Presentation Q&A

Q: For Q2, Murata has maintained the net sales forecast announced in April 2014. How have you been doing in actual terms? What do you think of the soundness of demand from Chinese manufacturers?

A: As usual, incoming orders from the Chinese market increased starting in March, and showed a tendency to decrease in May and June due to the market trend. For Q1 as a whole, we understand that, despite Chinese manufacturers’ rush to purchase components, purchase quantities have subsequently been corrected appropriately. Considering the future launch of chipset for LTE, incoming orders are expected to rise again in August and September. 
On the other hand, we expect to achieve our forecast for Q2 net sales because, as of July, the company as a whole sees an increase in incoming orders as the launches of new models from other customers are drawing near. 

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A: We initially planned to accumulate inventories in Q1 to accommodate demand in Q2 and Q3. The strong demand from Chinese manufacturers prevented us from following the plan. Toward September and October, when monthly net sales reach peaks, we will secure production levels in keeping with net sales, instead of accumulating inventories. Note that inventories could temporarily increase at the end of Q2 depending on whether or not Chinese manufacturers purchase components before the Chinese National Day. But either way, it will not have a great impact on the full-year inventory policy because the difference only lies in whether the net sales will be posted in Q2 or Q3. 

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A: MLCCs achieved the planned utilization ratio of approximately 90% for the first quarter based on 27 operating days per month. We will not increase overall production capacity. However, aged production equipment is being replaced with equipment for ultra-compact and high-capacitance products for a double-digit increase in capacity to meet the expected demand. 
SAW filters recorded more than 100% of the first quarter based on 20 operating days per month. Following a 30% increase in production capacity implemented in the previous fiscal year, we initially planned to enhance it by 10 to 15% in this full fiscal year. But we will move up the schedule in view of the development in demand. The expected increase in demand in August and September will be accommodated by increasing the number of operation days, e.g., by operating on holidays. 

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A: In Q1, production amount was at the same levels as net sales because inventories remained unchanged. 

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A: We maintain our initial net sales forecast. That is, we expect higher overall revenue than in Q1. We do not forecast net sales of individual products, but we expect even higher growth for communication modules. 

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A: We see no significant deviations because we recognize the impact of reducing costs and ongoing generation of fixed costs. 

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A: It depends on the product. 

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A: Carrier aggregation will lead to further sophistication of communication functions, which could increase the number of Murata components used per mobile device and accelerate the use of modules. 

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This Q&A contains forward-looking statements concerning Murata Manufacturing Co., Ltd. and its group companies' projections, plans, policies, strategies, schedules, and decisions. These forward-looking statements are not historical facts; rather, they represent the assumptions of the Murata Group (the "Group") based on information currently available and certain assumptions we deem as reasonable. Actual results may differ materially from expectations due to various risks and uncertainties. Readers are therefore requested not to rely on these forward-looking statements as the sole basis for evaluating the Group. The Company has no obligation to revise any of the forward-looking statements as a result of new information, future events or otherwise.

Risks and uncertainties that may affect actual results include, but are not limited to, the following:

1.economic conditions of the Company's business environment, and trends, supply-demand balance, and price fluctuations in the markets for electronic devices and components
2.price fluctuations and insufficient supply of raw materials
3.exchange rate fluctuations
4.the Group's ability to provide a stable supply of new products that are compatible with the rapid technical innovation of the electronic components market and to continue to design and develop products and services that satisfy customers
5.changes in the market value of the Group's financial assets
6.drastic legal, political, and social changes in the Group's business environment; and
7.other uncertainties and contingencies.

The Company undertakes no obligation to publicly update any forward-looking statements included in this Q&A.