Establishing ourselves as Establishing ourselves as ““Individualized Chemical CompanyIndividualized Chemical Company””and realizing our visionand realizing our vision

Progress Made in the First Year of Progress Made in the First Year of ““SPROUT SPROUT Project,Project,”” Showa Denko Showa Denko K.K.K.K.’’ss MediumMedium--Term Term

Consolidated Business PlanConsolidated Business Plan

December 10,2003December 10,2003

【【Our VisionOur Vision】】We at Showa Denko K.K. and its Group companies will provide proWe at Showa Denko K.K. and its Group companies will provide products and ducts 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.

P. 1This 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.

Performance forecast for 2003 5Substantial increase in earning power

6Cost reductions 8Reduction in interest-bearing debt9

P. 2

Showa Denko's basic strategy 11Business Portfolio 12HD 13Petrochemicals 14Electronics 15Aluminum 16Chemicals 17Inorganic materials 18

SMU 20SMU projects and supporting technologies 21Shift from seller's viewpoint to customer's viewpoint

22Sharing market information; Interconnecting technologies 23VGCF 24Titania 25High-purity C4F6 26LED chips with exceptional brightness 27Solid conductive polymer aluminum capacitors 28“Chemical changes” and “interconnections” taking place 29R&D expenses allocated mainly to growth businesses

30

PART1 Improvement in Financial StrengthPART1 Improvement in Financial Strength

PART2 Sprout: Strategic Business ExpansionPART2 Sprout: Strategic Business Expansion

PART4PART4 Showa Denko Continues to ChangeShowa Denko Continues to Change

SixSix--year consolidated business planyear consolidated business plan 3PART3PART3 SMU : Key Concept in Growth StrategySMU : Key Concept in Growth Strategy

Giving incentives to motivated and capable employees32

Advancing rapidly into China 33Cost reductions in 2004 34Reductions in interest-bearing debt 35

Moving forward to realize our visionMoving forward to realize our vision 36Yearly Sales and Operating Income PlanYearly Sales and Operating Income Plan 37

Realizing our visionRealizing our visionCustomer/shareholderCustomer/shareholdersatisfactionsatisfactionContribution to societyContribution to societyon a global scaleon a global scale

Six-year consolidated business plan

20002001

2002200320032003

2004Growth strategy Growth strategy through the Sprout Projectthrough the Sprout Project

Establishing ourselves as an Establishing ourselves as an individualized chemical companyindividualized chemical 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

2005

P. 3

Part 1 Improvement in Financial StrengthPart 1 Improvement in Financial Strength

P. 4

Part 1 Improvement in Financial StrengthPerformance forecast for 2003 (as announced in August)

Part 1 Improvement in Financial StrengthPart 1 Improvement in Financial StrengthPerformance forecast for 2003 (as announced in August)Performance forecast for 2003 (as announced in August)

Net salesNet sales ¥¥686 billion686 billionOperating incomeOperating income ¥¥3838 billionbillionOrdinary profitOrdinary profit ¥¥26.5 billion26.5 billionNet incomeNet income ¥¥10 billion10 billionRetained earningsRetained earnings ¥¥14.314.3 billionbillionInterestInterest--bearing debtbearing debt ¥¥531.6531.6 billionbillion

Cash dividend (Mar. Cash dividend (Mar. ‘‘04)04) ¥¥2 per share2 per share

P. 5

Part 1 Improvement in Financial StrengthSubstantial increase in earning power(1) Operating income

Part 1 Improvement in Financial StrengthPart 1 Improvement in Financial StrengthSubstantial increase in earning power(1) Operating incomeSubstantial increase in earning power(1) Operating income

287

251

296

192

313

380

150

200

250

300

350

400

'98 '99 '00 '01 '02 '03

First year of Sprout: Achieving earnings goal First year of Sprout: Achieving earnings goal

Cheetah Project Sprout ProjectSprout Project

Sprout target: ¥37.6 billion

(Forecast)

（¥100 million）

P. 6

Part 1 Improvement in Financial StrengthSubstantial increase in earning power(2) Sales profit ratio

Part 1 Improvement in Financial StrengthPart 1 Improvement in Financial StrengthSubstantial increase in earning power(2) Sales profit ratioSubstantial increase in earning power(2) Sales profit ratio

