report 2025
Page 30
Risk Opportunity The SUMCO Group set goals for net-zero emissions covering Scope 1+2 of the SUMCO Group (Japan) in September 2021, and in February 2024, changed the goal to comply with the SBT’s 1.5°C scenario from the 2°C scenario. In addition, in February 2025, we changed the goal that covers domestic and overseas sites, and set the new goal covering Scope 3. As a result, we obtained SBT certification for its near-term goals in June 2025. Climate-related disclosure in accordance with TCFD recommendations SUMCO expressed its endorsement of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in April 2021. Information relating to governance, strategy, risk management, and metrics and targets is disclosed in accordance with these recommendations. While all the items identified as risks and opportunities are evaluated as having a significant impact, two items (blue shading in the above list) were selected for the scenario analysis in the current fiscal year. Calculating a carbon tax from GHG emission forecasts for 2030 and based on data compiled by the International Energy Agency (IAE), an increased cost burden of approximately 2.4 billion yen/year (4°C scenario) to 4.7 billion yen/ year (2°C scenario) is estimated. SUMCO will strive to mitigate this risk by working toward net-zero emissions. As we move toward a decarbonized society, demand is expected to increase for power semiconductors that provide stable and efficient power supply and streamlined, high-precision control. Target Year 2030 (Near-term Goals) 2050 (Long-term Goal) Scope 1+2 goals Scope 3 goal ― Initiatives * Science Based Targets (Reduction targets of greenhouse gas emissions set by companies that comply with the standards of the Paris Agreement) Indirect GHG emissions from the use of electricity, heat, or steam supplied by othersScope 2 Direct GHG emissions by the Company (fuel)Scope 1 Major risks and opportunities related to climate change1 Scenario analysis2 In conformity with the 1.5°C scenario of SBT* 42% reduction from 2023 (6.0% reduction per year) 25% reduction from 2023 (3.6% reduction per year) In conformity with the WB2°C scenario of SBT* ●Continuous energy-conservation activities ●Further introduction of renewable energy (such as solar power generation, wind PPA, etc.) ●Procurement of environmental value (such as Non-Fossil Certificates and J-Credit, etc.) ●Promotion of initiatives for net-zero emissions by our suppliers, etc. 100% reduction Initiatives to Prevent Global Warming ●Roadmap to reduction of GHG emissions Measures Reducing energy consumption Introducing renewable energy Energy conversion GHG absorption 2024 2025 2026 2027 2028 2029 2030 2050 Energy-saving activities based on ISO 14001 and updating to high-efficiency equipment Introducing environmental value Private power generation and PPAs Green Power menu introduction Fuel/gas fuel switching Forest absorption, CCS ˔Base year (2023) GHG emission amount Category 2 Category 1 Category 3Category 4 to 15 Scope 3 58 Scope 2 39 3 Scope 1 Share of emissions thousand tons-CO2e 3,049 Scope 3 Indirect GHG emissions, i.e., those by others in the value chain related to the Company’s activities Category 1 Purchased goods and services Category 2 Capital goods Category 3 Fuel- and energy-related activities not included in Scope 1 or Scope 2 Along with appointment of an Executive Officer Responsible for Sustainability Promotion, SUMCO has established a Sustainability Promotion Department as a dedicated organization under the jurisdiction of top management. As a Group-wide body responsible for overseeing sustainability activities, a Sustainability Promotion Council attended by Managing Executive Officers and above meets twice annually. The council periodically reports a summary of the meetings to the Board of Directors, where active discussions take place involving also the outside directors. We recognize the risks and opportunities of climate change as a key management issue that will have a financial impact. We have therefore conducted forecasts and quantitative evaluation of the risks and opportunities that may have financial impact, and carried out scenario analysis in line with the recommendations of the TCFD. Governance Strategy August 2029: Nagasaki Prefecture offshore wind power facility April 2025: Abukuma land-based wind power facility December 2025: Kyushu Factory solar power system Initiatives for Sustainability For the sustainable growth of society and business Classification Expected Result Timing of Embodiment Possibility Degree of Impact Risk Transition risk Increase in procurement costs due to suppliers’ net-zero emissions and carbon tax (carbon pricing) costs reflected in raw material unit prices Medium to long term Large Medium Increase in operating costs due to the introduction of a carbon tax (carbon pricing) Medium term to medium to long term Large Medium Increase in waste disposal costs due to the formation of a recycling-oriented society Medium to long term Large Medium Increase in business costs due to the increased burden of renewable energy levy Short term to medium to long term Large Medium Increase in capital costs due to the expansion of ESG investments Medium term Large Small Physical risk Suspension of business activities due to wind and flood disasters Short term Medium Small to large Supply chain disruptions due to wind and flood disasters Short term Medium Small to large Opportunity Expansion of demand for energy-saving-related equipment due to the advancement of energy conservation and renewable energy Long term Large Large Expansion of demand for automotive products due to the spread of EVs Medium to long term Large Large Growth in data center demand with the expansion of communication and data processingMedium to long term Large Large Expansion of demand for infrastructure and automation equipment aimed at enhancing energy efficiency Medium to long term Large Large ● Scope: SUMCO Group ● Timing of embodiment: short term (1 year or less), medium term (1 to 3 years), medium to long term (3 to 10 years), long term (over 10 years) ● Degree of impact: small (1 billion yen or less), medium (1 to 10 billion yen), large (over 10 billion yen) SUMCO Annual Report 2025 5857 SUMCO Annual Report 2025
Page 31
AC (alternating current) electricity arrives. The power semiconductor efficiently converts power from AC to DC (direct current). Power semiconductor Through Leading-Edge Silicon Wafers, SUMCO Contributes to Realization of a Carbon-neutral Society Two common types of power semiconductors are Power MOSFET and IGBT. SUMCO puts major effort into the development of silicon wafers for Power MOSFET and IGBT. IGBT is used in electrified vehicles (xEVs), seen as a growth market. Use of 300 mm silicon wafers, able to accommodate more chips per wafer, is needed to increase IGBT production. SUMCO was early to take up the development of 300 mm silicon wafers for IGBT, obtained certification for IGBT silicon wafers for xEVs, with their stringent quality requirements, and has moved to mass production. A Power MOSFET is made from a crystal with red phosphorus additive for the efficient flow of electricity in the silicon wafer. Using large amounts of red phosphorus, however, can cause crystal defects to occur in the epitaxial layer. SUMCO was the first in the world to develop technology that greatly minimizes such epitaxial layer defects even when ample amounts of red phosphorus are used, as well as the first to achieve mass production. Source Gate Drain Crystal defect Red phosphorus crystal Epitaxial layer Source Gate Drain Red phosphorus crystal Epitaxial layer Engine Motor Generator Inverter Si-IGBT Inverter Si-IGBT Step-up converter Si-IGBT DC-DC converter Battery Approximately 8% of the world’s electricity consumption is by data centers. The worldwide volume of stored and transmitted data is expected to increase more than 30-fold by 2030 and 4,000 times by 2050. With today’s technology, assuming no further energy conservation measures, electricity consumption by data centers alone is estimated to reach an enormous amount by 2050, of 400 quadrillion watt-hours (Wh). Making transistors smaller with advances in semiconductor fabrication process scaling shortens the distance electrons must travel, for greater energy efficiency. Scaling also increases the number of transistors per surface area, making possible electronic devices with more advanced functions. The logic chips used in data center servers see reductions in electricity consumption of around 20% to 30% with each generational advance in scaling. Power semiconductors are used in all kinds of electrical equipment, from air conditioners, refrigerators, and other home electrical appliances around us to social infrastructure such as industrial motor drives, railways, and power transmission and distribution equipment. Power semiconductors have the role of switches, changing between on and off states to supply and control electric power. In performing their role while minimizing power loss, power semiconductors are essential for achieving carbon neutrality. Source: SUMCO estimates based on various data 2018 20502030 (Wh) 1018 1017 1016 1015 1014 Electricity consumption with current technology Electricity consumption using leading-edge semiconductors Reduction in electricity consumption from use of leading-edge semiconductors Benefits of leading-edge semiconductors in reducing electricity use (Year) SUMCO’s initiatives | Control of crystal defects and enlargement of wafer size to 300 mm diameterSUMCO’s initiatives | Ongoing development of high-precision substrates with advances in scaling Silicon wafers for Power MOSFET Silicon wafers for IGBT Reduction in electricity consumption from scaling of leading-edge logic semiconductors Improvement in energy efficiency by power semiconductors 2nm 14 Å 10 Å 2020 202220182016Year 2024 2026 20302028 5nm 3nm28nm 16nm 7nm 'JO'&5 (BUF"MM"SPVOE (BUF 4J0 1MBOBS 4J As scaling has advanced, the structure of semiconductor transistors has gone from planar to fin-shaped to gate-all-around. To provide high-precision silicon wafers that are up-to-date with the latest in semiconductor scaling and structural changes, SUMCO continually carries out development in the areas of crystal growing technology, high-flatness processing technology, and defect control and detection technology. Miniaturization of the size of light point defects (LPDs) to be measured and controlled High-precision flatness control on the front and back sides of wafers High-precision control of crystal defect density and study of crystal orientation corresponding to new device structures Ongoing development of high-precision silicon wafers supporting the latest in semiconductor scaling and structural changes Scaling road map and semiconductor structural changes Initiatives for Sustainability For the sustainable growth of society and business SUMCO Annual Report 2025 6059 SUMCO Annual Report 2025
Page 32
Environmental Management Structure The SUMCO Group (Japan) has established the Environmental Management Structure in which the Environmental Management Officer appoints the Company-wide Environmental Manager and the Environmental Managers at site, and defines their roles, responsibilities, and authorities. The thoroughness of instructions and information-sharing are ensured at meetings of the Company-wide Environmental Management Committee and the Environmental Management Committee at each site, both of which are convened periodically. SUMCO's Environmental Management Officer holds chief responsibility for issues related to climate change and has chief authority regarding those issues. The Environmental Management Officer convenes meetings of the Environmental Management Committee and monitors SUMCO's efforts to address climate change, resource circulation, and coexistence with nature. SUMCO has been selected by international nonprofit CDP *1 for its 2025 Corporate A List*2 in climate change and water security in recognition of the Company’s initiatives in both areas. CDP is widely regarded as the global standard in corporate environmental reporting. This is the second straight year that SUMCO has earned a place on the top-tier A List for water security and the first that it has done so for climate change. Environmental Management Officer Environmental Management Representative in each division Environmental Management Committee at site Expert Committee Secretariat at site Statutory Administrator Internal Environmental Auditor Environmental Manager at site Environmental Management Committee EMS Personnel Conference Company-wide Secretariat Environmental Promoter in each division Employees Company-wide Environmental Manager *1 The provisional and final figures prior to third-party verification will be disclosed on our website. *2 CO2 emissions from electricity are calculated using the basic CO2 emission coefficient of each electric power supplier. Input Energy Electricity 1,858 GWh Electricity (crude oil equivalent) 414,000 kL Fuel (crude oil equivalent) 10,648 kL Steam (crude oil equivalent) 14,872 kL Renewable energy*1 Electricity 690.4 GWh PRTR-regulated substances Amount handles 3,856 t Water Industrial water 15.7 Mm 3 Tap water 0.2 Mm 3 Groundwater 4.2 Mm 3 Business activities Product development Environmental assessment Production Energy conservation Compliance with laws and ordinances Reduced water consumption Reduced use of chemical substances Reduced emissions of pollutants Reduced amount of waste Output GHG emissions*1 GHG emissions 596 thousand tons-CO2e Breakdown Scope 1 28 thousand tons-CO2e Scope 2*2 567 thousand tons-CO2e CO2 emissions from transport 4 thousand tons-CO2e Discharged wastewater Ocean 9.3 Mm 3 Rivers 3.6 Mm 3 Sewerage 3.9 Mm 3 Waste Ordinary business waste 0.4 kt Industrial waste 25.8 kt Specially controlled industrial waste 3.0 ktTransport Use of reusable sipping cartons Reuse of materials Improved transport system Procurement Safe raw materials Use of recycled materials PRTR-regulated substances Amount released 6.5 t Amount transferred 2,726 t Business Activities and Environmental Load in 2025 (SUMCO Group [Japan]) The depletion of energy resources, global warming, threats to biodiversity and other environmental problems are having an increasingly serious impact on the global environment. Given these situations, the SUMCO Group (Japan) identifies forms of energy such as electric power, chemical substances, waste products, and wastewater as significant environmental aspects in its production activities. We also pursue initiatives to consider the environment and reduce environmental load across all of our business activities. Fundamental Environmental Philosophy Environmental Action Guidelines As a manufacturer of high-quality silicon wafers for semiconductors and of quartz crucibles, SUMCO has established the following action guidelines and is committed to self-initiated and sustained environmental conservation activities to pass on the Earth's irreplaceable environment to future generations. Environmental Load of Business ActivitiesSUMCO Environmental Policies ● Environmental Management Structure ● SUMCO Named to CDP’s 2025 A List for Both Water Security and Climate Change Others (1) We shall promote green procurement with our suppliers and reduce environmental impact. (2) We shall comply with environmental laws, regulations, ordinances and other agreed-upon requirements. ( 3) We shall promote continuous improvement of our environmental management sy stem by setting environmental goals and reviewing them regularly. 4 Coexistence with nature (1) We shall strive to prevent pollution, conserve the global environment, and coexist with local communities in all our business activities. (2) We shall strive to give consideration to biodiversity and its conservation. ( 3) We shall strive to achieve zero deforestation in factory locations and production activities. 3 Resource circulation (1) We shall strive to reduce waste generation and expand recycling. (2) We shall strive to make effective use of water in our business activities. 2 Climate change (1) We shall strive to curb emissions of greenhouse gases from our business activities across the entire supply chain, including logistics. 1 *1 An international nonprofit that calls on corporations to disclose information on their environmental initiatives with the goal of achieving a sustainable economy. In 2025, more than 22,100 corporations all over the world disclosed environmental data through CDP. *2 Companies are rated for their environmental activities on an eight-point scale (A, A-, B, B-, C, C-, D, D-), and the best-performing are included on the highest-ranking A List. Initiatives for Sustainability For the sustainable growth of society and business SUMCO Annual Report 2025 6261 SUMCO Annual Report 2025
