(W) 610pt x (H) 794pt215 x 280mm
R E V I E W O F O P E R AT I O N S

Consumer Products

Business Results
The business environment affecting Nikons consumer products operations remained harsh in fiscal 1998, exemplified by ongoing downward price pressure and increasing competition. Despite the Camera Divisions return to profitability for the first time in five fiscal years, sales of consumer products fell, slipping 0.8%, to 130.3 billion (US$986 million), and accounted for 35.0% of consolidated net sales. Sales of interchangeable lenses grew during the term, thanks in part to the successful launch of the worlds first micro AF zoom lens (AF Zoom Micro Nikkor ED70mm180mm, f4.5-5.6D) suitable for In compact cameras, Nikon introduced the Advanced Photo System Nuvis 160iwhich features a received high acclaim from consumers around the world. Coupled with strong performances by the Nikon F50 and Nikon F70 series and the new F50, with its metalliccolored body, camera sales continued to surge. In 1997, the Nikon F5 was awarded first prize in the Camera Grand Prix 97 in Japan and selected Camera of the Year and Best SLR Camera in overseas competitions. SLR cameras. This lens provides photographers with zoom capabilitieseven for near-range photographsallows the switching of reproduction ratios without changing the position of the camera, and increases flexibility in framing the shot. Other strong-selling interchangeable lenses include the compact AF Zoom Nikkor 28mm200mm f3.5-5.6D (IF), which boasts a zoom ratio of approximately 7X, and the AF Zoom Nikkor ED70mm300mm f4.5-5.6D, which offers superior cost performance.

Cameras

During the period under review, the Nikon F5 and Nikon F90X (N90s in the United States) SLR cameras

Nikon F50

AF Zoom Micro Nikkor ED70mm-180mm, f4.5-5.6D

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superior 4.2X zoom lensand the easy-to-operate Nuvis 110i. In addition, during the period under review we initiated activities aimed at enhancing customer support and increasing sales in this area.
Refract-Keratometer refraction measuring devices and Zoom-Slit Lamp Microscope NS-1V eye diagnostics equipment displayed significant growth. In binoculars, 8-20 25CF-Zoom compact binoculars (DX series overseas) sold well, and the Company launched the Mikron CF, a commemorative model designed to resemble the original Mikron, which was launched in 1921. In addition, top-of-the-line 8 42HG DCF WP and 10 42HG DCF WP binoculars, which offer brighter visuals and higher resolution than conventional binoculars, recorded impressive sales.

Future Outlook

The positive effects of the weaker yen and sterling success of the Nikon F5 have given a tremendous boost to the performance of the Camera Division. Nikon will continue to promote its Total Productivity Management systemwhich links every division, from design and development through marketingand work to stimulate the market with the launch of attractive new products, including new lines of cameras featuring the Advanced Photo System.

Ophthalmic Products

In eyewear, in the first half of the year Nikon introduced the Nikon Lite Effort high-refraction lens and Nikon Soltes CPI and CPII progressive lenses for nearsightedness. In Japan and elsewhere in Asia, sales of ophthalmic and ophthalmological equipment fell while in the United States and Europe demand for the Retinomax series of cordless Hand Held Auto

8 42HG DCF WP/ 10 42HG DCF WP

Nikon Soltes CPI/CPII

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Industrial Instruments

In fiscal 1998, sales of industrial instruments declined 2.4%, to 241.9 billion (US$1,831 million), and accounted for 65.0% of consolidated net sales. This fall was due primarily to a slump in the market for semiconductors. Also pulling down the market were delays and withdrawals of orders from companies in Korea, which had previously comprised a stronger market of steppers and now are hard pressed by the economic turmoil in that country. Amid these harsh conditions, Nikon launched its new NSR-2205EX14C Krypton Fluoride (KrF) excimer steppers for use in the mass production of such next-generation devices as third- and fourth-generation 64M DRAMs. In addition, we introduced the NSR-S202A Step-and-Repeat KrF Excimer Scanning System for the mass production of 256M DRAMs and next-generation microprocessors. Orders are now being accepted for both products.
Other Precision Instruments
In microscopes and measuring instruments, Nikon introduced the ECLIPSE E1000, a new addition to its top-of-the-line ECLIPSE series of biological microscopes. The ECLIPSE E1000 was designed to offer unparalleled performance to researchers conducting detailed, exacting studies. This fully automated

Steppers

The market for semiconductor manufacturing related equipment continued to stagnate as memory prices continued to plummet, stifling demand for capital investment by semiconductor manufacturers.

NSR-2205EX14C

ECLIPSE E10OO

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microscope allows users to switch to optimal magnification with just the touch of a button and boasts a variety of features that meet sophisticated and diversified user needs. During the period under review, Nikon was successful in boosting demand for its NEXIV series of computerized NC video measuring systems and the new Nikon V-20B large-scale profile projector. In addition, we have developed and begun marketing three new varieties of surveying instruments in our DTM-800 series that can
be made to perform an array of measurement functions simply by changing the application program card.

shipment of equipment for R&D of 300mm wafers and have made delivery on a prototype for the nextgeneration ArF excimer stepper, which we will begin producing commercially in 1999. Furthermore, Nikon expects to improve its performance through the strong sales of COOLPIX 900 digital cameras, which were launched in April 1998, and optics engines, which will be installed in the companys high-resolution, highbrightness LCD projectors.
Despite the effects of deteriorating conditions in the semiconductor market, Nikon continues to work to increase its global market share for excimer steppers and is confident that by constantly improving the quality and reliability of its products it will realize higher earnings in the current term. We have already commenced the

COOLPIX 900

Optics engine

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