Establishing ourselves as Establishing ourselves as ““Individualized Chemical CompanyIndividualized Chemical Company”” and realizing our visionand realizing our vision
Progress Made in the 2nd Year of Progress Made in the 2nd Year of ““SPROUT Project,SPROUT Project,””Showa Denko K.K.Showa Denko K.K.’’ss
MediumMedium--TermTermConsolidated Business PlanConsolidated Business Plan
Growth Started to AccelerateGrowth Started to Accelerate
December 14, 2004December 14, 2004
P. 1
【【Our VisionOur Vision】】We at Showa Denko K.K. and its Group companies will provide prodWe at Showa Denko K.K. and its Group companies will provide products and ucts and
services that are useful and safe and exceed our customersservices that are useful and safe and exceed our customers’’ expectations, thereby expectations, thereby enhancing the value of the Group, giving satisfaction to our shaenhancing the value of the Group, giving satisfaction to our shareholders, and reholders, and
contributing to the sound growth of society on a global scale.contributing to the sound growth of society on a global scale.This document, containing statements relating to projections of the Company’s future performance, has been prepared on the basis of information available at this moment and which we believe is correct. However, the Company cannot guarantee that all statements are accurate and perfect because of inherent risks and uncertainty. Please note that actual results may differ materially from the forecast due to variety of factors, including changes in the market conditions. The timely commercialization of products under development by the Company may be disrupted or delayed by a variety of factors, including market acceptance, and the introduction of new products by competitors. The foregoing list of factors is not inclusive.
Contents
Part Part Ⅱ Ⅱ Implementation of Growth StrategyImplementation of Growth Strategy ((22))SproutsSprouts
Blue LED: Developed Blue LED with proprietarytechnology 22
Blue LED: result of interconnection of amassedtechnologies 23
Autoprep® @Series: Environmental protection & food safety 24Organic electroluminescent materials durable
for 10,000 hours 25Key materials for the future 26Portfolio management → Changes in earning structure
27
Part Part Ⅲ Ⅲ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform
Petrochemicals : Completed restructuring;now a base business 29
Chemicals: Striving to improve profitability 30Aluminum: Restructuring to be completed in 2005 31Aluminum: Increasing profitability (1) 32Aluminum: Increasing profitability (2) 33Aluminum: Increasing profitability (3) 34
Part Part Ⅳ Ⅳ Plan for 2005Plan for 2005
Tasks to be accomplished 36
Yearly Sales and Operating Income PlanYearly Sales and Operating Income Plan 37
SixSix--year consolidated business planyear consolidated business plan 3
SMU projects and supporting technologies (TPF)SMU projects and supporting technologies (TPF) 44
Part Part ⅠⅠ Progress in ReformProgress in Reform
How the Sprout Project is changing the company 6Encouraging signs that Sprout goals will be
accomplished 7Expansions in high-growth markets 8Progress in restructuring 9Business Portfolio 10Portfolio management → Changes in earning structure
11Financial goals achieved ahead of schedule 12
Part Part ⅡⅡ Implementation of Growth StrategyImplementation of Growth Strategy ( (11))Establishment of Establishment of ““RoadmapRoadmap””
HD: Focusing on growing market for very small media 14HD: Interconnection of core technologies 15Solid conductive polymer Al capacitors (SDK-CAP®):
Applications broadening 16Solid conductive polymer Al capacitors (SDK-CAP®):
Interconnection of core technologies 17Fine gases: Growing demand from IC/LCD makers 18Fine gases: Etching gas for IC processing
at narrow line widths 19VGCF ®: Developing composites 20
P. 2
Six-year consolidated business plan
20002001
2002
2005
Realizing our visionRealizing our visionCustomer/shareholderCustomer/shareholder
satisfactionsatisfactionContribution to societyContribution to society
on a global scaleon a global scale
Growth strategy Growth strategy through the Sprout Projectthrough the Sprout Project
Establishing ourselves as an individualized Establishing ourselves as an individualized chemical companychemical company
Strategic reduction in scaleStrategic reduction in scalethrough the Cheetah Projectthrough the Cheetah Project
Transformation from a diversified chemical Transformation from a diversified chemical company to an individualized chemical companycompany to an individualized chemical company