Page 33
Amount of water recycled and rate of recycling (SUMCO Group [Japan]) Water recycle flow (SUMCO Group) 0 12 20 16 8 4 0 30 50 40 20 10 2023 202420222021 2025 Collection/reuse Industrial water Well water Production processes Utility facilities Water purification processes Release Wastewater collection Wastewater treatment processes (Year) (Mm3) (%)Amount of recycling Rate of recycling 36.1 37.036.638.8 38.9 9.5 10.8 9.49.2 11.7 The SUMCO Group resolves and implements year-long initiatives targeting climate change issues that take into account the risks and opportunities for each department, reports the results to the Environmental Management Officer, evaluates and analyzes the results at meetings of the Environmental Management Committee, and as necessary, revises these risks and opportunities. To look at a specific example, for the production of silicon wafers, the SUMCO Group makes every effort to streamline production and promote rationalization in order to reduce electric power consumption. When it comes time to update production and utility facilities, we replace them with energy-saving and high-efficiency alternatives. In offices, lighting is turned off during lunchtime and other breaks, and air conditioners are set at a reasonable temperature to save energy. The SUMCO Group (Japan) recognizes that water is an essential resource in the manufacturing of silicon wafers. Therefore, the SUMCO Group (Japan) has set environmental targets aimed at reducing water consumption and is working to effectively use water resources at all manufacturing bases. The water recycling rate of the SUMCO Group (Japan) reached 38.9% in 2025. The SUMCO Group (Japan) is working to reduce the amount of waste generated as part of environmental conservation efforts. With a focus on the circular economy, the Group is focusing on promoting the recycling and conversion of waste into valuable resources. In particular, the Group is driving efforts to convert waste oil, which accounts for a large volume of its emissions, into valuable resources. To achieve our net-zero targets, the SUMCO Group (Japan) started introducing green power through a corporate PPA (Power Purchase Agreement) mechanism in April 2025. The green power is being used in facilities located in the Hokkaido and Tohoku areas, leading to a reduction in GHG emissions. Furthermore, we plan to introduce renewable energy generated by the offshore wind power project off the coast of Eshima, Saikai City, Nagasaki Prefecture in the future. 2022 2023 2024 2025 Recycling rate 79% 89% 84% 91% Generated amount 742t 927t 877t 982t Recycling rate of industrial waste for products using plastic (SUMCO Group [Japan]) 0 600 1,500 1,200 900 300 (Year)202420222021 2025 SUMCO Group GHG emissions (Scope 1+2) (Thousand tons of CO 2 ) * 2023 1,181 793 1,277 839 1,126 0 20 50 40 30 10 0 60 100 80 20 40 Amount of disposal and rate of recycling (SUMCO Group [Japan]) (Thousand tons) (%) 2023 202420222021 2025 Amount of recycling Amount of valuable resources Amount of final disposal Rate of recycling 6.95.5 3.96.8 6.42.8 4.8 25.6 6.2 22.4 27.3 23.4 3.4 7.2 22.9 91.6 80.685.079.8 82.5 (Year) There was some impact from having acquired a polysilicon business in 2024. Unit 2025 Renewable electricity GWh 690 Total electricity consumption 1,858 Renewable energy ratio (ratio of renewable electricity) % 37.2 Renewable Energy Introduction Results (SUMCO Group [Japan]) Land-based wind power in the Abukuma district of Fukushima Prefecture Solar power generation at Kyushu Factory Initiatives for Reducing GHG Emissions Efforts to Introduce Renewable Energy Effective Use of Water Resources Reduction of Waste ● Investment in Clean Technologies (such as Solar Power Generation, etc.) ● Introduction of Green Power Generated in the Land-based Wind Power Project in the Abukuma District of Fukushima Prefecture The SUMCO Group (Japan) is replacing the containers used to ship 300 mm diameter silicon wafers with reusable alternatives as one of the initiatives to reduce post-shipment waste. The percentage of reusable containers used for shipment in 2025 was 84.7%, an increase from 2024. Before introducing reusable containers, the Group conducts tests to ensure that the quality of the products is not affected. The SUMCO Group (Japan) is driving the recycling of industrial plastic waste as part of its initiatives to reduce waste and promote recycling. ● Waste Reduction through the Adoption of Reusable Containers ● Efforts to Promote Resource Circulation of Plastic * The provisional and final figures prior to third-party verification will be disclosed on our website. The SUMCO Group has started introducing procurement of non-fossil electricity. With this introduction, the Group's procurement of non-fossil electricity input in CY2025 will be 690 GWh, which is expected to contribute to a reduction of approximately 321,344 ton-CO 2e/year. ● Procurement of Non-fossil Electricity* * The provisional and final figures prior to third-party verification will be disclosed on our website. Initiatives for Sustainability For the sustainable growth of society and business We have installed solar power generation equipment at our Kyshu Factory (Kubara, Imari), High-Purity Silicon Corporation (Yokkaichi), and we use and sell renewable energy. In December 2025, we installed an additional solar power generation system with a capacity of 1.0 MW at the Kyushu Factory (Kubara, Imari) for in-house consumption. The total power generation capacity is 3.36 MW. SUMCO Annual Report 2025 6463 SUMCO Annual Report 2025
Page 34
For the purpose of maintaining and enhancing the Group's levels of safety and health, the SUMCO Group annually convenes the Company- wide Safety and Health Committee in which reports on the status of safety and health-related initiatives and information-sharing are made. The committee, attended by the Chief Safety and Health Officer, plant general managers, and presidents of group companies, reports on Group-wide performance, issues, and activities related to safety and health. It also reviews and approves safety and health-related issues and targets to be addressed in the following fiscal year. Additionally, each plant shares safety and health information and improves safety and health issues, and engages in daily activities to achieve safety and health objectives, through channels such as Safety and Health Committees, Workplace Safety and Health Committees, and small group workplace safety meetings. During 2025, seven lost-time accidents (domestic / overseas) occurred (three more than in the previous fiscal year), most of which were due to lower back pain and lack of risk prediction. SUMCO conducts risk assessments to prevent such accidents from occurring in the future, with particular emphasis on risk assessments for high-risk work (chemicals, heavy objects, high places, rotating objects, etc.), and also strengthen knowledge and awareness education on hazards and harmfulness. For the SUMCO Group and contractors, the number of deaths due to occupational accidents was zero. Aiming for zero occupational accidents, the Group is working to enhance the effectiveness of existing activities while actively engaging in initiatives, including broad introduction of the lockout-tagout safety procedure. Having acquired ISO 45001 certification for its occupational health and safety management systems, the Group is further developing and enhancing these systems, while carrying out safety awareness- raising activities based on employee survey results. In these and other ways, the Group is endeavoring to create a workplace environment that is safe, healthy, comfortable, and pleasant to work in. Under the principle that “the safety and health of employees take the highest priority over all,” the SUMCO Group aims to become an excellent company with a high profit mindset by ensuring that our employees can work vibrantly in good health, both physically and mentally. To achieve this, the Group has announced the SUMCO Group Health Declaration both internally and externally. Rather than treating these initiatives as mere welfare benefits, we strategically promote various health advancement activities as a forward-looking health investment that supports sustainable growth. The Company-wide Safety and Health Committee, Company-wide Health Committee, and Health Promotion Meeting are convened regularly. Through these meetings and committees, we share the status of initiatives and the attainment of health objectives (KPIs) for each site, and reflect these findings in the planning of new measures and improvements. We have established a support system staffed by highly expert personnel, and we promote individual health guidance, smoking cessation support, workplace environment improvements utilizing stress checks, and mental health training. These activities are conducted in collaboration with the health insurance union and the labor union. Furthermore, we collaborate with our business partners on health and safety activities (such as gathering feedback at meetings) and share our expertise in health and productivity management to support them. We promote various company-wide initiatives to maintain and improve the health of each employee. Our initiatives for employee health have been highly evaluated, and the SUMCO Group was selected as a “Health & Productivity Stock Selection”—jointly chosen by METI and the TSE—for the fourth time. Furthermore, the Group has been certified as one of the "White 500" corporations under the "Certified Health & Productivity Management Outstanding Organization Recognition Program" (sponsored by METI and Nippon Kenko Kaigi) for the eighth consecutive year from 2019. SUMCO believes that maintaining good mental health among employees leads to a workplace environment where they can meet the high customer demands, maximize productive, and work vibrantly. As primary prevention of mental health issues, SUMCO has been operating and assessing workplace environment improvement activities since 2003 through its occupational safety and health management system. Regarding these improvements, based on stress check results for each workplace, employees exchange ideas, and then decide on and implement action items. Effective initiatives are posted on the company intranet site. National average: 100 better 85 80 90 105 115 110 100 95 Indicators for improving the work environment 2023 2024 20252018 2021 202220202019 99 103 98 100 106 96 89 87 107 102 101 103 100 97 97 90 *1 General health risk is calculated from the stress check using a work stress determination chart. *2 ERI-adjusted general health risk is calculated using general health risk and an effort-reward imbalance model. General health risk ERI adjust general health risk (Year) 0 0.4 1.6 1.2 0.8 0.2 1.4 1.0 0.6 Change in the Accident Frequency Rate* (SUMCO Group) * Accident Frequency Rate = Number of workers killed or injured in occupational accidents (injuries requiring one or more days off) / total number of working hours × 1,000,000 2015 2023 20242016 2017 2018 2021 20222020 2019 Manufacturing industry average SUMCO Group (Japan) SUMCO Group (Japan / Overseas) Target 2025 0.24 0.37 0.35 0.16 0.15 0.25 0.37 0.27 1.06 0.39 0.26 1.15 1.02 1.20 1.20 1.21 1.31 1.25 1.29 1.30 0.47 1.33 (Year) 2025 target: 0.20 SUMCO Group Basic Policy on Safety and Health Health and Productivity Management Initiatives Initiatives for Safety and Health ● Promotion Framework ● The SUMCO Group's Approach to Employees' Health ● Health Promotion Framework ● Health and Productivity Management Initiatives ● Mental Health ● Status of Occupational Accident Occurrences Basic Principle Basic Policy Under the principle that "the safety and health of employees takes the highest priority over all," the SUMCO Group is committed to "creating a safe and pleasant workplace environment supportive of good mental and physical health" through leadership by supervisors and through active communication across the organization. We will collectively and thoroughly strive to create a workplace where all members adhere to relevant laws and regulations as well as rules stipulated in manuals and work procedures. 1 In the event of any work-related accidents, we will collectively and thoroughly analyze the root causes and implement measures to prevent their recurrence. 2 We will collectively and thoroughly strive to create an open workplace environment, as well as to maintain and promote employees' mental and physical health and to prevent occupational illnesses. 3 We will collectively and thoroughly engage in raising awareness of traffic consideration and promote traffic safety initiatives as models for society. 4 Main Action Items Results of Activities Mental health training (stratified training, e-learning) and consultation framework for counselors and other staff Workplace Environment Improvements Based on Stress Check Results Workplace environment improvement activities based on stress check results Initiatives for Sustainability For the sustainable growth of society and business SUMCO Annual Report 2025 6665 SUMCO Annual Report 2025
Page 35