7,309

6,627

7,470

7,089

6,740

6,8603.9

3.84.0

2.7

4.6

5.5

6,200

6,400

6,600

6,800

7,000

7,200

7,400

7,600

'98 '99 '00 '01 '02 '03

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0Net sales

Profit ratio ★

Forecast

（％）Profit ratio improved through restructuringProfit ratio improved through restructuring

(¥100 million)

Cheetah Project Sprout ProjectSprout Project

P. 7

Part 1 Improvement in Financial StrengthCost reductions

Part 1 Improvement in Financial StrengthPart 1 Improvement in Financial StrengthCost reductionsCost reductions

Actual cost reductions would exceed goals Actual cost reductions would exceed goals for the first year of Sprout Projectfor the first year of Sprout Project

2003 target2003 target ¥¥10 billion10 billionExpected reductionsExpected reductions ¥¥11 billion11 billion

Breakdown:Breakdown: Personnel expenses Personnel expenses ¥¥1 billion1 billionManufacturing costManufacturing cost ¥¥5.5 billion5.5 billionPurchasing costPurchasing cost ¥¥2.4 billion2.4 billionSCM/LogisticsSCM/Logistics ¥¥2.1 billion2.1 billion

P. 8

Part 1 Improvement in Financial StrengthReduction in interest-bearing debt

Part 1 Improvement in Financial StrengthPart 1 Improvement in Financial StrengthReduction in interestReduction in interest--bearing debtbearing debt

6,224

5,811

5,316

6,469

6,729

7,116

5,000

5,500

6,000

6,500

7,000

7,500

'98 '99 '00 '01 '02 '03(Forecast)

D/E ratio: 3.3 times

(¥100 million) Steady progress during the first year of SproutSteady progress during the first year of Sprout

Cheetah Project Sprout ProjectSprout Project

P. 9

Part 2 Sprout : Strategic Business ExpansionPart 2 Sprout : Strategic Business Expansion

P.10

Part 2 Sprout: Strategic Business ExpansionShowa Denko's basic strategy

Part 2 Sprout: Strategic Business ExpansionPart 2 Sprout: Strategic Business ExpansionShowa Denko's basic strategyShowa Denko's basic strategy

“Individualized Chemical Company” with improved earning power

“Individualized Chemical Company” with improved earning power

MediumMedium-- & long& long-- term strategyterm strategy

Rebirth or disposal of Rebirth or disposal of ““businesses that need businesses that need

restructuringrestructuring””Expansion of strategic Expansion of strategic

growth businessesgrowth businesses

Continuation and fortification of Continuation and fortification of base businessesbase businesses

Continuous cost reductionsContinuous cost reductionsSMU : Strategic Market Unit P.11

Part 2 Sprout: Strategic Business ExpansionBusiness Portfolio

Part 2 Sprout: Strategic Business ExpansionPart 2 Sprout: Strategic Business ExpansionBusiness PortfolioBusiness Portfolio

““Business PortfolioBusiness Portfolio”” determined by target market segments and coredetermined by target market segments and core--technologiestechnologies

Specialty polymers(vinyl ester, allyl ester)

OlefinsOrganic chemicalsPolyolefinsPlastic products

PetrochemicalsPetrochemicals

Strategic growth Strategic growth businessesbusinesses Base businessesBase businesses Businesses that Businesses that

need restructuringneed restructuring

ChemicalsChemicalsSpecialty Chemicals (Raw material for cosmetics; Medical/agrochemical intermediates; Amino acids, etc.)

Basic chemicals(ammonia, industrial gases, etc.),Agrochemicals, Disinfectants

ElectronicsElectronicsSpecialty gases & chemicals for semiconductor processingCompound semiconductorsRare earths, Solid conductivepolymer aluminum capacitors

Hard disks

InorganicInorganicMaterialsMaterials

Fine carbonsAdvanced ceramics

Graphite electrodes Commodity ceramics

Aluminum andAluminum andothersothers

High-performance aluminum components *High-purity aluminum foils for capacitors,Heat exchangers,Environment-related business

Aluminum cansIngot/alloysCommodity aluminummaterials

* Shotic; highly heat-conductive aluminum alloy(ST60);photosensitive drums for laser beam printers P.12

Part 2 Sprout: Strategic Business ExpansionHD: Restructuring based on state-of-the-art technology

Part 2 Sprout: Strategic Business ExpansionPart 2 Sprout: Strategic Business ExpansionHD: Restructuring based on stateHD: Restructuring based on state--ofof--thethe--art technologyart technology