200420042004
2003
Achieved restructuringAchieved restructuringSteady implementation of growth strategySteady implementation of growth strategy
Attained financial goalsAttained financial goals
P. 3
SMU projects and supporting technologies (TPF)SMU projects and supporting technologies (TPF)SMU projects and supporting technologies (TPF)
12 12 SMU projectsSMU projectsSMU : Strategic Market Unit
27 27 TPFsTPFs
TPF : Technology Platform
Auto parts
Battery materials
Parts for lighter cars
Magnetic materials
Life science productsHeat exchangers
Semiconductor processing materials
Communications devices
Capacitors / their materials
Displays / their materials
Raw materials for cosmetics
Energy-saving system
Printer parts
Personal Care/Environment
Electronics
SupportSupport CooperationCooperation
Structural analysis; Chemical analysis; Computational science
Organic electronic materials,Battery/capacitor/recording media materials, Inorganic electronic materials, Crystal growth/thin film depositionprocesses, Precision fabricatingprocess, Micro-system process,Functional gases, Ultimate conditions process
Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles, Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry
Heat transfer systemCasing processPlasticity processingBondingFunctional metallic materials
P. 4
PartPartⅠ Ⅰ Progress in ReformProgress in Reform
P. 5
PartⅠ Progress in Reform How the Sprout Project is changing the companyPartPartⅠⅠ Progress in ReformProgress in Reform How the Sprout Project is changing the companyHow the Sprout Project is changing the company
SMU strategySMU strategy
Strategic growth Strategic growth businessesbusinesses
Businesses to be Businesses to be restructuredrestructured
Base businessesBase businesses
ReformReformIncreasing Increasing
competitivenesscompetitivenessCost reductionsCost reductions
Inventory Inventory reductionsreductions
Issue of CBIssue of CBSale of assetsSale of assets
Greater financial Greater financial strengthstrength
Strengthening HD business
PetrochemicalsCommodity ceramicsCommodity aluminum
products
Basic chemicalsElectrodes,
Aluminum cans SproutsSproutsExpansion in high-growth markets
Expansion in highExpansion in high--growth marketsgrowth marketsImproving profitability of existing base businessesImproving profitability of existing base Improving profitability of existing base
businessesbusinesses
By completing the Sprout Project, By completing the Sprout Project, we will establish ourselves as an we will establish ourselves as an ““individualized chemical company.individualized chemical company.””
Big jump in the Big jump in the ““postpost--SproutSprout”” periodperiodP. 6
Expansions in highExpansions in high--growth marketsgrowth marketsAdvancement in SMU projectsAdvancement in SMU projects
Established a roadmap for growthEstablished a roadmap for growthFound the key to further advancementFound the key to further advancement
Hard diskHard disk((HDHD))Leading the market with the best technology in the worldLeading the market with the best technology in the world
SproutsSproutsTechnical development in anticipation of sophisticated market neTechnical development in anticipation of sophisticated market needseds
HD business transformed into a growth engineHD business transformed into a growth enginePetrochemicals business becoming more competitive Cash coPetrochemicals business becoming more competitive Cash coww
PartⅠ Progress in Reform Encouraging signs that Sprout goals will be accomplishedPartPartⅠⅠ Progress in ReformProgress in Reform Encouraging signs that Sprout goals will be accomplishedEncouraging signs that Sprout goals will be accomplished
Accelerating growthAccelerating growthAccelerating growth
Progress in restructuringProgress in restructuringProgress in restructuring
P. 7
PartⅠ Progress in Reform Expansions in high-growth marketsPartPartⅠⅠ Progress in ReformProgress in Reform Expansions in highExpansions in high--growth marketsgrowth markets
Establishment of the road mapEstablishment of the road mapHD Becoming the world leader
Technical advantagesMarket creation through small-sized media
Capacitors Volume production Further growth
Fine gases Launching next-generation products ahead of competitors
VGCF® Developing composites
SproutsSproutsGaN Highest-level brightness with proprietary
technology
Autoprep® Environmental protection and food safety
Phosphorescent polymer For organic electroluminescent devices; durable for 10,000 hours
P. 8
20032003
AluminumAluminum
CeramicsCeramics
HDHD
PetrochemicalsPetrochemicals
