Message from CEO
The mission of management is to maximize true corporate value
R&D is our core. We continue investing to lead with technology.
Transformation of business portfolio is nearly complete
Resonac aims to transform into a World-class Functional Chemical Company from Japan, and we have implemented various strategies to achieve this. These initiatives can be broadly categorized into three areas: (1) business portfolio reform, (2) strengthening human capital management and (3) fostering corporate culture. I will discuss Resonac’s current progress on these three initiatives.
First, in business portfolio reform, I believe we are now starting to see a path forward for the near future. Before the merger of the former Showa Denko and former Hitachi Chemical, we evaluated businesses based on three criteria: fitness for strategy, profitability and capital efficiency, and best owner (that is, whether Resonac is the best owner for the business). Businesses that did not meet these standards were divested. By July 2025, we had divested 15 businesses. In February 2024, we announced plans to explore a partial spinoff of our olefins and derivatives business. Then in January of this year, we initiated a group restructuring to support this process. Once the partial spinoff is complete, Resonac’s portfolio will be crystal clear from a strategic perspective. However, as I always say, portfolio reform is an ongoing process with no end. With defensive aspects of our reform nearing completion, we will now shift to a more offensive stance as part of continuously optimizing the Resonac portfolio to the demands of the times.
We are a functional chemical company, not a semiconductor materials company. Our foundation is built on refining our functional materials technology. Our technology today is primarily applied in the semiconductor field, so our strategy is to maintain a competitive edge in semiconductor materials.
A new opportunity for our technology is beginning to emerge. This lies in the mobility field, specifically in automobiles. The automotive industry is undergoing a once-in-a-century transformation from internal combustion engines to electric vehicles. New materials are essential for industries undergoing transformation, and functional materials will surely be required. Seizing this major business opportunity will now depend on how effectively we can refine our materials technologies and respond.
We must maintain our competitive edge in semiconductors, transform our automotive sector venture into a profitable business, and refine underlying technologies for them. We will focus on these three pillars. I view the business portfolio for this purpose as nearing its final form.
Degree of implementation with the Purpose and Values up to 60%—clear shift in corporate culture underway
Next, I will discuss our progress in strengthening human capital management and fostering corporate culture.
I take pride in having dedicated myself to this critical management issue since our companies effectively merged in 2022. I visited 70 business sites each year and held over 100 roundtable discussions and town-hall meetings, using these opportunities to convey a variety of messages to employees.
In the first year, we focused on clearly communicating our planned transformation and our Purpose and Values. In the second year, noticing a culture where employees found it difficult to speak up, we launched the “Moyamoya Meetings” program to encourage staff to voice their moyamoya (concerns and frustrations). In the third year, we started the “Purpose Exploration Café” sessions for reflecting on personal purpose. Through these sessions, I encouraged employees to think of the Company as a vehicle for everyone to achieve their own purpose and think about how they can leverage Resonac, and urged them to be autonomous.
Each year, Resonac conducts an engagement survey. We place special emphasis on the degree of implementation with the Purpose and Values as a key indicator of how deeply our culture has taken root. This score was 34% in the first year, 49% in the second year, and rose to 60% last year, the third year of the program. I view this change as a major advancement.
For instance, last year, we gathered about ten section manager-level employees for a roundtable discussion at a business site, and I caught them off guard with the following surprise question. I asked them what were the engagement survey results and scores for their sections and to share what actions they took if performance improved compared to last year, and what they would do if it declined. They all responded perfectly. Four years ago this would have been unimaginable. I was impressed by how deeply the new corporate culture has taken root. We now use the “-san” honorific instead of formal, hierarchical titles. We have embraced a casual dress code, and have adopted the “Go Anzen Ni! (Be safe!)” greeting from the former Showa Denko. These practices have become so ingrained that it is hard to recall how things were before. I call the phenomenon where the unimaginable becomes commonplace “ex-ante discontinuity and ex-post common sense.” To me, this is the essence of transformation. I can clearly see this transformation unfolding within Resonac. We are making significant progress and have no intention of slowing down. We aim to achieve a 70% to 80% penetration and implementation rate for our Purpose and Values.
