July 24, 2007,08:50 +0900(JST)

VISION 2012 (4): R&D, capital expenditure and CSR

To conclude this series about VISION 2012, I’d like to write about what VISION 2012 says regarding R&D, capital expenditure, and corporate social responsibility (CSR).

To ensure that our diversified Group continues to grow, it is essential to consider developing new products that are both related and totally unrelated to our existing business categories. We keep working on fundamental research looking 10 to 20 years ahead.
We are thinking about setting the target ratio of new product sales at 30% for fiscal 2013 (April 2012 to March 2013). Our new product development themes are “Environment and Resource Conservation,” “Life Science,” and “Safe, Secure and Ubiquitous Society” in consideration of society’s needs, which expand as living standards continue to improve. R&D will be based on an accurate understanding of customer needs, so as to ensure the Group’s continuous growth.

In VISION 2012, a total of 1 trillion yen is earmarked for prior investment over the next five years, including capital expenditure and R&D. Of this, a total of 400 billion yen will be invested in R&D. For our existing business categories, R&D will mainly concern material renovation and product modularization, so as to maintain and improve our competitiveness. Moreover, as I’ve just stated, we’ll also focus our R&D efforts on developing brand new products that may be pillars of our future activities. This will require active support for new business category development.
For the same five-year period, a total of 600 billion yen will be expended on capital expenditure, basically including investment in priority areas of the core business categories, and more active overseas investment aimed at enhancing our worldwide presence.

Finally, as part of our CSR activity, this year, which marks the 110th anniversary of our operation, we established the “Sumitomo Electric Group Basic Policies on Social Contributions,” from the standpoint of performing our social duties as a corporate member of society.

The Basic Policies were determined based on three key phrases, “respect for human resources,” “attaching importance to technology” and “creating a better society and environment,” in compliance with the Sumitomo Business Spirit and the Sumitomo Electric Group Corporate Principles. More specifically we will be more active than ever in our social contributions in terms of developing human resources, promoting community-oriented social contribution programs and supporting employees’ voluntary social contribution activities.

As concrete measures, from fiscal 2008 (April 2007 to March 2008) to fiscal 2009 (April 2008 to March 2009) the Sumitomo Electric Group will establish the Sumitomo Electric Group Scholarship and Fellowship Fund, launch a special subsidiary for hiring disabled persons and introduce a volunteer leave system. Moreover, community service activities that the Group has been carrying out until now will be continued and reinforced.

By performing our duties from the CSR perspective, in addition to our business activities we hope to take steady steps toward becoming a truly Glorious Excellent Company, with support from a wide spectrum of stakeholders, while maximizing value for shareholders.

Masayoshi Matsumoto
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July 17, 2007,11:46 +0900(JST)

VISION 2012 (3): Segment-specific growth strategies

Today I’d like to explain the growth strategies for the five business segments of Sumitomo Electric.

In the Automotive segment, we will aim at “Global 25” with the segment’s main product, wiring harness, that is, a 25% share on the world market. To that end, we’re hoping to ensure orders from Japanese manufacturers and to increase our share of the non-Japan world market by at least 15%.
We’re also hoping to further enhance our profitability by actively responding to automakers’ requests, which continue to become increasingly sophisticated, and capitalizing on the Sumitomo Electric Group’s capabilities.

In the Information & Communications segment, we hope to firmly establish ourselves as a world-leading optical product manufacturer by increasing price competitiveness with our optical fibers and cables against the background of anticipated worldwide expansion of FTTH, and by investing our managerial resources in a number of priority optical device-related areas, such as the development of super-high-speed optical modules.
Moreover, in the fast-growing broadband equipment market, bolstered by expected progress in next-generation network (NGN) construction, we’re planning to develop attractive products, including access equipment and service terminals, and to expand their sales, drawing on the collective strength of the Sumitomo Electric Group.

