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5. Mitsubishi Electric Corporation Business Report FY ended 2015

Management Strategy

Fundamental Management Policies
-The Mitsubishi Group will face challenging changes based on its corporate slogan "Changes for the Better", always looking for a better tomorrow along with pursuing sustainable growth and continuing advancing balanced management based on its pillars of ability to grow, earn profits, improve efficiencies, and remain stable.

-The Company has held a corporate strategy briefing for FY 2015 ending in March 2016 at its headquarters in Tokyo, Japan. The Company is forecasting its net sales to reach JPY 4.37 trillion and operating income to reach JPY 320 billion. Both of these figures are higher than the previous year's record-high results. As growth strategies for FY 2020, the year of the Company's 100th anniversary, the Company is poised to further expand new core businesses, which include safety/prevention applications, electric powertrain, and multimedia systems for automobiles. (From an article in the Nikkan Jidosha Shimbun on May 22, 2015)

-The Company will make an entry into the automotive preventive safety system market, expecting a diffusion of the system including collision damage mitigation braking. The Company plans to commercialize an ultrasonic sensor by 2015 and a front-view camera by 2017. By 2020, the Company plans to propose a package combining the sensor and the camera with drive motor control technologies and information and communication technologies. The Company has produced corner sensors to detect an obstacle when a driver is parking a car as well as rearview cameras for rear view monitors. This is the first time for the Company to develop front-view cameras and sensors for advanced preventive safety systems. The Company will enhance sensing function of the sensor and the camera so that they will be chosen in automotive safety systems. (From an article in the Nikkan Jidosha Shimbun on May 29, 2014)

Management Objectives
-Objective by FY ending March 2021: "Consolidated sales: JPY 5 trillion or more", "Operating margin: 8% or more"
-Always maintain a ROE of 10% or more, and a debit-to-equity ratio of 15% or less
-FY2014 (ended March 2015)'s achievement: profit margin of 7.3%, ROE of 13.9%, and a debt-to-equity ratio of 9.4%

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

-For FY ending March 2016, R&D expenditure is planned to be JPY 202,000 million as overall.

R&D Structure

-The Company conducts its development activities, which include areas from basic research, application research, product planning, up to production engineering at its research centers in Japan, the U.S., and Europe, and in addition, at the development divisions at its plants and consolidated subsidiaries.

R&D Facilities

-The Company announced that it has completed the construction of its new engineering management building, "LCD Innovation Center," in Kikuchi, Kumamoto Prefecture, Japan. Operations are expected to start in January 2015. Created with an investment of approximately JPY 1 billion, the new facility has a floor area of approximately 4,050 square meters. It is located adjacent to the Shisui factory of Melco Display Technology Inc., the Company's manufacturing subsidiary. The Company moved the design and development division of its liquid crystal display business from an existing facility in Koshi, Kumamoto Prefecture to the new facility. As a result, the Company's production division and design and development division can easily carry out various joint activities such as prototype testing, performance assessment, and meetings. Liquid crystal modules are used in various industrial and automotive applications. (From a press release on November 19, 2014)

-On March 10, the Company will start operations of a new building for designing and developing new products at its Power Device Works in Fukuoka, Japan. The Company will strengthen interdivisional cooperation within the Works to meet increasingly diversified needs. Sales, development and design divisions were previously located in different sections at the Works, but will be consolidated to the new building. The Company expects this will accelerate development of new products including SiC (Silicon Carbide) power semiconductor modules. The new six-story building has a total floor space of 11,000 square meters. JPY 2.5 billion was invested in the building. (From an article in the Nikkan Jidosha Shimbun on March 7, 2014)

R&D Activities

Industrial automation systems
-The Company is conducting R&D activities on the following: FA control system devices, drivetrain devices such as servo motors, electric-supply control devices, mechatronic devices, industrial-use robots, automotive electric parts such electric power steering systems, and car multi-media equipment.

-The Company successfully developed the following products during the fiscal year that ended March 2015.

• Audio navigation system DIATONE SOUND. NAVI NR-MZ90 series
• On-board DIATONE SPEAKER DS-G500
• Power unit for 3 motor system
• 8th generation airbag control unit
• New generation brushless alternator

-Following items are under development as of March 2015:

• Motor; Stator
• Forward-looking camera   >>>Information from 2015 Automotive Engineering Exposition
• Advanced Driving Assistance System-ECU
• Long-range ultrasonic sensor  >>>Information from 2015 Automotive Engineering Exposition

