Nidec Corp Adr

Now it's time for us to start the presentation on NIDEC Corporation's financial results for the first half of fiscal year 2023. First, please make sure to turn off your mobile phone or switch to silent mode. Thank you. Presenting the company's financial results are as follows. mr shigenobu nagamori representative director chairman and chief executive officer mr hiroshi kobe representative director president and chief operating officer Mr. Mitsuya Kishida, Executive Vice President and Executive General Manager of AMEC Business Unit. Mr. Akinobu Samura, Senior Vice President and Chief Financial Officer. Mr. Masahiro Nagayasu, General Manager of Investor Relations and CSR Promotion Department. That is all. In today's presentation, these executives representing NIDA Corporation will provide an outlook and details of the company's financial results for the first half of fiscal 2023. After that, the floor will be open up for questions. This conference is planned to last until 1130. Thank you. Thank you very much for gathering at this conference. despite your busy schedule. I am Kobe, the president of the company. Mr. Samara will present our company's financial performance in detail for the first fiscal year of 2023, and Mr. Nagamori will explain the details of the company's performance. Then the floor will be opened up for questions for us to be able to answer. Now, Mr. Samara, please start your presentation. This is Samara speaking. I would like to give you a brief outline of our performance for that brief period. If you take a look at the slide three, first half net sales stood at the record high of 1.160.7 billion yen. Apprentice profit was increased 21.1%. and operating profit ratio was 10.0 percent. The first of operating before income taxes increased 22.8 percent to 144.4 billion yen, and profit attribute about the owners of the parent increased 22.4 percent to 106.1 billion yen. When it comes to sales and all the operating related ratio, were all record high. And now, here in this time, sales and other operating-related figures were record high as well. But the annual forecast remains unchanged. That is all from me. Now I'd like to give you the details of our financial performance for the first half of this fiscal year. Please take a look at slide four of the document. We have four main business categories. When it comes to small precision motors, compared with Q4 of 2022 fiscal year, we hit the bottom there. And in Q1 and Q2 of this fiscal year, we made a recovery. When it comes to this, particular business segment, we increased our prices and it was delayed. But this process was almost completed by the end of September. On a quarterly basis, we made a profit of 10 billion yen, approximately. That's the type of structure of this small precision motor business. When it comes to the sales, used to be 360 billion yen in total. That's the target we need to go back to. And we are expecting to achieve that goal. There are some new products in this area. We like to grow this business with these new emerging products. When it comes to automotive business, I believe this is one of the most paid attention to areas. We have a business strategy in place. We have changed it. First of all, we have focused on certain countries, in other words, China, We have deeply dependent upon the country so far, but now we have diversed our interest to Japan, the United States, and Europe. We have received many inquiries from these regions and countries. Profit recovery is the most important task that we have. There are quite a few companies that are in deficit in competition with us. The competition over a product's performance is not there yet. We are competing over prices in China. And these competitors are in deficit constantly while competing with us. Such a price-based competition is not something we are used to. It's not necessarily maybe healthy. We have been in a competition. And sometimes some competitors are enjoying 5% profit, others even more or less. We need to recognize the values of other companies with each other. And that's the type of competition we should be in. We launched in June 1 in the past. And at the most, they're at the break-even point. Currently, we have not accepted orders for Gen1 products, even though they do come to us. Basically, we elect a cheap operating profit ratio target of 15, 1.5%. And we elect to compete with other companies to be able to generate at least 15%, 1.5% operating profit ratio I cannot give you any names at this moment, but in Japan there are some OEM manufacturers. We are going to receive orders from an OEM manufacturer in the country. Instead of having many inexpensive products orders, And we have had production capacity. With such a system in place, we won't be able to foresee a much brighter future. Therefore, we decided to decline those offers for inexpensive products. We would like to secure profit first. We would like to be focused on generating profit. Starting next April, we're going to have NEP in Europe to be consolidated into our NIDA Group's performance. I'd like to give you figures in detail later in this conference. In addition, we have Japan, US new customers. Compared with current business partners, we have better unit prices. And we shouldn't generate any more deficit while we try to increase our production. In order to continue to win going forward in a business, when it comes to performance, we are a specialized motor manufacturer. compared with other competitors' performance, product-wise, our products excel them. We're not going to discount our products anymore. Because when it comes to components that we use We're going to use some of the components that are manufactured in China. It is okay, according to our customers, for us to continue to use China-made components, but we need to make some changes for that too. And the local production, local consumption is very important in China. When it comes to Japanese customers, they want us to produce components in Japan. So when the production size is right, we will produce those components for the customers in Japan. When it comes to United States, American customers, we will produce our components products in Mexico. It may not be right now, but in the future, we would like to be able to achieve the operating profit ratio of 15, 1.5%. That's the type of operating profit ratio that we need in order to avoid generating deficit. We like to avoid negotiation for lower prices when it comes to our products. It has been 50 years since I founded this company. It has not been really profitable to be in such a type of price reduction type business. We have never tried to reduce our mortars prices And all those competitors had to withdraw from the business. Because of that, we have been able to achieve profitability. Performance has not been so much of the focus, but the price has been people's focus. In such a market, we tried to reduce our price to the best extent possible. We still needed to make money. If we cannot make money, we shouldn't be in such a business. Unfortunately, we