Financial Information: Annual Report 2004

	Review of Operations

Growth Drivers of the Bearing Division

Machinery Orders in Japan (year-on-year)		Sales of Hub Unit Bearings
General Industrial Bearings A large portion of bearings sold to the general industrial sector are installed in a wide variety of heavy-duty machinery for use in natural resource development (oil fields, mines, etc.) and in civil engineering and construction. In Japan, the natural resource development industry has never been a major industry, and the size of the civil engineering and construction sector is contracting. Given the relatively small scale of the domestic market, NSK’s cultivation of the industrial bearing business lags that of our major overseas competitors.   However, with a recovery in cost-competitiveness brought about by drastic business restructuring activities and to the expansion of China-related demand, Japan’s heavy-duty industries, such as the steel industry, have started to make a remarkable comeback. We are determined to satisfy the strong demand from these industries for OEM (original equipment manufacturer) products in order to establish a strong foothold in the repair markets in countries such as China, where this market is expected to expand rapidly.   Going forward in China, where strong growth is expected in the heavy-duty industries, we will endeavor to strengthen recognition of the NSK brand and increase competitiveness by putting to full use the advantages we have gained by taking our first steps in China before other companies, while at the same time taking advantage of the strong sales network we have established since that time.		Hub Unit Bearings The range of applications for hub unit bearings, which are modular units of wheel bearings and peripheral components, is rapidly expanding. In addition to their role in making cars lighter and improving their performance, hub unit bearings help to simplify the assembly process for automakers. In addition to our conventional ball bearing hub units, we are working to expand sales of newly developed next-generation products. These include tapered roller bearing hub units developed through our alliance with Timken, and hub unit bearings with a variety of built-in modularized sensors. Forecasting an annual growth rate of approximately 10%, we expect sales of hub unit bearings to grow from ¥43.4 billion in fiscal 2003 to ¥48.6 billion in fiscal 2004, and to ¥53.4 billion in fiscal 2005.