Japanese Semiconductor Industry Service : Companies, 1990

Japanese Semiconductor Industry Service

Companies DataQuest nn a company of MmMm TheDun&BiadstFeetCorporatic

1290 Ridder Paric Drive San Jose, California 95131-2398 (408) 437-8000 Tfelex: 171973 I«x: (408) 437-0292

Sales/Service Offices:

UNITED KINGDOM FRANCE EASTERN U.S. Dataquest UK Limited Dataquest SARL Dataquest Boston Roussel House, Tour Gallieni 2 1740 Massachusetts Ave. Broadwater Park 36, avenue Gallieni Boxborough, MA 01719-2209 Denham, Uxbridge, Middx UB9 5HP 93175 Bagnolet Cedex (508) 264-4373 England France Tfelex: 171973 0895-835050 (1)48 97 31 00 Fax: (508) 635-0183 Tfelex: 266195 Tfelex: 233 263 Fax: 0895 835260-1-2 Fax: (1)48 97 34 00

GERMANY JAPAN KOREA Dataquest GmbH Dataquest Japan, Ltd. Dataquest Korea Rosenkavalierplatz 17 Tkiyo Ginza Building/2nd Floor Daeheung Bldg. 505 D-8000 Munich 81 7-14-16 Ginza, Chuo-ku 648-23 Yeoksam-dong >^fest Gertnatiy Tbkyo 104 J^an Kangnam-gu, Seoul 135 Korea (089)91 10 64 (03)546-3191 011-82-2-552-2332 Tfelex: 5218070 Tfelex: 32768 Fax: 011-82-2-552-2661 Fax: (089)91 21 89 Fax: (03)546-3198

The content of this rq>ort represents our interpretation and analysis of information generally avail able to the public or released by responsible individuals in the subject conq>anies, but is not guaranteed as to accuracy or coiiq>leteness. It does not contain material provided to us in confidence by our clients.

This information is not furnished in coimection with a sale or offer to seU securities, or in coimection with the solicitation of an offer to buy securities. This firm and its parent and/or their officers, stockholders, or members of their families m^, fifom time to time, have a long or short position in the securities mentioned and m^ sell or buy such securities.

Printed in the United States of America. All rights reserved. No part of this publication may be reproduced, stored in r^rieval systems, or transmitted, in aiiy form or by any means—mechanical, electronic, photocc^ing, duplicating, microfilming, videotq>e, or otherwise—without the prior written permission of the publisher.

Table of Contents

JAPANESE SEMICONDUCTOR INDUSTRY SERVICE Company Profiles

ENTRODUCnON Intioduction to Company Profiles

COMPANY PROFILES Ccnnpany Profiles Fuji Electric Fujitsu Hitachi Matsushita Mitsubishi NEC NTT Old Ricoh Saaksa Sanyo Seiko Epscxi Sharp Sony Toshiba Other Companies

(Page intentionally left blank)

Company Summary

All major Japanese semiconductor producers, including Nippon Telegraph and Telephone (NTT), are profiled in this binder. Each profile is organized into three subject areas: general corporate background, specific semiconductor-related details, and financial statements. Subcategories in each of these areas are outlined as follows: • Corporate - Financial - Background - Strategy - Organization - Operations • Semiconductor Segment - Revenue—worldwide and regional - Market share—worldwide and regional - Products and technology - Investments - Facility locations - Alliances and agreements - Distribution channels • Financial Statements The companies covered in this section and their fiscal year-end dates are as follows:

Company Fiscal Year End

Fuji Electric Co., Ltd. March 31 Fujitsu Limited March 31 Hitachi, Ltd. March 31 Matsushita Electric hidustrial Co., Ltd. March 31 Mitsubishi Corporation March 31 NEC Corporation March 31 NTT Corporation March 31 Oki Electric Industry Company, Limited March 31 Ricoh March 31 Rohm Company Ltd. March 31 Sanken Electric Co., Ltd. March 31 Sanyo Electric Co., Ltd. November 30 Seiko-Epson Private Company Sharp Corporation March 31 Sony Corporation March 31 Toshiba Corporation March 31

The following information was used in the company profiles: • Total corporate revenue is based on the Japanese fiscal year (except Sanyo), which runs from April 1 to March 31 • Semiconductor revenue is based on the calendar year, from which Dataquest derives its estimates. • The following companies changed their fiscal year-end date in 1987: - Matsushita—November 20 to March 31 Sony—October 31 to March 31 (In the years prior to 1987, the numbers were adjusted to March 31 fiscal year for comparison purposes.) • Because of the change in accounting methods, some companies have revised their historical financial figures. Dataquest has retained the latest numbers reported by each company. • The yen per US$1 exchange rate used to compute company revenue is based on an average over both the fiscal year and calendar year (see Table 0).

Tables 1 through 7 and Figures 1 and 2 summarize the corporate revenue of the 15 major semiconductor companies covered in this section.

Table 0

Exchange Rates--Yen per US$1

Japanese Calendar Year Fiscal Year

1981 221 228 1982 249 249 1983 237 236 1984 237 245 1985 238 221 1986 168 160 1987 144 138 1988 130 128 1989 138 Source: Dataqueit April 1990

Table 1 Total Consolidated Corporate Revenue of Major Japanese Semiconductor Manufacturers (Billions of Yen) Japanese Fiscal Year CAGR Company 1984 1985 1986 1987 1988 1984-1988

Fuji Electric* 381.2 526.3 539.5 557.2 680.2 8.9% Fujitsu 1,562.3 1,691.8 1,789.4 2,046.8 2,387.4 11.2% Hitachi 5,013.3 5,010.5 5,543.2 5,717.0 6,401.4 6.3% Matsushita 4,734.2 5,117.6 4,647.1 5,067.2 5,504.3 3.8% Mitsubishi 2,034.8 2,109.5 2,107,5 2,368.3 2,716.8 7.5% NEC 2,258.4 2,334.7 2,449.7 2,714.7 3,082.8 8.1% Old 417.5 392.6 407.4 451.4 555.5 7.4% Ricoh 545.5 593.9 592.4 674.2 729.4 7.5% Rohm 103.0 97.8 107.2 117.6 146.1 9.1% Sanken 62.4 63.4 66.3 81.0 97.5 11.8% Sanyo 1,420.7 1,500.1 1,181.1 1,186.4 1,236.8 (3.4%) Seiko-Epson N/A N/A N/A N/A N/A N/A Sharp 1,105.4 1,149.1 1,038.4 1,077.8 1,238.4 2.9% Sony 1,327.9 1,433.8 1,456.5 1,555.2 2,145.4 12.7% Toshiba 3,342.8 3,373.0 3,307.6 3,572.4 3,800.9 3.3%

•Fuji Electric's fiscal year 1984 is noiKonsolidaud. lu CAGR is between 1985 md 1988. Sowce: Con^iany Amiual Report N/A = Not AvaUable DaUqoest Apia 1990

Table 2

Total Consolidated Corporate Revenue of Major Japanese Semiconductor Manufacturers (Millions of Dollars) Japanese Fiscal Year CAGR Company 1984 1985 1986 1987 1988 1984-1988

Fuji Electric* 1,556 2,381 3,372 4,038 5,314 30.7% Fujitsu 6,377 7,655 11,184 14,832 18,652 30.8% Hitachi 20,462 22,672 34,645 41,427 50,011 25.0% Matsushita 19,323 23,157 29,045 36,719 43,002 22.1% Mitsubishi 8,305 9,545 13,172 17,161 21,225 26.4% NEC 9,218 10,564 15,311 19,672 24,084 27.1% Oki 1,704 1,777 2,546 3,271 4,340 26.3% Ricoh 2,227 2,687 3,702 4,886 5,699 26.5% Rohm 420 443 670 852 1,142 28.4% Sanken 255 287 414 587 762 31.5% Sanyo 5,799 6,788 7,382 8,597 9,663 13.6% Seiko-Epson N/A N/A N/A N/A N/A N/A Sharp 4,512 5,199 6,490 7,810 9,675 21.0% Sony 5,420 6,488 9,103 11,270 16,761 32.6% Toshiba 13,644 15,262 20,672 25,887 29,694 21.5%

'Fuji Electric's fiscal year 1984 is nonconsolidated. Its CAGR is between 1985 and 1988. Source: Company Annual Repon N/A = Not Available Dataquest Apiil 1990

Table 3

Estimated Worldwide Semiconductor Revenue of Major Japanese Semiconductor Manufacturers (Billions of Yen) Calendar Year CAGR Company 1984 1985 1986 1987 1988 1989* 1984-1989

Fuji Electric 41.5 37.3 34.2 36.3 45.0 51.2 4.3% Fujitsu 282.0 242.6 227.5 259.3 338.9 405.9 7.6% Hitachi 486.1 397.7 360.2 377.0 455.8 542.3 2.2% Matsushita 220.0 215.6 196.4 209.8 244.8 258.2 3.3% Mitsubishi 228.5 157.4 187.5 214.8 300.6 362.8 9.7% NEC 533.5 472.2 436.7 485.0 590.6 685.0 5.1% Oki 85.8 73.1 71.5 93.7 123.1 155.3 12.6% Ricoh N/A N/A 9.2 9.4 11.1 12.6 N/A Rohm 59.7 58.9 69.0 74.6 93.7 102.1 11.3% Sanken 38.4 37.1 37.4 42.3 49.8 53.4 6.8% Sanyo 107.8 106.8 102.7 122.5 140.8 156.2 7.7% Seiko-Epson 27.3 22.1 27.6 35.3 40.4 50.8 13.2% Sharp 79.8 78.1 72.3 85.0 134.7 169.7 16.3% Sony 40.1 59.9 76.5 82.2 123.5 148.6 30.0% Toshiba 370.0 349.4 380.9 436.2 571.3 674.7 12.8%

•Pielimiiiaiy Source: Dataquest N/A = Not Available >^)ril 1990

Table 4

Estimated Worldwise Semiconductor Revenue of Major Japanese Semiconductor Manufacturers (Millions of Dollars) Calendar Year CAGR Company 1984 1985 1986 1987 1988 1989* 1984-1989

Fuji Electric 175 157 204 252 346 371 18.6% Fujitsu 1,190 1,019 1,354 1,801 2,607 2,941 21.7% Hitachi 2,051 1,671 2,144 2,618 3,506 3,930 14.3% Matsushita 928 906 1,169 1,457 1,883 1,871 19.3% Mitsubishi 964 661 1,116 1,492 2,312 2,629 24.4% NEC 2,251 1,984 2,599 3,368 4,543 4,964 19.2% Oki 362 307 426 651 947 1,125 27.2% Ricoh N/A N/A 55 65 85 91 N/A Rohm 252 247 411 518 721 740 30.1% Sanken 162 156 223 294 383 387 24.0% Sanyo 455 449 611 851 1,083 1,132 24.2% Seiko-Epson 115 93 164 245 311 368 28.2% Shaip 337 328 430 590 1,036 1,230 32.4% Sony 169 252 455 571 950 1,077 53.9% Toshiba 1,561 1,468 2,267 3,029 4,395 4,889 29.5%

•Preliminaiy Source: DaUquest N/A = Not Available April 1990

Table 5

Total Semiconductor Revenue as a Percentage of Total Corporate Revenue for Major Japanese Semiconductor Manufacturers Calendar Year Average Company 1984 1985 1986 1987 1988 1984-1988

Fuji Electric 11.1 7.6 6.4 6.6 6.9 7.7 Fujitsu 19.1 14.6 12.9 13.1 14.7 14.9 Hitachi 10.0 7.9 6.6 6.6 7.3 7.7 Matsushita 5.0 4.3 4.1 4.2 4.5 4.4 Mitsubishi 11.7 7.5 8.9 9.3 11.4 9.8 NEC 25.0 20.4 18.0 18.3 19.7 20.3 Oki 21.5 18.3 17.7 21.3 23.2 20.4 Ricoh N/A N/A 1.5 1.4 1.6 0.9 Rohm 62.9 59.4 65.6 64.9 67.4 64.1 Sanken 65.0 58.8 56.9 54.7 53.3 57.8 Sanyo 7.6 7.2 8.1 10.3 11.5 9.0 Seiko-Epson N/A N/A N/A N/A N/A N/A Sharp 7.4 6.9 6.8 8.0 11.2 8.0 Sony 3.1 4.3 5.3 5.4 6.2 4.8 Toshiba 11.6 10.4 11.4 12.4 15.3 12.2

Note: For conq>aiison, Japanese fiscal year mimbeif were converted to calendar year munbers. Source: Dataquest N/A = Not Available April 1990

Table 6

Preliminary Estimated 1989 Semiconductor Revenue By Geographic Region for Major Japanese Semiconductor Manufacturers (Billions of Yen) United Rest of Company States Japan Europe World Total

Fuji Electric 2.8 42.6 3.0 3.2 51.6 Fujitsu 73.0 282.2 30.1 20.4 405.7 Hitachi 80.3 370.5 39.7 51.9 542.5 Matsushita 15.9 208.5 13.0 20.7 258.1 Mitsubishi 58.0 248.7 28.3 27.9 362.8 NEC 101.6 480.0 58.2 45.7 685.4 Oki 46.6 86.5 9.5 12.6 155.3 Ricoh 0.4 11.7 0.1 0.1 12.4 Rohm 5.4 82.8 3.2 10.8 102.1 Sanken 0.7 36.7 0.7 15.5 53.5 Sanyo 3.5 128.1 1.5 23.0 156.1 Seiko-Epson 8.7 39.2 1.1 1.8 50.8 Sharp 11.5 138.0 3.7 16.4 169.6 Sony 5.5 122.5 6.9 13.5 148.5 Toshiba 159.8 375.6 57.0 82.0 674.4

Columns may not add to totals shows because of rouuding. Source: Dataquest April 1990

Table 7

Preliminary Estimated 1989 Semiconductor Revenue By Geographic Region for Major Japanese Semiconductor Manufacturers (Millions of Dollars) United Rest of - Company States Japan Europe World Total

Fuji Electric 20 309 22 23 374 Fujitsu 529 2,045 218 148 2,940 Hitachi 582 2,685 288 376 3,931 Matsushita 115 1,511 94 150 1,870 Mitsubishi 420 1,802 205 202 2,629 NEC 736 3,478 422 331 4,967 Oki 338 627 69 91 1,125 Ricoh 3 85 1 1 90 Rohm 39 600 23 78 740 Sanken 5 266 5 112 388 Sanyo 25 928 11 167 1,131 Seiko-Epson 63 284 8 13 368 Sharp 83 1,000 27 119 1,229 Sony 40 888 50 98 1,076 Toshiba 1,158 2,722 413 594 4,887 Source: Ditaquest April 1990

Figure 1 Major Japanese Semiconductor Manufacturers Ranked by Semiconductor Revenue as a Percent of Total Corporate Revenue 1989 (Preliminary Estimates)

Rohm c^c^.^x^^;:3.\XXXXV^K^^^ Okl x:vOCVvS>^\XV^^.:i NEC ^:%x^3>:s-v,\xN Toshiba -s-.:ss:xs:^^:<^s] Fujitsu ^;^:xvvvc>N Sanyo .^'NSv-vv! Mitsubishi •v.S^>^N^ Sharp ^cv:'^.NVC-^ Hitachi ^!vx

T ' 1 ] 1 10 20 30 40 50 eo 70 60 Percentage

0006600-1 Source: Daiaquest April 1990

Figure 2 Preliminary Estimated 1989 Semiconductor Revenue by Geographic Region for Major Japanese Semiconductor Manufacturers

Fuji Electric ^:^AN\\\VV\XV\VVVsVWsNA\XV^ Fujitsu ^xvx\xx'v\v<\x\v\x\\xxv\\\\vvsxx\xx: Hitachi -^X\\X\\.NXx-\xx\xX\X\X\V\X\-0 Matsushita \x%:v\x\x\xx\x\x\:wv\\\\\\x-- Mitsubishi -^\:%\\\\:v^x>xxx\\:V\NV\x-Cvsx\] NEC KV\vxv.>Axxsxxxxv\Vs\xxxxv\x:vvoXXXxXS Ricoh \XXSXX\XXX%-..SX%\XX\X\XX\XVx\XXXX\XX\vV.N'%%^.x-.-^ Rohm ',:.%-<'".yS'\S^ sx;vv\v\xvvvxxxx\v-^.'%x:\xxx^ Sanken \\\vxvvvX'%xs\\\x\\\\x:v^\:\M Sanyo VxXx\\Xs\:X^XxXVXSXXVX\XXX Sony .x\X%%;xxvvXX^X\vAXAX>\Sx^XX\N.Xv\:XX%XX\:\>.X Toshiba •-^^•^^'^ —I— —I— m 40 w m lOD Percentage Japan United States IX^X^j Europe I I Rest of World

OOOESOO-2 Source: Dalaquest April 1990

(Page intentionally left blank)

Fuji Electric Company, Ltd. Corporate

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation.

Address Head Office 12-1, Yurakucho 1-chome Chiyoda-ku, Tokyo 100, Japan

Phone (03)211-7111 Fax (03) 214-2744

President Takeshi Nakao Chairman Hideo Abe

Main Product Areas Power plant and industrial mac Systems Electronics devices Standard machinery and apparatus Vending machines and specialty appliances

No. of Employees 12,066

Top Shareholders Fujitsu Ltd. 7.2% Siemens AG 7.0% Asahi Life Insurance 5.7% Furukawa Electric 3.8% DKB 3.6% Sumitomo Trust 2.2% IBJ 2.0%

Outstanding Stock Foreign Owned 9.3%

Stock Exchanges All major Japanese

Ranking (based on 16th among Japanese electronic equipment makers revenue)

STRATEGY

Fuji Electric's goals for 1989 and accomplishments in 1988 are highlighted in this section.

Fuji Electric's corporate goals include the following:

• Increase contribution of Electronics sector to overall corporate sales (In 1987 and 1988, 60 percent of R&D spending was for electronics sector.)

• Continue to restructure and streamline organization to reduce costs and increase efficiency

• Increase sales of the Systems sector as it contributes to overall sales

• Become a major participant in the growing computer-integrated manufacturing market (CIM)

The following developments occurred at Fuji Electric during 1988:

• Developed two new groups into which all product lines report: Standard Products and Electrical Machinery Systems Group

• Increased overseas procurement in an effort to further reduce costs

• Established Public Authority Sector to service public works projects and Data Processing Business Promotion Center for factory automation and data processing products

• Redefined the role of each subsidiary and affiliate and consolidated financial statements

• Introduced 32-bit MICREX-F5(X) program controller system

• Listed Fuji Denki Reiki Co., Ltd., which markets vending machines, showcases, and retailing data systems, on the Tokyo stock exchange (This is the first group company to become public.)

ORGANIZATION

Fuji Electric was founded jointly with Siemens AG of West Germany and Funikawa Electric of Japan in 1923. In 1935, Fujitsu was created as a separate entity from Fuji Electric's Telephone Division. Fuji Electric maintains strong ties with Siemens. In 1980, the two formed Fuji Electronic Components, which is currently manufacturing MOSFETs. Figure 1 shows the organization of Fuji Electric.

Figure 1

Fuji Electric Co., Ltd. Organizational Chart

Board of i President's Executive 1 Directors 1 Office Committee |

Fuji Electric and KHI Nuclear Power Promotion Group Export Control Office

Technology and Development Managing Center

Corporate Planning Office - Data Processing Center Legal Departnnent General Affairs Department Production TachnoJogy Center Personnel Department

Accounting Department Purchasing Center Financial Department

Systems Department Electrical Machinery and Systems Group Overseas Operations Department k , 1 ^H r-uaiic cniBrDrtse secior i Sales Assistance Department Energy Sector ] Auditor's Office r> k r> 1 Systems sector Advertising Department ^ Engineering Coordination Division 1 Secretary's Office - Systems Coordination Division | 1 Fuji Electric Corporate Training Center Group Coordination Division Fuji Electric Hospital

Standard Products Group

Electronic Sectors Standard Machinery and Apparatus Sector Vending Machines and Specialty Appliances Sector

0004631-1 Source: Fuji Electric Co., Ltd.

OPERATIONS

In 1988, Fuji Electric began reporting consolidated financial statements. For the purposes of comparison, this section will use the nonconsolidated figures.

Product Segments

Fuji Electric is divided into five product groups. Examples of products within each category are listed below.

• Power plant, industrial machinery—Power generating equipment, transformers, power receiving and distributing equipment, power network control, AC and DC motors, treatment and monitering equipment, power supplies for computers

•0 Systems—Data processing equipment, artificial intelligence systems, factory control equipment, robots, video sensors, motors, laser devices, clean rooms and related facilities

• Electronics—High-voltage diodes, power transistors, solar cells, custom ICs, discrete devices, photoconductive drums, magnetic storage equipment, power MOSFETs

• Standard machinery—Meters, motors, special motors, fans, relays, switches, terminal blocks, circuit breakers, transformers, labor-saving systems, compressors

•! Vending machine and specialty appliances—Vending machines, coin sorters, card- operated accountability systems, dispensers, automatic tea servers, bill validators, protocol analyzers, open showcase for food, coolers, garbage treatment equipment, energy management, and fully automated shopping systems

Product Revenue

Figure 2 and Table 1 show Fuji Electric's revenue by product segment from 1984 through 1989. Fiscal 1989 revenue was released as this profile was being updated. It has been included in Table 1.

Figure 2

Product Revenue as a Percentage of Total Corporate Revenue

Percentage 100- •H Vending 90 Machine 80 I I Standard Machinery 70 rWl Electronic ^^ Devices ^aa Systems/ 60 Instrumentation 50 FTxl Power Plant/ industrial 40 30- 20

10- 0^ -v..-^ V- -^t. I t\x\V"' 19S4 1985 198S 1967 igsB

0004631-2 Sgurct: Dataquest Auguil 19S9

Table 1

Sales by Product Segment (Billions of Yen)

1984 1985 1986 1987 1988 1989

Power Plant and Industrial Machinery ¥159 ¥145 ¥156 ¥171 ¥152 ¥174 Systems / Instrumentation 41 50 52 43 42 53 Electronic Devices 45 55 51 51 58 65 Standard Machinery 59 71 72 70 82 101 Vending Machines and Specialty Appliances 51 60 55 58 68 87

Total ¥355 ¥381 ¥386 ¥393 ¥402 ¥479

Exchange Rate (Yen per USSl) 236 245 221 160 138 128

Source: Fuji Electric Annual Report Dataquest August 1989

Domestic versus International Revenue

Fuji Electric does not report its domestic versus international revenue. However international sales were estimated to be 14 percent of total corporate revenue in 1988.

Growth Rate

Figure 3 shows the year-to-year growth rates of product segment revenue. Following Figure 3 is a list of factors explaining the changes in 1988 product growth.

Figure 3

Growth Rates by Product Segment (Yen-Based)

Growth Rate "^n n3 Power Plants ^Wi Electr

10- •t. ^ xV n IP ^L • K -10- i 1 I 1 " -20- 1985 1986 1987 1986

00046:J1- 3 Sources Dalaquett Aufutt 19&9

Main Factors Affecting 1988 Growth

The major factors affecting Fuji Electric' s growth in 1988 are listed below by product segment.

• Power plant, industrial machinery

- Domestic investments in public works were strong, but outside Japan sales were weak.

• Systems

- Demand increased for office automation, data processing, and computer power supply equipment.

- Demand for large-scale systems, such as plant instrumentation and clean room systems, was down.

• Electronic devices

Demand for custom ICs generated an increase of approximately 25 percent in IC sales.

- Hybrid IC sales declined because of a drop in demand.

Demand of power devices increased, particularly in numerically controlled ma chine tools, industrial robots, air conditioner inverters, and switching power supplies.

Sales of silicon diodes were up 42 percent because of demand in home electronic applications.

Sales of computer peripherals (hard disk drives and sputtered media) were down as a result of increased competition and the strong yen.

• Standard machinery

Demand increased in both the rotating machinery and the apparatus control divisions because of the strong domestic economy

- Exports also increased 22.6 percent

Vending machines and specialty appliances

- Demand for vending machines, coin and currency mechanisms was brisk, while growth of open freezing and refrigerating showcases remained flat.

CAPITAL AND R&D INVESTMENTS

Fuji Electric's central R&D center is called Fuji Electric Corporate R&D, Ltd. and is located in Nagasaka, Yokosuka. Investments in 1988 were made to raise production capacity for MOSFETs, custom ICs, and hard disks and to expand computer integrated manufacturing (CIM) systems. Expenditures were also made for R&D equipment, particularly ICs, semiconductor devices, and semiconductor production equipment. Fuji Electric's capital and R&D spending in 1988 increased slightly from 9.4 percent of total corporate revenue to 9.5 percent in 1988. Total spending grew 2.7 percent over 1987. Figure 4 and Table 2 show R&D and capital spending as a percentage of total corporate revenue.

Figure 4

Capital and R&D Spending as Percentage of Total Corporate Revenue

Percent 12- Capital Spending 10 [SZ] RB.D Spending

^ % ''4, •'. 'V. X\ '^SSSS- ., vVvW' WXV^ 1984 1385 i^198 6 1987 19S8 \ \ ^ V *t ^^ 0004631- Source: DslaquEti Autuil 1989

Table 2

Capital and R&D spending (Billions of Yen and Millions of Dollars)

1984 1985 1986 1987 1988

Corporate Revenue ¥ 38 ¥ 381 ¥ 386 ¥ 393 ¥ 402 $1,504 $1,555 $1,747 $2,456 $2,913

Capital Spending ¥ 10* ¥ 10 ¥ 15 ¥ 15 ¥ 15 $ 42 $ 41 $ 68 $ 94 $ 109 % Total Revenue 2.8% 2.6% 3.9% 3.8% 3.7%

R&D Spending ¥ 18* ¥ 21 ¥ 22 ¥ 22 ¥ 23 $ 76 $ 86 $ 100 $ 138 $ 167 % Total Revenue 5.1% 5.5% 5.7% 5.6% 5.7%

Total Spending , ¥ 28 ¥ 31 ¥ 37 ¥ 37 ¥ 38 S 119 S 127 $ 167 $ 231 $ 275 % Total Revenue 7.9% 8.1% 9.6% 9.4% 9.5%

Exchange Rate (Yen per USSl) 236 245 221 160 138

*Estimated by Dataquest

Source: Fuji Electric Annual Reports Dataquest August 1989

Target R&D Areas

Some of Fuji Electric's notable examples of recent research are listed below.

Auto-focus control IC for cameras

CMOS high-voltage driver ICs for flat-panel displays and thermal printer heads

Metal organic chemical vapor deposition equipment with multitask controller

A 1 .OOOkW phosphoric acid fuel cell and molten carbonate type fuel cells

Large-area amorphous silicon solar cell for power generation

Programmable controllers with 32-bit microprocessor

Data transmission units for multiple signal transmissions over telephone lines

Data management system for factory automation

High-output laser for precision metal processing and welding

Superconductive materials made of oxide ceramics

Optical character reader that can read both Japanese and romain characters

FACILITIES

Table 3 shows the distribution of Fuji Electric's domestic and foreign manufacturing facilities. Fuji Electric has a total of 189 subsidiaries and affiliates worldwide.

Table 3

Fuji Electric Corporate Manufacturing Facilities

Countrv Facilities Tvoe

Japan 9 Manufacturing all products

Overseas 10 Subsidiaries or affiliate companies

Source: Dataquest August 1989

(Page intentionally left blank)

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation's semiconduc tor activity.

Address Matsumoto Factory 2666 Tsukama Matsumoto City, Nagano Prefecture 390, Japan

Phone (0263)25-7111

Management Hideo Onishi Tsuneto Sekiya Executive Managing Director General Manager General Manager IC Division Electronics Sector

Kaneyoshi Koyama Isamu Tatsuoka General Manager General Manager Discrete Semiconductor Division Matsumoto Factory

Main Product Areas Discrete Hybrid ICs Analog CMOS

Ranking (based 17th among Japanese semiconductor manufacturers on revenue) 27th among worldwide semiconductor manufacturers

STRATEGY

Listed below are some of Fuji Electric's accomplishments and goals during 1988 and goals for 1989.

Overall

Develop custom and hybrid IC business, especially in the U.S. market where it is currently very small (In 1988, sales of ICs increased 25 percent and 90 percent of ICs were custom)

Plan to keep position as 60 percent supplier to worldwide high-voltage rectifier diode market

Established position for foreign procurement of semiconductors in response to trade tensions

Increased sales of ICs and discrete devices to 58 percent of total Electronics sector's sales

Custom ICs

Introduced CMOS one-chip auto-focus unit for SLR camera (Fuji Electric is currently the only company with auto-focus chip)

Introduced flat-panel display custom ICs and custom driver ICs for thermal heads on facsimile machines and office equipment

Power Discretes

• Increased wafer production for power transistors for switching applications

• Introduced MOS-gate bipoplar transistor for high-speed switching application

Diodes

• Introduced 1600V diode module

ORGANIZATION

Figure 5 shows the organizational chart for Fuji Electric's Electronics sector.

Figure 5

Fuji Electric Co., Ltd. Electronics Sector

Business Planning Department

Administration Department

Computer PerlphersJs Division

Photoconductlve DNMs and Specialty Appliances Division

Standard IC Division Products I Electronics Group 8 Sector Discrete SemJconductor Division

Tokyo Electronics Products Sales Office

— Branch Offices (sales)

Matsumoto Factory

— llyama Factory — Omachi Factory | — Hokurlko Factory j L—j Tottori Factory

0004631-6 Source: Fuji Electric Co., Ltd. Dataquest Auguit 1989

OPERATIONS

Note: Exchange rates used in the semiconductor section of this profile are based on the calendar year.

Product Segments

The Company's main semiconductor product areas are listed below.

• Discrete—Power transistors, silicon and zener diodes, high-current rectifier diodes and thyristors, power MOSFETs

• Analog—Power regulators, custom ICs

• CMOS—Auto-focus ICs, custom ICs, controllers

• Hybrid ICs—Power supplies, power converters, solid-state relays

Product Revenue

Figure 6 shows Fuji Electric's percentage of semiconductor revenue by product. For example, only 18.5 percent of Fuji Electric's semiconductor revenue came from ICs in 1988, whereas 80.6 percent came from discrete products.

Figure 6

1988 Estimated Semiconductor Revenue Percentage by Product (Millions of Dollars)

Opto 1.4% MOS Technology 37.5% MOS Logic 100.0%

IC 17.2%

0004631-6 Source: Dataquett August 1989

Regional Sales

Fuji Electric's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4. Approximately 1 percent are captive sales.

Table 4

1988 Estimated Semiconductor Revenue by Region Percentage by Region (Billions of Yen)

Product United States Japan Europe ROW

Semiconductor 4% 82% 5% 9% IC 1 % 90% 7% 1 % Bipolar Digital 0 0 0 0 MOS (Technology) 0 100 0 0 MOS Memory 0 0 0 0 MOS Micro 0 0 0 0 MOS Logic 0 100 0 0 Analog 2 81 14 2 Discrete 5% 80% 5% 10% Optoelectronics 0 100% 0 0

Source: Dataquest August 1989

Growth Rate

Fuji Electric's growth rate by product hne is shown in the table and figures that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 7 graphically compares Fuji Electric's growth rate in the world market with the growth rate of the world market itself. This information is then provided for the Japanese market as well in Table 6 and Figure 8.

Worldwide Market Growth Rate

In 1988, Fuji Electric's sales of discrete products grew 35.4 percent. Overall, the Company grew 37.2 percent.

Table 5

Fuji Electric Sales in World Market (Millions of Dollars)

World Market 1987 1988 % Change %Chanee

Semiconductor $252 $346 37.2% 31.9% IC S 42 $ 64 52.0% 36.5% Bipolar Digital 0 0 0 9.2% MOS' (Technology) 14 31 119.8% 53.1% MOS Memory 0 0 0 90.3% MOS Micro 0 0 0 39.8% MOS Logic 14 31 119.8% 28.2% Analog 28 33 18.1% 15.3% Discrete S206 $279 35.4% 13.2% Optoelectronics S 4 $ 3 (23.1%) 25.4%

Exchange Rate (Yen per USSl) 144 130

Source;: Dataquest August 1989

Figure 7

Fuji Electric Growth Rate Compared with World Market

Growth Rate 1

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004631-7 Dataquest Source: August 1989

Japanese Market Growth Rate

Fuji Electric's sales in Japan grew 38.1 percent, almost 3 percent faster than the Japanese market. The Company's sales and growth rate compared with the Japanese market are shown in Table 6 and Figure 8, respectively.

Table 6

Fuji Electric Sales in Japanese Market (Millions of Dollars)

Japanese Market 1987 198R %Chanee % Change Semiconductor $205 $283 38.1% 35.6% IC $ 38 $ 58 51.8% 39.1% Bipolar Digital 0 0 0 18.3% MOS (Technology) 14 31 119.8% 58.4% MOS Memory 0 0 0 85.4% MOS Micro 0 0 0 35.9% MOS Logic 14 31 119.8% 50.3% Analog 24 27 12.2% 11.7% Discrete $164 $222 35.6% 18.5% Optoelectronics $ 3 $ 3 2.6% 42.3% Exchange Rate (Yen per USS1) 144 130

Source: Dataquest August 1989

Figure 8

Fuji Electric's Growth Rate Compared with Japanese Market

Growth Rate 100- Japanese Market rrq Fuji Electric

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004631-S Source: Dataquest Auguit 19S9

Other Japanese Companies

The growth rate by product line for Fuji Electric is compared with that of the Japanese companies tracked by Dataquest in the following graphs. Dataquest surveys a total of 18 companies, plus a category called "Other." The total of these companies' revenue were used for comparison in Figures 9 and 10.

Figure 9

Fuji Electric versus Japanese Companies in Japanese Market GroNvth Rate 90

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product °°°^631-9 S„„,„^ Dataquct August 1989

Figure 10

Fuj'i Electric versus Japanese Companies in World Market

Growth Rate 100- 90 Japanese Companies i ''•'••• 1 Fuji Eieotric 80

7Q.

60.

50-1 40

30-

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004631-10 Source: Dataquest August 1989

Channels of Distribution

In Japan, about 20 percent of Fuji Electric's products are sold through direct sales and the other 80 percent through dealers and representatives. The major distributors are Hoei Denki Co., Ltd., Fuji Denki Sangyo Co., Ltd., and Kyoda Denki Co., Ltd. In North America, Collmer Semiconductor, Inc. in Dallas, Texas, is the Company' s sole distributor. MOSFETs are produced and sold mainly through a joint venture with Siemens called Fuji Electric Components Co., Ltd.

CAPITAL SPENDING

Semiconductor capital investments as a percentage of tatal revenue are shown in Tables 7 and 8. Most corporate R&D spending is focused on custom ICs for industrial and consumer use. The semiconductor R&D lab is located at the Matsumoto factory.

Table 7

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Millions of Dollars

1983 19§4 19R5 1986 1987 1988

Revenue S124 S175 $157 $205 $252 $346 Semiconductor Capital Spending S 25 S 51 $ 50 $ 30 $ 21 $ 38 Growth Rate of Capital Spending 63% 100% (0.4%) (41%) (30%) 85%

Percent of Revenue 20% 29% 32% 15% 8% 11%

Exchange Rate (Yen per USSl) 237 237 238 168 144 130

Source: Dataquest August 1989

Table 8

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Billions of Yen

1983 xm 1985 1986 1987 1988 Revenue ¥29 ¥41 ¥37 ¥34 ¥36 ¥45 Semiconductor Capital Spending ¥ 6 ¥12 ¥12 ¥ 5 ¥ 3 ¥ 5 Growth Rate of Capital Spending 50% 100% 0 (58%) (40%) 67% Exchange Rate (Yen per USSl) 237 237 238 168 144 130

Source: Dataquest •••. August 1989

FACILmES

Semiconductor products are produced at the Matsumoto factory and its affiliates, as listed in Table 9. Fuji Electric Components Co., Ltd., a 10-year-old joint venture with Siemens, works with the Omachi Fuji Co. factory to produce primarily MOSFETs and bipolar linear ICs for consumer products.

Table 9

Fuji Electric Semiconductor Facilities

Name/Prefecture Function

Matsumoto Factory Fab, assembly, test—hybrid Nagano bipolar and MOS ICs, hard disk drives, diodes, rectifiers

IiyamaFujiCo.,Ltd. Assembly—diodes, rectifiers Nagano

Hokuriku Fuji Co., Ltd. Assembly—rectifiers, high Toyama speed diodes, transistors

Tottori Electric Co., Ltd. Assembly —transistors Tottori

Fuji Electric Corporate R&D Ltd. R&D—long-term projects Kanagawa

Ohmachi Fuji Co., Ltd. Assembly—MOSFETs, transistors, Nagano hybrid ICs

Source: Dataquest August 1989

ALLIANCES AND AGREEMENTS

Fuji Electric's alliances and agreements for 1985 to 1988 are summarized in Figure 11. For more in-depth information, please refer to Volume n of the Japanese Semiconductor Industry Service (JSIS) behind the tab entitled "Strategic Alliances."

Figure 11

Fuji Electric Co., Ltd. Semiconductor Alliances and Agreements

0004631-11 Source: Dataquest August 19£9

(Page intentionally left blank)

REVENUE SUMMARY

Tables 10 and 11 show Fuji Electric's semiconductor revenue in detail. The tables show sales from 1983 to 1988 in both billions of yen and millions of dollars.

Table 10

Fuji Electric Co., Ltd. Estimated Worldwide Semiconductor Revenue (Billions of Yen)

1983 im. 1985 1986 1987 1988 Total Semiconductor 29 41 37 34 36 45

Total IC 6 7 5 6 6 8

Bipolar Digital (Technology) 0 0 0 0 0 0

MOS (Technology) 1 1 1 1 2 4 NMOS 1 0 0 0 0 0 PMOS 0 0 0 0 0 0 CMOS 0 1 1 1 2 4 BiCMOS 0 0 0 0 0 0

MOS (Function) 1 1 1 1 2 4 MOS Memory 0 0 0 0 0 0 MOS Micro devices 0 0 0 0 0 0 MOS Logic 1 1 1 1 2 0

Analog 5 6 3 4 4 4

Total Discrete 21 31 30 27 30 30 Transistor 4 7 7 7 8 13 Diode 9 14 14 13 14 15 Thyristor 0 1 1 0 0 0 Other Discrete 8 9 9 7 7 8

Total Optoelectronic 2 3 2 1 1 0

Exchange Rate (Yen per US$1) 237 237 238 168 144 130

Source: Dataquest August 1989

Table 11

Fuji Electric Co., Ltd. Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

1983 1984 mi 1986 1987 1988 Total Semiconductor 124 175 157 205 252 346

Total IC 25 31 20 35 42 64

Bipolar Digital (Technology) 1 2 1 2 0 0

MOS (Technology) 4 5 6 7 14 31 NMOS 3 0 0 0 0 0 PMOS 0 0 0 0 0 0 CMOS 1 5 6 7 14 31 BiCMOS 0 0 0 0 0 0

MOS (Function) 4 5 6 7 14 31 MOS Memory 0 0 0 0 0 0 MOS Micro devices 0 0 0 0 0 0 MOS Logic 4 5 6 7 14 31

Analog 20 24 13 26 28 33

Total Discrete 90 132 127 163 206 279 Transistor 17 31 29 40 57 99 Diode 39 60 57 79 97 119 Thyristor 2 3 3 2 3 3 Other Discrete 32 38 38 42 49 58

Total Optoelectronic 9 12 10 7 4 3

Exchange Rate (Yen per US$1) 237 237 238 168 144 130

* Preliminary estimates for 1988.

Source: Dataquest August 1989

BALANCE SHEETS

Tables 12 and 13 show Fuji Electric's corporate non-consolidated balance sheets for 1985 through 1988. In 1988, the Company reported both consolidated and nonconsolidated figures for 1987 and 1988, both of which are stated in the following tables.

Table 12

Consolidated and Nonconsolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

1983 1984 1985 1986 mi im Total Semiconductor ¥124 ¥175 ¥157 ¥205 ¥252 ¥346

Total Current Assets ¥326 ¥318 ¥348 ¥394 ¥434 ¥496 Cash ¥ 45 ¥ 32 ¥ 62 ¥ 83 ¥ 87 ¥108 Receivables ¥141 ¥122 ¥115 ¥115 ¥148 ¥158 Inventory ¥ 84 ¥ 92 ¥ 86 ¥105 ¥104 ¥126 Other Current Assets ¥ 56 ¥ 72 ¥ 85 ¥ 91 ¥ 95 ¥104 Net Property. Plant, and Equipment ¥ 66 ¥ 74 ¥ 72 ¥ 70 ¥101 ¥104 Depreciation ¥ 90 ¥102 ¥115 ¥123 ¥147 ¥162 Other Assets ¥ 35 ¥ 35 ¥ 37 ¥ 39 ¥ 40 ¥ 43

Total Assets ¥427 ¥427 ¥457 ¥503 ¥575 ¥643

Total Current Liabilities ¥277 ¥273 ¥290 ¥336 ¥372 ¥428 Long-Term Debt ¥ 75 ¥ 73 ¥ 77 ¥ 54 ¥ 98 ¥ 77 Other Liabilities ¥ 7 ¥ 8 ¥ 8 ¥ 8 ¥ 14 ¥ 19

Total Liabilities ¥359 ¥354 ¥375 ¥398 ¥484 ¥524

Total Shareholders' Equity ¥ 68 ¥ 73 ¥ 82 ¥105 ¥ 91 ¥119 Common Stock ¥ 28 ¥ 29 ¥ 32 ¥ 42 ¥ 32 ¥ 42 Other Equity ¥ 15 ¥ 19 ¥ 26 ¥ 38 ¥ 26 ¥ 38 Retained Earnings ¥ 25 ¥ 25 ¥ 24 ¥ 25 ¥ 33 ¥ 39

Total LiabUity and Total Equity ¥427 ¥427 ¥457 ¥503 ¥575 ¥643

(Continued)

Table 12 (Continued)

Consolidated and Nonconsolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen) Income Statement (March 31) 1985 1986 1987 1988 mu 12SS! Revenue ¥381 ¥386 ¥393 ¥402 ¥540 ¥557 Domestic Sales N/A N/A N/A N/A N/A N/A Overseas Sales N/A N/A N/A N/A N/A N/A Other income 0 0 0 0 0 0 Cost of Sales ¥309 ¥318 ¥328 ¥327 ¥437 ¥440 Gross Margin (%) 19 18 17 19 19 21 R&D Expense ¥ 21 ¥ 22 ¥ 22 ¥ 23 N/A N/A SG&A Expense ¥ 62 ¥ 64 ¥ 64 ¥ 68 ¥ 95 ¥101 Other Operating Expenses 0 0 0 0 0 0 Total Operating Expenses ¥371 ¥382 ¥392 ¥395 ¥532 ¥541 Operating Income (Loss) ¥ 10 ¥ 4 ¥ 1 ¥ 7 ¥ 8 ¥ 16 Interest, Net ¥ 1 ¥ 2 ¥ 3 ¥ 5 ¥ 2 ¥ 4 Pretax Income ¥ 11 ¥ 6 ¥ 4 ¥ 12 ¥ 10 ¥ 20 Provision for Taxes (Credit) ¥ 4 ¥ 2 ¥ 1 ¥ 7 ¥ 5 ¥ 13 Effective Tax Rate (%) 36 33 35 58 50 65 Extraordinary Items 0 0 0 0 (¥ 2) 0 Net Income ¥ 7 ¥ 4 ¥ 3 ¥ 5 ¥ 4 ¥ 7

Avg. Shares Outstanding (Millions) 557 566 592 643 592 643 Employees 13,265 13.372 12.932 12,066 N/A N/A Capital Expenditures ¥ 10 ¥ 15 ¥ 15 ¥ 15 N/A N/A

Exchange Rate (Yen per US$1) 245 221 160 138 160 138

N/A = Not Avaialble * Consolidated figures

Source: Dataquest August 1989

Table 13

Consolidated and Nonconsolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

im. I2S4 mi 13M. 1987 1988 Total Current Assets $1,331 $1,439 $2,175 $2,855 $2,713 $3,594 Cash $ 184 $ 145 $ 388 $ 601 $ 544 $ 783 Receivables $ 576 $ 552 $ 719 $ 833 $ 925 $ 1,145 Inventory $ 343 $ 416 $ 538 $ 761 $ 650 $ 913 Other Current Assets $ 229 $ 326 $ 531 $ 659 $ 594 $ 754 Net Property, Plant, and Equipment $ 269 $ 335 $ 450 $ 507 $ 631 $ 754 Depreciation $ 367 $ 462 $ 719 $ 891 $ 919 $ 1,174 Other Assets $ 143 $ 158 $ 231 $ 283 $ 250 $ 312

Total Assets $1,743 $1,932 $2,856 $3,645 $3,594 $4,659

Total Current Liabilities $2,294 $2,538 $3,963 $5,138 $5,056 $6,616 Long-Term Debt $ 306 $ 330 $ 481 $ 391 $ 613 $ 558 Other Liabilities $ 29 $ 36 $ 50 $ 58 $ 88 $ 138

Total Liabilities $1,465 $1,602 $2,344 $2,884 $3,025 $3,797

Total Shareholders' Equity $ 278 $ 330 $ 513 $ 761 $ 569 $ 862 Common Stock » S 114 $ 131 $ 200 $ 304 $ 200 $ 304 Other Equity $ 61 $ 86 $ 163 $ 275 $ 163 $ 275 Retained Earnings $ 102 $ 113 $ 150 $ 181 $ 206 $ 283

Total LiabUity and Total Equity $1,743 $1,932 $2,856 $3,645 $3,594 $4,659

(Continued)

Table 13 (Continued)

Consolidated and Nonconsolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Income Statement (March 31) 1985 1986 1987 im. 12221 1988* Revenue $1,555 $ 1,747 $2,456 $2,913 $3,375 $4,036 EX)mestic Sales N/A N/A N/A N/A N/A N/A Overseas Sales N/A N/A N/A N/A N/A N/A Other Income 0 0 0 0 0 0 Cost of Sales S 1,261 $1,439 $2,050 $2,370 $2,731 $3,188 Gross Margin (%) 19 18 17 19 19 21 R&D Expense $ 86 $ 100 $ 138 $ 167 0 0 SG&A Expense $ 253 $ 290 $ 400 $ 493 $ 594 $ 732 Other Operating Expenses 0 0 0 0 0 0 Total Operating Expenses $1,514 $ 1,729 $2,450 $2,862 $3,325 $3,920 Operating Income OLoss) $ 41 $ 18 $ 6 $ 51 $ 50 $ 116 Interest, Net S 4 $ 9 $ 19 $ 36 $ 13 $ 29 Pretax Income $ 45 $ 27 $ 25 $ 87 $ 63 $ 145 Provision for Taxes (Credit) $ 16 $ 9 $ 9 $ 51 $ 31 $ 94 Effective Tax Rate (%) 36 33 35 58 50 65 Extraordinary Items 0 0 0 0 (9) 0 Net Income 29 S 18 $ 16 $ 36 22 51 Avg. Shares Outstanding (Millions) 557 566 592 643 592 643 Employees 13,265 " 13,372 12,932 12,066 N/A N/A Capital Spending $ 41 $ 68 $ 94 $ 109 N/A N/A

Exchange Rate (Yen per US$1) 245 221 160 138 160 138

* Consolidated figures

Source: Dataquest August 1989

Fujitsu Limited Corporate

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation.

Address Fujitsu Limited 6-1, Maninouchi 2-chome Chiyoda-ku, Tokyo 100, Japan Phone (03)216-3211 Fax (03) 216-9365 President Takuma Yamamoto Main Product Areas Computers and data processing Communications systems Semiconductors and electronic components Car audio No. of Employees 94,825

Top Shareholders Fuji Electric 14.3% Asahi Mutual Life Insurance 6.8% Dai-Ichi Kangyo Bank 4.7% Mitsubishi Trust 3.0% Industrial Bank of Japan 2.4% Japan Securities Clearing 2.3% Toyo Trust 1.9% Sumitomo Trust 1.9% Yasuda Trust 1.9% % Outstanding Stock Foreign-Owned 7.0% Stock Exchanges All major Japanese, Frankfurt, Zurich, London, Basel, Geneva Ranking (based on 1st among Japanese computer manufacturers revenue) Major producer of communications equipment

STRATEGY

Fujitsu's goals for 1989 and accomplishments in 1988 are highlighted in this section. Fujitsu's corporate goals include the following: • Expand mainframe presence in Europe and Australia • Increase market share of PCs and workstations • Expand creative R&D

• Shift from conventional exporter to local overseas producer The following developments occurred at Fujitsu during 1988: • Japan

Strengthened local manufacturing through technical exchanges and business alliances

- Promoted concept of integrated corporate information systems and increased sales of FACOM M-700 Series of medium- and large scale computers

Introduced 32-bit PC with CDROM memory called FM Towns

Inaugurated new Technology Center at Kawasaki Research and Manufacturing Facilities. Exhibits included: First neurocomputer robots Artificial intelligence for voice analysis ISDN teleconference HDTV

High-electron mobility transistor (HEMT) Resonant-tunneling, hot-electron transistor (RHET) 4-bit MPU based on Josephson junctions Flat-panel displays

United States Restructured Fujitsu America and other North American subsidiaries - Formed a new subsidiary to develop, manufactxire, and market PBX equipment - Increased local production of disk drives, assembly of communication control processors, and printed circuit boards in Hillsboro, Oregon Broke ground on a second building in Hillsboro Established new design centers in Georgia and Illinois to meet growing ASIC demands - Began construction on a semiconductor ASIC plant in Gresham, Oregon Asia Signed contract for installation of an optical submarine cable system to link Hong Kong, Japan, and Korea Established Fujian Fujitsu Communications Software Ltd., a joint venture with the Posts and Telecommunications Bureau of Fujian Province in China Granted Taicom Corp. of Taiwan a license to produce optical transmission systems

Established procurement office in Singapore to buy parts in Southeast Asia for worldwide Fujitsu companies

ORGANIZATION

Fujitsu is a spin-off of the parent company, Fuji Electric Co., Ltd. It is part of the DKB group (Dai-Ichi Kangyo Bank), formed in 1971. The DKB group is divided into subdivisions—the Furukawa, Kawasaki, Meiji, and Jugosha groups. Fujitsu is a member of the Furukawa group. Figure 1 shows the organization of the DKB group of companies and Figure 2 shows Fujitsu Limited's organization.

Figure 1

DKB Group Companies

Jugosha Shacho-Kai Sankln-Kai Kawasaki tVlutsumi-Kal Trading Fukoku Mutual Life Insur. Kawasaki Steel Kanematsu-Gosho Shiseido Company C. itoh & Company Nigata Engineering Yaslisuzu Motors (Orient Finance) Furukawa Company (Kyowa Hakko) (Showa Shell Seklyu) Nippon Light Metal (i.H.i.) (Nissho-iwal Corporation) Furukawa Eiectric (Kobe Steel) (Lion Corporation) Fuji Electric (Asahl Chemical) (Japan Metals & Chemicals) (Hitachi, Ltd.) (Ebara Corporation) Fujitsu Ltd. (Chlchlbu Cement) Shibusawa Warehouse

Intragroup Joint Ventures Meiji Group

World Energy Development MeijI Selka Century Leasing System MeiJI Milk Products Century Research Center MeijI Machine

Affiliate

0004339-1 Source: Industrial Groupings in Japan 1986/87 Dodwell Marketing Consultants Dataquest July 1989

Figure 2 Fujitsu Limited Company Ch^anization

Corporate Administration Board J> c :> -(^ Marketing and Sales Group (Systems) J^^ -<^|||^lnternational Operations Group (Systemsr_~^ Executive Committee c s> TelecommunJcations Group Data Processing Group

-^^11^ Electronic Components Operations Group ~~^

internallonaJ Operations Group ^ C (Electronic Devices) ^^^.^ 0004339-2 Source: Fujitsu Limited

OPERATIONS Fujitsu Limited is one of the top four suppliers of equipment to NTT. Product Segments

Fujitsu is divided into four product groups. Examples of products within each category are listed below.

• Car audio—Car radios and stereos, electronic fuel injection, emission control, and transmission equipment • Semiconductors and electronic components—ASICs, MPUs, memory, flat-panel displays, relays, connectors, keyboards • Communication systems—Fiber-optic transmission systems, digital switching and digital microwave systems, corporate information network systems, PBX, optical LANs, mobile radio equipment

• Computer and data processing—FACOM M-700 series of large and medium computers, FACOM VP supercomputers, superminicomputers, software, value-added networks, PCs, advanced workstations, Japanese-language word processors

Product Revenue Figure 3 and Table 1 show Fujitsu's revenue by product segment from 1984 through 1988. In 1988, the total revenue increased by 14.4 percent, the first double-digit growth since 1985. Net income and operating income increased during 1987 by 92 and 95 percent, respectively. The main reasons for the tremendous growth are improved domestic demand, increased capital investment activity, and successful new product introductions.

Figure 3 Product Revenue as a Percent of Total Corporate Revenue

Percentage IOOT •1 Other- 90-1 I I Communication eo Systems F^ Semloonductor 70- and Electrical Components 60- ^M Data Processing 50 KS\ Car Audio 40-1 30 20 10 0 1984 1985 1S66 1987 1988

SokUce: Dalaquest 0004339-3 Juiy 1989

Table 1 Sales by Product Segment (Billions of Yen)

1983 1984 1985 1986 1987 1988

Car Audio ¥ 49.4 ¥ 54.0 ¥ 58.5 ¥ 65.9 ¥ 56.6 ¥ 62.1

Data Processing 566.5 727.4 957.6 1,116.5 1,210.6 1,372.0

Semiconductors and Electronic Components 151.8 217.9 307.4 225.6 222.0 256.0

Communications System 170.2 186.1 210.8 254.2 270.3 324.8

Other 18.9 24,5 28,0 29.6 29.9 31.8

Total ¥956.8 ¥1 ,209.9 ¥1 ,562.3 ¥1,691.8 ¥1,789.4 ¥2,046.7

Exchange Hate 249 236 245 221 160 138 (Yen per US$1)

Note: Columns may not add to totals because of rounding.

Source: Fujitsu Corporation Annual Report Dataguest July 1989

Domestic versus International Revenue Figure 4 shows the year-to-year growth of Fujitsu's international and domestic sales for 1983 through 1988. In 1988, domestic sales were ¥1,594 billion and international sales were ¥453 billion. Sales to the Americas have averaged 59 percent of total overseas revenue. In 1987, sales to the United States alone were equal to 50 percent of total overseas sales. Sales to Europe reached 27 percent in 1987.

Figure 4 Total Corporate Revenue Growth of International versus Domestic Sales Percent Growth

50 Domsstlc L- --"j International 40

20-

10-

-10 1983-1984 1984-1985 1985-1986 1986-1987 1987-1988

0004339-4 Source: Dataquest July 1989

Growth Rate Figure 5 shows the year-to-year growth rates by product segment revenue. A list of factors explaining the changes in 1988 product growth follow this figure. Figure 5 Growth Rates by Product Segment (Yen-Based) Percent Change

Main Factors Affecting 1988 Growth The major factors affecting Fujitsu's growth in 1988 are listed below by product segment: • Car audio - Exports, especially AM/FM stereo cassette receivers, expanded Domestic sales of DAT, CD-ROMs, mobile radio systems, and electronic equipment for cars improved • Semiconductors and electronic components Demand for memory devices for data processing equipment grew CMOS gate array demand expanded Growth of laptops spurred demand for flat panel displays • Telecommunications - NTT and other companies invested heavily in facilities and telecommunications equipment - Corporate and overseas demand for communication networks increased • Data processing Governmental push to expand domestic demand spurred growth in data processing equipment - Many new products were introduced

CAPITAL AND R&D INVESTMENTS Fujitsu's capital and R&D spending in 1988 increased to 18.6 percent of its total revenue, a 23.6 percent increase over 1987 spending. In 1988, the Company showed positive growth for the first time in three years. In 1987 and 1986, R&D spending remained positive, but capital investments slowed down. Also in 1988, Fujitsu announced that it would be sponsoring an R&D center at Edinburgh University in Scotland. Figure 6 shows R&D and capital spending as a percent of total corporate revenue. Table 2 shows these amounts in yen and U.S. dollars, respectively.

Figure 6 Capital and R&D Spending as Percent of Total Corporate Revenue

Percentage 30- Capital Spending 25-j ES R&D Spendlnfl

10-

1S53 1984 igs5 1986 1987 1988 Source: Dataqueit db(>4339-e July 1989

Table 2 Capital and R&D spending (Billions of Yen, Millions of Dollars)

1983 1984 1985 1986 1987 1988 Corporate Revenue ¥ 957 ¥1,210 ¥1,562 ¥1,692 ¥ 1,789 ¥ 2,047 $3 ,843 $5,127 $6,376 $7,656 $11,181 $14,833 Capital Spending ¥ 111 ¥ 168 ¥ 298 ¥ 216 ¥ 142 ¥ 191 $ 445 $ 710 $1,215 $ 979 $ 887 $1,383 % Total Revenue 11.6% 13.8% 19.1% 12.8% 7.9% 9.3% R&D Spending ¥ 85.5 ¥ 103 ¥ 133 ¥ 157 ¥166.3 ¥190.1 $ 343 $ 436 $ 542 $ 710 $1,039 $1,378 % Total Revenue 8.9% 8.5% 8.5% 9.3% 9.3% 9.3% Total Spending ¥ 196 ¥ 270 ¥ 430 ¥ 373 ¥ 308 ¥ 381 $ 789 $1,146 $1,756 $1,690 $1,926 $2,760 % Total Revenue 20.5% 22.3% 27.5% 22.1% 17.2% 18.6% Exchange Rate (Yen per US$1) 249 236 245 221 160 138

Source: Fujitsu Corporation Annual Report Dataquest July 1989

Target R&D Areas Fujitsu has targeted four areas for research and development, which are listed below. In addition, it has accelerated research for the neurocomputer, cellular-array processing, and perpendicular magnetic recording. • Telecommunications - Prototyped optical and broadband switching system based on asynchronous transfer mode for ISDN Improved fiber-optic transmission system - Developed new technology for radio and satellite transmissions • Space development Developed module for protein crystal growth experiments in space Developed space robot simulator • Electronic devices Developed basic patterns for ICs with 0.2-micron resolution Designed a 170,000-gate fast Fourier transform processor Prototyped a 16-bit multiplier on a 4,000-gate gate array at 4.1ns for multiplication at room temperature Prototyped 4 Kbit SRAM with a speed of 0.5ns - Prototyped world's first 4-bit slice microprocessor based on Josephson technology Developed multicolor projection display using new phase transition-type liquid crystal • Materials - Developed methods and technologies for making superconductive devices available for practical use - Continued research on ceramic board materials

FACILITIES Table 3 shows the distribution of Fujitsu Limited's domestic and foreign facilities. In April 1989, the Company announced plans to build a semiconductor plant in Britain.

Table 3 Fujitsu Limited Facilities

Country Facilities Type

Japan 15 All product lines tTorth America 6 California (2) PBX systems, semiconductors

Florida Modems/ cables, power supplies for disk drives

Oregon (2) Semiconductors, disk drive storage controllers

Texas Fiber-optic transmission systems, cellular phones, microwave radio equipment

Ireland 1 Semiconductors

Spain 1 Small business computers, serial printers, displays, ATMs, CDs, modems

Australia 1 Telephones, PBX

Korea 1 Disk drive heads

Malaysia 2 Relays, keyboards, connectors, semiconductors

Singapore 2 Semiconductors

Thailand 1 Planned for 12/89

Source: Dataquest July 1989

SUMMARY

The purpose of this section is to provide a one-page overview of the Company's semiconductor activity. The domestic semiconductor activities of Fujitsu Limited fall under the Semiconductor Operations Group, and international activities are handled by the International Operations Group, Electronic Devices.

Address Fujitsu Limited ^ Semiconductor Marketing Furukawa Sogo Building 6-1, Marunouchi 2-chome Chiyoda-ku, Tokyo 100 Japan Phone (03)216-3211 Management Hiroyuki Ino Managing Director General Manager Semiconductor and Electronic Components Group Taro Okabe Executive Vice President Chief Operating Officer Fujitsu Microelectronics Main Product Areas Bipolar gate arrays MOS MPU and MPC ASICs Discrete Optoelectronics Electronic tubes Memory devices Standard logic ASS? ICs

Ranking (based on 4th among Japanese semiconductor manufacturers revenue) 6th among worldwide semiconductor manufacturers

STRATEGY Below are some of Fujitsu's accomplishments in the semiconductor area during 1988 and its goals for 1989. This includes new product announcements. The information is divided into product categories for clarity.

Overall Opened hybrid IC design center in San Diego, California Opened first U.S. wafer fab in Gresham, Oregon Opened quality assurance center in Hillsboro, Oregon to help increase the percentage of domestically produced components

Memory • Integrated production of 1Mb DRAMs • Shipped Samples of 4Mb DRAM with 3-D stacked capacitor cell • Strengthened ECL RAMs by developing two series of 16Kb ECL RAMs, four self-timed RAMs, and BiCMOS 256Kb ECL RAMs • Developed 1Mb SRAM • Introduced two 8-bit, dual port, high-performance SRAMs • Introduced family of BiCMOS PROMs Analog

Microdevices • Developed TRON microprocessor and peripheral chips in the Gmicro F32 series • Developed general-purpose CMOS 32-bit DSP • Introduced line of single-chip controllers for SCSI protocol • Released second generation of SPARC chips into production

ASICs Expanded family of CMOS gate arrays with an ultrafast AU series of highly integrated chips Introduced new ECL gate arrays using a new bipolar process developed by Fujitsu that increases speed and reduces chip count Introduced CAD systems for 32-bit PCs and superminicomputers

ORGANIZATION Figure 7 shows Fujitsu Limited's Semiconductor and International Operations Group's organizational chart. Figure 7 Fujitsu Limited Semiconductor and International Operations Organizational Chart

International Operations Group Semiconductor Operations Group Electronic Devices (Semiconductor & Components)

Advanced Planning Administration rC :) D Domestic Marketing^ Administration K. Sales y <: Compound Semiconductor Semiconductor Martcettng <: Bipolar IC InternatlonaJ Operations Group ASIC Marketing Semiconductor Electronic Devices Operations lUIOS IC (Semiconductor Group Microcomputer & Components) Marketing •c iVllcrocomputer iC Semiconductor Sales Support <: Quality & Reliability Electronic Engineering K development & Supporirt_t ^ Components Marketing Overseas Production Production Facilitlee Faciiities :> Overseas Sales Domestic Companies Subsidiaries K: :^ 0004339-7 Source: Fujitsu Limited

OPERATIONS

Note: Exchange rates used in the semiconductor section of this profile are based on the calendar year.

Product Segments

ASIC—CMOS ECL, BiCMOS ASIC, bipolar gate arrays, standard cell Micro—4- and 8-bit microcontrollers, 16- and 32-bit microprocessors, special peripheral controllers

Memory—DRAMs, SRAMs, EPROMs, EEPROMs, mask ROMs, NVRAMs, Kanji ROM, PROMs, TAG memory, video RAM and self-time RAM, bipolar Discrete—power and low noise GaAs FETs, laser diodes, LEDs, PINs, APDs for fiber optics, and power transistors

Standard Logic—TTL, LSTTL, ALSTTL, FAST, ECL gate arrays, and logic circuits and converters, telephone ICs

Product Revenue

Figure 8 shows Fujitsu's percentage of semiconductor revenue by product. For example, 66.3 percent of Fujitsu's IC revenue came from MOS technology in 1988 and of this, 21.1 percent of revenue came from MOS logic devices.

Figure 8 1988 Estimated Semiconductor Revenue Percent by Product (Millions of Dollars)

MOS Logic 21.1% MOS Micro Discrete 14.1% 3.5%

0004339-S Source: Dataquest July 1989 Regional Sales Fujitsu's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4. Table 4 1988 Estimated Semiconductor Revenue Percent by Region (Millions of Dollars)

Product United States Japan Europe R01

Semiconductor 14% 77% 6% 3% IC 14% 76% 6% 3% Bipolar Digital 19% 78% 2% 1% MOS (Technology) 14% 74% 8% 4% MOS Memory 17% 68% 10% 5% MOS Micro 7% 84% 4% 5% MOS Logic 11% 84% 4% 1% Analog 0 95% 0 5% Discrete 16% 79% 0 5% Optoelectronics 13% 85% 0 3%

Exchange Rate (Yen per US$1) 130 Source; Datag[ues t July 1989

Growth Rate Fujitsu's growth rate by product line is shown in the tables and figures that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 9 graphically compares Fujitsu's growth rate in the world market with the growth rate of the world market itself. (This information is then provided for the Japanese market as well.)