have some customers who have been giving us inquiries, orders, and we have negotiated with our Chinese customers to decide on appropriate level of prices for us to sell our components to our customers. That's the direction we're going into. We are selling Gen 2 and Gen 3 prices. going to reduce the prices of these new emerging products, but we will make sure to secure a healthy profit. We will review all the designs and everything else in our products. The performance will not be declined, but this is a very new market. at this moment it is not wise for us to try to reduce our price components and products prices in the end in all cases we have became we have become the worst leading manufacturers and the details of this area will be explained by our executive vice president in this area when it comes to appliance commercial and industrial products I have purchased Emerson's businesses on three different occasions. We have launched a lot of reforms when it comes to people and others, and top executives are there. We have new business units called ASIM and Moen. Both of these business units are... under my operation over the past 10 years or so, and they all know, do understand index policy. And they have launched many new products, and they are enjoying a very good profitability. They are making sure to achieve at least 15%, 1.5% of their management is very stable. And their profitability in Q1 and Q2, there are some seasonalities. Still, their profitability is going toward 15%, 15%. When it comes to slide 24, this is very important for our future profitability. When it comes to large industrial motors here, This is part of the infrastructure business in the United States and other places. And many parts of the infrastructure is being replaced with new ones for the next 10 to 15 years. And these were originally built in 50 years, and now it's time for replacement. On the other hand, we have some strict issues, serious issues such as CO2 emissions. motor's efficiency is in question. And in slide 24, you can see the market 2.5 trillion yen, and that's the size of the market. There's induction motors and others included in this market. Over the past years, I have researched in this area. This is one of the best areas that we are truly best at. We have brushless motors, and we have induction motors. Those high-efficiency motors are here, and they are now brushless already. Now, finally, my ideal is coming to reality. High-performance motors. Now, they are here. It has taken a long time, but they are here. And Shinra is the brand that we have for this product. But two years ago or so, this was introduced into the market. In the United States, technological innovation is already taking place, has received three major technological innovation awards in the United States already. And you can see the performance related differences between conventional motors and this one. And this is 40% smaller than the conventional ones, as you can see, among other features. This area, has had only 3% per year when it comes to profit. Now it's now up to 18%, 8% when it comes to 20% in a small circle here.

And you will see the market environment here. Nidec has number four in market share up until now. Now with Sinra Motors being launched, I think, We have been able to take away shares from our competitors all at once. And in FY 30, the market size is expected to grow to about 5 trillion yen. And we believe that we will be able to take more than half of that market share. So you know, the 18% today will increase to about 19% in margin. So the profitability of appliance and commercial industrial segment is increasing and becoming stable. And we're looking at this on a long-term basis as well. The induction motor market, as for the, you know, they still have a very large size motors. The Tesla market, new motor is using induction motor and this is the conventional induction motor so they're not using a very highly efficient motor but with the technological innovation I think we will be able to capture number one, overwhelming number one market share in the world, and I think our profitability will exceed 20%. And it's already implemented in the market. So that is why with products that are actually monopolizing some of the markets in the United States, we are able to see further growth in this business segment for appliance, commercial, and industrial, and we will also enhance on profitability. The motor industry, like I said, For example, in the infrastructure segment, they use a lot of large motors, but there's a lot of energy, electricity consumption here, and with this size, there's so much difference, and the market for induction motor in the world will change quite significantly. So for airlines and commercial, especially for industrial, I think the profitability structure will change quite significantly for the industrial segment. So induction motor used to be cheap and because it's easy to build and they thought it was good, but because efficiency is so bad, and so in terms of CO2, It's not compatible. So that is why the specification is changing. So there's really no choice. They are no longer able to enter the market unless you have that IEE specification standard. And we are actually meeting all the way up to number fifth IEE. So the situation is changing. quite significantly. And it's not just increased sales, but also better profitability. And this is a very large change that we're seeing in the motor segment. And also, this area, we're implementing new products like, for example, the flying cars from 2026, we're expecting to launch this. And we have already placed the order for the first manufacturer. This is at 150 million. I think this will come down to about 2 million in the future. And also, in terms of investment in this area, in India, there's a very large plant. So I think there's a lot of conversation. To have a conversation in one particular country or region will pose a lot of risk in the future. So often, you know, if you're considered to be a company with a great dependency on a particular country, then that's actually problematic. So we are looking at, you know, Vietnam. So the mainstay will be in India and also the United States, Mexico. So there will be large investments in those regions, countries. That's the direction. So in the world, we want to spread out our production bases And we're also seeing customers that want to have manufacturing bases in certain areas. So the idle plants we're utilizing in Japan because customers want to have it built in Japan. There's a request from customers asking for collaboration. So there are about three plants which we are actually trying to resume in Japan. So we can see a lot of different types of risks in the future. the company needs to make sure that we're able to deal with these risks. So whether it be the manufacturing basis or whether it be the sales basis, we need to make sure we scrutinize so that we can mitigate risks in terms of manufacturing and sales. So this would be different from the way we have done in