(All financial information has been prepared in accordance with accounting principles generally accepted in Japan)



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(All financial information has been prepared in accordance with accounting principles generally accepted in Japan)



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(All financial information has been prepared in accordance with accounting principles generally accepted in Japan)



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Results for the FY2001 Interim

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Results for the FY2001 Interim

  1. 1. (All financial information has been prepared in accordance with accounting principles generally accepted in Japan) 1. Management Policy Advantest’s Basic Management Policy It is Advantest’s mission to support leading-edge technology at its forefront. Increasing corporate value, improving shareholder and customer satisfaction and achieving excellence are the basic elements of its management policy. Business Strategy Advantest seeks to increase customer satisfaction and improve results by means of a management structure which is responsive to market changes, early development of technologies required for the coming era, and speedy customer solutions under the concept of “GET Solution”.1 Advantest became listed on the New York Stock Exchange on September 17, 2001. Advantest hopes this listing will facilitate its overseas business activities, particularly in the U.S., and will seek to strengthen its investor relations and disclosure efforts and increase the name value of the company. Target Financial Index Advantest uses “AVA” (Advantest Value Added), a financial index incorporating such concepts as profit margin, ROE, cash flow and EVA (Economic Value Added)2, to measure its business performance. Advantest seeks to increase its corporate value and shareholder value by setting a minimum target rate for AVA of 8% and striving to achieve a return on investment of at least 12% in the medium term. Basic Policy on Distribution of Profits Advantest thinks that the basics of shareholder value lie in the long-term and continuous growth of corporate value. In terms of direct distribution of profit, it is Advantest’s policy to maintain and continue a level of dividend consistent with its results at the time. Retained profits will be invested in new businesses, research and development, cost-cutting efforts and overseas expansion, to provide the basis for strengthening its business position and corporate value. 2. Business Results (1) Results for the FY2001 Interim Overall Results During the interim period, the direction of the Japanese economy was clouded further with uncertainties due to the worldwide recession triggered by the IT slowdown in the U.S. and the aftershocks of the September terrorist attacks in the U.S. Investment and consumer spending dropped rapidly, causing unease about further delays in economic recovery. The electronics industry, on which Advantest depends, was hit by the rapid drop in semiconductor demand caused by the worldwide recession. Domestic and overseas semiconductors manufacturers alike have announced worsening profits and capital expenditures cuts, making this the worst semiconductor recession in history. On the other hand, a second IT revolution soon to be triggered by the popularization of broadband connections is expected to give rise to a true digital society, shifting the focus from personal computers to digital consumer devices. While overall investment has dropped in recent months in comparison with the IT bubble, 1 GET Solution (Globally Enabled Total Solution) is our service-based business designed to provide a set of comprehensive solutions to issues ranging from the design to product delivery of semiconductors. 2 “EVA” is the registered trademark of Stern Steward & Co. 4
  2. 2. (All financial information has been prepared in accordance with accounting principles generally accepted in Japan) investments continued in certain next-generation or advanced communication sectors and the industry is still fervent with M&A and restructuring transactions. To respond to these changing market conditions, Advantest has sought to make timely introduction of new products to increase customer satisfaction. Advantest also made efforts to centralize the management of sales, production and development data, shorten delivery lead-time and compress costs by expanding its company-wide computer backbone system to associated companies. Under these conditions, incoming orders was ¥35.7 billion (down 75.5% from the corresponding period in the preceding year), net sales was ¥65.0 billion (down 48.7%), ordinary income was ¥5.5 billion (down 84.8%) and interim net income was ¥3.7 billion (down 83.6%). In addition, overseas sales as a percentage of total sales was 60.5% as compared to 76.8% in the corresponding period in the preceding year. Results by Segment <Automatic Test