20042004 20052005
Established as stable source of profit
Established as stable Established as stable source of profitsource of profit
On track for further growth as the world
leader
On track for further On track for further growth as the world growth as the world
leaderleader
Lowest cost and competitive derivatives
Lowest cost and Lowest cost and competitive derivativescompetitive derivatives
Restructuring to be Restructuring to be completed in 2005completed in 2005
PartⅠ Progress in Reform
Progress in restructuringPartPartⅠⅠ Progress in ReformProgress in Reform
Progress in restructuringProgress in restructuring
Cost reductions (One of the most competitive complexes in Asia) Feedstock diversification (most advanced in Japan)
Strengthening acetyls business (Japan Ethyl Acetate) Reform of polyolefins business (JPE) Reform of plastic products business
Growth through acquisitions of existing facilities (Singapore) (Taiwan)
New technologies(higher memory density; very small media)
Drastic cost reductions Production in China (Lianyungang)Concentration on selected areas
(withdrew from unprofitable operations)
Drastic cost reductions and expansion of high-value products operationsNew organization (head office and R&D functions concentrated)Optimizing production setup (separation of rolled products business into a subsidiary; concentration of extrusions business)
P. 9
Sprout : Strategic Business ExpansionSprout : Strategic Business Expansion
Strategic growth Strategic growth businessesbusinesses
Ingot/alloysIngot/alloys
Base businessesBase businesses Businesses that Businesses that need restructuringneed restructuring
OlefinsOlefinsOrganic ChemicalsOrganic ChemicalsPolyolefinsPolyolefinsPlastic productsPlastic products
Hard disksHard disks
Commodity CeramicsCommodity Ceramics
Commodity Commodity aluminum materialsaluminum materials
Aluminum andAluminum andothersothers
InorganicInorganicMaterialsMaterials
ElectronicsElectronics
ChemicalsChemicals
PetrochemicalsPetrochemicals
Specialty Chemicals (Raw Specialty Chemicals (Raw material for cosmetics; material for cosmetics; Medical/agrochemical interme Medical/agrochemical interme diates; Amino acids, etc.)diates; Amino acids, etc.)
Specialty gases & chemicals for Specialty gases & chemicals for semiconductor processingsemiconductor processingCompound semiconductorsCompound semiconductorsRare earths, Solid conductiveRare earths, Solid conductivepolymer aluminum capacitorspolymer aluminum capacitorsHard disksHard disks
Fine carbonsFine carbonsAdvanced ceramicsAdvanced ceramics
HighHigh--performance aluminum performance aluminum components *components *HighHigh--purity aluminum foils for purity aluminum foils for capacitors,capacitors,Heat exchangers,Heat exchangers,EnvironmentEnvironment--related businessrelated business
OlefinsOlefinsOrganic ChemicalsOrganic ChemicalsSpecialty polymersSpecialty polymers(vinyl ester, allyl ester)(vinyl ester, allyl ester)
Basic chemicalsBasic chemicals(ammonia, industrial gases, etc.),(ammonia, industrial gases, etc.),Agrochemicals, DisinfectantsAgrochemicals, Disinfectants
Graphite electrodesGraphite electrodesCommodity CeramicsCommodity Ceramics
Aluminum cansAluminum cans
* Shotic; highly heat-conductive aluminum alloy(ST60);photosensitive drums for laser beam printers
PartⅠ Progress in Reform
Business PortfolioPartPartⅠⅠ Progress in ReformProgress in Reform
Business PortfolioBusiness Portfolio
P.10
223290 290
90
95
210
0
100
200
300
400
500
600
2002 2003 2004 forecast 2005
Growth businessBase business
PartⅠ Progress in Reform
Portfolio management Changes in earning structurePartPartⅠⅠ Progress in ReformProgress in Reform
Portfolio managementPortfolio management Changes in earning structureChanges in earning structure
((100 100 million yenmillion yen)) Operating IncomeOperating Income
4.5
Profit Ratio(%)
5.5
6.5
7.5
4.6
5.5
6.87.0
6.0
5.0
Profit Ratio
P.11
Accelerating growth: Progress in SMU projects and growing HD business
HD shiftedto a growth business
PartⅠ Progress in Reform
Financial goals achieved ahead of schedulePartPartⅠⅠ Progress in ReformProgress in Reform
Financial goals achieved ahead of scheduleFinancial goals achieved ahead of schedule
Reductions in interest-bearing debt and improvement in D/E ratio
5,100
5,811
5,274
3.9
3.2
4,600
4,800
5,000
5,200
5,400
5,600
5,800
6,000
2002 2003 2004 forecast 2005
1.8
2.2
2.6
3.0
3.4
3.8
4.2
4.6
Interest bearing debt D/E Ratio
2.9
D/E Ratio((100 100 million yen)million yen)
Sprout TargetSprout Target
P.12
