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SDK To Acquire MCC Group's Hard Disk Business

Showa Denko K.K.
Mitsubishi Chemical Corporation
October 15, 2002

Showa Denko K.K. (SDK) and Mitsubishi Chemical Corporation (MCC) announced today that they have reached basic agreement on the transfer of MCC Group's hard disk (HD) business to SDK Group on or around January 1, 2003.

Subject to transfer are the HD business conducted by Mitsubishi Chemical Infonics Pte Ltd. (MCI)-MCC's fully owned subsidiary in Singapore-as well as all HD-related production/R&D facilities and part of intellectual property owned by MCC.

SDK will establish a new subsidiary in Singapore, tentatively named Showa Denko HD Singapore Pte. Ltd. (SHS), to take over the business. MCI's employees engaged in its HD operation will also be transferred to SHS.

The agreement has been reached as SDK intends to secure sufficient production capacity to meet growing demand, while MCC continues to restructure its business portfolio through further concentration of its resources on its focused areas.

SDK is currently producing HDs through its subsidiary Showa Denko HD (SHD) in Ichihara City, Japan, and memory disks (MDs, aluminum substrate for HDs) in Malaysia, and Oyama, Japan. With the addition of SHS, SDK Group will increase its HD production capacity to 5.3 million pieces a month, consisting of 3.2 million at SHD and 2.1 million at SHS. As a result, SDK Group will become virtually the top HD vendor in the world in terms of technical and production capabilities combined.

As SHS is expected to achieve sales of ¥12 billion in 2003, SDK's consolidated HD/MD sales for the year will amount to ¥45 billion.

MCI will continue to be one of the core subsidiaries of MCC's information and electronics businesses and will focus on optical disk and organic photoconductor operations. SDK and MCC will cooperate closely to ensure smooth transfer of the HD business.

"The world's HD industry has undergone substantial changes in recent years and is now entering the stage of consolidation. The agreement between SDK and MCC reached this time is quite meaningful and timely," said Mitsuo Ohashi, President & CEO of SDK.

"The acquisition will enable us to further strengthen our HD business through an increase in capacity and enhancement of technology. Furthermore, the addition of MCC researchers to our staff and integration of their expertise with SDK's own expertise will lead to development of HDs with further improved quality."

In SDK's new medium-term consolidated business plan "Sprout Project," the HD and MD businesses are classified in the category of "Businesses that need restructuring." In view of the growing demand, SDK has decided to acquire MCC Group's HD business as a means to restructure, and strengthen the competitiveness of, HD/MD operations.

[Reference]

Showa Denko HD Singapore Pte. Ltd. (SHS)

(To be established in Singapore)
Capital Approx. ¥1 billion
Production capacity 2.1 million pieces of HDs a month
President Yasumasa Sasaki
(concurrently serving as president of SHD)
Number of employees Approx. 350