2019_2q_omron_e

40/42 Questioner(6)

Thank you. I have 2 questions. My first question is from a longer-term perspective. The i-BELT business model appears to be a stock business. Can you talk about when you expect to see a contribution to profits? Also, I assume you are expecting to generate high margins on this business but can you talk about your image, if any, for how much it will push up GP margin? We have only just launched this business so for now we are still in an investment phase. We are currently incurring expenses to build more Automation Centers, add more sales engineers as well as increasing our R&D spend. Therefore, we are expecting to see contributions to profit after FY2020. At the moment, revenue scale is only several hundreds of millions of yen, so our first target is to grow topline to ￥10 billion, then ￥50 billion. You alluded to this being a stock business: it is certainly our intent to build a stock business. By expanding from diagnostics into predictive management and maintenance, we will not only generate fee income from our customers as they add services but have visibility into their future challenges. We believe that addressing these new challenges will allow us to develop more revolutionary applications. By packaging these applications, we can then sell these solutions to other OMRON customers facing similar challenges. This is the virtuous cycle we envision for this business model. Effectively, this allows you to lock in your customers? In other words, it is a sticky business model where once they sign-up for the service, they will be yours for life? That’s what we are aiming to achieve. This is more than simple outright sales of hardware, such as selling a specific controller or sensor for a production line. This is a business model where we propose to sell total systems which includes maintenance services, so once a customer has signed on, we would expect it to be very sticky. The key will be how much value we can offer to the customer at the outset. We are currently focused on developing a model that will be very compelling for our customers. Understood. Thank you. My second question is more short-term in nature. On the Auto investments you expect to see, I can understand the increase in ADAS investments but on the EV side, we already hearing concerns about excess capacity, particularly for batteries. Given this, your expectations for EV-related investments in H2 seem somewhat optimistic. What is your view? We are continuing to monitor the situation very closely. However, as an example, there is a wire winding process; many OMRON controllers and sensors are being used in the process managing the tension of the wires. We are seeing broader take-up of applications like this. We consider this to be a positive factor for OMRON. That said, as you have indicated, we are aware that there is uncertainty in the market and we would expect to see volatility. As such, we will be monitoring the market very closely. We have, however, been successful in broadening the customer base. Please hand the mic to the person next to you. Thank you.