Omron 2005 Annual Report Download - page 22

SOICHI YUKAWA, Senior Managing Officer,
Company President, Electronic Components Company
The principal markets in which the Electronic Components Business (ECB) operates
represent growth domains that spawn such major trends as the acceleration of digiti-
zation, downsizing, and multifunctional design of products and components. While
they undergo brief swings, they are also domains that allow full use of our techno-
logical advantages. Our ongoing strategy is to develop a business that fosters the
creation of added value by investing aggressively in technological development.
ELECTRONIC COMPONENTS BUSINESS (ECB)
Manufacture and sale of electronic components for consumer appliances,
telecommunications equipment, and industrial equipment.
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REVIEW OF FISCAL 2004
•Substantial expansion of components for mobile
equipment through exports mainly to Greater China
In the domestic market, robust performance in such product
areas as relays, switches, and connectors for the consumer and
commerce components market was fueled not only by the
strength of the semiconductor industry and dramatic growth of
flat-panel televisions and other electronics products, but also by
the increased production of air conditioners and rises in electric
power demand driven by high summer temperatures. Overseas,
sales of LCD backlights are growing due to the worldwide popu-
larity of mobile phones and portable music players. Our various
devices experienced a significant increase in sales to the IT
industries in China and Europe, which have moved briskly to
deploy telecommunications infrastructure, as well as in East Asia
where demand for air conditioners grew. As a result of these
developments, the ECB segment increased sales by 13.6%
year-on-year to ¥101.1 billion and achieved a 10.1% increase in
operating income to ¥16.1 billion. In addition, despite some neg-
ative factors including soaring materials costs and sales price
drops, operating income margins remained high at 15.9%.
BUSINESS ENVIRONMENT AND KEY STRATEGY
•Strengthening our technological advantages in growth
fields and areas
The ECB segment targets a wide range of industries in its pursuit of
technological development. These include the consumer appliance
industry, with its shift to multifunctional devices and digitization, the
telecommunications industry, which is moving toward large-capac-
ity, high-speed capabilities, and the amusement and mobile
equipment industries. Of these, part of the semiconductor and other
industries experienced a strong phase of inventory adjustments, but
they are generally past this stage with some products already begin-
ning to show signs of recovery. These industries are expected to
return to a medium to long-term trajectory of growth in the latter half
of fiscal 2005 and thereafter. In recognition of the business environ-
ment, the segment’s geographic strategy has positioned China at
the top of its priority list in terms of markets and manufacturing
bases. Although China is likely to enter occasional periods of policy
adjustment to avoid a slightly overheated economy, medium to
long-term growth potential in China will remain extremely high. In
view of these conditions, we will continue to push forward with the
following measures: (1) construction of a plating plant to establish
an integrated production system from the component
stage; (2) improvement of productivity to further reduce costs and
expansion of production capabilities; and (3) reinforcement of sales
structure by increasing the number of sales offices.
Additionally the ECB segment will promote the develop-
ment of new products supported by its own technological
advantages, as typified by products already developed as
mainstays such as LCD backlights.
MEASURES FOR ACCELERATING GROWTH
•
Expansion of production bases in China for the manufacture
of relays used in telecommunications equipment
In China and other parts of Asia, the installation of telephone
lines is proceeding at a rapid pace, and demand for relays for
telecommunications equipment is increasing sharply in
response to the worldwide expansion of ADSL. Squarely meet-
ing this opportunity, we expanded our Shanghai plant in March
2005 and commenced production of fourth-generation relays
using the latent miniaturization technology.
•Expanded structure for provision of large LCD backlights
The ECB segment has positioned its large-scale LCD back-
lights operations at the core of its growth business domains.
To exploit this growth potential, a plant in Taiwan in which
Omron has a 10% stake commenced operations in Decem-
ber 2004, providing a structure that integrates development,
manufacturing, and sales. The market for flat-panel televi-
sions that use large flat-panel displays (FPDs) is expected to
continue growing at a sharp pace for the time being and lead
to the creation of many new production lines by major LCD
manufacturers. Success or failure in the flat-panel television
market, however, will be determined by measures such as
cost reductions, shortening of delivery times, and swift adap-
tation to new products. For this reason, we will improve
further our cost competitiveness and accelerate the estab-
lishment of customer-oriented services and sales systems,
particularly in Taiwan due to its large customer base.
•New product development for the IT and mobile markets
The ECB segment marketed its OKAO Vision Face Recognition
Sensor, a device that can recognize and verify an owner by his
or her face. This sensor can be implemented in PDAs, mobile
phones, or other mobile devices with a camera function. Other
products marketed by the ECB include the world’s thinnest
vibration motor and multi-functional input devices optimal for
the main operation parts in mobile phone use, and the XF2-
series with FPC connectors, which boasts a narrow pitch, low
profile, and small surface area. In this way, we are expanding
our lineup of new products for the IT and mobile markets.