Furukawa Electric Co., Ltd. Business Report FY ended Mar. 2016

Financial Overview

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 Rate of Change
Sales 874,879 867,817 0.8 -
Operating income 27,116 17,873 51.7 -
Ordinary income 18,710 18,598 0.6 -
Current net income 10,007 7,355 36.1 -
Electronics and Automotive Systems
Sales 321,930 299,667 7.4 -Heavy demand for heatsinks, which are parts for heat-dissipating products
-Robust sales of lead-storage batteries for hybrid and start/stop system vehicles at Furukawa Battery, a subsidiary.
Operating income 12,923 12,923 0.0 -Due to the weak yen, the automotive harness business suffered from higher import expenses for products manufactured at plants overseas and higher costs due to production issues that rose because of launching too many products at once to meet new orders.
Sales 117,557 130,254 (9.7) -
Operating income (1,118) (4,944) - -

Recent Development in Japan

Flat wire for automotive small motors
-The Company will enhance promotions of its flat wire (ribbon wire) for use in automotive small motors. The flat wire can contribute to downsizing and enhanced performance of motors and the Company will propose the products for the high-value parts market, which prioritizes functionality of parts. The Company intends to propose its flat wire for ultra small motors used in power windows and windshield wipers as well as for transformers in High Intensity discharge (HID) lamps. The flat wire is magnet wire that has an almost flat shape. The flat wire has a surface areal percentage higher than that of round wire. The wire can improve conductivity, though its production costs increase. Thus, flat wire is widely used in transformers in HID units that require highly efficient voltage conversion. (From an article in the Nikkan Jidosha Shimbun on January 22, 2015)

Strengthen metal plating business
-The Company will separate its precious metal plating business which is currently under its departments of copper strip and high-performance materials to its subsidiary, Furukawa Precision Engineering Co., Ltd. (FHE) (headquartered in Nikko City, Tochigi Prefecture). The Company's board meeting approved the resolution on June 4, 2015. The Company will unify two companies' similar businesses to strengthen their management foundation and to respond to needs in the automotive market quickly. Technologies of both companies will be combined, and the variety of precious metal plating products will be increased. The Company currently produces the precious metal plating products at the plant of Copper Foil Division in Nikko City, Tochigi Prefecture. This plating business will be merged into FHE, effective on October 1, 2015. The companies will address increasing demand for high-performance plating in and outside Japan by leveraging the synergy effect that will arise from the business consolidation. To respond to the increasing need for local procurement from overseas customers, the Company will also utilize assets of its subsidiary in Thailand, Furukawa Precision (Thailand) Co., Ltd. (in Ayutthaya Province) that has been operating in the same field. (From an article in the Nikkan Jidosha Shimbun on June 6, 2015)

-The Company and its group companies will strengthen its plating business for the automotive products. It's subsidiary, Kanzacc Co., Ltd., in Kita-ku, Osaka-shi, has developed a new specialized silver-plated film for automotive connectors. The subsidiary will start mass-producing the film in the latter half of the fiscal year ending in March 2016 (FY 2015). The Group plans to raise the sales ratio of automotive products in its plating business to 50% by the fiscal year ending in March 2019 (FY 2018) from 10% in FY 2014. The Company intends to expand its sales of plated products while improving their quality and increase sales of the group companies' other automotive products such as copper strips and automotive connectors. (From an article in the Nikkan Jidosha Shimbun on April 18, 2015)

Enhance copper strip for automotive products
-The Company will raise the sales ratio of copper strip for automotive products to 60 percent by the fiscal year ending in March 2019 (FY2018) from 40% at present. The Company has decided to enhance its automotive business to continue business growth, expecting higher demand growth for automotive products globally, than that for electronic equipment including smartphones. The Company will expand its scope of automotive businesses with mass-produced parts such as connecter materials for in-vehicle devices by pursuing cost reduction. It will also promote sales of value-added products with improved heat dissipation properties, conductivity and strength. The Company intends to establish an automotive supply chain by strengthening linkage with its group companies that have close connection with many tier-2 and tier-3 suppliers. (From an article in the Nikkan Jidosha Shimbun on April 10, 2015)


