Consolidation of Medical Material Businesses of
Kyocera Corporation and Kobe Steel, Ltd.
Agreement to Establish "Japan Medical Materials Corporation" (tentative name)

Kyocera Corporation (Headquarters: Kyoto; President: Yasuo Nishiguchi) (hereinafter referred to as "Kyocera") and Kobe Steel, Ltd. (Headquarters: Kobe; President: Yasuo Inubushi) (hereinafter referred to as "Kobe Steel") agreed to establish a new company aiming to become a total medical material manufacturer by consolidating the medical material businesses of both companies as of September 1, 2004.

The name of the new company will be "Japan Medical Materials Corporation" (tentative name) and the amount of its capital will be 2.5 billion yen. Shareholding ratios of Kyocera and Kobe Steel will be 77% and 23%, respectively.

The new company will integrate material and processing technologies for both ceramics and titanium alloys as well as business resources derived from Kyocera and Kobe Steel, and will promptly establish a business basis as a medical material specialist, which is unique in the world. The new company will conduct business not only in Japan but all over Asia, and will aim to develop its business on a global scale, targeting markets all over the world. Especially in the area of artificial joint business, which is the main product line of the new company, Kyocera and Kobe Steel are the No. 1 and No. 2 manufacturers, respectively. And the new company, as a result of the consolidation of the two manufacturers, will aim to become Japan's premier total medical material manufacturer.

Currently, the domestic size of the market for artificial joints is approximately 73.5 billion yen, which are used for medical treatment of osteoarthritis and chronic articular rheumatism, which are often seen among older people. Overseas manufacturers have been participating in the Japanese market for the past 40 years, and with abundant clinical experience, they control a majority in aggregate of market (Source: Yano Research Institute, Ltd.; 2002). However, there has been substantial demand from domestic medical institutions to develop artificial joints which match the body types and lifestyles of Japanese people, and Kyocera and Kobe Steel both have been providing such artificial joints, taking advantage of the merits of the features of the materials and processing technologies.

The Japanese demographic is aging, and to capture expanding market demands and provide outstanding products thereto, the new company must establish its business basis as soon as possible.

For this purpose, it is thought to be very important to integrate the advantages of the two leading companies, namely, the knowledge and processing technologies of Kyocera in ceramic materials and Kobe Steel in titanium materials and to maximize synergies resulting from the consolidation of their development, manufacturing and marketing divisions, in order to provide the high quality services demanded by medical institutions and to achieve business expansion and development.

Within three years, the new company will aim to control a 20% market share in the artificial joints market and continue to provide products and services which will contribute to the health of people all over the world, and hence, contribute to the progress and development of human society.

Outline of New Company