Highlights in FY2006

(in million yen)	FY2006	FY2005	Rate of change	Factors
Overall
Sales	566,805	490,784	15.5%	In order to meet growing demand, the Company carried out projects to increase the production capacity of its major product lines. It also improved its profit structure by reducing costs and enhancing productivity; and in addition, developing and bringing to the market more high-value added products. As a result, both sales and income rose from what they were the previous year.
Operating income	113,365	89,839	26.2%
Net income	71,309	58,448	22.0%

Sales by product

(in million yen)	FY2006		FY2005	Rate of change	Product items
	Sales	%	Sales
Capacitors	215,255	38.1%	173,598	24.0%	- Chip multilayer type ceramic capacitors - Disc type ceramic capacitors - Trimmer capacitors
Piezoelectric products	81,585	14.4%	73,242	11.4%	- Ceramic filters - Ceramic resonators - SAW filters - Piezoelectric censors - Piezoelectric sounders
High-frequency devices	114,108	20.2%	97,178	17.4%	- Multilayer devices - Short-range wireless communication modules including Bluetoothﾂｮ systems - Dielectric filters - Isolator  - Connectors
Modules	59,306	10.5%	58,303	1.7%	- Circuit modules - Power supply products
Other products	94,601	16.8%	86,808	9.0%	- EMI suppression filters - Coils - Sensors - Resistors
Total	564,855	100.0%	489,129	15.5%	-

Car Electronics Market
 - In fiscal year 2006, which ended in March, 2007, sales of car electronics products reached 61.5 billion yen, which accounted for 10.9 percent of the overall revenue. On a year-over-year basis, this was an increase of 6.6 billion yen or 12.0 percent.

 - Sales of mass-storage capacitors and Bluetoothﾂｮ modules increased, as more car navigation systems are being installed in a growing number of vehicles. Sales were also boosted by strong demand for remote, keyless entry systems; tire pressure monitoring systems; and components used in airbag systems, illustrating the growing use of electric equipment in the auto industry.

Acquisition of SyChip
 - In April, 2006, the Company's U.S. business unit, Murata Electronics North America, Inc. (MEA), announced that it acquired 100 percent of the shares in U.S.-based SyChip, Inc., which manufactures and sells wireless communication modules in the U.S. and China. SyChip also provides its customers with software support. The Company believes that SyChip's capability to develop software and offer customer support will help it strengthen the wireless communication module business that uses Low Temperature Cofired Ceramics (LTCC) Technology.  (From a press release on April 13, 2006) 

Technical Alliances
 - The Company and Enax, Inc., which is based in Tokyo, reached an agreement under which  Enax will transfer its existing technology on lithium ion rechargeable batteries to the Company. In addition, the Company and Enax, Inc. formed a comprehensive commercial alliance to cooperate in developing, manufacturing, and selling lithium ion rechargeable batteries. The Company expects this alliance will support its entry into the market. 

Division of roles based on three-company alliance: 

Company	Roles
Murata Manufacturing Co., Ltd.	- Development and manufacture of batteries and their materials - Sales of batteries
Enax, Inc.	- Development, manufacture, and sales of batteries
Daiken Chemical Co., Ltd.	- Development, manufacture, and sales of materials

The high-power lithium ion battery market is projected to grow rapidly after 2010, when these batteries are anticipated to replace nickel hydride batteries used in hybrid vehicles. (From a press release on September 19, 2006)

Acquiring multi-layer chip ceramic capacitor business from Rohm
The Company and Rohm Co., Ltd., which is based in Kyoto, Japan, reached an agreement in November 2006 under which Rohm will transfer its multi-layer chip capacitor business to the Company. This will allow Rohm to use its management resources more efficiently, while helping the Company to expand its customer base and business operations. Rohm generated sales in the area of 3.5 billion yen in fiscal year 2005, which ended in March, 2006. Based on the agreement made by the two companies, Rohm's equity shares, employees, and production facilities will still belong to Rohm. In addition, the agreement does not include the transfer of Rohm's EMI filter and tantalum capacitor businesses. (From a press release on November 9, 2006 )

Domestic business
-Kanazawa Murata Manufacturing Co., Ltd.
This subsidiary announced that it will start constructing its sixth production facility in January, 2007. 

