International Wrought Copper Council Joint Meeting in Seoul May 11, 2009 The Furukawa Electric Company Limited Mitsuyoshi Shibata

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1 Japanese Copper Fabricating Industries in Asia International Wrought Copper Council Joint Meeting in Seoul May 11, 2009 The Furukawa Electric Company Limited Mitsuyoshi Shibata All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD. 2008

2 Today s Presentation 1) 1) Brief Introduction of of Furukawa Electric 2) 2) Japanese Wire and Cable Industry in in Asia 3) 3) Furukawa s s Exodus 1: 1: Automotive Wire Harness Assembly 4) 4) Japanese ACR Copper Tube Industry in in Asia 5) 5) Furukawa s s Exodus 2: 2: ACR Copper Tube All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

3 Furukawa Group Founder, Mining Smelting Refining Ichibei Furukawa Furukawa Co. Mining Smelting Machinery Nippon Light Metal Aluminum Furukawa Electric Wire & Cables Non Ferrous Metals ADEKA Chemicals Food Fuji Electric Power Electric Devices Yokohama Rubber Rubber Tires Zeon Corp. Petrochemicals Plastics Fujitsu Computers Telecom Devices All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

4 Profile Company name: The Furukawa Electric Co., Ltd. President: Masao Yoshida Foundation: 1884 Net sales: JPY 1,174 billion (FY2007) Employees: 37,669 (as at at end of of Mar. 2008) Operation base: 67 bases over 18 countries --Asia: Asia: American American Continent: Continent: Europe:5 Europe:5 FURUKAWA ELECTRIC EUROPE LTD.(FEEL) FURUKAWA SHANGHAI LTD.(FSL) FURUKAWA ELECTRIC HONG KONG LTD.(FEHK) FURUKAWA ELECTRIC SINGAPORE PTE.LTD.(FES) All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

5 Innovations in Copper First in the world 1983: Tin plating copper alloy for connectors 1884:Copper refinery business initiated 2000: Precious strip plating 1990: Palladium plating for leadframes 1985: Contact material 1956: Electrodeposited copper foil Plating 1970: EFTEC : SCR copper wire rod 1967: Research on superconducting wires 1987: Research on high temperature superconductivity 2000: EFTEC : Copper alloy for CPU pins Strips 201x: Ultra-thin, highstrength and highductility copper alloy Wires 2006: Thin copper alloy wires Tubes CO 2 coolant tubes 1960: 1973: 1995: Copper tubes Insulated Micro heat pipes All Rights Reserved, for Copyright heat exchangers copper tubes First in the world THE THE FURUKAWA ELECTRIC CO., CO., LTD. LTD Foil First in the world Super Conductivity

6 Business Three core materials across Five Five business segments Copper Products(17%) Telecommunications (13%) Strips & Sheets 40% Tubes 45% Foils 15% Aluminum Products (20%) Metals Photonics Polymers Optical fiber cables & Telecom cables 60% Photonics devices & network components 40% Energy & Industrial products (25%) Aluminum thin plate for LNG tanker 10% Electronics & Automotive systems (21%) Aluminum Beverage Can sheet 30% General roll sheet and Compressor wheels 60% Automotive Wire harness & Components 60% Electronics components, Magnet Wire and Blanks for hard disk 40% Copper Wire Rod & Power cables 80% Plastic tapes for semiconductor & Foam products 20% Note: (XX%) shows sales ratio (Excluding Services and elimination to consolidated sales) All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

7 Consumption of Refined Copper for Asian Operations FPZ FPZ (Zhongshan) (Zhongshan( Zhongshan) Plated Plated Products Products CFT CFT (Vietnam) (Vietnam) Wire Wire Rod Rod Capacity;4500mt Capacity;4500mt PAM PAM Fabricated Fabricated Tube Tube Products Products FMW FMW (Wu Xi) (Wu Xi) Copper Copper Strip Strip Capacity;1000mt Capacity;1000mt SKMC (Shanghai) SKMC C (Shanghai) Fabricated Fabricated Tube Tube Products Products SSC SSC (Shanghai) (Shanghai) ACR ACR Tube Tube Capacity;2200mt Capacity;2200mt Furukawa Furukawa Electric Electric Wire Wire Rod 20000mt Rod 20000mt Strips Strips & Sheet 5000mt & Sheet 5000mt Copper Copper Foil 1000mt Foil 1000mt ACR ACR Tube Tube 2500mt 2500mt FSL FSL (Shanghai) (Shanghai) Purchasing Office Purchasing Office FMT FMT (Thailand) (Thailand) ACR ACR Tube Tube Capacity;2500mt Capacity;2500mt FCFT FCFT (Taiwan) (Taiwan) Copper Copper Foil Foil Capacity;1000mt Capacity;1000mt FEMM (Malaysia) FEMM (Malaysia) Magnet Wire Magnet Wire Capacity;1100mt FES (Singapore) Capacity;1100mt FES (Singapore) Purchasing Purchasing Office Office TMS TMS (Indonesia) (Indonesia) Alpha Alpha (Malaysia) (Malaysia) Wire Wire Rod Rod Wire Wire Rod Rod Capacity; Capacity; Cu Cu 8800mt 8800mt Capacity;5500mt Capacity;5500mt Al Al 1500mt 1500mt OMM OMM (Malaysia) (Malaysia) OMT OMT (Thailand) Fabricated (Thailand) Fabricated Tube Tube Products Products Fabricated Fabricated Tube Tube Products Products All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

