Omron 2005 Annual Report Download - page 24

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HIROKI TOYAMA, Managing Officer,
Company President, Automotive Electronic Components Company
The increasing use of electronic components for automobiles has become a major world-
wide trend today. Needs for safety in particular are ever increasing in this domain. The
Omron Group will utilize its advanced core Sensing and Control technology to respond to
driving safety needs by providing sensing systems that assist drivers by measuring the
distance to the vehicle ahead and assessing driver fatigue. Through these advanced
capabilities, the Group intends to realize the excellent growth potential of this domain.
AUTOMOTIVE ELECTRONIC COMPONENTS BUSINESS (AEC)
Manufacture and sale of electronic components for automobiles
REVIEW OF FISCAL 2004
•Growth in the European and Asian Markets
—Overall performance declines as the burden of
advance investments erodes profits
In fiscal 2004, the Automotive Electronic Components Busi-
ness (AEC) was impacted as the sales results of some
major customers dropped amidst intensifying global com-
petition in the automobile industry. However, sales were
strong, centering on sensors and various control units,
whose performance was driven by the growing use of elec-
tronic components in automobiles. A regional analysis
reveals that sales in the European markets grew substan-
tially for reasons including benefits from the acquisition of a
relay company. In addition, sales in Asian markets
expanded significantly due to the release of many new
models by Korean manufacturers that have expanded their
exports to North America. Sales were also firm in the Japan-
ese and North American markets, despite inactivity among
some customers. As a result, sales grew 9.7% year-on-year
to ¥64.6 billion. However, profits suffered due to an
increase in advanced investments in R&D expenses and
transient costs for quality improvements. The result was an
operating loss of ¥900 million, in contrast to fiscal 2003, in
which the AEC segment posted a profit of ¥1 billion.
BUSINESS ENVIRONMENT AND KEY STRATEGY
•Responding to new needs
The AEC segment expects that although automobile sales in
fiscal 2005 will vary widely by manufacturer and region, per-
formance overall will remain firm. With the growing use of
electronic components in automobiles and the need for safety,
the market growth for automotive electronics is expected to
surpass growth in the production of automobiles. Based on
this recognition of the business environment, we will move for-
ward with technological development and new product
introductions to respond to the needs for safety, comfort, and
environmental friendliness. Specific plans include the market
launch of electric power steering controllers that help to
improve automobile fuel efficiency. Another new product is
laser radar for driver assistance systems that feature (1) adap-
tive cruise control systems, (2) a collision mitigation device, and
(3) a low speed following device. The laser radar will be first
introduced into luxury models manufactured by major domes-
tic automakers. To address automotive needs already growing
in North America, we plan to introduce a tire pressure monitor-
ing system (TPMS).
In fiscal 2005, the AEC segment will pursue ongoing
development and the release of new products stated
above to respond to the introduction of new models by our
domestic and overseas client manufacturers, and further
step up investment in R&D and globalization to gain indus-
try recognition as a leading company.
MEASURES FOR ACCELERATING GROWTH
•Acquisition of automotive relay firm
In October 2004, the Omron Group purchased Europe’s
third-ranked automotive relay business from Bitron Industrie
SpA of Italy, establishing a joint venture company with
Bitron. Automotive relays have many uses in cars, from
headlights and fans to power switches for a variety of
motors. The two main types of relays are the plug-in type
used for high current switches and a type mounted directly
on PCBs (PCB relays). The ability to satisfy customer needs
by handling both types of relays and demonstrating techno-
logical synergies is a competitive edge for global expansion.
Our new acquisition has enabled the AEC segment to
secure a production base for plug-in type relays, which it
had not handled previously in Europe, as well as acquiring
distribution channels to customers in the European market.
Through this new capability, we will seek a rapid business
expansion in this market, which, combined with our 30%
share of the North American market, will place us in the
world number one position in automotive relays.
•Expansion of R&D investment
The AEC segment’s R&D expenses for fiscal 2004
increased by 23.3% year-on-year to ¥6.4 billion. Within the
automobile industry, the automotive electronics field is
experiencing an expansionary trend stimulated by expand-
ing needs for safety, comfort, and environmental
friendliness. Therefore, we are moving to enhance signifi-
cantly our R&D organization. Specifically, we aim to
promote the commercial use of new technologies needed
today, including a more highly refined version of the laser
radar for driver assistance systems mentioned above, high
dynamic range CMOS technology capable of sensing con-
ditions of extreme brightness and darkness, systems for
determining a driver’s condition from facial expression and
other data, and systems for enhancing security, thereby
contributing to industrial needs.