| Toshiba Unveils Proactive Medium-term Business Plan
Covering Fiscal Years 2003 to 2005
7 March, 2003
Tokyo -- Toshiba Corporation today announced a wide-ranging consolidated
mid-term business plan for the three fiscal years to the end of March
2006. The plan is designed to complete Toshiba's transition to a dynamic
group of companies active in two high growth business domains, digital
products and electronic devices, and a social infrastructure domain that
generates stable profit. Key objectives of the plan are a stable and strong
profit structure that will support Toshiba in generating consolidated
operating income of more than 270 billion yen in fiscal year 2005, and
improved financial soundness and a D/E ratio of 150% at the end of fiscal
The core of the plan, which Toshiba uses to clarify mid- to long-term
goals and strategies for Toshiba Group, is a commitment to building: "a
highly profitable group of companies, active in both high growth and stable
growth businesses." This will be pursued through the enhanced competitiveness
achieved with the '01 Action Plan that Toshiba initiated in 2001, and
through a series of structural reforms, including a reorganization of
in-house companies and transfers of some businesses into group companies,
that will be engineered from April 2003 on.
1. The Fundamentals
The timeframe of the plan will see the emergence of truly ubiquitous
networks and computing, a shift that will bring dramatic changes to our
life environment: in the home, in the office, through to social administration,
healthcare and all aspects of daily life. Toshiba expects this transition
to be accompanied by growth in demand for products based on mobile and
wireless technologies, and for the electronic devices supporting those
At the same time, the company sees opportunities for business expansion
in social infrastructure. Environmental concerns will become more pronounced,
generating demand for environmentally friendly products, infrastructure
and services. The emergence of broadband networks will support new services,
and an emphasis on overseas markets will help drive business expansion.
In its new plan, Toshiba responds to this market reality by defining
three major areas as business domains: digital products and electronic
devices, the company's high growth domains; and social infrastructure
as a third domain generating stable profits. In line with this business
delineation, Toshiba will strengthen the competitiveness of its home appliance
business by spinning it off and integrating it with related group companies.
In its high growth domains, Toshiba will aim to secure its position
among the top three in each product area and to realize a growth
rate surpassing the pace of market expansion. In these two domains,
the company will target consolidated operating income of 180 billion
yen in 2005, with an average annual growth rate of 8%.
In its stable business domain, Toshiba will generate new sources
of profit by establishing new businesses, by moving into overseas
markets, particularly in Asia, and by reorganizing group companies.
Combining this approach with a policy of lean management, Toshiba
aims to secure an operating profit of 70 billion yen in fiscal year
2005, even assuming a sales expansion rate as low as 2% per annum.
In all of its businesses, Toshiba will promote enhanced overseas
operations, with an emphasis on business in Asia. By the end of
fiscal year 2005, Toshiba expects overseas sales to account for
50% of all sales, a 10% increase over fiscal 2002.
||Enhanced financial soundness
Toshiba is determined to reinforce financial soundness. The company
will further extend the Asset Light program initiated under the '01
Action Plan as a means to improve the effectiveness of use of assets.
Capital expenditure will be limited to within cash flows, and 400
billion yen of the free cash flow generated within the period of the
plan will be channeled to reducing interest-bearing debt. Proactive
measures will be taken to strengthen the company's capital base, and
an improved D/E ratio of 150% is targeted for the end of fiscal year
Toshiba will invest 204 billion yen in capital expenditures in fiscal
year 2002 and envisages investments of 840 billion yen in the three
years to March 2006. Three quarters of these investments will be dedicated
to high growth areas, including semiconductors.
R&D will continue to drive Toshiba's future, and a key emphasis
over the course of the plan will be on development and innovation
in "engines of growth." The company will also continue
to build for its future, cultivating seed technologies that will
sustain growth beyond the new three-year plan.
R&D in semiconductors will be directed to sustaining Toshiba's
industry-leading position in new generations of process technology,
reinforcing SoC-solution capabilities, and strengthening technologies
that enable differentiation from competitors.
In digital products, the focus will be on digital AV and information
equipment, including the high-end home servers that will soon become
an essential part of every household. Toshiba aims to build a leading
position in this new field.
Environmentally friendly equipment and technologies for environmental
monitoring will be a key area in R&D related to social infrastructure,
alongside development of new businesses, such as next generation
plant and equipment and operation and maintenance services.
