THE NEW VALUE FRONTIER

Top Management Message

President and Representative Director KYOCERA Corporation
          Hideo Tanimoto

Since our founding, the Kyocera Group has remained devoted to growing our business and promoting social development based on our Management Rationale: “To provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind.”The core of our Management Rationale is the Kyocera Philosophy, which has been carefully cultivated over the course of more than 60 years.
Currently, we face a period of great change. With the expanding digital transformation and widespread adoption of 5G communications, Advanced Driver Assistance Systems (ADAS) and Artificial Intelligence (AI), as well as changing work-styles, a giant wave of change is upon us.
The COVID-19 pandemic has also prompted changes in the business environment and how we work. We must accelerate our transformation without changing the business philosophy we inherited from our founders. We will promote reforms based on new ideas without being bound by conventional wisdom or customs, so that new members can flourish more than ever in the spirit of our Management Rationale.

Entering a Period of Dynamic Change Worldwide

Since assuming the post of president in April 2017, I have observed the business environment surrounding the Kyocera Group changing significantly, and it is no exaggeration to say that we are entering a period of dynamic change around the world. Social trends, digitalization and globalization have advanced significantly. As a result, individual needs have diversified, and what people value is shifting from products and devices to experience. With the business environment changing drastically, the outlook has become more uncertain and opaque due to the lingering impact of the COVID-19 pandemic. With the business environment changing drastically, the outlook has become more uncertain and opaque due to the lingering impact of the COVID-19 pandemic. Meanwhile, the work-style reforms we have enacted, such as the introduction of remote work and flextime systems, have represented a dramatic leap forward. In the midst of such changes in the world we live in, companies are also required to take swift action. Businesses are being encouraged to shift from a precedent-based approach, which emphasizes certainty, to a proactive, risk-taking approach in which speed is the number-one priority.

We need to accelerate our business transformation further, and in new ways, such as by breaking away from our self-sufficient approach and actively utilizing external resources. Most importantly, our ability to turn social solutions into business strategies and increase our corporate value will be key to our success. As a company supporting the energy sector, developing renewables to promote carbon offsets1 with diverse technologies and business assets, we must give greater emphasize the social aspects surrounding our business.


1Carbon offsets: reductions in carbon dioxide emissions intended to compensate for emissions made elsewhere.


Restructured Organization Adapts to Changes in External Environment

In FY2022, we restructured to integrate our business divisions into three segments in order to adapt to changes in the external environment and optimize key technologies.

The aim of this restructuring is to change the organization from pyramid-style into a flatter structure, which can respond faster to diversifying needs as manufacturing shifts from mass production toward an age of mass customization.

Manufacturers like us cannot survive if we cannot keep up with changes in the market.

Thus, I thought it was necessary to review our organizational structure and personnel system to keep pace with the changing times.

In undertaking this restructure, our 16 product lines have been newly consolidated into three segments: “Core Components,” “Electronic Components,” and “Solutions.”

One of our strengths is that we deploy our businesses over a wide spectrum rather than specializing in a specific sector. However, a strong vertical awareness can divide organizations, and we faced challenges in maximizing synergy opportunities between individual businesses.

By consolidating the product lines into 3 segments, we will promote intra-organization exchange, break down hierarchical boundaries, and accelerate collaboration.

During the same time as this consolidation initiative, our back office divisions were integrated into “Headquarters” operations.

Following the organizational restructure, officers in charge of each segment were appointed.

By giving each officer in charge the authority of a top manager, our aim is to make swift and dynamic management decisions that go beyond existing frameworks and put the Kyocera Group on a new course for growth. We can now better execute strategies across business divisions, stimulating our staff and organizations, and optimizing management resources.

In the Core Component segment, we will focus on growth markets such as 5G and semiconductors, while strengthening our technological development to increase revenue growth and profitability. In the Electronic Components segment, first and foremost, we will strengthen our sales force by integrating our global sales organization with our US subsidiary, AVX Corporation (now KYOCERA AVX Components Corporation). In October 2021, we rolled out a new business brand called “KYOCERA AVX.” In addition, we will work to increase revenue and profits through the integration of manufacturing and development resources. In the Solution segment, we will strive to build new business models that utilize our communication technology and software.

