Aero Engine, Space & Defense Business
Area Briefing
September 20, 2023

Hideo Morita
Director, Managing Executive Officer, and Presidentof Aero-Engine, Space & Defense Business Area
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Contents
1. Business Area Outline
2. Business Environment Outlook and Assumptions
3. Aero Engine, Space & Defense Business Area Initiatives(1) Segment Strategies Based on Group Management
Strategies 2023
(2) Business Strategies to Reach Performance Targets

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1. Business Area Outline

Hideo Morita,Managing ExecutiveOfficer• Defense Systems Division(Consolidatedbasis)

6,981• Rocket Development

Parentcompany

4,177

Business head
Number ofemployees(as of March31, 2023)• Civil Aero-Engine Division

Department

Businessstructure• Space Systems BusinessPreparation Office Research& Engineering Center• Production Center• Lifecycle Solutions Center

Operating Results
Billionsof yen500• Transformation Center

Consolidated
revenue
492.2

Operatingmargin480.8
480FY2022 Revenue Composition
400364.1

300
251.5

7.1

265.2

200
1000

* Consolidation since FY2020 based on International Financial
Reporting Standards
Copyright © 2023 IHI Corporation All Rights Reserved.

Space utilization and rockets%Defense

29.6 %
63.3 %
Civil aeroengines31. Business Area Outline: Product Lineup
Businesses

Key Products

Civil aeroengines
Source: *2

Source: *1

GE9X

GE90

Source: *4

Source: *3

GEnx

V2500

Source: *5

Source: JAEC

PW1100G-JM

CF348/10

Source: *6

Passport20

Defense
Aircraft engines
Gas turbines formarine vessels

F135

Source: *7

Equipment

LM2500F7

CIWS＊１

F100

Nuclear, biological, Decontaminationsets
and chemical alarms

SpaceDevelopment
H3

Image
from JAXA

Epsilon

Image
from JAXA

Source: *8CompactrocketRocket turbo
pumps

Nanosatellites*1）CIWS：Close in Weapon System

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Satellite dataapplication
solutionsSpace Station
Image from JAXA

Hayabusa
recovery capsule
Image from JAXA

Note: See slide 16 for sources4

2. Business Environment Outlook and Assumptions
Civil Aero-Engines✓ Global aviation demand should largely recover by 2024
✓ Ongoing supply chain disruptions and price hikes → need to bolster financial strength✓ Competition intensifying to develop light, electrified, and other fuel-efficient products(carbon-neutral)
Hours in service(1000s)

Civil aero-engine operating hoursand number of units serviced

Number of units

Initial defense budgets

10

Numberof units

9

Hours in service

8Trillions of yen

765432
2019

2020

2021

2022

2023

2024

V2500, CF34, GE90, GEnx-1B and PW1100G

2025

10
2019

2020

2021

2022

2023

2024

2025

Defense and Space✓ Defense: Cabinet decision on three national security documents→ Government policy to dramatically reinforce defense capabilities and lift defensebudget✓ Space: Global market to expand, primarily for satellite services→ Market to triple to more than ¥100 trillion by 2040
✓ Defense and Space: Satellite data-based solutions business expanding across bothfields
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5

2. Business Environment Outlook and Assumptions➢ With global demand for aircraft poised to steadily expand, IHI participates in programs todevelop and mass-produce best-selling engines all classes, from small through large andsuper-large models➢ Refining proprietary technologies across domestic supply chain and tackling the world market
First generation
Number of aircraft

Fleet mix forecasts for passenger jets
TO DATE

Second generation

Seat capacities
Seatcapacities

FUTURE

Around 3% annual growth

Source: *1

GE90 (B777)
IHI share: 9%• In service since 1995

Source: *2

GEnx (B787)
IHI share: 13%

Source: *5

GE9X (B777 successor)
IHI share: 11%• Type recognition
obtained in 2022
• In service from 2025

• In service since 2011

Source: *3

Source: *6

V2500 (A320ceo)
IHI share: 14%

PW1100G-JM(A320neo)
IHI share: 15%• In service since 1988

• In service since 2016

Source: *4

Source: Japan Aircraft Development Corporation

Passport 20
CF34(Bombardier and Embraer RJ) (G7500/8000)
IHI share: 27%
IHI share: 27%• In service since 2001

Copyright © 2023 IHI Corporation All Rights Reserved.

