Status of the Medium-Term
Management Plan

We achieved our sales target—also
our profit targets, excluding such items
as corporate tax code revisions and sharply
higher crude oil and raw materials prices.
The Furukawa Electric Group formulated its 2006-2009 MediumTerm Plan, Innovations 09, in March 2006 to shift its management
strategy from a defensive stance to seizing the initiative. In theprevious fiscal year, the first year of the plan, we actually achieved
our final year net sales target of ¥1 trillion ahead of schedule, andtherefore, in May 2007, revised our target upward.
During the fiscal year under review, the second year of thePlan, we cleared our net sales target but fell short of attaining ourtarget for operating income due to the rise in depreciation costs
resulting from revised tax laws and to the impact of surging prices
for raw materials and crude oil. We have, however, accomplishedsufficient growth to clear our profit target, excluding such
subsequent events. In fiscal 2009, we will seek to further reduce
costs to meet our targets despite these negative factors.

Fiscal 2010 (Innovations 09) Operating Income Forecast(billions of yen)

+1.3
Units soldproduct
composition
cost reduction

7.9
Crude oil andresources

62.0
($70

$111)

6.5
2.9

Fiscal 2008 tax
revision

Foreignexchange rate

Depreciation andamortization: Useful lives
shortened to 7 years

Initial target for fiscal 2009
(announced May 2007)

(¥115

46.0

Forecast for fiscal 2010
(announced May 2008)¥100)

Status of Innovations 09 accomplishments
2008

2009 (Forecast)

Final goal (Fiscal 2010)¥1.10 trillion¥53.6 billion
12.7%
4.9%
1.0
1.8

¥1.17 trillion¥48.4 billion
6.4%
4.8%
1.2
1.7

¥1.21 trillion¥46.0 billion¥1.25 trillion¥70.0 billion*
11.0%
6.2%
1.1
1.3

09
ANNUAL REPORT 2008

Net sales
Operating income
ROE
ROA (based on operating income)
Total asset turnover rate
D/E ratio

2007* Prior to fiscal 2008 tax code revisions.

R&D Strategy

Overseas Market Strategy

We strive to enhance corporate value by developing uniqueproducts that command global market share focused on
development themes for creating new businesses. Among these
themes, we aggressively demonstrated our optical interconnections
at trade shows during the fiscal year under review to raise market
recognition and gather information on market demand.

In the fiscal year under review, we aggressively invested inreinforcing the capacity of our overseas bases in response torobust demand for optical fiber cables and high voltage cables. As
a result, the overseas sales ratio increased by 0.9 percentage point
to 30.2% as of March 31, 2008, exceeding 30% for the first time.

Development Themes for Creating New Businesses
Superconductive cable materials
Optical interconnections
Fiber lasers for industrial use

Antenna modules for ubiquitous computing
Onboard sensors for automobiles
Power-source management modules

Overseas Sales Ratio

21.9%
2004
¥162.3 billion

30.2%
2008
¥354.5 billion

35%

2010
¥437.5 billion (Plan)

Investment Strategy

Asset Efficiency

The Furukawa Electric Group spent ¥45.2 billion in capital
expenditures, an amount that exceeded depreciation costs of¥42.1 billion, on capital investment toward boosting productionof optical fiber cables and doubling production capacity of tapes
used for semiconductor fabrication, which are experiencing sales
growth. In fiscal 2009, with the addition of mass producing glass
substrates, we plan to spend ¥49.8 billion in capital expenditures
against depreciation costs of ¥52.8 billion.

Under Innovations 09, we are seeking to attain a total asset
turnover rate of 1.1 and a D/E ratio of 1.3 by March 31, 2010. To
that end, we are endeavoring to reduce interest-bearing debt
(target: ¥380.0 billion), while also enhancing asset efficiency byproceeding with the reorganization of subsidiaries such as Riken
Electric Wire Co., Ltd., a Group company that was converted into
a wholly owned subsidiary, and by reducing inventories.

10
ANNUAL REPORT 2008

FeatureTowards

Further

GrowthThe Furukawa Electric Group is engaged in a varietyof businesses encompassing a broad range ofindustries in the five segments ofTelecommunications, Energy and Industrial
Products, Electronics and Automotive Systems,
Metals and Light Metals. To achieve consistent growth amid a volatile business environment, we must
keep abreast of market developments in each segment to identify the needs that will emerge as the next
trend and optimize our management portfolio so we can concentrate our resources on fields in which
we maintain a competitive edge. By focusing on the dual strategy of expanding sales in high-growthcountries and strengthening niche products with high market share, the Furukawa Electric Group willbolster its businesses to achieve further growth in the segments and markets where we operate.