PartPartⅡⅡ Implementation of Growth StrategyImplementation of Growth Strategy
(1)(1)Establishment of Establishment of ““RoadmapRoadmap””(2)(2)SproutsSprouts
P.13
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2004.0 2005 2006 2007 2008 2009 2010
Regular sizes Very small
1000
Memory density(Gb/in2)
100
10
Memory Memory densitydensity
Vertical media Discrete media Patterned media
SDKSDK’’s sales s sales forecast 850forecast 850
PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap
HD: Focusing on growing market for very small mediaPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap
HD: Focusing onHD: Focusing on growing market for very small mediagrowing market for very small media
A ¥200 billion market growth expected by 2010 Half of the growth coming from new applications for very small media
Market sizeMarket size((¥¥100 million)100 million)
To grow by To grow by ¥¥200 200 billionbillion
Estimated by SDK
P.14
Structural analysis; Chemical analysis; Computational science
20052005Vertical mediaVertical media
20072007Discrete mediaDiscrete media
20102010Patterned mediaPatterned media
Improvement in interference control technology
Improvement in interference Improvement in interference control technologycontrol technology
1μm
150nm
PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap
HD: Interconnection of core technologiesPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap
HD: Interconnection of core technologiesHD: Interconnection of core technologies
Memory density improving rapidly supported by SDK’s thin-film depositionand precision processing technologies
Organic electronic materials,Battery , capacitorRecording media materials,Inorganic electronic materials,Crystal growth processThin film deposition process, Precision fabricating process,Micro-system process,Functional gases, Ultimate conditions process
Heat transfer systemCasing processPlasticity processingBondingFunctional metallic materials
Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles, Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry
P.15
1 2 5 10 20 50 100
104
103
102
10
1
0.1
0.01
Conductive polymer Conductive polymer aluminum capacitorsaluminum capacitors
High capacitance
High capacitance
High capacitance
High voltage
High voltageHigh voltageLow heightLow heightLow height
PC marketPC market
Cell phone marketCell phone market
Automotive marketAutomotive market
SDK’s sales forecast4 billion yen ((20052005年)年)
SDKSDK--CAPCAP®®
CV range expandingCV range expanding
PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap Solid conductive polymer Al capacitors (SDK-CAP®): Applications broadeningPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap Solid conductive polymer Al capacitors (SDKSolid conductive polymer Al capacitors (SDK--CAPCAP®®): Applications broadening): Applications broadening
Applications broadening due to their advantages:High capacitance, high voltage, low-height, low ESR and high reliability
Capacitance (μF)
Rated voltage (V)
P.16
P.17
0
5
10
15
20
25
30
2003 1st half 2003 2nd half 2004 1st half 2004 2nd half 2005 1st half 2005 2nd half
Annual Sales (Annual Sales (¥¥100 million)100 million)
Second line on Second line on streamstream
Epoxy resin
Mask
Lamination
Aluminum foilAluminum foil
Solid electrolyteSolid electrolyte
Cabon paste
Silver paste
Merallic frame
prospect forecast forecast
PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap
Solid conductive polymer Al capacitors (SDK-CAP®)PartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap
Solid conductive polymer Al capacitors (SDKSolid conductive polymer Al capacitors (SDK--CAPCAP®®))
Interconnection of SDK core technologies to meet market requirementsInterconnection of organic chemical and Interconnection of organic chemical and aluminum technologiesaluminum technologies
(( Sectional view of SDKSectional view of SDK--CAPCAP®® ))
Structural analysis; Chemical analysis; Computational science
Organic electronic materials,Battery , capacitorRecording media materials,Inorganic electronic materials,Crystal growth processThin film deposition process, Precision fabricating process,Micro-system process,Functional gases, Ultimate conditions process
Heat transfer systemCasing processPlasticity processingBondingFunctional metallic materials
Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles, Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry
0
500
1,000
1,500
2,000
2,500
3,000
2004.0 2005 2006 2007 2008 2009 2010
P.18
SDKSDK’’s sales s sales forecast 140forecast 140
Market will grow more than ¥100 billion by 2010.
PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap Fine gases: Growing demand from IC/LCD makersPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap Fine gases: Growing demand from IC/LCD makersFine gases: Growing demand from IC/LCD makers
Market size Market size ((¥¥ 100 million 100 million ))
Estimated by SDK
C4F6: Started commercial production ahead of competitorsAdopted by major device manufacturers To be used worldwide
P.19
Technolo
gy n
ode [
nm
]
CC44FF6 6 applicationsapplications
PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap Fine gases: Etching gas for IC processing at narrow line widthsPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap Fine gases: Etching gas for IC processing at narrow line widthsFine gases: Etching gas for IC processing at narrow line widths
An SiO2-selective-etching gas that gives a high aspect ratioAn SiOAn SiO22--selectiveselective--etching gas etching gas that gives a high aspect ratiothat gives a high aspect ratio
Roadmap for IC miniaturizationRoadmap for IC miniaturization
Based on SIA dataBased on SIA data
0
50
100
150
200
250
300
1995 2000 2005 2010 2015
Structural analysis; Chemical analysis; Computational science
Organic electronic materials,Battery , capacitorRecording media materials,Inorganic electronic materials,Crystal growth processThin film deposition process, Precision fabricating process,Micro-system process,Functional gases, Ultimate conditions process
Heat transfer systemCasing processPlasticity processingBondingFunctional metallic materials
Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles, Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry
A key material for lithium-ion batteries
Developed VGCF-S for use in resin composites
Prof. Endo of Shinshu
Univ.
P.20
Showa Denko
MEFS Co., Ltd.
+
++
0
20
40
60
80
100
120
140
160
180
2001.0 2002 2003 2004 2005 2006 2007 2008
Fine carbon sales in Fine carbon sales in 2005: 2.5 billion yen2005: 2.5 billion yen
PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap
VGCF® : Developing compositesPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap
VGCFVGCF®® : : Developing compositesDeveloping compositesMarket/technology Market/technology
developmentdevelopment
VGCFVGCF®® sales (T/Y)sales (T/Y)
Growing in the area of composites
Growing in the area of composites
Growth in the battery market
Growth in the battery market
Structural analysis; Chemical analysis; Computational science
Organic electronic materials,Battery , capacitorRecording media materials,Inorganic electronic materials,Crystal growth processThin film deposition process, Precision fabricating process,Micro-system process,Functional gases, Ultimate conditions process
Heat transfer systemCasing processPlasticity processingBondingFunctional metallic materials
Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles,Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry
PartPartⅡⅡ Implementation of Growth StrategyImplementation of Growth Strategy
(1)(1)Establishment of Establishment of ““RoadmapRoadmap””(2)(2)SproutsSprouts
P.21
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2004年 2005年 2006年 2007年 2008年 2009年 2010年
Cell phone Regular LED Backlight Automotive lights
40
60
80
100
120
P.22
Luminous efficacy
AdvantagesAdvantagesHighest-level brightnessLow forward voltage and low electricity consumption
Proprietary technologyProprietary technologyEpitaxial crystal growth Chip manufacturing
CommercializationCommercializationNov. 2004Started sample shipment
2005To start full-scale marketing
PartⅡ Implementation of Growth Strategy (2)SproutsBlue LED: Developed Blue LED with proprietary technology
PartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)SproutsBlue LED: Developed Blue LED with proprietary technologyBlue LED: Developed Blue LED with proprietary technology
Output (Mp/YOutput (Mp/Y)) Luminous efficacy (lm/W)
Increasing brightness for illumination applicationsIncreasing brightness for illumination applications
SDK’s sales forecast4 billion yen ((20052005年)年)
P.23
400
450
500
550
600
650
700
750
800
850
900
950
Wave-length(nm)
GaN
AlInGaP
GaAlAsGaP-R
GaP
GaAs
GaNGaN
AlInGaPAlInGaP
UltravioletUltravioletGreenGreen
