Toray S Business Strategy for Carbon Fiber Composite Materials

Toray’s Business Strategy for Carbon Fiber Composite Materials

September 21, 2012 Toray Industries, Inc. © All Nippon Airways Senior Vice President Moriyuki Onishi

Foundation Businesses Fibers & Textiles Plastics & Chemicals ◆Expand businesses in growth business fields and regions and steadily increase revenues and profits ◆Improve products and business models to expand earnings and allocate management resources to growth business fields Steadily drive business expansion and profit growth of the Group

Strategically Expanding Businesses IT-related Products Carbon Fiber Composite Materials ◆Focus on growth business fields including information- telecommunication, automobiles and aircraft, and energy saving and new energy ◆Allocate management resources with priority ◆Implement measures including M&A and business alliance Drive revenue and profit growth over the medium- and long-term and achieve strategic and aggressive business expansion

Intensively Developing and Expanding Businesses Environment & Engineering Life Science ◆Allocate management resources with priority ◆Develop and expand businesses by measures including M&A and business alliance Develop as the next driver for revenue and profit growth to follow IT-related products and carbon fiber composite materials Copyright 2012 Toray Industries, Inc. All Rights Reserved 1 Group-wide Projects under “Project AP-G 2013”

Three themes in AP-G 2013 that would work more effectively when practiced on a group basis are implemented as a group-wide project.

Green Innovation Business Expansion (GR) Project Toray Group will use its strength in chemistry to develop “Green Innovation Businesses” on a global scale to provide solutions to the environmental issues and energy and resource issues, towards the independence from petroleum resources and the realization of a low-carbon society.

Asia and Emerging Country Business Expansion (AE) Project Toray Group will seek to aggressively develop and expand businesses in Asia and emerging countries in other regions that are expected to realize major economic growth.

Total Cost Reduction (TC-II) Project Toray Group will continue cost reduction initiatives to reinforce the robust business footing required to achieve its objective of becoming a corporate group that continually increases revenues and profits.

Energy Saving New Energy Weight saving Alternative fuel Natural gas tank

Fuel cell © Airbus Hydrogen gas tank

Efficiency enhancement Battery-charging

Volume of 2007 2010 Around 2015 Around 2020 50 CO2 Emissions (million tons) 0

50 CO2 Reduction by 100 Toray’s Product (million tons) 150 More contribution to CO reduction 200 2 by Toray’s Product 250

Year 2007 16 million tons/year Around Year 2020 200 million tons/year

(Japan Carbon Fiber Manufacturers Association (JCMA) modeling: collaboration with; Tokyo Univ. Prof. Takahashi , Prof, Rinoie; Toyota Motor Corp.; All Nippon Airways Co., Ltd.; The Boeing Co. (US))

CarbonCarbon fiberfiber：：FourFour timestimes lighterlighter thanthan steel,steel, tenten timestimes strongerstronger thanthan steel,steel, rustproof,rustproof, etc.etc.→→idealideal forfor structuralstructural materialmaterial

Automobile Aircraft CFRP CFRP

CFRP for 17% of auto weight 80 CFRP for 50% of total structural elements Others 70 CFRP ＣＦＲＰ )

） 1,500 n g o 60 K CFRP 17% CFRP 50% titanium T (

Others ( t

h 50 Steel g

1,000 h i g

nonferrous i e 40 e

w metal Aluminium

Lightens 20% by weight w

30 CFRP 3% e

l Lightens auto weight by 30% Steel 500 y of structural elements c d i 20 o h B e 10 V 0 1,380kg 970kg 60 tons 48 tons 0 Conventional model CFRP model B767 conventional aircraft B767 CFRP Aircraft (B787-compliant by weight) < Per ton of carbon fiber> Volume of CO emissions Life cycle 2 Volume of CO2 emissions Life cycle ＊ from the production of CFRP CO2 reduction ＊ from the production of CFRP CO2 reduction

＊including carbon fiber manufacturing ＊including carbon fiber manufacturing Synthesis / Carbonization ▲50 tons Synthesis / Carbonization ▲1,400 tons Light weight 20 tons 20 tons ↓ Improvement of fuel efficiency

UsageUsage ofof carboncarbon fiberfiber willwill contributecontribute substantiallysubstantially toto thethe reductionreduction ofof COCO22 emissionsemissions overover thethe total total lifelife cycle.cycle. Copyright 2012 Toray Industries, Inc. All Rights Reserved 5 Business Forecast of Carbon Fiber Composite Materials Business in Medium-term Management Program “Project AP-G 2013”

Consolidated Operating Income (Billion yen)Consolidated Net Sales (Billion yen) 200 30

