4.  Research and Development

Research and development are main parts of SCG’s vision and also SCG’s
goal to develop the organization to a leader of ASEAN.

SCG has established a subsidiary, namely, The SCI 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.

Mission of the SCI Research and Development Co., Ltd.

1.  Create new commercial products or add value to commercial products.

2.  Improve product quality.

3.  Reduce production cost by finding raw material substitute.

4.  Provide technical service for business units.

Research and development projects were given emphasis to cement products
including Portland cement, dry mortar and other special cements. Those
projects consisted of developing new products, saving production cost,
improving production process, reducing contaminated pollution resulting
from production process, finding substitute raw material and improving
quality of existing products. Moreover, other research and development
projects included finding new materials to use in construction.

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.

In addition, each business has researched and developed qualified
products and services to meet customer needs by establishing research
and development units of each business which are Research & Technology
Planning – Polyolefins of Chemicals business, The Research and
Development Center of Paper business and Innovation & Technology office
of Building Materials business.

Chemicals Business

In addition to cost reduction activities in which the Company has
continuously improve in 2006, the Company has reorganized its research
and development structure by emphasizing on High value added product
development, production process and supportive process efficiency
development to increase the Company’s competitive advantage as follows:

1.  Higher Value-Added Product Development

  The Company has set up product development teams to produce Technology
  Roadmap as well as to consistently develop new products for both local
  and overseas markets. Moreover, the Company has carry out research and
  development into producing high value-added products focusing on
  innovative products and specialty chemicals in response to changing
  customer needs. The Company has also engages in research and analysis
  in both markets and technology to add more products into the market
  such as plastic components for automotive, electrical appliances, and
  various types of containers, water pipes, and water storages.

2.  Production Process and Supportive Process Efficiency Development.

  The Company adheres to the policy to consistently improve production
  process to be safe, reliable, environmentally friendly and most
  efficient. 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.

The Company has successfully formed collaborations with universities and
research institution to support the Company’s innovation development in
line with the rapidly changing industry requirements. This strategy
should increase the Company’s competitive advantage significantly.

Paper Business Established The Research and Development Center, under
The Siam Pulp and Paper PLC, registered to be a research and development
center according to the announcement about tax (4^(th) issue) by the
Ministry of Finance. The objectives of the center are to research and
develop the product of the Business, 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 production process development are encouraged
to build competitive advantages and reduce import technology.

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.

Cement Business The Company continuously researches on various types of
cement, along with emphasizing a variety of applications and
international quality standards, to respond to each customer segment and
to support its technological leadership. During the past few years, the
Company has focused on research and development including a planning in
marketing strategy for the latest innovative products, e.g. Elephant
Precast Cement, Elephant Chloride-and-Sulfate-Resisting Cement, Twin
Tiger White Plaster Mortar, Twin Tiger Fine White Plaster Mortar, Twin
Tiger White Skim Coat, etc. Moreover, The Company has researched and
improved CPAC ready-mixed concrete to have special properties for
specific application needs, for example, CPAC Waterproof Concrete in
coating a swimming pool floor, CPAC Freezing Room Concrete using in
frozen food factory, etc.

Building Materials Business Research and Development is a vital part in
developing new products, improving a better product quality to be over
market standard and reducing production costs in the long run. The
business established a Research and Development unit to control and
follow up as well as improve production process so as to deliver better
quality products to serve its customer needs. In maintaining competitive
advantages over its competitors, the business invested in research and
development by improving production technology as well as using
knowledge and production experience to increase operational efficiency.
In 2006, the business launched new innovative products to the markets.
The business developed “Rustique” wood-look roof tiles and received
National Innovation Award 2006 for Economy from the National Innovation
Agency. Besides, Rustique is the first innovative product of the world
that applied aerodynamic concept to design rain-leakage protection.

The Business used the Process of Strategic Product Innovation from
Decision Process International of the USA to generate a stream of
innovations. To that effect, a workshop was organized for all involved
employees to improve the method of new products development in
accordance with Strategic Product Innovation. Major examples of
innovative product and service concept included:

-   Developed and launched the world’s first aromatic mosaic tile,
    Fiorina, to the market.

-   Established Cementhai Roofing Center, the first one-stop roofing
    center in Thailand.

Distribution Business Consists of Business Development Units and Pilot Projects which utilize knowledge, marketing information and customers' needs to improve customer service process and new product development such as  transportation management , product assortment, product display, after sales service, etc. 

During the past few years, SCG spent on research and development as
follows:

+------------------------+--------------+-------------+---------------+
| Year                   | 2004         | 2005        | 2006          |
+------------------------+--------------+-------------+---------------+
| Amount (Million Baht)  | 321          | 426         | 447           |
+------------------------+--------------+-------------+---------------+