Product Development

Compact and lightweight Power semiconductor module
-The Company will start supplying compact and lightweight power semiconductor modules for use in inverters for electric and hybrid vehicles. The Company started shipping samples of the new modules on February 19, 2015. The new module has highly integrated components that lead to weight reduction and compactness of inverters. The module features a highly integrated sixth-generation IGBT with a unique structure and high-thermal conductivity isolation sheet in a transfer molded package. The module achieves 36% smaller footprint and 42% lighter weight compared with the Company's existing power semiconductor module. The utilization of a sixth-generation IGBT achieves 12% lower collector-emitter saturation voltage compared with the Company's existing power semiconductor module. This leads to low power-loss inverter design. (From an article in the Nikkan Jidosha Shimbun on February 25, 2015)
>>>Information from 2015 Automotive Engineering Exposition

Noise-suppression technology for Hands-free calls
-The Company has developed a new noise-suppression technology that improves the voice clarity during in-vehicle hands-free calls by removing 96% of noises inside a car. The Company's new artificial neural network can distinguish between speech and non-speech signals. The system suppresses noises including irregular noises from other vehicles, turn signals and windshield wipers. The new technology will contribute to improvements in driving safety and comfort as the quality of hands-free voice communication is significantly improved. The Company aims to apply the new technology in car navigation systems and other in-vehicle equipment to be released in 2018. (From an article in the Nikkan Jidosha Shimbun on February 18, 2015)

Charging EVs economically and automatically
-The Company announced that it has launched new energy measurement and data collection technology for the "Mitsubishi HEMS (Home Energy Management System)," which connects and controls various electric home appliances and housing equipment. The HM-ST03 that consists of an energy measurement unit and a data collection unit features a new function to link an electric vehicle with the HEMS network. By using a power conditioner, HM-ST03 can charge the vehicle automatically according to the registered schedule or during the period when electricity charges are low. Compared to conventional systems, the number of products that can be connected with the network increases to 14 from 7. (From an article in the Nikkan Jidosha Shimbun on August 22, 2014)

Efficient motor drive system for EVs
-The Company has developed a prototype electric vehicle (EV) motor drive system with a built-in silicon-carbide inverter. The new EV motor drive system features a cylindrical power module which accommodates parallel cooling ducts and integrates cooling system for motor and inverter. This unique feature improved the motor drive's cooling performance. The Company also succeeded to reduce the power loss of the system significantly by using silicon-carbide for all the inverter's power semiconductors. The Company plans to propose the new system to automakers and to commercialize it in 2018. (From an article in the Nikkan Jidosha Shimbun on February 14, 2014)

Ultra-simple human machine interface (HMI)
-The Company has developed an ultra-simple human machine interface (HMI) that allows a driver to operate car navigation systems, air conditioners, audio-visual equipment and phones safely and easily. The new HMI predicts the driver's need at the right time by utilizing the vehicle's driving history such as destinations and routes as well as the usage records of in-vehicle equipment. According to the prediction, the HMI system initially shows the most possible options on a head-up display in such a way that the driver can complete the operations only with simple button pushes or voice commands. This will minimize the steps and time required to operate the devices while driving. The Company will propose the new technology to automakers and hopes to commercialize it by 2018. (From an article in the Nikkan Jidosha Shimbun on February 12, 2014)
>>>Information from 2015 Automotive Engineering Exposition

-The Industrial Automation Systems Division focused its investment activities on increasing production of automotive equipment, and on factory automation systems.

Investments Outside Japan

<USA>
-The Company announced that it will boost its production capacity of high-efficiency alternators in the U.S. Approximately JPY 4 billion (approximately USD 33 million) will be invested in an additional plant and new production equipment at the headquarters plant of Mitsubishi Electric Automotive America, Inc. in Mason, Ohio. The Company plans to construct the steel-framed one-story building, which will have a floor area of 14,500 square meters. The expansion will increase the total floor area of the headquarters plant to 56,000 square meters. Operations are expected to start in January 2016. The U.S. automotive market is projected to keep enjoying stable demand in the foreseeable future. The Company is poised to meet growing demand for components used in fuel-efficient vehicles in the U.S., where regulations on fuel consumption are intensifying. (From an article in the Nikkan Jidosha Shimbun on March 26, 2015)

<Mexico>
-The Company announced that its new Mexican subsidiary, Mitsubishi Electric Automotive de Mexico, S.A. de C.V. (MEAM), commenced automotive parts manufacturing and sales operations in October 2014. The new base in Mexico, where car production is thriving, will put the Company in a better position to expand its auto parts business in the Americas. The subsidiary aims to achieve annual sales of JPY 30 billion by the end of the fiscal year ending in March 2018 (FY 2017). MEAM, located in the State of Queretaro, will manufacture and sell automotive parts including alternators, starter motors and multimedia products. Its paid-in capital is MXN 500 million (JPY 3 billion), of which 95% was paid by Mitsubishi Electric and 5% by Mitsubishi Electric Automotive America, Inc. (MEAA). The number of employees is approximately 80. (From an article in the Nikkan Jidosha Shimbun on October 9, 2014)