Technological Changes That Are Shaping the World

The coming era of Electro Mechanics Solutions™

In 2009, shortly after assuming the position of President, I defined a clear direction for the company's future during the financial results announcement. That vision is "Electro Mechanics Solutions™ (EMS)," which looks toward a world of "integrated electromechanics." I believed that an era in which machinery, electronics, and software would be highly integrated was about to emerge. With a strong determination to become a company capable of responding head on to these technological changes, we registered this term as a trademark. Now, 17 years later, I am convinced that the EMS era which we foresaw and have been preparing for has finally arrived.

Looking back at the history of industry, mechanics once played a central role in applications such as automobiles and VTRs, supporting our affluent lifestyles. Subsequently, semiconductors and electronic components evolved rapidly, ushering in the era of electronics. For example, in personal computers, HDDs have increasingly been replaced by SSDs, and the number of moving parts inside smart phones has decreased significantly, with various functions being replaced by electronic components.

However, as the term "physical AI" suggests, humanoid robots and similar devices cannot operate on electronic technology alone. They function only when advanced electronic control is integrated with mechanical technology that actually moves objects, sensors that monitor the surrounding environment, and software based on information stored on AI servers. In a world where it seemed as though everything had been replaced by electronics, the importance of mechanics has once again risen. We have entered an era where EMS, a combination of mechanics and electronics, is literally moving the "world," and ultra-precision technology is once again demonstrating its true value.

To implement EMS as a concrete business strategy, we have defined "Eight Spears" as our core products. These are defined as niche markets within larger markets with products that will not become obsolete due to technological innovation, products that leverage our strengths, such as ultra-precision technology and products that generate synergy through "Integration^*."

Furthermore, we refer to the technological seeds that address needs such as AI, automation, electrification, energy conservation, and ultra-high-speed communications, which contribute to solving social challenges, as the "4 Highs": High Voltage, High Current, High Frequency, and High Speed. The Eight Spears are indispensable to these technologies. No other component manufacturer possesses a business portfolio that integrates mechanics and electronics spanning bearings, analog semiconductors, motors, sensors, connectors/ switches, power supply components, access products, and wireless communications/software. We take pride in the fact that this is the source of new value that only we can create and that is indispensable to the world.

* This term was adopted with the intended meaning "to be combined" rather than "to sum up." Create new value through synergy by combining all the resources of our group.

The "Five Growth Areas +1" to drive higher profitability

Markets where EMS can truly demonstrate its value and where future growth is anticipated are now emerging one after another. To turn this unprecedented opportunity, in which multiple massive market waves are surging simultaneously rather than in a single market, into assured growth, we have designated these markets as the Five Growth Areas +1. We have formed a global, company-wide cross-functional project team to accelerate development, manufacturing, and sales expansion. I also visited the San Jose area in the United States to see the latest developments in AI servers, humanoid robots, drones, and other fields firsthand. While there, I could feel firsthand the strong desire among customers to secure a component manufacturer that has demonstrated high reliability and overwhelming supply capacity, and to grow together with such a partner to meet their needs.

On the other hand, we understand that not all markets will take off at the same pace. While AI servers and new mobility in automotive applications are already making an expanded contribution to earnings, humanoid robots, commercial drones, and fully autonomous driving are still in the process of being put into practical use and mass production. We will seize business opportunities while carefully assessing the growth stage and return on investment for each market.

We are now shifting from the pursuit of scale to management centered on profitability, with a focus on capital efficiency and cash generation capabilities. We are strategically allocating management resources to our Five Growth Areas +1, while also advancing structural reforms in low-profit businesses to steadily convert profits into cash. Our strengths, built by refining ultra-precision machining technology and mastering niche fields, are driving profitability by increasing our competitiveness and the value we add, and we are now entering a harvest season in which those strengths are yielding substantial results.

AI servers

As AI processing power continues to improve, demand for high-performance server cooling with reliability is on the rise. In this environment, our company has secured a significant market share in products such as cooling fan motors, bearings, HDD spindle motors, and pivot assemblies. While there were concerns that the shift to liquid cooling would reduce demand for cooling fans, business opportunities are expanding in areas such as large fans for heat dissipation and power supply equipment, battery protection modules, precision micro motors for water cooling systems, connectors, and semiconductors.

