Kyocera Corporation Business Presentation

Kyocera Corporation Business Presentation February 2008 MAKOTO KAWAMURA President and Representative Director

1 Today s Presentation 1. 1. Consolidated Financial Forecast (Year Ending March 31, 31, 2008) 2. 2. Management Policy "Creativity and and Growth" 3. 3. Strategic Significance of of Acquisition of of Mobile Phone Related Business of ofsanyo Electric Co., Co., Ltd. Ltd. Makoto Kawamura President and Representative Director 4. 4. Solar Energy Business Strategies Tatsumi Maeda Senior Managing Executive Officer General Manager of Corporate Solar Energy Group

2 Forward-Looking Statements Certain of the statements made in this document are forward-looking statements (within the meaning of Section 21E of the U.S. Securities and Exchange Act of 1934), which are based on our current assumptions and beliefs in light of the information currently available to us. These forward-looking statements involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors include, but are not limited to: general economic conditions in our markets, which are primarily Japan, North America, Europe, and Asia, particularly including China; unexpected changes in economic, political and legal conditions in China; our ability to develop, launch and produce innovative products, including meeting quality and delivery standards, and our ability to otherwise meet the advancing technical requirements of our customers, particularly in the highly competitive markets for ceramics, semiconductor parts and electronic components; manufacturing delays or defects resulting from outsourcing or internal manufacturing processes which may adversely affect our production yields and operating results; factors that may affect our exports, including a strong yen, political and economic instability, difficulties in collection of accounts receivable, decrease in cost competitiveness of our products, increases in shipping and handling costs, difficulty in staffing and managing international operations, and inadequate protection of our intellectual property; changes in exchange rates, particularly between the yen and the U.S. dollar and euro, respectively, in which we make significant sales; inability to secure skilled employees, particularly engineering and technical personnel; insufficient protection of our trade secrets and patents; holding licenses to continue to manufacture and sell certain of its products, the expense of which may adversely affects its results of operations; future initiatives and in-process research and development may not produce the desired results; events that may impact negatively on our markets or supply chain, including terrorist acts and outbreaks of diseases; the occurrence of natural disasters, such as earthquakes, in locations where our manufacturing and other key business facilities are located; and fluctuations in the value of, and impairment losses on, securities and other assets held by us, and changes in accounting principles. Such risks, uncertainties and other factors may cause our actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements included in this document.

Net sales Profit from operations Pre-tax income Net income EPS (diluted - yen) Capital expenditures Depreciation R&D expenses Consolidated Financial Forecast - Year Ending March 31, 2008 - Year ended March 31,2007 Amount 1,283,897 135,102 156,540 106,504 564.79 69,896 70,155 61,100 % to net sales 100.0 10.5 12.2 8.3-5.4 5.5 4.8 Year ending March 31, 2008 Previous forecast (October 2007) % to net Amount sales 1,330,000 151,000 166,000 103,000 543.40 81,000 79,000 65,000 100.0 11.4 12.5 7.7-6.1 5.9 4.9 Revised forecast (January 2008) % to net Amount sales 1,290,000 140,000 166,000 103,000 543.33 81,000 76,000 63,000 100.0 (Unit: Yen in millions) 10.9 12.9 8.0-6.3 5.9 4.9 % change 0.5 3.6 6.0-3.3-3.8 15.9 8.3 3.1 Average exchange rate (yen) Foreign currency fluctuation effect on: net sales pre-tax income US$:117 Euro:150 39.6 billion 15.7 billion US$:115 Euro:156-3.7 billion 2.5 billion US$:115 Euro:161 5.7 billion 7.2 billion 3

Pre-tax Income Ratio Trends - FY05 through FY08 (Forecast) - 20 10 (%) Components Business Equipment Business Kyocera Group 16.1 14.6 14.2 13.4 12.2 12.9 8.9 10.0 8.6 6.6 4.3 5.2 0 FY05/3 FY06/3 FY07/3 FY08/3 (Forecast) Pre-tax Income has grown for three consecutive fiscal years (Forecast) Commencing in FY 3/08, the "Optical Equipment Group," previously a separate reporting segment, has been reclassified and included in "Others." Please refer to accompanying note on page 2 and 35. 4