150 20

100

50 69.9 7.7

0 0 FY 2011 FY 2013 Around FY 2011 FY 2013 Around Actual Target FY2015 Actual Target FY 2015 Image Image

t t r i o r a a a a i a m l l c l e

e l S

k o

a a e e e b p t x x t e i

p p p l a e l l

i t c a e n n d a p s s

i i C t o p o i o n l n a © Luxfer i c n

r i b n © Daimler AG a

o t i o n n

100 G o l f

S h a A S B S f e e t o i

r l l B

b © Airbus e © Boeing e e o A B i u c c n S o o i s t t t g r

e a e b e m A

d 7 d i r u n 3 t 7 s

2 g f o f

7 o o A 0

f 7 r r

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8 p p 8 7 a r 0 r i i m m

50 n u a a f r r a y y Industrial Application c

s s t t t u r r u u r e c c

e e T o

o o r a f f

(Ktons/year) CAGR 150 (2011-2020) 140 Total Market 16% Industrial 18% Sporting Goods 7% 100 Aerospace 12% 70

48 50 41 37 32 31 33 24

0 2007 2008 2009 2010 2011 2012 2013 2015 2020

Aerospace

Sporting Goods Windmill Sporting Automobile Pressure Vessel Aerospace Goods Aero Civil Engineering space Compounds Others Automobile Pressure China・Taiwan & Other Asia Vessel Windmill （9.4Ktons/year） North America Europe （8.1Ktons/year）（15.5Ktons/year） Japan （3.6Ktons/year）

Total Global Demand 37Ktons/year (in 2011：estimated by Toray) Copyright 2012 Toray Industries, Inc. All Rights Reserved Classification and Application of Carbon Fiber TORAYCA® Classification by Carbon fiber TORAYCA® series Mechanical characteristics of Regular carbon fiber T1000 7.0 7.0 ) High-strength a T1000G p carbon fiber Aircraft 6.0 G T800S/T800H 6.0 Primary structure

（ Space h t T700S g 5.0 M35J High modulus n 5.0 T400H M40J carbon fiber Aircraft e

r T300J t M46J Secondary High-

s M55J 4.0 M30 performance e structure l M50J 4.0 i s M60J Industrial use n T300 M65J Special Space e

T 3.0 M40 M46 3.0 Sporting goods M50 Industrial use 2.0 2.0 Sporting goods

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

©Boeing ©Boeing Primary / Secondary structure Primary / Secondary structure CFRP usage : Approx. 10 ton CFRP usage : Approx. 35 ton © JAXA

Airbus A320 Airbus A380 Rocket

©Airbus ©Airbus Primary / Secondary structure Primary / Secondary structure CFRP usage : Approx. 2 ton CFRP usage : Approx. 35 ton © JAXA Copyright 2012 Toray Industries, Inc. All Rights Reserved 12 Examples of Application -Environment and Energy-related -

Wind power blade Tube trailer tank Battery-charging flywheel

Tidal power blade

Image courtesy of Tidal Generation Ltd Electric cable core Fuel cell

Toray concept EV Roof © Nissan Motor Hood TEEWAVE® AR1

©YONEX ©DUNLOP SPORTS ©MIZUNO Racket Golf shaft Softball bat

Maintain and strengthen overwhelming competitive advantages in aircraft application  Started production lines for Boeing 787 US : precursor / carbon fiber / prepreg one line each Japan : precursor / carbon fiber one line each  Signed a long-term basic supply agreement with Airbus (May, 2010)  Started production of the tail wing parts of MRJ （Mitsubishi Regional Jet）

Develop advanced technologies for automotive market expansion  Expanded the A&A Center in Nagoya Opened the Automotive Center (AMC) (June, 2008) Opened the Advanced Composite Center (ACC) (April 2009)  Acquired 21% shares of ACE Advanced Composite AMC Engineering (ACE) in Germany (December, 2008)  Established a joint venture Euro Advanced Carbon Fiber Composites GmbH (EACC) with Daimler AG in Germany to produce and sell CFRP automotive parts (June, 2011)

ACC Copyright 2012 Toray Industries, Inc. All Rights Reserved 18 Progress of the Basic Strategies set up at the Last IR Seminar (April, 2008) Improve competitiveness in quality and cost through enhancement of technical capabilities  Developed A-VaRTM (Advanced-Vacuum assisted Resin Transfer Molding) technology and adopted it to mass production Tail wing Parts for MRJ  Developed High-cycle RTM (Resin Transfer Molding) technology and adopted it to mass production Established EACC  Expanded technical centers worldwide - enhanced technical centers in Europe and the US - established Advanced Composite Materials Technical Center at Toray Advanced Materials Korea in the Republic of Korea - set up development and technical service function related to composites at Toray Advanced Materials Research Laboratories (China) Continuously expand production capacity worldwide Enhance competitiveness and business scale in industrial market  Commence full-scale production of carbon fibers in the Republic of Korea (scheduled in January 2013 / 2,200 tons)  Increase worldwide production capacity at four production bases (Japan, US, France and the Republic of Korea) Japan : precursor / carbon fiber one line each USA & Republic of Korea : carbon fiber one line each France: precursor one line Copyright 2012 Toray Industries, Inc. All Rights Reserved 19 Worldwide Carbon Fiber Production Capacity Increase at 4 Production Bases