Equipment Segment> Following the strong performance of the last period, the semiconductor industry entered a readjustment phase of unprecedented scale where investments suffered sharp falls. It was under these conditions that Advantest introduced the T5375, a backend flash memory and front-end DRAM tester that works with 300mm wafers. Advantest has also started delivery of the new T5771, the next generation model of its front-end flash memory testers, whose throughput is eight times and test speed is five times that of previous models. Advantest is currently developing new customers for this tester. In terms of SoC testers, Advantest introduced the T6673 and T6683 to the market, which function at test speeds of 500MHz and 1GHz respectively. These testers feature significantly improved mixed signal capability for the mass production of next-generation devices which are becoming increasingly complex and multi- functional. The SoC tester has generated a high level of inquiries throughout Japan, Europe and North America. The new LCD driver IC test system T6371 is also selling well. As a result of the above, incoming orders in the automatic test equipment segment was ¥25.0 billion (down 80.4% from the corresponding period in the preceding year) and net sales was ¥50.6 (down 55.2%). In a geographical breakdown, sales dropped significantly in South East Asia, with foundries in Taiwan suffering particularly hard hits. As a result, overseas sales as a percentage of total sales was 68.6% as compared to 82.7% in the corresponding period in the preceding year. <Measuring Instrument Segment> In the mobile communication market, the R3200 series, which are spectrum analyzers used in the installation of base stations using the W-CDMA and cdma2000 standards, have increase in sales. On the other hand, sales of the R3700 series, which are network analyzers used in the testing of high frequency parts, decreased significantly. In the optical communication market, D-WDM3 capable testers, which experienced rapid growth in the previous fiscal year especially in North America, suffered setbacks from excessive capital expenditures during the IT investment boom, resulting in a significant reduction in the sales of bit-error rate test systems for optical communication, optical network analyzers, optical spectrum analyzers and ondometers. Sales of coherent optical time domain reflectmeters, used in the rollout of undersea optical cables, have decreased in comparison with their previously brisk sales levels overseas. As a result of the above, incoming orders in the measuring instrument segment was ¥10.7 billion (down 39.7% from the corresponding period in the preceding year) and net sales was ¥ 14.4 billion (up 5.6%). Overseas sales as a percentage of total sales was 32.0% as compared to 27.5% in the corresponding period in the preceding year. 3 “D-WDM” – Dense-Wavelength Division Multiplexing. 5
  3. 3. (All financial information has been prepared in accordance with accounting principles generally accepted in Japan) Research and Development (Automatic Test Equipment) With regards to memory testers, Advantest successfully developed and began delivering the T5375, a system used in the front-end testing of DRAM and backend testing of flash memory under mass production, and capable of testing 128 devices simultaneously at 143 or 286 MHz. Advantest also developed the T5771, a low- cost and high-throughput test system used in the front-end testing of flash memory that is capable of testing 128 devices simultaneously. As for SoC testers, Advantest developed and began delivering the T6673, which features significantly improved mixed signal capability for the mass production of next-generation devices that are becoming increasingly complex and multi-functional, and is capable of testing a maximum of 1024 pins at 500MHz. Advantest also developed the high-end T6683 SoC testing system for high-speed communication devices and high-speed processors, capable of testing a maximum of 1024 pins at 1GHz. (Applied Nanotechnology Systems) Advantest developed the F5112 low-cost single column electronic beam lithography system for the research or mass production of next generation devices based on design rules of under 0.13 micron. In addition to next generation SoCs, the F5112 is expected to be useful in applications such as the testing of next generation magnetic disk heads (GMR heads) and high-speed communication devices (GaAs devices). In the area of pattern inspection, Advantest is currently developing an automatic pattern measuring system, the E3410, that is capable of testing at the nanometer level during the process testing of arch-shaped electrodes of SAW filters. (Measuring Instruments) In response to the emergence of the IMT20004 standards in mobile communication, Advantest developed and began delivering optional components for the R3562 for testing the reception characteristics, and optional components for the R3267 and R3273 for testing