FY08 Consolidated Financial Forecast (1) - Components Business - (4.0% increase in sales, 8.3% decrease in operating profit compared with FY07) 1. 1. Business environment outlook --Q4 Q4 in in FY08 FY08 -- Deceleration trend in some industries, such as a semiconductor production equipment industry, will continue Demand for passive components will recover from February or March 2008 Revision of forecast for average exchange rates rate US$ Euro FY07Q4 120 156 FY08Q4 (E) 107 155 2. 2. Increase in in depreciation (increase (increase of of approx. approx. 10.0 10.0 billion billion compared compared with with FY07) FY07) Effect of change in accounting method related to depreciation will be 9.5 billion (forecast) for the full year 3. 3. Recordation of of business restructuring expense Write-down of goodwill in the cutting tool business is expected to have a 2 billion negative impact 4. 4. Improvement of of profitability in in strategic businesses Significant increase in sales and profit for 2H of FY08 in solar energy business is expected compared with 1H FY08 Organic package business is forecast to achieve profitability in FY08 5

FY08 Consolidated Financial Forecast (2) Equipment business ( i ) (3.8% decrease in sales, 25.5% increase in operating profit compared with FY07) 1. 1. Telecommunications Equipment Group will achieve operating profit ratio of of 5% 5% in in 2H 2H of of FY08 Increased profit in domestic mobile phone handset business led by increased sales of sophisticated models Improved profit ratio for PHS business due to focus on domestic (Japanese) market During 2H of FY08, KWC s sales are forecast to decrease significantly, but profit will improve in 2H compared with 1H. 6

10 (%) Operating Profit Ratio Trends - Telecommunications Equipment Group - 5.9 5.2 5 2.7 2.2 0.5 0-5 -5.6-0.5-0.6-10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY 3/07 FY 3/08 (Forecast) 7

FY08 Consolidated Financial Forecast (3) Equipment business ( ii ) (3.8% decrease in sales, 25.5% increase in operating profit compared with FY07) 2. 2. Increase in in sales and operating profit for for Information Equipment Group compared with FY07 Decrease in sales for US market due to arising uncertainty in economy Increase in sales of printers particularly in Europe Continuous introduction of both new color and monochrome products Intend to increase sales of consumable products by raising color product ratio 8

"Creativity and Growth": Aim at Sustainable Growth Achieve Continuous Sales Expansion and High Profit Ratio Creativity and Growth Seek synergies within group companies Develop new products and technologies Practice "Customer-first" Principle Management Policy Promote Global Management Establish a highly Profitable Structure 9

Creativity and Growth: Strategic Markets Promote development of new products and technologies in strategic markets Telecommunications Environment and Energy Information Automotive Handsets / Base Stations Color Printers Solar Energy / / MFPs Fuel Cells Intelligent Transport System (ITS) Hybrid Vehicles related products Efficient Utilization of Group-wide Management Resources 10

FY09 Business Outlook 1. 1. Increased uncertainty in in world economy Fear of slowing individual consumption in the US and Europe Fear of decreasing infrastructure investment by businesses (IT infrastructure) Appreciation of yen against both US dollar and Euro 2. 2. Steady growth in in demand for for digital consumer equipment Demand from Beijing Olympics Solid demand in the emerging countries Increasing number of components per product due to digitalization of equipment Mobile phone handsets PCs Digital TVs Sales unit forecast -CY2008- Forecast -CY2008- (Unit: Millions) 1,265 286 115-125 % increase from CY2007 +10% +10% +20-30% 11