SUMCO has established the SUMCO CSR Procurement Policy and promotes responsible procurement activities to fulfill its social responsibilities across the supply chain. We share various issues related to the supply chain with all suppliers, both domestic and overseas, and tackle procurement activities while keeping those issues in mind to ensure that customers can use our products confidently and to satisfy our stakeholders. Through periodic briefings to suppliers and procurement activities such as those described below, we request our suppliers to make voluntary efforts to promote CSR management. We also call for their efforts to respect human rights, protect the environment, comply with corporate ethics, etc., when contracting with new suppliers. In our procurement activities, SUMCO strives to engage in fair and rational trade with all suppliers, both domestic and overseas, based on mutual trust. With the cooperation of all suppliers, we also actively promote initiatives to fulfill our corporate social responsibilities, including compliance with related laws, ordinances and social norms, and efforts to support global environmental conservation. SUMCO promotes optimum inventory control and multiple sources for procured materials according to the level of risk involved. If a disaster or accident should occur, we will immediately launch an investigation into its impact, while we take all possible steps for emergency procurement, including finding alternative suppliers and adopting alternative products, thus ensuring the necessary framework to do all we can to minimize the impact on production. As part of this initiative, we distribute a self-check sheet on BCP and risk countermeasures to main suppliers along with the aforementioned CSR questionnaires to confirm their BCP and risk management status. Based on the responses, we conduct checks on the efforts and status of BCP and risk countermeasures for the relevant suppliers during supplier audits. ● Basic Stance on CSR Procurement ● Strengthening of BCPs for Material Procurement We share the SUMCO CSR Procurement Policy with our suppliers at regularly held briefing sessions, and through separate briefing sessions and CSR audits, we explain the SUMCO CSR Procurement Policy, SUMCO Environmental Policies, and Responsible Business Alliance (RBA) Code of Conduct, and provide advice on compliance with these standards. In this way, SUMCO continues to deepen suppliers' understanding of the Company's labor, safety/health, environment, and ethics-focused efforts towards CSR procurement. Briefing Sessions for Suppliers in 2025 were held using both face-to-face and web-based formats. Briefings on CSR Procurement1 To help suppliers understand our approach to procurement activities, we distribute the Supplier Handbook, which includes a section on our procurement policy and requests to suppliers including items relating to CSR. The Supplier Handbook is posted on our dedicated procurement website used in SUMCO's daily procurement activities for easy reference at any time by suppliers. In this handbook, we ask suppliers that comprise our supply chain to promote CSR. As a guideline to be followed in implementing CSR management, we ask suppliers to utilize the RBA Code of Conduct, and also encourage subcontractors and sub-subcontractors to implement CSR management in a similar fashion. Furthermore, we request them to develop an environmental management system that complies with ISO 14001 by distributing this handbook. To promote the procurement of products with minimal environmental impact (green procurement), we have also posted the Green Procurement Guidelines on the dedicated procurement website. The guidelines summarize relevant laws and ordinances, the RoHS Directive, REACH regulations, prohibited or controlled substances designated in customer requests and other pertinent information. SUMCO's procurement and environmental management departments work together to promote green procurement by asking suppliers to submit certificates of non-use of prohibited substances as well as issuing and collecting various questionnaires, in order to confirm that substances specified in the Green Procurement Guidelines are not being used. We prepare and regularly distribute CSR questionnaires based on the RBA Code of Conduct to our main suppliers from whom we purchase large amounts and who are essential or irreplaceable to our production activities, in order to review the status of CSR promotion initiatives at each company. In fiscal year 2025, the CSR questionnaires were distributed to more than 200 such companies, and SUMCO has managed to secure responses from almost all of them. Based on the results of these questionnaires, we conduct regular CSR audits that include field audits of a given number of suppliers. Along with providing explanations of our CSR procurement policy and environmental policy and asking for understanding and cooperation, we verify the state of compliance with each of the items on the CSR questionnaire such as human rights, safety, environment, ethics, information security, and management systems, as well as confirming the status of improvements. The CSR Audit found cases involving the insufficient protection of whistleblowers in internal reporting, deficiencies in the management of information received from third parties such as customers and suppliers, inadequate management of expiration dates for legally stipulated safety and environmental qualifications and a failure to secure emergency exits and escape routes for employees. SUMCO requested the understanding of suppliers and asked them to correct these issues, leading suppliers to improve their operations. The SUMCO Group will continue to promote CSR management in our supply chain. SUMCO's procurement staff also need sophisticated expertise and a compliance-oriented mindset to conduct the CSR procurement activities listed above. By training staff about the SUMCO Charter of Corporate Conduct and providing departments in charge of procurement with opportunities to train themselves regarding laws and regulations every year, the Company aims to increase employee understanding and awareness regarding the background and meaning of the SUMCO CSR Procurement Policy, legal compliance, unfair competition and improper transactions, anti-corruption, and respect for human rights. Supplier Handbook2 Green Procurement Guidelines3 Raw Material Surveys4 CSR Questionnaires and Audits5 Training for Procurement Staff6 May 2025 November 2025 Total of Tokyo and Kyushu 157 companies 88 companies 240 attendees at the venue 314 attendees via web 135 attendees at the venue 439 attendees via web Briefing Sessions for Suppliers Procurement Policy CSR Procurement Activities Procurement Policy Transactions based on partnership We will develop favorable partnerships with our suppliers based on mutual trust.1 Fair transactions We will ensure that our procurement is clean, open, and fair.2 Promotion of value analysis (VA) activities We will encourage our suppliers to conduct value analysis (VA) activities in order to propose cost improvement methods, new materials, new technologies, and others, and will actively adopt such proposals.3 Compliance in procurement activities We will comply with laws, ordinances, and social norms in the course of our procurement activities.4 Fulfillment of corporate social responsibilities We will fulfill our social responsibilities when conducting procurement activities across our entire supply chain, including our suppliers.5 Green procurement We will promote the procurement of materials with minimum environmental impact.6 Continuing optimum inventory control based on the characteristics of each procured material 1 Source investigation and risk response 2 Maintenance, enhancement, and review of BCP for each item procured 3 Risk assessment of suppliers 4 Supply Chain Asia 4 Others 2 Procurement amount ratio by area in 2025 Japan 63 North America 31 Initiatives for Sustainability For the sustainable growth of society and business SUMCO Annual Report 2025 6867 SUMCO Annual Report 2025
Page 36
Technology and quality 2025 supplier evaluation results (Scoring on a 100-point scale) 85points or higher Notification to related divisions (determining response status) Quality, cost, delivery time, service, technology Confirmation of response status Sales Management Division Information aggregation Sales Management Division, Technology Division Analysis and listing of issues as a result of internal information gathering Management review Discussed in: Sales Division Analysis and listing of issues Discussed in: Technology Division Plants, related divisions Customer Sales Division Information flow in assessing customer satisfaction (CS) SUMCO has been continuously selected as a constituent of the FTSE4Good Index, an environmental, social, and governance (ESG) index developed by FTSE Russell in the U.K.* The FTSE4Good Index has become a major investment selection criterion for investors as a leading index measuring the performance of companies that excel in ESG activities. A total of 1,175 companies from developed countries around the world (including 278 Japanese companies) have been selected for the FTSE4Good Index as of June 30, 2025. In addition, the Company was selected for inclusion in the FTSE Blossom Japan Index and the FTSE Blossom Japan Sector Relative Index as in the previous year. * FTSE Russell, a wholly owned subsidiary of the London Stock Exchange Group, is engaged in designing and maintaining investment indices worldwide. SUMCO Selected as a Constituent of the FTSE4Good Index The Timely Disclosure Network (TDnet) of the Tokyo Stock Exchange is utilized to disclose information that needs to be disclosed in a timely fashion, and documents are posted simultaneously in both Japanese and English on our website to ensure the fair disclosure of information to shareholders and investors in Japan and overseas. Our Annual Report and Message to Shareholders are also published to convey messages from top management and report on business performance and conditions. As well as regularly held meetings with institutional investors and securities analysts, SUMCO also periodically organizes visits to overseas institutional investors in Europe, North America, and Asia to help investors develop a better understanding of the Company. In fiscal year 2025, SUMCO held quarterly briefings on financial results led by senior management, actively participated in domestic and overseas conferences, and conducted web and tele-conferences with investors. Amid competition, SUMCO aims to continue being a company that customers call on first and that is chosen as their development partner. We strive to further raise customer satisfaction by always providing a timely supply of the products they need, as well as by building solid bonds of trust. Regular supplier evaluations from our customers are also an important measure of customer satisfaction. By analyzing these evaluations across specific categories—technology, quality, cost, delivery, and service—and sharing the results with management and relevant divisions for ongoing improvements, we work to continually enhance customer satisfaction. As a company that manufactures silicon wafers that represent the base materials for the semiconductors installed in all kinds of electronic devices, we see it as a social responsibility of the highest priority to ensure the safety and reliability of our products while making sure they comply with all applicable laws, ordinances, and regulations. For this reason, the SUMCO Group makes every effort to implement the stable supply of products that meet the quality requirements of customers and further boost customer satisfaction by implementing quality management in an appropriate and effective manner. In the SUMCO Group, all sites that manufacture silicon wafers including affiliate companies in Japan and overseas have obtained IATF 16949 and ISO 9001 certifications. Furthermore, all sites that manufacture quartz crucibles and polycrystalline silicon including affiliate companies in Japan and overseas have obtained ISO 9001 certification. We strive to ensure stable levels of quality as well as further enhance it, and have made continuous improvements to our quality management system. To enhance product reliability and safety, it is necessary for each employee to have high quality awareness and improve their skills. For this reason, we have developed quality education programs for each job function and level, and assigned dedicated instructors to each production site to provide timely, necessary training. In 2025, the SUMCO Group conducted around 100 internal seminars. In addition to these, we expanded training using a video distribution system featuring internal instructors and held on-site seminars inviting external lecturers, thereby creating an environment where employees can more easily access education, in an effort to enhance quality control knowledge and awareness on a company- wide level. As part of our initiatives for quality improvement, the SUMCO Group is introducing AI-driven automated analysis and judgment systems to reduce quality variation. When quality issues or internal abnormalities occur, we identify the best known method (BKM) to prevent recurrences, swiftly deploy the response throughout the entire SUMCO Group as needed, and build systems to ensure that similar issues do not occur in the future. Flow for sharing quality problems Quality problems Meeting to discuss how to share the problem across the Group 1st-stage sharing Meeting to determine BKM Plants Plants The targets are shared across the SUMCO Group. Mission Statement SUMCO Vision Quality Policy It is the quality policy of the SUMCO Group to deliver world class quality and reliability through anticipation of future needs; continuously improving products, process, technology and service for total customer satisfaction. SUMCO SUMCO Group companies in Japan SUMCO Group companies Overseas Quality targets The SUMCO Group Mission Statement, Quality Policy and Targets Environmental management Other management Occupational safety and health management Pursuit of Quality and Reliability Initiatives to Improve Customer Satisfaction Communication with Shareholders and Investors ● Why SUMCO Addresses Quality and Reliability ● IR Activities ● Quality Control System Reliability ● Quality Education ● Quality Enhancement Initiatives 2nd-stage sharing Initiatives for Sustainability For the sustainable growth of society and business SUMCO Annual Report 2025 7069 SUMCO Annual Report 2025
Page 37
