1 Copyright 2007, Toshiba Corporation.
Taking the Initiative:Strategies for Continued Growth 2007
Atsutoshi NishidaPresident & CEO
Toshiba Corporation
April 12, 2007
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Forward-looking statements
・ This presentation contains forward-looking statements concerning Toshiba’s future plans, strategies and performance.
・ These forward-looking statements are not historical facts, rather they represent assumptions and beliefs based on economic, financial and competitive data currently available.
・ Furthermore, they are subject to a number of risks and uncertainties that, without limitation, relate to economic conditions, worldwide mega-competition in the electronics business, customer demand, foreign currency exchange rates, tax rules, regulations and other factors. Toshiba therefore, wishes to caution that actual results may differ materially from our expectations.
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Business Forecast for Fiscal Year 2006
Business StrategiesBasic Management PolicyRealize Sustained Growth with ProfitMaximize Multiplier Effect of InnovationsCSR Management
Outline of Mid-term PlanSales & Operating Income, Capex, R&D
Strategies for Key BusinessesDigital Products, Electronic Devices, Social Infrastructure
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FY2006 Forecast(announced January 2007) Comparison with FY2005
Net Sales 7,000 +656.5*10.3% increase
Operating Income250
(3.6%) +9.4Income before
income taxes and minority interest
290(4.1%) +111.8
Net Income120
(1.7%) +41.8
Aim for further growth through continuous creation of innovations
FY2006 Business ForecastIncreased sales and increased income in two consecutive fiscal years, FY05 & 06Record sales, fourth highest ever operating incomePlanned consolidated dividend payment ratio: 30%
Unit: billion yen
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Business Forecast for Fiscal Year 2006
Business StrategiesBasic Management PolicyRealize Sustained Growth with ProfitMaximize Multiplier Effect of InnovationsCSR Management
Outline of Mid-term PlanSales & Operating Income, Capex, R&D
Strategies for Key BusinessesDigital Products, Electronic Devices, Social Infrastructure
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Basic Management PolicyRealize Sustained Growth with ProfitShift management direction further toward growth and continue proactive management through strategic allocation of resources
Maximize Multiplier Effect of Innovations
Execute Management with Corporate Social Responsibilities
Prioritize human life and safety, and legal compliance in all business activities, and evolve as a global group recognized for responding to social and environmental concerns
Enhance global competitiveness through Process Innovations and Value Innovations
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Stable Business
Achieve high growth and profit in every business domain
FY08
Growth Business
Reinforce provision of “Safety and Security”(nuclear power, next generation batteries, environment)
Deliver more “Surprise and Sensation”(NAND, Cell, AV products)
Social Infrastructure
Secure stable growth,establish profitability
Digital Products
Secure high growth,expand high profitability
Electronic Devices
Reinforce competitiveness,promote renovation
FY10
Reinforce Intra-company collaboration
Reinforce competitiveness to achieve growth in current businesses
Realize Sustained Growth with ProfitVision of FY2010
Achieve Sustained Growth with Profit in All Business Domains
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Continued expansion of NAND flash and nuclear power businesses
FY2010FY2006 FY2007 FY2008 FY2009
Corporate culture that generates continuous innovation
Create value through intra-company collaborative projectsExpand business domains; promote new businesses
Plan reinforcement of each businessChannel major resources into growth areas
Overcome competition
in each business
Thorough review ofcurrent businesses
Realize Sustained Growth with ProfitRoadmap toward FY2010 Vision
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Targets for FY2010 FY2006 Projection
Net sales 9.5 trillion yen 7.0 trillion yen
Operating income(Operating income ratio)
480 billion yen (5.0%)
250 billion yen (3.6%)
Return on equity 15% 11.6%
Shareholders’ equity ratio over 20% 18.6%
Realize Sustained Growth with Profit
Targets for FY2010
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We define innovation broadly from
バリューバリュー
Gain profit through radical changes
Grow while offering new value
up tosmall improvements
completely new ways to increase our ability to generate value from available resources and maximize profits.