the past. And next is machinery. Now, this is affected by global trend, but we actually advancing to machinery tool. This most recent case would be Takisawa. We have actually did a tender offer to this company, and we're almost done with this. But most of the large machinery tools have already been included in our lineup, including lathe. And there's a little bit that we're still missing in our lineup, but we will try to add on to that with that. And then we have a company called OKK. This used to be a company that was booking large losses. But I think Mitsubishi, we have acquired this company and we have been able to make a lot of profit, like 18%, same with Takisawa as well. So we think that we can rebuild this company in the short term and generate large profit. And as for press machines, We have been doing it from before, but we're beginning to see increased demand, especially EV motors are very large and therefore uses a lot of press machines. So this is in the machinery automation business unit. So we're looking at press machines and also reducers, gears. And the robot business performance isn't doing so well right now, so it's not as good. But the lines before and after the press process, we have acquired it with M&A. So we have been able to enjoy great competitiveness So I would say the greatest challenge we face today is even for Otto, the traction motor So other motor businesses, aside from traction motor, is also doing well. It's starting to recover. So brake motors, power steering, they're also performing quite nicely. We're beginning to see nice profits generated. And also traction motor, this is about running. We need to make sure that strategy doesn't go wrong here. And of course, in my past, my track record, I have never backed out of anything like this, especially at a degree like this. Whenever I started, I want to make sure I finish it strong. So, of course, you know, we have to adapt to the market, and there's a way we need to compete according to what the market, the environment is at that point in time. But if we do that, we can be strong. So, for Otto, I want to say at the outset that this year, as for traction motor, we are expecting to lose about 15 billion on an annual basis. We already generated that amount. on an overall basis. So 15 billion by the end of this fiscal year in March, we will develop different types of models. So we are looking at a loss of about 15 billion. We are estimating that, but with that, It doesn't mean that overall AMIC business will be loss-making. That's not the level, because we have the brake motors and other types of motors from conventional business, which is generating profits. So I think we should be able to offset that loss of 15 billion. And also another major change next year is that, you know, this year we were expecting to be profitable in traction motors, but unfortunately we're looking at a conservative loss of 15 billion. But next fiscal year, NPE will be consolidated. So my vice president will explain a little bit more about what would happen to this. So my name is Kishida, and I'm responsible for the automotive products business. So if you could go back to page 18. As we had explained earlier, at this point in time, with regards to the China business, we're seeing a rapid price destruction. And so we are intentionally trying to restrict orders so that we can be more profitable, especially our joint venture partner like NPE and Huanzhou. We want to make sure that we will accelerate our orders from our partners. That's our policy. And if you look at the current number today, you know, how solid are they? So as of today, the firm orders, we have revised it to the firm order numbers. And going forward, we will do the same. We will be very severe with our forecasting, and we will engage in order-taking from that. In 2025, That's the timing which the market would explode. We still have time for that. So how are we going to really finalize our strategy for that? I think that's really critical. So from 2024, NPE's number will be added to our consolidation. So we're looking at And then this will go to 2 million, 4 million. And our target is to achieve 10 million. So there's no change with our target. But we want to make sure that we're profitable in the China business and accelerate order taking in Europe and as for Japan. We want to make sure that we're able to increase business in Japan as well. So that's our target for 24-25. So if you could turn to page 19. So on a monetary basis, this is how it looks when it's translated. So from 2023 to 2025, as for traction business, we're looking at flat.

After 2024 fiscal year, NPA will be consolidated into a group of 24 million, and we are going to achieve 500 million currently. 387.2 billion yen is in our target. And we're going to do our sending our models into these vehicles. And we would like to expand our sales based on the sales of these models into these vehicles. And there are some reasons that this where this forecast is coming true. But when it comes to China, where price competition is extremely tough, What we need to do is we need to focus on production productivity, work productivity. In 2024 and onward, we're going to have a new joint venture with a new partner. Supply of components to Europe is something we're going to launch as well. That's part of this green section, part of the green sections on the slide. And external sales of the components, and that's another chance in business we would like to make come true. This battle has just begun. We are at just a starting point of this battle. That's one thing that I'd like to reiterate here. and we have investment in research and development. Please go back to slide 17, Generation 3 or Gen 3. We have Gen 1 and Gen 2 in place. We are doing our business with these models, Gen 1 and Gen 2. It's about 70% and 30% respectively in our business, automotive business. Towards June next year, we elect to launch Gen 3 in the market. This is not really our random target of entry into business. This is an automotive manufacturing plant with GSC, our partner. Here you can see the XE1 model. 7 in 1 is what we are going to start our business with. 7 includes these three major components, inverter, motor, and gear. We have IPS included in it. And here the PTC heater is also included in it. We have these are all heat source related components. These will be part of our inverter. That's how it's called, seven in one. ECU will be included in it. This is how we like to slash our cost as much as possible. As has been explained by Mr. Nagamori, we will produce and complete all the business in China, in China, for China, in China, so to speak. This is a very important point. 