Change in sales policyChange in sales policyFocusing on HDD makers with inFocusing on HDD makers with in--house productionhouse production→→ Focusing on HDD makers without inFocusing on HDD makers without in--house productionhouse production

Strategic alliance/acquisitionStrategic alliance/acquisition of Mitsubishi Chemicalof Mitsubishi Chemical’’s operations operation（（Production site in Singapore; expansion)Production site in Singapore; expansion)Preferential right of purchase from TRACEPreferential right of purchase from TRACE(with licensing of production technology)(with licensing of production technology)

Rapidly increasing demand and broadening applications (Other than PCs, DVD recorders, car navigation systems and MP3

players)

Rapidly increasing demand and broadening applications (Other than PCs, DVD recorders, car navigation systems and MP3

players)

Becoming the largest OEM

maker (Capacity: Up to

8.3 million disks a month)

Becoming the Becoming the largest OEM largest OEM

maker maker (Capacity: Up to (Capacity: Up to

8.3 million disks a 8.3 million disks a month)month)

Strong foundation as OEM supplier of HDsStrong foundation as OEM supplier of HDsStrong foundation as OEM supplier of HDsP.13

Part 2 Sprout: Strategic Business ExpansionPetrochemicals: Strategic alliance and cost reductions

Part 2 Sprout: Strategic Business ExpansionPart 2 Sprout: Strategic Business ExpansionPetrochemicals: Strategic alliance and cost reductionsPetrochemicals: Strategic alliance and cost reductions

Ensured high operating rate of naphtha cracker in OitaEnsured high operating rate of naphtha cracker in OitaStrengthening acetyls businessStrengthening acetyls business

JV with Kyowa Hakko for ethyl acetate productionJV with Kyowa Hakko for ethyl acetate production→ Secured stable source of demand for ethylene

Integration of polyethylene operationsIntegration of polyethylene operationsEstablishment of Japan Polyethylene (largest in Japan)Establishment of Japan Polyethylene (largest in Japan)

Cost reductionsCost reductionsReduced Reduced ¥¥3 billion in 20033 billion in 2003To reduce a total of To reduce a total of ¥¥5 billion by 20055 billion by 2005

・Use of low-cost cracker feedstock・Diversification of utility fuels・Higher efficiency of catalysts for new acetyl technology

Aiming to be Asia’s strongest petchem complexAiming to be AsiaAiming to be Asia’’s strongest petchem complexs strongest petchem complexP.14

Part 2 Sprout: Strategic Business ExpansionElectronics: Active preparations for growth

Part 2 Sprout: Strategic Business ExpansionPart 2 Sprout: Strategic Business ExpansionElectronics: Active preparations for growthElectronics: Active preparations for growth

Solid conductive polymer aluminum capacitors Solid conductive polymer aluminum capacitors Doubling production capacity (Construction of 2nd line)New grades (thinner package; higher quality and capacity)

Compound semiconductorsCompound semiconductorsNew LED chips with exceptional brightness (red/orange light)

VGCFPlanning to expand capacity:

Increasingly used in lithium ion batteries JV with Prof. Endo for developing VGCF applications

Specialty gases for semiconductor processingSpecialty gases for semiconductor processingOfferingC4F6 : next-generation dry etching gas

Chemical mechanical polishing (CMP Slurries)Chemical mechanical polishing (CMP Slurries)Technology to serve the needs of next-generation devices

Rare earthRare earthTrial run at new plant in Baotou (Production in Japan & China)

P.15

Part 2 Sprout: Strategic Business ExpansionAluminum: Optimizing production and increasing value

Part 2 Sprout: Strategic Business ExpansionPart 2 Sprout: Strategic Business ExpansionAluminum: Optimizing production and increasing valueAluminum: Optimizing production and increasing value

Strategic growth businesses and base businessesShotic: Record sales due to technical/quality advantagesPhoto-sensitive drums for LBP: New plant in DalianHeat exchangers: Transferring production overseasHigh-purity foil for capacitors: Cost reductions by making Sakai

a subsidiary; Maintaining the leading market shareHighly conductive ST60 alloy: Expanding with the growth of PDPAluminum cans: Participating in the aluminum bottles business

Businesses that need restructuringCommodity sheet: Cost reductions by making Sakai a subsidiaryExtrusions: Consolidation of sites (3→2); Reduction of extrudersSky Aluminum: Merged with Furukawa Electric’s aluminum business