Under the SUMCO Human Rights Policy, in case any business activities of the SUMCO Group caused or provoked an adverse impact on human rights, we commit to correct and/or relieve the adverse impact by taking appropriate and effective measures. As one of the measures for such correction or relief, we have established a Harassment Consultation Service to serve as the point of contact for employees to consult about issues related to human rights violations and harassment at each site, in addition to the internal reporting hotline, which has a contact point with an external attorney. To ensure that employees can casually seek advice at any time, the consultation service at each site is staffed by both male and female consultants who work based on three principles: (1) protecting the privacy of employees seeking consultation; (2) prohibiting disadvantageous treatment of related persons; and (3) dealing with consultations in a fair manner. In particular, the service accepts consultations by e-mail or telephone to keep them confidential. Each consultation request received is investigated in the relevant department, measures for rectification and prevention of a recurrence are taken as the situation calls for, and the results are reported to management, while the consulting party is given feedback. In addition, with appropriate consideration to privacy, the harassment cases are shared with the Human Rights Awareness and Promotion Committee, putting them to Group-wide use in measures for preventing a recurrence. In 2025, the Harassment Consultation Service handled 37 cases. Reports number of consultation cases and training results Proposes basic policy, annual targets, etc. Provides directions on how to fix the workplace environment Reports to Consults and submits applications to Confirms facts and presents solutions Human Rights Awareness and Promotion Committee Each region's General Affairs Sect. Harassment Consultation Service Workplace Employees Chairperson Vice Chair Committee Members Secretariat Executive Officer, Human Resources Director in charge of human resources Plant Managers, General Managers, select General Managers from Group companies General Manager, Human Resources Department Establishment of a harassment consultation service To identify and evaluate the adverse impact on human rights and to prevent or reduce the impact, in considering not only new business but also existing business, the SUMCO Group clearly stipulates in the SUMCO Human Rights Policy that the Company regularly conduct human rights due diligence and has communication with external experts and stakeholders. In the human rights due diligence conducted in 2025, we had communication with external experts and stakeholders and then investigated any adverse impacts on human rights caused by SUMCO’s business activities. We also assessed that the corrective and remedial measures against the following adverse impacts on human rights are required, and have decided to vigorously address them. Results for Fiscal 2025 Measure Occupational accident occurrences During 2025, seven lost-time accidents occurred. Aiming for zero occupational accidents, the SUMCO Group works to further develop and enhance the occupational health and safety management systems based on ISO 45001 and to further promote communication, education, and training related to safety and health. Harassment case occurrences During 2025, the Harassment Consultation Service handled 37 cases. The SUMCO Group works to further promote training on the SUMCO Charter of Corporate Conduct and harassment training as well as fulfill Group-wide measures for preventing a recurrence. Problem with working time management A case arose of underreporting of overtime hours worked. By strengthening labor management and information-sharing, we will seek to ensure that working time management is carried out properly throughout the Group. Following an internal whistleblower report, recorded working hours were verified against attendance system logs, and identified discrepancies were resolved through retroactive wage payments. The SUMCO Group regards respect for basic human rights to be an important social responsibility. Based on the SUMCO Charter of Corporate Conduct and the SUMCO CSR Policy, we pursue a number of initiatives to be a company that "values people" and respects the human rights of all people associated with the SUMCO Group. In 2023, to clearly stipulate the SUMCO Group’s policy for respecting human rights, we established the SUMCO Human Rights Policy, pledged to respect any human rights that are internationally recognized through the International Bill of Human Rights, ILO Declaration on Fundamental Principles and Rights at Work, and UN Guiding Principles on Business and Human Rights, and we are working to further promote initiatives, such as reflecting this policy in relevant policies and regulations, to respect human rights. Furthermore, in promoting these initiatives, we are also referring to the RBA’s Code of Conduct. These policies are translated into languages that employees are able to understand and aimed at increasing human rights awareness among all employees of the Group. We also ask our suppliers to respect human rights in accordance with the SUMCO CSR Procurement Policy. SUMCO regularly educates all employees on various forms of harassment, aiming to prevent all forms of discrimination, and makes every effort to improve awareness of these issues in the workplace. In addition, we formulate and implement action plans aimed at improving the working environment at each workplace by conducting a stress check each year as part of our health management initiatives and adding items related to employee satisfaction to the stress check. As a part of these action plans, to eradicate harassments, we hold harassment training on e-learning for all employees, as well as harassment prevention training and harassment awareness activity at each site. During the period from April 2025 to March 2026, the cumulative number of participants in training within the SUMCO Group (Japan) was 30,633. Seeking to eliminate all forms of employment discrimination, we also actively pursue initiatives such as attending lectures held by the U.S. Equal Employment Opportunity Commission (EEOC), as well as Americans with Disabilities Act (ADA) training seminars. In line with the ongoing efforts in the SUMCO Group to maintain and improve a favorable working environment, monthly engagement surveys are conducted for our employees, and the results are reflected in effective policy measures tailored to each workplace. Besides endeavoring to maintain and improve employee engagement in this way, we take steps to energize workplace communication, such as through various kinds of group communities using system tools, as well as club and other group activities at each site, and a variety of in-company recreation aimed at deepening fellowship among employees. Respect for diversity (especially gender, sexual orientation, etc.) Workplace harassment Harassment related to pregnancy, childbirth, childcare or nursing care leave in the workplace Measures based on the number of consultations to the consultation service in the year, harassment, etc. Human rights for the elderlySexual harassment Mental health issues in the workplace Major Themes Covered in Human Rights Awareness Training Respect for Human Rights ● SUMCO’s Basic Policy on Human Rights ● Conducting Human Rights Due Diligence ● Establishment of a Reporting Hotline / Consultation Service ● Human Rights Awareness Training ● Maintaining and Enhancing a Pleasant Working Environment Initiatives for Sustainability For the sustainable growth of society and business Priority themes set forth in the SUMCO Human Rights Policy • Prohibition of forced labor and all other involuntary labor • Prohibition of child labor and prohibition of young labor from engaging in hazardous work • Compliance with labor-related laws and regulations regarding working hours, holidays, wages, etc. • Prohibition of discrimination based on any factors, including race, religion, gender, nationality, origin, age, sexual orientation, and disability • Prohibition of harassment, libel, etc. • Appropriate management of personal information and protection of privacy • Respect for freedom of association • Providing a safe and sanitary working environment • Compliance with environmental laws and regulations, including prevention of pollution • Pursuit of quality and reliability SUMCO Annual Report 2025 7271 SUMCO Annual Report 2025
Page 38
SUMCO believes that the promotion of diversity, equity, and inclusion is essential for becoming a strong company that can grow sustainably. Since our company has three roots: Mitsubishi, Sumitomo, and Komatsu, we have fostered a culture in which we can bring together and utilize the knowledge and expertise of each. In addition to this, we work to further enhance our corporate value so that diverse talents can work to utilize their ideas and experiences by expanding measures to promote women’s career and systems, local hires at our domestic and overseas bases, and experienced workers of other companies. We will continue to actively promote diversity, equity, and inclusion initiatives to meet our stakeholders’ expectations. To provide a favorable working environment for employees with young children and to help in combining work and parenting, SUMCO and domestic Group companies set a childcare leave period that is longer than legally required. We also provide remote work options, various shorter working hour options, and other work support programs, as we are constantly aiming to provide a working environment where women can thrive. In 2016, as part of these efforts, the Company established SUMCO Nursery School Imari as an on-site day-care facility at our Kyushu Plant in the Imari area, the largest site across the SUMCO Group. We also provide a childcare support allowance for employees who are unable to use SUMCO Nursery School Imari. Additionally, we improve support for female employees by developing a “Retiree Comeback Program” that allows employees who are forced to leave the company temporarily due to childcare or other reasons to return to work again. To further increase diversity within the company and to further promote women’s participation, we have set a medium-term goal of increasing the percentage of female managers to 10% in SUMCO* and 12% on a consolidated basis (in the SUMCO Group) by 2030, and actively promote regular and experienced female employee hiring. In addition, we are providing training programs in support of career formation for female employees, roundtables with female directors, and diversity management training for managers. In such ways, we are acting to create an environment where women can become fully involved with confidence. * Total figures include the number of SUMCO employees assigned to other companies and exclude secondees to SUMCO Corporation from other companies. Diversity, Equity, and Inclusion ● Promoting the Active Participation of Women ● Support Programs for Each Life Event Q1 Q2 Having used SUMCO Nursery School Imari yourself, what are your impressions of it? How do you think it can help strike a balance between work and parenting? How have programs like childcare leave or support from your workplace been helpful? I live in Imari, and the local government has taken steps to make sure that there are zero children on the day-care waiting list. Still, the company has its own fully equipped day-care facility near the factory, which I am really grateful for. You can tell the day-care staff genuinely care. I feel completely safe leaving my children with them. When we had our first son, I took a month’s childcare leave, which was a good lesson in how much work parenting is. My plan is to continue parenting alongside my wife. Right now, I work flextime so I can take my boys to nursery school and pick them up. With a day-care facility right there ready and waiting, my arrangements to return to work after having my baby went so smoothly. The nursery is close to the factory, so if they call me because of a sudden fever or other reason, I can just go. Every room has a camera, too, so I can monitor what my boys are doing in real time. That makes me feel secure leaving them there. I often talk with the other parents about the generous portions and high quality of the meals, which are another thing to be thankful for. They help keep my boys healthy. I work flexible hours (8:30 a.m.–5:15 p.m.). Flexible work hours are convenient for doing my job, and my workplace is understanding of the arrangement. Another helpful program is special paid time off, which employees can claim by the hour for hospital visits. Voice of the User The K Family, Kyushu Factory (Husband: D / Wife: N) The SUMCO Group is actively working to employ persons with disabilities, as demonstrated by SUMCO establishing a company that specifically hires persons with disabilities in Japan. In 2025, the employment rate of people with disabilities in Japan and overseas is 1.90%, and the actual employment rate of people with disabilities in Japan is 2.58%, in comparison with 2.5%, the statutory employment rate. We have set up a reemployment system by which all employees, if they wish to continue working after mandatory retirement at age 60, are in principle reemployed until age 65. Under this system, by maintaining the same compensation applied at the time of mandatory retirement, we allow these employees to continue working while leveraging their extensive experience, sophisticated skills, and high-level abilities with a strong sense of motivation. 1.9 1.8 1.7 2.0 2.3 2.5 2.8 2.7 2.6 2.4 2.2 2.1 * The figure for each fiscal year is the average of the period from January to December of the following year. 20232011 2012 2013 2014 2015 2016 2017 2018 2020 2019 Employment Rate of people with disabilities (SUMCO Group [Japan]) ʢʣ Statutory employment rate for persons with disabilities until March 2013: 1.8% Statutory employment rate for persons with disabilities from April 2013 to March 2018: 2.0% Statutory employment rate for persons with disabilities from April 2018 to February 2021: 2.2% Statutory employment rate for persons with disabilities from March 2021 to March 2024: 2.3% Statutory employment rate for persons with disabilities from April 2024 to June 2026: 2.5% Statutory employment rate for persons with disabilities from July 2026: 2.7% 2021 2022 20242010 2025 2.12 2.27 2.58 1.811.85 1.99 2.01 2.08 2.22 2.26 2.40 2.40 2.342.37 2.31 2.17 (FY) ● Employment of People with Disabilities ● Employment of Older Workers D D N N Initiatives for Sustainability For the sustainable growth of society and business Marriage Marriage time off Childcare leave (available to both father and mother) Childcare leave at the time of birth Family care leave SUMCO Nursery School Imari Childcare support Family care support Family care service assistance (Support through specialized care firm) Special paid time off to care for family member Shorter workdays during family care Flexible work hours Work from home Time off for morning sickness Congratulatory cash gifts upon marriage Grants toward nursery school costs Congratulatory cash gifts upon childbirth Shorter workdays during childcare Work from home Flexible work hours Special paid time off to care for child Childbirth Child: 3 yrs old Child: In junior high school Pre- and post-childbirth time off Special time off when spouse gives birth Provision of childcare/family care guidebook to make known and give details on available programs Various work support programs Return to work Return-to-work program for former employees Early retirement SUMCO Nursery School Imari Celebrates 10th Anniversary SUMCO Nursery School Imari, an on-site day-care facility at our Kyushu Plant in the Imari area, is celebrating its 10th anniversary. Established in November 2016 as part of our efforts to help employees with young children strike a balance between work and parenting, the facility has served a total of 286 working parents to date. In addition, some of the enrollment spaces are open to local residents who are not SUMCO employees as part of our corporate commitment to the community. SUMCO Annual Report 2025 7473 SUMCO Annual Report 2025
Page 39