Maximize Multiplier Effect of Innovations
Commodity Products Decommoditized Products
Process Innovation
Value Innovation
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Maximize Multiplier Effect of Innovations
- Benchmark from a broad, long-term perspective- Essential for creating continuous innovations
Sense of Urgency
- Collect the wisdom of Toshiba Group, breakthroughconventional thinking to reach a new level
Customer value, calculated risk, challenge contradictions
Maximize the Multiplier Effect
The 21st century is an age when change becomes commonplaceJust maintaining the status quo requires us to move at 2 or 3 timesthe speed of the past
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Next-generation terminals Higher capacity NAND Next-generation CPU
Next-generation AV products High image quality TVs Fuel cells
Toshiba Innovations: ExamplesDeliver products that support ubiquitous connectivity
HD DVD
CELL chipWindows Mobile 6 Cell phone with keyboard
16Gb NAND, 56nm process
Fuel cells for mobile devicesDMFC (prototype)
REGZAFull-HD LCD TV
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Super charge battery (prototype)
Toshiba Innovations: ExamplesDeliver products with consideration for the global environment
Small and light , high-efficiency, reduced-emission-type turbo-generator
(reduce environment loads, including CO2)
Long-term-use PC including adoption of HDD protection
(reduce waste)
Typhoon RoboLED downlight E-CORE
Environmentally friendly turbo-generator Robust PC
Next-generation battery Highly efficient cleanerHighly efficient lighting
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Next Generation Display Next GenerationDiagnostic Imaging System
Toshiba Innovations: Examples
Organic LED DisplayShowcased at International FPD Expo, April 11-13, 2007
256-Slice CTResults of clinical evaluations to be announced at Japan Radiological Society seminar, April 13-15, 2007
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Innovation To Strengthen ManufacturingMaximize the Multiplier Effect of Innovations
Design ForManufacturability
Primary competitivenessProduct, price, promotion, place
Sustained growth with profit
Add valueMarket
Basic competitivenessQuality, cost, delivery, flexibility
Product Price Promotion
Cost Quality Delivery
DFM SCM
Raise efficiency
Enhance speed
Minimize losses
Improve accuracy
Technology Sales
Manufacturing Supply ChainManagement
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CSR Management
Earning Global Trust
Committed to People, Committed to the Future
1. Give the highest priority to human life & safety, and to legal compliance in all business activities.
2. Global Promotion of CSR Activities(1) Contribute to a sustainable society through a leading
role in environmental activities
(2) Respect diversity, contribute to regional society
3. Proactive information disclosure and communication
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Environmental Management: Reduction of CO2 Emissions…
CSR Management
- Clean room ecology projectat semiconductor facilitiesCut CO2 emission rate by 25%(Benchmark: FY1990)
- Motors for hybrid electric vehiclesCut CO2 emissions by 10 to 20%(Source: Environmental Restorationand Conservation Agency)
…from power plants …from the home
…from Toshiba’s plants … from vehicles
- Nuclear power plantsCut CO2 emissions to one forty fifth ofcoal powered plants
- Higher temperature, higherefficiency thermal power plantsCut CO2 emissions by 150Kt a year
- “Daiseikai SDR series” airconditionerCO2 emissions reduced by 45%(Benchmark: 1996 Toshiba products)
- Efficient LED downlight E-CORECO2 emissions reduced by 85%(compared with incandescent lamp)
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Environmental Management: Voluntary Environmental Plan
Indicator Plan of FY2006 Target for FY2010
Ratio of ECPs to net sales
Eliminate use of certain chemical substances(15 substance groups contained in products)
Reduction of CO2 emission rate (compared with FY1990)
