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  5. Alpine Electronics, Inc. Business Report FY ended 2015

Alpine Electronics, Inc. Business Report FY ended Mar. 2015

Business Highlights

Financial Overview

 (in millions of JPY)
  FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 Rate of Change (%) Factors
Overall
Sales 294,560 285,884 3.0 -New-vehicle sales were strong in North America and China; operations in Japan grew, and there was favorable currency translation, resulting in record sales for the second consecutive year.
Operating income 11,523 9,813 17.4 -Operating profit was the second-highest on record.
Ordinary income 15,000 11,763 27.5 -
Net income 12,704 9,229 37.7 -
Audio systems division
Sales 62,920 69,378 (9.3) -While sales of high-quality audio systems such as genuine Alpine speakers and amps to OEMs were strong in North America, they remained flat in Europe and Asia.
Operating income 2,734 2,552 7.1 -
Information/communication systems division
Sales 231,640 216,505 7.0 -As a result of strong sales of high-end European luxury cars in North America and China, sales of genuine Alpine products were higher, with higher sales of factory-installed integrated displays for new vehicles.
Operating income 13,465 11,857 13.6 -

New Product Launch

-The Company plans to introduce its navigation systems series that are exclusively designed for specific vehicle models in the North American market in the summer of 2014. The lineup will include dedicated navigation systems for two or three pickup trucks from a U.S.-based automaker. As pickup truck users are likely to put more weight on entertainment systems than navigation functions, Alpine made extra efforts to achieve high acoustic performance. The navigation systems targeted at specific models were released as the Big X series in Japan in 2010. The Company will accumulate various experiences in introducing the products in new markets, and will leverage them in expanding the lineup and functionality of its domestic products. (From an article in the Nikkan Jidosha Shimbun on June 30, 2014)

Display Audio System for the Apple CarPlay

-The Company will pass on the introduction of its display audio system that supports the Apple CarPlay in Japan for the fiscal year ending in March 2016. The system was released for sale in the U.S. and Europe in the fall of 2014. The Company had planned its launch in Japan, anticipating the growth of the display audio market. However, the Company postponed the launch in consideration of a slow market growth and an absence of growth factors at present. For the time being, the Company will focus on sales promotion of the existing products such as in-vehicle navigation and audio systems and rearview monitors in the Japanese aftermarket. The Company recently launched its first teaser advertisement for the Big X Premium car navigation systems with a large LCD monitor. (From an article in the Nikkan Jidosha Shimbun on March 7, 2015)

-The Company and Pioneer Corporation will introduce aftermarket products and services that support the Apple CarPlay. The products and services will be launched in Europe and the U.S. Automakers in Japan, U.S. and Europe have announced the launch of vehicles that support the CarPlay, and the two companies are expecting a rise in demand for CarPlay-compatible aftermarket products. CarPlay is the infotainment system for iPhones and enables users to access applications of their iPhones which are displayed on the vehicles' infotainment screens. Pioneer and Alpine will launch CarPlay-compatible products and services in summer and autumn of 2014, respectively. (From an article in the Nikkan Jidosha Shimbun on April 24, 2014)

Joined Open Automotive Alliance (OAA)

-The Company announced that it has become a member of the "Open Automotive Alliance (OAA)." The OAA was initiated by Google Inc. and automakers to promote the installation of the Android platform on cars. The Company will launch car navigation systems and other in-vehicle equipment which are compatible with the "Android Auto" in-vehicle operating system by the end of 2015. Android Auto is an interface which enables drivers to use Android phone applications for telephone and e-mail communications safely while driving. By connecting an Android phone to compatible in-vehicle equipment, the driver can access to Android phone applications and services that are optimized for in-vehicle use. (From an article in the Nikkan Jidosha Shimbun on July 1, 2014)

Awards

OEM Awards Reasons
GM 2014 Supplier of The Year a strategic partner
Fiat-Chrysler Supplier Recognition of Excellence For its sound system
Volvo 2014 Award of Excellence Infra-red sensing touch panel

Outlook for FY ending Mar. 31, 2016

 (in millions of JPY)
  FY ending Mar. 31, 2016
(Forecast)		 FY ending Mar. 31, 2015
(Actual)		 Rate of Change
(%)		 Factors
Sales 285,000 294,560 (3.2) 1)
Operating income 10,000 11,523 (13.2) 2)
Ordinary income 10,500 15,000 (30.0) -
Net income 7,000 12,704 (44.9) -


1) Sales
-In the fiscal year ending March 2016, the Company forecasts sales will be lower in Japan due to increased competition in car-navigation systems. In the U.S., sales are predicted to decrease because some OEM models will be between rebuild seasons, in spite of the Company's strengthening its sales operations. In Europe, even though sales will increase to some OEMs, sales overall are predicted to be lower.

2) Operating profit
-In the fiscal year ending 2016, operating profit is forecast to drop due to lower sales, negative currency translation, and a worsening product mix, even though improvements to pricing and lower R&D expenses will help boost profit.

