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5. Denso Corporation Business Report FY ended Mar. 2019

Denso Corporation Business Report FY ended Mar. 2019

Business Partnership

Airbiquity (US)
-Denso has taken a USD 5 million stake in Seattle-based Airbiquity Inc., a global leader in connected vehicle services and a pioneer in the development of automotive telematics technology. The investment will accelerate the development of over-the-air (OTA) systems for wirelessly updating automotive software from a remote location. Denso will accelerate the development of secure and highly reliable OTA systems in cooperation with Toyota Motor and Toyota Tsusho by harnessing Airbiquity’s engineering capabilities and developmental strengthens and resources. Working with Airbiquity, OEMs and suppliers have deployed highly scalable, manageable, and secure connected vehicle service programs in over 60 countries around the world. (From a press release on March 12, 2019)

quadric.io (US)
-On February 7, DENSO Corporation announced that NSITEXE, Inc., a Denso Group company that designs and develops semiconductor IP cores, has taken a lead stake in quadric.io, a startup company based in Burlingame, California. The purpose of the investment is to accelerate quadric.io’s development of edge processing units (EPUs), to further enable automated driving technology. One of NSITEXE’s focuses is developing a Data Flow Processor (DFP), a new type of processor different from conventional processors such as central processing units (CPUs) and graphic processing units (GPUs). NSITEXE aims to achieve instant processing of both complex and large amounts of calculations to extend the ability of DFP by accelerating development of quadric.io’s real-time end-to-end edge computing technology. Denso established NSITEXE in 2017 to design and develop next-generation, high-performance semiconductor devices to advance automated driving solutions. (Denso press release on February 7, 2019)

TomTom (Netherland)
-TomTom announced that it will collaborate with Denso for software platform for autonomous vehicles. TomTom's High Definition (HD) Map will work in combination with Denso in-vehicle sensors such as cameras and radars to power the localization, perception and path planning functions for a complete autonomous driving system. This collaboration will allow Denso to offer a market-leading system targeting level 2 automation for highways and major urban roads, by leveraging mapping system developed together with TomTom. (From a press release on January 4, 2019)

Canatu (Finland)
-Finland based Canatu announced that it has signed a licensing agreement with Denso Corporation. This non-exclusive licensing agreement consists of Canatu CNB film manufacturing for heaters used in, for example, autonomous car. The joint development and manufacturing both in Finland and Japan serve the customers of Canatu and Denso Corporation. The parties do not disclose the value of the licensing agreement. Canatu is a designer and manufacturer of 3D shaped, transparent conductive films for heater and touch solutions.  The meaning of sensor heaters will increase when the evolution of automotive industry moves towards autonomous driving. The sensors controlling the driving must be reliable in any weather.  It can be used in several product areas of future driving. (From a press release on December 13, 2018)

eSOL (Japan)
-Denso Corporation has invested JPY 170 million in eSOL Co., Ltd. (eSOL), an embedded software developer. Denso now owns about a 2% stake in eSOL. Denso regards eSOL as its important partner for the development of automotive electronic platforms. The two companies plan to sign a technical advice agreement and enhance collaboration in areas like personal exchange. eSOL is the premium partner of AUTOSAR, a consortium that standardizes automotive software platforms. DENSO established AUBASS Co., Ltd., a joint venture with eSOL and NEC Communication Systems, Ltd., in 2016 for the development of basic automotive software. (From an article in the Nikkan Jidosha Shimbun on October 15, 2018)

Infineon Technologies (Germany)
-Infineon informed that it is strengthening its long-term partnership with Denso Corporation to bolster its automotive business. Infineon is a global leader in semiconductor solutions for the automotive industry. Both companies aim to jointly enhance their system know-how in established and new technologies – like automated driving and electro-mobility. Underpinning this collaboration, the Japanese company has bought an equity stake in Infineon in the range of a mid-double-digit million Euro amount. (From a press release on November 26, 2018)

ThinCI (US)
-On September 6 Denso Corporation (Denso) announced that its subsidiary NSITEXE, Inc. (NSITEXE) made investments in ThinCI Inc., a startup company based in California, U.S. This is an additional investment for Denso following another investment made by Denso International America, Inc. (Denso America) in 2016. The two companies will strengthen joint development of the Data Flow Processor, or DFP, which enables reflexive data processing, aiming to put it into commercial application in the early 2020’s for autonomous driving vehicles and cars with advanced driver assistance systems. NSITEXE is a Tokyo-based developer and designer of semiconductor intellectual properties (IPs) established by Denso in September 2017. The investment amount, including that by Denso America, was not disclosed.  (From an article in the Nikkan Jidosha Shimbun on September 7, 2018)