P.16

Part 2 Sprout: Strategic Business ExpansionChemicals: Consolidation on selected areas

Part 2 Sprout: Strategic Business ExpansionPart 2 Sprout: Strategic Business ExpansionChemicals: Consolidation on selected areasChemicals: Consolidation on selected areas

Specialty chemicalsSpecialty chemicalsMedical/agrochemical intermediates:Medical/agrochemical intermediates: New product sales in EuropeMicroMicro--powder composite:powder composite: TiO2 photocatalyst masterbatch

Agrochemicals, disinfectantAgrochemicals, disinfectantSDS Biotech: Acquired three kinds of agrochemicals from Ube

New biofungicide (Exclusive marketing right)

Basic chemicalsBasic chemicalsAmmonia: New plant that uses waste plastic as raw materialEpichlorohydrin: Sold the business to Daiso

P.17

Part 2 Sprout: Strategic Business ExpansionInorganic materials: Restructuring production setup

Part 2 Sprout: Strategic Business ExpansionPart 2 Sprout: Strategic Business ExpansionInorganic materials: Restructuring production setupInorganic materials: Restructuring production setup

Commodity ceramicsCommodity ceramicsAbrasives (fused alumina, CBN, SiC)Abrasives (fused alumina, CBN, SiC)

Transferring production to ChinaTransferring production to China → Cost competitiveness

Graphite electrodesGraphite electrodesSynergies of two plants (Japan and US); highly cost competitiveSynergies of two plants (Japan and US); highly cost competitiveIn short supply worldwide

FerrochromeFerrochrome

Withdrew from domestic businessWithdrew from domestic businessDissolved production subsidiary (Shunan Denko)

P.18

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth Strategy

P.19

○Environment business

○○Heat exchangers

○High-purity foil for capacitors

○○○High-performancecomponents *

Aluminumand others

○○○○○○Specialty chemicalsChemicals

○○○○○Advanced ceramics

○Fine carbonInorganicmaterials

○Solid aluminum capacitors

○○Rare earth

○○Compoundsemiconductors

○○○Specialty gases

Electronics

Displays and their materials

Communi-cationsdevices

Capacitorsand their materials

Heatexchan-

gers

Energysaving

systemsPrinterparts

SMU

Growth businessesSegment

Part 3 SMU: Key Concept in Growth StrategySMU (Strategic Market Unit)

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategySMU (SMU (SStrategic trategic MMarket arket UUnitnit))

SMU projects: Facilitating the expansion of strategic growth busSMU projects: Facilitating the expansion of strategic growth businessesinesses

Batterymaterials

Semicondu-ctor

processing materials

Magneticmaterials

Parts forlighter cars

Raw materials

for cosmetics

Life science products

＊ Shotic; highly heat-conductive aluminum alloy(ST60);photosensitive drums for laser beam printers

P.20

Part 3 SMU: Key Concept in Growth StrategySMU projects and supporting technologies

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategySMU projects and supporting technologiesSMU projects and supporting technologies

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

Electronics12 SMU projects12 SMU projectsSMU : Strategic Market Unit

CooperationCooperationSupportSupport

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 conditionsprocess

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

27 27 TPFsTPFsTPF : Technology Platform

P.21

Part 3 SMU: Key Concept in Growth StrategyShift from seller's viewpoint to customer's viewpoint

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategyShift from seller's viewpoint to customer's viewpointShift from seller's viewpoint to customer's viewpoint

In the pastIn the past SproutSprout

Our strengths: Many customers in various markets; Diversified technical capabilitiesOur strengths: Many customers in various markets; Diversified teOur strengths: Many customers in various markets; Diversified technical chnical capabilitiescapabilities

Market

tech-nology

Division A

SMU ProjectsSMU Projects

27 technology platforms (27 technology platforms (TPFsTPFs))

pro-duct Markettech-

nology

Division B

pro-duct

tech-nology

Division C

pro-duct

tech-nology

Division A

pro-duct

tech-nology

Division B

pro-duct

tech-nology

Division C

pro-duct

P.22

Part 3 SMU: Key Concept in Growth StrategySharing market information; Interconnecting technologies

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategySharing market information; Interconnecting technologiesSharing market information; Interconnecting technologies