Profitability was driven by materials for AI semiconductors and hard disk media businesses, exceeding market expectations in 2024
Our business portfolio reform is progressing, and the new corporate culture is firmly taking root. Next, I will discuss the Resonac’s performance.
In fiscal 2023, net sales were approximately ¥1,288.9 billion, and we recorded an operating loss of approximately ¥3.8 billion. Although I took these results seriously, I was not overly concerned. This is because we took necessary actions, like investing in the semiconductor and electronic materials fields and reforming our business portfolio. I believed that results would soon follow. But when we were drafting the 2024 budget, I thought achieving a significant profit this year would be difficult. However, under Japanese Generally Accepted Accounting Principles (JGAAP), we achieved significant profits with net sales of approximately ¥1,389.3 billion and operating income of approximately ¥78.7 billion. I believe these figures to a certain extent exceeded the expectations of investors and analysts.
Our return to profitability was driven by increased sales in AI semiconductor materials and the hard disk media business. Resonac has two materials critical for AI semiconductors that have significantly boosted sales. Furthermore, in the hard disk media business, closing the Taiwan plant in 2023 significantly reduced fixed costs. Additionally, the rebound in data center investments greatly boosted sales. We achieved strong performance, and I am deeply grateful to everyone in each business segment for their dedication.
Resonac began applying International Financial Reporting Standards (IFRS) from the fiscal year ended December 31, 2024. The goal is to enhance our appeal to international investors and strengthen Group business management. Throughout this year, we plan to carefully brief stakeholders on the differences from the previous accounting standards.
We absolutely must not fall behind in technology— our focus this year
Since early 2025, the capital markets have remained unstable. Going back to the basics of management, I believe that a corporate manager’s role is to maximize corporate value. In many cases, the stock price mirrors an approximation of a company’s value. However, this requires two conditions: capitalism must function properly, and capital markets must be nearly perfect in their efficiency. But in these times, capitalism is not functioning properly due to tariffs, a policy that hinders free competition, and capital markets are in imperfect state due to extreme information asymmetry.
The stock price is an important indicator. But in such a distorted market, the stock price cannot be considered a correct approximation of corporate value. I also believe that hastily reacting to short-term stock price fluctuations is not sound judgment for a corporate manager. In times like these, it is crucial to focus on our purpose and core competencies. Instead of being distracted by short-term stock price volatility, we must aim to maximize true corporate value. I believe that is the right way to manage a business. Our purpose is to “change society through the power of chemistry.” By implementing various initiatives to achieve this purpose, we have increased our corporate value. I strongly believe that we must never stray from this core principle.
Resonac’s core competence clearly lies in research and development. We must continue investing in it to maintain our technological edge. This is where the size of our material development pipelines becomes crucial. Material development cannot be precisely targeted; it starts with a hypothesis, such as “To create this function, we should probably experiment in this general area.” However, outcomes do not always align perfectly with expectations, and success can emerge in unexpected areas. That is why, even amid volatile stock prices, we will carefully consider what kind of technology portfolio to build and how to build it.
Tariffs and supply chain disruptions may occur, but the march of technological progress is inevitable. To keep pace with or stay ahead of evolving technologies, it is vital that we continually refine our technologies through research and development. We can address supply chain issues later. This is why we absolutely must not fall behind in technology. That will be where we focus our efforts this year.
Establishing co-creation platforms in semiconductors and mobility respectively to drive R&D
So how can we maintain our technological edge? Let me explore Resonac’s strengths and our tactics for leveraging them to win.
The greatest strength of Resonac’s semiconductor materials business lies in its foundation for co-creation. We offer a lineup that covers approximately 80%, presumably, of the key semiconductor back-end process materials. This facilitates the formation of consortia such as “JOINT2” and “US-JOINT”. We have most of the necessary materials in-house. By collaborating with equipment manufacturers and suppliers of materials we lack, we can create an environment where, at least for semiconductor back-end processes, customers think of us as having everything they need under one roof.
In US-JOINT, we are taking a step further by building interfaces with businesses we have had limited interaction with, such as hyperscalers like Google and Amazon, and prospective semiconductor designers. In the ever-evolving world of AI semiconductors, we will build a system to co-create with consortium partners and gear up for the next breakthrough materials. Our Packaging Solution Center (PSC) is fully equipped with devices for semiconductor back-end processes, enabling us to perform verification in manufacturing processes using actual equipment with our co-creation partners. Resonac’s strength lies in its ability to seamlessly transition from idea generation to actual execution phases.