Anticorrosion connector terminals
-The Company announced that Furukawa Automotive Systems Inc., its subsidiary, has developed new anticorrosion connector terminals for aluminum wire harnesses. The new terminals called the α series are already used in the new Toyota Land Cruiser 200, which was released in August 2015. This connecting technology with an airtight structure can be used widely and offer high productivity. Use of aluminum wire harnesses will help automakers reduce vehicle weight at low cost. The Company will promote aluminum wire harnesses with the new terminals for future models, including those that are currently being developed. (From an article in the Nikkan Jidosha Shimbun on October 1, 2015)

Recent Development outside Japan

-The Group will increase its capacity to produce high-performance, small-diameter, round enamel wires in Taiwan to meet the growing demand for these products in China. Production capacity will be expanded at Jung Shing Wire Co., Ltd., which is partly owned by Furukawa Magnet Wire Co., Ltd., a subsidiary of Furukawa Electric. (From an article in the Nikkan Jidosha Shimbun on August 26, 2015)

-The Company will launch its group's fourth wire harness plant in Mexico, where vehicle production is increasing. The fourth plant is a rented facility in Guanajuato, and will be the second plant operated by Furukawa Automotive Systems Mexico S.A. DE C.V. (FASM), a subsidiary of Furukawa Electric. Mass production is slated to begin at the new plant this fall. Although Furukawa Electric has not revealed its Mexican facilities' production capacities, the new rental plant has a floor area of 9,000 square meters, similar to that of the FASM plant that is currently in operation. The new plant will hire 1,200 people, whereas FASM's existing plant employs 1,300. Through raising its number of plants from three to four, Furukawa Electric's production capacity in Mexico is expected to rise by several tens of percent. The new plant will supply wire harnesses to Japanese OEMs like Toyota Motor Corporation, Honda Motor Co., Ltd., Nissan Motor Co., Ltd., and Mazda Motor Corporation, which are building new plants and expanding existing facilities primarily in Mexico. (From an article in the Nikkan Jidosha Shimbun on July 21, 2016)

-The Company said it had reached a settlement in a collective civil suit related to the trading of wire harnesses and related products for automobiles in the U.S. The Company will pay a settlement of USD 56 million (approximately JPY 5.7 billion) in total to the plaintiffs, which include automotive dealers and car buyers. The case will officially be settled with the approval of the U.S. District Court for the Eastern District of Michigan. (From an article in the Nikkan Jidosha Shimbun on August 18, 2016)

R&D Activities

-The 2015 mid-term plan at the R&D center is to grow higher profits by "further advancing the greening of automobiles", "further streamlining power infrastructure" and "raising capacity of communications infrastructure". Under the policy of “further advancing the greening of automobiles”, the Company is developing automotive foam by applying technology on aluminum and polymers so as to meet the demand for lighter weight harnesses. Also, it developed battery state sensors that respond to the need to precisely know the amount of charge left in batteries.

Wire-harnesses using aluminum electric wiring
-The Company is developing stronger aluminum wiring, as well as related technology on anticorrosive terminals, so as to further expand their scope of use in meeting demands for reducing vehicle weight.

Automotive battery sensors
-The Company is working on developing, as well as making product presentations and expanding sales, of high-performance automotive battery sensors that properly manage battery power and make more efficient use of automotive energy. On-board electronic devices and electrification are expected to increase even more in the future, so the Company is developing products for battery management systems that maintain the quality of electric power sources.

Measurement technology supporting ADAS
-The Company is developing a 24GHz peripheral monitoring radar, which can accurately detect obstacles such as pedestrians and complex objects, based on a pulse system, as new measurement technology supporting the Advanced Driving Assistant System (ADAS).

Heat pipe technology
-The Company is developing lithium ion batteries and heat radiation products such as inverters, which are needed to respond to the need for greater heat radiation, for next-generation hybrid electric vehicles (HEVs). These types of products are heat-management systems using heat-pipe technology to maintain stable heat and deal with heat dissipation.

-The Company is developing strong aluminum wiring for next-generation automotive harnesses, making product presentations and preparing for commercialization.

-The Company is developing wire and joining/fastening materials for electronics using copper nano particles, getting evaluations from customers about samples.