Table 5 Fujitsu Sales in World Market (Millions of Dollars)

World Market 1997 1988 "^ Change % Change

Semiconductor $1,801 $2 ,359 31.0% 31.9% IC $1,660 $2 ,166 30.5% 36.5% Bipolar Digital 495 561 13.3% 9.2% MOS (Technology) 1,014 1,,43 7 41.7% 53.1% MOS Memory 634 932 47.0% 90.3% MOS Micro 146 202 38.4% 39.8% MOS Logic 234 303 29.5% 28.2% Analog 151 168 11.3% 15.3% Discrete $ 70 $ 82 17.1% 13.2% Optoelectronics $ 71 $ 111 56.3% 25.4%

Exchange Rate 144 130 (Yen per US$1)

Source: Dataguest July 1989

Figure 9 Fujitsu's Growth Rate Compared with World Market

Growth Rate

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product Source: Dataquest 0004339-9 July 1989

Worldwide Market Growth Rate In 1988, Fujitsu grew almost twice as fast as the world market in optoelectronics and had almost one-half of the world growth rate in MOS memory.

Japanese Market Growth Rate Fujitsu grew faster than the Japanese semiconductor industry in two categories—bipolar technology and optoelectronics. The Company's sales in the Japanese market are shown in Table 6 and Figure 10.

Table 6 Fujitsu's Sales in Japanese Market (Millions of Dollars)

Japanese Market 1987 1988 % Change % Change

Semiconductor $1 ,356 $1,811 33.6% 35.6% IC $1 ,246 $1,652 32.6% 39.1% Bipolar Digital 357 435 21.8% 18.3% MOS (Technology) 743 1,057 42.3% 58.4% MOS Memory 427 634 48.5% 85.4% MOS Micro 125 169 35.2% 35.9% MOS Logic 191 254 33.0% 50.3% Analog 146 160 9.6% 11.7% Discrete $ 55 $ 65 18.2% 18.5% Optoelectronics $ 55 $ 94 70.9% 42.3%

Exchange Hate 144 130 (Yen per US$1)

Source! Dataquest July 1989 Figure 10 Fujitsu's Growth Rate Compared with Japanese Market

Growth Rate 100- 90. Japanese Market Fujitsu 80

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004339-10 Source: Dataquest July 1989

Other Japanese Companies The growth rate by product line for Fujitsu is compared with that of the other Japanese companies tracked by Dataquest in the following graphs. Dataquest surveys a total of 18 companies, plus a category called "Other." The total of these companies' revenue were used for comparison in Figures 11 and 12.

Figure 11 Fujitsu versus Other Japanese Companies in Japanese Market

Growth Rate 90- Other Japanese Companies [53 Fujitsu

Semiconductor IC Bipolar MOS Memory Micro LOQIC Analog Discrete Opto Product Source: Dataquest 0004338-11 July 1989

Figure 12 Fujitsu versus Other Japanese Companies in World Market

Growth Rate 100

Semiconductor 10 Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004339-12 Source; Data quest July 1989

Channels of Distribution Dataquest believes that 20 percent of Fujitsu's sales are captive and 20 percent are sold to distributors. Fujitsu's three major Japanese distributors are Hoei Electric, Fujitsu Bohin Shoji, and Kantoh Denshi. In the United States, the Company's distributors are Marshall, Cetec, Sterling, Bell, and Milgray.

CAPITAL SPENDING As shown in Tables 7 and 8, capital investment, as a percentage of total revenue, dropped significantly after the peak year 1984.

Table 7 Semiconductor Capital Spending compared with Total Revenue Calendar Year—^Millions of Dollars

1984 1985 1986 1987 1988

Revenue $1,190 $1,019 $1,362 $1,801 $2,359 Semiconductor Capital Spending $ 485 $ 303 $ 95 $ 139 $ 462

Growth Rate of Capital Spending N/A (38%) (69%) 46% 232%

Percent of Revenue 41% 30% 7% 8% 20%

Exchange Rate (Yen per US$1) 237 238 168 144 130

N/A = Not Available

Source: Dataquest July 1989

Table 8 Semiconductor Capital Spending Compared with Total Revenue Calendar Year—^Billions of Yen

1984 1985 1996 1987 1988

Revenue 282 243 229 259 307

Semiconductor Capital Spending 115 72 16 20 60

Growth Rate of Capital Spending N/A (37%) (78%) 25% 200%

Percent of Revenue 41% 30% 7% 8% 20%

Exchange Rate (Yen per US$1) 237 238 168 144 130

N/A = Not Available

Source: Dataquest July 1989

FACILITIES Fujitsu's semiconductor facilities are listed in Table 9. The Company recently announced plans to build a manufacturing facility in Great Britain, where it will produce memory and ASIC devices.

Table 9 Fujitsu Limited Semiconductor Facilities

Name/Location Function

Aizu Factory Fab, test Fukushima Prefecture Discrete, converters memory, MPUs

Wakamatsu Factory Gate arrays, logic Fukushima .Prefecture memory, ASIC

Fujitsu VSLI Minokamo Prototype ICs Gifu Prefecture Design

Iwate Fab, test Iwate Prefecture gate arrays, memory

Kawasaki Factory Fab, test Kanagawa Prefecture Josephson junction ICs

Mie Factory Fab Mie Prefecture Gate arrays, logic 4Mb DRAM prototypes

Miyagi Factory Assembly Miyagi Prefecture ASIC, MOS memory

Yamanashi Electronics Fab, assembly, test Yamanashi Prefecture FET, linear Optoelectronics

Fujitsu Microelectronics, Inc. Fab Gresham, Oregon Gate arrays, memory

Source: Dataquest July 1989

ALLIANCES AND AGREEMENTS Fujitsu's recent alliances and agreements are shown graphically in Figure 13. For more in-depth information, please refer to Volume II of the Japanese Semiconductor Industry Service behind the tab entitled "Strategic Alliances."

Figure 13 Fujitsu Limited Semiconductor Alliances ami Agreements

0004339-13 Source: Dataquest July 1989

(Page intentionally left blank)

REVENUE SUMMARY Tables 10 and 11 show Fujitsu's semiconductor revenue in detail. The tables show sales from 1981 to 1988 in both billions of yen and millions of dollars. Table 10 Fujitsu Limited Estimate Worldwide Semiconductor Revenue (Billions of Yen)

1991 1992 1993 1984 1995 1986 1997 1998'

Total Semiconductor 83 115 158 282 243 227 259 307

Total IC 74 106 142 260 224 208 239 282 Bipolar Digital 22 32 41 72 64 66 71 73 (Technology)

MOS (Technology) 48 69 95 179 150 130 146 187 NMOS 41 58 78 146 119 101 106 125 PMOS 2 2 2 2 1 0 0 3 CMOS 6 10 16 31 30 29 40 59 BiCMOS

MOS (Function) 48 69 95 179 150 130 146 187 MOS Memory 32 47 65 125 98 81 91 121 MOS Microdevices 11 15 20 29 25 20 21 26 MOS Logic 6 7 10 25 27 28 34 39

Analog 4 5 6 10 10 13 22 22

Total Discrete 6 6 8 10 9 9 10 11 Transistor 6 6 8 10 9 9 10 11 Diode 0 0 0 0 0 0 0 0 Thyristor 0 0 0 0 0 0 0 0 Other Discrete 0 0 0 0 0 0 0 0

Total Optoelectronic 12 10 10 10 14

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

*Preliminary estimate for 1988.

Source! Dataquest July 1989

Table 11 Fujitsu Limited Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 375 465 672 1,190 1,020 1,361 1,801 2,359

Total IC 335 427 606 1,098 939 1,247 1,660 2,166 Bipolar Digital 99 129 174 305 267 397 496 561 (Technology)

MOS (Technology) 218 280 406 753 631 775 1,014 1,438 HMOS 185 232 331 615 500 602 734 962 PMOS 8 6 7 7 4 0 1 26 CMOS 25 42 68 131 126 173 279 450 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 218 280 406 753 631 775 1,014 1,438 MOS Memory 145 190 278 527 412 485 634 931 MOS Microdevices 48 60 85 121 106 120 146 202 MOS Logic 25 30 43 105 113 170 234 303

Analog 18 18 26 40 42 75 151 168

Total Discrete 25 23 32 40 37 53 70 82 Transistor 25 23 32 40 37 53 70 82 Diode 0 0 0 0 0 0 0 0 Thyristor 0 0 0 0 0 0 0 0 other Discrete 0 0 0 0 0 0 0 0

Total Optoelectronic 15 15 35 52 43 62 71 111

Exchange Rate 221 249 237 237 238 168 144 130 (Yen per US$1)

*Preliminary estimate for 1988,

Source: Dataquest July 1989

Tables 12 and 13 show Fujitsu's corporate consolidated balance sheet for 1984 to 1988 in yen and U.S. dollars, respectively. Table 12

Consolidated Balance Sheet Fiscal Years 1984—1988 - (Billions of Yen)

1984 1985 1986 1987 1988

Total Current Assets V 766 ¥ 944 ¥1,008 ¥1,122 ¥1,355 Cash V 79 ¥ 83 ¥ 84 ¥ 116 ¥ 119 Receivables V 279 ¥ 369 ¥ 418 ¥ 463 ¥ 503 Inventory V 255 ¥ 353 ¥ 390 ¥ 409 ¥ 463 Other Current Assets V 153 ¥ 139 ¥ 116 ¥ 134 ¥ 270 Net Property, Plant, and Equipment ¥ 328 ¥ 497 ¥ 554 ¥ 546 ¥ 592 Depreciation ¥ 325 ¥ 425 ¥ 538 ¥ 650 ¥ 751 Other Assets ¥ 183 ¥ 280 ¥ 310 ¥ 330 ¥ 370

Total Assets ¥1 ,277 ¥1,721 ¥1,872 ¥1,998 ¥2,317

Total Current Liabilities ¥ 527 ¥ 711 ¥ 710 ¥ 796 ¥ 974 Long-Term Debt ¥ 205 ¥ 252 ¥ 356 ¥ 338 ¥ 302 Other Liabilities ¥ 111 ¥ 150 ¥ 169 ¥ 184 ¥ 214

Total Liabilities ¥ 843 ¥1,113 ¥1,235 ¥1,318 ¥1,490

Total Shareholders' Equity ¥ 434 ¥ 608 ¥ 637 ¥ 680 ¥ 827 Common Stock ¥ 64 ¥ 100 ¥ 102 ¥ 117 ¥ 169 Other Equity ¥ 136 ¥ 196 ¥ 207 ¥ 232 ¥ 308 Retained Earnings ¥ 234 ¥ 312 ¥ 328 ¥ 331 ¥ 350

Total Liability and Total Equity ¥1 ,277 ¥1,721 ¥1,872 ¥1,998 ¥2,317

(Continued)

Table 12 (Continued) Consolidated Balance Sheet Fiscal Years 1984—1988 (Billions of Yen)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue *1, ,210 ¥1,,56 2 ¥1,,69 2 ¥1,789 ¥2,047 Domestic Sales y 927 ¥1,,14 1 ¥1,,29 1 ¥1,397 ¥1,594 Overseas Sales y 283 ¥ 421 ¥ 401 ¥ 392 ¥ 453 Other income 0 0 0 0 0 Cost of Sales V 750 ¥ 959 ¥1,,14 1 ¥1,233 ¥1,339 Gross Margin (%) 38 39 33 31 35

RScD Expense ¥ 103 ¥ 133 ¥ 157 ¥ 166 ¥ 190 SG&A Expense ¥ 326 ¥ 408 ¥ 467 ¥ 495 ¥ 588 Other Operating Expenses 0 0 0 0 0 Total Operating Expenses ¥1,,07 5 ¥1,,36 8 ¥1,,60 8 ¥1,727 ¥1,927 Operating Income (Loss) ¥ 135 ¥ 195 ¥ 84 ¥ 62 ¥ 120 Interest, Net (¥ 18) (¥ 16) (¥ 33) (¥ 14) (¥ 14) Pretax Income ¥ 117 ¥ 179 ¥ 51 ¥ 48 ¥ 106 Provision for Taxes (Credit) ¥ 60 ¥ 101 ¥ 22 ¥ 31 ¥ 73 Effective Tax Rate (%) 51 57 43 65 69 Extraordinary Items ¥ 10 ¥ 11 ¥ 10 ¥ 5 ¥ 9 Net Income ¥ 67 ¥ 89 ¥ 39 ¥ 22 ¥ 42

Avg. Shares Outstanding (Millions) 1,,08 4 1 ,211 1,,37 0 1,516 1,652 Employees 62 ,071 74 ,187 84,,27 7 89,293 94,825 Capital Spending ¥ 168 ¥ 298 ¥ 216 ¥ 142 ¥ 191

Exchange Rate 236 245 221 160 138 (Yen per US$1)

Source: Dataquest July 1989

Table 13 Consolidated Balance Sheet Fiscal Years 1984—1988 (Millions of Dollars)

1984 1985 1985 1987 1988

Total Current Assets $3,246 $3,853 $ 4,561 $ 7,013 $ 9,819 Cash $ 335 $ 339 $ 380 $ 725 $ 862 Receivables $1,182 $1,506 $ 1,891 $ 2,894 $ 3,645 Inventory $1,081 $1,441 $ 1,765 $ 2,556 $ 3,355 Other Current Assets $ 648 $ 567 $ 525 $ 838 $ 1,957 Net Property, Plant, and Equipment $1,390 $2,029 $ 2,507 $ 3,413 $ 4,290 Depreciation $1,377 $1,735 $ 2,434 $ 4,063 $ 5,442 Other Assets $ 775 $1,143 $ 1,403 $ 2,063 $ 2,681

Total Assets $5,411 $7,024 $ 8,471 $12,488 $16,790

Total Current Liabilities $7,123 $9,098 $11,285 $17,275 $23,094 Long-Term Debt $ 869 $1,029 $ 1,611 $ 2,113 $ 2,188 Other Liabilities $ 470 $ 612 $ 765 $ 1,150 $ 1,551

Total Liabilities $3,572 $4,543 $ 5,588 $ 8,238 $10,797

Total Shareholders' Equity $1,839 $2,482 $ 2,882 $ 4,250 $ 993 Common Stock $ 271 $ 408 $ 462 $ 731 $ 225 Other Equity $ 576 $ 800 $ 937 $ 1,450 $ 232 Retained Earnings $ 992 $1,273 $ 1,484 $ 2,069 $ 2,536 Total Liability and Total Equity $5,411 $7,024 $ 8,471 $12,488 $16,790

(Continued)

Table 13 (Continued) Consolidated Balance Sheet Fiscal Years 1984—1988 (Millions of Dollars)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue $5,127 $6,376 $ 7,656 $11,181 $14,833 Domestic Sales $3,928 $4,657 $ 5,842 $ 8,731 $11,551 Overseas Sales $1,199 $1,718 $ 1,814 $ 2,450 $ 3,283 Other income 0 0 0 0 0 Cost of Sales $3,177 $3,915 $ 5,163 $ 7,704 $ 9,703 Gross Margin (%) 38 39 33 31 35 R&D Expense $ 436 $ 543 $ 710 $ 1,038 $ 1,377 SG&A Expense $1,379 $1,667 $ 2,113 $ 3,091 $ 4,261 Other Operating Expenses 0 0 0 .0 0 Total Operating Expenses $4,556 $5,582 . $ 7,276 $10,795 $13,964 Operating Income (Loss) $ 571 $ 794 $ 380 $ 386 $ 870 Interestr Net ($ 76) ($ 65) ($ 149) ($ 88) ($ 101) Pretax Income $ 495 $ 729 $ 231 $ 299 $ 768 Provision for Taxes (Credit) $ 254 $ 412 $ 100 $ 194 $ 529 Effective Tax Rate C^) 51 57 43 65 69 Extraordinary Items $ 42 $ 45 $ 45 $ 31 $ 65 Net Income $ 283 $ 361 $ 176 $ 136 $ 304

Avg. Shares Outstanding (Millions) 1,084 1,211 1,370 1,516 1,652 Employees 62,071 74,187 84,277 89,293 94,825 Capital Spending $ 712 $1,216 $ 977 $ 888 $ 1,384

Exchange Rate 236 245 221 160 138 (Yen per US$1)

Source: Dataguest July 1989

Hitachi, Ltd. Corporate

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation.

Address Hitachi, Ltd. 6, Kanda-Surugadai 4-chome Chiyoda-ku, Tokyo 101-10, Japan Phone (03)258-1111 FAX (03)253-2186 President Katsushige Mita Executive Vice President Masataka Nishi Main Product Areas Power systems and equipment Information and communication systems and electronic devices Industrial machinery and plants products Consumer products Wire and cable, metals, chemicals, and other products No. of Employees 274,508 (consolidated) Top Shareholders Mitsubishi Trust 4.1% Nippon Life Insurance 4.0% Mitsui Trust 3.1% Toyo Trust 2.8% Dai-Ichi Life Insurance 2.7% Yasuda Trust 2.7% Sumitomo Trust 2.4% IBJ 2.4% Sanwa Bank 2.3%

% Outstanding Stock Foreign-Owned 8.6% Stock Exchanges Tokyo, Osaka, Nagoya, Luxembourg, Frankfurt, Amsterdam, Paris, Hong Kong, New York

Ranking (based 1st among Japanese electric machinery companies on revenue) 1st among Japanese electronics manufacturers

STRATEGY

Hitachi's goals and accomplishments in 1989 are highlighted in this section.

Hitachi's corporate goals include the following:

• Shift majority of consumer and home appliance production to NIEs and increase domestic production of high-technology products

• Double overseas procurement by 1993 by consolidating purchases to 1(X) top foreign suppliers from a cuirent list of over 1,(XX)

• Intensify competition with Fujitsu in United States and European supercomputer markets

#; Decrease export ratio from current 26 percent to 22 percent by 1992

• Expand overseas manufacturing ratio from current 5 percent to 8 percent by 1993

• Continue to pursue aggressive R&D investments, spending approximately ¥350 billion per year until 1993

• Begin to expon more Hitachi name-brand equipment, such as mainframe computers and laptops

The following developments occurred at Hitachi during 1988 and early 1989:

• Consolidated overseas sales and production under four regional companies—^Hitachi America Ltd., Hitachi Europe Ltd., and Hitachi Asia (Hong Kong) Ltd. and Hitachi Asia Pte. Ltd. in Singapore

• Established Domestic Sales Operations Group to reinforce domestic operations and marketing strategies

• Established Semiconductor Design and Development Center to better focus R&D

• Aquired National Semiconductor's National Advanced Systems (NAS), a computer sales company, in a joint move with Electronic Data Systems (EDS) (The new company is called Hitachi Data Systems Corp. and will strengthen Hitachi's area of weakness— software.)

Reached agreement with Fujitsu to develop PCs and make ISDN-compatible equipment

Introduced EDTV LSIs developed with Mitsubishi Electric

Established an HDTV Center for promoting HDTV as a strategic product for its overall operations

Began marketing digital VCRs for HDTV (sales will begin in October 1989)

North America

- Began wafer fabrication at Hitachi Semiconductor (America)

- Established Hitachi Canadaian Industries to produce and market power-generation equipment

- Expanded production of peripherals in United States and plans to quintuple production within five years

Europe

- Established Fiat-Hitachi Excavators, a joint venture in Italy to manufacture hydraulic excavators

Asia

Expanded color picture tube production at Hitachi Electronic Devices (Singapore)

- Established new company in Malaysia to manufacture VCRs and color TVs

- Announced production of VCRs in China

- Established joint venture with Fujian province in China for production of TVs and stated that the majority will be exported to the United States (Hitachi has shown strong interest in joint ventures with China and as a result, has gained the largest market share of that country's electronic appliance market.)

ORGANIZATION

Figure! shows the organization ofthe Hitachi Group companies. The Hitachi Group is made up of Hitachi, Ltd., domestic and overseas, and its subsidiaries and affilitates, including three major subsidiaries—Hitachi Chemical, Hitachi Metal, and Hitachi Cable, Figure 2 shows the organiza tional chart of Hitachi, Ltd.

Figure 1

Hitachi Group Organizational Chart

Electrical & Plant Engineering & Electronic Service Industry Hitachi Densini Hitachi Plant Hitachi Maixell Engineering Hitachi Koki & Construction Japan Servo Hitachi Elevator Yagi Antenna Engineering & Service Horiba, Ltd. Kokusan Denki Trading & Wholesaling Nakayo Telecommunications Nlssel Sangyo Kokusai Electric Hitachi Sales Nippon Columbia Hitachi Credit Hitachi Air Conditioning :;j^'Ji"m I^^ Hitachi Heating & Refrigeration Appliances Hitachi Condenser Kyosan Hitachi Medical Electric Wire Nippon MukI Nippon Tool Transportation Works Machinery Toyo Brass Shin-Kobe Electric Machinery General Machinery Tokico Ltd. !;!i!;!ayJ+Vi Shin Melv^a Industry Hitachi Kiden Kogyo Jidosha DenkI Kogyo Major Subsidiaries Hitachi Seiko Babcock-HltachI Transportation Parent Co. Subsidiaries or Affiliates Hitachi Construction Hitachi Express Machinery

00CM615-1 Seurcc: ll^duilrial Gn>ucinei in Japan ISBS/lSg? Dodwell, Tokyo

Figure 2

Hitachi, Ltd. Organizational Chart

Board of Directors

Central Research Laboratory President Power Group

Hitachi Research Laboratory Industrial Processes Secretary's Office Group Mechanical Engineenng Corporate Planning Research Laboratory and Development Office Subsidiaries Office Energy Research industrial Components Laboratory and Equipment Group Internal Auditing Office

-| Sales Administration DeotT Production Engineering Research Laboratory Consumer Products Information Systems Group Administration Department Systems Development Laboratory I Corporate Research and Computer, Technology Coordination Dept. Microelectronics Telecommunications & —I Production Engineering Dept. Product Development Office Systems Group — —I Project Coordination Dept. J Laboratory — fsflateriais Dept. Design Center Electronic Devices International Procurement Dept. Group Advertrsina Deot. Advanced Research Laboratory Finance Dept. Domestic Sales Accounting Controls Dgpt. Operations Group Personnel S Education Dept. Labor Relations Dept. ^ International '— Administration Dept. Operations Group —flntellectual Property Office ] —[ Corporate Ouality Assurance Office | Ibaraki Hospital Center —I Corporate Export Regulation Office [ •j Product Strategy Center —I Auditor's Office I Corporate Overseas Business Center

Hitachi Institute of Technology Management Improvement Center Hitachi Institute of Supervisory Value Engineering for Customers and Technical Training Promotion Center Technical Coiieges (Ibaraki & Keihin) International Finance Center Markettng Promotion Center Odaira Memorial Tokyo Hitachi Hospital Information Network Center Industrial Health Promotion Center

0004615-2 Source: Hitachi, Ltd.

OPERATIONS

In 1989, the Company changed its accounting policy, increasing the number of consolidated subsidiaries and restated 1987 and 1988 revenue.

Product Segments

Hitachi is divided into five product groups. Examples of products within each category are listed below.

• Power systems and equipment—Nuclear, hydroelectric, and thermal power plants, water, gas, and steam turbines, generators, boilers, transformers, circuit breakers, motors, automobile parts and accessories, switchboards, control equipment

• Consumer products—TVs, VCRs, video cameras, audio equipment, audio and video tapes, air conditioners, refrigerators, washing machines, microwave ovens, vacuum cleaners, kitchen appliances, dry batteries, lighting fixtures

• Information and communication systems and electronic devices—Mainframes, periph erals, workstations, magnetic disks, word processors, telephone exchanges, facsimile and broadcasting equipment, semiconductors, picture tubes, CRTs, medical electronic equipment, analytical instruments

• Industrial machinery and plants—Compressors, pumps, chemical plants, construction machinery, elevators, environmental control and welding equipment, industrial robots, locomotives, monorail diesel and electric cars

• Wire and cable, metals, chemicals, and other products—optical fiber cable, special steels, rollers for rolling mills, cast iron products, pipe fittings, electric wire and cable, rolled copper products, carbon, graphite, synthetic resin products, printed circuit boards, ceramic materials

Product Revenue

Figure 3 and Table 1 show Hitachi's revenue by product segment from 1984 through 1989. The Information/Communication/Electronic Devices segment was the largest contributor to total sales again in 1989. Just under 50 percent of sales in this segment are from computers, approximately 70 percent of which were plug-compatible mainframe sales.

Figure 3

Product Revenue as a Percentage of Total Corporate Revenue

Percentage 100

1984 1985 1985 1937- 1988* 19S9 'These years have been restated by the con^pany. 0004615-3 Source: I>>t«que>t Aufuii 1*89

Table 1

Sales by Product Segment (Billions of Yen)

1984 1985 1986 mr 1988* 12S2 Power Systems and Equipment 727 720 761 858 804 881 Consumer Products 930 1,104 1,081 1,065 1,018 1,033 InfOTmation/Communication 1,174 1,507 1,452 1,568 1,729 2,051 Systems/Electronic Devices Industrial Machinery/Plants 730 786 835 874 903 1,046 Wire/Cable/Metals/ Chemicals/Others 806 896 881 ' 1,178 1,263 1,390

Total 4,367 5,013 5,010 5,543 5,717 6,401

Exchange Rate (Yen per US$1) 236 245 221 160 138 128

•These years have been restated by the Company.

Source: Hitachi Annual Report Dataquest August 1989

Domestic versus International Revenue

Figure 4 shows the year-to-year growth of Hitachi's intemational and domestic sales for 1984 through 1989. In 1989, domestic sales were ¥4,932 billion and intemational sales were ¥1,469 billion. Intemational sales have averaged 27.6 percent of total corporate revenue since 1984, peaking at 33.6 percent in 1985 and hitting a low of 22.9 percent in 1989.

Figure 4

Total Corporate Revenue Growth of International versus Domestic Sales

-10-1 i.$j^ Am$ 1987* tgae* 1969 •These years have been restated by the company. 0004615-4 Source; Daiaquetl Ausutt 19S9

Growth Rate

Figure 5 shows the year-to-year growth rates of product segment revenue. The Information/ Communication/Electronic Devices segment showed the strongest growth for the second year in a row, growing 19 percent over 1988. Total corporate revenue grew 12 percent over 1988, the strongest growth since 1985. Following Figure 5 is a list of factors explaining the changes in 1989 product growth.

Figure 5

Growth Rates by Product Segment (Yen-Based) Growth Rate 50- ES] Power Systems E23 ^'}l°T^}}°llLr,r. CID Industrial — consumer iy°sTers"'°'*'°" ^ Machinery Wire/Cable/ Products ' Metal/Chemical

-10 1984 1985 1966 1987* 1988' * These years have been restated by the company. 0004615-5 Source: Dalaqueii Auiuil 1969

Main Factors Affecting 1989 Growth

The major factors affecting Hitachi's growth in 1989 are listed below by product segment

• Power systems and equipment

-. Exports were slow, but domestic demand was strong, especially for thermal power generation equipment.

• Consumer products

- Overall, exports were slow, but domestic demand was strong, especially for color and large-screen TVs.

- Sales of VCRs, the main product for the division, were slow in the United States and strong in the Asian market.

• Information and communication systems and electronic devices

- Overall, sales increased, especially due to domestic investments in ISDN-related equipment and information processing equipment.

- Exports of large general-purpose computers, the Company's main export line, medical equipment and facsimiles were strong.

- Worldwide sales of ICs, particularly memories, increased.

• Industrial machinery and plants

- Demand for construction-related machinery increased because of increased domestic urban development.

• Wire and cable, metals, chemicals, and other products

- Sales of semiconductor-related items, lead frames, wires, resin, and epoxy in creased.

- Domestic demand for specialty steel and housing-related products was strong.

CAPITAL AND R&D INVESTMENTS

Hitachi has opened four new R&D labs: Cambridge University in England for basic R&D for high-speed semiconductors; Dublin University in Ireland for neural networks and ultrahigh-level supercomputer language; Detroit, Michigan for automotive electronics; and San Jose, California for high-speed DSPs for computer graphics.

Hitachi's capital and R&D spending in 1989 increased 26 percent over 1988. As a percentage of total revenue, spending increased to 13.9 percent. Figure 6 and Table 2 show R&D and capital spending as a percentage of total corporate revenue.

Figure 6

Capital and R&D Spending as Percent of Total Corporate Revenue

Percent IB' Capital Spending 16-J I- •- i RiD Spending 14

10 e^ 6

4 2A

1984 igS5 1986 1fi67 198B 1989

0004615-6 Source: DBtaqueit Autuii 19S9

Table 2

Capital and R&D Spending (Millions of Dollars and Billions of Yen)

1984 1985 1986 1987 1988

Corporate Revenue ¥ 4.367 ¥ 5,013 ¥ 5,010 ¥ 5.543 ¥ 5,717 $ 18,504 $20,461 $22,670 $34,644 $41,428

Capital Spending ¥ 382 ¥ 455 ¥ 447 ¥ 421 ¥ 373 $ 1,619 $ 1,857 $ 2,023 $ 2,631 $ 2,703 % Total Revenue 8.7% 9.1% 8.9% 7.6% 6.5%

R&D Spending ¥ 212 ¥ 268 ¥ 296 ¥ 314 ¥ 332 $ 898 $ 1,094 $ 1,339 $ 1.963 $ 2,406 % Total Revenue 4.9% 5.3% 5.9% 5.7% 5.8%

Total Spending ¥ 594 ¥ 723 ¥ 743 ¥ 735 ¥ 705 $ 2,517 $ 2,951 $ 3,362 $ 4.594 $ 5,109 % Total Revenue 13.6% 14.4% 14.8% 13.3% 12.3%

Exchange rate (Yen per US$1) 236 245 221 160 138

Source: Hitachi Annual Reports Dataquest August 1989

TARGET R&D AREAS

The Company currently views electronics and alternative energy sources as two areas of strategic growth in the 1990s and is focusing R&D resources on these two areas. Below are some of the examples of Hitachi's current research activity.

• Electronics

- Neural computing

- Fuzzy logic

- High-speed, high density semiconductors

- GaAs LSIs for practical uses

- Superconductive materials

• Consumer products

- HDTV

• Materials

- Silicon-based photoresist with noted resistance to dry etching

• Biotechnology

FACILmES

Table 3 shows the distribution of Hitachi's domestic and foreign manufacturing facilities. Hitachi has a total of 679 consolidated subsidiaries including 134 overseas subsidiaries.

Table 3

Hitachi, Ltd. Corporate Manufacturing Facilities

Country Facilities Iyi£

Japan 27 Manufacturing all products

North America 10 Chemical, semiconductor, computer and ccmsumer products, cable,

South America 1 Consumer products

Europe 6 Semiconductor, consumer

Asia 17 Chemical, TV, consumer, metal semiconductor, motors, elevators

Source: Dataquest August 1989

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation's semiconduc tor activity.

Address Musashi Works, Hitachi, Ltd. Hitachi America, Ltd. 5-20-1 Josuihon-cho, Kodaira-shi Semiconductor and IC Division Tokyo, 187 Japan 2210 O'Toole Ave San Jose, CA 95131

Phone Kokubunji (0423) 25-1111 (408) 435-8300 Telex 2832-555 Hitsem. Fax (0423)23-7381

Management Kazou Kimbara Board Director Group Executive Electronic Devices Group

Main Product Areas MOS memory MOS microcomponents MOS logic Bipolar digital memory/logic Gallium arsenide ASIC Optoelectronic Analog Discrete

Ranking (based 2nd among Japanese semiconductor manufacturers on revenue) 3rd among worldwide semiconductor manufacturers

STRATEGY

Listed below are some of Hitachi's accomplishments in the semiconductor area during 1988 and early 1989 and future objectives. This includes new product announcements. The information is divided into product categories for clarity.

Overall Goals and Accomplishments

• Goals

- Expand product mix, so as not to rely to heavily on any one product line, such as MOS memory

- Expand global operations by localizing production, marketing, and design

- Continue to develop close-to-the-customer philosophy

• Accomplishments

- Built wafer fabrication line in Dallas, Texas for SRAM, DRAM, and logic production (This is seen as the first step toward integrating overseas operation capacity)

- Expanded production capacity for wafers at domestic plants

Added R&D lab in San Jose, California for high-speed DSPs for computer graphics and in Cambridge, England for high-speed semiconductors

Introduced ISDN protocol IC

Memory

• Goals

- Increased capital investments to ramp up overall production

- Doubled overseas production of 1Mb DRAMs in Malaysia and West Germany

- Introduced 80ns 4Mb CMOS DRAM with stacked capacitor and plans to be a serious competitor in this market

- Announced plans to gradually shift production of 256K DRAMs in favor of 1Mb and 4Mb DRAMs

- Announced plans to develop a 256K memory chip by the mid-1990s

Introduced a 64K ECL RAM

- Introduced world's fastest 1Mb CMOS SRAM with 9ns access time

- Introduced 4Mb pseudo SRAM

Developed 60 ns 16Mb DRAM

- Introduced 1Mb BiCMOS DRAM with 35ns access time

Microcomponents

• Plans to double microprocessor sales by 1992 by developing products based on its own architecture (Currently many of Hitachi's MPUs are licensed from Motorola.)

• Introduced H-32, multitasking MPU that runs both TRON and UNIX

• Introduced BiCMOS MPU that runs at 70 MHz

• Involved in lawsuit with Motorola regarding H series of MPUs

• Introduced 4-bit, highly-integrated MPU and 4-bit MCU with vacuum fluorescent display drive (VFD)

• Introduced 4-bit MCU with CCD

Logic

• Announced intention to increase reliance on custom and ASIC devices in an effort to diversify product base

• Increased investments in design tools and software

• Announced plans to move into cell-based ICs

ORGANIZATION

Figure 7 shows Hitachi, Ltd.'s electronic devices group organizational chart.

Figure 7

Hitachi, Ltd. Electronic Devices Group Organizational Chart

Electronic Devices Group

Electron Tube Semiconductor and Integrated | Division Circuits Division I Tamgffiataisimiaaaa m^nrtMnm, rjyfuj^^^

Semiconductor Design and Development Center

0004615-7 Source: Hitachi, Ltd.

OPERATIONS

Note: Exchange rates used in the semiconductor section of this profile are based on the calender year.

Product Segments

MOS memory—DRAM, SRAM, EPROM

MOS micro—MPU, MCU, TRON

Bipolar digital

Discrete

Logic devices—ASIC, gate arrays, cell-based

Analog

Optoelectronic devices

Product Revenue

Figure 8 breaks out Hitachi's percentage of semiconductor revenue revenue by product. For example, 69 percent of Hitachi's IC revenue came from MOS technology in 1988 and of this, 59.1 percent of revenue came from MOS memory devices.

Figure 8

1988 Estimated Semiconductor Revenue Percent by Product (Millions of Dollars)

IC77.9% ^\

69.0% ^\ MOS Technolofly N^^

/^ MOS N. \ \ Memory \ > / Bipolar \^59.0%^.,^ 18.3% ^-^^^^^OS ^-"-"yv^ Micro MOS -"y/ V\. 27.9% Logic VAnaiog • 13.1%

Opto 2.0% . Discrete V,-/ y 20.1% ^ y

0004615-8 Source: Dataquest August 1989

Regional Sales

Hitachi's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4

1988 Estimated Semiconductor Revenue by Region Percent by Region (Billions of Yen)

United Product States Japan Europe ROW

Semiconductor 13% 70% 7% 10% IC 16% 67% 9% 8% Bipolar Digital 7% 74% 1% 19% MOS (Technology) 20% 62% 12% 6% MOS Memory 27% 56% 12% 5% MOS Micro 13% 67% 13% 7% MOS Logic 5% 81% 5% 8% Analog 6% 88% 2% 5% Discrete 3% 82% 1% 14% Optoelectronics 8% 68% 5% 19%

Exchange rate (Yen per USS1) 130

Note: Rows may not equal 100% due to rounding

Source: Dataquest August 1989

Growth Rate

Hitachi's growth rate by product line is shown in the tables and figures that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 9 graphically compares Hitachi's growth rate in the world market with the growth rate of the world market itself. This information is then provided for the Japanese market as well.

Worldwide Market Growth Rate

In 1988, Hitachi's sales of MOS memory ICs grew 93.1 percent, slightly more than the world market growth rate for MOS memory devices. The Company also grew slightly faster than the world market in optoelectronic devices.

Table 5

Hitachi Sales in World Market (Millions of Dollars)

World Market 1987 1988 %Chanee %Chanee

Semiconductor $ 2.616 $3,509 34.1% 31.9% IC $1,946 $ 2,731 40.3% 36.5% Bipolar Digital 463 501 8.2% 9.2% MOS (Technology) 1.173 1,885 60.7% 53.1% MOS Memory 576 1.112 93.1% 90.3% MOS Micro 402 526 30.9% 39.8% MOS Logic 195 248 27.0% 28.2% Analog 310 345 11.2% 15.3% Discrete $ 624 $ 708 13.5% 13.2% Optoelectronics $ 47 $ 70 48.9% 25.4%

Exchange Rate (Yen per USSl) 144 130

Source: Dataquest August 1989

Figure 9

Hitachi Growth Rate Compared with World Market

Growth Rate 110- 100- ^P World Market r^XI Hitachi 90- 80, 701

SO: io-j 30 20 10-1

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004615-9 Source: Dataquest August 1989

Japanese Market Growth Rate

Hitachi grew slower than the Japanese market in all pixxiuct areas except optoelectronics. See Table 6 for a breakdown of the Company's 1987 and 1988 sales and growth rates in the Japanese market. Figure 10 shows the growth statistics graphically.

Table 6

Hitachi Sales in Japanese Market (Millions of Dollars)

Japanese Market . 1987 1988 % Change % Chance Semiconductor S 2,102 $ 2,470 17.5% 35.6% IC $1,494 $1,842 23.3% 39.1% Bipolar Digital 367 368 0.4% 18.3% MOS (Technology) 825 1,172 42.0% 58.4% MOS Memory 339 619 82.7% 85.4% MOS Micro 311 351 12.8% 35.9% MOS Logic 175 202 15.2% 50.3% Analog 302 302 0.0% 11.7% Discrete $ 578 $ 581 0.5% 18.5% Optoelectronics $ 31 $ 48 53.8% 42.3%

Exchange rate (Yen per US$1) 144 130

Source: Dataquest August 1989

Figure 10

Hitachi's Growth Rate Compared with Japanese Market

Growth Rate 100

Semiconductor Bipolar MOS Memory Micro Logic Discrete Opto Product 0004615-10 Source: Dataquest August 1989

Other Japanese Companies

The growth rate by product line for Hitachi is compared with that of the Japanese companies tracked by Dataquest in Figures 11 and 12. Dataquest surveys a total of 18 companies, plus a category called "Other." The totals of these companies' revenue were used for comparison in these graphs.

Figure 11

Hitachi versus Japanese Companies in Japanese Market

Growth Rate 90

Semiconductor IC Bipolar MOS Memory Micro Logic Discrete Opto Product 0004615-11 Source: Dataquest August 1989

Figure 12

Hitachi versus Japanese Companies in World Market

Growth Rate 110- 100 Japanese Companies Hitachi 90-1 80 70 60 50- 40- 30- 20- 10- 0 Semiconductor iC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004615-12 Source: Dataquest August 1989

Channels of Distribution

Hitachi's semiconductor products are marketed overseas through distributors and Hitachi's own sales force. In Japan, almost 70 percent of Hitachi's semiconductors are marketed through distribution and 30 percent are marketed by the Company's sales force. Hitachi's three major Japanese distributors are Nissei Denshi Co., Ltd., Nissei Sangyo, and Easton Electronics. Approxi mately 16 percent of Hitachi's semiconductor sales are captive.

CAPITAL SPENDING

Semiconductor capital investments as a percentage of total revenue are shown in Table 7 and Table 8.

Table 7

Estimated Semiconductor Capital Spending Compared with Total Revenue Calender Year—^Millions of Dollars

1983 1284 i2Si 12S6 12S2 ISSS Revenue $1^66 $2,050 $1,671 $2,145 $2,616 $3,509

Semiconductor Capital Spending $264 $ 506 $ 387 $ 131 $ 208 $ 500

Growth Rate of Capital Spending N/A 92% (23.7%) (66%) 59% 140%

Percent of Revenue 21% 25% 23% 6% 8% 14%

Exchange Rate (Yen per USSl) 237 237 238 168 144 130

N/A = Not Available

Source: Dataquest August 1989

Table 8

Estimated Semiconductor Capital Spending Compared with Total Revenue Calender Year—Billions of Yen

1983 1984 1985 1986 1987 1988

Revenue ¥ 54 ¥ 86 ¥ 73 ¥ 72 ¥ 94 ¥123

Semiconductor Capital Spending ¥ 63 ¥120 ¥ 92 ¥ 22 ¥ 30 ¥ 65

Capital Spending Growth Rate N/A 92% (23%) (76%) 36% 117%

Exchange Rate (Yen per US$1) 237 237 238 168 144 130

N/A = Not Available

Source: Dataquest August 1989

FACILrnES

Hitachi has added wafer fabrication capability to its Texas facility and is considering adding an additional European fab by 1990. The Company is now doing assembly in West Germany. Hitachi's semiconductor facilities are listed in Table 9.

Table 9

Hitachi, Ltd. Semiconductor Facilities

Name/Location Funf^ipn

Mobara Works Fab, assembly.test Chiba DRAMs, CMOS logic, LCD

Takasaki Works Fab, assembly,test Gunma bipolar and MOS ICs, EPROM, CMOS logic

Hokkai Semiconductor Fab, assembly, test, SRAM Hokkaido

Hitachi Works Fab, discrete Ibaragi

Naka Works Fab, assembly, test Ibaragi semiconductor sensor, DRAM, SRAM

Haramachi plant Fab, assembly.test (Harmachi Semiconductor Ltd.) diode, thyristor Ibaragi

Tsuchinia Plant Assembly, MOS (Nissin Electronics Ltd.) Ibaragi

Tsugaru Works Assembly, bipolar IC (Tobu Semiconductor Ltd.) Aomori

Main plant Assembly, transistor, hybrid IC (Tobu Semiconductor Ltd.) Saitama

Musashi Works Fab, assembly, test, R&D Tokyo MPU. diodes, DRAM, SRAM

(Continued)

Table 9 (Continued)

Hitachi, Ltd. Semiconductor Facilities

Name/Location Function

Kofu Works Fab, assembly, test, diode (Toyo Electronics Ltd.) Yamanashi Fab, assembly, MOS IC

Hitachi Microcomputer Engineering Fab, assembly, test, R&D, MPUs, ASIC Tokyo

Komoro Works Fab, assembly, test, photo device Nagano hybrid IC

Yuwa plant and main plant Assemby, MOS, bipolar IC (Akita Electronics Co.) Akita

Yamanashi Works Assembly, diode, bipolar IC (Tokyo Electronic Co.) Yamanashi

Yanai Works Assembly, diode, bipolar IC (Tokyo Electronic Co.) Yamanashi

Yomezawa Elec. Co. Assembly, MOS Yamagata

Niigata Works Assembly, linear, bipolar (Toyo Electronics Ltd.) digital IC Nigata

Lascorinus Factory Fab, assembly, test, SRAM, MPU, ASIC (Hitachi Semiconductor USA) Texas

Hitachi Semiconductor (Europe) Assembly, test, SRAM, DRAM West Germany

Hitachi Semiconductor Malaysia Assembly, DRAM, TTL, Linear Malaysia

Source: Dataquest August 1989

ALLIANCES AND AGREEMENTS

Hitachi's alliances and agreements for 1986 to early 1989 are summarized in Figure 13. For more in-depth information, please refer to Volume n of the Japanese Semiconductor Industry Service (JSIS) behind the tab entitied "Strategic Alliances."

Figure 13

Hitachi, Ltd. Semiconductor Alliances and Agreements 1986 to Early 1989

International C Rectifier

0004615-13 Source: Dataqueit Augutl 1989

REVENUE SUMMARY

Tables 10 and 11 show Hitachi's semiconductor revenue in detail. The tables show sales from 1983 to 1988 in both billions of yen and millions of dollars.

Table 10

Hitachi, 1Ltd . Estimated Worldwide Semiconductor Revenue (Billions of Yen)

1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 178.3 217.9 300.0 485.8 397.8 360.4 376.7 456.2

TotallC 111.0 151.0 214.3 371.6 294.2 273.9 280.2 355.1

Bipolar Digital (Technology) 21.0 27.5 33.8 52.7 46.3 53.7 66.6 65.1

MOS (Technology) 63.7 97.2 149.9 276.5 202.8 175.9 168.9 245.2 NMOS 34.9 59.8 90.0 167.8 117.3 76.3 67.6 90.9 PMOS 3.2 2.2 0.9 1.8 0.7 0.5 0.7 1.1 CMOS 25.6 35.2 59.0 106.9 84.8 99.1 100.6 153.2 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 63.7 97.2 149.9 276.5 202.8 175.9 168.9 245.2 MOS Memory 44.2 72.2 117.5 230.1 157.5 120.1 82.9 144.5 MOS Microdevices 11.1 16.3 19.9 28.4 26.1 38.1 57.9 68.5 MOS Logic 8.4 8.7 12.5 18.0 19.2 17.7 28.1 32.2

Analog 26.3 26.3 30.6 42.4 45.1 44.3 44.7 44.8

Total Discrete 60.7 59.5 77.7 102.0 93.5 79.5 89.8 92.0

Transistor 23.9 22.3 28.9 36.7 32.7 28.9 33.4 35.3 Diode 29.8 29.8 38.5 50.4 46.2 39.3 45.3 44.6 Thyrisior 3.5 2.7 4.0 5.3 5.3 4.1 4.1 4.7 Other Discrete 3.5 4.7 6.3 9.6 9.3 7.2 7.0 7.5

Total Optoelectronic 6.6 7.4 8.0 12.2 10.1 7.0 6.7 9.1

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

* Preliminary estimates for 1988

Table 11

Hitachi, Ltd. Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

im 1982 im. 1984 1985 1986 1987 198?* Total Semiconductor 807 875 1,266 2,050 1.671 2,145 2.616 3.509

TotallC 502 606 904 1,568 1,236 1,630 1.946 2,732

Bipolar Digital (Technology) 95 110 143 222 195 320 463 501

MOS (Technology) 288 390 632 1,167 852 1,047 1.173 1,886 NMOS 158 240 380 708 493 454 469 699 PMOS 14 9 4 8 3 3 5 8 CMOS 116 141 249 451 356 590 699 1.178 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 288 390 632 1,167 852 1,047 1,173 1,886 MOS Memory 200 290 496 971 662 715 576 1,112 MOS Microdevices 50 65 84 120 110 227 402 527 MOS Logic 38 35 53 76 81 105 195 248

Analog 119 106 129 179 189 264 310 345

Total Discrete 275 239 328 430 393 473 624 708

Transistor 108 90 122 155 137 172 232 271 Diode 135 120 162 213 194 234 315 343 Thyristor 16 11 17 22 22 24 28 36 Other Discrete 16 19 27 41 39 43 49 57

Total Optoelectronic 30 30 34 51 42 42 47 70

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

* Preliminary estimates for 1988

Source: Dataquest August 1989

BALANCE SHEETS

Tables 12 and 13 show Hitachi's corporate consolidated balance sheet for 1984 through 1989 in yen and dollars, respectively. In 1989, Hitachi restated its 1987 and 1988 balance statements. The Company has included previously unconsolidated subsidiaries.

Table 12

Consolidated Balance Sheet Fiscal Years 1984-1989 (Billions of Yen)

Balance Sheet (March 31) 1984 mi 1986 1987* I2SS! msi Total Current Assets ¥ 3,029 ¥ 3,319 ¥ 3,276 ¥3,445 ¥ 4,303 ¥ 4,870 Cash ¥1,015 ¥ 1,182 ¥ 1,154 ¥1,364 ¥ 1,405 ¥ 1,638 Receivables ¥ 945 ¥ 971 ¥ 971 ¥1,011 ¥ 1.220 ¥ 1,372 Inventory ¥ 914 ¥ 988 ¥ 980 ¥ 898 ¥ 1.135 ¥ 1.250 Other Current Assets ¥ 155 ¥ 178 ¥ 171 ¥ 172 ¥ 543 ¥ 610 Net Property, Plant, and Equipment ¥ 944 ¥ 1,095 ¥ UOO ¥ 1.179 ¥ 1.354 ¥ 1,474 Depreciation ¥ 1,102 ¥ 1,294 ¥ 1,490 ¥ 1,680 ¥ 2,071 ¥ 2,250 Other Assets ¥ 638 ¥ 660 ¥ 688 ¥ 704 ¥ 531 ¥ 594

Total Assets ¥4,611 ¥ 5,074 ¥ 5,164 ¥5.842 ¥ 6,188 ¥ 6.938

Total Current Liabilities ¥2,294 ¥ 2,505 ¥ 2,393 ¥238 ¥ 2.851 ¥ 3.184 Long-Term Debt ¥ 325 ¥ 323 ¥ 370 ¥ 489 ¥ 468 ¥ 521 Other Liabilities ¥ 258 ¥ 285 ¥ 320 ¥ 353 ¥ 850 ¥ 951

Total Liabilities ¥ 2,877 ¥ 3,113 ¥ 3,083 ¥ 3.130 ¥ 4.169 ¥ 4.656

Total Shareholders' Equity ¥1.734 ¥ 1,961 ¥ 2,081 ¥ 2,198 ¥ 2.019 ¥ 2.282 Common Stock ¥ 140 ¥ 140 ¥ 140 ¥ 141 ¥ 180 ¥ 219 Other Equity ¥ 485 ¥ 527 ¥ 525 ¥ 572 ¥ 248 ¥ 322 Retained Earnings ¥1,109 ¥ U94 ¥ 1.416 ¥ 1,485 ¥ 1.591 ¥ 1.740

Total Liability and Total Equity ¥4,611 ¥ 5,074 ¥ 5,164 ¥ 5,328 ¥ 6.188 ¥ 6.938

(Ccmtinued)

Table 12 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1989 (Billions of Yen)

Income Statement (March 31) 1984 1985 1986 1987* 1988* im* Revenue ¥ 4,367 ¥ 5.013 ¥ 5.010 ¥5.543 ¥ 5.717 ¥ 6.401 Domestic Sales ¥3,136 ¥ 3.378 ¥ 3.499 ¥4.068 ¥ 4.286 ¥ 4.932 Overseas Sales ¥ 1,231 ¥ 1,635 ¥ 1.511 ¥ 1,475 ¥ 1.431 ¥ 1.469 Cost of Sales ¥3,213 ¥ 3,648 ¥ 3.741 ¥4,089 ¥ 4,123 ¥ 4,552 Gross Margin (%) ¥ 26 ¥ 27 ¥ 25 ¥ 26 ¥ 28 ¥ 29 R&D Expense ¥ 212 ¥ 268 ¥ 296 ¥ 314 ¥ 332 ¥ 374 SG&A Expense ¥ 581 ¥ 650 ¥ 667 ¥ 869 ¥ 943 ¥ 1.042 Other Operating Expenses ¥ 0 ¥ 0 ¥ 0 ¥ 0 ¥ 0 ¥ 0 Total Operating Expenses ¥4,006 ¥ 4.566 ¥ 4.704 ¥5,272 ¥ 5398 ¥ 5.968 Operating Income (Loss) ¥ 361 ¥ 447 ¥ 306 ¥ 271 ¥ 319 ¥ 433 Interest, Net ¥ 46 ¥ 62 ¥ 65 ¥ 24 ¥ 61 ¥ 58 Pretax Income ¥ 407 ¥ 509 ¥ 371 ¥ 295 ¥ 380 ¥ 491 Provision for Taxes (Credit) ¥ 213 ¥ 270 ¥ 198 ¥ 175 ¥ 218 ¥ 272 Effective Tax Rate ¥ 52 ¥ 53 ¥ 53 ¥ 59 ¥ 57 ¥ 55 Extraordinary Items, (¥ 27) (¥ 29) (¥ 23) (¥ 21) (¥ 25) (¥ 33) Net Income ¥ 167 ¥ 210 ¥ 150 ¥ 99 ¥ 137 ¥ 186

Avg. Shares Outstanding (Million) 2,802 2.803 2.803 2,810 2.869 ¥ 2,970 Employees 161,533 164.951 164.117 161.325 263.996 274.508 Capital Spending (Million) ¥ 382 ¥ 455 ¥ 447 ¥ 421 ¥ 373 ¥ 515

Exchange Rate (Yen per US$1) 236 245 221 160 138 128

*In 1987. the value for total assets was restated, but the detail was not provided. In Tables 12and 13, the details were not changed, but the restated total asset number has been added. Therefore, the columns will not add correctly.

Source: Hitachi. Ltd. Annual Reports Dataquest August 1989

Table 13

Consolidated Balance Sheet Fiscal Years 1984-1989 (Millions of Dollars)

Balance Sheet (March 31) 1984 1985 im. 12S21 12^ 1989* Total Current Assets $12,835 $13,547 $14,824 $21,531 $31,181 $38,047 Cash $ 4.301 $ 4,824 $ 5,222 $ 8,525 $10,181 $12,797 Receivables $ 4.004 $ 3,%3 $ 4,394 $ 6.319 $ 8,841 $10,719 Inventory $ 3.873 $ 4,033 $ 4,434 $ 5,613 $ 8.225 $ 9,766 Other Current Assets $ 657 $ 727 $ 774 $ 1,075 $ 3,935 $ 4,766 Net Property, Plant, and Equipment. $ 4,000 $ 4,469 $ 5.430 $ 7369 $ 9,812 $11,516 Depreciation $ 4,669 $ 5,282 $ 6.742 $10,500 $15,007 $17,578 Other Assets $ 2,703 $ 2,694 $ 3.113 $ 4,400 $ 3.848 $ 4,641

Total Assets $19,538 $20,710 $23,367 $33,300 $44,841 $54,203

Total Current Liabilities $ 9,720 $10,224 $10,828 $14300 $20,659 $24,875 Long-Term Debt $ 1,377 $ 1318 $ 1,674 $ 3,056 $ 3,391 $ 4,070 Other Liabilities $ 1,093 $ 1,163 $ 1,448 $ 2,206 $ 6,159 $ 7,430

Total Liabilities $12,191 $12,706 $13,950 $19,563 $30,210 $36,375

Total Shareholders' Equity $ 7.347 $ 8,004 $ 9,416 $13,738 $14,630 $17,825 Common Stock $ 593 $ 571 $ 633 $ 881 $ 1304 $ 1,714 Other Equity $ 2,055 $ 2,151 $ 2376 $ 3,575 $ 1,797 $ 2,515 Retained Earnings $ 4,699 $ 532 $ 6,407 $ 931 $11,529 $13,596

Total Liability and Total Equity $19,538 $20,710 $23,367 $33,300 $44,840 $54,200

(Continued)

Table 13 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1989 (Millions of Dollars)

Income Statement (March 31) 1984 1985 1986 19R7* 1988* imi Revenue $18,504 $20,461 $22,670 $34,644 $41,428 $50,008 Domestic Sales $13,288 $13,788 $15,833 $25,425 $31,058 $38,531 Overseas Sales $ 5,216 $ 6,673 $ 6,837 $ 9.219 $10,370 $11,477 Cost of Sales $13,614 $14,890 $16,928 $25,556 $29,877 $35,563 Gross Margin (%) $ 26 $ 27 $ 25 $ 26 $ 28 $ 29 R&D Expense $ 898 $ 1,094 $ 1.339 $ 1,963 $ 2.406 $ 2,922 SG&A Expense $ 2,462 $ 2,653 $ 3.018 $ 5.431 $ 6.833 $ 8.141 Other Operating Expenses $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Total Operating Expenses $16,975 $18,637 $21,285 $32,950 $39,116 $46,625 Operating Income (Loss) $ 1,530 $ 1.824 $ 1.385 $ 1,694 $ 2.312 $ 3.383 Interest, Net $ 195 $ 253 294 150 442 453 Pretax Income $ 1,725 $ 2,078 1.679 1,844 2.754 3.836 Provision for Taxes (Credit) $ 903 $ 1,102 896 1.094 1.580 2.125 Effective Tax Rate $ 52 $ 53 53 59 57 55 Extraordinary Items ($ 114) ($ 118) 104) 131) 181) 258) Net Income $ 708 $ 857 679 619 993 1.453

Avg, Shares Outstanding (Million) 2,802 2,803 2.803 2.810 2.869 2.970 Employees 161,533 164,951 164,117 161.325 263,996 274.508 Capital Expenditures (Million) $ 1,619 $ 1.857 $ 2.023 $ 2.631 $ 2.703 $ 4.023

Exchange Rate (Yen per US$1) 236 245 221 160 138 128

* In 1987, the value for total assets was restated, but the detail was not provided. Therefore, in Tables 12 and 13, the details were not changed, but the restated total asset number has bee added. Therefore, the columns will not add correctly.

Source: Hitachi, Ltd. Annual Reports Dataquest August 1989

Matsushita Electric Industrial Co., Ltd. Corporate

SUMMARY The purpose of this section is to provide a one-page overview of the corporation.

Address Matsushita Electric Industrial Co., Ltd. 1006 Kadoma, Kadoma City Osaka 571, Japan Phone (06)-908-1121 Fax (06)-906-1762 President Akio Tanii Chairman Masaharu Matsushita Main Product Areas Video equipment Electronic components Energy and kitchen-related products Communication and industrial equipment Audio equipment Home appliances No. of Employees 134,186 Employees Overseas 51,600 Top Shareholders Sumitomo Bank 4.4 % Sumitomo Life Insurance 4.4 % Nippon Life Insurance 4.0 % Matsushita Investment and Development 3.2 % Mitsubishi Trust 3.0 % Sumitomo Trust 2.9 % Konosuke Matsushita 2.6 % Toyo Trust 2.0 % Kyowa Bank 2.0 % % Outstanding Stock Foreign-Owned 9.0% Stock Exchanges All major Japanese, New York, Pacific, Amsterdam, Frankfurt, Dusseldorf, and Paris Ranking (based on revenue) 1st among Japanese consumer electronic companies

STRATEGY Matsushita's goals for 1989 and accomplishments in 1988 are highlighted in this section.

Matsushita's corporate goals include the following: • Maintain leadership in consumer markets while transforming itself into an integrated electronics company. Areas targeted for expansion include: Information equipment; specifically, high-speed workstations Office and factory automation Audiovisual equipment Semiconductors Housing-related equipment Air conditioning systems Automotive electronics • Expand production facilities overseas and raise local procurement By 1990, local content in the United States is slated to increase from the current 50 percent to 70 percent • Establish four decision-making headquarters: Singapore, United States, Europe, and Japan • Develop global information network system by 1992 to integrate domestic and overseas Matsushita companies The following developments occurred at Matsushita during 1988: • Coordinated all overseas manufacturing and sales activities under one global policy by merging with its subsidiary, Matsushita Electric Trading • Emphasized foreign imports

• Unified Matsushita group under a fiscal year that ends March 31 • United States

Established North American television division in Illinois

Asia Expanded existing manufacturing bases, emphasizing re-exports and horizontal divisions of labor Established China's largest color picture tube manufacturing company. Production is scheduled to start in 1989.

Europe Expanded production of audiovisual equipment to avoid antidumping policies

ORGANIZATION Figure 1 shows the organization of the Matsushita group of companies. As shown, Matsushita Electric Industrial is the parent of of the Matsushita group.

Figure 1 Matsushita Group Companies Organizational Chart

Matsushita Electric Industrial

Housing Construction Electrical & Electronics Lighting Equipment

Matsushita Electric Works National House Industrial ^M ^ Asahl National Lighting Matsushita Communication Ind. Victor Company of Japan Kyushu Matsushita Electric Bicycle Matsushlta-Kotobuki Securities Electronics Inds. National Bicycle Industry Matsushita Refrigeration National Securities MIyata Industry Matsushita Seiko Wakayama Machine Tools Matsushita Electronics Publishing Real Estate Matsushita Electronic Components

PHP Institute Matsushita Housing Products Matsushita Investment Matsushita Industrial Equipment Telchiku Records & Development Matsushita Graphic Communication Systems Matsushita Battery Ind.

Trading

Matsushita Electric Trading

Parent Co. Subsidiaries or Affiliates

0003999-1 Source: Dodwell Marketing Consultants Industrial Groupings in Japan

OPERATIONS

Product Segments Matsushita is divided into six product groups. The groups and examples of products within each are listed below. Video equipment—VCRs, camcorders, televisions Audio equipment—CD radios, digital tapes, recorders, electronic musical instruments, speaker systems Home appliances—air conditioners, refrigerators, microwave ovens, vacuum cleaners, bread-baking machines, dishwashers, laundry equipment Communication and industrial equipment—office automation, communication, and information equipment; traffic control and post office sorting systems; industrial robots; electric motors; welding equipment Energy 'and kitchen-related products—batteries, kitchen fixtures, gas equipment, solar energy equipment Electronic components—semiconductors, electronic tubes and lamps, general components Others—musical tapes, records, bicycles, photographic equipment, electronic pencil sharpeners, water purifiers

Product Revenue Figure 2 and Table 1 show Matsushita's revenue by product segment from 1984 to 1988.

Figure 2 Product Revenue as a Percent of Total Corporate Revenue

Percent IOC-

go r~W\ Electronic Components 80- ^H Energy and Kitchen-Related 70- I I Communication 60- and Industrial [a Home 50 Audio 40 Pvl Video 30- V, V •'/, -S, ''I 20- 10-

'rt. -•: Ji

1984 1985 1966 1987 \\s:198 8 Note: Percentages'do not add to 100 because the "Other' category has not been Included. 0003999-2 Source: Dataquest June 1989

Table 1

Sales by Product Segment (Billions of Yen)

Nov. 21, 1986- 1984 1985 1986 Mar. 31, 1987 1988

Video Equipment ¥1 ,726.4 ¥1 ,890.2 ¥1 ,502.8 ¥ 510.0 ¥1 ,438.0 Audio Equipment 478.9 452.8 391.3 119.3 385.0 Home Appliances 683.3 731.5 707.0 201.5 721.7 Communication and Industrial Equipment 783.9 880.2 859.0 290.0 990.5 Energy and Kitchen- Related Products 193.3 192.9 207.5 73.1 232.4 Electronic Components 542.7 538.1 529.0 182.7 601.3 Other Products 312.2 367.0 378.3 105.8 450.1

Total ¥4 ,720.7 ¥5 ,052.7 ¥4 ,574.9 ¥1,482.4 ¥4 ,819.0

Exchange Rate 237 242 172 155 138

Note: Columns may not add to totals because of rounding.

Source: Matsushita Electric Annual Report Dataquest June 1989

Domestic versus International Revenue

Figure 3 shows the year-to-year growth of Matsushita's international and domestic sales for 1983 through 1988. In 1988, domestic sales were ¥2,889 billion and international sales were ¥1,930 billion.

Figure 3 Total Corporate Revenue Growth of International versus Domestic Sales

Percent Growth

25- Domestic KSXl NoncJomestIc 15-

S- ^

1 ''tu '/. T ', \ \S -5 vW -15- 1^ -25 1982-1983 1983-1984 1984-1985 1985-1986 1987-1988

Note: 1986-1967 are not included because of a change In the fiscal year. 0003999 -3 Sources DalaqucsT June 19E9

Growth Rate Figure 4 shows the year-to-year growth rates by product segment revenue. Following this figure is a list of factors explaining the changes in 1988 product growth.

Figure 4 Growth Rates by Product Segment (Yen-Based)

Growth Rate

75- Video Communlcatfon and Industrial Audio Energy and Kit Chan-Related Home 55- F^^ Electronic Components

35-

15 i f!

-25 1984 1955 1966 1936 Fiscal Year 0003999-4 Source: DaL^Queat lunelSKS

Main Factors Affecting 1988 Growth The major factors affecting Matsushita's growth in 1988 are listed below by product segment. • Video equipment Domestic demand was strong for VCRs and large-screen TVs, but international sales were down as a result of the high yen. • Audio equipment Demand for CD-equipped hi-fi component systems increased, but exports were down. • Home appliances - Domestic demand was strong, especially for air conditioners, refrigerators, and microwave ovens.

