Kyocera Group Strategy optical module business 9Reallocate management resources 9Enhance use of...

February 10, 2005

Kyocera Group StrategyKyocera Group Strategy

1

Certain of the statements made in this document are forward-looking statements (within the meaning of Section 21E of the U.S. Securities and Exchange Act of 1934), which are based on our current assumptions and beliefs in light of the information currently available to us. These forward-looking statements involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors include, but are not limited to: general economic conditions in our markets, which are primarily Japan, North America, Europe, and Asia, including in particular China; changes in exchange rates, particularly between the yen and the U.S. dollar and Euro, respectively, in which we make significant sales; our ability to launch innovative products and otherwise meet the advancing technical requirements of our customers, particularly in the highly competitive markets for ceramics, semiconductor parts and electronic components; the extent and pace of future growth or contraction in information technology-related markets around the world, including those for communications and personal computers; and events that may impact negatively on our markets or supply chain, including terrorist acts and outbreaks of diseases such as SARS. Such risks, uncertainties and other factors may cause our actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements included in this document.

Forward-Looking Statements

Please refer to the accompanying note on page 1.

Forecast as of October '04Current forecast

135

107

55,000

59,000

58,000

314.59

59,000

100,000

95,000

1,150,000

Amount

－

－

4.8

5.1

5.0

－

5.1

8.7

8.3

100.0

% to net sales

17.94.146,6304.051,000R&D expenses

-3.15.360,8615.265,000Depreciation

5.64.854,9374.962,000Capital expenditures

Year ended March 31, 2004Year ending March 31, 2005

133

113

364.78

68,086

115,040

108,962

1,140,814

Amount

129

106

455.40

85,000

140,000

135,000

1,260,000

Amount

－

－

－

6.0

10.1

9.6

100.0

% to net sales% to net

sales

－－Euro (yen)

－－U.S. dollar (yen)

－－EPS (Diluted-yen)

-13.36.7Net income

-13.111.1Pre-tax income

-12.810.7Profit from operations

0.8100.0Net sales

Percentage change

(Unit: Millions of yen)

Consolidated Financial Forecast- Fiscal Year Ending March 31, 2005 -

2


FY3/05 Financial Forecast by Operating Segment- Compared with FY3/04 -

Net sales

FY3/04results

Pre-tax income

Fine CeramicsGroup

Electronic DeviceGroup

EquipmentGroup

Others Adjustmentsand

eliminations

(Unit: Billions of yen)

1,140.8

1,150

Corporate and others

FY3/05forecast

FY3/05forecast

FY3/04results

1,150.0+31.2+31.2 +4.1+4.1 --27.827.8 +13.5+13.5 --11.811.8

+11.5+11.5 +28.3+28.3 --30.330.3 +2.9+2.9 --27.427.4

+822Total Components Business+35.3

Total Components Business+39.8

+9.2

115.0-15.0100.0

3


Forecast as of October '04Current forecast

135

107

55,000

59,000

58,000

314.59

59,000

100,000

95,000

1,150,000

Amount

－

－

4.8

5.1

5.0

－

5.1

8.7

8.3

100.0

% to net sales

17.94.146,6304.051,000R&D expenses

-3.15.360,8615.265,000Depreciation

5.64.854,9374.962,000Capital expenditures

Year ended March 31, 2004Year ending March 31, 2005

133

113

364.78

68,086

115,040

108,962

1,140,814

Amount

129

106

455.40

85,000

140,000

135,000

1,260,000

Amount

－

－

－

6.0

10.1

9.6

100.0

% to net sales% to net

sales

－－Euro (yen)

－－U.S. dollar (yen)

－－EPS (Diluted-yen)

-13.36.7Net income

-13.111.1Pre-tax income

-12.810.7Profit from operations

0.8100.0Net sales

Percentage change

(Unit: Millions of yen)

Consolidated Financial Forecast- Fiscal Year Ending March 31, 2005 -

4


Reasons for Revisions to Consolidated Financial Forecast- Fiscal Year Ending March 31, 2005 -

Solar energy productsSolar energy products・・・・・・Expanding global market/ Enhanced production capacityExpanding global market/ Enhanced production capacity

Cutting toolsCutting tools・・・・・・Steady growth in automotive and machine tool marketsSteady growth in automotive and machine tool markets

Declining component demand and prices in second half of the fiscal yearDownturn in Equipment GroupTelecommunications equipment・・・Declining mobile and PHS handset priceｓ

Restrained investment in PHS base stations in ChinaOptical instruments・・・Declining digital camera prices / continued structural reform

