Recently, Omron, a well-known Japan manufacturer of industrial control systems and electronic components, announced a global workforce optimization program aimed at optimizing the cost structure by adjusting staffing to drive profitable growth.
According to the announcement, Omron plans to lay off about 2,000 employees worldwide, including 1,000 in Japan and 1,000 overseas. This move is one of the company's management strategies under the "NEXT2025" structural reform plan.
For Japan-based employees, Omron intends to accept voluntary retirement applications from April 10 to May 31 for full-time and senior employees who have been with the company for three years or more and are at least 40 years old as of July 20, 2024. This plan is expected to result in a reduction of approximately 1,206 employees in Japan.
At the same time, Omron's overseas layoff plan is also underway, and the specific results have not yet been announced.
It is worth noting that the planned layoffs are expected to incur a one-time cost of approximately 28 billion yen, which Omron has included in its full-year consolidated financial forecast for fiscal year 2024 (effective May 8, 2024).
According to the financial report documents, Omron's performance in fiscal 2023 showed a downward trend, and net sales decreased from the previous fiscal year. Among them, the healthcare business benefited from the recovery in many places, especially the increase in demand for blood pressure monitors and other healthcare equipment; The Social Systems, Solutions and Services business also benefited from the growth in demand for renewable energy. However, sales in the Industrial Automation business declined year-over-year due to weak global manufacturing capital investment demand and distributor inventory adjustments. At the same time, the Device & Module Solutions business experienced a significant decline due to weak demand from the consumer sector.
In the past five years, Omron's performance
Regarding the performance of the group's business in 2023, Omron pointed out that although it has achieved remarkable results in price optimization and variable cost control, the company's gross profit margin has shown a downward trend year by year due to changes in business structure and product mix, as well as the negative impact of inventory overstock and write-downs in the industrial automation business. In addition, selling, general and administrative expenses increased during the year due to higher personnel costs due to inflation and increased investment in selective and systems investments.
As a result of these factors, the Omron Group's operating income declined significantly compared to the same period last year, and its net income from shareholders also decreased significantly by 8.1 billion yen. In particular, the revaluation loss on JMDC Inc. stock became one of the significant factors contributing to the decrease in net income. Excluding this exceptional loss, Omron's shareholders' net income was still 20.1 billion yen, but it was still down 72.8% from last year.
Particular attention is paid to Omron's industrial automation business (IAB), whose net sales account for 48% of the group's total sales, but in fiscal 2023, net sales of this business segment fell to 393.572 billion yen from 485.738 billion yen in the same period of the previous year.
In the past five years, the growth rate of Omron's automation business has been compared
In the past five years, the performance of Omron Automation's business
01. About Omron
In 1933, Omron came into being in Kyoto, Japan. Its headquarters is located here, and its product fields cover a wide range of industrial automation control systems, electronic components, automotive electronics, social systems and health and medical equipment, with a wide range of products up to hundreds of thousands.
Omron's founder, Kazuma Tateishi, was born on September 20, 1900. After graduating from university, he worked as an electrical mechanic at the Hyogo Prefectural Office, and then joined Inoue Electric Manufacturing Co., Ltd., where he worked on the localization of "induced protective relays". In 1930, Kazuma Tateishi founded the "Saiko Society". With his extensive practical experience, he founded Tateishi Electric Manufacturing in 1932, the predecessor of Omron. In the early days, the company mainly produced timers and protective relays for X-ray photography.
At the end of World War II, Tateshi Electric started the road of diversified development, and got involved in the production of many products such as electronic stoves and women's hair dryers. In 1950, Tateishi Electric was restructured into a joint stock company and named "Omron Tateshi Electric Co., Ltd.", thus opening a new chapter in Omron. In 1990, the company became unified with its name and brand as "Omron Corporation" and gradually moved towards globalization.
02. the founder's third son and China
The founder of Omron is Kazuma Tateishi, and the founder who led the group to take off is Yoshio Tateishi.
