Toray's Strategy for Carbon Fiber Composite Materials

<3rd IT-2010 Strategy seminar (Carbon Fiber Composite Materials) Presentation>

Toray’s Strategy for Carbon Fiber Composite Materials

April 11, 2008 Toray Industries, Inc. Senior Vice President Masayoshi Kamiura Long-term Corporate Vision and Positioning of Carbon Fiber Composite Materials Business

Project Innovation TORAY 2010 (IT-2010)

After achieved NT reforms, Toray Group launched Project “Innovation TORAY 2010 (IT- 2010)” in October 2006 in order to challenge for further growth through Innovation. April 2002 April 2006 Long-term Vision AP-New TORAY 21 AP-Innovation TORAY 21

Mid-term Business Strategies Goals in and IT-2010 around 2010 NT-Ⅱ 「Management based on Net sales NT21 「Offensive ¥1,800 billion Innovation」「Corporate management Operating Structure postures」 - Challenges for further income ¥150 billion Reinforcement - Establish foundation growth - defensive for further growth - Operating management income to net postures sales ratio 」 8.3% Achievement of Toward a Global Top Company - Breakaway from ¥100 billion in of Advanced Materials ROA:8% Crisis - Operating Income ROE:11% 2002 April 2004 April 2006 October Around 2010 Copyright 2008 Toray Industries, Inc. All Rights Reserved 2 Basic Strategies (by Business Category)

Fibers & Textiles, Plastics / Chemicals

① Developing global operations Establish stable ② Promoting “New Value profit base Foundation Creator”

Businesses ③ Developing downstream and S Promote advancement

processing business u ④ Expanding advanced materials of foundation s

(automobiles, businesses t environment/energy, etc.) a i n

IT-related Products, Carbon Fiber Composite Materials a b ① Strategically Focusing on growing markets l Expanding (IT, automobiles, aircrafts) e

Businesses ② Prioritizing allocation of managerial resources G Positive expansion as profit r

driving businesses o w

Life Science, Environment (water treatment) t h

Strategically Nurturing the next profit base beyond 2010 Developing ① Intensive allocation of Strategically Businesses managerial resources developing and ② M&A and strategic alliances with expanding external parties Copyright 2008 Toray Industries, Inc. All Rights Reserved 3 Positioning of Carbon Fiber Composite Materials Business in IT-2010

Consolidated Net Sales Consolidated Operating Income 2,400 180 Carbon Fiber Composite Materials Carbon Fiber Composite Materials 2,100 Others 160 Others 150.0 1,800.0 1,800 140 1,546.5 160.0 32.0 120 1,500 68.6 102.4 100 1,200 18.1 80 900 1,640.0 1,477.9 60 118.0 600 40 84.3 300 20 0 0 FY2006 Around FY2010 FY2006 Around FY2010 (B Yen) (B Yen)

4% 9% 18% 21%

(1) Business environment and market structure

Global Clean Energy Warming Wind Power Natural Gas

Strict exhaust gas regulations high consciousness of energy saving Energy Saving

Inflation Weight saving (Aircraft, Automobile) of oil prices Diversification of energy Improvement of fuel efficiency Shift to alternative energy Atomic Power Deep water oil mine Generation (Uranium concentration)

Needs for Corrosion-resistance High- High Modulus Radiolucency performance Electromagnetic Materials Shielding, etc. Medical PC Casing Equipment Copyright 2008 Toray Industries, Inc. All Rights Reserved 6 Carbon Fiber Market transition

Introduction Growth Expansion Full-scale Expansion Rapid Expansion （1971－1983) （1984－1993) （1994－2003) （2004－2011) （2012- ) F

Thousand Tons / Year u R S l L S E F R l S - T S a e S e S e

140 x u s D S e e e u p e c p l e c l e c e l e e l n n t e - l e a a l l e e e c e l v s e n c c e s n l c m s t e e c c c h t i e s c s s t s e a t