PositivePositivePositive

NegativeNegativeNegative

5

Production Adjustment for Mobile Handsets Production Adjustment for Mobile Handsets and Digital Consumer Productsand Digital Consumer Products


Telecommunications Equipment Business:Challenges and Future Strategies

MobileMobilehandsetshandsets

Promote structural reform at KWCShift production to MexicoOutsource services/maintenanceReduce headcount by 600 (by July '05)

・・ Strengthen Strengthen KWC'sKWC's responseresponsecapabilities to price declinescapabilities to price declines

・・ Boost product competitivenessBoost product competitiveness

Challenges Strategies

ChallengesPHSPHS--

relatedrelatedproductsproducts

6iBurstTM is a trademark of ArrayComm, Inc.

Leverage group synergies to createnew products

Launch price-competitive productsReduce production costs throughValue Engineering method

Strategies

Increase new customers and expand sales of iBurstTM

・・ Intensifying price competitionIntensifying price competition

・・ Continue inventory adjustmentContinue inventory adjustmentof base stations for existingof base stations for existingcustomers in Chinacustomers in China


DigitalDigitalCamerasCameras

・・ Intensifying price competition Intensifying price competition in digital camera marketin digital camera market

7

Optical Instruments Business:Challenges and Future Strategies

Challenges

StrategiesPromote structural reformConclude in FY3/05

Reduce inventoryDownsize overseas sales operations

Continue in FY3/06Expand optical module businessReallocate management resourcesEnhance use of China factories

Maximize group synergies


Kyocera Group Corporate Strategy

Promote "HighPromote "High--ValueValue--Added Diversification"Added Diversification"

Catalyst for continuous business growth Catalyst for continuous business growth

Create new markets by advancing, focusing and integrating Create new markets by advancing, focusing and integrating vital technological capabilitiesvital technological capabilities

Build a structure competitive with specialized manufacturers Build a structure competitive with specialized manufacturers by acquiring external management resourcesby acquiring external management resources

Key Management Resources to Achieve "HighKey Management Resources to Achieve "High--ValueValue--Added Diversification"Added Diversification"

Technology Brand Sales/Marketing

SoundFinancial Base

8


Basic Policy on Business Investment

・ AVX ・ Kyocera Mita・ Kyocera Kinseki・ Kyocera Chemical etc.

Key role・ Integrate organization,

management systems, culture and human resources

・ Consolidate company

Bolster key businesses and pursue synergies・ Secure management

resources in technology,production, brand, sales and marketing

・ KDDI・ WILLCOM

Assisting role・ Provide technology,

business know-how and human resources

Provide indirect support to key businesses and pursue synergies・ Secure potential customers,

business opportunities and sales channels

Realize capital gains

PurposePurpose

Investment in Investment in ManagementManagement

ExamplesExamples

Investment to Indirectly Support Investment to Indirectly Support Key BusinessesKey Businesses

Investment to Strengthen Investment to Strengthen Key BusinessesKey Businesses

9


130.1

11.8 13.12.4

30.2

FY3/00 FY3/01 FY3/02 FY3/03 FY3/04

Kyocera Group: Rate of Return on Investment in Past Five Years

Average rate of return on Average rate of return on investment in past five years:investment in past five years:

37.5%37.5%

ROI (%)

10

Rate of Return on Investment (%) = Contribution to pre-tax income in fiscal yearAccumulated total investment at fiscal year-end (since FY3/85) X 100


Kyocera Group: Investment Recovery Rate- Through FY3/85 to FY3/04 -

Accumulated total investment (Billions of yen)

(%)

TaitoTaito

Kyocera Kyocera MitaMitaKDDIKDDIAVXAVX

Kyocera Kyocera ElcoElco

Amount of investment recovered = Accumulated total pre-tax income of invested company - Accumulated total investment

15.0

100

Annual Investm

ent Recovery R

ate

Kyocera ChemicalKyocera ChemicalKyocera SLC TechnologiesKyocera SLC TechnologiesKyocera Kyocera TycomTycom

Kyocera KinsekiKyocera KinsekiKyocera Wireless Corp. (KWC)Kyocera Wireless Corp. (KWC)

0.0Towards

inv estmentrecovery

11


○○○19891989Electronic devicesElco

○○20012001Cutting toolsTycom

○○○20002000Telecommunicationsequipment

QUALCOMM's handset business

○20032003Electronic devicesID Tech's OEL business

○○○19981998Electronic devicesKinseki

○19991999Solar systemsGolden Genesis

20042004

20032003

20002000

19901990

○

○

○

○

○

○

○

○

Semiconductor partsIBM Japan's SLC business

Dental / orthopedic implants

Kobe Steel's medical materials business

○Information equipmentMita Industrial

○Electronic devicesAVX

Major Business Investments

Company Name Business YearTechnology/Production Brand

Sales/Marketing

Purpose

12


Investment to Strengthen Key Businesses- Cases of Enhanced Performance -

Electronic devicesElectronic devicesElectronic devices Information equipmentInformation equipmentInformation equipment( AVX and Kyocera Elco joined in FY3/90) (Kyocera Mita joined in FY3/01)