11

Expanding sales inhigh-growth countries

Telecommunications

Energy andIndustrial ProductsElectronics andAutomotive
Systems

Focused on the automotive andelectronic component markets

MetalsLight Metals

Strengthening
niche products withhigh market share

ANNUAL REPORT 2008

Responding to global infrastructure needs

Feature

Towards

Responding to global infrastructure needs

Further Expanding sales in

Growthhigh-growth countries

If we were to use the human body as an analogy, theelectric power infrastructure would be the blood vessels
while the telecommunications infrastructure would be
the nerves—both essential for economic development.
In Japan, with its small land area and mature economy,
we cannot expect the market for these infrastructureindustries to significantly expand in the future. Once weturn our eyes to the world, however, there is ample
opportunity for the growth of infrastructures in countries
with large land areas, such as North America, Europe
and Russia. Newly emerging countries such as India andChina are also accelerating the pace of infrastructuredevelopment to achieve further economic growth.
Our growth strategy in this field consists of applying
the technology and expertise accumulated by the
Furukawa Electric Group in Japan into these global
markets. Here are some of the actions we are undertaking to shift the axis of our business overseas towards
our goal of establishing our products as global standards.
Telecommunications

12

Increasing global demand fortelecommunications infrastructures

ANNUAL REPORT 2008

Growing demand in Europe, the U.S., the BRIC
countries and across the globe
In Japan, where FTTH has spread nationwide and optical line
subscriptions have exceeded 10
million households, themarket for telecommunications infrastructures isentering the maturephase. However,further expansion indemand is expected

in North America, for example, where leading telecommunications carrier Verizon is planning to lay 12 million FTTH lines infour years, from fiscal 2007 to fiscal 2010.
Meanwhile, demand for optical telecommunications
networks is rapidly growing in Western Europe, along with therise in intra-regional transactions resulting from the expansionof the EU. Furthermore, the full-scale development of information infrastructures is about to begin in BRIC countries, including
Russia and India, as well as in newly emerging economies suchas South Africa, Argentina and the ASEAN nations.
Bolstering our overseas production system tomeet demand
Given this expanding demand for optical fibers throughout theworld, the Furukawa Electric Group has been transferring its
business bases overseas. Although we had already establishedsales bases, primarily in countries showing high demand, in the
future we will build a system enabling us to offer a more timely
and detailed response to the demand and needs of each
Optical fiber/Cable market forecast
CY06
CY11
(Unit: thousand km)

CAGR

12,426Japan-4%

10,38324,256

North
America

33,950

+17%

7,392

Europe16,11524,054

BRICs
Source: CRU

+7%

+11%

36,767

region by shifting our production bases overseas as well.
For example, we are boosting our production capacity in OFS
Russia starting in October 2007 and in OFS Germany from thelatter half of 2008, and we will seek greater market share by
locally manufacturing products to meet the needs of each region.
Energy and Industrial Products

Rising demand for electric power
infrastructures in newly emerging
countries
The need for more efficient and stable electric
power infrastructures

Annual growth in electricity generation by region
OECD
(%)

Non-OECD

North America
EuropeAsia
Europe Eurasia

1.5

13

0.8
1.4
2.3

China

4.4

India

3.9

Other Asia

3.8

Middle East

2.9

Increasing orders worldwide on the back ofsuperior technology

AfricaCentralSouth America

Rising worldwide demand for electric power infrastructures has

Source: Energy Information Administration “International Energy Outlook 2007”

3.5
2.9

ANNUAL REPORT 2008

As demand for electric power dramatically rises throughout theworld, particularly in China and other newly emerging
economies, the development of electric power infrastructuresconnecting electric power stations with locations of demand is
rapidly underway. Efficiency and stability are the watchwords inthe market for electric power infrastructures, such as powertransmission cables.
In view of the surging price of resources and heightenedawareness of global warming over the past few years, reducing
energy loss to more efficiently transmit electric power has
become a general societal concern. This need is particularly
acute in countries such as China, with a large land area that
requires transmitting electricity over extended distances.
Meanwhile, the creation of a stable electric power
infrastructure has emerged as a challenge for newly emerging
countries that must guarantee a stable supply of electricity
without power outages as a precondition for attracting
factories from advanced economies.