35% of materials are for inverters. We need to reduce the cost for that. When it comes to our customers, they are requesting us to use semiconductors produced in China for their products. We have found partners for that so that we can develop inverters in China. so that we can produce Gen3 products in China with these inverters on. That's part of our additional research and development investment for this fiscal year. That's part of our profit and loss statement. That's one thing that I wanted to add. That is all from me. Thank you. I would like to open the floor for questions, if that's okay. Thank you very much. Now I would like to open the floor for questions and answers. If you have any questions, please make sure to raise your hand, and we will hand over the microphone to you. Does anyone have any questions on the floor? This is Takayama Magoldima-Sacks. Thank you. My question is regarding China's EXO. The strategy has been changed, I believe. When it comes to Gen 3, with the Chinese market going to remain unchanged, are you going to continue to have a price competition? Do you have any risks for any changes? Do you have any ultimate form that you have in mind when it comes to these products that are used in China? What is the ultimate form going to be for these products? I'd like to ask this question to Mr. Nagamori and others on stage. When it comes to the traction motor strategy that we have as a company, if we take a look back, We have made some mistakes. I'm not going to say anything about the people who are no longer with us. But back then, one of them wanted to take everything in his power to make a decision on the automotive business of NIDIC. And delegating the responsibility was my mistake. When it comes to motors, our company is the world's leading motor manufacturer. We have purchased new companies. Inverter is the critical component. We have made a major mistake in the inverter strategy. We have components from China. We have components from Europe. We wanted to use those products in these regions in our country. We were performance focused. If you disassemble these components at 25% profitability for motor gear, 15% inverter, 25 to 30% in deficit, that's the inverter. So it is clear that where we had a mistake in our strategy. It is not right to purchase other components to assemble these components into one inverter and that's not really meaningful. I'm talking about the Chinese market here. For Chinese customers, we should use all the China-made components. 2,000 renminbi can be reduced to a lower price, like 1,200 renminbi. That's how much you can reduce the price in China by using China-made components. And we were given permission to use China-made components for Chinese customers. There are some quality issues, but even if they happen, that's not going to be a problem for a motor. Those are the problems with inverters, not with motors. We have a very good inverter manufacturer that is very reliable. And we decided to outsource the production of this inverter production. And their products are very inexpensive. We need to be competitive. We need to use competitive components in China. That's how, by switching the strategies like that, we can increase our profitability. inverter has a loss of 25% to 30%. In RMB, the price was 2,000 RMB, but additional costs are associated with such a problem. So far, when it comes to inverter business, we are yet to be capable enough to be able to produce inverters on our own. We cannot rely on our service to make everything, including all the inverter components and the inverter itself. When it comes to Japanese customers and European customers, the situation is different. They are purchasing our products at a higher price than they do in China. When it comes to MPE, next fiscal year, sales are expected to be 250 billion yen, including currency exchange rate changes. NPE does not say it is okay for us to use China-made components for investors. We can expect a 5% to 80% operating profit ratio from the beginning when it comes to NPE joint venture. That's the goal, the threshold that has been set between us and NPE. The price reduction aggressiveness doesn't exist in our European customers. They are willing to pay the price despite some problems that we face. Same thing can be said about Japanese customers. People understand what products are suitable for them and what products are not suitable for them. So when it comes to performance, some customers were used to make these products on their own. But they are now attracted to use our products because our products seem to be of better quality than theirs. It is not wise to do a loss-making business. Performance has to be considered in a right way. And price has to be set properly based on the performance. That's the type of customers that we are looking for. Still, the Chinese market is expected to grow even larger than it is now. There are quite a few Chinese companies there in China. Some of these companies are withdrawing from their market. numbers are rapidly increasing we need to be very selective in choosing our customers so that we can increase our overall profitability for a certain period i believe it is okay for to be in a deficit but a long-term deficit is not really a business that should be involved in that's not part of our nidec policy at least we have many customers in 2025 or so. 2025 will be a critical point in my opinion. And then there is some customers are coming to us because their production was not really right when it comes to 2025 as the critical turning point. The first step is to secure a very healthy profitability. When it comes to power storing unit and brake motors, we have been in this business over the past 20 years. And among the manufacturers that are supplying these components, there are quite a few companies that have to recall their products from the market due to some problems. But that's not the case with us. That has never happened to us at Nidec. We are reliable, and our customers are not aggressive in a price reduction on us when it comes to these customers. And we clearly state that we cannot do business with certain customers at a certain price range if that range is not acceptable to us. We are making products that make the car turn, stop, and run. Traction motors. is the unit that makes the car. It's for the car to be able to make very good turns. Generating a deficit constantly is not really good at all. Sometimes you have an increase in production productivity or volume over the past three months or so. We need to secure profit so that we can, it is not really my concern about receiving or being subject to criticism in investors' conference like this one. We need to secure profit. I'm not really answering your question at all, I believe, but that's what I wanna say here, your response to your question. When it comes to Stellantis that you have referred to, it says 8%. This number here on the slide doesn't cover that much. What is the secured amount of money with profit and sales for Stellantis? And these are all in yen, Japanese yen, 120, 130 per euro. Euro is currently 150 per yen. That's the difference in the currency exchange rate. Can you answer the question, Mr. Nagayasu? This is Kishida speaking. I'd like to answer your question. 130 yen per euro. Please make sure to use the right currency. I'm talking about in terms of euro. So 7% to 8% can be secured. Yes, that's right.