100 100

FY3/89 FY3/00FY3/05 (Forecast) FY3/05 (Forecast)

Net salesPre-tax income 391 400

495

645

* Standard of 100 used for results in respective fiscal year immediately proceeding consolidation of AVX, Kyocera Elco and Kyocera Mita

13

Net salesPre-tax income


60Approx. +10%Digital cameras

9+80%DVD recorders

12+40~50%Digital TVs

170Approx. +5%PCs

600+5~10%Mobile handsets

CY2005 Shipment Volume Forecast for Key Electronic Equipment

(Unit: Million units)

(Kyocera forecast)

CY2005CY2005 CY2004CY2004

14


１Ｑ１Ｑ２Ｑ２Ｑ３Ｑ３Ｑ４Ｑ４Ｑ１Ｑ１Ｑ２Ｑ２Ｑ３Ｑ３Ｑ４Ｑ４Ｑ



Outlook for Components Market

Increase usage rate of digital consumer equipment by improving performance

Increase usage rate of digital consumer Increase usage rate of digital consumer equipment by improving performanceequipment by improving performance

Recovery from summerExpand applications

Recovery from summerRecovery from summerExpand applicationsExpand applications

General electroniccomponents

General electronicGeneral electroniccomponentscomponents

SMD packagesSMD packagesSMD packages

Parts for semiconductor fabrication equipment

Parts for semiconductor Parts for semiconductor fabrication equipmentfabrication equipment

FY3/05FY3/05 FY3/06FY3/06

Set makers concludeproduction adjustmentsSet makers concludeSet makers conclude

production adjustmentsproduction adjustments

(Kyocera forecast)15


Market Drivers for FY3/06

・ Higher share of color LCDs for industrial equipment・ Launch organic EL display business

・ Strengthen lineup, such as new color models

・ Expand opportunities in domestic PHS business・ Benefits of structural reform at KWC

・ Benefits of structural reform

Electronic Device GroupElectronic Device Group

Equipment GroupEquipment Group

・ Expanding market, enhanced production capacity・ Expanding automotive production, increased application

to digital consumer products・ Sapphire substrates, parts for LCD fabrication equipment・ Increased application, new MPUs

Solar energy productsSolar energy productsCutting toolsCutting tools

Fine ceramic partsFine ceramic partsOrganic packagesOrganic packages

ThinThin--film productsfilm products

Information equipmentInformation equipmentTelecommunicationsTelecommunicationsequipmentequipment

Optical instrumentsOptical instruments

Electronic componentsElectronic components ・ Miniature high-capacity capacitors, timing devices

Fine Ceramics GroupFine Ceramics Group

16


Business Portfolio: Current Situation and Future Direction

Market Share (high)

Pre-tax income ratio (high)

Cutting toolsCutting toolsDental/orthopedic Dental/orthopedic

implantsimplantsConnectorsConnectorsLCDsLCDsInformation equipmentInformation equipment

Organic packagesOrganic packagesCellular handsets Cellular handsets (CDMA)(CDMA)Optical instrumentsOptical instruments

Fine ceramic partsFine ceramic partsCeramic packagesCeramic packagesSolar energy productsSolar energy productsThermal Thermal printheadsprintheadsTiming devicesTiming devices

PHSPHS--related productsrelated products

(a) Average pre-tax income ratio is forecast at 8.7% (across businesses for FY3/05)(b) Portrays business in top three in terms of market share (Kyocera estimate)

Ceramic capacitorsCeramic capacitors

17


We aim to grow businesses globally by leveraging synergies with Kyocera Group Companies.

Kyocera SLC Technologies is a specialized manufacturer of high density organic substrates

Kyo cera SLC T echnologies Corp.

179 comp aniesin K yocera Group

(as of December 2004)

18


Flip chip packages

System in a Package(SiP) substrates

Micro card

・ Digital entertainment equipment

・ Mobile handsets・ Mobile AV equipment・ Car navigation systems

・ Mobile AV equipment・ Mobile handsets・ Digital still cameras

・ Servers / routers・ Advanced PCs

・ Mobile handsets・ Digital still cameras

・ Mobile music players

ProductProduct TraditionalTraditionalMarket DriversMarket Drivers Upcoming Market DriversUpcoming Market Drivers

(Digital TVs, games, STBs etc.)

