Introduction

Q1You were appointed president of Shindengen Electric Manufacturing Co., Ltd. in April 2023. Please tell us about your personal principles and aspirations in this role.

A1I want to listen closely to stakeholders, with all employees working to find the best possible solutions from a customer-first perspective, and advance the harmonious management of a united Group.

I joined Shindengen in 1985; this year is my 39th with the Company. I have spent about one third of my career each in sales, administration and management—I started out in a semiconductor-related sales division, then worked in the Head Office administrative divisions, such as personnel and business planning, before serving as an officer for the Electronic Device Division Group and Sales Division Group. I also have a total of four and a half years of experience working overseas, in Singapore and Malaysia.

“Customers first” has been my personal credo since my first decade in semiconductor sales after joining the Company. Now, in corporate management, I intend to focus on activities that give priority to the businesses at the core of the Company’s management and the front-line business sites that serve as their foundations. At the same time, my experience in administrative divisions made very clear to me the difficulty of gaining Companywide consensus. Focusing on harmony, I will seek to understand the views and expectations of our full range of stakeholders in order to advance flat organizational operations and corporate management that fosters an open and vigorous culture.

Going forward, I plan to create opportunities to hear directly from our sales and production companies in order to unite and strengthen the Group.

For more information about

• The president’s career history, please refer to Board of Directors

Vision

Q2Looking ahead, how do you think Shindengen will have changed a decade from now?

A2By expanding sales of eco-friendly products, Shindengen will realize its Long-Term Vision 2030 of being a power electronics company needed by stakeholders.

The Shindengen Group has designated as its vision for 2030 to be “A power electronics company which creates environmentally friendly cutting-edge solutions via innovative technologies, contributes to a sustainable society, and continues to be needed by all stakeholders.” We arrived at this vision by asking how we could leverage Shindengen’s power electronics technologies to solve social issues, as we believe that contributing in the environmental field will be optimal in terms of the characteristics of our business, and that expanding our lineup of competitive products will generate a positive response from customers and society at large.

Shindengen’s eco-friendly products currently include high-efficiency devices (MOSFETs) and power modules in the Electronic Device Business; power control units (PCUs) and DC/DC converters for EVs in the Car Electronics Business; as well as quick chargers and AC chargers for EVs (an area of expected market growth) in the Energy Systems & Solutions Business, which handles the largest power sources of our businesses.

We will expand the scale of our business by promoting the technological superiority, originality and uniqueness of these product groups. By reorganizing these product groups into our core portfolio, we will realize our vision for 2030.

For more information about

• Long-Term Vision 2030, please refer to The Evolution of Our Business Model and Efforts to Realize a Sustainable Society

Strategy & Performance

Q3Please describe the progress of key initiatives and operating performance in the first year of the 16th Medium Term Business Plan (Fiscal 2022–2024).

A3We made progress in building the foundation necessary for the achievement of the Long-Term Vision 2030 in line with the plan’s three key themes, but operating performance fell short of plans.

Under the 16th Medium Term Business Plan, we designated the management policy of “Build a foundation aimed at the realization of Long-Term Vision 2030” and formulated measures based on three key themes.

Key theme 1: Earnings structure construction

Going beyond mere cost reduction, we are looking for opportunities to minimize total costs from upstream areas, such as design, to downstream areas, such as production and distribution. Currently, we are steadily advancing these efforts by carefully examining each of the individual processes of the value chain. In addition, for products we have been stably producing for a long time, we are also reviewing our manufacturing systems themselves to improve productivity.

Key theme 2: Building a foundation for expansion of growth businesses

We have focused on speed in product development to avoid getting our products to market after competitors. As a result, over the past few years, we have built up a strong lineup of strategic products for the automobile market, our mainstay, including MOSFET power semiconductor devices, power modules, motorcycle PCUs, and EV DC/DC converters and quick chargers. Having established technologies and a framework for the expansion of sales of these strategic products, which constitute our growth businesses, is one achievement.

Key theme 3: Focusing resources on product groups that can reduce greenhouse gas emissions

The products designed to maximize energy efficiency that Shindengen creates inherently contribute to the betterment of the environment. As such, we will focus technical personnel and other management resources on such products, mainly in growth businesses. We will also advance the appropriate allocation of resources to other ESG-related areas.

As the above illustrates, our efforts to build a foundation for the achievement of Long-Term Vision 2030 are progressing well.

Nevertheless, operating performance declined significantly in fiscal 2022, especially in the Electronic Device Business. This reflected a decrease in the utilization rate of our manufacturing lines due to customers’ production adjustments as a result of difficulties in procuring parts and materials, as well as economic slowdown in China.

Earnings were severely impacted by rising raw material and energy prices, and although we are working with customers to adjust sales prices, we have not been able to pass on 100% of the cost increase. Higher electricity prices have significantly impacted our semiconductor factories, which use a great deal of electricity, and the Electronic Device Business has faced particularly difficult circumstances in terms of maintaining profitability. These issues are ongoing, and we are advancing countermeasures.