l t e e i o t d b e i e e

i o o d e l o r d d e p

e d x d

120 n a n

d f n

f m p o r

c B f e

o f

o o o f a r o 1 o k x r o e o

s f r f n r

p 1 f e p

r n

a c s p a

s t a a t r s i

i i o i n

r e

m i a i r o n e o m m r i m c g m c n c n 100 s f c a r

a a r d i

m a o 7 G a o r a i n t r n

y f n 8 r e n C f y t u o d

y t

d 7

s a

i n l

s i i i n f

n s t a n u

i s p r t r d c S t t r

l b d u t t r r

r i u o a u r n f u h

80 u o o u c u o c m t s d c a c t j n s i c e r t o u t t u t f u t

r o t u c u t r n r G S y u s

r y e b r t r a

r a t

e o

e s

i r e n l

o t i

e a l

f e a

f o d o o f o

60 l l S f a

e f r l A

F Industrial

i a

p B l t

h B l B i e A i p i r p s a t o b o

o e p i h l f e r i u e Use e t

l b c i

i i n s i c n i B a u n n g

a g t s o A 40 g g i

o R

3 7 A 7 o 7 n m 8 5 o 7 n 3 3

0 7 d

2 7

7 Aerospace 6 7

0 Sports 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 M

a Increase in Full-scale increase in

i Limited Field Increase in application n

A p Industrial Use Aircraft and Automobile Tennis rackets p Fishing rods Pressure vessel Large aircraft program l i c Golf Shafts a Aircraft secondary structure Machine parts

t Wind blade i o Aircraft primary structure n Engineering, Marine Automobile, Oil mine

e Increase of product type

m High Quality Cost reduction Variety in molding method a

r Progress in molding

k Large scale Recycle of Carbon Fibers s

Full-scale expansion Dramatic expansion Expansion Full-scale expansion Dramatic expansion 140 Thousand tons / year

120

100

80 Energy 60 Environ- Safety 40 ment Industrial Use 20 Aerospace Sports 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Unit: ton Growth rate 69,000 70,000 (’04 - ’10 average) 70,000 Industrial Use Market Aerospace 60,000 10%15% 60,00060,000 Sports 52,000 Updated 50,00050,000 46,000 Previous Forecast Forecast 40,000 40,000 Industrial Use 40,00040,000IR seminar in 37,500 10%15% June, 2005 35,000 28,000 34,000 24,000 30,500 30,00030,000 27,500 25,000 22,000 20,00020,000 Aerospace 15%24% 10,00010,000 Sports 3%8% 0 0 20042004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 Copyright 2008 Toray Industries, Inc. All Rights Reserved 9 Market classification of PAN-based Carbon Fibers 1

Classification by Classification by Mechanical characteristic 1 Mechanical characteristic 2

7.0 7.0 a ) a ) Aircraft p p Primary G G 6.0 I n 6.0 S M Structure t （（ t e r o a n h h and Space t d t - u m g g d

5.0 l u 5.0 a r e d e n e n s r r High-performance d

H i g Aircraft t t i a Industrial Use s s Secondary t e 4.0 h 4.0 Structure and

m M

Large s i l e s i l e Special Sports Space o Tow o e n d e n d T u T 3.0 3.0 u l u l u s s

2.0 2.0 Industrial Use Sports

1.0 1.0 100 200 300 400 500 600 700 100 200 300 400 500 600 700 Tensile modulus（Gpa) Tensile modulus（Gpa)

Carbon Fiber TORAYCA® series

T1000 T1000 7.0 7.0 High-strength Only TORAY T1000 T1000 a ) a ) Carbon Fiber p p 6.0 G 6.0 G G G T800S/T800H T800S/T800H （（ T700S High Modulus T700S h h t t 5.0 M35J Carbon Fiber 5.0 M35J g g Competitors’ T400H M40J T400H M40J T300J T300J Competitors’ e n e n M46J Products r r M55J M46J M55J t t Products 4.0 M30 4.0 M30 s s M50J M50J M60J M65J M60J M65J s i l e s i l e T300 T300 Competitors’ 3.0 3.0 e n e n M40 M46 ProductsM40 M46 T T Only TORAY M50 M50 2.0 2.0

1.0 1.0 100 200 300 400 500 600 700 100 200 300 400 500 600 700 Tensile modulus（Gpa) Tensile modulus（Gpa)

Market structure Market structure by grade by application

High-strength/High-Modulus fiber High-end Thin fiber High-grade Prepreg / fabric

Primary Aerospace structure Sports Middle-range

Intermediate Modulus fiber Intermediate strength fiber Secondary Prepreg / Fabric structure