Product Lineup and Related Markets

19


•Servers / routers•Advanced PCs

•Mobile handsets•Digital still cameras•Mobile music payers

Business Vision

•Servers / routers•Advanced PCs

•Mobile handsets•Digital still cameras•Mobile music players•Servers / routers•Advanced PCs

Internet

Broadband

Optical broadband and ubiquitous networks created with high-performancesemiconductors such as CELL

•Digital entertainment equipment(Digital TVs, games, STBs, etc.)

•Mobile AV equipment•Car navigation systems

20


Trend in Package Market and Focus Fields

Mobile phonesMobile phonesMobile phones

Digital still camerasDigital still camerasDigital still cameras

Mobile AV equipmentMobile AV equipmentMobile AV equipment

Digital entertainment equipmentDigital entertainment equipmentDigital entertainment equipment

・ Enhanced performance with large image processing and high-speed communications capabilities

Advanced high density package

・ 20 micrometer line・ 3 stacked via structure・ 180 micrometer pitch

(Flip Chip Pad Pitch)

Advanced mass productionAdvanced mass productiontechnologytechnology

・ Diversification: advanced and multifunctional / low-priced

・ Various media, lighter, slimmer

System in a Package (SiP)Slim high density substrate for micro HDDs

・ Combine functions on main circuit board, small sized・ Higher performance in communications, network

compatibility System in a Package (SiP)

・ Smaller, slimmer HDD Slim high density substrate formicro HDDs

21


Business Strategy

Expand sales in growing markets (digital consumer equipment)Expand sales in growing markets (digital consumer equipment)Expand sales in growing markets (digital consumer equipment)

Boost profitability through a state-of-art production lineBoost profitability through a stateBoost profitability through a state--ofof--art production lineart production line

Develop new markets with new products that realize high density packaging

Develop new markets with new products Develop new markets with new products that realize high density packagingthat realize high density packaging

Cultivate new markets through new technologiesCultivate new markets through new technologiesCultivate new markets through new technologies

22


SuppliersSuppliers

High-Added-Value Production in Japan

Materials

Japan commands most advanced infrastructure

technology

Promote continuous cycle of designPromote continuous cycle of design--R&DR&D--productionproduction--reform for leadingreform for leading--edge organic packages to flexibly and speedily meet market needsedge organic packages to flexibly and speedily meet market needs

Processing

Equipment

Production of digital consumer equipment concentrated in Japan

ProductionProduction

ReformReform DesignDesign

DevelopmentDevelopment

BlackBox

Devices Collaboration Collaboration

Semiconductors

Packaging

CustomersCustomers

23


Outline of New Plant

Conceptual diagramComplete construction: March 2005 Commence production: June 2005

UltraUltra--streamlinedstreamlined

Boost profitability with a state-of-art production lineBoost profitability with a stateBoost profitability with a state--ofof--art production lineart production line

Total floor area: 151,608m2

Building area: 8,400m2

(140m ×60m) 3 floorsSite area: 25,200m2

Production yield 100%Production yield 100%

24


Integrated IT-based Production Management System

Monitor processing quality and capability

New Plant in New Plant in AyabeAyabe, Kyoto, Kyoto

SLC business productionmanagement system

Install state-of-art fixtures and equipment

・・ Complete automationComplete automation・・ Systems integrationSystems integration

Production process not susceptible to skill level or experience

Integrate / strengthenIntegrate / strengthen

25


Characteristics of New Plant / New Production Line

Handle a wide range of products, from highHandle a wide range of products, from high-- to lowto low--end,end,based on the key concepts of "IT" and "rationalization"based on the key concepts of "IT" and "rationalization"

Create highCreate high--addedadded--value through innovative conceptsvalue through innovative concepts

Fewer personnel clean room

Enhancedquality

Costsaving

Energy-saving

Less labor hours

Reduced TAT

Fewer personnel

26


Sales Target

0

100

200

300

400

500

FY3/04 FY3/05 FY3/06 FY3/07 FY3/08 (target)

4-fold increase

5-fold increase

1.6-fold increase

(Increases based on comparison with FY3/04 standard of 100)

(results) (forecast) (target) (target) (target)

27


Cutting Tools Explained

Cutting tools are attached to machine tools and are used to cut and shape materials such as metals into prescribed dimensions

Cutting Tools Business

28


Graph: Japan Cemented Carbide Tool Manufacturers' Association Diagram / photo: Respective company catalogs

