Message from the President

As of August, 2022

Making a Better World with Trust and Creativity: Contributing to a better sustainable world Toshikazu Umatate Representative Director and President

Announcing Vision 2030 and our Medium-Term Management Plan

Guided by its corporate philosophy of "Trustworthiness and Creativity," Nikon has continued to contribute to the development of society and culture. We recently announced our 4-year Medium-Term Management Plan spanning fiscal years 2022-2025.

In order to formulate this Medium-Term Management Plan, we first imagined our Vision 2030, set targets to be reached by 2025 to move toward achieving this, and then laid down measures to make it a reality. When we imagine society in 2030, there will be changes in people's values and outlook on life, changes in social environments, such as climate change and resource scarcity, and the continuation of technological innovations, such as the arrival of Industry 5.0. In the midst of such great change (a megashift), we believe that people will leave the labor required to live up to machines and humans and machines will co-create seamlessly in order to enable people to focus on more creative work for self-expression and consumption in the pursuit of value.

Nikon has three strengths: innovations in manufacturing technologies, proven capability and brand to deliver sophisticated solutions globally, and strong support from stakeholders. Taking advantage of these, we wanted to continue to provide new value to a global society where humans and machines co-create seamlessly in 2030, and so we formulated our Vision 2030 as "A key technology solutions company in a global society where humans and machines co-create seamlessly." In order to do this, we will accompany our customers and deeply align with customer needs, thereby aiming to be a supporter of customer innovation.

Nikon has posted its "Vision 2030 concept book" on its website in order to generate interest across a broad range of stakeholders. Please have a look at it as well.

Summary of the Previous Medium-Term Management Plan and Two Remaining Challenges

Our previous Medium-term management plan from FY2019 to FY2021 is summarized as follows. In addition to achievements such as strengthening the company's composition and becoming profitable by completing restructuring measures of the Imaging Products Business, expanding our Precision Equipment Business customers/service business, having our first fully profitable year for our Healthcare Business, and quickly scaling up the Components Business, our company improved its financial standing by optimizing the balance sheet. Our ROE for last fiscal year was 7.5%, falling short of our goal of 8%. However, it was during the unexpected situation of the COVID-19 pandemic, and we believe we made three years of steady progress. On the other hand, two challenges remain: evolve from a business mainly in sales of end products and cultivate new earnings pillars alongside Imaging Products and Precision Equipment.

For the first challenge of evolving from a business mainly in sales of end products, we will achieve this by breaking away from the production-oriented perspective, being closer to our customers, accurately grasping their needs, and providing end products, services, and components as integrated solutions. For the second challenge of cultivating new earnings pillars, we will challenge ourselves to create growth in all five business domains. Specifically, we will focus on five growth drivers: optical and EUV related components; material processing and robot vision; digital lithography; imaging contents; contract cell manufacturing; and drug discovery support.

Business Areas and Growth Drivers

Aim to strengthen delivery of integrated solutions to grow the business in a stable manner and expand both revenues and profits

In this Medium-Term Management Plan, we chose "providing products and services optimized to meet our customer needs" for our Vision 2025. To achieve this, we aim to strengthen delivery of integrated solutions to grow the business in a stable manner and expand both revenues and profits.

An Overview of the Medium-Term Management Plan

Main Businesses: Expanding customer interactions and the value delivered to sustain the business

Imaging Products Business

For the vision for Imaging Products Business, we chose to "Expand the possibilities for visual expression and acquire overwhelming support from all generations of fans around the world." We will adhere to a business model of providing mirrorless, high value-added products to professionals and hobbyists. In addition to expanding lenses and the lineup of advanced functions achieved with flagship models to include other models, we will continue to work to increase the numbers of Nikon fans by enhancing video functions and expanding touchpoints with customers.

Along with sustaining the business, we have newly entered the imaging contents business as a growth driver. We will provide high-quality volumetrics and 3D-capture technology to the worlds of virtual reality and mixed reality with imaging expressions with 3D and 4D—its video form—and support a society where people are connected in ways that transcend time and space with imaging production technologies. Recognized as Microsoft's only partner in Japan, in April 2022, Nikon Creates Corporation began operating as a subsidiary imaging production company. Continuing to support imaging culture, Nikon will create new visual expressions and contribute to the further development of visual culture.

Precision Equipment Business

The Precision Equipment Business vision is: "Continue delivery of innovative solutions to customers and support a digital society." For FPD lithography systems, we will advance technology development to support next-generation panels, and ensure stable revenue through pursuing both higher resolution and productivity. For semiconductor lithography systems, we will respond to increasing demand from major customers, while at the same time expanding the market with multiple layers and 3D to increase revenue. We also plan to firmly grasp our customers' needs for Nikon's lithography systems that operate globally, including line relocation, modifying work, maintenance, and parts supply, and steadily increase service revenue.

In the Precision Equipment Business, digital lithography is the driver of growth. Although current lithography systems primarily comprise systems wherein the pattern on the original substrate, called a "photomask," is transferred to a wafer, we are advancing technological development toward the practical application of technology for transferring digitally input patterns directly onto wafers. Digital lithography enables significant reduction of the prototyping period of semiconductor devices and the achievement of flexible manufacturing systems. Not only improvement of productivity, but also digital lithography is expected to have many benefits, such as reducing mask costs and making it easier to modify circuit design. Through digital lithography, we will provide new value to society.