■ Mainly in the communities where SUMCO has production sites, we conducted on-site classes on semiconductor technology as well as the utilization of AI and DX at 13 universities and technical colleges in 2025. Additionally, we have donated silicon monocrystals and silicon wafers for exhibits at a total of seven universities and technical colleges, providing opportunities for students to learn about the manufacturing technology for silicon wafers, the most important substrate material for semiconductors. ■ At the Mitagawa public junior high school in Yoshinogari, Saga Prefecture, where our Kyushu Factory is located, we offered a class titled “Learning from a Familiar Company About SDGs Initiatives,” introducing our efforts to protect the environment and help prevent global warming through our manufacturing activities. ■ SUMCO TECHXIV conducted an on-site class at a local technical high school in September 2025, providing an opportunity for students to deepen their understanding by speaking directly to them about the physical properties and manufacturing processes of silicon, the substrate material for semiconductors. ■ SUMCO’s Chitose Plant conducts cleanup activities in the Chitose- Rinku Industrial Park every year, striving to maintain the road environment. ■ The JSQ Division participates annually in the “Omono River Basin Joint Cleanup” organized by Akita City, collaborating with local residents and neighboring companies. ■ At High-Purity Silicon Corporation, the Suzuka Manufacturing Division participates in “Clean Town Amana,” a community beautification activity held every June in the Amana district of Suzuka City. ■ SUMCO Taiwan Technology Corporation conducts annual beach cleanup activities at Kanhai Park in Hsinchu City, under the guidance of the Environmental Protection Bureau of Hsinchu City Government. ■ SUMCO Phoenix Corporation (U.S.A.) organizes an annual community cleanup initiative called “Litter Patrol,” drawing the participation of many employees every year. ■ SUMCO’s Yonezawa Plant has concluded the “Yamagata Kizuna-no Mori” (Yamagata Bonds of the Forest) agreement with Yamagata Prefecture and the local community association, Zusayama Ward, and conducts forest conservation and maintenance activities, such as thinning and fertilization, in Zusayama, Bansei-cho, Yonezawa City. ■ To protect valuable biological resources at risk of extinction, SUMCO’s Kyushu Factory provides financial support for the conservation activities of the horseshoe crab, which inhabits the Makishima area of Imari City, Saga Prefecture, and are designated as a Category I Endangered Species. ■ The Miyazaki Plant of SUMCO TECHXIV conducts annual tree-planting activities, including broadleaf trees, in Tsubakiyama Forest Park as part of its biodiversity conservation efforts. ■ At the Nagasaki Plant of SUMCO TECHXIV we have organized the “External Rescue Team” and conduct joint rescue drills under the guidance of the Omura Fire Department to ensure preparedness for potential fire disasters at nearby welfare institutions. ■ SUMCO Europe Sales Plc (U.K.) supports local charity organizations in various ways, including by participating in the activities of the nonprofit organization “Refugee Network International,” which provides food, clothing, and other vital supplies to people experiencing homelessness on the streets of London. ■ PT. SUMCO Indonesia, in cooperation with local high schools, offers an annual employment experience program spanning approximately three months, providing students with hands-on workplace experience. This program offers students a valuable opportunity to explore their future career paths. Furthermore, with a view to developing high- quality human resources, we provide a scholarship program for the children of our employees. ■ SUMCO Support Corp. has been registered as a Saga Prefectural Special Needs School Employment Supporter since 2023. The company periodically hosts students for workplace tours and hands-on work training, and delivers career path presentations at special-needs schools. Through these initiatives, it seeks to strengthen cooperation with special-needs schools and further enhance its employment support. Hands-on work training ● Interaction with Local Students Through On-site Classes ● Participation in Environmental Conservation Activities ● Participation in Cleanup Activities ● Other Community Contribution and Welfare Activities ● Collaboration with Regional Educational Institutions Education-related Endeavors Environment-related Initiatives Community-based Social Contribution Activities Charitable activities in the United Kingdom Forest management activities in Zusayama Cleanup activities in the United States (Litter Patrol)On-site class by SUMCO TECHXIV Miyazaki Plant Apprenticeship program in Indonesia Scholarship program event in Indonesia Beach cleanup activities in TaiwanOn-site class at Mitagawa public junior high school in Yoshinogari Initiatives for Sustainability For the sustainable growth of society and business SUMCO Annual Report 2025 7675 SUMCO Annual Report 2025
Page 40
Dec. 2023 73.0 Dec. 2024 36.9 Dec. 2025 Dec. 2023 63.8 Dec. 2024 19.8 Dec. 2025 (11.7) Dec. 2021 41.1 Dec. 2022 70.2 Dec. 2024 Dec. 2024 114.0 Dec. 2023 144.6 Dec. 2025 112.4 Dec. 2021 104.3 Dec. 2022 169.5 1.3 Dec. 2021 51.5 Dec. 2022 109.6 17.2 9.3 0.3 15.4 24.9 Operating profit / Operating profit margin 160 Profit (loss) attributable to owners of parent 75 400 120 300 80 200 40 100 Capital expenditures / Depreciation and amortization EBITDA 200 50 150 25 100 0 50 (25) 0 0 0 78.9 214.9 Dec. 2023 Dec. 2025Dec. 2021 Dec. 2022 71.4 315.4 115.6 79.9 51.369.5 59.5 1 30.8 (%) 30 20 10 0 Operating profit Operating profit margin(Billions of yen) (Billions of yen) Capital expenditures Depreciation and amortization(Billions of yen) (Billions of yen) Financial Information Net sales in the consolidated fiscal year under review increased by 13.0 billion yen from 396.6 billion yen in the previous consolidated fiscal year to 409.6 billion yen. Overseas sales accounted for 80.6% of consolidated net sales. For both cost of sales and selling, general and administrative expenses, their respective ratios to net sales deteriorated, due to higher depreciation costs from greenfield investments, growing costs of materials, and a drop in shipment volume for small- diameter products. Cost of sales rose from 323.8 billion yen in the previous consolidated fiscal year, to 355.1 billion yen. Selling, general and administrative expenses increased from 35.8 billion yen in the previous consolidated fiscal year, to 53.1 billion yen. Operating profit decreased by 35.6 billion yen from 36.9 billion yen in the previous consolidated fiscal year, to 1.3 billion yen. Non-operating income rose from 6.1 billion yen in the previous consolidated fiscal year, to 4.5 billion yen. Non-operating expenses increased from 5.6 billion yen in the previous consolidated fiscal year, to 9.8 billion yen. Ordinary profit decreased by 41.2 billion yen from 37.4 billion yen in the previous consolidated fiscal year, to 3.8 billion yen. As a result of the above, and after recording income taxes and excluding profit attributable to non-controlling interests, profit attributable to owners of parent declined by 31.5 billion yen from 19.8 billion yen in the previous consolidated fiscal year, to a loss of 11.7 billion yen. As of the end of 2025, the SUMCO Group has largely completed greenfield investments as decided in 2021. Capital expenditures in the consolidated fiscal year under review sharply declined 135.0 billion yen from the previous consolidated fiscal year, to 79.9 billion yen. Depreciation and amortization was 115.6 billion yen, an increase of 36.7 billion yen from the previous consolidated fiscal year. EBITDA decreased by 1.6 billion yen from the previous consolidated fiscal year, to 112.4 billion yen. Note: EBITDA = Operating profit + Operating Depreciation + Amortization of Goodwill Dec. 2023 344.0 81.9 Dec. 2024 313.1 83.5 Dec. 2025 330.1 79.5 Dec. 2021 Dec. 2022 259.8 75.7 355.4 85.6 77.4 80.6 80.8 78.9 80.6 Net sales / Overseas sales ratio (%) 750 0 150 300 450 600 100 0 20 40 60 80 (Billions of yen) Overseas sales Domestic sales Overseas sales ratio Management's Discussion and Analysis of Operations and Financial Conditions Japan North America China Taiwan Korea Others Total Sales 79.5 36.3 51.9 153.2 40.4 48.0 409.6 Percentage of total (%) 19.4 8.9 12.7 37.4 9.9 11.7 100.0 Sales by country (for year ended December 2025, in billions of yen) Profit and Loss Status ●Net Sales ● Cost of Sales, and Selling, General and Administrative Expenses ●Operating Profit ●Non-operating Income/Expenses ●Ordinary Profit ●Profit Attributable to Owners of Parent ●Capital Expenditures and Depreciation and Amortization Note: Amounts in the operational and financial analyses are rounded down to the nearest 0.1 billion yen. During fiscal year 2025 (January 1, 2025–December 31, 2025), the pace of recovery varied across the semiconductor market. Demand was steady in leading-edge fields, most notably AI, while inventory adjustments continued in non-leading-edge fields, including wafers for consumer products, industry, and automobiles. In this market environment, SUMCO’s financial results for fiscal year 2025 were as follows. Net sales were 409.6 billion yen, operating profit was 1.3 billion yen, and loss attributable to owners of parent was 11.7 billion yen. Increased depreciation costs associated with greenfield investments put downward pressure on earnings. Depreciation costs are expected to peak in fiscal year 2026 and then decline in fiscal year 2027 and beyond as assets depreciate, leading to a recovery in earnings. On the financial front, net cash provided by operating activities stood at 100.0 billion yen, with free cash flow improving starting from the second half of fiscal year 2025 as we passed our capital expenditures peak. At the end of the fiscal year, our shareholders' equity ratio was 51.3%, and our debt-equity ratio (gross) was 0.61 times. Our financial foundation thus remains sound. Going forward, we will steadily make the investments necessary for growth while working to strengthen our financial fundamentals by enhancing our earning power and reducing borrowings. Shinichi Kubozoe Representative Director, Executive Vice President, CFO CFO Message SUMCO Annual Report 2025 7877 SUMCO Annual Report 2025
Page 41
Financial Information Dec. 2024 1,172.6 Dec. 2023 1,073.0 Dec. 2025 1,127.9 Dec. 2021 7 64.8 Dec. 2022 Dec. 2024Dec. 2023 Dec. 2025Dec. 2021 Dec. 2022 892.5 Dec. 2023 572.1 Dec. 2024 592.1 Dec. 2025 578.3 Dec. 2021 476.1 Dec. 2022 Dec. 2023 Dec. 2024 Dec. 2025Dec. 2021 Dec. 2022 533.5 1,200 900 600 300 0 1,000 750 500 250 0 80 60 40 20 0 15 10 5 0 (5) Total assets Shareholders’ equity / Shareholders’ equity ratio Interest-bearing debt / Debt-equity ratio (gross) ROE / ROA (Times) 600 0.80 450 0.60 300 0.40 150 0.20 0 0 (%)(Billions of yen) (Billions of yen) Shareholders’ equity Shareholders’ equity ratio Interest-bearing debt Debt-equity ratio (gross)(Billions of yen) ROE ROA(%) 224.4 353.9 353.7 141.0 141.3 7.4 11.6 0.1 (2.0) 7.6 13.210.4 13.9 3.3 3.4 53.3 50.5 51.3 59.862.3 0.26 0.39 0.60 0.61 0.30 The rapid growth of AI products and the shift to 3D structure due to the physical limits of semiconductor scaling, among other things, are requiring significant changes in silicon wafers, which are not the extension of the conventional process. Under such circumstances, the Group develops new products jointly with customers and provides high-value-added silicon wafer products that meet their needs. In addition, the Group will focus on leveraging AI technology to improve productivity and expedite the launch of new products, among other aims. During the consolidated fiscal year under review, the Group promoted R&D activities to become the "World's Best in Technology" under the following activity policies. (1) Understand the needs early by building trust through close communication with customers (2) Be the first-call supplier for customers to jointly develop silicon wafers dedicated for their next-generation devices (3) Search and explore technical challenges by proactively promoting open innovation, such as joint research with universities and suppliers at home and abroad (4) Leverage AI in the following areas: Improving productivity, upgrading R&D capabilities, and accelerating the speed of launching a new product (5) Enhance the precision of evaluation techniques and develop products with high accuracy by making full use of such techniques (6) Promote the upgrading of manufacturing equipment at existing plants to meet the growing share of leading-edge products R&D expenses in the consolidated fiscal year under review totaled 11.1 billion y en, representing 2.7% of consolidated net sales Total assets as of the end of the consolidated fiscal year decreased by 44.7 billion yen year on year, to 1,127.9 billion yen. Although raw materials and supplies increased by 13.9 billion yen, the main factors for the decline were a decrease in total property, plant and equipment of 28.9 billion yen and a drop in cash and deposits of 19.8 billion yen. Total liabilities as of the end of the consolidated fiscal year decreased by 35.2 billion yen year on year, to 480.1 billion yen. The main factors were a decrease in accounts payable for equipment of 31.1 billion yen and a decrease in retirement benefit liability of 3.0 billion yen. Total net assets as of the end of the consolidated fiscal year decreased by 9.4 billion yen year on year, to 647.7 billion yen. Although non-controlling interests increased of 4.2 billion and remeasurement of defined benefit plans grew of 2.5 billion, the decrease was due mainly to a 17.3 billion drop in retained earnings resulting from a loss attributable to owners of parent and dividend payments. Shareholders’ equity excluding non-controlling interests was 578.3 billion yen. The shareholders' equity ratio went to 51.3% from 50.5% in the previous consolidated fiscal year. The debt-equity ratio (gross) deteriorated by 0.01 points from the previous consolidated fiscal year to 0.61 times, while ROE declined to (2.0)% from 3.4% in the previous consolidated fiscal year. Net cash provided by operating activities in the consolidated fiscal year was 100.0 billion yen, a year on-year increase of 30.4 billion yen. Although increase in inventories was 16.9 billion yen and income taxes paid came to 7.2 billion yen, the main factor behind the increase was depreciation and amortization of 115.6 billion yen. Net cash used in investing activities in the consolidated fiscal year was 111.4 billion yen, a year-on-year decrease of 136.4 billion yen. The main factor was 111.0 billion yen used for the purchase of property, plant and equipment, and intangible assets. Net cash used in financing activities in the consolidated fiscal year was 8.7 billion yen. The main factors were proceeds from long-term borrowings of 56.0 billion yen, repayments of long-term borrowings of 49.7 billion yen, and a net decrease in short-term borrowings of 9.9 billion yen. As a result of these factors, cash and cash equivalents at the end of the consolidated fiscal year under review decreased by 20.3 billion yen from the end of the previous consolidated fiscal year to 75.2 billion yen. Financial condition and Cash Flows ●R&D Activities ●Assets ●Cash Flows ●Liabilities ●Net assets ●Shareholders’ Equity Dec. 2024 8.5 Dec. 2023 8.1 Dec. 2025 11.1 Dec. 2021 5.5 Dec. 2022 6.5 R&D expenses 12.0 9.0 6.0 3.0 0 (Billions of yen) SUMCO Annual Report 2025 8079 SUMCO Annual Report 2025
Page 42