Another last question. In FY25, you said $4 trillion, organic $3 trillion. So with the conversion of the China strategy, you know, you're thinking if not here, maybe somewhere else. So you have it all built up, but whether it be ASIM or machinery tool, but... Can you tell me a bigger picture on how to drive to that number? Which would compose what? Well, so we have ACM, large motors. So this will become a very big pillar for us going forward. I talked about the sales size. It's written here, but it's a very large market already. you know, infrastructure, you know, it takes like, you know, 20, 30 years to change. So I know that we can expect large sales and also As you can see from the market size, we have the 10% market share. And if this increases to 55%, then the profitability also. Even if it's conservatively looking, 20% in a profit margin, that's still a very large amount. But having said that, there's not that many companies that do large motors. So we will leverage M&A. And this will become a very large and stable business for us, which we want to continue to grow. And application is wide-ranged. So up until now, they said, you know, because it was bad efficiency, maybe there's thermal issues. And so they had all these problems. But if you have something with a great performance, then we will have expanded application. And, you know, this is a small market today, but it's not a small market. It's actually, you know, trillions of yen in the market size. And it has taken us decades to develop this. But we will have a new brand name, Simra. That's the brand name. And we will market this around the world. And I know that this will sell well in Japan as well. Thank you. We would like to take other questions. So the gentleman from the second row in the front. Uchino from Mitsubishi Morgan Stanley Securities. Kishida-san, I want to ask this question to you. With regards to automotive, you talked about specific strategy on Gen 3, now focusing on customers, and you talked about 7 in 1. So next fiscal year, What are you planning to introduce from June? Is it substantially, like, mostly 7-in-1, or would it be concentrated on high-end cars? Could you be a little bit more, give us more color? And also, you talked about $15 billion in losses. Is this, you know, $15 billion in just all our R&D, anything else in there? Well, then, let me answer that question. So, first of all, In June 2024, that's our target. At the beginning, it will be 135 kilowatts. That will be the first jump. It used to be 100 kilowatts, but actually we're seeing better performance, so we're aiming for 135 kilowatts for luxury cars, so high-end cars. That's our plan. And after that, within GAG, Guangzhou Automotive Group, we have received a lot of inquiry. So we will start with Guangzhou Automobile Group, and we will produce at the joint venture basis, and we will supply them. So that's where we want to start with. So we will begin with 135 kilowatt, but we have 70 kilowatt as well. At this point in time, from GAZ, we have received formal orders from them. Aside from this, at GAZ, they have an ICE engine group company, and they are building hybrids. So as a hybrid motor, They're inquiring us about motors. And within their affiliate, there are domestic companies as well. So we're starting dialogue with them as well. So we should be able to disclose them when the appropriate timing comes, and we will do so. And the second point about the 15 billion this year, this is a very large downward revision. And we do feel the responsibility for that. However, we talked about, you know, how there's this rapid price decline. And as Mr. Nagamori said, the moment we think this is a price decline of destruction, then we will be defeated in this competition. So even if there's a price decline, There's not much history of that being recovered. So the price was, you know, declining. There's, you know, every generation we have with the development of these new generations, we will need to accommodate this declining prices. That's the environment we need to compete in. So Gen 3 will be able to accommodate that decline in prices. And that is why we're adding on this R&D cost in order to accommodate that. And last year, we had $30 billion in losses. This year, even on our own, we are generating about one billion in losses. And we are adding on R&D cost. So that is why we will be booking 15 billion in losses for this fiscal year. So this is organic plus R&D in 10 billion or so. So this is a natural cost increase. Is this because of inverter in China development? Is that very big? Inverter, yes. And other than that, we're trying to accelerate some of the developments as well. What we call it as inverters, it's not just a control type, but also because, you know, we're implementing 7-in-1, we have this new IPS. This is a new type of control circuit. for past sources, so we are also looking for partners and we want to be trying to accelerate that process so we can complete this by this fiscal year. Needed mobility, which Omran has talked about. We are specializing in converters. They are specializing in converters and we want to collaborate with them, and we want to do joint research as one NIDIC. And in terms of inverter, one of the challenges is that there's a lot of electronic components that we will be using. and being able to deal with the pricing, price issues. You have to be able to have a certain level of volume, otherwise you will not be able to keep the cost or the price down. So going scale is important. And so, for example, there's a power source manufacturer in China, and they use a lot of components. So maybe we can outsource it to them. that would be price-wise maybe decreasing 30, 40 percent or so. So as long as we're not booking losses with inverter, then we're able to make profits from motors and gears. So we need to also polish up on our inverter technology in the meantime. But if you look at the companies in the West and if you look at the semiconductors and manufacturers in Japan, to be honest, I mean, they can't really lower the prices. That just doesn't become cheap. So in order to compete against this price competition, we have to buy it from someone who actually produces at the cheapest price. so you know whatever we can we will do so but with regards just chips you know you can't immediately produce this in-house so up until now we have tried to produce everything in-house but in order to go to producing chips at this situation the investment about is quite large so we may need to leverage the power of the third party. It's completely different. You know, we say, you know, there are manufacturers, and we say 2,000, they say 1,200. So that is why, you know, what happens is that we all end up with components from China. So, you know, and Chinese companies do purchase it from us. But with regards to the Japanese companies and the European companies, maybe they think it's a little too early in stage. So we have to separate it by customers. Also, FROM ONE DEVELOPMENT, IF YOU NEED TO MAKE A DRASTIC CHANGE, I BASICALLY TELL THEM NOT TO DO ANYTHING LIKE THAT. YOU BUILD THE BASE AND YOU MODIFY SLIGHTLY AND HAVE SOMEONE ELSE PURCHASE IT. BECAUSE OTHERWISE YOU CAN'T MAKE A COMPLETELY NEW DEVELOPMENT EVERY TIME. BECAUSE, YOU KNOW, RIGHT NOW, EVEN, YOU KNOW, NOTHING IS FREE LUNCH AND SO BE EXPENSIVE. In order to, we don't know if that company could survive. So we have to basically cut business with unprofitable customers. You know, just because we want orders, we don't have to go take orders from everyone. And this is because the management was coming from outside the company, and that is why they used to think that way. But we need to eliminate that kind of thinking. We have to be profitable in our order taking. My second question then, with regards to induction motors. You've mentioned about application being wide, and I can see that there's a lot of potential. And you said that you talked about Tesla in automotive. Can you actually have this application in automotive? Yes, for induction motors, yes, it's everything. So the induction motors percentage is about 60% in industrial. So we have this very large market share, but we have not been able to convert it because induction motors are cheap. So Tesla's first cars were using, adopting induction motors. But efficiency is bad for induction motors, so that is why Tesla is going brushless motors for magnetic. But that's not necessarily you know, with an efficiency improvement like this with the auto, you know, they will switch to induction motors. I mean, that's a possibility. And of course, we're already starting with experiments in this. So depending on the application, I think that, you know, 50 kilowatt, you know, 30 kilowatt, these smaller cars, they're cheap. So, you know, induction motor doesn't use magnets. You know, just as long as you have power source, it moves. So, you know, and with this much of efficiency improvement, I think this is quite innovative, dramatic. And the market implementation has started. And with AMEC and Moen, The reason why their profitabilities are improving is because of these. You know, they have contributed. So they're still yet to take off, but it's coming. And Moen has already, I'm thinking, I think we've declared that the sales will double by 2025, I think. I think I wrote it somewhere in the document here, but page 25. So application is expanding. So at the bottom left corner, page 25, it says very large, enormous motor. This, if the efficiency difference. they would be able to cut down on CO2 quite significantly as well. We have never produced anything as big as this in Japan. I think there's only one or two global players who are able to do this.