provided a powerful tailwind for the Furukawa Electric Group.
In rapidly growing China, we will boost production at our electric
cable subsidiary Shenyang Furukawa Cable Co., Ltd. by 30%
and we expect annual net sales to increase 35%. In addition,
VISCAS Corporation, our subsidiary based on the equity methodthat manufactures and sells high pressure cables, has also wonlarge-scale orders from Singapore, the UAE and South Africa;
we expect sales to exceed ¥100 billion in fiscal 2009.
The foundation of this stable growth lies in the high qualityof our products backed by superior technology. For example, inhigh-pressure technology for transmitting more energy withless loss, we have succeeded in mass-producing extremely
reliable ultra-high pressure cables drawing on the world’s topclass manufacturing technology and quality control. We arealso participating in a national project for commercializing
superconducting cables that feature extremely low energy loss
compared with conventional cables, and we are moving
toward a formal market launch. (See: p.16)

Feature

Towards

Focused on the automotive and electronic component markets

Further Strengthening niche products with

Growthhigh market share

In the segments of Electronics and Automotive Systems,
Metals and Light Metals, we are focusing on markets
with high growth potential, such as automobiles andelectronics. Competition is intense in these markets, andcomponents and materials for general-use may easily
become commodities and subject to price competition.
The Furukawa Electric Group, however, has captured
significant market share and maintained high profitability without having to engage in price competition by
utilizing our proprietary materials technology in metals
and plastics to provide unique products with a competitive edge in niche areas. The creation of these highshare niche products is possible precisely because of ourapproach to development, in which we are able tounderstand the manufacturing sites of our client
corporations based on our own manufacturing experience across a broad range of fields. This ensures wepursue products that are genuinely needed. These are a
few of the high value-added products supported byinnovative manufacturing in their respective markets.
Automobiles

14

Fully considering the environment

ANNUAL REPORT 2008

Promoting energy conservation by improving
mileage through weight reduction
The greatest challenge in the automobile field today isconserving energy to cut back the CO2 emissions associatedwith global warming. To this end, automakers around theworld are working on reducing automobile weight to improvemileage while also developing engines with higher fuelefficiency.
The particular challenge of reducing weight is being
explored from a variety of approaches, from developing bodymaterials that balance lightness with strength and producing
smaller, lighter interior components, to developing lighter wire
harnesses that cover the entire body as a vehicle’s “nerves andblood vessels.”
Developing and supplying varied products forconserving energy in automobiles
The Furukawa Electric Group provides diverse products for the
automobile industry, ranging from body materials and interior
components to wire harnesses. The Group stands alongside
the world’s leading automakers on the frontlines of technological innovation for reducing vehicle weight.
For example, we have developed lighter wire harnesses byproducing ultra-thin aluminum wires and copper wires, whileat the same time shortening the length of the wire harness
itself through optimal electric installation design. We have also
developed a metal core substrate with superior heat dissipation properties and produced compact, lightweight junction
boxes that serve as the core of internal wiring.
Furthermore, we have succeeded in mass producing
compressor wheels, which constitute the key component ofdiesel turbo engines with superior mileage, in the form of ahighly accurate, ultra-lightweight aluminum product. These
are some of the broader contributions we are making toenergy conservation in automobiles.
Electronics

Providing the platform for the ongoing
evolution of information devices
Pursuing greater capacity and higher density
In the area of electronic devices, digitization has advanced inevery type of equipment, from information terminals such as
mobile phones and notebook PCs to home electronics. LSI andother semiconductor technologies will bring about a “ubiquitous society,” in which a diverse array of electronic devices areconnected via networks to facilitate the free exchange andutilization of information.
Attention is particularly focused on the key areas of greater
capacity for recording and processing more information andhigher density for making devices compact and lightweight
while at the same time upgrading functionality. There is no
end to the need for materials, components and manufacturing technologies that provide the platform for this technological evolution, and fierce competition is underway around theworld in pursuit of ever higher levels of accomplishment.
Developing and supplying highly functional
products for advanced needs

most advanced needs in the field of electronics.
One example is the processing tape used in the high-density
3D packaging process for manufacturing semiconductors. The
tape offers superior quality and exceptional operational
efficiency by controlling adhesion using UV-curing material.
We also develop and supply electrolytic copper foils used ascathode material for lithium ion batteries, which are growing
in demand as power supplies for mobile devices; wecommand an overwhelming 50% share of the global market
based on the high quality of these items. Other products wedevelop and sell include aluminum blank materials and glass
substrates that meet stringent property requirements forachieving increasing storage capacity (for example, external
memory devices).

