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Yokogawa Electric Corporation

2006 Press Releases-10

Tokyo, Japan - May 9, 2006


Yokogawa Defines Fiscal Year 2010 as the Second Milestone 
- New Targets for VISION-21 & ACTION-21


Yokogawa Electric Corporation has defined fiscal year 2010 as the Second Milestone with new targets for its VISION-21 & ACTION-21 corporate strategy and aims to achieve an operating income of 75 billion yen and a return on sales of 12.5%.

By specifying fiscal year 2005 as the First Milestone according to the VISION-21 & ACTION-21 corporate strategy announced in January 2000, Yokogawa has been promoting reforms in its business structure and group management. As a result, Yokogawa has achieved both sales and profit increases for three consecutive years.

With the aim of achieving its business objectives over the next five years, Yokogawa has reset the targets for its ACTION-21 strategy to realize the VISION-21 long-term corporate vision, which remains unchanged.

The six years from FY2000 to FY2005 were a structural reform phase in which Yokogawa aimed to establish a profitable structure. The five fiscal years from FY2006 are projected to be a growth phase during which Yokogawa aims to maximize its profits on the basis of that structure.

1. New Operating Targets
The new operating targets to be achieved by fiscal year 2010, which has been defined as the Second Milestone, those to be achieved in fiscal year 2006, the first year toward the Second Milestone, and those to be achieved by fiscal year 2008, the midpoint of the next five-year period, are as follows:


Groupwide Targets
                                                                                               Unit: billion yen
Index Fiscal year
2006
Fiscal year
2008
Fiscal year
2010
Consolidated orders *2   450 500 610
Consolidated sales 410 490 600
Consolidated operating income 31 55 75
Return on sales 7.6% 11.2% 12.5%
Total assets turnover  0.95 1.0 1.1
*2  Revised on Oct. 31, 2006           
Targets by Business Segment

(1) Orders
                                                                                              Unit: billion yen
Index Fiscal year
2006
Fiscal year
2008
Industrial automation and control business *2   320 320
Test and measurement business *2   81 110
New and other businesses  *2   49 70
Total *2   450 500

(2) Sales
                                                                                              Unit: billion yen
Index Fiscal year
2006
Fiscal year
2008
Industrial automation and control business *1  282 310
Test and measurement business *2   80 110
New and other businesses  *2   48 70
Total 410 490

(3) Operating Income Unit: billion yen
                                                                                              Unit: billion yen
Index Fiscal year
2006
Fiscal year
2008
Industrial automation and control business *2   35 39
Test and measurement business *2   2.5 13
New and other businesses  *2   (6.5) 3
Total 31  55
*1:Revised on Jul. 27, 2006            
*2:Revised on Oct. 31, 2006           

2. Basic Strategy

Yokogawa aims to dramatically improve its managerial efficiency in order to increase the corporate value of the Yokogawa Group. The initiative for this effort is "One Global YOKOGAWA." Yokogawa Group companies around the world will operate in a truly consolidated manner to dramatically improve managerial efficiency, solve problems from the customer's point of view (Customer Centric Solutions) using optimum technical expertise (Leading Edge Technology), and thereby achieve the Second Milestone targets.

The three priority measures Yokogawa will implement are:
1) Operating in a truly consolidated manner to dramatically improve managerial efficiency
2)  Boosting sales and profits not only in Japan, but on a global scale by increasing shares in world markets
3) Continuing to be committed to proactive technology development to create new demand and start up new businesses

3. Priority Strategies Classified by Business Segment
(1) Industrial Automation and Control Business
With a view to becoming the global number one company in this business segment by 2010, Yokogawa will secure the number one position in terms of market share in regions where it is competitive and where the market growth is high. In other regions, Yokogawa will make efforts to replace the products of  competitors with Yokogawa products.

- Markets in Japan
Taking advantage of its long-cultivated capability to offer reliable products and total solutions, Yokogawa will make efforts to further increase its market share. By integrating the information systems business with the industrial automation and control business, Yokogawa will expand its business area into manufacturing execution systems (MES), enterprise resource planning (ERP), and other domains to expand its market share.

