Shareholder Communication: FY2024/25 Q2

Weighing equipment refers to equipment that measures such things as weight. When considering the type of weighing equipment that we are familiar with as part of our lives, this would be equipment that detects and displays the weight of items, such as a kitchen scale used for cooking and a bodyweight scale that we place in the bathroom at home. A&D has highly accurate electronic scales that can detect 1 μg (microgram), which is equivalent to one-millionth the weight of a one yen coin. This type of highly accurate equipment is being used as a mother tool in various industries such as in the development of new material, in new drug development departments at pharmaceutical companies, and institutions that investigate changes in the global environment using dust collected from atmospheric substances.
Recently, the need for this type of equipment has increased at manufacturing lines that produce batteries for EV (electric vehicles) and smartphones. A&D’s highly accurate weighing equipment is used to measure the weight of special liquids applied to LCD screens on smartphones as well as small quantities of liquids that are integral to the manufacturing process of new EV batteries.

DSP (measurement, control, and simulation systems) equipment is a general term for equipment that can control testing machines and calculate simulations in real time. When we first started this business, it mostly involved small devices such as controllers. Then we expanded the business by applying DSP equipment to large-scale system equipment such as the HILS* system, which performs simulations, tire testing machines, and vehicle powertrain testing machines that combine software and machinery. Currently, this type of system equipment is our main source of sales. Both DSP equipment and system equipment are used in the research and development of vehicles and vehicle parts. They are used for various development testing, obviously provide testing functions, and are utilized for tasks such as optimizing and automating the development conducted at development sites. It has become increasingly important to provide system-based solutions while market changes are taking place. We deliver our equipment mostly to automobile manufacturers and automotive parts manufacturers in both Japan and North America.

Demand in Japan, and the Asia & Oceania regions has remained steady so that our net sales have increased year on year.
Meanwhile, our shipment to North America is still sluggish, which has affected both sales and profit. However, there are signs of a recovery in demand for capital expenditures.

Orders for DSP equipment have been growing steadily. Demand has grown for EV testing systems, and we have also continued to see demand for internal combustion engine systems. Since sales for large-scale systems only tend to converge at the end of the year, it is necessary to strengthen our product line that can contribute towards sales in the first half of the year.
The growth of EVs in the global market has slowed slightly and I feel that the tide has changed. However, I don’t believe that the global trend towards achieving carbon neutrality will stop. The demand for electrification has remained at a high level, and capital expenditures that was restrained during COVID-19 has recovered so I am looking forward to what the future holds.

Increasing sales of weighing equipment overseas is a major theme for us. We need to focus on the North American market as part of this theme. Different countries and regions require different weighing equipment, and since the number of users of our e-commerce website has exceeded our initial expectations, we are improving our marketing capabilities and reviewing sales channels.

Our strategies are based on sharing issues with local subsidiaries and providing feedback to technical departments at head office. This involves conveying new product development policies and sales policies for each product line through direct communication, and then listening to the opinions of locally based members. Following this, we resolve the issues and concerns faced by these members, take home any technical homework, and then discuss the matter with our technical departments. We established online meetings during COVID-19. However, this summer, after I participated in the regional strategy meeting held at a local subsidiary in Michigan, USA, I felt that face-to-face is the best method of communication. I am able to better understand the feelings in the heart of the person I am talking to when I can look at them in the eye. When considering strategies for overseas, I reaffirmed my belief that this is the most important aspect. Members attending the meeting from the USA and Korea shared the same opinion, so I plan to increase the opportunity to have face-to-face meetings in the future.

We will continue to invest in the automation of production lines for weighing equipment at production subsidiaries in Japan and Asia. Above all, I anticipate much in terms of the technical capabilities of production subsidiaries in Korea. They have enough technical capabilities to develop production equipment with the same level of performance on their own once the equipment has been installed at a production site in Japan and its specifications are analyzed in detail. Many of their engineers also understand Japanese, so I expect that the quality of their products will increase as they proceed with automating their factory.

DSP equipment is mainly for the Japanese market. Japanese automobile manufacturers and their affiliate companies are investing more in their research and development departments and production equipment. Among these investments, support for electrification is receiving the highest priority, and we will promote contract testing services that request us to perform electrification testing using our equipment. We will revise our strategy direction while catching up with customer trends. When looking at the global situation, there is no doubt that there is a rising demand for testing equipment for electrification. Under the present situation, there is also a good chance that testing equipment for internal combustion engines, for which A&D has accumulated much technical prowess, will continue for longer than previously expected. Based on this fact, for the time being we will proceed in parallel to work on both types of equipment and determine the direction to take from next year.

Our sales in North America are not as large as those in Japan but we are aiming to increase our dealings with US automobile manufacturers from our base in Michigan to the same scale as our weighing equipment. Mr. Nagane just talked earlier about how face-to-face is the best method of communication and I agree with this sentiment. A few days ago, while holding a local strategy meeting for the first time in a long while, I received many requests about when to exchange information and what information should be exchanged. This experience made me realize that you must not rely on online communication if you are really serious about wanting to increase your business.

We still have much to do in the Asian region, but we are working on partnerships to provide DSP equipment in a system. In 2023, when I went on an inspection tour of a Chinese test machine manufacturer, I sensed a lot of expectation from them regarding Japan’s technical prowess. Our vision, including the Asian and North American markets, is to create new values together and offer it to customers. I would like us to make flexible progress, including collaborating with Japanese-owned companies.

I joined A&D as a new graduate over 40 years ago. Since then A&D has continued to grow and change due to mergers and acquisitions several times. However, the free and open-minded corporate culture that I felt when I first joined still remains part of A&D to this day. The most attractive trait of this company is the environment that facilitates us to turn our creative ideas into reality.

I was hired mid-career by A&D. The first thing I felt when entering the Development Department was that "technology driven" was ingrained in A&D. I realized that this company has grown by developing and creating products from new technology on its own.

I believe that creativity is the engine that increases the technical capabilities of a manufacturer. So taking a single engineer’s unique idea and having a team of people work on its implementation, this is the type of engineering team I want us to be. A&D has also embraced a variety of corporate cultures so I believe that newcomers who are starting from scratch and even engineers with a lot of experience working at other companies can grow in A&D without losing any of their individuality.

Of course, this does not mean that you can simply give shape to anything from whatever comes to mind. At the regional strategy meeting held in the USA, we talked for many hours, and future issues were about improving our global marketing capabilities. I believe that giving greater clarification to the purpose and targets for product development will further increase our technical capabilities, which is A&D’s greatest strength.