Top Management Message

The Kyocera Group will develop businesses that contribute to solving societal issues and evolve our Amoeba management to keep pace with these changes and realize our vision.

Since its founding, the Kyocera Group has expanded its business and supported social development through 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." Our management will remain rooted in this Kyocera Philosophy, which has inspired our corporate culture for over 60 years.
Today, we find ourselves in a time of great change, with rapidly evolving social and industrial structures. We are required to adapt to changes in society and industrial structure brought about by the evolution of digitalization and AI, and we must create new businesses that address societal and environmental needs. Against this background, we announced our medium-term management plan in May 2023. To accelerate our growth and achieve our goals, we will improve our business not only in traditional metrics but also by applying Kyocera's unique Amoeba Management system in response to changing markets. In the process, we will implement new capital strategies and sustainable practices to strengthen our management, foundation, and expand businesses that contribute to fulfill societal needs.

Looking back from the time I became president to today
Promoting intra-company collaboration and participation by new employees to reinforce a culture of creating value

After assuming the post of president in 2017, I noticed that "walls" between departments had become greater as the company expanded, creating obstacles to further growth. One of Kyocera's major strengths is its diverse business operations. Although each department has unique technologies and skills to create new value, I felt that the culture of collaboration to create new things was being lost. This led us to establish Kyocera Minatomirai Research Center to promote cross-divisional collaboration, reform our R&D departments, and revitalize internal communication. Next, we reorganized our diverse business portfolio into three core segments, stimulating deeper interaction beyond each segment's internal departments, and developing a stronger base for creating new value together. Factories have gradually added automation, and production of storage batteries at the Yasu Factory in Shiga is now completely automated. Issues we encountered at the beginning have been resolved through functional improvement, demonstrating the value of automated production at other factories. This success was made possible by newer employees participating in design and development. The challenging nature of their work made them highly motivated and goal-oriented, which I believe is the key to ensure job satisfaction. I will strive to continue building structures that encourages the active engagement of newer employees in meaningful work.

Societal challenges including our environment
From ensuring a more comfortable workplace to reducing greenhouse gas emissions, digitalization and AI can help address societal needs

The most serious issues affecting our business include the declining birthrate and aging population, which are already constraining labor resources. As a countermeasure, we must improve productivity through digitalization in factories and indirect departments. Regarding generative AI, which is rapidly advancing, we are assessing both practicality and safety in anticipation of implementing it at Kyocera. Further, we plan to make improvements in the work environment to better accommodate a diverse range of employees and create a better gender balance, especially in manufacturing sector.
Reducing greenhouse gas (hereafter, "GHG") emissions is a top priority requiring greater use of renewable energy and higher-efficiency equipment. Progress has been made with solar power generation systems to secure our power supply and address the rising cost of electricity, but more work is needed. Ceramics manufacturing is power-intensive and emits significant GHG. We are therefore implementing aggressive efficiency measures to reduce manufacturing times and increase furnace productivity. Our GHG reduction program will stand on the three pillars of rising renewable energy use, installing new equipment with the highest power efficiency, and improving our manufacturing productivity.
Another example of our group's efforts to address societal needs with unique products and services is our FOREARTH inkjet textile printer, which was announced in Japan and Italy this year. Conventional textile printing requires tremendous volumes of water in washing and dyeing processes, leading to serious river and soil pollution. FOREARTH resolves this issue with an innovative technology for water-free textile printing. In addition, FOREARTH overcomes the long-standing inability of conventional equipment to print fabric economically in small quantities, which can help end the practice of producing huge fabric and garment inventories that become waste as fashions change.
Regarding renewable energy, we are not only adopting it internally, but also promoting the trend toward net-Zero Energy Housing (ZEH) in apartment complexes by combining our power storage batteries with solar electric generating systems. Our components businesses are also focused on this initiative through high-efficiency energy-saving lighting devices now under development using our proprietary laser device technology.
To bring value to society, we must continue developing products that can help solve environmental and societal challenges. Some have suggested that we withdraw from the solar energy business if it is not sufficiently profitable. However, we have continued this business because it addresses a societal need. I believe we must continue businesses that contribute solutions to societal challenges. This is one of the key ideals built into Kyocera by our founder, Kazuo Inamori.

Toward achieving the medium-term management plan
Sharing our commitment to growth: announcing the plan's strategic focus on semiconductor and electronic components