>>> See Capital Investment for more details

-Okayama Murata Manufacturing Co., Ltd.
In March, 2007, this subsidiary held a ceremony to celebrate the completion of a new production facility. 

>>> See Capital Investment for more details

-Fukui Murata Manufacturing Co., Ltd.
In March, 2007, this subsidiary held a ceremony to celebrate the completion of a new production facility. 

>>> See Capital Investment for more details

Overseas business
India
 - In January, 2007, Murata Electronics Singapore (Pte.) Ltd. established a liaison office in India. Up until now, marketing activities targeting the Indian electronic equipment market were handled by Murata Electronics (Pte.) Ltd. in Singapore. Following its customers' move to enter the Indian market, the Group decided to set up a local office to gather information on the market and study the feasibility of starting production there. The new office will also conduct research activities to decide the scope of the Group's future operations in the country. The Indian office will officially start operations on February 1, 2007. (From a press release on January 31, 2007)

R&D Structure

Facility	Location	Areas of development
Yokaichi Plant	Higashi-omi, Shiga Pref.	Materials process
Yasu Plant	Yasu, Shiga Pref.	Industrial engineering, electronic materials, thin-film process technology
Yokohama Technical Center	Yokohama, Kanagawa Pref.	Information communications, function module products
Research Center for Next Generation Technology	Kyoto, Kyoto Pref.	New technology, new business fields

- The Group reorganized its major R&D structure in January, 2007.
- Under the aim of improving efficiencies in developing new technology that is currently in demand and then turning the results of these development activities into practical business solutions, the Company established the Technology and Business Development Division. This division has an R&D center that integrates functions to engineer new materials and application devices.
- The Company set up the Research Center for Next Generation Technology within the premises of its Kyoto Research Park to help the Group to expand the scope of its business by sharing technical information and conducting joint studies with outside research bodies and universities.  
- The Company is building an additional facility at the Yasu Plant, the Group's largest R&D facility, so as to engineer new energies and turn them into practical business solutions.

-Yasu Plant
- The Company announced that it will hold a ceremony to celebrate the completion of its 13th research facility on October, 30, 2006. The new facility will focus on the development and production of chemical materials used in the Company's major products.

Overview of the new facility:

Item
Construction period	From March, 2006 through October, 2006
Total investment	4.6 billion yen (This figure does not include costs for purchasing production equipment.)
Floor area	15,195 square meters
Building area	3,047 square meters (36 meters (east-west) by 75 meters (north-south))
Scope of business	Development and manufacture of chemical materials such as electrode paste used in ceramic electronic parts. Development and manufacture of ceramics materials

This facility became the Group's largest research center to engineer production technology, electronic materials, and thin-film process technology. (From a press release on October 27, 2006)  

-Head Office
The Company announced that it will start constructing a new R&D facility within the premises of its headquarters in December, 2006.

Overview of the new facility:  

Item
Construction period	From December, 2006 through September, 2007
Building area	8,063.65 square meters
Floor area	1,746.33 square meters
Scope of business	Research, development, and designing of new products

The company will position this new facility as its third largest R&D center following the ones in Yasu and Yokohama. (From a press release on November 6, 2006) 

R&D Expenditure (FY2006)
The total amount of R&D spending during FY2006, which ended in in March, 2007, was 38,670 million yen.

R&D achievements (FY2006)
(1) Ultra compact, short Micro Electro Mechanical Systems* (MEMS) gyro sensors for car navigation systems
The Company developed and commercialized ultra compact MEV-50A-R gyro sensors that offer a significant improvement in terms of the level of accuracy compared with existing piezoelectric sensors. The small, 10.0mm x 10.0mm x 3.3mm units can be mounted on surfaces. The vibration architecture uses monocrystalline silicon and has a vibrating gyroscope, which incorporates MEMS technology. The sensors?ｽf circuit units are equipped with special ICs, which help the circuits to process signals coming from the MEMS elements accurately without being affected by temperature changes. Commercial production of these sensors began in April, 2006.