The Furukawa Electric Group continues to turn out products
based on its proprietary materials technology, which meets theStrengthening the positioning of niche materials with high market share
Semiconductor tape

Electrolytic copper foil

Storage

Automotive components

Compressor wheel

15

Products

Raised domestic production
capacity for lithium ion
batteries and FPC by 20% inJune 2008

Solid performance byaluminum blank materials
used in HDD
Mass production of glass
substrates to begin during thefirst half of fiscal 2009

Focusing our resources on“Compact car × Asia”
Expanding sales of metal core
substrates used in boxes
Strengthening development ofaluminum wire and ultra-thincopper wire

Expanding sales ofaluminum components
used in diesel turbo engines
in Europe

Growth rate
for net sales
in fiscal 2008

+20%

+20%

+10%

+10%

+30%

ANNUAL REPORT 2008

Initiatives

Doubled production capacity
for DDF (Dicing Die Bonding
Film: two-in-one film with thefunctions of both dicing tapeand die bonding film) in April
2008

Feature

Towards

Further

GrowthR&D
Environmental
Topics16

Opening new possibilities forsuperconducting technology

ANNUAL REPORT 2008

Superconducting technology makes efficient generation,transport and storage of electrical energy possible, and istherefore expected to boost the overall effectiveness ofelectrical power infrastructures and accelerate information
processing. The ability of this technology to generate large
magnetic fields has also attracted attention in the fields oftransportation, physics and chemistry, and medicine. The
scale of this market is projected to reach ¥1.6 trillion by
2020.
Conventional approaches to superconducting technology have been primarily dedicated to low-temperature
superconductivity using metallic materials such as
niobium-titanium (NbTi). This method requires costly liquid
helium (-269°C) as a coolant and, therefore, its range ofpossible applications is limited. More recent progress has
occurred in research on high-temperature superconductivity using yttrium (Y), with less costly liquid nitrogen(–196°C) as a coolant.
The Furukawa Electric Group, a global leader in thefield of low-temperature superconductivity, has beendeveloping superconducting cables, an essential component of the large-scale international effort now under way
in France, known as the ITER*1 Project. We maintain our
active engagement in research by applying the expertise,knowledge and benefits gained from this project, toward
establishing a leading position in current international
research and development for the commercialization ofhigh-temperature superconductivity.
*1 ITER: International Thermonuclear Experimental Reactor

Superconducting technology as the backbone
for the evolution of electrical power infrastructures
Today, many countries are actively pursuing research
projects with the aim of commercializing high-temperature
superconductivity. The Furukawa Electric Group participatesin two projects sponsored by NEDO*2, Japan’s leading
research and development management organization.
One project involves the superconducting electric
power cable, recently demonstrated at the Toyako Summit,
as the definitive solution for reducing CO2 emissions. This
cable facilitates a 25% reduction in energy loss duringtransmission compared to current levels, leading to asignificant quantitative decrease in electricity generation.
The second project relates to SMES*3, a technology forstoring electricity as magnetic energy. It enables therepeated storage and discharge of electricity, thereby
enhancing the stability of the electric power grid.
The participation of the
Furukawa Electric Group inthese projects will contributeto the creation of the nextgeneration electric power
infrastructure.
Superconducting cables*2 NEDO: New Energy Development Organization*3 SMES: Superconducting Magnetic Energy Storage
Conservation of electric power using superconducting cables(Japanese case study):

3,120 gigawatts/hour per year

Projected markets for the superconductivity business
SMES

Transmission cables

Industrial motors

Transformers

Current-limiting device

Electric power used by a population ofMarine motors

2.6 million in a year

(Billions of yen)

1,629.8
1,600

Converted into reduced CO2 emissions

1,441.3

1.06 million CO2-tons/year

1,260.3
1,200

1,074.3
872.3

800

489.5
400

0

2015

2016

2017

2018

2019

2020 (Year)

Source: Superconductivity Roadmap, Ministry of Economy, Trade and Industry

Kosaku Nakano
Chief Officer, Technology & Production

CSR Activities

The Furukawa Electric Group recognizes its corporate responsibility to society is to provide products andservices that contribute to social development and to improving people’s lives while emphasizing public
regulations and corporate ethics, reduced environmental burden associated with business activities, andproduct safety, as well as the safety of employees and the local community.
To meet these social responsibilities, the Group formulated the Furukawa Electric Group Basic Policy
on CSR in February 2007, thereby establishing a structure for reinforcing CSR efforts across the entire
Group.
Under this structure, we plan to conduct corporate activities that effectively balance the threefactors of business, environmental protection and social contribution by deepening communication
with our stakeholders and further advancing and developing the CSR activities of the Group.
Compliance
The Furukawa Electric Group defines compliance as not only compliance with laws but also behavior inline with the values and ethics required for a company as a constituent member of society as well as forindividual employees.
We make sure that every employee becomes familiar with the Furukawa Electric Group Action
Guidelines, which define our basic stance on compliance, and we promote compliance througha system comprising the Central Compliance Committee chaired by the CSRO and Compliance
Committees set up at each individual works and branch.
We have also introduced an internal system for anonymous reporting to detect and remedy
compliance violations at the earliest possible opportunity.

