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As of September, 2019

We strive to be a “Leading Company in Precision and Optics” that realizes sustainable enterprise value growth in the medium to long term. Toshikazu Umatate Representative Director President

Q1:What do you hope to achieve in your position as president and CEO?

I am Toshikazu Umatate, and I assumed the position of Representative Director and President of Nikon Corporation on June 27, 2019. The fiscal year ending March 31, 2020 will be a crucial year as it will represent our transition from the prior phase of restructuring to a new phase of growth strategies. Stepping into my new role at this time, I am keenly aware of the significance of my mission and the momentousness of my responsibilities.

Since entering Nikon in 1980, I have devoted my entire career to the Semiconductor Lithography Business. When I joined, we launched the NSR-1010G, the first domestically manufactured commercial stepper, heralding a new era for Nikon. Back then, the lithography business was new to Nikon, and naturally the size of our development team was very small. Because of that, I found myself placed in charge of important projects from my first year at Nikon. This exposed me to wide-ranging experiences and fostered in me a sense of determination and responsibility to follow through. In retrospect, I feel fortunate that I was given the opportunity to acquire these crucial strengths, which I still call upon today, at such an early point in my career.

My most important mission as the helmsman of the Nikon Group is to build the foundation for our future growth. To accomplish this, I first plan to clearly define the vision for the Group that we should pursue. I then want to devote myself to making Nikon into an energetic and empowered company that inspires its employees to march toward that vision. I do not want Nikon to be a place where we are overly focused on current conditions and results. Rather, I want us to be an organization where everyone is united in our pursuit of future growth based on solid situational analyses and projections.

The restructuring tested us and was painful, and we never forget what we went through. However, it is also a fact that, through this, we gained invaluable experience that united us in pursuit of overcoming the challenges that had plagued us for years. The corporate culture that emerged during the period is a major strength for the Nikon Group and is something that gives us confidence in our ability to advance our growth strategies going forward.

As we move ahead with our growth strategies, I want to emphasize the importance of always putting ourselves in the customer’s shoes. The Nikon Group boasts unparalleled opto-electronics and precision technologies, the core technologies, it has continued to refine throughout its long history. These technologies have won much praise from customers around the world. Nevertheless, we must recognize that the pace of social change is swift, and technologies are progressing on a daily basis. User needs are constantly diversifying as well. It will therefore be crucial for us to be close to our customers and be agile in responding to changes in the operating environment and other conditions in order to grow further.

Q2:What was the background for the restructuring and what was accomplished through this undertaking?

It was in November 2016 when Nikon chose to discontinue its Medium-Term Management Plan 2015 and enter into a restructuring phase. The greater-than-anticipated degree of market contraction in core businesses and the divergence from our expectations with regard to progress in growth businesses led us to decide to preemptively restructure while we have a sound financial base. Our goal was to complete the restructuring by the fiscal year ended March 31, 2019. With the focus on improving enterprise value, enhancing management DNA fundamentally underpinned the restructuring that aimed to increase profitability dramatically.

In the Semiconductor Lithography Business, which was suffering from chronic losses, we drastically revised our operations by dedicating ourselves to practicing build-toorder manufacturing and implementing revisions to development policies. Steps taken in the Imaging Products Business included the selection and concentration on high-value-added products with the focus on profitability and the optimization of development, production, and sales structures. We also undertook head count optimization to reduce fixed costs, introduced management indicators linked to capital markets, and built a foundation for portfolio-based management. These efforts resulted in the steady improvements to profitability and management DNA that we envisioned. At the same time, however, the uncertainty in the operating environment surrounding the Nikon Group is growing. We must therefore remain vigilant and continue to implement improvements and reforms in the future.

I will never forget the struggle that accompanied this undertaking and we are indebted to the stakeholders that supported us throughout the restructuring. I am committed to using this experience to remain vigilant in focusing on operations and the ongoing growth for the Nikon Group.