Humanoid robots

In addition to bearings, humanoid robots utilize numerous sensors, motors, and other components. As the market transitions from the development stage to practical applications and mass production stages, we anticipate a sharp increase in demand for high-quality, high-value-added components that offer reliability and durability.

Commercial drones

In the commercial drone industry, as commercialization progresses, the variety of drone models is increasing and the market is expanding. Demand is also growing for various ultra-precision components, including bearings and motors that support stable flight.

Fully autonomous driving

As expectations for fully autonomous driving grow with the widespread adoption of robo-taxis and other technologies, it is essential to have highly reliable systems that can accurately map surroundings using technologies such as LiDAR and operate stably in all environments. We supply a variety of components, including bearings and motors for these applications.

New mobility

Automobiles have evolved from being merely a "means of transportation" to spaces that function as "comfortable offices" or "living rooms," and there is now a demand for added value, such as even more comfort. As seats, displays, and other features become more sophisticated, demand for high-end components is growing.

+1: Aerospace

In addition to the aviation sector, the rapidly growing space industry also demands extremely high quality, reliability, and a stable supply of products. Demand for our rod-end bearings and specialty bearings manufactured by our overseas group companies is also steadily increasing.

Indispensable Value for the World

Our company's current vision is "becoming an indispensable company by driving the world forward." As expressed in our corporate philosophy, "To contribute to realization of a sustainable, eco-friendly and prosperous society by providing better products, at a faster speed, in larger numbers, at a lower cost and by smarter means," this vision conveys our desire to be indispensable to the world through the supply of ultra-precision components.

What is the "indispensable value" expected of us as component manufacturers at the forefront of cutting-edge technologies that drive the world forward? I believe it can be summed up as "reliability" and overwhelming "supply capacity."

The "reliability" of components that determine the performance of cutting-edge technologies

First is reliability. This means the ability to continue operating without failure even in harsh environments over long periods, extremely quiet operations, and with low power consumption. In increasingly sophisticated end products, the quality of components makes all the difference. For example, humanoid robots require ultra-precise components, such as micro-force sensors, reduction gears, and micro-bearings to ensure smooth movement of high-performance robots. We estimate that the robot we are developing uses 107 bearings in a single hand and nearly 300 throughout the body. As cutting-edge technologies progress from the conceptual and development stages to mass production, ensuring reliability and quality, free from malfunctions even under extreme conditions is the greatest value we can offer to our customers and to the world, which will in turn assist in accelerating innovation.

"Supply capacity"—the "time to market" demanded by the front lines of cutting-edge technology

The other fundamental, the partner to reliability, is our supply capabilities. In the B2B business in which we operate, our customers who develop end products for their consumers are fighting for survival amid fierce market competition. If they cannot secure the necessary components at the optimal moment to launch a new product, they will be forced out of the market. While pricing specifically "how much it costs" is important, what is valued even more highly is the ability to ensure a stable and consistent supply— meaning whether we can reliably supply the required quantities when needed— as well as the speed of that supply. As the term "time to market" suggests, the key to success and profitability lies in how quickly we can accelerate the process from development to market launch and stay ahead of the competition.

Over the next few years, the fields of AI and robotics will enter a period of intense competition. In this rapidly changing market, our responsibility as a parts manufacturer is to support our customers' success and ensure reliability by continuing to supply high quality products at the volume and speed (timing) they require. I believe fulfilling both requirements is our responsibility as a component manufacturer. Our corporate slogan, "Passion to Create Value through Difference," embodies our passion for creating value through "difference" that transcends conventional wisdom. Driven by this passion, we are committed to continuing to provide true value as an "indispensable company" that drives the world forward.

A Means of Realizing "Indispensable Value" for the World

Vertically integrated manufacturing that combines ultra-precision machining technology with mass production

Integration—toward creating a conglomerate premium

Another major strength of our company is Integration. By leveraging our integrated mechanical and electrical business portfolio and combining multiple technologies and products, we can differentiate ourselves from competitors and create new value.

For example, to manufacture high performance motors, we need high-precision bearings to support rotational performance, analog semiconductors to control the motors, sensors to monitor their condition, and connectors to transmit power and signals. We have many of these critical components within our group, which allows us not only to enhance the performance of individual components but also to optimize them through vertical integration.

