High-performance substrates for generative AI drive growth in the Electronics segment

In FY2027-Q1, consolidated sales were ¥123,219 million and operating income was ¥26,880 million, up 26.4% and 52.4%, respectively, year on year. The Electronics segment reported sales of ¥77,522 million and operating income of ¥21,375 million, accounting for approximately 79.5% of consolidated operating income. Electronics sales increased 37.7% year on year and operating income rose 52.4%, making the segment large enough to drive nearly all of the group's earnings growth on its own.

The Electronics segment's operating margin was approximately 27.6%, calculated by dividing ¥21,375 million by ¥77,522 million. The company attributed the recent improvement in profitability to orders for high-performance IC package substrates, the product mix for generative AI servers, stable production at the Ohno site and lower manufacturing costs at the Philippines plant. Even while demand for conventional PCs and general-purpose servers remains weak, the key question is whether focusing on high-value-added products can continue to secure profits.

Historically, the Electronics segment's sales increased in FY2025, but operating income declined because of price competition and a temporary drop in production utilization. In FY2026, it recovered to sales growth of 23.4% and operating income growth of 68.5%. This provides a basis for assessing whether the business is shifting toward a structure in which product mix and cost improvements, rather than a simple recovery in market volumes, are driving profits. The latest disclosure, however, does not provide figures for order intake, order backlog or generative AI-related sales.

In FY2027-H1, the key points will be whether the Electronics segment can maintain its Q1 operating margin of 27.6% or whether depreciation and start-up costs associated with capacity expansion cause it to decline. It will also be important to see whether the company discloses segment details on the value or volume of generative AI orders, the extent of recovery in PC and general-purpose server demand, and the impact of lower costs at the Philippines plant. These disclosures will help assess whether the growth can be repeated.