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

R&D Expenditure

 (in millions of JPY)
  FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 FY ended Mar. 31, 2013
Group 18,100 19,800 16,800
Audio System Division 3,100 2,900 3,200
Information / Communication System Division 15,000 16,900 13,600

Joint Development

-The Company will increase the number of engineers who will develop an Android-based software platform for in-vehicle equipment. Android is an operating system (OS) for smartphones and other mobile data terminals. This move is in preparation for the joint development of the Android-based platform with Fujitsu Ten Limited. The Company expects that the cooperation with Fujitsu Ten will reduce its workload of software design and costs, and will improve its profitability. The new platform will be installed on the two companies' products in two to three years. Alpine has set up a development base for the new platform in Tokyo. The number of workers at the base will be increased fivefold to 100 from present 20. (From an article in the Nikkan Jidosha Shimbun on August 5, 2014)

-The Company and Fujitsu Ten Limited have reached a basic agreement to jointly develop an operating system (OS) for in-vehicle equipment including car navigation systems. By cutting the development costs of the OS, which is a non-competing field, the Company and Fujitsu Ten intend to strengthen their profits. In addition, each company will allocate management resources to add unique functions in order to differentiate the companies' OSs. Installation of the new OS on vehicles will begin in two to three years. Currently, car navigation makers develop both their own OSs and additional functions to use smartphone applications on a car navigation system. This has increased development costs and has been putting pressure on corporate profits. Against this backdrop, the Company and Fujitsu Ten will jointly develop the OS's basic software part, which will not affect in differentiating the companies' OSs. The two companies will also concentrate on the development in competing fields such as the sophisticated in-vehicle equipment and combined functions of in-vehicle equipment. (From an article in the Nikkan Jidosha Shimbun on June 19, 2014)

R&D Activities

Total car-life solution
-During the fiscal year ending in March 2015, the company launched its "total car life solutions exclusive for the car model", which are now on 13 models. Customized for each model, the solutions are appropriately designed to fit the contour of the instrument panel. Being a total-system package, equipped with audio and camera equipment and rear-vision systems, they provide a new type of car-life.

Onboard 10.2 inch WXGA LCD model
-The Company developed a new, onboard 10.2 inch WXGA LCD for the Big-X launched in Japan. Based on　the display's system with rear vision, the high-performance display can be viewed from both the front and rear seats.

Onboard iLX-007
-The Company developed its onboard iLX-007 that is compatible with Apple Car Play, launching it in Europe. Compared to the previous model, this one is significantly thinner, housed in a 3-inch unit. It can be mounted on a variety of vehicle models. In addition to the standard touch-panel that can be used, this model can use Siri voice-recognition software also, enabling safer use of iPhones functions when the car is being driven.

Major Technology Licensing-in Agreement

 (As of Mar. 31, 2015)
Contract signed with Country Contract details Contract period
Dolby
Laboratories Licensing Corporation		 U.S.A. Licensing of patent rights on noise reduction devices for DVD players etc. From January 1, 1977, until the patent expires.
Thomson S.A. France Licensing of patent rights on DVD players From Oct. 1, 2000-Sept. 30, 2005, after which it automatically renews every five years
Toshiba Corporation Japan Licensing of patent rights on DVD players From Dec. 31, 2000-Dec. 31, 2007, after which it automatically renews every five years
MPEG LA LLC U.S.A. Licensing of patent rights on DVD players From January 1, 2002, until the patent expires.
Microsoft Corporation U.S.A. Licensing of usage rights to basic software From July 1, 2003-Dec. 31, 2012, after which it automatically renews every five years
Sony Corporation Japan Licensing of patent rights on Navigation equipment with audio function From Jan. 1, 2014-Dec. 31, 2018

Capital Investment

 (in millions of JPY)
  FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 FY ended Mar. 31, 2013
Group 7,496 8,193 6,719
Audio System Division 1,731 2,076 1,882
Information /Communication System Division 5,765 6,100 4,833


Capital Investments in FY ended Mar. 31, 2015

Audio System Division (in millions of JPY)
  FY ended Mar. 31, 2015
Investments in dies, molds and other tangible fixed assets 399
Investments in software development 65
Investments in production facilities
-Alpine Electronics of America, Inc. 252
-Alcom Electronicos de Mexico, S.A. de C.V. 137
-Alpine Electronics Manufacturing of Europe, Ltd. 101
-Dalian Alpine Electronics Co.,Ltd. 64
-Alpine Technology Manufacturing (Thailand) Co., Ltd. 322

Information /Communication System Division (in millions of JPY)
  FY ended Mar. 31, 2015
Investments in tangible fixed assets that help streamline manufacturing and R&D processes 1,651
Investments in software development 271
Investments in production facilities
-Alpine Electronics of America, Inc. 687
-Alcom Electronicos de Mexico, S.A. de C.V. 328
-Alpine Manufacturing of Europe, Ltd. 461
-Dalian Alpine Electronics Co., Ltd. 625

Planned Capital Investments

 (As of Mar. 31, 2015)
Name Location Activities/Products Planned investment amount
(million JPY)		 Starting date Planned completion
Alpine Electronics, Inc. Iwaki city,
Fukushima Pref.		 Production, R&D and other facilities 2,030 Apr. 2015 Mar. 2016
Dalian Alpine Electronics Co. Ltd. Dalian,
China		 Production facilities 1,350 Apr. 2015 Mar. 2016
Alpine Technology Manufacturing (Thailand) Co., Ltd. Prachinburi,
Thailand		 Production facilities 1,492 Apr. 2015 Mar. 2016