In addition, we are proceeding with projects under the direct control of the president. For example, group-wide R&D will be conducted as a project under the direct control of the president, focusing on priority themes that best contribute to future growth. For example, in local 5G, technologies for base stations, sensors, software, AI, and others that were previously rolled out separately, and technology handled by each organization, will be integrated to bring hardware and solutions together. I think that one of the reasons why IoT is not as widely adopted as had been expected is that there are few companies that can handle all the products and technologies necessary for solving problems using IoT.

We possess technologies in both components and wireless communications systems, and will improve this area as one of our strengths. Going forward, the integration of hardware and solutions will become even more essential, and so we plan to make significant investments in the solutions field in the future.

Growth Strategy Maximizing the Collective Strengths of the Group

With regard to capital expenditure, we are planning a total of 450 billion yen in investment over the three years from FY2022. Especially in 5G-related business, where the next three years are pivotal to success, we will concentrate our efforts to become the market leader. We will aggressively expand into this growing market by optimizing our diverse business assets, such as our expertise in fine ceramics and wireless communications, as well as our global expansion capabilities. In the components business, we will apply the fine ceramic technology we have developed since our company's founding to supply key products such as fine ceramic parts for semiconductor manufacturing equipment, image sensor packages, optical communication packages, and communication module circuit boards. In terms of electronic equipment, we are utilizing our wireless communication technology to develop 5G handsets, base stations, routers, IoT communication equipment and other products. We plan to deploy local 5G systems in facilities, such as factories and stadiums, and drone-related 5G solutions for agricultural and inspection applications. Our plan is to aim for growth by maximizing the Group's collective strengths in these 5G growth areas and responding to all needs, whether it involves selling products and devices or experiences.

Regarding digital transformation, in April 2020 we assembled members from each department to promote company-wide digitalization and established our “Digital Business Promotion Group.” For manufacturing divisions, we have built an automated production system that utilizes IoT and AI based on our proprietary data platform to double productivity, and are now implementing it on the clay-type Li-ion storage battery production line at our Yasu Plant in Shiga. Using this case as a model, we plan to roll out smart factories groupwide. To support sales divisions, we are introducing Sales Force Automation to share sales information between divisions. We have begun full-scale operation of SFA in some business divisions.

In addition, to help support these efforts, we are promoting initiatives in the fields of data science, information security, and core infrastructure. In addition to promoting Group-wide digitization, we intend these efforts to bring drastic change in awareness among all employees.

Optimizing Management Resources to Achieve Growth Strategy

To implement such a growth strategy, we need to acquire and appropriately allocate management resources such as funds and staff. In raising funds, the ideal scenario is to increase our earning power to cover our costs, but in some cases, we will consider borrowing and issuing corporate bonds. We will also devote more consideration than before to the selection and concentration of our businesses. The aim of this restructure includes both business expansion and consolidation. In the future, we plan to concentrate our management resources on businesses that are expected to grow and businesses that offer greater social value.

In terms of human resources, we are working to achieve our Management Rationale of providing “opportunities for the material and intellectual growth of all our employees.” We are reviewing our personnel system to support new ideas and challenges in order to put the Kyocera Group back on course for sustained economic growth. In particular, we will create new specialist courses as a system that enables us to pick out talented employees. First and foremost, we will review our work styles with a focus on our technical research staff.

Reforming our personnel systems will promote exchanges between people of different levels. We hope to stimulate the entire Group by building a system in which veteran employees support the activities of more junior members. In addition, regarding the mobility of human resources, we will respond to changes in the business environment by acquiring staff from outside the Group, including mid-career recruits, to ensure diversity. People are the most important resource of all, and we will strive to acquire and develop talented human resources.

We will also consider acquiring external management resources through M&A and business alliances. SLD Laser, of the United States, which we acquired in January 2021, is a world leader in laser light sources based on gallium nitride (GaN) technology. We will continue to consider M&A and investment to acquire excellent businesses and technologies that will lead to greater growth and development.

ESG Management that Achieves Corporate Value and Social Solutions

Solving environmental challenges and fulfilling societal needs are extremely important themes for us in terms of creating innovative products and enhancing our corporate value. Since our founding, we have continued to improve our environmentally friendly ceramics technology. After Japan was hit by its first oil crisis, in 1975, when the whole country was calling for energy-saving measures, we were early to focus R&D on solar cells — and in 1993, we launched the industry's first2 residential solar power generating system. Since then, we have continued to expand our energy business by focusing on developing storage batteries and fuel cells. By further advancing these efforts, we will continue to emphasize Environmental, Social and Governance (ESG) measures as a corporation.

