Automotive & Industrial Systems

Company
Business Policy

May 30, 2018

Yoshio Ito, President
Automotive & Industrial Systems Company
Panasonic Corporation

FY2018 Summary
FY2019 Business Policy
Mid-term Strategy
FY2018 Results
„ Sales increased whereas profits decreased vs. L/Y. Note that "profit created from
businesses," which exclude special factors, increased in all the businesses.

Sales Operating profit

(billion yen, % vs. L/Y) (billion yen, % indicates profit rates)
2,803.5
(+16%)

Others

Reaction to gains on
Offset, etc. Effects of reversal related to
Industrial exchange Profit created from legal affairs and
rates gains on business
businesses transfer of the
+31.7 previous fiscal year,
Energy etc.
Industrial

93.0
(3.8%) Energy 91.4
(3.3%)
Other income /
Automotive loss

2,416.6
Automotive

FY2017 FY2018 FY2018 FY2017 FY2018

In real terms excluding the
effects of exchange rates: (Excluding effects of -1.6
+13% exchange rates)

Automotive & Industrial Systems Company Business Policy 2/20

FY2018 Achievements and Issues

* The graphs indicate operating profit analyses.

Increase in R&D
- New IVI* and cockpit products contributed
Achieve-
ments

Consolidation of depreciation expenses,

to sales and profits increase.
Automotive

Ficosa, sales and Loss etc.

profits increase, costs
etc. - Consolidation of Ficosa
31.7
Issues

- Loss costs for new product launch put a

downward pressure on profit.
FY2017 FY2018
Achieve-

- Small rechargeable batteries shifted to

ments

Effects of 11.1
exchange rates,
new markets and contributed to profit.
Energy

other income /
loss

FY2017 FY2018 - Sales increase (automotive cylindrical

Issues

Automotive
Automotive
cylindrical types
prismatic types,
small rechargeable
types) by the Nevada factory lags behind
batteries, etc. by a fiscal year.

- Growth of industrial devices

Achieve-

39.9
ments

Businesses
- Profitability improved in businesses to be
Industrial

Effects of to be turned
around
turned around (semiconductors & LCD
exchange rates,
other income /
Fundamental
panels).
loss
businesses

- Delivery problems occurred in part

Issues

due to demand increase.

FY2017 FY2018

* IVI: In-Vehicle Infotainment

Automotive & Industrial Systems Company Business Policy 3/20

Growth Strategies

- Started the public road demonstration

Living Space Autonomous
experiment of autonomous driving cars. Cabin
Automotive

- Showcased the concept of the Living Space

Autonomous Cabin.
- Ficosa's Morocco factory opened.
- Capital tie-up with AZAPA Co., Ltd.
(model base development) Public road demonstration
experiment

- The Nevada factory started mass production for Tesla.

- The Dalian factory started the mass production of Automotive batteries
(Prismatic type)
Energy

automotive prismatic type batteries.

- Decided to expand automotive prismatic type
batteries to the Himeji factory.
Automotive batteries
- Started examining collaboration with Toyota Motor (Cylindrical type)
Corporation on automotive prismatic type batteries.

- Panasonic Industrial Devices SUNX became a Pressure sensor

wholly owned subsidiary.
Industrial

- Motor factory expansion (Zhuhai in China and

Kaga in Ishikawa Prefecture, Japan).
- Production increase in high-function multi-layer
circuit board materials (new Guangzhou factory). Servo motor

Automotive & Industrial Systems Company Business Policy 4/20

FY2018 Summary
FY2019 Business Policy
Mid-term Strategy
FY2019 Basic Policy
„ The year to start reaping the benefits of large-scale investments and show results.
„ Focus on "the automotive and industrial" markets and lead Panasonic by a sales
and profit increase.

