Product category: Analogue and Mixed Signal ICs
News Release from: Innotech
Edited by the Electronicstalk Editorial Team on 21 May 2002

Tough year for Innotech

Innotech Corp has announced its financial results for the fiscal year ended 31st March 2002

Group net sales fell 3.7% to 54.2 billion yen, while operating profit dropped 90.6% to 187.7 million yen. Net income fell to a loss of 689.9 million yen. In October, Innotech and Xilinx agreed that Innotech would provide an end-to-end solution for Xilinx in Japan, incorporating technical support, product development and distribution.

During the year, Innotech successfully reorganised operations to narrow its business focus, selling a manufacturing plant in Hiroshima and also a subsidiary company, TYECIN-Innotech.

Innotech also improved its cost structure and balance sheet.

Innotech aims to release its threshold voltage modulation image sensor (VMIS) solid-state sensor from the second half of 2002.

Setting the standard for next-generation imaging devices, VMIS carries the cost advantages of CMOS devices while it also has picture quality of 5-10Mpixel, similar to CCD sensors.

Innotech designed VMIS in house and will license the technology to cellular phones makers for use in cellphone handset cameras.

The increased product line up, partnerships and reduction in debt puts Innotech in a good position to benefit from any upturn in the semiconductor market.

Innotech estimates group sales for the year ending March 2003 will rise 11% to 60 billion yen, while operating income will increase about 10 times to 1.55 billion yen.

Net income will rise to 150 million yen, reversing this year's loss.Sales from the semiconductor design and semiconductor manufacturing equipment business fell 1.3% to 29.5 billion yen, while operating income fell 40.3% to 1.4 billion yen.

Innotech has the exclusive license to supply and support in Japan electronic design automation software developed by Cadence Design Systems, the world`s largest supplier of electronic design tools.

The tough operating environment meant many Japanese semiconductor makers stopped producing low margin products and focused on more sophisticated chips that require EDA design tools.

Innotech's knowledge and central position within the Japanese semiconductor market and the quality of Cadence's leading-edge EDA design tools allowed Innotech to almost maintain sales from the year before.

By shortening its receivables collection period from 210-180 days to 120-90, Innotech improved cash flow and reduced interest-bearing debt to 25 billion yen from 32 billion yen.

By changing its model from sales to licensing EDA tools, Innotech allowed its customers to license EDA tools from Innotech for an agreed period and then to update them as Innotech's customers needed.

Under the terms of the contracts Innotech could then book sales quarterly rather than semiannually as it did under the old contracts.

At the end of the year, cash flows from operating activities were 10.1 billion yen, up from 362 million yen, while free cash flow was 6.83 billion yen, up from 1.7 billion yen the year before.

Innotech also succeeded in lowering its cost structure.

Despite the fall in group sales, selling, general and administrative expenses fell to 8.6 billion yen from almost 10 billion yen.

In addition, extraordinary losses were narrowed to 1 billion yen from almost 4 billion yen.

'Despite the steep drop in demand for semiconductors around the world over the past year, Innotech's model of providing value-added services to the semiconductor industry reduced our exposure to the most severe industry fluctuations and allowed us to maintain stable sales and limit our losses more than other companies in the industry', said Yoshinao Negishi, general manager, Innotech corporate planning department.

'It was also a year we expanded our product line up and reduced interest-bearing debt, putting us in a good position for an upturn in the semiconductor market'.

Innotech renewed supply contracts for EDA tools with Fujitsu in October 2001 and renewed another similar contract with Hitachi in July 2001.

To increase its line up of EDA tools, Innotech also agreed with @HDL and BindKey Technologies to supply the EDA tools the two companies developed.

@HDL provides a range of software products that address functional verification for the development of system-on-chip and silicon IP, while BindKey provides innovative IC tools for submicron manufacturing.

The division developed new sources of growth during the year by reorganizing its semiconductor manufacturing equipment business, developing equipment for test and measurement.

In conjunction with engineers from PDF Solutions, Innotech`s semiconductor solution business provides clients with ways to improve the manufacturing yield of their semiconductor manufacturing plants.

In addition, Innotech agreed to distribute in Japan verification equipment for flash memories made by Credence Systems and also obtained from Beltronics patent rights to develop, manufacture and distribute Automated Optical Inspection products in Japan and Asia.

Sales from the electronic components business fell 6.5% to 24.8 billion yen while operating income at the division fell 66.3% to 542 million yen.

The effects of a deflationary recession in Japan and in particular the fall in demand for information technology products and services led to a fall in sales and profits at the division.

During the period, Innotech agreed to purchase Sanei Hytechs for 2.7 billion yen in cash.

Sanei Hytechs designs analogue LSIs for electronic audiovisual equipment and its engineers will allow Innotech to increase client technical support services.

These value-added services have proved to be important factors when overseas semiconductor companies select companies to distribute their products in Japan.

(Updated by CR, May 2007)

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