Dec-25 Dec-24 Dec-23 Dec-22 Fiscal year Millions of yen Net sales 409,670 396,619 425,941 441,083 Domestic sales 79,562 83,513 81,930 85,628 Overseas sales 330,108 313,106 344,011 355,455 Operating profit (loss) 1,342 36,924 73,080 109,683 Profit (loss) attributable to owners of parent (11,751) 19,877 63,884 70,205 Comprehensive income (loss) (4,237) 35,540 82,387 91,680 End of fiscal year Millions of yen Total assets 1,127,966 1,172,683 1,073,087 892,555 Cash and cash equivalents 75,296 95,671 156,353 259,305 Total liabilities 480,181 515,447 437,559 301,071 Interest-bearing debt 353,709 353,955 224,454 141,383 Total equity 647,785 657,236 635,527 591,484 Cash flows from operating activities 100,040 69,627 96,342 179,462 Cash flows from investing activities (111,447) (247,876) (247,677) (126,351) Cash flows from financing activities (8,729) 112,294 43,456 (23,153) Depreciation and amortization 115,692 78,986 71,425 59,532 Capital expenditures 79,957 214,927 315,415 130,851 R&D expenses 11,151 8,532 8,180 6,555 EBITDA 112,442 114,088 144,663 169,530 Per share information Yen Basic net earnings (loss) per share (33.60) 56.84 182.59 200.49 Diluted net earnings (loss) per share － － － － Net assets per share 1,653.87 1,693.17 1,636.19 1,523.71 Cash dividends per share Yen Common stock 20.00 21.00 55.00 81.00 Class A share － － － － Financial ratios % Operating profit margin 0.3 9.3 17.2 24.9 Return on assets 0.1 3.3 7.4 13.2 Shareholders' equity ratio 51.3 50.5 53.3 59.8 Return on equity (2.0) 3.4 11.6 13.9 Debt-equity ratio (Gross) (Times) 0.61 0.60 0.39 0.26 Debt-equity ratio (Net) (Times) 0.48 0.44 0.12 (0.22) Number of shares outstanding (thousands) 350,175 350,175 350,175 350,175 Number of employees 9,714 9,850 9,847 9,189 Eleven-year Major Financial Data Dec-21 Dec-20 Dec-19 Dec-18 Dec-17 Dec-16 Dec-15 335,674 291,333 299,460 325,059 260,627 211,361 236,826 75,795 67,739 69,079 71,520 60,624 53,653 54,889 259,879 223,594 230,380 253,538 200,002 157,707 181,936 51,543 37,897 50,636 85,165 42,085 14,046 29,447 41,120 25,505 33,112 58,580 27,016 6,588 19,747 59,105 27,965 38,701 63,976 39,255 4,122 21,763 764,821 593,443 578,511 588,250 530,906 493,243 489,842 224,673 82,968 70,020 78,900 74,640 45,565 46,913 241,978 238,439 237,361 262,704 249,282 250,407 245,301 141,067 149,898 152,027 153,371 169,395 177,085 180,365 522,842 355,003 341,149 325,545 281,623 242,836 244,540 104,708 84,188 77,664 93,602 51,808 27,322 31,768 (67,337) (55,193) (61,184) (52,244) (15,750) (18,003) (13,416) 99,099 (16,236) (24,825) (35,424) (7,615) (9,120) (38,136) 51,325 45,145 40,771 27,910 23,402 22,002 21,795 69,536 53,333 58,811 59,283 22,817 16,513 15,765 5,584 4,857 5,215 5,661 5,469 5,630 5,801 104,321 84,655 93,011 114,657 67,019 37,645 52,876 135.86 87.48 112.90 199.74 92.12 22.46 70.06 － － － － － － 67.77 1,359.77 1,082.22 1,030.39 971.76 822.53 715.46 721.78 41.00 27.00 35.00 62.00 28.00 10.00 20.00 － － － － － － － 15.4 13.0 16.9 26.2 16.1 6.6 12.4 7.6 6.5 8.7 15.2 8.2 2.9 5.9 62.3 53.1 52.2 48.4 45.4 42.5 43.2 10.4 8.3 11.3 22.3 12.0 3.1 10.0 0.30 0.48 0.50 0.54 0.70 0.84 0.85 (0.18) 0.21 0.27 0.26 0.39 0.63 0.63 350,175 291,181 293,285 293,285 293,285 293,285 293,285 8,469 8,199 8,142 8,017 7,711 7,520 7,480 Note: Yen amounts are rounded down to millions. Financial Information SUMCO Annual Report 2025 8281 SUMCO Annual Report 2025
Page 43
Based on the management philosophy of “always aiming to become the world’s No. 1 silicon wafer manufacturer by exceeding the expectations of our customers and stockholders, by promoting the welfare of our employees, and by contributing to society,” the Group has developed advanced technological capabilities that lead the world and the ability to roll out a wide range of products in manufacturing high-quality large- to small-diameter silicon wafers used in semiconductor devices. By taking full advantage of these strengths to create a stable supply capability, the Group seeks to contribute to the advancement of society. In particular, the Group focuses on improving its technological capabilities to meet its customers’ stringent requirements for quality and cost, promoting higher-precision silicon wafers to Forward-looking statements herein are based on the Group’s judgment as of the end of the consolidated fiscal year under review. Of the matters concerning the status of business, status of accounting, and other issues presented in this annual report, major risks that the Group’s management recognizes as potentially having a material impact on the Group’s financial position, business results, and cash flows (hereinafter “business results, etc.”) are described below. The possibility and timing of these risks becoming evident are not stated if it is difficult to predict them in a reasonable manner. The following is not an exhaustive list of all the risks related to the Group. There are other risks not stated below. Furthermore, forward-looking statements in the following items are based on the Group’s estimate as of the end of the consolidated fiscal year under review. Actual results may differ from the statements, which are inherently subject to uncertainties. support the evolution of various types of semiconductors. Through these efforts, the Group will try to maintain and improve its position in the silicon wafer industry and carry out CSR and sustainability promotion activities based on the SUMCO CSR Policy, considering it our corporate social responsibility to value all stakeholders, including customers, stockholders, business partners, employees, and the global environment and society as a whole. Under these basic policies, the Group is committed to further strengthening its business foundations and meeting its mandate from stakeholders, aiming for the sustainable growth of its business. The silicon wafers the SUMCO Group manufactures and sells are used for semiconductor substrates and other parts that are used in various products, including data centers, personal computers, smartphones, tablets, other portable terminals, cars, and other consumer products. This makes them highly susceptible to the market demand for semiconductor devices. As a result, demand for silicon wafers is sensitive to rapid progress in technological innovation or product obsolescence, rapid change in the product mix, falling product prices, and other factors characteristic of semiconductors and surrounding industries. With the recent rapid expansion of the semiconductor and silicon wafer market coverages, the semiconductor device market has become increasingly intertwined with global macroeconomic trends. Economic recessions caused by infectious diseases or geopolitical risks, such as regional conflicts between nations and U.S.-China trade frictions, may affect demand for semiconductor products. Furthermore, demands for semiconductor devices and silicon wafers are expected to grow in the medium to long term due to technological innovations, such as an increase in data communication volume, development of generative AI technology, progress in driverless driving, and digital transformation (DX), and the semiconductor market growth driven by the increasing adoption of HEVs and EVs. There is, however, no guarantee that demand for silicon wafers will increase as expected by the Group. A discrepancy between the actual market condition and the Group’s expectation may impact the Group’s business results, etc. To address these changes in the business environment, the Group is creating business foundations that can speedily and accurately adapt to market trends, while endeavoring to further strengthen its financial fundamentals. If, however, such measures do not have a positive impact, it may affect the Group’s business results, etc. Prices of semiconductors that use products manufactured by the Group generally tend to decline after their release into the market, due in part to their spread and subsequent growth in sales volumes. If the sales price of semiconductor products declines more significantly than expected due to a sudden deterioration of a supply-demand balance or other events, downward pressure could be put on the prices of silicon wafers, which are basic materials of such products, and affect the Group’s business results, etc. To increase its ability to deal with market fluctuations, the Group prepares business plans to offset potential declines in the prices of such products. These plans include efforts to improve productivity using AI technology and raise production yields through continuous technological improvement. These measures, however, may not produce the expected impact. Moreover, the Group’s business results, etc., may be affected by a loss or decline in the Group’s production capacity caused by developments including the following: falling sales volume or market share due to reputational damage; discontinuation of or significant delays in production or lowering yield rates following a large accident in its facilities, large-scale system errors or other reasons; breakdown of manufacturing facilities; or disruption of distribution functions. In response, the Group takes measures to avoid the risks of production capacity declines and product supply difficulties in the entire Group. Such measures include continuous communication with customers to comprehend changes in the required quality in a timely manner, continuous technological improvement, and periodical preventive maintenance of production facilities. Also, we work to prevent large-scale system errors by establishing CSIRT and firewalls, regularly updating antivirus software, and restricting taking portable memory devices into offices, such as USB memory sticks. However, if these measures are unsuccessful, it may affect the Group’s business results. The silicon wafer market is characterized by large capital expenditures, customers’ strict demand for quality, price, delivery time, and so on, deterioration in the supply-demand balance due to the increased production capacity of competitors, and the impacts of technological innovation, among other things. The Group is mainly competing with other silicon wafer manufacturers globally in terms of pricing, quality, production capacity, product lineup, technology, and services. Many of these competitors are large companies which may have advantages over the Group in terms of their funding ability, technology, production capacity, relationship with customers, and so on. Furthermore, consolidations or mergers among the Group’s competitors may dramatically raise their competitiveness and relatively weaken the Group’s competitiveness. This could lead to the lowering of product prices and falling sales and may affect the Group’s business development, business results, etc. A relatively small number of major manufacturers account for a large portion of the semiconductor market. As a result, a significant portion of the Group’s sales are made to specific major customers. However, there is no guarantee that its major customers will maintain the same level of purchase volume as before. Any reduction in the purchase of silicon wafers by these major customers from the Group due to semiconductor market conditions, geopolitical reasons, economic deterioration, or individual factors of customers may impact the Group’s business development, business results, etc. Management Policies, Business Environment, Issues to Address, etc. Business and Other Risks Operating environment1 Competition with other companies3 Major customers4 SUMCO Group’s products2 Basic management policies Business environment and issues to address Target management indicators and medium- to long-term management strategies 1 3 2 The market for 300 mm semiconductor silicon wafers is expected to see strong demand for leading-edge logic and DRAM use in AI data centers, while demand for NAND use is also projected to rise in sync with the growth of server SSDs. Regarding wafers for non-leading-edge logic use, we anticipate that customers will plan to conduct full-scale inventory drawdown and adjust their purchase volumes accordingly. In the market for silicon wafers of 200 mm and smaller, while some demand growth is seen related to AI data centers, the demand is expected to remain at the current level. Under these circumstances, the Group is proceeding with business structural reforms. Regarding 300 mm products, given the accelerating pace of semiconductor technology innovation, we will work to leverage new plant facilities and to upgrade manufacturing facilities at existing plants, focusing on meeting Despite factors that could cause short-term fluctuations, the semiconductor silicon wafer market is expected to grow in the medium to long term with the semiconductor market’s growth on the back of an increase in data communication volume, development of generative AI technology, progress in driverless driving, technological innovation such as digital transformation (DX), and the spread of HEVs and EVs. In particular, demand for 300 mm wafers for leading-edge semiconductors, one of the Group’s strengths, is expected to continue to grow. Regarding 200 mm silicon wafers, while demand related to AI data centers is increasing, we expect overall demand to remain at the current level. Meanwhile, demand for 150 mm and smaller wafers is projected to contract in the long term. demand for leading-edge products for which strong growth continues. As for 200 mm and smaller wafers, we will strive to improve efficiency and profitability through initiatives such as reorganizing our production systems. We will also continue to closely watch the impacts on the market environment from geopolitical risks and the policies of individual countries, paying special attention to the impact on demand for end products containing semiconductors. Moreover, the Group is promoting initiatives related to sustainability and has identified issues it will address on a priority basis as materiality (key issues). These issues are intended to resolve social issues and enhance corporate value in a sustainable manner. The Group will further accelerate its activities to achieve medium- to long-term goals for promotion of the active participation of women, net-zero emissions, human resources development, etc. In this business environment, the Group, for its mainstay product, 300 mm wafers, will focus on technology development and investment in modernization to meet the demand related to the rapid growth of AI. As for wafers of 200 mm or smaller, the Group will reorganize an appropriate production system that is commensurate with the market environment. Given that semiconductor silicon wafers are part of business areas with a volatile market environment, the Group will continue making efforts to enhance cost competitiveness and improve profitability, as well as working on building business foundations that can promptly and effectively optimize management resources responding to changes in the demand environment. SUMCO Annual Report 2025 8483 SUMCO Annual Report 2025
Page 44