Low-end Industrial Use Large-tow fiber Standard Prepreg

Market size: 35,000 tons

Quantity Sales amount

34% High-end 40% Toray’s occupation Toray’s occupation

Middle range

Low-end

Based on CF quantity Based on Sales amount

Primary/Secondary structure Primary/Secondary structure CFRP usage : Approx. 10t CFRP usage: Approx. 35t

Airbus A320 Airbus A380 Rocket

Primary/Secondary structure Primary/Secondary structure CFRP usage: Approx. 2t CFRP usage: Approx. 35t Copyright 2008 Toray Industries, Inc. All Rights Reserved 14 Examples of application -3 major sports-

Fishing rod

Golf Shaft Tennis racket

Hockey stick Softball bat

Bicycle

Uranium centrifuge Fuel cell

Wind power blade Oil-related

Hood Spoiler Propeller shaft

F1 machine parts

Radiator core support Body panel

Bridge pier reinforcement Deck reinforcement

Pillar reinforcement Bridge railing

Boat Sailboat

SCBA (self-contained-compressed air breathing apparatus) CHG (Hydrogen) tank

CNG (Compressed Natural Gas) tank

Machine parts, Medical equipment and IT-related products

Doctor blade Roller / Pipe

Robot hand for LC panel

PC casing (Compound) X-ray top panel

Electric cable core Body panel for train Robot parts

(2) Current status

Intermediate Precursor Carbon Fiber material Composite End-products Raw material of Prepreg, Fabric, etc. Molded products Carbon Fiber Toray Carbon Fiber business Aircraft

Automobile

Pressure Prepreg Vessel Molding Maker Civil Engineering

Weaver Machine Parts （Fabric manufacturer ）

Medical Equipment

Sporting goods

Intermediate Country Precursor Carbon Fiber material Composite Raw material of Prepreg, Fabric, etc. Molded products Carbon Fiber TORAY Ehime Plant

Ishikawa Plant Shiga Plant Japan （Under Construction） Ichimura / Sowa Nagoya Textile, etc. A&A center Sakai Composite

USA Toray Carbon Fibers Toray Composites America, Inc. (CFA) (America), Inc. (TCA)

France SOFiCAR SOFiCAR

EU market US market TCA SOFiCAR TORAY CFA

Japan/Asia Market Production capacity of each production base Societe des Fibres TORAY Toray Composites Toray Carbon Fibers de Carbone S.A. (Ehime/Ishikawa) (America) (TCA) America (CFA) (SOFICAR) (FRA) (JPN) (USA) (USA) Carbon 3,400  5,200 7,300  8,300 3,600  5,400 Fiber (t) (Jan, 2008) (Dec,2008) (Jan, 2008) (Jul, 2009) (Jan,2008) (Dec,2008)

Prepreg 10,800  16,600 11,400  17,200 (‘000㎡) (Jan, 2008) (Jan, 2009) (Jan, 2008) (Jul, 2008)

Worldwide vertically-integrated operations, from Precursor to Composite materials 37-year long top supplier of high-performance carbon fibers 27-year experience in production of aircraft Prepreg Proactive R&D investment and technical development from Carbon Fibers to molding process Strong and reliable partnerships with customers from development stage (Aircraft, PC casing, Automobile, Sporting goods, Machine parts, etc)

Regular tow Large tow TORAY competitors competitors

Quality / R&D ability Excellent Fair – Good Poor – Good Global marketing system Excellent Good Poor – Fair

Performance in the Excellent Fair – Good Poor Qualified business

Sales price Excellent Good Fair (High = Excellent)

HP*1: Excellent HP: Good Supply capacity GP*2: Good GP : Excellent GP: Good (Excellent for future )

Intermediate products, Composites Excellent Good Poor

Aerospace Sports Industrial use Wind power blade, Main application HP industrial use Industrial use Compound, etc High-grade sports A part of Aerospace A part of sports

(3) Strategy

Promote business expansion in each market through global production, marketing and technical services as the world’s largest Carbon Fiber manufacturer Net Sales Operating profit Around 2010: 160 billion ¥ ratio Around 2015: 300 billion ¥ ~ 20% Around 2020: 500 billion ¥

Maintain firmly largest share by differentiation of TORAYCA’s high-quality and high-performance Try to expand supply of Carbon Fiber with cost competitiveness into industrial use market Differentiate in intermediate and composite materials and promote business expansion with high profitability Copyright 2008 Toray Industries, Inc. All Rights Reserved 31 Basic Strategies

