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Southwall Orders Third Production Machine to Increase Capacity At Their German Plant

    PALO ALTO, Calif.--Jan. 16, 2002--Southwall Technologies Inc. announced today that a new sputtering machine, PM10, has been ordered for its European subsidiary, Southwall Europe GmbH, in GroBrohrsdorf, (Saxony) Germany. The GroBrohrsdorf manufacturing plant was officially opened with the commissioning of the first production machine, PM8, in July of 2000.
    The new machine will be fabricated and installed by von Ardenne Anlagentechnik GmbH of Dresden, Germany, the same supplier of PM8 and PM9. PM10 will be the third machine installed to support the strong demand for Southwall's solar control film technology in the expanding worldwide markets for automotive and architectural laminated glass products. PM10 will supply XIR(R) and Heat Mirror(R) film products for these market segments and provide improved delivery times to markets in Europe, the Middle East, and Africa.
    "We are very pleased with the results of our first full production year at the GroBrohrsdorf plant," stated Wolfgang Heinze, vice president and general manager of Southwall Europe GmbH. "Our manufacturing and technical teams learned a great deal during the start-up of our first machine, PM8. As a result, we were able to measurably shorten the start-up phase for PM9, making a significant contribution to our production during the last half of 2001. Our plans and time schedule for the fabrication, installation, and commissioning of PM10 should allow us to begin regular production with the new machine in early 2003," he added.
    Although PM10 is nearly identical to PM8 and PM9, certain features were added to the design of PM10 that will permit product mix changes as well as other product design modifications in a more efficient manner. The purchase of PM10, like PM8 and PM9, will be supported by subsidies from the state of Saxony, the Federal Government of Germany and the European Commission in Brussels. It is expected that PM10 will be financed with a combination of bank debt and cash generated from ongoing operations, confirming Southwall's improved operating performance and resulting positive cash flow.
    As previously announced (Press Release dated Jan. 9, 2002), Southwall and Saint-Gobain Sekurit signed a new 2-year supply contract for XIR(R) automotive film for delivery in 2002 and 2003. In the Agreement, Southwall guarantees the availability of certain minimum quantities of automotive XIR(R) film with the majority supplied from Southwall Europe GmbH.

    About Southwall Technologies Inc.

    Southwall Technologies (www.southwall.com) designs and produces technologically advanced thin film coatings that selectively absorb, reflect or transmit electromagnetic radiation. Southwall products are used in a number of architectural, automotive and electronic display products to enhance optical and thermal performance characteristics improve user comfort and reduce energy costs. Southwall exports advanced thin film coatings to over 25 countries around the world for use in products manufactured by such companies as Audi, BMW, DaimlerChrysler, Renault, Peugeot-Citroen, Volvo, and Mitsubishi Electric.

    This press release may contain forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995), including, without limitation, statements regarding Southwall's expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements in this press release are based on information available to Southwall on the date hereof, and Southwall assumes no obligation to update any such forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those presented. These risks include that customer demand for Southwall's products will not grow or will decline or that Southwall will experience manufacturing or quality problems in the future despite being ISO 9001 compliant, as well as, that the new production machine, PM10, will not be fabricated, installed, and/or commissioned on the expected schedule. Further risks are detailed in Southwall's filings with the Securities and Exchange Commission, including those set forth in Southwall's most recent Form 10-K and Form 10-Q.