Communication and industrial equipment Demand for office automation and information equipment has expanded. Private capital investment recovered and boosted factory automation equipment sales. Energy and kitchen-related products Housing construction boomed. Steady growth occurred for batteries. Electronic components General market conditions were strong.

CAPITAL AND R&D INVESTMENTS Matsushita's capital and R&D spending in 1988 increased to 9.3 percent of total revenue, an 11.0 percent increase over 1986 spending. Matsushita strengthened R&D and expanded facilities in areas such as semiconductors, VCRs, and new AV and OA equipment. Figure 5 and Table 2 show R&D and capital spending as a percentage of total corporate revenue. Figure 5 Capital and R&D Spending as Percentage of Total Corporate Revenue

Percent 12- Capltal Spending 10- r- ' -. I R&D Spending

A-

:S:^ 1983 1964 1965 1966 1967 19S8

Table 2 Capital and R&D spending (Dollars and Yen)

1983 1984 1985 1986 1987* 1988

Corporate Revenue ¥ 3,989 ¥ 4,721 ¥ 5,053 ¥ 4,575 ¥1,,48 2 ¥ 4,819 $16,018 $20,003 $20,623 $20,701 $9,,26 3 $34,920

Capital Spending ¥ 145 ¥ 248 ¥ 255 ¥ 153 ¥ 50 ¥ 175 $ 580 $ 1,050 $ 1,041 $ 691 $ 311 $ 1,270 % Total Revenue 3.6% 5.2% 5.0% 3.3% 3.4% 3.6%

R&D Spending ¥ 174 ¥ 200 ¥ 241 ¥ 250 ¥ 92 ¥ 271 $ 700 $ 848 $ 982 $ 1,132 $ 578 $ 1,967 % Total Revenue 4.4% 4.2% 4.8% 5.5% 6.2% 5.6%

Total Spending ¥ 319 ¥ 448 ¥ 496 ¥ 403 ¥ 142 ¥ 447 $ 1,280 $ 1,898 $ 2,024 $ 1,823 $ 888 $ 3,236 % Total Revenue 8.0% 9.5% 9.8% 8.8% 9.6% 9.3%

Exchange rate 249 236 245 221 160 138

*Because of a fiscal year change, 1987 was only four months long.

Source: Matsushita Electric Industrial Co., Ltd. Annual Reports Dataquest June 1989

Target R&D Areas

Matsushita has established a new international R&D center at its headquarters to study R&D strategies from an international perspective. The Company plans to build a facility in the United States in the near future to carry out basic and applied research. Matsushita has established four areas for R&D development in the future: semiconductors, office and factory automation, and audio/video equipment. Some of its recent projects include the following: • Office automation A compact multifunction facsimile with a telephone answering feature - 32-bit workstations

Semiconductors A 16Mb-mask ROM and a 16Mb DRAM A high-speed multiple-valued logic multiplier LSI High-speed personal supercomputers Artificial intelligence in home electronics Audio/video equipment HDTV-related equipment Factory automation Panasert, a automatic parts-mounting machine Automation systems for service industries

FACILITIES Table 3 shows the distribution of Matsushita Electric Industrial's domestic and foreign facilities. In 1988, Matsushita Electric Corporation of American and Panasonic Europe were granted headquarter status to control the Matsushita group companies in America and Europe, respectively. Plans are being made to create additional headquarters in Singapore.

Table 3 Matsushita Corporate Facilities

Country Facilities Type

Japan 132 Offices 35 Manufacturing plants 18 RStD laboratories and centers

Overseas 66 Manufacturing plants (in 38 countries) 30 Sales companies 4 Financial subsidiaries

Source: Dataguest June 1989

12 !St Incorporated June JSIS Volume III 0003999 Matsushita Electric Industrial Co., Ltd. Semiconductor

SUMMARY The purpose of this section is to provide a one-page overview of the Company's semiconductor activity. The Matsushita group's semiconductor production is done at Matsushita Electronics Corporation. Matsushita Electronics Corporation is 65 percent owned by Matsushita Electric Industrial and 35 percent by Philips. Its main customer is Matsushita Electric Industrial.

Address Matsushita Electronics Corporation 1-1, Saiwai-cho, Takatsuki City Osaka 569 Japan Phone 0726-82-5521 President Fumio Kanazawa Main Product Bipolar digital logic MOS memory Areas MOS microdevices MOS logic Linear Discrete Optoelectronics Electronic tubes Lightening equipment

Ranking (based 5th among Japanese semiconductor manufacturers on revenue) 9th among worldwide semiconductor manufacturers

STRATEGY Listed below are some of Matsushita's accomplishments in the semiconductor area during 1988 and goals for 1989. They are divided into product categories for clarity.

Overall Strengthen MOS IC product lines (Matsushita has historically emphasized bipolar digital ICs for use in Matsushita Electric Industrials consumer and industrial equipment.) Increase 1989 plant and equipment investments 2.4 times over 1988 Investigate production of a U.S. manufacturing facility

Memory Plan to be competitive in the 4Mb and 16Mb DRAM sectors

• Manufactured prototype 16Mb DRAMs with 3.3-square microns and an access time of only 65 nanoseconds; plan to ship in 1991 • Shipped engineering samples of its 4Mb DRAMs in spring 1988 • Increased production of 1Mb DRAMs at Uozu plant • Developed positive channel transistor structure for 64Mb DRAMs • Developed excimer lithography resist and a pattern transfer technique for use in designing circuits narrower than 0.5 micron. Both will be used in 16Mb DRAMs • Developed world's first 16Mb-mask ROM

Analog • Developed high-speed display processor

Communications Industry • Increase production capacity of CCDs at Arai plant during 1989

Microdevices • Introduced prototype of 64-bit RISC microprocessor

• Developed high-speed, multiple-value logic multiplier LSI

ASIC Will establish two new design centers for ASIC and gate arrays in Europe (West Germany or United Kingdom)

Technology • Developed ultraprecision processing technology • Developed LSI mounting technology • Plans to remain one of the world leaders in GaAs technology

ORGANIZATION Figure 6 shows Matsushita Electronics Corporation's organizational chart. Figure 7 shows the organization of the Semiconductor Research Center under the direction of Matsushita Electric Industrial. Figure 6 Matsushita Electronics Corporation

~ HiD Center J Head T Office CRT Sales DIvlGlon

— Monochrome CRT Division 1 Electronic —1 Tube • Grcup Color CRT DIvlBlon

Camera Tube Division

^Si^iairman^ Maonetron Sales Division

Tokyo Research Lab

t^^ President ^ Application TachnolDOv Center

International Marketing Division 1 Microcomponent Division • Semiconductor Memorv Division 1 Group

IC Division

Discrete Device Division

Sales Promotion Division

1 Ught Ught Division • Group

Kyoto Re ee arc in Lab

Electronics Research Lab

Figure 7 Matsushita Electric Industrial Semiconductor Research Center Organizational Chart

Matsushita Electric Industrial Co., Ltd.

Semiconductor Research Center

Basic Research Advanced Devices Optoelectronics Laboratory Laboratory Laboratory

0003999-7 Source: Dataquest June 1989

OPERATIONS Note: Exchange rates used in the semiconductor section of this profile are based on the calendar year.

Product Segments

The Company's main semiconductor product areas are listed below. Bipolar Digital Logic—LSTTL and ECL

MOS Memory—CMOS and NMOS SRAMs, DRAMs, ROMs, EPROMs, and NMOS nonvolatile memory

MOS microdevices—4, 8, 16, and 32-bit MPUs, MCUs, and microperipherals MOS logic—standard CMOS logic, CMOS gate arrays, and standard cells Linear—op amps, comparators, industrial linear ICs, D/A and A/D converters

• Discrete—small signal and power transistors, junction FETs, thyristors, diodes, GaAs FETs • Optoelectronics—LEDs, GaAs semiconductor lasers, microwave ICs • Nonsemiconductor—electronic tubes and lighting equipment

Product Revenue Figure 8 shows Matsushita's percentage of semiconductor revenue by product. For example, 66.1 percent of Matsushita's IC revenue came from MOS technology in 1988, and of this, 45.8 percent of the revenue came from MOS linear devices.

Figure 8 1988 Estimated Semiconductor Revenue Percent by Product (Millions of Dollars)

Bipolar 6.6%

Source: Dataquest 0003999-6 June 1989

Regional Sales Matsushita's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4 Estimated Semiconductor Revenue by Region—1988 Percentage by Region (Millions of Dollars)

United Product States Japan Europe ROW

Semiconductor 3% 86% 2% 8% IC 4% 85% 2% 9% Bipolar Digital 0 90% 10% 0 MOS (Technology) 6% 85% 2% 6% MOS Memory 18% 63% 10% 8% MOS Micro 2% 94% 0 3% MOS Logic 2% 91% 0 7% Analog 0 84% 1% 15% Discrete 2% 85% 4% 10% Optoelectronics 0 99% 1% 0 Exchange Rate (Yen per US$1) 130

Source! Dataguest June 1989

Growth Rate Matsushita's growth rate, by product line, is shown in the tables and figures that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 9 graphically compares Matsushita's growth rate in the world market with the growth rate of the world market itself. (This information is provided for the Japanese market as well.)

Table 5 Matsushita Sales in World Market (Millions of Dollars)

World Market 1987 1988 % Chanae % Chanae

Semiconductor $1 ,457 $1 ,886 29.4% 31.9% IC $ 994 $1 ,335 34.3% 36.5% Bipolar Digital $ 26 $ 30 15.4% 9.2% MOS (Technology) $ 592 $ 882 49.0% 53.1% MOS Memory ••• $ 91 $ 216 • 137.4% 90.3% MOS Micro $ 199 $ 262 31.7% 39.8% MOS Logic $ 302 $ 404 33.8% 28.2% Analog $ 376 $ 423 12.5% 15.3% Discrete $ 318 $ 369 16.0% 13.2% Optoelectronics $ 145 $ 182 25.5% 25.4%

Exchange Rate (Yen per US$1) 144 130

Source! Dataquest June 1989 Figure 9 Matsushita Growth Rate Compared with World Market

Growth Rate 160- ^M World Market 140- t%\l Matsushita 120-

100

40^

Semiconductor IC Bipolar MOS Memory Micro Logic Anal 05 Discrete Opto Product 0003099-6 Source: Dataquest June 1989

Worldwide Market Growth Rate In 1988, Matsushita grew significantly faster than the world growth rate in MOS memory. In both total semiconductor and total ICs, Matsushita grew slightly less than the world totals.

Japanese Market Growth Rate Matsushita grew much less than the Japanese market in all product categories, except analog and discrete, which were almost flat. In the MOS memory category, Matsushita grew significantly less than the rest of the Japanese market. The Company's sales in the Japanese market are shown in Table 6 and Figure 10.

Table 6 Matsushita Sales in Japanese Market (Millions of Dollars)

Japanese Market 1987 1999 % Change % Chanae

Semiconductor $1 ,290 $1,,62 5 26.0% 35.6% IC $ 885 $1,,13 3 28.0% 39.1% Bipolar Digital 24 27 12.5% 18.3% MOS (Technology) 545 752 38.0% 58.4% MOS Memory 87 137 57.5% 85.4% MOS Micro 187 247 32.1% 35.9% MOS Logic 271 368 35.8% 50.3% Analog 316 354 12.0% 11.7% Discrete $ 263 $ 312 18.6% 18.5% Optoelectronics $ 142 $ 180 26.8% 42.3%

Exchange Rate (Yen per US$1) 144 130

Source: Dataguest June 1989

Figure 10 Matsushita Growth Rate Compared with Japanese Market

Growth Rate 100

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product Source: Dataquest 0003999-10 June 19S9

Other Japanese Companies The growth rate by product line for Matsushita is compared with that of the other Japanese companies tracked by Dataquest in the following graphs. Dataquest surveys a total of 18 companies, plus a category called "Other." The total of these companies' revenue were used for comparison in Figures 11 and 12.

Figure 11 Matsushita versus Other Japanese Companies in Japanese Market

Growth Rate 90' Other Japanese Companies 80 t '•'••'.: i Matsushita 70-

20-

10-

0 Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product Source: Dataquesl 0003999-11 June 1989

Figure 12 Matsushita versus Other Japanese Companies in World Market

Growth Rate 160 Other Japanese Companies 140- Matsushita

120^

100-

60-

20-

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product Source: DataquesaoD t 0003999-12 Junel98e 1 9

Channels of Distribution At the time of this update, information regarding Matsushita's channels of distribution were unavailable.

CAPITAL SPENDING As shown in Tables 7 and 8, capital investment as a percentage of total revenue dropped significantly after the peak year of 1984.

Table 7 Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—^Millions of Dollars

1984 1985 1986 1987 1988

Revenue $928 $906 $1,176 $1,457 $1,886

Semiconductor Capital Spending $464 $252 $ 149 $ 153 $ 385

Growth Rate of Capital Spending N/A (46%) (41%) 3% 152%

Percent of Revenue 50% 28% 13% 10% 20%

Exchange Rate (Y per US$1) 237 238 168 144 130

N/A = Not Available

Source; Matsushita Electric Corporation Annual Report Dataguest June 1989

Table 8 Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Billions of Yen

1984 1985 1986 1987 1988

Revenue V220 V216 ¥198 ¥210 ¥245

Semiconductor Capital Spending ¥110 y 60 ¥ 25 ¥ 22 ¥ 50

Capital Spending Growth Rate N/A (45%) (58%) (12%) 127%

Percent of Revenue 50% 28% 13% 10% 20%

Exchange Rate (Y per US$1) 237 238 168 144 130

N/A = Not Available

Source: Matsushita Electric Corporation Annual Report Dataguest June 1989

FACILITIES Matsushita Electronics Corporation has 10 semiconductor manufacturing facilities and 3 semiconductor-related R&D laboratories. These are listed in Table 9. Table 9 Matsushita Electric Indiistrial Semiconductor Facilities

Name/Location Function Arai Works Fab/ assembly, test Niigata Prefecture ICs

Kagoshima Matsushita Electric Assembly (affiliate) Opto, germanium transistors, ICs, LSIs Kagoshima Prefecture

(Continued)

Table 9 (Continued) Matsushita Electric Industrial Semiconductor Facilities

Name/Location Function Nagaoka Factory Fab, assembly, test Kyoto Prefecture ICs, discretes, opto, VLSI R&D

Okayama Factory Assembly Okayama Prefecture Transistors

Utsunomiya Factory Assembly Tochigi Prefecture Silicon transistors, diodes

Toyo Dempa (Affiliate) Assembly Kyoto Prefecture Silicon diodes

West Denki (Affiliate) Assembly Osaka Prefecture Germanium diodes

Uozu Factory Fab, assembly Toyama Prefecture MOS logic, MPU

Matsushita Denshi Pte. Assembly Singapore Silicon transistors, ICs

Matsushita Electronic Assembly Components Company Custom hybrid ICs Santa Clara, CA

Development Research Laboratory R&D on semiconductor and other related Kadoma City, Osaka material, devices, and equipment

Semiconductor Research Center Mid- to long-term R&D for optoelectronics, Moriguchi City, Osaka ICs, and microwave semiconductors

Matsushita Electronics Corp. Semiconductor R&D in biotechnology, Research Lab microprocessing

Source: Dataguest June 1989

ALLIANCES AND AGREEMENTS Matsushita's recent alliances and agreements are shown graphically in Figure 13 and described in detail below.

Figure 13 Semiconductor Agreements and Alliances

Source: Dataquesi 0003999-13 June 1989

1986

NTT Agreed to jointly develop 4M and higher DRAMs. The two companies will share R&D expenses and patents and will exchange engineers.

1987 • NEC Agreed to develop the next generation of steppers for VLSI manufacturing.

SAE Inc. Agreed to jointly develop 64-bit MPU with plans for a 64-bit engineering workstation in 1989. Matsushita invested approximately $10 million in SAE, a 1986 start-up under the direction of a former Motorola engineer. Production and sales for SAE within Japan will be handled by Matsushita, and sales in the United States and Europe will be a joint effort.

Philips Renewed business cooperation agreement for next ten years in which Matsushita Electric will continue to own 65 percent of Matsushita Electronics and Philips will own 35 percent. Supplied LSIs for compact discs to Philips. Made second-source agreement for 8-bit CMOS MCUs.

Intel Obtained license from Intel for 8051 and three other 8-bit MCUs. Chinese Company in Dandong, Liaoning Province Supplied discrete semiconductor manufacturing technology and related facilities. Under the ¥400 million contract, Matsushita will train 25 Chinese personnel.

TRW Agreed to jointly develop 0.8 micron-wavelength GaAlAs semiconductor laser for space communications. NASA plans to introduce a Matsushita 80mW device in 1990.

Nikon Jointly developed advanced i-line steppers and excimer lasers for next-generation VLSIs.

1988 • Hewlett-Packard, IBM, Intel Agreed to supply these companies with a total of more than 1 million IM DRAMs per month.

Intel Agreed to subcontract production of Intel's 8-bit microcontrollers for the Japanese market. Agreed to jointly develop sub-0.5-micron 16M DRAM process.

Sun Microsystems Licensed the SPARC RISC chip for use in workstations being developed by Solbourne Computer, Matsushita's Colorado subsidiary. Solbourne will eventually use Matsushita's own 64-bit SPARC design in a graphics supercomputer.

Tosoh Agreed to jointly develop conductive electron-beam resist that completely solves the electrification problem occurring with direct-write e-beams.

Motorola Agreed to purchase semiconductors produced at Motorola for use in video cassette recorders. Matsushita will buy ¥10 billion worth for an indefinite period of time.

REVENUE SUMMARY Tables 14 and 15 show Matsushita's semiconductor revenue in detail. The tables show sales from 1981 to 1988 in both billions of yen and millions of dollars. Table 14 Matsushita Electric Industrial Estimated Worldwide Semiconductor Revenue (Billions of Yen) 1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 108 106 141 220 216 197 210 245

Total IC 61 62 86 140 142 133 143 174

Bipolar Digital (Technology)

MOS (Technology) 20 22 38 67 64 65 85 115 NMOS 12 12 24 44 41 40 45 48 PMOS 4 4 3 1 1 1 0 0 CMOS 4 6 11 22 23 24 40 66 BiCMOS

MOS (Function) 20 22 38 67 64 65 85 115 MOS Memory 2 2 7 19 14 12 13 28 MOS Microdevices 10 12 21 28 27 28 29 34 MOS Logic 8 8 10 20 24 25 44 53

Analog 39 38 46 68 73 63 54 55

Total Discrete 40 36 44 59 54 45 46 48

Transistor 24 23 29 37 33 32 35 37 Diode 12 9 12 16 14 12 11 11 Thyristor 1 1 1 1 1 0 0 0 Other Discrete 2 3 2 4 5 1 0 0

Total Optoelectronic 6 11 21 20 19 21 24

Exchange Rate (Yen per US$1) 221 248 235 237 238 167 144 130

•Preliminary estimates for 1988.

Source: Dataguest June 1989

Table 15 Matsushita Electric Industrial Estimated Woridwide Semiconductor Revenue (Millions of Dollars)

1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 487 427 600 928 906 1,176 1,457 1,886

Total IC 277 250 367 592 595 795 994 1,335

Bipolar Digital (Technology) 10 7 13 22 21 28 26 30

MOS (Technology) 91 89 160 283 269 388 592 882 NMOS 53 50 103 184 170 239 310 368 PMOS 18 15 12 5 4 4 2 3 CMOS 20 24 45 94 95 145 280 511 BiCMOS .• 0 0 0 0 0 0 0 0

MOS (Function) 91 89 160 283 269 388 592 882 MOS Memory 9 9 29 80 58 71 91 216 MOS Microdevices 45 48 88 119 111 167 199 262 MOS Logic 37 32 43 84 100 150 302 404

Analog 176 154 194 287 305 379 376 423

Total Discrete 181 146 188 247 226 266 318 368 Transistor 110 94 122 157 139 191 240 281 Diode 55 38 52 68 60 71 78 88 Thyristor 5 4 4 5 4 0 0 0 Other Discrete 11 10 10 17 23 4 0 0

Total Optoelectronic 29 31 45 89 84 115 145 182

Exchange Sate (Yen per US$1) 221 249 237 237 238 168 144 130

•Preliminary estimates for 1988.

Source: Dataquest June 1989

BALANCE SHEETS

Tables 16 and 17 show Matsushita's corporate consolidated balance sheet for 1984 through 1988 in yen and dollars, respectively.

Table 16

Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Mar.31, Balance Sheet 1984 1985 1986 1987* 1988

Total Current Assets ¥2,455 ¥4,944 ¥2,446 ¥2,301 ¥2,763 Cash ¥ 687 ¥ 765 ¥ 878 ¥ 862 ¥1,126 Receivables ¥ 623 ¥ 604 ¥ 555 ¥ 372 ¥ 422 Inventory ¥ 623 ¥ 626 ¥ 587 ¥ 554 ¥ 569 Other Current -Assets ¥ 522 ¥ 503 ¥ 426 ¥ 513 ¥ 646 Net Property, Plant, and Equipment ¥ 546 ¥ 596 ¥ 561 ¥ 550 ¥ 544 Depreciation ¥ 723 ¥ 863 ¥ 979 ¥1,034 ¥1,127 Other Assets ¥1,140 ¥1,270 ¥1,366 ¥1,317 ¥1,535 Total Assets ¥4,141 ¥6,810 ¥4,373 ¥4,168 ¥4,841

Total Current Liabilities ¥1,544 ¥1,487 ¥1,364 ¥1,094 ¥1,285 Long-Term Debt ¥ 160 ¥ 156 ¥ 141 ¥ 149 ¥ 299 Other Liabilities ¥ 607 ¥ 660 ¥ 696 ¥ 713 ¥ 781

Total Liabilities ¥2,311 ¥2,303 ¥2,201 ¥1,956 ¥2,364

Total Shareholders' Equity ¥1,830 ¥2,061 ¥2,172 ¥2,212 ¥2,477 Conv. Preferred Stock 0 Common Stock ¥ 88 ¥ 89 ¥ 90 ¥ 90 ¥ 145 Other Equity ¥ 242 ¥ 246 ¥ 214 ¥ 213 ¥ 282 Retained Earnings ¥1,500 ¥1,726 ¥1,868 ¥1,909 ¥2,050

Total Liability and Total Equity ¥4,141 ¥4,364 ¥4,373 ¥4,168 ¥4,841

(Continued)

Table 16 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue ¥4,721 ¥5,053 ¥4,575 ¥1,,48 2 ¥4,819 Domestic Sales ¥2,431 ¥2,549 ¥2,567 ¥ 824 ¥2,889 Overseas Sales ¥2,289 ¥2,504 ¥2,008 ¥ 658 ¥1,930 Cost of Sales ¥3,038 ¥3,288 ¥3,128 ¥1,,01 8 ¥3,314 Gross Margin (%) 36 35 32 31 31 R&D Expense ¥ 200 ¥ 241 ¥ 250 ¥ 92 ¥ 271 SG&A Expense ¥1,107 ¥1,204 ¥1,135 ¥ 390 ¥1,218 Other Operating Expenses 0 0 0 0 0 Total Operating Expenses ¥4,145 ¥4,492 ¥4,263 ¥1,,40 8 ¥4,532 Operating Income (Loss) ¥ 576 ¥ 561 ¥ 312 ¥ 74 ¥ 287 Interest, Net ¥ 93 ¥ 128 ¥ 129 ¥ 56 ¥ 144 Pretax Income ¥ 669 ¥ 689 ¥ 441 ¥ 130 ¥ 431 Provision for Taxes (Credit) ¥ 366 ¥ 377 ¥ 239 ¥ 72 ¥ 227 Effective Tax Rate (%) 55 55 54 55 53 Extraordinary Items (¥ 64) (¥ 66) (¥ 38) (¥ 11) (¥ 42) Net Income ¥ 239 ¥ 246 ¥ 164 ¥ 47 ¥ 162

Avg. Shares Outstanding (Millions) 1,753 1,768 1,780 1,,79 1 1,826 Employees 132,814 133,963 135,881 134,,76 4 134,186 Capital Expenditures ¥ 248 ¥ 255 ¥ 153 ¥ 50 ¥ 175

Exchange Rate (Yen per US$) 237 242 172 155 138

*Effective in 1987, Matsushita changed its fiscal year end to March 1987, and issued a financial report for the one-time fiscal period of November 21, 1986 to March 31, 1987.

Source: Matsushita Electric Industrial Annual Report Dataguest June 1989

Table 17 Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Mar.31, Balance Sheet 1984 1985 1986 1987* 1988

Total Current Assets $10,341 $10,331 $14,246 $14,826 $20,019 Cash $ 2,894 $ 3,164 $ 5,114 $ 5,554 $ 8,159 Receivables $ 2,624 $ 2,498 $ 3,232 $ 2,397 $ 3,060 Inventory $ 2,624 $ 2,589 $ 3,419 $ 3,570 $ 4,120 Other Current Assets $ 2,199 $ 2,080 $ 2,481 $ 3,305 $ 4,680 Net Property, Plant, and Equipment $ 2,300 $ 2,465 $ 3,267 $ 3,544 $ 3,941 Depreciation $ 3,045 $ 3,569 $ 5,702 $ 6,662 $ 8,165 Other Assets $ 4,802 $ 5,252 $ 7,956 $ 8,486 $11,122

Total Assets' $17,443 $18,048 $25,469 $26,856 $35,082

Total Current Liabilities $ 6,504 $ 6,150 $ 7,944 $ 7,049 $ 9,309 Long-Term Debt $ 674 $ 645 $ 821 $ 960 $ 2,164 Other Liabilities $ 2,557 $ 2,730 $ 4,054 $ 4,594 $ 5,657

Total Liabilities $ 9,735 $ 9,524 $12,819 $12,603 $17,131

Total Shareholders' Equity $ 7,709 $ 8,524 $12,650 $14,253 $17,951 Conv. Preferred Stock 0 0 0 0 0 Common Stock $ 371 $ 368 $ 524 $ 580 $ 1,049 Other Equity $ 1,019 $ 1,017 $ 1,246 $ 1,372 $ 2,045 Retained Earnings $ 6,318 $ 7,138 $10,879 $12,300 $14,857

Total Liability and Total Equity $17,443 $18,048 $25,469 $26,856 $35,082

(Continued)

Table 17 (Continued) Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue $19,885 $20,897 $26,645 $9,.55 2 $34,920 Domestic Sales $10,241 $10,542 $14,950 $5,,31 2 $20,933 Overseas Sales $ 9,644 $10,356 $11,695 $4,,24 0 $13,987 Cost of Sales $12,797 $13,598 $18,218 $6,,56 2 $24,014 Gross Margin (%) 36 35 32 31 31 RS.D Expense $ 842 $ 997 $ 1,456 $ 593 $ 1,964 SG&A Expense $ 4,663 $ 4,979 $ 6,610 $2,,51 3 $ 8,826 Other Operating Expenses 0 0 0 0 0 Total Operating Expenses $17,460 $18,577 $24,828 $9,,07 5 $32,841 Operating Income (Loss) $ 2,425 $ 2,320 $ 1,817 $ 477 $ 2,080 Interest, Net $ 392 $ 529 $ 751 $ 361 $ 1,040 Pretax Income . $ 2,817 $ 2,849 $ 2,568 $ 838 $ 3,120 Provision for Taxes (Credit) $ 1,542 $ 1,559 $ 1,392 $ 464 $ 1,644 Effective Tax Rate (%) 55 55 54 55 53 Extraordinary Items ($ 270) ($ 273) ($ 221) ($ 71) ($ 301) Net Income $ 1,005 $ 1,017 $ 955 $ 303 $ 1,174

Avg. Shares Outstanding (Millions) 1,753 1,768 1,780 1 ,791 1,826 Employees 132,814 133,963 135,881 134 ,764 134,186 Capital Expenditures $ 1,045 $ 1,055 $ 891 $ 322 $ 1,270

Exchange Rate (Yen per US$1) 237 242 172 155 138

•Effective in 1987, Matsushita changed its fiscal year end to March 1987, and issued a financial report for the one-time fiscal period of November 21, 1986 to March 31, 1987.

Source: Matsushita Electric Industrial Annual Report Dataguest June 1989

Mitsubishi Electric Corporation Corporate

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation.

Address Mitsubishi Electric Corporation Mitsubishi Denki Building 2-3, Marunouchi 2-chome Chiyoda-ku, Tokyo 100 Japan Phone (03)218-2111 Telex J24532

President Moriya Shiki Chairman Nihachiro Katayama Main Product Areas Heavy machinery Industrial products and automotive equipment Information and communication systems, electronic products, systems, and devices Consumer products

No. of Employees 75,795 Employees Overseas More than 22,000

Top Shareholders Mitsubishi Trust & Banking Corp. ,7% Mitsui Trust & Banking Corp. 2% Meiji Mutual Life Insurance Co. ,1% Nippon Life Insurance Co. 8% Mitsubishi Bank, Ltd. 2% Japan Securities Clearing Corp. 7% Sumitomo Trust & Banking Co., Ltd. 3% The Yasuda Trust & Banking Co., Ltd. 2% Mitsubishi Electrfc Group Employee Shareholders Union 2.1% Norin Chukin Bank 1.9%

% Outstanding 4.2% Stock Foreign-Owned

Stock Exchanges All major Japanese, Amsterdam, Frankfurt Ranking (based 4th in Japanese electronics manufacturers on revenue)

STRATEGY Mitsubishi's goals for 1989 and accomplishments in 1988 are highlighted in this section.

Mitsubishi's corporate goals include the following: • Significantly expand sales of computers, telecommunications equipment, and semiconductors • Continue to increase R&D expenditures • Launch wholly owned subsidiary called Mitsubishi Electric Information Network Corporation to promote value-added networks (VANs) • Expand operations around the world by increasing overseas production and technology transfers • Increase ratio of locally procured parts for offshore production • Deepen ties with local communities in which the corporation operates The following international developments occurred at Mitsubishi during 1988: • Thailand Acquired 20 percent stake in a company producing cathode-ray tubes for Thai color televisions Established a joint venture to manufacture flexible disk drives • Korea Established a joint venture for producing electronic fuel-injection systems

• Australia Began production of cellular mobile telephones • United States Began manufacturing 1Mb DRAMs and automotive equipment Expanded facilities to boost production of cellular mobile telephones Began selling U.S.-made Mitsubishi-brand personal computers

• United Kingdom Expanded facilities to produce VCRs for the European market Mitsubishi's domestic developments during 1988 were as follows: • Boosted efficiency of manufacturing and marketing networks to improve parts and material procurement • Installed largest value-added networks (VANs) in use by a Japanese corporation to enhance flow between headquarters and domestic subsidiaries and affiliates • Began, for the first time, importing high-tech products from offshore subsidiary (Luma Telecom in the United States)

ORGANIZATION Figures 1 and 2 are Mitsubishi's organizational charts. Figure 1 shows the Mitsubishi Group, of which Mitsubishi Electric is a member, and Figure 2 shows Mitsubishi Electric itself.

Figure 1 The Mitsubishi Group Organization Chart

Kin yo--Kal

Pape' Foodsluffs Petroleum Res\ Estate & Japan Maize Consi ruction Products

MUsubithJ Kifin Mitsubishi Mitsubishi Meiwa Papef VIJIIS Brewery Oil Estate Trading Mitsubishi Mitsubishi Office Construction Machinery

Chukyc Cnernicals Glass Coca-Cola Fudow Bottling CJiemicel ^* Mitsubishi Top 3 Leaders Asahi Nitto Flour Gas Chemical G.ass Milling Mitsubishi , Pasco Corp. Petro Nitto Kako chemical Mitsubishi Corporation Taiyo Sanso Electrical & Ryoden Mitsubishi Machinery Tradmg Plastics , Toyo Carbon Inds. Mitsubishi Nihon N Kantetsu Nippon ^* Mitsubishi ^" Shrzuki Siyntneti c Chemical Inds. Milsub'Shi Electric Kako^i Chemical Mitsubisfi! Kodensha Mitsubishi , Bank Nippon Company Nippon Kasei Monsanto Kooaku Kanagawa Chemical Chemical to- Mitsubishi Electric Motors Kawasaki £ Kasei £tee; & ' Toyo Chemicals Mela's Enoineerino Mitsubishi fioers 4 Works Teil

MitsobiEti' Mming & Finance and Insurance Tokyo Cable lnd£. Cement Nippon » Senpaku Yusan Mitsubishi Trust and Banking Sakai Tai^ieiyo Chemjcal Mitsubishi Mitsubishi Min.ryg & MeijI Mutual Life Insurance Warehouse & Kaiun \nousXTy Transportation Cement Tokio M.& F. Insurance Shinwa Kalun

Intra-group Joint Ventures

Con cre^e Mitsubishi Petroleum Dev. P.S. C •ncrete Mitsubishi Research institute Mitisubishi Atomic Power Industry Diamond Lease

Parent Company Subsidiaries or Atlillates

Source; Dodwell Marketing Consultants 0003954-1 Industrial Groupings in Japan

Figure 2 Mitsubishi Electric Corporation Organization Chart

EiacTfonic Products anet Systems Group

Consun-Af ProductT droup h^magirp^ Chairman &irKTOf NJ. Katayama Energy ar>d X Industry PresicJent Systenns Group Managing M. Sh.iki Director T K«t |i=

^"£ngin»ffrLng and MAHuTlC tuning

Er^tculiva Purchasing vici Prai-dant Dapanrn*nT p. Hirow

(ptormUlor £yH«^l DapmnmanT

ViC» PrSl^atfif H*k[i4uAriart p hrirosa —Mafhaltng

PJBIIC ViC* PraudB'^t <^al|1iori| C Kir OS* D*Ciarirr)«nT

JDi^acltf LJ Jkmino Fkn^nc* inttrnmh Qapvj^mttnt Auditing D«pJUlrrp»nT Mar.igifif] Dircciv h hAanj AiLEOCiAtad Personal General AHaira and il^ c:oinp«rLi*« ATTairi ^pa.'^rrunT Corporals Daptnmtnt Labor Relations Strai«

OPERATIONS

Product Segments

Mitsubishi's product categories and the types of products found under each are listed below.

• Heavy machinery—Energy, building, and transportation equipment • Industrial products and automotive equipment—Motors, robotics, palm recognition systems, rafts, boats, spiral escape chutes, automobile radios, air conditioners and refrigeration, factory automation, and electrical automotive equipment

• Information and communication systems, electronic products, systems, and devices—Semiconductors, mobile telephones, computers, radar systems, satellites, CRTs, printers, disk drives, PCS terminals, facsimile transceivers, and information network systems and equipment

• Consumer products—Audiovisual equipment, home electronics

Product Revenue

Figure 3 and Table 1 show Mitsubishi's revenue by product segment from 1984 to 1988.

Figure 3 Product Revenue as Percent of Total Corporate Revenue

Percent lOO-P Consumer 90H HD Products 60 Information/ EO Electronic 70 Industrial/ Automotive 60 Heavy Machinery 50 E3 40-^ iililii 30 '^jfijiiS^^aliliiiilJi^

'ii 'i '^ •'•, ^'i I 20 /\VXVM VVVVM 10 0 m'^ 1984 1985 ms\1986 1987 1988 0003954-3 Source: Dataquest June 1989

Table 1

Sales by Product Segment (Billions of Yen)

1984 1985 1986 1987 1988

Machinery ¥ 548 » 577 « 582 ¥ 562 ¥ 621 Industrial/Automotive 333 368 405 387 434 Information/Electronics 401 573 512 564 668 Consumer Products 459 517 610 595 645

Total ¥1,741 ¥2,035 ¥2,109 ¥2,108 ¥2,368

Source: Mitsubishi Electric Company Annual Report

Domestic versus International Revenue Figure 4 shows the year-to-year growth of Mitsubishi's nondomestic and domestic sales for 1983 through 1988. In 1988, domestic sales were ¥1,808 billion and international sales were ¥560 billion.

Figure 4 Total Corporate Revenue Growth of International versus Domestic Sales

Percent Growth 40- Domestic 30 [•• • I Nondomestic

20-

•.mwrc^T^ It-

•pt ij. 0 m -id-

-20 1963-1984 1984-1965 19Q5-19B6 1986-1987 1987-1988

0003954-4 Source: Dataquest June 19S9

The negative growth rate for international sales in 1987 can be attributed to the impact of the appreciation of the yen and a drop in the company's export business.

Growth Rate Figure 5 shows the year-to-year growth rates by product segment revenue. Following this figure is a list of factors explaining the changes in 1988 product growth. Figure 5 Growth Rates by Product Segment (Yen-Based) Percent Change

EaSiia Industrial/ I t Consumer Automotive Products 36r ' v*' i l.^%'^ Heavy WW^ Information/ Machinery Electronic 2S-

« •yfX 18 m^

VBa^ -t

-12 1564 19S5 1S6S 1987 1988

00t)3S54-E Source: Dataquest June 19S9

Main Factors Affecting 1988 Growth The major factors affecting Mitsubishi's growth in 1988 are listed below by product segment. • Heavy machinery

Domestic boom in construction and increased investment in public works • Industrial products and automotive equipment

Increased sales of numerical control and laser-processing equipment

- Renewed investment in manufacturing equipment - High domestic and foreign automotive sales Information and communication systems, electronic products, systems, and devices - High demand of semiconductors Successful new products in communications and information-processing areas Consumer products Higher domestic consumer spending; specifically, large-screen televisions, VCRs, and room air conditioners

CAPITAL AND R&D INVESTMENTS Mitsubishi's combined capital and R&D spending have been consistently running just over 10 percent of total revenue. In 1988, spending increased to approximately 13 percent. Figure 6 shows R&D and capital spending as a percentage of total revenue. Table 2 shows these amounts in yen and U.S. dollars, respectively.

Figure 6 Capital and R&D Spending as Percent of Total Corporate Revenue Percent

14- ^11 R&D Spending I'. -1 Capital Spending 12

10-

8 S^ 6 ^^;:'S^ A-

2 \y 0- 1983 1984 m1985 1986 1987 1963 0003954-e Sou.«: D=,a,.»,

JSIS Volume III © w1989 Dataques t Incorporated June 0003954 Mitsubishi Electric Corporation Corporate

Table 2 Capital and R&D Spending (Billions of Yen, Millions of Dollars)

1983 1984 1985 1986 1987 1988

Corporate Revenue ¥1 ,558 ¥1 ,741 ¥2 ,035 ¥2 ,109 ¥ 2 ,108 ¥ 2,368 $6 ,257 $7 ,376 $8 ,305 $9 ,545 $13 ,172 $17,159

Capital Spending V 73 ¥ 115 ¥ 133 ¥ 154 ¥ 126 ¥ 218 $ 293 $ 487 $ 543 $ 697 $ 788 $ 1,580 % Total Revenue 4.7\ 6.6% 6.5% 7.3% 6.0% 9.2%

R&D Spending V 53 ¥ 61 ¥ 77 ¥ 89 ¥ 95 ¥ 102 $ 213 $ 258 $ 314 $ 403 $ 594 $ 739 % Total Revenue 3.4% 3.5% 3.8% 4.2% 4.5% 4.3%

Total Spending V 126 ¥ 176 ¥ 210 ¥ 243 ¥ 221 ¥ 320 $ 506 $ 746 $ 857 $1 ,100 $ 1 ,381 $ 2,319 % Total Revenue 8.1% 10.1% 10.3% 11.5% 10.5% 13.5%

Exchange rate •> (¥ per US$1) 249 236 245 221 160 138

Source: Mitsubishi Electric Corporation Annual Reports Dataguest June 1989

Target R&D Areas Mitsubishi has established four target areas for R&D development in the future: energy sources, new materials, biotechnology, and electronic devices. Some of its recent projects include the following:

• An ultrahigh-density memory material that can store ten gigabits on one square centimeter • A gallium arsenide (GaAs) solar cell that can convert solar energy into electricity using little surface space • Research to develop superconducting transistors and wiring for semiconductors • The world's first laser resonator that can adjust laser beam phases • Stepper exposure techniques for superfine processing technologies in thin-film transistors

FACILITIES

Table 3 shows the distribution of Mitsubishi's domestic and foreign manufacturing facilities.

Table 3

Mitsubishi Corporate Facilities

Country Facilities Type

Japan 25 All product lines

North America 3 Georgia Consumer products North Carolina Semiconductors Ohio Automotive equipment

United Kingdom 1 Scotland Consiimer products

Australia 1 Automotive equipment

Source: Dataquest June 1989

(Page intentionally left blank)

SUMMARY The purpose of this section is to provide a one-page overview of the corporation's semiconductor activity.

Address Kita-Itami Works Mitsubishi Semiconductor America 4-1, Mizuhara Itami-City 3 Diamond Lane Hyoga Prefecture Durham, NC 27704 Japan 664

Phone 0727-82-5131 (919) 479-5427 Management Yasuo Endo Executive Vice President General Manager, Information and Communication Systems Group Bujiro Kobayashi Senior Managing Director General Manager, Electronic Devices Group Yuichi Okutomo Senior Executive Vice President Semiconductor Division General Manager, Electronics Semiconductor Division A. Katayama Kita-Itami Works Overseas Marketing Manager Tadaaki Mizoguchi Durham, North Carolina, USA plant President Main Product Bipolar digital logic MOS memory Areas MOS microcomponents MOS logic Gallium arsenide Analog

Ranking 6th among Japanese semiconductor manufacturers 8th among worldwide semiconductor manufacturers

STRATEGY Listed below are Mitsubishi's accomplishments during 1988 and goals for 1989. They are divided into product categories for clarity.

Memory • Total production is predicted to double by early 1989, specifically in SRAMs and ultrathin memories for IC cards. • A IM DRAM line was added to the Kochi Plant. Production of 4M DRAMs began in early 1989 at the Saijo Plant. Memory production began in Durham, North Carolina, in summer 1988, with a monthly capacity of 500,000 units. Also in 1988, 4M DRAMs were developed and sampled. • Three 25ns, 256K CMOS SRAMs were introduced in 1988. These products have the fastest access times currently available for cache and main memory products. Three 15ns 64K SRAMs were developed jointly with NTT and a IM EEPROM was developed with a new CMOS EEPROM cell.

Microdevices • The Kochi plant was refurbished in January 1988 for fully integrated production. • Microcontroller production was increased, specifically for industrial use. The 16-bit, single chip MCU and 3700 series production was expected to triple by the end of 1988.

• A 16-bit, one-chip microcomputer series was started at Kochi. The chip incorporates an EPROM with the world's largest memory, according to Mitsubishi. Its 8-bit MPUs reached 1 million units per month in March 1988. In 1989, it began building its 32-bit MPU to The Real-Time Operating System Nucleus (TRON) specifications. The Company also developed a 64-bit RISC MPU using the UNIX operating system.

ASICs

Mitsubishi's U.S. Design Engineering Center was expanded, and construction began on an ASIC production facility in Durham, North Carolina.

Transistors

A superlow-static, high electric motion transistor was developed for telecom munications.

Optoelectronics Mitsubishi developed an optical neuro chip for commercial applications and jointly developed a high-speed voice and image data processing chip with Sharp.

GaAs The Company introduced microwave GaAs high-electron mobility transistors (HEMTs) for microwave receiver applications, five new types of high-output GaAs FETs, and a 7ns GaAs SRAM.

Bipolar Logic The Mitsubishi Advanced Schottky TTL (MAST) family of FAST-compatible products was introduced for high-speed applications.

Other

Other developments included LSI chip sets, which were developed with Hitachi for EDTV, and laser printer ICs that were shipped at the end of 1988.

ORGANIZATION The entire Mitsubishi semiconductor organization is shown in Figure 7.

Figure 7 Mitsubishi Electric Corporation Semiconductor Organization

Strategic Planning of Semiconductor Business Department Electronic Devices Group Semiconductor Marketing Division

Kita-itami Works

Saijo Factory

Kochi Factory

Kumamoto Works

FukLtoka Works

LSI Research and Headquarters Development Laboratory Research and Development ASIC Design Engineering Center

Overseas Marketing Division International Electronic Products Operations Affiliate Operations Department Group

MELA Mitsubishi Electronics America, inc. USA Marketing

MSAI Mitsubishi Semiconductor America, Inc. USA Production

Europe Marketing MEG Mitsubishi Electric Europe GmbH

MEUK Mitsubishi Electric (UK) Ltd. United Kingdom Marketing

MTW Meico Taiwan Company, Ltd. Taiwan Marketing

MHK Mitsubishi Electric (H.K.) Ltd. Hong Kong Marketing

MSS MELCO Sales Singapore Ptc. Ltd. Singapore Marketing

0003954-7 Source: Mitsubishi Electric Corporation

OPERATIONS Note: Exchange rates used in the semiconductor section of this profile are based on the calendar year average.

Product Segments The Company's main semiconductor product areas are listed below. • Bipolar digital logic—low-power Schottky TTL (LSTTL) and ALSTTL • MOS memory--64K, 256K, IM DRAMs; NMOS and CMOS SRAMs; ROMs; and EPROMs • MOS microcomponents—second source for Intel microcontrollers in NMOS and CMOS; 8-bit CMOS and NMOS microperipherals; original 8-bit MPUs; 16-bit microcontrollers being introduced early 1989 • MOS logic—CMOS and ECL gate arrays, PLDs • Analog—Transistor arrays, op amps, voltage comparators and regulators, timer ICs, and current drivers • Gallium arsenide (GaAs) field-effect transistors (FETs)

Product Revenue Figure 8 shows Mitsubishi's percentages of semiconductor revenue by product. Of the Company's 1988 IC sales, 72.6 percent were MOS technology, and within the MOS technology category, 66.9 percent were from memories.

Figure 8 1988 Estimated Semiconductor Revenue Percentage by Product (Millions of Dollars)

••03SM-S Sourc«J DalAqLiCil. June 19SSI

Regional Sales Mitsubishi's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4 1988 Estimated Semiconductor Revenue Percent by Region (Millions of Dollars)

United Product States Japan Europe ROW

Semiconductor 13% 69% 4% 14% IC 15% 65% 4% 15% Bipolar Digital 6% 91% 0 2% MOS (Technology) 20% ' 65% 6% 9% MOS Memory 26% 53% 7% 13% MOS Micro 6% 92% 2% 0 MOS Logic 17% 83% 0 0 Analog 0 58% 0 42% Discrete 0 89% 2% 9% Optoelectronics 4% 89% 7% 0

Exchange rate (Yen per US$1) 130

Source: Dataguest June 1989

Growth Rate

Mitsubishi's growth rate by product line is shown in the table and figure that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 9 graphically compares Mitsubishi's growth rate in the world market with the growth rate of the world market itself. (This information will be provided for the Japanese market as well.)

Table 5 Mitsubishi Sales in World Market (Millions of Dollars)

World Market 1987 1988 % Chanae % Chanae

Semiconductor $1 ,492 $2 ,278 52.7% 31.9% IC $1 ,239 $1 ,940 56.6% 36.5% Bipolar Digital 122 128 4.9% 9.2% MOS (Technology) 812 1 ,408 73.4% 53.1% MOS Memory 492 943 91.7% 90.3% MOS Micro 267 377 41.2% 39.8% MOS Logic 53 88 66.0% 28.1% Analog 305 404 32.5% 15.3% Discrete $ 227 $ 311 37.0% 13.2% Optoelectronics $ 26 $ 27 3.8% 25.4%

Exchange Rate (Yen per US$1) 144 130

Source: Dataguest June 1989

Figure 9

Mitsubishi Growth Rate Compared with World Market

Percent Growth

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto

0003954-9 Source: Dataquest June 1989

Worldwide Market Growth Rate In 1988, Mitsubishi grew faster than the world growth rate in all areas except bipolar digital and optoelectronics. The Company's analog and discrete lines grew almost twice as fast as the world growth rates. Japanese Market Growth Rate Mitsubishi's analog growth in the Japanese market was much less than its analog performance in the world market. Also within Japan, it grew less than the MOS memory market. The Company's sales in the Japanese market are shown in Table 6 and in Figure 10.

Table 6 Mitsubishi Sales in Japanese Market (Millions of Ellollars)

Japanese Market 1987 1958 % Chanae % Chanoe

Semiconductor $1 ,132 $1,,57 1 38.8% 3 5.6% IC $ 907 $1 ,270 40.0% 39.1% Bipolar Digital 109 117 7.3% 18.3% MOS (Technology) 569 920 61.7% 58.4% MOS Memory 279 501 79.6% 85.0% MOS Micro 245 346 41.2% 36.3% MOS Logic 45 73 62.2% 50.4% Analog 229 233 1.7% 11.7% Discrete $ 203 $ 277 36.5% 18.5% Optoelectronics $ 22 $ 24 9.1% 42.3%

Exchange rate (Yen per US$1) 144 130

Source! Dataguest June 1989

Figure 10 Mitsubishi Growth Rate Compared with Japanese Market

Percent Growth 100 WMii Japanese Market 90 I I Mitsubishi 80

50-J

30-1

20 1o^

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto 0003954-10 Source: ?u^ilTII^

Other Japanese Companies Mitsubishi's growth rate by product line is compared with that of the other Japanese companies tracked by Dataquest in the following graphs. Dataquest surveys a total of 18 Japanese companies plus a category called "Other." The total of these companies' revenue was used for comparison in Figures 11 and 12.

Figure 11 Mitsubishi versus Other Japanese Companies in Japanese Market

Percent Growth 90- other Japanese Companies 80- Pl^ [3D Mitsubishi 70-

60-

50.

40- M-A 30- m^ 20- S: md I • 10- f^ i 1 iji^ SemicondLtctor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto

00D3954-11 Sourccr DaLaQuc&l Junt I9S4

Figure 12 Mitsubishi versus Other Japanese Companies in World Market

Percent Growth 100- ^&mi Other Japanese Companies 90 1 •'' -'I Mitsubishi 80

70 60- 50- 40 30 20 10

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto

0003954-12 Source: Dataquest June 1989

Channels of Distribution Dataquest believes that approximately 80 percent of Mitsubishi's semiconductor products are sold domestically in Japan through distributors. The Company's major distributors are Ryoyo Electric, Ryoden Shoji Co., Ltd., and Kyoei Sangyo. Approximately 14 percent of Mitsubishi's sales are captive. In the United States, Mitsubishi sells semiconductors through Mitsubishi Electronics America, Inc., headquartered in Sunnyvale, California, and through distributors. In Europe, Mitsubishi has sales offices in most of the major countries and also sells through distributors. Its main sales and marketing office in Europe is in West Germany.

CAPITAL SPENDING As shown in Tables 7 and 8, capital investment as a percentage of total revenue dropped significantly after the peak year, 1984. The exchange rate inflation makes the 1988 figure appear to be higher than the 1984 figure in dollars, but in yen, this is not the case.

Table 7 Estimated Semiconductor Capital Sjiending Compared with Total Revenue Calendar Year—Millions of Dollars

1982 1983 1984 1985 1986 1987 1988

Revenue $337 $500 $966 $662 $1,117 $1,491 $2,279 Semiconductor Capital Spending $ 72 $131 $274 $261 $ 119 $ 104 $ 308

Growth Rate of Capital Spending N/A 81% 110% (5%) (54%) (13%) 195%

Percent of Revenue 21% 26% 28% 39% 11% 7% 13%

Exchange Rate (¥/US$l) 249 237 237 238 168 144 130

N/A = Not Available

Source: Dataquest June 1989

Table 8 Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Billions of Yen

1982 1983 1984 1985 1986 1987 1988

Revenue ¥84 »119 V229 ¥158 ¥188 ¥215 ¥296

Semiconductor V18 V 31 V 65 ¥ 62 ¥ 20 ¥ 15 ¥ 40 Capital Spending

Capital Spending N/A 72% 110% (5%) (68%) (25%) 167' Growth Rate

Percent of Revenue 21% 26% 28% 39% 11% 7% 13%

Exchange Rate (¥/US$l) 249 237 237 238 168 144 130

N/A = Not Available

Source: Dataguest June 1989

FACILITIES Mitsubishi's semiconductor facilities are listed in Table 9.

Table 9 Mitsubishi Electric Corporation Semiconductor Facilities

Name/Location Function

Mitsubishi Electronics Kita-Itami Works Fab, assembly, test Hyogo Prefecture Arrays, opto, MOS logic

Kximamoto Works—B#l Fab Kumamoto Prefecture EPROM, gate arrays, 256K SRAM, 1Mb ROM

(Continued)

Table 9 (Continued)

Mitsubishi Electric Corporation Semiconductor Facilities

Name/Location Function

Mitsubishi Electronics (Continued) Saijo Industrial Park Fab, assembly, test Ehime Prefecture 256K, 1Mb DRAMs

LSI Development Lab R&D, assembly, test Hyogo Prefecture New product development, 4Mb, 16Mb DRAMs, 1Mb EEPROM

Fukuoka Handotai Factory Fab, assembly, test Fukuoka Prefecture Bipolar logic, discretes, linear

Kochi Factory Fab, assembly, test Kochi Prefecture MPU, MCU, 1Mb DRAMs, ASIC, CMOS microdevices

Mitsubishi Semiconductor America Fab, assembly, test Durham, NC 64K, 256K, 1Mb DRAMs, ASIC begins in 1989

Source: Dataquest June 1989

ALLIANCES AND AGREEMENTS

Mitsubishi's recent alliances and agreements are described on the pages that follow and shown graphically in Figure 13.

Figure 13 Semiconductor Agreements

00C39S4-13 Source: Dataquest June 19S9

1983

Texas Instruments Mitsubishi supplied both die and packaged 64K EPROMs to TI to be sold through TI's distribution channel with TI's marking. TI produced its own part at full capacity.

1984

Standard Microsystems Corporation

The two companies agreed to worldwide cross-licensing of each other's semiconductor patents and patent applications.

1986 • Texas Instruments

Mitsubishi and TI agreed to mutually supply logic ICs on an OEM basis. TI was to supply high-speed bipolar TTLs; Mitsubishi to ship low-power CMOS logic. Dai Nippon Printing Co., Ltd. Mitsubishi's LSI Development Laboratory provided Dai Nippon Printing, Hoya Toppan Printing, and ULVAC Coating with photomask manufacturing technology. The four companies were to pay contract fees and royalties based on production volumes. LSI Logic Corporation - Mitsubishi agreed to provide foundry for LSI. Nihon MRC Co., Ltd. Mitsubishi has 25 percent ownership of Nihon MRC. Nihon is a subsidiary of Materials Research Corporation (MRC) of the United States; Mitsubishi was to sell MRC equipment in Japan. Semicon Systems Mitsubishi invested ¥200 million in Semicon and sent the company three directors. Semicon changed its name to Dai Semicon Systems.

1987 • Intel - Mitsubishi was to produce Intel memory chips for Japanese consumption. It also second-sources Intel's 8086 product line. Powerex General Electric Company Powerex Inc. is a joint venture corporation with General Electric Company, Mitsubishi, and Westinghouse located in the United States. One of the stipulations of the joint venture was that the companies would not compete with Powerex. Products were developed by one of the three partners and included power transistors, diodes, and thyristors.

Photonic Integration NTT This company was formed to develop optical IC technology and is owned 41 percent by Mitsubishi, 40 percent by NTT, and 10 percent by Battelle. National Semiconductor Mitsubishi was to repackage, sell, and support National's NS32000 family of 32-bit MPUs on an OEM basis in Japan. National intended that the Mitsubishi connection would open a variety of embedded control design wins in Japan for the 3200 family. This would also open possibilities for future joint R&D-related TRON projects.

1988 Hitachi and Fujitsu The three companies achieved first silicon on the TRON-based H32/200 32-bit MPU. First silicon has also been achieved on several peripheral devices. National Mitsubishi began importing National's 32-bit MPUs and assembling National's high-speed TTLs in Japan.

(Page intentionally left blank)

REVENUE SUMMARY Tables 10 and 11 show Mitsubishi's semiconductor revenue in detail. The tables show sales from 1981 to 1988 in both billions of yen and millions of dollars. Table 10 Mitsubishi Electric Corporation Estimated Worldwide Semiconductor Revenue (Billions of Yen) 1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 71 84 119 229 158 188 215 296

Total IC 47 61 90 182 120 146 178 252

Bipolar Digital (Technology) 8 11 16 29 18 22 18 17

MOS (Technology) 22 34 58 128 77 91 117 183 NMOS 18 28 44 110 61 73 88 104 PMOS 2 2 3 1 1 0 0 1 CMOS 2 4 12 17 16 18 29 78 BiCMOS

MOS (Function) 22 34 58 128 77 91 117 183 MOS Memory 7 20 37 88 35 48 71 123 MOS Microdevices 4 6 13 37 29 34 39 49 MOS Logic 10 8 8 4 13 8 8 11

Analog 17 16 16 24 25 33 44 53

Total Discrete 24 23 28 44 33 37 33 40

Transistor 9 8 9 13 15 16 13 15 Diode 5 5 4 5 1 1 1 1 Thyristor 6 6 4 6 9 9 8 8 Other Discrete 4 4 12 20 8 11 11 17

Total Optoelectronic N/A

Exchange Rate (Yen per US $1) 221 248 235 237 238 167 144 130 *Preliminary estimates for 1988 N/A = Not Available Source: Dataguest June 1989

Table 11 Mitsubishi Electric Corporation Estimated Worldwide Semiconductor Revenue (Millions of Etollars)

1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 321 340 505 964 662 1,123 1,492 2,278 Total IC 212 244 384 766 504 873 1,239 1,940

Bipolar Digital (Technology) 38 44 68 123 75 134 122 128

MOS (Technology) 99 137 247 541 323 544 812 1,408 NMOS 80 114 186 463 255 436 612 803 PMOS 9 9 12 5 2 2 1 5 CMOS 10 14 49 73 66 106 199 600 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 98 137 247 541 323 544 812 1,408 MOS Memory 33 81 158 370 147 289 492 943 MOS Micro Devices 20 25 54 156 122 205 267 377 MOS Logic 45 31 35 15 55 50 53 88

Analog 76 63 69 102 105 195 305 405

Total Discrete 109 94 119 185 140 221 227 311

Transistor 39 33 38 56 64 94 89 118 Diode 22 19 15 23 3 4 5 5 Thyristor 29 25 15 23 37 56 54 61 Other Discrete 19 17 51 83 35 67 79 127

Total Optoelectronic N/A 2 2 13 18 29 26 27

ihange Rate 221 249 237 237 238 168 144 130 (Yen per US $1)

•Preliminary estimates for 1988 N/A = Not Available

Source: Dataquest June 1989

BALANCE SHEETS

Tables 12 and 13 show Mitsubishi's corporate consolidated balance sheet for 1984 to 1988 in yen and U.S. dollars, respectively.

Table 12

Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Balance Sheet (March 31) 1984 1985 1986 1987 1988

Total Current Assets ¥1 ,089 ¥1 ,248 ¥1 ,205 ¥1 ,285 ¥1 ,472 Cash ¥ 183 ¥ 209 ¥ 211 ¥ 268 ¥ 374 Receivables ¥ 432 ¥ 483 ¥ 460 ¥ 456 ¥ 551 Inventory ¥ 279 ¥ 357 ¥ 400 ¥ 370 ¥ 342 Other Current Assets ¥ 205 Net Property, Plant, and Equipment ¥ 283 ¥ 325 ¥ 388 ¥ 409 ¥ 483 Depreciation ¥ 366 ¥ 430 ¥ 500 ¥ 578 ¥ 723 Other Assets ¥ 274

Total Assets ¥1,586 ¥1,816 ¥1,833 ¥1,943 ¥2,229

Total Current Liabilities ¥ 980 ¥1,088 ¥1,064 ¥1,133 ¥1,355 Long-Term Debt 189 257 216 205 206 Other Liabilities 116

Total Liabilities ¥1,242 ¥1,430 ¥1,370 ¥1,433 ¥1,677

Total Shareholders' Equity ¥ 343 ¥ 386 ¥ 463 ¥ 507 ¥ 552 Conv. Preferred Stock 0 0 0 0 0 Common Stock ¥ 83 ¥ 87 ¥ 118 ¥ 139 ¥ 151 Other Equity ¥ 162 Retained Earnings ¥ 184 ¥ 219 ¥ 234 ¥ 230 ¥ 239

Total Liability and Total Equity ¥1,585 ¥1,816 ¥1,833 ¥1,940 ¥2,229

(Continued)

Table 12 (Continued) Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue ¥1,,74 1 ¥2,,03 5 ¥2,,10 9 ¥2,,10 8 ¥2,,36 8 Domestic Sales ¥1,,27 1 ¥1,,46 1 ¥1,,51 8 ¥1,,59 6 ¥1,,80 8 Overseas Sales ¥ 469 ¥ 574 ¥ 592 ¥ 512 ¥ 560 Cost of Sales ¥1,,30 6 ¥1,,52 1 ¥1,,61 2 ¥1,,62 5 ¥1,,81 7 Gross Margin (%) 25 25 24 23 23 R&D Expense ¥ 61 ¥ 77 ¥ 89 ¥ 95 ¥ 102 SG&A Expense ¥ 278 ¥ 312 ¥ 324 ¥ 319 ¥ 370 Other Operating Expenses ¥ 29 Total Operating Expenses ¥1,,64 5 ¥1,,91 0 ¥2,,02 5 ¥2,,03 9 ¥2,,31 8 Operating Income (Loss) ¥ 84 ¥ 99 ¥ 65 ¥ 33 ¥ 50 Interest, Net (¥ 2) ¥ 1 ¥ 7 ¥ 5 ¥ 13 Pretax Income ¥ 82 ¥ 99 ¥ 72 ¥ 38 ¥ 63 Provision for Taxes (Credit) ¥ 45 Effective Tax Rate (%) 55 55 63 76 71 Extraordinary Items, Net ¥ 2 ¥ 3 ¥ 3 ¥ 1 ¥ 4 Net Income ¥ 39 ¥ 47 ¥ 30 ¥ 11 ¥ 22

Avg. Shares Outstanding , (Millions) 1,,59 8 1,,62 0 1,,71 4 1,,86 4 1,,97 6 Employees 65,,90 4 68,,74 5 71,,47 9 73,,53 6 75,,79 5 Capital Spending ¥ 115 ¥ 133 ¥ 154 ¥ 126 ¥ 218

Exchange Rate (Yen per US$1) 236 245 221 160 138

Source: Mitsubishi Electric Corporation Annual Reports Dataquest June 1989

Table 13

Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Balance Sheet (March 31) 1984 1985 1986 1987 1988

Total Current Assets $4,613 $5,093 $5,452 $ 8,029 $10,667 Cash $ 775 $ 853 $ 956 $ 1,675 $ 2,710 Receivables $1,833 $1,970 $2,080 $ 2,853 $ 3,993 Inventory $1,181 $1,457 $1,812 $ 2,314 $ 2,478 Other Current Assets $ 1,486 Net Property, Plant, and Equipment $1,201 $1,326 $1,758 $ 2,559 $ 3,500 Depreciation $1,551 $1,756 $2,260 $ 3,614 $ 5,239 Other Assets $ 1,986

Total Assets $6,719 $7,412 $8,294 $12,147 $16,152

Total Current Liabilities $4,151 $4,442 $4,815 $ 7,083 $ 9,819 Long-Term Debt $ 803 $1,051 $ 975 $ 1,278 $ 1,493 Other Liabilities $ 841

Total Liabilities $5,264 $5,836 $6,197 $ 8,957 $12,153

Total Shareholders' Equity $1,455 $1,576 $2,097 $ 3,166 $ 4, 000 Conv. Preferred Stock 0 0 0 0 0 Common Stock $ 353 $ 353 $ 532 $ 870 $ 094 other Equity $ 174 Retained Earnings $ 782 $ 893 $1,058 $ 1,438 $ 1,732

Total Liability and Total Equity $6,719 $7,412 $8,294 $12,123 $16,153

(Continued)

Table 13 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue $7,376 $8,305 $9,,54 5 $13,,17 2 $17,159 Domestic Sales $5,387 $5,964 $6,,86 8 $ 9,,97 2 $13,101 Overseas Sales $1,989 $2,341 $2,,67 7 $ 3,,20 0 $ 4,058 Cost of Sales $5,536 $6,210 $7,,29 3 $10,,15 9 $13,167 Gross Margin {%) 25 25 24 23 23 R&D Expense $ 257 $ 314 $ 403 $ 591 $ 739 SG&A Expense $1,176 $1,275 $1,,46 8 $ 1,,99 5 $ 2,681 Other Operating Expenses $ 210 Total Operating Expenses $6,969 $7,799 $9,,16 4 $12,,74 5 $16,797 Operating Income (Loss) $ 357 $ 402 $ 294 $ 209 $ 362 Interest, Net ($ 9) $ 2 $ 34 $ 30 $ 94 Pretax Income $ 348 $ 405 $ 328 $ 239 $ 457 Provision for Taxes (Credit) $ 326 Effective Tax Rate 55 55 63 76 71 Extraordinary Items, Net $ 7 $ 11 $ 15 $ 9 $ 29 Net Income $ 165 $ 192 $ 136 $ 66 $ 159

Avg. Shares Outstanding (Millions) 1,598 1,620 1,,71 4 1,,86 4 1,976 Employees 65,904 68,745 71,,47 9 73,,53 6 75,795 Capital Spending $ 486 $ 541 $ 698 $ 789 $ 1,580

Exchange Rate (Yen per US$1) 236 245 221 160 138

Source: . Mitsubishi Electric Corporation Annual Reports Dataquest June 1989

NEC Corporation Corporate

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation.

