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- 00:36:46.2 I have two questions as well.
My first question is about the innovative-Automation strategy for IAB. Can you give me a sense for the scale of revenues that you are generating with the application packages you described? Could you also talk about the industries or specific applications where take-up has been strong? Is there a killer application that is showing particularly strong growth?
- 00:37:16.3 It is still early days in terms of putting these proposals in front of our customers. However, as examples, we have packages that control vibration, or in a process where a metal pin is being inserted at a perpendicular angle into a glass substrate, a package that ensures the insertion process is sufficiently gentle. We believe that there is a lot more that can be done with such packages.
That said, our focus for developing applications is on the four target industries. We feel we are making good progress as we have seen these four industries account for an increasingly larger proportion of sales over time.
- 00:37:56.6 What is the profit contribution from such application packages?
- 00:38:01.9 It is very high margin business.
The improvement we are seeing in GPM reflects this, as you can see from the materials. Excluding the forex impact, we expect to raise our GPM by 7% points on a full-year basis. What is driving this improvement in IAB is the combination of sales of the innovative-Automation application packages and, an enhanced ability to capture more opportunities as a result of the more concentrated industry focus. Both of these are having a multiplier effect in boosting GPM.
(Nitto) Just to clarify on the application package contribution, software application packages on a standalone basis are not driving the growth in higher margin business. Our model is to embed application packages into our controller and, on the back of this, to create a total systems package. The driver of sales is the combination of the application packages and the controller but what generates the higher margins is sales of the total systems.
This is the business model. Rather than simply selling the controller as a standalone device, we sell total systems by incorporating the applications required by our customers into a package. The shift to selling total systems is contributing to improved margins.
- 00:39:16.8 Going back to an earlier point, are you saying that such systems still only account for a small proportion of total sales?
- 00:39:23.1 Yes, there is still plenty of room to grow.
- 00:39:27.0 I apologize for going on so long with this question, can you be more specific about how AI can be used to enhance productivity?
- 00:39:45.6 Unfortunately, this is an area that we cannot discuss in great detail, but can you look at slide 23?
As you can see, our product includes a vast array of control components, ranging from sensors to motors and beyond. All of these components are able to capture specific data related to the manufacturing process.
However, we do not believe that all of this vast data necessarily merits further analysis. Being unselective about the data could generate a lot of irrelevant feedback. It is necessary to determine which data points are meaningful and where there are significant correlations between data streams.
We hope to leverage AI technologies in order to enable meaningful feedback loops, distinguishing between those where control should be exerted at the point of manufacture and those that should be examined at a higher level. Where we see value from further analysis, we must also ensure that we focus only on the relevant data.
This is what we are trying to do with AI technology.
- 00:40:36.6 What is the scale of current initiatives with AI?
- 00:40:45.4 We are still at a very early stage.
As I noted in our presentation, our aim is to work with our customers to develop this technology going forward.
- 00:40:57.3 I have one last question. I apologize in advance since it is a subject that was raised earlier. On the backlight business, you indicated that this year, unfortunately, the business will remain loss-making. Do you see this business achieving breakeven next fiscal year?
- 00:41:10.4 We are certainly aiming to achieve profitability in this business going forward.
- 00:41:12.9 In talking about this business, you said you are aiming to further refine ROIC management. Can you talk a little more about what do you meant by this?
- 00:41:27.7 Each of our business units have ROIC and growth metrics, which form the basis for evaluation. As a part of the process, there are some businesses that we choose to downsize but others where we choose to take remedial actions.
The backlight business falls in the latter camp. We want to maintain a foothold in what we consider to be a growth area.
- 00:41:55.8 Understood. Thank you.
- 00:42:00.5 Next, the person in front.