（tons） Released on Mar.9, 2012 30,000 26,100 27,100 25,000 Republic of 21,100 Korea 20,000 17,900 Europe

15,000 USA 10,000

5,000 Japan

0 Current 2012 End 2014 End Mar. 2015

 At Ehime Plant, build an integrated production facility of precursor and high-performance fine carbon fiber, mainly used in aircrafts and luxury automobiles  At three overseas bases, bolster production facilities for high strength and standard modulus fiber, which has become the de-facto standard for industrial and sporting goods applications, to ensure stable supply to those markets / Establish the first precursor production line in Europe Copyright 2012 Toray Industries, Inc. All Rights Reserved 20 Toray Global Network

EACC ACE TCA CFE TAK CFA Toray

Carbon Fiber Production Capacity (Sep. 2012→Mar. 2015) （tons） Toray Toray Toray Advanced Carbon Carbon Materials Fibers Fibers Toray Korea Group America Europe (Japan) (TAK) Total (CFE) (CFA) (Republic (France) (USA) of Korea) 7,300 0 5,400 17,900 5,200 → 9,300 → 4,700 → 7,900 → 27,100 Copyright 2012 Toray Industries, Inc. All Rights Reserved 21 Toray Group Production Bases

Precursor Carbon Fiber Intermediate Material Composite Base Raw material for Prepreg, Fabric, etc. Molded products carbon fiber Toray Ehime Plant

Toray Ishikawa Plant Toray Shiga, Nagoya Plant Japan Sakai Composite

Sowa Textile

USA Toray Composites Toray Carbon Fibers America (America)

Toray Carbon Toray Carbon Toray Carbon France Fibers Europe Fibers Europe Fibers Europe

Euro Advanced Carbon Fiber Composites Germany ACE Advanced Composite Engineering

Copyright 2012 Toray Industries, Inc. All Rights Reserved 23 Strength of Toray’s Carbon Fiber Composite Materials Business Vertically-integrated business model from precursor to composites materials  Maximize product competitiveness by technological capabilities of precursor and carbonization  Comprehend market evolution and customer demand “ Global operation” among 4 production bases to efficiently enhance business competitiveness  Tight relationship with customers  Strong Business structure, less effected by exchange rate fluctuation Strong capability of market creation supported by integrated technological advantages  Technical capability to satisfy advanced technical requirement from aircraft manufacturers  Development of high quality and competitive intermediate materials  Development of competitive molding process technology Commitment to market with continuous investment to R&D and production capacity increase  Investment of capital resource based on long perspective Copyright 2012 Toray Industries, Inc. All Rights Reserved 24 Basic strategy of Carbon Fiber Composite Materials Business

Promote business expansion by globally strengthening production, marketing, technical services and R&D Maintain and strengthen overwhelming world’s No.1 position in aerospace application and high-performance industrial and sporting goods applications by high quality of Torayca carbon fiber. Expand middle / down stream business by strengthening R&D forces and establishing supply chain through proactive alliance in intermediate products such as prepreg / fabric and in advanced composite processing field. Accelerate developing new application / market by further increasing production capacity of cost competitive carbon fiber for commodity industrial applications.

Copyright 2012 Toray Industries, Inc. All Rights Reserved 25 Basic strategy of Carbon Fiber Composite Materials Business 1．Business strategy by application (1) Maintain and strengthen overwhelming competitive advantages in aerospace application (2) Expand business in strategically selected industrial applications (3) Promote technical development and market exploitation in automotive industry (4) Stably expand business in high-performance sporting goods application 2. Expand advanced composites business 3. Enhance stable supply-ability by continuous capital investment to increase production capacity 4. Enhance global R&D forces 5. Develop market in emerging countries 6. Establish carbon fiber recycling system Copyright 2012 Toray Industries, Inc. All Rights Reserved 26 Strategy of Carbon Fiber Composite Materials Business Aerospace Application Maintain and strengthen overwhelming competitive advantages in aerospace application Aggressively sign in to programs of two major aircraft manufacturers and expand supply to them Boeing  Secure stable supply to increasing build rate of Boeing 787  Secure stable supply to increasing build rate of existing models such as Boeing 777 and 737  Develop and supply new materials for next generation model Airbus  Realize supply of prepreg based on Long-term Basic Supply Agreement concluded May 2010 - Develop and get qualified new high performance prepreg - Establish production base of prepreg in Europe (integrated supply chain in Europe)  Secure stable supply to existing models such as A320, A380, A330

