2020_2q_omron_e

34/37 Questioner(3)

(Questioner 3) Thank you for the presentation. I have 2 questions. My first question is about IAB. Could you provide a rough image of the split in revenue between the 4 focus domains and the non-focus domain business? Also, are there differences in margin between the 4 focus domains and non-focus domain business? Could you talk about how you want to change this mix over the next few years? (Yamada) I apologize but we do not disclose this information. (Questioner 3) Understood. My second question is about EMC. Today you talked about your criteria for continuing with businesses, as shown on slide 21. Frankly speaking, I don’t think EMC meets any of the criteria stated here. If you were to combine EMC with IAB, the combined business would still generate high margins, so that could be one approach. Given the emergence of low-cost Chinese manufacturers such as Hongfa, what is the mission you have set for the president of EMC? (Yamada) Fundamentally, EMC’s primary mission is to be a strong manufacturer of device modules to support the 3 domains we show here. For a number of different reasons, profitability at EMC has suffered this year. As a part of initiatives to reorganize and consolidate manufacturing bases, we chose to raise inventory levels during the transition period to ensure our customers were not inconvenienced. However, the increase in inventory coincided with the decline in demand. Within OMRON, EMC is one of the few businesses that requires significant capacity but the falling demand led to low capacity utilization. We are currently prioritizing the reduction of inventory levels, at the expense of capacity utilization. This is why profits are off sharply now. However, once inventory levels normalize, we expect profitability will return to previous levels. Additionally, EMC is the supplier of key modules for IAB and HCB. As an example, the mainstay product for HCB is our BPMs. The pressure sensors that support the high degree of accuracy in blood pressure readings for OMRON are manufactured in-house at EMC. Many of the components used in IAB products are made by EMC. As such, the EMC business is indispensable for OMRON. We are focused on returning to the previous ROIC levels of more than 10% as quickly as possible. (Questioner 3) Understood. Thank you. (Okumura) Thank you. Next question please. Could you pass the mic to the person behind you? Thank you.