As a result, in fiscal 2022, net sales came to ¥101,007 million, operating profit was ¥3,621 million, and profit attributable to owners of parent was ¥1,644 million, falling short of plans.

For more information about

• The 16th Medium Term Business Plan, please refer to Long-Term Vision
• Achievements by segment, please refer to Value Creation
• Operating performance by segment, please refer to Management’s Discussion and Analysis

Governance

Q4Could you explain the recent changes to Shindengen’s leadership?

A4Shindengen shook up its top leadership to forcefully advance Long-Term Vision 2030 and balance the skill matrix.

The change in president was aimed at ensuring that the Group achieves Long-Term Vision 2030. I hope to make full use of my experience and personal connections to carry out this mission. The change in president came at the second year of the Medium Term Business Plan and, as we work toward the plan’s targets, I will maintain the same basic policy as my predecessor.

In addition, we have two new outside directors. Yoshihiro Nishiyama brings extensive experience in corporate management. Given his wealth of experience, we expect that he will be able to provide us with wide-ranging advice from a well-informed perspective. Yaeko Kitadai, meanwhile, is an attorney. Legal risks are on the rise across many aspects of our business, so our expectation is that, as a director, she will be able to provide us with timely legal interpretations, including on dealing with such risks, from an expert perspective.

Looking at the overall skill matrix, I think that as a result of these changes, along with the changes among the other directors, we have achieved a good overall balance of skills on the Board.

For more information about

• The governance system and director skill matrix, please refer to Corporate Governance
• The views of the independent outside directors, please refer to Interviews with the Independent Outside Directors

Q5Please tell us your thoughts on Shindengen’s PBR, currently below 1, and returning profits to shareholders.

A5We aim to increase PBR to above 1 via profitable business growth, mainly in expanding fields, and the thoroughgoing promotion of capital efficiency with an eye to optimizing our capital composition.

We must address our price-to-book ratio (PBR), which is below 1. This is an important issue. Maximizing corporate value is, I believe, the most essential element to being appropriately evaluated by the stock market. One key aspect of this is constantly pursuing business growth. The other key aspect is enhancing capital efficiency.

As I mentioned, we have been releasing a lineup of new products that will drive the Company’s growth. It will therefor be crucial to launch these strategic products in a way that ensures they will be embraced by the market as we work to expand business while steadily securing greater earnings from such growth. We have designated earnings structure construction as a key theme under the plan, and, accordingly, will work to build business structures that secure profit by minimizing total costs and to appropriately adjust sales prices. Boldly and thoroughly implementing these and other basic measures will be essential.

In terms of financial capital, we aim to efficiently allocate capital to growth businesses to increase profitability, establish a firm financial base with an eye toward optimal capital composition, and return profits to shareholders. I believe doing this will improve such management indicators as ROE and ROA. As a result, PBR will rise above 1.

Environment & Social

Q6Could you please tell us about Shindengen’s environmental and human capital initiatives?

A6We will show our social impact through Scope 3 disclosure and enliven communication to develop the Asaka Office as a place of innovation.

Shindengen established its Basic Sustainability Policy in 2023, stipulating that we will actively promote ESG management as we pursue our corporate mission. In addition, we have identified four material issues related to the Sustainability Development Goals (SDGs), and we are proactively implementing disclosure regarding the implementation and results of related activities.

Environment (E): Eco-friendly products that contribute to efforts to combat climate change via energy efficiency are at the core of Shindengen’s business. Steadily manufacturing and releasing such products is therefore a key part of our environmental efforts. Particularly with regard to CO2 emissions reduction, we need to clarify the extent of the impact from our products. To this end, we will calculate and disclose Scope 3 emissions going forward.

In addition, to address the risk of climate change-related disasters, we are implementing business continuity management (BCM) drills and creating systems for confirming the safety of employees in emergencies. We are also vigorously advancing such initiatives as disclosure in line with the TCFD recommendations, acquiring SBT validation and endorsing the United Nations Global Compact.

Social (S): Our first priority in Group human resource initiatives is to ensure safe and secure working conditions. The COVID-19 pandemic changed working conditions significantly, and through the expansion of flex time and remote work systems, we have built frameworks that enable greater freedom for employees in their work.

However, we are also aware that we need to foster more opportunities and time for the kind of direct, face-to-face communication between employees that was lost in the pandemic. By effectively using the Asaka Office, our new facility completed in 2021 that combines head office, R&D, business management and other functions, I hope to create a work environment that feels like a well-harmonized home for employees.

More than direct manufacturing, the central focus of Shindengen itself lies in generating intellectual property, and any decline in that ability represents a loss of Shindengen’s core capabilities. People are vital to Shindengen. Direct communication between employees fosters a corporate culture conducive to innovation, helping us to meet the expectations of customers and society. I will therefore work to promote such communication as an important aspect of my job as president.

For more information about

• Environmental initiatives, please refer to Environment
• Social initiatives, please refer to Social