Copyright 2012 Toray Industries, Inc. All Rights Reserved 27 Strategy of Carbon Fiber Composite Materials Business Aerospace Application Develop new market and new application Regional & Business Jet  Supply tail wing parts for MRJ  Enter the programs of small-mid size

aircraft in emerging countries © Embraer Engine parts  Proceed with development of engine made of CFRP with major engine manufactures (CFRP Carbon Fiber Reinforced Plastics)

Maintain overwhelming top share in space application Space industry  Continuously expand production capacity of high-performance grades such as high modulus carbon fiber Copyright 2012 Toray Industries, Inc. All Rights Reserved 28 History of Aircraft Materials

Early 1900s

1930s

Wright Flyer 1 Ornithopter (Leonardo da Vinci) Wood/Steel/Canvas Wood/Canvas 1980 to 1990s Boeing 247 1st aluminum structure

1950s The present

© Airbus Comet 1st aluminum jetliner © Boeing Boeing 777, Airbus A320 Boeing 787 CFRP Primary structure (CFRP Carbon Fiber Reinforced Plastics) “CFRP” Aircraft Copyright 2012 Toray Industries, Inc. All Rights Reserved 29 Agreement of long-term Supply of Carbon Fiber Composite Materials for Boeing 787

ConcludedConcluded aa comprehensivecomprehensive agreementagreement withwith BoeingBoeing Co.Co. toto supplysupply carboncarbon fiber fiber composite composite materials materials for for Boeing Boeing 787 787 medium-sized medium-sized aircraftaircraft over over a a long-term long-term period period of of 16 16 years years (including (including 5 5 years years availableavailable option). option). TorayToray supplies supplies carbon carbon fiber fiber Uni-Directional Uni-Directional Prepreg* Prepreg* used used for for the the mainmain wingwing and and tailtail wingwing ofof BoeingBoeing 787787 asas wellwell asas carboncarbon fiberfiber clothcloth prepregprepreg used used for for the the fuselage. fuselage.

＊１ Uni-Directional Prepreg; Disposition carbon fiber in one direction and combine with epoxy resin to foam sheet

© Boeing Max.80% of fastener reduction by 20 to 30% of weight reduction one piece molding of carbon for large sized main wing fiber cloth prepreg for fuselage Copyright 2012 Toray Industries, Inc. All Rights Reserved 30 Advantages of CFRP applied to Aircrafts

Weight Reduction – Improved Fuel Efficiency

High Durability – Maintenance Cost Reduction

High Strength – Higher Cabin Pressure

High Strength – Larger Window

Corrosion Resistant – More Cabin Humidity

Boeing787Boeing767Part AluminumFuselage Composite

A lu m in u mMain Wing AluminumMain Composite

A lu m in u mTail Wing AluminumTail Composite

Boeing 787 CompositeFlap Composite © Boeing

Boeing 767 Boeing 787

© Boeing Other Composite 3% 5% Steel 10% Steel 10% CFRP Titanium 6% Titanium Composites 15% 50% CFRP (sandwich structure) GFRP Aluminum Aluminum 77% Aluminum 20% Other metals Copyright 2012 Toray Industries, Inc. All Rights Reserved 32 Development of Empennage Material for MRJ ■ Full-scale vertical stabilizer parts for MRJ (co-development with Mitsubishi Heavy Industries) Mitsubishi Regional Jet (MRJ)

Spar

5.5m © Mitsubishi Aircraft A-VaRTM molding vacuum resin injection Ｖ oven curing Stringer / co-bond panel dry fabric (Advanced-Vacuum assisted Resin Transfer Molding) ・Low-cost, energy-saving molding technology ・Realization of complex-shapes including multilayer difference 1.5m ・Dimension accuracy equivalent to prepreg Rib ・Stable control of Vf (fiber content) Copyright 2012 Toray Industries, Inc. All Rights Reserved 33 Strategy of Carbon Fiber Composite Materials Business Industrial Application Expand business in strategically selected industrial applications Establish overwhelming advantages in environment / energy-related applications requiring high-performance Pressure Vessel Maintain world No.1 share  Respond to the demand associated with the use of shale gas in US  Enter natural gas programs in emerging countries collaborating with leading manufacturers of pressure vessels  Develop high-performance carbon fiber for compressed hydrogen gas tanks installed in fuel-cell vehicles Designed pressure: 160MPa CFRP reinforced sectionliner Working pressure: 70MPa