And we're going to make one of those manufacturing factories in India, which is going to be a huge campus. It's a huge investment for us. It makes a serial motor, a manufacturing factory here. Thank you very much for your explanation. Thank you. Any other questions, please? Another person in the third row. And this is Hira of Nikkei Shimbun, a newspaper. First, I'd like to ask you about Gen 3 products. It says the target is for next June. Are you going to set a target for Chinese customers? You have talked about the Japanese OEM manufacturers as well in your presentation, but are you going to first target the Chinese customers? When it comes to next year, Chinese customers are already fixed. They are official. When it comes to Japanese domestic customers, we need to contact them. We have already doing that. We are already doing that this year. If these businesses come through, Gensory will be more a product and more successful as a business. whether it be China or any other overseas businesses, traction motor business scale as a whole, when it comes to Japanese auto manufacturers, they are going to launch their vehicles from now. And for that, the largest scale of components, these traction motors are required. But as the changes continue, There will be a restriction on height, and there will be a request on shrinking, making the motors small from Japanese domestic and European customers. And they are targeting 2027, 2028, and they will be giving us those requests to us as far as we can predict. So compared with Gen 2, Gen 3 products are much better. That is all from me. And plus, there are quite a few major changes happening in China. They have started exporting their products, not just automobiles, but other products as well. They're exporting them. Of course, prices are very strictly restricted. But there are some products for which they would like to use Japanese products, according to our customers. For products to be exported, Japanese products are preferred. When it comes to fans, for example, they would like to have high efficiency fans in order to avoid exported related problems. so it is not that the cheaper the better for chinese customers but this is as a result of a growing intensifying competition those advanced companies such as those in europe maybe not in the united states but when it comes south east asian countries For exports, they have specifications for exports, and products have to be in all the specifications for exports. We need to think about it very carefully, about what models that we should use for each of these individual countries and regions. There has been one person who bragged about everything about our business, and that person is now gone. Now we have a much more serious person in charge of this business. He is not going to be very optimistic about the future. We need to be able to use figures to convince everyone. We have many customers visiting our research and development facilities. Good products have to be regarded as such. Price doesn't have to be the sole point of contention or discussion. That's not something that I like very much. and some customers are very strict about making a payment. Some customers are not really willing to pay us. Some customers are not really willing to keep their deadlines with us. We have a GAC, a Guangzhou, which are very nice, very great company. They are export-oriented, and they are trying to establish a factory in Thailand, and they would like to partner up with us in Thailand, outside of China. Now, such companies are not really a problem at all. Now, 300 companies used to be in the market. About now, 200 of them are gone in the Chinese automotive market, EV market. only 100 remaining in the Chinese EV market. Now we are learning about how to survive in this business in China. And as a result, Our sales are down. Our sales may be down, but if you want to, if you are disappointed about this result, please make sure to sell your shares. Of course, that will be no problem. And your next question is about, you're talking about your companies going back to the Japanese market from overseas market and appliance and home appliance and industrial. Do you have any ongoing cases? This is concerning our customers, so I cannot disclose so much, but we have many companies returning back to the Japanese market from overseas due to various reasons. We have our factories. Two of us, two of them, in fact, two of these factories are under construction. They would like to use Japanese products when it comes to our customers for these products. There are quite a few issues, like political issues. We're not really expert on that. And that's the type of trend. And yen is being depreciated. So it is okay. It makes sense business-wise to produce products in Japan instead of overseas. And they are making those decisions, coming back to Japan after considering those risks. And American customers are requesting us to make our components in Mexico in exchange under the condition that we will be their single source supplier. When it comes to India, there are quite a few Chinese manufacturers going over there. In Thailand as well, there are Chinese manufacturers that are doing business in the country. such phenomena are occurring here and there as far as we are concerned we have been making investment in china in a significant amount and we are making a very stable profitability and doing a very stable profitability in china some things happen war may occur or take place in some places in the world we need to make sure to avoid drastic destructive damage to us by thinking ahead. That's all thing we can do. We are in a business in 46 countries around the world. If we are dependent upon a certain country, we will cause a significant damage or problem to our customers. We should avoid that situation at all costs. If customers are requesting us to make products in Japan, we will try to do that right away. and we like to be a single source supplier, a sole vendor for that. That's what we say in the negotiations with such customers. As far as NIDAC is concerned, it has become 50 years old this year. We have been doing various reforms on wages, for example, salaries. We need to make sure that we are competitive enough in comparison with other companies in terms of salary, et cetera, et cetera. And we need to make work-life reform as well, work-balance reform as well. As I've stated already, we are not solely focused on our growth. That's not the case anymore. We need to make sure to generate very sound, healthy profit in any business that we do. In India, for example, this is going to be an investment for large production of large motors. We are transporting our technologies from overseas to India. This is the fourth or fifth factories that we're going to construct. We're going to make a large-scale investment in India. We may be having some shortage of battery. Energy platforms is growing rapidly. And as you can see from these figures, we have a joint venture for battery production business. We have already established a supply chain for that business. There are quite a few areas. that could potentially grow in the future. We're not going to be dependent upon traction motors only. You may think that our share price may decrease because of the traction motor, but we need to make investment where necessary, and we grow after generating profit. When it comes to ASIM, They used to be having a very low operating profit ratio of 2% or even 3%. It has taken time for us to establish a very good management system. We have purchased a very good company. We made a lot of reforms. And I believe they will make wonderful contributions. We started our company with this small process motor business. We have been highly dependent upon how this could drive business, but now we have new businesses emerging. We are going to make a focus on two-field business. That will take time still. But still, we have been receiving many inquiries. I believe this business as well is going to make a very good contribution to us, and water cooling modules as well. Microprocessor thermal heating production