Yaskawa Electric : Creating Social Value and Solving Social Issues through Business

03 Creating Social Value and Solving Social Issues through Business

Business Model Transformation and Initiatives for Value Creation

Yaskawa launched the i3-Mechatronics solution concept in 2017. The three "i"s of i3, integrated, intelligent, and innovative, contribute to solving customer management issues* and are concepts that transform internal business models.

Yaskawa Group is transforming its business model by realizing and implementing the concept of i3-Mechatronics through the integration and analysis of data in YASKAWA Digital Transformation (YDX), utilizing YASKAWA Solution Factory and YASKAWA Technology Center.

In order to transform the group's business model, we built a digital management foundation as YDX, and implemented various measures including integration of functions in the value chains of Technology/Product Development, Production, Sales, and Quality/Service in the previous mid-term business plan Challenge 25 Plus.*2

Business model transformation through i3-Mechatronics

Integration of Technology/Product Development

Integration of Production Functions

Develop technologies and products that accurately meets customer needs timely by integrated development functions

Develop concept of "YASKAWA Solution Factory" that will transform manufacturing and business

Integration and Visualization of Data through YDX

Integration of Sales System

Analysis of

issues

Data linkage	Data
integration

Real-time feedback

Data analysis

Offer optimal solutions through

communication with customers including

top management

Integration of Quality/Service Functions

Develop new services that

contribute to improving customers'

production efficiency

*1 Yaskawa's unique approach to solving various manufacturing issues through i3-Mechatronics is described in "Differentiation Strategy" on page 9-10. *2 Details are explained on page 31-36 "Business Model Transformation" in YASKAWA Report 2022.

*3 Marketing activities to understand management challenges through direct sales by top executives

31 YASKAWA Report 2023

In the new mid-term business plan Realize 25, we will enhance the effectiveness of the i3-Mechatronics business model and create value. As a result, we will further enhance our competitiveness as a manufacturing company, expand our business area, and provide customers with value-added automation solutions.

01 Drivers of Value Creation

Value creation through

i3-Mechatronics solutions

Enhancing technological development capabilities to increase values of customers

Evolving group-wide manufacturing with i3-Mechatronics

Strengthening strategic approach to customers and their supply chains

Innovating product and service quality throughout the product lifecycle

Providing new value through YDX chain based on PLM restructuring

Create products and technologies to increase value of customers

Global cross-business development that integrates development process, and aggregates and creates intelligence

Open innovation with companies and research/ education institutions

Realization of cutting-edge manufacturing at mother factories and its global expansion

Strengthening production in demand areas, particularly in Europe and the United States

Promotion of internal manufacturing and automation

Dialogue and commitment with the management of customers through SET/MET*3

Strengthen technical support and proposal activities to improve equipment performance and strengthen solutions

Cooperation with equipment manufacturers and partners such as SIers

Improving product quality by utilizing market quality and service data

Provision of new services for predictive diagnosis and maintenance

Strengthening the global quality assurance system

Construction and advanced utilization of Yaskawa data lake

Data linkage throughout the product lifecycle

02 Management Policy03 Creating Social Value and Solving 04 Foundation of Value Creation Social Issues through Business

05 Corporate Governance

06 Corporate Data

YASKAWA Report 2023 32

03 Creating Social Value and Solving Social Issues through Business

Global Production System

Our Global Network

China: Shenyang

Production: AC servo drive

China: Changzhou

Production: Robot

China: Shanghai

Production: AC drive

India: Bengaluru

Production: AC drive

Japan: Kitakyushu

Asia-Pacific

Japan

Singapore: Asia HQ

China: China HQ

Japan: Yukuhashi		Japan: Iruma

Production: Robot

Production: AC drive

Production: AC servo drive

Breakdown of revenue by location (FY2022 results)

Asian countries except China 11%

Japan 29%

				Japan
	China	Consolidated	29%
		revenue
	24%
Overseas 71%	556.0
		billion JPY
		Europe	The Americas
		15%	21%

Breakdown of personnel by region (As of the end of FY2022)

Japan 44%

Asia
30%	Number of
	employees	Japan
Overseas 56%	(consolidated)
44%
13,094
Europe
14%	The
	Americas
	12%

33 YASKAWA Report 2023

Yaskawa Group conducts optimal production at 29 sites in 13 countries and regions around the world based on its policy of production in demand areas. We strive to reduce risks associated with foreign exchange, natural disaster, and geopolitical issues while taking advantage of having manufacturing sites close to our customers in terms of delivery times and building relationships.

During the term of the mid-term business plan "Realize 25," we will invest in Japan to further improve efficiency and added value through the implementation of "i3-Mechatronics," restructuring of plants and offices, and the expansion of in-house manufacturing of parts. At overseas locations, in addition to increasing capacity in demand areas in the United States and Europe, we will promote automation and in-house manufacturing in China and examine the feasibility of establishment of new parts factories for servos and drives in Southeast Asia. As a result, we will flexibly respond to changes in demand and the environment, as well as to risks, and realize stable manufacturing on a global scale.