Main Initiatives in FY09 1. 1. Achieve sustainable growth by by enhancing strategic businesses Expand solar energy business (Sales target: 100.0 billion yen, ASAP) Improve profit for new Telecommunications Equipment Group after acquisition of SANYO s mobile phone related business (currently setting post-acquisition business targets) Expand product line-up for Information Equipment Group (sales target: 300.0 billion, ASAP) Expand sales in organic package business 2. 2. Accurately grasp market trends and attentively execute investment for for production expansion 3. 3. Innovation of of new businesses for for growth 12

Creativity and Growth: Initiative for FY09 Operating profit (%) Applied Ceramic Products Maintain Profit Profit Ratio Ratio and and Expand Sales Sales 11.5% Fine Ceramic Parts Semiconductor Parts Information Equipment Electronic Device Telecommunication Equipment Improve Profit Profit Ratio Ratio and and Expand Sales Sales 0 2,000 200.0 4,000 400.0 Documented in accordance with financial forecast for FY08 Operating profit ratio used above refers to Kyocera Group s consolidated operating income ratio of 11.5% for FY08 (forecast) as an average (Unit: Yen in billions) 13

Strategic Significance of Acquisition of Mobile Phone Related Business of SANYO Electric Co., Ltd.

Relevant Businesses Gained through Acquisition of Mobile Phone Related Business of SANYO 1. 1. Domestic mobile phone handset business 2. 2. Domestic base station business 3. 3. Overseas business 14

Keys to Strengthening Domestic Mobile Phone Handset Business Encourage replacement purchase Actively hold and keep existing users of both KYOCERA and SANYO Establish Kyocera brand Clarify each handset marketing position for each company then establish brands that cover all market segment and secure widespread customer support Strengthen designing & development Integrate management resources of two companies to develop products with attractive design that meet customer needs 15

Mobile Phone Handset Line-up Positioning In addition to product line-up with current positioning, launch models that contribute to new branding High provide middle to high end mobile phone handsets mainly for users aged 20s to 30s Mid SANYO KYOCERA Newly Launch models that contribute to branding Low KYOCERA KYOCERA Gain wide range of users aged late 20s to 80s, mainly for middle to low end mobile phone handsets 20 40 60 70 age 16

Launch Product Line-up that Meets Characteristics of Users Base stations FY2007 Next generation PHS KDASH FY2008 (E) KDASH Ⅱ BPSK ~ 64QAM Interference IP Interface FY2009 (E) KDASH Ⅲ Macro Cell High Capacity FY2010 (E) Next generation PHS OFDMA 3.9G AAS/MIMO MAX Speed 20Mbps Maximize efficiencies of development resources for next generation PHS base stations by integration of technologies with SANYO Mobile WiMAX Towards launching of service on February 28, 2009 (Expectation) Expectation for outcome of establishment of mobile WiMAX business 17

Business Structure in USA KWC (Sales channel) US market US Sanyo (Sales channels) North American carriers North America (Distribution) Latin America (Distribution) Latin American carriers Oceania North American carriers Flextronics Kyocera Wireless (India) Japan Kyocera Telecommunications Research R&D Yokohama KYOCERA Yokohama SANYO Osaka and Gifu (Production system) Malaysian plant Tianjin Plant Kitami plant Tanakura Plant 18

Synergy Effects with SANYO: Cost Reduction 1. Synergy Effects with KWC (FY2009) Reducing R&D costs Reducing business risks 2. Reducing materials costs Activity to achieve cost targets (KYOCERA to SANYO) Know-how for procurement of components overseas (SANYO to KYOCERA) 3. Know-how for overseas production (SANYO to KYOCERA) 19

Synergy Effects with SANYO: Sales Growth 1 Product road map collaboration Clarify branding policy Distinguish product line-ups between KYOCERA and SANYO 2 Encourage replacement purchase within own brands in domestic market Encourage replacement purchase from past hit models (W44K, etc) Verify continuous replacement purchase within SANYO models, examine effective strategies 3 Execution of proposal oriented product plannings Development of fascinating and attractive products for users and carriers 4 Collaboration of development resources Considering new business for starting up towards FY2010 (ex. W-CDMA) 5 Examine the needs of future support for carriers of wireless broadband business 20

