What Are the Secrets of Mitsubishi Electronics' Success?

By Syoko Tomita : Reporter of Toyokeizai
November 04,2014
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After the Lehman Shock, even as Japan’s other major electronics manufacturers were falling into the red, Mitsubishi Electric Corp. remained a solidly profitable blue-chip corporation. The latest fiscal period is expected to see record high corporate profits for the first time in seven years since March 2008.

The driving force behind the record profitability is the mechatronics division. The division’s corporate profits are forecast to increase to \124 billion at the end of the current fiscal period, up from \98 billion in March 2014. With Chinese smartphone manufacturers actively investing in high-performance facilities in order to improve productivity, there is expected to be an increase in demand for FA (factory automation) system projects. Mitsubishi Electric Executive Officer Akihiro Matsuyama expressed the view that, “Chinese smartphone manufacturers will continue to make capital investments.” And with solid exports by domestic auto manufacturers, the division’s automobile equipment business is expected to expand from the second half of the year.

The upwardly revised operating margin is 6.5%. Total sales are less than those of Hitachi, but operating margin is a step ahead of Hitachi’s 6.1% (forecast for March 21015) and Toshiba’s 4.9% (same period).

Mitsubishi Electric has set a target of “realizing quality growth” by fiscal 2020, aiming for \5 trillion in sales and an operating margin of 8%. Operating margin is increasingly solidly towards that goal, but of the \275 billion operating profit forecast for March 2015, the reality is that about 40% is earned by the FA systems and automobile equipment of the mechatronics division. The Information and Communication Systems division is responsible for projects such as the Himawari satellites, but it is connected to national policy and government budgets and is easily influenced by larger matters, and cannot be said to be entirely stable.

Update the revenue structure to avoid excessive reliance on FA system or automobile equipment business – that is the challenge for Mitsubishi Electric as it aims to be a corporation of high quality and high revenue.