(An example in the Battery Materials SMU)(An example in the Battery Materials SMU)(An example in the Battery Materials SMU)

Market info sharing Technology interconnectionMarket info sharing Technology interconnection

Aluminum LaminateAluminum Laminate Conductive polymerConductive polymer VGCFVGCF SeparatorsSeparators GasGas--phase TiOphase TiO22

Lithium-ion batteries

Battery case market Electrolyte market Cathode market

Solar batteries

Electrode material market

Fuel cells

Separator market

Aluminum/OrganicAluminum/OrganicPlasticity processing

Surface and interface chemistry F

Organic chemicalOrganic chemicalControlled reaction designunctional molecular design H

Inorganic chemicalInorganic chemicalUltimate conditions process

igh-performance catalysts

Inorganic/OrganicInorganic/OrganicSpecialty polymer design

Ultimate conditions process

Inorganic/OrganicInorganic/OrganicFine particles

Surface and interface chemistry

P.23

Part 3 SMU: Key Concept in Growth StrategyVGCF (Battery Materials SMU)

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategyVGCFVGCF (Battery Materials SMU)(Battery Materials SMU)

MEFSCo., Ltd.

Prof.Endo of

Shinshu Univ.＋

Showa Denko

Showa DenkoVGCF and and

othersothers

Development of new Development of new applicationsapplications

Established in Nov. Established in Nov. ‘‘0303

MarketAdopted by leading Japanese makersAdopted by leading Japanese makers

DemandDemand growing fastgrowing fast →→ Planning capacity expansionPlanning capacity expansion

【【Effect of Effect of VGCFVGCF】】

1. Longer life cycle of1. Longer life cycle of charge/dischargecharge/discharge2. Higher capacitance

（＋）（＋） （－）（－）

ElectrolyteElectrolyte

AnodeAnode

Cathode material (carbon)

Anode material

VGCFVGCF

Copper foilLithiumLithium--ion batteryion batteryCathodeCathode

Binder

Aluminum foil

2. Higher capacitance

Fine carbon sales in 2005: Fine carbon sales in 2005: ¥¥4 billion4 billion

P.24

Part 3 SMU: Key Concept in Growth StrategyTitania: Strengths based on market-oriented approach

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategyTitaniaTitania: Strengths based on market: Strengths based on market--oriented approachoriented approach

Sales in 2005: Sales in 2005: ¥¥2 billion2 billion

Dielectric materials market UV shielding market

(For ceramic capacitors)(For ceramic capacitors)

Deodorant/Stain-proofing agent market

Solar batteryelectrode market

Dielectric propertyDielectric property UV shieldingUV shielding PhotocatalystPhotocatalyst PhotoelectronPhotoelectron transfertransfer

Micro powder titaniaMicro powder titania Coated titaniaCoated titania TitaniaTitania--containing resincontaining resin Titania pasteTitania paste

Differentiated Titania material Differentiated Titania material ＋＋ Proprietary technologyProprietary technology

P.25

SMU Project for battery SMU Project for battery materials

SMU Project for capacitors SMU Project for capacitors and their materials

SMU Project for raw SMU Project for raw materials for cosmetics

SMU Project for life SMU Project for life science products materialsand their materials materials for cosmetics science products

Part 3 SMU: Key Concept in Growth StrategyHigh-purity C4F6 (Semiconductor Processing Materials SMU)

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategyHighHigh--purity Cpurity C44FF66 (Semiconductor Processing Materials SMU)(Semiconductor Processing Materials SMU)

Sales in 2005: Sales in 2005: ¥¥1 billion1 billion

0

0.05

0.1

0.15

0.2

0.25

0.3

technolo

gy n

ode

(m

icro

n)

1995 2000 2005 2010

Source:SIASource:SIA

Roadmap for Roadmap for miniaturizationminiaturization

Market requirements (CPU, Memory)Market requirements (CPU, Memory)1. Miniaturization (line width: <90 nm)1. Miniaturization (line width: <90 nm)2.Low global warming potential2.Low global warming potential

↓↓

Developed technology for commercial Developed technology for commercial production of nextproduction of next--generation etching generation etching gasgas with research labs in Russiawith research labs in Russia

↓↓

Device makers adopting CDevice makers adopting C44FF66

Showa Denko obtained first government Showa Denko obtained first government approval under relevant law*approval under relevant law*