8 Copper Wire & Cable Production in Japan 1,400,000 Tons pa Million J P Y pa 1,800,000 1,200,000 1,000, , , , , O thers Building A utom otive Electronic Power Telecom Value (R H S ) Export (Source:The Japanese Electric Wire & Cable Makers' Association) (E) All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD ,600,000 1,400,000 1,200,000 1,000, , , , ,000 0

9 Export/Import of wire & cable of Japan 350, , ,000 tons Im p o rt Export Balance 200, , ,000 50, , , ,000 (Source: Japan Electric Wire & Cable Trading Association) All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

10 Export/Import of Japan by Regions 700, , , , ,000 Others Europe North America Other Asia Indonesia Philippines Thailand Vietnam China IMPORT 200, , , , , , ,000 Others Europe North America Other Asia Malaysia Philippines Hong Kong China EXPORT 200, , (Source:The Japanese Electric Wire & Cable Makers' Association) Units: million JPY All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

11 Production Transfer of Japanese Wire&Cable Industry Number of Operations Others North America Europe (14) Asia (11) WORLD Korea Singapore India Taiwan Philippine Vietnam Hong Kong Malaysia Indonesia Thailand China ASIA (Source:The Japanese Electric Wire & Cable Makers' Association) All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

12 Sales of Asian Operations ASIA LOC AL LOC AL SALES SALES 48% 48% THIRD THIRD COUNTRIES COUNTRIES 25% 25% EXPORT TO EXPORT TO JAPAN JAPAN 26% 26% N.AM E R IC A N.AM E R IC A 9% 9% ASIA ASIA 14% 14% EUROPE EUROPE 2% 2% OTHERS OTHERS 1% 1% Japanese Wire Wire & Cable Cable Operations In In Eleven Eleven Asian Asian Countries in in ) 1) ASIA ASIA Total Total (154) (154) billion billion JPY JPY 2) 2) CHINA CHINA (65) (65) billion billion JPY JPY 3) 3) NON-CHINA (89) (89) billion billion JPY JPY CHINA LO C AL N.AM E R IC A LO C AL N.AM E R IC A SALES 9% SALES 9% 48% 48% THIRD THIRD COUNTRIES COUNTRIES 12% 12% EXPO RT TO ASIA EXPO RT TO ASIA JAPAN 3% JAPAN 3% 39% 39% EURO PE EURO PE 1% 1% (Source:The Japanese Electric Wire & Cable Makers' Association) NON-CHINA LO CAL SALES LO CAL SALES 53% 53% THIRD THIRD COUNTRIES COUNTRIES 23% 23% EXPO RT TO EXPO RT TO JAPAN JAPAN 24% 24% N.AM E R ICA N.AM E R ICA 20% 20% ASIA ASIA 2% 2% EURO PE EUROPE 1% 1% All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

13 Asian Operations by Product Sectors Wire Harness 25% Wire Rod 12% Magnet Wire 15% Building Wire 7% Power Cable 3% Telecom Cable 5% Electronic Wire 33% Wire Rod Magnet Wire Electronic Wire Telecom Cable Power Cable Building Wire Wire Harness China Korea Taiwan Thailand Hong Kong Vietnam India Singapore Malaysia Philippines Indonesia ASIA Total (Source:The Japanese Electric Wire & Cable Makers' Association) All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

14 Production Transfer of Japanese Car Makers K/YEAR 25,000 PRODUCTION OF JAPANESE CAR MAKERS 20,000 15,000 Production In Overseas 10,000 5,000 Production In Japan ,000 10,000 8,000 6,000 4,000 2,000 OVERSEAS PRODUCTION OF JAPANESE CAR MAKERS OTHERS USA ASIA All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

15 Exodus 1-1 (Automotive Wire Harness Assembly) 1st Stage (from mid 1980s to to mid 1990s) (Background) Japan-US trade friction and strong Japanese Yen after Plaza Accord made Japanese car makers accelerated to to transfer productions in in North America. For survival in in labor intensive wire harness assembly business, we needed to tofind an an assembly location with a lower cost. All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

16 Exodus 1-2 1st Stage (from mid 1980s to to mid 1990s) (Actions) To To start wire harness assembly in in the Guandong area in in China, with an an OEM partner in in Hong Kong for for avoiding business risks To To supply wires and components from Japan, assemble in in China, and ship back to to Japan, utilizing trade system in in South China and Hong Kong Small size plant with one tenth of of labor cost and limited investment, exclusively for for the Japanese domestic market All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

17 Exodus 1-3 2nd Stage (from mid 1990s to to early 2000s) (Background) Further severe competition in in Japan Japanese car makers started to totransfer plants to to Asia (Actions) 100% owned larger size wire harness assembly plant in in Vietnam for for demand in in Japan, combined with local production of of wire and components Collaboration with local assemblers in in Asian countries for for local production of of Japanese car makers All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

