Clarion Co., Ltd. Business Report FY ended Mar. 2016

Financial Overview

(in million JPY)
FY ended Mar. 2016 FY ended Mar. 2015 Rate of change (%) Factors
Sales 216,227 198,632 8.9

-Sales increased year-on-year as a result of favorable currency translation, higher sales to the OEM markets in the Americas and Asia, and releases of new products.

Operating income 11,551 7,386 56.4

-Operating income increased as a result of improved operating rate due to higher sales, and cost reductions.

Profit before tax 10,495 6,131 71.2 -
Profit for the year attributable to owners of the parent 7,743 4,875 58.8 -

Financial overview by region (FY ended March 2016)

-Sales decreased 12.8% year-over-year (y/y) due to sluggish demand for new vehicles and a delay in market recovery.
-Operating profit increased 97.7% y/y as a result of the Company's moving back production to Japan on the back of a strong yen, and making company-wide cost-reduction efforts.

-Sales increased 47.6% y/y due to strong vehicle sales in the U.S., releases of new products targeted at the OEM market, and expansion of EMS business at Electronica Clarion, S.A. de C.V., a subsidiary in Mexico.

-Although vehicle sales were strong in Europe, sales decreased 13.9% y/y because there were no major introduction of new models by the Company's customers, which are planning new model releases for the future.
-Despite the sales decline, operating profit increased 6.8% y/y as a result of the Company's cost reduction initiatives.

-Sales increased 11.8% y/y due to increased sales to the OEM markets in China and Thailand and greater exports to North America, which improved the Company's operating rate in the region.


-The Company has received an order for some components of an automated parking system. The Company will handle the parts that recognize spaces where the vehicle can be parked, and transmit that information to the control system of functions like the steering and brakes. The Company's proprietary image processing technology is utilized to make a high-precision composite image from the multiple images taken with the on-board cameras. The automated parking system eliminates the need for a driver's control of the steering wheel and brakes. It will be equipped in a production model that is to be launched by a Japanese OEM in 2018. In the future, the Company will investigate and develop other uses of this technology, such as valet parking where drivers give instructions outside their vehicles. (From an article in the Nikkan Jidosha Shimbun on February 12, 2016)

Mid-term Business Plan

-The Company announced its mid-term management plan through the end of March 2018 (FY 2017). Looking ahead to the year 2020, the Company will focus on its "Intelligent Safety system" business for a safer and more secure automobile society, and "Connectivity" business that enables vehicle-to-vehicle, vehicle-to-pedestrian, vehicle-to-infrastructure communications. The consolidated operating profit ratio target for FY 2017 is 5% or higher. In its product strategy, the Company will promote cost reduction reform for all products. As for the Intelligent Safety systems, the company will expand the market area of automatic parking systems and SurroundEye which supports securing the view in a vicinity of a vehicle. In the field of in-vehicle navigation, display, and audio systems, the Company aims to develop Smart Access further and differentiate itself in Human Machine Interface. "With Smart Access, Clarion will provide important information that leads to higher safety and security of users," the Company's president and Chief Operating Officer, Hidetoshi Kawamoto, said. (From an article in the Nikkan Jidosha Shimbun on May 28, 2015)

Recent Development in Production

-The Company has started mass-producing car navigation systems and other products in Japan. The Company shifted production of some items from its plant in Dongguan, China to its subsidiary and sole plant in Japan, Clarion Manufacturing and Service Co., Ltd. The plant started mass-producing some items in May 2015. The shifted production volume, expected to reach hundreds of thousands of units annually, is a countermeasure against the weaker yen and a hike in labor costs in China. If the yen continues to decline further, Clarion will shift production of more items from China. Clarion has plants in six countries. As of April 2015, its production volume in Japan accounted for 21% of the total production of finished products. With the latest shift of production to Japan, the Company intends to increase that ratio to 25% or more by the fiscal year ending in March 2018. (From an article in the Nikkan Jidosha Shimbun on July 30, 2015)

Outlook for FY ending Mar. 2016

(in million JPY)
FY ending Mar. 2017
FY ending Mar. 2016
(Actual Results)
Rate of Change
Revenue 200,000 216,227 (7.5)
Operating income 10,000 11,551 (13.4)
Profit before tax 9,000 10,495 (14.2)
Net income 6,500 7,743 (16.1)

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

R&D Expenditure

(in million PY)
FY ended Mar. 2016 FY ended Mar. 2015 FY ended Mar. 2014
Overall 19,509 17,536 16,819

R&D Activities

(1) Expanding Smart Access, the Company's onboard cloud-based telematics service:
-The Company will continue to expand its Smart Access cloud-based telematics service for automobiles by collaborating with the Hitachi Group.