・ Mission parts・ Drive parts・ Engine parts

Transportequipment

37%

Generalmachinery(other)

14%８%

８%

６%

Electrical machinery(equipment)

７%

Iron &Steel

６%

Other

１１%

Mining and civilengineering

３%

Composition of Cutting Tools Market Cutting Tools Business

Electrical machinery(electronic parts)

Generalmachinery(metalworking)

Generalmachinery(industrial)

29


250

60150

22022030

40

Europe

Other Asia / Pacific

Korea

Japan

North & SouthAmerica

Other

Market Share (Indexable tools: Japan) Market Share (Cutting Tools: World)

Kyocera

Co. A

Co. B

Co. C

OtherCo. E

Co. D

Kyocera

Other

※ Kyocera estimate

Japan

Europe

Asia/Pacific

Korea

Scale of Cutting Tools Market (¥750 billion)(Unit: Billions of yen)


North & SouthAmerica

30


-2 0

-1 5

-1 0

- 5

0

5

1 0

1 5

2 0

2 5

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

CY94 CY95 CY9 6 CY97 CY98 CY9 9 CY00 CY01 CY02 CY03 CY04

Resource: Ministry of Economy, Trade and Industry / Japan Cemented Carbide Tool Manufacturers' Association

Characteristics of Cutting Tools Market(%)


Mining and manufacturingproduction index

JCTMA shipment figures

31


CY03 CY04 CY05 CY06

Sales Target of Leading Auto Makers

Approx.8.5 million units

CY01 CY02 CY03 CY04 CY05 CY06

(Unit: million units)

Resource: Toyota Motor Corporation / Japan Machine Tool Builders' Association

¥1,200 billion

Market Outlook for Cutting Tools Business

(forecast)


(forecast)

(Unit: billions of yen)

(forecast) (forecast)

Orders for Machine Tools (Japan)

10

8

6

4

2

0

1,400

1,200

1,000

800

600

400

200

0

32


GlobalizationGeneral Tool Manufacturer of Value

Management Focused on Users

Policy of Cutting Tools Cutting Tools Business

33


Consolidated Sales of Cutting Tools Business

１００

２００

３００

４００

０

FY3/95

※ Based on FY3/95 standard of 100

2.7-foldincrease

3.8-foldincrease

FY3/00FY3/05

FY3/06FY3/07


FY3/08(forecast)

34


Overseas Sales of Cutting Tools BusinessGrowth Rate by RegionTotal Overseas Sales

FY3/02 3/03 3/04 3/05

North AmericaEuropeSoutheast AsiaEast Asia

Apr

Jul

Oct

Jan

Apr

Jul

Oct

Jan

Apr

Jul

Oct

Jan

Apr

Jul

Nov

CY01 02 03 04

※ Based on April CY01 standard of 100

100

200

150

250

0

100

200International

Logistics Center


Total domestic & overseas inventory

※ Based on FY3/02 standard of 100

(forecast) 35


Excellent Materials Foundations: Ceramic Coating Thin-Film Technology

Ultra-fine coating

Conventional technology CA55series

Bright gold coating

Crackless coating

Crack length Crack length

Clack-suppressing coating

Kyocera's Strength - 1 Cutting Tools Business




36


TN60（1.5μm）

TN6020（0.6μm）

Micro-graining gives enhancedflexural strength: 2,600MPa

Othercompany's

cermet:Weibull

coefficient（5.3）

TN6020Weibull

coefficient（11.1）


Excellent Materials Foundations: Super Micro-Grain Cermet Production Technology

More elaborate structure improves reliability (prevents internal defects)

37


0

2 0

4 0

6 0

8 0

10 0

12 0

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

CY2 0 01 CY2 00 2 CY20 0 3 CY2 0 04 CY2 00 5

１”/<1"＜ 1.8”2.5”

3.5”ATAEnterprise

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

3 5 0

4 0 0

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

C Y9 6 C Y 97 C Y 9 8 C Y9 9 C Y 00 C Y0 1 C Y 02 C Y 0 3 C Y 0 4

HDD Shipment Forecast Shipments of Ultra Micro-Grain Carbide Coated ToolsSource: Techno Systems Research Co., Ltd.