JOLED (Japan)
-Denso has invested JPY 30 billion in JOLED Inc., a developer of printed organic light-emitting diode (OLED) displays. The investment ratio stands at 19.7%. OELD displays offer higher-definition images and are designed to be thinner than existing displays used in car navigation systems. Human-machine interfaces that use OELDs deliver improved visibility and dynamic design, contributing to better safety and usability. Denso will accelerate the development of onboard printed OELDs, aiming to commence commercial production by 2021. (From an article in the Nikkan Jidosha Shimbun August 24, 2018)

Contract

-Denso has developed a new electric-powered refrigeration system for heavy-duty trucks and will sell it for the Profia Cool Hybrid truck, which is scheduled to be launched by Hino Motors, Ltd. in the summer of 2019. The new refrigeration system offers improvements in line with improved truck hybrid system performance. The new refrigeration system incorporates Denso's compressor technology used in plug-in hybrid vehicles and provides an efficient refrigeration cycle. It offers enhanced refrigeration capacity with about a 20% improvement in its coefficient of performance over conventional systems (under summertime and very low temperature conditions). The system can drive its refrigeration unit even during an engine shutdown owing to an increase in the truck's hybrid battery capacity. The new electric-powered refrigeration system achieves about a 65% reduction in pre-cooling time for heavy-duty refrigerator trucks compared to conventional systems due to the hybrid system's enhanced motor output and improved efficiency. (From an article in the Nikkan Jidosha Shimbun on September 27, 2018)

Acquisition

-Denso Corporation (Denso) and Pioneer Corporation announced that Denso will acquire Tohoku Pioneer EG Corporation (Tohoku Pioneer EG), a wholly-owned subsidiary of Tohoku Pioneer Corporation, Pioneer’s wholly-owned subsidiary. Denso will acquire all of the Tohoku Pioneer EG’s shares on December 1, and the transaction will be valued at JPY 10.9 billion. Tohoku Pioneer is a system integrator that has a track record of supplying factory automation (FA) systems for various industries. Denso regards FA as a growth area, and aims to offer FA system solutions by utilizing its know-how. (From an article in the Nikkan Jidosha Shimbun on September 11, 2018)

-The Company announced it has now fully integrated its consolidated subsidiary ASMO companies in the U.S. into its North American operations. Denso Manufacturing North Carolina (DMNC), formerly known as ASMO North Carolina, Inc., will become a more integral part of Denso's North America Motors Business group. DMNC's main facility is in Statesville, North Carolina, with additional locations in Greenville, North Carolina; Battle Creek, Michigan; and Ennis, Texas. The integration of Denso's and DMNC's motor businesses promotes collaboration amongst both companies to accelerate the development of advanced technologies and product innovation. With approximately 1,500 employees, DMNC produces blower motors, power seat motors, windshield wiper systems, power window motors, electric power steering motors and pinch sensor assemblies. (From a press release on April 1, 2019)

Joint Ventures

<China>
-Denso will establish a joint venture with Wuhan Kotei Informatics Co., Ltd. (Kotei), a Wuhan-based software developer, in December to strengthen the development of next-generation digital meters in China. The joint venture will design and develop software for automotive digital meters and consider the possibility of manufacturing digital meters in China in the future. In China, consumers tend to prefer digital meters to analog meters. The new company "Denso Kotei Automotive Electronics Co., Ltd." will be capitalized at CNY 100 million (JPY 1.65 billion) and owned 51% by Denso and 49% by Kotei. It will be established in Wuhan City in December. (From an article in the Nikkan Jidosha Shimbun on September 29, 2018)

<Japan>
-Denso and NRI SecureTechnologies, Ltd. (NRI Secure) will jointly establish a new cybersecurity company, NDIAS, Ltd., in December to diagnose the security risks of in-vehicle electronic products. The new company will be equally owned by Denso and NRI Secure. The new joint venture will primarily undertake security diagnosis operations to protect automated driving and connected vehicles against external hacking threats. NDIAS will be established in Tokyo with a capitalization of JPY 100 million. It will start with 10 employees mostly made up of white hat hackers (experts at protecting systems against hacking). After sales begin to take off, the new company will increase staff to 20. (From an article in the Nikkan Jidosha Shimbun on September 29, 2018)

New Company

-The Company announced that Denso Sales Japan Corporation, a subsidiary of Denso Corporation; Denso Ten Sales Limited and Denso Ten Service Limited, subsidiaries of Denso Ten Limited, will merge to form a new company called Denso Solution Japan Corporation on April 1, 2019. The integrated company will expand Denso’s aftermarket business through increased cooperation between Denso and Denso Ten to provide new products and services for car safety and security, connected driving, and other applications, which are expected to be in greater demand, and thereby better serve their global customer base. (From a press release on January 7, 2019)

