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- 00:50:09.0 Thank you for the presentation. I am sorry for harping on the same business, but I would like to ask about the LCD backlight business. You talked about prices falling but can you talk about what is happening with the market shares of various players like Minebea and others? Qualitative comments are fine. Chinese smart phone handset makers seem to be doing well. Are you seeing volumes rise from such players? Or, are the volume increases you see not enough to offset price declines? Or, in addition to price declines, are you also losing market share? Also, on the facilities that you have written down, it was my understanding that because it was possible to convert these facilities for use by IAB, major impairment losses for this business were unlikely. If that is the case, why are you taking such a large impairment loss of more than ￥10 billion?
- 00:51:12.0 (Nitto) In terms of our peers in the backlight business, as you alluded to in your question, the big competitors are Minebea and E-Light com. In terms of positioning, Minebea is by far the largest player. Our sense is that we are the number 2 player with a very distinctive product. In smart phone backlights, as stated by CEO Yamada, what we saw is a rapid decline in prices in the segment of the market traditionally referred to as high-end, on the back of significant improvements in the functionality of the traditional mid/high segment. If you look at handset offerings in domestic retail stores, you can see that there has been a rapid shrinking in the high-end handset market, although the overall smart phone market continues to grow. What has happened is that the high-end segment has lost ground rapidly, although we have not lost market share in the high-end. We were also selling backlights in the mid/high segment but it was not enough to offset the scale of price declines we saw in the high-end. It was because of the large-scale price declines that we made the decision to optimize our business and to focus on areas where we have strength. In areas where we have superiority like narrow bezel backlights, our product is very competitive. We do not expect this segment of the market to go away either. As handset functionalities continue to evolve, we aim to maintain our competitiveness in this area. This is the backdrop to why we chose to optimize our backlight business. If you look at individual models, obviously the picture is mixed, but at a high level, we believe that this business will be viable if we focus on our strengths. On the impairment losses, the facilities that can be converted have been converted. However, when we looked at some facilities, like press equipment, we felt that the scale was too large to convert everything. This is why we chose to take a relatively large and full impairment loss. By dealing with all of this now, we have a clean slate to rebuild our business for profitability.
- 00:54:28.7 Thank you. I have one more question. Looking at the financial data book you have provided, on page 3 you have data for IAB. My question is about how to look at IAB margins. When you look at the quarterly progression, although Q1 and Q2 revenue levels were relatively similar, Q1 OPM was 13% and Q2 was 16%. In 2H, you are guiding for OPM to revert to 13%. Are there one-off factors specific to Q2 like the absence of integration expenses or unrealized gains on inventory that boosted margins? Or is the Q2 level the sustainable level and 2H a conservative forecast?
- 00:55:27.4 There are two things I would highlight. I talked earlier about the overall GPM improving solidly. Also, we do not manage our business on a quarterly basis. Therefore, there can be timing issues in terms of expenses that leads to lumpiness in quarterly margins. Additionally, for IAB and HCB, we had frontloaded advance growth investments which are reflected in increased SG&A and R&D spend.
- 00:56:11.0 Thank you.
- 00:56:15.0 Are there any more questions?
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