taking the initiative: strategies for continued …...2. global promotion of csr activities (1)...

1 Copyright 2007, Toshiba Corporation.

Taking the Initiative:Strategies for Continued Growth 2007

Atsutoshi NishidaPresident & CEO

Toshiba Corporation

April 12, 2007

2

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.

3

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

4

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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6

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

7

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

8

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

9

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

10

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.


Commodity Products Decommoditized Products

Process Innovation

Value Innovation

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- 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

13

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

14

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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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


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


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


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

27

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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-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%


FY06-09 CAGR:187%


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%

33

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

34

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%

35

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

36

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

37

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

38

- 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

41

- 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

42

-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

44

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.

taking the initiative: strategies for continued …...2. global promotion of csr activities (1)...

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