In our medium-term management plan, we set a goal of achieving 2.5 trillion yen in annual sales revenue, with 14% pre-tax profit ratio, and 7% return on equity (ROE) by the fiscal year ending March 2026. Further, by the fiscal year ending March 2029, we are targeting sales of 3 trillion yen, pre-tax profit of 20%, and ROE of 10% or more.
Earlier in my career, Kyocera experienced a long period of rapid expansion; however, after 2000, our growth slowed down. I experienced both eras, and in comparison, I feel that Kyocera's earlier vitality was greater. Consequently, we decided that re-energizing the company would call for us to target a new stage of growth, so we set a lofty goal of 3 trillion yen in annual sales. The medium-term management plan represents our desire to steadily move forward in achieving this. In fact, we felt it would be better to share our commitment not only within the company but also with external stakeholders, to create a greater sense of urgency, so we announced our targets publicly. The announcement was received very favorably by our stakeholders, who have found our strategies and directions easy to understand, and employees have seen it as an exciting plan as well. We expect strong growth in the parts-related business, especially in the Core Components segment's semiconductor-related products. This market is poised to expand in the near future as mass production of 3-nanometer semiconductors begins in 2023. We will make aggressive upfront investments, allocating nearly half of our plan's total capital investment to semiconductor-related parts. In addition, we will build a new factory in Isahaya City, Nagasaki Prefecture, to open in fiscal 2027, and will accelerate other initiatives such as building new production systems and introducing new equipment to manufacture cutting-edge products.
In the Electronic Components segment, Kyocera made U.S.-based KYOCERA AVX Components Corporation (hereafter, "KYOCERA AVX") a wholly owned subsidiary two years ago. This was done to promote growth by integrating Japan-based electronic components headquarters, which is strong in Japan and Asia, and KYOCERA AVX, which is strong in U.S. and Europe. Currently, KYOCERA AVX is responsible for all sales in Europe and U.S., and will expand into Asia starting in 2023. The two groups are collaborating in manufacturing and development, and are moving toward full integration by establishing sub-segments together in multilayer ceramic capacitors (hereafter, "MLCCs"), connectors, and R&D. Kyocera's advanced technology in miniaturized products, like crystal components and MEMS oscillators, will be further commercialized. KYOCERA AVX is very strong in tantalum capacitors, and it will develop continuously. By combining our strengths, we will make this segment a pillar for growth.
In the Solutions segment, we plan to continue developing businesses that can help resolve societal challenges. We are continuing the solar cell business which offers significant social value. To ensure a flexible response to evolving demands in Japan's energy market, we will sell renewable electricity in addition to solar cells.
Our Communications unit will stop targeting smartphones for the consumer market, and will focus instead on providing rugged mobile solutions for enterprise and professional users. These decisions were based on annual assessments of business performance. Underperforming segments are tasked to redefine their business mission as part of the "selection and concentration" process of deciding whether to continue or withdraw from businesses. Although Solutions sales revenue certainly grew in the past two years, profits have not met expectations. We will continue to pursue the approaches specified by the medium-term management plan to expand profits and improve both ROE and price-to-book ratio (PBR).

To strengthen management and achieve our vision:
Reinforcing a culture of openness and employee engagement by maximizing the unique strengths of Amoeba Management

The term "material" in the Kyocera Management Rationale is generally understood as "compensation." The term "intellectual," however, is harder to define. To ensure a fulfilling workplace, I believe we must continually optimize growth opportunities for everyone and maintain a culture of openness where all employees can feel comfortable and secure. To facilitate this, we began conducting evaluations of supervisors by their employees in Japan operations during FY 2024. We also conduct annual workplace vibrancy surveys to monitor the changes over time. Because employee satisfaction with the work environment is not always immediately evident, we must continually seek better ways of measuring our success. We need performance indicators for other social and environmental activities as well and are currently considering systems to do this.
One of the functions of Kyocera's unique Amoeba management system is to cultivate a "managerial mindset" among all employees, which is suitable for small groups of about 10 members. In the past, when Kyocera was smaller, managing the profit-and-loss status of an Amoeba was simpler. Today, some individual departments sell billions of yen per month, and the size of many Amoebas has expanded, which creates challenges for to the existing profit management system.
At the same time, the technologies we work with today have become so advanced that it is often no longer possible for a single engineer to complete a task alone. A team-based approach is more important than ever to solve problems. This will require us to evolve our systems, including Amoeba Management indicators, according to the scale of our business.
The image of a leader leading a team has also changed. The top-down style of directing a project by giving orders is obsolete. We need leaders who pull teams together and bring out everyone's strengths. While this involves trial and error, we are working through the process to not only grow our business, but also win employees' hearts and minds.

Approaches to Governance
Enhancing Sustainability Through Corporate Governance and Risk Management

Chairman Goro Yamaguchi is leading an effort to enhance the effectiveness of the Board of Directors. Following the election of Directors at the 69th General Meeting of Shareholders, two of our three Outside Directors now bring chief executive experience from other companies. Outside Directors with top executive perspectives strengthen discussion of business operations and targets, making Board meetings more productive. Of course, opinions from directors with other backgrounds, such as law, are also valuable, and we will continue to seek diverse viewpoints. As part of our policy to enhance gender balance on the executive team, we elected one female Outside Director, and two female Executive Officers.
We have implemented a variety of new risk management initiatives since FY 2023 and are now discussing whether to maintain the current framework or expand it. Rising digitalization and globalization are increasing risk exposure on multiple fronts, including cyberattacks. Which was perpetrated on KYOCERA AVX in 2023. To prevent recurrence, we are continuously investigating the risk landscape and strengthening security with new countermeasures. At the same time, we are assessing the rising risk from climate change, which causes unprecedented weather events and local natural disasters. We are reinforcing our initiatives aggressively in recognition of these risks.

To our stakeholders
Accelerating growth by developing new businesses that address societal needs

To achieve the medium-term plan, the Kyocera Group will fund aggressive capital investment and R&D focused on high-growth markets. We will strive to create innovative new products and services in collaboration with stakeholders to address the most urgent needs confronting society. In addition to expanding our businesses, we believe solving problems in the world around us can also fuel employee engagement.
Higher growth rates require us to expand our businesses and improve our Amoeba Management system. By enhancing the unique features of Amoeba Management, we can raise employee satisfaction and fulfillment. We will also prioritize communication with stakeholders and timely transparent disclosure of corporate information to the public.
The Kyocera Group's target of 3 trillion yen in annual sales through our medium-term management plan represents a natural extension of 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." Please look forward to our achievement of these goals. We appreciate your continued support.

image: President and Representative Director, Hideo Tanimoto