Industrial Solutions

Fiscal 2020 Second-half

and Medium-term Initiatives

November 22, 2019

Shinji Sakamoto, CEO
Industrial Solutions Company
Panasonic Corporation
Notes: 1. This is an English translation from the original presentation in Japanese.
2. In this presentation, “Fiscal 2020” or “FY20” refers to the year ending March 31, 2020.

Industrial Solutions Company: Business Introduction

Offer single-item devices and module/package products based on the devices

Businesses differentiated
Businesses aiming for modules/packages
with material/process technologies

Capacitors Inductors (Coils) EV relays Mechanical relays

Core Growth Business

Devices Business Sales Systems Business

35% 1,422.3 42% Automotive Lithium-ion storage
Circuit board materials Resistors Billion yen power supplies battery modules
（FY2019）

Others*
23%
Motors for
Dry batteries Industrial application FA sensors
Semiconductors LCD panels

*including other Divisional Companies’ products, etc.

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 1

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 Fiscal 2020 First-Half Progress and Second-Half Initiatives

FY20 1H Results and 2H Forecast

Full-year
[yen: billions] 1H results vs. FY19/ 2H forecast vs. FY19/ forecast vs. FY19/ vs. initial
Difference Difference (as of Oct. 31) Difference target
Sales 657.9 -73.9 672.1 -18.4 1,330,0 -92.3 -30.0
Adjusted OP 21.1 -15.8 38.9 +12.3 60.0 -3.5 -19.0
（margin） （3.2%） （5.8%） （4.5%）

Other income/loss -4.7 -5.3 -4.3 -8.8 -9.0 -14.1 -

Operating profit 16.4 -21.1 34.6 +3.5 51.0 -17.6 -19.0
（margin） （2.5%） （5.1%） （3.8%）

Capital investment 23.9 -2.0 35.1 -2.4 59.0 -4.4 -13.0

Operating profit (yen: billions)

2H forecast
68.6 -15.8  Although equipment market has signs of
bottoming out, there is no recovery
Sales
forecasted. Sales will continue to
+12.3 -8.8 decrease y/y.
 Effect of decreased sales will be offset by
-5.3 fixed-cost reduction and contract
51.0 Adjusted OP
alteration effect in the semiconductor
business. Profit will increase y/y.

 Reaction to return the provisions for

Other quality lawsuit in the previous year.
income/loss
(in rechargeable battery business)
Adjusted Other Adjusted Other
OP Income/loss OP income/loss

Recognition of challenges:
FY19 1H 2H FY20 Shift to the structure resistant to market changes
results -21.1 +3.5 forecast

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 3

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 FY20 2H Initiatives

Promote enhancing management structure and directing underperforming businesses

Key measures Break-even-point sales

-4%

・Fixed-cost reduction Fixed cost

(yen: billions)
Core -Continue investment for
growth
-8.3
growth
businesses

・Quality loss reduction

・Raw material
rationalization
FY19 FY20
results forecast

Under- LCD panels: End production around CY2021

performing
businesses Semiconductors: Set the direction through taking various approaches

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 4

Long-term Vision of Core Growth Business

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 Transition of Mid-term Strategy Core Growth Business

Complete shift to automotive/industrial areas, taking advantage of our high-reliability

products
Competitiveness Continue to strengthen material/process technologies and
of products lead in high reliability and performance
Shift to automotive/industrial areas
Strategic phases Selection and concentration Further growth in new areas

OP margin 10%

Sales composition

AV/ICT, etc.
areas
Sales CAGR
+8.4%
Automotive/ 83%
industrial areas 38%

〜
〜
〜
〜

FY13 FY17 FY18 FY19 FY20 FY22

forecast target

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 6

Long-term Goal : Concept Core Growth Business

Support the solution of social issues by focusing on continuously evolving

areas

■Areas to be faced (Focused areas)

Automotive CASE Information/communication Factory labor-saving

CAGR +8.7%*1 infrastructure CAGR +6.5%*3
CAGR +5.9%*2

■Value to offer
Devices Business Systems Business
Modules/packages based
Competitive devices
on competitive devices
（High-reliability/performance)
(Unique solutions)

*1: Our estimate based on research materials such as device markets for automotive CASE (2019-2030 CAGR）
*2: Our estimate based on research materials such as device markets for 5G base station and server markets（2019-2030 CAGR）
*3: Our estimate based on research materials such as device markets for labor-saving factories (2019-2030 CAGR）

