3Q FY2006 Financial Announcement Meeting Q&A

Q1.	What is your forecast for future market trends? All equipment manufacturers are taking a positive view, but what negative factors, if any, could you cite?
A1.	The fact that specific risks cannot be foreseen in the near future is in itself a risk factor. Our current understanding is that the market will continue to be strong until the summer of 2006, but prospects for market trends for the summer and thereafter are still uncertain.

Q2.	You say that orders during the January-March period of 2006 will remain almost at the same level as during the October-December period of 2005, but indications from U.S. equipment manufacturers suggest that orders will increase. Are your expectations restrained?
A2.	If one only considers semiconductor production equipment, we realize that orders are certainly continuing to rise. However, if FPD production equipment is included, orders at TEL will remain almost at the same level as in the preceding quarter. We are under the impression that there will be a steady stream of orders during the April-June period.

Q3.	When compared to the previous prospects announced by TEL, it seems that market trends and orders continue to be strong. What is your view of these trends?
A3.	We had previously expected that the market would enter a phase of adjustment in 2005 and 2006. However, orders, rather than falling, have in fact been gradually rising, and there are no signs of a decline in the future.

Q4.	It is reported that the LCD panel industry in Taiwan will be restructured in the near future. Is this impacting orders for FPD production equipment?
A4.	We predict that the overall investments in LCD panels will increase by more than 10% in CY2006. We are receiving an especially large number of inquiries from the top three Taiwanese LCD panel manufacturers.

Q5.	Will reductions in capital investments by Korean memory chip manufacturers and the slowdown in PC shipments have an impact on market prospects in 2006?
A5.	The enthusiasm for capital investments by major Korean memory chip manufacturers remains strong, and we understand that the entire industry will spend more capital on both DRAM and NAND flash memory production in the medium-term.

Q6.	During the January-March period of last year, net sales exceeded 200 billion yen. Do you expect the same level of net sales for the January-March period of 2006?
A6.	Since we expect net sales of around 660 billion yen for the entire fiscal year ending March 2006, net sales for the January-March period will be 180 billion yen or more.

Q7.	You have not revised financial forecasts for the fiscal year ending March 2006 upward. Do you expect that some negative factors will have an impact on your financial results?
A7.	Financial forecasts are on the conservative side and we do not expect any specific factors, such as extraordinary losses.

Q8.	Cash flow was negative during the October-December period of 2005. Will this continue throughout the period of growth in business performance?
A8.	The factors underlying the negative cash flow include the rise in sales from Japanese customers, from whom it takes longer to recover accounts receivable. We do not expect this to be protracted, however. The rapid growth in shipped but uninstalled inventories also affected our cash flow. For the January-March period of 2006, we do not predict that cash flow will be particularly negative.

Q9.	Will there be asset impairment charges in the future as well?
A9.	Most of the asset impairment was completed by the first half of the current fiscal year, and no further asset impairment is expected at this point.

Q10.	With the ongoing depreciation of the yen, what is the situation for export profitability?
A10.	TEL conducts business negotiations mainly in yen terms. Therefore, exports are basically not affected by exchange fluctuations.

Q11.	Please describe your future goal for interest-bearing debt, and how to use surplus funds that may materialize.
A11.	Basically, we would like to reduce our interest-bearing debt to the greatest extent possible. We would like about 150-200 billion yen in cash available as working capital with surplus funds appropriated for research and development of next-generation technologies and other projects.

Q12.

What is your market share for wafer probers, thermal processing systems, and FPD coaters/developers, respectively?

A12.

With respect to wafer probers, production cannot keep up with the processing of backlogged orders, and profitability is ensured in this area. Our understanding is that we are not losing market share. We have a high degree of confidence in TELINDY, the new, highly competitive thermal processing system, and believe that we will be able to increase market share. The shipment of a FPD coater/developer based on a new concept has begun, and if a number of manufacturers adopt it in the future we can hope for a greater share of the market.

Q13.	To what degree will the profit margin for FPD coaters/developers improve in the future?
A13.	During the second half of the current fiscal year, we finally became confident that our FPD coaters/developer business will be profitable. Since new products have just been introduced, we will continue to seek to achieve improvements in profitability.

Q14.	Was the reorganization announced a shift from a policy based on the perspective of generational change and an emphasis on sales and marketing?
A14.	In one sense, the reorganization embodies the modification of previously planned courses of action. As in the past, product strategies will mainly be driven by business units, but top managers of factories have been assigned to general manager of SPE divisions. In the years to come, we will also put an emphasis on bolstering and revitalizing the development capabilities of plants.