Greenhouse gas emissions (other than CO2) (CO2 conversion ratio : compared with FY2000)
Zero waste emissions
Management of chemical
substances
Total emission of chemical substances to air and water
Provision of environmentally
conscious products(ECPs)
Expand to 60%28%
47%
33%
31% reduction 35% reduction
Effective utilization of resources
Ratio of achieved sites: 39%
Achieve zero emissions at all sites
20% reduction
Total eliminated
Prevention of global warming
Keep 25%
50% reduction
CSR Management
Double overall eco-efficiency (FY2010/FY2000)Product eco-efficiency: 2.2 times, Business process eco-efficiency: 1.2 times
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Business Forecast for Fiscal Year 2006
Business StrategiesBasic Management PolicyRealize Sustained Growth with ProfitMaximize Multiplier Effect of InnovationsCSR Management
Outline of Mid-term PlanSales & Operating Income, Capex, R&D
Strategies for Key BusinessesDigital Products, Electronic Devices, Social Infrastructure
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Sales growth: CAGR7.5% (FY06-09); Operating Income: 400b yen in FY2009
Sales and Operating Income Plan
2.7%
4.6%
3.6%3.8%
Net Sales (¥b)
Operating Income (¥b)
operating income ratio
CAGR 7.5% (06CAGR 7.5% (06--09)09)
Overseas sales: CAGR 12% (06
Overseas sales: CAGR 12% (06--09)09)
Operating income and operating income ratios reflect Impact of changed depreciation systemImpact: FY07: minus ¥35b (operating income ratio: minus 0.5%)
FY09: minus ¥50b (operating income ratio: minus 0.6%)
FY04 FY05 FY06 FY07 FY08 FY09
5,836.16,343.5
7,000
8,700
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Global Business Development
Digital Products Electronic Devices Social Infrastructure
Realize sustained growth with profit in overseas business of each key business group
FY06 FY09 Overseas BusinessNet sales: 49% 56%; Operating income: 35% 50%
70%75%
30%
25%
50%56%
50%
44%
32% 41%
68%59%
Overseas
Japan
FY06 FY09
Overseas
Japan
FY06 FY09
Overseas
Japan
FY06 FY09
Expansion in North America, China and rest of Asia,
mainly in Power Systems
Semiconductor and displays expansion in China and other Asian countries
Expansion, mainly in the US and Europe
Net Sales
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Goals by Business Segment
DigitalProducts
ElectronicDevices
SocialInfrastructure
HomeAppliances
Net salesOperating
income ratio
Net sales
Operatingincome ratio
Net sales
Operatingincome ratio
Net salesOperating
income ratio
2,780
0.5%
1,590
7.2%
2,080
4.6%
740
1.4%
FY2006Forecast
FY2006 forecast: announced on January 31, 2007
CAGRFY06-09
3,4307%
1.6%
2,33014%
8.6%
2,4205%
5.0%
8404%
1.8%
FY2009Plan
Unit: ¥b
Digital Products: improve profitabilityElectronic Devices: expand profitability
Social Infrastructure: maintain stable profitability
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Electronic Devices to generate over 40% of operating income ratiElectronic Devices to generate over 40% of operating income ratioo
Operating Income, by Key Domains
(¥b)
47%
51%
34%32%
14%
7%
- Improve income from PC and AV product lines
- Steady income from the Mobile business
Digital Products
- Expand income from NAND flash memory and discrete semiconductors
- Improve income from the System LSI and display businesses
Electronic Devices
- Expand income from power systems and medical systems
- Steady income from industrial and social infrastructure systems
Social Infrastructure
Electronic Devices
Digital Products
Social Infra-structure
Others
FY04-06 FY07-09
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¥300b
Others
1,750.0
1,442.1
72%
68%
FY04-06 FY07-09
Electronic Devices
Digital Products
Social Infrastructure
Continue proactive management through a primary strategic focus on Electronic Devices
Boost by 300b yen in the next three years
Capex Plan
ElectronicDevices
DigitalProductsSocialinfra-structure
*excluding investments and loans, such as acquisition of Westinghouse(¥b)
- Invest over ¥1 trillion in Semiconductor business
- Includes plans for reinforcing Fab 4 and for Fab 5 NAND flash memory manufacturing facility