<Korea>
-Denso will integrate the operations of three of its South Korean group companies in charge of production, development, and sales of automotive parts on July 2. The three companies are: Denso Korea Electronics Corporation and Denso Korea Automotive Corporation, which produced instrument clusters and engine-related products, and Denso International Korea Corporation, which handles sales and development. The combined companies will operate as Denso Korea Corporation with 2,198 employees. The new company will be headquartered in Changwon City and capitalized at approximately JPY 900 million. Manufacturing plants of each company will remain operational. (From an article in the Nikkan Jidosha Shimbun on June 29, 2018)

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

-The Japan segment accounts for about 88% of the total R&D expenditure for the FY ended March 2019, meaning it is the center of the Company's R&D operations.

Major R&D locations in Japan

-The Company announced it will establish a new facility at Haneda Airport in Tokyo to develop and test automated driving technologies. The facility is expected to be complete by June 2020, and will have approximately 200 employees when it opens. In April 2018, Denso established its Global R&D Tokyo facility, an automated driving R&D office near Shinagawa Station in Tokyo. The newly announced facility will include a building to develop prototypes and maintain test vehicles, and also a proving ground to conduct live, in-vehicle tests. This will enable Denso to take an integrated approach to the development of automated driving in Tokyo because the new facility at Haneda Airport can develop and test prototypes based on automated driving technology planned, researched and developed by Global R&D Tokyo in Shinagawa. (From a press release on October 31, 2018)

Product Development

ECU for digital side-view monitors
-Denso has developed an electronic control unit (ECU) for digital side-view monitors that improves visibility for the driver and contributes to improved vehicle safety. Digital side-view monitor technology is expected to offer improvements in vehicle safety, such as an enlarged field of vision and enhanced visibility in bad weather conditions compared to traditional optical mirrors. DENSO has been focused on the development of technologies to recognize the driving environment surrounding vehicles using cameras and radar sensors. By taking advantage of the image processing technology that it has accumulated during the course of its development process, the company has developed the world's first digital side-view monitor ECU. (From an article in the Nikkan Jidosha Shimbun on October 27, 2018)

-In the fiscal year ended March 2019, the Company's capital expenditure mainly focused on increasing production, development of next-generation models, switching to new products, and R&D to develop new products.

-In the FY ending March 2020, the Company will make capital investments to increase production, make next-generation models and switch to new products.

Investment in Japan

-Denso Yamagata Corporation announced that it will double the building area of its new plant that is currently under construction, and will newly start the production of automotive electric control units (ECUs). The company will invest about JPY 4.9 billion by 2020 (representing an increase of 5 times from the originally planned figure). It will also double the number of employees to 410 from the current figure by FY 2021. In May, Denso Yamagata announced the construction of a new plant for vehicle proximity notification devices for electrified vehicles, as well as for its current buzzers and directional signals. The plant construction will be completed in March 2019. The company changed its name from Marcon Denso Co., Ltd. to Denso Yamagata Corporation on June 1. It will construct an additional building for the addition of automotive ECU production, and expand the total floor area from the originally planned 5,300 square meters to 10,900 square meters during the first phase of construction, and then to 21,300 square meters in the second phase of construction. (From an article in the Nikkan Jidosha Shimbun on November 9, 2018)

Investment outside Japan

<Thailand>
-Siam DENSO Manufacturing Co., Ltd. (SDM) announced that the company will build an additional plant at Amata City Chonburi in Chonburi province, Thailand, to increase capacity of fuel injection system production of the ASEAN region. By 2020, the company will invest about THB 1.21 billion to build the new plant and expand production. The project is scheduled to begin in April 2019 and will be completed in February 2020. Production will begin in September 2020 in stages. The space will be increased to around 23,900 square meters. (From a press release on November 27, 2018)

<US>
-Denso Air Systems Michigan (ASMI) announced that it will expand its presence in Hopkinsville, Kentucky by investing more than USD 3.5 million. Denso Air Systems will double the size of the Hopkinsville facility with a 48,000-square-foot addition and purchase new equipment to meet rising customer demand. The expansion will boost production of aluminum HVAC pipes, tubes and hose assemblies for the automotive industry. The Hopkinsville facility was established in 2011. Denso Air Systems currently employs 308 people at plants in Michigan and Kentucky. (From Kentucky Cabinet for Economic Development release on June 28, 2018)