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- 00:39:32.0 I have two questions.
My first question is about the increase in added value. You have indicated you expect added value to increase ¥17.3 billion on a full-year basis but achieved ¥13.3 billion in Q1. I am well aware that the smartphone-related business was very strong in Q1 but can you tell me if your initial expectations were that the full-year added value contribution on a quarterly basis would be roughly 25% per quarter? Can you provide some sort of context around the level that was achieved in Q1, please?
- 00:40:06.1 The image we had for the full-year plan we announced had profits essentially flat YoY. Therefore, if you make the comparison to last year, that should give you some sense for how we allocated across the quarters. Frankly, Q1 came in significantly higher than we had expected.
- 00:40:39.4 Is this overshoot basically the result of the strong smartphone-related investments?
- 00:40:42.2 In our initial expectations, we considered China to be an area of concern, particularly at the end of the fiscal year. Last fiscal year was quite strong but in hindsight, we did not expect that demand would be even stronger into this fiscal year.
In addition, smartphone-related demand was also strong in Asia, and Korea in particular. However, we had not expected smartphone-related demand to be as strong as it turned out to be. For us, it turned out to be a pleasant surprise.
Furthermore, the global macro backdrop was also strong, with all of the regions expanding. We saw strength across all the key regions. Our initial assumptions did not fully factor the impact of the positive macro backdrop.
- 00:41:40.0 I recognize that I may be jumping the gun here, but might it be better to look at this year as an aberration, in that we are seeing the confluence of a number of different trends? I have to say that I have some concerns about what next fiscal year might look like. Are there structural forces at work that are driving the demand growth in China? What do you think?
- 00:42:05.8 First of all, on China, and to a certain extent Korea as well, we are seeing a step up in the competition to invest amongst the digital players, with end customers investing as they battle for survival.
However, while this is the case for the digital industry, if you look at food & beverage or infrastructure industries, and some of the high level global trends, such as a shortage of workers or a shift toward local production for local consumption, it may well be that we have reached an inflection point in terms of the positioning of automation. We have long believed automation is a mega trend, but perhaps it is now truly becoming the mainstream.
Supported by technologies such as IoT or AI, we are seeing sustained increases in automation investments. Our experience in China has been that many companies have a very speedy decision-making process, and that they are proactively leading the charge in automation investments, with the other regions now investing to catch up.
Obviously, smartphone investment trends are volatile by nature, so it is unlikely to be a simple, linear progression, but at a high level, our view is that there is a solid tailwind that will be supportive as we aim to achieve our VG 2.0 targets. This is being borne out by what we have seen near term.
- 00:43:40.0 Thank you.
I would like to quickly ask about Sentech. If you have already factored in Sentech’s contribution to full-year forecasts, can you talk about the impact or provide a general sense of scale, please?
- 00:43:55.4 (Takeda) You are asking for a general image of Sentech’s impact? We have already factored in a contribution of several billion yen.
(Nitto) Having said that, it is still relatively small in comparison to our overall business, so you should not expect it to have a huge impact on overall consolidated results in this fiscal year.
- 00:44:12.5 Thank you.
- 00:44:14.7 Can you hand the microphone to the person next to you, please?