4.  Research and Development

The Company has established a subsidiary, namely, The Siam Research and
Development Co., Ltd., on July 1, 1997. It was transformed from Research
and Development Center (Bangkok) of The Siam Cement Public Company
Limited and obtained the BOI privileges on January 4, 1991, and was
registered as a research company at The Ministry of Finance on July 4,
1997.

Apart from various technology research and development, the Company owns
analysis and test laboratories in chemistry, physics, and product test
to handle with increasingly important test service. The laboratories
attained ISO/IEC 17025 certification from The Thai Industrial Standard
Institute for export analysis and test of every type of portland cement,
raw materials for cement and concrete durability.

Mission of The Siam Research and Development Co., Ltd.

1.  Create new commercial product.

2.  Improve production process for better product quality.

3.  Reduce production cost by finding raw material substitute.

4.  Explore new utilization of industrial waste.

5.  Provide technical service for business units.

Research is divided into four aspects:

1.  Fibre-Cement Technology Provide technical know-how for glazed and
    unglazed fibre-cement products, e.g. roof tiles, flat sheets, louver
    tile, ridge tile, and AC pipe. The research and development covers
    quality enhancement, raw material development, process development,
    new product development, cost reduction, and waste recycle.

2.  Cement Technology Research on cement products such as portland
    cement, dry mortar, and special type of cement. This includes new
    product development, cost reduction, pollution reduction, raw
    material reuse, and product quality improvement.

3.  Concrete Technology Emphasize on high performance concrete,
    durability of concrete, super high early strength concrete and
    concrete additives.

4.  Ceramic and Refractory Technology Research on ceramics products such
    as ceramic tiles, sanitary wares, and refractory, etc. Services
    comprise new product development, new raw material, and formula
    adjustment to reduce cost. Besides, research equipment, i.e.
    characterization tools, and processing tools for ceramics are
    available.

In the last five years, the Group incurred research and development
costs as follows:

+-------------------+---------+---------+---------+---------+---------+
| Year              | 1999    | 2000    | 2001    | 2002    | 2003    |
+-------------------+---------+---------+---------+---------+---------+
| Million Baht      | 76      | 64      | 67      | 70      | 62      |
+-------------------+---------+---------+---------+---------+---------+

Even though most production technology of the Group has not rapidly
changed, especially in cement, building products, and ceramics fields.
Each company department still pursues technology progress as well as
cooperates with The Siam Research and Development Co., Ltd. Regarding
Petrochemical Business, new technology has consistently been introduced,
both through learning from venture partners who own the technology and
buying from foreign technology owners. This leads to product quality
over market standard and cost reduction in the long run.

In addition, some businesses have themselves researched and developed
qualified products and services to meet customer needs. Examples are:

Cement Business Continuously research on many types of cement, stressing
on a variety of application and international standard quality, to
respond to each customer segment and support its technological
leadership. In 2003, the Company launched new products, e.g. “Tiger
Plus” Cement, “Elephant” Marine Cement, “Elephant” Oil-Well Cement,
“Twin Tigers” Aerated Bricklaying Cement and “Twin Tigers” Acid
Resistant Tile Grout, etc.

Petrochemical Business Three main objectives are cost reduction, higher
value-added product development, and production process and supportive
process efficiency development. This ranges from short-term (6 months)
to long-term (3 years) plans as follows:

1.  Cost Reduction

  The Company has made a research and development on key raw materials
  to lower their costs, enabling it to better compete in local and
  foreign markets. Moreover, modification of some raw materials
  differentiates better products than rivals.

2.  Higher Value-Added Product Development

  The Company set up product development teams to respond to changing
  customer needs as well as consistently develop new products for both
  local and overseas markets. Besides, it improves its marketing
  strategy to step into industrial products to add more revenue. Plastic
  substance for automotive components, electrical appliances, various
  types of containers, water pipes, and water storages are examples.

3.  Production Process and Supportive Process Efficiency Development.

  The Company adheres to the policy to consistently improve production
  process to be safe, reliable, and most efficient. Capacity was
  expanded via existing assets. Production process was upgraded to lower
  cost as well as adjusted to produce new valuable and higher-priced
  products. Information technology was also applied to speed up all
  business procedures precisely, and most efficiently with lowest cost.

Paper and Packaging Business Established The Research and Development
Center for Paper and Packaging Business to improve product quality,
meeting customer needs, and improve production process. This leads to
lower cost, hence being competitive in domestic and overseas markets. In
addition, raw material and new product production process development
are encouraged to build competitive advantages and reduce import
technology.

In 2003, The Research and Development Center founded Technology
Information and Training Unit to strengthen the business in the long
run. Its task is utilizing efficient information software to allocate,
share, and rapidly create the Knowledge Management to counter the
changing markets. Besides, pulp and paper technology training courses
are implemented to boost staff potential and organization innovation in
the future.

In the last four years, The Paper and Packaging Business incurred
research and development costs as follows:

+----------------------+----------+----------+----------+-----------+
| Year                 | 2000     | 2001     | 2002     | 2003      |
+----------------------+----------+----------+----------+-----------+
| Million Baht         | 12.7     | 12.7     | 12.6     | 15.9      |
+----------------------+----------+----------+----------+-----------+

 Distribution Business Business Development Unit utilizes knowledge, marketing information, and customer needs to readdress customer service processes and explore new products both within and outside the Group. Examples include logistics, product assortment, product display, after sales service, etc. All help trade partners sell more and increase customer demand.