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5. NGK SPARK PLUG CO., LTD. Business Report FY ended Mar. 2015

NGK SPARK PLUG CO., LTD. Business Report FY ended Mar. 2015

6th Mid-term Plan 「Evolution」 (covers fiscal years ending March 2014 to March 2016)

Basic Policies
-Maximize management resources, strive toward evolution, and tackle bold challenges for businesses in new regions and fields

Initiatives
-Initiate marketing strategies for sales and technology in new business areas
-Further develop absolute superiority by making use of proprietary technology and creating a new technical foundation
-Strengthen production operations to achieve true product creation
-Establish a strategic supply chain and strength its functions
-Enhance the Group by clearly assigning work functions and clarifying responsibilities of subsidiaries and affiliated companies
-Create a corporate framework that continually develops human resources capable of facing challenges in terms of new values and overcome changes in the business environment
-Strengthen functions and strategies company-wide and establish a company-wide management framework
-Thoroughly implement CSR activities globally

Automotive Components Group
-The Company is in the midst of building a new, global production structure to meet the demand foreseen in 2020.

• SparkTec (Thailand) Co., Ltd., which launched operations in April 2015, plans to increase the annual production capacity of main, metal fittings for spark plugs to 1.4 million units by 2020.
• The Komaki Plant is scheduled to launch production in March 2016, and by 2020, the annual production capacity of spark plug parts such as center electrodes and terminals is planned to be 30% more than the current capacity.
• SparkTec Tono is increasing production of insulators.

Financial goals under the mid-term plan

Acquisition

-The Company has decided to acquire all shares in Nihon Ceratec Co., Ltd. from its current parent company, Taiheiyo Cement Corporation, on April 1, 2015. Nihon Ceratec will be a wholly owned subsidiary of NGK Spark Plug at a cost of JPY 7.3 billion. Nihon Ceratec has expertise and sales networks in the semiconductor manufacturing equipment parts business. The Company will leverage these advantages to reinforce its competitiveness in semiconductor businesses. (From an article in the Nikkan Jidosha Shimbun on March 2, 2015)

Awards

-In 2014, the Company was recently recognized by Cummins Inc. as one of its top suppliers to its U.S. operations. (From a press release on May 2, 2014)

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

R&D Structure

-The Company has various centers of R&D activities. There is the R&D Division that is a headquarters function, the New Business Development Division, Fuel-cell Project Office and the R&D functions at each business division. In addition, the Company gathers and implements the latest technology through participating in academic conferences and associations, and conducting joint research with university and private-sector R&D organizations.
-The Company has technical centers in the U.S., Europe, Brazil, and Korea.

R&D Activities

Spark plugs
-The Company is developing smaller and more wide-ranging products by further increasing their heat resistance, high voltage resistance, and ignitability. It is working to create a seamless operating structure, from developing materials up to designing products and production methods.
-The Company developed and began delivering to European OEMs long-reach spark plugs that have new insulators with improved voltage resistance, which maximize engine cooling performance because of their small diameter and elongated shape.
-The Company developed an electrode-joining method, giving the spark plug a shape that achieves a high degree of durability and ignitionability, two qualities that are required for high-performance turbo engines.

Glow plugs for diesel engines
-The Company developed plugs with a longer life and superior temperature rise characteristics. It also developed a temperature control system for plugs.
-The Company is developing a single unit containing glow plugs with pressure sensors. Even when continually used in harsh engine conditions, this latest unit has a product life 3-times longer than conventional products but still maintains precision.

Sensors
-The Company is developing sensors that need to comply with exhaust-gas-emissions; offer improved performance in terms of resistance to heat, thermal shock/impulse, vibration, and water penetration; and also reduce energy and the consumption of resources.
-The Company developed sensors such as OBD (on-board diagnostics) sensors which are required under new exhaust-gas emission regulations; and sensors that control EGR systems.

-The Company has developed the world's first intake oxygen sensor that optimally controls the exhaust gas recirculation (EGR) system. The Company utilized its technologies for existing exhaust oxygen sensors to commercialize the new intake oxygen sensor. The newly developed intake oxygen sensor is attached on the intake side of an engine EGR system to sense and control oxygen concentration. This achieves the optimum combustion efficiency and EGR environment, leading to reduced exhaust gas emissions and improved fuel efficiency. The new intake oxygen sensor can be installed on both gasoline and diesel engines with EGR systems. The Company has already received orders for the new product from auto manufacturers. The Company will begin to supply it by the end of the fiscal year ending in March 2018. Initially, the annual production volume will be tens of thousands of units. (From an article in the Nikkan Jidosha Shimbun on October 16, 2014)

Other technologies
-The Company developed and commercialized ignition units for improving the durability of plugs for gasoline engines.
-The Company developed the next generation ASIC (Application Specific Integrated Circuit) for full-range air-fuel ratio sensors that have an interface function with an engine control circuit in automobiles.

-In the fiscal year that ends March 2016, the Company plans to invest JPY 61,500 million in facilities and equipment, among which JPY 47,823 million will be allocated to Automotive Components Group.

Investments in Japan

-The Company announced that it will establish a new plant to produce center electrodes and terminals used for spark plugs in Komaki, Aichi Prefecture, Japan around 2016. Approximately JPY 7 billion will be invested in the new plant, which will be operated by Nittoku Seisakusho Co., Ltd., NGK's subsidiary based in Nagoya, Aichi Prefecture. In Japan, the Company currently produces these spark plug parts at two NGK plants and two Nittoku plants. The company plans to integrate the four plants into the new facility, aiming to improve its production efficiency and capacity. Through this project, the Company intends to boost its global spark plug capacity by 30 percent to 1 billion units per year by March 2021. (From an article in the Nikkan Jidosha Shimbun on December 19, 2014)

-The Company announced that it has celebrated the completion of its new plant in Gifu Prefecture, Japan. The plant is the company's fifth facility to produce spark plug insulators in Japan. Approximately JPY 28 billion was invested in this project. Production capacity is expected to reach 13.5 million units per month by March 2016. The Company not only intends to increase its spark plug production capacity, but also aims to reduce disaster risks and ensure stable supply with the new earthquake-resistant facility. (From an article in the Nikkan Jidosha Shimbun on April 16, 2014)