Q3:What are some of the key points regarding Nikon’s vision of becoming a “Leading Company in Precision and Optics”?

While we were able to improve profitability and enhance our management DNA through the restructuring, Nikon continues to face a difficult operating environment. It was against this background that we unveiled our new Medium-Term Management Plan in May 2019. Keeping true to the principles of our corporate philosophy of “Trustworthiness and Creativity” and our vision of “Unlock the future with the power of light,” this plan calls on us to pursue the medium to long-term goal of becoming a “Leading Company in Precision and Optics.” Guided by this plan, we will work to achieve sustainable improvements in enterprise value over the medium to long term by concentrating resources on the precision and optics field businesses in which we boast significant scale and a leadership position.

The new Medium-Term Management Plan defines the three years beginning with the fiscal year ending March 31, 2020, as a period for “Establishing a Foundation for Sustainable Growth” to achieve sustained improvements in enterprise value after the conclusion of the plan. Our top priority is establishing this foundation for sustainable growth, and we look to steadily enhance Nikon’s long-term profit-generating capability.

Q4:Could you please explain some of the strategic initiatives that will be implemented to accomplish Nikon’s vision of becoming a “Leading Company in Precision and Optics”?

One of the most important strategies for becoming a “Leading Company in Precision and Optics” is the creation of new core pillars of profit, that is, the swift acquisition of new growth engines. Nikon has defined three areas of long-term growth, namely, Digital Manufacturing, Vision Systems / Robotics, and Healthcare. During the period of the new Medium-Term Management Plan, one of our focuses is the launch of a Material Processing Business, which will revolve around 3D printers and laser processing systems. We anticipate the rise in social needs for manufacturing automation and mass-customization to stimulate the material processing market to grow. Moreover, there are many manufacturers that seek to reduce the burden of set-up, process design, and prototyping in order to overcome the limitations of manufacturing technologies and achieve higher levels of speed, simplicity, and freedom in manufacturing. Nikon takes pride in its high-precision control and non-contact 3D metrology technologies and in its opto-electronics technologies cultivated through its Precision Equipment Business and Industrial Metrology Business. I am confident in Nikon’s ability to create new markets and industries in the manufacturing field through the provision of “Optics-based machine tools” that leverage the strengths of these technologies and our relevant expertise. If we can evolve conventional metal processing equipment, those that use blades and drills, to instead use light as lasers, the result will be fast, low-cost, and high-precision material processing. Furthermore, it should be possible to develop systems that can freely create almost any shape by combining the molding and additive manufacturing capabilities of a 3D metal printer with the marking, welding, and polishing functions of laser technologies.

We established a beachhead for the creation of new markets, by taking orders for the optical processing machine Lasermeister 100A, the first metal processing machine launched with proprietary Nikon technologies, in April 2019. The compact design of this machine makes it viable for installation in company and school research facilities and even in standard offices. Recently, we have been seeing the global emergence of a new business model known as a fabrication laboratory. This business model entails offering facilities equipped with digital fabrication equipment that can be used by anyone to manufacture products so long as they provide the data. Nikon looks to provide an option for simple and open manufacturing by developing such easy-to-use facilities.

Up until now, we have adopted an approach of carefully crafting products through prolonged development periods contained in-house. In the Material Processing Business, however, we intend to employ a new approach. This approach will see us first launch entry models to get a foothold in the market. Thereafter, we will use these models as a tool for engagement with customers to determine the best course for future development activities, so that we can evolve our products in line with customer needs. Open innovation and collaboration with machine tool manufacturers will be options considered in this engagement as we seek to flexibly incorporate external insight and technologies as necessary. Through these initiatives, we look to evolve our Material Processing Business to hold a leadership position in the global market.

Q5:What are Nikon’s policies for improving the profitability of existing businesses?