P.26**Law Concerning Examination and Regulation of Manufacture of ChemLaw Concerning Examination and Regulation of Manufacture of Chemical Substancesical Substances

Part 3 SMU: Key Concept in Growth StrategyLED chips with exceptional brightness (Communications Device SMU)

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategyLED chips with exceptional brightness LED chips with exceptional brightness (Communications Device SMU)(Communications Device SMU)

AlInGaPAlInGaP

InGaNInGaN

AlInGaP LED chipsAlInGaP LED chipsVery bright red/orange light Very bright red/orange light Expanding product portfolioExpanding product portfolio

Achieved the highestAchieved the highest--level level brightnessbrightness in the industryin the industry

Sales in 2005: Sales in 2005: ¥¥3 billion3 billion

Expansion into LEDs with Expansion into LEDs with exceptional brightnessexceptional brightness

Wavelengths(nm)

４００

４５０

５００

５５０

６００

６５０

７００

７５０

８００

８５０

９００

９５０

Brightness

【【ApplicationsApplications】】Automotive parts; outdoor Automotive parts; outdoor displays, mobile phones, traffic displays, mobile phones, traffic light, etc.light, etc.

P.27

Part 3 SMU: Key Concept in Growth StrategySolid conductive polymer aluminum capacitors (Capacitor/materials SMU)

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategySolid conductive polymer aluminum capacitorsSolid conductive polymer aluminum capacitors (Capacitor/materials SMU)(Capacitor/materials SMU)

Doubling production capacityDoubling production capacitySecond line in Oyama (StartSecond line in Oyama (Start--up: July up: July ‘‘04)04)Strengthening tieStrengthening tie--up with KEMET (Frontup with KEMET (Front--end process end process consolidated at Showa Denko)consolidated at Showa Denko)

Placing new grades on the marketPlacing new grades on the marketThin packaging; high quality (low ESR); high capacitanceThin packaging; high quality (low ESR); high capacitance

↓↓Increasing demand for use in CPU of notebookIncreasing demand for use in CPU of notebook--size PCssize PCs

VV--casecase（（ H 1.9 mm H 1.9 mm ））

DD--casecase（（ H 2.8 mm H 2.8 mm ））

ConvenConven--tionaltional

gradesgradesNewNew

gradesgrades

100100μμFF

220220μμFF

220220μμFF

330330μμFF

Sales in 2005: Sales in 2005: ¥¥5 billion5 billion

V-case D-caseP.28

Part 3 SMU: Key Concept in Growth Strategy“Chemical changes” and “interconnections” taking place

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth Strategy““Chemical changesChemical changes”” and and ““interconnectionsinterconnections”” taking placetaking place

Battery Materials SMU ProjectBattery Materials SMU ProjectVGCFTM for lithium-ion batteries→ Sales up due to synergy with Al laminate marketing team

Displays/Materials SMU ProjectIdentified new opportunity in LCD as a result of technology interconnections (Sales to start in 2004)

Magnetic Materials SMU ProjectMagnetic Materials SMU ProjectBusiness sectors jointly developing materials to be used in mobile phones (Sales to start in 2004)

Communications Device SMU ProjectJoint work with TPF: Sampling of new compound semiconductors advanced by three months

P.29

Part 3 SMU: Key Concept in Growth StrategyR&D expenses allocated mainly to growth strategic businesses

Part 3 SMU: Key Concept in Growth StrategyPart 3 SMU: Key Concept in Growth StrategyR&D expenses allocated mainly to growth strategic businessesR&D expenses allocated mainly to growth strategic businesses

Strategic growth businesses (SMU) : 50 %

Breakdown of R&D Expenses for 2003(Estimate)Breakdown of R&D Expenses for 2003(Estimate)

Businesses that need restructuring : 24 %

Base businesses : 26 %

P.30

Part 4 Showa Denko Continues to ChangePart 4 Showa Denko Continues to Change

P.31

Part 4 Showa Denko Continues to ChangeGiving incentives to motivated and capable employees

Part 4 Showa Denko Continues to ChangePart 4 Showa Denko Continues to ChangeGiving incentives to motivated and capable employeesGiving incentives to motivated and capable employees

Introduction of a new HR system (from 2004)

Reward according to accountability and performance (The set annual pay raise system to be abolished)Basic annual salary for the position ＋

performance-based reward

Business results of a given sector to be reflected on bonuses for employees of that sector(To be implemented first with employees in managerial positions)

