Annual Report (An Interview with the President)

Q1. How do you evaluate the business performance of Toshiba Group over the past two years since you became the president of Toshiba in 2009?

A1. Since assuming the presidency, I have taken a number of steps to restructure businesses with the result being that underperforming businesses have been improved and our profit-making structure is steadily being strengthened. I have also implemented several decisive measures to establish a robust financial foundation that provides both the resources for growth and financial soundness. At the same time, to transform Toshiba’s business structure, I worked on focusing on growth businesses, expanding the scope of key businesses and accelerating the development of new business areas, and aimed for further growth and the improvement of profitability.
In restructuring our LCD panels business, we moved ahead with our strategic management policies of focusing on high-value- added products by taking such measures as transferring the LCD panels business for PCs to Taiwan’s AU Optronics Corporation and reorganizing LCD production bases in Japan. We will concentrate on the manufacturing of LCDs for mobile devices, such as smartphones and car navigation systems. As a result, we were able to improve the earnings of this business. In our industrial lighting business, we consolidated overseas manufacturing bases and carried out a review of our business system in Japan. In addition, we transferred our mobile phone business to a new company through a business merger with Fujitsu Limited.
In the system LSI business, we dissolved our joint venture with Sony Corporation – Nagasaki Semiconductor Manufacturing Corporation – transferring its semiconductor fabrication equipment to Sony, and we consolidated our production bases. We also have been aggressively carrying out fixed-cost reductions. In FY2009, we reduced these costs by about ¥430 billion, compared with the previous fiscal year, and in FY2010, we further reduced fixed costs by about ¥100 billion. During the past two years, we have become a much leaner company that can more quickly respond to changes in the business environment.
We will continue to resolutely carry out the restructuring of underperforming businesses. However, because these efforts are now on a firm footing, I am thinking of focusing more on achieving the transformation of Toshiba’s business structure. To ensure the growth of our NAND flash memory business, in August 2010 we began construction of Fab No. 5 at our Yokkaichi Operations, our mass production base for NAND flash memories. Construction was completed in March 2011, and we will soon be ready with manufacturing capabilities that can meet the expanding global demand for these memories. By accelerating process migration, we intend to strengthen and extend our leadership in the NAND flash memory market. To accomplish this goal, while expanding product applications, we have begun mass production of cutting-edge high-density NAND flash memories using 24nm process technology.
In Smart Community-related businesses, we are focusing on such new business opportunities as participating in a number of verification projects both in Japan and overseas as well as in possible commercial projects. In addition, we began mass production of rechargeable lithium-ion SCiB™ batteries in Japan at a new plant in Kashiwazaki City in Niigata Prefecture. Our unique SCiB™ batteries have a wide range of applications such as for EVs (electric vehicles), PHEVs (plug-in hybrid electric vehicles) and energy storage for Smart Grids.
Going forward, I intend to further accelerate the transformation of Toshiba’s business structure and achieve vigorous sustained growth that surpasses that of the market as well as a more highly profitable business structure. I will advance our basic management policies of accelerating global business development, further speeding up the pace of innovation and assiduously promoting CSR management. I intend to make Toshiba an even stronger global contender, one with unrivalled global competitiveness in our major business fields and with a robust financial foundation.

Q2. The business environment has changed due to the Great East Japan Earthquake. Has this led to any changes in your business strategies?

A2. First, I wish to express my heartfelt sympathies to all those people and families who were affected by the disaster.
A few Toshiba Group manufacturing facilities located in East Japan experienced some damage from the Great East Japan Earthquake, but its impact was limited and operations have already been restored. Presently, through our business activities, we are doing our utmost to help in the restoration and recovery of the disaster-stricken areas.
There has been no change in the direction of our strategic management policies. The essential importance of such crucial matters as meeting the growing demand for electric power, more effectively dealing with environmental issues, advancing digitalization and networking and handling the hugely-increasing volume of information flows remain as key trends affecting the business environment.
As a result of the steps that have been taken to cope with the effects of the earthquake disaster, I realized once again that there is a need to further improve Toshiba Group’s supply chains and components and parts procurement systems from the point-of-view of our business continuity plan. We are carrying out the further strengthening of our BCP through such measures as minimizing procurement risks by forming a multi-vendor system that includes the use of dispersed regional bases of procurement and reconfiguring a part of our production systems so as to meet our supply responsibilities as a maker.
In the coming years, as we globally expand our businesses, there will be no change in the reality that development is important to the newly emerging economies such as China and India. In order to respond speedily to changes in the global market environment, we will move forward by further improving our response capability to fluctuations in foreign exchange rates, strengthening our cost competitiveness and refining our BCP readiness, as we aim to realize the most appropriate balance for optimizing production, procurement and sales by expanding businesses in emerging economy markets, maximizing the effectiveness of Japanese and overseas production bases and expanding overseas procurement.