2019_3q_omron_e

34/34 Questioner(7)

(Questioner 7) Thank you. On the forecasts for IAB, you indicated that of the 4 focus domains, Digital was lower, primarily on semiconductor weakness. However, for the other focus domains up to the end of Q3, conditions were relatively solid and largely in line with internal plan. Three months ago, you had indicated you expected a pick-up in auto-related business from 2H and that this would be a driver for growth in 2H. Has there really been no change in Automotive? How do you view Automotive in Q4? This is my first question. (Nitto) Of the 4 focus domains, only Digital reported a Y/Y decline in sales. Automotive sales remain in positive territory. That said, auto capex, including both the US and China, has not recovered and, in fact, is clearly slowing. This has been factored into our forecasts. It is true we had expected a slight recovery but instead capex declined, so the gap versus our previous expectations widened. Auto capex is not recovering. Auto makers continue to invest in forward-looking development in areas like ADAS and EVs but have been moving to significantly reduce maintenance and upgrade capex for existing manufacturing capacity. This is true on a global basis, including Japan and the US, not just for China. (Q) So in other words, your overall assumptions for Automotive within IAB for Q4 are on the cautious side relative to December? (Nitto) Yes. We do not expect to see any recovery in Q4 for Automotive, either in terms of specific regions or product lines. (Q) Thank you. My second question relates to HQ expenses. This fiscal year, the Corporate and Eliminations line forecast is relatively large. You have talked about IT spending today, as you have previously. Is it the case that you are undertaking large-scale investments that are concentrated in 2H FY2018? To the extent that you can, could you comment whether this is the peak for these investments and whether we can expect IT investments will fall off in the next fiscal year? Or, are the IT investments not that large? I would be grateful for any hints you can provide. (Nitto) I cannot comment specifically on how much we are spending on IT but it is relatively sizeable and in the billions of yen. We believe we need to fundamentally rebuild some parts of our IT systems, so we wouldn’t expect investments of this nature to drop off next fiscal year. We will be maintaining a certain level of IT investments over time. (Q) Understood. Thank you (Itagaki) Thank you. We will close the Q&A session. We would be grateful if you can take the time to complete our feedback sheet. This concludes the Q3 FY2018 results briefing for Omron. Thank you for your participation today.