To Our Shareholders

As NEC Electronics Corporations newly appointed President and Chief Executive Officer, I am pleased to be writing my first letter to our shareholders.

During the year under review, the semiconductor market started with a decelerating trend, characterized by unexpectedly weak demand associated with the Beijing Olympics in the first half of the fiscal year. In the second half of the fiscal year, the financial crisis spurred downward momentum in the economy, triggering a severe economic downturn worldwide. As a result, the semiconductor market, especially in the second half of the fiscal year, saw a sharp downturn in demand and massive inventory adjustments, experiencing harsh conditions that were worse than when the IT bubble collapsed in 2001.
In this challenging climate, consolidated net sales for the fiscal year ended March 31, 2009 were 546.5 billion yen or 5,520 million U.S. Dollars. We saw solid sales in some products, such as the EMMA series products for digital home appliances with an expansion in the customer base, and new business for embedded DRAM LSIs. This growth, however, was outweighed by lower sales of driver ICs for LCD panels, automotive semiconductors, and general-purpose products, including discrete semiconductors
and microcontrollers.
We posted a consolidated net loss of 82.6 billion yen or 835 million U.S.dollars for the fiscal year, primarily due to a loss provision related to pending legal issues, as well as expenses stemming from the closing of manufacturing and pilot lines in Japan.

In light of severe economic conditions, NEC Electronics intends to accelerate structural reforms for building a sound business foundation in the fiscal year ending March 31, 2010. We will speed up realignment of manufacturing structures, enhance research and development efficiency, and slash other expenses, which will include reductions in personnel expenses. By implementing these measures we will reduce fixed costs significantly, and aim to restore Operating Income for the fiscal year ending March 2010.

As competition heats up in the global semiconductor market, NEC Electronics and Renesas Technology Corp. entered into negotiations to integrate their business operations in April 2010. It is our utmost goal to establish a strong business foundation and technology drive, and to attain substantial growth in corporate value through further improvements in customer satisfaction.
I ask for your continuous support and guidance as we strive to build a stronger NEC Electronics.


June 2009

Note: Operating Income(loss) = Net Sales - COGS - R&D - SG&A