1. Business strategies by applications (1) Maintain and expand overwhelming advantages in aircraft application (2) Develop market and technologies as a pioneer in automobile applications (3) Enhance competitiveness in high-performance industrial market and establish overwhelming cost competitiveness in general-purpose market (4) Maintain high market share and increase revenue in high-grade sports application 2. Improve competitiveness in quality and cost through enhancement of technical capabilities 3. Expand supply capability by continuing proactive capital investment 4. Give consideration to recycle and global environment

Copyright 2008 Toray Industries, Inc. All Rights Reserved 32 Basic strategy 1-(1) Maintain and expand overwhelming advantages in aircraft application Boeing - Establish production lines for 787 Strengthen our - Develop and propose new materials sole-supplier position for next generation aircraft Airbus - Secure stable supply for existing models - Promote qualification test of our materials for A350XWB Become main supplier Regional - MRJ: Develop materials and molding technology - Regional jet: Expand sales based at TCA Exploit new aircraft Market

1971/1972 Started commercial production of Carbon fiber/Prepreg 1975 Selected as CF for secondary structure of Boeing 737 1981 Selected as Prepreg for secondary structure of 757 & 767 1982 Established SOFiCAR : Started CF production in Europe 1983 Selected as CF for secondary structure of Airbus A300 1987 Selected as CF for primary structure of Airbus A320 1989 Qualified as Prepreg for primary structure of Boeing 777 1992 Established TCA : Started Prepreg production in USA 1997 Established CFA : Started CF production in USA 2002 Selected as CF for primary structure of Airbus A380 2003 Started Co-development of materials for 787 with Boeing 2004 Signed MOU with Boeing on contract for supply to 787 2006 Singed comprehensive long-term agreement with Boeing

Heat resistance and Impact resistance CFRP used for primary structures Toray’s development product Boeing 777’s primary structure specification Boeing 777 High CFRP: Approx. 10t

I m Materials in p

a c early 1980s t

r Material in early 1970s

e s i Boeing 787 CFRP: Approx. 35t t a n c e

Heat resistance High Used CFRP at 50% out of all structure Only Toray’s Carbon fiber and Prepreg are qualified as materials for primary structure of Boeing aircrafts Copyright 2008 Toray Industries, Inc. All Rights Reserved 35 Basic strategies 1-(1) Overwhelming advantages in aircraft application Now co-developing new molding technology (A-VaRTM) for Mitsubishi Regional Jet (MRJ) with Mitsubishi Heavy Industries, Ltd. ◇Points of technology (Compared with existing Prepreg laminated composite) 1. Excellent mold ability: Easy to mold complicated shapes by using dry fabric (no need for chilled storage) 2. Excellent mechanical characteristic: Achieve the same characteristic as using chilled Prepreg 3. Cost competitiveness: No need for autoclave  Small capital investment Skin / Stringer panel

5.5m

©Mitsubishi Heavy Industries, Ltd. Spar A-VaRTM method Vacuum Resin injection Ｖ Oven curing

1.5m Rib Dry fabric A-VaRTM method Advanced-Vacuum assisted Resin Real-size vertical tail wing Transfer Molding (Prototype) Copyright 2008 Toray Industries, Inc. All Rights Reserved 36 Basic strategies 1-(1) Overwhelming advantages in aircraft application

Carbon Fiber Demand for commercial aircraft

Unit: ton and our market share forecast 25,000 70% CF demand for commercial aircraft Our market share 65% up 65% 20,000 60% up 60% 15,000 55% 55%

10,000 50% 50%

5,000 45%

0 40% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Respond to environmental regulation and needs for weight saving - Comprehend trends in automobile industry - Study effect of weight saving by CFRP - Propose solutions to automobile manufacturers Create CFRP demand for automobile

Enhance R&D for automobile - Integration of company-wide technologies - Develop low-cost material and mass production molding technology - Co-develop with customers Cross-organizational development Go into automobile filed drastically

Tightening emission regulations JPN USA EU g-CO2/km g-NOx/km 200 CO2 Emission regulations 1.0 Euro1 NOx Emission regulations

