New Year Message from the President

Welcome to 2009

I am very pleased to open this New Year with a short message and my best wishes.

Last year’s sudden and dramatic downturn in the world economy, driven by the surge in oil prices and the fast unfolding global financial crisis, undermined consumer confidence and consumption. As a result, demand for finished products grew more sluggish and the economic slowdown made itself increasingly felt.

In the business environment surrounding Shibaura Mechatronics Group, the flat panel display industry promoted active, steady investment in equipment investment for large-sized LCD panels during the first half of last year. However, demand for the finished products that use LCDs—televisions, personal computers and mobile phones—was undermined by the downturn and turned sluggish. As the balance of demand worsened, manufacturers made sweeping adjustments in production plans, including postponing equipment investment plans for the coming term. As a result, we expect this year to be harsh, and to offer little clarity about the future. The same severe conditions are also expected to continue in the semiconductor industry.

In the optical disc business, demand for equipment investment for Blu-ray discs has grown with the increasing penetration of Blu-ray disc recorders, and further growth is expected to continue. Higher demand is also expected in the battery business, in line with steady worldwide growth in the energy- and environment-related markets.

In these circumstances, we will promote continued advances in emergency countermeasures, including reductions in fixed costs and accelerated efforts to restructure costs through moves toward standardization and reductions in lead times. We will also take steps to accelerate product power, in order to win more orders.

Improved demand for final products and a recovery in consumer confidence and purchasing is expected for the second half of 2010. Investments in new equipment are required to respond to this upturn in demand, and we expect to see a recovery in demand for manufacturing equipment during 2009. In preparation for this recovery, Shibaura Mechatronics Group has established a basic policy of “strengthen product appeal, productivity and business power as the means to achieve growth and a profitable organization.” We are advancing plans to reinforce existing businesses, particularly in the flat panel display and semiconductor fields, and to build up new and promising businesses in such areas as batteries.

Although tough business conditions are expected to continue during 2009, the awareness that “hard times are a chance for self-improvement, without which growth is impossible” will be our springboard to preparing for new growth out of adversity.

We look forward to serving you again this year.