-The Company is creating copper foil design indices to meet the special demands by customers for electrolytic copper foil for lithium ion batteries, carrying out designing activities based on using the indices.

Product Development

Radar system for ADAS
-The Company is developing a surrounding surveillance radar system for advanced driver assistance systems (ADAS), and is already on track to put the technology into practical use. It is now in the stage of developing software for the system, aiming to start mass production within the next few years.
The Company's new system uses the Pulse Doppler Method that generates pulse waves from each object, which enables the collection of detailed vehicle surrounding information in real time. Specifically, the system can accurately measure the relative velocities, distances, and angles (based on the moving direction) of objects like other vehicles, obstacles, and pedestrians in vicinity of within 1 meter to those located 100 meters from the vehicle. The sensor module is a lightweight and palm-sized unit, small enough to be installed in a narrow space like the inside of the bumper. The sensor unit offers accurate detection even under bad weather conditions, and can be also applied to autonomous vehicles. The Company is currently performing an algorithm analysis jointly with a European company, aiming to develop a sophisticated arithmetic processing program that assumes complex road conditions like a number of obstacles approaching or moving away at the same time. Because the radar system for ADAS needs to be linked with a camera image analysis system, the Company will consider collaboration with other in-vehicle equipment manufacturers. (From an article in the Nikkan Jidosha Shimbun on August 4, 2016)

MCPET reflective sheet
-The Company will work to expand the use of its microcellular foamed sheet of polyethylene terephthalate (MCPET) in automobiles. Currently, the Company produces and sells the MCPET reflective sheet mainly for building lighting. The MCPET prevents illuminance irregularity of LEDs and can be used for automotive interior illuminations and instrument panels. It is expected to help automakers and lighting manufacturers develop and produce smaller lighting units with fewer LEDs. The Company will stress these advantages, aiming to receive new orders for applications in vehicle models that will be released a few years from now. Monthly sales of the MCPET are expected to reach JPY 100 million to JPY 200 million by FY 2020. The reflective sheet creates high diffusion reflectivity to eliminate the brightness irregularities of LED lighting. The adoption of MCPET increases the average illuminance by 60%, which will ensure the same level of brightness with one-third fewer LEDs. (From an article in the Nikkan Jidosha Shimbun on July 27, 2016)

Water-cooling heat pipe
-The Company has developed a new water-cooling heat pipe suitable for heat sinks and heat -dissipating devices for use in inverters and lithium-ion batteries on electric vehicles (EVs). A conventional heat pipe transports a heating medium through a grooved wick. The coolant, however, gets stuck at the lower part of the heat pipe when the vehicle drives on a steep uphill road. As a result, the heat pipe cannot fully deliver cooling performance (known as the top heat mode). Under the circumstances, the Company developed a spongy wick in which copper powder is sintered. With increased capillary force, the new water-cooling heat pipe successfully transports a heating medium regardless of gravity. The newly-developed heat pipe can maintain cooling performance without applying pressure with a pump even on an uphill road. The Company will promote the new product for use in EVs and hybrid vehicles. (From an article in the Nikkan Jidosha Shimbun on June 2, 2015)

High-performance copper alloy strip
-The Company has developed the EFTEC-550 high-performance copper alloy strip that has superior electrical conductivity and heat resistance. The Company will initially start mass production for electronics devices and aims to apply the new copper alloy strip to automotive products in the next two or three years. The new product will be proposed to automakers and in-vehicle equipment manufacturers as optimal materials to improve the reliability of terminals, connectors, and relay components for use in electric vehicles and plug-in hybrid vehicles. (From an article in the Nikkan Jidosha Shimbun on October 7, 2015)

Next-generation flywheel power storage system
-The Company announced that a test facility of the world's largest next-generation flywheel power storage system has been completed. Furukawa Electric is one of the companies joining a project, "Safe and Low Cost Large Scale Power Storage System Technology Development" supported by the New Energy and Industrial Technology Development Organization (NEDO), and the power storage system was built under this project. The project aims at stabilizing power supply utilizing recyclable energy for commercial facilities including automotive parts makers' plants. Grid-connection tests will be conducted until March 2016 at Komekurayama large-scale solar power plant operated by Yamanashi Prefecture.(From an article in the Nikkan Jidosha Shimbun on September 9, 2015)

Carbon nanotube cable
-The Company, on consignment from the New Energy and Industrial Technology Development Organization (NEDO), is participating in the Development of high-performance resin nanocomposites by resin cellulation using multi-walled carbon nanotubes, which is a new energy-reduction initiative making use of innovative technology. It has successfully developed a material made solely of carbo-nanotubes, making a low-resistance electric conductor that has the smallest values in the world.

