Electronics from upstream to downstream
KAGA ELECTRONICS
Information Meeting for First Half of Fiscal 2007

November 22, 2006
KAGA ELECTRONICS CO., LTD. (TSE 1st section, 8154)
2-2-9 Hongo, Bunkyo-ku, Tokyo 113-8503 Tel: (03) 4455-3131 Fax: (03) 3815-6807

http://www.taxan.co.jp

1

An Introduction to the KAGA ELECTRONICS Group2© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

What’s
2.1 ページタイトル
KAGA ELCTRONICS GROUP ?

What’s1 KAGA ELCTRONICS

2

3

4

GROUP ?

An independent electronics general trading company that meets every needfrom the customers’ perspective
Demand forelectronic
components

Demand for
assembly
services

Demand for
product designs
and development

Demand for
selling
product

Using the KAGA ELECTRONICS Group’s comprehensive
strengths to assist customers worldwide

３Ｇ● GENERAL● GLOBAL● GROUP（General merchandise）（Global coverage ）（Group resources ）3© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 KAGA
ページタイトル
The
ELECTRONICS Group’s Business Model

What’s

ELCTRONICS
1 KAGAGROUP ?

2

3

4

The one-stop source of services for electronics
A complete lineup of products and services

A complete lineup●General-purpose memories●System LSIs
●Original ICs
Semiconductor●ASICsbusiness

Electronic
components
business●General electronic components●LCD panels Others

EDMS
business

One-stop source of services
Manufacturing Sales
Parts
Planning
Designs
Ideas Developmentprocurement●PCs●Digital cameras●Digital imaging devices© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Informationequipment
business

IT and new
businesses●Main boards forelectronic devices●LCD units●Power supplies

Problemsolving●IP telephone systems●LAN systems●Voice recognition
systems
4

KAGA ELECTRONICS Group History and Sales Growth
2.1 ページタイトル

What’s1 KAGA ELCTRONICS

2

3

4

GROUP ?

The KAGA ELECTRONICS Group has grown steadily along with progressin the electronics industry.

FY07 sales forecast is¥280 billion, up 8.6%

(billion yen)
KAGA (DALIAN) / KAGA IMPEX established
KGF established / KASHIMURA becomes a subsidiaryFYT established

Debut of space invader game in Japan(1978)

KAGA (TAIWAN) /KAGA SOLNET established

KAGA DEVICES (H.K.) established/
DIGITAL MEDIA LAB
becomes a subsidiary
KAGA (THAILAND) established

KAGA (SHENZHEN) TECHNOLOGY DEVELOPMENT established
KAGA (SHANGHAI) established
KAGA (SINGAPORE) /KAGA (KOREA) established
Introduced TAXAN-brand PC monitor(1978)

KAGA (H.K.) established,became Apple Computer sales agent

KAGA DEVICES established/
KAGA COMPONENTS becomes a subsidiary

AD DEVICES
becomes a subsidiary/
DIGITAL GAIN established
Listed on
TSE 1st section

Listed on
TSE 2nd section
TAXAN (EUROPE) establishedStart of CB transceiver boom in Japan(1973))
TAXAN USA established
KAGA ELECTRONICS established(Plan)
5© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

KAGA ELECTRONICS Group Sales by Product2.1 ページタイトル
Category

What’s1 KAGA ELCTRONICS

2

3

4

GROUP ?

Sales Composition by Product Category
Information equipment
business

IT and new businesses

13％

11％

Electronic components
business

22％ Consolidated sales 24％
in first half of FY07
EDMS business(ends March 2007)¥126,183 million

Semiconductor business30％

6© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 ページタイトル
Major
Group Companies

What’s1 KAGA ELCTRONICS

2

3

4

GROUP ?

Group companies in Japan (21)Major KAGA ELECTRONICS Group companies in Japan

Taking full advantage of the group’s technologicalexpertise to launch new businesses

Support extending from semiconductor sales to
EDMS as a Toshiba system integrator

A highly skilled semiconductor trading company
backed by a sales agent agreement with
Mitsubishi Electric and Renesas

Performs EDMS operations for the KAGA ELECTRONICS Group.
Planning, development, manufacturing and sales activities
in Japan and overseas.
OFFICE

Uses expertise in high-resolution images anddesigns to produce computer graphics f
or movies and video games

Total coordinator for digital imaging devices.
General sales agent in Japan for Kodak products.