190 0.9

180 0.8 Mileage standard Euro2 in 2010 0.7 170 Tier 0Tier 1 0.6 160 Short-term Euro3 0.5 (ST) Long-term 150 (LT) 0.4 JAMA / KAMA Mileage standard 140 in 2015 ACEA 0.3 Euro4 130 New ST Tier2 Bin9 0.2 Euro5 120 0.1 New LT Post New LT Euro6 110 0 Tier2 Bin5 2007 2009 2011 2013 2015 2017 2019 1994 1999 2004 2009 2014

•US standard is based on the draft passed by Senate recently , in which CO2 limit is set to 35mpg(156g-CO2/km) by 2020, reduced by 4% annually after 2020. Due to uncertainness of CO2 limit on each year, we estimate decrease in linear manner from current limit (2008). Copyright 2008 Toray Industries, Inc. All Rights Reserved 39 Basic strategies 1-(2) Business environment and issues in automobile industry

Trends in automobile industry Environment / Energy Safety / Comfort - Emission gas purification - Fuel efficiency - Design - CO2 reduction - Weight saving - Information-communication - Recycle - Vibration, Noise - Playful spirit and fun - Environment-friendly material

Weigh saving project on main automobile manufacturer Project Target Outline Mass 10% weight saving by ・ Position CFRP as one of the method TOYOTA Innovation 2011 (Midsize sedan) ・ Reduce component ・Resinification

*Vary by 10% CO2 reduction ・ CO2 reduction by LCA (include Honda model by 2010 production) ・ Ahead in using Aluminum ・ Position CFRP as one of the method 15% weight saving by ・ 40% CO2 reduction by 2015 (vs 2005) NISSAN Vision 2015 2015 (Average) ・ Completed main method for 10% mileage improvement

CLW30 30% weight saving by ・ Start accepting supplier’s proposal for Mitsubishi （Challenge for 2010 Light Weight） (2010 model car) the development for next model Copyright 2008 Toray Industries, Inc. All Rights Reserved 40 Basic strategies 1-(2) Business environment and issues in automobile industry

Hood weight comparison Propeller shaft weight (Unit: kg) Comparison (Unit: kg) 30 30 Metal accessories Metal accesoories Hood body PS body 25 25

19.5 20 20 1.6 15.0 15 15 12.0 12.0 1.6 10 10 17.9 7.8 11.0 7.8 1.6 10.4 5 10.4 5 6.2 6.2 4.0 1.6 1.6 0 0 Steel Aluminum CFRP Steel Aluminum CFRP

1996 1998 2000 2002 2004 ～2007 Reason for adoption 5,000 Development Units Light weight Total Nissan GTR 2007 900,000 10,000 Development Light weight units! Units Aston MartinV8-Vantage 2005

10,000 Development Unites Light weight Aston Martin DB9 2004

Development 130,000 Unites Light weight

MAZDA RX-8 2003

Development 250,000 Unites Light weight

Nissan FairladyZ 2002 Development 500,000 Unites Crash safety

New Pajero 2006MMC Pajero 1999 New Pajero 2006MMC Copyright 2008 Toray Industries, Inc. All Rights Reserved 42 Basic strategies 1-(2) R&D enhancement through integration of cross-organizational technology

General R&D center for Automobile and Aircraft

A&A center (Automotive & Aircraft Center)

Resin Advanced Development Center Automotive Center Composite Center 【Existing】【Open in Jun, 2008】【Open in Apr, 2009】 high-tech material, Automobile structure, system Electronics Development of composite for automobile Resin Development for Automobile, Aircraft, for IT / Industrial use IT and industrial use Integrated development of Technology

Fundamental reinforcement of development capability for automobile application Integration of Establish Automotive Center Toray Group technology as cross-organizational base Advanced Automotive center Material technology (AMC) Polymer chemistry Organic synthetic chemistry Biochemistry Nanotechnology

Advanced Product processing technology design support

High process of fiber and film CAE analysis technology Resin molding process Analytical evaluation technology Composite innovative molding Reliability and durability Joint technology evaluation technology Micro-fabrication technology Image 【Open in Jun, 2008】

Pursuit of ultimate performance through Proposal of innovative solution integration of material and technology by Integrated technology

Enhancement of composite development function Transfer composite Promote development innovation development bases to Nagoya - Design of composite products - Deepening molding process Ehime plant Shiga plant technology Advanced Composites - Development of next generation Development Center Advanced Composite Technical Dept. composite products Advanced Composites - Integration of resin and chemical Technical Dept. technology Transfer to - Collaborative development for Nagoya plant automobile application Advanced Composites Center - Co-development system with (ACC) customers - Speed-up of development - Collaborative development with AMC

