Fujitsu has had a flash memory joint venture with U.S.-based Advanced Micro Devices, Inc. (AMD), and to realize greater efficiencies and strengthen their competitiveness in this sector, the two companies have decided to integrate their operations, including marketing and R&D. Toward that end, on June 30 the two companies established a new joint venture, with Fujitsu's equity share at 40% and AMD's at 60%, into which both companies have transferred their entire flash memory operations, including their production facilities. With integrated operations extending from R&D to production dedicated solely to the flash memory market, the new venture will have the focus and responsiveness required to succeed in this market. This transaction had no impact on the company's consolidated earnings for the first quarter.

The earthquake that occurred off the coast of Miyagi Prefecture on May 26 inflicted damage to the semiconductor production facilities at the company's Iwate plant. While the facility has been restored to full production, the company incurred a 4.7 billion yen casualty loss as an extraordinary charge in the first quarter. The temporary disruption to production has affected sales and profitability for the first and second quarters.

First quarter sales in this sector overall rose sharply, increasing 14.5% over the same period in the prior year. Although damage from the earthquake had an adverse impact on a portion of sales, sales of semiconductors were up sharply, particularly of chips used in digital audio-visual equipment and mobile phones. Sales of plasma display panels also posted a substantial increase, buoyed by growing demand for plasma display televisions.

The operating loss for the first quarter narrowed by 1.2 billion yen compared to the previous year. Although results were adversely affected by lower prices in some product lines, the positive impact of higher sales, lower fixed costs stemming from previous restructuring initiatives, and stabilized profitability in the plasma display panel business contributed to the sector's improvement.

FY2003 Earnings Projections for Electronic Devices

	FY2003 (Billion Yen)		Change FY02 to FY03
Net Sales	710.0		+14.8%
Operating Income	15.0		+46.6 billion yen

Full-year projections for sales and operating income remain unchanged. While there is some uncertainty regarding market price trends for some products, the markets for end-products such as PCs and mobile phones equipped with a high-resolution camera are recovering, so the company anticipates a rising trend for sales of semiconductors and semiconductor parts. The company also anticipates a continued strong market for plasma display panels.