Solar Energy Business Developments

Contribution of Subsidies to Expansion of European and U.S. Markets Japan - Payback period comparison (3kW system)- approx. 20~25 years Germany Spain Feed-in tariff Feed-in tariff approx. 11 years approx. 10 years France California Feed-in tariff approx. 6.5 years CSI + Federal Tax Credit approx. 13 years (CSI / Step2) Calculated by Kyocera Corp. Ignores possible increases in interest rates and energy costs Germany 2004~ 2005~ 2006~ California WA OR ID NV 400 KW CA UT MT WY CO ND SD NE KS MN IA MO WI IL MI IN KY 2002~ 2005~ RPS* NH VT ME MA NY RI PA CT OH NJ DE WV VA MD DC NC AZ NM TX OK AR LA TN MS AL GA SC Spread of feed-in tariff HI id Parity AK Spread of incentives FL * RPS= Renewable Portfolio Standard 21

12 10 8 6 4 2 0 CY EU EU 14 0.9 2006 approx. 14 3.1 1.4 2010(E) Principal Market Outlook 12.0 3.6 2016(E) Asia 2 1 0 approx. 18 0.5 0.2 0.1 CY2006 2010(E) 1.1 4 3 2 1 0 0.5 Japan 0.3 CY 2006 2016(E) approx. 11 0.8 0.4 2010(E) 2,9 1,3 2016(E) 4 USA 3 2 1 0 0.14 CY2006 Left: Outlook with incentive by governmental policy Right: Conservative outlook approx. 20 0.5 0.4 2010(E) 2.9 1.3 2016(E) World market size CY 2006 2010 (E) 2016 (E) 1.5 4 2 5.6 3.0 16 7 22.0 9.6 Market outlook with incentive by governmental policy Conservative outlook Estimate by Kyocera Corp. 22

Kton 200 Relationship between Expansion Plan of Materials Manufacturers and Market Demand 150 100 Demand for Materials for Semiconductor + Solar Products New material manufacturers CY2016 Solar 22 50 Materials Shortage Demand for Solar Products Demand for Semiconductors Existing materials manufactures 0 CY 01 02 03 04 05 06 07 08 09 10 11 12 31 14 15 16 Forecast 13 Calculation by Kyocera Corp. 23

Overseas Solar Photovoltaic (PV) System Manufacturers USA SunPower United Solar First Solar More than 20 GERMANY Q-Cells Conergy EverQ Ersol SolarWorld SCHOTT More than 60 Wurth Solon Wacker CHINA Cell / Module Makers Major New TAIWAN Motech E-ton More than 20 Gintech 24 Yingli Trina LDK Suntech More than 20

Market Conditions: Overview Spread of subsidies + Increase in production of materials = Sudden increase in number of manufacturers Europe, US, Korea, etc. Continuous market growth Increase in production volume by existing manufacturers + new entrants Stability in supply and price 200~300 EEG* in Germany: reexamination of buyback price of feed-in tariff annual decrease rate 5% 7~9% *EEG= Erneuerbare-Energien-Gesetz Beginning of "intense competition era" Gain comprehensive competitive advantages: "technologies, cost competitiveness, and quality" 25

Cost Competitiveness: Improvement of conversion efficiencies Silicon Casting Cutting Wafer slicing Solar cells Solar modules Improvement of conversion efficiencies Improvement of crystalline quality Impurity contamination measures Optimization of slicing condition Thinner wafers Improvement wires awing process Passivation Reactive Ion Etching (RIE) technology High sheet resistance emitters Improvement of contact metal Optimization of Module materials Optimization of Module fabrication Process Vertical integration Aims to maximize conversion efficiencies with optimization in all production phases 26