Address NEC Corporation 33-1 Shiba S-chonoe Minato-ku, Tokyo 108, Japan

Phone (03)-454-llll Fax (03)-452-6351

President Tadahiro Sekimoto Chairman Atsuyoshi Ouchi Main Product Areas Communication Systems and Equipment Compu^' and Industrial Electronic Systems Election Devices Home Electronics Products

No. of Employees 102,452 Employees Overseas More than 38,000 Top Shareholders Sumitomo Life Insurance 7.2% Sumitomo Trust & Banking 5.0% Sumitomo Bank 4.8% Mitsubishi Trust & Banking 3.5% Nippon Life Insurance 3.3% Dai-ich Mutual Life Insurance 3.1% Sumitomo Marine &, Fire Insurance 2.7% Toyo Trust & Banking 2.7% Sumitomo Electric Industries 2.3% Sumitomo Corporation 2.3%

% Outstanding Stock Foreign-Owned 7.0%

Stock Exchanges All major Japanese, Amsterdam, Frankfurt, London, Basel, Zurich, Geneva

Ranking (based 5 th among worldwide information systems makers on revenue) 4th among worldwide telecommunications equipment makers

STRATEGY

NEC's goals for 1989 and accomplishments in 1988 are highlighted in this section.

NEC's corporate goals include the following:

• Continuing to focus on "C&C concept "C&C* refers to the integration of computers and communications, with such technological developments as digitization, distributed data processing, and advanced microelectronics.

• Continuing to categorize R&D strategies into two groups, "today and tomorrow" and "the day after tomorrow" to upgrade production engineering capabilities

• Localizing products and services

The following international developments occurred at NEC during 1988:

• Australia

- Introduced a locally developed line of radio equipment for both domestic and overseas markets

• North America

- Established additional LSI design centers and new facilities for communications and home information systems technology to meet local customers' needs

• Latin America (Brazil, Argentina, Mexico)

- Delivered locally manufactured digital central office switching systems to customers in South America

- Increased shipments of communications equipment components from Mexico to the Oregon plant of NEC America, Inc.

Europe

- Began production of 1Mb DRAMs at NEC Semiconductors in Scotland for export outside of Europe

- Began production of videocassette recor^rs and printers at NEC Technologies in the United Kingdcmi and made plans to begin producing facsimiles and cellular phones

- Merged two marketing subsidiaries in Germany in order to meet the goal of having a single contact in each country

Middle and Near East and Afirka

- Progressed toward completion of the Middle East and Mediterranean Telecommunications Network, for which NEC was main supplier of microwave communications systems for the world's longest trunk line connecting countries from Morocco to Syria

ORGANIZATION

Figures 1 and 2 are organizational charts. Figure 1 shows the Sumitomo Group, of which NEC Corporation is a member, and Figure 2 shows NEC Corporation itself.

Figure 1

Sumitomo Group Companies Organizational Chart

I- •^lfeiiusui4t*n -•-• '''^r Wafa^nusa M. 4F. Sumitomo MM'\>- r-- • Insuranca u X:::::.:.-.-:::::::::. . .^', ' . .^ Saltatau Densalsu ill: Kagaku Sumttomo 3M ' m.m ,1 Sumitomo Top 3 L»ad«rs Ufa Osaka 1 Inauranea Shinto Paint Diamond MMaia Industrial -:- -: Taoka Ciwnloal Nliatn Elactrlc •^r i'^ Tokal Sunltomo m. 1 Elactrle kKte, ^:^ i •- RubtMT Indi. t^am^l} i... Sumitomo Chamtoats Sumitomo SumKomo ^^1^ ^ Rubbv Ind«. AJumlnum Chomkial i Smalting :*S:'''»:i:ii';' Sumitomo Tsutsunaka r^^ eakailta Plastic md.

;•••••. •••• Sumitomo Matal SumJtomo Nttto MataJ Mimna Industry Bank ^i Nippon Sumitomo Akjmlnim UQM Matal Mschlnary Mfg. Inds. Nlhoo ^ SLunitomo Sumitomo Sp India MTg. ••t Metal Heavy Inds. Ind3. .:.

Kanto Spaclal StMt Wwkm Nippon Electric Glass Sumitomo Praclilon •:!: Nippon Electric Products Q1«**& Mining Forastry Elactrtoaj & Ind. Camant Elactronlcs Nippon Plpa NItsuka Ltd. Mfg. Nippon Shsat Anrltsu Sumttomo Glass Corp. Sumitomo Sumttomo NEC Corp, Spoctal Coal Mining Foraatry Metals Sumitomo Toyo Camont Communication Nippon -:- Equip. Stajnlssft StMl Tohoku Matai Inds. Dai kin Inds. mmli::li.js NEC Home NarumI China Electronics Osaka Ando Electric Tttanlum Japan Aviation Isollto Electronic* Chuo OankI Insulating Kogyo Products ind. NEC System Sumikura Industrial Integration and Construction Parent Company Subsidiaries or Aftillatas] 000O77-1 Source: Dodwell Marketing Coiuultanu Indmthal Grouping in Japan Dataquest Auguit 1989

Corporate Managemsnl Executtva Commltlaa Convnittee Administration Staff OpwaUom Staff @ vO Corparais Peraonne) Relallon*, Comptroller, Operations Support oo Admlntalfatlon EntfhMTlna Manufaoiiihg Purohatlna VO Rarmlno Industrial Relallorit, Treasury, and and Communfty o and Education Annates Relations Markelkig QriMM 'g 1/1 NTT Sales Oovarnment Sata) Domestic InlernatlonaJ Oparatlont AdvertMna Sales Broiy Group oa

n*c«uch ind Production EnQlnattflng Tnntnllltlon Oroup ConvTuntc • I kmi kiduibid Syila I O Group Dnic<]nduol« a Oavatopmaftl Qroup Otoup Qraup Of QUI > c MIcrowHVB QrasdcBsl And PvtiDThil Cdnvutv oaQ Syitami Oq Subgroup Vldog Subgroup

CO Qp«C4 uKl Ridto InfEvmAUon ApfrikCAllon &kibQrai4i etrvteti

0004377-J Ssurcai NEC CoiporatW*

O* NEC Corporation Corporate

OPERATIONS

Product Segments

NEC is divided into five product groups. Examples of products within each category are listed below:

• Communications systems and equipment—Carrier transmission, microwave and satel lite communications, and mobile communications equipment; digital central office switching systems; facsimiles

• Computers and industrial electronic systems—Mainframe, personal, and small business computers, building automation and communications network control systems

• Electron devices—^Memories, microcomputers and software, linear ICs, gate arrays, standard cells

• Home electronics products—Color TV receiver and projectors, VRCs, videodisc players

• Other operations—VAN services, electrical connectors, semiconductor equipment, measuring and testing system

Product Revenue • Figure 3 and Table 1 show NEC's revenue by product segment from 1985 to 1989. Revenue for the communications systems and equipment category is a combination of revenue from communication terminals, radio, switching and transmission groups. Revenue for the computer and industrial electronic systems category includes revenue from the information processing and industrial systems groups. The electron devices category includes the semiconductor and electronic components groups. Home electronics includes only revenue from the home electronics group.

Figures

Product Revenue as a Percent of Total Corporate Revmue Percentaoe 100

1965 1988 ia&7 198a 1989*

0004377-3 Source: Dataqueit August 19S9

Table 1

Sales by Product Segment (Billions of Yen)

1985 1986 1987 1988 1989

Communications Syst^ns and Equipment ¥ 659.9 ¥ 747.0 ¥ 699.9 ¥ 757.8 ¥ 802.4 Computers and Industrial Electronic Systems 721.5 855.2 1,012.1 1,129.7 1,332.9 Electron Devices 596.0 441.3 417.0 463.0 566.0 Home Electronics Products 188.5 179.0 188.3 214.5 381.4* OthCTS 92.4 112.1 132.5 149.8

Total ¥ 2^58.4 ¥ 2^34.7 ¥ 2,449.7 ¥ 2,714.7 ¥ 3,082.8

Exchange Rate 245 221 160 138 136

Note: Columns may not add to totals because of rounding. *The "Home Electronics Products" and "Others" categories were combined in the 1989 preliminary annual report.

Source: NEC Ccaporation Annual Report Dataquest August 1989

Domestic versus International Revenue

Figure 4 shows the year-to-year growth of NEC's international and domestic sales for 1984 through 1989. In 1989, domestic sales were ¥2,306 billion and international sales were ¥777 billion. In 1988, sales are ¥1,969 billion and ¥746 billion, respectively.

Figure 4

Total Corporate Revenue Growth of International versus Domestic Sales

Percent Growth

-15 1964 1985 1986 1987 1988 1989

0004377-4 Source: Dtmqucii Auguil 1989

Growth Rate

Figure 5 shows the year-to-year growth rates by product segment revenue. Following this figure is a list of factors explaining the changes in 1988 product growth.

Figures

Growth Rates by Produ^ Segment (Yeii~8ased)

Percent Change 70

1986 1SS7 Fiscal Year *ln 1989's preitmlnary annual report, *Othar«' was kicludsd In home electronics revenue. 0004377-6 Source: Dataquett August 1989

Main Factors Affecting 1988 Growth

The major factors affecting NEC's growth in 1988 are listed below by product segment.

• Communications systems and equipment

- Increased demand for D70 central office switching systems, APEX2400 series digital PBXs, mobile communications systems, and broadcast equipment

• Computers and industrial electronic systems

- Introduced the SX-A series supercomputer

- Introduced the 3100 and 3050 series of small business computers

- Increased demand for building automation systems

• Electron devices

- Expanded lineup of CMOS gate arrays

- Increased demand for 1Mb DRAM

- Expanded original V series microprocessor

• Home electronics products

- Increased demand for hi-fi VCRs and large-screen color TVs

- Strengthened manufacturing networic in Europe and Southeast Asia

• Other areas

- Completed C&C-VAN Tokyo Communications Center

- Strengthened its 9000 series of VLSI testing systems

- Developed ILC-1050 and ILC-1551 in-line multichamber systems

CAPITAL AND R&D INVESTMENTS

Figure 6 and Table 2 show NEC's R«feD and capital spending as a percent of total corporate revenue.

Figure 6 Capital and R&D Spending as a Percoitage of Total Corporate Revenue Percentage 40- ^B Capital Spandlng 35 ^1 R&O Spendino 30

ZQ- ii- '^^^ 15 Im

1983 1984 1S8S isas 1987 19S8 0004377-6 Source: Dataquest August 1989 Table 2 Capital and R&D Spending (Billions of Yen, Millions of Dollars)

mi 12S4 I2S5 1986 1987 im. Coiporate Revenue ¥1,443 ¥ 1,762 ¥2,258 ¥ 2335 ¥ 2,450 ¥ 2,715 $ 5.795 $7,466 $9,218 $10,566 $15,313 $19,672

Capital Spending ¥ 204 ¥ 208 ¥ 369 ¥ 293 ¥ 194 ¥ 250 $ 818 $ 882 $ 1,508 $ 1,327 $ 1,210 S 1,812 % Total Revenue . 14.1% 1.8% 16.4% 12.6% 7.9% 9.2%

R&D Spending* ¥ 175 ¥ 217 ¥ 287 ¥ 327 ¥ 384 ¥ 433 $ 701 $ 919 $ 1,171 $ 1,480 $ 2,400 $ 3,138 % Total Revenue 12.1% 12.3% 12.7% 14.0% 15.7% 16.0%

Total Spending ¥ 378 ¥ 425 ¥ 656 ¥ 620 ¥ 578 ¥ 683 $ 1,519 S 1,802 $ 2,680 $ 2,807 S 3,610 S 4,949 % Total Revenue 26.2% 24.1% 29.1% 26.6% 23.6% 25.2%

Exchange Rate (¥ per USSl) 249 236 245 221 160 138 *These R&D numbers represent R&D and engineering expenses. Source: NEC Corporation Annual Report Dataquest August 1989 JSIS Volume III © 1989 Dataquest Incorporated August 11 0004377 NEC Corporation Corporate

Target R&D Areas

NEC regards its activities in research, development and engineering as the foundation for all of the Company's current and future successes. In the R&D Group, long-torn projects are carried out, and in each operating group, shorter-term R&D projects are done. Seven areas have been targeted for current R&D—electronic material and devices, VLSI technology, optoelectronics, "C&C" systems, basic technology, technical support, and software.

Some recent projects include the following:

• Improved and compacted AI language processor

• Achieved an 80 kilometer long, nonrepeated fiber-optic transmission at 10 Obits per second

• Created a version of AT&T Bell Laboratories' UNIX operating system for proprietary V60 and V70 32-bit microprocessors

• Developed an automated final-housing assembly and testing system for printers

Some ongoing projects include:

• Continuing to integrate indium phosphide (InP)-based optical components with gallium arsenide (GaAs) ICs

• Continuing to develop of 2 million pixel CCD image sensor

• Continuing development of Josephson 1Kb RAM for ultrahigh-speed Josephson computers

FACILITIES

Table 3 shows the distribution of NEC Corporation domestic and foreign facilities.

Table 3

NEC Corporate Facilities

Cownffiy lcwMs& Type Japan 200 Sales office 53 Manufacturing plants 12 R&D iatxsatories aad centers

Overseas 170 Sates offices 25 (in 12 countries) Manu£actimng plants

Source: Dataquest August 1989

(Page intentionally left blank)

SUMMARY

The purpose of this section is to piovide a one-page overview of the corporation's semiconductor activity.

Address Tamagawa Works NEC Electronics Inc. 1753 Shimonum^M 401 Ellis Street Nakahaza-ku P.O. Box 7241 Kawasaki-city Mounts View, Kanagawa, 211 Japan California 94039

Phone 044-433-1111 (415) 965-0650 Management Tomio Matsumura Executive Vice President General Manage ElectrcHi Devices Group

Hideo Nakao President NEC Electronics Inc. « Main Product Areas MOS memory MOS micro MOS logic Linear ICs Hybrid ICs Bipolar digital Transistor Diodes

Ranking (based 1st among Japanese semiconductor manufacturers on revenue) 1st among worldwide semiconductor manufacturers

STRATEGY

Listed below are some of NEC's accomplishments in the semiconductor area during 1988 and 1989, and goals for 1990. They are divided into product categories for clarity.

Memory

• Began installing production line for 1Mb and 4Mb DRAMs at NEC Yamaguchi

• Began construction of a new wafer fab for 4Mb and 16Mb DRAMs in Hiroshima and a 16Mb DRAM prototype production line at Sagamihara

• Conmienced production of 265Kb and 1Mb DRAMs at NEC Semiconductor (U.K.) Limited

• Began construction of additional 256Kb DRAM facility at NEC Electronics Singapore Pte. Ltd.

• Shipped 4Mb DRAM and 1Mb SRAM samples

• Introduced 2Mb EPROM for word processors and other OA equipment

• Developed 55ns 16Mb DRAM with a built-in, self-test function

• Continued a feasibility study on producing 4Mb DRAMs in the United States

Microcomputers

• Added the 16b single-chip microcomputer V35 to V series of microprocessors

• Developed 2(X)-MHz 16-bit BiCMOS signal processor (SSSP) for video signal processing

• Increased production microcomputer at Kyushu plant

• Continue to expand V series marked by strengthening product lineup

ASICs

• Est£U3lished advanced CAD technology

• Expanded product Uneup of CMOS gate airays, featuring a maximum of 45,000 gates

• Began assembling gate airays at NEC Electronics in the United States

• Established 31 additional ASIC design centers worldwide, bringing the total to 71 (plan to continue «q)ansion)

• Inoease production of ASICs at Kyushu

• Accelerate both systematization and customization

Analog

• Began construction of analog facilities at NEC Electronics Singapore

ORGANIZATION

Figure 7 shows NEC Semiconductor Group's organizational chart.

Sarrdoonductor Group

1 Ssmlconduclor Qroup Serrlcanduclor Qroup Sen^conductor Qroup SemlcoiKfcictor Qroup Relablity and Angela Technolofiy Plannind 0(Hc« Information Systems tec^ology Center Center © Center Quality Control Center H-» VO 00 vo D Syatsm LSJ Appicatkiit- Spedfto f-t Somlconductor Dsvslopment LSI DMslon NEC Aktta, Ltd. NEC OMi, Ltd. 43 Marketing DMston C Division CD SamlcondNclor c« Bipolar LSI Dlvlston NEC Fdai, Lid. AppUcallon VLSI Development NEC YamasaU, Ltd. a EnrfnoBrlna Dt/lslon Division rs o Semteonducior VLSI CAD Consumer LSI Division N£C FutoMka, Ltd. NEC YamaguoH, Lid. Mahiel Developmsnt Engineering Division DIuiHtnn

tut Ssmic endue tor FA Semiconductor DIvlelon NEC HIroiHma, Ltd. NEC Electrortct Ino. Semlconduciar EnginB Bring Sale$ Division a Compound Semiconductor NEC (C Mloro- NEC Elsotronica 1 eompiiter Systtm, Ltd. > 2nd Dsvtce Division Slnoabor* PTE Ltd. 1 Semiconductor LSI Memory Sales DMslon QMsEon c LSI Manufacluring NEC Kuisal, Ltd. NEC Semktonductore Ctq Ireland Ltd. Etoctron Device Division C Microcomputer t/> In-House SaiBS Dtvlslon Pfomollon Division NEC Semiconductors Hiroshima Plant NEC KumamolD, Ltd. Protect Division Malavsla, SDN QHO

NEC Semlconductars NEC KyuBhl, Ltd. lU.K.I Ltd.

ooMiinr-^ Source: NEC Corporation NEC Corporation Semiconductor

OPERATIONS

Note: Exchange rates used in the semiconductor section of this profile are ba^d on the calenikryear.

Product Segnnnts

The Company's main semiconductOT product areas are listed below.

• MOS memory—256K, IM,4MDRAMs; 256K, IM SRAMs; IM, 2M, 8MmaskROMs; 512K, IM, 2M EPROM; 4K, 64K EEPROM

• MOS and bipolar microdevices—8-bit, 16-bit, 32-bit MPUs; 4-bit, 16-bit MCUs, microperipheral devices

• MOS Logic—CMOS and ECL gate arrays, standard logic

• Analog—audio, visual, and industrial devices

• Discrete—GaAs field-effect transistors, diodes

• Optoelectronics

Product Revenue

Figure 8 shows NEC's percentage of semiconductor revenue by product For example, 80.4 percent of NEC's IC revenue came from MOS technology in 1988 and of this, 47.6 percent came from MOS memory devices.

Figure 8

1988 Estimated Semiconductor Revenue Percentage by Product (Millions of Dollars)

BtpQtar 7.5% Opto 1.9%

0004377-6 Source: Dataquest August 1989

Regional Sales

NEC's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4

1988 Estimated Semiconductor Revalue Percent by Region (Millions of Dollars)

United product States JSBSIkJa^aq Europe ROW

Semiconductcn' 13% 72% 8% 7% IC 15% 71% 10% 5% Bipolar Digital 3% 90% 2% 5% MOS (Technology•y)) 18% 67% 12% 4% MOS MeniOTy 28% 57% 14% 1% MOS Micro 13% 67% 14% 5% MOS Logic 4% 83% 5% 9% Analog 1% 87% 1% 11% Discrete 1% 78% 1% 20% Optoelectronics 3% 1% 7%

Exchange Rate (Yen per US$1) 130

Source: Dataquest August 1989

Growth Rate

NEC's growth rate by product line is shown in the table and figure that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 9 graphically compares NEC's growth rate in the world market with the growth rate of the world market itself. (This information is then provided for the Japanese market as well.)

Tables

NEC Sales in World Market (Millions of Dollars)

World Market 1987 ^988 % Change % Change

Semiconducusr $3368 $4,534 34.6% 31.9% IC $ 2,795 $ 3,875 38.6% 36.5% Bipolar Digital $ 247 $ 292 182% 9.2% MOS (Technology) $2,006 $3,114 55.2% 53.1% MOS Memcay $ 838 $ 1.481 76.7% 90.3% MOS Micro $ 566 $ 790 39.6% 39.8% MOS Logic $ 602 $ 843 40.0% 28.2% Analog $ 542 $ 469 (13.5%) 15.3% Discrete $ 518 $ 571 10.2% 13.2% Optoelectronics $ 55 $ 88 60.0% 25.4%

Exchange Rate (Yen per US$1) 144 130

Source Dataquest August 1989

Figure 9

NEC's Growth Rate Compared with World Market Growth Rate 100

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 000*377-9 Source: Dataquest Augutt 1989

Worldwide Market Growth Rate

As shown NEC grew significandy fastec than the world growth rate in bipolar digital, optoelectronics, and MOS logic in 1988.

Japanese Market Growth Rate

NEC grew fasten than the Japanese market in two categories—MOS mioro and optoelectronics.

Table 6

NEC Sales in Japanese Maricet (Millions of Dollars)

World Market 1987 1988 %Chanfe % Change

Semiconducux' $3368 $4334 34.6% 31.9% Semiconductcs^ $ 2,488 $3^71 31.5% 35.6% IC $2,058 $2,746 33.4% 39.1% Bipolar Digital $ 223 $ 264 18.4% 18.3% MOS (Technology) $ 1,370 $ 2,074 51.4% 58.4% MOS Mwnory $ 517 $ 843 63.1% 85.4% MOS Micro $ 369 $ 533 44.4% 35.9% MOS Logic $ 484 $ 698 44.2% 50.3% Analog $ 465 $ 408 (12.3%) 11.7% Discrete $ 384 $ 447 16.4% 18.5% Optoelectronics $ 46 $ 78 69.6% 42.3%

Exchange Rate (Yen per US$1) 144 130

Source:: Dataquest August 1989

Figure 10

NEC Growth Rate Compared with Japanese Market

Grovrth Rate 100- I^S Japanaa* Martcet ES NEC

-20. m Samiconduotor IC BIporar MOS M«mory Micro Logic Analog Discrete Opto Product 0004377-10 Source: Dataquest August 1989

Other Japanese Companies

NEC's growth rate by product line is compared with that of the Japanese companies tracked by Dataquest in Figures 11 and 12. Dataquest surveys a total of 18 companies, plus a category called "Other." The total of these companies' revenue was used for this comparison.

Figure 11

NEC versus Japanese Companies in Japanese M^ket Growth Rate

Semiconductor IC Bipolar MOS Msmory Micro Logic Analog Discrete Opto Product 0004377-11 Source: Dataquest August 1989

Figure 12

NEC versus Japanese Companies in World Market

Growth Rate 100- Japanesa Companies E^ NEC

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 00O«977-12 Source: Dataquest August 1989

CAPITAL SPENDING

As shown in Tables 7 and 8, capital investment, as a percentage of total revenue, dropped significantly after 1984 and 1985.

Table?

Semiconductor Capital Spending Compared ^th Total Revenue Calendar Year—^Millions of Dollars

1984 1985 1986 1987 1988

Revenue $2,251 $1,984 $2498 $3,368 $ 4,534

Semiconductcv Capital Spending $ 544 $ 517 $ 179 $ 208 S 423

Growth Rate of Capital Spenduig N/A (5%) (65%) 17% 103%

Percent of Revenue 24% 26% 7% 6% 9%

Exchange Rate (Yen per US$1) 237 238 168 144 130

N/A = Not Available Source: Dataquest August 1989

Table 8

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Billions of Yen

1984 1985 1986 1987 1988

Revenue 534 472 437 485 589

Semiconductcff Capital Spending 129 123 30 30 55

Capital Spending Growth Rate N/A (5%) (76%) 0 83%

Percent of Revenue 24% 26% 7% 6% 9%

Exchange Rate (Yen per USSl) 237 238 168 144 130

N/A = Not Available Source: Dataquest August 1989

FACamES

NEC's 27 semiconductor manufactuiing and R&D fsuiilities are list«i in Table 9.

Table 9

NEC Corporation Semiconductor Fadlities

Name/Lcjcation Fungtion Hara SdM Industry Kumamoto Prefecture Assembly, test, 256K DRAM

Kiian^;>pon Electronics Co. Toyama Ptefecoue Assembly, test, MOS, BIP

KitaniiqxNi ElectnHucs (Fudiu) Toyama Prefecture Assembly, test, discrete

Kyu^u Denshi Co. Fab. LED Kumamoto Prefecture Assembly, test, 256K DRAM Kyushu Nissei Denshi Co. Assembly, test, MOS memory, MPU Kumamoto Prefecture diodes

Naito Denshi Kogyo Co. (Mano) Niigata Prefecture Assembly, test, transistor, diodes

Naito Denshi Kogyo Co. (Hama) Niigata Prefecture Assembly, test, diodes, discrete

NEC Cfflp. Otsuki Worics Yamanashi Prefecture Fab, optoelectronics

NEC Cc«p. Sagamihara Works Fab, R&D, MOS devices, logic IC, Kanagawa Prefecture ASICs

NEC Crap. Tamagawa Works Kanagawa Prefecture Fab, R&D, 256K DRAM NEC Corp. Tsukuba R&D Center Ibaragi Prefecture R&D, basic research NEC Akita, Ltd. Akita Prefecture Assembly, test, linear, discrete

NECChugoku,Ltd. I&oshima PrefecQire Fab, 256K DRAM, 1Mb EPROM, 32b MPU

(Continued)

Table 9 (Continued)

NEC Corporation Semiconductor Facilities

Namg/LQgation BmiSism NEC Fukui, Ltd. Assembly, test, BIP linear IC, Fukui Prefecture powo^ transistor, MOS device

NECFukuoka.Ltd. Fukuoka Prefecture Assembly, test, MOS devices NEC Kagoshitna, Ltd. Assembly, test, optoelectronics, Kagoshima Prefecture discrete NEC Kansai, Ltd. (Otsu) Fab, linear, power transistor, Shiga Prefecture MOS device NEC Kansai, Ltd. (Yokkaichi) Mie Prefecture Fab, diodes

NEC Kumamoto, Ltd. Kumamoto Prefecture Assembly, test, MOS memories

NEC Kyushu, Ltd. Kumamoto Prefecture Fab, 256K and 1Mb DRAM, MPUs, ASICs

NEC Oita, Ltd. Assembly, test, 256K DRAM, Oita Prefecture 64K SRAM, 1Mb Mask ROM

NEC Yamagata, Ltd. (Tsuruoka) Yamagata Prefecture Fab, CMOS, linear, transistor NEC Yamagata, Ltd. (Takahata) Assembly, test, linear, transistor, Yamagata Prefecture MOS NEC Yamaguchi, Ltd. Yamaguchi Prefecture Fab, 256K and 1Mb DRAM, 64K SRAM

Yamagata Electronics Ltd. Assembly, test, MOS, BIP, discrete Yamagata Prefecture

NEC Electronics, Inc. Roseville, CA, U.S.A Fab, 256K DRAM, ASICs, DSP NEC Electronics (UK) Ltd. Livingston, Scodand Fab, ASIC, 1Mb DRAM

Source: Dataquest August 1989

ALLIANCES AND AGREEMENTS

NEC's alliances and a^r^menis f(»: 1986 to early 1989 are summmzed in Figure 13. For more in-depth information, please refer to Volume H of the Japanese Semiconductor Ihdustiy Service behiod the tab entitled "Strategic Alliances."

Figure 13

Semiconductor Agreements

0004377-13 Source: Dataquest August 1989

(Page intentionally left blank)

REVENUE SUMMARY

Tables 10 and 11 show NEC's semiconductor revenue in detail. The tables show sales from 1981 to 1988 in both billions of yen and millions of dollars.

Table 10

NEC Corporation Worldwide Semiconductor Revenue (Billions of Yen) 1981 1982 im 12M 1985 1986 1987 \m* Total Soniconductor 219 269 335 533 472 437 485 589

Total IC 151 198 259 436 382 358 402 504

Bipolar Digital (Technology) 17 22 27 32 31 29 36 38

MOS (Technology) 97 137 186 335 279 268 289 405 NMOS 76 110 151 267 216 199 190 151 PMOS 7 8 6 8 5 1 1 0 CMOS 14 19 30 61 58 68 98 254 BiCMOS 0 0 0 0 0 0 0

MOS (Function) 97 137 186 335 279 269 289 405 MOS Memory 41 59 81 169 112 98 121 193 MOS Microdevices 31 41 56 97 89 80 82 103 MOS Logic 25 37 49 69 78 91 87 110

Analog 36 39 46 69 71 60 78 61

Total Discrete 64 66 69 90 84 71 75 74

Transistor 38 38 38 49 43 36 49 50 Diode 19 19 21 27 25 22 17 16 Thyristor 5 5 5 7 7 6 2 2 Other Discrete 3 4 5 8 9 7 7 6

Total Optoelectronic 5 6 6 8 7 8 8 11

Exchange Rate (Yen per USSl) 221 249 237 237 238 168 144 130

Table 11

NEC Corporation Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

1221 12S2 1222 1221 122S 1226 1222 1988*

Total Semiconductor 993 1,080 1,413 2,251 1.984 2.601 3368 4.534

TotallC 681 794 1,093 1,838 1.603 2.131 2.795 3.875

Bipolar Digital (Technology) 78 89 115 134 129 173 247 292

MOS (Technology) 438 549 786 1.414 1.174 1.595 2.006 3.114 NMOS 343 441 636 1.125 908 1,185 1.320 1.159 PMOS 30 31 25 32 22 6 7 3 CMOS 65 77 125 257 244 405 679 1.952 BiCMOS

MOS (Function) 438 549 786 1.414 1,174 1.601 2.006 3,114 MOS Memory 185 236 343 713 470 583 838 1,481 MOS Microdevices 142 166 237 411 375 476 566 790 MOS Logic 111 147 206 290 329 542 602 843

Analog 165 156 192 290 300 357 542 469

Total Discrete 291 263 293 379 351 423 518 571

Transistor 171 153 162 205 179 214 338 384 Diode 84 77 88 114 105 131 118 123 Thyristor 21 19 21 28 29 36 15 16 Other Discrete 15 15 22 32 38 42 47 48

Total Optoelectronic 21 22 27 34 30 48 55 88

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

*Preliminary estimate for 1988

Source: Dataquest August 1989

BALANCE SHEETS

Tables 12 and 13 show NEC's corpc»^e consolidated balance sheet for 1984 to 1988 in yen and U.S. dollars, resp«:tively.

Table U

C(nisoIidated Balance Sheet Fuscal Years 1984-1988 (Billions of Yen)

Balance Steet (March 31) ISM J^ 1986 1987 1988 Total Currrat Assets ¥1328 ¥1,779 ¥1,554 ¥1,760 ¥ 1,830 Cash ¥ 102 ¥ 134 ¥ 146 ¥ 179 ¥ 209 Receivables ¥ 507 ¥ 642 ¥ 637 ¥ 672 ¥ 733 InventCHy ¥ 354 ¥ 526 ¥ 550 ¥ 599 ¥ 650 Otfier Cun^it Assets ¥ 365 ¥ 477 ¥ 221 ¥ 310 ¥ 237 Net I*rcq)erty, Plant, and Equipment ¥ 449 ¥ 553 ¥ 645 ¥ 642 ¥ 681 Depredaticm ¥ 400 ¥ 495 ¥ 614 ¥ 729 ¥ 836 Otter Assets ¥ 303 ¥ 379 ¥ 387 ¥ 364 ¥ 394

Total Assets ¥2,080 ¥2,711 ¥2,586 ¥2,766 ¥2,905

Total Current Liabilities ¥ 1,168 ¥ 1,577 ¥1,422 ¥ 1,484 ¥ 1,597 Long-Term Debt ¥ 488 ¥ 634 ¥ 637 ¥ 738 ¥ 680 Other Liabilities ¥ 15 ¥ 23 ¥ 29 ¥ 30 ¥ 35

Total Liabilities ¥ 1,671 ¥2,234 ¥2,088 ¥2,252 ¥2,312

Total Shareholders' Equity ¥ 409 ¥ 477 ¥ 498 ¥ 514 ¥ 593 Common Stock ¥ 100 ¥ 102 ¥ 107 ¥ 115 ¥ 147 Other Equity ¥ 145 ¥ 200 ¥ 178 ¥ 185 ¥ 221 Retained Earnings ¥ 164 ¥ 175 ¥ 213 ¥ 214 ¥ 226

Total Liability and Total Equity ¥2,080 ¥2,711 ¥2,586 ¥2,766 ¥2,905

(Continued)

Table 12 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Income Statement (March 31) 1984 19S5 1986 12S2 1988

Revenue ¥ 1,762 ¥2,258 ¥2335 ¥2,450 ¥ 2,715 Domestk Sales ¥ 981 ¥1,641 ¥1,560 ¥ 1,755 ¥1,969 Overseas Sales ¥ 781 ¥ 617 ¥ 775 ¥ 695 ¥ 746 Other income ¥ 42 ¥ 59 ¥ 69 ¥ 55 ¥ 41 Cost of Sales ¥1,206 ¥1,516 ¥1,579 ¥1,702 ¥ 1,875 Gross Margin (%) 32 33 32 31 31 R&DExpoise ¥ 217 ¥ 287 ¥ 327 ¥ 384 ¥ 433 SG&A Expense ¥ 432 ¥ 565 ¥ 609 ¥ 656 ¥ 727 Other Opoating E;q)enses ¥ 79 ¥ 97 ¥ 98 ¥ 89 ¥ 83 Total Operating Expenses ¥ 1,717 ¥ 2,178 ¥2,286 ¥2,447 ¥ 2,685 Opoating Income (Loss) ¥ 87 ¥ 140 ¥ 118 ¥ 58 ¥ 70 Interest, Net 0 0 0 0 0 Pretax Income ¥ 87 ¥ 140 ¥ 118 ¥ 58 ¥ 70 Provision for Taxes (Credit) ¥ 48 ¥ 78 ¥ 98 ¥ 45 ¥ 51 Effective Tax Rate (%) 55 56 83 78 72 Extraordinary Items ¥ 6 ¥ 6 ¥ 7 ¥ 2 ¥ 6 Net Income ¥ 45 ¥ 67 ¥ 27 ¥ 15 ¥ 25

Avg. Shares Outstanding (Millions) 1,177 1,309 1,380 1,398 1,438 Employees 78,389 90,102 95,796 101.227 102,452 Coital Spending ¥ 208 ¥ 370 ¥ 293 ¥ 194 ¥ 250

Exchange Rate (Yen per US$1) 236 245 221 160 138

Source: Dataquest August 1989

Table 13

Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Balance Sheet (Nffaich 31) 1984 ms. IM. 1987 1988 Total Cmrau Assets $5,627 $7,261 $7,032 $11,000 $13,261 Ca^ $ 432 $ 547 $ 661 $ 1.119$ 1415 Recdvables $2,148 $2,620 $2,882 $4,200 $5314 InvOTttny $uoo $2,147 $2,489 $3,744 $4,711 Oth^ Currmt Assets $1,547 $1,947 $1,000 $ 1,938 $ 1,720 Net Property, Hant, and Equipment $1,903 $2,257 $2,919 $4,013 $4,933 DepreciaticHi $ 1.695 $2,020 $ 2.778 $4,556 $6,060 Other Assets $13* $1,547 $ 1.751 $2,275 $ 2,856

Total Assets $ 8.814 $11,065 $11,701 $17,288 $21,050

Total CiBTent Liabilities $10,941 $13,633 $15,140 $22,963 $28,625 Long-Term Debt $2,068 $2488 $ 2.882 $4,613 $ 4,928 Other Liabilities $ 64 $ 94 $ 131 $ 188 $ 254

Total Liabilities $ 7.081 $9,118 $9,448 $14,075 $16,754

Total Shareholders' Equity $ 1,733 $ 1,947 5 2,253 5 3,213 5 4,299 Common Stock $ 424 $ 416 $ 484 5 719 5 1,064 Other Equity $ 614 $ 816 $ 405 $ 1,156 $1,600 Retained Earnings $ 695 $ 714 $ 964 $ 1,338 $ 1,634

Total Liability and Total Equity S 8,814 $11,065 $11,701 $17,288 $21,052

(Continued)

Table 13 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Income Statement (March 31) J2S4 1985 1986 1987 1988

Revenue $7,466 $9,218 $10,566 $15313 $19,672 Domestic Sales $4,157 $6,700 $ 7,059 $10,969 $14,270 Overseas Sales $3309 $2,518 $ 3307 $ 4344 $ 5.402 Other income $ 178 $ 240 $ 312 $ 344 $ 293 Cost of Sales $5,110 $ 6,186 $ 7.145 $10,638 $13386 Gross Margin (%) 32 33 32 31 31 R&DExp«ise $ 919 $ 1,171 $ 1,480 $ 2.400 $ 3,138 SG&AE^nse $ 1,831 $2306 $ 2,756 $ 4.100 $ 5,268 Other Operating Expenses $ 335 $ 396 $ 443 $ 556 $ 602 Total Operating Expenses $7,275 $ 8,888 $10344 $15,294 $19,457 Operating Income (Loss) $ 369 $ 570 $ 534 $ 363 $ 509 Interest, Net 0 0 0 0 0 Pretax Income $ 369 $ 570 $ 534 $ 363 $ 509 Provision for Taxes (Credit) $ 203 $ 318 $ 443 $ 281 $ 368 Effective Tax Rate (%) 55 56 83 78 72 Extraordinary Items $ 25 S 24 $ 32 S 13 S 43 Net Income $ 191 S 275 $ 122 S 94 S 184

Avg. Shares Outstanding (Millions) 1,177 1309 1380 1,398 1,438 Employees 78389 90,102 95,796 101,227 102,452 Coital Spending $ 881 S1310 $ 1.326 $ 1,213 S 1,812

Exchange Rate (Yen per US$1) 236 245 221 160 138

Source: Dataquest August 1989

NTT Corporation Corporate

SUMMARY

The puipose of this section is to provide a one-page ovendew of the coiporatioiL

Address NTT CoiporaticMi 1-6, Uchisaiwaicho l-cfa(MX» Quyoda-ku, Tokyo 100, Japan Phone (03) 509-5035 Fax (03) 509-9104 President Haruo Yamaguchi Chairman underdetomn^ as of 6/89 Main Product Areas Telephone services Telegraph services Leased circuit services Data communication facility s^vices Digital data exchange services Pocket pager services No. of Employees 291,000

Top Shareholders Minister of Finance 77.5% Mitsubishi Trust & Banking 0.5% Sumitomo Trust 0.4% Toyo Trast 0.4% Yasuda Trust 0.4% Sumitomo life 0.3% Nippon Life 0.3% Japan Securities Gearing 0.3% Chuo Trust 0.3% % Outstanding Stock Foreign-Owned 0 Stock Exchanges All major Jj^anese

Ranking 1sistt amonaiivjiig g Japanesjapoiibobe telecommunicatioL«^x(^wvîiiiiiuiiiâuv.;ini (v^vîiipaiii^;ompan : a 2nd among worldwide telecommunications companies

STRATEGY

NTTs goals for 1989 and accomplishnKnts in 1988 are highlighted in this section. NTT has been undergoing many changes in the past few years. In 1985, it went from a government-run enterprise to being the largest private company in Japan. As part of the privatization, ownership of NTT by the Japanese government eventually will be reduced to 33 parent There have been three public stock offerings since March 1986, and more are expected in 1989.

Beginning last year, NTT is in the process of recovering from a scandal associated with the Recruit Company, in which NTT employees were accused of accepting bribes from Recruit. In March 1989, as a result of the scandal, NTT's chairman and former president, Hasashi Shinto, resigned after only six months as chairman.

NTT*s corporate goals include the following:

• Digitize all telecommunication systems in order to implement Integrated Services Digital Network (ISDN) throughout Japan in die near future (the Company expects that 34 percent of subscriber equipment to be digital by the end of fiscal 1989).

• Diversify through joint ventures and technology agreements

• Invest heavily in R&D within the next three years

• Introduce INS-Net 1500 first commercial, primary rate service in Japan

• Integrate management, sales networks, and customer service operations in cellular phones and pocket pagers

The following developments occurred at NTT during 1988:

• Reduced administrative levels in the telephone office operations group in order to improve efficiency of customer services

• Established a subsidiary, NTT Data Communications Systems Corporation, in July 1988, in an effort to better focus on data processing, software development, and Value Added Networks (VANs)

• Established Affiliated Companies Headquarters to develop and manage joiat ventures aad subsMiaiies wOTldwide. Strate^es for die nevi^ group as follows:

- Expand scope of business, iimde and outside of tel^xjmmunications

- Streamline and enagize NTT

- Use NTT's assets and resources rffcctively

• Concluded ISDN project gathering user (pinions on eqtupment and service

• In April 1988, began ISDN operaticm with INS-Net 64, the first basic-rate networic in Tdcyro, Nagoya, and Osaka, and began INS 1500 operation in 30 cities in June 1989 (INS 1500 is a high-speed version of the INS-Net 64)

• Developed technique for simplifying bipolar CMOS IC {mxiuction process using only one extra mask

• Developed VTX Sales Management System, a videotex-based corporate information system linking NTT's headquarters to nine branch offices

• Developed high-speed liquid crystal display (LCD) driver transistor capable of switch ing off and on 10 million times per second

The following international developments occurred at NTT during 1988:

• Continued to pursue growth in overseas markets through NTT International Corporation (NTTI) and subsidiaries for the following reasons:

- To balance the decline in domestic revenue lost to competition since privatization

- To meet the needs of NTT clients that are expanding overseas

• Continued pursuing intelligent building markets overseas, specifically in the United States, through NTTI

• Continued efforts to raised procurement of foreign-made equipment

ORGANIZATION

Figure 1 shows NTT's corporate organizational structure and Figure 2 shows the orgamzation of NTT Data C(»imiunications Q>., a subsidiary that was formed in 1988. Figure 3 shows the Research and Development Headquarters organizational chart and Table 1 lists NTT's current subsidiaries and affiliates with NTT's percentage of ownership.

© 1989 Dataquest Incorporated August JSIS Volume III 0004459 Corporata TatocominurtoaUiina Natwork DMaton WaWwrtCwHT Slratagy Nerwofk Sector Ftsnotng Haodquartart Tatacommunlcatlont Sarvica Support Hawiquanar*

CustPfnar Eqiipntanl DhAalon

_ Tatacortvnunlcatkin* Oractory DhWon

Tataoommwicittan* Sar>riea @ Support Haadquanar* t—» vo _ Intaoratad ConnTuricaUona _ Intagratad ConnMnloaUara cx> Syatwm DMaton vo Systsmi Sactpr M Advanced Talecotnnailoatlgiw a Sarvlca* Sector I — Leased Cb-ciit UvWon Area Branch Offloa JO K c video and Record n Communlcalloni DhWan H Ara» Branch Offlca | (/> Mobla Cwnmwikiatkina Araa Brancti OWca h _ sr DMston o naaearoh and Davatopmant TataconvnunloBtlon* Headquarter* l-T"Lalmratorta t I _ Natwork Syttamt Devak>ptnent Centar i Software Engtneafing Camar It a ~ Procuramant and Supply Dapanmant | > ~ BuMng EngtnearlnB OepartmanI c trt Trainino Inatltute |

'— Teltshki Hoipltal

I Representative Office) Soufcc: NTT Aawai ktpMt

v« NTT Corporation Corporate

Figure 2

NTT Data Commuiications Co^ Ltd Organizational Chart

— Public Systems Division

— Social Sacurfty Division

— Financial System Division

— inc&istrlat System Division

Software Division

— Plaid Sarvica Division

Stratagy Shinatsu Branch Planning Dapartmant ^ Tokal Branch

PrssI dent's IHokurIku Branch Offlca ^ Kansal Branch

Intamal AudJt Offlca — Chugokii Branch A Shll(oku Branch Corporate Marketing Kyushu Branch ^ Headquarters Tohol(u Branch

Ganaral Affairs Dapartment — Hokkaido Branch ^

Public Relations — Purchasing Department Department ^ Corporate Development Headquarters Personnel Dapartment Personnel Development A Department Accounts and FinancB H Department Information Systems Division 000445D-2 Source: NTT Annual Keport

Figures

NTT's R&D Organizational Structure

Network Planrdng. Network Technoksgles. Private Comnwraoatlons. Telecommunications Qu8^ Control ComnvAiicatlmis and information Processing Systems. Knowledga Systems. Natural Language Processing

Language. Visual. Speech, and Acoustics Meda, Visual Perception

Switching Systmns. Traffic Theory

Lightwave Convnwilcations, Transntlssion Line Systems, Transport Processing

Rado Transn^sion Tectmoiogies, Sateiyte Technologlas

Softwwe Production Technologies. Software Production Management Support System

Application-Specific Design. Manufacturing Cs w ^ -^ \ ^ '^ -^ w ^ %^> % •* v C' Systems, Advanced Fabrication Technologies

Integrated Optoelectronics, Photonic Functional Devices. Photonic Components and Materials

Storage Systems, Advanced Hardware Engineering, ElectroniElectror'c Equipment, Materials an\5rd Characterizatio n Information Science, Physical Science, Material Science

S^^??J"I*J?TT^^?!TIJ^T^?^^ External Affairs and Ucensing, Technical Information Patent, and | p^^^^^ ^^ Specification Management. RiD- • igi^^Ê^^gasîJi^Kî Related Public Relations Communications Network and Information Network Systems Development Center| Processing Systems

Communications Software

Main Location of Each Laboratory: Hiblya i i Yokosuka R&D Center S^ Ibaraki R&D Center Shinagawa rr^ Atsugl R&D Center MWl Musashino R&D Center

00044S9-3 Source: NTT Annual Report

Table 1

NTT Corporate Subsidiaries and Affiliates

QaasmsL ACtiYitY NTT's Share (%)

Advanced Teleconununications Resesch and development of basic 57.8% Research Institute International tdecommunications technologies

NTT Data Communications VAN and software services, systems, 100.0% Systems Corporation integration

NTT Urban Development Co., Ltd. Acquisition, diqxTsal, development, 100.0% NTT Tokai Real Estate Coip. maintoiance, and leasing of NTT-related 100.0% NTT Estate Co., Ltd. real estate 100.0% NTT Kansai Real Estate Coip. 100.0%

Nippon Information and VAN and other teleconununications 50.0% Communications Corp. networks

NTT IntematicHial Corp. Engin^ring and consulting services for ovo^eas telecommunications systems, 52.7% fiber-q)tic systems, intelligent buildings

NTT PC Communications Inc. Development and marketing of PC 90.0% netwoiks and related terminals

Nippon Senpaku Tsushin KJC. Cellular telephones for ships 51.9%

NTT Infcvmation Development Develc^ment, application, maintenance, 52.0% Co., Ltd. and consulting cm various databases

NTT Central Network System Planning and marketing of remote mcmitoring systems 60.3%

AIREC Engineering Corp. Ace mole rental and sales 52.0%

NTT intelligent technology Design and marketing of artificial- Co., Ltd intelligence workstations 53.0%

Nippon Telematique, Inc. Marketing and consulting on private CAPTAIN systems 50.0%

Nippon Directory Development Marketing consultation related to 50.0% Co., Ltd. telephones directories

Table 1 (Continued)

NTT Corporate Subddiaries and Affilrates

Cnmnanv Activity NTT's Share (%)

Healthynet Hiroshima Co. Spods dab management 100.0%

Nippon Airport Radio Service Aixpnt ladiotBleidione service 60.0% Co., Ltd.

NTT Software Corp. Design, inoduce, maintain, 97.5% mfflka software

NTT Kansai Tele«m Co. Plaining and maiketing (tf 50J% lont^ moiuicmng and inffxmation systnns

NTT Finance (U.K.) Ltd. Oversras finance 100.0%

NTT America, Inc. FadlitaticMi of technology transfer and 100.0% r^eaich activities in North America

Note: Only companies with capitalization of at least ¥200 million and equity ownership by NTT of at least 50 parent have been indued.

Source: NTT Corporation Dataquest August 1989

OPERATIONS

Product Segments

NTT is divided into seven revenue-generating SCTvices and another category called "related business." Examples of items within each category are listni below.

• Telephone services—^Telephone subscriber services, public telephones, automobile telephone services

• Telegraph services—^Telegram and telex services

• Leased circuit services—Standard circuit and high-speed digital circuit services, video, record, and satellite communications

• Data communications facility services—^Public and customized data communications facility services, automatic answer network for electrical request response service (ANSER), credit information systems

• Digital data exchange services—Circuit and packet-switching services

• Pocket pager services

• Other services—^Facsimile network, videoconference, and videotex services

• Related business—^Terminal equipment, telecommunications consulting, operator in formation services

Product Revenue

Figure 4 and Table 2 show NTT's nonconsolidated revenue by product segment from 1984 to 1988.

Figure 4

Product Revenue as a Perc^tage of TiHal Corporate Revalue

Percent 100-1 Other/Reiattd 90' Business taA Digital Data Exchange Poclcat Pagw 70 - O Data Confummlcations 60 Leased Circuit Telegraph 50 Telephone 40 30 20' 10- 0 1S84 1989 1986 1987 1988

000445S-» Source; Dataqueit July 1989

Table 2

Sales by Product Seg^nent (BUlionsofYen)

1221 12S1 12S^ 1331 1988 Operating Revenue Telephone ¥3,984.0 ¥4.111.7 ¥4,233.7 ¥4368.9 ¥4,553.8 Telegraph 57.8 52.9 52J 49.1 49.8 Leased Circuit* 342.9 382,0 251.4 275.2 295.4 Data Conunimication — — 153.3 162.4 176.1 — — Digital Data Exchange 10.3 15.8 22.4 — — 70.2 80.9 93.3 Pocket Pager 114.7 126.9 159.7 137.8 155.0 OthCT Services 53.0 82.7 160.1 263.4 316.2 Nonopnating Revalue Total ¥4,552.4 ¥4,7562 ¥5,091.2 ¥5353 J ¥5.662.0 Exchange Rate 236 245 221 160 138

•On-line computo^ services' revenue is included in leased circuit revenue from 1983 to 1985; firom 1986 onward, it is included in data communications.

Source: NTT Corporation Annual Report Dataquest August 1989

Domestic versus International Revenue and Procurement

NTT does not report revenue into foreign markets.

In 1989, procurement of foreign-manufactured products increased 33 percent to $336 million over the previous year. Procurement from the United States accounted for 90 percent of the total. In 1989, NTT announced that it will be purchasing telephones made in Europe.

A top priority of NTT is to increase procurement of foreign products. The Company does its own R&D, but does not manufacture any of the equipment it sells or leases. It purchases end equipment from competitive bidders. In the case of semiconductors, the Company has stringent quality and reliability standards and actually inspects its suppliers' semiconductor production lines.

Growth Rate

Table 3 shows the year-to-year growth ratesb y ^oduct segment revenue. Following this table is a list of facttjrs explaining tbs changes in 1988 product growdi.

Tables

Growth Rates by Product Segment (Yen-Based)

1985 1986 12S2 1988

Opoating Revenue Telqphone 3% 3% 3% 4% TelegiaiA (8%) (1%) (6%) 1% Leased Circuit 11% (34%) 9% 7% 0 0 6% 8% Data C

Source: Dataquest •••• August 1989

Main Factors Affecting 1988 Growth

The major factors affecting NTT's growth in 1988 are listed below by product segment.

• Telephone services

- Growth was moderate despite reductions in long-distance rates forced by increased competition from New Common Carriers (NCCs) in Japan.

- Gains were made in the area of magnetic telephone cards, toll-free dialing, three- party calls, and cellular telephone services.

Telegraph service

- Overall demand has weakened, but popularity of new products, such as musical, embroidered, or scented telegrams, are expected to boost growth in 1989.

Leased circuit services

- Demand has increased for high-speed digital leased circuit s^vices for comprehen sive corporate communications systems.

- Competition from NCCs have increased.

Data communications facility services

- Data communications revenuewa s shifted from corporate to NTT Data Commu nications, which was formed in July 1988.

- Demand for on-line credit and financial information system and computer- generated response services has continued to grow.

Digital data exchange services

- Demand was strong for Nil's newly introduced "long-packet" switching service, a low-cost, high-volume data transmission system.

Pocket Pager Service

- Demand was up as a result of increased availability of service and reliance on paging systems, but competition from NCCs also increased.

Other/Nonoperating Businesses

- Facsinaile network services continued to gain popularity.

- Videotex services, and Character and Pattern Telephone Access Information (CAPTAIN) more than doubled the number of subscriptions.

CAPITAL AND R&D INVESTMENTS

Elev«i teiecoimntuucations labs with 6,000 en^loyees art under tiiedirectio n of Research and Develiqnnent Headquarters. NTT reports R&D spending as the expoiditure of this headquarters. The Onnpany also has four developii»nt centers that coomiarcialize technology, and applied research labs.

NTT's capital and R&D spending in 1988 increased 12 percent over 1987, with a 22 percent increase in R&D spending alone. Total revenue increased by 6 percent Table 4 and Figure 5 show the capital and R&D spending as a percentage of total ccaporate revenue from 1983 to 1988.

Figures

Capital and R&D Spending as a Percentage of Total Corporate Revenue

Percent

50 P&D Spending Capital Spanding 40-

30^ ^^::^ 2(1- i N> 10- 1^ >'Xx\: ••,.\ 1983 1934 19S5 i193 6 1987 1988

0OD445S-5 Source: Daiaqueit July l9S9

Table 4

Capital and R&D Inve^nKiits (Billions of Yen, Millions of Dollars)

1983 1984 12S5 12Sfi 12S2 1988

Ccnporate Revenue ¥ 4344 ¥ 4452 ¥ 4,756 ¥ 5,091 ¥ 5354 ¥ 5.662 $17,446 $19,288 $19,412 $23,036 $33,463 $41,029

Capital Spending ¥ 1,743 ¥ 1,682 ¥ 1,723 ¥ 1,581 ¥ 1,613 ¥ 1,797 $ 7,000 $ 7,127 $ 7,033 $ 7,154 $10,081 $13,022 % Total Revalue 40.1% 37.0% 36.2% 31.1% 30.1% 31.7%

R&D Spending ¥ 94 ¥ 94 ¥ 127 ¥ 136 ¥ 149 ¥ 182 $ 377 $ 398 $ 518 $ 615 $ 931 $ U19 % Total Revalue 2.2% 2.1% 2.7% 2.7% 2.8% 3.2

Total Spending ¥ 1,837 ¥ 1.776 ¥ 1,850 ¥ 1,717 ¥ 1,762 ¥ 1,979 $ 7377 $ 7,525 $ 7.551 $ 7,769 $11,013 $14,341 % Total Revenue 42.3% 39.0% 38.9% 33.7% 32.9% 35.0%

Exchange rate (¥ per US$1) 249 236 245 221 160 138

Source: NTT Corporation Annual Reports Dataquest August 1989

Target and R&D Areas

Basic research is the priority of Nil's laboratories. Specifically, work is done that develops technologies for ISDN and improved operating efficiency and reliability of telecommunication networks. The Company conducts research in the following four basic areas:

• Development and integration of digital network technologies

- Began operation of commercial ISDN in 1988

- Developed a design support system to optimize networks

- Developing a large-scale onboard deployable multibeam satellite antenna

• Intelligent processing technologies for natural language processing knowledge

- Development of high-pof onnance wcffkstations fcxr artificial intelligence program development and applicaticms

• Nanoelectionics for ultralarge-scale integrated (ULSI) ciicuits and advances in molectilar electronics

- Developed Mgh-perfcsmance geometrical mapping LSI ^t)cessor five tinKS faster than previous LSIs

- Developing superself-align^ process technology to fjualitate fabrication of high- spe«l mCTiory devices

• Optoelectronics for integrated circuits, optical transmission media, optical memory materials, and lightwave transmission equipment

- Developed laser that enables coherent transmission systems that function over great distances

ALLIANCES AND AGREEMENTS

NTT's agreements and alliances for 1987 to early 1989 are summarized in Figure 6. For more in-depth information, please refer to Volume n of the Japanese Semiconductor Industry Service behind the tab entided "Strategic Alliances."

Figure 6

NTT Alliances and Agreements

0004450-8 Source: Dataquest July 1989

BALANCE SHEETS

Tables 5 and6 show NTT's corporate nonconsolidated balance sheet for 1984 through 1988 in yen and dollars, respectively. The conq)any did not repent consoUda^ sales prior to 1989, as revenue fiom any subsidises was considered immaterial. NTT just rqxnted 1989 nonconsolidated revenue of ¥5652 MlUon.

Table 5

Nonconsolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Balance Slwet (Mardi 31) 1984 1985 i3M 1987 1988

Total Currrait Assets ¥ 650 ¥ 655 ¥ 889 ¥ 998 ¥ 1,081 Cash ¥ 225 ¥ 142 ¥ 115 ¥ 450 ¥ 441 Recdv^les ¥ 165 ¥ 234 ¥ 337 ¥ 401 ¥ 467 Inveayxy ¥ 39 ¥ 37 ¥ 40 Other CuiT^t Assets ¥ 260 ¥ 279 ¥ 398 ¥ 110 ¥ 133 Net Prq)erty, Plant, & Equipment ¥ 9,787 ¥10,046 ¥10,157 ¥ 9,961 ¥ 9,940 Depreciati

Total Assets ¥10.522 ¥10,792 ¥11,369 ¥11,378 ¥11,456

Total Current Liabilities ¥ 443 ¥ 551 ¥ 1,555 ¥ 1,575 ¥ 1,651 Long-Term Debt ¥ 5,156 ¥ 5,027 ¥ 4,165 ¥ 4,009 ¥ 3,786 Otter Liabilities N/A N/A ¥ 2,137 ¥ 2,206 ¥ 2,242

Total Liabilities ¥ 5,599 ¥ 5,578 ¥ 7,857 ¥ 7,790 ¥ 7,679

Total Shar^olders' Equity ¥ 4,922 ¥ 5,214 ¥ 3,512 ¥ 3,587 ¥ 3.777 Conv. Preferred Stock 0 0 0 0 0 Common Stock 0 0 ¥ 780 ¥ 780 ¥ 780 Otter Equity ¥ 2,567 ¥ 2,731 ¥ 2446 ¥ 2,557 ¥ 2,566 Retained Earnings ¥ 2355 ¥ 2,483 ¥ 186 ¥ 250 ¥ 431

Total Liability and Total Equity ¥10,521 ¥ 10,792 ¥11,369 ¥11,377 ¥11,456

i (Continued)

Table 5 (Continued)

Nonconsotidated Balance Sheet Fiscal Years 1984-1988 (BUUonsofYen)

Income Statement (March 31) im. 198S 1986 ML IM Revenue ¥4.552 ¥ 4,756 ¥5.091 ¥5354 ¥5.662 Domestic Sales N/A N/A N/A N/A N/A Ovoseas Sales N/A N/A N/A N/A N/A Cost of Sales N/A N/A N/A N/A N/A Gross Margin (%) N/A N/A N/A N/A N/A R&D Expense ¥ 94 ¥ 127 ¥ 136 ¥ 149 ¥ 182 SG&A Expense ¥3.983 ¥4,177 N/A N/A N/A Other Operating Expenses ¥ 185 ¥ 251 ¥4334 ¥4,549 ¥ 4.747 Total Operating Expenses ¥4.168 ¥4,428 ¥4334 ¥4449 ¥ 4.747 Operating Income (Loss) ¥ 384 ¥ 328 ¥ 758 ¥ 805 ¥ 915 Interest, Net N/A N/A (¥ 384) (¥ 394) (¥ 338) Pretax Income ¥ 445 ¥ 391 ¥ 373 ¥ 411 ¥ 577 Provision for Taxes (Credit) N/A N/A ¥ 188 ¥ 218 ¥ 309 Effective Tax Rate (%) N/A N/A ¥ 50 ¥ 53 ¥ 54 Extraordinary Items 0 0 0 0 0

Net Income ¥ 384 ¥ 328 ¥ 186 ¥ 193 ¥ 268

Avg. Shares Outstanding (Millions) N/A N/A ¥ 15.6 ¥ 15.6 ¥ 15.6 Employees 318.000 314,000 304,000 298,000 291,000 Capital Spending ¥1.682 ¥ 1,723 ¥ 1,581 ¥ 1,613 ¥ 1,797

Exchange Rate (Yen per US$1) 236 245 221 160 138

N/A = Not Available

Source: NTT Corporate Annual Report Dataquest August 1989

Tabte 6

BalaiK:e Sheet (March 31) 1^ 1985 1986 1987 IM Total Cimoit Assats $ 2,754 $ 2,673 $ 4.023 $ 6.238 $ 7,833 Cash $ 953 $ 580 $ 520 $ 2.813 $ 3.196 Recdvabies $ 699 $ 955 $ 1.525 $ 2,506 $ 3384 Inventcvy 0 0 S 176 $ 231 $ 290 Other Currrat Assets $ 1,102 $ 1.139 $ 1.801 $ 688 $ 964 NetPmpeity,P\aau&Bqp. $41,470 $41,004 $45,959 $62,256 $72,029 Dqxeciation 0 0 $48,914 $72,713 $89,217 Other AssMS $ 360 $ 371 $ 1,462 $ 2,619 $ 3,152

Total Ass^ $44,585 $44,049 $51,443 $71,113 $83,014

Total Currrat Liabilities $ 1378 $ 2,249 $ 7,036 $ 9,844 $11,964 Long-Term D^t $21,847 $20,518 $18,846 $25,056 $27,435 Other Liabilities 0 0 $ 9,670 $ 13,788 $16,246

Total Liabilities $23,725 $22,767 $35,552 $48,688 555,645

Total Shareholders' Equity $20,856 $21,282 $15,891 $22,419 527,370 Conv. Prefared Stock 0 0 0 0 0 Common Stock 0 0 3,529 4,875 5,652 Other Equity $ 10,877 $11,147 $11420 $ 15,981 $ 18,594 Retained Earnings $ 9,979 $ 10,135 $ 842 $ U63 5 3,123

Total Liabilities and Equity $44,581 $44,049 $51,443 $71,106 $83,014

(Continued)

Table 6 (Continued)

Nonconsolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Income St^ement (March 31) 19S4 1985 im 1987 1988 Revenue $19,290 $ 19.413 $23,038 $33,463 $41,029 Domestic Sales N/A N/A N/A N/A N/A Ovoseas Sales N/A N/A N/A N/A N/A Cost of Sales N/A N/A N/A N/A N/A Gross Margin (%) N/A N/A N/A N/A N/A R&D Expense $ 398 $ 517 $ 616 $ 933 $ 1319 SG&A Expense $16377 $17,049 N/A N/A N/A Other Opoating Expenses $ 784 $ 1.024 $19,609 $28,431 $34399 Total Operating Expoises $17,661 $18,073 $19,609 $28,431 $34399 Opoating Income (Loss) $ 1.629 $ 1340 $ 3.429 $ 5,031 $ 6,630 Intnest,Net N/A N/A $(1,739) $(2,463) $(2,449) Pretax Income $ 1,629 $ 1340 $ 1,690 $ 2,569 $ 4,181 Provision for Taxes (Credit N/A N/A $ 851 $ 1,363 $ 2,239 Effective Tax Rate (%) N/A N/A 50 53 54 Extraordinary Items 0 0 0 0 0

Net Income $ 1,629 $ 1340 $ 839 S 1,206 S 1,942

Avg. Shares Outstanding (Millions) N/A N/A $ 15.6 $ 15.6 S 15.6 Employees 318,000 314,000 304,000 298,000 291,000 Capital Spending $ 7.128 $ 7,031 $ 7,152 $ 10,083 $ 13,022

Exchange Rate (Yen per US$1) 236 245 221 160 138

N/A = Not Available

Source: NTT Corporation Annual Reports Dataquest August 1989

Oki Electric Industry Company, Ltd. * Corporate

SUMMARY

Hie purpose of this section is to provide a one-page overview of the coi][K}ration.