LiquidphaseLiquidphaseepitaxialepitaxial processprocess
Lineup of LED productsLineup of LED productsLineup of LED products
PartⅡ Implementation of Growth Strategy (2)SproutsBlue LED: result of interconnection of amassed technologies
PartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)SproutsBlue LED: result of interconnection of amassed technologiesBlue LED: result of interconnection of amassed technologies
Developing GaN-based ultraviolet and green LEDs
MOCVD processMOCVD process
Structural analysis; Chemical analysis; Computational science
Organic electronic materials,Battery , capacitorRecording media materials,Inorganic electronic materials,Crystal growth processThin film deposition process, Precision fabricating process,Micro-system process,Functional gases, Ultimate conditions process
Heat transfer systemCasing processPlasticity processingBondingFunctional metallic materials
Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles, Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry
Sample-preparation cartridge for analysis of trace amounts of chemical substances
Increasing concern of the public about the environment and food safetyGrowing demand for analysis of trace amounts of chemical substances in water and food
0
10
20
30
40
50
60
2004 2005 2006 2007 2008 2009 2010
Environmental & Food safety Pharmaceutical
PartⅡ Implementation of Growth Strategy (2)SproutsAutoprep® @ Series: Environmental protection & food safety
PartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)SproutsAutoprepAutoprep®® @@ Series: Environmental protection & food safetySeries: Environmental protection & food safety
Removing components that interfere with Removing components that interfere with analysis; andanalysis; andconcentrating target chemical substancesconcentrating target chemical substances
New packing material with nanoNew packing material with nano--scale scale ““doubledouble--porepore”” structurestructure Improved efficiency Improved efficiency Using the Using the ShodexShodex®® technology andtechnology andorganic/inorganic materials
P.24
Size of domestic marketSize of domestic market((¥¥ 100 100 million)million)
Structural analysis; Chemical analysis; Computational science
Organic electronic materials,Battery , capacitorRecording media materials,Inorganic electronic materials,Crystal growth processThin film deposition process, Precision fabricating process,Micro-system process,Functional gases, Ultimate conditions process
Heat transfer systemCasing processPlasticity processingBondingFunctional metallic materials
Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles, Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry
Estimated by SDK
organic/inorganic materials
PartⅡ Implementation of Growth Strategy (2)SproutsOrganic electroluminescent materials durable for 10,000 hours
PartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)SproutsOrganic electroluminescent materials durable for 10,000 hoursOrganic electroluminescent materials durable for 10,000 hours
Developed the world’s first phosphorescent polymer for commercialapplication in the next-generation displays.
Used for illumination at an exhibitionUsed for illumination at an exhibitionDramatically improved durabilityDramatically improved durability
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
3 4 5 6 7 8 9 10 11
Application to highApplication to high--precision displaysprecision displays
2004
Hal
fH
alf -- l
ife (h
ours
)lif
e (h
ours
)
Developing new businesses Developing new businesses using innovative using innovative
phosphorescent polymer
P.25Structural analysis; Chemical analysis; Computational science
Organic electronic materials,Battery , capacitorRecording media materials,Inorganic electronic materials,Crystal growth processThin film deposition process, Precision fabricating process,Micro-system process,Functional gases, Ultimate conditions process
Heat transfer systemCasing processPlasticity processingBondingFunctional metallic materials
Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles, Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry
phosphorescent polymer
P.26Note: Apprecier is SDK’s trademark. (Registration applied for.)
