April 4, 2006

New Mid-Term Management Plan Launched
- Aggressive Strategies Aimed for Earnings Growth -

Sanken Electric Co., Ltd. today announced that it started a new Mid-Term Management Plan ("the MTP06") covering 3 years from April 2006 to March 2009.

This Mid-Term Management Plan focuses on three areas; i) reforms in the semiconductor business, ii) further expansion of the CCFL business, and iii) upgrading of global management and control. It deploys management resources into the two business domains of power electronics and optical device businesses, and pursues aggressive strategies.

With the corporate slogan of "Leadership through innovative power and optical solutions," and the continued use of the expression, "Success by Overcoming Constant Challenges," to characterize our proactive mindset, the company strives to release its growth potential to reach the sales figure of ¥250 billion, to generate the ordinary income of ¥23 billion and the net income of ¥14 billion, both twice as much as what they presently are, during the last fiscal year of the plan ending March 2009.

Mid-Term Management Plan 2006-08(PDF) here

Summary of the Mid-Term Management Plan ("the MTP06")

I. The Mid-Term Corporate Vision
  The company adopted the definition of business domains, the corporate slogan and the strategic directions applicable for the next 3 years as follows.

(1) Business Domain and Corporate Tagline
We are in "the power electronics business" ranging from the core of semiconductor device business to such the closely related businesses of power modules and power systems. In addition, our CCFL business has recorded growth at a pace so rapid that the business has already come close to surpass even our core business. Together with our LED business, "the optical device business" now stands tall as the second pillar of our earnings potential.
These two areas are placed as the focus business domains. The company will deploy resources to become able to quickly offer to the marketplace series of high-value-added new products relying on our technological superiority. In this regard, the company adopted a new corporate slogan of "Leadership through Innovative Power and Optical Solutions," in order to represent its aspiration to be a path-finding strong leader in the industry.
(2) Strategic Direction
1. Aggressively Pursue Growth in the Core Businesses.
2. Expand the Optoelectronic Business.
3. Achieve Innovation and Excellence in Manufacturing.
4. Realize the Full Potential of the Sanken Group Companies through Enhanced Global Management and Control.
5. Foster a Corporate Culture that Addresses the Dynamics of our Markets and the Business World.

II. The Mid-Term Management Plan Targets
(1) Consolidated Earning
(Billion Yen)
Fiscal Years 2006 2007 2008
Sales 210 230 250
Operating Income 17 21 25
Ordinary income 15 19 23
Net Income 9 11 14

(2) Management Indices
Fiscal Years 2008
Total Asset Turnover (Times) 1.42
ROA 13%
ROE 14%
Debt Ratio 11%
Equity Ratio 61%

(3) Capital Expenditures
(Billion Yen)
Fiscal Years 2006 to 2008
Aggregate Capital Expenditure 45
Aggregate Depreciation 50

III. Organizational Change

In order to lay a framework for the solid implementation of the Mid-Term Plan, the company instituted a large-scale organizational change effective as of April 1.

First, in order to place firm monitoring and control over the progress of management initiatives and sales and profits in particular, the semiconductor device business, our core, is divided into four to form each of power supply ICs, general purpose ICs, automotive ICs and discrete devices, and together with four existing business units of LED, CCFL, SMPS and Power Supply Equipment, a corporate organization along product lines is institute d with a total of eight businesses.

Second, in order to shift the modus operandi from reactive to proactive and to aggressively pursue growth, two new organizational units for strategic marketing and advanced technology development respectively are created. Further, with the aim to instill into the company a profitability structure where profit growth is secured by productivity improvements alone, the Center for Manufacturing Excellence is established to lead the "Four Reforms of the Production Reform, the Optimal Production, the Quality Reform and the Procurement Reform."

With these changes, an organizational framework is set for the pursuit of focused aggressive growth strategies.

IV. Business Plans for Each of the Divisions.
(1) PCD (Power Conversion Devices): primary and secondary power supply ICs.
The MTP06 lays out the strategy to strengthen Sanken's ability to develop new power supply IC systems to expand this power conversion device business. The plan calls for the development of such products as power supply ICs for the FPD market, power devices with extraordinary low power losses, higher switching frequency for smaller dimensions and lighter weight, and lower power consumption It also looks at sales increase by lowering cost through a combination of the existing technology and the economies of scale by larger manufacturing output.
(2) PPD (Power & Peripheral Devices): general purpose ICs for motor control and portable electronics.
In response to the ever increasing motor-related business in office equipment and white goods markets, the plan aims for the market share expansion by extended product line-up and enhanced functionalities. Further, the plan starts a number of initiatives to nurture products such as digital audio amplifiers and LED driver ICs to become future core products in this business sector.
(3) AMD (Automotive Devices): automotive ICs and sensors.
In order to capture the high growth potential of this market sector, the plan tries to launch the multi-faceted strategies for sales growth by promotion of existing products of automotive regulators and igniter ICs, expansion of the customer base in Japan for Allegro Hall-effect sensor ICs, and introduction of new processes and new packages including solenoid and motor drivers with such high value-added functions as current detection and communication, and design-ins for products to be installed in hybrid electric or fuel cell vehicles.
(4) PDD (Power Discrete Devices): diodes, transistors, MOSFETs and IGBTs.
The plan requires further expansion of the global market share for automotive alternator diodes and sales growth for products such as fast recovery diodes for PDPs, MOSFETs and IGBTs. It also accelerates measures to increase sales and profit like termination of less profitable products and cost reduction by collaboration with wafer suppliers and subcontractors.
(5) LEDs
The plan targets sales increase in the Silicon Blue LEDs by raising their efficiency as well as making efforts to introduce proprietary products. The focus is placed on communication/industrial automation, consumer electronics and audio markets.
(6) CCFLs.
In answering expectations from customers, the plan puts great emphasis on the capacity expansion represented by the untroubled ramping-up of Sanken Optoproducts Co., Ltd., the manufacturing facility exclusively for large-screen LCD televisions. Further, the plan intends to maintain the top-ranking market share in the global CCFL market for large-screen LCD television and notebook-sized portable PCs through introduction of highly-differentiated products made possible by proprietary technologies, thereby securely position the name of Sanken as a premiere brand in the CCFL market world-wide.
(7) Power Modules: former SMPS.
The plan endeavors to boost sales in the expanding consumer markets exemplified by the flat panel displays as well as the existing markets for office equipment and adapters, through product differentiation realized by collaboration with the semiconductor device divisions to bring out application specific ICs embedded with key circuit technologies.
(8) Power Systems: former Power Supply Equipment.
The plan enlists market share expansion initiatives such as comprehensive review of sales framework and mechanisms, focused approaches toward growth markets of surface-wave digital television, disaster preparedness, environment, and energy conservation, etc., and introduction of the next generation high-performance inverters in China.
V. Capital Expenditure Plan
  Due to a construction project for the new production facility dedicated to CCFLs for large-screen LCD televisions, the aggregate total of the capital expenditure during the three-year Mid-Term Plan period reaches as much as approximately ¥45 billion. It is, however, our basic policy to keep the amount within the aggregate sum of depreciation.
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