Highlight from Integrated Report
Guided by its corporate slogan, Challenging towards a New Era of Technological Innovation & Super Smart Society, the Nisshinbo Group is pursuing innovation in a wide range of fields. New Japan Radio Co., Ltd. leads the Group’s efforts in electronic technologies. Our analog chips, which include a range of microscopic sensors, are needed for new products being developed by businesses across the Nisshinbo Group. In March 2018, Ricoh Electronic Devices Co., Ltd. became part of the Group. We plan to generate synergies with the company to support Nisshinbo’s continued growth in the electronics field.
The Nisshinbo Group’s Market Position
The global analog semiconductor market is worth around ¥4 trillion and the market for our main analog chips is worth about ¥1 trillion. With the acquisition of Ricoh Electronic Devices, the Nisshinbo Group now has one of the leading market shares in Japan and ranks around fourth worldwide.
New Japan Radio has leveraged its strong industry position in signal processing-related devices. We have built an extensive product range that includes sensors, amplifiers and AD converters, which convert analog signals to digital outputs. That lineup, along with our strengths in chip packaging technology, means New Japan Radio can provide one-stop solutions to clients.
In the automotive field, where demand for customized chip designs is growing, we are highly regarded by automakers, helping us to secure major orders.
New Japan Radio supplies MEMS microphones for smartphones and other products. With AI speakers becoming increasingly popular, shipments of MEMS microphones are rising steadily. The time needed to develop and launch electronic devices differs depending on the final application, whether IT, industrial or automotive. That means we need separate development teams for each type of product.
How Analog Semiconductors Work (signal processing chips)
Two Promising Growth Markets
Vehicles and industrial equipment are our two most promising growth markets. In the automotive field, there is a growing shift to electronic systems, which is leading to an increase in the number of electronic sensors per vehicle. Suppliers and automakers typically start working together on new automotive components several years before they are used in vehicles, and we are currently developing new products with an SOP* date of 2021. In 2016, we set up a new office in Germany as our first move into the European auto market. We plan to increase our presence in Europe going forward.
In industrial equipment, we are seeing an increase in the number of sensors used in control equipment and industrial robots, spurred by factory automation and the adoption of IoT.
Japan’s industrial equipment manufacturers have a high share of the market and we have business relationships with almost all those companies.
To address rising demand for automotive and industrial equipment applications, New Japan Radio plans to build a new chip package facility, which will be operated by subsidiary Saga Electronics Co., Ltd. The facility is scheduled to start production as early as 2020.
* Start of production
Synergies with Ricoh Electronic Devices
The consolidation of Ricoh Electronic Devices has lifted sales in the Group’s micro devices business to around ¥80 billion. Third place in the global market is now within sight and we plan to increase sales to ¥100 billion. In addition to growing sales, we see significant potential for cost synergies and improvements to our device design capabilities. Ricoh Electronic Devices is focused on energy-efficient, high-performance power management integrated circuits (PMICs) and is one of the top suppliers for the smartphone sector. New Japan Radio has a strong position in the automotive and industrial equipment markets, so there is minimal overlap in business fields. We plan to draw on our combined strengths in all fields to reinforce our business. The acquisition has also expanded the Group’s capabilities in chip production, with Ricoh Electronic Devices specializing in front-end chip fabrication processes and large-diameter wafer processing. New Japan Radio’s presence in chip testing, assembly and other back-end processes means Ricoh Electronic Devices no longer needs to outsource that work, which should help reduce costs by keeping chip fabrication processes in-house. By switching to in-house production and encouraging closer cooperation, I’m confident we can lower costs and establish a robust quality assurance system – a vital step in expanding our automotive-related business. We also plan to take advantage of advanced design and development resources at Ricoh Electronic Devices to develop new electronic devices for automotive and industrial applications. We have been business partners with Ricoh Electronic Devices for more than 30 years and the company will now play a key role in implementing our business strategy.
New Japan Radio to Become Wholly Owned Subsidiary of Nisshinbo Holdings
We have agreed to make New Japan Radio a wholly owned subsidiary of Nisshinbo Holdings Inc., effective September 1, 2018. We believe the move is vital to help us respond to rapid changes in the operating environment by creating faster, more flexible decision-making and investment decision processes. We also have to create a framework that allows us to tap the Nisshinbo Group’s highly skilled personnel and extensive expertise to help us grow our business in the automotive and industrial equipment fields. For example, Japan Radio Co., Ltd.
has a portfolio of fundamental wireless and communications technologies, which is something we lack. By stepping up communication with other divisions in the Nisshinbo Group, we aim to create a steady stream of new products and businesses in the advanced driver assistance systems (ADAS) field and in the medical & healthcare field.
Ricoh Electronic Devices has a strong position in compact, energy-efficient PMICs, with one of the highest shares in the smartphone market. By joining the Nisshinbo Group, we will be able to work more closely with New Japan Radio, which also has a range of analog semiconductor technology. But we are also excited about the prospect of new growth opportunities in application fields such as vehicles, communication and healthcare.
For example, we can now offer a wider choice of solutions to clients by combining the Nisshinbo Group’s sensors and communication modules with our own low-power PMICs.
Going forward, we plan to focus on the automotive and industrial equipment fields, which offer prospects for sustained growth. Our goal is to increase the ratio of automotive sales from around 10% now to about 20% by around 2020. We will also seek cost synergies with New Japan Radio by collaborating in manufacturing, aiming to raise the operating margin to over 10% by 2020.
The Nisshinbo Group has positioned electronics as a growth business. We will play our part by making necessary and timely investments to grow our business in order to further strengthen our presence in the analog semiconductor market.