PartⅡ Implementation of Growth Strategy (2)Sprouts
Key materials for the futurePartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)Sprouts
Key materials for the futureKey materials for the future
New products based on market-oriented concept and technological synergies
New isocyanate monomerNew isocyanate monomerKarenzKarenz®® AOIAOI
The worldThe world’’s first commercial s first commercial production of the monomer;production of the monomer;
High photoHigh photo--curability contributing to curability contributing to efficient production of displaysefficient production of displays
Electromagnetic wave Electromagnetic wave absorption sheetabsorption sheet
HalogenHalogen--free;free;Effectively controls noise;Effectively controls noise;
Flame retardant and resistant to heatFlame retardant and resistant to heat
New stabilized vitamin CNew stabilized vitamin CApprecierApprecier
High wrinkleHigh wrinkle--care effect;care effect;Removes active oxygenRemoves active oxygen generatedgenerated
deep in the skindeep in the skin
Electrode for resinElectrode for resin--based based solar cellsolar cell
SPSP--XX
Enables the production of flexible and Enables the production of flexible and light solar cells; Expected to be widely light solar cells; Expected to be widely used for portable device applicationsused for portable device applications
Aluminum reflector for Aluminum reflector for LCD backlightingLCD backlighting
95% 95% or more reflectivityor more reflectivity
223290 290
90
95
210
0
100
200
300
400
500
600
2002 2003 2004 forecast 2005
Growth businessBase business
PartⅡ Implementation of Growth Strategy (2)Sprouts
Portfolio management Changes in earning structurePartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)Sprouts
Portfolio managementPortfolio management Changes in earning structureChanges in earning structure
4.5
Profit Ratio(%)
5.5
6.5
7.5
4.6
5.5
6.87.0
6.0
5.0
Profit Ratio
Accelerating growth: Progress in SMU projects and growing HD business
P.27(Same drawing appearing on Page 11)
((100 100 million yenmillion yen)) Operating IncomeOperating Income
HD shiftedto a growth business
PartPartⅢ Ⅲ Improved Earning Power Improved Earning Power through Structural Reformthrough Structural Reform
P.28
Part Ⅲ Improved Earning Power through Structural Reform
Petrochemicals: Completed restructuring; now a base business Part Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform
Petrochemicals: Petrochemicals: Completed restructuring; now a base business Completed restructuring; now a base business
““Simple and compactSimple and compact””Source of stable profit and cash flowSource of stable profit and cash flow
Competitive ethylene plantEstablished optimum production setupOne of the most cost-competitive complexes in AsiaFeedstock diversification (most advanced in Japan)Plant location closest to the Chinese/Asian markets
Business structure resistant to fluctuations in naphtha pricesRestructuring of the polyolefins business completed
Leading position in the acetyls market in AsiaEthyl acetate: the world leaderAdvancing into the growing Chinese market
P.29
Part Ⅲ Improved Earning Power through Structural Reform
Chemicals: Striving to improve profitabilityPart Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform
Chemicals: Striving to improve profitabilityChemicals: Striving to improve profitability
Base businessesBase businessesRestructuring in the commodity chemicals operations
Oxygen/nitrogen/hydrogen: Integration with the Tokyo Gas Group
Ammonia: Strengthening cost-competitivenessIncreasing utilization of the waste plastic gasification plant
Growth businesses (speedy commercialization)Growth businesses (speedy commercialization)
Raw materials for cosmetics : Stabilized vitamins and UV shieldShodex® liquid chromatography columns :
Meeting the growth of the analytical equipment marketDeveloping new businesses
Semiconductor processing materials (photoresist, etc)Fluorescent nanoparticles
P.30
Part Ⅲ Improved Earning Power through Structural Reform
Aluminum: Restructuring to be completed in 2005 Part Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform
Aluminum: Restructuring to be completed in 2005 Aluminum: Restructuring to be completed in 2005
Through drastic cost reductions and expansion of highThrough drastic cost reductions and expansion of high--value value products operations, the restructuring of the aluminum busineproducts operations, the restructuring of the aluminum business ss will be completed by the end of 2005.will be completed by the end of 2005.
