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- 00:52:53.4 Thank you.
I have several questions on slide 35 related to the KPIs for the medium-term management plan.
First, a basic question. Are these targets only factoring in organic growth?
- 00:53:08.7 Basically, the targets only reflect organic growth. Obviously, as with the recent acquisition of Sentech, we are constantly looking at potential opportunities. We have both a long and short list of potential candidates and we will proactively pursue attractive opportunities.
Given that we have set ambitious targets for ourselves, we will continue to look at acquisitions.
- 00:53:28.8 Understood. Based on your response, looking at slide 34, it is clear you will be increasing investments significantly. Starting with R&D, you talked about investments in areas like AI and increasing field engineering resources. However, the shortage of qualified engineers has become quite acute recently and we understand that competition is fierce. It now appears that even at an annual salary of ¥10 million, you would struggle to hire qualified AI engineers. In addition to Google, IBM and Apple, in Japan you are seeing the emergence of companies like Preferred Networks that are hiring engineers. On that basis, even if you were to offer higher salaries, your chances of success would be limited, if you only use conventional channels. What kind of measures have you implemented to get around this?
- 00:54:04.0 I completely agree with your view of the hiring situation.
This time, the new R&D bases we will open will focus on cutting-edge research. We are open to carving these R&D centers out from the Omron Group in order to give them more of a free hand in determining remuneration.
One other point I would make is that AI or IoT are technologies that you could arguably choose to acquire. Omron’s strengths are in sensing and control. With regard to AI and IoT, it is my view that in the long-run these technologies become ubiquitous. Therefore, I believe they should not be considered technologies that support long-term differentiation. The key is how to leverage such technologies as Omron enhances our own technological strengths. It behooves us to continue to invest in our core technologies. This is why we have significantly increased our R&D spend.
- 00:54:59.3 Understood.
Related to this, I believe that you are very well positioned to provide solutions for manufacturers on the ground. You are viewed as being the player that is closest to the ‘edge’ in the context of manufacturing lines. As such, there are many AI companies that would like partner with you. I think you should have the upper hand in selecting partners.
To your earlier point about AI being a technology that can be bought, already we have seen AI become much more commoditized. Given this, wouldn’t it be better for you to invest much more in alliances in AI rather than developing this in-house?
Looking at the targets you have set this time, the combined incremental spend you are proposing for in-house R&D and capex amounts to an increase of more than ¥100 billion for four years. I do note that you say that your growth investments include alliances but it seems to me that focusing more on alliances is a better use of capital than trying to develop technologies like this in-house. Please talk about how you think about such incremental investments from the perspective of ROIC.
- 00:56:01.1 Fundamentally, we apply ROIC metrics in assessing investments. The reason why we are focusing on IAB and HCB is because ROIC is higher for these businesses.
To your question, I agree that we are well positioned to provide solutions at the edge. Using altitude as an analogy, Omron is, at most, at an altitude of 2-3 meters vis-a-vis production lines, and is focused on doing as much processing as possible at the edge, rather than trying to impose control from the cloud, effectively at an altitude of hundreds of meters. It is this positioning that is a key strength for Omron.
It is true that many companies have expressed an interest in partnering. While we will continue to advance our in-house expertise in our areas of strength, we are not aiming to do everything in-house. We are interested in alliances. With regard to AI and IoT, we are certainly open to considering alliances.
- 00:57:02.1 If at all possible, I would like to request that you provide more information on this subject. Even the slightest indication of what you specifically propose to do would be helpful. The reason why I ask is because, if all we have to go on is the numbers you have provided for the four-year period, the takeaway, given that you are increasing investments significantly, is that the next four years will be all about investments and that the prospects for further improving returns will be limited. Could you consider providing more specifics please? Thank you.
- 00:57:26.7 Can you pass the mic to the person next to you, please? Thank you.