In the Electronics segment, we will focus mainly on product improvement and sales expansion in the product categories intended for growth areas, such as mobile phones and liquid crystal displays.
To win out in low-cost competition, we will strive to improve our manufacturing expertise and global competitiveness by, for example, reinforcing our production centers in China and opening new facilities in Vietnam, so as to shorten the lead time up to product delivery.
We also intend to commence activity in new product categories, such as environmental protection and biotechnology, while considering the possibility of collaboration and M&A with other companies.

The Electric Wire & Cable, Energy segment continues to face a very challenging business environment, amid declining electricity-related investment in Japan. However, to bring this mature segment back on the growth track, we will further reform its business structure, reduce cost and take measures to ensure better and more stable profits. At the same time, we will actively reconstruct our energy infrastructure-related operations which are expected to grow in countries and regions outside Japan, particularly in the United States and Asia.
We will also vigorously explore new business opportunities for our superconducting cables and other products in areas such as energy saving, resource conservation and environmental protection.

In the Industrial Materials segment, we will further enhance our competitiveness with our core technologies, mainly for new materials development, processing and raw material recycling. We will focus our resources in priority areas in which we intend to make our products the world’s best three, among the great variety of products on the market.
As well, to secure raw materials and contribute to global environmental protection, we will further enhance our recycling efforts.

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July 10, 2007,13:13 +0900(JST)

VISION 2012 (2): Numerical targets

Following the post “VISION 2012 (1): Fundamental spirit,” today I’d like to write about the numerical targets of VISION 2012: 3 trillion yen in consolidated sales, 210 billion yen in operating income (7% operating margin), and 10% ROE by the end of fiscal 2013 ending March 2013.

The target for operating income is not only about the amount of money. It’s also about improving the operating margin, a major business management challenge. With our unique technologies and products, we’ll aim to increase our operating income to achieve a 7% operating margin.
As for the ROE, we have already managed to raise it to 8%, but we believe it can be further improved, and so we hope to improve to 10% to meet the stakeholders’ expectation.

Since there is a long period of six years before the end of fiscal 2013 and there are many uncertain factors, we’ve set interim targets to be achieved by the end of the fiscal 2010 ending March 2010: 2,520 billion yen in consolidated sales, 150 billion yen in operating income (6% operating margin), and 8% ROE. As a stepping-stone to the achievement of the final targets, the entire Group is going to do its utmost to meet these interim targets.

As I wrote in the earlier post, VISION 2012 has three pivotal policy objectives. I’d like to explain them in detail, one by one:

1. Developing profit-oriented growth portfolio
This involves adopting the basic stance of considering all our five business segments of “Automotive,” “Information & Communications,” “Electronics,” “Electric Wire & Cable, Energy” and “Industrial Materials” as core segments and striving to improve performance in all of them.
At present, the Automotive segment accounts for nearly half the total amount of operating income. By fiscal 2013, we hope to increase the degree of contribution to overall performance by other segments like Information & Communications and Electronics, thereby better diversifying business risk and realizing more stable growth.

2. Strengthening our business structure by fully implementing capital and financial strategies
As we attempt to strengthen our presence in ever-expanding overseas markets, we need a financial structure that corresponds to the business risk we must deal with.
As our policy, we will direct more operation-generated cash flow toward prior investment. At the same time, a portion of surplus cash will be used to reduce debts with interest, so as to realize a financial constitution that is appropriate for a “Glorious Excellent Company.”
Also, with VISION 2012 as a new beginning, we hope to return to shareholders a part of the surplus cash flow, while retaining the remainder for necessary prior investments and efforts for financial structural improvement.