Another key aspect of the semiconductor materials business is enhancing the presence of materials used in semiconductor back-end processes.
In the semiconductor profit pool, the back-end processes are often seen as the most disadvantaged. However, the miniaturization of semiconductor front-end processes has become increasingly challenging both technically and financially. As a result, attention is shifting to innovations in back-end processes, presenting us with a rare opportunity. To seize this opportunity, we will continue producing AI semiconductor materials unique to Resonac. I believe this will enhance our presence in the entire back-end process materials sector. At the same time, we are exploring the possibility of considering collaboration with front-end material suppliers as an option to sustain our competitive advantage.
As I mentioned at the outset, another application of our technology, following semiconductors, is in the automotive mobility business. To turn the mobility business into a profitable venture, we are steadily implementing strategies based on our successful experiences with semiconductor materials.
We offer eight to ten materials for power modules, the core component of electric vehicles. Resonac is the only company worldwide that offers such a wide range of materials for power modules. Leveraging this prime position, we established the Power Module Integration Center (PMiC), based on the same concept as the PSC, our co-creation hub in semiconductors that drives Resonac’s technology development. The PMiC is equipped with the capabilities to combine our materials to create power modules and test their performance.
We can use our materials to directly present customers with various test results. For example, we can demonstrate how one combination yields a certain performance, while another combination produces a different result. We can also propose material configurations that could deliver the highest performance for customers’ power module designs. For power module manufacturers, collaborating with the PMiC can significantly reduce development lead times, making it a highly practical and valuable facility. Starting in 2025, joint evaluations with customers on heat management and improvements in fuel efficiency and range are set to begin, further speeding up the customer co-creation cycle within the PMiC.
This is our tactics to develop the mobility business into a profitable venture. The PMiC launched full-scale operations in 2023 and is actively conducting various promotional activities to attract a large customer base. I have asked the head of the PSC to concurrently serve as the head of the PMiC. He has experience in transforming the PSC into the place for co-creation it is today. We are sharing this expertise with members in the mobility field to help them achieve a strong presence in a shorter timeframe, emphasizing speed in our efforts.
A merger of two companies with different origins Initiating communication in a common language and aligning business and human resource development strategies to expand the contributions of co-creative talent
Resonac’s human capital management is characterized by the complete alignment of business strategy and human resource development strategy. From what I have covered so far, it should be clear how important co-creation is to us. Without co-creation, new value cannot be created, nor can we develop applications for our technology. This is why we cultivate co-creative talent.
Resonac’s goal is to become a World-class Functional Chemical Company. Such a company is defined by its ability to align materials. Functional materials are created by mixing organic resin with inorganic filler. After delivering this mix to customers, we use their feedback to collaborate with material manufacturers on new material combinations. Then we mix it again and present it to customers once more. This iterative approach leads to a continuous and thorough alignment process.
This continuous alignment occurs not only within the Company but also externally. External interactions encompass diverse touchpoints with customers, suppliers, and consortium partners. We aim to cultivate co-creative talent capable of effectively managing this alignment process.
As we pursue business strategies rooted in our purpose, we develop human resources aligned with these strategies, ensuring that their actions embody our values. Everything is clearly interconnected, which I believe strengthens Resonac’s human capital management.
Looking back, we believed that if the former Showa Denko, which produced materials, and the former Hitachi Chemical, skilled at transforming those materials into finished products, could work closely together and easily consult on creating specific materials, it would surely result in a strong company. We saw it as a way to leverage the capabilities of developers at Showa Denko, which has molecular design technology for creating materials. That was the original aim of merging the two companies.
However, it took time for a common language to develop between the two companies with different origins. One reason for this was that the former Showa Denko and former Hitachi Chemical were in separate sites, which limited opportunities for communication. So we designated several centers of excellence and gathered personnel from both organizations’ material and technology hubs. Additionally, Resonac has a research and development base in Yokohama called the Stage for Co-creation, where it has co-located semiconductor researchers and computational science and informatics researchers. This approach has increased opportunities for direct communication, leading to the development of a common language. This represents a major transformation, and I am eager to see what technologies will emerge in the future.