Address Oki Electric Industry Company 7-12 Toranonron 1-chome, Minato-ku Tokyo, 105 Japan

Phone (03)501-3111 Fax (03) 508-9465

President Nobumitsu Kosugi Chairman Namio Hashinooto

Main Product Areas Telecontununcations Information processing systems Electronic devices Other products

No. of Employees 18,659 (consolidated)

Top Shareholders Yasuda Life 7.8% Meiji Life 6.0% Dai Ichi Life 5.6% Fuji Bank 4.3% Yasuda Trust 3.8% Mitsubishi Trust 3.6% Japan Securities Finance 3.3% Yasuda F&M Insurance 2.4% Sumitomo Trust 2.4%

% Outstanding Stock Foreign-Owned 1.4%

Stock Exchanges Tokyo, Osaka

Ranking (based 16th among Japanese electronics companies on revenue)

STRATEGY

Old's goals for 1989 and accomplishments in 1988 are highlighted in this section

Oki's corporate goals include the following:

Develop products that incorporate advanced communication and information processing capabilities

Develop range of high-speed wide-band switching systems, multimedia multiplexers, and multifunctional terminals for domestic expansion of Integrated Services Digital Network (ISDN)

Develop digital cellular mobile telephones

Enhance capabilities in systems and software engineering to meet fierce competition in information processing area

Expand memory and ASIC IC capabilities and products

Expand R&D facilities in Japan for computer system products, semiconductors, and software

The following developments occurred at Oki during 1988 and early 1989:

Increased procurement overseas

Constructed Miyagi Plant for manufacturing of ultralarge-scale integrated (ULSI) ICs

Established Oki Seatec Company, Ltd, to develop products related to marine resources and oceanographic services

Joined AT&T's UNIX group for software development

Launched superminicomputers

United States

- Began asseiid>Ung electronic autonootive parts at the Adanta, Georgia, plant

- Esmblished two R&D centers for communication and information processing equipment on each coast of the United States, as well as collecting information on new changes in telecommunications standards in the United States

Europe

- Began manuf^turing dot-matrix printers in Scodand for European Market.

- Qeated Old Europe in London to pronK>te {Hinter sales

ORGANIZATION

Figure 1 shows the organization of the Fuyo Group of which Old Electric Industry is a member. The Fuyo group is composed of companies with close financial relationswit h Fuji Bank, Marubeni is the Fuyo group's central trading firm. Figure 2 shows Old's organizational chart

Figure 1

The Fuyo Group Organizational Chart

Katalora Chfldcaiin Two Sugar Rsflrdng Trading Fuye-Kal PInanoe and Insurance Nisshin Rour Oriental Kail Iron Yeast Milling ^ Works Marubeni Corp. Yasuda Trust & Bankbig NIssNn Paper Okano Valve Sapporo Mills Manufacturing Yasuda Mutual Brewarias Marubeni Chemical* Ufa Insurance Shiryo Showa Oenko Yasuda P. & M. NFchlrel Tefltoku insuraioe Corp. Piston rang Showa Nippon OH & Fats Aluminum Kureha Industries Chemical ind. Real Estate & Showa Transportation Okamoto Highpolymw incbistrtes Pulp ft Paper Tokyo Shoko Co. Tatemono Sanyo-Kokusafcu Japan Paper Pulp Showa Line ^ Hinode Klaan Ind. Chlyoda Kelhin Electric Shigyo Petroleum Express Railway Toa Misiilma Toa Nenryo Tobu Railway Electronics Paper Kogyo Fuji Bank Asano State - Electrical & Origin Asahi Cement Machinery Electric Concrete Nihon Cement Works Kubota. Ltd. Nippon Hume Oki Electric Nippon Seiko Pipe Cable Nippon Iron & Steel OH PlARtrift ^ Taiko Etemit Pipe Electric Works Industry DaiicM Nippon Kokan Okaya Yokogawa Cement Electric r Hokushin Industries 1 Electric Tokyo ^ J Rbers & Textiles Shearing Construction Canon Inc. BM Canon Sates Tosliin Steel NIsshIn Spinning (Hitachi, Ltd.) Canon Taisel Corp Japan Casting l^Toho Rayon (Nissan Motor) Electronics Azuma Steel 1 i Intragroup Joint Ventures Taisel Road Construction Fuyo General Development Fuyo Ocean Dev. & Engineering Yuraku Real Fuyo Petroleum Dev. Estate Fuyo Data Processing & Systems Dev. Taisel Prefab ^^i^J Nucleus Trading Firm Fuyo General Lease Construction Fuyo Air Servic e 1 Parent Co. ^a^ s ubs Idlarles or Afflliatesj

Source: Dodwell Marketing Consultanti, 0004S83-1 Industrial Groupings in Japan

Figure 2

Oki Electric bidustry Company, Ltd. Organizadoiral Cliart

Qwwral Administration Group Systems Lab Morlcsting Qroup Rasearch Lab RssMTch and D«vslo(»n«nt Beard of Diractora Group 1 Digital Commurteatlons Lab Cwnputw- Sy«tMT» PrMktont and Chtof ExBcutIv* Offlcm* 1 Semteonductor Technology Lab Talsconvnunlcatlona

Information Syatsnm

Information Products

Elactronlo Daviess

Advanced Products and Systems Group

0004SS3-2 Source: Oki Electric Industry Company, Ltd.

OPERATIONS

Product Segments

Old is divided into three product groups. Examples of products within each category are listed below:

• Telecommunications systems—PBX, telex, central office exchanges, cellular mobUe and push-button telephones, radio equipment, modems, TV converters, optical fiber communications systems, facsimile, local area networks (LANs), IC cards, teleconfer encing systems

• Information processing systems—^PCs, POS terminals, minicomputers, banking, water resource control, intelligent building, disaster-prevention and radar systems, underwater acoustic sensors, printers, word processors, medical electronic systems

• Electronic devices—Semiconductors, printed circuit boards, plasma display panel units, reed relays, and switches

• Other products—Office automation equipment

Product Revenue

One of Old's major customers is NTT. Figure 3 and Table 1 show Oki's revenue by product segment from 1984 through 1988. Old just announced fiscal 1989 revenueo f ¥555.5 billion.

Figures

Product Rev^ue as a Percmtage of Tcrtal Corporate Revenue

Percent 100 I I Oth»r Product* 90 FT^ Sactronlo Devlcaa 80 ^B Information 70 ^_^ Proceasirg ^^"••i Tftlftoonmiunlcatlona 60 « m^ $0- 20- 10 S^M 0 19S4 19S5 1986 1987 1968

0004583-0 Source: Dataqueit Au(iut 1989

Table 1 Sales by Product Segment (BUUonsofYen)

19S4 1985 1986 1987 1988

TeleccHnmunications 76.4 94.1 99.3 112.0 135.1 Information Processing 178.4 203.6 196.7 194.3 202.5 Electronic Devices 74.8 100.0 80.1 84.8 94.7 Other Products JM 19.8 16.5 16.3 19.1 Total 345.4 417.5 392.6 407.4 451.4

Exchange Rate 236 245 221 160 138

Source: Oki Annual Report Dataquest August 1989

Domestic versus International Revenue

Figure 4 shows the year-to-year growth of Old's international and domestic sales for 1984 through 1988. In 1988, domestic sales were ¥336 biUion and international sales were ¥115 billion. Intemational sales have averaged between 25 to 31 percent of total corporate revenue since 1983.

Figure 4

Total Corporate Revenue Growth of International versus Domestic Sales

Percent Growth

Domestic t.."'^-"'i NondomestJc

1984 198S 1986 1S87 1988

0004503-4 Sdurcc: Dataqucsc Auguit 19S9

Growth Rate

Hgure 5 shows Ae year-to-year growth rates by product segment revenue. Following this figure is a list of factors explaining the changes in 1988 i»txiuct growth. Telec(nnmunications products have shown the strongest grow^ of all products since 1986.

Figures

Growth Rates by Product Segment (Yen-Based)

Growth Rate 65

1SS4 1985 1986 1387 1988 Fiscal Year 00O4fia3-5 Soimc: Dataquiit AU|uii 1989

Main Factors Affecting 1988 Growth

The major factors affecting Old's growth in 1988 are listed below by product segment.

• Telecommunicadons systems

- Domestic sales of digital telecommunications systems were up, due to demand from companies preparing for ISDN

- Sales of equipment increased in China, Honduras, India, and Southeast Asian nations

- Old won a contract with leading U.K. teleconomunications equipment company to export systems to the United Kingdom

- Sales of facsimile transceivers, compact cellularphones, and building management systems were strong

• Information processing systems

- Sales increased as financial institutions upgraded equipment in anticipation of further deregulation of domestic markets

- Demand for 16- and 32-bit PCs increased worldwide, boosting both Oki' s PC and printer lines

- Sales of Oki's dot-matrix printers slowed because of the increased demand for laser printers, which Old just introduced

• Electronic devices

- Sales increased because of an upturn in the PC market and greater use of ICs in other equipment

- Demand for DRAMs was higher than expected

- Sales of graphic plasma displays increased as PC market expanded

- Sales of reed switches used in automobiles and optical diodes for digital switching systems increased

CAPITAL AND R&D INVESTMENTS

Oki has its Central Research Laboratory for genmd research, die Systems Research lab for basic R&D, and the Digital Communication Lab fOT telecommunicadon and digital signal process ing R&D. Also, there are two semiconductor labs mi R&D labs within each product group.

Oki's capital and R&D spending in 1988 decreased to 10.6 percent as a percentage of total revenue. However, actual spending increased 16.4 pocent over 1987. Figure 6 and Table 2 show R&D and capital spending as a percentage of total corpcHate revenue.

Figure 6

Capital and R&D Spending as Percent of Total Corporate Revenue

Percent

20 Capttai Spending R&D Spending

ts-

to-

1963 19S4 19B5 1966 1987 1388

0004583-6 Source: Dataqu«*t Auguit 19S9

Table 2

Capital and R&D spending (Billions of Yen, Millions of Dollars)

1983 1984 1985 1986 1987 1988

Corporate Revalue ¥ 280 ¥ 345 ¥ 418 ¥ 393 ¥ 407 ¥ 451 $1,165 $1,462 $1,704 $2,243 $2,595 $3,268

Coital Spending ¥ 28 ¥ 38 ¥ 68 ¥ 35 ¥ 23 ¥ 25 $ 117 $ 161 $ 278 $ 200 $ 146 $ 181 % Total Revenue 10.0% 11.0% 16.3% 8.9% 5.6% 5.5%

R&O Spading ¥ 12 ¥ 15 ¥ 17 ¥ 16 ¥ 18 ¥ 23 $ 48 $ 64 $ 69 $ 91 $ 115 $ 167 % Total Revenue 4.1% 4.4% 4.1% 4.1% 4.4% 5.1%

Total Spending ¥ 40 ¥ 53 ¥ 85 ¥ 51 ¥ 41 ¥ 48 $ 165 $ 225 $ 347 $ 291 $ 261 $ 348 % Total Revenue 14.1% 15.4% 20.4% 3.0% 10.1% 10.6%

Exchange Rate (Yen Per US$1) 240 236 245 175 157 138

Source: Oki Annual Reports Dataquest August 1989

Target R&D Areas

Old operates a research facility at its HacMoji plant and has an R&D group dut coordinates the acdvitks of the digital communicadons and semiccmductor technoloigies labs.

• Telecommunciadons systems

~ Advanced digital switching and transmission equipn^nt

- Multiplexers utilizing GaAs LSI optical communications

• Information processing systems

- Fifth-Generation Computer Project

- Artificial intelligence Japanese-English translation system

- Color video teleconforendng system

- Voice-band and image signal compression t^hnologies

- Superminicomputers for distributed processing

• Electronic devices

- High-speed-logic and three-dimensional ICs

- Optical and electronic IC devices

16Mb DRAMs

- Artificial intelligence components for expert systems

• Other products

- Operation-specific robots

FACILmES

Table 3 shows the distribution of Old's domestic and foreign facilities.

Table 3

Oki Electric Industry Facilities

f^"""trv Facilities Isss. Japan 58 Sales offices 11 Manufacturing plants 6 R&D labs

Ovoseas 3 Manufacturing Atlanta, Georgia, USA Cellular telephones Glasgow, Scotland Printras Siuinyvale, California, USA (planned) Semiconductors

10 Sales offices 11 Sales companies (subsidiaries) 1 Financial subsidiary

Source: Dataquest August 1989

SUMMARY

The purpose of this section is to i^ovide a one-page overview of the ccvporation's semiconduc tor activity. Old Electric Industry uses Old Semic(Hiduct<^, a subsidiary of Oki America, for semiconductor sales and engineering in the Uiuted Suites.

Address Hachioji W<»ks Old Semiconductt)r Group Inc 550-1, Higashiasaka-cfao 785 North Mary Ave. Hachioji-City, Tokyo Sunnyvale, CA 664 Japan 94086-2909

Phone (0426)63-1111 (408) 720-1900

Management MasaoNogami Executive Vice President and Genaal Manager Electronic Devices Group

Yoji Tanaka Director General Manager Marketing Division Semiconductor and Electronic Devices Group

Main MOS memoiy MOS microcomponents Products MOS logic Bipolar digital Gallium arsenide ASIC Optoelectronic Analog

Ranking 11th among Japanese semiconductor manufacturers 16th among worldwide semiconductor manufacturers

STRATEGY

Listed below are some of Oki's accomplishments in the semiconductor area during 1988 and early 1989 and future objectives. This includes new product announcements. The information is divided into product categories for clarity.

Overall

• En^hasize DRAM development to drive technology for all product lines

• Promote Oki as a complete solution for system designers-ICs, ASICs, packaging, boards

• Develop semiconductor technology fix>mVLS I to ULSI

• Advance GaAs technology for mass production

• Develop BiCMOS technology in order to improve submicron geometries

• Increase 256K SRAM sales for merchant market (previously, 256K SRAMs were used internally)

• Build a semiconductor fab in Oregon by 1990, according to recent press announcements

Memory

• Will begin volume production of 4Mb DRAMs at Miyagi Factory by the end of 1989

• Started 1Mb DRAM production at new Miyagi Factory

• Developed gate oxide film, less than lOnm thick, for use in 64Mb DRAMs

Microcomponents

• Introduced software simulation package exclusively for DSP devices

Logic

Expanded ASIC i»oduct line by adding 12 nsicton gate arrays and standard cells

Introduced 11 gate arrays with 1(X),(XX) gates each

Annotmced ASIC design centen in Japan and the United States (There will be two new centers in &e United States: one in Detroit, Michigan, to work with the auK}motive market and one in Sunnyvale, California to work widi Silicon Valley companies.)

ORGANIZATION

Figure 7 shows Oki Electric Industry Company, L^.'s electronic devices group organizational chart

Figure?

Oki Electric Industry Company, Ltd. Electric Devices Group Organizational Chart

Bustnass Ptanning D«partmsnt

Adminlatratlon Department

Aceoundlng Department

Quality Assurance Department

Marketing Group

IC Application Business Promotion Center Electronic Devicss Group Production Group t Production Technology Center VLSI Oevelopment Center

Memory LSI Group

Logic LSI Group

Process Technology Center

LSI Rant

Electric Devices Group

0004683-7 Source: Oki Electric Induiity

OPERATIONS

Note: Exchange rates used in the semiconductOT section of this profile are based on the calendar year avoage.

Product Segments

• Memory devices—CMOS and NMOS SRAMs, DRAMs, mask ROMs, EEPROMs, EPROMs

• Microdevices—-MPU, MCU, peripherals, DSP, IRON MPU

• Bipolar digital

• Discrete—^LED

• Logic devices—^ASICs, gate arrays, standard cells

• Analog—Voice synthesis and recognition ICs, LCD, LED, telecom LSI

• Optoelectronics—CCDs, optical memories

Product Revenue

Figure 8 shows Old's percentage of semiconductor revenue by product. For example, 93.2 percent of Old'sic revenue came fromMO S technology in 1988 andof this, 42.2 percent of revenue came from MOS logic devices.

Figures

1988 Estimated Semiconductor Revenue Percent by Product (Millions of Dollars)

Analog Discrete 2.5% 1.0%

0004583-8 Source: Dataqueit Augiut 1989

Regional Sales

Old's 1988 estimated percentage of semiconductor revenueby region is shown in Table 4.

Table 4

1988 Estunated Semiccmdu^or Revenue by Region Perc»it by Region (Millions of Dollars)

£Q2ilU£l States Jgpan Europe ^M Semiomductor 30% 56% 6% 8% IC 32% 54% 6% 8% B^lar Digi^ 0 0 0 0 MOS (Technotogy) 34% 50% 7% 9% MOS Memory 52% 31% 11% 6% MOSN&io 13% 52% 12% 22% MOS Logic 23% 69% 1% 7% Analog 0 100% 0 0 Discrete 0 100% 0 0 Optoel»:tionics 0 94% 3% 3%

Exchange Rate (Yen per US$1) 130

Source: Dataquest August 1989

Growth Rate

Oki's growth rate by product line is shown in the table and figure that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 9 graphically compares Oki's growth rate in the world market to the growth rate of the world market itself. (This information is then provided for the Japanese market as welL)

Worldwide Market Growth Rate

In 1988, Oki's sales of MOS memory ICs grew 82.9 percent, just under the world market growth rate for MOS memory devices. Overall, the company grew faster than the world market in discrete, optoelectronic devices, and bipolar digital.

Table 5

Oki Sales in World Market (Millions of Dollars)

World Market mi i2sa % Ctmnse % Chanee Semiconductor $651 $947 45^% 31.9% IC $619 $902 45.7% 36J% Bipolar Digital 32 38 18.8% 92% MOS (Technology) 566 841 48.6% 53.1% MOS Memray 193 353 82.9% 90.3% MOS Micro 101 134 32.7% 9.8% MOS Logic 272 354 30.1% 28.2% Analog 21 23 9.5% 15.3% Disoete $ 7 $ 9 28.6% 132% Optoelectronics $ 25 $ 36 44.0% 25.4%

Exchange rate (Yen per US$1) 144 130

Source: Dataquest August 1989

Figure 9

Oki Growth Rate Compared with World Market

Growth Rate

Semiconductor iC Blpolar MOS Memory Micro Logic Analog Discrete Opto Product 0004S83-9 Source: Oatsquest August 1989

Japan&e Market Growth Rate

Old grew much faster tlun the Japiuiese market in the discrete andMOS memory and bipolar digital categories (see Table 6 and Figure 10).

Table 6

Oki Sales in Japanese Market (Millions of Dollars)

1987 1988% Oiange %Qm^ SemiconductCK' $379 $527 39.1% 35.6% IC $348 $484 39.1% 39.1% Bqwlar Digital 29 37 27.6% 18.3% MOS (Technology) 298 424 42.3% 58.4% MOS MemOTy 48 110 129.2% 85.4% MOS Micro 57 70 22.8% 35.9% MOS Logic 193 244 26.4% 50.3% Analog 21 23 9.5% 11.7% Discrete $ 7 $ 9 28.6% 18.5% Optoelectronics $ 24 $ 34 41.7% 42.3%

Exchange Ktte (Yen per US$1) 144 130

Source: Dataquest August 1989

Figure 10

Oki's Growth Rate Compared with Japanese Market

Growth Rate 140

120

IflO-

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004583-10 Source: Dataquest August 1989

Other Japanese Companies

The growth rate by product line for Oki is compared with that of the Japanese companies tracked by Dataquest in Figures 11 and 12. Dataquest surveys a total of 18 companies plus a category called "Other". The total of these companies' revenue were used for comparison in the following figures.

Figure 11

Oki versus Japanese Companies in Japanese Market

Growth Rate 140

Samkionductor IC BIpdar MOS Mamory NOGTO Ijoglto Analog Discrete Opto Product 0OCI46S3-11 Source: Dataquest August 1989 Figure 12

Oki versus Japanese Companies in World Market Growth Rate 100- 90 ^B Japanese Companies ES3 OW 8Q-j 70 BO- SO- 40- 30.

20- 10- 0 Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004583-12 Source: Dataquest August 19S9

Channels of Distribution

Oki has two maj<»: semiconductor distributors in Japan: Nihon D^iso Industry Company, Ltd. and Ashitate Electric. Dataquest believes that more than 40 percent of Old's Japanese semiconduc tor sales are made through distribution. In the United States, sales are made mainly through Old Semiconduaor Group. In July 1988, Oki contracted Marshall Industries, a distributor in the United States and Canada, to sell its CMOS IC line. Approximately 17 percent of Old's semiconductor sales are captive.

CAPITAL SPENDING

Semiconductor capital investments as a percentage of total revenue are shown in Table 7 and Table 8. Spending has increased since 1986, when Oki stated that it would be emphasizing semi conductor R&D. The Company has two semiconductor R&D labs—^the Semiconductor Technology Lab, which currentiy is working on 16Mb DRAMs, and the Compound Semiconductor Devices Center, which does work on all semiconductor devices. R&D is also done within the product groups.

Table 7

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Millions of Dollars

1983 1984 1985 1986 1987 1988

Revenue $227 $361 $308 $426 $651 $946

Semiconductor Capital Spending $ 46 $110 $109 $ 60 $174 $285 •

Growth Rate of Capital Spending N/A 136% 0.4% 46% 192% 64%

Percent of Revenue 20% 30% 36% 14% 27% 30%

Exchange Rate (Yen per US$1) 237 237 238 168 144 130

N/A = Not Available

Source: Dataquest August 1989

Table 8

Estimated Semiconductor Cai^tal Spending Compared with Total Revenue Calradar Year—Billions of Yen 1983 m&. m^ 1986 1987 1988 Rev«n» 54 86 73 72 94 123

SeiniconA]cU)r Coital Spending 11 26 26 10 25 37

Capital Spalding Growth Rate N/A 136% 0 62% 150% 48%

Exchange Rate (Yen per US$1) 237 237 238 168 144 130

N/A » Not Available

Source: Dataquest August 1989

FACILmES

Old currently has three semiconductor manufacturing facilities. It has announced plans to construct a facility in Oregon by 1990, which will manufacture ASICs andDRAMs. The company's facilities are listed in Table 9.

Table 9

Oki Electric Industry Company, Ltd. Semiconductor Facilities

Namg/Lwation EuQCiiQii

MiyagiOki Fab Miyagi Gate anays, DRAMs

MiyazaldOki Fab test Miyazaki DRAM, SRAM, MPU, gate array. EEPROM

Hachioji Factoy Fab, assembly, test Tokyo BiCMOS, bipolar, MOS

Oki Semiconductor Tualatin, (>egon Fab, assembly, test (expected to begin production 4/90) Memory, ASIC

Chichibu Factory Assembly, test Tokyo ICs and discrete

VLSI Pilot Production Plant R&D, test Tokyo MOS ICs

Honjyo Factory Assembly, test Saitama Linear

Yoshikawa Semiconductor Assembly, test Miyazaki ICs

Source: Dataquest August 1989

ALLIANCES AND AGREEMENTS

Oki's alliances and agreements from 1986 to 1988 are summarized in Figure 13. For more in depth information, please refer to Volume n of the Japanese Semiconductor Industry Service behind the tab entitied Strategic Alliances.

Figure 13

Oki Electric Indu^iy Compsuiy, Ltd. Semiconthictor Alliances and Agreem^its 1986 to 1988

0004583-13 Source: Dataquest August 1989

(Page intentionally left blank)

REVENUE SUMMARY

Tables lOmuill ^ow Old's semiconductorievenueindetml. The tables show sales from 1983 xo 1988 in both billions of yen and millions of dollars.

Table 10

Oki Electric Industry Company, Ltd. Estimated World^de Semiconductor Revenue (BilUonsofYen) mi 1982 1983 im. 1985 1986 12SI 1988* Total Semiconductra 21.6 31.9 53.9 85.6 73.2 71.5 93.7 123.0

Total IC 19.4 29.9 50.9 81.2 68.9 67.5 89.1 117.1

Bipolar Digital (Technology) 2.0 3.5 4.0 5.8 5.3 3.2 4.5 4.94

MOS (Technology) 17.0 26.2 46.4 74.7 62.9 62.0 81.6 109.3 NMOS 6.6 10.4 18.4 33.6 26.2 22.9 28.7 39.5 PMOS 1.1 1.2 12 0.2 0 0 0 0 CMOS 9.3 14.6 26.8 40.9 36.7 39.1 52.9 69.8 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 17.0 26.2 46.4 74.7 62.9 62.0 81.6 109.3 MOS Memory 6.9 14.5 23.7 35.3 21.7 15.1 27.9 45.9 MOS Micro Devices 0.4 1.5 4.5 10.9 10.7 11.3 14.5 17.4 MOS Logic 9.7 10.2 18.2 28.5 30.5 35.6 39.2 46.0

Analog 0.4 0.2 0.5 0.7 0-.7 2.3 3.0 2.8

Total Discrete 1.1 1.0 0.7 0.9 1.0 1.0 1.0 1.2

Transistor 1.1 1.0 0.2 0 0 0 0 0 Diode 0 0 0 0 0 0 0 0 TTiyristor 0 0 0 0 0 0 0 0 Other Discrete 0 0 0.5 0.9 1.0 1.0 1.0 1.2

Total Optoelectronic 1.1 1.0 23 3.5 3.3 3.0 3.6 4.7

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

* Preliminary estimates for 1988

Source : Dataquest August 1989

Table 11

Oki Electric Industry Company, Ltd. Estimated Woridwide Semiconductor Revenue (Millions of Dollars)

1981 1982 1983 1984 1985 1986 1987 mr Total Semicoiductor 98 128 227 361 308 426 651 946

Total IC 88 120 215 343 289 402 619 900

Bipokff Digital CTechnology) 9 14 17 25 22 19 31 38

MOS (Technology) 77 105 196 315 264 369 567 841 NMOS 30 42 78 142 110 137 199 304 PMOS 5 5 5 1 0 0 0 0 CMOS 42 59 113 173 154 233 367 537 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 77 105 196 315 264 369 567 841 MOS Memcay 31 58 100 149 91 90 194 353 MOS Micro Devices 2 6 19 46 45 67 101 134 MOS Logic 44 41 77 120 128 212 272 354

Analog 2 1 2 3 3 14 21 22

Total Discrete 5 4 3 4 4 6 7 9

Transistor 5 4 1 0 0 0 0 0 Diode 0 0 0 0 0 0 0 0 Thyristor 0 0 0 0 0 0 0 0 Other Discrete 0 0 2 4 4 6 7 9

Total Optoelectronic 5 4 10 15 14 18 25 36

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

Preliminary estimates for 1988

Source: Dataquest August 1989

BALANCE SHEETS

Tables 12 and 13 show Old's ccoporate consolidated balance sheet for 1984 to 1988 in yen and U.S. doUars, respectively.

Table 12

Consolidated Balance Sheet Fiscal Years 1984 • 1988 (BUlionsofYen)

Baiatux Sheet (March 31) 19S4 19R5 im. mi im Total Cuirent Assets ¥234 ¥275 ¥279 ¥337 ¥348 Cash ¥ 63 ¥ 63 ¥ 71 ¥100 ¥115 Receivables ¥ 84 ¥ 95 ¥104 ¥125 ¥119 Invoitory ¥ 84 ¥113 ¥ 99 ¥106 ¥109 Other Cuirent Assets ¥ 4 ¥ 5 ¥ 5 ¥ 6 ¥ 5 Net Pr(q)erty, Plant, and Equipment ¥ 78 ¥114 ¥111 ¥105 ¥105 Deineciation ¥ 85 ¥109 ¥140 ¥162 ¥178 Other Assets ¥ 29 ¥ 33 ¥ 42 ¥ 50 ¥ 59

Total Assets ¥341 ¥422 ¥432 ¥491 ¥513

Total Current Liabilities ¥214 ¥235 ¥217 ¥267 ¥295 Long-Term Debt ¥ 62 ¥110 ¥121 ¥115 ¥ 99 Other Liabilities ¥ 1 ¥ 1 ¥ 6 ¥ 6 ¥ 0

Total Liabilities ¥277 ¥347 ¥344 ¥388 ¥394

Total Shareholders' Equity ¥ 64 ¥ 75 ¥ 88 ¥103 ¥119 Common Stock ¥ 26 ¥ 28 ¥ 32 ¥ 38 ¥ 44 Other Equity ¥ 25 ¥ 30 ¥ 46 ¥ 52 ¥ 58 Retained Esumings ¥ 12 ¥ 18 ¥ 10 ¥ 13 ¥ 18

Total Liability and Total Equity ¥341 ¥422 ¥432 ¥491 ¥513

(Continued)

Table 12 (Continued)

Consolidated Balance Sheet Fiscal Years 1984.1988 (Billions of Yen)

Income Statement (Match 31) 1984 1985 1986 1987 1988

Revenue ¥345 ¥418 ¥393 ¥407 ¥451 Domestic Sales ¥244 ¥288 ¥291 ¥307 ¥336 Overseas Sales ¥102 ¥130 ¥102 ¥100 ¥115 Other income ¥ 0 ¥ 0 ¥ 0 ¥ 0 ¥ 0 Cost of Sales ¥243 ¥296 ¥294 ¥315 ¥332 Gross Margin (%) 30 29 25 23 27 R&D Expense ¥ 15 ¥ 17 ¥ 16 ¥ 18 ¥ 23 SG&A Expense ¥ 59 ¥ 74 ¥ 70 ¥ 71 ¥ 75 Other Opoating Expenses ¥ 3 ¥ 3 ¥ 1 (¥ 9) ¥ 3 Total Operating Expenses ¥320 ¥389 ¥381 ¥395 ¥433 Operating Income (^oss) ¥ 26 ¥ 29 ¥ 12 ¥ 13 ¥ 18 Interest, Net (¥ 8) (¥ 8) (¥ 9) (¥ 9) (¥ 8) Pretax Income ¥ 18 ¥ 20 ¥ 2 ¥ 4 ¥ 10 Provision for Taxes (Credit) ¥ 9 ¥ 11 ¥ 3 ¥ 2 ¥ 8 Effective Tax Rate (%) 48 54 41 43 73 Extraordinary Items 0 0 0 0 1 Net Income ¥ 9 ¥ 9 (¥ 1) ¥ 2 ¥ 3

Avg. Shares Outstanding (Millions) 427 454 470 491 510 Employees 17,027 18,134 18,649 19,375 18,659 Capital Spending ¥ 38 ¥ 68 ¥ 35 ¥ 23 ¥ 25

Exchange Rate (Yen per US$1) 236 245 221 160 138

Source: Dataquest August 1989

Table 13

Consolidated Balance Sheet Fiscal Years 1984.1988 (Millions of Dollars)

Balance Slraet (March 31) 1984 12SS 1986 I2S1 im Total Ciorent Assets $ 990 $1,122 $1,263 $2,103 $2,525 Cash $ 265 $ 256 $ 323 $ 623 $ 835 Receiv^les $ 357 $ 388 $ 471 $ 779 $ 862 Inventt»7 $ 354 $ 460 $ 447 $ 665 $ 792 Otfier Current Assets $ 15 $ 18 $ 23 $ 37 $ 36 Net Ptopertf, Plant, & Equipment $ 330 $ 464 $ 502 $ 654 $ 762 Depredaticm $ 358 $ 445 $ 631 $ 1,013 $1,287 Otter Assets $ 123 $ 136 $ 189 $ 313 $ 429

Total Assets $1,443 $ 1.722 $1,954 $ 3,070 $ 3,716

Total Current Liabilities $2,066 $ 2,423 $2,908 $4,706 $ 5.838 Long-Term Debt $ 264 $ 450 $ 546 $ 721 $ 715 Other Liabilities $ 5 $ 6 $ 26 $ 36 S 1

Total Liabilities $ 1,173 $ 1,415 $ 1,556 $ 2,425 S 2,855

Total Shareholders' Equity $ 271 $ 308 S 399 $ 644 S 823 Common Stock $ 111 $ 114 $ 146 $ 239 S 278 Other Equity $ 107 $ 122 $ 207 S 327 $ 417 Retained Earnings $ 53 $ 72 $ 47 $ 78 S 128

Total Liability and Total Equity $1,444 $1,722 $1,955 $3,069 $3,678

(Continued)

Table 13 (Continued)

Consolidated Balance Sheet Fiscal Years 1984 • 1988 (Millions of Dollars)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue $1,464 $1,704 $1,776 $2,546 $3,270 Domestic Sales $ 1.033 $ 1.173 $U15 $1,921 $ 2,435 Ovo'seas Sales $ 431 $ 531 $ 462 $ 625 $ 836 Other income 0 0 0 0 0 Cost of Sales $ 1.031 $1,208 $U30 $ 1,971 $2,403 Gross Margin (%) 30 29 25 23 27 R&D Expense $ 62 $ 68 $ 73 $ 109 $ 168 SG&A Expense $ 250 $ 301 $ 317 $ 444 $ 543 Oth» Opiating Expenses $ 13 $ 10 $ 4 ($ 58) $ 24 Total Operating Expenses $1,293 $1,520 $ 1,651 $2357 $ 2.970 Operating Income O^oss) $ 170 $ 184 $ 126 $ 189 $ 301 Interest, Net ($ 32) ($ 33) ($ 43) ($ 55) ($ 57) Pretax Income $ 139 $ 151 $ 83 $ 134 $ 243 Provision for Taxes (Credit) $ 37 $ 45 $ 14 S 11 S 55 Effective Tax Rate (%) 27 30 17 8 23 Extraordinary Items 0 $ 1 0 $ 1 S 4 Net Income $ 101 $ 105 S 69 $ 123 S 193

Avg. Shares Outstanding (Millions) 427 454 470 491 510 Employees 17,027 18,134 18,649 19,375 18,659 Capital Spending $ 159 $ 276 $ 157 $ 144 $ 181

Exchange Rate (Yen pCT US$1) 236 245 221 160 138

Source: Dataquest August 1989

36 © 1989 Dataquest Incorporated August JSIS Volume III 0004583 o s. Ricoh Company, LtdiNFORMATioN RESOURCE CENTER ^ . DATAQUEST INCORPORATED L^OrpOrate 1290 Ridder park Drive Sa(408n )Jose 437-860, CA0 95131-2398 SUMMARY

The purpose of this section is to provide a one page overview of the corporation.

Address 15-5 Minami-Aoyama 1-chome, Minato-ku Tokyo 107, Japan

Phone (03)479-3111 Fax (03)403-1578

President Hiroshi Hamada

Main Product Areas Copiers and related equipment Facsimile equipment Data processing systems Other products

No. of Employees 30,500

Top Shareholders Nippon Life Insurance 5.8% Sumitomo Trust 4.6% Mitsubishi Trust 4.1% Asahi Life Insurance 3.4% Fuji Bank 2.9% Tokai Bank 2.9% Toho Life Ins. 2.8% Mitsubishi Bank 2.9% Mitsui Trust 2.7% Koa F«S:M Insurance 2.7%

% Outstanding Stock Foreign-Owned 9.9%

Stock Exchanges All major Japanese, Amsterdam, Frankfurt, Paris

Ranking (based Leader among world office automation equipment makers on revenue) 15th among Japanese electronics companies

STRATEGY

Ricoh's goals for 1989 and accomplishments in 1988 are highlighted in this section.

Ricoh's corporate goals include the following:

Globalize production (This is the top priority for the company. In 1989, it plans to add a production facility in Georgia.)

Diversify the product base; specifically, increase exports of facsimiles, laser printers, and cameras and domestic sales of PCs

Increase responsibility and independence of Ricoh subsidiaries in the United States and the United Kingdom

Strengthen commitment to quality

Accelerate product development; specifically, digital image processors and color copiers

The following developments occurred at Ricoh during 1988:

Jointly developed erasable magnetic optical disk drive with Olympus Optical Company, Ltd. (Previously, Ricoh had an OEM agreement with Maxtor Corporation)

Developed electronic filing system with fax-sending capability, 50Mb removable cartridge Winchester disk drive, and optical disk library unit for storage and retrieval of data on Local Area Networks (LANs) and data bases

Introduced three new laser printers, a desktop image scanner, and IMAGIO, a digital image processor

Developed first still color TV telephone, automatic text-to-speeth system capable of reading Japanese in near-natural voice, and high-speed copier capable of 100 copies per minute

Developed STARLAN system with AT«&T and expect it to become the industry standard for Japanese PCs

Added printed circuit board plant in Tottori, Japan and upgraded plants in the United States and United Kingdom

© 1989 Dataquest Incorporated August JSIS Volume III 0004703 Pirnh rnmnnnv T fH^^O^MATlON RESOURCE CENTER ivicuii v.uuip«tii^, ^''"DAT.AQUEST INCORPORATED CorDorate ^n^^^ ^Jose "^^^^"^^, CA 95131-239 8^'^'^' ^ ^^^"^'^ (408) 437-8600 ORGANIZATION

Ricoh is not a member of any larger industrial group. However, in 1982, it joined a smaller industrial group, the Tokai group. The Company is organized along product and regional lines, with centralized North America, and European manufacturing and marketing organizations. At the time of this update, no organizational charts were available for Ricoh.

OPERATIONS

Product Segments

Ricoh is divided into four product groups. Examples of products within each category are listed below.

• Copiers and related supplies—Copiers, electronic filing systems

• Facsimile equipment—Equipment, photosensitive paper

• Data processing systems—PCs, laptops, LAN, laser printers

• Other products—Cameras, camera lenses, electronic components and devices, measur ing instruments

Product Revenue

Figure 1 and Table 1 show Ricoh's revenue by product segment from 1984 through 1988.

Figure 1

Product Revenue as a Percentage of Total Corporate Revenue

Percentage 100- 90' I 1 other Products r^ Data Processing 80- W^ Pacsimile 70- r'^'l Copiers 60

50 \. \ xV 40 30 ^^ 20 10 ft^

1983 19B1 1985 1986 1987 1988

0004703-1 Source: Dataquest August 1989

Table 1

Sales by Product Segment (Billions of Yen) 1983 1984 mi 1986 1987 1988

Copiers ¥263 ¥318 ¥340 ¥360 ¥344 ¥374 Facsimile 40 55 72 86 84 103 Data Processing 43 53 61 74 86 110 Other Products 44 46 72 74 78 87

Total ¥390 ¥472 ¥545 ¥594 ¥592 ¥674

Exchange Rate (Yen per US$1) 249 236 245 221 160 138

Source: Ricoh Annual Report Dataquest August 1989

Dataqu{;s t Incorporated August JSIS Volume III 0004703 jNFORMATION RESOURCE CENTEFi Ricoh Company, Ltd^^^^^^jcoRPORATED San Jose, CA 95131-2398 Corporate (408) 437-8600

Domestic versus International Revenue

Figure 2 shows the year-to-year growth of Ricoh's international and domestic sales for 1984 through 1989. In 1988, domestic sales were ¥419 billion and international sales were ¥255 billion. International sales have averaged 37 percent of total corporate revenue since 1983.

Figure 2

Total Corporate Revenue Growth of International versus Domestic Sales

Percent Growth

35 Domestic i\y^ Internationa]

25- W^ =^. r, ' •

15- 'SSs ^^ SJ m -16 1984 1985 1966 1987 1388

0004703-2 Source; Dauquett Auguit 1<)S9

Growth Rate

Figure 3 shows the year-to-year growth rates of product segment revenue. Following this figure is a list of factors explaining the changes in 1988 product growth.

Figure 3

Growth Rates by Product Segment (Yen-Based)

Growth Rate 60

1984 19B5 1986 1987 1988 Fiscal Year 0004703-3 Source; Dtiaquciv August 1989

© 1989 Dataquest Incorporated August JSIS Volume III 0004703 , INFORMATION RESOURCE CENTE Ricoh Company, Ltd. DATAQUEST INCORPGRATED '^ *" 1290 Ridder Park Drive Corporate SanJose(408) 437-860, CA0 95131-2398

Main Factors Affecting 1988 Growth

The major factors affecting Ricoh's growth in 1988 are listed below by product segment.

• Copiers and related supplies

Demand for advanced, multifunction copiers, such as IMAGIO, the digitized copier, increased, but demand for lower-end models declined.

- Overseas demand was hurt by the strong yen and trade firiction, but new product in troductions overseas boosted overall market shares.

- Sales for electronic filing systems were small in scale, but experienced strong growth rates.

• Facsimile equipment

- Demand overseas exceeded domestic demand for the first time, growing 60.6 percent over 1987.

Demand for lower-end models within the Japanese market caused higher unit sales, but lower revenue

- Introductions of new products and increased overseas production boosted sales.

• Data processing

- Sales were up due to strong domestic PC sales and overseas printer sales.

• Other products

- Camera sales were hurt by weak domestic demand and a strong yen.

- Overseas sales of electronic devices were hurt by the strong yen and trade friction, while domestic demand was healthy.

- Unit sales of optical disk drives increased, making Ricoh Japan's number one supplier in 1988.

CAPITAL AND R&D INVESTMENTS

The Research and Development Center is at the core of Ricoh's R&D organization. Seven affiliated labs support this center. Ricoh's total R&D andcapital spending grew 27.4percentin 1988. Figure 4 and Table 2 show R&D and capital spending as a percentage of total corporate revenue.

Figure 4

Capital and R&D Spending as Percent of Total Corporate Revenue

Percentage 16-

Capital Spending 14 I' I R&D Spending 12-

10-

A- <

0004703-4 Source: DftliqtiEi! Augutt 19S9

% © 1989 Dataquest Incorporated August JSIS Volume III 0004703 Ricoh Company, Ltd/fi^jo^^^^^ CENTEI *^ •^' DATAQUES1290 Ridder ParTk DrivINCORPORATEe D -San Jose, CA 95131-2398 Corporate (408) 437-8600 Table 2

Capital and R&D Spending (Billions of Yen, Millions of Dollars)

1984 1985 12M 1988

Corporate Revenue ¥ 472 ¥ 545 ¥ 594 ¥ 593 ¥ 674 $2,000 $2,224 $2,688 $3,706 $4,884

Capital Spending ¥ 31 ¥ 50 ¥ 48 ¥ 25 ¥ 36 $ 131 $ 204 $ 217 $ 156 $ 261 % Total Revenue 6.6% 9.2% 8.1% 4.2% 5.3%

R&D Spending ¥ 23 ¥ 29 ¥ 36 ¥ 37 ¥ 43 S 97 $ 118 $ 163 $ 231 $ 312 % Total Revenue 4.9% 5.3% 6.1% 6.2% 6.4%

Total Spending ¥ 54 ¥ 79 ¥ 84 ¥ 62 ¥ 79 $ 229 $ 322 $ 380 $ 388 $ 572 % Total Revenue 11.4% 14.5% 14.1% 10.5% 11.7%

Exchange Rate (Yen per USSl) 236 245 221 160 138

Source: Ricoh Annual Reports Dataquest August 1989

Target R&D Areas

Ricoh has focused on the following areas for R&D in the near future:

ASIC ICs for computer-aided design applications

Optical memory disks and ultracompact optical disk drives

Artificial intelligence

Imagery and production technology

Software

FACILITIES

Table 3 shows the distribution of Ricoh's domestic and foreign manufacturing facilities. Ricoh is planning to construct a facility in Georgia for copiers. Of all United States made copiers, 20 percent are exported to Japan.

Table 3

Ricoh Company, Ltd. Corporate Manufacturing Facilities

Coamx Facilities TYP?

6 Manufacture all products 14 Sales Japan 8 R&D

Manufacture New Jersey, United States Facsimile equipment Overseas France Copiers Taiwan Photographic equipment United Kingdom Copiers, facsimile California, United States Copiers, facsimile

Sales

Source: Dataquest August 1989

10 © 1989 Dataquest Incorporated August JSIS Volume in 0004703 -— —— iixr^^niviAHUlINFORMATION RESOUPCKhbUUPCIH^ CHNTCE E Ricoh Company, Ltd. DATAQUEST INCORPCHATED SemiconductoJ-, . J r Sa129n0 Jose Ridde, Cr APar 95131-239k Drive-; 8 (408) 437-8600 SUMMARY

The purpose of this section is to provide a one-page overview of the corporation's semiconduc tor activity.

Address Ricoh Company, Ltd. Electronic Devices Group Ikeda Works 13-1 Himemuro-cho Ikeda, Osaka 563 Japan

Phone (0727)53-1111

Main Product Areas Nonvolatile MOS memory MOS ASIC logic MOS microcomponents

Ranking (based 23rd among Japanese semiconductor manufacturers on revenue) 66th among worldwide semiconductor manufacturers

STRATEGY

Listed below are some of Ricoh's accomplishments and goals during 1988 and goals for 1989. Ricoh sells ASIC devices.

Overall Goals

• Promote closer relationships with customers by adding design centers and strengthening marketing operations

• Emphasize development of programmable logic devices and structured cells for captive and merchant use

• Develop a range of advanced devices for computer-aided design applications

• Develop ASIC devices for modem applications to sell externally

Developments

• Established development centers in Tokyo and San Jose, California, for ASIC products

ORGANIZATION

At the time of this company profile update, no organizational chart was available for Ricoh's semiconductor operations.

OPERATIONS

Note: Exchange rates used in the semiconductor section of this profile are based on the calendar year.

12 © 1989 Dataquest Incorporated August JSIS Volume III 0004703 -^, r-p; J INFORMATION RESOURCE CENTF Ricoh Company, Ltd. DATAQUEST INCORPORATED O • J X ^290 Ridder Park Drive iSemicondiictor san jose. CA 951312398 (408) 437-8600 Product Segments • MOS memory—ROMs

• MOS microdevices—Microperipherals

• MOS ASIC logic—Gate arrays, cell-based ICs, electrically programmable logic (EPL)

Product Revenue

Figure 5 shows Ricoh's percentage of semiconductor revenue by product. Currently, Ricoh only makes MOS ICs, of which 29.3 percent are MOS memory.

Figure 5

1988 Estimated Semiconductor Revenue Percentage by Product (Millions of Dollars)

0004703-5 Source: Dataquest Auguit 1989

Regional Sales

Ricoh's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4

1988 Estimated Semiconductor Revenue Percent by Region (Billions of Yen)

United Product Stat?? J?P9n Europe ROW

Semiconductor 1% 95% 2% 2% IC 1% 95% 2% 2% Bipolar Digital 0 0 0 0 MOS-(Technology) 1% 95% 2% 2% MOS Memory 0 92% 4% 4% MOS Micro 0 100% 0 0 MOS Logic 2% 94% 2% 2% Analog 0 0 0 0 Discrete 0 0 0 0 Optoelectronics 0 0 0 0

Exchange Rate (Yen per USSl) 130

Source: Dataquest August 1989

Growth Rate

Ricoh' s growth rate by product line is shown in the tables and figures that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 6 graphically compares Ricoh's growth rate in the world market with the growth rate of the world market itself. This information then is provided for the Japanese market as well in Table 6 and Figure 7.

Worldwide Market Growth Rate

In 1988, Ricoh's sales of MOS microdevices grew 35.7 percent, slightly less than the world market growth rate. Overall, the Company grew less than the world market.

14 © 1989 Dataquest Incorporated August JSIS Volume III 0004703 Pirnh rftmnnnv T fi\ INFORMATION RESOURCE CENTEF ivi«.uii v^umpmi^, ^'-"'DATAQUEST INCORPORATED Semiconductor P^ f'"^"^fiHT^^o^ Sa(408n )Jose 437-860, CA0 95131-2398 Table 5

Ricoh Sales in World Market (Millions of Dollars)

World Market 1987 1988 fc Change % Chanee

Semiconductor $65 $75 15.4% 31.9% IC $65 $75 15.4% 36.5% Bipolar Digital 0 0 0 9.2% MOS (Technology) 65 75 15.4% 53.1% MOS Memory 18 22 22.2% 90.3% MOS Micro 14 19 35.7% 39.8% MOS Logic 31 34 9.7% 28.2% Analog 0 30 0 15.3% Discrete 0 0 0 13.2% Optoelectronics 0 0 0 25.4%

Exchange Rate (Yen per USSl) 144 130

Source: Dataquest August 1989

Figure 6

Ricoh Sales in World Market Compared with World Market

Growth Rate 100- World Market 90 C3I Ricoh 80 70. 60- 50- 40 30 ^^^9 20 10- S^ BflE^l ^ WBSSt— Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004703^ Source: Dataquest Au(ust 1989

Japanese Market Growth Rate

Ricoh's growth was less than that of the Japanese market in all product areas except MOS microcomponents.

Table 6

Ricoh Sales in Japanese Market (Millions of Dollars)

Japanese Market 1987 i2sa % Change % Chanpe iconductor $60 S70 16.7% 35.6% IC S60 $70 16.7% 39.1% Bipolar Digital 0 0 0 18.3% MOS {Technology) 60 70 16.7% 58.4% MOS Memory 16 20 25.0% 85.4% MOS Micro 14 19 35.7% 35.9% MOS Logic 28 31 10.7% 50.3% Analog 0 0 0 11.7% Discrete 0 0 0 18.5% Optoelectronics 0 0 0 42.3%

Exchange Rate (Yen per USSl) 144 130

Source: Dataquest August 1989

:^emiconauctor ga(408n) jose437-860, C0A 951312393 Figure 7

Ricoh's Groveth Rate Compared with Japanese Market

Growth Rate 100^ 90- Japanese Market fv^ Ricoh 80 70 604 50 40-1 30 20- 10- 0 Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004703-7 Source: Dataquest August 1989

Other Japanese Companies

The growth rate by product line for Ricoh is compared with that of the Japanese companies tracked by Dataquest in the following graphs. Dataqiiest surveys a total of 18 companies, plus a category called "Other." The total of these companies' revenue was used for comparison in Figures 8 and 9.

Figure 8

Ricoh versus Japanese Companies in Japanese Market

Growth Rate 90- Other Japanese Companies eo- rVI Ricoh 70

60:^

30-4

0 Semiconductor IC Bipolar MOS Memory Logic Analog Discrete Opto Product 0004703-8 Source: Daiaquest August 1989

Figure 9

Ricoh versus Japanese Companies in World Market

Growth Rate 100

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product Source: Dataquest 0004703-9 August 1989

18 © 1989 Dataquest Incorporated August JSIS Volume III 0004703 4NF0RMATI0N RESOURCE. CENTEf Ricoh Company, Ltd.DATAQUE.sT INCORPORATED . 1290 Ridder Park Drive Semiconductor san jose, CA 951312393 (408) 437-8600 Channels of Distribution

At least 94 percent of Ricoh's products are sold to the Japanese market. At the time of this update, information on its distribution system for ICs was unavailable.

CAPITAL SPENDING

Dataquest does not follow semiconductor capital spending for Ricoh.

FACILITIES

Ricoh has one semiconductor manufacturing plant, Ikeda Works, located in Osaka prefecture. This facility manufactures 256K ROMs, PLDs, gate arrays, logic devices, and cell-based ICs.

ALLIANCES AND AGREEMENTS

Ricoh's alliances and agreements are summarized in Figure 10. For more in-depth information, please refer to Volume n of the Japanese Semiconductor Industry Service behind the tab entitied "Strategic Alliances."

Figure 10

Ricoh Company, Ltd. Semiconductor Alliances and Agreements

00M7Q3-10 Source: Dataquest Autust 1989

20 © 1989 Dataquest Incorporated August JSIS Volume III 0004703 INFORMATION RESOURCF GEN Ricoh Company, Ltd. OA iAQUEST INCORPORATED 1290 Ridder Park Drive Semiconductor San Jose, CA 95131-2398 (408) 437-8600 REVENUE SUMMARY

Tables 7 and 8 show Ricoh's semiconductor revenue in detail. The tables show sales from 1986 to 1988 in both billions of yen and millions of dollars.

Table 7

Ricoh Company Ltd. Estimated Worldwide Semiconductor Revenue (Billions of Yen)

1986 1987 198R*

Total Semiconductor 9 9 10

Total IC 9 9 10

Bipolar Digital (Technology) 0 0 0

MOS (Technology) 9 9 10 ^fMOs 6 6 6 PMOS 0 0 0 CMOS 4 4 4 BiCMOS 0 0 0 MOS (Function) 9 9 10 MOS Memory 3 3 3 MOS Microdevices 2 2 2 MOS Logic 5 4 4

Analog 0 0 0

Total Discrete 0 0 0

Transistor 0 0 0 Diode 0 0 0 Thyristor 0 0 0 Other Discrete 0 0 0

Total Optoelectronic 0 0 0

Exchange Rate (Yen per US$1) 168 144 130

•Preliminary estimates for 1988

Source: Dataquest August 1989

Table 8

Ricoh Company Ltd. Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

1986 1987 J988*

Total Semiconductor 55 65 75

Total IC 55 65 75

Bipolar Digital (Technology) 0 0 0

MOS (Technology) 55 65 75 NMOS 34 39 43 PMOS 0 0 0 CMOS 21 26 32 BiCMOS 0 0 0

MOS (Function) 55 65 75 MOS Memory 16 19 22 MOS Microdevices 11 15 19 MOS Logic 28 31 34

Analog 0 0 0

Total Discrete 0 0 0

Transistor 0 0 0 Diode 0 0 0 Thyristor 0 0 0 Other Discrete 0 0 0

Total Optoelectronic 0 0 0

Exchange Rate (Yen per USSI) 168 144 130

•Preliminary estimates for 1988

Source: Dataquest August 1989

22 © 1989 Dataquest Incorporated August JSIS Volume III 0004703 JNFORMATICN RESOURCE CENTEJ Ricoh Company, Ltd. DATAQUEST INCORPORATED '^ •^' 1290 Ridder Park Drive Financial Information?/" Jose, CA 951312393 (408) 437-8600 BALANCE SHEETS Tables 9 and 10 show Ricoh's corporate consolidated balance sheets for 1984 through 1988 in yen and United States dollars, respectively.

Table 9

Consolidated Balance Sheet Fiscal Years 1984-198S (Billions of Yen)

1984 1985 1986 1987 1988

Total Current Assets ¥298 ¥354 ¥342 ¥382 ¥447 Cash ¥ 13 ¥ 18 ¥ 25 ¥ 49 ¥ 19 Receivables ¥106 ¥125 ¥129 ¥133 ¥150 Inventory ¥ 67 ¥ 83 ¥ 83 ¥ 76 ¥ 91 Other Current Assets ¥112 ¥128 ¥105 ¥124 ¥187 Net Property, Plant, and Equipment ¥ 93 ¥120 ¥132 ¥125 ¥130 Depreciation 0 0 0 0 0 Other Assets ¥ 31 ¥ 39 ¥ 46 ¥ 56 ¥ 65

Total Assets ¥422 ¥513 ¥520 ¥563 ¥642

Total Current Liabilities ¥185 ¥231 ¥216 ¥237 ¥287 Long-Term Debt ¥ 74 ¥ 88 ¥ 96 ¥110 ¥ 60 Other Liabilities ¥ 2 ¥ 2 ¥ 2 ¥ 2 ¥ 2

Total Liabilities ¥261 ¥321 ¥314 ¥349 ¥349

Total Shareholders' Equity ¥161 ¥192 ¥207 ¥212 ¥291 Common Stock ¥ 19 ¥ 27 ¥ 29 ¥ 29 ¥ 63 Other Equity ¥ 58 ¥ 68 ¥ 70 ¥ 69 ¥102 Retained Earnings ¥ 84 ¥ 97 ¥108 ¥114 ¥126

Total Liability and Total Equity ¥422 ¥513 ¥521 ¥561 ¥640

(Continued)

Table 9 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue ¥472 ¥545 ¥594 ¥593 ¥674 Domestic Sales ¥311 ¥332 ¥359 ¥390 ¥419 Overseas Sales ¥161 ¥213 ¥235 ¥203 ¥255 Other income ¥ 0 ¥ 0 ¥ 0 ¥ 0 ¥ 0 Cost of Sales ¥299 ¥349 ¥378 ¥381 ¥427 Gross Margin (%) 37 36 36 36 37 R&D Expense ¥ 23 ¥ 29 ¥ 36 ¥ 37 ¥ 43 SG&A Expense ¥139 ¥163 ¥184 ¥183 ¥207 Other Operating Expenses 0 0 0 0 0 Total Operating Expenses ¥438 ¥512 ¥562 ¥564 ¥634 Operating Income (Loss) ¥ 34 ¥ 33 ¥ 32 ¥ 29 ¥ 40 Interest, Net ¥ 1 ¥ 3 (¥ 1) (¥ 3) (¥ 5) Pretax Income ¥ 35 ¥ 36 ¥ 31 ¥ 26 ¥ 35 Provision for Taxes (Credit) ¥ 21 ¥ 21 ¥ 19 ¥ 17 ¥ 21 Effective Tax Rate (%) 60 58 61 65 60 Extraordinary Items ¥ 1 ¥ 2 ¥ 3 ¥ 2 ¥ 3 Net Income ¥ 15 ¥ 17 ¥ 15 ¥ 11 ¥ 17

Avg. Shares Outstanding (Millions) 388 407 413 452 582 Employees 21,000 25,000 26,500 28,000 30,500 Capital Spending ¥ 31 ¥ 50 ¥ 48 ¥ 25 ¥ 36

Exchange Rate (Yen per US$1) 236 245 221 160 138

Note: Columns may not add to totals shown because of rounding.

Source: Dataquest August 1989

24 © 1989 Dataquest Incorporated August JSIS Volume III 0004703 INFORMATION RESOURCE CENT Ricoh Company, Ltd. DATAQUEST INCORFOHATED 1290 Ridder Park Drive San Joss, CA 95131-2398 Financial Information (408) 437-8600 Table 10

Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Balance Sheet (March 31) 1984 1985 1986 1987 1988

Total Current Assets $U63 $1,445 $1,548 $2,388 $3,239 Cash $ 55 $ 73 $ 113 $ 306 $ 138 Receivables $ 449 $ 510 $ 584 $ 831 $ 1,087 Inventory $ 284 $ 339 $ 376 $ 475 $ 659 Other Current Assets $ 475 $ 522 $ 475 $ 775 $1,355 Net Property, Plant, and Equipment $ 394 $ 490 $ 597 $ 781 $ 942 Depreciation 0 0 0 0 0 Other Assets $ 131 $ 159 $ 208 $ 350 $ 471

Total Assets $1,788 $2,094 $2,353 $3,519 $4,652

Total Current Liabilities $1,843 $2,167 $2,466 $3,825 $4,790 Long-Term Debt $ 314 $ 359 $ 434 $ 688 $ 435 Other Liabilities $ 8 $ 8 $ 9 $ 13 $ 14

Total Liabilities $1,106 $1,310 $1,421 $2,181 $2,529

Total Shareholders' Equity $ 682 $ 784 $ 937 $1,325 $2,109 Common Stock $ 81 $ 110 $ 131 $ 181 $ 457 Other Equity $ 246 $ 278 $ 317 $ 431 $ 739 Retained Earnings $ 356 $ 396 $ 489 $ 713 $ 913

Total Liability and Total Equity $1,788 $2,094 $2,357 $3,506 $4,638

(Continued)

Table 10 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue $2,000 $2,224 $2,688 $3,706 $4,884 Domestic Sales $1,318 $ 1,355 $1,624 $2,438 $3,036 Overseas Sales $ 682 $ 869 $1,063 $1,269 $1,848 Other income 0 0 0 0 0 Cost of Sales 51,267 $1,424 $1,710 $2,381 $3,094 Gross Margin (%) 37 36 36 36 37 R&D Expense $ 97 $ 118 $ 163 $ 231 $ 312 SG&A Expense $ 589 $ 665 $ 833 $1,144 $1,500 Other Operating Expenses 0 0 0 0 0 Total Operating Expenses $ 1,856 $2,090 $2,543 $3,525 $4,594 Operating Income (Loss) S 144 $ 135 $ 145 $ 181 $ 290 Interest, Net $ 4 $ 12 (S 5) ($ 19) ($ 36) Pretax Income $ 148 $ 147 $ 140 $ 163 $ 254 Provision for Taxes (Credit) $ 89 $ 86 $ 86 $ 106 $ 152 Effective Tax Rate (%) 60 58 61 65 60 Extraordinary Items $ 4 $ 8 $ 14 $ 13 $ 22 Net Income $ 64 $ 69 $ 68 S 69 $ 123

Avg. Shares Outstanding (Millions) 388 407 413 452 582 Employees 21,000 25,000 26,500 28.000 30.500 Capital Spending $ 131 $ 204 $ 217 $ 156 $ 261

Exchange Rate (Yen per US$1) 236 245 221 160 138

Note: Columns may not add to totals shown because of rounding.

Source: Dataquest August 1989

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation.

Address Sanken Electric Company, Ltd, 3-6-3 Kitano, Niiza City, Saitama 352 Japan

Phone (0484)72-1111 Fax (0484)71-6249

President Koichi Kotani Chairman Goryosaku Matsumoto

Main Product Areas Power supply equipment Switching power equipment Semiconductors Circuit protectors

No. of Employees 5,(XX) (consolidated)

Top Shareholders Daihyaku Life Insurance 5.1% Saitama Bank 4.9% Mitsui Trust 3.9% Asahi Life Insurance 3.6% Sumitomo Trust 3.5% IBJ 3.4% Mitsubishi Trust 2.5% Chuo Trust 2.2% Nippon F&M Insurance 2.1% Toyo Trust 2.1%

%Outanding Stock Foreign Owned 4.5%

Stock Exchanges Tokyo, Osaka

Ranking (based 63rd among Japanese electronics companies on revenue)

STRATEGY

Sanken's goals for 1989 and accomplishments in 1988 are highlighted in this section.

Sanken's corporate goals include the following:

Increase capital investments by approximately lOOpercent in fiscal year 1989 for Sanken group companies

Meet sales target of ¥100 billion in fiscal year 1989 (This would be an increase of 23 percent over 1988.)

Continue to focus on development and marketing of four product areas—Power, protectors, controllers, and sensors—boosting product differentiation

Improve export ratio—This is contrary to goals of other Japanese companies that are concerned about relying too heavily on exports. Sanken has a very low export ratio and is concerned about its reliance on domestic demand cycles.

Expand overseas production, but with caution

Expand sensors, fuses, and thermostats within the Circuit division because of a forecast slowdown in applications for circuit protectors

The following developments occurred at Sanyo during 1988 and early 1989:

Expanded Fukushima Sanken Company, Ltd., adding capacity to produce LEDs and ceramic varistors

Started linking all faciities and offices with fiber-optic cables in a system called Sanken SG-NET

Introduced new L-type fuse that improves blowing speed and substantially reduces circuit board mounting operations

Formed a joint venture with Airpax Corporation (United States), for local production of new products

Introduced new rotating detector meter using magnetism that can be read with the naked eye

ORGANIZATION

Sanken Electric encompasses the Sanken Group, which consists of 13 companies as shown in Figure 1. The group has loose connections with the Saitama Bank group of companies.

Figure 1

Sanken Electric Organizational Chart

R&D Division

General Affairs Department Tokyo Semiconductor Sales Division

Personnel Department Osaka Semiconductor Sales Division

Accounting Department Semiconductor Division President

Denshi Sales Division Management Ranning Departnwnt

DenshI DMsion '— Overseas Operations (Sales and manufacture of switching power supply)

KIKl Sales Division

KiKI Division

(Sales and manufacture of power supply equipment)

0004702-1 Source: Dataquest Augutl 1989

OPERATIONS

Product Segments

Sanken is divided into four product groups. Examples of products within each category arc listed below.

• Semiconductor—Power hybrid ICs, power transistors, thyristors, rectifier diodes, varistors

• Switching power supply—Office and factory automation and information equipment switching power supplies

• Power supply equipment—Uninterruptible power supplies, DC/AC inverters and con verters, VVVF-inverters, voltage regulators, electronic devices equipment, flicker compensators, airway beacon systems

•i Circuit protectors—Quick action fuses, thermostats, current detectors, circuit protectors

Product Revenue

Figure 2 and Table 1 show Sanken's revenue by product segment from 1984 through 1988.