Manufacturing bases in Japan.
Produces information equipment,
amusement products and other products.

Able to build systems ranging from sophisticated LANs
with powerful security to imaging systems for surveillance.

Sales promotion and content businesses thatuse computer graphics,
Web and other digital technologies

New businesses that use digital technology
and IT for golf and other sports

PLANT

Internet shopping for food products,
nutritional supplements and other merchandise
7© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 ページタイトル
Major
Group Companies

1 What’s

KAGA
ELCTRONICSGROUP ?

2

3

4

Overseas group companies (21 in 12 countries)
KAGA (USA）
Gathers information on the latest advancesin electronics technology and products in
Silicon Valley and other regions andconducts marketing activities.

KAGA DEVICES(H.K.)
Serves mainly Japanese and Chinese TV
manufacturers
in China by selling semiconductors backed bytechnology development activities.
。

KAGA (KOREA)

Exports electronic components from Korea
and sells components to companies in
Korea.

KAGA (TAIWAN)
Export/import of electronic components andelectronic devices. Identification of new
products and information gathering in
Taiwan.

KAGA (SINGAPORE)
The nucleus of electronic component trading
activities in Southeast Asia. Covers Indonesia,
Malaysia, India and other countries in the region.

KAGA (DALIAN)
Sells semiconductors and electronic
components to Japanese and Chinesecompanies in northern China. Established in 2006.

KAGA (H.K.)
The nucleus of the KAGA ELECTRONICS Group’s overseas EMS
business. Offers a main board EMS business for Japanese digital
device manufacturers at its own factory (Kaga (Shenzhen)
Electronics) and five partner factories.

KAGA (SHANGHAI)
An EMS base that serves Japanese digital device manufacturers
located mainly in the Shanghai area. The number of customers is
growing. Major customers include manufacturers of electronic
musical instruments, home healthcare devices, and equipment forhomes.

KAGA (THAILAND)
Offers a main board EMS business for Japanese manufacturers
located in Thailand that produce air conditioners and digital
devices at its own factory (Ayutthaya Factory) and partner factories.
This company has also started to serve automotive device manufacturers .

KAGA (EUROPE) Sales offices in the U.K. and Czech Republic.
Sells electronic components and semiconductors
to the European factories of Japanese manufacturers ofdigital devices and air conditioners. Recently started
an EMS business by using partner factories.

KAGA (SHENZHEN) Electronics Technology Development
Provides extensive technological support to semiconductor
companies in China. Design and development support for
semiconductor companies in Japan. Local design anddevelopment support for the EMS business.

KAGA IMPEXSales of electronic components and devices in Russia. Engaged
in the electronic components and semiconductor business andthe EMS business. Established in 2006.
8© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 ページタイトル
Profileof the KAGA ELECTRONICS Group

1 What’s KAGA ELCTRONICS 2

3

4

GROUP ?

Profile of the KAGA ELECTRONICS Group■Established

September 12, 1968

■Paid-in capital¥12.1 billion (March 31, 2006)■CEO

Isao Tsukamoto, President■Shares listed

Tokyo Stock Exchange, First Section (8154)■Consolidated results

Year ended March 2006:
Net sales: ¥257.7 billion Ordinary income: ¥8.6 billion
Year ending March 2007 (forecast)
Net sales: ¥280.0 billion Ordinary income: ¥8.7 billion■Group companies(September 30, 2006)
42 (21 in Japan, 21 overseas) (September 30, 2006)■Group workforce(September 30, 2006)
4,623 (parent company, 560/group, 4,063)■Group activities

Sales of electronic components and semiconductors
EDMS (outsourced manufacture of electronic devices)

KAGA ELECTRONICS Group Head Office(Ochanomizu, Tokyo)

sales of information equipment; design and development ofsemiconductors and electronic substrates;
production of computer graphics; others

9© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 ページタイトル
マスタ
タイトルの書式設定

2 The Strengths of the KAGA ELECTRONICS Group (10© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

The Defining Characteristics of the KAGA
2.1 ページタイトル
ELECTRONICS Group

1The Strengths of3
2 the KAGA ELECTRONICS Group

4

Strength as a group with no corporate affiliations
Able to establish diverse business relationships with no restrictions
Suppliers: 2,000 companies
Sales channels: 4,000 companies (7,000 accounts)
Information, communication, AV, office,amusement and other products
Overseas operations

Powerful technological capabilities

A global networkwith bases in 13 countries

400 engineers
at the KAGA ELECTRONICS Group5,000 engineers at alliance partners

Japan, U.S., U.K., Germany, Czech
Republic, Netherlands, Russia, China,
Korea, Taiwan, Thailand, Singapore,
Malaysia11© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Diverse and unrestricted relationships with business
2.1 ページタイトル
partners

1

The Strengths of3
2 the KAGA ELECTRONICS Group42,000 suppliers in Japan and other countries
Products sold through 4,000 companies (7,000 accounts)
Suppliers (about 2,000 companies)

Sales channels (about 4,000 companies,
about 7,000 accounts)

Customers are active in many growing market sectors, including
information, communication, AV, office and amusement products
12© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 ページタイトル
GlobalOperations

1

3

2 The Strengths of

4

the KAGA ELECTRONICS GroupThe KAGA ELECTRONICS Group operates on a global scale.
(42 companies in 12 countries)
KAGA IMPEX(RUSSIA)

KAGA (DALIAN),

KAGA (SHENZHEN) ELECTRONICS TECHNOLOGY DEVELOPMENTKAGA (SHANGHAI),ELATEC VERTRIEBS

KAGA (SHENZHEN),GUANGZHOU KEIDENKI,DONGGUAN POWERTEK,
KAGA(SHENZHEN)TRADING

KAGA(KOREA)

KAGA(EUROPE)
KAGA(EUROPE) Czech sales office

KAGA (DALIAN) established in 2006
KAGA ELECTRONICS (Japan)

KAGA (H.K.)
KAGA DEVICES (H.K.)
KAGA COMPONENTS (Hong Kong)
KAGA DEVICE( Hong Kong office)

KAGA USA

KAGA(TAIWAN)

KAGA(THAILAND)KAGA COMPONENTS MALAYSIA

KAGA(SINGAPORE)

A global operation that matches the needs of each customer.
Covers China, Russia, Czech Republic, U.S. and other countries. Makes possible procurement,
manufacturing and sales on a global scale

13© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 ページタイトル
Globalexpansion continues (1) Growth in China

The Strengths of13
2 the KAGA ELECTRONICS Group

4

Aiming to raise annual sales in China to about ¥60 billion;･･･Starting operations in more regions of China and increasing the number of applications
Nine production lines equipped with high-density SMT equipment＜EMS＞

１ factory, ５ partner factories

KAGA H.K.

３partner factories

KAGA (SHANHAI)

Office equipment, ATMs, others
Office equipment, home healthcare devices, automotive devices, others

KAGA COMPONENTS−GUANGZHOU KEIDENKI

１factory

Precision devices ,communication devices−DONGGUAN POWERTEK １factory

Precision devices, communication devices−Kaga Denki (Hong Kong)

Operations Precision devices, communication devices
main boards

AC adapters, power supplies, etc＜Electronic component sales ＞
KAGA DEVICE HK

Head office: Hong Kong

Sales of electronic components, TV and home electronics makers in China(Sales offices: Shenzhen and Chengdu)
KAGA TRADING SHENZHEN Head office: Shenzhen Sales of electronic components ＴV and home electronics makers in China ・Can handle yuan transactions
KAGA (DALIAN)

Head office: Dalian

Sales of electronic components TV and home electronics makers in China ・New sales base

KAGA DEVICE

Hong Kong branch

Sales of electronic components TV and home electronics makers in China＜Development and design ＞
KAGA (SHENZHEN) ELECTRONICS TECNOLOGY DEVELOPMENT Head office: Shenzhen
Development and design of semiconductors and electronic devices＊Established in 2006

KAGA TRADING SHENZHEN ／TV and home electronics makers in China ・Provision of technologies

KAGA (DALIAN)
14© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 ページタイトル
Globalexpansion continues (2) Growth in Asia