Promote drastic expansion of composite products, especially in automobile and aircraft application Image 【Open in Apr, 2009】 Copyright 2008 Toray Industries, Inc. All Rights Reserved 45 Basic strategies 1-(2) Breakdown of world’s automobile production and CF demand

Car Price Super car 4K cars 30 MM ¥ Use Carbon fiber (CF) in all body (100kg / car) Super-luxury car 400K 10 MM ¥ CF demand : 400 tons Luxury car 3 MM 5 MM ¥

Use CFRP in parts CF 100kg / car X 500K cars CF demand: 50,000 tons Popular car Approx. 60 MM cars

Huge potential market CF 100 kg / car X 6MM cars CF demand: 600,000 tons

[CFRP effects] Possible to reduce 400kg by CFRP Weight saving Hood Roof Good Mileage  Ecology Seat back Fender support Front cowl Door flame pillar Better crash safety Headrest support Front engine cover Rear luggage partition Energy-absorbing Front strut tower bar Mission center tunnel 970kg（- 30%） Lower assembly man-hour / expense Radiator core support Rear luggage back panel Modularized by unification Engine parts Crush box Rear luggage side panel Door inner Rear luggage floor Better driving performance Front floor tunnel Under cover Impact beam Better vibration damping Front floor panel Front dashboard Natural vibration UP Under support rod Thermal cure CFRP: Safety improvement Panel, Reinforced member RTM method, Improvement of 30% the weight of steel material fatigue 1,380kg CFRP化 Thermoplastic CFRP: Press molding material Average weight car model 50 the weight of steel For more CFRP application… (Gasoline car, 4 door, FF)

■Issues ■ Solving issues, even as aiming for Countermeasures proposing new concepts by integration of - Total cost down -Integration and systematization CF characteristics (electromagnetic - Improvement of molding of material shielding, etc.) and those of other flexibility Combination with thermoplastic materials and materials such as resin or IT-related joint technology, etc. materials. Copyright 2008 Toray Industries, Inc. All Rights Reserved 47 Basic strategy 1-(3) Enhance competitiveness and expand business scale in industrial application Enhance cost competitiveness in general- purpose CF by growing in machine size - Install world’s largest line (4000tons/yaer) - Develop low-cost molding method Promote cost down Maintain quality advantage in 24K fiber Develop new application by technical marketing - Enhance function of technical center in US and Europe - Promote cooperation among government, industry and academia Develop new application Expand in high-performance field

Demand forecast in industrial application by business field 1st Step Until 2012 Unit: ‘000 ton A. Increase outlets in high-performance field 70 High-performance field: (High-price field), especially in high-strength Performance concern fiber (T700S-12K） and thin fiber（T300） 60 General-purpose field: B. Enhance cost competitiveness by large line Price concern C. Develop low-cost molding method 50

Pressure vessel Civil engineering 2nd Step After 2012 40 Luxury car Sports car A. Increase sales in automobile application Uranium centrifuge with cost competitiveness 30 Oil-related Electrical cable, etc. B. Expand composite business with low-cost molding technology 20 High-performance filed Popular car Create demand by switching 10 General-purpose Wind power from other materials filed Compound ,etc. 0 2006 2008 2010 2012 2014 Further expansion of CF demand

Top panel for X-ray CT Robot hand for LC glass substrate scanner (Fork)

Taking advantage of high modulus materials with high radiolucent ratio

Electrical cable core

Weight saving  Long-span, fewer power pylon Increase carrying capacity Taking advantage of vibration (larger aluminum cross-sectional area） dumping by high modulus Taking advantage of high-strength Copyright 2008 Toray Industries, Inc. All Rights Reserved 50 Basic strategy 1-(4) Enhance high-end sporting goods and maintain high market share Maintain high profitability through expansion of high-value added products - Respond to production shift to Asia as a top supplier for leading brand manufacturers in Japan and US - Design and develop best suitable materials for sporting use Expansion in high-value added products Create new market and application - Survey Vietnam and India market which can become production base of sporting goods following China - Increase sales into new application such as bicycle, hockey stick, softball bat, etc. Increase share by acquiring new demand

Develop high-performance CF - Increase tensile strength - Increase tensile modulus Develop resin enhancing CFRP property - Develop nano-matrix resin Reduce composite molding time

