Fiscal 2008 Review

In 2007, the world economy faced crucial challenges such as sharp increases in oil and raw material prices, and confusion in the financial markets triggered by the U.S. subprime mortgage crises. However, we saw capital investment and individual consumption continue to grow significantly in the BRIC economies, while in Europe, the economy also showed a steady transition for the better. Japan's economy, meanwhile, underwent a solid transition in corporate business over the first half, spurred by steady growth in exports and a weaker yen. Individual consumption remained steady and the economy managed to maintain a recovery trend. However, at the end of the year, in addition to confusion in the financial market, the sudden rise in the yen rate and falling stock prices resulted in a sudden increase in the severity of our external environment.

The electronics industry was influenced by sharply rising oil and raw material costs, coupled with a decline in product prices caused by intense market competition. However, the worldwide prevalence of products adopting digital technology was accompanied by expansion of markets for flat-screen TVs, personal computers and mobile phones in rapidly developing countries. This resulted in increasing the demand for relevant semiconductors and electronic parts. Furthermore, digitalization and ‘electronization’ in new fields such as automotive and medical equipment are progressing, especially automobile related parts, showed a solid growth.

The Alps Group consolidated net sales for the fiscal year ended in March 2008 are a result of our positive orders and sales promotion efforts in the automobile, mobile phone and home appliances sectors of our electronic components business. Sales amount in Magnetic Devices dropped drastically due to our discontinuation of production of HDD (Hard Disk Drive) heads. However, we compensated for the reduction through components, automotive electronics, communications, and peripheral products business. Overall profit was down slightly, compared to the previous fiscal year.

In audio equipment, we increased sales in the automotive aftermarket and with leading automakers on the back of significant growth in the Russian and the Middle Eastern automobile markets. However, in our biggest market, the U.S.A., sales were down, with a loss in profit resulting from the strong yen.

Meanwhile, in logistics and other segments, efforts in improving the capability of domestic and off-shore business bases and development of IT-based service products resulted in profit growth. However, for the group as a whole, fiscal 2007 ended on a slight loss in profit.

Business Outlook

In the past, the U.S. economy used to be a driving force of the global economy. But today, it is from Russia and China that the economy is strengthening, while at the same time we see that the South American economy has also stabilized. In the Mid-East, oil revenues from soaring crude prices are being re-invested all over the word. There are concerns that the subprime loan crises in the U.S. is getting worse and may, combined with soaring oil prices, cause a decline in the global economy. We are heading into an era in which the global economic structure is about to change substantially. However, I feel it is necessary to monitor the economic situation for a while.

In such a situation, the Japanese electronic parts manufacturing industry has collaborated with domestic and overseas set makers to provide highly unique products that will meet market demands. The “Design-In,” where we participate from the development stage, is one of the main strengths of the Japanese electronic parts industry and has been the major factor of our growth. By utilizing the synergy effect created by presenting each other's ideas, we are confident in the continuous development of high-value-added products. ‘Electronization’ in automotives has been progressing greatly. Along with higher functional semi-conductors, electronics components are expanding their demands such as installation on home appliances for energy-saving purposes. As the market for electronic parts continues to expand, I believe that demand will also continue to grow.

In order to move on from our past core product—the HDD head, we are in the process of streamlining the production framework and aggressively conducting sales promotions for Sensor and Optical products, which we hope to establish as the next core products. As sensors can be used in various situations, we are sometimes presented with requirements for usage that go far beyond our imagination. From this aspect, we feel the sensor market has a big potential for the future. Conventionally, functions and convenience were the main requirements in sensors. However, creation of new “values,” such as environmental preservation and safety factors, has become significant. With the addition of Sensor and Optical products to our core products, a company-wide effort to develop new markets and new products will be conducted, along with improvement of management efficiency from activities such as production innovation. Based on the concept of “perfecting the art of electronics,” we will target further expansion of business and profit by supplying superior electronic parts that are not just visually perfected, but with the ideal balance in price, function and quality.

In conclusion, I would like to thank our stockholders for their continued support and encouragement.