Fluctuations in the Global Economy and Automotive and Electronics Demand

「Mobility-related markets account for approximately 84% of consolidated sales,」

「In the automobile market, a core business area of the group, uncertainty remains regarding the outlook for demand due to the impact of policies in the United States and China. During the current interim consolidated fiscal period, however, production by Chinese automakers remained firm, supported by government policies in China.」

「The automotive market, a core business area of our Group, showed signs of slowing automobile production due to sluggish EV sales in China, Europe and the United States from the second half of the previous fiscal year, as well as certification misconduct issues in Japan.」

「Although the manufacturing sector showed signs of stagnation in major producing countries and regions against the backdrop of declining global demand, automobile production and sales, a core business area of the group, recovered as shortages of components such as semiconductors gradually eased. However, signs of slowing were also seen in Europe and China.」

「Although the manufacturing sector showed signs of stagnation in major producing countries and regions against the backdrop of declining global demand, automobile production and sales, a core business area of the group, were recovering as shortages of components such as semiconductors gradually eased.」

「Automobile production and sales, a core business area of the group, were recovering as shortages of components such as semiconductors gradually eased. However, temporary factors, including inventory adjustments due to sluggish sales of new energy vehicles in China, meant that they had not yet normalized.」

「During the nine months ended the third quarter, countries advanced monetary tightening in response to sharp price increases for energy and other goods. In Japan, the yen appreciated following a year-end policy shift away from the Bank of Japan's continued zero-interest-rate policy. In China, infections spread rapidly following the lifting of the zero-COVID policy at year-end, causing a sharp economic slowdown.」

「During the six months ended the second quarter, uncertainty surrounding the global economy increased further due to high global inflation, monetary tightening and other factors. In China, which accounts for more than 30% of the global automobile market, industrial production and personal consumption stagnated sharply in the first quarter because of lockdowns in Shanghai and other cities. Although the economy showed some recovery after restrictions were lifted, economic growth continued to slow.」

「Meanwhile, in China, lockdowns in Shanghai and other areas under the zero-COVID policy caused industrial production and personal consumption to stagnate sharply, particularly in April, due to suspended production of industrial products, logistics delays and other factors. In addition, automobile production and sales, a core business area of the group, had not yet normalized due to the prolonged invasion of Ukraine and shortages of components, including semiconductors, whose recovery had been delayed.」

「During the fiscal year, the global economy saw various measures implemented in countries to normalize economic activity amid the approximately two-year COVID-19 pandemic. From the second quarter onward, however, various problems materialized, including prolonged shortages of components, beginning with semiconductors, shortages and rising prices of raw materials, higher transportation costs, container shortages, supply-chain disruptions, and the worsening situation in Ukraine. Market growth remained constrained not only in automobile production, which is a core business area of the group, but also in appliances and other products.」

「During the nine months ended the third quarter, the global economy initially recovered as economic activity normalized in various countries amid the approximately two-year COVID-19 pandemic. From the second quarter onward, however, various problems materialized, including supply-chain disruptions caused by shortages of components, beginning with semiconductors, shortages and rising prices of raw materials, higher transportation costs and container shortages. In the manufacturing sector, growth remained constrained not only in automobile production but also in appliances and other products.」

「Meanwhile, supply-chain disruptions caused by the prolonged semiconductor shortage, component supply shortages associated with the spread of COVID-19 in Southeast Asia, shortages of raw materials, higher transportation costs and container shortages, among other factors, materialized as global risks, and automobile production in the manufacturing sector showed limited growth.」

「In Europe and the United States, the manufacturing sector, including the automotive industry, had recovered from the COVID-19 pandemic, but production growth was constrained by shortages of semiconductors and other raw materials. Personal consumption remained firm as activity restrictions were eased.」

「The economies of Europe, the United States and Japan generally recovered from their April troughs, and production and sales volumes in the automotive industry also showed signs of recovery as production activities resumed. However, the economy slowed in the fourth quarter due to renewed COVID-19 infections in Europe and the United States and the effects of a global semiconductor shortage.」

「During the nine months ended the third quarter, the global economy was stagnant in the first quarter due to the impact of the COVID-19 pandemic, but moved into a stronger-than-expected recovery phase from the second quarter onward, although uncertainty about the outlook remained due to renewed infections in some regions.」