-The Company and Shinshu University jointly developed a carbon nanotube (CNT) cable with the world's top-level conductivity. This achievement has been selected as a program funded by New Energy and Industrial Technology Development Organization (NEDO). Under the program, researches will be made to put it to practical use for in-vehicle applications. The newly developed cylindrical CNT cable is made of a sheet that consists of hexagon-shaped carbon atoms. It weighs one-fifth of steel, but is 20 times stronger than steel, having an approximately 1,000 times greater current density. The use of the lightweight material with an excellent conductivity will lead to weight reduction and performance improvement of electronic devices. (From an article in the Nikkan Jidosha Shimbun on June 18, 2015)

R&D Expenditure

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Overall 16,845 16,599 17,461
-Electronics and Automotive Systems 4,263 4,292 4,343
-Metals 1,157 896 931
-Light metals - - 1,374

-The Company is planning to spend JPY 57.0 billion in R&D expenses between the fiscal years ending in March 2017 and March 2019. The infrastructure and automotive business will receive 80% of the amount.

R&D Facilities

Facility R&D field Location
Automotive/Electronics R&D center Automotive technology Main center: Hirastsuka City, Kanagawa Pref., Japan; (satellite locations: Nikko City, Tochigi Pref. Japan and Inukami-gun, Shiga Pref., Japan)
Core Technology Integration R&D center Core technology Main center: Yokohama City, Kanagawa Pref., Japan; (satellite locations: Ichihara City, Chiba Pref., Japan; Nikko City, Tochigi Pref., Japan; Hiratsuka City, Kanagawa Pref., Japan)
High-tech R&D Center New materials and technologies Main center: Yokohama City, Kanagawa Pref., Japan; (Satellite locations: Nikko City, Tochigi Pref., Japan; Hiratsuka City, Kanagawa Pref., Japan)
Information communications/energy R&D Center Infrastructure technology Main center: Ichihara City, Chiba Pref., Japan; (Satellite locations: Hiratsuka City, Kanagawa Pref., Japan
Furukawa Electric Institute of Technology Ltd. (FETI) Analysis Hungary
OFS R&D Center Optical fiber U.S.
SuperPower Inc. Superconductivity U.S.

-The Company will strengthen cooperation with its R&D base in Hungary, Furukawa Electric Institute of Technology Ltd. (FETI). Furukawa Electric will increase sharing of technologies in its group to expand its automotive business in the European market that is expected to grow further. The Company will promote personal exchanges with FETI, which has been engaged in research of electrical insulation materials. In the future, the Company intends to enhance connections with its R&D bases in the U.S. and other countries as well. (From an article in the Nikkan Jidosha Shimbun on July 2, 2015)

Capital Expenditure

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Overall 25,687 30,674 37,436

Capital investments in the FY ended in March 2016

-Wiring/Electronics Business: capital investments for automotive products and boosting production capacity of automotive batteries

-Metals Business: capital investment to maintain and renew production facilities

Planned Capital Investment

-The amount planned is JPY 38,000, with JPY 14,000 allocated to the wiring/electronics business mainly to boost production capacity of automotive wiring and electrical products.

-The Company plans to invest JPY 110,000 million for the two years, between the fiscal year ending in March 2017 and the fiscal year ending in March 2019. The Company will allocate 38% of the amount to the wiring/electronics business.