Figure 2

Product Revenue as a Percentage of Total Corporate Revenue

Percentage 100 90 I I Circuit Protectors ^ El Power Supply 80 Equipment 70 Switching Power Supply 60 50 40 30 20 10 #$: 18M; 1985 -C-AV-1966 V t9B7 1986 0004702-2 Source: Dataquett Aucuii 19S9

Table 1

Sales by Product Segment (Billions of Yen)

1984 1985 1986 1987 1988

Semiconductor ¥31 ¥37 ¥35 ¥37 ¥44 Switching Power Supply 10 13 16 14 20 Power Supply Equipment 6 9 10 11 13 Circuit Protectors 2 3 3 3 4

Total ¥ 9 ¥62 ¥64 ¥ 65 ¥ 81

Exchange Rate (Yen per US$1) 236 245 221 160 138

Source: Sanken Annual Rqx>rts Dataquest August 1989

Domestic versus International Revenue

Figure 3 shows the year-to-year growth of Sanken's international and domestic sales for 1984 through 1989. In 1988, domestic sales were ¥70 billion and international sales were ¥11 billion. International sales have averaged 10.6 percent of total corporate revenue since 1984, growing 37.5 percent in 1988 over 1987.

Figure 3

Total Corporate Revenue Growth of International versus Domestic Sales

^9 Domestic nr^] International

^SL 1SS5 19BS 1967 1986

0004702-3 Source: Ditiqueit Aufuti 19S9 Growth Rate

Figure 4 shows the year-to-year growth rates of product segment revenue. Following Figure 4 is a list of factors explaining the changes in 1989 product growth.

Figure 4

Growth Rates by Product Segment (Yen-Based)

Growth Rate

^S Semiconductor ^^ Power Supply Switching Equipment Power SuppFy I I Circuit Protectors

m^ •H^ 1985 igse 1987 1388 0004702-4 Source: D«l*qu«t Aucuii 198$

Main Factors Affecting 1988 Growth

The major factors affecting Sanken's growth in 1988 are listed below by product segment

• Semiconductor

- Domestic sales of large-screen TVs, VCRs, consumer appliances and worldwide demand for office automation and computer terminal equipment was strong and increased sales of Sanken's semiconductors

ft Switching power supplies

- Application markets were strong, namely office automation and information equipment

- Sales were threatened by the increased sensitivity in the market to price and product safety, yet Sanken was able to remain one of the top three Japanese suppliers

Power supply equipment

- Strong public investment created strong demand for large-scale power supply equipment and small, uninterruptible power supplies (UPS)

- Widespread introduction of POS, VAN, and LAN systems has created strong demand for small, UPS equipment, which prevents power flickers or stoppages that can damage stored data

Circuit protector

- Demand from computer industry was strong for circuit protectors

- Introduction of new products was successful

CAPITAL AND R&D INVESTMENTS

Sanken's capital and R&D spending in 1988 increased 40 percent over 1987 to¥8 billion. As a percentage of total revenue, spending increased to 9.9 percent. The Company plans to increase capital investments to¥l 5 billion in fiscalyea r 1989. Figure 5 and Table 2 show the company'si R&D and capital spending as a percentage of total corporate revenue.

Figure 5

Capital and R&D Spending as Percentage of Total Corporate Revenue

Percentage 20-

18- Capital Spending R&D Spending 16 14 12

1984 1965 19B6 1967 1988

0004702-5 Source: Daiiqueit Aufuii 19S9

Table 2

Capital and R&D spending (Billions of Yen and Millions of Dollars)

1984 mi lam 1987 12S& Corporate Revenue ¥ 49 ¥ 62 ¥ 63 ¥ 66 ¥ 81 $208 $253 $285 $413 $587

Capital Spending* ¥ 5 ¥ 9 ¥ 10 ¥ 5 ¥ 7 $ 21 $ 37 $ 45 $ 31 $ 51 %Total Revenue 10.2% 14.5% 15.9% 7.6% 8.6%

R&D Spending* ¥ 1 ¥ 1 ¥ 1 ¥ 1 ¥ 1 $ 4 $ 4 $ 5 $ 6 $ 7 %Total Revenue 2.0% 1.6% 1.6% 1.5% 1.2%

Total Spending ¥ 6 ¥ 10 ¥ 11 ¥ 6 ¥ 8 $ 25 $ 41 $ 50 $ 38 $ 58 %Total Revenue 12.2% 16.1% 17.5% 9.1% 9.9%

Exchange Rate (Yen per USSl) 236 245 221 160 138

*Nonconsolidated

Source: Sanken Annual Rqmrts Dataquest August 1989

Target R&D Areas

The Company's Central Research Laboratory is located in Asaka City in Saitama prefecture and consists of three divisions—ICs, semiconductors, and applied products. Some examples of recent accomplishments are listed below.

• Dot matrix type LED displays and orange LEDs with peak wave length of S80ns

• GaAs power Schottky barrier diodes

• Self-oscillating FCC type switching power supply with high performance and simplified control circuits

New switching power supplies that meet safety standards and noise regulations of leading nations of the world

Decentralized dispatching-type high-frequency rectifiers

All-digital control VVVF inverters

Induction motor control systems

Improved circuit protectors that meet most world standards

Quick-action fuses

FACILITIES

Table 3 shows the distribution of Sanken's domestic and foreign manufacturing facilities.

Table 3

Sanken Electric Corporate Manufacturing Facilities

Country Facilities I^3£

Japan 16 All product areas

Korea 1 Power switching supplies

Source: Dataquest August 1989

(Page intentionally left blank)

SUMMARY

The purpose of this section is to provide a one page overview of the corporation's semiconduc tor activity.

Address Sanken Electric Company, Ltd. Semiconductor Technology Development Center Niiza-shi, Saitama, 352, Japan

Phone (0484)72-1111 Fax Not Available

Product Discrete Power ICs Optoelectronics

Ranking (based 15th among Japanese semiconductor manufacturers on revenue) 23rd among worldwide semiconductor manufacturers

STRATEGY

Below are some of S anken' s accomplishments in the semiconductor area during 1988 and early 1989 and future objectives. This includes new product announcements. The information is divided into product categories for clarity.

Overall

Increase capital investments for increased production capacity and improved reliability

Double production capacity in 1989 and install new assembly lines in Japan

Focus on three main areas for improvement within manufacturing and marketing— Automation, integration, and labor saving

Develop general-purpose hybrid ICs for audioA'isual and office automation markets

Focus on development of improved performance, speed, withstand voltage, integration, and reliability in semiconductor products

Disc ete

Introduced hybrid IC series of products for switching power supplies using large output MOSFETs

Introduced high-voltage Schottky barrier diodes with molybdenum as the barrier metal

Introduced high-voltage, high-frequency power transistors for horizontal deflection in high-resolution CRTs

Introduced low power loss IC regulators with monolithic control circuits

Introduced regulating rectifiers for smaller motorcycles

Developed GaAs power Schottky banier diodes for super-high breakdown voltage and high-frequency rectifying capability

Optoelectronics

• Introduced two LEDs—An orange colored LED and a dot matrix type LED display

ORGANIZATION

Sanken's semiconductor organizational chart was not available at the time of this update.

OPERATIONS

Note: Exchange rates used in the semiconductor section of this profile are based on the calendar year.

Product Segments

• Discrete—Transistors, rectifiers, diodes, varistors, power regulators, power amplifiers

• Optoelectronics—LEDs

• Analog—Hybrid ICs

Product Revenue

Figure 6 shows Sanken's percentage of semiconductor revenue revenue by product. For example, Sanken only has analog ICs. Discrete products make up 54 percent of its total semiconduc tor revenue.

Figure 6

1988 Estimated Semiconductor Revenue Percentage by Product (Millions of Dollars)

0004702-fi SourcE: D>t«qu«(t Auiuit 1$S9

Regional Sales

Sanken's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4

1988 Estimated Semiconductor Revenue Percent by Region (Billions of Yen)

United Product States Japan Eurone ROW

Semiconductor 0 70% 0 30% IC 0 71% 0 29% Bipolar Digital 0 0 0 0 MOS (Technology) 0 0 0 0 MOS Memory 0 0 0 0 MOS Micro 0 0 0 0 MOS Logic 0 0 0 0 Analog 0 71% 0 29% Discrete 0 67% 0 33% Optoelectronics 0 100% 0 0

Exchange Rate (Yen per US$1) 130

Source: Dataquest August 1989

Growth Rate

Sanken's growth rate, by product line, is shown in the tables and figures that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 7 graphically compares Sanken's growth rate in the world market to the growth rate of the world market itself. This information is then provided for the Japanese market as well.

Worldwide Market Growth Rate

In 1988, Sanken's sales discrete semiconductor devices grew 27.7 percent. The Company also showed strong growth in its other product areas shown in Table 5 and Figure 7.

Table 5

en Sales in World Market (Millions of Dollars)

World Market 1987 1988 % Changp % Chafige

Semiconductor $294 $383 30.3% 31.9% IC $119 $157 31.9% 36.5% Bipolar Digital 0 0 0 9.2% MOS (Technology) 0 0 0 53.1% MOS Memory 0 0 0 90.3% MOS Micro 0 0 0 39.8% MOS Logic 0 0 0 28.2% Analog 119 157 31.9% 15.3% Discrete $162 $207 27.7% 13.2% Optoelectronics $ 13 $ 19 47.9% 25.4%

Exchange Rate (Yen per USSl) 144 130

Source Dataquest August 1989

Figure 7

Sanken Growth Rate Compared with World Market

Growth Rate 100- 90 World Market Sanken so 70

40-

20-

10-

0- Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004702-7 Source: Dataquest Au(Uit 1989

Japanese Market Growth Rate

Sanken had significant growth in descrete devices in the Japanese market as shown in Table 6 and Figure 8.

Table 6

Sanken Sales in Japanese Market (Millions of Dollars)

Japanese Market 1987 1988 % Chance % Change

iconduclor $224 $268 20.0% 35.6% IC $ 98 $111 13.4% 39.1% Bipolar Digital 0 0 0 18.3% MOS (Technology) 0 0 0 58.4% MOS Memory 0 0 0 85.4% MOS Micro 0 0 0 35.9% MOS Logic 0 0 0 50.3% Analog 98 111 13.4% 11.7% Discrete $112 $138 24.2% 18.5% Optoelectronics S 15 $ 19 31.7% 42.3%

Exchange Rate (Yen per US$1) 144 130 Source: Dataquest August 1989

Figure 8

Sanken's Growth Rate Compared with Japanese Market

Growth Rate 100- 90 B^ Japanese Marlcet ES3 Sanken 80-j 70 60 50 40H 30 20- 10-

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004702-8 Source: Dataquest August 1989

Other Japanese Companies

The growth rate by product line for Sanken is compared with that of the Japanese companies tracked by Dataquest in the following graphs. Dataquest surveys a total of 18 companies, plus a catergory called "Other." The total of these companies' revenue were used for comparison in Figures 9 and 10.

Figure 9

Sanken versus Japanese Companies in Japanese Market

Growth Rate go-r

Semiconductor IC Bipolar MOS Memory Micro Loeic Analog Discrete Opta Product 0004702-e Source: DXaqueil Aufutt 19S9

Figure 10

Sanken versus Japanese Companies in World Market

Growth Rate 100- 90- BS Japanese Companies IS^l Sanken 80 70-1 60 50 40i 30 20

10-1

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004702-10 Sourct: Daisqueit Autuit 19S9

Channels of Distribution

At the time of this company update, the distribution information for Sanken was unavailable.

CAPITAL SPENDING

Sanken has announced plans to add two assembly plants and expand its optoelectronic capacity at the Yamagata facility. Semiconductor capital investments as a percentage of total revenue are shown in Tables 7 and 8

Table 7

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Millions of Dollars

1983 im. 1985 1986 1987 1988 Revenue $103 $162 $156 $224 $294 $383

Semiconductor Capital Spending $ 13 $ 25 $ 25 $ 24 $ 21 $ 77

Growth rate of Capital Spending 58% 100% 0% (6%) (13%) 269%

Percent of Revenue 12% 16% 16% 11% 7% 20%

Exchange Rate (Yen per US$1) 237 237 238 168 144 130

N/A = Not Available

Source: Dataquest August 1989

Table 8

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Billions of Yen

1983 1984 1985 1986 1987 1988

Revenue ¥24 ¥38 ¥37 ' ¥38 ¥42 ¥50

Semiconductor Capital Spending ¥ 3 ¥ 6 ¥ 6 ¥ 4 ¥ 3 ¥10

Growth rale of Capital Sjjending 50% 100% 0 (33%) (25%) 233%

Percent of Revenue 12% 16% 16% 11% 7% 20%

Exchange Rate (Yen per US$1) 237 237 238 168 144 130

FACILmES

Sanken has three plants for semiconductor production and two assembly facilities as shown in Table 9. The Company plans to complete its new silicon chip production facility at Yamagata Sanken by the end of 1989.

Table 9

Sanken Electric Semiconductor Facilities

Name/Location Function

Headquarters plant Fab—^power transistors, diodes, LEDs Saitama

Semiconductor Technology Center Fab—^power transistors, diodes, LEDs Saitama

Yamagata Sanken Fab—^power transistors, diodes, LEDs Yamagata

Ishikawa Sanken Assembly Ishisawa

Kashima Sanken Assembly Kashima

Source: Dataquest August 1989

ALLIANCES AND AGREEMENTS

Dataquest has recorded two alliances for Sanken since 1984. The first was in December 1987 between Sanken and International Rectifier. The ageement stated that Sanken would package and market International Rectifier's HEXraT power MOSFET. The second alliance occurred in 1988 between Airpax Corportion and Sanken. The two companies formed a joint venture called Sanken Airpax Company, Ltd. to develop new products that will be produced in the United States.

REVENUE SUMMARY

Tables 10 and 11 show Sanken's semiconductor revenue in detail. The tables show sales from 1983 to 1988 in both billions of yen and millions of dollars.

Table 10

Sanken Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 99 90 103 162 156 224 294 383

Total IC 18 19 25 47 53 81 119 157

Bipolar Digital (Technology) 0 0 0 0 0 0 0 0

MOS (Technology) 0 0 0 0 0 0 0 0 NMOS 0 0 0 0 ' 0 0 0 0 PMOS 0 0 0 0 0 0 0 0 CMOS 0 0 0 0 0 0 0 0 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 0 0 0 0 0 0 0 0 MOS Memory 0 0 0 0 0 0 0 0 MOS Microdevices 0 0 0 0 0 0 0 0 MOS Logic 0 0 0 0 0 0 0 0

Analog 18 19 25 47 53 81 119 157

Total Discrete 72 62 67 109 97 133 162 207

Transistor 29 27 30 44 38 43 48 61 Diode 35 29 31 65 59 90 114 146 Thyristor 8 6 6 0 0 0 0 0 Other Discrete 0 0 0 0 0 0 0 0

Total Optoelectronic 9 9 11 6 6 10 13 19

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

•Preliminary estimates for 1988

Soim» : Dataquest August 1989

Table 11

Sanken Estimated Worldwide Semiconductor Revenue (Billions of Yen)

1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 22 22 24 38 37 38 42 50

Total IC 4 5 6 11 13 14 17 20

Bipolar Digital (Technology) 0 0 0 0 0 0 0 0

MOS (Technology) 0 0 0 0 0 0 0 0 NMOS 0 0 0 0 0 0 0 0 PMOS 0 0 0 0 0 0 0 0 CMOS 0 0 0 0 0 0 0 0 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 0 0 0 0 0 0 0 0 MOS Memory 0 0 0 0 0 0 0 0 MOS Microdevices 0 0 0 0 0 0 0 0 MOS Logic 0 0 0 0 0 0 0 0

Analog 4 5 6 11 13 14 17 20

Total Discrete 16 15 16 26 23 22 23 27

Transistor 6 7 7 10 9 7 7 8 Diode 8 7 • 7 15 14 15 16 19 Thyristor 2 1 1 0 0 0 0 0 Other Discrete 0 0 0 0 0 0 0 0

Total Optoelectronic 2 2 3 1 1 2 2 2

Exchange Rate (Yen per USSl) 221 249 237 237 238 168 144 130

' Preliminary estimates for 1988

Source: Dataquest August 1989

BALANCE SHEETS

Tables 12 and 13 show Sanken's corporate consolidated balance sheet for 1984 to 1988 in yen and United States dollars, respectively.

Table 12

Sanken Electric Consolidated Balance Sheet (Billions of Yen)

Balance Sheet (March 31) mi 1986 1987 1988 Total Current Assets ¥44 ¥38 ¥44 ¥ 66 Cash ¥ 8 ¥ 8 ¥10 ¥ 17 Receivables ¥21 ¥17 ¥21 ¥ 30 Inventory ¥14 ¥12 ¥12 ¥ 15 Other Current Assets ¥ 1 ¥ 1 ¥ 1 ¥ 4 Net Property, Plant, and Equipment ¥16 ¥21 ¥20 ¥ 21 Depreciation ¥12 ¥14 ¥17 ¥ 21 Other Assets ¥ 3 ¥ 4 ¥ 5 ¥ 14

Total Assets ¥63 ¥63 ¥69 ¥101

Total Current Liabilities ¥34 ¥31 ¥30 ¥ 41 Long-Term Debt ¥ 5 ¥ 7 ¥13 ¥ 22 Other Liabilities ¥ 2 ¥ 2 ¥ 2 ¥ 3

Total Liabilities ¥41 ¥40 ¥45 ¥ 66

Total Shareholders* Equity ¥22 ¥23 ¥24 ¥ 35 Common Stock ¥ 8 ¥ 8 ¥ 9 ¥ 13 Other Equity ¥ 9 ¥ 9 ¥ 9 ¥ 14 Retained Earnings ¥ 5 ¥ 6 ¥ 6 ¥ 8

Total Liability and Total Equity ¥ 63 ¥63 ¥69 ¥101

(Continued)

Table 12 (Continued)

Sanken Electric Consolidated Balance Sheet (Billions of Yen)

Income Statement (March 31) 1985 1986 12SZ 1988

Revenue ¥62 ¥63 ¥66 ¥81 Domestic Sales ¥56 ¥57 ¥59 ¥70 Overseas Sales ¥ 6 ¥ 6 ¥ 7 ¥11 Other Income ¥ 0 ¥ 0 ¥ 0 ¥ 0 Cost of Sales ¥48 ¥53 ¥55 ¥66 Gross Margin (%) 23 16 17 19 R&D Expense ¥ 1 ¥ 1 ¥ 1 ¥ 1 SG&A Expense ¥ 5 ¥ 6 ¥ 7 ¥ 9 Other Operating Expenses ¥ 0 ¥ 0 ¥ 0 ¥ 0 Total Operating Expenses ¥53 ¥59 ¥62 ¥75 Operating Income (Loss) ¥ 9 ¥ 4 ¥ 4 ¥ 6 Interest, Net (¥ 3) (¥ 2) (¥ 2) (¥ 1) Pretax Income ¥ 6 ¥ 2 ¥ 2 ¥ 5 Provision for Taxes (Credit) ¥ 4 ¥ 1 ¥ 1 ¥ 2 Effective Tax Rate (%) 67 58 56 56 Extraordinary Items ¥ 0 ¥ 0 ¥ 0 ¥ 0 Net Income ¥ 2 ¥ 1 ¥ 1 ¥ 3

Avg. Shares Outstanding (Millions) 46 64 82 100 Employees 4,749 4.830 4,760 5,000 Capital Spending ¥ 9 ¥10 ¥ 5 ¥ 7

Exchange Rate (Yen per USSl) 245 221 160 138

Source: Dataquest August 1989

Table 13

Sanken Electric Consolidated Balance Sheet (Millions of Dollars)

Balance Sheet (March 31) 1^ 1986 1987 1988

Total Current Assets $180 $172 $275 $ 478 Cash $ 33 $ 36 $ 63 $ 123 Receivables $ 86 $ 77 $131 $ 217 Inventory $ 57 $ 54 $ 75 $ 109 Other Current Assets $ 4 $ 5 $ 6 $ 29 Net Property, Plant and Equipment $ 65 $ 95 $125 $ 152 Depreciation $ 49 $ 63 $106 $ 152 Other Assets $ 12 $ 18 $ 31 $ 101

Total Assets $257 $285 $431 $ 732

Total Current Liabilities $339 $385 $600 $1,007 Long-Term Debt $ 20 $ 32 $ 81 $ 159 Other Liabilities $ 8 $ 9 $ 13 $ 22

Total Liabilities $167 $181 $281 $ 478

Total Shareholders' Equity $ 90 $104 $150 $ 254 Common Stock $ 33 $ 36 $ 56 $ 94 Other Equity $ 37 $ 41 $ 56 $ 101 Retained Earnings $ 20 $ 27 $ 38 $ 58

Total Liability and Total Equity $ 257 $285 $431 $ 732

(Continued)

Table 13 (Continued)

Sanken Electric Consolidated Balance Sheet (Millions of Dollars)

Income Statement (March 31) 1985 1986 1987 im. Revenue $253 $285 $413 $587 Domestic Sales $229 $258 $369 $507 Overseas Sales $ 24 $ 27 $ 44 $ 80 Other Isncome $ 0 $ 0 $ 0 $ 0 Cost of Sales $196 $240 $344 $478 Gross Margin (%) 23 16 17 19 R&D Expense $ 4 $ 5 $ 6 $ 7 SG&A Expense $ 20 $ 27 $ 44 $ 65 Other Operating Expenses $ 0 $ 0 $ 0 $ 0 Total Operating Expenses $216 $267 $388 $543 Operating Income (Loss) $ 37 $ 18 $ 25 $ 43 Interest, Net ($ 12) ($ 9) ($ 13) ($ 7) Pretax Income S 24 $ 9 $ 13 $ 36 Provision for Taxes (Credit) $ 16 $ 5 $ 6 $ 14 Effective Tax Rate (%) 67 58 56 56 Extraordinary Items $ 0 $ 0 $ 0 $ 0 Net Income $ 8 $ 5 $ 6 $ 22

Avg. Shares Outstanding (Millions) 46 64 82 100 Employees 4.749 4.830 4,760 5,000 Capital Spending $ 37 $ 45 $ 30 $ 51

Exchange Rate (Yen per USSl) 245 221 160 138

Source: Dataquest August 1989

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation.

Address Sanyo Electric Co., Ltd. 18, Keihan-Hondori 2-chome Moriguichi City, Osaka 570, Japan

Phone (06)991-1181 Fax (06)991-6566

President Satoshi lue Chairman Tsutomu Kurokawa

Main Product Areas Video equipment Audio equipment Home appliances Industrial and commercial equipment Information systems and electronic devices Batteries and other products

No. of Employees 39,179 (consolidated)

Top Shareholders Sumitomo Life 5.5% Sumitomo Bank 4.1% Nippon Life Insurance 3.5% Sumitomo Trust 3.2% Dai-Ichi Life Insurance 3.1% Asahi Life Insurance 3.1% Kyowa Bank 2.9% Mitsubishi Trust 2.4% Meiji Life Insurance 2.3%

% Outstanding Foreign Owned Stock 0.9%

Stock Exchanges All major Japanese, Amsterdam, Frankfurt, Zurich, Basel, Geneva, Paris

Ranking (based 9th among Japanese electronics companies on revenue)

STRATEGY

Sanyo's accomplishments in 1988 and goals for 1989 are highlighted in this section. Sanyo Electric owns Tokyo Sanyo Electric and both companies market products under the name brands Fisher and Sanyo.

Sanyo's corporate goals include the following:

• Create a corporate image of a dynamic, first-class company with original, high-quality products (Sanyo has been reorganizing and increasing investments to achieve this goal since 1987)

• Balance revenue between industrial and consumer products, reaching 50 percent each by 1990 (currently the ratio is 70 percent consumer and 30 percent industrial)

• Emphasize domestic rather than export markets (a radical change for Sanyo) and decrease export ratio from current 31 percent to approximately 25 percent in fiscal year 1989 (the export ratio was 60 percent of total sales in 1985)

• Produce upscale items for the increasingly sophisticated domestic markets

• Increase facsimile business, especially domestically, by adding eight new models in 1989, increasing domestic sales channels, and boosting production capacity

• Establish a joint venture with a European company to produce office automation equipment such as facsimiles or copiers in Europe before 1992

• Raise overseas production to about ¥700 billion by fiscal year 1990 and create fully integrated, more independent local systems

• Increase sales of PCs in the United States and move R&D and design centers to U.S. affiliate. Icon International

The following developments occurred at Sanyo during 1988 and early 1989:

• Won Ishikawa prize for development of computer-aided engineering (CAE) system that can be used to design analog ICs

• Tripled domestic PC and laptop sales, specifically AX PCs (Japanese version of IBM PC AT)

• North America

- Merged U.S.-based Sanyo Electric and Fisher Corp, making Sanyo Fisher (USA), Coip.

Europe

Boosted local content of equipment in Europe, specifically Spain's audio equip ment plant, which reached 98 percent local content in 1988

Established Sanyo Electric Manufacturing (UK) Ltd. to produce microwave ovens and magnetrons for microwave ovens

Asia

Integrated sales organizations in Singapore; previously, Fisher and Sanyo brands were competing

Established joint venture with Indonesian government to produce transformers, tuners, and electronic systems and components for TVs, VCRs, and audio equipment

Established Sanyo Compressors Singapore Pte., Ltd. to produce rotary compressors

ORGANIZATION

Sanyo Electric has ties with the Sumitomo Industrial Group, one of whose major members is NEC Corporation. The Sumitomo Group's influence on the Company has been significant, because a large percentage of its shareholders are Sumitomo Group companies. An organizational chart for Sanyo Electric was not available at the time of this company profile update.

OPERATIONS

All revenue in this section is based on Sanyo's fiscal year, which ends November 30.

Product Segments

Sanyo is divided into six product groups. Examples of products within each category are listed below.

• Video equipment—VCRs, video camera, TVs, teletext adaptors, receivers, electronic components, speakers, capacitors

• Audio equipment—Cassette recorders, radios, stereos, components, CD players, car stereos and CD players, personal transceivers, telephones

• Home appliances—Washers, vacuum cleaners, industrial washers, megnetrons, genera tor lamps, microwave ovens, home cooking, irons, dryers, electric heaters

• Industrial and commercial equipment—Vending machines, refrigerator/freezer show cases, air conditioning equipment, commercial and home refrigerators, freezers, incuba tors, credit card systems, POS systems and coin mechanisms

• Information systems and electronic devices—PCs, medical information system, word processors, facsimiles, cordless phones, semiconductors, electronic components, copi ers, calculators, filing systems, color printers, 32-bit super-microcomputers

• Batteries and other products—Batteries, solar cells

Product Revenue

Figure 1 and Table 1 show Sanyo's revenue by product segment from 1984 through 1988.

Figure 1

Product Revenue as a Percentage of Total Corporate Revenue

Percent 100- Batteries/ go Others Information 80 HD IndustriaJ 70 60-i 50 r%i m 40 H 30 20 10-1 ^ \ -Ir^ \ 0 1984 1965 1986 1957 1988

0004701-1 Source: Oitaqueit Aututl 19S9

Table 1

Sales by Product Segment (Billions of Yen)

1984 1985 1986 1987 1988

Video equipment ¥ 388 ¥ 415 ¥ 308 ¥ 239 ¥ 223 Audio equipment 351 354 238 205 169 Home appliances 361 387 301 287 286 Industrial/commerical equipment 113 125 124 162 197 Information systems electronic devices 119 120 103 206 261 Batteries and others 89 99 107 87 101

Total ¥ 1,421 ¥U00 ¥1,181 ¥ 1,186 ¥1,237

Exchange Rate (Yen per US$1) 237 242 172 148 128

Source: Sanyo Annual Report Dataquest August 1989

Domestic versus International Revenue

Figure 2 shows the year-to-year growth of Sanyo's international and domestic sales for 1985 through 1989. In 1988, domestic sales were ¥511 billion and international sales were ¥726 billion. International sales have averaged 54.9 percent of total corporate revenue since 1984, steadily declining from 66.9 percent in 1984 to 41.3 percent in 1988.

Inl988,59 percent of corporate revenue came from Japan, 16 percent from the North America, 12 percent from Europe, 9 percent from Asia and 4 percent came from other regions.

Figure 2

Total Corporate Revenue Growth of International versus Domestic Sales

Percent Growth 30- ^M Domestic 20- i '"•••• \ International

-10

-20-

-30 b^N

-40- 1965 19S6 1987 1968

0004701-2 Source; Dataqueii Auguit 1989

Growth Rate

Figure 3 shows the year-to-year growth rates of product segment revenue. Following Figure 3 is a list of factors that explain the changes in 1988 product growth.

Figure 3

Growth Rates by Product Segment (Yen-Based)

Growth Rate 105 KS) Video [ 1 Industrial • 85 ^ ^M Audio HI Information [?^ Home r|p Batteries/others 65 Appliance I

45 25 1 5 - EXL ill \\imMM rli ^~" P^ "^ -15

-35 1985 P19B"6 1987 1988 0004701-3 Source: D*t>que>t Autuii 19S9

The major factors affecting Sanyo's growth in 1988 are listed below by product segment.

• Video equipment

- Sales were hurt by the continued strength of the yen and NIE competition.

- Marketing was reorganized midway through the year to develop domestic sales.

• Audio equipment

- Sales were hurt by the continued strength of the yen and NIE competition.

• Home applicances

- Sales of air conditioners increased overseas, but sales of microwave ovens decreased.

• Industrial and commercial equipment

Demand for commercial equipment was steady and exceeded industry average, and exports were up.

- Sales of supermarket and pharmaceutical showcases increased.

• Information systems and electronic devices

Demand for newly introduced PCs, facsimiles (nine percent of sales in this category), cordless phones, and word processors was strong.

Demand for Medicats, a medical education system, has been strong.

- Exports of semiconductors and electronic components increased.

• Batteries and other products

Sales for Cadnica batteries for VCRs and OA equipment increased (Sanyo has 30 percent of world market and 50 percent of domestic market).

- Lithium batteries for cameras performed well.

- Sales of exports increased due to Sanyo's improved marketing networks.

CAPITAL AND R&D INVESTMENTS

Sanyo's capital and R&D spending in 1988 increased 21.7 percent over 1987. As a percentage of total revenue, spending increased to 9.9 percent. Investments have increased substantially since 1986 due to Sanyo's effort to expand its nonconsumer product lines. In fiscal 1989, the Company plans to increase capital spending by an estimated 70 percent. Currently, 40 percent of Sanyo's total capital investment is for semiconductors and 12 percent is spent on each remaining product line. Figure 4 and Table 2 show the company's R&D and capital spending as a percentage of total corporate revenue.

Figure 4

Capital and R&D Spending as Percentage of Total Corporate Revenue Percent 12- ^@ Capita! Spending 10 i-'"''-f R&D Spending

^ 1984 1385 mm1966 1987 igss 0004701-* Source: Dataquest Auguit 1989

Table 2

Capital and R&D spending (Billions of Yen and Millions of Dollars)

1984 1985 1986 1987 1988 Corporate Revenue ¥ 1,421 ¥1.500 ¥1.181 ¥ 1,186 ¥1,237 $ 5.996 $ 6,198 $6,866 $ 8,014 $9,664 Coital Spending ¥ 43 ¥ 65 ¥ 43 ¥ 48 ¥ 67 S 181 $ 269 $ 250 $ 324 $ 523

% Total Revenue 3.0% 4.3% 3.6% 4.0% 5.4% R&D Spending ¥ 22 ¥ 24 ¥ 24 ¥ 53 ¥ 56 S 93 $ 99 $ 140 $ 358 $ 438

% Total Revenue 1.5% 1.6% 2.0% 4.5% 4.5% Total Spending ¥ 65 ¥ 89 ¥ 67 ¥ 101 ¥ 123 $ 274 S 368 $ 390 $ 682 $ 961 % Total Revenue 4.6% 5.9% 5.7% 8.5% 9.9% Exchange rate (Yen per USSl) 237 242 172 148 128

Source: Sanyo Annual Reports Dataquest August 1989

Target R&D Areas

In 1988, Sanyo reorganized its R&D labs in an effort to link them closer to the related business headquarters. Current research is focusing on molecularelectromcs, semiconductorrmcroprocessing, artificial intelligence, and new materials. Some examples of Sanyo's recent R&D accomplishments are as follows.

• Hi-Vision and liquid crystal projection TVs

• High-definition imaging filing system

0 Color video phone

Sublimation transfer color printer

Semiconductor laser for erasable optical disk systems

HEMT for satellite broadcasting converters

Superconductive thin films with a temperature of 116K

Semiconductor submicron process using X-rays

Solar cell that achieves the world's highest conversion efficiency rate of 9.6

A 200kw cogeneration fuel cell system

FACILmES

Table 3 shows the distribution of Sanyo's domestic and foreign manufacturing facilities.

Table 3

Sanyo Corporate Manufacturing Facilities

Country Facilities Typg

North America 10 Video, audio, lasers, energy, electronics

South America 6 Consumer

Europe 5 Consumer, printers, facsimiles

Afirica 3 Consumer

Asia 31 All products

Source: Dataquest August 1989

(Page intentionally left blank)

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation's semiconduc tor activity. Sanyo Electric merged with Tokyo Sanyo Electric Co., Ltd. Tokyo Sanyo was the manufacturing arm of the semiconductor operations for the Sanyo group.

Address Sanyo Electric Co., Ltd. Semiconductor Business Headquarters 180, Sakata Oiaumi-Machi Ora-Gun, Gunma, Japan

Phone (0276) 63-8058 Fax (0276) 63-7378

Management Hiroshi Yoshie Director General Manager of Semiconductor Group

Product Bipolar digital MOS memory areas MOS microdevices MOS logic Linear Discrete Optoelectronics

Ranking (based 8th among Japanese semiconductor manufacturers on revenue) 13th among worldwide semiconductor manufacturers

STRATEGY

Some of Sanyo's accomplishments in the semiconductor area during 1988 and early 1989, divided by product category, as well as future objects, are as follows:

Overall

Increase semiconductor revenue at least 25 percent in fiscal year 1989 and double revenue by 1990

Raise ratio of MOS ICs, primarily memory and logic, to 50 percent of total semi conductor production in near future (Currently, the Company's most successful products are analog ICs)

Announced plans to enter the BiCMOS market, using proprietary bipolar technol ogy, and will make proprietary logic ICs at Niigata facility (Sanyo has stated a goal of becoming a BiCMOS market leader)

Increase semiconductor capital investment by more than 100 percent in fiscal year 1989

Establish ULSI research center in Gifu prefecture in October 1989 to do R&D on 16- and 64Mb DRAMs and ASICs

Develop 32-bit RISC MPU for consumer applications in late 1989 through a joint venture with VLSI

Memory

Developed 60-80ns, 4Mb DRAM with Mosaid of Canada in anticipation of HDTV- related applications and to diversify IC product base

Began production of 1Mb DRAMs

Announced start of 256K SRAM production at VLSI center

Increased 256K SRAM and 1Mb DRAM production while gradually reducing 16K and 64K SRAM production

Micro and logic devices

- Signed agreement with Motorola in which Motorola will produce CMOS logic ICs for Sanyo

- Announced development of 16-bit air conditioner microcontroller (Sanyo will be the only company to have this chip)

Analog

- Develop single-chip solution for 1990/91 VCRs signal processing

- Introduced one-chip HDTV converter LSI to process video signals for MUSE/NTSC converters

Optoelectronics

- Announced LECs in red, green, and blue (Sanyo's new blue LED is the brightest in the world)

ORGANIZATION

Sanyo's semiconductor organizational chart in shown in Figure 5.

Figure 5

Sanyo Electric Co., Ltd. Semiconductor Business Headquarters Organization

Administration

R&D Centers

Transistor Division 4 LSI Division Thick Film IC Division

VLSI Division

LCD DMsion

Tottorl Sanyo Device Division

Marketing i. Sales Division

0004701-5 Source: Sanyo Electric Co., Ltd.

OPERATIONS

Exchange rates used in the semiconductor section of this profile are based on the calendar year.

Product Segments

• Bipolar IC—Specialty logic products such as level moniters, general-purpose timers, intermittent wiper controllers

• MOS memory, microdevices, logic—EPROMs, SRAMs, DRAMs, ASIC 8- and 16-bit microprocessors, 32-bit RISC MPU, standard cell

• Linear—Mainly for consumer products like watches, clocks, stereos, radios, TVs, VCRs

• Discrete—Transistors, diodes, FETs

• Optoelectronics—LEDs, LCD, CCD

• Hybrid ICs

Product Revenue

Figure 6 breaks out Sanyo's percentage of semiconductor revenue revenue by product. For example, 74.9 percent of Sanyo's semiconductor revenue came fromIC s in 1988 and 58.1 percent of its semiconductor revenue came from analog devices.

Figure 6

1988 Estimated Semiconductor Revenue Percent by Product (Millions of Dollars)

Bipolar 5.1%

MOS Memory 29.1% MOS Micro 23.4%

0004701-e Source: Dataquest August 1989

Regional Sales

Sanyo's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4

1988 Estimated Semiconductor Revenue by Region Percent by Region (Billions of Yen)

Product United States Japan Europe ROW

Semiconductor 1% 80% 2% 17% IC 1% 83% 2% 14% Bipolar Digital 0 92% 0 8% MOS (Technology) 0 82% 4% 13% MOS Memory 0 96% 0 4% MOS Micro 0 79% 16% 4% MOS Logic 1% 76% 0 24% Analog 2% 82% 1% 15% Discrete 2% 66% 0 32% Optoelectronics 0 95% 4% 1%

Exchange rate (Yen per USSl) 130

Note: Columns may not add to 100 percent due to rounding.

Source: Dataquest August 1989

Growth Rate

Sanyo's growth rate, by product line, is shown in Table 5 and Figure 7. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure? graphically compares Sanyo's growth rate in the world market with the growth rate of the world market itself. This information is then provided for the Japanese market in Table 6 and Figure 8.

Worldwide Market Growth Rate

In 1988, Sanyo's sales ofMOS memory ICs grew atremendous221.9percent which was, partly due to strong market conditions for memory products. The Company also showed strong growth in MOS logic as shown in Table 5 and Figure 7. These are two areas that the Company has stated it will continue to expand.

Table 5

Sanyo Sales in World Market (Millions of Dollars)

World Market 1987 1988 % Chang? Percent Chanee

Semiconductor $851 $1,083 27.3% 31.9% IC S556 $ 811 45.9% 36.5% Bipolar Digital 29 41 40.6% 9.2% MOS (Technology) 150 299 99.3% 53.1% MOS Memory 27 87 221.9% 90.3% MOS Micro 53 70 32.1% 39.8% MOS Logic 70 142 103.3% 28.2% Analog 377 471 25.0% 15.3% Discrete $210 $ 210 0.0% 13.2% Optoelectronics $ 85 $ 62 (26.7%) 25.4%

Exchange rate (Yen per USSl) 144 130

Source: Dataquest August 1989

Figure 7

Sanyo's Sales in World Market Compared with World Market

Growth Rate 240 T

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0OM701-7 Source: DBLiqurai Auguit 1SS9

Japanese Market Growth Rate

Sanyo had significant growth in both MOS memory and logic in the Japanese market as shown, in Table 6 and Figure 8.

Table 6

Sanyo's Sales in Japanese Market (Millions of Dollars)

Japanese Market 1987 1988 % Chanee Percent Chanee

Semiconductor 694 868 25.1% 35.6% IC 452 672 48.6% 39.1% Bipolar Digital 27 38 39.6% 18.3% MOS (Technology) 114 246 115.9% 58.4% MOS Memory 25 84 235.4% 85.4% MOS Micro 42 55 31.9% 35.9% MOS Logic 47 108 129.1% 50.3% Analog 311 302 (2.9%) 11.7% Discrete 159 138 (13.4%) 18.5% Optoelectronics 83 59 (28.6%) 42.3%

Exchange rate (Yen per USSl) 144 130

Source: Dataquest August 1989

Figure 8

Sanyo's Growth Rate Compared with Japanese Market

Growth Rate 270

-60 Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product CX)04701-8 Source: Dataquest August 1989

Other Japanese Companies

The growth rate by product line for Sanyo is compared with that of the Japanese companies tracked by Dataquest in Figures 9 and 10. Dataquest surveyed a total of 18 companies, plus a category called "other." The total of these companies' revenues were used for comparison in Figures 9 and 10.

Figure 9

Sanyo versus Japanese Companies in Japanese Market

Growth Rate 270

Semiconductor IC Bipolar MOS Memory Micro Logic Anaiog Discrete Opto Product 0004701-9 Source: Dataquest August 1989

Figure 10

Sanyo versus Japanese Companies in World Market

Growth Rate 240

-30 Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004701-10 Source: Dstaqucit Auguil 1989

Channels of Distribution

Dataquest believes that less than 25 percent of Sanyo's semiconductor production is for captive use. This percentage has decreased as Sanyo has penetrated more of the merchant semiconductor market and made strides to increase the portion of corporate revenue that is semiconductors.

Sales within Japan are handled through sales offices in Japan. Several independent agents also sell Sanyo semiconductor products. Approximately 10 percent of Sanyo's semiconductor products are sold through distributors.

Sales outside Japan are made through Sanyo sales companies in various countries. These include:

• Sanyo Semiconductor Distribution in North America

• O.S. Semiconductor Co., Ltd. and Ton San Electric Co., Ltd. in Taiwan

• Shin-nichi Electronics Ptd. Ltd. in Singapore

• Shin-nichi Electronic Devices in Hong Kong

Sanyo Semiconductor in West Germany

Sanyo Semiconductor (Shekou) Ltd. in People's Republic of China

CAPITAL SPENDING

Sanyo has three semiconductor R&D centers: Tsukuba Research Center, Semiconductor Research Center, and VLSI Research Center. All three are focusing on the following areas:

Optoeletronics

Super high speed devices

Large-scale memories

Deep submicron lithography. X-ray lithography, and focused ion beams

Three-dimensional structure ICs

Biotechnology

Sanyo plans to increase its capital spending by more than 100 percent in fiscal 1989. Approximately 40 percent will be used for DRAM development and 60 percent will be used for expanding the capacity of microdevices. Semiconductor capital investments as a percentage of total revenue are shown in Tables 7 and 8.

Table 7

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year (Millions of Dollars)

im. 1984 1985 1986 1987 1988 Revenue $351 $455 $457 $615 $851 $1,083

Semiconductor Capital Spending $ 51 $135 $197 $107 $174 $ 223

Growth Rate of Capital Spending N/A 167% 46.3% (46%) 62% 28%

Percent of Revenue 14% 30% 43% 17% 20% 21%

Exchange Rate (Yen per US SI) 237 237 238 168 144 130

N/A = Not Available

Source: Dataquest August 1989

Table 8

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year (Billions of Yen)

1983 1984 1985 1986 1987 1988

Revenue ¥ 83 ¥108 ¥109 ¥103 ¥123 ¥141

Semiconductor Capital Spending ¥ 12 ¥ 32 ¥ 47 ¥ 18 ¥ 25 ¥ 29

Capital Spending Growth Rate 20% 167% 47% (62%) 39% 16%

Exchange Rate (Yen per US SI) 237 237 238 168 144 130

Source: Dataquest August 1989

FACILmES

Sanyo plans to establish a plant in an ASEAN country in 1990. A location has not been officially announced, but Dataquest believes it may be Singapore. The new plant will do assembly for hybrids and general-purpose ICs. Table 9 lists Sanyo's semiconductor facilities and functions.

Table 9 Sanyo Semiconductor Facilities

Name/Location Function VLSI Engineering/LCD Engineering Fab, assembly, test— Gifu CCD, SRAMs, gate arrays, CBIC Semiconductor Business Headquarters Fab, assembly—diode, Gunma transistor Niigata Sanyo Fab—DRAM, MPU, linear, Niigata ASIC, PLD Tottori Sanyo Fab, assembly—laser, LEDs Tottori Hanyu Sanyo Denshi Assembly—ÎCs Saitama Sanyo Silicon Denshi Assembly—ICs Tochigi Korea Tokyo Silicon Co., Ltd. Assembly—MOS, LCD, discrete, Korea Sanyo Electric (Taichung) Taiwan Assembly—ÎCs, discrete Hong Kong Sanyo Semiconductor (Shekou) Ltd. Assembly—ÎC, discrete China Sanyo Isesaki Electronics Assembly—ÎC, discrete Gunma Miyoshi Electronics Assembly—discrete Gunma Tokyo IC Co. Assembly—discrete, hybrid Gunma

Source: Dataquest August 1989

ALLIANCES AND AGREEMENTS

Sanyo's alliances and agreements for 1986 through 1988 are summarized in Figure 11. For more in-depth information, please refer to Volume n of the Japanese Semiconductor Industry Service located behind the tab entitled "Strategic Alliances."

Figure 11

Sanyo Electric Co., Ltd. Semiconductor Alliances and Agreements 1986 to 1988

Atmel Corporation CMOS EPROMs

32-blt RISC MPU MPU for ContrQl Systems

0004701-11 Source: Dataquest August 1989

REVENUE SUMMARY

Tables 10 and 11 show Sanyo's semiconductor revenue in detail. The tables show sales from 1983 to 1988 in both billions of yen and millions of dollars.

Table 10

Sanyo Electric Co., Ltd. Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

1981 1982 1983 1984 mi ISM 12S2 1988*

Total Semiconductor 226 241 351 455 457 615 851 1083 TotallC 148 146 247 305 314 407 556 811 Bipolar Digital (Technology) 12 12 14 18 18 23 29 41 MOS (Technology) 23 28 50 67 68 88 150 299 NMOS 12 15 28 26 26 31 37 63 PMOS 4 3 2 1 0 0 0 0 CMOS 7 10 20 40 42 57 113 236 BiCMOS 0 0 0 0 0 0 0 0 MOS (Function) 23 28 50 67 68 88 150 299 MOS Memory 0 0 0 1 1 5 27 87 MOS Micro Devices 0 5 23 35 36 44 53 70 MOS Logic 23 23 27 31 31 39 70 142 Analog 113 106 183 220 228 296 377 471 Total Discrete 47 64 58 105 103 159 210 210 Transistor 33 46 51 84 84 109 151 170 Diode 11 15 7 21 19 25 28 32 Thyristor 0 0 0 0 0 0 0 0 Other Discrete 3 3 0 0 0 25 31 8 Total Optoelectronic 31 31 46 45 40 49 85 62 Exchange Rate (Yen per US $1) 221 249 237 237 238 168 144 130 •Preliminary estimates for 1988

Source: Dataquest August 1989

Table 11

Sanyo Electric Co., Ltd. Estimated Worldwide Semiconductor Revenue (Billions of Yen)

1981 1982 1983 1984 1985 1986 1987 J988*

Total Semiconductor 50 60 83 108 109 103 123 141

TotallC 33 36 59 72 75 68 80 105

Bipolar Digital (Technology) 3 3 3 4 4 4 4 5

MOS (Technology) 5 7 12 16 16 15 22 39 NMOS 3 4 7 6 6 5 5 8 PMOS 1 1 0 0 0 0 0 0 CMOS- 2 2 5 9 10 10 16 31 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 5 7 12 16 16 15 22 39 MOS Memory 0 0 0 0 0 1 4 11 MOS Micro Devices 0 1 5 8 9 7 8 9 MOS Logic 5 6 6 7 7 7 10 18

Analog 25 26 43 52 54 50 54 61

Total Discrete 10 16 14 25 25 27 30 27 Transistor 7 11 12 20 20 18 22 22 Diode 2 4 2 5 5 4 4 4 Thyristor 0 0 0 0 0 0 0 0 Other Discrete 1 1 0 0 0 4 4 1

Total Optoelectronic 7 8 11 11 10 8 12 8

Exchange Rate (Yen per US SI) 221 249 237 237 238 168 144 130

•Preliminary estimates for 1988

Source: Dataquest August 1989

(Page intentionally left blank)

Balance Sheets

Tables 12 and 13 show Sanyo's corporate consolidated balance sheet for 1984 to 1988 in yen and U.S. dollars, respectively. Sanyo's fiscal year ends on November 30.

Table 12

Consolidated Balance Sheet Fiscal Years 1984 -1988 (Billions of Yen)

Balance Sheet (November 30) 19S4 1985 1986 1987 1988

Total Current Assets ¥ 887 ¥ 876 ¥ 751 ¥ 1,033 ¥ 1.124 Cash ¥ 67 ¥ 67 ¥ 66 ¥ 36 ¥ 30 Receivables ¥ 333 ¥ 327 ¥ 321 ¥ 364 ¥ 390 Inventory ¥ 186 ¥ 198 ¥ 172 ¥ 187 ¥ 179 Other Current Assets ¥ 301 ¥ 284 ¥ 192 ¥ 446 ¥ 525 Net Property, Plant and Equipment ¥ 158 ¥ 190 ¥ 195 ¥ 353 ¥ 353 Depreciation N/A ¥ 168 ¥ 197 ¥ 410 ¥ 437 Other Assets ¥ 186 ¥ 194 ¥ 199 ¥ 168 ¥ 192

Total Assets ¥ 1,231 ¥1,260 ¥ 1,145 ¥1,554 ¥1,669

Total Current Liabilities ¥ 717 ¥ 723 ¥ 633 ¥ 681 ¥ 788 Long-Term Debt ¥ 61 ¥ 55 ¥ 40 ¥ 180 ¥ 150 Other Liabilities ¥ 59 ¥ 61 ¥ 58 ¥ 68 ¥ 71

Total Liabilities ¥ 837 ¥ 839 ¥ 731 ¥ 929 ¥1,009

Total Shareholders' Equity ¥ 394 ¥ 421 ¥ 414 ¥ 625 ¥ 660 Common Stock ¥ 60 ¥ 62 ¥ 64 ¥ 106 ¥ 129 Other Equity ¥ 109 ¥ 108 ¥ 107 ¥ 309 ¥ 330 Retained Earnings ¥ 225 ¥ 251 ¥ 243 ¥ 210 ¥ 201 Total LiabUiues and Total Equity ¥1,231 ¥1,260 ¥1,145 ¥1,554 ¥1,669

(Continued)

Table 12 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Income Statement (March 31) 1984 mi im. 1987 1988

Revenue ¥ 1,421 ¥1,500 ¥1,181 ¥ 1.186 ¥1.237 Domestic Sales ¥ 470 ¥ 518 ¥ 538 ¥ 638 ¥ 726 Overseas Sales ¥ 951 ¥ 982 ¥ 643 ¥ 548 ¥ 511 Other income 0 0 0 0 0 Cost of Sales ¥ 1,142 ¥1,214 ¥ 996 ¥ 998 ¥ 1,033 Gross Margin (%) 20 19 16 16 16 R&D Expense ¥ 22 ¥ 24 ¥ 25 ¥ 53 ¥ 56 SG&A Expense ¥ 218 ¥ 233 ¥ 198 ¥ 200 ¥ 208 Other Operating Expenses (¥ 20) (¥ 18) (¥ 21) (¥ 19) (¥ 19) Total Operating Expenses ¥ 1,340 ¥ 1,429 ¥ 1,173 ¥ 1.179 ¥ 1,222 Operating Income (Loss) ¥ 81 ¥ 71 ¥ 8 ¥ 7 ¥ 15 Interest, Net ¥ 1 (¥ 3) ¥ 5 (¥ 6) ¥ 9 Pretax Income ¥ 82 ¥ 68 ¥ 13 ¥ 1 ¥ 24 Provision for Taxes (Credit) ¥ 48 ¥ 39 ¥ 10 ¥ 10 ¥ 16 Effective Tax Rate (%) 59 57 58 56 56 Extraordinary Items ¥ 10 ¥ 7 (¥ 1) (¥ 8) (¥ 2) Net Income ¥ 44 ¥ 36 ¥ 2 (¥ 17) ¥ 6

Avg. Shares Outstanding (Millions) 1,192 1.189 1,134 1,436 1,764 Employees 24,797 25,429 25,599 40.590 39.179 Capital Spending ¥ 43 ¥ 65 ¥ 43 ¥ 48 ¥ 67

Exchange Rate (Yen per USSl) 237 242 172 148 128

Source: Dataquest August 1989

. Table 13

Consolidated Balance Sheet for Sanyo Electric Co., Ltd. Fiscal Years 1984-1988 (Millions of Dollars)

Balance Sheet (November 30) 1984 1985 1986 1987 1988

Total Current Assets $ 3,743 $ 3,620 $4366 $ 6,980 $ 8,781 Cash $ 283 $ 277 $ 384 $ 243 $ 234 Receivables $ 1,405 $ 1,351 $1,866 $ 2,459 $ 3,047 Inventory $ 785 $ 818 $1,000 $ 1,264 $ 1,398 Other Current Assets $ 1,270 $ 1,174 $1,116 $ 3.014 $ 4,102 Net Property, Plant and Equipment $ 667 $ 785 $ 1,134 $ 2385 $ 2.758 Depreciation N/A $ 694 $ 1,145 $ 2.770 $ 3.414 • Other Assets $ 785 $ 802 $ 1,157 $ 1,135 $ 1,500

Total Assets $ 5,194 $5,207 $ 6,657 $10,500 $13,039

Total Current Liabilities $ 5,477 $ 6,178 $ 8,186 $13,514 $16,688 Long-Term Debt $ 257 $ 227 $ 233 $ 1.216 $ 1,172 Other Liabilities $ 249 $ 252 $ 337 $ 459 $ 555

Total Liabilities $ 3,532 $ 3,467 $4,250 $ 6.277 $ 7,883

Total Shareholders' Equity $1,662 $ 1,740 $ 2,407 $ 4,223 $ 5.156 Common Stock $ 253 $ 256 $ 372 $ 716 $ 1.008 Other Equity $ 460 $ 446 $ 622 $ 2.088 $ 2.578 Retained Earnings $ 949 $ 1,037 $ 1,413 $ 1.419 $ 1.570

Total LiabiliUes and Total Equity $5,194 $5,207 $6,657 $10^00 $13,039

(Continued)

Table 13 (Continued)

Consolidated Balance Sheet for Sanyo Electric Co., Ltd. Fiscal Years 1984-1988 (Millions of Dollars)

Balance Sheet (November 30) 1984 1985 1986 1987 1988

Revenue $ 5.996 $ 6.198 $6,866 $ 8.014 $9,664 Domestic Sales $ 1,983 $ 2,140 $ 3,128 $4,311 $ 5,672 Overseas Sales $4,013 $ 4,058 $ 3.738 $ 3,703 $ 3,992 Other income 0 0 0 0 0 Cost of Sales $ 4,819 $ 5,017 $ 5.791 $ 6,743 $ 8,070 Gross Margin (%) 20 19 16 16 16 R&D Expense $ 93 $ 99 $ 145 $ 358 $ 438 SG&A Expense $ 920 $ 963 $1,151 $ 1,351 $ 1,625 Other Operating Expenses ($ 84) ($ 74) ($ 122) ($ 128) ($ 148) Total Operating Expenses $ 5,654 $ 5.905 $ 6.820 $7,966 $ 9,547 Operating Income (Loss) $ 342 $ 293 $ 47 $ 47 $ 117 Interest, Net S 4 ($ 12) $ 29 ($ 41) $ 70 Pretax Income $ 346 $ 281 $ 76 $ 7 $ 188 Provision for Taxes (Credit) $ 203 $ 161 $ 58 $ 68 $ 125 Effective Tax Rate (%) 59 57 58 56 56 Extraordinary Items $ 42 $ 29 ($ 6) ($ 54) ($ 16) Net Income $ 186 $ 149 $ 12 ($ 115) $ 47

Avg. Shares Outstanding (Millions) 1,192 1,189 1.134 1,436 1,764 Employees 24,797 25,429 25.599 40,590 39,179 Capital Spending $ 181 $ 269 $ 250 $ 324 $ 523

Exchange Rate (Yen per US$1) 237 242 172 148 128

Source: Dataquest August 1989

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation. Seiko Epson Corporation was incorporated in November 1985 by a merger between Suwa Seikosha and Epson Corportion. It is a privately held company.

Address Seiko Epson Corporation 3-5, 3-chome, Owa Suwa City Nagano Prefecture 392 Japan

Phone (0266) 52-3131 Fax (0266) 53-4844

President Tsuneya Nakamura Chairman Reijiro Hattori

Main Product Areas Computers Printers Semiconductors and electronic devices Consumer products Other products

No. of Employees 8,150 (nonconsolidated)

Top Shareholders Seiko Epson is privately held by Hattori Sell

% Outstanding Stock Foreign-Owned 0

Stock Exchanges Not public

Ranking (based 26th among Japanese electronics companies on revenue)

STRATEGY

Seiko Epson's goals for 1989 and accomplishments in 1988 are highlighted in this section.

Seiko Epson's corporate goals include the following:

Increase global presence of Epson-brand products worldwide

Increase local production, marketing, and R&D

Focus on three priorities in management—Product innovation, employee pride, and internal and external communication

Maintain commitment to quality from product design to shipment

Maintain position as market leader in dot-matrix printers

Move plastic eyeglass lens production for United States export to Mexico by 1990

The following developments occurred at Seiko Epson during 1988 and early 1989:

Introduced book-size laptop PC called PC-286 Note Executive

Began exporting small color LCD TVs to Europe

Established a second PC production facility at subsidiary, Shonai Electronics Industry, and renamed it Tohoku Epson

Increased the number of employees by approximately 40 percent during year ending March 31,1988

ORGANIZATION

Seiko Epson is a member of the Seiko Group, which is owned by the Hattori Company, Ltd. Figure 1 shows the organization of the Seiko Group.

Figure 1

Seiko Group Organizational Chart

Hattori Seiko Company, Ltd.

Seiko Epson Corporation Seiko Instruments, Inc Seikosiia Co., Ltd. •wtsmssitasmaaaa i.iiim.ijiiuii.i I ]

00047O4-1 Source: Seiko Epson Corp.

OPERATIONS

Product Segments

Seiko is divided into eightproduct groups. Examples of products within each category are listed below.

Printers—Dot matrix, miniature, ink-jet, and laser printers printer mechanisms for calculators, POS systems, and cash registers

Computers and office machines—Portable and desktop PCs, IBM-compatible PCs

Watches—Analog and digital

Semiconductor devices—CMOS SRAMs, analog, logic gate arrays, ASIC

Liquid crystal displays—LCDs for watches, calculators, pocket color TVs, instrument panels, and computers

Disk drives—Floppy, hard, and optical disk drives

Electronic components, assembly robots, and factory automation systems—Color filters, displays, modules for LCD pocket color TVs, components for PCs, peripherals, watches, and VCRs, small-scale assembly robots and precision production equipment

• Corrective lenses—Contact and eyeglass lenses, mainly plastic

Product Revenue

Seiko Epson does not repon product group revenue; however, in 1988 total revenue was reponed to be ¥130,480 million. Fiscal year 1987 revenue was reponed at ¥191,054 million. Its major customer is the Hattori Seiko Co., Ltd.

Domestic versus International Revenue

The Company does not report domestic versus international revenue, but exports for the Company are high. In 1988, 70 percent of its products were exported.

CAPITAL AND R&D INVESTMENTS

Seiko Epson does not report corporate capital spending on an annual basis. Dataquest believes that in 1988, capital spending was approximately ¥10 billion. The Company has emphasized creativity in its R&D efforts. It also is pursuing new technologies based on megatronics. Some of these technologies are large-scale miniaturation, ultraprecision processing techniques, thin-film processing, and software development for artificial intelligence.

FACILmES

Table 1 shows the distribution of Seiko Epson's domestic and foreign manufacturing f acihties.

Table 1

Seiko Epson Corporate Manufacturing Facilities

Countrv Facilities Ii!E£

Japan 13 All products

Overseas 18 Subsidiaries and affiliates 7 Representatives 12 Manufacturing plants

Source: Dataquest August 1989

(Page intentionally left blank)

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation's semiconduc tor activity. Seiko Epson began producing semiconductors in 1980 in an effort to improve the quality and reduce the size of its watches. In 1988, revenue from the semiconductor division reached 15 percent of the total corporate revenue.

Address Seiko Epson Corporation Semiconductor Operation Division Fujimi Plant 281 Fujimi, Fujimi-machi Suwa-gun, Nagano-ken, 399-02 Japan

Phone (0266) 62-5380 Fax (0266) 62-5393

Management Katsumi Yamamura Senior Managing Director Semiconductor Group

Product CMOS memory iCMO S microdevices CMOS gate arrays Linear ASIC :Semicusto m

Ranking (based 16th among Japanese semiconductor n on revenue) 30th among worldwide semiconductor

STRATEGY

Below are some of Seiko Epson's accomplishments in the semiconductor area during 1988 and early 1989, as well as future objectives. This includes new product announcements.

Overall Goals

• Continue to focus on CMOS semiconductor products

• Expand ASIC production (mainly semicustom micro gate arrays) by 10 percent by the fall of 1989 in order to prepare for growing competition

• Expand Fujimi plant for ASIC production (Total investment will be approximately ¥5 billion.)

• Promote technical tie-ins with top corporations around the world to develop custom ICs and new products

• Boost semiconductor sales to OEMs (Currently, OEM sales equals 10 percent of total semiconductor revenue.)

Accomplishinents

• Established sales and customer support office in Raleigh, North Carolina

• Moved three semiconductor divisions from Nagano to Tokyo (Design, Sales and Headquaners)

• Introduced 1Mb SRAMs and plans to boost SRAM production

• Established design center in Taiwan (Currently, there is one in San Jose, California, two in Japan, and one planned for West Germany)

ORGANIZATION

Seiko Epson's semiconductor division organizational chart is shown in Figure 2.

Figure 2

Seiko Epson Corporation Semiconductor Operation Division Organizational Chart

00047tM-2 Source: Seiko Epion Corp.

OPERATIONS

Note: Exchange rates used in the semiconductor section of this profile are based on the calendar year.

Product Segments

• MOS Memory—CMOS 256K, 1Mb SRAMs

• MOS microdevices—Small number of MPUs

MOS logic—CMOS gate arrays, ASIC

Analog—Converters, sensors, hybrid and melody ICs, ICs for watches and clocks

Custom—CMOS analog, high and low voltage operation, and high-density mounted ICs

Product Revenue

Figure 3 shows Seiko's percentage of semiconductorrevenue revenue by product. For example, 100 percent of Seiko's semiconductor revenue came from ICs, and MOS technology made up 95.2 percent of the total IC revenue.

Figure 3

1988 Estimated Semiconductor Revenue Percent by Product (Millions of Dollars)

Analog 4.8%

MOS Micro 4.1%

0004704-3 Source: Ddaqueit August 1989

Regional Sales

Seiko's 1988 estimated percentage of semiconductor revenue by region is shown in Table 2.

Table 2

1988 Estimated Semiconductor Revenue by Region Percent by Region (Billions of Yen)

United Product States Japan Europe ROW

Semiconductor 14% 73% 6% 7% IC 14% 73% 6% 7% Bipolar Digital 0 0 0 0 MOS (Technology) 14 73 6 7 MOS Memory 16 61 12 11 MOS Micro 0 100 0 0 MOS Logic 14 76 4 6 Analog 21 69 5 5 Discrete 0 0 0 0 Optoelectronics 0 0 0 0

Exchange Rate (Yen per USSl) 130

Source: Dataquest August 1989

Growth Rate

Seiko's growth rate by product line is shown in the tables and figures that follow. Table 3 compares its growth rate of revenue with the world market for 1987 and 1988. Figure 4 graphically compares Seiko Epson' s growth rate in the world market with the growth of the world market itself (This information will be provided for the Japanese market as well.)

Worldwide Market Growth Rate

In 1988, Seiko grew significantly faster than die world growth rate in MOS micro, as shown in Table 3 and Figure 4.

Table 3

Seiko Espon Sales in World Market (Millions of Dollars)

World Market Product 1987 1988 % Change % Chanee

Semiconductor $245 $311 27.0% 31.9% IC $245 $311 27.0% 36.5% Bipolar Digital 0 0 0 9.2% MOS (Technology) 231 296 28.2% 53.1% MOS Memory 71 94 32.2% 90.3% MOS Micro 6 12 105.1% 39.8% MOS Logic 154 190 23.4% 28.2% Analog 14 15 4.4% 15.3% Discrete 0 0 0 13.2% Optoelectronics 0 0 0 25.4% Exchange Rate (Yen per US$1) 144 130

Source: Dataquest August 1989

Figure 4

Seiko Epson Growth Rate Compared with World Market

Growth Rate 120- World Market 100- Seiko Epson

80-

60-

WKSS m&-} Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004704-4 Source: Daiaqucit Au(u>i 19S9

Japanese Market Growth Rate

As shown in Table 4 and Figure 5, Seiko grew more than twice the rate of the Japanese MOS micro market.