Yoshio Tateishi is the third son of Omron founder Kazuma Tateishi and the third president of Omron. In 1963, Yoshio Tateishi joined Omron, a company that he has been associated with ever since. In 1987, he was promoted to president, a position he held for 16 years. During this period, he showed extraordinary wisdom and courage to lead the Omron Group all the way. With a series of precise decisions and efficient management, Omron has flourished, with an astonishing 4-fold increase in overseas turnover, successfully becoming one of the leading giants in the world's microelectronics industry.
In 1990, Yoshio Tateishi made a far-reaching decision to rename the company "Omron". This change is not just a name change, but also a key step in the company's internationalization process, which greatly enhances its global presence.
When it comes to expanding into the Chinese market, Yoshio Tateishi has also shown keen insight and unwavering determination. In 2002, when he held the opening ceremony for Shenzhen Electronic Components (Shenzhen) Co., Ltd., he knew that China had become the focus of the world economy after its successful accession to the WTO. Based on this judgment, he decided to move Omron's electronic component production base to China and set up a headquarters in China, second only to the headquarters in Japan. At the same time, it has successfully established 18 legal entities in the "Cross-Strait Three Regions", and is determined to build a second Omron in this vast land.
Yoshio Tateishi has achieved remarkable business results in the Chinese market. His transfer of production base to China fully demonstrates the importance and firm confidence in the Chinese market. The establishment of 18 subsidiaries in China has greatly expanded Omron's influence in China and significantly expanded its business scale. Through this series of measures, Yoshio Tateishi has deepened Omron's strategic layout in the Chinese market and laid a solid foundation for its long-term stable development in the Chinese market.
According to the data, in fiscal year 2022 (ending March 2023), Omron's net sales from Greater China reached 211.528 billion yen. And in fiscal year 2023 (ending March 2024), although net sales in Greater China decreased from the previous year to 171.932 billion yen, they still accounted for 21% of Omron's total sales.
In the past five years, Omron's net sales in Greater China
03. Challenges encountered in the Chinese market
As the global market continues to evolve and become increasingly competitive, many multinational companies are constantly optimizing their global strategies to better adapt to the new market environment. As a world-renowned manufacturer of automation control and electronic equipment, Omron has also implemented a series of key strategic adjustments in the Chinese market.
On July 16, 2018, Omron Precision Electronics (Suzhou) Co., Ltd. announced that it had entered a state of permanent shutdown and started the placement of employees. This decision was not a sudden move, but Omron's proactive response to the dramatic changes in the smartphone market in recent years. With the rapid development of smartphone technology, there has been a major shift in the market demand for the backlight panel business, and Omron Head Office has decided to optimize and restructure the backlight panel business in order to meet the challenge.
As one of Omron's important production bases in China, the Suzhou plant was established in December 2003, covering an area of 30,000 square meters, with a production plant area of about 7,000 square meters, mainly producing optoelectronic devices such as backlight panels for liquid crystals. However, due to the rapidly changing smartphone market, the plant's production capacity was becoming more and more difficult to meet market demand, so Omron made the decision to close the plant.
Following the Suzhou plant, Omron has decided to discontinue the backlight business of its subsidiary Omron Precision Electronics Co., Ltd. and plans to close the Dongguan production site by the end of fiscal 2019 (to March 2020). This decision is also based on in-depth analysis and judgment of the market environment. Omron believes that the current market environment of the project business has changed dramatically, and it will be difficult to continue to move forward with the related business. Therefore, in order to reduce operational risks and optimize resource allocation, Omron decided to terminate this business.
This decision has had a level of impact on local employees and the community. It has been reported that if the decision is implemented, it will probably result in about 765 employees losing their jobs. However, while Omron is closing its factories, it is also actively promoting employee relocation, striving to provide reasonable compensation and employment opportunities for affected employees.
Although Omron has closed some of its factories in China, it has not completely withdrawn from the Chinese market. On the contrary, Omron is still optimistic about the potential and prospects of the Chinese market and continues to increase its investment in China. At present, Omron has production bases in Dalian, Shanghai, Guangzhou, Shenzhen and other places in China, and has R&D bases in Shanghai and Dalian.