Improving profitability of existing businesses is another important strategy of the Medium-Term Management Plan. This strategy will target our Imaging Products Business, Precision Equipment Business, and the areas where we already entered in the Healthcare Business. They will have a role to play in generating stable cash flows over the medium to long term. Nikon needs to be able to reliably produce earnings, even when faced with a highly volatile market. The restructuring helped us make strides in reducing fixed costs to an appropriate level. Nonetheless, I believe there is still room to improve them by making work processes simpler. At the same time, we will further advance the optimization of supply chains and sales and production structures as well as the revision of related processes as facets of Companywide cost reforms, and we seek to raise product competitiveness in all of the aforementioned businesses.

I would now like to discuss these businesses respectively. In the Imaging Products Business, we will improve profitability by bolstering our lineup of Z series and other mid-range and high-end cameras. We will also enhance coordination with social media and imaging applications and proactively propose ways to enjoy images beyond shooting. Turning to the Precision Equipment Business, we anticipate stable growth in FPD lithography systems and semiconductor lithography systems over the medium to long term. Nonetheless, these are competitive and highly volatile markets. We need to listen to the voices of our customers, accurately capture their needs and offer them optimal solutions both in terms of tools and services, and, in doing so, we will maintain the selection and concentration measures emphasizing profitability. For the Healthcare Business, we need to carefully assess market trends in such fields as biological microscopes and ultra-widefield retinal imaging devices, where we already entered, so that we can timely launch products without missing opportunities. At the same time, we will endeavor to reduce costs while improving our earnings power so that we can further strengthen our structure to generate more cash flows.

Q6:In what ways is Nikon striving to enhance its manufacturing (Monodzukuri) foundation?

Enhancing our Monodzukuri foundation is one of the strategic initiatives put forth in the new Medium-Term Management Plan to support operations in growth fields and existing businesses. Our goal through this initiative is to evolve fundamental aspects of our manufacturing in preparation for the operating environment changes indicated by the advent of digital manufacturing. I anticipate that the increased efficiency and processing speeds now seen throughout manufacturing procedures, largely due to the adoption of IoT and AI, will bring about substantial changes in the elements of manufacturing that define competitiveness. Responding to this trend and supplying products that meet customer needs in terms of QCD (quality, cost, and delivery) will require various reforms in our Monodzukuri.

The Nikon Group established the Technology Strategy Committee in 2017 to facilitate the drafting of crossbusiness technology strategies. In my capacity as the chairman of this committee and substantive CTO, I visited design, development, and production divisions throughout the Group. These visits gave me an opportunity to reaffirm the number of unique strengths of the Nikon Group, such as its solid technological prowess and commitment to quality. These strengths are something that our competitors cannot emulate.

Conversely, I also saw a failure to form connections between these technologies, which resulted in a lack of overall cohesion, as well as insufficient forethought regarding future product development efforts. By objectively analyzing the state of Nikon, I hope to quickly remedy deficiencies while also aggressively investing in the augmentation of our strengths.

We will also be stepping up our efforts to further improve upon the quality behind our strong reputation for delivering reliable products. Many of the initiatives taken in the past were closed and completed within an individual business unit. However, during restructuring, we have installed frameworks for cross-business initiatives and boosted the overall level of our quality management initiatives. I hope to build upon these efforts going forward.

Q7:What measures are being implemented to strengthen corporate governance at Nikon?

Various corporate governance reforms were conducted during the course of the restructuring, such as increasing the ratio of external directors on the Board of Directors and commissioning third-party organizations to conduct evaluations of the Board’s effectiveness. Looking ahead, we aim to further strengthen our corporate governance structure by invigorating the Board of Directors and formulating a succession plan for the CEO. To invigorate the Board of Directors, we have made the diversification of external directors a priority measure, which led us to welcome a new external director who previously held important positions in manufacturing industry. We anticipate that this individual will be more than capable of exercising his deep insight and expertise to the benefit of the Nikon Group. Meanwhile, the Nominating Committee was established in May 2019 to help with the formulation of a succession plan.

