PM Business Market Portfolio Shift

「This category includes sales of products manufactured by Allegro MicroSystems, Inc. (hereinafter, “Allegro products”) and sales of switching power supply products (formerly the Unit Products Business), for which product sales ended during the current consolidated fiscal year.」

「In recent years, we had been withdrawing from nonstrategic markets for these products. However, we determined that continuing the business would be difficult because of the emergence of inventory risk resulting from longer component lead times, the increasing difficulty of finding alternatives as various components reached the end of production, and aging production equipment, among other factors. Accordingly, we decided to end production and sales.」

「During the first quarter of the current consolidated fiscal year, the transfer of the Social Systems Business, which formed part of the Power Systems Business, was completed, and Sanken Densetsu Co., Ltd., which operated that business, was excluded from the scope of consolidation.」

「The transfer was completed on 1 May 2021.」

「As withdrawal from sales of unit products for nonstrategic markets progressed steadily, consolidated net sales for the business decreased by ¥3.013 billion, or 19.0%, year on year to ¥12.823 billion. In terms of earnings, however, the company recorded consolidated operating income of ¥250 million, compared with a consolidated operating loss of ¥76 million in the same quarter of the previous year.」

「At a meeting of the Board of Directors held on 4 August 2020, we resolved to transfer the Social Systems Business, which forms part of the Power Systems Business operated by the company, to our subsidiary Sanken Densetsu Co., Ltd. through an absorption-type company split, and then transfer all issued shares of Sanken Densetsu Co., Ltd. to GS Yuasa Corporation. We also entered into a share transfer agreement.」

「As stated in the notice dated 6 November 2019, “Notice Concerning Optimization of the Production Structure for Core Businesses and Strategic Review of Noncore Businesses,” we have promoted selection and concentration in the business structure to concentrate management resources on our core semiconductor devices and power modules and accelerate our growth strategy. For the Power Systems Business, we have advanced consideration of strategic options including a sale of the business.」

「Against this backdrop, in November 2019 we announced a policy of pursuing selection and concentration in businesses centered on the semiconductor device business as a new business structural reform. We decided to advance measures including optimizing the production structure through the consolidation and integration of factories related to the semiconductor device business, considering strategic options including the sale of the Power Systems Business, withdrawing from the LED lighting business, and selling certain sites.」

「In November 2019, as a new structural reform plan, we announced a policy of pursuing selection and concentration in businesses centered on the semiconductor device business. Specifically, we decided to optimize the production structure through the consolidation and integration of factories related to the semiconductor device business, consider strategic options including the sale of the Power Systems Business, withdraw from the LED lighting business, and advance the sale of certain sites.」

「In addition, sales withdrawal from unprofitable unit products continues to be advanced,」

「In the Power Systems Business, sales of power system products for domestic capital-goods export manufacturers were postponed amid restrained capital investment resulting from China’s economic slowdown. In addition, the company is advancing structural reforms centered on withdrawing from sales of products for the AV and office automation markets, where profitability has deteriorated,」

「In the Power Systems Business, withdrawal from unprofitable products for the AV and office automation markets reduced consolidated net sales by ¥2.948 billion, or 13.2%, year on year to ¥19.430 billion.」

「In the Power Systems Business, sales of products for the communications market continued to recover, but withdrawal from unprofitable products for the AV and office automation markets is being advanced,」

「In the Power Systems Business, sales of products for the communications market continued to recover, but sales of unprofitable products for the AV and office automation markets were restrained. As a result, consolidated net sales for the business decreased by ¥64 million, or 1.0%, year on year to ¥6.194 billion.」

「We have implemented structural reforms addressing longstanding management issues, including withdrawal from the PM Business, discontinuation of unprofitable products in the semiconductor device business, and reductions in fixed costs at headquarters.」

「In the Power Systems Business, sales declined because sales of products for the AV and office automation markets, including adapters for televisions with low profitability, were restrained. However, sales of products for mobile base stations recovered in the communications market, among other factors, and consolidated net sales for the business increased by ¥884 million, or 6.6%, year on year to ¥14.294 billion. In terms of earnings, the decline in sales of low-margin products resulted in a consolidated operating loss of ¥60 million, compared with an operating loss of ¥712 million in the same quarter of the previous year, representing progress in improvement.」

「(1) Withdrawal from the PM Business (excluding products for the automotive, industrial equipment and communications markets) ① Business description: Manufacture and sale of switching power supplies and other products ② Business scale: Fiscal year ended March 2017: net sales of ¥11.178 billion ③ Withdrawal schedule: End of March 2018: production to end (scheduled); end of September 2018: sales to end (scheduled)」

「In the PM Business, sales of the automotive products on which we are focusing increased, but sales of products for office automation equipment and other products remained sluggish. As a result, consolidated net sales for the business decreased by ¥93 million, or 0.8%, year on year to ¥12.203 billion. In terms of earnings, although fixed-cost reductions were advanced, the company recorded a consolidated operating loss of ¥551 million, compared with an operating loss of ¥694 million in the same quarter of the previous year, as cost-improvement initiatives for unprofitable products remained in progress.」

「In the PM Business, sales of the automotive products on which we are focusing increased, but sales of products for multifunction printers and audio products declined. As a result, consolidated net sales for the business decreased by ¥147 million, or 1.8%, year on year to ¥8.199 billion. In terms of earnings, the company recorded a consolidated operating loss of ¥323 million, compared with an operating loss of ¥374 million in the same quarter of the previous year, as structural reforms centered on shifting the market portfolio and reducing fixed costs remained in progress.」

「In the PM Business, sales of the automotive products on which we are focusing increased from the same quarter of the previous year, but sales of adapter products declined. As a result, consolidated net sales decreased by ¥66 million, or 1.6%, year on year to ¥4.001 billion. In addition to the decline in sales, the business remains in the process of shifting its market portfolio,」