*This Micro Electro Mechanical System is a electromechanical system consisting of small components made by using semiconductor micro fabrication technology. 

(2) Ceramic capacitors for power electronics systems
Under the objective of producing inverter products that are more compact and that offer a higher level of performance, the Company developed and commercialized ECV laminated ceramic capacitors especially for use in power electronics. Currently smooth film compressors and aluminum electrolytic capacitors are widely used in drive motors on hybrid and electric vehicles and in inverter systems used in electric air conditioning systems. Compared with these types of existing capacitors, the Company's new ECV series provide low ESR levels especially at  higher frequencies. In addition, the ceramic dielectric has small and high capacity units, assuring excellent performance at higher temperatures. The Company already began commercial production of these compressors in January, 2007.

Planned amount of capital investment for FY2006

Item	Amount (in million yen)
Installing additional production equipment and streamlining operations	63,842
Building new plants	19,926
Installing additional R&D equipment	6,954
Total	99,651

Capital investment plans in Japan (FY2006)

-Kanazawa Murata Manufacturing Co., Ltd.
Kanazawa Murata Manufacturing Co., Ltd. announced that it will start construction of its sixth manufacturing facility in January, 2007. The new plant is located within the premises of the subsidiary. 

Overview of the construction plan: 

Item
Construction period	From January, 2007 through October, 2007
Total investment	30 billion yen/five years (This includes costs for installing production equipment)
Land area	16,000 square meters
Building area	75 meters by 105 meters
Product	High frequency devices

After the facility is being completed, the Company intends to focus its activities not only on developing existing mobile communication products but also on developing and manufacturing new products in this sector, aiming to further increase the ratio of new products in its product line. In line with this strategy, the Company plans to hire an additional 200 researchers and line workers over the next two years. (From the press release on September 7, 2006)

-Okayama Murata Manufacturing Co., Ltd.
On March 22, 2007, the Company held a ceremony to celebrate the completion of its sixth production building. 

Overview of the new plant: 

Item
Construction period	From August, 2006 through February, 2007
Total investment	17.4 billion yen
Floor area	27,000 square meters
Product	Multilayer type capacitors, multilayer devices

Okayama Murata Manufacturing Co., Ltd. is the Group's largest supply hub of capacitors and multi-layer devices. (From a press release on March 20)

-Fukui Murata Manufacturing Co., Ltd.
On March 28, 2007, Fukui Murata Manufacturing Co., Ltd. held a ceremony to celebrate the completion of its sixth production facility.

Overview of the new facility:

Item
Construction period	From August, 2006 through March, 2007
Total investment	15 billion yen
Floor area	17,200 square meters
Product	Multilayer capacitors

Fukui Murata Manufacturing Co., Ltd. develops and manufactures ceramics-based electronic components such as laminated capacitors, high-frequency devices, and EMI suppression filters. (From a press release on March 27, 2007)

Capital investment plans for FY2007

Facility	Investment plan	Planned amount of investment (million yen)	Project period
			From	To
Murata Manufacturing Co., Ltd. Yasu Plant	Installing R&D equipment and production equipment to manufacture semi-finished products	16,100	Apr. 2007	Mar. 2008
Murata Manufacturing Co., Ltd. Yokaichi Plant	Installing additional equipment to manufacture raw materials	5,200	Apr. 2007	Mar. 2008
Izumo Murata Manufacturing Co., Ltd.	Installing additional equipment to manufacture capacitors and building a new production facility	21,100	Apr. 2007	Mar. 2008
Kanazawa Murata Manufacturing Co., Ltd.	Installing additional equipment to manufacture high frequency devices and building a new production facility	18,200	Apr. 2007	Mar. 2008
Fukui Murata Manufacturing Co., Ltd.	Installing additional equipment to manufacture capacitors	13,200	Apr. 2007	Mar. 2008