Clarion Business Report FY2007

Business Highlights

Financial Overview
( in million JPY ) FY2007 FY2006 Rate of change Factors
Sales 246,806 181,041 36.3% -
Operating income 5,465 3,072 77.9% -
4,986 2,052 143.0% -
1,378 (784) - -
Automotive equipment business
Sales 217,522 161,786 34.5% Due to severe competition in the domestic and foreign markets, the Company was forced to lower the selling prices of its products. Although there was a slowdown in vehicle sales both in Japan and outside Japan, the Company's OEM sales at home and abroad remained strong.
4,330 1,648 162.8% The Company suffered from higher material prices and increased development costs. But thanks to increased revenue and a successful improvement in the ratios of its sales administrative costs, its profit increased.

Relocation of Headquarters

The Company announced that the construction of its new head office and technical center in Chuo ward, Saitama City was completed on July 31, 2007. With this transfer, the Company will strengthen its capabilities of product development, technologies and sales presentation of in-vehicle information terminals, to order to further step up solution proposals targeting the in-vehicle systems market. The Company will also reinforce an alliance with Hitachi, Ltd. in the automotive systems business. (From an article in the Nikkan Jidosha Shimbun on Aug. 8, 2007)


The Company will start supplying car AV and navigation systems for the new Suzuki SX4 Swift and Escudo for Europe on an OEM basis. It is the first time for the Company to offer its car navigation systems to automakers as factory-installed units on vehicles for the European market. It will begin offering Windows Automotive 5.0 based systems equipped with large 7-inch touch panel displays, which feature easier operation and high level of visibility. To meet the market needs, the systems contain maps of 30 European countries, offer directions in nine languages, and have rich audio visual functions, including a capacity to store music with titles as well as replay DVDs. (From an article in the Nikkan Jidosha Shimbun on Dec. 7, 2007)

Business Restructuring

In 2006, the Company became a consolidated subsidiary of Hitachi Ltd. In 2007, its jointly owned subsidiary manufacturing in-vehicle information and telecommunications equipment, Xanavi Infomatics Corporation, became a wholly owned subsidiary of the Company. These developments are in line with the Group's strategy to focus and concentrate its functions and organization mainly in the areas of technological development, purchasing, production, quality and sales.

The Company announced the start of a new organization to combine production and purchasing functions between the Company and its subsidiary Xanavi Infomatics Corporation. The collaboration will allow the two companies to renew their relationship and create synergy effects. Specifically, its purchasing department will take over all purchasing functions and Clarion Manufacturing "Protech" Co., Ltd. all production functions. They intend to capitalize on their strength in the area of QCD (quality, cost and delivery) and pursue economies of scale. Additionally, the Company will try to improve its group competitiveness in quality and cost by optimizing its global manufacturing operations. (From an article in the Nikkan Jidosha Shimbun on Oct. 2, 2007)

In August 2007, the Company announced that it would dissolve two of its subsidiaries that specialize in developing hardware and software for automotive electronics devices such as car audio systems. The two companies' entire functions and their combined technology will be transferred to the Company's headquarters, leading to shorter development lead-time and lower development costs.

>>> See R&D for more details

Hitachi Ltd. and the Company will dissolve HCX Corporation, their joint venture company for the development of car information systems (CISs), on Mar. 31, 2008. The research and development functions of HCX will be transferred to the Company and Xanavi Informatics Corporation, which is its wholly owned subsidiary. By integrating the development resources to the Company, the Hitachi Group intends to increase its comprehensive engineering efficiency and capabilities in the growing CIS business. HCX was established jointly by Hitachi, the Company, and Xanavi in Dec. 2000. It conducts development activities in the area of CIS products with particular emphasis on establishing a common platform for car navigation systems. (From an article in the Nikkan Jidosha Shimbun on Dec. 12, 2007)

Business Plan

In April 2007, the Company announced its midterm business plan, setting its objectives for the fiscal year that will end in March 2010, when the Company targets sales of 270 billion yen and an operating profit margin of 5.0%.


R&D Structure

In July 2007, the Company completed construction of its Corporate Headquarters & Technology Center in Saitama-shi, Saitama prefecture. The main reasons the Company relocated its headquarters were to enhance its capabilities in terms of technology and development, as well as to establish a better environment for proceeding with its projects in the areas of entertainment and intelligent transport systems (ITSs). (From press release as of August 7, 2007)

The Company will dissolve Clarion Engineering Co., Ltd. and Clarion System House Co., Ltd. located in Chuo-ward, Saitama Prefecture. These subsidiaries specialize in developing hardware and software for automotive electronics devices such car audio systems. The two companies' entire functions and technology will be transferred to the development division of the Company's headquarters on Oct. 1, 2007, leading to shorter development lead-time and lower development costs.(From an article in the Nikkan Jidosha Shimbun on Aug. 30, 2007)

R&D Expense
(in millions JPY) FY2007 FY2006 FY2005
Amount 2,255 975 710
*They are not classified by division as most of the investment was spent on either development of fundamental technology or on cross-divisional technology covering more than one business segment.

Recent developments

(1) The Company worked on developing parking and driving assist systems that incorporate onboard cameras.

The Clarion Group has developed one new applied technology, which is the use of onboard cameras that show vehicles from overhead and also project lines of trajectory patterns on screen.

The Company also is working on developing an ASIC (Application Specific Integrated Circuit), which will enable drivers to see not only the front, back, left and right sides of their vehicles but also an overhead view of their vehicles as well. In addition, the Company is developing ASIC image processing technology. It also is developing cameras with super-wide views. These cameras will be capable of displaying more than 180-degrees horizontally. Plus the Company is developing technology to detect approaching objects in order to support safe driving at blind corners.

The Company plans to combine the car navigation technology of the Clarion Group with the image-recognition technology of Hitachi, so as to enhance its technological capabilities in the area of ITS and add support for parking and driving safety.

(2) For superior sound in onboard devices, the Company is developing the following:

-Systems that automatically control the volume and frequency of sound to provide better sound that more naturally matches the human auditory sense.

-Technology to make the level of volume more even among different media and sources.

-Technology to improve and correct sound quality when compressed audio sources are played.

-A function that automatically creates a list of music to play based on analyzing the properties of favorite music car occupants play.

-Technology that is able to simulate the common noises heard inside the vehicle as well the usual noises heard outside as well.

Technology Licensed-in (As of Mar. 2008)

Partner Country Outline of tie-ups Contract period
Discovision Associate U.S.A. licensed patent on manufacturing optical disc players

Dec. 1, 1994
to the patent expiry date

Koninklijke Philips Electronics NV Netherlands licensed patent on DVD products Apr, 1, 2003 -
Mar. 31, 2008
Vehicle Information and Communication System Center Japan license on the use of VICS technical information

Nov. 28, 1995 -
expiry date agreed by two parties

Investment Activities

Capital Expenditure
(in millions JPY) FY2007 FY2006 FY2005
Investment 6,855 6,074 8,106
Automotive equipment 6,352 5,666 7,748

Investment in FY2007(Auto parts business)

-Constructing a new building in Saitama Shintoshin

-Installing additional equipment to increase production capacity; and purchasing new dies to cope with model changes at its plant in China.