Toshiba anticipates total R&D expenditure of 1,100 billion
yen in the three years to 2005, against 340 billion yen in fiscal
2002. Of that amount, three fourths will be invested in high growth
In a related measure, Toshiba will strengthen intellectual property
management and secure competitiveness by retaining know-how on advanced
high-tech within Toshiba Group.
Introduction of business group chief
Toshiba is determined to enhance management speed and efficiency.
Toward this, the company will group in-house companies and
group companies together, according to their characteristics:
the nature of the business, time constants and growth rates.
A corporate executive will supervise each group and assure
its optimized management.
More specifically, business group chief executive officers
will be assigned to assist the President and CEO in overseeing
the digital products business, the electronic devices business,
the social infrastructure business, the home appliance business
and group company businesses, including the solutions and
medical systems businesses. The role of these executives will
be to promote enhanced management agility in the group and
to assure flexible allocation of resources.
Promotion of spin-offs
Toshiba has undertaken a comprehensive review of its operational
framework in order to secure its optimization. As a result
of this, the company will reform some in-house businesses
and separate others from the parent and integrate them with
In-house companies that will be spun off fall into one or
more of four categories: those whose integration with another
group company will boost competitiveness; those that would
increase operating effectiveness by becoming completely autonomous;
those that would expedite alliances with third parties by
becoming completely autonomous; and those whose business and
style of operation require adoption of a particular management
The first results of this policy will see the Display Devices
& Components Company, e-Solutions Company, Medical Systems
Company and Home Appliances Company move into new operating
structures through integration with group companies.
Strategies for Individual Businesses
Major strategies for each of the business domains and major organizational
changes that will assure their implementation are described below.
Digital Products Businesses
Our business is centered on advances in the mobile and wireless
solutions businesses, where Toshiba is a recognized innovator. Proactive
introduction of advanced products that support and build on ubiquitous
networks will assure a leading position in the market.
Mobile Communications Company
Continuous introduction of market-defining, leading-edge products
with motion picture capabilities, a particular Toshiba strength,
is expected to secure a profitable structure for our mobile phone
business and to build a high market share. Market expansion is also
expected in Europe and China, markets that Toshiba has recently
entered by focusing on high-end models.
Digital Media Network Company
From a position in the vanguard of the shift to ubiquitous networking
and all that it offers, Toshiba create new markets and assure growth
by delivering competitive technologies and products fusing wireless
and broadband technologies.
The Digital Media Network Company will continue timely introduction
of new digital AV and PC products, and reinforce its leading position
by promoting new businesses in such areas as high-end home servers.
As the leading supplier in the Japanese market for HDD/DVD recorders,
the company aims for the number one position in the market for DVD
recorders/players in 2005. It also aims to regain the number one
share in portable PCs, through the introduction of new wireless,
AV media, and fuel cell technologies, and by moves to strengthen
marketing and sales and production.
In manufacturing, we will continue our drive to define benchmarks
for cost-efficient manufacturing operations. Our new portable PC
plant will come on line in Hangzhou, Zhejiang Province, China, this
spring, supplementing the capacity of our plant in the Philippines.
Operations of our German PC facility in Regensburg will shift to
a focus on configuration-to-order service, like our facility in
Our PC business core facility, Ome Operations in Tokyo, will direct
its energies to product and technology R&D and to engineering
capabilities that will add to the mass production technologies at
our plants serving the global market.
In marketing and sales, there will be a greater emphasis on direct
sales, both in Japan and overseas.
The Digital Media Network Company will also take over the e-Solutions
Company's cable modem business and business communications systems
unit on April 1, 2003, and strengthen them
in combination with servers and network operations.
Electronic Devices Businesses
We will continue to channel resources to electronic devices
for such high growth areas as digital consumer products and
mobile equipment. An emphasis on the expanding markets of
China and Asia and moves to enhance strategic marketing to
large accounts is expected to fuel high growth and the profitability
of this major business area.
Toshiba will maintain its top-three position in the global
semiconductor market by positioning discrete devices, analogue
ICs and NAND flash memories as sources of sustained profit,
while further expanding its system on silicon solution businesses.
A three-fold strategy of early development and introduction
of large capacity devices, utilization of multilevel cell
technology, and advances in process technologies ahead of
competitors will sustain global leadership in flash memory
In system LSIs, a differentiation strategy will continue
to direct our work in high-level devices, including graphic
processors. Moves to establish high profitability will include
furthering alliances with strategic partners, reinforcing
new product development and cultivation of new markets.