Outlook for FY ending Mar. 31, 2017

(in million JPY)
FY ended Mar. 31, 2017
FY ended Mar. 31, 2016
(Actual Results)
Rate of Change
Sales 860,000 874,879 (1.7)
Operating income 27,500 27,116 1.4
Ordinary income 25,500 18,710 36.3
Current net income 12,500 10,007 24.9

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

  • Automotive products: increase sales of aluminum and functional products
  • Batteries: increase sales of lead-storage batteries for hybrid and stop/start system vehicles
  • Copper foil: launch consignment auto service; further expand operations overseas, especially in Asia; increase sales of pure copper products
  • Coils: increase sales of rectangular and ribbon wire for HEVs

  • Harnesses: aluminum wiring, anticorrosive terminals, high-voltage harnesses
  • Onboard products: steering roll connectors (SRCs), battery state sensors (BSSs), peripheral monitoring radar, interior lighting.
  • Storage batteries: ultra batteries for stop/start system vehicles, lead-storage batteries complying with the EN standard

Mid-term Management Plan

Furukawa G Plan 2015
-Based on the policy of "focus on infrastructure and the automotive market", which was outlined in the Furukawa G Plan 2015 mid-term management plan starting from the fiscal year that ended in March 2014 to the fiscal year that ended in 2016, the Company will advance development of new products at the Electronics and Automotive Systems segment, such as fastenings for automotive aluminum wire harnesses; as well as boost production capacity of automotive rectangular wires for hybrid vehicles, which are experiencing phenomenal growth.

-The Company held a press conference at the company's head office in Tokyo. President Mitsuyoshi Shibata explained the recent status of the group's business and the policy to develop its mid-term business plan for the next three years. Shibata said it is difficult to achieve target sales of JPY 900 billion with operating profit of JPY 38 billion in the FY2013-2015 term, but saw bright prospects for a sustainable growth. Automotive business will be reinforced from fiscal 2016 ending March 2017. Shibata also said that he expects a growth in demand for wire harnesses, its major product, and steering roll connectors (SRCs) associated with tougher vehicle safety regulations outside Japan. (From an article in the Nikkan Jidosha Shimbun on December 25, 2015)

Furukawa G Plan 2020
-The Company is targeting achieving a consolidated operating profit of JPY 40.0 billion yen under the Furukawa G Plan 2020 that it announced in May 2016, which covers the fiscal year that ended in March 2016 up to the fiscal year that will end in March 2021. Under the slogan of "Achieve Never-ending Growth", the Company will carry out three initiatives. Those for the automotive business are provided below.

(1) Strengthening and renewing business operations:
The Company is further stepping up its focus on the infrastructure/automotive market which is forecast to grow. In the automotive sector, the Company is aiming to increase sales of mainly highly functional products such as aluminum wire harnesses and fasteners that reduce vehicle weight; and products for power-source management systems that contain large-capacity, highly durable lead batteries and battery state sensors.

(2) Expanding sales globally:
The Company, in expanding its operations outside Japan, plans to increase the number of automotive-parts production plants in Southeast Asia and South Asia, in order to expand its capacity to deliver products to growing markets.

(3) Develop and launch new businesses:
Over the next five years, the Company will double the amount of its R&D expenses, in order to develop new products in the infrastructure/automotive segment, a major focus of the Company. Expenses paid in the fiscal year that ended in March 2016 will be the benchmark. This is being done to expand business in this segment and to turn new technologies into their own business segments, such as peripheral monitoring systems, which is measurement technology supporting advanced driving assist systems.

-Global shift

  • Establish headquarters companies in China and Thailand (ASEAN Region) that are needed to oversee design and sales to Japanese OEM transplants.
  • Migrate to both regions where markets are growing, to respond to the shrinking Japanese domestic market.

-Expand the use of aluminum

  • Build in-house capabilities to handle all processes involving materials, wiring, and harnesses within the Group. Optimize alloy development and process design under seamless operations within the Group.

-Steering roll control (SRC)

  • Establish headquarters in China and the ASEAN Region to oversee local operations.
  • Establish production plants in India and Brazil, countries where business is foreseen to expand in line with legal regulations.
  • Establish sales companies to expand sales to European OEMs, with which there is plenty of room for growth.

-Battery state sensors (BSS)

  • Establish a 3-region supply network, which consists of locations in North America, China, and the Philippines (for Japan).
  • In 2017, launch the second-generation with larger capacity and ability to assess the progress of deterioration with a high degree of precision.