Strategic businesses: Creating new value with customers

Healthcare Business

The Healthcare Business vision is: "Support improving quality of life for people through innovation." For biological microscopes, we will lay the foundation for growth by expanding the technology/skills, knowledge, and experience developed within academia as solutions for private markets such as pharmaceuticals and bio ventures, which are growing rapidly. In addition to increasing the share volume of retinal diagnostic imaging systems in Europe, Japan, China and other Asian regions with high growth potential, we are also working to develop new diagnostic equipment that combines our technology with that of our subsidiary, Optos Plc. For contract cell manufacturing, which is a growth driver, we will leverage one of Japan's largest production capacities to fully develop the contract manufacturing business for cellular medicine for difficult-to-treat diseases and rare ailments in the field of regenerative medicine.

Components Business

The vision for the Components Business is: "Grow together with customers as we support their innovation." Optical parts and components are a source of value throughout all of Nikon's businesses. For EUV-related components that have been fully launched since last fiscal year, we will work to increase their production capacity and develop the so-called "High NA" products, which will feature high numerical aperture in the next generation, in response to customer requests for increased production. Nikon has seen increased inquiries about its optical parts and components, and we expect the Components Business to expand steadily as the semiconductor industry develops. In the Encoder Business, we will focus on modules for human-robot collaboration, and in the Glass Business, on large photomask substrates for FPD that require high-precision polishing and high-quality film deposition.

Digital Manufacturing Business

The vision for the Digital Manufacturing Business is: "Enable innovations in manufacturing with applied optics application technologies." At present, industrial microscopes and CNC video measuring systems, which are the current main businesses of the Industrial Equipment Business, are supporting revenue. Sales growth will be driven mainly through laser radar, X-ray/CT, and in-line measurement, which are expected to grow rapidly. Heading towards 2030, with environmental changes in society such as the expansion of outer space businesses, digitization in the manufacturing industry, and becoming carbon-neutral, etc., we aim for greater than 10% revenue growth by making material processing and robot vision growth drivers for the Digital Manufacturing Business, based on anticipated technological innovations such as high-output lasers, AI, and compact/multifunction sensors. For material processing and robot vision, taking advantage of high-precision measurement that was cultivated for the development of lithography systems and advanced technologies like 3D alignment and high-speed sensing as well as integration of various systems, we will provide end products, components, contract processing services, etc. through a variety of forms by combining the unique value provided by additive processing, removal processing, riblet processing, and robot vision, thereby bringing innovation to the world of manufacturing.

Basic strategy to support the implementation of the Medium-Term Management Plan

Strengthening the management base is critical to implementing the business strategy set out in the Medium-Term Management Plan.

First, sustainability strategies. Based on the corporate philosophy of "Trustworthiness and Creativity," we will continue to evaluate and improve the impact of our business on the environment and society, and meet society's expectations to win trust, while creating value that contributes to solving environmental and social issues and achieving SDGs more actively through our businesses. For "Trustworthiness," an example of which is becoming carbon neutral by FY2050, we are working with the lofty goal of reducing greenhouse gas emissions from our business locations by 46.5% (Compared to FY2013) by FY2025. For "Creativity," we aim to provide technologies, products, and services, etc. that contribute to areas such as decarbonization, resource circulation, and health through business strategies. In addition, we will increase opportunities for all employees to consider social issues and sustainability in their daily work.

Next, human capital management. Human capital is the most important management resource for making our visions a reality. We will acquire, develop, and leverage all necessary talent, while focusing more than ever on furthering its acquisition, such as by strengthening employment strategies and employment branding to make our growth strategies a reality. We also hope to combine young and mid-career workers, global talent, and specialists to increase individual productivity. For our employees, we want to be a company that provides them with the opportunities to acquire abilities as professionals, express themselves and their abilities, and feel fulfilled.

Finally, Digital Transformation (DX). Nikon's DX will develop from the perspectives of both customers and employees. In our relationships with our customers, we aim to increase both customer satisfaction and revenue by developing account-based marketing utilizing digital or digital services for individual and corporate customers. In our relationships with employees, we will create an environment in which they can work on a higher level through the digitization of business processes, while also creating a digital infrastructure in which they can flexibly work anywhere, and at any time.

Based on Trust and Creativity

For Nikon, manufacturing is the source of our corporate activities. Multiple production locations have occasions to discuss ideas and concerns with each other, as well as how to provide value to customers. In order to bring innovation to the world through manufacturing, Nikon will precisely hone its manufacturing strengths and further elevate quality.

We are also actively working to strengthen our corporate governance. While actively studying the optimal composition of our board of directors, we are taking care to ensure the independence and diversity of our external directors. In addition, for KPIs that affect the performance-linked portion of officer compensation, we designed it to be linked not only to financial KPIs such as ROE, but also to non-financial KPIs related to sustainability. Strengthened corporate governance is essential for sustained corporate growth, and we will continue to strive to improve the transparency and effectiveness of our governance.

Nikon aims to firmly support the "a global society where humans and machines co-create seamlessly" that is scheduled to arrive in 2030. Through our core businesses, we contribute to the realization of a sustainable society while providing employees with opportunities to express themselves. We additionally aim for a future where Nikon meets the expectations of all stakeholders, including shareholders, through business growth and improved corporate value. We sincerely hope that you will look forward to what Nikon has to offer going forward.