the transmission characteristics, of the cdma2000 standard. Advantest developed the R3264, a 3GHz spectrum analyzer for the installation and maintenance of mobile communication equipment. For the next-generation optical communication market, Advantest is developing a bit error rate test system capable of testing at the transmission rate of 40Gbps. Advantest also developed the R6244, a voltage/current generator and monitor for test systems, which generates test currents useful in the research and development of electronic parts and circuits including semiconductors and battery cells. (Advantest Laboratories) Advantest Laboratories continued to conduct research on basic technologies required for the testing of next generation photonic networks and extremely high frequency wave communications, and developed prototypes for a wide band amplifier that works with the L/C band5 and an input circuit for MMIC6 testers. By use of wave visualization technologies, Advantest Laboratories successfully developed a technology for detecting waves coming from multiple sources while moving at high-speed. Capital Expenditures Advantest invested a total of ¥9.2 billion in capital expenditures, primarily in areas such as the development of new products, streamlining of production and energy conservation. In addition, Advantest began construction of its Northern Kyushu R&D Center during this interim period. 4 “IMT2000” – International Mobile Telecommunications 2000. The third generation of digital mobile communications. 5 “L/C band” – the usual spectrum (C band) and long-wavelength spectrum used in optical communications. 6 “MMIC” – Microwave Monolithic IC. 6
  4. 4. (All financial information has been prepared in accordance with accounting principles generally accepted in Japan) Distribution of Profits Based on the profit distribution policy described above, Advantest will pay a dividend of ¥25 per share for the current interim period (compared to ¥25 per share for the corresponding period a year earlier), consistent with the original forecast of ¥25 per share for the current period. (2) Fiscal Year Forecast Prospects for Overall Results In the IT and electronics markets, as represented by products such as computers, communication infrastructure equipment, communication devices and consumer electronics, Advantest expects PDA’s and digital cameras to further gain in popularity and ADSL subscribers to grow in number. In the communication market, Advantest thinks that IMT2000 will begin its full-scale rollout and that preparations will be underway for high-speed and high-capacity terabit networks. In response to these developments, Advantest will continue to make timely introduction of new products, including test systems for next generation semiconductors and measuring instruments compatible with these new communication standards. However, the global IT slowdown and delay in economic recovery caused by the U.S. terrorist attacks are expected to continue to pose difficulties for the semiconductor industry, on which Advantest depends, through the fiscal year. As a result, even though Advantest will continue its cost-saving efforts throughout the corporate group, including cuts in labor and running expenses, reduction of inventory, and decrease of capital expenditures, net sales in the fiscal year is expected to drop significantly to ¥100.0 billion (down 61.9% from the previous fiscal year) while ordinary loss is expected to be ¥8.5 billion and net loss is expected to be ¥5.0 billion. In addition, net sales in the automatic test equipment segment is expected to be ¥76.5 billion (down 66.3% from the previous fiscal year) while net sales in the measuring instrument segment is expected to be ¥23.5 billion (down 32.9%). Profit Distribution Forecast Despite the dismal results expected for the fiscal year as described above, the year-end dividend is expected to remain at ¥25 per share (a total of ¥50 per share for the fiscal year after the addition of the interim dividend of ¥25 per share), consistent with the original forecast of ¥25 per share. Important Business Plans Scheduled for the Current Fiscal Year On October 1, 2001, Advantest will start a new company-wide initiative called “Initiative 21”. This initiative will bring together all sections of the company from sales to development, maintenance and administration toward the goal of “winning fierce competition ahead” through a myriad of new ideas and improvements. Each employee will be asked to take the initiative in tackling new challenges in order to achieve further growth and fulfill our social mission. This initiative will continue through 2004, the year of the 50th anniversary of the company. In addition, Advantest will continue building the Northern Kyushu R&D Center with the aim to strengthen support for semiconductor manufacturers located in Kyushu and Asia and to develop next generation semiconductor test systems. 7

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