• Precision Equipment Business
• Imaging Products Business
• Related Matters

Precision Equipment Business

Q. What is the outlook for IC steppers and scanners sales?

A. Manufacturers have further cut back on semiconductor equipment investment. Therefore we have revised and cut back on our current forecast for IC steppers and scanners sales. We believe we will meet our fourth quarter sales forecast as long as there are no delays in incoming installment. While it remains extremely uncertain when the market will recover, investment in cutting-edge equipment continues, and our view is that the market should start to recover in the latter half of the year ending March 2010.

Q. Tell us about postponing construction of one new building for production of IC steppers and scanners.

A. Our judgment is that the significant fall in demand for semiconductors and semiconductor manufacturing equipment will continue for some time. As a result, we reviewed the construction schedules for the facilities of Kumagaya Plant and Tochigi Nikon Precision Co., Ltd. and decided to postpone the start of construction at Tochigi Nikon Precision until we find the upturn in sight for the market. As a result of this alternation, the original plan for the capital expenditure of about 35 billion yen over three years has been reduced to about 20 billion yen.

Imaging Products Business

Q. What is the profit outlook for the imaging products business?

A. Market conditions are expected to deteriorate further in the fourth quarter of the year ending March 2009 resulting in a decrease in unit sales that will extend to high-end Digital SLR cameras. Moreover, we anticipate that ongoing market competition and a reduction in inventory will bring down unit prices and profits.
Therefore, we anticipate that fourth quarter sales will be 20 to 30% less in comparison to the same period last year and we plan a 50% cutback in production. As a result, we anticipate sales to drop by approximately half in comparison to the same period last year and to record an operating loss.
The outlook is that consumer uncertainty and harsh market conditions will continue. Nonetheless, we aim to return to profitability next fiscal year by intensifying our efforts to provide competitive, high-valued added products, and to adjust inventories, cut costs, and reduce expenses.

Q. What measures do you have in place to deal with the appreciation of the yen?

A. To deal with the current appreciation of the yen, we have been making every effort to cut costs in the design phase of production. In addition to enhancing productivity and increasing the ratio of local procurement by overseas affiliates, we are considering the merits of further shifting production overseas.

Related Matters

Q. Tell us about company-wide efforts to streamline management performance

A. Given the further deterioration of business results this period, we will implement the following measures to keep in check the decline in profits and we will prepare for the stage of market recovery.

• 1.Reduce monthly compensation of directors and managerial staffs
  Monthly compensation for directors was reduced starting in January and monthly compensation for managerial staffs will be reduced from February.
• 2.Hold down capital expenditure
  Reduce current fiscal year order based investment and postpone construction of one new building for production of immersion IC scanners.
• 3.Reduce expenses
  Reconsider the expenses from scratch. And reduce further costs focusing on the expenses flowed outside company.
• 4.Adjust production, including temporary layoffs and reducing personnel
  Implement temporary layoffs and production stoppages at production facilities. We will reduce temporary staffs in the domestic and overseas group companies.