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53
Fiscal 2008 Management’s Discussion and Analysis
Note: The business divisions are presented using their abbreviated names
Industrial Automation Business (IAB), Electronic Components Business (ECB), Automotive Electronic Components Business (AEC),
Social Systems Business (SSB), Healthcare Business (HCB).
Market Environment
1. Macroeconomic Environment
Domestic Macroeconomic Environment
2. The Omron Group Market Environment
The subprime loan crisis originating in the United States
had strong repercussions on the real economies in coun-
tries around the world in fiscal 2008, and when conditions
deteriorated abruptly in the third quarter, the economic
conditions took on the characteristics of a global recession.
Japan’s economy, which relies heavily on exports, was
critically damaged during the year. The steep drop in
demand and the appreciating value of the yen deeply
impacted corporate earnings while employment conditions
deteriorated markedly and private consumption continued
to decline.
The business environment was extremely harsh for the
Omron Group in fiscal 2008. Most manufacturing indus-
tries, including the Group’s clients in the automotive and
semiconductor industries, implemented production adjust-
ments and reduced or postponed capital spending,
particularly following the degeneration of business condi-
tions in the third quarter.
Demand plummeted for the Company’s core factory
automation control equipment. Strict inventory adjustments
in the business and consumer equipment sectors also led
to a steep drop in demand for electronic components. The
steep production cuts in the automotive industry also led
to a further decline in demand for automotive electronics.
On the positive side, demand grew in the first half in some
regions for blood pressure monitors and other health-relat-
ed equipment on growing health consciousness in emerging
economies.
External factors influencing profits included a sharp
decline in raw material prices and the strengthened yen
beginning when economic conditions soured in the third
quarter. The strong yen also impacted profits as the aver-
age exchange rates increased by ¥13.4 to ¥100.7 versus
the U.S. dollar and by ¥17.4 to ¥144.5 versus the euro from
the previous fiscal year.
%
Real Private Capital Investment
Note: Seasonally adjusted
Source: Cabinet Office, Government of Japan
-10
-5
0
5
2007 2008 (FY)
Q1 Q4Q2 Q3 Q1 Q4Q2 Q3
Billions of yen %
Machinery Orders (Manufacturing)
Note: Seasonally adjusted
Source: Cabinet Office, Government of Japan
Orders [left axis]
Change from the previous quarter [right axis]
0
500
1,000
1,500
2,000
-50
-40
-30
-20
-10
0
10
2007 2008 (FY)
Q1 Q4Q2 Q3 Q1 Q4Q2 Q3
Indices of Electronic Parts and Devices
(Seasonally adjusted indices, 2005 average =100)
Source: Ministry of Economy, Trade and Industry
Productions Shipments Inventory
50
100
150
200
250
05 06 07 08
Yen/kg Yen/kg
Silver and Copper Prices
Silver［left axis］
Copper［right axis］
0
300
600
900
1,200
1,500
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
05 06 07 08
80
90
100
110
120
130
140
150
160
170 Yen
Exchange Rates
US$
EUR
05 06 07 08
Growth Rates of Real GDP for Each Country/Region
CY
2007
2008
2009 Estimates
Source: IMF “World Economic Outlook,” April 2009
Japan
2.4
-0.6
-6.2
U.S.
2.0
1.1
-2.8
EU
2.7
0.9
-4.2
China
13.0
9.0
6.5