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decreased 31% from the previous fiscal year, to ¥1,074.8 billion (US$8,082 million), and Toshiba posted an operating loss of ¥176.3 billion (US$1,325 million). 

Sales of the Semiconductor Company de- creased 34% from the previous fiscal year, to ¥725 billion (US$5,451 million), with an operating loss of ¥122 billion (US$917 million) that reflected the de- clines in sales volumes and fall in prices of commod- ity DRAMs. 

As the shape of the year became clearer, the Semiconductor Company responded with vigorous and wide-ranging reforms implemented as a part of the Toshiba Group’s 01 Action Plan. Steps taken by the company included withdrawal from the commod- ity DRAM business, the unification and shuttering of domestic production lines and accelerated person- nel reductions. As a result, the semiconductor busi- ness is now capable of generating a profit even if sales remain at the ¥700 billion level recorded in fiscal 2001. 

Even with the withdrawal and other measures taken under the 01 Action Plan, the Semiconductor Company expects to retain a position within the industry’s top three, and to do so confident of its positioning as an Integrated Device Manufacturer (IDM). Put more specifically, Toshiba will now con- centrate on three product areas: discrete devices, where we are the world No. 1; memories, particu- larly NAND flash memories, which we invented and where we lead the world; and SoC that will pave the way for our advance into the digital consumer and mobile and broadband network markets. 

Discretes: A substantial slide in sales of discrete devices was inevitable in fiscal 2001, given overall market conditions. Even so, gallium nitride-based LEDs, four-element LEDs, red visible laser diodes (VLDs) and other optical devices sold well. We will fully leverage our advantages in small packages and a broad product lineup for small signal and power devices to encourage their application in cellular phones, PC peripherals, PDAs, and a range of other products. We will also aggressively promote VLDs for DVD pickups, high luminosity LEDs for cellular phones, and other optical devices. Through these efforts, we are confident of remaining the world's leading manufacturer and supplier of discrete devices. 

Memories: Toshiba has long been recognized for its technological and manufacturing prowess in com- modity DRAMs. However, while a strong source of sales during times of rising demand, the commodity DRAM business is extremely volatile and feast is more often than not followed by famine—and damage to the bottom line. The Semiconductor Company looked long and hard at the business in light of TVC and 

decided on a complete exit, including the sale of its U.S. memory manufacturing base, Dominion Semi- conductor, L.L.C., to Micron Technology, Inc. Need- less to say, we will maintain the leading-edge DRAM technologies needed for DRAM-embedded SoC. 

Demand for high-density NAND flash memo- ries for digital audio equipment did not produce the growth we expected. However, demand for applica- tion in digital still cameras did begin to rise in early 2002. We will continue to concentrate our energies on NAND flash memories, as we expect demand for application in cellular phones and as a replacement for HDDs to produce a surge in sales in the near future. We are confident of success in the NAND area. Toshiba invented the product and owns key IP that will prevent commoditization. We will also use the potential of flash memories to the full by promoting sales of multi-chip packages (MCPs) for cellular phones. These devices mount NAND and NOR flash memories with SRAMs. Highlight: 

• December 2001: Agreement to transfer low-power consumption SRAM process technology to China's Semiconductor Manufacturing International Corp. 

System LSIs: Difficult market condition also under- mined our forecasts for sales of system LSIs. We did see favorable moves in the fiscal second half in CPUs for digital consumer products, LCD drivers and bipolar ICs for audio and visual products, and power supply ICs for automotive systems and TX Reduced Instruc- tion Set Computer (RISC) processors both proved to be hit products. Our focus from now on will be on embedded memory/analog SoC products. Some spe- cific examples include SoC for digital consumer equip- ment, wiress systems, intelligent office and automo- tive systems—all of which are expected to see very positive demand growth in the near future. 

In the course of the year, Toshiba took initia- tives to promote technology advances that will help the Semiconductor Company stand out among sys- tem solutions providers and further bolster competi- tiveness in system LSIs. Highlights: 

• May 2001: Agreement on joint development with Sony Corporation of leading-edge 0.1 ∝ m and 0.07 ∝ m process and design technologies for system LSIs. The two companies shared a recognition of the need to reduce power consumption and to achieve high per- formance process and device technologies. 

• October 2001: Agreement on joint development with Canon Inc. of Silicon-on-Insulator (SOI) wafers required for high-performance system LSIs. 

• February 2002: Agreement on joint development with MIPS Technologies, Inc. on the next- generation high performance RISC processor core, the TX99 series. Toshiba participates in core devel- 

