Financial Information: Annual Report 2004

	NSK’s Comprehensive Growth Strategy —Maximizing Synergies

The Precision Machinery and Parts Business and NSK

1. Significance of the Precision Machinery and Parts Business
The main customers of our precision machinery and parts business are semiconductor and liquid crystal display (LCD) manufacturers in the electrical and IT industries, as well as industrial robot and machine tool makers in the general machinery industry. Our precision machinery and parts, used as key components of production equipment and machinery, feature advanced electronics technologies and micron-level precision control accuracy, making this a business area where we can take maximum advantage of our four core technological strengths in tribology, material engineering, analysis, and mechatronics. Our products are not familiar to the public. As consumer goods grow in technological sophistication, however, so does the equipment used to produce them. This is creating higher demand for our products that integrate our core technologies. In this sense, the continued advancement of consumer goods is providing us with an enormous business opportunity.

NSK is able to take maximum advantage
of its core technologies in
the precision machinery and parts business.

2. Synergistic Effects of the Precision Machinery and Parts Business
The broad range of technologies applied in the precision machinery and parts business is supporting expansion in our automotive products business, as well. Today, differentiation in the automotive components industry depends on the ability to provide automakers with comprehensive solutions that are both economically efficiency and environmentally friendly. We are integrating the tribology-related technology developed in our bearings business and the high-precision mechatronics technology used in our precision machinery and parts business in products such as electric linear actuators. Automotive components that incorporate ball screws, electric linear actuators are critical for the advancement of drive-by-wire technology. We expect to see applications for these products increase in line with the trend toward the use of electric-powered vehicles.
  In addition, many customers of our precision machinery and parts are also customers of our industrial machinery bearings, which allows simultaneous marketing of both products. In this sense, taking advantage of synergies with other businesses and the potential for expanding business into other products areas are the foundations of maximizing our comprehensive business capabilities.

By applying our mechatronics technology,
we hope to further enhance synergies with
the automotive products business.

3. Business Strategy
Demand in the precision machinery and parts business tends to fluctuate sharply. To reduce the impact of this demand volatility, we are working on various fronts. First, we are reviewing our cost structure with an eye to reducing fixed costs. In addition to spinning off this business into a separate corporate entity in October 2002, we have reorganized production and reduced employee headcount. Second, we are cultivating customers in new fields and introducing new products into markets where demand is relatively stable, such as medical equipment, automotive production equipment, and glass production equipment.
  Through these measures, we aim to stabilize profitability and buttress our resilience to demand downturns, while at the same time continuing to pursue growth in this business.

By pursuing both stability and growth,
we are contributing to overall Group profitability.

4. Notable Achievements in the Precision Machinery and Parts Business
The most rapidly growing product in the precision machinery and parts business recently has been our photofabrication equipment for LCD color filter production. As LCD televisions increase in size, demand is growing for equipment capable of producing larger LCD panels. In response, we have adopted the cost-effective proximity exposure method. These equipment developed by NSK have won high acclaim from the global market.
  At a glance, it is perhaps unclear why NSK, a bearings manufacturer, should be involved in the production of LCD-related equipment. In fact, we have been producing XY tables, a basic component of LCD photofabrication equipment, since the 1980s, in addition to peripheral equipment such as external inspection equipment, shadow mask production equipment, and measuring devices. This long experience, coupled with our core electronics and precision positioning technologies, forms the foundations upon which our LCD photofabrication equipment business is built.