Expand technical center

Copyright 2008 Toray Industries, Inc. All Rights Reserved 52 Basic strategies 2 Pursuit of ultimate strength Control of surface defect at nano-level 10 Image of fiber surface at nano-size (AFM) a ) Size of defect p 8 G （ h t 6 Nano g e n r t 4 s

s i l e Sub-micron

e n 2

T Micron 0 1970 1980 1990 2000 2010

Micron-size defect Sub-micron size defect Nano-size defect

800 Surface (STM)

a ) 700 p

G 600

s （ 500 l u u

d 400 o m 300

s i l e 200

e n Orientation 95% T 100 0 6nm 1970 1980 1990 2000 2010

Orientation Cross section 80% Graphite (TEM) Crystalline Fiber Axis 10nm 2nm Copyright 2008 Toray Industries, Inc. All Rights Reserved 54 Basic strategies 2 Reduction of composite molding time Reduced composite molding time by developing Achieved less than ultrahigh-speed curing resin and high-speed resin 10 minutes of molding injection technology in national project led by NEDO by new method Resin injection / curing Base material Removal

ＲＴＭ Base material Resin injection Resin curing Removal setup 25 min 35 min 90 min 10 min 1 min 1 min Demonstration of 3 min Total 160 min 10 minutes molding New method 5 min Total less than 10 min in inner door panel Ultrahigh-speed curing resin High-speed resin injection (5-min curing) Removable High

technology (3-min injection) ) y t i e

s Ultrahigh-speed curing resin Resin injection e r o g c Blending chain transfer agent e s i d v Anionic polymerization

e n r i u s Existing epoxy resin C Vacuum e R

( (Amine curing )

Low 0 3 5 35 90 Resin flowable Time (min) It takes 3 min by multipoint injection *Based on isothermal condition Copyright 2008 Toray Industries, Inc. All Rights Reserved 55 Basic strategies 2 Development of new application by expansion of technical center

4 worldwide R&D sites [R&D workforce: Approx. 350 workers] Site Name of unit Main function TORAY Technical Dept. / Research - Basic and general R&D center institution, A&A center - Headquarter of R&D TCA Technical center / Research - R&D for aircraft Prepreg & resin institution Technical center CFA Technical center - Develop industrial application in US - R&D for Carbon fiber SOFiCAR Composite center - Develop industrial application in EU - Develop molding method TORAY : General R&D center from yarn to composite material Overseas site: Develop new application with market-based development function

Enhancement of Technical support / Solution, Cooperation among government, industry and academia, Discover potential needs

Expand business in high-performance field and composite business in which we can take advantage of our strength Commercial aircraft Long-term Automobile, Electrical cable Core Pressure vessel Growing Robot, Uranium centrifuge, etc. business Civil engineering, sports, etc. business Copyright 2008 Toray Industries, Inc. All Rights Reserved 56 Basic strategy 3 Expand supply capability by continuing proactive capital investment Continue capital investment in worldwide In Japan : 1 line precursor / 1 line CF / 1 line Prepreg – under construction In USA : 1 line precursor / 1 line CF / 1 line Prepreg – under construction In EU : 1 line CF – under construction Plan to start local production of Precursor and Prepreg in Europe Establish first production line of precursor and Prepreg in Europe Integrated production system from precursor to Prepreg Reduction of transport cost Install dedicated large machine for industrial application World’s largest dedicated machine with 4000ton production capacity Cost-down by high energy efficiency and scale merit Secure suitable supply

Copyright 2008 Toray Industries, Inc. All Rights Reserved 57 Basic strategies 3 Promote proactive capita investment ahead of competitors Expansion plan of carbon fiber production lines Ton/year ( As of end of year ) 35000 Future vision CFA 30000 SOFICAR Start in Jan, 2008 Ehime’s expansion Future vision TORAY 25000 Start in Aug, 2007 Under Future SOFiCAR’s expansion construction vision Start in Jan, 2007 20000 Ehime’s expansion Start in Jan, 2006 CFA 15000 CFA’s expansion Start in Oct, 2004 SOFiCAR’s expansion 10000 SOFiCAR

