Instruments Company

• Overview
• Business Strategy
• An Interview with the Company President

As of November 29, 2012

Overview

Main Products

Biological microscopes, industrial microscopes, stereoscopic microscopes, measuring instruments, semiconductor inspection equipment

Consolidated Financial Results

Market Environment and Business Trends

The bioscience-related market faced challenges due to deferment or reduction of government budgets, while the industrial instruments-related markets experienced a tough business climate from dampened enthusiasm for capital investment despite sales related to information equipment showed solid performance. Challenging conditions are expected in the Instruments Business, due to growing uncertainty toward market conditions and apparent declines in capital investment.

Business Strategy

An Interview with the Company President

Q2:What is the market outlook in the bioscience field and challenges to expanding revenue and earnings?

A2:

Most of the demand for our bioscience-related products comes from government agencies and public institutions, and conditions in the bioscience sector are expected to remain severe for some time. To improve our sales and profits under these conditions, it is essential that we move into new fields and develop new markets in emerging countries.

One new field attracting much interest is live cell research. As aging populations and rising health care costs become serious social problems worldwide, there is increasing recognition of the need to remain healthy. This need is closely linked to regenerative and preventive medicine. Live cell research is particularly important in regenerative medicine, an area in which demand for highly advanced microscopes is strong. Nikon is already the market leader in high-end microscope systems for advanced research, but as interest in regenerative medicine grows, we expect that live cell research will become an increasingly important market for the Instruments Company.

Increasing our sales of high-end systems and high-volume products in emerging markets remain important goals. We aim to expand sales of the latter, particularly in the emerging markets of Asia by increasing our sales locations in China, and expanding the localized direct sales in Brazil and Mexico that Nikon established during the fiscal year ended March 2012.

Q3:What is the market outlook in the industrial instruments field, and Nikon's product strategies?

A3:

Market conditions for industrial instruments are expected to remain severe due to the rapid downturn in capital investment into IC equipment, problems between Japan and China and the stagnation of economic growth in Asia and so on.

Demand for certain products in fields where technology is advancing rapidly will continue to grow. For example, in 3D measuring systems, contact-type devices currently dominate the market, but the shift to non-contact instruments is expanding steadily. Advances in non-contact technology are making it possible to obtain data instantaneously from massive numbers of measurement points, in contrast to the paltry amount of data obtained with contact-type devices, thus facilitating a shift from point-based to plane-based measurement. Moreover, Nikon's technology is allowing us to produce X-ray inspection systems with far superior image quality and measuring accuracy, which is opening up new applications in the industrial instruments field. For these reasons we have identified Nikon Metrology's non-contact 3D measuring systems and X-ray inspection systems as medium-term growth products, and have implemented full-scale product development and marketing programs targeting users with large-scale measurement needs, such as aircraft and automotive industries. We expect these steps to contribute to increased Company sales and profits in future.

We will continue to develop and introduce to the market highly competitive products that combine Nikon's proven optical technologies with the non-contact 3D measurement and X-ray inspection technologies of Nikon Metrology. We will place special emphasis on reinforcing marketing activities for Nikon Metrology products in Japan and in Asia as a whole. We will take advantage of Nikon's sales subsidiaries and local distributors to extend our sales channels, and we will work to develop product support systems that cover both hardware and software applications.

Q4:What areas is the Instruments Company emphasizing in its measures in the Medium Term Management Plan?

A4:

Steady growth and expansion is essential for any business, and the Instruments Company is no exception. Our Medium Term Management Plan places special emphasis on the following four strategic areas to help achieve steady growth. 1) Organization: We are reinforcing our marketing department, and creating an organizational management system capable of responding quickly to the needs of the market. 2) Product development: We will focus on development of highly competitive products that meet market needs. 3) Marketing: We will establish a sales system optimized for each regional market, and a service system to enable our customers to select and use our products with confidence. 4) Production: We will establish a more flexible production system in which the manufacturing sites for each product are optimized with regard to exchange rates and other external factors.

These strategic measures will be promoted in a coordinated manner by all of our business divisions, and are designed to help the Instruments Company increase both revenues and profits in the years to come.