Sales/Ratio of automotive and industrial businesses Operating profit/rates

(billion yen, % vs. L/Y) (billion yen)
4.5%
3,000.0
(+7%) 3.8%
3.3%
2,803.9 Expansion of automotive
(+16%) and industrial businesses
Approx. +210.0 billion yen 136.0

93.0 93.4

2,416.6

Automotive 59%
19% 60%
54%
Industrial 18%
18%

FY2017 FY2018 FY2019 FY2017 FY2018 FY2019

(Exchange rates: $1 =) 111 yen 105 yen
* Restated the results of FY2018 based on the new structure.

Automotive & Industrial Systems Company Business Policy 6/20

FY2019 Management Targets

■ The three business groups all achieve sales and profits increase
(excluding the effects of exchange rates).
■ The energy business's sales increase and the industrial business
contribute to a profit increase.
Sales Operating profit
(billion yen, % vs. L/Y) (billion yen, % indicates profit rates)
136.0
(4.5%)
Others
Offset,
etc. 3,000.0
Industrial Other income
(+7%) / loss
Industrial
Effects of
exchange
rates

93.4 Energy
2,803.9 (3.3%)
Energy
Automotive

Automotive

FY2018 FY2019 FY2019 FY2018 FY2019

In real terms excluding the (Excluding effects of +42.6
effects of exchange rates: exchange rates)
+9% * Restated the FY2018 results based on the new structure.

Automotive & Industrial Systems Company Business Policy 7/20

Business Portfolio
Playing roles in the company with sales and earnings growth potential,
concentrating resources mainly in automotive and industrial fields
High- Automotive Infotainment Systems,
Automotive
growth Automotive Electronics Systems, Ficosa International
business Energy Tesla Energy, Automotive Energy
（６BD）
Industrial Electromechanical Control

Steady profit generation by competitive or high-share products, and

Stable- creating investment resource for high-growth business
growth Energy Energy Device, Energy Solutions
business
（4BD） Industrial Device Solutions, Electronic Materials

Improving profitability by thorough initiatives including business

Low- profitable
business transformation and concentration in automotive and industrial fields
Panasonic Semiconductor Solutions,
（2BD） Industrial
Panasonic Liquid Crystal Display
Low-
Composition profitable Operating
Sales
Profits
ratio by
Stable- Stable-
business growth growth
portfolio High- High-
（FY2019） growth growth
* excluding the sales of other company’s products *excluding Low-profitable business and the
sales of other company’s products
Automotive & Industrial Systems Company Business Policy 8/20

Strategies by Business Group

Pie charts: Sales-based ratios

• Four key categories (IVI, cockpits, ADAS*, and electric mechanisms) fully contribute to a sales increase.
• Continue R&D investments for new themes (next-generation cockpits, etc.)

Automotive 14% 4 categories

27%
Next-generation cockpit
FY2017 FY2019
*ADAS: Advanced Driver Assistance System

• Accelerate the shift to automotive and industrial fields.

• Launch full-scale operations for factories with large-scale investments
(Nevada, Dalian) contributing to an increased profit.

Energy Automotive:
33% 54%
Industrial:
29% 26% Nevada factory, US
FY2017 FY2019

• Continue to expand sales and profits by further increasing the ratio of automotive and industrial
businesses.
• Steadily improve profitability at "businesses to be turned around" (semiconductors & LCD panels) toward
turning them into the black in FY2020.
Industrial 29% Automotive EV relay
: 30%

FY2017 36% FY2019 Industrial

: 45%
HV capacitor

Automotive & Industrial Systems Company Business Policy 9/20

Automotive Business
„ Fully expand the four key categories (IVI, cockpit systems, ADAS*, and electric mechanisms).
„ Achieve sales increases through new product releases in collaboration with Ficosa (electronic
mirrors, communication units, etc.).
[Sales, operating profit rates] [Operating profit analysis]
(billion yen, ( ) vs. L/Y) (billion yen)
4.7% 43.4

3.4% Excluding effects Others

of exchange rates 31.7
(+2%)
928.8 Decrease in loss
922.7 costs, etc.
(+38%) (-1%) Sales increase/
Sales price declines

Increase in R&D
depreciation
671.6 expenses, etc.
Streamlining/
Product mix
FY2018 +11.7 FY2019

[Key initiatives during FY2019]

• The car model expansion of IVI and cockpits contributes to a sales
increase.

