Due to the rapid downturn in capital investment into IC equipment following this summer, market size for IC steppers and scanners for 2012 (calendar year) has been adjusted downward from our initial outlook of approximately 240 units to 230 units. Investment schedules of IC manufacturers will remain tight into next year and we are predicting a reduction of slightly over 10% in the equipment market in comparison with 2012.
We have not changed our outlook of approximately 60 units for 2012 for the LCD steppers and scanners market and judging from the recent, high number of orders for equipment for the production of mid-sized and smaller panels, we expect a notable recovery in the market early in 2013. As a result, we predict an increase of close to 20% in market size compared to this year for the full year. We are also now receiving new inquiries regarding equipment for the production of large LCD panels and we hope that the orders will recover for the next period as a result of these inquiries.

Unit sales for IC steppers and scanners over the first half dropped by one third in comparison to the first half of the previous year on the back of a fall in capital investment while unit sales for LCD steppers and scanners dropped by approximately 50%. As a result, sales fell by 36% compared to the first half of the previous year while operating income fell by 69%. Rapidly declining capital investment into IC equipment is expected to result in a further reduction in unit sales and in line with this, we have made a downward adjustment in sales of 25 billion yen to 185 billion yen and a downward adjustment of 14 billion yen in operating income to 11 billion yen for the full fiscal year.

In IC steppers and scanners, we will be channeling our energy into increasing our customer base of our ArF immersion scanners with the aim of increasing our market share when the market recovers. Meanwhile, we will continue our efforts to reduce production lead times for IC steppers and scanners and incorporate these measures into the production of LCD steppers and scanners. Along with making efforts for cost reduction activities, we will also be focusing on strengthening internal business foundation in order to lower our break-even point. We are also forging ahead with the development of equipment for the production of 450mm wafers, based on our belief that immersion scanners will be employed on 450mm wafer mass production lines before EUVL technologies. We hope to be ready to ship equipment for mass-production ahead of our competition by 2017.

The market for digital cameras with interchangeable lenses grew by approximately 20% in the first half compared to the same period in the previous year however the compact digital cameras market fell by approximately 20%. Amidst this business environment, Nikon achieved growth in unit sales above market growth and increased its market share across all product segments. Global share for the recent 2Q saw us regain our market share of above 40% for digital SLR cameras by overcoming the influence of the floods in Thailand while we achieved just over a 20% market share for non-reflex cameras and compact digital cameras. With respect to market size for the full year, our forecasts for digital cameras-interchangeable lens type and interchangeable lenses remains unchanged on the back of strong growth in these areas. However, with the downturn in the economy of emerging countries and the impact of smartphones, we expect the market for compact digital cameras to contract further by 15 million units to 80 million units.

It is difficult to determine whether the drop in sales in China is the result of a slowdown economy or a direct result of the boycotts, however in stores, the impact on compact digital camera sales has been severe and more recently, this is being passed on to digital SLR camera sales. Although we expect a drop in sales of digital cameras with interchangeable lenses in the vicinity of tens of thousands of units over the full year, we are planning to recover this primarily through the European market. The impact on the compact digital camera market will be more severe and as a result, we expect that it will impact on approximately 40% of a downward adjustment of 1 million units.

Although varying from region to region, the non-reflex camera market is growing on average from 60 to 70% per year. In regards to the Nikon 1 advanced camera with interchangeable lenses, while difficult in the maturing domestic market, we are currently fighting for top market share in the European and US markets where the ratio of non-reflex cameras to digital cameras with interchangeable lenses is still low and there is potential for further growth. We are receiving strong support from our customers with global share reaching approximately 25%. Nikon will continue draw on the unique concept of the Nikon 1 series to provide appealing products and enhance our marketing activities.