Note: These figures include inter-segment sales.

Used in mobile phones for vehicles, our KHF5311 LSI combines a full duplex intercom program for hands-free operation of the phone and a background noise reduction program for clearer communication.

Solid Audio, the world's smallest network audio player, allows listening to audio while on the move by downloading audio content from networks and playing it back at CD quality.

During the year under review, sales in the Electronics and Information Sector rose 5.1%, to 80.2 billion yen, reflecting higher sales of semiconductor-related products. However, the adverse effects of slumping market prices for DRAMs led to a 16.8 billion yen operating loss. A continued drop in market prices for DRAMs resulted in a significant deterioration in our business results. In response, KTI Semiconductor Ltd., a subsidiary that manufactures semiconductor products, worked to improve its cost efficiency. However, these efforts failed to compensate for the sharp decline in DRAM prices, which adversely affected KTI's performance for the fiscal year. To improve KTI's competitiveness and performance, we recently reached a basic agreement to transfer Texas Instruments Incorporated's equity share in the company to Micron Technology, Inc. The combination of Micron's advanced process technology and KTI's world-class production technology should enable the joint venture to produce memory semiconductors that offer the world's highest levels of performance, quality, and cost competitiveness. In the coming fiscal year, KTI will begin a new phase of its operations as a major producer of memory chips. Genesis Technology Inc., a subsidiary engaged in integrated circuit (IC) testing, recorded a steady expansion in its business in fiscal 1997. The company aims to continue increasing its profitability by raising productivity. Our LSI Center, which handles semiconductor sales, has shifted the focus of its business strategy away from sales of memory chips toward providing solutions, primarily in digital signal processors (DSP). This move has enabled the LSI Center to improve its profitability. The LSI Center will work to provide customers with optimal and efficient solutions, focusing on such leading edge-technologies as CDMA digital technology, which is attracting attention for its application in next-generation portable phones, and TwinVQ, a high sound quality compression technology. Markets for information systems have been growing steadily. Within this field, we have shifted the focus of our sales of real-time operating systems from control-related systems to multimedia systems, which has yielded a sharp rise in orders. Furthermore, increased government investment for information systems and a recent surfacing of various environmental problems has led to brisk growth in inquiries about environment-related information systems. In this field, we are conducting research and development that will enable us to take a more flexible approach to costs as we aim to enhance our profitability. Kobelco Systems Corporation has been recording steady growth in its system solution business along with the trend toward open and integrated systems. In the coming fiscal year, we will strive to use the significant structural changes taking place in the semiconductor industry as an opportunity for achieving further growth.