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, Siam Research and Innovation
Co., Ltd. (Formerly: SCI Research and Innovation 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 Siam Research and Innovation 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 Technical and Research
Division of Thai Polyethylene Co., Ltd. and Research & Technology
Planning – Polyolefins of SCG Chemicals, The Research and Development
Center of SCG Paper and Innovation & Technology office of SCG Building
Materials.

SCG Chemicals: In addition to continuous cost reduction activities in
2008, the business has reorganized its research and development
structure by emphasizing on high value-added product development,
production process enhancement, and supportive process efficiency
development to increase the business’s competitive advantages as
follows:

1.  Higher Value-Added Product Development

  The business 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 business has carried
  out research and development into producing high value-added products
  focusing on innovative products and specialty chemicals in response to
  changing customer needs. The business has also engaged 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. In addition, the business has conducted Product Master Plan
  to respond to market requirements and accelerate product development,
  resulting in obvious achievement in adding values to the business’s
  products.

2.  Production Process and Supportive Process Efficiency Development

  The business adheres to the policy to consistently improve production
  process in terms of production efficiency, reliability, safety and
  environmental friendliness. The business also developed and applied
  information technology to speed up production process and business
  procedures while being at the best performance with lowest cost.

  The business has utilized software to increase effectiveness in
  research management and research quality to the same level of
  outstanding research institutions with 3 main aspects namely:

(1) Enterprise Content Management focuses on systematic filing and
    distribution of research information

(2) Project Management focuses on managing different stages of a project
    ranging from initiative thinking, basic feasibility study, research,
    development, production, product launching, to project termination

(3) Portfolio Management focuses on managing research projects to
    support short-term and long-term business strategies

  The business has successfully formed collaborations with 43
  universities and research institutions to support the business’s
  innovation development in line with the rapidly changing industry
  requirements. This strategy has increased the business and other
  companies in SCG’s competitive advantage sustainably.

SCG Paper The purposes of the establishment of The Research and
Development Center are to research, improve its product quality and
develop innovative products to meet customer needs, and improve the
production process. This leads to lower cost, hence enhancing
competitiveness in both domestic and overseas markets. In addition, raw
material and production process development are being covered to build
competitive advantages and reduce dependency on import technology.

The Research and Development Center founded Information Technology and
Training Unit (Knowledge Management) to strengthen the business
competitiveness in the long run, by sharing of information in response
to changing markets. Besides, pulp and paper technology training courses
are implemented to boost staff potential and organizational innovation
in the future. In 2008, the business invested in properties and human
resource for each profession to support the rapid growth of the
business.

SCG Cement The business has continuously conducted 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
business has focused on research and development including a planning in
marketing strategy for the new innovative products, e.g.

-   Cement for special applications, i.e. special elephant brand to
    reduce setting time of

  precast concrete work, Super Cement (mixed cement) designed to serve
  customers

  needing enriched cement ingredient

-   Total solution for mortar cement business (Silo and Spraying
    System), providing plastering service at site through using silo and
    spraying tools

-   CPAC agricultural concrete, designed with special property to reduce
    outdoor drying time of rice

-   CPAC Hub & Spoke System to improve ready mixed concrete delivery
    service in congestive areas in big cities

    SCG Building Materials: 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 2008, the company developed innovative products and services
    included:

-   Developed new ceiling and wall systems that answer the needs of
    homeowners and interior designers i.e. heat insulation wall and
    noise insulation wall.

    • Developed “Cotto Speed Bathroom”, a full bathroom renovation
    service that delivers prompt and convenient service with minimum
    dust and noise during installation. The service capitalizes on the
    “Easy Concept” faucets and sanitary ware that cut installation time
    and the “Modular Concept” furniture.

    • Developed CPAC Design cool blocks that able to store water in the
    block and bring out heat through evaporation, keeping the nearby
    area cooler.

    • Developed the innovative single lap roofing system which requires
    no sub roof. Used in combination with the CeraFino ceramic slate
    roof tile, it delivers an ideal roofing solution for natural modern
    style home

    • Developed Roof Garden, a new gardening system on the roof that
    keeps homes cool as it is a thermal insulation. The system helps
    increase oxygen. It also easy for installation and maintenance.

SCG Distribution: 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
both inside and outside of SCG such as transportation management,
product assortment, product display, after sales service, etc. The main
purpose of these units is to boost up sales of its partner and increase
customer’s demand.

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

+------------------------+--------------+-------------+---------------+
| Year                   | 2006         | 2007        | 2008          |
+------------------------+--------------+-------------+---------------+
| Amount (Million Baht)  | 250          | 340         | 380           |
+------------------------+--------------+-------------+---------------+