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5. NGK SPARK PLUG CO., LTD. Business Report FY ended Mar. 2018

NGK SPARK PLUG CO., LTD. Business Report FY ended Mar. 2018

7th Mid-term Management Plan (from FY ending in March 2017- FY ending in March 2021)

-Objectives to be achieved by the FY ending in March 2021 (121st term, final year of the plan): sales of JPY 520 billion, operating profit of JPY 100 billion; three basic strategies of the plan: further strengthening of the existing businesses, creation of new businesses, and establishing a firm management base.

-Present state and future initiatives of the automotive components business are:

＜Further strengthening of the existing businesses＞

1. Plug repair
   -Sales in emerging markets grew steadily.
   -Aims to expand sales in China and India.
2. Automotive sensors
   -The Company expects that the demand of sensors, mainly value-added products, will remain strong.
   -The Company will continue production of sensors in Thailand and India.
3. Automotive repair business
   -Increase sales of automotive products by taking advantage of the expertise of its subsidiary Wells Vehicle Electronics, L.P.

R&D Structure

-The Company's R&D functions include Technology Development Headquarters at the head office and the engineering functions at each business.

-The Company has technical centers in the U.S., Europe, Brazil, and Korea.

R&D Activities

Spark plugs
-The Company is working to increase the performance of spark plugs by improving their resistance to high heat and high voltage, as well as enhance their high-ignition capability. This is in addition to reducing the size of their diameters and elongating them. This involves seamless R&D activities, from developing materials, up to designing products and developing new production methods.

-The Company commercialized long-reach plugs that optimize engine-cooling performance, combining new insulation that improves their voltage-resistance performance.

-The Company established a mass production system of spark plugs, which meet performance demands, offer longer durability, and have longer-lasting ignition capability for high-efficiency turbos.

Glow plugs for diesel engines
-The Company is developing spark plugs that meet exhaust-gas regulations, offer better performance against rising temperatures, and have longer product lives. It is also developing control systems that control spark plug temperatures.

-The Company is developing a new product that integrates glow plugs and voltage sensors into a single unit. Commercialization process of the product was established during FY 2017. This device is expected to detect combustion pressure of the engine and control fuel injection optimally.

Sensors
-The Company is developing energy-saving and resource-saving sensors that need to comply with exhaust-gas regulations, making them more environmentally efficient by improving their performance in terms of coping with high temperatures, thermal shock, vibration, and moisture.

Others
-While developing plugs and sensors, the Company promotes the development of NGK brand ignition coils, easy-to-use and selective compact multi gas meters.

Investments Outside Japan

＜Brazil＞
-In March 2018 the Company announced that it will invest BRL 210 million for the expansion and modernization of its plant in Mogi das Cruzes, Brazil. More than half of the investment will be applied later in 2018 for the factory upgrade and the remainder will be used by 2020 to increase its production capacity. BRL 87 million will be targeted to increase the production capacity of insulators by 30% through the construction of new buildings, purchase of equipment, training and hiring of more employees.

＜Thailand＞
-In July 2017 the Company announced that it will build a new plant in Thailand to manufacture automotive sensors like zirconia oxygen sensors that detect oxygen concentration in exhaust gas. The new plant will be built at a site adjacent to NGK Spark Plug's local plant in Thailand. Investment in this project will amount to JPY 12 billion. The company plans to start construction on the new plant in November 2017 and complete the work at the end of September 2018. The new plant will have a total floor area of about 34,700 square meters. It will manufacture zirconia oxygen sensors, temperature sensors, and wide-range oxygen sensors for customers in Europe and Asian countries like China and India. It will shift some production of zirconia oxygen sensors from its Komaki Plant in Komaki City, Japan to the new plant in Thailand. It will double NGK Spark Plugs (Thailand) Co., Ltd.'s production capacity for zirconia oxygen sensors to 24 million units and increase the capacity for temperature sensors by about 2.5 times to 23 million units from the current levels by 2023.