17

Relationship with the Global Environment
environmentally sound products that exert less burden on theenvironment, such as foam extinguishers requiring less water toextinguish fires.
In addition to efforts already underway at our works, we beganparticipating in the Team Minus 6%* movement in April 2008 to* Team Minus 6%: This is a national
campaign in Japan where business entities,
organizations and individuals participate ina team effort to achieve a 6% reduction in
CO2 emissions, Japan's commitment under
the Kyoto Protocol.

encourage CO2 reduction activities in our offices as well. We also launched “Uchi Eco” (Home Eco)activities that challenge individual households to reduce CO2 emissions and distribute pamphlets to all
employees to raise awareness of global warming to steadily reduce our own CO2 emissions.
Relationship with Society and Local Communities
The Furukawa Electric Group established the Involvement with Local Communities in May 2008.
In the past, we have undertaken various social contribution activities rooted in the local community
and we intend to further strengthen these efforts to fulfill our responsibility as a member of society
through activities centered on nurturing the next generation, promoting sports and culture andcoexisting with the local community.
Furukawa Electric Group’s Basic Policy on Social Contribution Activities
The Furukawa Electric Group seeks to carry forward and strengthen the bonds it has cultivated with society
over the past century to pass on an even brighter future for generations to come by contributing to society
through business activities as well as by undertaking steady, consistent social contribution activities centered on
nurturing the next generation, promoting sports and culture and coexisting with the local community.

ANNUAL REPORT 2008

The Furukawa Electric Group is committed to developingCorporate Governance

Basic Philosophy
The Furukawa Electric Group strives to enhance its performance by promptly responding to changes
in the business environment and the market through efficient management based on prompt decision
making. At the same time, we ensure sound management by developing and establishing an internal
control system. We uphold the basic policy of seeking to expand and develop our operations on asustainable basis and to raise corporate value through these efforts.
We not only pursue complete compliance across the Group but also provide society with excellent
products and technologies that enrich people’s lives while maintaining harmony with the earth’s
environment. We fulfill our corporate social responsibility to develop solid relationships with all
stakeholders, including shareholders, business partners, local communities and employees and toremain a company that is valued by society.
Management Organization
Furukawa Electric has adopted the organizational structure of a Company with Auditors andemphasizes the functions of a system of Auditors and Board of Auditors that is independent from theBoard of Directors. We are also taking various steps in managing the Board of Directors to strengthen
the monitoring and supervising of operational execution and to accelerate decision making.
Reinforcing Internal Controls
Furukawa Electric establishes, develops and operates its internal controls based on the following fiveprinciples:18(1) Efficient Execution of Responsibilities(2) Compliance System

ANNUAL REPORT 2008

(3) Risk Management System(4) Information Management System(5) Group Company Management
Corporate Governance Organization Chart
Shareholders’ Meeting

Monitoring andSupervision

Appoints

Appoints

Board of Directors

12 Directors(three Outside Directors)
Submits proposals and reports

CSR and Risk Management Committee
President, Chief Officers, Company Presidents
Special Committees
Central Committee for Environmental Management
Central Compliance Committee
etc.
Monitors

Business Operation

Appoints

Audits accounts

Accounting
Auditors

Board of Auditors

Submit reports
Submits reports,
Four Corporate Auditors
attends meetings(twoOutsideAuditors)
and audits•Reviewing business reports•Examines status of operations
and assets
Collaboration between audits•Decision of critical matter relating tobusiness operation•Supervises business operation•Screen reports
relating toaccounting•Examine statusof operations
and assets

Appoints

President, CEO & COO

Submit reports

Internal Audits(CSR Division)

Advises

Chief Oﬃcers

Direction

Management Committee
President, Chief Officers, Company Presidents

CSO (Chief Strategy Officer)
CPO (Chief Production Officer)
CFO (Chief Financial Officer)
CSRO (Chief Social Responsibility Officer)
CMO (Chief Marketing Officer) CTO (Chief Technology Officer)

Provide support and guidanceBusiness
operations

Company Presidents

Furukawa-Sky Aluminum Corporation

Telecommunications Company, Energy and Industrial Products Company,

Light Metals Company

Metals Company, Electronics and Automotive Systems Company
Affiliate Companies

Other Affiliate companies