P.32

Part 4 Showa Denko Continues to ChangeAdvancing rapidly into China

Part 4 Showa Denko Continues to ChangePart 4 Showa Denko Continues to ChangeAdvancing rapidly into ChinaAdvancing rapidly into China

Footholds for business supportFootholds for business support

Showa Denko (Shanghai), established in 2000; Shoko (Shanghai), Showa Denko (Shanghai), established in 2000; Shoko (Shanghai), set up in 2001set up in 2001

Production & service in Shanghai to serve customersProduction & service in Shanghai to serve customers’’ local plantslocal plantsWaste gas scrubbers for semiconductor industry (1999)Waste gas scrubbers for semiconductor industry (1999)Resins (BMC, vinyl ester) (2000)Resins (BMC, vinyl ester) (2000)Semiconductor processing specialty gases (2003)Semiconductor processing specialty gases (2003)

Ongoing projectsOngoing projects

Rare earth in Baotou (making a trial run): To secure feedstockRare earth in Baotou (making a trial run): To secure feedstockPhotosensitive drums in Dalian (making a trial run): For customePhotosensitive drums in Dalian (making a trial run): For customerr’’s local plants local plantAbrasive grains in Lianyungang (to begin construction): To securAbrasive grains in Lianyungang (to begin construction): To secure feedstocke feedstock

P.33

Part 4 Showa Denko Continues to ChangeCost reductions in 2004

Part 4 Showa Denko Continues to ChangePart 4 Showa Denko Continues to ChangeCost reductions in 2004Cost reductions in 2004

TargetTarget ¥¥5 billion5 billion

BreakdownBreakdownManufacturingManufacturing ¥¥2.5 billion2.5 billionPurchasingPurchasing ¥¥1.5 billion1.5 billionSCM & logisticsSCM & logistics ¥¥1.0 billion1.0 billion

P.34

Part 4 Showa Denko Continues to ChangeRedeuctions in interest-bearing debt

Part 4 Showa Denko Continues to ChangePart 4 Showa Denko Continues to ChangeRedeuctionsRedeuctions in interestin interest--bearing debtbearing debt

1998 year1998 year--endend ¥¥711.6 billion711.6 billion2002 year2002 year--endend ¥¥581.1 billion581.1 billion2003 year2003 year--end (estimate)end (estimate) ¥¥531.6 billion531.6 billion2005 year2005 year--end (Sprout target)end (Sprout target) ¥¥520 billion or less520 billion or less

（（D/E ratio:D/E ratio: less than 3 timesless than 3 times))

Additional reductions to be made by the end of 2005Additional reductions to be made by the end of 2005

To be reduced further under the To be reduced further under the ““postpost--SproutSprout”” business planbusiness plan

P.35

Realizing our visionRealizing our visionCustomer/shareholderCustomer/shareholdersatisfactionsatisfactionContribution to societyContribution to societyon a global scaleon a global scale

Moving forward to realize our vision

20002001

2002

2003

200420042004Growth strategy Growth strategy through the Sprout Projectthrough the Sprout Project

Establishing ourselves as an Establishing ourselves as an individualized chemical companyindividualized chemical 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

200520052005

P. 36（Same drawing appearing on Page 3)

Sprout Project :

Yearly Sales and Operating Income PlanSprout Project : Sprout Project :

Yearly Sales and Operating Income PlanYearly Sales and Operating Income Plan

50.0680.0

41.6670.0

38.0686.0

37.6650.0

31.3674.0TotalTotal

-1.9-4.7-5.2-4.9-4.8HQ costsHQ costs

15.7255.0

14.2255.0

12.4239.0

14.4255.0

12.9245.6AluminumAluminum

3.849.0

2.448.0

2.251.0

1.147.0

1.456.9InorganicInorganic

MaterialsMaterials

14.6116.0

12.8108.0

10.094.0

10.695.0

6.275.2ElectronicsElectronics

8.787.0

8.085.0

7.179.0

7.381.0

5.768.5ChemicalsChemicals

9.1173.0

8.9174.0

11.5223.0

9.1172.0

10.0227.8PetrochemicalsPetrochemicals

O.I.SalesO.I.SalesO.I.SalesO.I.SalesO.I.Sales

2005(Sprout)2004(Sprout)2003(forecast*)2003(Sprout)2002

（unit: billions of yen）* Revised on Aug 12, 2003

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