(1) Automotive heat exchangers: Laying the groundwork for growth(2) Restructuring of rolled products/extrusion operations(3) Expansion of high-value products operations
Head office/marketing functions consolidated at OyamaIntegration of production and marketingIntegration of production and marketing
Established Aluminum Technology CenterEstablished Aluminum Technology CenterControlling core aluminum technologies
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Optimum production setup to meet customers’ global strategies
Managing production & development on a global basis; pursuit of optimum costs
Automotive heat exchangers: Laying the groundwork for growthAutomotive heat exchangers: Laying the groundwork for growthCompleted the development of next-generation productsRehabilitating the U.S. operation
Advancing into the Chinese market through a joint ventureDrastic cost reductions
To provide high-performance products by fully utilizing our materials/parts design capability
Part Ⅲ Improved Earning Power through Structural Reform
Aluminum: Increasing profitability (1)Part Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform
Aluminum: Increasing profitability (1)Aluminum: Increasing profitability (1)
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2004
Providing customers with high-performance products based on
advanced components technology
2005 2006 2007 2008
Establishing optimum production setup and increasing cost-
competitiveness
To launch next-generation products
and expand the business
To develop environment-friendly
heat exchangers
Rehabilitate the U.S. site; advance into China
Returning to a growth trackReturning to a growth trackReturning to a growth track
Sales ¥30 billion ¥50 billion
Part Ⅲ Improved Earning Power through Structural Reform
Aluminum: Increasing profitability (2)Part Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform
Aluminum: Increasing profitability (2)Aluminum: Increasing profitability (2)
Restructuring of rolled products/extrusions operationsOptimized production setup and drastically reduced costs
Separation of Sakai Plant into a subsidiaryReduction in the scale of the plain foil businessConsolidation of extrusions operation sites and optimization ofproduction capacity
Shift to high-value productsFocusing on high-purity foil for capacitorsGrowing sales of large extrusions for IC/ LCD production
Reorganization of sales/distribution channelsMarketing in western Japan consolidated at newly formedShowa Denko Aluminum Trading K.K.
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Part Ⅲ Improved Earning Power through Structural Reform
Aluminum: Increasing profitability (3)Part Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform
Aluminum: Increasing profitability (3)Aluminum: Increasing profitability (3)
Expansion of highExpansion of high--value products operationsvalue products operationsShotic®®
Record shipments due to technology/quality advantagesCommercial production of suspension arms
Aluminum cylinders for laser beam printers (world leader)Commercial production started at Dalian plant.Technical synergies through integration with extrusions business
High-purity foil for capacitors (world leader)Highly cost-competitive due to the integrated production linesFoil shipment growing for high-voltage applications (PDP , Car)
Lithium ion battery package (market leader in Japan)Foil processing technology meeting market requirements
Aluminum cansShipment of aluminum bottles started in 2nd half of 2004.
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Part Part Ⅳ Ⅳ Plan for 2005Plan for 2005
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Part Ⅳ Plan for 2005
Tasks to be accomplishedPart Part ⅣⅣ Plan for 2005Plan for 2005
Tasks to be accomplishedTasks to be accomplished
To complete the Sprout Project, To complete the Sprout Project, we should:we should:
Expand strategic growth businesses, andcommercialize new products quickly.
Establish ourselves as an “individualized chemical company”Achieve highly profitable business structure
Preparing for the Preparing for the ““postpost--SproutSprout””periodperiodTo accelerate growth strategy, andfurther improve financial strength
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2002 2003 2004(forecast*) 2005(Sprout)
Sales O.I. Sales O.I. Sales O.I. Sales O.I.
PetrochemicalsPetrochemicals227.8
10.0235.1
12.0252.0
18.0173.0
9.1
ChemicalsChemicals68.5
5.778.2
6.082.0
5.587.0
8.7
ElectronicsElectronics75.2
6.294.7
10.7114.0
15.0116.0
14.6
InorganicInorganicMaterialsMaterials
56.91.4
51.02.7
55.05.5
49.03.8
AluminumAluminum245.6
12.9230.3
11.6232.0
12.0255.0
15.7
HQ costsHQ costs▲4.8 ▲4.4 ▲6.0 ▲1.9
TotalTotal674.0
31.3689.4
38.5735.0
50.0680.0
50.0
Sprout Project :
Yearly Sales and Operating Income PlanSprout Project : Sprout Project :
Yearly Sales and Operating Income PlanYearly Sales and Operating Income Plan
(unit: billions of yen)* Revised on Nov. 16, 2004
Notes: Sprout target figures for respective segments were announced in January 2002.
The performance forecast and plan are based on the economic conditions and the Company’s policy at this point of time. Please note that actual results may differ from the forecast and the plan due to a variety of factors, including changes in the market conditions. P.37