Sumitomo Electric Industries_Business Report FY2007

Business Highlights

Highlights FY2007 (ended Mar. 2008)

Financial Overview
(in million JPY) FY2007 FY2006 Rate of Change (%) Factors
Sales 2,540,858 2,384,395 6.6% Sales and income were up year-on-year because the Company made thorough efforts to cut costs and improve quality; and because it developed new technology and products. It also restructured its business operations and strengthened its revenue base.
Operating income 148,996 128,745 15.7%
Ordinary income 169,644 145,368 16.7%
Current net income 87,804 76,029 15.5%
Automotive related business
Sales 1,199,352 1,095,852 9.4% Sales declined, as the Company transferred its automotive brake business to Aisin Seiki. But the Company continuously increased sales of wire harnesses worldwide to its established customers and also sales of new vehicle models in Europe and the U.S. Its volume of both orders for and production of vibration-isolating rubber increased in North America and China and its overall sales increased both at home and abroad.
Operating income 74,532 58,048 28.4%

New Subsidiary

-Sumitomo Electric Wiring Systems becomes a wholly owned subsidiary

On August 2007, the Company made its subsidiary, Sumitomo Electric Wiring Systems, its wholly owned subsidiary. In consolidating its organizational structure, the Company intends to consolidate the management resources of the two companies into one and make advances in developing new products and technology using the combined expertise in the areas of materials and information technology. The Sumitomo Electric Industries Group positions the automotive wire harness business as one of its core businesses. The Company itself is responsible for making business plans and carrying out marketing activities while Sumitomo Electric Wiring Systems is in charge of product designs and production. 

Sale of Business

-Brake business unit transferred to Aisin Seiki

On October 1, 2007, the Company transferred its brake business to Aisin Seiki. (In 2001, these two companies established a new brake system manufacturing and sales company, Advics Co., Ltd., with Denso Corporation and Toyota Motors Corporation.) Nevertheless, the two companies over time found it necessary to integrate their brake business in order to rationalize and improve production efficiencies so as to grow the brake business of Advics. As a result, they decided to consolidate their brake business into Aisin Seiki, one of the parent companies of Advics, firstly by establishing a new, temporary company called AS Brake Systems Inc, which is to be in charge of brake production until the transfer is completed. In addition, Sumitomo Electric Industries' production facility in Thailand, SEI Brake Systems (Thailand), Ltd., will be acquired by Aisin through transferring stock shares. (From press release on September 3, 2007)

As the transfer of the brake business to Aisin Seiki completes, the Company will dissolve SEI Brake Systems Inc. (SEIB), its wholly owned subsidiary that manufactures and sells  brake and brake products. The functions of SEIB will be transferred to AS Brake Systems Inc., its joint venture with Aisin Seiki. The exact timing of the disseverment is to be determined later. (From press release on March 26, 2008)

Establishing new facility 

-New plant in Vietnam

In February 2008, Sumitomo Wiring Systems, Ltd. established Sumi Vietnam Wiring Systems Co., Ltd. in Vietnam to manufacture and sell automotive wire harnesses. (Press release, February 4, 2008)

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-Acquisition of German sintered parts manufacturer

In September 2007, the Company acquired a sintered parts manufacturer from Germany Cloyes Europe GmbH. The Company acquired 40% of the equity capital while its wholly owned subsidiary, Sumitomo Electric Sintered Alloy Ltd.,  acquired 60%.

Recent developments outside Japan

-Wire harness business

In Europe, orders from non-Japanese automakers such as Fiat and IVECO increased. The Company also won orders for new vehicle models from PSA and Renault and is expecting to increase its market share in and after 2009. It is now working on plans to move its production facilities from Poland and Slovakia, where labor costs are surging, to Morocco, Tunisia, The Ukraine and other countries.

In emerging markets like China and India, the Company has a stable log of orders from Japanese automakers, from which has a 40% share of the market. However, its market share in terms of business with Japanese automakers is a little over 10%, so the Company needs to increase this.


