Results of the First Quarter for the Fiscal Year Ending March 2009 Q&A

What are the prospects for orders for the July-September period in 2008?

As of July, we had expected a 30 to 40% recovery for our semiconductor production equipment (SPE) orders, but currently we expect a 20 to 30% recovery. The outlook remains unchanged for these products, which are expected to hit bottom during the April to June period before making a recovery. For FPD production equipment, however, we anticipate orders to dip below 10 billion yen.

What do you expect orders to be like for the October to December period this year?

Orders for SPE are on the path to recovery. As for FPD production equipment, we already received large orders during the October to December period last year and the January to March period this year, and due to the large backlog we do not anticipate any further large orders.

In terms of orders, what is the outlook for the SPE composition ratio by application?

The state of the DRAM market has hit the bottom, and will probably recover depending on the DRAM price. This recovery is anticipated to be faster than that of NAND flash, which is expected to remain sluggish for the rest of the year and recover around the beginning of 2009. Amid this circumstance, MPU market is in the upward trend.

Of the SPE and FPD orders, how many were for services other than equipment?

In the areas of parts sales and services, we receive orders worth over 20 billion yen each quarter.

What is the risk of canceled orders?

Compared to the previous downturn in sales in 2001, there have been hardly any canceled orders, although there have been some delivery delays.

What are the quarterly profit trends in light of the downward revision in the financial forecasts for the current fiscal year?

The greatest reason for the substantial deterioration of profit margin in the second quarter is the effects of the product/customer mix. An increase in costs due to a reduction in the utilization rate of the manufacturing divisions is also causing the deterioration in profit. Another contributing factor was the seasonal concentration of costs and expenses during the second quarter. Operating income for the second quarter is forecast at 1.1 billion yen, which is a conservative estimate, and we do not think there is any risk of slipping into the red. We do not anticipate disparities in the results for the third and fourth quarter comparing to those of the first half.

How is the free cash flow progressing?

Progress was made in the collection of accounts receivable during the first quarter. There is no change in the forecast range of between 50 and 80 billion yen for the current fiscal year.

Are there any signs that market conditions are improving?

Recovery is slower than expected due to poor final consumption in response to the impact of a downturn in the macro economy. Conditions are expected to gradually pick up from the next fiscal year. With the launch of new applications made possible by new communication protocol and new MPU, the market is expected to start recovering toward 2011.

How is the 218.6 billion yen in cash on hand (consisting of 'cash and deposits' and 'certificate of deposit') being used?

We are currently in the process of discussing it, from the perspective of our new growth strategies and capital policies. These new growth strategies, which are aimed achieving net sales of 2 trillion yen and an operating income margin of 25% by 2020, include initiatives such as the development of new products in existing business areas, entering new business sectors, the development for a transition to lager, 450mm wafer, as well as further manufacturing reforms at the new Miyagi Plant. We intend to announce our decisions sometime during the current fiscal year.

What is your M&A policy?

We intend to carry out mergers and acquisitions in order to acquire technologies because we are in an industry characterized by great technological innovation.