-In the fiscal year ended in March 2015, the Company enhanced its voice-operated onboard information system. The system supports more languages for use in North America and Europe. Furthermore, the Company started providing new services for OEMs that are part of its next-generation infotainment systems.

(2) Development of new safety and information technologies
Enhanced driver assistance function with image processing technology and cameras
-The Company has been working on putting automated parking technology into practical use by leveraging image recognition and vehicle control technology, utilizing an on-board camera that improves object detection, and adding improved image processing functions with the SurroundEye digital image transmission system.

-The Company improved its safety systems after collecting customers feedback, and began full scale development towards mass production in FY ended March 2016. Anticipating further requirements for more advanced systems, it is working on introducing a more sophisticated route guidance system by use of multiple sensors, expanding detection range, and achieving integrated control with on-board communication systems.

-SurroundEye is being adopted also for commercial vehicles, and is targeted at the global market.

-In the area of autonomous vehicles, which are expected to be introduced around 2020, the Company is developing technologies like microprocessor units (MPUs) for accurate position detection, advanced image recognition systems, and on-board communication systems through collaboration with the Hitachi Group.

C2X Communication Technology
-In the fall of 2015, the Company began full-scale production and supply of its TCU modules, which provide increased driving comfort, safety, and security. The modules can control air conditioners before drivers get in a car, and also support emergency call systems in Russia.

-In collaboration with the Hitachi Group, the Company is developing C2X platform for car-to-car and car-to-infrastructure communication systems for next-generation vehicles to provide improved driving safety.

(3) Advanced auto-interior acoustics technology to meet diversified demand
-The Company developed "Intelligent Tune App" automatic sound space compensation smartphone application in June 2015.

(4) Full digital speaker
-At the end of 2015, the Company developed high-power LSI that supports full digital sound technology for automotive applications. The technology was introduced into a high-resolution car audio system released in April 2016.

-The Company has developed a new in-vehicle full digital sound system made up of a digital processor and full digital speakers. Utilizing full digital transmission from digital audio sources to speakers, this new system can play back high quality and original digital sounds. The new system is highly versatile with connectivity options for a wide range of devices such as smartphones, and also offers precise and intuitive sound tuning. The system will go on sale in Japan, the U.S., Europe, and Australia in April 2016. The Company is holding a demo exhibition of this new system at the 2015 Frankfurt Motor Show (IAA) in progress. (From an article in the Nikkan Jidosha Shimbun on September 18, 2015)

Technology for Autonomous Vehicles
-Japanese auto parts manufacturers are accelerating the development of components for autonomous vehicles. Mitsubishi Electric Corporation has developed a new collision-avoidance technology that detects cargo or any obstacles falling from a vehicle ahead and helps apply emergency evasive steering while ensuring safety. The company also developed a compact AI that can be easily implemented on vehicle equipment, and is planning to put it into practical use from around 2017. Meanwhile, on February 19, Hitachi Automotive Systems, Ltd. revealed its autonomous drive system it developed jointly with Clarion Co., Ltd. A public road test using this technology will start on February 22. European companies such as Robert Bosch GmbH and Continental AG are said to be taking the lead in developing autonomous driving technologies. Japanese manufacturers are currently stepping up their development activities, expecting that the autonomous car market will expand in the future. (From an article in the Nikkan Jidosha Shimbun on February 20, 2016)

