Seiko Holdings Corporation
FY2018 Consolidated Results & 7th Mid-Term Management Plan Presentation
Summary of Q&A

Date:Thursday, May 16, 2019, from 3:00-4:15 p.m.

Place:TCCI Grand Hall,
the Tokyo Chamber of Commerce and Industry

Summary of Q&A :<FY2018 Results>
Q1. Please tell us about sales trends by region for watches in the 4th quarterof FY2018.
A1. The Watches Business achieved increases in earnings and profit forcompleted watches throughout FY2018. We believe we were able toachieve certain results amid the severe market environment in Japan andoverseas.
Conditions in Japan were tough in the first half, as factors including
typhoons and earthquakes had a significant impact on demand fromvisitors from overseas. However, the situation improved in the second half.
Overseas, looking first at the U.S., Grand Seiko (GS) made it into the top
10 in a ranking of watch brands in the $5,000 – $10,000 price range. In
the Asia region, we had a very strong first half, but trade friction between
the U.S. and China began to have an impact on affordable watches in the4th quarter. The pace dropped, particularly in China where pricecompetition has become fiercer in the e-commerce market, which has
grown considerably. Swiss watch brands are thought to be on a recovery
track in the global market, but even those brands performed poorly inEurope. Seiko’s situation in Europe is stable. Even so, we believe it is themost challenging of our markets, partly due to the impact of politicalfactors.
Under the Seventh Mid-Term Management Plan, we will strengthen
efforts in the U.S. and China, which are showing results.

Q2. Overseas net sales of GS tripled during the three years of the Sixth
Mid-Term Management Plan. What features make it popular withconsumers?
A2. Identity is the most important feature for high-end watches. We believethat GS is highly regarded for its made-in-Japan quality, design and brand1

story, including Japanese craftsmanship and sense of beauty.

Q3. The Electronic Devices Business posted a deficit in the 4th quarter ofFY2018 due to the impact of the current slowdown in the Chinese
economy. Do you see any signs that the situation will recover in thecoming fiscal year?
A3. The U.S.-China trade friction, which is a major factor behind the Chinese
economy’s slowdown, has intensified in May, and the outlook is extremely
difficult to foresee.

Q4. Regarding that trade friction, a fourth round of additional tariffs, which
include watches, were announced on May 13. What impact do you expect
this to have?
A4. We might need to consider adjusting prices, reviewing manufacturingbases and other measures, while keeping an eye on the situation at ourcompetitors. However, the U.S. tariff system is complex, so responding to
it is not an easy matter. To begin with, we carefully monitor the situation.

<7th Mid-Term Management Plan>
Q5. The Seventh Mid-Term Management Plan is positioned to take “anaggressive approach” that will lead to winning. What is your vision of“winning”?
A5. Firstly, we will achieve an operating profit ratio of 5% in the third year of
the new Mid-Term Management Plan. At the same time, we will further
strengthen investment over the plan’s three years. After that, we willrealize our vision for FY2025 and make progress in cash collection tofurther reduce borrowings. In addition, we will develop and raiseawareness of GS as a global brand, while making SEIKO a beloved andfamiliar sports brand.

Q6. What are your investment plans under the Seventh Mid-Term
Management Plan?
A6. We will make capital investments of ¥12.0 billion during the first year, at ahigher pace than depreciation expenses. We expect the level ofinvestment to exceed depreciation expenses during the three years of theplan. We will be making investments for growth for some time to come.
From the end of the three-year period, it will be time to prepare to steadily2grow the business into the next three years. So we believe the amount ofinvestment will be higher in the plan’s early phases.

Q7. Are you going to increase capital investment and advertising andpromotion expenses during FY2019? What kind and size of investment
will you make in advertising and promotion?
A7. Our product mix varies according to changes in market structure. We
therefore need to enter the corresponding distribution channels.
In Japan, products in the ¥100,000-and-over range already account for
more than half of our sales. Going forward, we will invest in various
channels including enlarging stores and strengthening Seiko-operatedboutiques.
As for overseas, in addition to these initiatives, considerable investment
will be associated with the shift to different distribution channels as aresult of changing the product mix to focus on global brands. We havealready begun collaborating with luxury-watch distribution channels in theU.S. and China and plan to increase spending on sales promotion. We
also intend to accelerate investment in digital media.
In monetary terms, we will invest around two or three billion yen eachfiscal year.

Q8. Please tell us your perspective on the watch market overall during thethree years of the Seventh Mid-Term Management Plan, and your viewson high-end and affordable watches, smartwatches, and other products.
A8. The watch market underwent major structural changes in FY2016. It later
returned to a gradual recovery track. At first glance, the overall market
appears to have entered a period of stable growth. However, thecontraction of the market for affordable watches that began in FY2016
has continued. Meanwhile, the high-end watch market has started
growing again, mainly for Swiss brands. The dramatically changed
industry situation of FY2016 has become the new normal and is expected
to continue.
Smartwatches are expected to capture a certain amount of the affordable
watch market. When formulating the plan, we also assumed that luxury
watches would perform steadily.

Q9. High-end watches will be strengthened under the Seventh Mid-Term
Management Plan. What strategies will you implement for mid- andaffordable watches?
3

A9. Although the market for affordable watches is shrinking worldwide, it is ofsome size for Seiko. In particular, we plan to expand our share byfocusing efforts on launching products that target millennials andGeneration Z.

Q10. How will you change the cost structure of the Systems Solutions Businessunder the Seventh Mid-Term Management Plan? Why is growth so low
under the new plan?
A10. We will continue to enhance the three initiatives we have been working on,
namely Amoeba Management, commitment management and highperformance culture.
We will ensure that we achieve the target values of the new Mid-TermManagement Plan and aim for further growth.

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