July 25, 2003

News Release: Southwall Technologies and Mitsui Chemicals Sign Volume Supply Agreement with Expected Minimum Value of $21 Million

Southwall Technologies Inc. (Nasdaq:SWTX), a global developer, manufacturer and marketer of thin-film coatings for the automotive glass, electronic display and architectural markets, and Mitsui Chemicals, Inc. of Japan, a leading global manufacturer of high-performance optical filters and backlighting substrates for flat panel displays, have signed an exclusive agreement for Southwall to supply Mitsui with sputtered film products for Plasma Display Panel (PDP) and Liquid Crystal Display (LCD) applications. Under the terms of the agreement, Southwall will supply certain proprietary sputtered film products to Mitsui Chemicals for its exclusive use worldwide through December 31, 2006. Mitsui has an option to extend the agreement beyond that date. Based on the current pricing and the minimum quantities required for purchase and delivery, the sales value for Southwall over the initial two years of the agreement is expected to be at least U.S. $21 million. Mitsui may also purchase other Southwall sputtered film products for use in automotive and architectural applications on a non-exclusive basis under the agreement.

The optical films to be supplied by Southwall under this agreement perform a number of important functions in flat panel displays. These include reducing ambient surface light reflection from the front of display screens, decreasing electronic and infrared emissions within displays, and increasing the brightness of LCDs through the enhancement of backlighting.

'Mitsui Chemicals and Southwall Technologies have a long and productive history of working together,'said Mr. Akihide Kudoh, general manager, Information Materials Division, Functional Chemicals and Engineered Materials Business Group of Mitsui Chemicals. 'We are very excited about the growth potential of the PDP and LCD display markets and view Southwall as an excellent strategic supply partner. Mitsui plans continued strong investment in these new display areas and has expectations of continuing its market leadership through the use of Southwall's products.'

'Mitsui Chemicals and Southwall are now aligned to effectively serve the rapidly growing needs of the flat panel display market,' said Mr. Thomas Hood, president and chief executive officer of Southwall Technologies. 'This agreement recognizes and capitalizes on the strengths of both companies. We have worked closely with Mitsui for over 18 years and view this as an exciting opportunity. Continued strong demand in the PDP and LCD display markets, along with Southwall's continued product innovation, has the potential to increase the expected value of the agreement significantly through the end of 2006. In addition to the display markets, we also expect this agreement to enhance our sales in the automotive and architectural markets in Japan.'

About Mitsui Chemicals, Inc.

Headquartered in Tokyo, Japan, Mitsui Chemicals, Inc. is a diversified chemical company with offices in Europe, China, Korea, Southeast Asia, and America. A worldwide leader in the chemical industry, the company is actively engaged in numerous industry segments, including Petrochemicals, Basic Chemicals, Functional Polymeric Materials, and Functional Chemicals and Engineered Materials. For more information on Mitsui Chemicals, Inc., visit the corporate website at www.mitsui-chem.co.jp

About Southwall Technologies Inc.

Southwall Technologies Inc., designs and produces thin film coatings that selectively absorb, reflect or transmit light. Southwall products are used in a number of automotive, electronic display and architectural glass products to enhance optical and thermal performance characteristics, improve user comfort and reduce energy costs. Southwall is an ISO 9001:2000-certified manufacturer and exports advanced thin film coatings to over 25 countries around the world. Southwall's customers include Audi, BMW, DaimlerChrysler, Hewlett-Packard, Mitsubishi Electric, Mitsui Chemicals, Peugeot-Citroen, Pilkington, Renault, Saint-Gobain SEKURIT, and Volvo.

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 the company's expectations, beliefs, intentions, or strategies regarding the future. All forward-looking statements in this press release are based on information available to the company on the date hereof, and the company 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 the possibility that the agreement between Southwall and Mitsui (the 'Agreement') will be terminated in whole or in part by one party or the other, that provisions of the Agreement (including those requiring Mitsui to purchase set amounts of products from Southwall and to pay even if it does not accept delivery) may be declared unenforceable, that customer demand for the products covered by the Agreement will be less than expected, that Southwall's production costs associated with the products covered by the Agreement will increase, that Southwall will experience manufacturing or quality problems in the future that will impair its ability to produce or provide sufficient quantities of products under the Agreement, that the Agreement will not enhance Southwall's sales in the automotive and architectural markets in Japan, that actual orders for products or revenues to Southwall under the Agreement will be materially lower than those described above, that Mitsui will not purchase the minimum amounts set forth in the Agreement, that Southwall will experience significant warranty or indemnification obligations in connection with the Agreement, that Southwall's costs to produce product for Mitsui will be higher than anticipated, that the Agreement will not be profitable to Southwall during some or all periods covered by the Agreement, that Southwall will be directly or indirectly harmed by negative developments for Mitsui, that the exclusivity provisions in the Agreement applicable to Southwall will have a negative effect, that the penalty provisions in the Agreement for late product delivery will adversely affect Southwall, that Southwall will not achieve any future growth or will experience losses, that Southwall's growth strategies will not be successful, and that shipments to customers will be materially less than anticipated, as well as risks associated with Southwall's failure to meet covenants under credit facilities and strains on the company's liquidity. Further risks are detailed in the company's filings with the Securities and Exchange Commission, including those set forth in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2002, filed on March 31, 2003, and Quarterly Report on Form 10-Q for the quarter ended March 30, 2003, filed on May 14, 2003.

SOURCE: Southwall Technologies

Southwall Technologies Thomas G. Hood, 650-962-9111 (President &CEO) This email address is being protected from spambots. You need JavaScript enabled to view it. Michael E. Seifert, 650-962-9111 (Sr. VP &CFO) This email address is being protected from spambots. You need JavaScript enabled to view it. www.southwall.com

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