Cost Competitiveness: Productivity 1. Higher cell efficiencies 2BB Current: 3BB Back Contact Cell Approx. 17% improvement from current power output Conversion efficiencies Power output Technologies 15.7% FY05 16.5% FY09 16.5% 17.5% 3.67W/cell 3.86W/cell 4.06W/cell 4.26W/cell 2BB 3BB Back Contact 2. Thinner cell FY05 06 07 Lager Cell (156 ) 08 09 FY09 target 18.5% 4.50W/cell Higher efficiencies for Back Contact 240 / 200μm 180μm Further advancement of thinner wafer Productivity improvement of approx. 40% compared to FY05 100% achievement 27

Development of Differential Products Snow resistance Building unifiable High temperature resistance Compact style with self power source Design oriented Snow resistance Design oriented High temperature resistance Compact style with self power source Snow resistance / weighting durability High temperature resistance / heat durability Design oriented / black back sheets Building unifiable / frame-less Compact style with self power source / small size Black Back sheets Frame-less High temperature resistance Compact style with self power source Annual average temperature map Compact style with self power source 28

Evaluation for High Quality Received best evaluation in general consumer product test (Germany)!. No.1 Quality Number of Manufacturers: 15 Score (Good Point): 1.9 (1.0=Highest Possible, 6.0=Lowest Possible) Evaluation criteria Power Output Durability Reliability Installation Quality is the key to differentiation "Kyocera Quality" 29

Czech Republic China Japan / Ise Japan / Yokaichi Mexico 4 production bases worldwide Germany EUROPE Czech Republic FY07 25MW FY11 150MW (Planned) FY07 FY11 30MW 90MW ASIA 7 sales bases worldwide Beijing (Planned) Tianjin Singapore Ise FY07 FY11 100MW 110MW Kyocera Japan Yokaichi (Cell) FY07 FY11 180MW Australia (Planned) 500MW (Planned) USA USA Mexico FY07 25MW FY11 150MW Brazil (Planned) Germany Singapore China Japan USA Brazil Australia 30

MW 600 Kyocera Group s Production Expansion Plan of PV Systems 500 California Solar Initiatives 500MW 400 300 Amendment to EEG in Germany Yokaichi, Japan new plant (Possible production volume:500mw) Czech Republic plant 300MW 400MW 200 EEG in Germany Mexico plant 100 Residential subsidies in Japan (until FY06) Tianjin, China plant 0 FY 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Plan 31

EUROPE ASIA Taichun Science Park Taiwan 70kW 13.8MW Salamanca - Spain 1.35MW Soccer Stadium Switzerland Station Switzerland China 44kW USA Alaska Pipeline - USA 16kW New Jersey Commercial 1MW School - Timor 32

Roof of bus stops 25.5kW JAPAN Spread of store installations by AEON AEON Kagoshima: 140kW Total Roofs of parking lots 57.5kW AEON mall, Hanyu: 100kW Asahi Shokuhin (Kochi): 500kW 33

Kyocera's Initiatives for Contribution to Environment Kyocera's headquarters Building that is "environmentally friendly and coexist with the local community" 1 Installation of solar energy system (214 kw) 2 Gas cogeneration system Generators (520 kwx2) 3 installation of air-conditioning equipment with ice-storage system Delivery lecture related to environment Let children intensify interests for environmental issues or technologies, and learn importance of natural resources on the earth. Total participants: approx. 3,500 from 50 schools 34

35 Notes for Consolidated Financial Results During fiscal year ended March 31, 2007, Kyocera sold its shares in Kyocera Leasing Co., Ltd., a subsidiary engaged in financing services. For this reason, business results of Kyocera Leasing Co., Ltd. and profit on sales of the shares in Kyocera Leasing Co., Ltd. have been recorded as income from discontinued operations in conformity with accounting principles generally accepted in the U.S. Consequently, some figures for the fiscal years from 2003 to 2006 have been retrospectively reclassified.