will be going to be huge. Phones will be not enough to cool down these devices. This is a very expensive system, several million yen, and we have been receiving a lot of inquiries for that as well. This is a very highly efficient, profitable business for us. No matter how far we go, we will be a motor manufacturer and we will be the world's leading motor manufacturer. We will be unbeatable in that regard. All our products will be installed with motor-related components. We are going to be number one, continue to be number one in this area. We're going to have high-efficiency induction motors as part of our business portfolio. This is an innovative, revolutionary product that we have invented or developed successfully. And this similar motor has received multiple wonderful prizes, awards. And we have been receiving prizes, compliments from around the world. And customers are liking it. This product is ranked number four, and I believe it will occupy the first ranked place, and 50% share is not going to be a dream in the future. This is something we are making that other companies cannot. We are not dependent upon products that other companies can make easily. We're not going to be in the price reduction war with other companies by making such easily copyable, imitatable products. We're not going to do that. Thank you. Any other questions from anyone on the floor? Thank you. This is Akizuki of Nomura Securities. I have two questions for you. Kishida-san, my first question goes to you. When it comes to automotive motor, you have purchased many companies you have purchased overseas. How do you manage these companies? What would be the best or an ideal way of managing these companies? And you joined NIDIC from the outside. How would you evaluate the way NIDIC manages its overseas business basis? That's my first question. Thank you very much for your question. I believe I myself have spent a year last year at one of the subsidiaries that we have purchased. I spent some time in Germany up until I returned to Japan recently. When it comes to NIDIC, it is full of challenges as a company. In my previous occupation, I was in Germany for a long time. Challenging spirit is here at NIDIC. The strength to take on challenges. That's the best thing that we have compared with other companies. When it comes to regions by region type of management, we're not doing that. And we have grown this far without doing that. I believe that's part of the essence of NIDIC's strength. you usually go overseas to establish regional businesses as part of the business network. One thing that surprised me is that in Europe, for example, there is not really an organization to manage the entire business basis in Europe. It is all up to individual basis. That's one thing, and that's one area of improvement, I believe.

In any case, in the last two years, it seems as though actually the two years is 10 years, but It's always been exciting, and there's a lot of new things, one after another. I mean, there are deepness in the challenges, but the target, the goal that they're aiming for is high, and it's very motivating. I'm not sure if I'm able to communicate that very well, but that's my honest feeling. Thank you. My second question is for Chairman Nakamori. Your induction motor business, I think it's reluctance motor, actually, but reluctance motor, you know, it's taken, you know, 10 years. I mean, don't say that easily. I mean, we did apply the, you know, principle, but we can't, you know, you know, we have spent more time and more development cost for that induction motor. But when you acquired Emerson's business, the reductionist motor technology was extremely important. And because of as it was, you were not able to neutralize this. So the question was, what kind of development did you do in order to make it smaller? Well, we did build a R&D center in Taiwan. And Taiwan is quite known for motor researches as well. And also US, we have our engineers, they work together. And what I say is a reduction motor requires no magnets. But you know, vibration is strong. So large noise. Reduction motor, we used to just build a washing machine, but because it was too noisy, it was not good. So reduction motor has a slip, and it doesn't sink. So there's some drawback for that. motor itself is bad in efficiency so we need to have efficient highly efficient synchronized and a very little vibration that's sort of the themes that the challenges that we have been working on over many years And if you really are interested in details, you can actually look at our patent documents. I can go and talk about this for fibers. It's an amazing motor. So based on that, your strategy is to really increase your share based on that. Is it a mandate? Is it partnership? I think industrial motor is very much dependent on the relationship with the customers. Even if you have a good product, it's very difficult to generate sales right away. Well, U.S., you know, America, it's really regulators. You know, America has been quite ahead in that, and same with Europe. it's not just efficiency and, you know, if the government, if the country supports it, the regulation supports it, then I think we'll be able to increase, you know, sales. But if the regulation is not so concerned about efficiency or CO2, then maybe we will not be able to increase the sales. So, but I think it's the age where technology really makes a difference. Thank you. Then we would like to take other questions. The person in the blue neck tie. My name is Naito from City Group Securities. So I have one question about e-axle. So you have developed Gen 3, and you're seeking for further cost reductions and acceleration, and you're spending more in R&D. So that was out of the need. So, ahead of that, in Gen 4 and Gen 5, have you seen any changes in your strategies from before? So, you talked about, you know, any development going forward will be the modification for Gen 3. So, what is your projections in development for Gen 4, Gen 5? And years after that. So EV, I think one of the greatest effects of EV is, you know, people talk about CO2, but I think it's the miniaturization. The cars have been able to make it smaller. So the K cars, I think this is where we see the greatest benefit. It is the K cars. And it talks about running about 506 kilometers, which is one fuel, one charging. And no one takes many trips in Tokyo like that. So about 10 years ago, I used to tell the floor shop worker, what is it that you want the most? And he said, the mobile phone, mobile phone. That's what they said. So now today people say, I want car, I want a car. But there's not that many cheap cars, especially the OEMs don't want to follow up these cheap cars. So it's 30 kilowatt or 20 kilowatt perhaps. I think those would be about 500,000 yen, maybe at most 1 million yen. If we're able to launch that kind of a car, then the world will become more convenient. But if we produce cars like that, OEMs will not be profitable. So that is why it's the large cars. Now, you have to have loads of batteries to run a big, large car, but a day-to-day car runs only about, you know, 20, 30 kilometers per day. I don't think any really car would go anywhere from 100 kilometers or beyond. It's just like commuting to work. So that's why they don't, but they don't, you know, launch these types of cars. I think they should be putting more emphasis on that. And finally, we're beginning to see, you know, 70 kilowatt, but the car is still expensive. So I don't think you can sell it like that at that price. You have to, you know, offer, cheaper cars That's what I've been saying So the cars are manufacturing K cars and there will be new cars, you know So the Tesla is making money from big cars That's why they're profitable Now smaller cars People say it's not profitable but actually A car with a 30 kilowatt, you know, 40 kilowatt, you know, maybe you don't need to have an automated door. A car that runs is sufficient. And solar power, you know, there's a lot of sunlight. You know, a lot of cars could run with just solar power. So why is it that we don't go in that direction?

