Latest Update : Aug.16, 2018
Investor Conference Call for 1Q FY 3/2019 held on August 3, 2018
* Some parts have been added and modified for a clearer understanding.
- Has the price been determined for the LED backlights of the electronic devices and components business? Based on the explanation provided by CEO Kainuma, my understanding of the nuance is that things are coming along pretty much as expected. Is that correct?
- Is it correct to say that the upward revision of second quarter operating income for electronic devices and components is a demonstration of that?
- With respect to the outlook for the Mitsumi business, despite better-than-expected performance in the first quarter, the first half forecast has not been changed. This would mean that the second quarter estimates are lower than originally anticipated, so is this because you are being careful with your estimates and keeping them conservative or because you're lowering them due to moving the game console back or other such reasons?
- Getting technical, I believe the fact that the operating income adjustment in the first quarter was small also contributed to the upward swing, but there's quite a significant amount in the second quarter and later. Why was it so small in the first quarter, and why has it not been changed in the second quarter and later?
- According to the new earnings forecast, the second quarter adjustment will increase to -4.9 billion yen. Is this because of some kind of expense you're anticipating, or are you keeping the estimates conservative?
- Can you tell us about the background behind the increased sales of Mitsumi camera actuators in the first quarter and the changes by region? Also, the forecast is for a substantial increase in income in the second quarter compared to the first quarter. Can you give some details as to which contribution is greater between game consoles and camera actuators?
- Can you tell us how to look at the utilization rate for LED backlights for new smartphones by quarter? When will it peak? Also, how will the timing of production launch and peak of operations match up between LED backlights and camera actuators?
- So for the Mitsumi business in the second quarter, is my understanding correct that there will be an increase not only in mechanical components but also optical devices?
- In regard to development of displays to compete with OLED, what kind of things are you working on?
- Up until now the production volume of ball bearings has been on an upswing, but what is the current situation? Will further increases be difficult or do you think there's still room for growth if those on the shop floor come up with ideas?
- I think the production ratio of small ball bearings is high in the industry overall. How do you plan to fulfill your supply responsibility? Will there be some kind of production bottleneck, or will you promote improvement of your product mix by eliminating lower priority items?
- In the full-year plan, motor sales are assumed to grow in the second half, but first quarter progress is a concern. Are things going well? Also, has the cryptocurrency market had any impact on fan motors or ball bearings?
- Inventories increased by 19 billion yen compared to the previous quarter. Was this due to manufacturing game consoles for the summer? Also, how much profit from high utilization rate is there in the first quarter results?
- A little earlier, there was talk that all the new models next year would be OLED, and there was a report even today in Taiwan. The idea continues to be widespread, but are you of the view that there will be new LCD models next year?
- In regard to the Mitsumi business, first quarter performance was considerably better than expected, while the estimates for the second quarter are conservative. Specifically, are you being conservative with estimates for mechanical components or optical devices?
- Is the reason for the conservative estimate for optical devices the general weakness of the smartphone market or is it out of consideration for market share or yield?
- In regard to the trade friction between the United States and China, have you seen any impact? Are you taking any countermeasures?
- There are some manufacturers that are pointing out a slowdown in orders for factory automation and industrial equipment. Has the slowdown in robots, factory automation and industrial machinery had an impact on your bearing or motor businesses? What are your thoughts on that possibility in the future?
- You said that the impact of higher specs in Chinese smartphones has been positive. As camera functionality advances with dual or triple cameras, how will your opportunities change? From the standpoint of triple cameras, what do the opportunities look like for major customers?
Question and Answer
- I believe your understanding would be correct. They've already been launched, so the price has been determined.
- It's a reflection that the launch has begun slightly ahead of schedule.
- We're keeping the estimates conservative.
- We applied IFRS in the first quarter, so goodwill amortization was eliminated, and some common expenses were allocated to specific segments. Furthermore, there were no expenses this quarter associated with various business considerations, such as M&As. There were also special factors such as the slight difference between the recorded allowance for director's bonuses, etc. and the amount paid. For the full year, we have not changed the estimate of 16 billion yen.
- As a general observation, I believe this is the time that second quarter expenses come into view.
- With respect to the change in camera actuators, there was not much production the previous quarter, but in the first quarter, production took off to an extent. That there was production for other customers also contributed.
In regard to the increase from the first quarter to the second quarter, I can't touch on specific products, but as far as sub-segments go, we expect bigger growth in mechanical components.
- LED backlight production is already underway as previously mentioned. We see it peaking in the third quarter, but I'm not at liberty to talk numbers.
As for optical devices, compared to LED backlights, the preparations are slightly earlier, and we see them peaking in the second or third quarter.
- We're confident that LCD is superior in various respects, including power consumption and durability. The one area in which OLED comes out ahead is contrast or how dark blacks can be displayed. Our belief is that if we can get LCDs to around that same level, LCDs will come out ahead.
When we first started developing competing displays, we were attempting to achieve design innovation with LCD, but we are now working on how well we can display blacks. Coincidentally, I saw one of the LCDs under development yesterday. The blacks were very distinct, so you can expect it.
- I don't think there's much room for potential upside in volume through improvement of productivity. We are hoping that they will level off.
We've made quite a bit of improvements to productivity up to now, and the last new machine will be put into service at the end of this month. It depends on the operating days, but even if there were an increase, it would be several million at the most.
- We plan to fulfill our supply responsibility as much as we can, but we don't know what's going to happen. We're at full capacity now, but I don't think there's much of a point in discussing hypotheticals.
I've heard reports from sales that they feel a plateau might be coming. My understanding is that the cryptocurrency market has entered a lull.
- Motor sales fell slightly short of the initial forecast, but based on the latest circumstances, we generally don't feel there is cause for great concern. In the second quarter, various motors will be launched, so we believe that the first and second quarter total will be about what we expected.
In regard to cryptocurrencies, ball bearings enjoy high market share in general, but as for fan motors and other jobs, we haven't disclosed what the impact of cryptocurrencies will be. The numbers disclosed for motor sales already reflect the impact from the slowdown in the cryptocurrency market.
- There was some advance manufacturing of seasonal products ahead of the second quarter, and inventories have grown, including strategic portions.
Also, as you can see from the Mitsumi results, there were operations that we did not have much in the fourth quarter, and there have been profits from this.
- I can't go into details, but as you say, it's nothing but a harmful rumor.
- It's a B-to-B business, so it's hard to express, but the estimates are slightly conservative for both. It's not one or the other.
- We don't believe there will be any significant change in market share. As for yield, my understanding is that the launch is currently going very favorably.
- We operate a large plant in China, and we are engaged in business in North America as well, primarily products for aircraft, but there has not been any significant direct impact. It's not that there's no impact, but it's very limited. I'm not sure about the impact on our customers, but one of our strengths is that we are engaged in manufacturing at facilities outside of China as well, so we will address the situation with flexibility.
- When we would see it is after our customers' production plans and inventories have been adjusted. At this point in time, we have not seen any impact. We will continue to keep a watchful eye on that as we go forward.
- I can't talk about the specific models of specific customers, but basically, the trend of requirements for accurate OIS and VCM is a positive one for us. The more such models come out, the more business opportunities we will have. We've actually had an increase in inquiries, and we're starting to get into it. This trend is not bad for us at all.