We lead the world in deploying 90-nanometer production capabilities,
and will continue to do so in the transition to next generation
65-nanometer process technology.
The key target in our discrete business is expanded market
share in two key growth markets, China and Korea. Increased
assembly in Asia will promote cost competitiveness, while
an expansion of our well-differentiated product lines will
assure we remain the world No.1 in market share.
The April 2002 establishment of Toshiba Matsushita Display
Devices, integrating our LCD business with that of Matsushita
Electric Industry, has given us a stronger, more viable LCD
business with world-class reach. A primary emphasis on medium
and small displays for mobile devices, our market-leading
low-temperature polysilicon TFT technology, and a dedication
to improved cost competitiveness is aimed at regaining profits
in this highly competitive business.
Following on from recent reorganizations of the LCD and CRT
businesses, Toshiba will study separation into Toshiba Group
subsidiaries of the electron tubes and devices, materials and
components and secondary battery businesses, currently handled
by the Display Devices & Components Company, with October
2003 as the target date. Assuming that this reorganization goes
ahead, the Display Devices & Components Company will be
dissolved; a new Display Devices & Components Control Center
will be set up to support Matsushita Toshiba Visual Display
Company Ltd., and to pursue the steady reorganization of the
other three businesses.
Social Infrastructure Businesses
A reorganization to maximize management resources will improve
the cost structure and secure profitable sources of business.
We will actively expand overseas businesses and enter new
businesses with the potential to become sources of profit.
Industrial and Power Systems &
The key strategy of the newly established Industrial and Power
Systems & Services Company will be development of overseas
business opportunities, particularly in Asia and China. We
will pursue provision of new thermal power plants, maintenance
of existing plants, and provide electrical systems for locomotives,
other industrial systems and components.
Promising business opportunities on the horizon include entry
into Japan's power generation business as deregulation proceeds;
growing demand for environmentally friendly technologies,
increased interest in medium and small power generation systems,
such as wind power systems; and opportunities in industrial
system management services.
Social Network & Infrastructure
The Hardware Solutions Company, a new in-house company to
be established on October 1, will promote overseas business
in system solutions, centering on hardware for broadcasting,
telecommunications and graphic recognition.
Package-type solution services will be reinforced by consolidating
marketing, R&D and engineering, so as to fully exploit
potential and make full use of wide-ranging expertise, sophisticated
technologies and high-level reliability nurtured through long
Medical Systems business
The goal of becoming a total medical solutions provider, able
to deliver timely advanced products and excellent services,
will be furthered by establishing a comprehensive global business
structure covering planning, R&D, design, manufacturing,
sales and marketing and after-sales services.
||The Power Systems & Services Company and Social
Infrastructure and Systems Company will be merged in the
Industrial and Power Systems & Services Company to
be set up on April 1, 2003.
||Another new in-house company, the Social Network &
Infrastructure Systems Company, will combine telecommunications
and broadcasting systems, railway-related systems, automation
and other systems of the e-Solutions Company, and the
radio application systems of the Social Infrastructure
and Systems Company. Its mission is to enhance integrated
solutions for these systems.
||To reinforce package-type solution businesses, Toshiba
will separate the e-Solutions Company's divisions for
software solutions businesses from the parent company
and integrate them with Toshiba IT Solution Co., Ltd.
This will be effected on October 1, 2003.
||The Medical Systems Company, currently an in-house company,
will be spun off as a new group company and integrate
Toshiba Medical Systems Co., Ltd., a domestic sales company.
The new company will reinforce its business through global
integration of product development, manufacturing and
sales and technologies. This will be effected on October
Home Appliances Businesses and Others
Home Appliances Businesses
A new marketing company will be established on October 1, 2003,
to reinforce marketing functions for white goods, lighting fixtures
and air-conditioners, with the goal of enhancing Toshiba's businesses
both in Japan and abroad. The new umbrella company will supervise
a new subsidiary that will be established to manufacture white goods,
Toshiba Lighting & Technology Corporation, Toshiba Carrier Corporation
and Toshiba Batteries Co., Ltd.
Network Service & Content Businesses
The establishment of a Network Services & Contents Control Center
will encompass network services, content and media services. The
i-Value Creation Company, one of the present 10 in-house companies,
will migrate into this organization on April 1, 2003.