Car companies.

Car companies don't want to compete with customers. That's what they say. You know, they have 600 kilometers or 700 kilometers. You know, it costs, you know, 4 or 5 million. If it's any high end, it's like 10 million yen. But that's not the main objective of EV. The objective is in the past when it was a cold day You know, moms would have to hand wash the clothes of your children, and that was a lot of labor, so that is why washing machines were developed. So companies should not be focused on just profitability, but they have to solve social issues. So they need to offer solutions. That's why they need to put more emphasis in. So they say, can we do hybrid? You know, in Japan next year, I'm sure that the average temperature in the summer will exceed 40 degrees. So who are going to solve those issues? But if I say that, you know, if people resist, and sometimes our share prices go down. So I shouldn't be talking about this too much, but that's the, you know, my, you know, passion for this company. And I think we have been able to develop a lot of, you know, convenient products. You know, for example, if you look at PCs, the reason why it's thin is because, you know, hard disks are thinner, and if you don't make the motor smaller, then you will not be able to produce these thinner hard disk drives. So in the last decade or two, You know, we have struggled. You know, we have not necessarily been always successful. And I think if we're able to build something even smaller that we can improve efficiency, then we have finally been able to develop a brushless motor. But now maybe with a cheap motor, efficient motors, we will no longer need brushless motors. You know, right now we're able to generate 90 to 95%. Brushless motor is like 90% or so. But the price is different because the cheaper ones don't require circuits. So if we're able to develop these kind of products, we will be able to see even more convenient societies. So induction motor, same thing, with the current efficiency. Induction motors are no good. The efficiency is only about 70%. But if we can achieve an efficiency of 92% or 93%, I think it would achieve 95% or 96% if we're able to continue with the development improvements. And it will be innovative. I know that you're not too familiar with motors. I'm a motor person. I have loved motors all my life. But with such a low efficiency, I know that it will not be able to sell. So that is why wisdom is like that. You have new ideas one after another, and you're able to achieve a certain goal. I know that, you know, this is a huge development that would help us generate a very large profit. Of course, you have to see our financial results. I have to make sure that I'm just not, it's not a pie in the sky. But it's already been demonstrated with all these awards that we have won. So thank you very much. Maybe we, I have one more question. On the short term, who's asking the question? Excuse me, Nigel from Citigroup. One more question. This is more of a short-term question. But ASIM, you're seeing improvement, and Moen is driving that. In addition to that, the conventional appliances, I think you're going to achieve even a greater growth. So what about overseas in Japan with regards to appliances? And what about the market environment? So appliances is not very good right now. And during COVID, everyone purchased refrigerators. And so the components that's used in the refrigerators, like compressors, are no longer doing good today. But in COVID, That period was strange in the sense that I was wondering why refrigerators were being sold so much. So I think we will begin to see normalization eventually. But materialization, that sort of technology needs to be leveraged more and more. everyone in you know you know if they buy these large refrigerators it takes up a lot of space it's noisy and so they will look for smaller refrigerators so that's why you have to make the motor smaller and that's why we need to do more R&D And I work so much in R&D, and I'm wondering why we get so criticized for this, and our share prices don't reflect that. But what we do, I know it will be rewarded eventually. So we will begin to see these new areas one after another. So for example, I'm trying to introduce this at the very beginning on the cover page. This is ultra large motor. Can you explain this?

This motor is in Qatar. LNG field is where it is used. And this is a new electric motor, high-speed, ultra-sized megawatt speed motor. It is a very expensive product. Several hundred million yen is its price. This is the type of products that we are receiving the orders for. So far, it has been gas turbines that they used. It will generate a lot of CO2. Now, the motor is installing these new products. CO2 is not really emitted. It's for the green revolution. Qatar L Energy's oil field is where it's going to be used. Still, they are extracting L Energy. Therefore, this is a very profitable business. Such applications are everywhere, emerging in large numbers in the world. This is about 5 billion yen per unit and about 50% profitability. Not many companies can produce these types of equipment. These other companies have to be subject to a lot of price reduction competition. And this is the area, one of the areas we need to grow even further. Thank you very much. Thank you. Now it is time for us to finish this meeting regarding NIDA Corporation's financial results for the first half of fiscal year 2023. Thank you very much, everyone, for your attendance today despite your busy schedule. Thank you.