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- 00:55:37.6 Thank you. For IAB, the growth rate in Q2 was very high relative to Q1. I believe that you have outpaced your Osaka-based peer this time. Up to now, when we compared the two, my impression had been that your growth rates had lagged that of your peer.
Is the strong growth a function of mix, due to the strong growth in the underlying focus industries? Or, does it reflect the changes in how you are selling your products? I appreciate that it would be difficult to split this out in volume terms, but could you talk about your impressions and how confident you are that the momentum will be maintained in Q3 and beyond?
- 00:56:31.7 (Miyanaga) The Q2 results are indeed a reflection of the factors you alluded to in your question. In terms of industries, certainly the auto industry started to ramp up investments in Q2. Also, there was a strong contribution from SPE-related investments. It is true that we did benefit from a heightened focus on providing solutions but there was also a positive impact from selling combinations of products. I would also say that there are a few cases where we simply saw opportunistic incidental sales on the back of our sales people visiting customers.
Additionally, our distributors have recently been focused on selling modular elements for control panels that have unified design principles and form factors, driven by customer preference for the ease of operability and use. We launched products to tap into this demand from last year, primarily for sale through our distributors. We have seen a change in spend per customer for our distributors increase on the back of this.
In terms of the outlook, from Q3 onward the auto industry will be stepping up their initiatives for new technologies such as EVs. We do not expect the demand from semiconductors to fall in the near future. We will also be able to better leverage our learnings from the new sales approach in H2. Therefore, we are quite confident about the outlook for both Q3 and Q4.
- 00:58:23.2 Thank you.
This may be a similar to earlier questions but my impression of the upward revision this time around, relative to how you have approached guidance in the past, appears to be quite positive, or more accurately, not conservative. I would like to know if the change in the sales approach alluded to by Mr. Miyanaga, has enhanced the accuracy of your demand forecasts because of the deepening of your relationships with your customers.
To date, you have generally said that it is difficult to project out even three months. Has this changed in such a way that you now have visibility out as far as six months? Also, quarterly net sales has been trending at around ¥100 billion. It may be tough to say, but do you think you can maintain this level up to the end of H1 FY2018?
- 00:59:25.6 (Miyanaga) In terms of the accuracy of our forecasts, I do believe it has improved on the back of increased visibility into individual customers. However, what complicates the picture is, say, a situation with a machinery manufacturer where their business is directly impacted by end-user investment trends. There are situations where the equipment manufacturer does not have visibility into their end users’ demand or they experience a sudden surge in demand.
The most challenging development for us in H1 was in semiconductor-related investments, where the major chip makers appeared to be accelerating investments for competitive reasons. This may be a phenomenon that is specific to 2017 but it created a situation where there were dramatic changes in the scale of investments on a month-by-month basis. It appears there were elements of catch-up that played into this trend, but while I believe our ability to forecast demand has improved, the volatility in digital, and more specifically, semiconductors, is quite high. We are doing our best to seize this opportunity.
In a more stable environment, I do believe that our forecasting accuracy will improve further.
On the second part of your question, it is difficult to say, although it is a subject that we need to look at now. We are probably unlikely to see the overall business deteriorate significantly. We are not in a situation like the recent past where the only driver for semiconductor demand was smart phones. We are seeing a diversification of the sources of demand, such as large-scale investments in EVs and other technologies. From that perspective, I feel that downside support is relatively firm although I don’t have specific visibility that would allow me to say how the firmness on the downside in the next fiscal year might compare to this fiscal year.
I would certainly hope to see this trend continue and I am relatively confident in our capabilities but it is still too early for me to be able to go beyond qualitative impressions.
- 01:02:22.0 I think you have given me a sense for what we might expect. Thank you.
- 01:02:26.3 (Yamada) Mr. Miyanaga is being somewhat modest. I believe that we have definitely been able to get in closer to the markets and our customers. You cited the Japan business in Q2 but I think what we are seeing is also a reflection of changes at our customers. Shortages in the manufacturing work force are a major challenge not only in Japan, but globally. There is a clear and rising need to provide solutions packages that integrate hardware and software to a high degree. Our broad product lineup allows us to provide solutions such as soft control or vibration control. We expect that this type of demand will persist and increase going forward.
- 01:03:18.0 Thank you.
- 01:03:20.0 (Yamada) Given that all of the questions are about IAB, maybe I should sit down and let Mr. Miyanaga stand at the podium!
Please feel free to ask whatever questions you might have.