In terms of the environment (E), as a measure against climate change, we set long-term environmental targets in FY2020 to reduce our CO2 emissions by 30%3 by FY2031 and to increase our adoption of renewable energy tenfold3. However, we are currently considering setting even more ambitious goals. After starting an in-house proof-of-concept verification trial for renewable energy using storage batteries at our Yasu Plant last year, our Kokubu Plant this year started a verification experiment using a combination of solar batteries, fuel cells, and storage batteries. Regarding the circulation of resources, in addition to recycling, we must also extend the lives of our products, an area where our ceramic technology can be utilized. As an extension of this, we believe we can contribute to the development of new automotive products in the future.

On the social (S) side of things, we will work to further promote diversity and inclusion. Kyocera originally deployed Amoeba Management to ensure the involvement of all employees, and this initiative was very strong especially at the time I joined the company. However, as we got bigger and bigger, we gradually changed to a pyramid-type organization, making it difficult to demonstrate what makes Amoeba Management good to begin with. Currently, we are moving once again to reignite implementation of the Amoeba Management approach. Against this backdrop, we can smoothly transition to a flat organization that promotes horizontal collaboration. This will lead to diversity, and I would like to ensure this approach is ingrained in the culture of Kyocera. In particular, expanding our solutions business can be achieved only under such a system. We are also promoting greater gender inclusion in the workplace. For example, in the “Venture Startup Program,” we seek ideas from a wide range of employees regardless of age, gender, and experience. Currently, we are turning the development of applications for people with food allergies into a business. This is based on an idea from a female employee, and I think that in the future such bottom-up businesses will inevitably increase. Respect for human rights, particularly within supply chains, is another issue that must be addressed as a responsibility of a company that engages in business globally. In November 2020, we formulated the “Kyocera Group Human Rights Policy,” which we are sharing with business partners and suppliers to help ensure that human rights are upheld in all aspects of business.

In terms of governance (G), at the Ordinary General Meeting of Shareholders in June 2021, the number of internal directors was halved from 12 to six along with the appointment of officers per the organizational restructuring. After the General Meeting of Shareholders, the Board of Directors consisted of nine members, including outside directors, and the ratio of outside directors was increased to one-third. Through this change in the structure of the Board of Directors, we are clarifying the roles of management supervision and execution, as well as speeding up decision-making and enhancing our supervision system. To date, our business division leaders also served as either directors or executive officers. Through these changes, by making all business division leaders directors, and by transferring authority for HR and capital investment from top management to the officers in charge, we are trying to further accelerate decision-making. By enlisting new experts as outside directors, we expect to receive a broader perspective of advice on management activities from a more diverse pool of knowledge and experience. Furthermore, we expect an increase in the number of female directors in the future, and we intend to ensure diversity in our addition of outside directors as well. For many years, we have been working on our mission to contribute to the advancement of humankind and society through our business. Going forward, we will continue to steadily promote ESG management based on our belief that a business is not a proper business unless it aims to fulfill societal needs.

2Kyocera started selling Japan's first residential solar power generating system in 1993.

3Compared to FY2014


To Our Stakeholders

The business environment we are surrounded by is undergoing major changes due to the acceleration of digitalization and changes in people's values.

I see these changes in the times and society as the perfect opportunity to create new value.

Reflecting the Kyocera Group's vision to create a brighter future by encouraging every employee to continue taking on new challenges, the Group slogan for FY2022 was set as follows:“Let's recognize the drastic changes in our environment as opportunities for innovation, and exert our spirit of challenge aggressively to create a brand new future.” On the business side of things, areas where we can fully demonstrate our core competencies, such as the semiconductor and renewable energy fields, are expanding before our very eyes. I believe that stakeholder capitalism, which emphasizes relationships with all stakeholders, and the Kyocera Philosophy have a great deal in common, and I see it as our mission to both increase our corporate value and fulfill societal needs. Going forward, we will continue to accelerate these efforts to remain a company that is trusted and held in high regard by our stakeholders. Expect big things from the Kyocera Group in the future!

President and Representative Director KYOCERA Corporation
          Hideo Tanimoto