Epson 2008 Annual Report Download - page 5

6Seiko Epson Corporation
7Annual Report 2008
Profits were higher for the Company as a whole compared with the previous fiscal year,
but diverged widely from the forecast at the beginning of the fiscal year.
Although we exceeded our sales target in the information-related equipment
segment, profitability in the electronic devices segment, particularly in the small- and
medium-sized display business, has been slower to improve than expected as we
sought to overcome the issues leftover from the previous fiscal year.
Q 2. In light of that, how do you rate the fiscal year ended
March 31, 2008?
Second, we restructured the small- and medium-sized display business, a business
that has seen a drastic erosion of profitability. Because of an impairment loss in the
fiscal period ended March 31, 2007, we started off with lower fixed costs in the fiscal
year under review. We were thus able to set a new direction, concentrating our resources
on amorphous silicon TFTs and LTPS TFTs, to this end completely transferring color
STN operations offshore and terminating the MD-TFD business.
In addition, we took steps to improve profitability by responding to strong mobile
phone demand with new applications that leveraged our strengths in such areas as
wide viewing angles, high luminance and high-definition displays, resulting in a sales
gain sufficient to cover fixed costs.
Direction of Each Technology (basis for the fiscal year under review)
■ Maintain the scale of business at past volumes for mobile phones.
Focus on developing other applications.
■ Transfer all operations offshore and streamline management.
Color STN Complete offshore transfer of operations
■ Continue with steps to terminate operations.
MD-TFD
■ Continue to exploit new business domains with products that provide low power
consumption, compact design, and high image quality.
LTPS TFT
Terminate operations in the year under review
■ Improve response to customer needs in existing domains.
Respond to new business domains by introducing distinctive technologies.
■ Extensive use of common components from the product planning stage.
Further lower procurement costs and boost profitability.
Amorphous
silicon TFT
Concentrate resources and respond to customer needs
In the first place, the entire inkjet printer market showed very limited growth. Therefore,
the fact that we were able to achieve any gain in sales volume at all, not to mention
recover our market position, was commendable in itself, especially considering the
future potential for consumables sales. We also fortified our business structure by
implementing marketing initiatives that precisely identify regional- and customer-specific
needs, enforcing cost efficiency and continuing to implement cost reductions. Unit
sales of new products launched for the year-end selling season surged thanks to higher
printer speeds that boosted product appeal and an enhanced lineup of multifunction
printers (models with integrated scanner and copier functions).
Profits in this segment were thus largely in line with projections owing to the cost
cutting benefits of reducing the number of platforms and strong sales of consumables,
not to mention the benefits of a weaker yen.
In addition, robust demand for business projectors for education applications
pushed unit sales up dramatically, and POS system-related products also fared well.
Background to achievements and issues
Q 3.What factors were behind the results achieved in the
information-related equipment segment?
Our basic strategy of concentrating resources on amorphous silicon TFTs and LTPS TFTs
remains unchanged. In line with this strategy, Epson terminated production of MD-TFDs in
the fiscal year under review. Although we completely transferred color STN production
offshore as planned, intense competition in the low end of the mobile phone market is
keeping our profit margins down. As a result, we plan to curtail color STN production
Q5.Please state what direction you intend to take in the small- and
medium- sized display business.
The reason has been our inability to quickly shift over to a product portfolio containing
profitable new LCD applications. This has had a major negative impact on net sales.
Looking at the reasons for this by LCD application, I can point to substantial delays
in our plan to make up for lost mobile phone-related MD-TFD demand due to the
termination of that business and refocus on amorphous silicon TFTs. We also attempted
to respond to demand for new applications; however, demand for high-definition
displays and other fields where Epson is strong did not grow as much as anticipated.
The second half of the fiscal year saw an increase in demand for non-mobile phone
LCD applications, including high-end smart phones and mobile multimedia devices.
However, because we were unable to capture sufficient sales, we are planning to speed
up the pace of structural reforms.
Q 4.Why is it taking so long for profitability to improve in the small-
and medium-sized display business?
Display business abbreviations
• Color STN:
Color super-twisted nematic
• MD-TFD:
Mobile digital-thin-film diode
• Amorphous silicon TFT:
Amorphous silicon thin-film tran-
sistor
• LTPS TFT:
Low-temperature polysilicon
thin-film transistor
• HTPS TFT:
High-temperature polysilicon
thin-film transistor