1

The Strengths of3
2 the KAGA ELECTRONICS Group

4

More production bases in Southeast Asia
Preparing to expand from Thailand and Malaysia to Vietnam and India＜EMS＞
KAGA THAILAND ‥ One factory, one partner factory
日系メーカー生産拠点の移転。
Air conditioners, office equipment, automotive devices,others
加賀電子生産拠点の中国集中。
KAGA COMPONENT MALAYSIA ‥ Two factories
人件費の増大。
Manufacture of power supplies and AC adapters, precision devices communication devices, audio devices, others
Produces main boards,☆In Vietnam, started office equipment EMS and are preparing to establish local subsidiary☆In India, continuing to sell electronic components and conducting EMS marketing activities

Operations near large markets for finished products
Czech Republic (EMS), Germany, Russia/Eastern Europe (electronic components)＜EMS＞
KAGA ＥＵＲＯＰＥ

Czech sales office

Two partner factories

Produce main boards Air conditioners, office equipment, others＜Electronic components ＞
ELATEC VERTRIEBS GMBH

Germany

Sales of electronic components
営業・生産拠点拡大の要望にあわせ、
ベトナム・インドなどへ進出準備中。

Germany, Bulgaria, Slovakia, Hungary, Poland, Czech Republic, Russia
KAGA IMPEX, LLC

RussiaSales of electronic components/devices
15© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 ページタイトル
Reinforcing
technological skills

1

3

2 The Strengths of

4

the KAGA ELECTRONICS Group

Using alliances with small, fast-growing companies
to further upgrade technology development skills in order to meet customers’ needs
Investing in many small, fast-growing companies in fields
ranging from semiconductors and electronic devices to content and software development

Using collaboration to enhanceskills in developing technologies「STB(Set Top Box)」Engineers at KAGA ELECTRONICS
Group alliance partners: 5,000「CSC Engine 」

Planning and development of
set-top boxes, video-ondemand and other data
communication systems

Planning and development ofcommunication modules

KAGA ELECTRONICS Group

Embedded OS “axLinux”
Development of captureboardsCreation of new businesses
Digital terrestrial wirelesscommunication, IP telephone system,
development of internal brands, others

Dual mode
IP wireless handheld device“WipCom 1000”

Planning and development of
IP wireless handheld device
16© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

3

Topics for First Half of Fiscal 200717

© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Topics (1)Established KAGA HITECH

1

Topics for First Half of2

3 Fiscal 2007

4

Established KAGA HITECH as the nucleus of the group’s informationequipment operations

ITM BusinessPhoto Business

Kodak
Business

Established KAGA HITECH in October 2006;
goal is sales of ¥100 billion in fiscal 2008.

（１）Liquidate or sellmoney-losing
subsidiaries(2) Achieve proper sizeof workforce= Move personnel amonggroup companies●Increase sales by using many sales
channels and a diverse product lineup●Complete revitalization of former
KASHIMURA group in current fiscal year.
Sales of this group’s assets areproceeding as planned, resulting in net
income in past FY and projected profit
in current FY.
課 題●Buildefficient operating structure by
reviewing distribution and personnel
expenses(3) Quickly take steps to makebig changes to distribution
expenses and other aspects of operations

Aim at profitability startingin the second half of fiscal 2007

Build a profitable operating framework by expanding the scale of operations
and raising efficiency through synergies.
18© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Topics (2)Growth of New Businesses

1

2

3

Topics for First Halfof Fiscal 20074

Golf product sales business (FYT) and health food and restaurant business (KGF)
were launched in the prior fiscal year.

wholesale sales of golf products to golf
stores in Japan and the directly operated
Active health food retail stores

Health foods whole selling and operationof Alba curry and Solacche restaurants●Dedicated to low-cost operations--Partial review of directly operated
locations.
●Conducting sports-related
electronics business---Device tomeasure golf club speed, golfswing recording/playback unit.
●Development and sale of original
products---Golf clubs, golf apparel,golf products, etc.

●Open highly profitable stores--Place stores in prime locations thatwill attract targeted customer
segments●Strengthen the wholesale business--Enlarge the lineup of food andrestaurant equipment products●Increase sales using the Internet --Beauty care products, health food, etc.