Q8: What are the Nikon Group’s sustainability strategies in relation to the United Nations Sustainable Development Goals and other concerns?

Recently, an increasing amount of attention has been levied toward corporations’ efforts to act upon and deliver the SDGs as well as other social issues. Corporations are members of society, and the survival and growth of corporations are contingent on the sustainable development of society.

Recognizing this, I believe it is a fundamental part of corporate management to contribute to efforts toward sustainability and deliver on the SDGs and other initiatives, and that contributing to society through business activities should be a natural part of operations.

I have no doubt that the process of exercising our responsibilities and accomplishing our targets will lead to sustainable growth for both the Nikon Group and society. To date, our business has played a substantial role in contributing to society, and I suspect that there will be plenty of opportunities for us to fulfill a similar role in the future.

For example, the cameras and lenses that are one of the mainstay products of the Nikon Group are indispensable in showing people the truth behind various events around the world and in sharing the feeling of inspiration from sports events. Meanwhile, FPD and semiconductor lithography systems are vital to the manufacturing processes for devices essential to the current digital society, such as displays and the various semiconductors used for memory, MPU, image sensors, and other applications.

Our competitiveness in these existing businesses is underpinned by Nikon’s core technologies, most notably its opto-electronics and precision technologies. As we continue to develop our existing businesses, we intend to also apply our core technologies to a variety of fields. I believe Nikon has the potential to create new businesses that help mitigate or resolve social issues through these undertakings.

The new Medium-Term Management Plan puts forth three areas of long-term growth: Digital Manufacturing, Vision Systems / Robotics, and Healthcare. Of these areas, Vision Systems / Robotics has massive potential for contributing to society. Eyes and hands will be important components of robot development going forward. If we can endow robots with vision as well as with precision multifunctional hands, that will lead to substantial progress and evolution for robots, which will surely have a significant impact on society. Such superior robots will be a culmination of the opto-electronics, precision, and other processing and control technologies as well as the software development technologies we have refined to date.

Goal 9 of the SDGs is “Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation.” It is our value creation process (sustainability strategy) to accomplish this goal by utilizing the core technologies and assets we have fostered to relentlessly pursue innovation, and thereby deliver an impact on the SDGs and other social issues to continue growing our businesses and contributing to society.

The Nikon Group will seek to create sustainable improvements in enterprise and social value through the continued implementation of the cycle indicated in this value creation process.

Q9:How do you view the Nikon brand?

The Nikon brand embodies our corporate philosophy of“Trustworthiness and Creativity.” We have won the trust of customers and society through real-life episodes such as the one where Nikon’s camera being the only camera that survived and remained functional in the frigid environment when all the other brands failed. Over the years, we have created new features and reached new pinnacles of performance in response to customer needs. Our history of living up to the expectations of customers while maintaining their trust, or even earning higher levels of trust, and creating new offerings is an embodiment of the Nikon brand and the point of origin for our corporate philosophy of “Trustworthiness and Creativity.” Going forward, I am committed to further enhancing the Nikon brand through our products and services that truly exhibit “Trustworthiness and Creativity.”

Q10:What is your medium- to long-term outlook for the Nikon Group?

Having closed a two-and-a-half-year period of restructuring, Nikon has begun establishing a foundation for growth to continuously increase its enterprise value. We are also moving ahead with the construction of frameworks for creating new businesses. Putting ourselves in customer’s shoes is always a beginning of our development. It is my mission to define the future of Nikon and lead the entire Nikon Group toward this future based on this guiding principle of putting customers first. I am convinced that the Nikon Group will successfully attain sustainable growth when everyone at Nikon unites together and focuses on pursuing higher levels of profitability and provide new value to society through innovation.

I am dedicated to living up to the expectations of our stakeholders. I hope you will continue to support us in our endeavors.