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- 00:36:48.6 My first question is about IAB. When I look at the sequential quarterly trend in revenues from Greater China, it appears that revenues are gradually declining. Demand from the smartphone-related sector was very strong in H1 so some moderation seems natural, but can you provide more color into what is going on? Also, I believe the US and European businesses would have been impacted slightly by forex, but revenues appear to have risen sequentially. Can you talk about some of the notable regional trends on a quarter by quarter basis, as well as the expected direction going forward please?
- 00:37:29.7 On Greater China for IAB, as you alluded to in your question, we saw a large volume of orders related to smartphones in Q1 and Q2, which drove very rapid growth. For Q3 and Q4, smartphone-related investments have moderated relative to H1 but this has been offset by demand from other industries such as automotive, semiconductor or food & beverage. The trend we are seeing has been a shift toward these industries as smartphone-related demand has tapered off, so while the absolute level has remained high, there has been a slight change in the mix of industries over the course of the quarters.
In terms of growth rates, there has been a moderation after the very strong growth rates in Q1 and Q2, so optically, it appears as if growth may be slowing down. However, if you look at the content of the orders, we believe the operating environment remains very strong.
For Europe and the US, it is certainly true there was some impact from forex but Europe saw continued strength from the food & beverage industry. For the US, capex in the automotive and semiconductor industries remains firm.
Regionally speaking, all of the key geographies continue to show solid growth. In the past, it had been rare to see all the geographies doing well at the same time. However, what we are seeing now is not limited to IAB, but is reflective of a broader trend globally. So we are in a rare situation. If you drill down to individual strategies in IAB, we are benefiting from initiatives such as the 3 +1 strategy, where we concentrate on providing value across the totality of a customer’s supply chain to maximize our business. innovative-Automation is also allowing us to provide new solutions. We believe such strategies are allowing us to capture the various growth opportunities in each geography, supporting overall growth.
- 00:39:41.2 Thank you. So in other words, you are benefiting from the underlying recovery in automotive and semiconductor investments, although smartphone investments have been a major driver. If we look at this on a longer-term basis, you believe that we will continue to see an uptrend in demand, is that correct?
- 00:39:56.4 Yes, that is correct.
- 00:39:58.9 My second question is related to your full-year forecasts for the Other segment. You have revised down sales and profit guidance for this segment. If we look at Q4 on a standalone basis, it appears that the losses will increase on a YoY basis. Can you talk about the factors behind the widening loss and when you expect this segment return to profitability on a full-year basis?
- 00:40:18.5 As you know, the smartphone market has been a disruptive force in many ways. Backlights in particular are being challenged in a number of ways including competition with OLED. If we look just at the smartphone application for backlights, then we have significantly reduced our sales expectations, on the back of optimization of the workforce and manufacturing capacity and a more selective focus on customers and value added products. This is why despite the forecast for a significant decline in smartphone-related backlight sales YoY, we believe we will be able to improve profits YoY. That said, given the current operating environment, we felt it was necessary to do another round of optimization so we have chosen to become even more selective in terms of our customers, and more proactive in reducing fixed costs. Effectively, we are frontloading the implementation of the next round of optimization. The impact of this is what is leading to a widening of losses in Q4.
With regard to returning this segment to the black in FY2018, although I cannot comment specifically on the timing, I can say that we will be disciplined in optimizing our business in line with the operating environment and that our forecasts for this year have factored in the frontloading of such initiatives.
- 00:41:37.3 Does this mean that you have also factored in some one-off expenditures in Q4?
- 00:41:43.1 Slightly, yes, but only very slightly.
- 00:41:46.2 Thank you.
- 00:41:49.1 Thank you. Could you pass the mic to the person behind you, please?