(aluminum or plastic) n e

g 55％ o r light- k d n

y weight a H t ２０％

f s light- o a

t weight g h g i e

W Toray newly deformation control high modulus Regular Glass fiber burst protection high strength developed carbon product fiber Copyright 2012 Toray Industries, Inc. All Rights Reserved 34 Strategy of Carbon Fiber Composite Materials Business Industrial Application Electrical Cable Core Make Torayca de facto standard  Secure power transmission demand from wind-power / photovoltaic stations located in remote areas  Approach infrastructure construction projects in China and emerging countries ・Suspensory control ・Low thermal expansion ・Increase of distance between towers Cable core (aluminum) coefficients ・Improvement of electric transmission efficiency ・High strength ・Increase of electric transmission capacity

Steel core

Steel core CFRP core © CTC CFRP core Nuclear Power Generation (Uranium Centrifuge) Stably supply of high-performance products  Capture uranium enrichment plant programs in Europe and US Offshore Oilfield Drilling Pioneer of the development  Promote joint development programs with major oil companies Copyright 2012 Toray Industries, Inc. All Rights Reserved 35 Strategy of Carbon Fiber Composite Materials Business Industrial Application Expand business in strategically selected industrial application Strategically expand commodity industrial application through the establishment of a competitive supply chain Wind Power Blade Selectively enter programs, focusing on profitability  Selectively capture programs under the strategy to maximize added- value through supply chain Civil Engineering Expand sales in overseas market  Expand sales corresponding to the demand increase in infrastructure construction projects in China and emerging countries  Further strengthen cost competitiveness through local production of fabric Plastics Compounds Expand sales utilizing Group collective strength  Expand sales of compound products by Plastics Division / reserve added value within Toray Group

Copyright 2012 Toray Industries, Inc. All Rights Reserved 36 Strategy of Carbon Fiber Composite Materials Business Automotive Application Proceed technical development and market exploitation in automotive industry Realize further adoption in automotive parts Automotive Outer Panel / Structural parts  Reinforce High-cycle RTM technology (further cycle time reduction)  Develop and promote thermoplastic intermediate materials having better recycling property  Develop competitive CFRP automotive parts through industry- government-academia collaboration Fuel-Cell Vehicles  Co-develop fuel-cell electrode substrate (carbon paper / GDL)  Develop and promote Toray carbon fiber as de facto standard for compressed hydrogen gas tanks (GDL Gas Diffusion Layer) Proactively promote business alliances  Enhance R&D capabilities, especially automotive parts designing  Secure sales channel and establish robust supply chain  Proactively promote “Molding technology license / Material supply” business model Copyright 2012 Toray Industries, Inc. All Rights Reserved 37 Increase in Adoption of Carbon Fiber for Automobiles CFRP Effectiveness Weight reduction (fuel efficiency improvement) 1980’s Crash safety improvement Assembly man-hours reduction through F1 machine parts modularization

c Nissan SKYLINE GT-R: r a e Engine hood

u © Nissan Motor a t s o e m

o o f t c i v a e r b p 2000’s

o © Nissan Motor a n r t Nissan SKYLINE: s f i b Radiator core support e r

LEXUS Subaru WRX STI tS: ©Daimler AG Roof 2010’s

LEXUS LFA: Mercedes- Benz SL AMG: Trunk lid Chassis, roof, other parts ©Fuji Heavy Industries Copyright 2012 Toray Industries, Inc. All Rights Reserved 38 Establishment of a Join Venture with Daimler AG in Germany Realized mass production of CFRP automotive parts utilizing High-cycle RTM technology

1. Company Name : Euro Advanced Carbon Fiber Composites GmbH 2. Location : Esslingen, Germany 3. Investment ratio : Toray 50.1% Daimler 44.9% ACE Advanced Composite Engineering 5.0% 4. Establishment : June, 2011 5. Start operation : October, 2012 (scheduled)

CFRP Trunk lid EsslingenEsslingen Copyright 2012 Toray Industries, Inc. All Rights Reserved 39 TEEWAVE® AR1 Next-Generation Concept EV TEEWAVE ® AR1 is the flagship vehicle that embodies Toray Group’s green innovation strategy in the automotive field, offering concepts tailored for the automotive industry, the users and the environment.