The Group has many non-current assets, including silicon wafer plants and manufacturing facilities. If there is any possibility that the Company cannot recover its investments in such non-current assets or a group of non-current assets, an impairment loss may be incurred on non-current assets. To determine whether there is any sign of impairment loss, it is necessary to consider factors, such as any significant drop in future cash flow from the businesses or product lines corresponding to assets, revisions to laws or ordinances or material deterioration in the business environment, worsening of the collectability of an important asset group, and lowering growth rate of product markets. Any negative change to these factors may have a material impact on the collectability of the relevant asset and affect the Group’s business results, etc., through, for instance, the need to post an impairment loss on non-current assets. In addition, any devaluation of inventories the Group owns may result in a valuation loss. Some of the Group’s bank loans and its commitment line agreements are subject to financial covenants. Any significant deterioration in the Group’s financial condition that could result in the breach of those covenants, trigger the cancellation of those agreements and demands for repayment, and cause the Group to forfeit the benefit of time, may affect its financing. In addition, any failure to raise finance at the desired time or under the desired terms due to the downgrading of credit ratings, interest rate levels, market conditions, or other factors may affect the Group’s business results, etc. To address and mitigate these risks, the Group endeavors to maintain a sufficient level of liquidity on hand. In addition, it is taking advantage of the current low-interest-rate environment, mainly taking out long-term, fixed-rate loans to reduce risks for domestic loans that are newly made. The Group will continue raising finance based on interest rate levels and market environment and endeavor to maintain favorable relationships with partner financial institutions. If, however, such measures do not produce a positive impact, this may affect the Group’s business results, etc. In addition, some consolidated subsidiaries raise finance through long-term borrowings with floating interest rates. If interest rates rise in the future, it may affect the Group’s business results. The semiconductor industry is characterized by rapid advances in technology. As semiconductors feature increasingly high circuit densities and fine line widths and their applications become more diverse and advanced, customers’ demands for the silicon wafers that the Group supplies are growing more diverse and sophisticated. To meet such customer demands, the Group conducts R&D activities, focusing on technologies related to leading-edge 300 mm semiconductor silicon wafers, for which demand is expected to grow in the medium to long term. By product category, its R&D activities focus on technologies for high-value-added wafers, such as epitaxial wafers, and technologies for next-generation wafer products. If, however, its R&D activities do not produce the expected benefits or it falls behind its competitors in terms of technology development, the Group will be unable to respond to technological advances in the semiconductor industry and find it difficult to meet customer demands. This may affect the Group’s business development, business results, etc. It is not easy to develop or mass produce leading-edge 300 mm semiconductor silicon wafers, which the Group focuses on. If the Group incurs a higher-than-expected R&D expense or if it takes long to improve productivity, this may have a negative impact on the Group’s business results, etc. To supply wafer products that meet escalating customer demands in a timely manner, the Group needs to endeavor to constantly update its understanding of customer needs and technological trends in the semiconductor industry, and promote R&D activities, anticipating their future needs. The Group enhances a structure to systematically comprehend technological trends of the semiconductor industry and its customers and to provide this information to the Group’s R&D sections in a timely manner. At the same time, the Group conducts cutting-edge R&D activities utilizing joint research activities with universities and technological information obtained through academic conferences and other opportunities. To conduct advanced R&D activities, the capabilities of engineers are no doubt important. The Group therefore develops engineers through its fine-tuned educational programs. The Group strengthens these structures so that it does not fall behind its competitors in meeting customer requirements. If, however, such measures do not produce a positive impact, this may affect the Group’s business results, etc. The Group recognizes that securing patents and other intellectual property rights is vital to competition with other silicon wafer manufacturers. It thus holds a large number of intellectual property rights, including those pending, both in Japan and abroad. There is, however, a risk that the Group loses its technological advantages due to the insufficient protection of intellectual property rights. In addition, there is a risk of infringement on the intellectual property right of a third party if an intellectual property right has been granted without the Group’s awareness. In this case, the Group may be required to cease the use of the technology and sued for damages. Any of these risks becoming evident may affect the Group’s business development, business results, etc., including its production and sales. The Group obtains licenses from third parties for some of the intellectual properties it uses in its business activities and may need to obtain licenses from third parties for other intellectual properties in the future. The acquisition and maintenance of these licenses may require high costs, and there is no guarantee that these technologies will afford the Company advantages in its business. For this reason, the Group strategically secures intellectual properties and conducts research on its competitors’ intellectual property rights to foresee any potential risks. In addition, the Group endeavors to minimize risks through measures such as developing alternative technologies that circumvent its competitors’ intellectual property rights. If, however, such measures do not produce a positive impact, this may affect the Group’s business results, etc. The Group takes every possible precaution to manage the credit it extends to its customers. If the financial position of a customer with a large amount of accounts payable deteriorates and the customer cannot make payments on due dates or the Group cannot recover the accounts receivable due to their bankruptcy, this may affect the Group’s business results, etc. Although recognizing that it can foresee signs of these risks becoming evident to a certain extent, the Group cannot say that all of them are necessarily avoidable. The Group has established a system to periodically conduct credit research and manage risks associated with customers’ financial conditions and business stability. There is, however, no guarantee that such a system sufficiently protects the Group against these risks. The Group has concluded long-term purchasing agreements on polycrystalline silicon, the main material used to produce silicon wafers, with the world’s major polycrystalline silicon manufacturers to ensure stable procurement of raw materials. Due to a discrepancy that has arisen between the demand forecasts made at the time the Group concluded the long-term purchasing agreements and the consumption outlook, however, the Group is currently holding excess inventories. Therefore, opportunities to reduce the cost of raw materials may be limited until the Group’s inventories return to a proper level. With respect to an outlook for raw materials and supplies, including raw material inventories, any change in consumption amounts or any implementation of necessary accounting processes due to significant changes in the business environment or other reasons may affect the Group’s business results. In light of the above risks associated with the procurement of raw materials, the Group endeavors to maintain an appropriate level of raw material inventories. There is, however, no guarantee that such efforts will produce a positive impact. Key manufacturing equipment used by the Group includes polishing machines and other equipment of which the Group may not be able to find alternative suppliers in a short time. Any problem hindering the smooth procurement of such manufacturing equipment may affect the Group’s business results, etc. In addition, if the Group’s capital expenditures generate a positive effect on manufacturing later than expected due to the prolonged delivery of manufacturing equipment, the lack of supply capacity of equipment makers, price increases, and other reasons, this may affect the Group’s business development, business results, etc. Furthermore, any difficulty in the smooth procurement of manufacturing equipment due to factors such as abrupt economic changes, natural disasters, the spread of infectious diseases, or export restrictions placed due to geopolitical changes may affect the Group’s business development, business results, etc. Even when the Group uses new capital expenditures in the future to respond to cutting-edge quality, there could be a delay in operation commencement particularly because many facilities the Group needs are customized to special, highly advanced specifications, and the number of equipment suppliers is small and their production capacity limited. To prepare for the materialization of these risks, the Group takes measures to avoid the risk of supply chain disruptions to ensure the stable procurement of manufacturing equipment. These measures include the enhancement and creation of relationships with major equipment suppliers and information-sharing on the medium- to long-term stable supply of manufacturing equipment. If, however, such measures do not produce a positive impact, this may affect the Group’s business results, etc. A supplier’s operation stoppage and other similar situation caused by reasons such as abrupt change in economic conditions, natural disasters, accidents involving manufacturing equipment, the spreads of infectious diseases, or changes in the geopolitical environment may cause problems to the procurement of materials the Group uses and ultimately affect the Group’s business results, etc. The Group therefore takes measures to avoid procurement disruption risk. These measures include making purchases from multiple suppliers and building up inventories. If, however, such measures do not produce a positive impact, this may affect the Group’s business results, etc. The Group’s business development, business results, etc., may be affected by any future surplus of equipment capacity or obsolescence of existing or newly introduced equipment caused by market fluctuations, changing requirements of customers, and other changes in the environment surrounding the semiconductor industry. Due to the variable nature of the semiconductor device industry, it is difficult to plan production capacity based on the accurate prediction of the future trend of the silicon wafer market and the production capacity reflecting such a trend. For this reason, if the market demand increases more than expected by the Group, the Group may not have a production capacity that meets the demand and thereby lose sales enhancement opportunities. This may negatively impact its relationships with customers or lower its market share. Conversely, even if the Group decides to enhance facilities to match the market demand, the Group may end up having excess production capacity if the market conditions deteriorate or competitors enhance their production capacity more than expected by the Group while the Group is enhancing its production capacity, due to a time lag between making such a decision and completing the enhancement. Furthermore, if such investments do not result in the expected quality or yield rate, the Group may not be able to secure the projected production volume or may even post impairment losses. In addition, the Group supplies products preferentially to customers who concluded longer-term sales contracts with economically rational pricing. However, depending on the semiconductor market conditions, the Group may not be able to sell products as stipulated under such long-term contracts or may not conclude or renew long-term sales contracts under the same terms and conditions. To prevent these risks associated with capital expenditures, the Group disburses capital expenditures based on factors such as the demand forecast factoring in medium- to long-term macroeconomic trends and the technological trends of customers comprehended through continuous communication with them. It is, however, not easy to accurately predict the future market conditions of silicon wafers and there is no guarantee that such risks can be eliminated. Business and Other Risks Credit management5 Procurement of raw materials6 Stable procurement of key manufacturing equipment7 Capital investment9 Supply chains8 Assets10 Intellectual property rights13 Financing11 Technology and R&D12 SUMCO Annual Report 2025 8685 SUMCO Annual Report 2025
Page 45
The Group’s operations, in particular at its manufacturing sites, are subject to environmental laws and regulations in Japan and abroad governing such matters as energy consumption, gas emissions, wastewater discharges, the use and storage of harmful chemical substances, the disposal of industrial wastes, the testing of soil and groundwater pollution, and the removal of contaminants. Pursuant to these laws and regulations, the Group may be held legally responsible to pay certain expenses or compensate for damages, etc. There has been a trend in recent years to tighten such regulations on the environment, etc. It is an undeniable possibility that new environmental laws and regulations may be enacted in Japan or other countries. In such cases, the Group is expected to incur new environmental preservation costs or to pay new taxes, etc., to comply with such laws and regulations. The Group’s failure to comply with the existing or future environmental regulations may result in compensation claims against the Group, imposition of fines, suspension of production or operation in certain areas, and damage to the Group’s reputation and credibility, which may affect the Group’s business development, business results, etc. Furthermore, expectations for ESG initiatives from various stakeholders are increasing. The additional costs incurred in relation to new environmental regulations and obligations and initiatives for net-zero emissions may affect the Group’s business development and business results. Moreover, as stated in “(3) Business environment and issues to address,” under “Management Policies, Business Environment, Issues to Address, Etc.,” the Group has set goals for priority issues and has been working to achieve such goals in order to solve social problems and continue improving its corporate value. There is, however, no guarantee that such efforts will produce a positive impact. To prepare for risks associated with the future tightening of environmental laws and regulations, the Group works on initiatives to reduce its environmental footprints. These include promoting renewable energy usage to reduce greenhouse gas emissions and improving production technologies to decrease the consumption of substances subject to regulations. However, if such efforts are unsuccessful, it may affect the Group’s business results. In the event of natural disasters, such as typhoons, torrential rains, earthquakes, tsunamis, and volcanic activity, or of accidents, fires, infectious diseases, or terrorism, the Group’s manufacturing sites may encounter unexpected problems such as damage to equipment, limited access to water and electricity, and human suffering, which may halt production and cause problems with the manufacturing and selling of products. If any of the Group’s key manufacturing sites are affected by the above natural disasters, accidents, fires, etc., the Group’s manufacturing and sales activities may be hindered, which affects its business development, business results, etc. To address these risks associated with natural disasters and accidents, the Group prepares a Business Continuity Plan (BCP). The BCP clarifies the earthquake-resistant and seismic isolation measures for its equipment and the procedures for stockpiling extra materials, organizing disaster prevention equipment and supplies, and restoring and resuming operations. It also promotes various measures and drills, including BCP training. The Business Continuity Management (BCM) meeting, which is a company-wide meeting twice a year, reviews these measures and discusses their progress. The results of their discussions are reported at the Business Security Committee (BSC) meeting, which oversees risk management in general, and are reviewed by management. If, however, such measures do not produce a positive impact, this may affect the Group’s business results, etc. Acquisitions of other companies may entail unexpected problems such as a rapid deterioration in the acquired company’s business results due to dramatic changes in the business environment and an impairment loss of goodwill, which may affect the Group’s business development, business results, etc. In considering the execution of company acquisitions, the Group endeavors to avoid risks in advance through the due diligence of the financial status and other aspects