Table 4

Seiko Epson Sales in Japanese Market (Millions of Dollars)

Japanese Market Product 1987 1988 % Change % Chang?

Semiconductor $172 $225 30.9% 35.6% IC $172 $225 30.9% 39.1% Bipolar Digital 0 0 0 18.3% MOS (Technology) 163 215 32.0% 58.4% MOS Memory 42 58 38.5% 85.4% MOS Micro 6 12 96.9% 35.9% MOS Logic 115 145 26.1% 50.3% Analog 9 10 10.8% 11.7% Discrete 0 0 • 0 18.5% Optoelectronics 0 0 0 42.3%

Exchange Rate (Yen per USSl) 144 130

Source: Dataquest August 1989

Figure 5

Seiko Epson Growth Rate Compared with Japanese Market Growth Rate 120- MssBn Japanese Market 100 \"-. \ \ Seiko Epson

80-

.^R. H Semiconductor tC Bipolar MOS Memory Micro Logic Analog DiscretWe- OptO Product 0004704-6 Source: Diliquett iAu(ui t 19B9 14 © 1989 Dataquest Incorporated August JSIS Volume III 0004704 Seiko Epson Corporation Semiconductor

Other Japanese Companies

The growth rate by product line for Seiko Epson is compared with that of the Japanese companies tracked by Dataquest in the following graphs. Dataquest surveys a total of 18 companies, plus a category called "Other." The total of these companies' revenue was used for comparison in Figures 6 and 7.

Figure 6

Seiko Epson versus Japanese Companies in Japanese Market

Growth Rate 120- Japanese Companies 100 (33 Seiko Epson

60-

40-

20-

mnyjf Semiconductor IC Bipolar MOS Memory Micro Logic An^og Discrata OptO Product 0004704-6 Source: Dataqucil Augiul t9£9

Figure 7

Seiko versus Japanese Companies in World Market

Growth Rate 120- SS Japanese Companies 100 I '•'''.-. i Seiko Epson

60-

20-

Semiconductor IC Bipolar MOS Memory Micro Logic Anaiog Discrete Opto Product 0004704-7 Source: Dataquest August 1989

Channels of Distribution

Seiko Epson sells its products through a network of its own sales offices in Japan. Overseas, it sells products through company regional headquarters and their respective network of sales agents.

CAPITAL SPENDING

Semiconductor capital investments as a percentage of total revenue are shown in Table 5 and Table 6.

Table 5

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Millions of Dollars

1984 1985 1986 1987 1988

Revenue $114 $92 $167 $243 $308

Semiconductor Capital Spending $76 $34 $30 $42 $54

Growth Rate of Capital Spending 100% (55.7%) (11%) 40% 29%

Percent of income 67% 36% 18% 17% 18%

Exchange Rate (Yen per USSl) 237 238 168 144 130

Source: Dataquest August 1989

Table 6

Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—Billions of Yen

1984 1985 1986 1987 1988

Revenue ¥27 ¥22 ¥28 ¥35 ¥40

Semiconductor Capital Spending ¥18 ¥ 8 ¥ 5 ¥ 6 ¥ 7

Capital Spending Growth Rate 100% (56%) (38%) 20% 17%

Exchange Rate (Yen per USSl) 237 238 168 144 130

Source: Dataquest August 1989

FAdLITIES

Seiko Epson's semiconductor facilities are listed in Table 7.

Table 7 Seiko Epson Semiconductor Facilities

Name/Location Function

Tomisato Plant Assembly Nagano

Fujimi Plant (4 lines) Fab—all semiconductor Nagano

Source: Dataquest August 1989

ALLIANCES AND AGREEMENTS

Seiko Epson' s alliances and agreements for 1986 to 1988 are summarized in Figure 8. For more in-depth information, please refer to volume II of the Japanese Semiconductor Industry Service behind the tab entitled "Strategic Alliances."

Figure 8

Seiko Epson Corporation Semiconductor Alliances and Agreements 1986 to 1988

D0047D4-B Source: Oalaquest August 1989

REVENUE SUMMARY

Tables 8 and 9 show Seiko Epson's semiconductor revenue in detail. The tables show sales from 1983 to 1988 in both millions of dollars and billions of yen.

Table 8

Seiko Epson Estimated Worldvnde Semiconductor Revenue (Millions of Dollars)

1984 19R5 1986 1987 19?$*

Total Semiconductor 115 93 165 245 311

TotallC 115 93 165 245 311

Bipolar Digital (Technology) 0 0 0 0 0

MOS (Technology) 115 93 147 231 296 NMOS 0 0 0 0 0 PMOS 0 0 0 0 0 CMOS 115 93 147 231 296 BiCMOS 0 0 0 0 0

MOS (Function) 115 93 147 231 296 MOS Memory 23 13 44 71 94 MOS Micro Devices 1 0 0 6 12 MOS Logic 91 80 103 154 190

Analog 0 0 18 14 15

Total Discrete 0 0 0 0 0

Transistor 0 0 0 0 0 Diode 0 0 0 0 0 Thyristor 0 0 0 0 0 Other Discrete 0 0 0 0 0

Total Optoelectronic 0 0 0 0 0

Exchange Rate (Yen per US$ 1) 237 238 168 144 130

•"Preliminary estimates for 1988

Source: Dataquest August 1989

Table 9

Seiko Epson Estimated Worldwide Semiconductor Revenue (Billions of Yen)

1984 1985 1986 1987 1988*

Total Semiconductor 27 22 28 35 40

Total IC 27 22 28 35 40

Bipolar Digital (Technology) 0 0 0 0 0

MOS (Technology) 27 22 25 33 38 NMOS 0 0 0 0 0 PMOS 0 0 0 0 0 CMOS 27 22 25 33 38 BiCMOS 0 0 0 6 0 MOS (Function) 27 22 25 33 38 MOS Memory 5 3 7 10 12 MOS Micro Devices 0 0 0 1 2 MOS Logic 22 19 17 22 25

Analog 0 0 3 2 2

Total Discrete 0 0 0 0 0

Transistor 0 0 0 0 0 Diode 0 0 0 0 0 Thyristor 0 0 0 0 0 Other Discrete 0 0 0 0 0

Total Optoelectronic 0 0 0 0 0

Exchange Rate (Yen per US$1) 237 238 168 144 130

"Preliminary estimates for 1988

Source: Dataquest August 1989

(Page intentionally left blank)

BALANCE SHEETS

Seiko Epson is a privately held company and therefore, corporate financial information is unavailable. Seiko Epson's fiscal year ends on March 31.

SUMNfARY The purpose of this section is to provide a one-page overview of the corporation.

Address Head Office Tokyo Office 22-22 Nagaike-cho 8 Ichigaya Hachiman-cho Abeno-ku, Shinjuku-ku Osaka 545, Japan Tokyo 162, Japan Phone (06) 621-1221 (03)260-1161 Fax (06) 628-1653 (03) 260-1822 President Haruo Tsuji Chairman Akira Saeki Main Product Areas TV and video systems group Audio systems group Appliance systems group Information systems and electronic components group

No. of Employees 29,351

Top Shareholders Nippon Life 5.5% Fuji Bank 4.6% Sanwa Bank 4.3% Daiwa Bank 4.2% Yasuda Life 4.2% Dai Ichi Life 4.0% Sumitomo Life 3.7% Taisho Marine & Fire Insurance 3.1% DKB 2.8% Yasuda Trust & Banking 2.8% % Outstanding Stock Foreign-Owned 2.5% Stock Exchanges All major Japanese, Paris, Luxembourg, Zurich, Basel, Geneva Ranking (based on 8th among Japanese electronics manufacturers revenue) Leader among world consumer electronics and office automation manufacturers

STRATEGY

Sharp's goals for 1989 and accomplishments in 1988 are highlighted in this section. Sharp's corporate goals include the following:

Strengthen sales organization to accommodate growing domestic demand Increase overseas production to meet local requirements and curb fluctuations in exchange rates

Increase sales of nonconsumer products to reach 41 percent of total sales in fiscal year 1989 and 50 percent of total sales within the next few years Emphasize development of optoelectronic technology as a core for the development of new data processing, office automation, and consumer products The following developments occurred at Sharp during 1988: Streamlined operations to reduce costs

Expanded production capacity for semiconductors, color liquid crystal displays (LCDs), and optoelectronics Established optoelectronics R&D lab in August 1988

Reorganized corporate R&D labs, creating one central lab for basic R&D and individual labs for each product line

Upgraded production capacity for VCRs and office automation equipment Built a second factory in the United Kingdom for VCRs, microwave ovens, electronic typewriters, and copy machines

ORGANIZATION

Sharp is not a member of any of Japan's large industrial groups; however, it does have loose connections with the Sanwa Group, which has close financial relations with the Sanwa Bank. Sharp is a member of the Sanwa Group's policy-making council called Sansui-Kai, or Third Wednesday Conference. This council is composed of the presidents of 42 Sanwa Group companies or related companies. Figure 1 shows Sharp Corportion's organization.

Figure 1 Sharp Corporation Organizational Chart

Corporate Strategy Central Research Planning Office Tolcyo Research

Personal Headquarters Energy Conversion Precision Engineering Engineering Headquarters Computer Systems

Computer Center

Corporate Design Headquarters

Product Reliability Headquarters Information Communication Sales Overseas Business Headquarters Domestic Electronic Components Sales Domestic Sales Headquarters Special Equipment Sates

Accounts and Finance Headquarters

1 TV and Video Lab Production Ranning Headquarters TV Division Video Division TV and Video Systems Group Audio Systems Lab

Audio Systems Group Audio Division Communications Audio Division Legal Office Appliance Systems LaiD Refrigeration Systems Division Appliance Systems Group Cooking Systems Division

Air Conditioning Division iC Group Laundry Division

Electronics Components Group information Systems Lab Computer Division Information Systems Group

Tokyo Branch Personal Equipment Division Copier Division

0004313-1 Source: Sharp Corporation

OPERATIONS Sharp reported consolidated fiscal 1988 net earnings of ¥20.3 billion on revenue of ¥1,225.2 billion. This represents a sales increase of 6.7 percent over fiscal 1987 and a decrease in net income of 2.4 percent.

Product Segments Sharp is divided into four product groups. Examples of products within each group category are listed below.

• TV and Video Systems Group—TVs, VCRs, video cameras, video disk systems • Audio Systems Group—Tape and stereo equipment, digital audio equipment • Appliance Systems Group—Refrigerators, washing machines, microwave ovens, air conditioners, other home appliances

• Information Systems and Electronic Components Group—Pocket computers, PCs, Japanese word processors, facsimiles, copiers, CAD systems, typewriters, electronic cash registers, measuring equipment, tuners, ICs, optoelectronics, printed circuit boards, solar batteries, calculators

Product Revenue

Figure 2 and Table 1 show Sharp's nonconsolidated revenue by product segment from 1983 to 1988. In 1988, the only product area that increased revenue was information systems and electronic components.

Figure 2

Product Revenue as a Percent of Total Corporate Revenue

Percentage

1983 1964 1985 1986 1987 1988

0004313-2 Source: Dataqueit July 1989

Table 1

Sales by Product Segment (Billions of Yen)

1983 1984 1985 1986 1987 1988

TV and Video Systems 205 257 321 334 311 297 Audio Systems 88 90 98 102 90 79 Appliance Systems 129 144 180 208 178 175 Information Systems and Electronic Components 227 267 310 311 290 323 Total Revenue (Nonconsolidated) 649 758 909 955 869 874 Exchange Rate (Yen per US$1) 249 236 245 221 160 138

Source: Sharp Corporation Annual Report Dataquest July 1989

Domestic versus International Revenue Figure 3 shows the year-to-year growth of Sharp's consolidated international and domestic sales for 1985 through 1988. In 1988, domestic sales were ¥678 billion. International sales were ¥547 billion, representing 45 percent of total sales.

Figure 3 Total Corporate Revenue Growth of International versus Domestic Sales

Percent Growth

35 Domsstio Nandomestlc 25 tv>^ 15H

5- p L.\.'s.N'- ^S! -5 •SSS':'

-15

-25 1985 1986 1987 1988

Source: Dataquest 0004313-3 Juiy 19S9

Growth Rate Figure 4 shows the year-to-year growth rates by product segment revenue. Following this figure is a list of factors explaining the changes in 1988 product growth.

Figure 4 Nonconsolidated Growth Rates by Product Segment Percent Change (Billions of Yen) 35 rV] TV/Vldeo d\ Information Audio Systems/ Electronic Components

1984 19S5 1986 1987 1988 Fiscal Year Source: Dataquest 0004313-4 Jul- f\9y 198~9

Main Factors Affecting 1988 Growth The major factors affecting Sharp's growth in 1988 are listed below by product segment. • Overall Exports were down in 1988, as a result of the strong yen and competition from newly industrialized countries. The Company has an export ratio of 47 in 1988. Operations were streamlined to reduce costs. • TV and video systems - Televisions and VCRs had strong growth in the domestic market. • Appliance systems Ovens had strong growth in the domestic market. • Information systems and electronic components

In 1987, an Information and Communications systems marketing headquarters was established that strengthened domestic marketing and overseas sales and production in 1988.

CAPITAL AND R&D INVESTMENTS

In 1988, Sharp reorganized its R&D labs. Under engineering headquarters, the Company created a central lab with 190 researchers for basic R&D on new technologies such as 16- to 64Mb ULSIs, 3-dimensional LSIs, and microwave devices. Sharp also created separate labs under each business unit for product engineering-related R&D.

In 1988, Sharp's combined capital and R&D spending was approximately 8.8 percent of total corporate revenue. Sharp does not report its corporate R&D spending; therefore, R&D spending (shown in Figure 5 and Table 2) has been estimated by Dataquest.

Figure 5 Sharp Corporation Capital and R&D Spending

Percentage

140 Capltsd Spending R&D Spending 120

100 so

60H

40 v\\\X\ 20 W^ ^ 1984 1965 1986 1987 1988 Source: Da tag u esc 0004313-5 July l9B9

Table 2 Capital and R&D SpeiKiing (Billions of Yen, Millions of Dollars)

1984 1985 1986 1987 1988

Corporate Revenue ¥1,017 ¥1,167 ¥1,216 ¥1,149 ¥1,225 $4,309 $4,763 $5,502 $7,181 $8,877

Capital Spending ¥ 69 ¥ 92 ¥ 82 ¥ 59 ¥ 55 $ 292 $ 376 $ 371 $ 369 $ 399 % Total Revenue 6.8% 7.9% 6.7% 5.1% 4.5%

RStD Spending* V 39 ¥ 47 ¥ 49 ¥ 48 ¥ 53 $ 165 $ 192 $ 222 $ 300 $ 384 % Total Revenue 3.8% 4.0% 4.0% 4.2% 4.3% Total Spending V 108 ¥ 139 ¥ 131 ¥ 107 ¥ 108 $ 458 $ 567 $ 593 $ 669 $ 783 % Total Revenue 10.6% 11.9% 10.8% 9.3% 8.8% Exchange rate (per US$1) 236 245 221 160 138

*Dataquest Estimates

Source: Sharp Corporation Annual Report Dataquest July 1989

FACILITIES

Table 3 shows the distribution of Sharp's domestic and foreign facilities.

Table 3

Sharp Corporation Facilities

Country Facilities Type

Japan 11 All product lines

North America Color TVs, microwave ovens, PCs, considering facsimiles

Europe Microwave ovens, VCR, typewriters, copiers, color TVs, stamping tools, precision parts

Asia Electronic calculators and typewriters, VCR tuners, TVs, tape recorders, audio equipment, home electronics, audio, and computer equipment

South America 1 TVs, stereos, VCRs, calculators

Australia 1 Color TVs

Source: Dataquest July 1989

SUMMARY The purpose of this section is to provide a one-page overview of the corporation's semiconductor activity.

Address Sharp Corporation Integrated Circuits Group 1, 2613-banchi, Ichinomoto-cho Tenri-shi, Nara Prefecture 632 Japan Phone 07436-5-1321 Management Hajime Nakajima General Manager Product Planning Division IC Group Main Product Areas MOS memory Analog MOS micro Optoelectronics MOS logic ASIC Ranking (based 1st among worldwide optoelectronics manufacturers on revenue) 9th among Japanese semiconductor manufacturers 15th among worldwide semiconductor manufacturers

STRATEGY Listed below are some of Sharp's accomplishments and goals during 1988 and goals for 1989.

Overall Establish design center in Germany in summer 1989. (Management of this design center will report to Sharp Electronics Europe GmbH and will design custom mask ROMs and gate arrays. Sharp claims that it has no plans for local production in Europe.) Increase memory and custom IC production and sales of optoelectronics to 40 percent of total semiconductor revenue in upcoming years

Memory Started a second line at Fukuyama Plant for submicron production using 6-inch wafers for 1Mb DRAMs (After current supply and demand inbalance is resolvedj production will switch to Mask ROMs, SRAMs, and 256K DRAMs.) Developed 4Mb DRAM and 16Mb Mask ROM for captive use Established semiconductor R&D lab and clean rooms in the state of Washington (Initial investment in the lab, to be called Sharp Microelectronics Technology, will be ¥2 billion, and the staff will consist of U.S. engineers.)

ORGANIZATION

Figure 6 shows the organizational chart for Sharp's IC and Electronics Groups.

Figure 6 Sharp Corportion IC ami Electronics Components Group

— IC Development Center

— VLSI Development Lab IC Group — IC Technology Center

- TenrI Plant

- Fukuyama Plant

— Opto Device Lab

— Components Division Electronic Components Group — Semiconductor Application Division

— Optoelectronics Division

— Solar Battery Division Source: Sharp Corporation 0004313-6 OPERATIONS Note: Exchange rates used in the semiconductor section of this profile are based on the calender-year average.

Product Segments Sharp has been manufacturing semiconductors since the 1960s, when it became the first company to produce GaAs LEDs. In 1970, the Company began manufacturing LSIs. Currently, Sharp's strongest product area is MOS memory, closely followed by optoelectronics. The Company is a leader in mask ROMs, with approximately 40 percent of the Japanese mask-ROM market, and is number one in both the world and Japanese markets in optoelectronics.

The company's main semiconductor product areas are listed as follows: • MOS Memory—CMOS SRAMs, NMOS DRAMs, CMOS and NMOS mask ROMs, and CMOS EPROMS

• MOS microdevices—4- and 8-bit MCUs (SM series and Z8), 8- and 16-bit MPUs and microperipherals (Z-80 and Z-800 families), second-sources NEC V20 and V30 MPUs

• MOS logic—CMOS gate arrays, CMOS logic devices for calculators, displays, clocks, watches, TVs, and other consumer applications • Analog—Converters, drivers, op amps, multiplexers • Optoelectronics—LEDs, photocouplers, photointerrupters, photo relays, phototransistors, photodiodes, photo amplifiers, CCDs, semiconductor lasers • ASICs—For captive use only

Product Revenue Figure 7 shows Sharp's percentage of semiconductor revenue revenue by product. For example, 91.1 percent of 1988 Sharp's IC revenue came from MOS technology, and of this, 41.5 percent came from MOS logic devices.

Figure 7 1988 Estimated Semiconductor Revenue Percent by Product (Millions of Dollars)

MOS Micro 7.9%

0004313-7 Source; Dataguejt July 1989

Regional Sales Sharp's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4 1988 Estimated Semiconductor Revenue Percent by Region (Millions of Dollars)

United Product States Japan Europe ROW

Semiconductor 5% 83% 1% 11% IC 7% 81% 2% 10% Bipolar Digital 0 0 0 0 MOS (Technology) 8% 79% 2% 11% MOS Memory 9% 77% 3% 11% MOS Micro 4% 83% 2% 11% MOS Logic 8% 81% 0 11% Analog 0 96% 0 4% Discrete 0 0 0 0 Optoelectronics 0 89% 0 11%

Exchange Rate (Yen per US$1) 130

Source: Dataguest July 1989

Growth Rate

Sharp's growth rate by product line, is shown in the table and figure that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 8 graphically compares Sharp's growth rate in the world market with the growth rate of the world market itself. (This information is provided for the Japanese market as well.) Worldwide Market Growth Rate In 1988, Sharp grew significantly faster than the world growth rate in MOS memory and showed positive growth in all product areas.

Table 5 Sharp Sales in World Market (Millions of Dollars)

World Market 1987 1988 % Chanae % Change -^ Semiconductor $589 $1 ,036 75.9% 31.9% IC $367 $ 752 104.9% 36.5% Bipolar Digital 0 0 0 9.2% MOS (Technology) $312 $ 684 119.2% 53.1% MOS Memory $130 $ 346 166.2% 90.3% MOS Micro $ 34 $ 54 58.8% 39.8% MOS Logic $148 $ 284 91.9% 28.2% Analog $ 55 $ 68 23.6% 15.3% Discrete 0 0 0 13.2% Optoelectronics $222 $ 284 27.9% 25.4%

Exchange Rate (Yen per US$1) 144 130

Source; Dataquest July 1989

Figure 8 Sharp Growth Rate Compared with World Market Growth Rate 180

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product Source: Dataquest 0004313-8 July 1989

Japanese Market Growth Rate Sharp grew faster than the Japanese market in all product categories except optoelectronics. Both MOS micro and MOS memory products had growth rates of almost twice that of the Japanese market. The Company's sales in the Japanese market are shown in Table 6 and Figure 9.

Table 6 Sharp's Sales in Japanese Market (Millions of Dollars)

Japanese Market 1987 1988 % Change % Change

Semiconductor $495 $858 73.3% 35.6% IC $298 $606 103.4% 39.1% Bipolar Digital 0 0 0 18.3% MOS (Technology) 247 541 119.0% 58.4% MOS Memory 107 265 147.7% 85.4% MOS Micro 31 45 45.2% 35.9% MOS Logic 109 231 111.9% 50.3% Analog 51 65 27.5% 11.7% Discrete 0 0 0 18.5% Optoelectronics $197 $252 27.9% 42.3% Exchange Rate (Yen per US$1) 144 130

Source: DatagueSt July 1989

Figure 9 Sharp Growth Rate Compared with Japanese Market Growth Rate 160- Japanese Market 140- Sharp 120

100

80 \\ 60-1 \\ '•--S, 40 K\ 20-1 ^™ ^ ?$• Semiconducto4r 10 Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004313-9 Source; Dataquest July 1989

Other Japanese Companies

Sharp's growth rate by product line is compared with that of the other Japanese companies tracked by Dataquest in the following graphs. Dataquest surveys a total of 18 Japanese companies plus a category called "Other." The total of these companies' revenue was used for comparison in Figures 10 and 11.

Figure 10 Sharp versus Other Japanese Companies in Japanese Market Growth Rate

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product Source; Dataqueit 0004313-10 July 1989

Figure 11 Sharp versus Other Japanese Companies in World Market

Growth Rate 180

Semiconductor IC Bipolar MOS Memory Micro Logic AneUog Discrete Opto Product 0004313-11 Source: Dataquest July 1989

Channels of Distribution

Dataquest believes that approximately 25 percent of Sharp's semiconductor sales are captive. For merchant sales, Sharp's semiconductors are sold through several distributors, including O.K. Denki and Nideco. In the United States, Sharp semiconductors are sold through Sharp Electronics Corporation.

CAPITAL SPENDING As shown in Tables 7 and 8, capital investment, as a percentage of total revenue, dropped after the peak year 1985.

Table 7 Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—^Millions of Dollars

1984 1985 1986 1987 1988

Revenue $338 $328 $429 $590 $1,038 Semiconductor Capital Spending $110 $151 $131 $139 $ 269

Growth Rate of Capital Spending N/A 38% (13%) 6% 94%

Percent of Revenue 33% 46% 31% 24% 26%

Exchange Rate (Yen per US$1) 237 238 168 144 130

N/A = Not Available

Source: Dataquest July 1989

Table 8 Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year—^Billions of Yen

1984 1985 1986 1987 1988

Revenue 80 78 72 85 135 Semiconductor 26 36 22 20 35 Capital Spending

Capital Spending N/A 38% (39%) (9%) 75% Growth Rate

Percent of Revenue 33% 46% 31% 24% 26%

Exchange Rate (Yen per US$1) 237 238 168 144 130

N/A = Not Available

Source: Dataquest July 1989

FACILITIES Sharp has five semiconductor manufacturing plants in Japan. Additionally, the Company has joint ventures with Brazil and Malaysia where semiconductor assembly is performed. Table 9 lists Sharp's semiconductor factory locations.

Table 9 Sharp Corporation Semiconductor Facilities

Name/Location Function

IC Technology Center Fab Nara Prefecture Gate arrays (R&D activity will be expanded here in 1989)

Fukuyama Factory Fab, test Hiroshima Prefecture MOS memory gate arrays, CCDs

Tenri Plant Fab, assembly, test Nara Prefecture Memory, logic, analog, optoelectronics, ASICs

Shiujo Factory Fab, assembly, test Nara Prefecture Optoelectronics, discrete

Nara Plant Fab, assembly, test Nara Prefecture Laser, LED, optoelectronics

Sharp Microelectronics R&D for CMOS, VLSI Technology software, and AI United States

Source: Dataguest July 1989

ALLIANCES AND AGREEMENTS Sharp's alliances and agreements for 1985 to 1988 are summarized in Figure 12. For more in depth information, please refer to Volume II of the Japanese Semiconductor Industry Service behind the tab entitled "Strategic Alliances."

Figure 12 Semiconductor Alliances and Agreements

0004313-12 Source: Dataquest July 1989

(Page intentionally left blank)

REVENUE SUMNfARY Tables 10 and 11 show Sharp's semiconductor revenue in detail. The tables show sales from 1981 to 1988 in both billions of yen and millions of dollars.

Table 10 Sharp Corporation Estimate Worldwide Semiconductor Revenue (Billions of Yen)

1981 1982 1983 1984 1985 1986 1987 1988* Total Semiconductor 35 48 66 80 78 72 85 135

Total IC 21 29 39 52 48 40 53 98

Bipolar Digital 0 • 0 0 0 0 0 0 0 (Technology)

MOS (Techndlbgy) 18 25 34 47 41 32 45 89 NMOS 4 6 9 11 10 10 13 24 PMOS 4 5 4 3 1 1 0 0 CMOS 11 15 22 33 31 22 32 65 BiCMOS

MOS (Function) 18 25 34 47 41 32 45 89 MOS Memory 2 4 8 8 7 9 19 45 MOS Micro Devices 6 7 11 15 11 4 5 7 MOS Logic 10 14 16 24 24 19 21 37

Analog 3 4 4 6 7 7 8 9

Total Discrete 0 0 0 0 0 0 0 0

Transistor 0 0 0 0 0 0 0 0 Diode 0 0 0 0 0 0 0 0 Thyristor 0 0 0 0 0 0 0 0 Other Discrete 0 0 0 0 0 0 0 0

Total Optoelectronic 14 19 27 27 30 33 32 37

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

•Preliminary estimates for 1988 Source: Dataquest July 1989

Table 11 Sharp Corporation Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 158 192 279 337 328 433 589 1,036

Total IC 96 115 164 221 202 236 366 752

Bipolar Digital 0 0 0 0 0 0 0 0 (Technology)

MOS (Technology) 82 100 146 197 173 193 311 685 NMOS 18 23 36 46 40 60 90 185 PMOS 16 18 18 11 5 3 3 3 CMOS 48 59 92 140 128 130 219 496 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 82 100 146 197 174 193 312 685 MOS Memory 11 16 34 32 28 55 130 347 MOS Micro Devices 25 29 45 62 46 26 33 54 MOS Logic 46 55 67 103 99 112 149 284

Analog 14 15 18 24 28 43 54 68

Total Discrete 0 0 0 0 0 0 0 0

Transistor 0 0 0 0 0 0 0 0 Diode 0 0 0 0 0 0 0 0 Thyristor 0 0 0 0 0 0 0 0 Other Discrete 0 0 0 0 0 0 0 0

Total Optoelectronic 62 77 115 116 126 197 223 284

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

•Preliminary estimates for 1988

Source: Dataguest July 1989

BALANCE SHEETS Tables 12 and 13 show Sharp's corporate consolidated balance sheet for the years 1984 through 1988 in yen and dollars, respectively.

Table 12 Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen) Balance Sheet (March 31) 1984 1985 1986 1987 1988

Total Current Assets V 600 ¥ 683 ¥ 799 ¥ 970 ¥1,114 Cash ¥ 128 ¥ 152 ¥ 246 ¥ 404 ¥ 485 Receivables ¥ 249 ¥ 272 ¥ 269 ¥ 266 ¥ 308 Inventory ¥ 171 ¥ 209 ¥ 229 ¥ 241 ¥ 236 Other Current Assets ¥ 52 ¥ 50 ¥ 55 ¥ 59 ¥ 85 Net Property, Plant, and Equipment . . ¥ 212 ¥ 258 ¥ 283 ¥ 283 ¥ 279 Depreciation ¥ 169 ¥ 196 ¥ 236 ¥ 281 ¥ 325 Other Assets ¥ 168 ¥ 119 ¥ 150 ¥ 148 ¥ 226 Total Assets ¥ 933 ¥1,110 ¥1,233 ¥1,400 ¥1,619 Total Current Liabilities ¥ 527 ¥ 609 ¥ 707 ¥ 872 ¥ 981 Long-Term Debt ¥ 94 ¥ 130 ¥ 128 ¥ 126 ¥ 146 Other Liabilities ¥ 11 ¥ 13 ¥ 19 ¥ 12 ¥ 14 Total Liabilities ¥ 632 ¥ 752 ¥ 854 ¥1,010 ¥1,141 ¥ 390 ¥ 478 Total Shareholders' Equity ¥ 300 ¥ 358 ¥ 379 0 0 0 Conv. Preferred Stock 0 0 ¥ 50 ¥ 51 52 91 Common Stock ¥ 39 ¥ ¥ ¥ 135 ¥ 136 ¥ 138 ¥ 179 Other Equity ¥ 121 ¥ 173 ¥ 192 ¥ 200 ¥ 209 Retained Earnings ¥ 140 ¥1,110 ¥1,233 ¥1,400 ¥1,619 Total Liability and Total Equity ¥ 932 Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue ¥1,017 ¥1,167 ¥1,216 ¥1,149 ¥1,225 Domestic Sales ¥ 453 ¥ 476 ¥ 504 ¥ 580 ¥ 678 Overseas Sales ¥ 564 691 ¥ 712 569 547 Cost of Sales ¥ 761 881 ¥ 933 913 978 Gross Margin C^) ¥ 25 25 ¥ 23 21 20 RSiD Expense ¥ 39* 47* ¥ 49* 48* 53* SGScA Expense ¥ 196 220 ¥ 240 219 227 Other Operating Expenses 0 0 0 0 0 Total Operating Expenses ¥ 957 ¥1,101 ¥1,173 ¥1,132 ¥1,205 Operating Income (Loss) ¥ 60 ¥ 66 ¥ 43 ¥ 17 ¥ 21

(Continued)

Table 12 (Continued) Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Income Statement (March 31) 1984 li ?95 1986 1987 1988

Interest, Net V 16 ¥ 12 ¥ 28 ¥ 26 ¥ 22 Pretax Income ¥ 76 ¥ 78 ¥ 71 ¥ 43 ¥ 43 Provision for Taxes (Credit) * 38 ¥ 39 ¥ 35 ¥ 23 ¥ 23 Effective Tax Rate ¥ 50 ¥ 50 ¥ 49 ¥ 53 ¥ 54 Extraordinary Items 0 ¥ 1 0 0 0 Net Income ¥ 38 ¥ 40 ¥ 36 ¥ 20 ¥ 20

Avg. Shares Outstanding (M) 708 731 733 737 908 Employees 26, ,627 28. ,221 28, ,873 29, ,346 29,351 Capital Expenditures ¥ 69 ¥ 92 ¥ 82 ¥ 59 ¥ 55

Exchange Rate 236 245 221 160 138 (Yen per US$1)

*Dataquest Estimate N/A = Not Available

Source: Sharp Corporation Annual Reports Dataquest July 1989

Table 13 Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Balance Sheet (March 31) 1984 1995 1996 1997 1988

Total Current Assets $2,542 $2,788 $3,615 $6,063 $ 8,075 Cash $ 542 $ 620 $1,113 $2,525 $ 3,516 Receivables $1,055 $1,110 $1,217 $1,663 $ 2,232 Inventory $ 725 $ 853 $1,036 $1,506 $ 1,712 Other Current Assets $ 220 $ 204 $ 249 $ 369 $ 616 Net Property, Plant, and Equipment $ 898 $1,053 $1,281 $1,769 $ 2,021 Depreciation $ 716 $ 800 $1,068 $1,756 $ 2,354 Other Assets $ 712 $ 486 $ 679 $ 925 $ 1,638 Total Assets $3,953 $4,531 $5,579 $8,750 $11,734 Total Current Liabilities $2,233 $2,486 $3,199 $5,450 $ 7,107 Long-Term Debt $ 398 $ 531 $ 579 $ 788 $ .058 Other Liabilities $ 47 $ 53 $ 86 $ 75 $ 101 Total Liabilities $2,678 $3,069 $3,864 $6,313 $ 8,267 Total Shareholders' Equity $1,271 $1,461 $1,715 $2,438 $ 3,463 Conv. Preferred Stock 0 0 0 0 0 Common Stock $ 165 $ 204 $ 231 $ 325 $ 657 other Equity $ 513 $ 551 $ 615 $ 863 $ .295 Retained Earnings $ 593 $ 706 $ 869 $1,250 $ 1,512 Total Liability and Total Equity $3,949 $4,531 $5,579 $8,750 $11,730

Income Statement (March 31) 1984 1995 1986 1987 1988

Revenue $4,309 $4,763 $5,502 $7,181 $ 8,878 Domestic Sales $1,919 $1,943 $2,281 $3,625 $ 4,912 Overseas Sales $2,390 $2,820 $3,222 $3,556 $ 3,966 Cost of Sales $3,225 $3,596 $4,222 $5,706 $ 7,086 Gross Margin (%) 107 100 105 128 20 RS

(Continued)

Table 13 (Continued) Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Income Statement (March 31) 1984 1985 1986 1987 1988

Provision for Taxes (Credit) $ 161 $ 159 $ 158 $ 144 $ 168 Effective Tax Kate $ 212 $ 204 $ 223 $ 334 $ 54 Extraordinary Items 0 $ 4 0 0 $ 2 Net Income $ 161 $ 163 $ 163 $ 125 $ 143 Avg. Shares Outstanding (M) 708 731 733 737 908 Employees 2^,627 28,221 28,873 29,346 29,351 Capital Expenditures $ 292 $ 376 $ 371 $ 369 $ 401 Exchange Rate (Yen per US$1) 236 245 221 160 138 *Dataquest Estimate N/A = Not Available

Source: Sharp Corporation Annual Report Dataquest July 1989

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation.

Address Sony Corporation 7-35 Kitashinagawa, 6-chome Shinagawa-ku, Tokyo 141 Japan

Phone (03)448-2111 Fax (03) 448-2244

President Norio Ohga Chairman Akio Morita

Main Product Areas Video equipment Televisions Audio equipment Other products

No. of Employees 60,500 (consolidated)

Top Shareholders Mitsui Trust 7.0% Raykay Inc. 6.6% Sumitomo Trust 4.6% Mitsui Bank 4.2% Yasuda Trust 4.0% Mitsubishi Trust 3.4% Japan Security Clearing 3.1% Toyo Trust 2.7% Chuo Trust 2.7%

% Outstanding Stock Foreign-Owned 10.7%

Stock Exchanges All major Japanese, New York Brussels, Antwerp, Vienna, Toronto, Montreal, Vancouver, Mid west, Zurich, Amsterdam, Frankfurt, Dusseldorf, Paris, Geneva, and Basel

Ranking (based 7th among Japanese electronics companies on revenue)

STRATEGY

Sony's goals for 1989 and accomplishments in 1988 are highlighted in this section.

Sony's corporate goals include the following:

• Distinguish itself from competition, especially in consumer products, by focusing more on coordinated software and hardware development CBS records will be the core of the software development effort.)

• Continue to strengthen overseas production capacity, R&D, and marketing. (In early 1989, the Company appointed two foreign executives, one from Europe and one from America, as company directors to help implement global business strategies.)

• Increase procurement of foreign products

• Expand nonconsumer products to approximately 50 percent of total sales

• Elevate financial position through tighter spending and inventory controls

• Plans to enter super-VHS VCR market currendy led by Matsushita Electric Industrial Co., Ltd.

• Continue to focus on after-sales service and R&D capabilities to beat competition in professional video equipment area

• Increase production of NEWS workstation to meet growing worldwide demand

The following developments occurred at Sony during 1988 and early 1989:

• Introduced 8mm hand-held video cassette system called GV-8

• Bought CBS Records from CBS Inc.

• Acquired CBS Incorporated's interest of a 50/50 joint venture, CBS/Sony Group, to further the development of hardware and software for consumer audiovisual electronics, especially CD players

• Formed a new subsidiary called Sony Engineering Corporation in April 1989 to develop new electronic products

Developed a new RISC-based workstation using Mips MPU, R30(X)

North America

- Established advanced video research center in San Jose, California, for developing software and hardware for high-definition television (HDTV) and NEWS worksta tions and for facilitating joint business with United States electronics makers

- Expanded production facility in San Diego for industrial use monitors

- Replaced Seagate's rigid disk drive at Apple Computer

Europe

- Opened audio equipment plant in France

- Established magnetic tape factory in Italy

- Built CD production facility in Austria

Asia (Sony calls this the "General Area" category)

- Opened an electronics components facility in Singapore

- Opened a color TV and audio equipment facility in Malaysia

ORGANIZATION

Figure 1 shows the Sony Corporation organization. Sony is a nonaligned Japanese corporation; it is not a member of any of Japan's industrial groups.

Figure 1

Sony Corporation Organizational Chart

— Home Video Group — Personai Video Group — Audio Group — Mobiie Electronics Group — TV Group — Picture Device Group — VIdeo-Com Group — Telecommunication Group — Information Equipment Group — Sennlconduotor Group — Supermlcro Group — Magnetism Product Group Executlv« Committee — Components Group — Production Technology Group — Machatronics Group Board of Directors I President I '— Electronic Photography Group

Central Research Laboratory ^ Corporate Total Laboratory Corporate Management Committee Domestic Marketing Headquarters Overseas Marketing Headquarters information System Domestic Marketing Headquarters Components Marketing Headquarters Venture Group

Communications Business Promotion Headquarters Purchasing Headquarters Product Promotion Group Creative Headquarters informatton Systems Headquarters Customer Service Headquarters Product Quaiity Headquarters Administration Headquarters

General Administration Group

Disk Business Promotion Department Education Development Group

0004536-1 Source: Sony Corporation

OPERATIONS

Product Segments

Sony is divided into four product groups; examples of products within each category are listed below.

• Video equipment—^Betamax and VHS VTRs, videotapes, camcorders, multidisc play ers, professional-use video equipment, high-definition (HD) video systems

• Audio equipment—^Walkman and CD players, stereo systems, audiotapes, radios, professional audio equipment

• Televisions—Large-screen TVs, satellite broadcasting receiving equipment, profes sional-use displays and monitors, projection TVs

• Other products—semiconductors, disk drive systems, CD-ROMs, NEWS workstations, precision electronic components, CBS records, CBS/Sony Group Incorporated, factory automation equipment, telephones, teleconferencing systems, word processors

Product Revenue

Figure 2 and Table 1 show Sony's revenue by product segment from 1984 and 1988.

Beginning after January 5,1988, Sony owned CBS Records Incorporated and 100 percent of CBS/Sony Group Incorporated. Revenue for these companies was approximately ¥39 billion in fiscal 1988 and is included under the "Other Products" category.

Figure 2

Product Revenue as a Percentage of Total Corporate Revenue

Percentage IOOT 90 I 1 Other Products ^^ Televisions 80 ^B Audio Equipment 70 E3 video Equipment 604 50 40-1 30 20 10 0 1964 ises 1986 1987 1988

0004536-2 Source: Dataqucit Aufiui 1989

Table 1

Sales by Product Segment (Billions of Yen)

10/31/86 to 1984 mi 1986 3/31/87 im. Video equipment 512.0 515.5 462.3 182.2 437.2 Audio equipment 271.5 338.4 345.5 151.2 394.2 Televisions 297.2 364.8 319.4 127.9 310.1 Other products 180.9 202.1 198.0 86.4 289.8

Total 1^1.6 1,420.8 1325.2 547.7 1,431.3

Exchange Rate 236 245 175 157 138

Note: Columns may not add to totals shown because of rounding.

Source: Sony Corporation Annual Report Dataquest August 1989

Domestic versus International Revenue

Figure 3 shows the year-to-year growth of Sony's international and domestic sales for 1982 through 1988. The fiscal year changed in 1987, but total fiscal 1987 numbers were provided, unaudited, by the Company and used for comparison. In 1988, domestic sales were ¥479 billion and international sales were ¥952 billion.

Figure 3

Total Corporate Revenue Growth of International versus Domestic Sales

Percent Growth 25-T

1963 1984 19S5 1986 :tW7 1968

0004536-a Source: Dataquest Auguit 1989

Growth Rate

Figure 4 shows the year-to-year growth rates by product segment revenue. The fiscal year changed in 1987, but total fiscal 1987 numbers were provided, unaudited, by the Company. Following this figure is a list of factors explaining the changes in 1988 product growth.

Figure 4

Growth Rates by Product Segment (Yen-Based)

Percent Change

45 !" ^1 Video Equipment t• •• •' 1 Televisions Audio Equipment i I Other Products m 35

15-i •1 ^^

-5 I

-15 1984 1985 19S6 1987 1968

0004536-4 Source: Paciquctt Auiuit 1^89

Main Factors Affecting 1988 Growth

The major factors affecting Sony's growth in 1988 are listed below by product segment.

• Video equipment

- Sales of 8mm video products were up, but sales of 1/2-inch Betamax were down

- Sales of multidisc players for CDs, CD-videos, and LDs were up

- Professional-use VTRs were down because of delayed switchovers to newer models by broadcast stations

- Sales of videotapes increased, but downward price pressure kept growth flat over last year

Audio equipment

- Sales for all products were up, especially of CD and Walkman players worldwide and of mini-component stereo systems in Japan

Televisions

- S ales were led by domestic demand for large- screen sets and equipment for satellite broadcasts

- Competition and the high yen kept sales almost flat over last year

Other products

- Sales of 3.5-inch micro floppy disk systems, semiconductors, and NEWS work stations were the main drivers of strong growth in the domestic market

CAPFTAL AND R&D INVESTMENTS

Sony's capital and R&D spending in 1988 increased to 17.9 percent of total revenue, a 21.4 percent increase over 1986. Figure 5 and Table 2 show R&D and capital spending as a percentage of total corporate revenue.

Figure 5

Capital and R&D Spending as a Percentage of Total Corporate Revenue

Percentage 20- 1S Bn Capital Spending ^"•••'- i R&D Spending 16 14 12 10 8 e-] ."WW-'-i \»A;ve^^\ 4 r\\x\> 2H ^^ ^frj^^ "irj./^ C^; 0 0^^ 1983 19B4 1985 1886 19B7 1988

0004536-S Source: Dataqueii Aufuit 1?S9

Table 2

Capital and R&D spending (Billions of Yen, Millions of Dollars)

19R3 1984 1985 i2Sfi imi 1988

Coiporate Revenue ¥ 1.124 ¥1,277 ¥1.439 ¥1346 ¥ 558 ¥ 1.457 $4,683 $5,411 $ 5.873 $ 7,691 $3,554 $10458

Capital Spending ¥ 57 ¥ 80 ¥ 130 ¥ 94 ¥ 50 ¥ 134 $ 238 $ 339 $ 531 $ 537 $ 318 $ 971 % Total Revenue 5.1% 6.3% 9.0% 7.0% 9.0% 9.2%

R&D Spending ¥ 89 ¥ 100 ¥ 111 ¥ 121 ¥ 51 ¥ 127 $ 371 $ 424 $ 453 $ 691 $ 325 $ 920 % Total Revenue 7.9% 7.8% 7.7% 9.0% 9.1% 8.7%

Total Spending ¥ 146 ¥ 180 ¥ 241 ¥ 215 ¥ 101 ¥ 261 $ 608 $ 763 $ 984 $1,229 $ 643 $ 1,891 % Total Revenue 13.0% 14.1% 16.7% 16.0% 18.1% 17.9%

Exchange Rate 240 236 245 175 157 138

*Due to a fiscal year change, 1987 was only five months long.

Source: Sony Corporation Annual Reports Dataquest August 1989

Target R&D Areas

Sony has two established overseas R&D facilities: one in Portland, Oregon, for optical recording media and one in Palo Alto, California, for NEWS workstations. In April 1989, the Company announced it was expanding its U.S. R&D with the establishment of the Advanced Video Technology Center (AVTC). The center is located in San Jose, California, and will concentrate on R&D for HDTV and video technology.

Video equipment

Audio equipment

- A pocket-sized CD player and 3-inch disc

- Digitized audio tapes (DAT)

- Multiband cassette-sized radio

Televisions

- Large-screen, high-quality picture televisions and CRTs for consumer and profes sional applications

Other products

- A 2-inch data disk system for portable word processors

CD-ROM technology

32-bit CPU version of NEWS workstation with CD-ROM (planned)

FACILITIES

Table 3 shows the distribution of Sony's domestic and foreign facilities.

Table 3

Sony Corporation Facilities

Country Facilities Ii3£

Japan 30 All products

United States 5 California CTV. CRT, NEWS Alabama Magnetic tape Indiana Compact discs Florida Pro-audio Pennsylvania Speakers

Europe U.K. CTV, CRT Germany CRT, VTR, audio

;• France (3) Audiocassettes, Videocassettes, CDP 8mm VTR Spain CRT, VTR, audio Austria Compact discs Italy Audiocassettes

South America Venezuela CTV Brazil Audio, VTR Mexico (2) Audiocassettes, CTV

Asia Malaysia (3) Audio, CTV Taiwan Audio, cm Korea Audio Singapore Precision components

ThaUand (3) Videocassettes, CTV semiconductors

Source: Dataquest August 1989

(Page intentionally left blank)

SUMMARY

The purpose of this section is to provide a one-page overview of the corporation's semiconduc tor activity. Sony began manufacturing semiconductors in 1954; however, it did not sell them on the merchant market until calender year 1983. Currentiy, merchant sales account for more than 50 percent of Sony's total semiconductor production.

Address Sony Semiconductor Group Sony Corporation of America 1-14-1 Asahi-cho Component Products Company Atsugi-shi Semiconductor Group Kanagawa 243, Japan 10833 Valley View St. Cypress, CA 90630-0016

Phone (0462)30-5111 (714)229-4190

Management Masahiro Takahashi Managing Director and Senior General Manager Semiconductor Group

Kazuo Imai President Sony Corporation of America

Hideo Kubota Vice President and General Manager Semiconductor Group Sony Corporation of America

Main Product Optoelectronics MOS memory areas Bipolar logic MOS logic MOS microcontrollers Discrete Hybrid Analog

Ranking 7 th among Japanese semiconductor manufacturers 7 th among worldwide semiconductor manufacturers

STRATEGY

Listed below are some of Sony's accomplishments in the semiconductor area during 1988 and early 1989, as well as and future objectives. This includes new product announcements. The information is divided into product categories for clarity.

Overall

Expand semiconductor business as it contributes to overall corporate revenue

Reinforce MOS memory and diversify into other more general purpose ICs such as SRAMs, MPUs, ASICs, and bipolar

Increase 1989 semiconductor sales 20 percent over 1988, and spend approximately ¥45 billion on facility investments

Establish a second semiconductor design center at Kokubu for bipolar ICs starting in the fall of 1989

Analog/Discrete

• Will introduce several video DACs in late 1989

• Added CMOS products to its bipolar A/D converter line

• Introduced visible laser diode

Memory

• Will introduce two-way set associative cache memory

• Shipped 1Mb SRAM samples

• Developed several high-speed SRAMs (20 to 35ns) and 4Mb CMOS SRAMs

• Announced plans to increase share of U.S. SRAM market from1 0 to 20 percent in 1990

• Announced plans to enter the DRAM market with a 4Mb DRAM in 1990 (Sony believes that electronic products of the future will require much more memory than today's products—especially consumer products such as HDTV—and it wants to be prepared with components.)

Microcomponents

• Plan to increase 4- and 8-bit MCU production, with an emphasis on 8-bit MCUs

Logic

• Introduced ECL gate arrays and opened a United States design center to support

Optoelectronics

• Doubled CCD production at Kokubu and Nagasaki plants

ORGANIZATION

Figure 6 shows Sony Corporation's semiconductor group organizational chart.

Figure 6

Sony Corporation Semiconductor Group Organizational Chart

'-V^r-'^^S^'^^'

Product Divisions

R&D

Staff and Technology Support

Production

r^jjj^jjj^^™,^!^^^ r^ ....,...,. M..... •r-;^--y- Application Engineering Application Englnesring Department r-.::-mi^^mm!;:^^ .... :.. .":'i';.^.,;i^

Sen^conductor Business Division, Components MarVetlno QroL^ ^^^^^m^fn^^w Sales and Marketing m m --^^^.^'.^^ Overseas Sales/Domestic Sales

0004536-6 Source: Sony Corporation

OPERATIONS

Note: Exchange rates used in the semiconductor section of this profile are based on the calendar year average.

Product Segments

MOS devices—SRAMs, DRAMs, CMOS mask ROMs, nonvolatile memories, MPUs, MCUs, ASICs

Bipolar logic—ECL gate arrays, standard logic

Analog—Audio ICs, PLL ICs, D/A and A/D converters

Discrete—Small signal diodes, small signal transistors, DSP, GaAs field-effect transis tors (FETs), HEMTs, and laser diodes

Optoelectronics—CCDs, optical memories

Semiconductor equipment—ARQUS-20, wafer inspection system

Product Revenue

Figure 7 shows Sony's percentage of semiconductor revenue by product. For example, 42.2 percent of Matsushita's IC revenue came from MOS technology in 1988, and of this, 44.0 percent of revenue came from MOS logic devices.

Figure 7

1988 Estimated Semiconductor Revenue Percentage by Product (Millions of Dollars)

MOS Technology 42.2%

MOS Logic 44.0% MOS Memory 41.3% MOS Micro 14.7%

0004536-7 Source: Dataquest August 1989

Regional Sales

Sony's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4

1988 Estimated Semiconductor Revenue Percent by Region1 (Millions of Dollars)

Product United States Japan Eurooe ROW

Semiconductor 1% 94% 1% 4% IC 1% 92% 2% 5% Bipolar Digital 0 0 0 0 MOS (Technology) 1% 96% 2% 1% MOS Memory 3% 89% 5% 3% MOS Micro 0 100% 0 0 MOS Logic 0 100% 0 0 Analog 1% 90% 1% 8% Discrete 3% 95% 0 3% Optoelectronics 0 100% 0 0

Exchange Rate (Yen per US$1) 130

Note: Rows may not add up to 100% due to rounding.

Source: Dataquest August 1989

Growth Rate

Sony's growth rate by product line is shown in the table and figure that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 8 graphically compares Sony's growth rate in the world market to the growth rate of the world market itself. (This information is then provided for the Japanese market as well.)

Worldwide Market Growth Rate

In 1988, Sony grew almost twice as fast as the world market. The strong products were discrete, analog, MOS logic, and micro, as shown in Table 5 and Figure 8.

Table 5

Sony Sales in World Market (Millions of Dollars)

World Market i2S2 1988 %Chanre %Chanffe

Semiconductor $574 $924 61.0% 31.9% IC $364 $595 63.5% 36.5% Bipolar Digital 0 0 0 9.2% MOS (Technology) 147 250 70.1% 53.1% MOS Memory 56 103 83.9% 90.3% MOS Micro 21 37 76.2% 39.8% MOS Logic 70 110 57.1% 28.2% Analog 217 345 59.0% 15.3% Discrete $ 72 $112 55.6% 13.2% Optoelectronics $138 $217 57.2% 25.4%

Exchange Rate (Yen per US$1) 144 130

Source: Dataquest August 1989

Figure 8

Sony Growth Rate Compared with World Market

Growth Rate 100-

90 World Market \S2 Sony 80

20-j

0 Semiconductor MOS Memory Micro Logic Analog Discrete Opto Product 000*536-8 Source: Dataquest Auguit 1989

Japanese Market Growth Rate:

As shown in Table 6 and Figure 9, Sony grew much faster than the Japanese market in all product categories except bipolar digital, which the Company does not carry.

Table 6

Sony Sales in Japanese Market (Millions of Dollars)

Japanese Market 1987 1988 % Change % Chang?

Semiconductor $541 $871 61.0% 35.6% IC . $336 $548 63.1% 39.1% Bipolar Digital 0 0 0 18.3% MOS (Technology) 139 239 71.9% 58.4% MOS Memory 48 92 91.7% 85.4% MOS Micro 21 37 76.2% 35.9% MOS Logic 70 110 57.1% 50.3% Analog 197 309 56.9% 11.7% Discrete $ 67 $ 106 58.2% 18.5% Optoelectronics $138 $217 57.2% 42.3%

Exchange Rate (Yen per US$1) 144 130

Source: Dataquest August 1989

Figure 9

Sony's Growth Rate Compared with Japanese Market

Growth Rate 100

Semiconductor IC MOS Memory Micro Logic Anal DO Discrete Opto Product 0004536-9 Source: Datiqueil Augutt 19B9

Other Japanese Companies

Sony's growth rate by product line is compared with that of the Japanese companies tracked by Dataquest in the following graphs. Dataquest surveys a total of 18 companies plus a category called "Other." The total of these companies' revenues were used for comparison in Figure 10 and Figure 11.

Figure 10

Sony versus Japanese Companies in Japanese Market

Growth Rate

Semiconductor IC MOS Memory Micro LoQlc Analog Die Crete Opto Product 0004536-1D SOUICE: Daiaqu«(t Ausud 19S9

Figure 11

Sony versus Japanese Companies in World Market

Growth Rate 100

Semiconductor Memory Micro Logic Analog Discrete Product Source: DaUqueit D004S36-11 August 1989

Channels of Distribution

Sony markets its semiconductors through specialized semiconductor traders. Currently, the Company uses USC of Tokyo, Nippon Chemi-Con Sales Corporation, and Vitec. Vitec is a semiconductor marketing company that Sony established in 1987.

CAPITAL SPENDING

Semiconductor capital investments as a percentage of total revenue are shown in Tables 7 and 8. Spending soared in 1988, reflecting Sony's goal to increase corporate growth through nonconsumer products, specifically semiconductors.

Table 7

Estimated Semiconductor Capital Spending Compared with Total Revenue Calender Year—Millions of Dollars

1984 im. 1986 1987 1988 Revenue $169 $252 $457 $572 $926

Semiconductor Capital Spending $ 59 $151 $ 95 $111 $269

Growth Rate of Capital Spending N/A 156% -37% 17% 142%

Percent of Revenue 35% 60% 21% 19% 29%

Exchange Rate (Yen per US$1) 237 238 168 144 130

N/A = Not Available

Source: Dataquest August 1989

Table 8

Estimated Semiconductor Capital Spending Compared to Total Revenue Calender Year—Billions of Yen

1984 1985 1986 1987 1988

Revenue ¥ 40 ¥ 60 ¥ 77 ¥ 82 ¥120

Semiconductor Capital Spending ¥ 14 ¥ 36 ¥ 16 ¥ 16 ¥ 35

Capital Spending Growth Rate N/A 157% 119%

Exchange Rate (Yen per USSl) 237 238 168 144 • 130

N/A = Not Available Source; Dataquest August 1989

FACXLITIES

Sony has four semiconductor manufacturing facilities and two semiconductor assembly facilities listed in Table 9. The Thailand plant will be shipping Sony's ICs by 1990. In the meantime, it is being leased by AMD for bipolar IC assembly. Sony also has announced that it is investigating plans for a facility in Europe for CD players and VCR ICs.

Table 9

Sony Corporation Semiconductor Facilities

Name/Location Function

Sony Kokubu (2 plants) Fab, assembly, test Kagoshima Discrete, linear, bipolar MPU, CCD, SRAM

Sony Atsugi Plant Fab, R&D Kanagawa Laser, CCD FET. ROM VRAM, 4Mb SRAM, Unear

Sony Nagasaki Plant Fab, assembly, test Nagasaki CCD, 1Mb SRAM, MPU, ASIC design center

Sony Oita Assembly, test Oita MOS Bipolar

Sony Shiroishi Semiconductor Assembly, test Miyagi Hybrids

Sony Semiconductor Thailand Co. Fab, assembly Bangkok Bipolar

Source: Dataquest August 1989

ALLIANCES AND AGREEMENTS

Sony's alliances and agreements for 1987 and 1988 are summarized in Figure 12. For more in- depth information, please refer to volume n of the Japanese Semiconductor Industry Service behind the tab entitled "Strategic Alliances".

Figure 12

Sony Corporation Semiconductor Alliances and Agreements 1987 and 1988

Source: Dataqueit 0004536-13 August 1989

(Page intentionally left blank)

REVENUE SUMMARY

Tables 10 and 11 show Sony's semiconductor revenue in detail. The tables show sales from 1983 to 1988 in both billions of yen and millions of dollars. Until 1983, Sony made semiconductors for internal consumption only. In 1983, the Company began to sell on the merchant market.

Table 10

Sony Corporation Estimated Worldwide Semicondlucto r Revenue (Billions of Yen)

1983 1984 1985 1986 1987 1988*

Total Semiconductor 30.2 40.1 59.9 76.4 82.4 120.3

Total IC 24.3 28.9 36.8 46.8 52.2 77.5

Bipolar Digital (Technology) 1.9 0 0 0 0 0

MOS (Technology) 10.6 9.0 14.0 18.9 21.1 32.6 NMOS 8.5 4.5 4.5 4.8 4.3 7.4 PMOS 0 0 0 0 0 0 CMOS 2.1 4.5 9.5 14.1 16.8 25.2 BiCMOS 0 0 0 0 0 0

MOS (Function) 10.6 9.0 14.0 18.9 21.1 32.6 MOS Memory 0.9 0.9 2.8 6.4 8.0 13.5 MOS Micro Devices 5.9 0 0 2.8 3.0 4.8 MOS Logic 3.8 8.1 11.2 9.7 10.0 14.3

Analog 11.8 19.9 22.8 27.9 31.1 44.9

Total Discrete 3.8 8.1 10.0 10.4 10.3 14.6 Transistor 3.3 1.9 1.7 2.7 2.7 4.6 Diode 0.5 6.2 8.3 7.7 7.6 10.0 Thyristor 0 0 0 0 0 0 Other Discrete 0 0 0 0 0 0

Total Optoelectronic 2.1 3.1 13.1 19.2 19.9 28.2

Exchange Rate (Yen per US$1) 237 237 238 168 144 130

* Preliminary estimates for 1988

Source: Dataquest August 1989

Table 11

Sony Corporation Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

mi 1984 1985 1986 1987 im* Total Semiconductor 127 169 252 455 574 926

Total IC 103 122 155 279 363 596

Bipolar Digital (Technology) 8 0 0 0 0 0

MOS (Technology) 45 38 59 113 147 251 NMOS 36 19 19 29 30 57 PMOS 0 0 0 0 0 0 CMOS 9 19 40 84 117 194 BiCMOS 0 0 0 0 0 0

MOS (Function) 45 38 59 113 147 251 MOS Memory 4 4 12 38 56 104 MOS Micro Devices 25 0 0 17 21 37 MOS Logic 16 34 47 58 70 110

Analog 50 84 96 166 217 346

Total Discrete 16 34 42 62 72 112 Transistor 14 8 7 16 19 35 Diode 2 26 35 46 53 77 Thyristor 0 0 0 0 0 0 Other Discrete 0 0 0 0 0 0

Total Optoelectronic 9 13 55 114 139 217

Exchange Rate (Yen per US$1) 237 237 238 168 144 130

Preliminary estimates for 1988

Source: Dataquest August 1989

BALANCE SHEETS

Tables 12and 13 show Sony'scorporateconsolidatedbalance sheet for 1984 to 1988 in yen and U.S. dollars, respectively. In 1987, Sony changed its fiscal year end from October to March.

Table 12

Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Balance Sheet 1984 1985 ,198 6 mi* 1988

Total Current Assets ¥ 896 ¥ 966 ¥ 974 ¥ 922 ¥ 1,077 Cash ¥ 27 ¥ 30 ¥ 41 ¥ 35 ¥ 55 Receivables . ¥ 275 ¥ 306 ¥ 294 ¥ 257 ¥ 326 Inventory ¥ 305 ¥ 333 ¥ 313 ¥ 303 ¥ 335 Other Current Assets ¥ 289 ¥ 297 ¥ 326 ¥ 327 ¥ 361 Net Property, Plant, and Equipment ¥ 291 ¥ 338 ¥ 333 ¥ 343 ¥ 426 Depreciation ¥ 254 ¥ 300 ¥ 348 ¥ 371 ¥ 452 Other Assets ¥ 123 ¥ 143 ¥ 143 ¥ 146 ¥ 364

Total Assets ¥ 1,310 ¥1,447 ¥ 1.450 ¥1,411 ¥ 1,867

Total Current Liabilities ¥ 622 ¥ 648 ¥ 628 ¥ 587 ¥ 944 Long-Term Debt ¥ 89 ¥ 134 ¥ 144 ¥ 143 ¥ 196 Other Liabilities ¥ 56 ¥ 66 ¥ 72 ¥ 72 ¥ 77

Total Liabilities ¥ 767 ¥ 848 ¥ 844 ¥ 802 ¥1,217

Total Shareholders' Equity ¥ 543 ¥ 599 ¥ 606 ¥ 609 ¥ 650 Common Stock ¥ 12 ¥ 12 ¥ 12 ¥ 12 ¥ 24 Other Equity ¥ 93 ¥ 86 ¥ 62 ¥ 56 ¥ 61 Retained Earnings ¥ 438 ¥ 501 ¥ 532 ¥ 541 ¥ 565

Total Liability and Total Equity ¥1,310 ¥1,447 ¥1.450 ¥1.411 ¥1,867

(CcMitinued)

Table 12 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Income Statement 1984 1985 1986 1987* 1988

Revenue ¥1,262 ¥ 1,421 ¥1325 ¥ 548 ¥ 1,431 Domestic Sales ¥ 345 ¥ 367 ¥ 934 ¥ 178 ¥ 479 Overseas Sales ¥ 917 ¥ 1,054 ¥ 391 ¥ 370 ¥ 952 Other income ¥ 15 ¥ 18 ¥ 21 ¥ 10 ¥ 26 Cost of Sales ¥ 864 ¥ 982 ¥ 1,010 ¥ 408 ¥1,065 Gross Margin (%) ¥ 32 ¥ 32 ¥ 25 ¥ 27 ¥ 27 R&D Expense ** ¥ 100 ¥ 111 ¥ 121 ¥ 51 ¥ 127 SG&A Expense ¥ 281 ¥ 323 ¥ 302 ¥ 131 ¥ 336 Other Operating Expenses 0 0 0 0 0 Total Operating Expenses ¥ 1,145 ¥ 1,305 ¥ 1,312 ¥ 539 ¥ 1,401 Operating Income G-oss) ¥ 132 ¥ 134 ¥ 34 ¥ 19 ¥ 56 Interest, Net (¥ 6) (¥ 4) (¥ 3) (¥ 2) (¥ 11) Other income (loss) ¥ 14 ¥ 12 ¥ 45 ¥ 7 ¥ 29 Pretax Income ¥ 140 ¥ 142 ¥ 76 ¥ 24 ¥ 74 Provision for Taxes (Credit) ¥ 77 ¥ 78 ¥ 41 ¥ 15 ¥ 40 Effective Tax Rate (%) 55 55 54 63 54 Extraordinary Items, ¥ 8 ¥ 9 ¥ 7 ¥ 4 ¥ 3 Net Income ¥ 71 ¥ 73 ¥ 42 ¥ 13 ¥ 37

Avg. Shares Outstanding (Millions) 231 231 231 231 235 Employees 43,973 44,908 48,671 47,600 60,500 Cq}ital Spending ¥ 80 ¥ 130 ¥ 94 ¥ 50 ¥ 134

Exchange Rate (Yen per US$1) 236 245 175 157 138

* 1987 figuresar e for the five months from October 1986 to March 1987. ** R&D expenses also are included in SG&A expenses.