Monocoque (CFRP) Roof and hatch (thermoplastic CFRP) PP resin: stamping molding (1 minute) High-cycle RTM (10 minutes) Integral molding (number of parts: three)

Seat (CFRP, ULTRASUEDE ® ) Ultralight, highly designable (artificial suede)

Steering wheel (decorative film) Easy molding, highly designable, no painting required

TEEWAVE ® AR1 Item (two-seater open car) Optional Mats (PLA) Bio 3 ,977 x 1,766 x 1,154Body size (mm) 3,977 x 1,766 x 1,154Body Energy absorber (CFRP) Dashboard (TORAY PEF ®, CFRP) 846Weight (kg) 846Weight Absorbability: three times that of steel Light weight, highly designable, bio Instrument cluster ( Picasus ® ) (220)(of which the weight of battery) (220)(of Metallic luster 2Number of passengers 2Number 47/3 ,000 to 6,000Maximum power (kW/rpm) 47/3,000 to 6,000Maximum 180/0 to 2,000Maximum torque (Nm/rpm) 180/0 to 2,000Maximum Electricity consumption rate 11.6 (km/kWh) Toray used Gordon Murray Design Ltd. of the Range (Japan 10-15 mode U.K. (CEO: Gordon Murray, former F1 185 cycle, km) designer) for the vehicle’s body and 147Maximum speed (km/h) 147Maximum structural design as well as manufacture 11.0Acceleration 0-100km /h (sec) 11.0Acceleration Copyright 2012 Toray Industries, Inc. All Rights Reserved 40 Forecast of World’s Automobile Production and Carbon Fiber Market

Supercar 5,000 units Super-luxury model 500,000 units Thermosetting Luxury model 5 million units plastics CFRP

Thermoplastics CFRP d

n Thermoplastics a CFRP m e

D UD tape Mass production car r e b

Approx. 95 million units i F

n o

b Stampable Sheet r Thermosetting a

C plastics CFRP

 Toward “first year on the market of fuel-cell vehicles” in 2015, automobile manufacturers worldwide are accelerating their development of Fuel-Cell Vehicles.  National governments have announced support for infrastructure construction toward the spread of Fuel-Cell Vehicles. For example, the Japanese government has decided to support the private sector with such plans as to install 100 hydrogen gas stations mainly in the 4 metropolitan areas by 2015 in association with the revision in the High Pressure Gas Control Act and the Fire Service Act.

cell Forecast of Fuel-Cell Vehicle Production air 400 (thousand units) hydrogen

300 separator GDL anode (catalyst) Gas Diffusion Layer electrolyte membrane cathodes (catalyst) separator 200

Fuel-cell 100 stack High- pressure (Source : Pike Research) hydrogen 0 © Toyota Motor gas tank 2015 2016 2017 2018 2019 2020 Copyright 2012 Toray Industries, Inc. All Rights Reserved 42 Strategy of Carbon Fiber Composite Materials Business Sporting Goods Application

Maintain overwhelming competitive advantages in the market required high-performance through continuous development of new products Further expand sales to bicycle application which has become the mainstay of sporting goods application Proceed the co-design and co-development with leading brand name manufacturers of golf shaft and fishing rods Expand sales to new applications such as hockey sticks and softball bats

Strengthen cost competitiveness of commodity products Establish competitive supply chain through collaboration with leading intermediate material manufacturers

Copyright 2012 Toray Industries, Inc. All Rights Reserved 43 Sales Expansion in Sporting Goods Application with Branding Strategy Appeal “high-performance and high-value added” advantage to end-consumers through combination of product brand and technology brand

Product brand Technology brand × A specific technology that realizes alloy structure of a number of polymers on a nanometer order. Toray holds the basic patent as well as major patent for production and application. This is a technology that offers high- performance and high-functional properties to polymer materials which could not have been realized with general micron order alloy.

Balance between

Market Creation

Development of Development of carbon fiber composite products / intermediate material business market IT-related devices Automobile / Aircraft parts - PC housing - Smartphone housing Toray composite products business Medical devices Capital participation - CT cradle, etc. Technology Licensing - X-ray cassette

Development of innovative materials and molding technologies complying with market requirements

Copyright 2012 Toray Industries, Inc. All Rights Reserved 45 Expansion of Advanced Composites Business Develop and market composite products through the combination between quality competitiveness of carbon fibers / intermediate materials and outstanding molding technology Hybrid molding IT device housing High-cycle RTM Automotive outer panel / structural parts A-VaRTM Complex-shaped aircraft structural parts

Lightweight 100 H i

Hybrid molding g

Hybrid CFRP h

r i ） CFRP molded panel 80 g i a d P i t Al alloy y G 60 （ s u l Mg alloy u 40 d

o Conventional （） M 20 CFRTP injection CFRTP(*1) or GFRTP *2 Conventional outsert injection molding 0 GFRTP injection 1 2 3 40 *1 CFRTP Carbon Fiber Reinforced Thermoplastics Specific gravity *2 GFRTP Glass Fiber Reinforced Thermoplastics Copyright 2012 Toray Industries, Inc. All Rights Reserved 46 Expansion of Advanced Composites Business Establish competitive production supply chain in low cost countries Respond to the relocation of IT / medical devices production base to China and Southeast Asia