Small diameter boring tool(System tip-bar)

Kyocera's Strength - 3

(millions of units)

Source: Kyocera


Excellent Products Foundations: Small Tools for Precision Processing (millions of yen)

38


◆◆Sales siteSales site●●Production siteProduction site★★R&D siteR&D site

●●◆◆

GermanyGermany◆◆◆◆★★JapanJapan●●●●

SingaporeSingapore◆◆★★

ChinaChina●●

North Carolina factory, USANorth Carolina factory, USA DongguanDongguan ShilongShilong factory, Chinafactory, China IncheonIncheon factory, Koreafactory, Korea

Kagoshima Sendai PlantKagoshima Sendai Plant Shiga Shiga YohkaichiYohkaichi PlantPlant

◆◆★★

◆◆

◆◆

Irvine factory, USAIrvine factory, USA

AmericasAmericasregionregion

AsiaAsiaregionregion

Japan Japan regionregion

KoreaKorea★★●●

BrazilBrazil

EuropeEuroperegionregion

◆◆FranceFrance

★★USAUSA●●


Excellent Products Foundations: Global Production Network

39


CY2003Res ul ts

2010～2020( forecas t)

Implement comprehensive measures for improvement

Dispatch engineersFollow overseas factories of leading automobile makersFuture Production

6.83

Overseas2.59

Japan4.24

Overseas

Japan

Approx.2-fold

increase

★★ToyotaToyota▲▲NissanNissan■■HondaHonda

High-Value-Added Business Creation - 1

▲▲★★

■■

■■

■■

■■■■

■■

■■

■■

■■

■■■■

▲▲

▲▲

▲▲ ▲▲

▲▲

★★

★★

★★★★

★★

★★

★★

★★

★★

★★

★★

★★★★

▲▲★★■■

Source: toyota Motor Corporation


Expanding Overseas Production of Japanese Automobile Makers

40


0

1

2

3

4

5

6

CY01 02 03 04 07 12

Increase sales in high-growth automobile industry TOYOTA's IMV project(Thailand, Indonesia and the Philippines)

Increase sales of tools for HDD process

Construct office in Bangalore, India (Apr. '05)

Construct office in Ho Chi Minh city, Vietnam (by July '05)

Construct first technical center as Japanese tool maker in Singapore (Apr. '05)

★★ToyotaToyota▲▲NissanNissan■■HondaHonda

Production of Japanese Automobile Makers in Asia

High-Value-Added Business Creation - 2

■■

■■

■■

■■

■■

■■

▲▲

★★

★★★★

★★

★★★★

★★

▲▲★★■■

(Million units)


Expand in Booming Asian Market

※ Kyocera estimate

(forecast) (forecast)

41


Tianjin

Dalian

Shilong

Chungking

Beijing

Shanghai

Dongguan Shilong factory

China Technical Cernter

Guangzhou▲▲

High-value-Added Business Creation - 3

Existing sitePlanned site

▲▲ Production site


Global Factories: Expand Operations in China

42


Promote Global SCM for Machine ToolsPromote Global SCM for Machine Tools

CPFR ProjectBoost accuracy ofdemand forecasts

Eliminate stockoutsReduce lost sales

opportunities

SCM ProjectImplement productionmanagement systemOptimize production

Enhance delivery fulfillmentShorten production lead-time

Demand forecastDemand forecast

Demand information flow

Kyocera

Strengthen ties with ITStrengthen ties with IT--driven agenciesdriven agencies

Products information flow

Salesstore

Agency /local

affiliatesSupplier

Towards Further Business Development - 1

Outsource logisticsShorten lead-time

Increase efficiency of localmanagement

Expand overseas salesReduce local inventory


Global Supply Chain Management (SCM) Creation

Optimum distributionOptimum distribution Optimum productionOptimum production

43


High-quality integratedproduction line

・Key products・Futuredevelopment

Kyocera

SynergyTechnology

2mm slim shank drill

Small diameter endmills for

metalworking

Towards Further Business Development - 2

Sales Target

FY3/05(forecast) 3/06 3/07 3/08

100

200※ Based on FY3/05 forecast standard of 100


M&A: Synergistic Effects

Strategic Products

Endmills & routers

SynergyTechnology・Production system・Service system

SynergyTechnology・Materials technology・Processingtechnology

Original materials development

Fully-automatic regrinding system

Drilling tools technology

Kyocera Tycom44

4Please refer to the accompanying note on page 1.

・Transfer domestic sales division handling solar power generating systems in public and industrial markets to Kyocera Solar Corp., a subsidiary handling solar power generating systems for residential use

・Establish quadripartite global production framework with module plant in Kadan, Czech Rep.(Investment: approx. ¥700 mill.)