Sustainability is now an essential component of corporate management
The path forward for our business strategy is clear. The crucial issue I must tackle as a corporate manager is sustainability.
I believe sustainability has now become an essential component of corporate management. Even with temporary setbacks, the overarching trend of sustainability remains unchanged. For carbon neutrality, it is crucial to maintain targets despite tightening timelines and continue efforts even if there are delays.
On the other hand, I view sustainability for a company as the pursuit of maximizing corporate value. However, the era when a company was evaluated solely on its ability to generate profits is already over. Investors and capital markets now assess whether a company benefits society and people, including its efforts in environmental, social, and governance (ESG) areas. This evaluation influences stock prices and ultimately determines corporate value. It is crucial to take action with this understanding in mind.
I also see sustainability as a business opportunity, which is why I am currently focusing on it. As a functional materials company, we should supply the necessary materials when a new industry emerges to replace semiconductors. In this context, we intend to pinpoint the materials needed under the broad theme of sustainability and seek out business opportunities.
By expanding the circle of respect, our 24,000-member orchestra is performing an excellent harmony
Since our second founding, as CEO of Resonac, I have focused on semiconductor materials. Our efforts, such as developing materials for AI semiconductors and establishing consortia in Japan and the U.S., are now beginning to yield results. While we have yet to launch US-JOINT, we expect the results to follow soon thereafter. Our performance has improved, and we are garnering strong public recognition. We increasingly hear comments that Resonac is impressive.
However, this does not mean we are content with Resonac as it stands. We want Resonac to be recognized as the world’s leading functional chemical company and to be seen as an enjoyable place to work. To achieve this, there are many things that we must do and want to do.
I am particularly focused on building a foundation for interpersonal relationships. For example, we conduct company- wide training for leaders on providing feedback to subordinates, conducting one-on-one meetings, and embodying a co-creative leadership style. When developing human resources, people often focus on knowledge areas like finance and marketing. However, these are like apps. As long as you have a solid “operating system (OS)” in place, you can download any app later. I believe building a robust OS is essential to human capital.
We are now in an era where generative AI can swiftly craft a business strategy. What we truly need are people with the execution skills to implement it. Execution is ultimately about alignment. We aim to develop talent who can align, have high emotional intelligence, influence others, and engage people emotionally.
This year, I am emphasizing the term “respect.” For a team to perform well, mutual respect is essential. When managers respect their subordinates, it maintains psychological safety, making it easier for employees to voice concerns. Managers respect their subordinates, subordinates respect their managers, and colleagues respect each other. I believe expanding that circle of respect will definitely make the Company enjoyable.
Resonac employs about 24,000 people. If each finds the Company enjoyable to work for and boosts their effort by just 2%, our productivity will soar. Boosting productivity is not about higher salaries or fear of reprimand from managers, but about employees finding joy in their work. Achieving this is truly wonderful. It is taken for granted that human rights are respected, and therefore, it is vital to build a work environment where employees’ safety is properly ensured, and they are able to work in good health and with vitality. We prioritize safety and health as the foundation of everything. I believe that a workplace where employees can work in good physical and mental health will also be a company where they can work happily and enjoyably.
In summary, I aim to make Resonac a company where everyone works confidently and enjoyably, with strong teamwork. As the conductor of an orchestra, I leave the musicians to play, and each produces outstanding music. Moreover, each instrument respects the others, creating a powerful harmony. I believe an impressive orchestra of around 24,000 members is taking shape.
Since becoming CEO in 2022, I have dedicated the past three years to showing how we can revive traditional companies and embed an entrepreneurial mindset. I have had to firmly convince Japanese executives who had not thought seriously about business management. As discussed, I am confident our actions were right, and we are now seeing tangible results. This is why I can now confidently say that we will make Resonac a great company.
By steadily continuing initiatives we have taken so far and our current strategies, we can enhance Resonac’s corporate value and ensure employee happiness. I am committed to this with an open mind and genuine intent.
Hidehito Takahashi
President and CEO