2019_2q_omron_e

41/42 Questioner(7)

I have one question about the near term. When I look at your Q2 IAB sales for Greater China, the growth was better than I expected. Some of your peers have reported very significant declines. If we look at the progression within the quarter, could you talk about whether conditions started to deteriorate from early in the quarter in July or later in the quarter. Also, Greater China includes more than mainland China, so if you could provide more color as to what went on, primarily in terms of the four focus domains. You are also expecting H2 revenues for Greater China to grow by 4%, so could you could also talk about what underpins your expectations for H2? After the launch of the innovative-automation strategy, China was the first market where we saw an impact. Last year, we were able to grow China IAB sales by more than 20% Y/Y. Growth was more modest in Q1 and Q2 of FY2018 but even in Q2, as you alluded to in your question, we were still able to achieve positive Y/Y growth. Sales to the Digital domain (primarily semiconductors and smartphone-related) fell off significantly but as touched upon earlier, was offset by sales growth in the Auto and Social Infrastructure domains. As an example, in China, when excavating a tunnel, sensors and controllers are used to manage ventilation and air conditioning for the underground corridors. We have broad industry coverage with the four focus domains approach, so even if one of the four domains is weak, it can be covered by strength in the other domains. This is what allows us to achieve positive Y/Y growth in IAB sales in Q2. This is one of OMRON’s strengths. We will continue to further build on this strength. Having said this, we recognize that the Digital domain is capable of dramatic growth in an upturn. In the absence of a full-fledged recovery in Digital, we think it would be challenging to return to last fiscal year’s growth rates. Therefore, we think achieving 20-plus percent growth would be difficult but given the cyclical nature of the business, it is important to focus on winning and maintaining the trust and confidence of our customers. In order to do so, it is important to focus now on proposing revolutionary applications. Thank you. Just a point of clarification, if I might. On the back of rising trade tensions between the US and China, there has been talk about putting investments on hold. Are you seeing this in your IAB business? You mean in terms of customers putting investments on hold? Yes, and also, if you could, how much of an impact do you think trade tensions could have? Some of your peers have a more optimistic view, suggesting that we could see a quick resumption of investments if the tensions ease. We are in a period of significant flux. My view would be that there is not much point in obsessing over every single perceived change. Every day we see new investments projects being initiated or existing projects being suspended or delayed. We have seen instances where a supposedly halted project gets restarted. We see a lot of this type of behavior in China. What we are doing now is to focus as much as possible on not relying on any one industry and ensuring that we are properly addressing the four domains we have identified as focus domains. As a consequence of concentrating on these four focus domains, we believe that we can achieve smooth growth over time. I apologize for taking up so much time, but there had been talk that given the possibility that customers might need to stop manufacturing in China, some were looking at moving their production to other countries. Is this still happening? We do have several such projects, where production is being moved from China to Asia or to the US. The impact of trade friction in the short term is negative, given that both sides are engaged in retaliatory behavior. But from the perspective of manufacturing locally for local consumption, over the longer-term it will drive demand to transfer or establish new production bases. This would represent a business opportunity for OMRON. We want to ensure that we can properly capture these opportunities. Thank you. Next, the person in the back, please. We are getting close to the end of the allotted time. Given the time constraints, this will be last question we take. Thank you.