4 categories • Reap the Ficosa synergy effects (R&D, manufacturing, procurement).

27% Sales ratio
14% 19%

FY2017
2016 FY2018
2017 FY2019
2018

Automotive & Industrial Systems Company Business Policy 10/20

Energy Business
„ Reorganize the Rechargeable Battery Business Division into three business divisions* by
customer and industry to reinforce the business base.
„ Automotive batteries achieve a significant sales and profit increase through a production
increase in sync with demand from key customers.
29.1
[Sales, operating profit rates] [Operating profit analysis]
(billion yen, ( ) vs. L/Y) (billion yen) Others

3.8% 11.1
Including
Tesla Energy
Business Division
2.0% 758.0
(+35%)
Increase in
equipment
depreciation
expenses
562.5 Material
(+14%) costs hike
Personnel expenses, etc. Streamlining/
increase in fixed costs Product mix,
493.6 etc.
Sales increase
FY2018 +18.0 FY2019

[Key initiatives during FY2019]

• Off-set increases in depreciation expenses and fixed costs due to
large-scale investments by sales increase, etc.

• Improve profitability by increasing the utilization rate in cooperation

with customers.
* FY2018: FY2019:
Rechargeable Battery Business Energy Solutions Business Division
Division Tesla Energy Business Division
FY2017
2016 FY2018
2017 FY2019
2018 Tesla BU Automotive Energy Business division
Energy Device Business Division Energy Device Business Division

Automotive & Industrial Systems Company Business Policy 11/20

 Industrial Business
„ Fundamental businesses: Increase profits through systematization/modularization and devices
with dominant market shares.
„ Businesses to be turned around: Improve marginal profit by enhancing the business structure.
[Sales, operating profit rates] [Operating profit analysis]
(billion yen, ( ) vs. L/Y)
5.7%
(billion yen) Fundamental businesses
55.8
4.4%
42.0 Others
984.1 Streamlining/
945.2 (+4%)
Product mix,
etc.
Businesses to
be turned around
(+9%)
Sales price
870.8 declines
Increase in
equipment Sales
depreciation increase
expenses
Personnel
expenses, etc.
increase in fixed
Fundamental costs
businesses
Electromechanical Control Business FY2018 +13.8 FY2019
Division
Device Solutions Business Division
Electronic Materials Business Division
[Key initiatives during FY2019]
• Expand the sales increase of industrial devices adapted for
automation needs.
• Increase the sales of automotive devices (EV relays, passive
components, etc.).
Businesses to be
turned around • Reduce the deficit of semiconductors and LCD panels with the
PSCS, PLD * prospect of turning them into the black in FY2020.
* PSCS: Panasonic Semiconductor Solutions Co., Ltd.
FY2017
2016 FY2018
2017 FY2019
2018 PLD: Panasonic Liquid Crystal Display Co., Ltd.
* Restated the results of FY2018 based on
the new structure.

Automotive & Industrial Systems Company Business Policy 12/20

AIS Company Capital Investment Strategy

„ Continue to invest aggressively with a focus on automotive batteries through close
collaboration with customers.
„ Gradually make large-scale investments while assessing the demand, on the basis of risk
minimization.
[Capital investments, equipment depreciation expenses] (Tangible assets only)

(billion yen)

Automotive battery investment

241.0
226.4 - Nevada: Operation launch of additional equipment in
line with an increase in vehicle production
Investment
191.8
- Himeji: Preparations for the start of mass
production during FY2020

141.0 - Dalian: Increase production capacity based on

customers' production plans.
Depreciation
expenses
102.3 105.5

FY2017 FY2018 FY2019

* Restated the results of FY2018 based on the new structure. Dalian factory

Automotive & Industrial Systems Company Business Policy 13/20

 FY2018 Summary
FY2019 Business Policy
Mid-term Strategy

Progress toward 2 Trillion Sales in Automotive Business

„ Expected to achieve the initial "2 trillion yen in FY2019" target in FY2020 with a one-year delay.
„ Aim to achieve the sales target of 2.5 trillion yen and be ranked among "the world's top 10" in
FY2022.