Source: *7• In service since 2018

Note: See slide 16 for sources62. Business Environment Outlook and Assumptions
Attributes of civil aero-engine business
25,000• Advanced technology requirements• Large initial investments• Payback
20,000 over 15 to 20 years
・PW1100G-JM ・V2500
・Passport20・GE90
・GE9X
・CF34・GEnx

15,000Investment for Development Commercial
advanced R&D phaseproduction
10,000phase

Payback phase

Typical profitability
curve
5,000

累計損0益Launch▼(5,000)(10,000)

Investment foradvanced R&DDevelopmentInitial
production

Commercial
production

Spare parts/maintenance,repair, and operations➢ As more programs enter payback phase, investing extensively in developing advanced
technologies is also necessary to tackle challenges in those areas
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7

3. Aero Engine, Space & Defense Business Area Initiatives(1) Segment Strategies Based on Group Management Strategies 2023
We have positioned the aero-engines and rockets as growth businesses:• As well as reinforcing and expanding our civil aero-engine and defense fields, we will drive
growth by overhauling our businesses• We will create new business areas from lifecycle and value chain perspectives

Initiatives for next-generation aircraft

Expanding businesses fromlifecycle and value chain
perspectives●

Lightweighting Technology●

Electrification technology●

Sustainable aviation fuel and synthetic fuelEco-friendly and economically viable carbon-neutral aircraft

Strengthen
existingbusinesses

Operating climate: Returning to growth after pandemic
downturn, with defense sector demand increasing

Space, terrestrial, andundersea datautilization initiatives

Reinforce aero-engine
business
●

●

●

●

●

Improve gas turbine performance
Develop engines for nextgeneration fighter aircraft
Apply proprietary technologies on
next-generation engines
Establish new maintenance sites
Expand materials businesses●

Fortify rocket business●

Boost profitability and asset efficiency
dramatically by tapping digitaltechnology to overhaul production

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●

Increase production structure to meetgrowing defense demand●

Reinforce solid rocket competitiveness●Establish launch service business

提供：JAXA

Surveillance and defense
systems
Collaborate with partners inusing satellites for vessel
surveillance, forest
management, and otherpurposes83. Aero Engine, Space & Defense Business Area Initiatives(1) Segment Strategies Based on Group Management Strategies 2023

Earnings targets
Billions of yenCivil

DefenseSpace

Operating profit

520.0
520
500

480.8
480

120

430.0
430
400

80

364.1
364

60.0
51.0

300

40.3
244.6
251

265.2
265

40

36.1
403 → 40.3-404 --> -40.4

200-9.3-93 → -9.3

0361 → 36.1
1000-40.1

510 → 51.0
600 → 60.0-40-80• Revenue bottomed out in FY2020, and should recover to pre-pandemic level by FY2025• Returned to profitability in FY2022; operating margin should stabilize at 10% from FY2022
Copyright © 2023 IHI Corporation All Rights Reserved.

93. Aero Engine, Space & Defense Business Area Initiatives(1) Segment Strategies Based on Group Management Strategies 2023
Civil aero-engines business revenues
Revenue

Billions of yen
400※After Market他には，MRO，下請け等を含む。

Unit sales of engines

300
200
1000

Billions of yen
5040

Civil aero-engine maintenance, repair, andoperations sales

DAT

Billions of yen
200

Repair

30150

Spare parts sales for key models

Large andultra large

MidsizedSmall10020105000*Figures from FY2023 are projections; forex assumption for revenue is ¥130 to US$1

• Sales up steadily for PW1100G-JM engine (on Airbus A320neo) offering excellent fuel efficiency• Sales of spare parts, particularly for small and mid-sized aircraft turning around in line with passenger
demand recovery
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10

3. Aero Engine, Space & Defense Business Area Initiatives(1) Segment Strategies Based on Group Management Strategies 2023

Earnings Analysis
Factors in operating profit changes for FY2022 through FY2025
Billions of yen