Typical examples of our integrated products include the BMW Winglet (a wing handle adopted by BMW) and fan motors for AI server power supplies. The wing handle is a high-value-added product realized by combining mechanical technology for door locks with motors, sensors, and analog semiconductors. Furthermore, fan motors for AI server power supplies incorporate bearings capable of high-speed rotation and driver ICs that enable advanced control. Their high performance is made possible by our ability to develop all the necessary components in-house through an integrated, end-to-end process. We have successfully secured a high market share in these niche fields, driving the profitability of our motor business.

In addition, we are creating numerous high value added products by integrating diverse technologies and leveraging the strengths of our vertically integrated manufacturing system. The expansion of these unique products leads to strong competitiveness and profitability, driving improvements in our business's earning power.

Integration is not limited to simply combining products. For example, the foreign particle analysis technology developed in the production process of fluid dynamic bearings for hard disk drives plays an indispensable role in advancing the manufacturing technology of semiconductors—a completely different field. Furthermore, in our smartphone backlight business, after demand subsided, we applied fully depreciated assets and established production technologies to automotive displays and tablets, thereby creating new value. By combining not only "products" but also a wide range of internal resources, including "technology," "know-how," "people," and "equipment", we are enhancing the value generated by "Integration."

Some investors view our company as a "conglomerate" which by definition is a collection of disparate businesses and consequently value it at a discount. However, we are by no means simply bringing together unrelated businesses in an effort to become a "generalist." At stores operated by apparel companies centered on sewing expertise, customers can find a full range of products to coordinate an entire outfit from head to toe. Similarly, with "ultra-precision machining technology" and "mass production technology" at our core, we aim to build a product lineup that will lead customers seeking cutting-edge technology to say, "If I turn to MinebeaMitsumi, they will have everything I need, including the components perfectly matched." Integration products are high-value-added products that only we can create, many of which boast double-digit profit margins and are beginning to generate a "premium" that enhances our overall profitability. We believe we will be able to demonstrate even greater results in the coming years.

Initiatives to improve profitability

In 2019, as part of our long-term growth vision looking ahead to 2029, we set targets of 2.5 trillion yen in net sales and 250.0 billion yen in operating income for the fiscal year ending March 2029. This plan assumes organic growth combined with M&A transactions on the scale of MITSUMI ELECTRIC or larger, and we have designated it as "Plan A" in our medium-term earnings forecast. However, with only three years remaining until 2029, we have formulated "Plan B" as the basis for our medium-term earnings forecast. This is a realistic scenario centered on organic growth and small-scale M&A in the event that M&A of the anticipated scale does not materialize, aiming for revenue of 1.9 trillion yen and operating income of 168.0 billion yen in 2029. Given that this fiscal year's planned revenue is approximately 1.7 trillion yen, the 1.9 trillion yen revenue target is entirely achievable within three years. From this point, we will increase operating income by 20.0 billion yen each year to secure a real operating margin* of over 10%. Should favorable opportunities arise in the future, we will promptly implement Plan A.

* Operating margin excluding net sales of supplied parts, etc.

Improving our operating margin is a key management priority for our company, and the "Five Growth Areas +1" businesses will serve as the drivers of this improvement. These markets are poised for explosive growth, and in the B2B sector, companies that can supply high-quality parts in large volumes without falling behind our customers' time lines will be valued and such will equate to fair prices commensurate with the high added value they provide. Until now, our business has centered on the B2C sector, which faces significant price pressure. However, we believe that if the value we create contributes to our customers' success, they will recognize and accept a commensurate profit margin going forward.

Furthermore, I have been hosting the "Development & Sales Expansion Meeting for Five Growth Areas +1" once a month since May to vigorously drive transformation aimed at improving profitability across the entire value chain, which is inclusive of R&D, manufacturing, sales, and procurement. At these meetings, we discuss key themes such as resolving various development bottlenecks, promoting synergy, and identifying and taking action to secure potential customers. Our goal is to eliminate missed opportunities in these massive growth markets and achieve rapid market entry.

R&D transformation: To ensure we capitalize on the rapid surge in demand for AI servers, humanoids, and other technologies, we are prioritizing the allocation of development resources to these growth areas and accelerating the pace of product development. In addition, we are also focusing on "collaborative creation" and strengthening our partnerships with stakeholders from industry, government, and academia.

