Instruments Company

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

As of July 19, 2013

Overview

Main Products

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

Consolidated Financial Results

Market Environment and Business Trends

We expect harsh market conditions to continue in both the bioscience and industrial instruments fields. However, in the bioscience field we foresee a recovery in government spending, mainly in Japan, while in the industrial instruments field we anticipate continued expansion of Asian markets.

Business Strategy

Objectives

Priority Measures

• *Objectives and Priority Measures for Business Strategy are at the time of Medium Term Management Plan announced on May 9, 2013.

An Interview with the Company President

Q2:What is the market outlook for the bioscience field, and Nikon's initiatives for live cell imaging and other cutting-edge fields?

A2:

The bioscience market in the fiscal year ended March 2013 was severely affected by shrinking public spending and project delays, mainly in Japan and the United States. However, we expect a shift in the market to gentle growth in the fiscal year ending March 2014. We plan to take full advantage of this opportunity to expand our market share, mainly in Japan and China; increase revenues; improve our operating income by lowering production costs; and effectively utilize resources to bring down the SG&A ratio.

Specifically, we will prioritize development spending for products with growth potential, while fully utilizing existing personnel and expanding our workforce in China and other promising growth markets.

Currently attracting attention in the bioscience market are uses to which induced pluripotent stem (iPS) cells and embryonic stem (ES) cells might be put. An important aspect of developing potential uses is the cultivation and observation of living cells. This requires advanced techniques that make possible the stable cultivation of cells, and the accurate determination of which cells are true and which are bad quality iPS cell colonies.

We believe that Nikon's live cell imaging technology will make a substantial contribution to enhancing the efficiency of this process. Our BioStation CT system allows for the stable cultivation of cells, along with automated observation and recording. The system is widely used in the world's leading research laboratories, including Kyoto University's Center for iPS Cell Research and Application, headed by Dr. Shinya Yamanaka, who was awarded the Nobel Prize in Physiology or Medicine in 2012.

We plan to further accelerate development of live cell imaging technologies beyond simply observing through imaging, and achieve technological innovations in automated processes for measurement, analysis and determination. We will pioneer new areas of business, such as support for drug development and medicine, and expand into the markets for diagnostic and laboratory instruments.

Further, we intend to improve earnings by expanding the scope of our business, from simple hardware sales to such system products as software and services. To this end, we will strengthen that part of our structure related to the direct sale of advanced research products.

In the area of products for general research and clinical use, we will broaden our sales channels in Japan and emerging markets, enhancing Nikon's competitiveness through cost reductions right from the design and production stages.

Q3:What is the market outlook for the industrial instruments field, and Nikon's initiatives for non-contact metrology and X-ray inspection systems?

A3:

In the industrial instruments market, during the first half of the fiscal year ending March 2014 we expect the effects of last fiscal year's harsh business environment to linger for semiconductors and electronic components. In the second half, however, we see conditions starting to recover.

In the area of mechanical systems, such as automobiles and aircraft, we anticipate stable growth throughout the fiscal year ending March 2014, although the pace of growth will be sluggish compared with that of last fiscal year.

Given the expected environment, Nikon is already strengthening its product lineup for the fiscal year ending March 2014 in the promising fields of non-contact measurement and X-ray inspection systems. In the area of two-dimensional (2D) measurement systems–and with a view to gaining an overall leading share of the image measuring instruments market–we will launch new models of the next-generation NEXIV VMZ-R series. In addition, we plan to introduce the NEXIV VMA series, a low-priced basic-level line targeting Asian markets.

Meanwhile, we will use Nikon's non-contact 3D scanner technology, which can quickly compile large quantities of point groups, for our non-contact 3D measurement systems. At the same time, we plan to market new models compatible with profilometry, the latest trend in 3D measurement. In the area of X-ray inspection systems, commencing in the second half of the fiscal year ending March 2014, we plan to introduce distinctive new products such as Metrology CT, which allows the internal dimensions of minute electronic and industrial components to be measured without causing damage.

In conjunction with this expansion of our product lineup, we are revising existing personnel assignments, and strengthening our sales structure in Asia. Further, we will focus on the automobile, aircraft, smartphone, and tablet computer markets with growth potential.

Nikon plans to form new markets in the area of industrial instruments, by concentrating on products for new areas of non-contact measurement and X-ray inspection systems. At the same time, we will strengthen our Asian sales structure and, to expand sales of more advanced products, we will reinforce our technical sales department in order to gain a leading position in the market.

Q4:What issues are you emphasizing for to expand business and regain profitability?

A4:

Nikon offers a wide range of attractive products in the areas of bioscience and industrial instruments. From basic models to advanced systems, we assist customers on the front lines of their business operations. We are also working to build a service structure that will ensure quality customer service.

While the fiscal year ended March 2013 was extremely challenging, the Instruments Company will continue its efforts to expand business operations and improve earnings. To do so, we must simultaneously:

1) offer more competitive products; 2) enhance cost competitiveness; and 3) have a greater market share.

In terms of product and market development, we will tap our resources and, under the slogans of "challenge the opportunity" and "move forward," we shall make a concerted effort to enhance our market presence.