IncreaseDecrease

Total

70

60.0

60

51.05040
400
36.1

3020

100
FY2022Forex
reaction

Reactions tosubsequent

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Changing
business climate

Strengthen
R&D and other growthearnings
investments
foundations

FY2023
forecasts

Strengthen
earnings
foundations

FY2025
forecasts

11

3. Aero Engine, Space & Defense Business Area Initiatives(2) Business Strategies to Reach Performance Targets

Civil aero-engines (pursuing carbon neutrality)
Lightweighting technologies

Ceramic matrix
Composite fan blades composite turbine
bladesInnovative engines

Fiber-reinforcedthermoplastic
airframe structure

Electrification and hydrogen propulsion technologies©Boeing

Source: *3

Source: *6©Airbus

Source: *7

Revolutionary aircraft
Highly heat-resistant motors

Hydrogen tanks
Source: *4

Source: *2©Universal Hydrogen

Fuel cell propulsion aircraft

Source: *5

Hybrid electric propulsion aircraft

Source: *1

Gas turbine engines

2020

2030

Driving advances with conventional aircraft
Aircraftpropulsion
systems
Fuel
diversification

Improve conventional aircraft and engines

2040

2050

Exploring revolutionary aircraft and technologies
Revolutionary aircraft and engines

Sustainable aviation fuel (biofuel → synthetic fuels)

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Carbon neutral(Effectively zero carbon
dioxide emissions)Hydrogen and fuel cells, etc.
Note: See slide 16 for sources12

3. Aero Engine, Space & Defense Business Area Initiatives(2) Business Strategies to Reach Performance Targets

Defense business
Cabinet decision on three national security documents leading to government policy to dramatically reinforce defense
capabilities and lift defense budget◼ Priority capabilities in ramping up defense capabilities → Major priority projects• Standoff defense and integrated air defense missile → Missiles and rocket motors
defense capabilities→ Including drones and unmanned underwater vehicles• Unmanned asset defense capabilities• Cross-domain operational capabilities and command → New engines, information-gathering satellites, and ocean surveillanceand control and information-related functions→ Expand engine auxiliary parts sales and conclude comprehensive agreements• Durability and toughness

Service scope◼ Positioning defense production and technological foundations as defense capability→ Boost profit margins, engage in Japan-led international joint development, and transfer defense equipment overseas

DefenseMinistrybusinessFuturebusinesses

F100 engine (for defense equipment transfer)

Image Source: Ministry of Defense (*1)

Existingbusinesses

Globalbusiness

Next-generation Global Combat Air Programmefighters → International joint development

Customer scope

Unmanned underwater vehicles
Marine surveillance → Multiregional surveillance
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(*1) https://www.mod.go.jp/j/press/news/2022/12/09a.html

13

3. Aero Engine, Space & Defense Business Area Initiatives(2) Business Strategies to Reach Performance Targets

Rocket systems and space utilization businessSolutionsprovision

As well as developing,manufacturing, and providing
launch services for rockets andsatellite components, we look topartner with other companies toprovide solutions that help
customers resolve their issues

Source: *1 https://www8.cao.go.jp/cstp/anzen_anshin/20221021_meti_3.pdf

Source: *1

VDES Satellite
constellation

Vessel monitoring(VDES)Forestmanagement

Epsilonlaunch services
Ocean
surveillance

Launchservices

Understanding
space
conditions

Development,manufacturing,and parts supply

Nanosatellites

Rocket andsatellite
manufacturing

提供：JAXA©スペースワン

Small commercial rockets
提供：JAXA©NASA
提供：JAXA

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iOMS : IHI Ocean Monitoring Service
AIS : Automatic Identification System
VDES: VHF Data Exchange System

14

3. Aero Engine, Space & Defense Business Area Initiatives(2) Business Strategies to Reach Performance Targets

Overhaul production efficiency and business structure through newTransformation Center
Leverage robust digital infrastructure to deliver world-class production efficiency and profit margins
equal to exceeding those of original equipment manufacturers
Operate as specialized reform organization that integrates design and manufacturing and unites withall business units and the Production and Research and Engineering centers to create andembed reform-centric culture that always takes on new challenges without fear of failure
Attain world-class production efficiency
Deploying zero defect initiatives as first step instreamlining production
Streamline
production
Technological transformation
Zero defects
World-classtechnological competitor