3. Optimizing Group management worldwide
At Sumitomo Electric, ordinary decision-making and business operations are, in most cases, carried out by the respective business unit, such as the Automotive Business Unit and the Electronics Business Unit. In VISION 2012 we adopt a more Group-wide perspective, with the aim of optimizing business management for the Sumitomo Electric Group as a whole, to reinforce Group-wide management and operation and construct a stronger profit-making structure.
For now, we will reexamine our segments from a Group-wide standpoint and devise a variety of measures in terms of human, material and financial resources, knowledge and brand.
We will also carry out such short-term measures as reorganizing subsidiaries and operating locations and global sharing of technologies, in addition to long-term measures such as training for global management leaders and reinforcement of corporate identity, so as to further strengthen our corporate constitution in both tangible and intangible ways.

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July 3, 2007,13:10 +0900(JST)

VISION 2012 (1): Fundamental spirit

On May 17, we announced to the mass media, analysts and investors an outline of “VISION 2012,” Sumitomo Electric Group’s new mid-term business plan, with the subtitle “Toward the realization of a Glorious Excellent Company”
That was the first time our mid-term plan was publicly announced, and I’m happy it was quite favorably received.

If you’re interested in how the plan was explained to analysts, please click here to see the presentation material. To the Sumitomo Electric Group people, I’m planning to communicate in a different manner, to explain what we should do and strive to achieve on the individual basis; but for the moment, I’d like to write about the outline in several posts following.

The Sumitomo Electric Group implemented various measures based on the clear mid-term business plan called “VISION 2007,” with numerical targets, by the end of March 2008, of 2 trillion yen in consolidated sales, 120 billion yen in operating income and 8% return on assets (ROA).
As a result, we achieved the target of 2 trillion yen in sales two years ahead of schedule and the target of operating income one year ahead of schedule. As for ROA, it has grown to 8.8% in FY 2007 ending March 2007, surpassing the target of 8%.

The targets were achieved mainly thanks to the Information & Communications segment’s return to the black, the Automotive segment market share’s expansion (over 20% on the wiring harness market), and other segments’ unique product development and supply (such as GaN Substrate), as well as the untiring efforts toward improving the Group’s business constitution.
In other words, the united efforts of the entire Sumitomo Electric Group enabled us to realize the initial targets of VISION 2007 one year ahead of schedule. Now, we inevitably need new targets: hence, VISION 2012, with its focus on further growth and greater profitability, we recently devised and announced.

So what is the difference between VISION 2012 and VISION 2007? Most notably, VISION 2007 was drawn up during the period of sluggish business that followed the bursting of IT bubble, and naturally focused on rebuilding our business, whereas VISION 2012, formulated after the recovery of the Group’s profit-making power, focuses on strengthening of business strategies; that is, reinforcement of our ability to develop and implement ingenious measures and solutions to achieve sustainable growth.

Concretely, VISION 2012 has three pivotal policy objectives: developing profit-oriented growth portfolio, strengthening our business structure by fully implementing capital and financial strategies, and optimizing Group management worldwide.

I hope the Sumitomo Electric Group achieves these objectives while realizing the fundamental strategy of becoming a Glorious and Excellent corporate group, as well as the growth strategy with its two basic guidelines of expanding our global presence and strengthening our leading technologies, all based on the Sumitomo Business Spirit, which has supported Sumitomo’s 400-year-old history, and Sumitomo Electric Group Corporate Principles, formulated in accordance with the Sumitomo Business Spirit. In addition, I also hope every member of the Sumitomo Electric Group turns above guidelines into his or her own goal and strives to achieve it.

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The president's photographProfile

Masayoshi Matsumoto
President & CEO
Sumitomo Electric Industries, Ltd.

Born in 1944 in Hyogo Prefecture, Masayoshi Matsumoto joined Sumitomo Electric in 1967. After serving as General Manager of Chubu District Office, Managing Director and Senior Managing Director, he assumed office of President and CEO in June 2004.

His leisure activities include jogging, reading and art appreciation. Also a seasoned athlete, he played baseball in junior high school and practiced judo in senior high school. In university, he threw the javelin competitively and participated in all-Japan inter-university competitions.

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