TAK TARC TORAY

Expand production bases (subcontractors) ACE EACC TORAY A&A Center

Collaborate with end-customers © Toshiba Medical Systems Establish integrated supply chain just in front of the market Collaborate with end-customers including parts designing Copyright 2012 Toray Industries, Inc. All Rights Reserved 47 Toray’s Global Management Principle

• Conduct cutting-edge research and development and develop advanced materials and innovative processes at mother factories in Japan • Leverage global production sites (in and outside Japan) to maximize business expansion and manufacture in optimal locations • Reinvest profits in further research and development (in Japan: advanced materials / outside Japan: development of product applications) ⇒ Sustainable growth

Further bolster business expansion Base sites outside Japan and cost competitiveness Development of product applications to meet local needs Mother factories in Japan Localize production to Development of advanced materials manufacture products close to source of demand and enhance cost competitiveness Creation of high value-added products Reinvestment in research and Development of innovative processes development

Thorough cost reductions

Copyright 2012 Toray Industries, Inc. All Rights Reserved 48 Expand Supply Capacity by Continuing Capital Investment Increase capacity at world four production bases toward 2015 Expand capacity of high-performance carbon fiber (Production start-up in 2015) Expand production of high value added products as the global mother factory Expand capacity of standard grade carbon fiber for industrial applications （Production start-up in 2014) Respond to expanding demand of environment and energy- related applications in USA Install first precursor production line in France (Production start-up in 2014) Establish integrated structure of production from precursor to carbon fiber Install production facility of standard grade carbon fiber for industrial applications (2 lines) (Production start-up in 2013 and 2015) Establish production site having cost competitiveness

TAKCFECFATORAY Major ApplicationLine-up

High modulus Satellite, Rocket ◎ ○ fiber High-end sporting goods Intermediate Aircraft primary structure ○◎◎ modulus fiber High-end sporting goods Standard Aircraft secondary structure modulus fiber Luxury car ◎ ○ (fine fiber) Fuel cell parts Standard General industry ○○→◎◎◎ modulus fiber Sporting goods

◎ Integrated production of precursor line and carbonization line ○ Carbonization line only

For Boeing’s Ishikawa Plant new program Prepreg Prepreg Standard for Ehime Plant grade Airbus Standard High-performance carbon fiber grade fine fiber for industrial carbon fiber application for industrial applications

Carbon Fiber Production Capacity Prepreg Production Capacity 50 60 (Ktons) (million ㎡) 50 40

Feedback to Product materials Strength of Toray advanced Design composite materials technology and processes Toray’s ・Overwhelming development capabilities of carbon fibers and resins Strength Process ・Integrated process engineering Material Strong Design capability from polymers to composite Design unique products technology ・Global integration of R&D forces (close collaboration with Boeing, Airbus, Daimler, etc.) Carbon fiber Carbon fiber/resin surface design matrix control

Molecular Carbon fiber Most suitable multi- R&D basic strategies design tow design layer structure mm mm m ・Pursuit of ultimate performance of A nm carbon fiber Resin ・Improvement of performance of CF Surface composite resins ・Development of innovative molding technology and proposal of solution ・Further reinforcement of Global R&D

Copyright 2012 Toray Industries, Inc. All Rights Reserved 52 Development of High Performance Carbon Fibers  Achievement of compatibility Hail resistance Lightning (Impact resistance) between high strength and high resistance modulus through innovative (conductivity) technology, which was not able to Silence be realized with conventional Tension technologies, by i) defect control, ii) improvement of fracture Compression toughness, and iii) optimization of interface Fiber defect control in nano-scale ) 10 a

P Nano size surface image （ＡＦＭ）

Strength improvement of G Defect size (

h 8 carbon fibers t g

n Nano

e 6 r

Target Area t s

e 4 l i

s Submicron n h t e 2 micron T g

n T800

e 0

r 1970 1980 1990 2000 2010 t

S T700 MJ series T300 Existing products

NANOALLOY resin Target Area ® y t ） i ・ s c

Compatibility between s a toughness and rigidity e n n h e

・ t

Extension of applications g n u Sporting i s o

Functional material t Goods e （

Functional particles l

Dumping control o r particle t Target Area

 Improvement of n o

damping characteristics c

・Vibration absorption for bike o i t

・ a

Improvement on impact r b feeling of golf shaft Absorption of i V © PINARELLO vibration energy Modulus y t  Improvement of conductivity Toughening i Target Area v particle i ・Improvement of lightning t c u

resistance d n o

Conductive c

impact resistance l

E Impact resistance Copyright 2012 Toray Industries, Inc. All Rights Reserved 54 Deepening of composite molding technology 50 ※1 ＲＴＭ：Resin Transfer Molding Realize compatibility ※2 ＳＭＣ：Sheet Molding Compound between high productivity Autoclave