- Invest in new businesses, such as fuel cells
- Secure growth of TV and HD DVD businesses
- Expand business through synergies from the Westinghouse acquisition
- Focus allocation on growth area, such as super charge battery
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19%
42%
46%
30%
29%
22%
1,290.0
1,113.2¥180b
Increase of about 180b yen in the three years from FY07
R&D Plan
Electronic Devices
Digital Products
Social Infrastructure
Others
ElectronicDevices
DigitalProducts
Socialinfra-structure
FY04-06 FY07-09
(¥b)R&D expenditure ratio to net sales (FY07-09): 5.3%
- Higher performance technologies for nuclear and thermal power generation
- Next-generation diagnostic imaging technology
- Next-generation network technology
- Next generation non-volatile memory
- Multi-core processor technology
- Small-sized methanol fuel cells
- HD image technology
- Digital home network technology
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FY07 FY07 -- 09 cumulative: Positive free cash flow of 540 billion yen is an09 cumulative: Positive free cash flow of 540 billion yen is anticipatedticipated
Financial Strength – Cash Flow
(¥b)
-500
0
500
1,000
FY06 FY07 FY08 FY09
Free Cash Flow
CF from operating activities
CF from investing activities
500
720
450
730
-220
280
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End of FY09: D/E ratio below 100%Shareholders’ equity ratio over 20%
Financial Strength – Shareholders’ Equity and Interest-bearing Debt
(¥b)Interest-bearing debt Total shareholders’ equity D/E
D/E:100%Shareholders’equity ratio:
18.6%
Shareholders’equity ratio:
21.7%
0
500
1,000
1,500
FY06 FY07 FY08 FY090%
50%
100%
150%
200%
250%
300%
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Business Forecast for Fiscal Year 2006
Business StrategiesBasic Management PolicyRealize Sustained Growth with ProfitMaximize Multiplier Effect of InnovationsCSR Management
Outline of Mid-term PlanSales & Operating Income, Capex, R&D
Strategies for Key BusinessesDigital Products, Electronic Devices, Social Infrastructure
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-Establish global business
-Expand further in global business(BRICs) and high-quality technology
-Consider the environment
-Establish business foundations and strengthen growing business
-Maintain top share in domestic POS business-Expand global business
Mobile Business
PC Business
AV Business
Digital Multi-function Peripherals andRetail Information Systems Business
CAGR (FY06-09): 7%FY2009 Operating Income Ratio: 1.6%
Digital Products Business Group
Sales Growth
CAGR11%
CAGR7%
FY03 FY06 FY09
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Differentiation Technologies: Products
PC business TV business
HD DVD player/recorder business HDD business
FY09 net sales target:1,200 billion yen
FY06-09 CAGR: 7%
FY09 net sales target:520 billion yen
FY06-09 CAGR: 11%
FY09 net sales target:200 billion yen
FY06-09 CAGR:187%
FY09 net sales target:380 billion yen
FY06-09 CAGR: 7%
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Target: in-house companies, group companies
Reinforce Intra-company Collaboration in Digital Products
Technology Strategy WGTechnology Fusion
Produce differentiated productsShare information on parts design
Develop design platforms
Production Strategy WGIntegration and sharing of
production sitesUnify procurement
Achieve efficient logisticsExpand production know-how
Marketing Strategy WGMarketing collaboration
Unification of brand and design
Mobile informationdevices
Generate superior cost competitive products
Product Planning WG
Next generation TV Home networks Differentiated PCs
MobileCommunications
Digital MediaNetwork
PC andNetwork
ToshibaTEC Semiconductor Toshiba Matsushita
Display Technology
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FY03 FY06 FY09
-Construct strong business structure that can respond to rapid environmental changeNAND and Discrete businesses:maintain high profitabilitySystem LSI: recover profit