Manufacturing transformation: We are capturing demand across Five Growth Areas +1, maximizing factory utilization to the fullest extent possible, reducing fixed costs, and improving profitability. On the manufacturing floor, we are promoting AI, digital transformation (DX), and automation to shift resources toward high-value-added tasks and increase productivity per employee. Also we are accelerating our efforts toward carbon neutrality, and in 2025, we amended our Articles of incorporation to enter the solar power generation business. We have implemented 100% renewable energy in Cambodia and the Philippines, and plan to switch to approximately 50% renewable energy at our two main factories in Thailand, thereby contributing to reduced electricity costs and the local power supply. We strive for sustainable growth by ensuring supply capacity while reducing our environmental impact.

Sales transformation: We have developed our own ERP system to precisely visualize not only how much we sell but also how much profit we generate, and have fully shifted to an evaluation system that treats operating margin as the most important KPI. Minebea Software Solutions, a subsidiary of HONDA TSUSHIN KOGYO, played a major role in this achievement.

In addition, we are accelerating the adoption of AI and DX company-wide, working to convert the tacit knowledge of top management and front line staff into explicit knowledge using our in-house AI, which in turn will assist us in solving challenges and eliminating reliance on individual expertise. We are also on the verge of introducing an AI avatar within the company that has been specifically trained on my past messages to employees, remarks from training sessions, as well as various media interviews. Furthermore, to foster innovative ideas, we have established the AI Innovation Challenge Award, with a top prize of 10 million yen.

Beyond managing P&L measures such as net sales and profit, we also aim to strengthen sustained cash generation capabilities and capital efficiency. We are developing systems to visualize various KPIs, including P&L figures, inventory metrics, free cash flow, and ROIC, and are using them to drive initiatives to maximize corporate value.

Becoming a Company Where Employees Are Proud to Work

Our Company's credo, the "Five Principles," states as its first principle: "Be a company where our employees are proud to work." During the 2011 floods in Thailand, as water threatened to engulf our factory, our local employees worked through the night to protect the facility from the floodwaters. When I witnessed this scene while leading the effort on-site, I truly realized from the bottom of my heart that the company is supported by its employees. After all, it is "people" who drive the company forward and in order to combine our diverse "businesses" and "technologies" to achieve sustainable growth, the Integration of our people is essential. My most important mission as CEO in sustainably enhancing corporate value is to translate growth opportunities into profit, draw out the passion of each of our 100,000 diverse employees worldwide, and pass on to the next generation the MinebeaMitsumi DNA cultivated over our 75-year history: an on-site approach, a commitment to manufacturing and profit, and a passion for success.

Developing the next generation of management talent through a hands-on approach and taking on challenges

Currently, our Company is working to identify, develop, and strengthen our core talent in order to cultivate the people who will form the backbone of our management in the future. I, too, am engaging directly with the next generation of leaders while learning effective talent development methods from other industries. It is not our generation, but this next generation that will generate profits for MinebeaMitsumi in the future. We do not merely rely on training. We demand a thorough commitment to a "hands-on approach" in which we can demonstrate how we respond to customer needs faster than anyone else and continuously deliver value through the integrated efforts of development, manufacturing, and sales. The Chairman's Office, the COO/CFO Office, and the Executive Vice President's Office also conduct shadowing programs, where next-generation leadership candidates spend several weeks to several months working alongside current executive leaders to gain firsthand experience in "the front lines of management." Furthermore, we offer a variety of programs, such as the "Samurai Project," in which members with deep knowledge of our manufacturing and sales operations, including those overseas, mentor new and current managers at each site. To encourage employees to take on challenges on their own initiative, we have revised our HR systems to evaluate results more fairly and established the Chairman's Special Award, with a top prize of 10 million yen, strengthening mechanisms that foster innovation and encourage initiative and motivation.

Prioritizing PMI in M&A and sharing our commitment to manufacturing and profitability

Toward our 100th anniversary: A passion for success is the key to winning

The quality I value most in next-generation leaders is a passion for success. When faced with difficulties, many people give up halfway through. However, the key lies in whether they can take that extra half-step forward. It is precisely that tenacity and passion that determine success or failure in the world of ultra-precision.

We are now entering a harvest season that will prove our journey so far has been the right one. Working together with the many employees who support me, we will strive to enhance corporate and shareholder value as we press ahead toward our 100th anniversary and beyond as we seek to become an indispensable company by driving the world forward. I hope you will continue to look forward to the future achievements of MinebeaMitsumi.

The CEO's Message is also available as a video on YouTube.

Related links

• CFO Message
• Integrated Reports
• Corporate Philosophy
• Medium-term Business Plan
• Financial Results Briefing

It ends about main text.