２００２０年上期から黒字化へ
Profitability
starting in FY07

Profitability starting in FY07
19

© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Topics (3)Advance From EMS to EDMS

1

2

Topics for First Half of

3 Fiscal 2007

4

Becoming an EDMS electronics trading company able to develop technologies
for value-added products

ＥＭＳ

EDMＳ

Electronic device outsourced
manufacturing

Originality

Designing services

Advanced

Rapid growth in demand for productplanning, development and designs

technical skills

Build a group network that can conduct value-added businesses,
using internally created designs to make original products.
Use collaboration with alliance partners to strengthen OEM capabilities for finished and semi-finished products.
Finished products Supply finished products and

DLP projectors.
Sell products using KAGAELECTRONICS’ TAXAN brand.

半完成品

Supply one-seg modules
for digital terrestrial broadcasts.
Targeting one-seg components used in portable devices.
Looking for more applications for this technology.
●Portable DVD players ●Automotive LCD TVs●Portable TVs●PDV20© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Topics (4)Expanding the EDMS Business1

2

Topics for First Half of

3 Fiscal 2007

4

EDMS business strategy--Target more applications, increase production and sales bases●Target more applications

RussiaCzech Republic

China
Japan
Hanoi
India
Thailand
Malaysia●Increase production and sales
bases
China (Shenzhen, Shanghai)Southeast Asia (Thailand, Malaysia)
Eastern Europe (Czech Republic)
Vietnam (Hanoi)
21© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

4

Financial Highlights of Fiscal 2007 First Half
22

© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2.1 ページタイトル
FY07
マスタ
forecast
タイトルの書式設定

1

2

3

Financial Highlights of

4 Fiscal 2007 First Half

On course to meet FY07 targets:
Net sales: ¥280.0 billion (up 8.6%) Ordinary income: up 0.7%
1. Increase sales

Establish many alliances with small,
fast-growing companies in Japan andoverseas in order to expand the scaleand scope of business activities.
⇒ Aggressive stance regarding

Semiconductors: Raise the number of sales
agents Acquire original IP
ＥＤＭＳ ：Expand in terms of applications
and geographic coverage
Information equipment: Capture synergies
within the groupmergers and acquisitions

Major
Majorgoals
goals
2. Cut SG&A expenses
Centralize group administrative functions at
the head office to streamline the administrative
organization and related expenses.

3. Improve the gross margin
Further expand EDMS business
Regional strategy: Grow in Southeast Asia.
Application strategy:
Use marketing activities to target demandin Asia for ATMs and air conditioners.

23© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

(consolidated)
2.1 ページタイトル
マスタ
タイトルの書式設定
FY06
Performanceand FY07 Plan

1

2

Financial Highlights of3

4 Fiscal 2007 First Half(consolidated) FY06 Performance and FY07 Plan(million yen)

FY06

FY07 (Plan)

ChangeNet sales

257,764

280,000

22,236

8.6％

Gross profit

29,54634,200

4,654

15.８％

Gross profit margin

11.5％

12.2％

0.7％

SG&A expenses

21,33625,900

4,564

21.4％

Operating income

8,209

8,300

91

1.1％

Ordinary income

8,638

8,700

62

0.7％

Net income

7,272

5,300

-1,972-27.1％FY06

FY07 (Plan)

ChangeTotal assets

119,441

124,430

4,989

4.2％

Equity49,84153,529

3,688

7.4％

Debt

10,2997,201-3,098-30％
24© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

(consolidated) FY06 Sales and FY07 Plan by Business Category
2.1 ページタイトル
マスタ
タイトルの書式設定
1

2

Financial Highlights of3

4 Fiscal 2007 First Half(consolidated) FY06 Sales and FY07 Plan by Business Category(million yen)

Net sales

ChangeCategory
FY06

FY07 (plan)

Amount%Informationequipment

55,33665,80010,46418.9％

EMS

86,646

90,200

3,554

4.1％

Semiconductors

69,86663,900-5,966-8.5％

General electronic
components

24,39325,200807

3.3％

Others21,521

34,90013,379

62.1％

Total

257,764

280,000

22,2388.6％
25© 2006 KAGA ELECTRONICS CO.,LTD All Rights Reserved.