Source: Dataquest August 1989

Table 13

Consolidated Balance Sheet Fiscal Years 1984-1988 (Mill ions of Dollars)

Balance Sheet 1984 1985 1986 im* 1988 Total Current Assets $ 3.797 $3,943 $5,566 $ 5.873 $ 7,804 Cash $ 114 $ 122 $ 234 $ 223 $ 399 Receivables $ 1,165 $1,249 $1,680 $ 1.637 $ 2,362 Inventory $1,292 $ 1,359 $ 1.789 $ 1.930 $ 2,428 Other Current Assets $1,225 $1,212 $ 1,863 $ 2,083 $ 2,616 Net Property, Plant, and Equipment $U33 $ 1,380 $ 1,903 $2,185 $ 3,087 Depreciation $ 1,076 $1,224 $ 1,989 $ 2,363 $ 3,275 Other Assets $ 521 $ 584 $ 817 $ 930 $ 2,638

Total Assets $5,551 $5,906 $8,286 $ 8,987 $13,529

Total Current Liabilities $ 6,742 $7,253 $10,509 . $11,573 $17,203 Long-Term Debt $ 377 $ 547 $ 823 $ 911 $ 1,420 Other Liabilities $ 237 $ 269 $ 411 $ 459 $ 558

Total Liabilities $3,250 $ 3,461 $4,823 $ 5,108 $ 8,819

Total Shareholders' Equity $ 2,301 $2,445 $ 3.463 $ 3,879 $ 4.710 Common Stock $ 51 $ 49 $ 69 $ 76 $ 174 Other Equity $ 394 $ 351 $ 354 $ 357 $ 442 Retained Earnings $ 1,856 $2,045 $3,040 $3,446 $ 4.094

Total Liability and Total Equity $5,551 $5,906 $8,286 $ 8,987 $13,529

(Continued)

Table 13 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Income Statement 1984 1985 1986 1987* 1988

Revenue $5,347 $5,800 $ 7,571 $3,490 $10,370 Domestic Sales $ 1,462 $ 1,498 $5337 $1,134 $ 3.471 Overseas Sales $ 3,886 $4,302 $2,234 $ 2.357 $ 6.899 Other income $ 64 $ 73 $ 120 $ 64 $ 188 Cost of Sales $3,661 $4,008 $ 5.771 $ 2.599 $ 7,717 Gross Margin (%) $ 32 $ 32 $ 25 $ 27 $ 27 R&D Expense •* $ 424 $ 453 $ 691 $ 325 $ 920 SG&A Expense $ 1.191 $1318 $ 1.726 $ 834 $ 2,435 Other Operating Expenses 0 0 0 0 0 Total Operating Expenses $ 4,852 $ 5.327 $ 7.497 $ 3,433 $10,152 Operating Income (Loss) $ 559 $ 547 $ 194 $ 121 $ 406 Interest, Net ($ 25) ($ 16) ($ 17) ($ 13) ($ 80) Other income (loss) $ 59 $ 49 $ 257 $ 45 $ 210 Pretax Income $ 593 $ 580 $ 434 $ 153 $ 536 Provision for Taxes (Credit) $ 326 $ 318 $ 234 $ 96 $ 290 Effective Tax Rate (%) 55 55 54 63 54 Extraordinary Items, $ 34 $ 37 $ 40 $ 25 $ 22 Net Income $ 301 $ 298 $ 240 $ 83 $ 268

Avg. Shares Outstanding (Millions) 231 231 231 231 235 Employees 43.973 44.908 48.671 47,600 60.500 Capital Spending $ 341 $ 532 $ 538 $ 318 $ 971

Exchange Rate (Yen per US$1) 236 245 175 157 138

• 1987 figuresar e for the fivemonth s from October 1986 to March 1987. ** R&D expenses are also included in SG&A expenses.

Source: Dataquest August 1989

Toshiba Corporation Corporate

SUMMARY The purpose of this section is to provide a one-page overview of the corporation.

Adkiress Toshiba Corporation 1-1 Shibaura 1-chome Minato-ku, Tokyo 105, Japan Phone (03)457-4511 Fax (03)456-1631 President and CEO Joichi Aoi Main Product Areas Consumer products and others Information/communication systems and electronic devices Heavy electrical apparatus No. of Employees 122,000 (consolidated)

Top Shareholders Dai-Ichi Mutual Life Insurance ,5% Nippon Life Insurance ,7% Mitsui Bank, Ltd. ,2% Japan Securities Clearing Corp. ,5% ,3% Mitsui Mutual Life Insurance ,2% Sumitomo Trust & Banking ,0% Nippon Fire & Marine Insurance ,9% Long-Term Credit Bank of Japan ,7% Tokai Bank ,6% Mitsubishi Trust and Banking % Outstanding Stock Foreign-Owned 5.9% Stock Exchanges All major Japanese, Luxembourg, London, Zurich, Geneva, Amsterdam, Frankfurt, Dusseldorf, Paris, and Basel

Ranking (based 3rd among Japanese electronics manufacturers on revenue) 10th among worldwide electronics manufacturers

STRATEGY

Toshiba's goals for 1989 and accomplishments in 1988 are highlighted in this section. Toshiba's corporate goals include the following: • Increase local procurement of components and increase imports • Expand production in Asia and expand both production and R&D in North America (specifically at the Irvine, California, plant) • Continue to promote "Electronics and Energy" (E&E) concept and "Project I" program. E&E emphasizes the development of new, energy-efficient technologies. Project I promotes development of information, integration, and intelligence-related technologies (i.e., PBX). The following developments occurred at Toshiba during 1988: • Designed and constructed world's first advanced boiling-water reactor nuclear power plant with General Electric. The Company is a leader in the Japanese power plant market. • Established Systems and Software Engineering Lab for artificial intelligence and software engineering R&D and Advanced Research Lab for basic research on supercomputers and biotechnology • Reduced inventory by 40 percent in past three years by enhancing just-in-time delivery and achieved a 30 percent gain in overall manufacturing productivity by improving capabilities in small-lot and mixed-production runs

• Reorganized worldwide management to better coordinate operations

• Established Strategic Products Control (SPC) program to monitor all sales of strategic products as a result of the Toshiba Machine Company case involving sales of machine tools to the Soviet Union

• North America Expanded line of laptop computers and automobile phones manufactured in Irvine, California

Europe

Increased sales of laptops, facsimiles, semiconductors, and computers Established Toshiba Electronics Europe GmbH for manufacturing electronic components and Tos/Ka corporation to manufacture laptops Asia Significantly expanded consumer product sales during the past three years in Hong Kong and China.

ORGANIZATION Toshiba is one of two leaders of the Toshiba-IHI Group; the other is Ishikawajima-Harima Heavy Industries (IHI). These parent companies have close capital and business connections. Their subsidiaries are engaged in electrical and electronics production, construction, trading and finance, and shipbuilding. Figure 1 is a diagram of the Toshiba-IHI Group and Figure 2 is a diagram of the Toshiba Company organization.

Figure 1 Toshiba-IHI Group

•.V JIf Ji< ,^l~ ji f y ,v IshlkawaJIma-Harlma Heavy Industries (IHI)

Atomi3zc Energ: y Machinery

Shlbaura Engineering Works Nippon Atomic Industry Group IshlkawaJIma-Shlbaura Nishishiba Electric Machinery Kitashiba Electric IshlkawaJIma Mass-Produced Tokyo Electric Machinery Toshiba Electronic Systems IshlkawaJIma Construction Marcon Electronics Machinery Toshiba Components IshlkawaJIma Materials Onkyo Corp. Handling Equipment Toshiba Battery Star Farm Machlrtery Mfg Toshiba hleatlng Appliances Toshiba Electric Appliances Shipbuilding

tchikawajlma Ship & Construction Chemical Plant Toshiba Eng'g & Const. MetsI Products

Machinery New Tachikawa Aircraft

Toshiba Machine Toshiba Tungaloy Real Estate Dengyosha Machine Works Toshiba Seiki Tachlhi Enterprises Tokyo Optical Trading/Finance Metats lihlkawajima Construction Toshiba Steel Tube Materials Nippon Tungsten IHI Marine Showa Electrk: Wire 8i Cable IshlkawaJIma Factoring

Chemicals

Toshiba Cnemlcal To«hlba Silicone Close Capital arxl Business Connections if'J'JJJ'J'JJJ'J^A Ceramics/Glass

Toshiba Ceramics Parent Co. Toshiba Glass

Trading SubsidiarieHs or Atll Hates Toshiba Electrical Equipment Toshiba Medical Systems Toshiba Cold Chain

0004214-1 Source: Industrial Groupings in Japan 1986/1987 Dodwell Marketing Consultants

Figure 2 Toshiba Corporation Company Organization

Industrial Electronics Business Sector

— Secretaries Office — Public Communications Office Corporate Policy Committee Corporate Planning Div. Executive Directors Committee Affiliated Companies Div. Administration Div. Personnel Div. Electronic Components Business Sector Employees Relations DIv. Manpower Development DIv. Total Information & Systems DIv. Finance Div. International Finance Div. Accounting Div. Sales Development Div. Consumer Products Business Sector Physical Distribution Div. Advertising DIv. Board of International Div. Directors President

Cfi airman Vice of the Board President — Productivity DIv. Construction Dept. Auditing Manufacturing Engineering Lab DIv. b Heavy Duty Electrical r Purchase DIv. Apparatus Business Sector Technical Planning & Coordination Div. Patent DIv. Research & Development Div.

' Tsul

0004214-2 Source: Toihiba Corporation

OPERATIONS Toshiba reported sales of ¥3,572 billion for the fiscal year ending in March 1988, an increase of 8 percent from the previous year. Earnings recovered, rising to the highest level since 1985. Net income was up 79 percent over fiscal 1987 to ¥61 billion. This significant gain is attributed to a strong Japanese market and an upturn in information-processing equipment, office automation, and semiconductors—particularly memory devices.

Product Segments In 1988, Toshiba reorganized its product segments into the following categories. Examples of the products within each are listed below: • Information/communication systems and electronic devices—office automation equipment, workstations, control systems, semiconductors, local area networks, laptop and personal computers, telecommunications equipment, space development, medical equipment, electron tubes, and other devices • Heavy electrical apparatus—power plant systems (nuclear and thermal), electrical machinery, general purpose motors, elevators, escalators, and transportation equipment • Consumer products and others—large-screen TVs, tuners, antennas, VCRs, camcorders, air conditioners, microwave ovens, lighting equipment, and materials for high-technology products

Product Revenue Figure 3 shows product revenue as a percent of total revenue and Table 1 shows sales in yen for each segment from 1984 through 1988. Domestic versus International Revenue Figure 4 shows the year-to-year growth of Toshiba's international and domestic sales for 1984 through 1988. In 1988, domestic sales were ¥2,466 billion and international sales reached ¥1,106 billion, up approximately 8 percent over 1987. International sales account for 31 percent of, the Company's total revenue in 1988. Improved demand for information-processing equipment and recovery of the worldwide semiconductor market are the main reasons for recovered growth in 1988.

Figure 3 Product Revenue as a Percentage of Total Corporate Revenue

Percentage 100 Fvyvl Consumer Products , 90 and Others 80 Heavy Electrical Apparatus 70 I "v. ''"i Information/ Communication 60-1 60 40^ 30 20 10-1 0 1984 1985 1986 1987 19B8

Source: DaiEigueii 0004214-3 Jul>-l9£S

Table 1 Sales by Product Segment (Billions of Yen)

1984 1985 1995 X9?7 1988

Information/Communication and Electronic Devices ¥ 984 VI,121 ¥1,267 ¥1,152 ¥1,170 Heavy Electrical Apparatus 675 911 807 827 874 Consumer Products and Other 1.048 1,311 1.299 1,329 1.528

Total ¥2,707 ¥3,343 ¥3,373 ¥3,308 ¥3,572

Exchange Rate (Yen per US$1) 236 245 221 160 138

Note: Product segments were reorganized in 1988. All sales have been restated to reflect this change.

Source: Toshiba Corporation Annual Reports

Figure 4 Growth Rate of Revenue International versus Domestic

Percent Growth 60- Domestic 40- I •••', 'i Nondomestic

30-

20-

••1 103 i

-10-1 1963-1984 1984-1985 1985-1986 1986-1987 1987-1988

Source: Dataquest 0004214-« July 1989 Growth Rate Figure 5 shows the year-to-year growth rate by product segment revenue. Following this figure is a list of factors explaining the changes in 1988 product growth. Figure 5 Growth Rates by Product Segment (Yen-Based) Percent Change 45

Main Factors Affecting 1988 Growth

The major factors affecting Toshiba's growth in 1988 are listed below by product segment. • Information/communication systems and electronic devices Strong demand existed for semiconductor memories worldwide

Strong capital investments boosted office automation and computer equipment sales

Picture tube sales increased, especially in China, and demand improved for color and large-screen televisions

• Heavy electrical apparatus Capital investments increased and Japan's construction boom boosted demand - Weak demand for new power facilities continued • Consumer products and others Japanese consumer spending increased - Sales of materials grew significantly as a result of increased demand from the semiconductor industry - Exports slowly recovered from effects of strong yen Competition from newly industrialized countries (NICs) and trade friction also hurt sales

CAPITAL AND R&D INVESTMENTS Toshiba's capital and R&D spending in 1988 increased 6 percent in 1988. This follows a decrease of more than 15 percent in 1987 due to the severe conditions of the semiconductor industry. Figure 6 and Table 2 show R&D and capital spending as a percentage of total corporate revenue.

Figure 6 Capital and R&D Spending As Percentage of Total Corporate Revenue

Percentage

14- Capital Spending I ••'• "-i R4D Spending 12-

tC;^

R^ V V% W '\W-N Sxw 0 1983 1S84 1985 1986 1987 1986

0004214-6 Source: Dataqucsi JulylsSS

Capital and R&D Spending (Billions of Yen, Millions of Dollars)

1983 1984 1995 1986 1987 1988 Corporate Revenue ¥2,401 ¥ 2,707 ¥ 3,343 ¥ 3,373 ¥ 3,308 ¥ 3,572 $9,643 $11,470 $13,645 $15,262 $20,675 $25,884 Capital Spending ¥ 131 ¥ 171 ¥ 274 ¥ 288 ¥ 204 ¥ 212 $ 526 $ 725 $ 1,118 $ 1,303 $ 1,275 $ 1,536 % Total Revenue 5.5% 6.3% 8.2% 8.5% 6.2% 5.9% R&D Spending ¥ 119 ¥ 141 ¥ 175 ¥ 190 ¥ 201 ¥ 217 $ 478 $ 597 $ 714 $ 860 $ 1,256 $ 1,572 % Total Revenue 5.0% 5.2% 5.2% 5.6% 6.1% 6.1% Total Spending ¥ 250 ¥ 312 ¥ 449 ¥ 478 ¥ 405 ¥ 429 $1,004 $ 1,322 $ 1,833 $ 2,163 $ 2,531 $ 3,109 % Total Revenue 10.4% 11.5% 13.4% 14.2% 12.2% 12.0% Exchange Rate (¥ per US$1) 249 236 245 221 160 138

Source: Toshiba Corporation Annual Reports Dataguest July 1989

Target R&D Areas Toshiba has targeted the following areas for R&D in the future: • Artificial intelligence (AI) In 1987, Toshiba created the Systems and Software Engineering Laboratory to develop systems technology and software production engineering for AI.

• Biotechnology and superconductivity In 1988, Toshiba established the Advanced Research Laboratory to carry out basic research on superconductivity and bioelectronics. Toshiba's research has developed new technology to make a flat and uniform layer of superconductor thin film that does not deteriorate.

• Electronic devices Toshiba has developed an experimental 16Mb DRAM with an access time of 70 nanoseconds on a 12.0mm by 17.5mm chip.

• Robotics A prototype robot has been developed for automated horticultural facilities that oversee the propagation of plants.

FACILITIES Table 3 shows the distribution of Toshiba's domestic and foreign manufacturing facilities. Table 3 Toshiba Corporation Facilities

Country Facilities Types

Japan 59 Sales offices 26 Manufacturing plants 11 R&D laboratories

Overseas 56 Sales offices and manufacturing plants

Source: Dataguest July 1989

(Page intentionally left blank)

SUMMARY The purpose of this section is to provide a one-page overview of the Company's semiconductor activity.

Address Toshiba Semiconductor Toshiba America Electronic Operations Components, Inc. Tamagawa Plant 9775 Toledo Way Komukai-Toshiba-cho 1 Irvine, CA 92718 Saiwai-ku, Kawasaki City Kanagawa 210

Phone 44-511-3111 (714) 455-2000 Management Hideharu Egawa Vice President and Director of the Board Group Executive Semiconductor Group Takeshi Nakagawa Senior Manager of Worldwide Business Planning Semiconductor Group Tadashi Wakayama President Toshiba America Electronics Components (TAEC) Main Product Bipolar digital MOS, particularly CMOS Areas Linear ICs ASIC Discrete Gallium arsenide Optoelectronics

Ranking 2nd among worldwide semiconductor manufacturers (based on 3rd among Japanese semiconductor manufacturers revenue)

STRATEGY

Listed below are some of Toshiba's accomplishments in the semiconductor area during 1988 and its goals for 1989. This includes new product announcements. The information is divided into product categories for clarity.

Overall

• Toshiba uses approximately 15 percent of its semiconductor products internally. • Efforts are being made to reduce reliance on volatile IC memory markets and to strengthen other product areas. • The Company made plans to strengthen overseas business.

Analog/Discrete • Toshiba remained largest supplier of discrete devices in both 1987 and 1988, according to Dataquest's estimates, and has stated goals to remain number one. • It moved from third to first place in analog market share according to our 1988 preliminary estimates.

Memory • Toshiba remained the largest supplier of 1Mb DRAMs to worldwide market. • It introduced four new high-speed 256K CMOS SRAMs in early 1989. • It developed a 4Mb DRAM and began shipping in spring 1989. • A second-generation 1Mb Video RAM was introduced. • Toshiba supplied approximately 50 to 60 percent of the world's 1Mb DRAMs in 1987 and 1988. • It will build a new 4Mb-DRAM line at Oita Works.

ASICs • Toshiba will double ASIC production capacity in 1989 by adding line at Iwate Toshiba Electronics Co., Ltd. • An experimental production integrated line at Microelectronics Center in the United States was completed in the fall of 1988. • The sixth U.S. design center was opened. • Toshiba introduced one-micron CMOS and BiCMOS standard cells.

Microcorapwnents • Toshiba announced a 32-bit TRON microprocessor called TXl.

ORGANIZATION Figure 7 shows Toshiba Corporation's semiconductor operations group's organizational chart.

Figure 7 Toshiba Corporation Semiconductor Group Organizational Chart

SemtcoDductor Group

International Project Staff r IC Center Semiconductor Business Planning Office Semiconductor 1st LSI Technology Dept. Semiconductor Administration Office Device Engineering 2nd LSI Technology Dept. Semiconductor Information Systems Dept. Lab Fundamental Technology i Dept. Semiconductor Accounting Office Semiconductor Engineering Administration Dept. VLSI Development r VLSI Planning Dept. Promoting Dept. 1- VLSI Device Development Dept.

Semiconductor Mari

Marl(et Research and Ranning Sec. Semiconductor Production ~ Integrated CIrcuK Control Dept. Production Control Dept. Semiconductor Sales • Administration Dept. Semiconductor Quality Integrated Circuit Assurance Dept. Quality Assurance Dept. Semiconductor Marlceting Managing Dept. Discrete Semiconductor Microcomputer Application Application Engineering Dept. Engineering Dept. Semiconductor Sales Development Dept. Consumer Semiconductor Industrial Semiconductor . Application Engineering Dept. Application Engineering Dept. Integrated Circuit Sales Automotive Semiconductor Development Dept. Discrete Semiconductor Device Engineering Dept. Application Engineering Dept. Semiconductor Tolcyo Sales Dept. Power Semiconductor Device Logic Device Engineering Dept. Engineering Dept. • Semiconductor Physical Memory Device Distribution Systems Dept. Optoelectronic Semiconductor Engineering Dept. Engineering Dept. - Microcomputer Device Bipolar 10 Engineering Dept. Engineering Dept. Imaging Device Development Semiconductor Advanced Manufacturing Engineering Dept. Integrated Circuit Advanced Himejl Semiconductor Worlcs Manufacturing Engineering Dept. - KItakyushu Works CAD and Test Engineering Dept. - Gate Array Engineering Dept. \" Microelectronics Center • (Tamagawa Works) - Microelectronics Center (Tamagawa Works) •" Horlkawracho Works h- Chita Works Horikawacho Works

0004214-7 Source: Toshiba Corporation

OPERATIONS Note: Exchange rates used in the semiconductor section of this profile are based on the calendar year average.

Product Segments The Company's main product areas are listed below: MOS~logic, memory (256K, IM, 4M DRAMs, EPROMs, SRAMs), microcomponents Analog—CCDs, DSPs, Discrete Bipolar digital Optoelectronics ASIC GaAs

Product Revenue Figure 8 shows Toshiba's percentage of semiconductor revenue by product. For example, 79 percent of Toshiba's IC revenue came from MOS technology in 1988 and of this, 57 percent came from MOS memory devices.

Figure 8 1988 Estimated Semiconductor Revenue Percentage by Product of Total Revenue (Millions of Dollars)

IC 75%

Bipolar . 79% ^\ 3% vV MOS Technology \

wos \ \ M amory \ 57% \ 1 Analog 18% r MOsl \ Logic / \30%/

Discrete 20% ~~--V^ MOS yf""--.^ Micro / 13% 1 Opto 5%

0004214-6 Source: Dataquest July 1989

Regional Sales Toshiba's 1988 estimated percentage of semiconductor revenue by region is shown in Table 4.

Table 4 1988 Estimated Semiconductor Revenue Percent by Region (Millions of Dollars)

United Product States Japan Europe ROW Semiconductor 23% 57% 8% 13% IC 28% 52% 9% 12% Bipolar Digital 2% 61% 3% 33% MOS (Technology) 35% 48% 10% 7% MOS Memory 46% 37% 13% 4% MOS Micro 17% 70% 8% 5% MOS Logic 22% 60% 6% 13% Analog 3% 65% 3% 29% Discrete 6% 73% 6% 15% Optoelectronics 6% 66% 8% 20% Exchange Rate (Yen per US$1) 130

Source: Dataguest July 1989

Growth Rate Toshiba's growth rate by product line is shown in the tables and figures that follow. Table 5 shows its worldwide sales and growth rates for 1987 and 1988. Figure 9 graphically compares Toshiba's growth rate in the world market with the growth rate of the world market itself. (This information will be provided for the Japanese market as well.)

Table 5 Toshiba Sales in World Market (Millions of Dollars)

World Market 1987 1988 % Change % Chanoe

Semiconductor $3 ,029 $4 ,302 42.0% 31.9% IC $2 ,194 $3 ,223 46.9% 36.5% Bipolar Digital $ 125 $ 108 (13.6%) 9.2% MOS (Technology) $1 ,593 $2 ,546 59.8% 53.1% MOS Memory $ 679 $1 ,439 111.9% 90.3% MOS Micro $ 283 $ 338 19.4% 39.8% MOS Logic $ 631 $ 769 21.9% 28.2% Analog $ 476 $ 569 19.5% 15.3% Discrete $ 703 $ 864 22.9% 13.2% Optoelectronics $ 132 $ 215 62.9% 25.4%

Exchange Rate (Yen per US$1) 144 130

Source: Dataguest July 1989

Figure 9 Toshiba Growth Rate Compared with World Market

Growth Rate 140

SemlcoridLictor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product Source: Dataquest CX»4Z14-9 July 1989 20 © 1989 Dataquest Incorporated July JSIS Volume III 0004214 Toshiba Corporation Semiconductor

Worldwide Market Growth Rate As shown in Table 5, Toshiba grew faster than the world market in all areas except bipolar digital, MOS micro, and MOS logic. Japanese Market Growth Rate Toshiba grew only slightly more than the Japanese semiconductor market as a whole. Although growth was strong in most areas, it slowed dramatically in bipolar digital and MOS micro. The Company's sales in the Japanese market are shown in Table 6 and Figure 10.

Table 6 Toshiba Sales in Japanese Market (Millions of Dollars)

Japanese Market 1987 1989 "(b Chanae % Chanae

Semiconductor $1 ,792 $2,,43 8 36.0% 35.6% IC $1 ,230 $1,,66 6 35.4% 39.1% Bipolar Digital $ 117 $ 66 (43.6%) 18.3% MOS (Technology) $ 766 $1,,23 0 60.6% 58.4% MOS Memory $ 251 $ 534 112.7% 85.4% MOS Micro $ 249 $ 236 (5.2%) 35.9% MOS Logic $ 266 $ 460 72.9% 50.3% Analog $ 347 $ 370 6.6% 11.7% Discrete $ 487 $ 630 29.4% 18.5% Optoelectronics $ 75 $ 142 89.3% 42.3%

Exchange Rate (Yen per US$1) 144 130

Source: Dataguest July 1989

Figure 10 Toshiba Growth Rate Compared with Japanese Market Growth Rate 140

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004214-10 Source; Dataquest July 1989 Other Japanese Companies Toshiba's growth rate by product line is compared with that of the Japanese companies tracked by Dataquest in the following graphs. Dataquest surveys a total of 18 companies, plus a category called "Other." The total of these companies' revenue was used for comparison in Figures 11 and 12.

Figure 11 Toshiba versus Japanese Companies in Japanese Market Growth Rate

Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product 0004214-11 Source: Dataquest July 1989 22 © 1989 Dataquest Incorporated July JSIS Volume III 0004214 Toshiba Corporation Semiconductor

Figure 12 Toshiba versus Japanese Companies in World Market 1988 Estimated Growth Rates

Growth Rate 140- Other Japanese Companies E3 Toshiba

-20 Semiconductor IC Bipolar MOS Memory Micro Logic Analog Discrete Opto Product Source: Daiaqucst 0004214-12 July 1989

Channels of Distribution Toshiba's major distributors in Japan are Toshiba Electron Device, Midoriya Electric, Tokyo Shuma, and Kenden Kogyo. In the United States, Toshiba's products are sold by Toshiba America Ltd., headquartered in Tustin, California. Toshiba's products are also available through several major U.S. distributors. In Europe, Toshiba uses its own sales offices in addition to European distributors.

CAPITAL SPENDING Semiconductor capital investments as a percentage of total revenue are shown in Tables 7 and 8. Spending in the past three years has decreased more than 50 percent since the peak years of 1983 to 1985. Semiconductor R&D that is 5 to 10 years out is done at the new ULSI laboratory in Kawasaki. For example, the 16Mb DRAM is being developed there. Product engineering related R&D is done at the Semiconductor Device Engineering Lab.

Table 7 Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year (Millions of Dollars)

1982 1983 1984 1985 1986 1987 1988

Revenue $715 $983 $1,561 $1,468 $2,281 $3,029 $4,302

Semiconductor Capital Spending $112 $367 $ 574 $ 517 $ 387 $ 417 $ 615

Growth Rate of Capital Spending N/A 226% 56% (10%) (25%) 8% 48%

Percent of Revenue 16% 37% 37% 35% 17% 14% ' 14%

Exchange Rate (V per US$1) 249 237 237 238 168 144 130

N/A = Not Available

Source: Dataguest July 1989

Table 8 Estimated Semiconductor Capital Spending Compared with Total Revenue Calendar Year (Billions of Yen)

1982 1983 1984 1985 1986 1987 1988

Revenue 178 233 370 349 383 436 559 Semiconductor Capital Spending 28 87 136 123 65 60 80

Capital Spending Growth Rate N/A 211% 56% (10%) (47%) (8%) 33%

Exchange Rate (¥ per US$1) 249 237 237 238 168 144 130

N/A = Not Available

Source: Dataquest July 1989

FACILITIES Toshiba's semiconductor manufacturing facilities are listed in Table 9.

Table 9 Toshiba Corporation Semiconductor Facilities

Name/Location Function

Kimitsu Plant Fab, assembly, test, discrete Kimizu City

Nippo Industrial Fab, assembly, test, discrete Nakama City

Tamagawa Plant Fab, assembly, test, memory (4Mb), Kawasaki City logic (Continued)

Table 9 (Continued) Toshiba Corporation Semiconductor Facilities

Name/Location Function

Himeji Factory Fab, assembly, test, discretes Himeji City

Iwate Toshiba Electronics Assembly, linear, discrete Kitakami City

Kitakyushu Factory Fab, assembly, test, linear Kitakyushu City

Tohoku Semiconductor Fab, assembly, MPUs, memory Izumi City (Joint Venture)

Micro Technorlogy Laboratory Fab, test, bipolar, MOS N/A

Micro Electronics Center Fab, test, bipolar, MOS N/A

Gita Factory Fab, assembly, test Oita City

Korea Electronics Assembly, test, ICs, opto, discrete Korea (Joint Venture)

Toshiba Electronics Assembly, test, ICs, discrete Malaysia

Industria Mexicana Toshiba Assembly, test, ICs, discrete Mexico

Toshiba Semiconductor Assembly, ASIC, Will begin fab of Sunnyvale, CA gate arrays in 1989

Toshiba Semiconductor Germany Assembly, test, MOS

N/A = Not Available

Source: Dataquest July 1989

ALLIANCES AND AGREEMENTS Toshiba's alliances and agreements for 1986 to 1988 are summarized in Figure 13, For more in-depth information, please refer to Volume II of the Japanese Semiconductor Industry Service behind the tab entitled "Strategic Alliances."

Figure 13 Semiconductor Alliances and Agreements 1986 to 1988

Source: Dataqucst 0004214-13 July 1989

(Page intentionally left blank)

REVENUE SUMMARY Tables 10 and 11 show Toshiba's semiconductor revenue in detail. The tables show sales from 1981 to 1988 in billions of yen and millions of dollars, respectively. Table 10 Toshiba Corporation Estimate Worldwide Semiconductor Revenue (Billions of Yen)

1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 171 178 233 370 349 383 436 559 Total IC 87 107 145 245 239 271 316 419

Bipolar Digital (Technology) 8 22 18 14

MOS (Technology) 55 78 108 182 175 187 229 331 NMOS 18 25 39 55 43 68 75 107 PMOS 4 6 5 0 0 0 0 0 CMOS 33 47 64 128 132 119 154 224 BiCMOS 0 0 0 0 0 0 0 0

MOS (Function) 55 78 108 182 175 187 229 331 MOS Memory 18 35 52 94 71 80 98 187 MOS Microdevices 2 7 11 17 16 30 41 44 MOS Logic 36 35 45 72 88 76 91 100

Analog 29 25 32 54 56 63 69 74

Total Discrete 67 54 64 99 88 93 101 112

Transistor 35 27 32 47 41 55 60 67 Diode 25 20 25 39 34 30 30 33 Thyristor 5 4 5 7 12 8 9 10 Other Discrete 3 3 3 6 0 0 2 2

Total Optoelectronic 17 17 23 26 23 18 19 28

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

•Preliminary estimates for 1988

Source: Dataguest July 1989

Table 11 Toshiba Corporation Estimated Worldwide Semiconductor Revenue (Millions of Dollars)

1981 1982 1983 1984 1985 1986 1987 1988*

Total Semiconductor 774 715 983 1,561 1,468 2,281 3,029 4,302

Total IC 394 429 613 1,035 1,004 1,616 2,194 3,223

Bipolar Digital (Technology) 14 16 21 37 33 129 125 108

MOS (Technology) 250 312 458 770 736 1,114 1,593 2,,54 6 NMOS 80 101 165 230 181 404 522 824 PMOS 20 24 21 2 1 0 0 0 CMOS 150 187 272 538 554 710 1,071 1 ,722 BiCMOS

MOS (Function) 250 312 458 770 736 1,114 1,593 2 ,546 MOS Memory 80 142 221 396 297 479 679 1 ,439 MOS Microdevices 8 30 45 70 69 180 283 338 MOS Logic 162 140 192 304 370 455 631 769

Analog 130 101 134 228 235 373 476 569

Total Discrete 304 217 272 418 368 556 703 864

Transistor 157 108 133 200 173 325 415 512 Diode 112 80 106 163 142 179 211 256 Thyristor 21 16 19 30 51 50 65 80 Other Discrete 14 13 14 25 2 2 12 16

Total Optoelectronic 76 69 98 108 96 109 132 215

Exchange Rate (Yen per US$1) 221 249 237 237 238 168 144 130

•Preliminary estimates for 1988

Source: Dataguest July 1989

BALANCE SHEETS Tables 12 and 13 show Toshiba's corporate consolidated balance sheet for 1984 through 1988 in yen and dollars, respectively.

Table 12 Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Balance Sheet (March 31) 1984 1995 198$ ^1987 1988

Total Current Assets 1,715 2,005 1,922 1,970 2,114 Cash 159 174 169 204 181 Receivables 619 681 687 672 722 Inventory 440 531 513 537 506 Other Current Assets 497 619 553 557 705 Net Property, Plant, and Equipment 495 630 736 744 738 Depreciation 635 739 884 1,009 1,128 Other Assets 444 479 510 570 607 Total Assets 2,654 3,114 3,168 3,284 3,459

Total Current Liabilities 1,599 1,819 1,820 1,835 1,836 Long-Term Debt 503 636 661 525 553 Other Liabilities 87 111 120 331 352

Total Liabilities 2,189 2,566 2,601 2,691 2,741

Total Shareholders' Equity 465 548 567 593 718 Conv. Preferred Stock 0 0 0 0 0 Common Stock 132 139 140 152 197 Other Equity 149 162 145 149 193 Retained Earnings 184 247 282 292 328

Total Liability and Total Equity 2,654 3,114 3,168 3,284 3,459 (Continued)

Table 12 (Continued) Consolidated Balance Sheet Fiscal Years 1984-1988 (Billions of Yen)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue 707 .343 3,373 3,308 3,,57 2 Domestic Sales 968 297 2,319 2,287 2. ,466 Overseas Sales 739 .046 1,054 1,021 1,,10 6 Cost of Sales 931 .389 2,444 2,429 2, .573 Gross Margin (%) 29 29 28 27 28 R&D Expense 141 175 190 201 217 SG&A Expense 651 595 617 626 672 Other Operating Expenses 111 115 108 117 Total Operating Expenses 2,582 .270 3,366 3,364 3,579 Operating Income (Loss) 125 73 7 (56) (7) Interest, Net 75 177 124 134 133 Pretax Income 200 250 131 78 126 Provision for Taxes (Credit) 75 99 71 45 65 Effective Tax Rate 38 40 54 58 52 Extraordinary Items, Net 0 0 0 1 0 Net Income 59 86 59 34 61

Avg. Shares Outstanding (M) 2,559 2,652 2,674 2,704 2,939 Employees 105,000 114,000 120,000 121,000 122,000 Capital Expenditures 171 274 288 204 212

Exchange Rate (Yen per US$1) 236 245 221 160 138

Source: Toshiba Corporation Annual Report Dataguest July 1989

Table 13 Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Balance Sheet (March 31) 1984 198? 1986 1987 1988

Total Current Assets 7,267 8,184 8,697 12,313 15,319 Cash 674 710 765 1,275 1,312 Receivables 2,623 2,780 109 4,200 232 Inventory 1,864 2,167 321 3,356 667 Other Current Assets 2,106 2,527 502 3,481 109 Net Property, Plant, & Eqp. 2,097 2,571 330 4,650 348 Depreciation 2,691 3,016 4,000 6,306 8,174 Other Assets 1,881 1,955 2,308 3,563 4,399

Total Assets 11,246 12,710 14,335 20,525 25,065

Total Current Liabilities 6,775 7,424 8,235 11,469 13,304 Long-Term Debt 2,131 2,596 2,991 3,281 4,007 Other Liabilities 369 453 543 2,069 2,551

Total Liabilities 9,275 10,473 11,769 16,819 19,862

Total Shareholders' Equity 1,970 2,237 2,566 3,706 5,203 Conv. Preferred Stock 0 0 0 0 0 Common Stock 559 557 633 950 1,428 other Equity 631 661 656 931 1,399 Retained Earnings 780 1,008 1,276 1,825 2,377

Total Liability and Total Equity 11,246 12,710 14,335 20,525 25,065

(Continued)

Table 13 (Continued)

Consolidated Balance Sheet Fiscal Years 1984-1988 (Millions of Dollars)

Income Statement (March 31) 1984 1985 1986 1987 1988

Revenue 11,470 13,645 15,262 20,675 25,884 Domestic Sales 8,339 9,376 10,493 14,294 17,870 Overseas Sales 3,131 4,269 4,769 6,381 '8,014 Cost of Sales 8,182 9,751 11,059 15,181 18,645 Gross Margin (,%) 29 29 28 27 28 R&D Expense 597 714 860 1.,25 6 1/,57 2 SG&A Expense 2,758 3,143 3,652 5, 169 6. ,442 Other Operating Expenses 0 453 520 675 848 Total Operating Expenses 10,941 13,347 15,231 21,025 25,935 Operating Income (Loss) 530 298 32 (350) (51) Interest, Net 75 177 124 838 964 Pretax Income • 200 250 131 488 913 Provision for Taxes (Credit) 75 99 71 281 471 Effective Tax Rate 38 40 54 58 52 Extraordinary Items, Net 0 0 0 6 0 Net Income 250 351 267 213 442

Avg. Shares Outstanding (M) 2,559 2,652 2,674 2,704 2,939 Employees 105,000 114,000 120,000 121,000 122,000 Capital Expenditures 725 1,118 1,303 1,275 1,536

Exchange Rate (Yen per US$1) 236 245 221 160 138

Source: Toshiba Corporation Annual Report Dataquest July 1989

New Japan Radio Co., Ltd.

Head Office: 1-22-14, Toranomon, Minato-ku, Tokyo 105 Tel: (03) 502-2331 Telex: 222-6154 NJRCTOJ

No. of Employees: 900

BACKGROOND New Japan Radio Co., Ltd., established in 1960 under license from Raytheon, is the semiconductor division of the Japan Radio Company. The Company is owned 67 percent by Japan Radio Corporation and 33 percent by Raytheon. It is a major producer of bipolar linear ICs and discrete devices for audio manufacturers and other consumer OEMs.

CaUBMn ORGANIZATION The New Japan Radio Co., Ltd., has three operations: its main headquarters in Tokyo, the Kawagoe plant in Saitama Prefecture, and a Kansai management office in Nara City. Saga Electronics, the Company's 100 percent owned subsidiary, employs 600 people.

Customer Base New Japan Radio sells its linear ICs and optoelectronic devices to Japanese VTR, stereo, and video disk OEMs, such as Sanyo, Sharp, Victor Company of Japan, Mitsubishi Electric, Sony, and Hitachi. It also exports devices to its partner, Raytheon, and sells in the domestic market through trading companies such as New Japan Radio Trading Company, Dai-Nichi Electronics Corporation, and Tokyo Radio Machinery Company. In the future, the Company plans to increase its sales of optoelectronic and microwave devices to Nippon Telegraph and Telephone (NTT) and other telecommunications OEMs.

SEMICONDUCTOR PRODUCT LINE

New Japan Radio sells diodes, transistor arrays, ICs, optoelectronic devices, and microwave devices and equipment. Its diode line includes zener diodes, variable capacitance diodes, band switching diodes, and electronic tuning diodes. Its IC product line offers impedance converters, voltage regulators, bipolar memories (PROMs and SPROMs), operational amplifiers, comparators, and decoders.

New Japan Radio's microwave product line is being strengthened to take advantage of the emerging direct broadcast satellite (DBS) and microwave equipment markets. Currently, the company offers GaAs infrared LEDs, photo diodes, photo transistors, photo Darlington transistors, photo reflectors, photo couplers, microwave tubes for radar sets, magnetrons for medical linear accelerators, Gunn oscillators, and microwave heating devices.

The Company is ramping up its production of CMOS logic for AD/DA converters, but it will avoid the memory market. After opening its new compound semiconductor factory in Saitama, the Company will enter the super-bright LED, field-effect transistor (FET), and optocoupler market.

MARKET ESTIMATES

As shown in Table 1, New Japan Radio Co., Ltd., had total semiconductor revenues of ¥11.0 billion ($47 million) in 1983. ICs accounted for ¥8.9 billion ($38 million), or 54.6 percent of total company revenues, IC production is about 25 million units per month, including 14 million units of op amp. Bipolar linear IC sales have grown at a compound annual growth rate (CAGR) of 67.7 percent due to the rapid growth in the telecommunications equipment market. Bipolar digital and MOS revenues together accounted for only 1.2 percent of the Company's sales, but CMOS is expected to grow rapidly as the Company seeks to establish its own niche market.- Optoelectronic devices, representing only ¥900 million ($4 million), or 5.5 percent of total sales, has shown only a 31.6 percent CAGR, but we expect this growth rate to increase in the future.

New Japan Radio Co., Ltd., President Yamashita has a sales goal of ¥30 billion (about $128 million) in 1986, of which 65 percent will be semiconductors.

Table 1

New Japan Radio Co., Ltd. ESTIMATED SEMICONDUCTOR REVENUES (Billions of Yen)

1979 1982 1981 1982 1983 CAGR

Total Semiconductor 4.6 7.7 8.8 8.3 11.0 24.4%

Total Integrated Circuit 3.1 5.2 6.0 6.2 8.9 30.2%

Bipolar Digital (Technology) 0.9 0,3 0.1 0.1 0.2 (31.3%)

Hybrid ICs 1.1 0.1 0.1 - - (100.0%)

Linear 1.1 4.8 5.8 6.1 8.7 67,7%

Total Discrete 1.2 2.1 2.1 1.4 1.2 0

Transistor 0.1 0.2 0.1 0.1 0.1 0

Diode 1.1 1.9 2.0 1.3 1.1 0

Total Optoelectronic 0.3 0.4 0.7 0.7 0.9 31.6%

LED Lamps ------

LED Displays 0.3 0.4 0.7 0.7 0.9 31.6%

Optical Couplers ------

Other ------

Total Sales 8.3 10.9 14.3 12.7 16.3 18.4%

% Semiconductors 55.4% 70.6% 61.5% 65.4% 67.5%

Source: DATAQUEST

RESEARCH AND DEVELOPMENT

DATAQUEST believes that New Japan Radio is focusing its research efforts on GaAs devices and bipolar-MOS hybrid devices. It is also developing seraicustom devices, such as gate arrays and standard cells.

PLANT AND EQaiPMENT INVESTMENT

New Japan Radio is moving aggressively to increase its production capacity. In 1983, it invested ¥3 billion ($12.8 million) in new plants and equipment, or 18,4 percent of its total sales. In 1984 this figure is expected to increase to ¥5.5 billion ($23.9 million), of which ¥4.0 billion ($17.4 million) will be invested in semiconductor capacity. This latter figure may be increased.

The Company is building two new facilities at its Kawagoe plant in Saitama prefecture. In January 1984, it began construction of a 2,000-sguare-meter building at a cost of ¥800 million ($3.5 million) to increase its production of compound semiconductor (CS) devices, such as GaAs microwave devices and LEDs. The facility will begin operations in October 1984. Construction on a second, 4,000-square-meter facility next to its existing plant began during this summer and will be completed by mid-1985.

New Japan Radio also is investing ¥1.7 billion ($7.4 million) to expand its Saga Electronics plant. About ¥0.8 billion ($3.5 million) will be invested in compound semiconductor production and ¥0.7 billion ($3.0 million) in various IC equipment.

Head Office: 2-1, 2-chome, Ohtemachi, Chiyoda-ku, Tokyo 100 Tel: (03) 279-4431 Telex: 222-2539 DENGEN J

No. of Employees: 1,400

BACKGROUND

Shindengen Electric Manufacturing Co., Ltd., established in 1946, is one of Japan's leading manufacturers of diodes and rectifiers. During the 1950s and 1960s, Shindengen signed technical agreements with General Electric, International Standard Electric, Motorola, RCA, and Western Electric (now AT&T International).

ORGANIZATION

Shindengen has five factories in Japan. Factories, locations, and products in which they specialize are shown in Table 1.

Table 1

SHINDENGEN FACTORIES IN JAPAN

Factory Location Products

Main Factory Saitama Prefecture Transistors, hybrid ICs

Akita Shindengen Akita Prefecture Diodes, rectifiers

Yamanashi Electronics Yamanashi Prefecture Rectifiers, copying Industries machine parts

Azuraa Electronics Chiba Prefecture Diodes Industries

Higashine (new) Yamagata Prefecture Diodes, transistors

Source: DATAQUEST

Semiconductor Product Line

Besides diodes and rectifiers, Shindengen builds transistors, switching power supplies, sequence processors, solenoids, and hybrid thick-film ICs. In 1983, discrete devices accounted for about 71 percent of the Company's total semiconductor revenues.

Customer Base

Nippon Telegraph and Telephone (NTT) is a major customer, accounting for 12 percent of Shindengen's total sales in 1982. However, the Company's reliance on NTT is declining with the increase in direct sales to factory automation (FA) and office automation (OA) makers, such as Fujitsu, Hitachi, Honda Motors, Oki, Toshiba, and government agencies.

MARKET ESTIMATE

As shown in Table 2, Shindengen sold about ¥21.2 billion ($90 million) worth of semiconductors in 1983, up 24.0 percent from 1982. The Company's sales of discrete devices, which account for 71 percent of the Company's semiconductor sales, increased 20 percent, while hybrid IC revenues grew 34.8 percent. Shindengen's recent five-year plan, which ended in February 1983, showed profits of ¥2.4 billion ($10.2 million), or 6.2 percent on total sales of ¥39 billion ($166 million). The Company expects total sales of ¥40 billion ($178 million) and profits of ¥2.6 billion ($11.6 million) in 1984. The Company's goal is to reach total sales of ¥1 trillion ($444 million) by 1989.

Table 2

ESTIMATED SEMICONDUCTOR REVENUES (Billions of Yen)

Calendar Year 1979 1980 1981 1982 1983 CAGR

Total Semiconductor 9.0 11.1 14.0 17.1 21.2 23.9%

Total Integrated Circuit 1.5 2.0 3.5 4.6 6.2 42.6%

Hybrid ICs 1.5 2.0 3.5 4.6 6.2 42.6%

Total Discrete 7.5 9.1 10.5 12.5 15.0 18.9%

Transistor 1.0 1.5 1.2 1.7 2.5 25.7%

Diode 0.5 0.6 0.6 0.7 0.9 15.8%

Rectifiers 6.0 7.0 8.7 10.1 11.6 17.9%

Total Revenues 23.4 26.9 32.5 34.8 41.6 15.5%

% Semiconductors 38.4% 41.3% 43.1% 49.1% 51.0%

Source: DATAQUEST

RESEARCH AND DEVELOPMENT

Shindengen has three research divisions: the R&D department (18 staff people), engineering department (25 people), and semiconductor engineering department (17 people). The Company's R&D budget for fiscal 1984 is about ¥500 million ($2.2 million). It plans to concentrate on developing ICs for computer peripherals and other industrial electronics.

PLANT AND EQUIPMENT INVESIMENT

To achieve its goal of ¥1 trillion in sales by 1989, Shindengen's six-year plan (1983-1989) calls for an investment of ¥30 billion ($130 million) in plant and equipment. This figure is less than 15 percent of its projected sales. Until recently, the Company has been investing only ¥2 billion to ¥3 billion ($8.9 million to $13.3 million) annually in plant and equipment.

Head Office: 2-19-13, Nakameguro, Meguro-ku, Tokyo 153 Tel: (03) 710-2222 Telex: 2466623 SECTOR J

No. of Employees: 2,300

BACKGROUND Stanley Electric, founded in 1920, is one of the leading manufacturers of autcanobile lamps and electronic automotive components, offering an array of light-emitting diodes (LEDs), silicon diodes, and hybrid ICs. The canpany was listed on the Tokyo Stock Exchange in 1961 and on the Osaka Stock Exchange in 1970. In 1965, Stanley diversified into silicon devices, and later, into LEDs.

ORGANIZATION The Stanley Group consists of 19 branch offices in Japan, a central R&D lab in Yokohama, 7 subsidiaries in Japan, and 3 foreign subsidiaries. The following plants produce Stanley's LEDs:

JAPAN

• Stanley Tsuruoka Works—Tsuruoka, Yamagata Prefecture

• Stanley Hatano Works—Hatano City, Kanagawa Prefecture

• Stanley Iwaki Works—Iwaki City, Fukushima Prefecture

• Stanley Ina Works—Shimo Ina District, Nagano Prefecture

OVERSEAS

• Stanley Electric U.S. Company, Inc.—London, Ohio

• Taiwan Stanley Electric Co., Ltd.—Miaoli, Taiwan

• Thai Stanley Electric Co., Ltd.—Pathumthanee, Thailand

CUSTOMER BASE

Stanley Electric provides LEDs to automobile, audio equipment, consumer electronics, office automation, and camera makers. The company's main customers include Honda, Mitsubishi Motors, Mazda, Ricoh, Pioneer, Matsushita Electric, NEC, Minolta Camera, Clarion, and Trio-Kenwood.

SEMICONDUCTOR PRODUCT LINE

Stanley Electric offers an array of red, green, yellow, and amber LEDs, photoreceptors, silicon diodes, and optoisolators. Its 5000-candela medium red LED, which was developed with Professor Junichi Nishizawa of Tohoku University, is the brightest in the industry. It will be produced in quantities in 1985. In addition, Stanley has a .500-candela yellow LED and a 200-candela green LED which will be mass produced this fall. New products include infrared LEDs, a superbright LED employing gallium arsenide for use in optical fiber cables (FH-511 LED), and large color LCDs. Its infrared LEDs are used in interrupters, sensors, and remote control systems.

MARKET ESTIMATES

Stanley Electric's semiconductor sales were ¥9.3 billion ($39.6 million) in 1983, representing 10.4 percent of the company's total revenues. Due to the economic recovery, semiconductor sales were up 14.8 percent from 1982 as shown in Table 1. LED sales, which accounted fdr 78 percent of total semiconductor sales, increased by 13.5 percent, while rectifier sales grew by 18.8 percent.

According to MITI statistics, Japanese LED production was about ¥84 billion ($360 million) in 1983, giving Stanley Electric a market iSWare of about 10.1 percent. MITI expects overall Japanese LED production to grow by 30 to 40 percent in fiscal 1984. b,9, --•: '^•f '• cof, •

Table 1

ESTIMATED SEMICONDUCTOR REVENUES (Billions of Yen)

Calendar Year 1979 1980 1981 1982 1983 CAGR

Total Semiconductor 4.0 5.9 7.1 8.1 9.3 23.5%

Discretes 0.7 1.1 1.4 1.7 9.3 231^%

Rectifiers 0.7 1.1 1.4 1.7 2.0 30.0,%

Optoelectronics LEDs 3.3 4.8 5.7 6.4 7.3 '22.0%

Total Company Revenues 58.6 70.5 79.6 84.8 90.5 11..^%

Percent Semiconductor 6.8% 6.8% 7.2% 7.5% 10.3%

Source: DATAQUEST

RESEARCH AND DEVELOPMENT

Professor Nishizawa advises Stanley on its LED research. Currently, the company is working on blue LEDs, brighter green and yellow LEDs, and optoisolators for optical fiber cables. Its 5,000-candela red LED, was announced in July, 1984.

Stanley Electric is aggressively developing its R&D capabilities. The Company is investing ¥530 million ($2.3 million) in a basic R&p laboratory at the Tsukuba Science City to conduct research on vappf deposition, plasma, electronics, and liquid crystal technology. The" lafe will have 1,780 square meters of floor space and be partially completed in August 1984. Stanley plans to conduct joint R&D with automobile makers, Tsukuba University, national testing labs, and the eight members of the Tsukuba Research Consortium.

Stanley is planning to add a new-building to its Yokohama R&D center, which will also make it a "technology sales center" for selling Stanley patents to users. Stanley plans to invest V3.0 billion ($13 million) to upgrade the facility.

Stanley Electric also plans to invest ¥1.1 billion ($4.8 million) to strengthen its R&D and production systems for its dot-matrix LCD line. Currently, the company is producing 30,000 to 40,000 million units per month of other LCD devices. In cooperation with the Renault Corporation, ^Stanley Electric will build an LCD factory in France soon.

PLANT AND EQUIPMENT INVESTMENT

r: To meet the sharp increase in demand for LEDs, Stanley is strengthening its production capacity at the Hatano Works and its subsidiaries. These expansions include:

• Hatano Works—about ¥4.5 billion ($19 million) was invested in -roi;! rebuilding the factory and adding a 3,700-square-meter building ' .-. :• for LED chip production. The new building is scheduled to be :i completed by September 1984.

;,T:> «--n. Tsuruoka Works—A ¥2.5 billion ($10.9 million), 2,200-square- meter factory building will be added to the existing 2,000-square-meter factory to increase production of 2,000-candela LEDs to 10 million units per month. Construction began in May 1984 and operation is scheduled by late 1984.

• Iwaki Works—The factory is expanding its production lines.

When the Hatano and Tsuruoka factories are completed, Stanley's production capacity for LED chips will increase from the current 60 to 70 million units to 130 million units per month by the end of 1984. LED lamp production will rise from 26 million units to 50 million units per month.

Due to the large investments, Stanley's profits, which were up 12 percent in 1983, are expected to be around ¥5.1 billion ($23 million) in 1984, up from ¥2.2 billion ($10 million) in 1983.

BACKGROUND

Suwa Seikosha Co., Ltd., is a $100 million company and the largest of the three semiconductor companies in the Seiko Group. The Seiko Groupnjs Japan's largest watchmaker, with 10,000 employees working at i.ts 49 companies and 33 plants worldwide. Suwa Seikosha specializes in CMOS VLSIs, including memories, LCD drivers, gate arrays, microprocessors, and microcontrollers. These products are based on the Company's experience in developing low-power consuming ICs for quartz watches. .,K .J'i

Since late 1982, Suwa Seikosha has processed 16K CMOS SRAM chips for RCA's Solid State Division and provided CMOS dice for both the 16R!-SM0S SRAM and 256K CMOS ROMs to RCA and Micropower Systems. .Ino..tbe United States the Company owns half of Micropower Systems. Epson America serves as Suwa's marketing subsidiary in Southern California* In December 1983, Suwa Seikosha established S MOS Systems, a semiconductor start-up in San Jose, California. The new company will market Suwa's line of CMOS 16R SRAMS, 64K ROMs, 256K IVDMs, MPUs, peripherals, and gate arrays. In January 1984, the Seiko Group agreed to produce ICs for Micropower Systems, U.S.A., which designs ICs for cameras and» home electronic appliances.

ORGANIZATION

iV The Suwa Seikosha Company consists of the Suwa Seikosha Co., Ltd., and seven subsidiary companies, including: • <

. • :> _. ;••€> •; '^ Epson Corporation ;•- i' ;^;:; ;-;!i£ . Hamaz awa, I nc. r, •. • ^n

Takaki Kogyo Co., Ltd. . -.-.r ••~f ' :r:'- ::• •*c 1J Matsushima Kogyo Co., Ltd. • . ^ i ,. .. - •~-^: ri

Tenryu Kogyo Co., Ltd.

Shiojiri, Ltd.

Shimauchi Seiki Co., Ltd.

At its headquarters in Nagano Prefecture, Suwa Seikosha operates a highly automated wafer fabrication plant with 21,000 square meters of ,floor space. This facility produces 35,000 4-inch wafers and 5,000 "Scinch T^afers per month. The Company plans to ramp up the 5-inch line to 'between 10,000 and 12,000 wafers per month. In addition, Suwa Seikosha ;%as ithe following sales offices and distributors worldwide:

-• Sales Offices

. :- Epson America, Inc. Torrancej California

in i.:- Epson U.K. Ltd. Wembley, Middlesex, England

Epson Electronics Trading Ltd. Hong Kong Taipei, Taiwan

• Distributors

• ^-' - . Wi^ Moor AG Zurich, Switzerland

, -;•- w. Moor GmbH ' Stuttgart, W. Germany c. • -. r _ - ' Vienna, Austria ;;,--': . _ L' ' . . - i- MLRN Electronics Tel Aviv, Israel

Charming Industries Co., Ltd. Taipei, Taiwan

COSTOMER BASE

Suwa Seikosha has numerous customers in the electronics, metals, and precision machine industries. In the United States, the Company is expanding its base through the Epson America network.

* ,. I: o , rneD::^^ ].dJ ::D' ismuHfo:' ,Zbtl r.: ai s:idoy ii:jitJ tr^:.

SEMICONDOCTOR PRODUCT LINE -^^:.' -• '• - . ^;

Suwa Seikosha pcoduces rtCMOS ICs £oc Seiko quactz watches, .rijat, because of falling prices foe watch ICs,; it ,is aggressively expandingitCs product line to include MCUs, memories, gate arrays, telecommunieatiotts ICs, and LCD dcivec ICs. The Company's initial focus h^?-been: CMOS ji4>K SRAMs, which it pcoduced at a cate of 100,000 units pec month in late 1983. In 1984 Suwa Seikosha began pcoducing 64K^ SRAM%,j (2-nw.cron geometries); EPROMs; and 64K, 128K, and 256K mask ROMs. The Company is planning coirnneccial pcoduction of 1-Mbit mask ROMs in late 1984. The Company also produces 64K DRAMs and 256K DRAMs on an experimental basis at its Fujimi plant and plans to begin sample shipments of 64K and 256K DRAMS in late 1984.

Currently, Suwa Seikosha is pcoducing about 300,000 to 400,000 units of 4-bit MCUs pec month. It intcoduced 8-bit, one-chip MCUs in 1984.

, - >(i * • Since the fall of 1982, the Company has pcoduced gate accays at its Fujimi plan^ aiid established a design center in the .Shinjukoa area of Tokyo. The Company offers three families of CMOS gate accays: the SLA4000 Secies (280-1,000 gates), SLA5000 Secies , (413-3,082 gates), and SLA6000 Secies (1,000-6,000 gates). Recently, the Company developed gate arrays of up to 10,000 gates for captive use. Through its tie-up with S MOS Systems, Suwa Seikosha is aggressively moving into the-U.S. gate array merchant macket (see ouc Reseacch Newslettec, "Satellites Link Japanese Gate Array Design Centers," dated April 24, 1984). The Company plans to open design centers in Boston, Chicago, Atlanta, and other cities, and to complete a design center for custom LSI production near San Jose within two years. "'•j..'..•;' S-li-iOl'SUD

- •• ' . ... i. ••ii^.r.;-r-t-- rt .'•fjVT. ; •• J- '•-'\-^r ^i •:,•'•< MARKET ESTIMATE . /; .-• h ^ r :~f. • • „: % .•i-Asioezq

As shown in Table 1, Suwa Seikosha's 1983 MOS semiconductor revenues were ¥19.8 billion ($84.3 million), making it the thirteenth largest semiconductor maker in Japan. Since 1979, its semiconductor revenues have grown at a compound average growth cate of 29.7 peccent. Semiconductoc sales gcew capidly in 1983 due to the lacge demand for LSI and VLSI circuits. Semiconductors for watch, clock, and other consumer products accounted for 60 percent of Suwa Seikosha*s production in 1983, down from 93 percent in 1979. OATAQUEST observes that Suwa Seikosha is making a thrust into industrial end-use markets with its memory and gate array products.

,T- .(«• i,*'- r.-^^^-itf- âble X. v.îS-?>•;.. . .; !•- . >i.5'i: . 1..' . î^j.:-'^f r- M » •-,•:,• 1 - - • v . . . • : ."Ijiii i P'- . • ,JKf>^S- Mr- ,. . ESTIMATED SEMICOKDUCTOH BEVENUES , - . j, ,,^, ^^ ' "" • ' {Billions Of ':ên) . _ ;^j., ^^ " '"r,!

Calender Year CAGR 1979 1980 1981 1982 1983 1979-1983

Total S/C ¥7.0 ¥12.6 ¥13.0 ¥14.5 ¥19.8 29.7%

Total MOS ¥7.0 ¥12.6 ¥13.0 ¥14.5 ¥19.8 29.7% Watch/Clock ¥4.7 ¥ 6.0 ¥ 5.0 ¥ 4.0 ¥ 4.0 (4.0%) MPOs/MCUs ¥0.5 ¥ 1.3 ¥ 2.0 ¥ 2.5 ¥ 3.0 56.5% SRAMs - ¥ 1.2 ¥ 2.0 ¥ 2.5 ¥ 5.0 60.9% DRAMS — — _ — - ROMs ¥ 1.3 Other ¥1.8 ¥ 2.8 ¥ 4.0 ¥ 5.5 ¥ 7.8 44.3%

Source: DATAQUEST

RESEARCH AND DEVELOPMENT

Suwa Seikosha has achieved 2-micron CMOS technology for its 64K SRAMs and 256K ORAMs. Currentlyf it is completing work on a 1-Mbit mask ROM for production in late 1984. For its gate arrays and custom ICs, the Company has developed a new CAD software system, called Seiko Router and Placement (SRAP), which can handle automatic placement and routing in three days. With this system, a 1,000-gate CMOS array can be designed in six weeks. The system, which will be ready in 1984, uses a Hitachi host computer. Software development took three years.

PLANT AND EQUIPMENT INVESTMENT

The Seiko Group is planning to invest ¥40 billion ($196 million) in 1984, of which Suwa Seikosha will invest ¥10 billion ($44 million) over several years to add a second building at its Fujimi plant. The goal is to increase 64K SRAM production to one million units per month. Presently, the Company has four IC lines in its first building. Production at the second building was originally scheduled for early 1985, but construction work was moved up four months to September 1984,

to take advantage of the strong deijiancj for VLSIs. When the new plant begins operations, Suwa Seikosha'S Semiconductor production will increase by 70 percent to 24 million units monthly. Construction work on a third building, which will'loletisôn' l^Mbit biÛ^Jîrddu^ will begin soon, with completion scheduled for tite 198^V " '*

)\fe lojtoT ••+*

• •: [V J. t t <. ?;0P isrtoT > „ >•« !f 'Z ,UTJ i.W

-":, V' *, :A"ds,:-- f-KAHa

•> S s^'^.C'S' ". ^ri fu-

V'-O

''3C CJ.

t r-c ,•:.;'; :3c t w.u B - f' -. r; V -i Ai • '-v •»,- 5' : o-.,.v^ r J-"s^.'-'m'-o. -- :'; ,*'.'"'••' ^ . c. i.:5 - •• 5 ' - •-' • *^- 'li* * • i": .'J "I -i^;- • ^.r • > ?•''. ..? f- *• i '-' b ^ '.,:, - JVZ •>iq '5c:-i

i.r.-f ,• •..•^ :^- '^ 'Jr-r .'' -:ii It'" 'i-fJ i '•'"' s f ;'->r, r:i-r; nh-mcO -, ', >i."'c • t;;s'Tt-3'..cJ'H

- • - t- p ^ ^ i ' O "4 •; ' ' •Vi-i -,.)i^' ^J^^p-S'lu.j 5 .;;;-:"" 'it" r 7 ' r . 2 1' *•* r? •''• X * (3 v; r. -t j: n , i 'f t i • • bi *^ *• £ * .!.••! r a; 1« .-•.-:• ji ..a! ft: $:*;• - Jnemqc_-.?V3i' s: • ^-Jic-o . .ts:tijqiT!C>:>

T^i"*-:: •I;'"'I.:U03 Ct-Ir- TiiAJ?

C _ 'T^ '• i "t; ^-v*-- » - J *

,,,f ; I:. • ^ -i -'r'-:•• *: _« jjf^' •: -.iw i.-.j-.^ :-.''& ;.•«•.r--- n-'irv jo ,*>aPi

iu -I . 1 _',-••* ^t J.

i; ; i :J.^.--} ••t •!. . (G, o: ,„..r5>.lv"'; . •('• i" H* eE--:v::!'.>TJ o,.» Q . ' : I ^ 'S:.' ,' •-* i-^ ,/^ •!• *:• - .. ,"•'• .iincj si ,v,. ':i9HS;:'i . • •' U .: J.., ^ ii~Z'i \ : *^: -;. JCi 5.^ t.'U!^. .^Ir^.: ^;-: >..••• -• :;''f.',^'r • ; '.% 5 .:y ;;J (^

(Page intentionally left blank)