・Mass produce multicrystalline silicon solar module with world's highest conversion efficiency ratio of 15.7%・Complete doubling of production capacity to 240MW/year at Yohkaichi plant

30 Years Since Inception of Solar Energy Business

・Released ECONOROOTS for residential use (For span or flat roofs: output up 8%)・Released SAMURAI for residential use (For hip or complex roofs: output up 5%)・Released Solar Power Plant III for public and industrial markets

(Japan's highest conversion efficiency ratio and output)・Increased production of solar modules to 30MW / year in Tianjin, China・Released ECONOWAVE for public and industrial markets

(no need for foundation work, resource-saving, lightweight)・Released 200-watt solar module for public and industrial markets (Japan's highest output)・Started operation of solar module plant in Tijuana, Mexico (Investment: approx. ¥200 million)・Installed solar power generating system of 1.2MW at Asaka Purification Plant, Tokyo (Japan's largest system)

First in world to mass produce multicrystallinesilicon solar modules using casting method

FY06 Plans

Siliconparticles Ingot Cutting Wafer slice Solar cell

1975 silicon ribbon crystal

1986

※240MW is sufficient to supply 3.5kW solar electric generating systems for about 68,600 houses per year

Module

FY05 Highlights

45


Global Environmental and Resource Depletion CrisisGlobal Environmental and Resource Depletion CrisisNew EEG Law

spreads through Europe

State of CaliforniaMillion Solar Home Initiative:Environmental / energypolicies spread to other states

Subsidy systemsspread through Asia

Developed nations Developing nationsDeveloped nations offer free or loan Global cooperation (CDM) / U.N. Small-scale finance (Local bank / NGO)

Environmental protection

Semi-developednations

Secure energy Poverty relief

Subsidy system / tax benefitsRenewable energy creditsGreen power

Three Leading Markets

spread spread

46


‘03‘04

‘05 ‘06 ‘07‘08

‘09‘10

0

1

2

3

4

5

6

5.3G

W

4.1

3.2

2.4

1.9

1.4

1.0

0.7

Growth Rate

40%

38%

35%

30%

30%

30%

30%Market Size2004$7.1B

RealReal ExcitingExciting

2010$30B

Source: CLSA

¥ 3 trillion

SkepticalSkeptical

Global PV Demand Forecast

CY

(E)(E) (E)

(E)

(E)

(E)

47


500

400

300

200

100

0

500

400

300

200

100

0

MWMW

CYCY91 92 93 94 95 96 97 98 99 00 01 02 03 0491 92 93 94 95 96 97 98 99 00 01 02 03 04

JPNEUUSA

CY2004 SHARE46.3%27.7%13.0%13.0%Others

500MW

EU

JAPAN

USAUSA

140MW

OTHERS

Source: PV News

300MW

140MW140MW

World PV Production

48


0.1 0.1 0.1 0.2 0.3 0.4 0.5 0.6 0.81.1 1.3 1.4 1.5 1.7

1.9 2.02.3

2.52.8

3.13.4

3.84.2

4.65.1

5.7

6.3

6.9

7.6

8.5

0

00

00

00

00

00

00

00

00

00

Longer Term Energy Demand Prediction

Total 4.8GW6% of new energy

Source: Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry

Sin

gleye

ar

‘01

9

8

7

6

5

4

3

2

1

0

9

8

7

6

5

4

3

2

1

0

GWGW

CYCY20012001 20102010 20202020 20302030

New Energy in 2030

Solar power

51%

Black liquor /scrap wood etc.

Biomass fuel

Unused energy /Waste-to-energy

Solar heatBiomass power

Waste power

Wind power7%

9%

3%

3%2%

11%

14%

Approx.17 timesApprox.17 times

(E)(E) (E)(E) (E)(E)

Sin

gleye

ar

Total 81.3GW51% of new energy

49


0

200

400

600

800

1,000

1,200

1,400

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EU (Mainly Germany) EU (Add. Program)MW

Germany MW 420MW4 MWp

22 MWp

3 MWp

40 MWp

9 MWp

6 MWp

17 MWp

25 MWp

2 MWp

400 MWp

Source: EPIA

※Forecast from2004 onwardCY

Accumulated SingleEnd 2003 2004

400400

New ProjectionBeg. 2004New ProjectionBeg. 2004

Old ProjectionEnd 2003Old ProjectionEnd 2003

PV-Market Situation in Germany and Europe

50


FY3/04 3/05(E) 3/06(E) 3/07(E)

Consolidated Sales Target

Japan

USA

Europe

FY3/06 Forecast

Overseas market

30%

Other10%

45%

15%

70%

World Sales

+35%

+55%

+45%

Consolidated Sales Target: Kyocera Solar Energy Business

Kyocera Consolidated sales

+38%

+35%

+30%

World demand forecast

51


Japan

Kyocera Establishes a Quadripartite Global ProductionFramework for Solar Modules

ChinaCzech Rep.