of the target companies. There is, however, a possibility that the Group cannot recover the capital or other resources it has invested if, for instance, the expected synergy does not materialize post-acquisition. In addition to seasonal influenza and COVID-19, in the event of a new variant or pandemic, the Group’s business results may be affected by a global economic downturn, supply chain disruptions, and diminished business operations following the infection of its employees. To address infectious diseases, the Group has taken possible effective measures, such as teleworking in certain areas, various infection prevention measures, and encouraging employees to receive vaccinations. However, once the infections spread, it may affect the Group’s productivity. If the spread of infection affects the Group’s operations, such as cluster infections in some of the Group’s production processes, it will take measures to minimize the impact on its operations and business results by adjusting work shifts or reassigning personnel for the affected processes. If, however, such measures do not produce a positive impact, this may affect the Group’s business results, etc. The following events resulting from changes in the business environment and other developments may affect the Group’s business results, etc. a. Major changes in the business environment necessitating business or organizational restructuring or other actions b. Significant changes in the actuarial assumptions used in calculating retirement benefit obligations c. Deterioration in earnings or significant changes in projections of future earnings caused by changes in the economic environment or other developments, which necessitate relevant accounting treatment d. Failure to recruit the human resources needed for the operations of the Group e. Lawsuits or other legal actions brought against the Group for defects in its products or other reasons f. Failure of its internal control to function effectively The Group has bases for production and sales in North America, Europe, and Asia, as well as in Japan, which supply silicon wafers to major semiconductor manufacturers and other entities worldwide. These production and sales activities may be affected by the diminished operation of plants and other developments arising from economic or political conditions, conflicts, terrorist activities, the spread of infectious diseases, delayed transportation services, suspension or lack of infrastructure, changes in labor conditions, human resource shortages, disasters, and so on in the countries or regions where the Group operates. Furthermore, major changes in various regulations, including those concerning taxation, foreign exchanges, tariffs, and exports or imports, and different standards or practices of regulatory authorities in different nations or jurisdictions may affect the Group’s business results, etc. Of particular concern is the U.S.–China trade friction, etc., which has resulted in significant increases in tariffs, sanctions against specific companies, and restrictions on and the expanded licensing requirements for products for certain uses. These may have a serious impact, such as the loss of major customers or the destruction of supply chains, in semiconductor-related industries that play an important role in national security and economic growth. Furthermore, national governments’ policy to encourage domestic production of semiconductors including silicon wafers may lower competitiveness of the Group’s products and affect the Group’s business development, business results, etc. The Group hedges risks associated with changes in global situations with flexible production allocation through the established multiple-base production system and the examination of country risks. If, however, such measures do not have a positive impact, this may affect the Group’s business results, etc. The Group possesses a large volume of confidential technological and business information indispensable for operating businesses and confidential and personal information of various stakeholders, including its customers, which the Group has come to possess through its business activities. If any of the information that the Group possesses is destroyed, lost, or leaked outside due to unauthorized access including cyberattacks, computer virus infections, information infrastructure breakdowns, unauthorized removals by related persons, or other reasons, this may lower the Group’s competitiveness or destroy the confidence that society places in the Group. The Group may also be held accountable for such destruction, loss, or leakage of information. All the above events may affect the Group’s business development, business results, etc. To minimize the risk of destruction, loss, or leakage of information, the Group takes various measures against cyberattacks and malware caused by outsiders via the internet and works on improving the company-wide security structure. In addition, the Group has established internal rules, guidelines, and so on, on information management and periodically offers educational opportunities for all its employees concerning information management rules and information security. If, however, such measures do not produce a positive impact, this may affect the Group’s business results, etc. The Group heavily relies on its information systems in materials procurement, product manufacturing, sales, delivery, and other business processes. If the Group’s information systems are not operated effectively, a problem arises in relation to system renewal or migration to an alternative system, a material network failure occurs for the security of such systems due to cyberattacks or other reasons, or the Group cannot maintain uninterrupted, safe systems, and its customer services may be delayed resulting in deterioration in the Group’s relationships with its customers. Furthermore, the Group’s operation efficiency may decline, the Group may require large capital expenditures to rectify the problems, or the Group’s reputation may suffer. All the above may affect the Group’s business results, etc. To address such risks related to information systems, the Group takes measures, such as duplicating core and peripheral systems, installing backup servers, and conducting periodical drills on a changeover to backup servers. If, however, such measures do not produce a positive impact, this may affect the Group’s business results, etc. The Group is subject to various laws and regulations in the countries where it operates its business activities, including those related to labor, taxes, exports and imports regulations, product liability, competition, and the environment. It is also subject to governmental permissions, approvals, or regulations necessary to conduct business activities or to make investments. There is a possibility that the Group may not be able to obtain or maintain necessary approvals, permissions, etc., and even if the Group has been able to obtain them, if it fails to comply with certain conditions, restrictions, or limits attached to such approvals, permissions, etc., the Group may be required to pay a fine, penalty charge, or additional expense, or may be stripped of approvals, permissions, etc., by the regulatory authorities. Any future tightening of these laws and regulations, or stricter application or interpretation thereof may increase compliance-related costs, restrict the Group’s business development, and thus affect its business results, etc. Based on internal rules, the Group designates sections in charge of the laws and regulations that are relevant to the execution of its business, and creates a structure for these sections to continue monitoring and quickly respond to the establishment, amendment, and repeal of laws and regulations, to minimize the impact of risks associated with the strengthening of laws and regulations, etc. There is, however, no guarantee that these efforts of the Group will completely control the impact of such risks. The Group conducts transactions in foreign currencies, such as in product exporting. It also translates financial data of overseas consolidated subsidiaries from foreign currencies into yen when creating consolidated financial statements. The Group’s business results, etc., may be affected by fluctuations in foreign exchange rates. To avoid foreign currency risks that transactions to be conducted in foreign currencies are exposed to, the Group closely monitors exchange rate trends and, as appropriate, executes forward exchange contracts. There is, however, no guarantee that this measure will eliminate such risks. Business and Other Risks Overseas operations14 Information management15 Laws and regulations16 Fluctuations in foreign exchange rates17 Environmental laws and regulations18 Natural disasters and accidents19 Acquisition of other companies20 Infectious diseases21 Other risks22 SUMCO Annual Report 2025 8887 SUMCO Annual Report 2025
Page 46
Company name SUMCO Corporation Head office Seavans North, 1-2-1 Shibaura, Minato-ku, Tokyo 105-8634, Japan Tel: +81-3-5444-0808 https://www.sumcosi.com/english/ Established July 30, 1999 Capital 199,034 million yen Employees Consolidated: 9,714 Unconsolidated: 5,065 IR inquiries Public Relations & IR Dept. Tel: +81-3-5444-3915 Corporate profile Head office Tokyo Marketing and business offices Tokyo, Osaka, Fukuoka Plants Kyushu Factory (Nagahama, Imari) (Imari-shi, Saga) Ky ushu Factory (Kubara, Imari) (Imari-shi, Saga) Ky ushu Factory (Saga) (Kohoku-machi, Kishima-gun, Saga) Kyushu Factory (Nagasaki) (Omura-shi, Nagasaki) Yonezawa Plant (Yonezawa-shi, Yamagata) Chitose Plant (Chitose-shi, Hokkaido) JSQ Division (Akita-shi, Akita) Operating sites Domestic SUMCO TECHXIV Corp. (Nagasaki) SUMCO Technology Corporation (Chiba) SUMCO Service Corporation (Saga) SUMTEC SERVICES CORPORATION (Nagasaki) SUMCO INSURANCE SERVICE CORPORATION (Nagasaki) Japan Formosa SUMCO Technology Corp. (Saga) High-Purity Silicon Corporation (Mie) Overseas SUMCO Phoenix Corporation (U.S.A.) SUMCO Southwest Corporation (U.S.A.) SUMCO Personnel Services Corporation (U.S.A.) SUMCO Europe Sales Plc (U.K.) PT. SUMCO Indonesia (Indonesia) SUMCO SINGAPORE PTE. LTD. (Singapore) FORMOSA S UMCO TECHNOLOGY CORPORATION (T aiwan) SUMCO Taiwan Technology Corporation (Taiwan) High-Purity Silicon America Corporation (U.S.A.) Major consolidated subsidiaries Corporate and Share Information Share InformationCorporate Information Information for Shareholders Business year From January 1 to December 31 Ordinary General Meeting of Shareholders Held in March of each year Base dates Record date of shareholders with voting rights at the Ordinary General Meeting of Shareholders December 31 Record date of shareholders eligible for dividends Year-end dividends December 31 Interim dividends June 30 Other dates are to be designated as needed, with prior public notice. Share trading unit 100 shares Methods of public notice Public notice is made electronically and posted on the Company website (https://www.sumcosi. com/ [in Japanese only]). When a notice cannot be made electronically due to system failure or other unavoidable reason, it will be made in the Nihon Keizai Shimbun. Market of listing Tokyo Stock Exchange (Prime Market) (code: 3436) Total number of authorized shares Common stock 804,000,000 shares Outstanding shares Common stock 350,175,139 shares Number of shareholders Common stock 123,183 Share situation Major shareholders (Share numbers rounded to the nearest 1,000 shares) Forecasts, estimates, projections, and other future information stated in this report have been prepared based on the information available to the Company and assumptions (including those based on our subjective judgments) at the time of its preparation. Changes in the domestic and global economic situation, semiconductor market situation, exchange rate trends, and other risk factors may cause actual results to differ substantially from those expressed or implied in any forward-looking statement herein. About the SUMCO Website https://www.sumcosi.com/english/ We are always striving to make our website a useful source of information for shareholders and investors. In addition to financial performance data and press releases, the site provides information about the silicon wafers we make, along with other information. We encourage you to visit our website. SUMCO website (As of December 31, 2025)(As of December 31, 2025) Shareholder name Holdings (in thousands) Ownership (%) The Master Trust Bank of Japan, Ltd. (trust account) 58,368 16.67 Custody Bank of Japan, Ltd. (trust account) 37,334 10.66 BNYMSANV AS AGENT/CLIENTS LUX UCITS NON TREATY 1 11,778 3.36 JP MORGAN CHASE BANK 385864 8,823 2.52 STATE STREET BANK AND TRUST COMPANY 505001 8,272 2.36 STATE STREET BANK AND TRUST COMPANY 505103 7,920 2.26 BBH (LUX) FOR FIDELITY FUNDS - GLOBAL TECHNOLOGY POOL 7,482 2.14 JP MORGAN CHASE BANK 385781 6,653 1.90 The Nomura Trust and Banking Co., Ltd. (Investment trust account) 6,036 1.72 SCBHK AC-SCBCN FOR PRUDENTIAL HONG KONG LIMITED 3,944 1.13 Notes: 1. Unable to fully ascertain the number of shares related to trust businesses of trust banks, etc., the Company describes the number of shares held in their names in its shareholder registry as the number of shares they hold. 2. The number of shares held by Custody Bank of Japan, Ltd. (trust account) includes 454,600 shares of the Company's stock held by the trust account under the performance-based stock compensation plan for the Company's Directors, presidents of major domestic subsidiaries, and Executive Officers of the Company. Notes regarding forward-looking statements Osaka Titanium Co., Ltd. Change of company name: November 1952 Sitix Division of Sumitomo Metal Industries, Ltd. Started operation: October 1998 Mitsubishi Materials Silicon Corp. Change of company name: October 1991 Transfer of business: February 2002 Merger: February 2002 Transfer of business: January 1979 Established: January 1937 Osaka Special Steel Manufacturing Co. Change of company name: February 2002 Sumitomo Mitsubishi Silicon Corp. Change of company name: August 2005 SUMCO Corporation Established: July 1999 Silicon United Manufacturing Corp. Established: December 1958 Nicchitsu Electronic Chemicals Corp. Established: October 1959 Japan Electronic Metals Co., Ltd. Consolidated subsidiary: October 2006 Komatsu Electronic Metals Co., Ltd. Founded: April 1960 1 2 3 4 5 History Sumitomo Metal Industries, Ltd. (currently NIPPON STEEL Corp.), Mitsubishi Materials Corp., and Mitsubishi Materials Silicon Corp. established a jointly owned company, Silicon United Manufacturing Corp., to develop and manufacture 300 mm silicon wafers. July 19991 Silicon United Manufacturing Corp. acquired the silicon wafer business of Sumitomo Metal Industries Ltd., merged with Mitsubishi Materials Silicon Corp., and changed the name of the resulting company to Sumitomo Mitsubishi Silicon Corp. February 20022 The Company name was changed to SUMCO Corporation. August 20053 The Company was listed on the First Section of the Tokyo Stock Exchange. November 20054 Note: In March 2023, SUMCO acquired the semiconductor poly silicon business of Mitsubishi Materials Corporation. SUMCO acquired a majority stake in Komatsu Electronic Metals Co., Ltd. (currently SUMCO TECHXIV Corp.) by tender offer, making it into a subsidiary. October 20065 SUMCO Annual Report 2025 9089 SUMCO Annual Report 2025
Page 47
SUMCO ANNUAL REPORT 2025 SUMCO CORPORATION Seavans North, 1-2-1 Shibaura, Minato-ku, Tokyo 105-8634, Japan Tel: +81-3-5444-0808 https://www.sumcosi.com/english/