Please let us know about the current market condition for semiconductor trading companies in Japan and the directions that INNOTECH Group is heading for.
As the industrial reorganization continues, we plan to remain successful by strengthening our manufacturing capabilities.
The semiconductor market is said to be stagnated but production and demands continue to grow in the newly emerging countries such as China and we expect that it will continue to grow substantially in the mid-term and long-term basis. The main players in the market are no longer Japanese but Chinese and Korean companies; however, for INNOTECH Group, it means simply that our business partners have changed and our fundamental role does not change, which is to provide products and solutions to where they are needed.
However, it will be tough to grow further and expand our business if we remain as a mere trading company. Japanese semiconductor trading companies share the same sense of crisis and are reorganizing themselves. There are mainly three directions for such reorganization; “Increase in size by M&A”, “Strengthen its function as a foundry” and “strengthening their manufacturing capabilities”.
Among them, INNOTECH Group has focused on software, hardware, and new business areas as a core to grow as a manufacturer, and with the previous medium-term management plan which took off in the FY2014, we have pursued our business structural reform.
What results have we achieved as we completed your previous medium-term management plan (FY2014-2018)?
We have pursued our business structure reform and we made solid progress in transforming our business structure to a highly profitable one.
I believed that our business portfolio was well transformed as we executed the business structure reform. On the other hand, as for the numerical goals of the plan, both sales and profit targets were unachieved and as for the ROE, the short-term goal of 5% was achieved but the mid-term goal of 8% was unachieved. The reasons for such non-achievements were no further expansion of business by major M&As and delay in ramping up new businesses; however as a result of the business structural reform, our ROE has significantly improved from 2.3% of the first year to 6.6% in the final year and our transformation to high-profitability business structure is moving forward.
What is the new medium-term management plan which is taking off from this year (FY2019~2023)?
Based on the five strategies, we will further increase our profitability in each business area as well as will expand our business scale.
In our new medium-term management plan, there are five strategies, which are “Grow Our Test Solution Business”, “Increase sales of In-house developed Products and Strengthen Functionality as a Manufacturer”, “Expand Customer Base and Cultivate Overseas Market”, “Actively Pursue New Business Areas”, and “Enhance Capital Efficiency”. Based on them, we will further improve our highly profitable business structure and expand our business scale.
INNOTECH and STAr test systems will support our customers’ needs on quality and cost performance. As for software such as verification tools of GAIO TECHNOLOGY, we will aim for further growth by promoting in-house developed products leveraging our unique expertise.
In the new business areas, electronic money settlement system of IT ACCESS and image-processing system utilizing AI look promising. We are still at an initial investment stage but we intend to develop and expand these businesses spending the next three years and more. As for our financial strategy, we will continue to execute our capital management policy which we have announced in February 2018 and pursue our ROE target of over 8%.
Lastly, what is your message to your shareholders and investors?
As our business environment changes rapidly, we are setting up a flexible and adaptive organizational scheme to promptly cope with such changes and continue to grow.
Charles Darwin of the theory of evolution once said, “It is not the strongest of the species that survives but the most adaptable”. It applies to companies as we also need to be adaptive to our business environmental changes to survive.
Our surroundings keep rapidly evolving and there are many hypotheses as to where they go. It is hard to predict the future and prepare for changes precisely. Companies must remain flexible to deal with unexpected matters. INNOTECH Group will, in order to remain flexible to the market changes and capable of supporting various needs from our customers, continue to execute various measures and to update our employees’ minds.
As we execute our new medium-term management plan, we will strive to expand our corporate value as we enhance our profitability.
We appreciate our shareholders’ and investors’ continued guidance and support. Thank you very much.
President & CEOToshihiko Ono