2019_1q_omron_e

34/36 Questioner(6)

Thank you. I would like to double-check a few points with regard to your outlook. For semiconductors, we have already seen pushouts to investments announced and I believe we have already seen a change in trends for data centers. If you look at the global PMI, we are already in a downward trend. On that basis, I believe that current conditions are significantly different from the outlook in April. In your commentary you indicated that you do have some concerns. Would it be fair to say you are shifting into a more cautious mode? Or is your outlook still relatively upbeat? At the very least, I would say that we are certainly not wildly optimistic. Given there is very little clarity about how things might play out, we are certainly more vigilant in trying to evaluate market conditions. At a high level, therefore, we recognize that we are already in a phase where we must exercise caution in managing our business. We do not believe that everything is rosy and that there is no cause for concern. However, it is a very mixed picture. An employee described the situation very aptly by saying that although we have clear skies, it is raining in places. It isn’t all gloomy skies and pouring rain, but neither is it sunny throughout. We are currently at a point where it is difficult to have a clear sense of direction. As such, we are being cautious, but we must balance this with the need to also manage for the longer term. Thank you. My second question relates to added value and the expected improvement to profitability from Q2 onward. Given that the product cycle for IAB is long, I find it difficult to imagine that your product mix can change dramatically from quarter to quarter. Is the expected improvement in margins more the result of products developed last year starting to have a meaningful impact from 2H? Or, were you able to successfully attract new hires in Q1 that are capable of contributing to profitability within 6 months of joining OMRON? Could you discuss this in more detail please? (Oue) Your question is about added value? On the cost side, we have continued our efforts to reduce costs. The benefits of such ongoing efforts should be cumulatively realized over time. Apart from this, we have changed our sales approach, focusing more on highlighting the added value we can contribute, rather than selling individual devices on a standalone basis. It is a solutions-based approach where we seek to resolve our customers’ issues. We have been gradually ramping up this sales approach to provide higher added value to our customers, on an ongoing basis. These efforts are gradually starting to bear fruit. On the product side, in terms of focusing on new products, we have put industry strategies into place. These have been very effective in allowing us to tap into the needs of our customers. We aim to develop products that match our customers’ needs, while also looking at ways to reduce costs. Our ability to generate added value is supported by aligning our strategies for costs, sales and products. (Nitto) Additionally, you asked about new products with high added value. The high value added products we developed last year have been positioned as KPPs. We are strategically focusing our sales activity on KPPs. This should allow us to gradually improve our profitability. For products developed during the current fiscal year, we remain focused on developing the next generation of KPPs or core products. When these products are released, our strategic focus will be to sell these high added value products. In this way, we will extend on the virtuous cycle in order to continue to boost the profitability of our product portfolio over time. As you alluded to in your question, the nature of our products means that you don’t see a dramatic change in product mix over relatively shorter time frames. Instead, the benefits are realized gradually over time; we remain focused on ensuring we can consistently maintain this process over time. We are almost out of time. Could we ask the final 2 questioners to limit themselves to 1 question each, please? Thank you.