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5. Pioneer Corporation Business Report FY ended 2015

Factors
1) Sales by product
Car Navigation Systems
-In the consumer market, in spite of higher sales overseas such as in the U.S., Europe, and China, sales were lower in Japan due to lower selling-prices and a drop in sales after demand fell once the last-minute buying rush before the consumption tax increase last year ended.
-In the OEM market, sales were higher due to increased sales to OEMs mainly in China and North America, although sales were lower in Japan.

Car Audio
-In the consumer market, sales were on par with those of the previous year because higher sales mainly in North and South America were offset by lower sales in Europe and Japan.
-In the OEM market, sales were higher due to greater sales in Europe, in spite of lower sales in China.

Out of all sales of car electronics products, OEM sales increased from 54% the previous year to 57%.

Recent Development Outside Japan

-Alpine Electronics, Inc. and the Company 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)

Business Partnership

-The Company has agreed with Treasure Data, Inc. of the U.S. to form a business alliance in the big data analysis and distribution services for the automotive industry. This allows Pioneer to analyze traveling vehicle information and other automobile-related data efficiently and in a short period of time. Pioneer collects and accumulates such vehicle information through sensors in car navigation systems and smartphones. Pioneer will start providing analysis results and information that match the needs of automotive companies such as dealers and car accessory shops in 2015. The analysis results will help the automotive companies to improve the quality of their after-sales services, for example, through the distribution of maintenance information to their customers. (From an article in the Nikkan Jidosha Shimbun on September 5, 2014)

Production operations

-The Company will introduce a common supply chain management (SCM) system to all of its plants in Japan and abroad. The SCM system, which is developed by NEC Corporation, will accelerate the plan-do-check-act cycle for procurement, production, quality control, and distribution at each plant. The new system will start operations first in January 2016 and gradually be installed to all of the company's plants by March 2018. The installation will start at the company's main plants in Japan, China, and Thailand. The new system will reduce the lead time required for new products and new plants. It will also enable easy transfer of production to an alternate plant in an emergency. Moreover, the adoption of a globally unified system will allow the company to reduce the number of current systems by 80%. Through faster operations to be achieved by this common system at each plant, Pioneer hopes to enhance its car electronics business and expand its sales from automakers and mega suppliers globally. (From an article in the Nikkan Jidosha Shimbun on March 27, 2015)

Mid-term Business Plan (FY ending Mar. 31, 2014 - FY ending Mar. 31, 2016)

Car Electronics

-The Company announced its plans to increase sales at its car electronics division to JPY 435 billion by the fiscal year ending March 2021 (FY 2020), up 25 percent from the result of FY 2013. By enhancing its R&D efficiency and streamlining its business structure, the company aims to achieve an operating income margin of 5 percent by FY 2017, which will be a significant rise from the FY 2013 level of 3.6 percent. Furthermore, the target is set at more than 6 percent for FY 2020. From FY 2018 onward, the company plans to focus on expanding its commercial and telematics service businesses in Japan, while boosting its global sales by introducing low-cost products in emerging markets. By improving its balance sheet, Pioneer intends to appropriate more funds for mergers and acquisitions, joint venture activities and advanced technologies development. (From an article in the Nikkan Jidosha Shimbun on November 11, 2014)

-In the fiscal year ending March 2016, sales at the car electronics division are expected to increase 5.3% year-on-year. This forecast is based on the following projections: 

• Higher sales of OEM and consumer-market car audio systems (CD, AV, speakers) and OEM car navigation systems.
• OEM sales are predicted to increase by the same amount as they did in the fiscal year ending March 2015, from 54% to 57%.

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

-The Company plans to invest JPY 25,000 million as R&D expenditure during FY ending March 2016.

R&D Facilities

R&D Activities

(1) Conducting R&D activities on LiDAR systems* and high-accuracy, vehicle-position locating technology designed for autonomous-driving vehicles.
-The Company is developing technologies for the following purposes: precisely estimating the position/location of autonomous-driving vehicles; creating precise, next-generation maps, which is technology fundamental to making it possible for vehicles to recognize their surrounding environment; processing information handled by onboard devices/equipment that can accurately recognize the surrounding environment while the vehicle is traveling; processing signals for image processing and SLAM**.

*LiDAR (Light Detection and Ranging) system: the system, which receives diffused light from objects illuminated by a laser, can measure and analyze the distance from the objects, as well as their shapes and characteristics.

**SLAM (Simultaneous Localization and Mapping): This technology simultaneously estimates the current location and maps the surrounding environment.

(2) LiDAR system
-Making use of optics technology (developed through R&D activities on optical-discs), broad-band analog circuit technology, and digital-signal processing technology, the Company is conducting R&D activities, from LiDAR-system elemental technology to applied systems. By doing so, the Company is aiming to develop a compact, low-cost, and highly reliable LiDAR system optimized for onboard uses.

(3) Highly accurate position-locating technology
-Using technology gained from developing car-navigation systems, the Company is developing technology to precisely estimate the position of vehicles with a degree of accuracy to a 10cm tolerance, significantly exceeding GPS, by making use of three-dimensional sensing technology based on the LiDAR system, highly accurate mapping technology, and SLAM technology.

(4) Rearview mirror telematics unit
-The Company has developed a rearview mirror telematics unit equipped with LTE communication module. This product is planned to be commercialized for the aftersales market within the fiscal year ending in March 2015. The unit is continuously connected to the Internet, allowing the driver to obtain real-time information. Its built-in front-view camera allows the unit to support safe driving by providing the driver with alerts when the vehicle deviates from the center of the lane or when the vehicle ahead starts moving. This product will be proposed widely to general consumers and freight forwarders in Japan. (From an article in the Nikkan Jidosha Shimbun on October 2, 2014)

-In FY ended March 2015, the Company invested mainly in embedded software, dies and new production equipment.
-The Company plans to invest JPY 33,500 million as capital investment during FY ending March 2016.