R&D Expenditure
(in million JPY) FY2007 FY2006 FY2005
Overall 72,271 68,373 64,427
Automotive related business 41,382 40,891 38,019

R&D Structure and Activities

The Company will build a new R & D building at its Osaka Works, Konohana-ku, Osaka City, to enhance R & D in new areas such as high-temperature superconductivity. Approx. 8 billion yen will be invested in the construction including the surrounding green zone. As part of the Company's 110 anniversary project, construction will begin this summer, scheduled to finish in April 2009. The facility, named "WinD Lab," will be a seven-story reinforced concrete building with a gross floor area of 155,00 m2. The R & D operations scattered in the Works will be consolidated to this new building to promote expansion of research areas from electric power cables, electronics and automobiles to include new areas such as high-temperature superconductivity and new materials in environment and resource businesses and ubiquitous technology in automobiles and information/telecommunications. After the completion, 60% of the current 530 researchers or approx. 330, will move to the new building. (From an article in the Nikkan Jidosha Shimbun on Mar. 20, 2007)

Wire harnesses/in-vehicle electronic equipment

R&D activities are mainly conducted at AutoNetworks Technologies, Ltd.,  which is jointly owned by the Company and Sumitomo Wiring Systems, Ltd. R&D activities are mainly focused on developing new products meeting safety, comfort and environmental needs.   

The Company made Sumitomo Electric Wiring Systems, Inc. its wholly owned subsidiary in August 2007 in order to make advances in developing new products and technology using the combined expertise in the areas of materials and information technology under a  consolidated organizational structure.

To make in-car electronic devices capable of handling IT applications and  performing more sophisticated functions, the Company is developing the following:

-Power Distributors (PDs)
-CDUs (Center Display Units) such as cameras that can monitor vehicles from three angles.
-Next-generation, high speed car information LANs and related software:
The Company also develops wire harness systems suitable for the devices or systems mentioned above.

Environmentally Friendly Products:  The Company will develop lightweight wire harnesses that respond to environmental concerns.

-High voltage harnesses for HEVs (Hybrid Electric Vehicles)

-Environmentally friendly products for wire harnesses such as halogen-free electric wires, lead-free solder, and connecting terminals that do not require soldering

To achieve the required standard of quality for new products and also shorten development time, the Company will develop technologies on testing, evaluation, and analysis that are essential for developing material elements. The Company is developing technologies that do not require prototypes, by enhancing simulation technology using computer-aided engineering (CAE).   This technology simulates the life of wire harnesses and analyzes heat and vibration of electronic modules. 

Vibration isolating rubber

Tokai Rubber Industries is making advanced  technological developments aimed at reducing costs, improving ride quality, and expanding the Company's businesses to a global level. The Company is also conducting R&D activities on environmentally friendly technologies.  This includes developing products for low permeability fuels, developing biomass materials and reducing hazardous substances.

The Company carried out development activities on technologies that produce thin film, negative electrodes for high capacity batteries used in hybrid vehicles. These activities are aimed at reducing CO2 emissions. They also form one theme of the Research Institute of Innovative Technology for the Earth. The Company also developed technologies that improve performance of magnesium compound expanded material in terms of strength and flexibility in order to get better fuel efficiency through reducing vehicle weight. This project is based on an R&D theme of the New Energy and Industrial Technology Development Organization (NEDO) dealing with practical applications.

Investment Activities

Capital Expenditure
(in million JPY) FY2007 FY2006 FY2005
Overall 121,912 119,887 121,830
Automotive related business 72,846 69,075 75,263

-The Company invested in the automotive business to increase production and improve the efficiency of wire harnesses and vibration isolating rubber.

Overseas Investment


-In February 2008, Sumitomo Wiring Systems, Ltd. established Sumi Vietnam Wiring Systems Co., Ltd. in Ha Nam, Vietnam to manufacture and sell automotive wire harnesses. The new company is capitalized at 17 million US dollars, fully invested by Sumitomo Wiring. Operations are scheduled to begin in January 2009. In FY2011, sales are expected to reach 90 million US dollars with a planned workforce of 2,500. (From a press release on Feb. 4, 2008)

Capital Investment Plan (FY2008)

-The Company plans to invest 135,000 million yen in FY2008.

-Its Automotive Business Division plans to invest 79,000 million yen mainly in its facility that produces wire harnesses and vibration-isolating rubber.

-It plans to expand the production capacity of its wire harness facilities in Asia, start production of parts for new vehicle models, and readjust production allocations in Europe.

-It plans to expand the production capacity of vibration-isolating rubber at Tokai Rubber Industries mainly in North America and Asia.