18 Exodus 1-4 3rd Stage (from mid 2000s to to Now) (Background) Expecting large potential growth of of car consumption in in Asia Local car makers expanded production in in this region (Actions) The most appropriate production for for global demand, including global production for for wire and components Collaboration with local assemblers for for domestic production of of local car makers as as well as as Japanese All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

19 Brass Mill Production in Japan 1,400,000 1,400,000 1,200,000 1,200,000 1,000,000 1,000,000 Ton Ton per per year year 800, , , ,000 WIRES BARS BARS TUBES STRIPS 400, , , , (Source: Japan Copper and Brass Association) All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

20 Aircon sales in Japan and Japanese Copper Tube Production in Japan and Asia Unit per year Unit per year 9,000,000 9,000,000 8,000,000 8,000,000 7,000,000 7,000,000 6,000,000 6,000,000 5,000,000 5,000,000 4,000,000 4,000,000 3,000,000 3,000,000 2,000,000 2,000,000 1,000,000 1,000,000 IMPORT IMPORT JAPANESE JAPANESE Ton per year Ton per year JAPAN 4 Companies CHINA CHINA 2 2 Companies Companies THAILAND THAILAND 3 3 Companies Companies MALAYSIA MALAYSIA 2 Companies 2 Companies Ton per year 125, ,000 85,000 65,000 45,000 25,000 5,000 Copper Tube Production at 7 Japanese Operations in Asia (Source: Japan Copper and Brass Association) All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

21 World Demand for Aircon All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

22 Exodus 2-1 (ACR Tubes) Period: Decade from mid of 1980s Market Market situations Japanese ACR ACR manufacturers transferred production sites sites to to SE SE Asia, Asia, by by growth growth of of the the ACR ACR market market and and appreciation of of Japanese Yen Yen Components makers makers were were asked asked to to transfer operations to to supply supply parts parts locally: locally: the the same same structure as as the the car car manufacturing industry Our Our actions actions To To establish the the fabrication of of ACR ACR component operations in in Malaysia. ACR ACR tubes tubes exported to to Thailand from from Japan, Japan, but but lost lost price price competitiveness due due to to high high import import duties. duties. To To start start local local production at at the the strong strong request of of our our customers All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

23 Exodus 2-2 (ACR Tubes) Period: From mid of 1990s until now Market Market situations ACR ACR market market surprising growth growth in in China China Japanese ACR ACR manufacturers transferred production in in China. China. Importing products from from China China and and SE SE Asia, Asia, due due to to the the fall fall of of prices prices in in the the Japanese market. market. Demand of of ACR ACR tubes tubes in in China China and and SE SE Asia Asia is is increasing, despite despite declining in in Japan Japan Our Our actions actions To To establish a joint joint venture plant plant with with Hitachi Hitachi for for ACR ACR tubes tubes in in Shanghai Fabricating ACR ACR components operation in in Shanghai and and Guangdong All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

24 Business Opportunities and Threats Opportunities Diffusion of of ACR ACR and and increase of of demand of of higher higher functional copper copper tubes tubes for for energy energy conservation Growth Growth of of emerging markets Development of of application of of heat-pump technology to to hot hot water water supply supply systems Threats and and Risks Rising Rising labor labor cost cost and and energy energy cost cost Unstable political situations Global Global economy weakness Sudden change change of of Taxation AFTA AFTA Fluctuation of of exchange rates rates High High copper copper price price and and high high volatilities Material substitutions All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

25 Now and Future Production of of copper wire and cable in in Japan dropped to to 765 kt kt (minus 10.6% yoy) Forecast for for 2009 will be be 705 k tons (minus 7.9% yoy), assuming GDP change is is minus 4.4% Production of of brass mills in in Japan dropped to to less than 810 kt ktin in 2008, at at the same level of of 1982, due to to the effect of of the global recession Forecast for for 2009 is is kt, kt, since no no recovery in in demand is is expected (Source:The Japanese Electric Wire & Cable Makers' Association) (Source: Japan Copper and Brass Association) All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

26 Now and Future In In the the short term term each company tries tries to to restructure to to reduce surplus inventory, employment, and and capacity In In the the long longterm global consolidation in in various areas of of copper fabricating industries may may happen to to dissolve surplus capacity resulting from from global competition and and sluggish markets Critical circumstances may may generate new new business opportunities for for copper fabricating industries, such as as solar power generation and and batteries, hybrid and and electric cars, LED LED lighting, eco-electronic home appliances, and and super conductivity by by utilizing cutting edge technology Asian markets such as as China, India, Thailand, and and Indonesia will willno no doubt drive copper consuming markets. All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

27 Conclusions Asia and China are not only the world factory but also the world market despite weakness in in the world economy Asia is is no no more the export base to to USA, EU, and Japan, but the largest consuming region Copper related industries are dependent on on the Asian market Asia is is not a mature region but is is expecting further development Technology innovation for for an an environmentally-friendly society will generate new copper application demands. All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD

28 Thank you Any Questions? All Rights Reserved, Copyright THE FURUKAWA ELECTRIC CO., LTD