and high performance ） [Prepreg] a Area to  High cycle molding technology with P 40 Higher G aim at Speed ※ thermoset plastics （ RTM 1

s [Fabric]  Realization of high modulus with u l

thermoplastics u d

o Continuous fiber  Technology verification by concept 30

m (CFRP) car TEEWAVE®AR1 c i

Key performances of TEEWAVE®AR1 t Higher s modulus

(comparison with the steel body) a l Press molding E Thermoset Vehicle weight: 846kg (about 40% decrease) 20 ［ Injection ［SMC, etc] ※2 Mileage (1 charge): 185km (about 30% improvement) Plastics molding Number of structural parts: 231 (about 40% decrease) Thermoplastics [pellet] Discontinuous fiber Monocoque frame, 10 Crash box, etc. 2 4 6 8 180 High cycle RTM (10 minutes) Molding cycle (minute)

Roof, Hatch, etc. PP resin, Stamping molding (1 minute)

Copyright 2012 Toray Industries, Inc. All Rights Reserved 55 Global R&D Enhancement Enhance world five R&D bases Mother R&D base of Toray group (Technical Dept., Research Lab., A&A Center and E&E Center) Product development and technical service base for North American market (TCA Technical Center & Research Lab. / CFA Technical Center) Product development and technical service base for European market (Pan European Technical Center / ACE Advanced Composite Engineering) Technical service base for Korean industrial markets (TAK Advanced Composite Materials Technical Center) Composite product development and technical service base for Chinese market (TARC ： Toray Advanced Materials Research Laboratories (China) Co., Ltd.) Strengthen R&D forces for automotive application Enhance parts designing technology through alliance including M&A Accelerate development by further enhancement of pilot plants Copyright 2012 Toray Industries, Inc. All Rights Reserved 56 Global R&D Network

Design and R&D of prepreg and development of Development of resin system for CFRP automotive parts industrial applications for aircraft application Korean domestic market ACE TCA CFE TAK CFA TARC TORAY

Development of Cultivation of US industrial industrial applications market and development in Europe carbon fibers suitable for industrial applications

Mother R&D base of Toray group Development of - Development of basic technologies composite products for - Development of advanced materials Chinese domestic market and value-added products - Development of advanced composite technologies

Plastics Application Technology Engineering Center (1989) EnvironmentEnvironment && EnergyEnergy DevelopmentDevelopment CenterCenter Two Wings Driving Green Innovation

Automotive Center A&A E&E (June, 2008) Center Center

Automotive Common Environment & Aircraft fields & Energy

- structural Li battery materials Photovoltaic - Panel / Interior Fuel Cell - Car electronics Biomass Advanced Composite Center Wind power (April, 2009) materials Copyright 2012 Toray Industries, Inc. All Rights Reserved 58 Approach to Carbon Fiber Recycling Establish carbon fiber recycling system Develop basic recycling technologies Subsidiary project of Ministry of Economy, Trade and Industry （2006～2008） “Verification research of carbon fiber recycling technology”  Establish basic technology to produce recycled fiber (chopped fiber and milled fiber) Issues to establish recycling system Develop mass production technology (scrap materials separation and cost reduction) Cultivate recycled product markets / applications

Europe Japan/Asia Americas

Establish integrated supply Strengthen R&D forces of Strengthen integrated structure from precursor, fundamental technologies supply structure for Boeing carbon fiber to prepreg and advanced materials, programs -Establish in-house supply and expand production chain to Airbus programs capacities of value-added products as the mother Enhance supply structure -Strengthen business factory of Group for environment and competitiveness in Europe energy-related applications Create domestic market of Expand Pan European automotive application by Technical Center industry, government, and Develop supply chain of academia collaboration intermediate materials and composite products for Reinforce R&D facility for Expand as core production automotive application automotive application base of standard grade (ACE and Branch Lab. of carbon fiber for industrial Pan Europe Technical and sporting goods Center ) applications

Establish supply chain of intermediate materials and composite products Central & Eastern Europe, India and ASEAN market Latin American market Russia and MENA market development development development Copyright 2012 Toray Industries, Inc. All Rights Reserved 61 Future Business Scale (Vision)

Net sales by product type Net Sales by application Unit: Billion ¥ Unit: Billion ¥ 350 350 Composites Industrial

Intermediate Materials Sporting Goods 300 300 Carbon Fiber Aerospace 250 250

200 200

150 150

100 100

50 50

0 0 2011 2013 2015 2020 2011 2013 2015 2020 Copyright 2012 Toray Industries, Inc. All Rights Reserved 62 Descriptions of predicted business results, projections and business plans contained in this material are based on assumptions and forecasts regarding the future business environment, made at the present time.

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

Unapproved diversion of any picture and photograph in this material should withhold.