Autonomous Driving Tests
-In February 2016, the Company will start autonomous driving tests on a toll road in Hitachinaka City, Ibaraki Prefecture. Its test vehicle was revealed to the press at the company's Sawa Works on February 19. The test car is based on Fuji Heavy Industries' Impreza, and is equipped with stereo cameras, millimeter-wave radars, and SurroundEye omnidirectional monitoring system provided by the Company in the Hitachi Group. Information from these sensing technologies will be integrated by the vehicle's ECU, which controls steering and braking systems. One feature of this autonomous driving system is that all the sensing, information processing, and control technologies, including a central gateway and high-precision mapping MPU, were provided within the Hitachi Group. These units are installed in the vehicle, eliminating the need for bringing in special computers and creating an environment similar to future production vehicles. (From an article in the Nikkan Jidosha Shimbun on February 22, 2016)

Vibrating Safety Seat
-The Company has developed a new system that alerts drivers to dangers such as approaching vehicles by vibrating the driver's seat. The new system equips seats with a speaker that has both voice output and vibration functions, and enables the driver to intuitively know in which direction the danger is coming from by controlling the position that is vibrated. The new system can even reliably convey information to elderly people with weak hearing via voice and vibration alerts. The Company will promote the new system to automakers and seat manufacturers as a function that ensures security and safety. (From an article in the Nikkan Jidosha Shimbun on February 18, 2016)

Collision Prevention Technology
-Hitachi, Ltd., Hitachi Automotive Systems, Ltd., and Clarion Co., Ltd. announced that they have developed a basic technology that can prevent collisions while maintaining safe and practical speeds, by predicting changes in pedestrian movements and calculating optimum speed patterns in real time. The companies have verified the validity of this technology by using their experimental vehicles. Through repeated trials, the companies will accelerate the development of the technology and the commercialization of autonomous driving technologies. (From a press release on October 14, 2015)

Next-generation of "SurroundEye" Camera System
-The Company exhibited the next-generation "SurroundEye" camera system at the 2015 Frankfurt Motor Show (IAA). The Company's SurroundEye is a video system that provides a bird's-eye-view display of the surrounding information of vehicles using multiple cameras. The next-generation SurroundEye transmits the megapixel images from the car cameras digitally, and reduces image degradation using digital ECU processing. This improves the image quality and driver's visibility by about 30% compared to the visibility of conventional systems. With this increased precision, the driver can see images surrounding the car more clearly in a further distance. This enables drivers to intuitively recognize their surrounding situations. The conventional visual field support system was developed to eliminate blind spots for drivers. The Company 's next-generation SurroundEye offers an improved surveillance and preventive safety system for warning support and automated parking. (From an article in the Nikkan Jidosha Shimbun on September 17, 2015)

New Production Lines
-The Company is developing a new production line for car navigation systems that will halve the capital expenditure. The Company initially plans to introduce the low-cost lines at its facilities in Japan by March 2017 and install them at its overseas facilities thereafter. The new production line is designed based on globally available equipment in order to achieve a cost reduction. The new line will allow the company to promote automated production and save labor costs at its plants in emerging countries. By utilizing the new production lines, Clarion aims to improve its cost competitiveness in the global market, while raising the level of quality and establishing a flexible production structure to reduce the risk of exchange rate fluctuations. (From an article in the Nikkan Jidosha Shimbun on July 2, 2015)

Technology Licensed-in Agreement

(As of Mar. 31, 2016)
Partner Country Outline of Licensing Agreement Contract period
Discovision Associates U.S. Licensed patent on manufacturing optical disc players

Dec. 1, 1994
to the patent expiry date

Vehicle Information and Communication System Center Japan License on the use of VICS technical information Nov. 28, 1995 -
expiry date agreed by two parties
Google Inc. U.S. License on the use of voice-recognition and retrieval technology Apr. 30, 2013
- Aug. 31, 2016

Capital Expenditure

(in million JPY)
FY ended Mar. 2016 FY ended Mar. 2015 FY ended Mar. 2014
Total 3,888 4,999 2,888

Investment in Japan

-The Company invested JPY 1,527 million in production facilities, dies, and other equipment.

Investment Outside Japan

-The Company invested JPY 547 million primarily n renewing equipment and facilities for the EMS operations at Electronica Clarion, S.A. de C.V.

-The Company invested JPY 374 million mainly in production facilities and equipment at Clarion Hungary Electronics Kft.

-The Company invested JPY 1,439 million to renew production equipment and purchase dies to produce new products in China, and to expand manufacturing facility at Clarion Asia (Thailand) Co., Ltd.