In line with our our endorsement of the GX
League*, we formulated plans to cut electricity
consumption at each works, and are pursuingcarbon neutrality for works and our products
Address social issues

Data-driven production

Developmentprocess
reformsBusinessstructurereforms

Carbonneutrality

MBSE - MBD

One Mirai ProjectFactory✓ CutTransformation
carbon dioxide
emissions by 20% byFY2025✓ Attain world-class digitalengineering✓ Maintain innovative
development design cycle✓ Enhance operational efficiency
by adopting processes basedon global standards✓ Halve indirect work

* The GX (for green transformation) League is a forum for companies to discuss ways to achieve
economic growth and reform social systems through initiatives to achieve carbon neutrality by 2050.
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15

Links for Sources
P. 4*1 https://www.geaviation.com/commercial/engines/ge9x-commercial-aircraft-engine*2 https://www.geaviation.com/commercial/engines/ge90-engine*3 https://www.geaviation.com/commercial/engines/genx-engine*4 https://www.mtu.de/engines/commercial-aircraft-engines/narrowbody-and-regional-jets/v2500/*5 https://www.geaerospace.com/propulsion/commercial/cf34*6 https://www.ihi.co.jp/all_news/2016/aeroengine_space_defense/1190378_1652.html*7 https://www.prattwhitney.com/en/products/military-engines/f135*8 https://www.space-one.co.jp/gallery/

P. 6*1 https://www.geaviation.com/commercial/engines/ge90-engine*2 https://www.geaviation.com/commercial/engines/genx-engine*3 https://www.mtu.de/engines/commercial-aircraft-engines/narrowbody-and-regional-jets/v2500/*4 https://www.geaerospace.com/propulsion/commercial/cf34*5 https://www.geaviation.com/commercial/engines/ge9x-commercial-aircraft-engine*6 https://www.mtu.de/maintenance/commercial-aircraft-engine-services/engine-portfolio-mro/narrowbody-and-regional-jets/pw1100g-jm/*7 https://www.ihi.co.jp/all_news/2016/aeroengine_space_defense/1190378_1652.html

P. 12*1 https://www.prattwhitney.com/en/newsroom/news/2022/10/04/pw-gtf-advantage-tm-flight-testing-starts-on-airbus-a320neo-aircraft*2 https://hydrogen.aero/press-releases/universal-hydrogen-successfully-completes-first-flight-of-hydrogen-regional-airliner/*3 https://www.cfmaeroengines.com/wp-content/uploads/2021/07/CFM_RISE_Whitepaper_Media.pdf*4 https://blog.geaerospace.com/product/the-future-of-flight-engine-maker-unveils-new-technology-development-program-to-cut-co2emissions-by-20/*5 https://www.mtu.de/newsroom/press/press-archive/press-archive-detail/clean-aviation-switch-project-to-advance-hybrid-electric-andwater-enhanced-turbofan-technologies/*6
https://www.boeing.jp/%E3%83%9B%E3%83%BC%E3%82%A4%E3%83%B3%E3%82%AF%E7%A4%BE%E7%B4%B9%E4%BB%8B/%E3%82%B5%E3%82%B9%E3%83%86%E3%83%8A%E3%83%93%E3%83%AA%E3%83%86%E3%82%A3.page.page*7 https://www.airbus.com/sites/g/files/jlcbta136/files/2021-06/Full%20-Report-Airbus-SE-Annual-Report-2020.pdf

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16

Forward-looking figures shown in this material with respect to IHI’s performance outlooks and other mattersare based on management’s assumptions and beliefs in light of the information currently available to it, andtherefore contain risks and uncertainties. Consequently, you should not place undue reliance on these
performance outlooks in making judgments. IHI cautions you that actual results could differ materially fromthose discussed in these performance outlooks due to a number of important factors. These important factors
include political environments in areas in which IHI operates, general economic conditions, and the yen
exchange rate including its rate against the US dollar.