5000 TORAY

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Capacity 9,100 10,900 17,900 25,000 more 30,000 more Copyright 2008 Toray Industries, Inc. All Rights Reserved 58 Basic strategies 3 Promote proactive capita investment ahead of competitors Expansion plan of Prepreg production lines ㎡ Million / year ( As of end of year ) 60 Future vision TCA 50 TORAY Under construction Future vision TCA: 1 line Ishikawa : 1 line Future 40 vision Start in Jan, 2007 Ehime’s expansion 30

Start in Jan, 2006 TCA 20 TCA’s expansion

10 TORAY

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Capacity 10.2 16.4 28.0 Copyright 2008 Toray Industries, Inc. All Rights Reserved 59 Basic strategy 4 Give consideration to recycle and global environment

Establish CF recycle technology - Establish Collecting system - Demonstrate recycle technology - Verify business potential

Survey CF’s effect on global environment - Survey CF’s LCA - Analyze production energy of CF and reduce its energy

JCMA started establishing CF recycle system and studying its business ◆Granted project of METI Theme: The energy reduction at carbon fiber manufacturing process * JCMA promotes “Proof research and development of carbon fiber recycling technology” ◆Twentieth production energy compared with producing CF from raw materials (Estimation) ◆CF recycle flow

Composite Thermal Milled fiber Filtering Cutting cracking Milled Prepreg Chopped fiber

Yarn / Fabric Collection 1st smash 2nd smash Sorting CF for cement filling

Establishment of collection system Demonstration of recycle technology Study of business potential ◆Schedule Apr, 2008 Start-up of a pilot plant Apr, 2008 – Mar, 2009 Demonstrated operation of recycle process and evaluation Summer, 2008 Start of user’s evaluation Copyright 2008 Toray Industries, Inc. All Rights Reserved 61 Basic strategies 4 Consideration to global environment

LCA of aircraft and automobile (“TORAY model”) LCA (Life Cycle Assessment): the assessment of the environmental impact of a given product or service throughout its lifespan

Aircraft CO2 emission Automobile CO2 emission

Material & parts Material & parts production, production: 13% Disposal：1% Assembly, Disposal: less than 1%

Flight: 99% Drive：84% Assembly：4% (Based on 10-year operation) (Based on 10-year driving)

Most part of CO2 is emitted during operation and driving

Improvement of mileage by weight saving with using Carbon Fiber is a key to reduce CO2 emission.

LCA of aircraft and automobile (“TORAY model”)

Aircraft CO2 emission Automobile CO2 emission

CFRP in use at 50%  20% weight saving CFRP in use at 20%  30% weight saving Annual 2,700 tons CO2 Annual 0.5 tons CO2 reduction / aircraft reduction / car

Amount of CO2 emission reduction in Japan (CFRP in use)

Japan 430aircrafts (more than 100 seats) 2,700t/(unit -year) : Approx. 1 MM t CO2/year

Japan 42MM cars (except mini cars)， 0.5t/(unit-year) ：Approx. 20 MM t CO2/year

Total Approx. 21 MM t CO2/year

Contribution to reduction of Japanese CO2 emission (CFRP in use)

Equal to 1.5% of Japanese gross CO2 emission – 1.3 billion ton CO2/year) (Equal to 8% of Japanese transportation dept. CO2 emission – 0.25 billion ton CO2/year)

Unit: ton 100,000 Industrial 88,000 90,000 Aerospace 80,000 Sports Toray's sales Qty. (Plan) 69,000 70,000

60,000 52,000 50,000 37% 40,000 35,000 35% 30,000 22,000 34% 20,000 当社シェア 34% 10,000 34%

0 2004 2007 2010 2012 2015

Net sales by product type Net Sales by application 350 350 Composite Industrial Use

300 Intermediate products 300 Aerospace Carbon Fiber Sports 250 250 Unit: Billion ¥ Unit: Billion ¥

200 200

150 150

100 100

50 50

0 0 5 2 0 7 d d d d 5 2 0 7 d d 1 1 1 0 n n n n n 1 1 1 0 n 0 u 0 0 0 u u u u 0 0 0 0 u o o 2 2 2 2 o o o o 2 2 2 2 r r r r r r Y Y Y Y Y Y Y Y A A A A A A F F F F F F F F

Copyright 2008 Toray Industries, Inc. All Rights Reserved 66 Descriptions of predicted business results, projections and business plans contained in this material are based on assumptions and forecasts regarding the future business environment, made at the present time.

The material in this presentation is not a guarantee of the Company’s future business performance.