Precision Equipment Company

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

As of December 1, 2011

Overview

Main Products

IC steppers and scanners, LCD steppers and scanners

Consolidated Financial Results

Market Environment and Business Trends

There are concerns about a downturn in the semiconductor-related market due to constraints on capital investment by some device manufacturers. In the liquid crystal panel-related market, although capital investment in large panels has cooled off, capital investment in mid-sized and smaller panels is expected to remain solid.

See Financial and Business Data for the Second Quarter of the Year ending March 31, 2012 (November 4, 2011)

Sales and Forecast Units of Nikon Steppers & Scanners

• IC Steppers & Scanners by technology
• LCD Steppers & Scanners by Generation

• PDF File (PDF:96KB)

Business Strategy

An Interview with the Company President

Q2:What initiatives are you pursuing for IC steppers and scanners, particularly the latest model NSR-S620D ArF immersion scanner?

A2:

The advanced capabilities of the NSR-S620D ArF immersion scanner will provide increased value for users. Therefore, it is a priority for Nikon to continue to enhance system performance to thereby expand S620D market share.

For the fiscal year ending March 2012, we expect a slight reduction in unit sales of ArF immersion scanners. Sales are gradually shifting from the previous model NSR-S610C system to the highly competitive, leading-edge NSR-S620D, which now accounts for the majority of unit sales of ArF immersion scanners. This shift has greatly improved profitability in this area, and we expect that it will contribute to an increase in net sales and a sharp rise in earnings for the Precision Equipment Company overall.

As of February 2011, we had achieved throughput of 200 wafers per hour and overlay accuracy of 2.5 nm with the NSR-S620D. Depending upon the customers' processing conditions, the NSR-S620D is able to produce more than 3,000 wafers per day. We believe that if we continue to enhance the system's capabilities to meet customer needs, we can achieve even higher earnings in the coming years.

We are also working to shorten the lead time for the scanner production process. Specifically, the lead time for manufacturing an ArF immersion scanner, which until now has been 12 months, will be halved in the fiscal year ending March 2012. This will allow us to both lessen our inventory risk and respond quickly to customer needs, while also enhancing earnings capacity by reducing costs.

In terms of future product strategies, with immersion double patterning the best method to achieve mass production of semiconductors at 22 nm, we consider an extension of this technology to be a viable candidate to 16 nm, and will focus our development efforts in this area. Extreme Ultra Violet Lithography (EUVL^*2) is another candidate for 16 nm device production, and for the time being we plan to concentrate on development of the optical systems that are the most important aspect of this technology. We anticipate that production of semiconductors at 16 nm will begin around 2016, with full-fledged mass production emerging around 2018-19.

• *2Extreme Ultra Violet Lithography (EUVL) is a next-generation technology that uses short wavelength extreme ultraviolet light.

Q3:What are the current trends in the market of LCD steppers and scanners, and Nikon’s sales projections?

A3:

For the fiscal year ending March 2012, we expect the market for LCD steppers and scanners (on a unit basis) to be roughly comparable to that of the previous fiscal year. At the same time, demand for panels used in smartphones and tablet computers remains strong, and we project that the major portion of the market will comprise LCD steppers and scanners used for small to medium-sized high-precision panels.

Nikon specializes in lithography equipment for this field, and we have sufficient capabilities to further enhance system performance to satisfy customer requirements. Accordingly, we are anticipating a considerable increase in unit sales of LCD steppers and scanners for small to medium-sized high-precision panels.

Meanwhile, we expect scanners for large-screen LCD televisions to experience a market adjustment in the fiscal year ending March 2012, in reaction to the earlier rapid growth. However, we anticipate there is the potential for demand for these scanners to pick up again from the fiscal year ending March 2013, as demand for replacement televisions and other factors drive a further increase in the larger size of LCD panels.

Q4:What are the strengths and potential of the Precision Equipment Company?

A4:

The Precision Equipment Company increased its operating income by more than ¥60,000 million and regained profitability in the fiscal year ended March 2011. We anticipate another sharp rise in earnings in the fiscal year ending March 2012, but are still not satisfied with this level of gains. Nikon has ample potential to achieve further earnings increases.

For example, Nikon ArF immersion scanners employ a new tandem stage platform rather than a single stage, which provides advantages for both improved throughput and overlay accuracy. In addition, our LCD steppers and scanners utilize a technology called multi-lens projection systems that allows them to be easily adapted for larger glass plates without any loss in resolution. We will work to strengthen our competitiveness by building upon such advantages to the fullest extent possible.