Automotive business sales Be ranked among the

- Consolidation of Ficosa world's top 10 auto parts
- The Dalian battery factory manufacturers
- Started initiatives toward 2 trillion launched operations
yen sales

- The Nevada battery factory 2.5 trillion yen

launched operations
- Acquired OpenSynergy
- AIS Company
established 2.0 trillion yen

1.8 trillion yen

1.7 trillion yen

Order Order Order

1.3 trillion yen ratio ratio ratio
96% 84% 50%
1.0 trillion yen

Current mid-term plan Next mid-term plan

FY2013 ➡ FY2017 CAGR +7% FY2017 ➡ FY2022 CAGR +14%

FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2022

2012 2013 2014 2015 2016 2017 2018 2019 2021

Automotive & Industrial Systems Company Business Policy 15/20

 Mid-term Growth Scenario: Automotive Business
„ Contribute to the evolution of cars through the four key categories "IVI, cockpits, ADAS, and
electric mechanisms."
„ Take up challenges for new service businesses in a mobility society.

[Sales growth/operating profit rates * ] Achieve profit growth by focusing on the four key categories.
(billion yen, %) *Size of circle: sales scale - Increase the market share through the integrated systems of "IVI +
cockpits."
Operating profit rates

FY2022 Cockpit systems

- Expand businesses by building a track record of receiving orders
5% and mass production of low-speed ADAS and electric mechanisms.

922.7
billion yen
4.7% FY2019 ADAS/Autonomous parking Automotive battery charger

928.8 Take up challenges for new service businesses.

billion yen
3.4%
- Contribute to mobility services linked to hardware.
FY2018
Expand areas where we make contributions to
transporting people/objects.
100 110 120
Sales index (FY2018: 100) ADAS/Autonomous EV/electric
Integrated cockpits mechanisms
driving

Automotive & Industrial Systems Company Business Policy 16/20

Mid-term Growth Scenario: Energy Business

„ Reinforce "manufacturing" and contribute to the proliferation of electric vehicles.
„ Take up challenges of "using" to create new demand.

[Sales growth/operating profit rates * ] Reinforce "manufacturing"

(billion yen, %) *Size of circle: sales scale - Respond to the dynamic automotive battery demand while
ensuring a reliable investment recovery.

- Himeji: Start mass production during FY2020 and

expand thereafter. (prismatic types)
FY2022
Operating profit rates

- Nevada: Toward more than 35 GWh/year

(cylindrical types)

- Dalian: Increase production lines by customer.

(prismatic types)
5%
758
billion yen Take up challenges of "using"
3.8%
- Make new contributions in the information infrastructure area
(power storage systems).
562.5 FY2019
billion yen - Build new ecosystems with partners (sharing services, etc.).
2.0%
FY2018 Base station power
supply, remote
monitoring service
Create new
battery demand
100 200 Data center
backup power Battery sharing
Sales index (FY2018: 100) supplies

Automotive & Industrial Systems Company Business Policy 17/20

 Mid-term Growth Scenario: Energy Business (Automotive Batteries)
„ Deepen partnership with "top runner" customers.
„ Further evolving "the world's No. 1 batteries" (cylindrical and prismatic types)

Lead the industry through product

Deepen customer relationships
competitiveness
<Collaborate as a "partner," rather than as a "supplier"> <Superiority of our batteries>
In addition to high safety,
product development suitable for use
High Prismatic types