- Enhance market share in overseasand accelerate development of differentiated technology
Sales Growth
Electronic Devices Business Group
CAGR
7%
CAGR
14%
Semiconductor Business
Display business
CAGR (FY06-09): 14%FY2009 Operating Income Ratio: 8.6%
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
CY04 CY05 CY06 CY07 CY08 CY09
NAND Flash Memory Market - Bit Growth Rate in 1GB Equivalent
Digital Still Cameras
Handsets
PC (Hybrid HDD/SSD*)
Digital Consumer/ Others
Audio/PMP
67698
1,825
227
3,966
(1GB equivalent, million units/year)
USB
Motion picture applications will lead the market
Target sales growth surpassing market growth8,500
(+222%) (+240%)
(+206%)
(+162%)
(+117%)
(+114%)
Year-on-Year Growth Rate
0606--09: CAGR 130%09: CAGR 130%
*Solid State Disk
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0
500
1,000
1,500
2,000
2,500
3,000
CY05 CY06 CY07 CY08 CY09
(¥b)
NAND Flash Memory Market, by Value
(Source: Toshiba)
The market will continue to growCAGR (06-09): 24%
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Mass production started in Jan. 2007
Reinforce NAND Flash Memory Manufacturing Capacity
56nmProcessGeneration (300mm CR)
(300mm wafer equivalent; average wafer number per term)
4Xnm
Manufacturing start at Fab 4
FY05/1H FY05/2H FY06/1H FY06/2H FY07 FY08
70nm
Previous Plan
Latest Plan
FY09
Full Capacity of Fab 3:150,000 wafers a month
- Full Capacity of Fab 4: around 1.4 times Fab 3
- Start manufacturing at Fab 5 (plan)
Steadily enhance 300mm capacity; respond to demand growth
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High-end AV PC(high speed, high capacity storage)
0
20
40
60
80
100
120
140
160
180
200
CY06 CY07 CY08 CY09 CY10
Notebook PC Market
(in million units/year)
07-10: CAGR 295%
Enhance New Applications – SSD for Notebook PC
Hybrid
HDD
(medium, high capacity PC)
SSD
Mobile PC, B2B PC(small capacity
storage)
Penetration of SSD in B2B and mobile PC market will accelerate in FY2010
0
500
1,000
1,500
2,000
2,500
CY07 CY08 CY09 CY10
(million units/ year)
SSD market (bit base)*1GB Equivalent
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Enhance Profitability of NAND Flash Memory
- Accelerate deployment of advanced process technology And start manufacturing ahead of other companies
70nm 56nm 4Xnm 3Xnm *56nm: Mass production start in Jan. 2007Accelerate application of 56nm (original plan: FY07/3Q over 50% FY07/2Q over 50%; FY07/4Q over 85%)Accelerate start-up of 4Xnm generation
- Develop super multi-level cell technologyEstablish 3-bit cell and 4-bit cell technology and create market
- Increase throughput in 300mm clean roomFab 3: 150,000 wafers/ monthFab 4: In operation from FY07/3Q,
1.4 times output of Fab 3 at full productionFab 5: Make maximization of production capacities of Fab 3 & 4
the top priority; decision on new Fab 5 to be made in FY07
Thorough cost reduction measures
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- Strong expansion of overseasbusiness
- Promptly launch new businesses:Super charge battery businessMotors for hybrid electric vehiclesSecurity businessEnvironmental business
- Promote environmentally friendlyproducts
Sales GrowthCAGR (FY06-09): 5%FY2009 Operating Income Ratio: 5.0%
Social Infrastructure Business Group
FY03 FY06 FY09
CAGR 7%CAGR 5%
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- Strengthen overseas businessReinforce local manufacturing,marketing and servicePromote M&A and alliances
- Steadily expand Westinghouse’sbusiness
Lead the global industry with AP1000Achieve synergies betweenToshiba and Westinghouse
- Expand service business in JapanPromote replacement and upgrade businesses
Basic Strategies: Secure high growth andprofitability through a global presence
-- overseas sales ratio of 65% --
Sales Growth
Power Systems Business
FY03 FY06 FY09
CAGR 14%
(03 –
06)
CAGR 5%
CAG
R 14
%(0
6 –
09)
CAGR 7%
50% CurrentBusiness
Westinghouse Business
Overseas Ratio of 65%
(Japan)
(Overseas)
40
20072007 2010
CAGR: 14% (FY06-FY10)
* EPC: engineering, procurement and construction
1.7 timesFY06
(1.0)
