The Bud of Fanuc's Regrowth Is Not Just from the iPhone

By Toru Utsunomiya : Reporter of Toyokeizai
November 11,2015
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Fanuc's robot business has continued to be strong.  (Photo by Hideji Umetani)

At the beginning of a press conference held at a Tokyo hotel on November 2 for the "International Robot Exhibition 2015," Fanuc President Yoshiharu Inaba stated with a flushed face that "The government will launch a new robot strategy in February, and the industry is very excited about this."

The International Robot Exhibition is organized by several companies, including Yasakawa Electric, Fujikoshi, and Kawasaki Heavy Industries, who are members of the Japan Robot Association. The exhibition will be held this year from December 2–5 at the Tokyo Big Sight. Fanuc is one of the leading members of the organization and President Inaba is serving as chairman of the steering committee for this exhibition.

Inaba’s comments at the press conference aren't necessarily just pleasantries. Currently, Fanuc is experiencing tremendous sales growth in its robotics business, and he has every reason to be excited as a leading representative of the industry.

Things didn’t look so great a few months ago. In July, Fanuc announced a significant downward revision in its 2015 fiscal year financial results, which had a major impact on the Tokyo stock markets. The company then predicted that its operating profit for the year would be 218.2 billion yen (about $17.6 billion) instead of 264.6 billion yen (about $21.4 billion), as it had previously expected at the beginning of the financial year.

According to the company, the sharp fall in orders received with respect to the short-term demand from parts of the IT industry is the sole reason for the downward revision.

Although the company did not elaborate on the details of the “shot-term demand” because of the duty of confidentiality, it is a well-known fact that its big clients are Asian electronics manufacturers that make smartphone parts, including parts for the iPhone.

Orders for Fanuc's Robodrill, which is used in smartphone metal housing process, were strong from around 2014 to the beginning of 2015, but began to fall starting around June. Sales for the company’s Robomachine business, which includes the Robodrill, also took a major hit.

Sales have continued to significantly decrease, from 91.9 billion yen (about $7.4 billion) in January–March 2015 period to 79.9 billion yen (about $6.4 billion) in April–June period and 39.8 billion yen (about $3.2 billion) in July–September period.

Signs of bottoming out

However, signs of bottoming out are also beginning to emerge. In an earnings presentation held on October 28, Inaba stated that "there is movement to revive part of the special demand for smartphones."

Although order volumes have not yet returned to previous levels and there are no specific descriptions for future projects, rumors have spread in the market that orders may have already been received for the new model of the iPhone, which could be available as early as 2016.

Nevertheless, Fanuc made only a slight upward revision for its full-year operating profit estimate to 218.4 billion yen (about $17.7 billion). It is because its FA business, which develops servomotors and NC apparatuses for machine tools that are said to have 50% of the global market share, has been depressed due to the slowdown in the Chinese economy.

On the other hand, the robot business has continued to be strong. Sales for the robot business have steadily expanded from 77.9 billion yen (about $6.3 billion) in 2010 to 181.9 billion yen (about $14.7 billion) in 2014. The total sales in April–September 2015 hit 92.3 billion yen (about $7.4 billion), which is a 24% increase from the previous period. The increase has continued because of brisk demand in Asia in addition to the U.S. and Europe where Fanuc has a strong presence.

Unlike the Robodrill and the FA business, which are easily affected by new smartphone production or economic trends, Fanuc’s robotics business can expect continuous growth, since the demand for factory automation will likely continue regardless of economic movement.

Nonetheless, the company is also making a strategic move for the future of the robotics business. The production capacity with respect to its robots is 5,000 units a month, but the current production volume is quite tight at 4,000 units per month. So the company “may increase capital expenditure to expand the production capacity,” said Ianaba.

On the technical side, Fanuc is working on artificial intelligence (AI) and the Internet of Things (IoT). In September, Fanuc acquired 6% of the outstanding stock of Preferred Networks, a venture company with state-of the-art technology in the development of deep learning and machine learning that identifies the optimal operations that machines can learn themselves.

In an interview with Toyo Keizai in May, Inaba shared his vision for the future, saying that "through automation and robotization, people can secure time they can use freely. They can use the spare time to enjoy their lives more."