Output density
Cylindrical types
For HV: High output

Tesla Toyota Motor For PHV and EV: High capacity

<Increase transactions with "top runner" customers> For EV: High energy density
[Vehicle models that adopted our batteries] Low
Underway
74 models Low Energy density High
68
16
18
Received orders
<Further evolution>
Japanese companies:
6 companies, 29 models New materials development: Industry-
leading energy density (Increase nickel
US companies:
50 58 ratio, optimize cobalt ratio)
2 companies, 14 models
Delivered
European companies:
New structure development: Improving
4 companies, 15 models safety and capacity per volume
Mar. 2017 Mar. 2018

Automotive & Industrial Systems Company Business Policy 18/20

Mid-term Growth Scenario: Industrial Business

■ Achieve stable growth by concentrating on "labor saving," "information communication
infrastructure," and "automotive electric systems," whose demands are strong in the society.
■ Pursue high profitability through "modularization" and "runaway high market share" based on
competitive devices.
Information communication
[Sales growth/operating profit rates* ] Labor-saving factory infrastructure
(billion yen, %) *Size of circle: sales scale - Increase customer value - Expanding for base stations
through core components that and data centers, by using
support automation. unique technologies as
advantages.
FY2022
Operating profit rates

Multi-layer circuit
10% board materials

Conductive
984.1 Industrial devices capacitors
billion yen
5.7% Automotive
945.2 FY2019 (Electric mechanisms, autonomous driving)
billion yen - Increase automotive modules - Highly reliable technologies
4.4% with competitive devices at the that customers continue to
FY2018 core. select.

100 110 130

Automotive power control units Inductors
Sales index (FY2018: 100) (EV relays + current sensors + battery monitor ICs)

Automotive & Industrial Systems Company Business Policy 19/20

 Mid-term Concepts
„ Partner up with "top runner" customers and continue to launch No. 1 products.
„ Create new business areas to aim for "next growth."

"Top runner"
customers × No. 1 product × Growth
investment

Shift to new Further selection

Next growth
business areas and concentration
From “take all" to “choosing Automotive/
ICT Æ Automotive/industrial
from alternatives " industrial areas
+
New business areas
Addition of layers, promotion of platform
development
(Units, modules, systems, services)

FY2014 FY2016 FY2019 FY2022 FY2031

Automotive & Industrial Systems Company Business Policy 20/20

Disclaimer Regarding Forward-Looking Statements

This presentation includes forward-looking statements (that include those within the meaning of Section 27A of the U.S. Securities Act of
1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended) 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; 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) Details of each business whose sales are disclosed

Businesses whose sales are disclosed Major products

Automotive Infotainment Systems • IVI, cockpit systems, car navigation systems, car AV
Business Division systems, car speakers, etc.

Automotive Electronics Systems • On board charging systems, camera modules, back &
Automotive Business Division corner sensors, etc.

• Automotive mirrors, shifter systems, communication

Ficosa International, S.A. modules, etc.

• Dry batteries, nickel metal-hydride rechargeable

Energy Device Business Division batteries, micro batteries, etc.

• Small lithium ion batteries, battery modules for storage,

Energy Solutions Business Division power storage systems, etc.
Energy
• Automotive/power storage cylindrical type lithium ion
Tesla Energy Business Division batteries, etc.

• Automotive prismatic-type lithium ion batteries, automotive

Automotive Energy Business Division nickel metal-hydride rechargeable batteries, etc.

Electromechanical Control • Relays, connectors, switches, automotive power supplies,

Business Division motors, FA sensors, etc.

• Conductive polymer capacitors, resistors, inductors,

Device Solutions Business Division inertial sensors, etc.

Electronic Materials • Electronic circuit board materials, plastic molding

Industrial Business Division
compounds, encapsulation materials, advanced films,
etc.
Panasonic Semiconductor Solutions • IC/LSI, image sensors, compound semiconductors, lead
Co., Ltd. frames, etc.

Panasonic Liquid Crystal Display • IPS liquid crystal display panel

Co., Ltd.

Automotive & Industrial Systems Company Business Policy 23/20