North America: increase steam turbine and generator orders top share for four consecutive years
China: JVs with local firms (transmission and hydro power) expanding performance as planned
Other Asia: increase orders in EPC business for thermal power plantsThree plants under construction
Overseas Sales Overseas Sales in FY2010in FY2010
North America: expand service business (acquisition of ReGENco), enhance STG efficiency
China: invest in existing JVs to increase production
Other Asia: expand thermal power plant business in India
Brazil: invest to increase local production, expand range of businesses
Expand business, with emphasis on North America, China and otherExpand business, with emphasis on North America, China and other Asian countriesAsian countries
Power SystemsStrategies for Overseas Business (Current Business)
New Reinforce-
mentmeasures
Currenteffortsand
resultsAsia except
China
ChinaNorthAmerica
Others
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- Applications for COL in the US increased from 11 30 plants; 16 for AP1000- Debt repayment period shortened from 17 14 years * COL: Combined Construction and Operation License
- Orders expected for four AP1000 reactors for Sanmen and Haiyangsites in China
- Increase in COL applications for AP1000 by US utilities
The AP1000 third generation reactor
Future order projections surpass the number and Future order projections surpass the number and value calculated at the time of the acquisitionvalue calculated at the time of the acquisition
Power Systems: Westinghouse Business
Maintenance & service and fuel
Construction
Estimate on acquisition
Sales
2006 2010 2015 2020
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-Expand total solutions businessMaintain market share in Japan
-Expand overseas sales, particularly in the U.S. and European markets
51% overseas sales ratio -Enhance global R&D
Promote network in U.S.,Europe and Asia.
-Maximize clinical valueDifferentiation with highvalue-added products
-Enhance healthcare IT business
Basic strategies: Global high growth through technology leadership
Medical Systems Business
Sales Growth
FY03 FY06 FY09
CAGR10%
CAGR4%
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Enhancing Global Operations in the Medical Systems Business
Established R&D Center in the US (06/9), Established Sales OfficEstablished R&D Center in the US (06/9), Established Sales Office in China (07/4)e in China (07/4)
Harvard University, BIDMC
Univ. of North Carolina
Johns Hopkins University
Long Beach MMC
Univ. of Pittsburgh
Leiden University Heidelberg University
Humboldt University
Europe
* Developing workflow-driven clinical applications * R&D and manufacturing using overseas resource
U.S.A.U.S. R&D CenterSoftware R&D Center
Hardware R&D Center
SoftwareR&D Center
Toshiba Dalian Medical Systems Factory
India
ChinaToshiba China Toshiba Dalian Ltd.
Kobe University
Kyoto University
Fujita Health University
JuntendoUniversity
Keio University Toshiba R&D Center
Toshiba production operation
Research and development
Clinical studies
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Net Sales 8.7 trillion yen 7.5% CAGR from FY2006
Operating Income
400 billion yen 250 billion yen in FY2006 forecast
D/E Ratio Below 100% 110% or below in FY2006 forecast
ROE Over 10% 11.6% in FY2006 forecast
Capital Expenditure
1.75 trillion yen In three years from FY2007 to FY2009;68% to Electronic Devices
R&D Expenditure
1.29 trillion yen In three years from FY2007 to FY2009;180 billion yen higher than FY2003-2006 level
Goals for Fiscal Year 2009
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Toshiba delivers technology and products remarkable for their innovation and artistry – contributing to a safer, more comfortable, more productive life.
We bring together the spirit of innovation with our passion and conviction to shape the future and help protect the global environment – our shared heritage.
We foster close relationships, rooted in trust and respect, with our customers, business partners and communities around the world.