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Epson has announced its SE15 Long-Range Corporate Vision and SE15 (First Half) Mid-Range Business Plan (FY2009-FY2011). These plans determine the direction Epson will take in the medium- to long-term, and the measures it will take to achieve its aims.
Epson pursued the following five management policies as part of its Creativity and Challenge 1000 Mid-Range Business Plan. Here we will look at the first three policies, which have a direct impact on Epson's net sales and profitability.
Epson was able to increase sales volumes in its strategically important printer and 3LCD projector businesses by launching competitive new products. Epson anticipates medium- to long-term growth as a result of its entry into the commercial and industrial inkjet printer markets in which it sees high growth potential.
Despite successes in consolidating business sites and driving efficiencies in human resources, Epson was unable to return to profitability in these businesses. This was largely due to a delay in shifting to high-value-added markets and to a steep decline in sales volumes due to the economic recession.
Here Epson succeeded in cutting variable costs through measures such as reducing the number of printer platforms. However, these benefits were offset by the effects of the economic recession and the appreciation of the yen.
In establishing its Long-Range Corporate Vision and Mid-Range Business Plan, Epson concluded that the economic recession and the appreciation of the yen would continue for the foreseeable future, as would the downward spiral of prices and declining demand.
In these difficult circumstances, Epson will maximize the benefits achieved by Creativity and Challenge 1000 in SE15, and will tackle the remaining issues going forward by implementing bold measures
Epson's aim is to become "a community of robust businesses" by refining and further leveraging "compact, energy-saving, high-precision technologies," as its core strengths since its foundation, and by creating products and services that emotionally engage customers.
To achieve this, we will concentrate on the following themes:
To achieve the aims of SE15 and become a community of robust businesses, Epson is in its Mid-Range Business Plan seeking to create a profit-generating structure and rebuild the foundations of its business.
Going forward, Epson will continue to rebuild its business and product portfolios, and will go beyond its traditional operational framework as it takes the steps to achieve its aims.
Epson will urgently shift human and other management resources to businesses where it can demonstrate its strengths, to growth businesses, and to strategically important businesses.
As it launches its new Mid-Range Business Plan, Epson has concluded that while its small- and medium-sized display and semiconductor businesses possess their own unique strengths, the worsening business environment has made a return to profitability unlikely and that further growth is unlikely. Epson has therefore decided to embark on bold actions in these businesses.
As explained earlier, Epson's recent efforts to return this business to profitability have borne some fruit. However, profitability has suffered as a result of the economic downturn. Epson has therefore continued with its efforts to consolidate production sites and transfer staff to growth businesses and to strategic businesses within the Group.
Epson understands the difficulty of returning this business to profitability by its own efforts. In March 2009, the Company therefore came to an agreement to begin discussions with Sony Corporation over an alliance in the field of small- and medium-sized liquid crystal displays (LCDs), including the transfer of a part of business assets of the Company to Sony. Combining the technical, product design, and manufacturing capabilities of the two companies will help meet internal demand and improve the ability to respond to customer needs and increase product competitiveness.
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Epson has to date aimed to maintain plant utilization rates by promoting hybrid ICs that take advantage of its expertise in low-power-consumption and low-leak technologies, and by accepting silicon foundry orders. However, demand has fallen due to the economic recession, and profitability has declined rapidly.
Epson forecasts that even if the economy recovers, a return to profitability in semiconductors is unlikely. It has therefore decided to reposition the semiconductor business into a business that will leverage its technical assets to support other parts of the Group as Epson seeks to expand into the growth areas and strategic areas defined in SE15. Epson will continue to emphasize its low-power consumption analog mixed-signal technologies as a core product line, but will aim to establish a thoroughly streamlined operation.
In the medium-term, this will mean consolidating two domestic manufacturing sites into one. At the same time, personnel will be reassigned with the purpose of reinforcing product design and manufacturing technology resources in other parts of the Group.
Epson intends to leverage its semiconductor technological assets to reinforce its products and the overall competitiveness of its finished products and other electronic device businesses. In particular, Epson anticipates that its semiconductors can add value to inkjet printers and crystal devices.
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As Epson seeks to realize the goals of SE15 and the Mid-Range Business Plan, it will shift management resources such as personnel to business domains in which it can leverage its strengths, to growth domains and to strategic businesses.
Epson will leverage its core proprietary Micro Piezo technology to expand into new business domains.
In developed countries, Epson will continue to create products that emphasize ease of use and functionality, and which emotionally engage with customers. In emerging markets with growth potential, Epson will look to further respond to the needs of customers. Epson will also continue its efforts to drive down costs as it seeks to reinforce the foundations of its business.
In the business domain, Epson will take full advantage of the benefits of its Micro Piezo technology, including high-speed and high-quality printing, reduced environmental impact, stable print quality, and low running costs. This will enable it to expand usage in the print-on-demand (POD) and office markets.
As a result of technical capabilities that allow printing mechanisms to fire minute ink droplets at high speed and which permit a wide range of ink compositions, Epson is looking to widen the scope of its inkjet technology to include manufacturing applications such as LCD color filters, digital textile printers, industrial label printers, etc. In addition to forming strategic alliances, Epson will take advantage of the industrial robot technology of its Factory Automation Operations Division.
Epson aims to boost its world-leading projector market share.
In addition to confirming its position as the leading manufacturer of products in the volume zone, Epson aims to establish a firm presence in all price zones by taking advantage of its ability to manufacture high-temperature polysilicon (HTPS) TFT liquid crystal panels ("HTPS-TFT panels"), the key device used in projection systems, with the goal of increasing its presence in the market for high-brightness projectors.
Epson will also propose solutions in a wide range of usage scenarios to broaden the scope of projector applications.
Epson has positioned its quartz device business as the mainstay of its electronic device business. With its market-leading quartz device subsidiary Epson Toyocom Corporation working closely with the Semiconductor Operations Division, Epson has positioned its proprietary micro-sensing devices as a core technology, and will take advantage of sensors and other applications for crystal-related devices as it looks to roll out crystal modules for electronic appliances requiring data input and output.
Confirming its position as the market leader, Epson will strengthen the foundations of its electronic device businesses. To achieve this, Epson has determined that it needs to develop a closer relationship with Epson Toyocom's management resources. Accordingly, the Company has made Epson Toyocom a wholly owned subsidiary by conducting a TOB and share exchange. By strengthening the capital relationship between the two companies, Epson believes that it will be possible to effectively deploy management resources and speedily roll out the necessary measures.
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In accordance with the Mid-Range Business Plan, Epson will continue to transfer resources to growth businesses and strategic businesses. In addition, Epson will steadily replace temporary workers with full-time workers as it seeks to stem the outflow of labor costs.
Other plans call for a review and consolidation of domestic and overseas business sites, strict selection of capital expenditures, and rigorous analysis and selection of research and development themes. These efforts are expected to yield fixed cost savings of approximately \20 billion in FY2009.
The benefits expected to be realized as a result of the \76.2 billion in business structure improvement expenses and the impairment loss generated by the measures taken in the electronic device businesses are as follows.
According to the new Mid-Range Business Plan, Epson, facing harsh economic conditions, will take various measures to return to profitability and transfer its management resources to strategic areas. Epson will steadily move forward with its plan as it seeks to realize the goals of SE15.
* Please refer to the following for a more information about Epson's business plan:
Explanatory presentation:
http://global.epson.com/IR/pdf/20090312_presentation_eng.pdf 
Press release:
http://global.epson.com/newsroom/2009/news_20090311_2.htm
Interview with the president:
http://global.epson.com/newsroom/manage_news/manage_090430.htm
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