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5. Alps Electric Co., Ltd. Business Report FY ended Mar. 2017

Alps Electric Co., Ltd. Business Report FY ended Mar. 2017

Factors
1) Electronic Components - Automotive market
-In the fiscal year that ended in March 2017, sales in electronic component segment were JPY 437,676 million, a 0.8% increase year-on-year (y/y). The Company launched its 8th mid-term management plan in the fiscal year that ended in March 2016, advancing initiatives aimed at achieving sustainable grow amidst a sea of changes. In the in-vehicle market, several new technologies were commercialized in the areas of advanced driver assist systems (ADAS) and autonomous driving. The further advancement of in-vehicle electronics was spurred on by various initiatives undertaken by OEMs. Some of the strong selling products included electronic shifters and communications modules such as Bluetooth, W-LAN, LTE and others, in addition to various kinds of in-vehicle devices such as sensors. The Company’s sales in the in-vehicle devices market reached JPY 256,000 million, a 3.4% increase y/y.

2) In-vehicle information devices business
-In the fiscal year that ended in March 2017, sales in this business segment were JPY 242,306 million, a 9.4% decrease year-on-year (y/y). Operating profit was JPY 5,623 million, a 3.5% increase y/y. In the car car-electronics market, collaboration is growing between the two main areas, i.e., the in-vehicle information segment, in which infotainment systems form the core product range; and new business areas such as automotive electrification and artificial intelligence (AI), as examples. However, competition in this business segment is heating up in this area, going beyond only the kinds of business areas and business models. Faced with this situation, the in-vehicle devices business promoted the product appeal of its in-vehicle solutions, in which car-navigation systems and premium-sound systems comprise the core product ranges. With China’s electric-vehicle market growing at a rapid pace, the Company is strengthening its R&D activities on next-generation battery-control systems.

Electronic components

Eighth Mid-term Management Plan (starting from the fiscal year ending in March 2017 and ending in the fiscal year ending in March 2019)
-Based on the slogan of becoming a “Company with Sustainable Growth”, the Company is focusing on three sectors with foreseeable growth: automotive, mobile, and EHII (Energy, Healthcare, Industry, IoT). The Company will work on improving profit at the automotive sector and continue creating new products for the mobile sector, while working at the same time to win new customers. As a result, it will aim to further increase profitability based on following a dual market approach.

Major objectives:
1. Achieve sales of JPY 300 billion in the automotive market

• Automotive modules: develop products integrating HMI, sensing, and connectivity
• Automotive devices: develop products for connected cars

2. Achieve sales of JPY 200 billion in the mobile market
3. Achieve sales of JPY 60 billion in the EHII market

Recent Business Developments

-The Company announced that it will absorb its wholly-owned consolidated subsidiary, Kurikoma Electronics Co., Ltd., effective October 1, 2016. Kurikoma Electronics, which is based in Miyagi Prefecture, manufactures and sells automotive electrical products. Alps Electric, as a surviving company, will absorb Kurikoma Electronics, which will be dissolved as a result of this merger. (From a press release on August 26, 2016)

-Toshihiro Kuriyama, president of Alps Electric Co, Ltd. (Alps Electric,) attended a ceremony held at the municipal office in Osaki City, Miyagi Prefecture, on June 15 to mark the agreement to acquire a factory site in the Kitahara Industrial Park. Kuriyama said, "We are planning a whole facility expansion, including renewal of the existing Furukawa Plant. The new plant will start operations within two to three years." While the company has not yet determined details, he emphasized that it will continue to expand its operations in Osaki City. Alps Electric will acquire 48,771 square meters of land in the industrial park's new development site next to its existing Kitahara Plant. The company has not yet decided what is to be produced, or the operation scale for the new plant, but it will consider production for automotive and industrial markets, as well as products related to Internet of Things. The company is aiming to maintain and expand its production bases in Japan, and establish next-generation smart factories. (From an article in the Nikkan Jidosha Shimbun on June 21, 2016)

-The Company announced that it will acquire a factory site in the Kitahara Industrial Park in Osaki City, Miyagi Prefecture. The company will hold a ceremony to mark the agreement on June 15, and officially conclude a contract with the city at the end of the month. Alps Electric will pay JPY 681 million for 48,771 square meters of land in the industrial park's new development site next to its existing Kitahara Plant. The company has not yet decided what is to be produced, or the operation scale for the new plant, but it will consider production for fields that are expected to grow, including automotive, energy, health care, and industrial markets, as well as products related to Internet of Things. (From an article in the Nikkan Jidosha Shimbun on June 11, 2016)

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

R&D Activities

Electronic Components - Automotive market
-In working to find solutions to enhance smoother communications between humans and media, the Company is developing unique, new products by making more in-depth research on its proprietary technologies such as mechatronics technology, processing technology, material technology and others.

-In terms of the in-vehicle device market, the Company is developing fully integrated operating devices that respond to advances being made in the electrification of cabin interiors and to the growing complexity operating devices. In addition, the Company is developing products needed for the growing number of hybrid, plug-in-hybrid, electric, and fuel-cell vehicles.

-The Company is developing touch-panel modules, haptic touchpads, electrostatic steering-wheel switches, small-sized electronic shifters and other such products so as to make it easier for vehicle occupants to operate automotive air-conditioning and audio systems. Furthermore, in working on collision-prevention and autonomous-driving solutions, the Company is working on developing ultra-short-distance, millimeter-wave radar systems.

-In working to achieve autonomous driving based on advanced driver assist systems (ADAS), the Company is modularizing in-vehicle devices by applying high-frequency circuit technology. It already launched production of Vehicle to X (V2X) modules, which are predicted to come into further use going forward. The Company is strengthening its product line in response to advances being made to intelligent transport systems (ITSs).

Product Development

Tact Switch
-The Company announced that it has started mass production of the SKPS Series TACT Switch with soft operating feel for controlling car navigations and air conditioners. It achieves high operating force while shortening the amount of movement (stroke) for pressing a switch. With this new product the company will meet various needs of automakers for the feel of TACT switches. Alps Electric has set an initial monthly sales target for product at two million units and plans to double the figure as soon as 2018. (From an article in the Nikkan Jidosha Shimbun on March 21, 2017)

Electrostatic capacitance touch panel module
-The Company has developed an electrostatic capacitance touch input module to sense the change of small current generated by a finger touching a screen (electrostatic capacitance) to identify location. The company will propose the module for use in air conditioners, audio systems, and in-vehicle controllers. Alps' self-developed technologies like electrostatic ICs, electrostatic sensors, and housing processing have enabled operation by means of electrostatic touch on a curved surface or resin moldings. The module can also respond to the force feedback function and respond to an input with vibration. Alps will market this product highlighting its feature to enhance operability and design flexibility for central consoles. (From an article in the Nikkan Jidosha Shimbun on October 17, 2016)

Electronic components
-In the fiscal year that ended in March 2017, the Company invested in R&D and production facilities/equipment to produce actuators for smart-phone cameras, as well as to produce other products such as tact switches and components.

Automotive Infotainment
- In the fiscal year that ended in March 2017, the Company invested to renew and streamline production equipment and ready facilities and equipment to produce dies used on new products.。
-Outside Japan, the Company invested in facilities and equipment at its production plant in Europe, Alpine Electronics Manufacturing of Europe, Ltd.