①Grasp customer needs by manufacturing near markets②Minimize distribution costs by increasing local procurement③Control production / material procurement on a global scale to reduce costs

Global Strategy

Sales siteProduction site

Mexico

52


2000"Econoroof" solar poweredroof cover for hipped roofs

1993Industry-first PV system forresidential use

1997Industry-first "Econoroof" solar powered roof cover

1996Integrated System

"Super Solar System"2003"SAMURAI" PV system for residential use

＋＋

2003Kyocera Eco Cute

"Solar energy＋Electrification"

2001"Dual Solar System" integratedheat and light mechanism

1995 1996 1997 1998 1999 2000 2001 2002 20031993

10thAnniversary "ECONONAVIT"

wireless monitor

2002"d.Blue" high efficiencysolar cells with automatic PV booster

Solar hotwater system

Solar powergenerating system

Kyocera: The Pioneer of Residential Solar Systems

Monitoring Implementation Diffusion

1994 2004

53


240kW240kW

Kyocera: Industry Leader in Large Solar Energy Systems for Public and Industrial Use

THE 2005 WORLD EXPO, JAPAN CHUBU INTERNATIONAL AIRPORT

54

200kW200kW

1Please refer to the accompanying note on page 1. 55


MAINTENANCEFOLLOW UP

CUSTOMERCENTER

INSTALLATION DESIGN MODULE

CELL

WAFERCUTTINGINGOTSILICON

Kyocera: World No.1 - From Casting To Module

Module15.7%

Efficiency

WORLD No.1

56


EnergyEnvironment

Crisis Desertification

Deforestation

Air pollution

Think

57


Nov. 5, 2004: Russian President Putinsigned ratification bill.Protocol becomes effective in Feb. 2005seven years after COP3.

CHANGE IN GROUND TEMPERATURECHANGE IN GROUND TEMPERATURE

CRISIS & HOPEEARTHEARTHTOPICSTOPICS

KYOTO PROTOCOL EFFECTIVE

First Coordinated Action By Developing Countries

20041997 2005 2006 2007 2008-2012 2013-7YEARS

COP3

KYOTOKYOTOCOP10

EU's ownEmissionTrading

PROTOCOLEFFECTIVE

Russia'sRatification

Draft law submitted to ordinary session of Diet. Emission Reports Required from certain large Companies

Emission Trade Increases Environmental Debt

1st COMMIT.DURATION

2nd COMMIT.DURATION

33

92

64

STATUSSTATUS

If 1sr commitment failed 1.3X delta added to 2nd

commitment

Global Warming!

1961～1990 deviation from average

Ratificationby Russia

DEVELOPED

DEVELOPING

NON-RATIFIED

W/ OBLIGATION

W/O OBLIGATION

JPN, EU, other

CHINA, BRAZIL, INDIA, other

USA, SAUDI, other oil-producing nations -

New Energy Age

58


ElectricPower

TV

HotWater

GasWater SOFC

Bath

Resource and Environmental PreservationKyocera's New Energy Business

Fuel cells

Solar cellsSolar cellsCreate

Save

Renewable energy leader: Solar cells

Next-generation energy hope: Fuel cells

Next-generation environmentalmodel house

+

59


‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘000

‘01 ‘02 ‘03

50

150

250

Energy cration benefit = Amount generated - amount used for manufacturing (single year)

Total greenhouse gas emissions (Kyocera parent) - cumulative CO2 reduction

143ton-CO2

Kyocera's Benefit of Energy Creation

¥2.9 bill./yr ←

Total electricity charge

2007CO2 Offset

(forecast)

2007CO2 Offset

(forecast)

※Total emission amount is based on permanent target of Kyocera Sustainability Report 2004

450

350

Unit: GWhton-CO2

Total340GWh

CY

60


Prim

ary

Ene

rgy

Sup

ply

[EJ/

Y]

1,600

1,400

1,200

1,000

800

600

400

200

0

WBGU: German Advisory Council on Global Change

2100

GeothermalOther REs

Solar heat

Solarelectricity

Wind

Biomass adv

Nuclear PWGasCoalOil

Biomass tradHydro-PW

Pri

mar

y E

nerg

y S

uppl

y [E

J/Y

]

1,600

1,400

1,200

1,000

800

600

400

200

0CY2000 2010 2020 2030 2040 2050

WBGU: German Advisory Council on Global Change

50%50%

Renewable

2050 About

2100 90%90%About

PVPV

25%25%

70%70%

Energy

World Energy Trend

※Forecast from 2004 onwardYEAR

WBGU's World Energy Vision 2100

61


A Piece of Peace

One PanelChanges a Life

62

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