- Markets outside Japan
Thanks to the effects of the Vigilance marketing campaign showcasing Yokogawa’s approach toward this business area, confidence in Yokogawa and industry recognition in markets outside Japan have improved dramatically. Taking this opportunity, Yokogawa will enhance its product development capabilities and actively endeavor to increase its market share outside Japan.

Yokogawa will promote product development and obtain a competitive edge by pursuing three excellence initiatives, namely, Production Excellence for realizing manufacturing innovations, Asset Excellence for making the optimum utilization of assets, and Safety Excellence for achieving plant safety.

(2) Test and Measurement Business
- ATE Business
Yokogawa will enhance its product competitiveness and reinforce its product lineups to increase its market share in this business area. To this effect it will further strengthen the R&D system in order to win the top share in the global markets of flat panel display (FPD) driver testers and memory testers for front-end processes. Concurrently, Yokogawa will continue to develop flash memory testers, next-generation memory testers for back-end processes, and SOC testers.

In addition, Yokogawa will increase testing efficiency, which is the greatest challenge facing users. To this effect it will use Yokogawa's comprehensive strengths to build solution models that streamline the overall semiconductor testing process, from design environment to application, servicing, and maintenance.

- Communications and Measurement Business

Yokogawa will intensively invest its resources in three areas where markets are projected to grow.

In the markets of electromechanical and energy-related products, Yokogawa will concentrate on automotive applications and applications related to alternative energy resources.

In the electronics and semiconductor markets, Yokogawa will focus on information appliances and other types of devices that have built-in CPUs in order to reinforce its family of waveform measuring instruments. In addition, Yokogawa will take the lead in offering combined analysis tools tailored for use with analog-digital hybrid circuitry.

In the communications and networking markets, Yokogawa will aim to increase its market share for optical and IP measuring instruments, targeting  next-generation communications networks.

(3) New and Other Businesses
- Photonics Business
Yokogawa aims to establish a backbone optical communications business and an optical packet network business.

In the backbone optical communications business, Yokogawa will develop and offer optical communications modules and subsystems using its leading edge compound semiconductor technologies. It thus aims to win a large share in the backbone optical communications market.

In the optical packet network business, Yokogawa will use its proprietary optical switching devices to realize optical packet networks much earlier than the original projection of the year 2015.

Yokogawa will pioneer an optical packet network market that is expected to grow rapidly as this technology is central to next-generation computers, for example, thereby winning a large market share in 2010.

- Advanced Stage Business
Using ultra-precise positioning control technology, high-performance control technology, and image testing algorithm quality levels as its key technologies, Yokogawa will further develop its large-size ultra-precision stage business.

- Life Science Business
Yokogawa will concentrate on the field of brain science, the study of brain functionality, and on the field of genomics, the study of cells and proteins, in order to establish this business area. Specifically, Yokogawa will direct its efforts toward the bioinstrumentation business focused on magnetoencephalographs, the business based on confocal scanners, and the business related to the support of drug discovery.

4. R&D Investment and Capital Investment Plans
In order to increase sales according to the strategies discussed above and achieve fiscal year 2010's operating targets, Yokogawa will proactively boost its R&D and capital investments in growing business areas. It plans to invest 120 billion yen in R&D over the three years from 2006 to 2008. This investment will account for 8.9% of the planned sales over the three-year period. Yokogawa also plans to make capital investments of 110 billion yen over the three years.

The priority areas of investment are:
(1) Industrial automation and control business: Yokogawa will develop strategic products necessary to become the global number one company by 2010.
(2)  Test and measurement business: Yokogawa will reinforce its lineup of semiconductor testers.
(3) New and other businesses: This priority area includes the photonics business, the advanced stage business, and the life sciences business, which may develop into Yokogawa's third, fourth and fifth core businesses.
(4) Investment in advanced technology development: This priority area will be characterized by efficient R&D with a focus on micro-measurement, field-ubiquitous computing, and photonic measurement technologies. 

  


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