「During the six months ended the second quarter, the global economy moved from the stagnation caused by the COVID-19 pandemic in the first quarter toward a stronger-than-expected recovery in the second quarter, although uncertainty about the outlook remained due to renewed infections in some regions.」

「The impact of the COVID-19 pandemic on the decline in net sales in the first quarter was approximately ¥4 billion. By region, the impact was approximately ¥1.4 billion in Asia, including China and Singapore, approximately ¥1.1 billion in Europe, approximately ¥1 billion in North America, and approximately ¥500 million in Japan.」

「During the nine months ended the third quarter, the global economy continued to slow as the impact of U.S.-China trade friction reduced trade volumes and weakened corporate investment. In China, GDP growth fell to its lowest level in 29 years due to the impact of U.S.-China trade friction, automobile production and sales remained at approximately 93% of the prior-year levels, and sales of new energy vehicles also declined.」

「In China, GDP growth reached a new quarterly low for the second consecutive quarter since 1992, while automobile production remained at approximately 87% and sales at approximately 90% of the prior-year levels, making the slowdown increasingly pronounced.」

「In China, trade friction with the United States continued, and GDP growth from April to June was 6.2%, the lowest quarterly level since 1992. Automobile sales also declined by more than 10% year on year, and the economic slowdown continued.」

「In our core automotive market, although we were affected by temporary factors, including deteriorating market conditions in the United States and China, related inventory adjustments, and lower automobile sales in Europe, sales of connectors for powertrains and other applications newly installed in automobiles increased as ADAS (advanced driver assistance systems), which we are actively pursuing, and vehicle electrification progressed. In the industrial market, sales declined as investment in facilities for smartphones decreased, causing a substantial decline in Japanese machine-tool orders from China, while investment restraint against the backdrop of U.S.-China trade friction and the resulting inventory adjustments also had an impact.」

「In our core automotive market, we were affected by temporary factors, including the deterioration in market conditions, such as sluggish sales of sedan-type passenger cars in the United States and a decline in automobile sales in China, which fell for the first time in 28 years, as well as related inventory adjustments and a decline in automobile production in Europe following the introduction of the Worldwide Harmonised Light Vehicles Test Procedure (WLTP) in September.」

「In addition, sluggish passenger-car sales in the United States, lower-than-expected growth in the installation rate of safety applications, and a decline in automobile sales in Europe following the introduction of the Worldwide Harmonised Light Vehicles Test Procedure (WLTP) in September caused results to fall below the initial plan.」

「During the three-month cumulative period, there were no new business or other risks, nor any material changes to the business or other risks described in the securities report for the previous fiscal year.」

「During the nine-month cumulative period, there were no new business or other risks, nor any material changes to the business or other risks described in the securities report for the previous fiscal year.」

「Meanwhile, due to the stronger-yen trend, lower demand for vehicles equipped with our connectors in China and Korea during the first half, and reduced production by customers due to the Kumamoto Earthquake, among other factors, net sales decreased 1.7% year on year to ¥37,547 million.」

「Demand for vehicles equipped with our connectors in China and Korea declined, customer production fell following the Kumamoto Earthquake in the first half, and the yen remained significantly stronger year on year.」

「In addition to the rapid appreciation of the yen, sales declined due to lower demand in the Chinese and Korean markets for vehicles equipped with the company's connectors and reduced production by the company's customers following damage to semiconductor plants in the area affected by the Kumamoto earthquake. As a result, revenue and profit decreased compared with the same period of the previous year.」

「In the core automotive market, demand for vehicles equipped with the company's products stagnated in China. However, global sales activities proved effective, and demand for automotive cameras and millimeter-wave radar remained firm as the electrification of vehicles and the installation of ADAS (advanced driver assistance systems) accelerated with advances in safety driving support technology. At the same time, the impact of the Kumamoto earthquake on the automotive and digital camera industries, a decline in demand for game consoles in the consumer sector, and a rapid appreciation of the yen resulted in lower revenue and lower profit than in the same period of the previous year.」

「More than half of consolidated revenue is generated from sales to the automotive-related market. Although the company is strengthening sales to non-automotive markets, including digital consumer electronics, office automation and factory automation equipment, demand trends for automotive-related and electronics-related products are both strongly affected by global economic conditions.」