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 7

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 Long-term Target : Positioning Core Growth Business

Aim to become a leading device company in industry

Industry position (FY2019)

20% Company A
FY31
Operating profit

Company E FY22
10% Top group
Company F Company B

Company D Company C
FY19
Size of circle: Operating profit

１ 2 （yen: trillions）
Sales
︓IS Company
(Core Growth Business)

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 8

Medium-term Initiatives of Core Growth Business

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 Medium-term Strategy:
Core Growth Business
Strategy Outline of Devices Business
Realize profitable growth by making even more competitive products

■Basic strategy ■Sales/profit targets

Increase top-share-product ratio
in industry (Specialize in market Adjusted operating profit
share No.1 and No.2 products) 10%

Build a solid foundation for Sales CAGR +4%

sales and profit （yen: trillions）

■Approach 0.50
Strengthen material/process technologies,
sources of differentiation
・Continuous investment from a long-term Top-share-product ratio
0.45 82%
perspective
・Innovation of development approaches
78%
（Materials informatics, AI）

〜
〜
FY20 FY22
Lead the industry with high reliability forecast target
as our strength
Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 10

Medium-term Strategy:
Core Growth Business
Major Products in Devices Business
Lead growth by top-share products based on high reliability

Growth ratio
Business opportunity Major products / value to offer (FY20→FY22)

Automotive inductor
Automotive CASE Market share No.1
Growing demand for compactness CAGR
and high reliability High heat resistance/ 30%
vibration durability
- Increasing mounted ECUs*
- Operation under severe
environment of use Film capacitor (for xEV)
*Electronic Control Units Market share No.1
CAGR
31%
Information/communication Compact/high-reliability
infrastructure
Growing demand for high-speed/
high-reliability devices Circuit board materials
Market share No.1
- High-speed network CAGR
- Stable performance High-capacity/ 22%
high-speed transmission MEGTRON

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 11

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 Medium-term Strategy:
Core Growth Business
Strategy Outline of Systems Business
Boost profit by module/package products based on competitive devices

■Basic strategy ■Sales/profit targets

-Maximize value to offer by being close to
customers (Provide unique solutions) Adjusted operating profit
-Focus on modules/packages based on
competitive devices
5%
Boost profit by creating new businesses
Sales
（yen: trillions）
■Approach CAGR +6%
Strengthen/improve customer contacts 0.60
and proposal capabilities

-Localize management in the strategic regions 0.50

Europe: Strengthen a collaboration with OEMs utilizing local management
China: Built a new business operational organization for FA area (FY20)
0.40
-Obtain technologies/know-hows
Aggressively promote business collaboration inside and outside the

〜
〜
company
FY20 FY22
forecast target

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 12

Medium-term Strategy:
Core Growth Business
Major products in Systems Business
Create new businesses by maximizing value to offer
Cumulative
Business opportunity Major products / value to offer sales
Automotive CASE Automotive power Safety and security
of power system
-Accelerate module development module
with sophistication of automotive
（Core device）
systems
EV relay
FY20-22
Cumulative
Information/communication Backup power High heat resistance/ 90.0
infrastructure long life billion yen
module
-Growing demand for data
security （Core device）
Durable, stable operation LiB cell FY20-25
Cumulative
300.0
billon yen
Factory labor-saving Motion control Reduction of customers’
-Shortage of development resources development manhours
due to increase of multiproduct
production lines with frequent
quantity changes （Core device）
-Deficit in know-how compatible with Servo motor
network

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 13

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 Medium-term Strategy: Target in FY22 Core Growth Business

Realize sales growth in evolving focused areas, and aim for double-digit profit
margin in FY22 as a transit point.

■Sales ■Adjusted operating profit

-Grow in the focused areas -Boost profit by enhancing management
structure and increasing sales of competitive
1.1 products
trillion yen

1.1
兆円
OP margin
+4 points
Focused areas Revise portfolio
＋130 billion yen /increase sales

1.0
trillion yen Strengthen
management
structure

Other than
focused areas

FY20 FY22 FY20 FY22

forecast target forecast target

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 14

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 Disclaimer Regarding Forward-Looking Statements

