Financial Information: Annual Report 2002

Since beginning production in South Korea in 1987, NSK has expanded its production network to China, Indonesia, Malaysia, Thailand and India, with a total of 11 production bases in six countries. Output has risen sharply in recent years. We have R&D bases in China, South Korea and Singapore. In addition, our sales offices in nine countries, including Singapore, Thailand, China and South Korea, cover the entire Asian and Oceania region.
 Our Asia Business Strategic Division-Headquarters has created a unified regional management structure to oversee operations at all production, technology and sales offices by assigning general managers to oversee each of the South Korean, Chinese and the ASEAN & Oceania regions.

Economies in the ASEAN nations and South Korea in 2001 deteriorated due to the economic slowdown in the U.S. and reduced demand from the IT-related industries. The Chinese market, on the other hand, was robust throughout the year.
 Sales increases in China and the ASEAN nations were not enough to offset the decline in sales to the IT, semiconductor and machine tool industries, resulting in a deterioration of overall Asian sales and profits.
 We are expecting a gradual recovery of our business in fiscal year 2002 due to sales expansion in China and the recovery of the U.S. economy.

China is crucial for the NSK Group and to the successful implementation of the 2nd Phase of our "Business Restructuring Program." At our Kunshan Plant, we will start construction of a third factory and a technical center building. In Suzhou, we are preparing for the construction of a small-sized tapered roller bearing plant through our joint venture with The Timken Company of the U.S. In Shanghai, we will establish a new procurement center that will eventually become a strategic procurement base for the NSK Group, and will also construct a factory to preprocess ball bearings.
 In South Korea, in line with industrial structure changes, such as the production shift by electrical appliance manufacturers out of the country, we will shift our product portfolio at our Changwon Plant to focus on the automotive industry.
 In the ASEAN region, we will focus on improving profitability of our miniature to small-sized ball bearings in Indonesia and Malaysia, and launch an automotive bearing plant in Thailand.