Business News

Epson Announces SE15 Long-Range Corporate Vision and SE15 (First Half) Mid-Range Business Plan (FY2009 – FY2011)

Wednesday 11. March 2009 - Responding to the rapid changes in the business environment, Epson (hereinafter used to identify the Epson Group, unless specified otherwise), today announced its "SE15" long-range vision for achieving future business growth and its envisioned state in the year 2015. To make this vision a reality, Epson also announced its three-year "SE15 (First Half) Mid-Range Business Plan", which commences from FY2009.

1. Review of and recognition of issues in the “Creativity and Challenge 1000 Mid-Range Business Plan” (three-year mid-range business plan initiated FY2006)

In FY2005, aiming to strengthen profitability, Epson formulated its “Creativity and Challenge 1000 Mid-Range Business Plan” (hereinafter referred to as “06 mid-range business plan”) with the ultimate goal of generating annual ordinary income of ¥100 billion or more by reorganizing management structures, redefining product portfolios, and streamlining costs across divisions. Epson implemented numerous measures from FY2006 through FY2008 in order to realize the targets set out within the business plan.
In the information-related equipment segment, which includes finished products such as printers and 3LCD projectors, Epson made progress in standardizing platforms and reducing costs. This, combined with the development of highly competitive products that met customer expectations, enabled Epson to launch products that were both profitable and functional. The Company also made inroads into domains viewed as conducive to future growth through tangible steps such as the expansion of inkjet technology into business and industrial domains.
In the electronic devices segment, Epson implemented various restructuring measures in the small- and medium-sized display and semiconductor businesses. These included the reduction of fixed costs, the reorganization of operations, and the realignment of the product portfolio to areas of high added-value. Although there were delays in lowering unit sales prices and shifting to more profitable product areas, Epson was able to achieve certain positive results in the first half of FY2008. Despite this, due to the effects of the increasingly severe global economic downturn since October 2008, the rapid deterioration of the environment surrounding the electronic devices segment is expected to result in an operating loss.
Seeking to reform its corporate governance by separating the management and execution of operations and increasing management accountability, Epson reduced the number of directors and introduced a system of executive officers, resulting in the formation of a management structure that facilitates swift management decisions. However, as changes in the business environment continue to accelerate, Epson aims to further enhance its speedy management style.
In terms of financial results during the period of the three-year 06 mid-range business plan, the execution of various measures, along with the effects of a weaker yen, allowed Epson to improve its profitability in FY2007. However, in FY2008, the accelerating global economic downturn brought on by the subprime loan problem is forecast to produce a significant loss.
Considering that this severe economic environment will continue for the foreseeable future, Epson is fully aware that in order to rebuild a highly-profitable structure, certain businesses within the Group cannot continue to exist in their current form. To that end, Epson now recognizes that to swiftly put the company back on a new growth path it is critical to reassess its strengths, and shift assets from businesses not expected to produce acceptable profit or growth to new growth domains and priority areas.
2. SE15 Long-Range Corporate Vision

As a result of this review of the 06 mid-range business plan, and consideration of a new long-range vision, Epson in 2015 is envisaged as becoming “a community of robust businesses”, by refining and further leveraging Epson’s core strengths since foundation of “compact, energy-saving, high-precision technologies”. This has been formally set out in the SE15 Long-Range Corporate Vision.
Following from this, the new SE15 (First Half) Mid-Range Business Plan, which covers the three years starting FY2009, will focus on the restructuring and reinforcement of the business foundations through shifting assets to stronger businesses.
SE15 Long-Range Corporate Vision

“Epson is committed to the relentless pursuit of innovation in compact, energy-saving, high-precision technologies, and through the formation of group-wide platforms will become a community of robust businesses, creating, producing, and providing products and services that emotionally engage customers worldwide.”
Implementation of the SE15 Long-Range Corporate Vision (structural change and rebuilding strategies)

Move ahead by focusing on areas in which we can leverage our strengths
Thoroughly reinforce the foundations of core businesses
Use technological assets and selling power to create new products and establish new businesses
Business domains specified for reinforcement in the SE15 Long-Range Corporate Vision

Printers (fortified presence in emerging markets and the business sector)
Commercial and industrial sectors, factory automation (expand commercial printing field, further develop applications of inkjet technology)
3LCD projectors (reinforce no.1 positioning, increase market share)
Crystal devices & sensors (reinforce no.1 positioning, make Epson Toyocom a wholly-owned subsidiary to realize efficient and flexible business management, strengthen development of sensing devices)
3. SE15 (First Half) Mid-Range Business Plan – Points and Measures

Epson positions the SE15 (First Half) Mid-Range Business Plan as the initial roadmap for achieving its SE15 Long-Range Corporate Vision, by establishing a path to growth over the next three years. In those three years, Epson will first aim to leverage the strength of its proprietary technologies, and redefine which businesses can expect growth and which will face issues in returning to profitability. After shifting assets to businesses with growth potential, Epson will seek to foster a new generation of businesses. For unprofitable businesses, the Company will consider a range of options, and promptly implement appropriate measures.
1) Plans for businesses with growth potential

Printers
Provide printers that offer ease-of-use and emotionally engage consumer and business customers worldwide with innovations in inkjet technology and business models, centered around Epson’s original Micro Piezo technology.
Expand operations through an increase in the number of models for emerging markets, and the launch of environmentally-considerate models.
Expand into commercial and industrial sectors through the application of Micro Piezo technology.
3LCD projectors
As the world’s leading manufacturer, aim to maintain top share, increase presence in the high-end projector market by leveraging the advantages of the core high-temperature polysilicon TFT LCD technology, and seek to enter and develop new business domains.
Quartz devices, sensors
Make Epson Toyocom a 100% subsidiary to improve management responsiveness and efficiency, and to reinforce Epson Toyocom’s position as the leading company in the quartz device market.
2) Plans for unprofitable businesses

Small- and medium-sized display business
Worsening conditions in the market environment have eroded the competitiveness of the small- and medium-sized display business. Efforts are being made to increase efficiency through the consolidation of domestic operations, including measures such as relocating head office functions to the Tottori Plant and accelerating personnel reassignment to growth areas within the Epson Group. Epson will continue to consider various options, and will make a fundamental decision regarding the future direction of the business that is not merely an extension of current efforts.
Semiconductor business
In the semiconductor business, where Epson forecasts issues in a return to profitability in the current environment, the focus will continue to be on products incorporating low-power mixed-signal analog technology. Operations will be overhauled, however, and manufacturing, which currently takes place in two domestic locations (Fujimi Plant, Nagano, and Sakata Plant, Yamagata) will be consolidated in the Sakata Plant over the medium-term. Also, technical resources, such as semiconductor technology, will be shifted to bolster growth in other business areas, such as printers and other finished products, and quartz devices.
4. Financial targets for the SE15 Long-Range Corporate Vision, and the SE15 (First Half) Mid-Range Business Plan

The financial targets for the SE15 Long-Range Corporate Vision are as follows.
Year Target
FY2015 ROS: 10% or above
ROE: 10% or above on a continuous basis

The financial targets for the SE15 (First Half) Mid-Range Business Plan are as follows.
Year Target
FY2009 Aim to breakeven, and carry out the initial goals of SE15 of reinforcing the business foundation
FY2010 Establish a sustainable profit-generating corporate structure
FY2011 Establish new paths for growth with the aim of realizing the SE15 vision