This presentation includes forward-looking statements about Panasonic and its Group companies (the Panasonic Group). To the extent
that statements in this presentation do not relate to historical or current facts, they constitute forward-looking statements. These forward-
looking statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently available
to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause the
Panasonic Group's actual results, performance, achievements or financial position to be materially different from any future results,
performance, achievements or financial position expressed or implied by these forward-looking statements. Panasonic undertakes no
obligation to publicly update any forward-looking statements after the date of this presentation. Investors are advised to consult any further
disclosures by Panasonic in its subsequent filings under the Financial Instrument and Exchange Act of Japan (the FIEA) and other publicly
disclosed documents.
The risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer
spending and corporate capital expenditures in the Americas, Europe, Japan, China and other Asian countries; volatility in demand for
electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical
markets; the possibility that excessive currency rate fluctuations of the U.S. dollar, the euro, the Chinese yuan and other currencies
against the yen may adversely affect costs and prices of Panasonic’s products and services and certain other transactions that are
denominated in these foreign currencies; the possibility of the Panasonic Group incurring additional costs of raising funds, because of
changes in the fund raising environment; the possibility of the Panasonic Group not being able to respond to rapid technological changes
and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in
terms of both price and technology; the possibility of not achieving expected results or incurring unexpected losses in connection with the
alliances or mergers and acquisitions; the possibility of not being able to achieve its business objectives through joint ventures and other
collaborative agreements with other companies, including due to the pressure of price reduction exceeding that which can be achieved by
its effort and decrease in demand for products from business partners which Panasonic highly depends on in BtoB business areas; the
possibility of the Panasonic Group not being able to maintain competitive strength in many product and geographical areas; the possibility
of incurring expenses resulting from any defects in products or services of the Panasonic Group; the possibility that the Panasonic Group
may face intellectual property infringement claims by third parties; current and potential, direct and indirect restrictions imposed by other
countries over trade, manufacturing, labor and operations; restrictions, costs or legal liability relating to laws and regulations or failures in
internal controls; fluctuations in market prices of securities and other financial assets in which the Panasonic Group has holdings or
changes in valuation of non-financial assets, including property, plant and equipment, goodwill and deferred tax assets; future changes or
revisions to accounting policies or accounting rules; the possibility of incurring expenses resulting from a leakage of customers’ or
confidential information from Panasonic Group systems due to unauthorized access or a detection of vulnerability of network-connected
products of the Panasonic Group; as well as natural disasters including earthquakes, prevalence of infectious diseases throughout the
world, disruption of supply chain and other events that may negatively impact business activities of the Panasonic Group. The factors
listed above are not all-inclusive and further information is contained in the most recent English translated version of Panasonic’s
securities reports under the FIEA and any other documents which are disclosed on its website.

(Reference) FY20 1H Results

Sales
(yen: billions)
1H results / initiatives
731.8

Systems  Sales and profit decreased by significant

Devices Industrial Solutions impact of deteriorated Chinese market
Others 657.9
Company conditions such as trade friction between
Effect of U.S. and China
exchange
rates

FY19 FY20
-73.9  Sales of devices for equipment such as
1H results 1H results
motors and FA sensors were sluggish
Systems
due to weak capital investment demand
in China
Operating profit
(yen: billions)  Sales and profit for passive components
37.5 decreased due to weakening investment
in server market and sluggish Chinese
Devices automobile market, etc.
 Sales of multi-layer circuit board
Systems materials for communication
Devices Others 16.4 infrastructure was steady.
Other
income/loss  Sales and profit decreased due to
Adjusted OP -15.8 -5.3 deteriorated market conditions in spite of
Others
profit improvement by contract alteration
FY19 FY20 from Q2
-21.1
1H results 1H results

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 17

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 (Reference) Details of Business Category

Businesses category Major products and services

 Electromechanical Control Business Division

・Relays, power supplies, switches, touch panels,
connectors

Systems  Industrial Devices Business Division

・Motors, FA sensors, PLCs, laser markers

 Energy Solutions Business Division

・Lithium-ion batteries, storage battery modules

 Device Solutions Business Division

・Capacitors, inductors, resistors, thermal insulation sheets

 Electronic Materials Business Division

Devices ・Multi-layer circuit board materials, encapsulation materials,
advanced films

 Energy Device Business Division

・Dry batteries, micro batteries, nickel-metal hydride batteries

 Panasonic Semiconductor Solutions Co., Ltd.

・ICs/LSIs, image sensors, compound semiconductors
Others
 Panasonic Liquid Cristal Display Co., Ltd.
・IPS liquid crystal display panels

Industrial Solutions Fiscal 2020 Second-half and Medium-term Initiatives 18

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