01 Drivers of Value Creation

The Americas

Europe, Middle East & Africa

U.S.A.: The Americas HQ

			U.K.: Cumbernauld
U.S.A.: Buffalo Grove, Illinois

Production: AC drive, AC servo motor

Production : AC drive, AC servo amplifier

Germany: EMEA HQ

Slovenia.: Kočevje

Production: Robot

02 Management Policy03 Creating Social Value and Solving 04 Foundation of Value Creation Social Issues through Business

05 Corporate Governance

Local procurement rate at major production sites

	(FY2022 results)
YASKAWA ELECTRIC		85.4%
YASKAWA AMERICA		85.9%
YASKAWA ELECTRIC UK		66.8%
SHANGHAI YASKAWA DRIVE		92.8%
YASKAWA ELECTRIC (SHENYANG)		99.3%
YASKAWA (CHINA) ROBOTICS		91.9%
YASKAWA INDIA		30.8%

Regional breakdown of production capacity by product

(1 shift basis/FY2022 results)

	Japan		China	The Americas	Europe	Asian countries except China	1				2
AC servo			67			30
AC drive
		58		22	6	10	4
	Robot			52			41		7					0
0		20	40	60	80		100 (%)

YASKAWA Report 2023 34

06 Corporate Data

03 Creating Social Value and Solving Social Issues through Business

Financial and Non-Financial Highlights

Operating profit / Operating profit ratio

(billion JPY)	(%)
80.0		20.0

				68.3
60.0					15.0
53.1			52.9	12.3
11.2
		11.0
40.0					10.0
	24.2	27.2
20.0	5.9	7.0			5.0
0					0.0
2018	2019	2020	2021	2022	(FY)

Operating profit (left scale)      Operating profit ratio (right scale)

Although there was the impact of rising raw material and logistics costs and an increase in overhead costs in response to inflation, operating profit saw year-on-year growth because of the improvement in profitability due to price pass-through and the impact of the depreciation of the yen, as well as other income related to changes in the retirement pension system and the sale of real estate.

ROE / ROIC

(%)

20.0

	17.9
	17.7				16.2
15.0			14.3
				13.3	14.6
10.0
			8.0
		6.6
5.0		5.9	7.0
0.0
	2018	2019	2020	2021	2022 (FY)
	ROE		ROIC

In FY2022, ROE was 16.2% and exceeded the target of 15%. ROIC was 14.6% and was below the 15% target, as a result of increased borrowings due to strategic inventory buildup and shorter payment times.

Dividends per share / Payout ratio	Capital expenditures / Depreciation and amortization /
	R&D expenses

(JPY)						(%)	(billion JPY)
80.0						100.0	40.0
		87.5						35.7
60.0						75.0	30.0					27.6
									25.5
										24.2
					32.0					22.8
40.0					50.0	20.0	20.8
26.0	26.0		26.0		19.0	17.9	18.2	19.7 18.8
					17.1
				35.4				16.8	16.1	17.5
	32.3			32.3
		33.1
20.0					25.0	10.0
	26.0	26.0	12.0	26.0	32.0
0			12.0			0	0
	2018	2019	2020	2021	2022	(FY)		2018	2019	2020	2021	2022	(FY)

Interim dividend (left scale)  Year-end dividend (left scale)    Payout ratio (right scale)

Annual dividend per share for FY2022 was record high at 64 yen, an increase of 12 yen from the previous year. The dividend payout ratio was 32.3% and kept the level of 30%+α, which is the standard for our shareholder returns.

Capital expenditures  Depreciation and amortization  R&D expenses

Capital investments in FY2022 increased by 3.4 billion yen from the previous year to 27.6 billion yen. We focused on our core business areas, Motion Control and Robotics, and made investments to save labor, streamline operations, and improve product reliability. In FY2022, R&D expenses increased by 0.6 billion yen from the previous year.

Equity attributable to owners of parent / Ratio of equity	Interest-bearing debt / Net debt-to-equity ratio
attributable to owners of parent to total assets

(billion JPY)							(%)	(billion JPY)						(%)
400.0							55.0	100.0					99.6	0.5
					347.5					81.6
320.0							54.0	80.0		76.5			0.4
				291.2
				53.2							68.0
			246.3
	244.0				53.0
240.0	228.4				60.0	55.4					0.3
160.0				52.1			52.0	40.0						0.2
52.6							0.18			0.16
80.0							51.0	20.0	0.04		0.10			0.1
								0.04
0		50.7	50.5				50.0	0						0
	2018	2019	2020	2021	2022	(FY)			2018	2019	2020	2021	2022	(FY)

Equity attributable to owners of parent (left scale)

Ratio of equity attributable to owners of parent (right scale)

Total equity attributable to owners of parent increased by 56.3 billion yen from the end of the previous fiscal year to 347.5 billion yen. The ratio of equity attributable to owners of parent was 53.2%, which is higher than 50%, the level we consider appropriate for stable management.

Interest-bearing debt (left scale)		Net debt-to-equity ratio (right scale)

The amount of interest-bearing debt at the end of FY2022 was 99.6 billion yen, an increase of 31.6 billion yen from the end of the previous fiscal year. The net D/E ratio was 0.16 times, 0.12 points worse than the end of the previous fiscal year. Current liabilities increased compared to the end of the previous fiscal year due to an increase in short-term borrowings and other current liabilities.

35 YASKAWA Report 2023