Q&A at IR Briefing for Financial Results
for the First Half of Fiscal Year Ending March 31, 2022
November 1, 2021
NEC Networks & System Integration CorporationQuestioner A
Q: Profit margin in the Digital Solutions (DSL) segment is lower in the second quarter (Q2:Jul. - Sept.) than in Q1 (Apr. - Jun.). Apart from the impact of the semiconductor
shortage, what else caused this?
A: When you look at this on a quarterly basis there will always be some fluctuations given
the varying profitability of individual projects, so that has an impact on profit margin,but in comparison to the same period in the previous fiscal year, we managed to firmly
improve profitability in Q2 as well, and view this as an ongoing trend of improvement.
Q: You were impacted by the semiconductor shortage in the first half of the year. How long
do you expect this to continue in the second half of the year and beyond?
A: We see the current severe situation continuing until around Q3, and forecast a similar
impact in the second half as the first half. Aside from semiconductor issues, in thesecond half of the year we also expect to be impacted by issues such as difficulties
procuring components produced in Southeast Asia and elsewhere due to COVID-19
lockdowns, and we also think that some projects may be postponed to the next fiscalyear.
Q: With the decrease in COVID-19 infections, we are seeing a trend of workers returning tooffices. Are there any strategic changes in response to this changing environment?
A: There is a trend of workers returning to offices in the near term, but we do not believe
this will be a complete return to pre-pandemic levels. It is necessary to make smart useof the respective advantages of working from home and working in the office toproduct results, and we will continue to promote that kind of hybrid work. The key tothat will be digital technologies, and as service-oriented DX businesses expand in
response to COVID-19, our business model itself has also shifted to a so-called hybridtype business model that leverages service-oriented business to enhance SI business.
Our perception is that things are heading in a positive direction, and we will accelerate
those trends.
Questioner B
Q: Please summarize the impact of the semiconductor shortage in the first and secondhalves of the year on a per-segment basis. Would it be correct to assume that you havealready incorporated in impact on the second half in your forecast figures? Additionally,in what ways will you response to the semiconductor shortage?
A: In the first half, there was a negative impact of a little more than 5 billion yen on net
sales, mainly in the Engineering & Support Services (ESS) segment. We calculate thatthe negative impact on profit was just under 1 billion yen. We have incorporated asimilar impact on net sales and profit into our forecasts for the second half of the year.
There are still some uncertainties, but we expect each segment to be impacted toroughly the same degree as the first half.
In response to the semiconductor shortage, we are thinking of ways to cover theproducts we cannot procure with other products. At the same time, we are considering
making revisions to our work processes so that we can proceed first with those tasks
that do not involve products that take a long time to procure.
Q: Regarding the results from the first half of the year, you revised your forecasts upwards
but failed to meet them. Additionally, in the Network Infrastructures (NWI) segment, thefull-year forecast was revised upward despite not meeting the forecast in the first half.
What is the thinking behind this kind of disconnect? In the first half of the year, were
there factors other than the semiconductor shortage warranting a downward revision?
A: The impact of the semiconductor shortage was the main factor in failing to meet therevised forecasts in the first half of the year, but apart from that, in the DSL segment thespeed of service development increased, and in some cases the time from order receipt
to when those sales were recorded took longer than expected.
For the NWI segment, we have performed strongly with telecom carriers, and since theorder backlog has also increased, we made an upward revision in light of thosecircumstances.
Q: On the local 5G front, is there any quantitative progress in terms of results, plans orotherwise?
A: Regarding local 5G, at this stage demonstrating testing is picking up speed and we arestill aiming for more than a billion yen per year. We intend to expand this over thecourse of the next medium-term management plan, and that plan is currently being
prepared.

Questioner C
Q: There is a sense that your business will benefit from Japan's new Digital Agency. What
areas are you thinking of targeting?

A: While it won't be directly from the Digital Agency, we think it will be a boost. For
example, areas such as safety and security, disaster prevention and community
development, as well as workstyle innovation, which is one of our strengths, are twofields where we think this will apply.

Questioner D
Q: The semiconductor shortage and component procurement risks are issues that allindustries are grappling with, but within those circumstances, where to NESIC's
strengths and challenges lie?
A: It is difficult to make comparisons with other companies, but speaking for ourselves,
under the conventional product SI model, almost all of our businesses would have been
impacted, but since we have successfully shifted to a solution service model, we could
say that has reduced the impact.

Questioner E
Q: You are doing well on orders, but won't the semiconductor shortage require you to holdoff on accepting orders.
A: We had to give up on winning some projects expected in the first half of the year, but inour forecasts for the second half, we have reconsidered project feasibility andincorporated those findings into our plans for accepting orders.
Q: For the DSL segment, you mentioned strong performance with DX for government
offices and local governments, but what is the situation with private sector demand?
A: Overall demand is rebounding, but there is a year-on-year decline as a recoil from strong
performance in the previous period with many projects for the financial sector. For theservice industry, performance has been flat since the first half of the previous year, whilein terms of other companies, including those in the manufacturing sector, orders are on
the rise.
For government offices and local governments, the amounts involved with the orders
have dropped significantly, but this is a reactionary decline from the large amounts
related to the GIGA School program in the previous year, and if those factors areexcluded, performance has expanded as you noted.
Questioner F
Q: We have heard that the Digital Agency will also be taking the lead on digital projects for
local governments, but how do you perceive the intentions of prefectural governments

that already have projects in motion?
A: For our part, since the effects from digitization are promising, we want to help ourcustomers move forward on those endeavors as quickly as possible.
Questioner G
Q: In your Q1 financial results briefing we heard that the semiconductor shortage had not
yet become apparent. From around when did it become apparent?
A: It became apparent from around August. At first, it was at the level where we could cover
the shortage through other options, but we gradually saw the impact increase.
Q: You mentioned that you carefully examined ordered projects in the second half of theyear in response to the semiconductor shortage, but will it be possible to continue
without compromising operations by shifting resources, etc.?
A: In terms of orders, we saw continued strong performance in the second quarter. We haveincorporated some factors such as being unable to handle projects due to thesemiconductor shortage, but in the second half of the year we believe we can maintainthe same strong performance from orders.