My name is Yoshida. I would like to explain the consolidated financial results for the Q3 of fiscal year ending in March of 2023. Consolidated net sales for the third quarter was up 22% year-on-year and up 12.5% quarter-on-quarter to total JPY 371.424 b illion. Operating income was up 2.3% year-on-year and up 0.1% quarter-on-quarter to total JPY 26 .432 b illion. Profit for the period attributable to the owners of the parent that was down 28.5% year-on-year and down 34.5% quarter-on-quarter to total JPY 13 . 148 billion.
We estimate the foreign currency translations, and we recorded a record high sales in terms of the quarterly result. We estimate that foreign currency translation have a quarter-on-quarter impact of JPY + 15.3 billion in net sales and JPY + 3.5 billion in operating income. Year-on-year impact of JPY + 57.2 billion in net sales and JPY + 7.7 billion in operating income. Next slide, please. This chart shows quarterly trend in net sales, operating income, and operating margin. The operating margin for the third quarter was 7.1%, down 1.4 percentage point year-on-year and down 0.9 percentage point quarter-on-quarter.
There was a negative impact on operating income from more than expected the fluctuations of exchange rate as we had foreign exchange forward contracts. Our estimation of the foreign exchange effects are shown in the boxes for your reference, as we did in the first and second quarters. The operating income figure for the third quarter includes a foreign exchange gain of JPY 1.9 billion and JPY 2.9 billion loss on the FX forward contract. Excluding the impact from the foreign exchange forward contract, our operating income would have been JPY 29.3 billion. Next slide, please. Here shows the difference between the forecast as of November and actual results for net sales and operating income by business segment for the third quarter.
Net sales for the machinery components business were generally on track with the forecast, thanks to soaring sales in the aircraft market, although bearing sales were lower than expected. The electronic devices and components business experienced lower than expected sales, due mainly to the slowdown in HDD motor sales. The Mitsumi business enjoyed higher than projected sales, mainly for mechanical components. U-Shin sales were higher than projected, mainly for automobile applications. Operating income for the machinery components business was lower than expected due to a slight decline in profitability resulting from production adjustments for bearings. The electronic devices and components business operating income falls slightly below our forecast, due to a drop in sales. Operating income for Mitsumi business was almost on par with our forecast. U-Shin's operating income was marginally lower than our forecast. Next slide, please.
This slide shows the quarterly trend of the machine, the components of business. The left graph indicates quarterly net sales trend, and the right charts quarterly operating income trend along with a line chart for operating margins. The third quarter net sales decreased 1.6% quarter-on-quarter to a total of JPY 50.5 billion. Sales of ball bearings decreased 4.1% quarter-on-quarter to total JPY 37.6 billion. The monthly external shipment volume was down 10.4% quarter-on-quarter for an average of 25 million units. This was due to a slowdown in the market, mainly for data centers. Sales of Rod-end & Fasteners totaling JPY 9.6 billion were up 16.5% over the previous quarter. Sales increased with the recovery of aircraft production.
Sales of pivot assemblies decreased 14.3% quarter-on-quarter to total JPY 3.3 billion. Operating income for the quarter totaled JPY 11.5 billion. The operating margin was 22.9%. On a quarter-on-quarter basis, operating income decreased 7.8%, while the operating margin dropped 1.5 percentage points. Looking at the results by product, we see that the operating income for ball bearings and pivot assemblies decreased quarter-on-quarter, while operating income for Rod-end & Fasteners was up compared with last quarter. Next slide, please. Let's look at electronic device and components segment. Net sales decreased 7.5% quarter-on-quarter to total JPY 90.7 billion. Looking at the results by product, we see that the sales of motors decreased 8.3% quarter-on-quarter to reach JPY 55.4 billion.
This was primarily due to a decrease in demand for HDD and motor. Sales of electronic devices were down 7.8% from the previous quarter to total JPY 14.3 billion. This is due to a decline the sales of LED backlight models used by our key customers. The sales sensing devices, totaling on JPY 9.9 billion were down 2.4% from the previous quarter. Operating income came to JPY 2 billion , and the operating margin was at 2.2% on a quarter-on-quarter basis. Operating income decreased at 37.8%, while the operating margin dropped at 1.1 percentage points. The results include a loss of JPY 1.4 billion due to the special factor of a foreign exchange effects noted earlier.
Next page, please. This is the performance for the Mitsumi business segment. We have included Minebea Connect, formerly SUMIKO TEC , in the scope of consolidation since 12/1/ 2022. Net sales increased 33% quarter-on-quarter at JPY 182.7 billion. This was due to increased revenues accompanied by seasonality of optical devices and mechanical components and others. Operating income totaled JPY 17.3 billion, while the operating margin was 9.5%. Quarter-on-quarter operating income increased 10.7% and operating margin dropped by 1.9 percentage points. Note that this figure include JPY 1.7 billion of negative goodwill of Minebea Connect, formerly SUMIKO TEC . Excluding this, operating income would be JPY 15.6 billion, stable quarter-on-quarter, and operating margin 8.6% or down 2.8 percentage points.
This was primarily due to the changes in product mix. Next slide. A look at the U-Shin business segment. Net sales were up 7.9% quarter-over-quarter at JPY 46.3 billion. This is due to the recovery of production by car manufacturers gradually, although the situation varied from region to region and customer to customer. Operating income totaled JPY 0.3 billion, and the operating margin 0.6%. Quarter-over-quarter operating income fell 59.7%. Operating margin dropped 0.9 percentage points. Next slide. The bar graph shows the trends in profit attributable to owners of the parent, and the line graph chart shows changes in the profit for the period per share. The profit for the period was JPY 13.1 billion. Earnings per share was JPY 31.9. Next slide. The quarterly inventory trend.
At the end of Q3, inventory totaled JPY 275.9 billion, an increase of JPY 3.1 billion over three months ago. Next slide. The bar chart shows trends in net interest-bearing debt, which is total interest-bearing debt minus cash and cash equivalents. The line chart represents free cash flows. At the end of Q3, net interest-bearing debt totaled JPY 211.8 billion, up JPY 124.9 billion from the end of the previous fiscal year. Next slide. We have made revisions to the full year forecast. Net sales were revised upward from JPY 1,250 billion - JPY 1,300 billion, and operating income was revised downward from JPY 115 billion - JPY 100 billion.
The operating income forecast includes one-time revenues such as negative goodwill associated with M&A and restructuring costs. Net sales, operating income, and profit for the period are all expected to reach record highs in the current fiscal year. The exchange rate is assumed to be 125 JPY to the US dollar. Next slide. This is the forecast by business segment. Sales and profits for Minebea AccessSolutions, formerly Honda Lock, in the scope of consolidation since January 27th of this year, are included in the U-Shin business segment for the second half of this fiscal year. This concludes my presentation. Mr. Kainuma, the floor is yours.
Good evening. This is Kainuma. Page 14, please. Q3. November or October and November, we had a solid result, basically in line with the plan or slightly below the plan. In December, things plummeted all of a sudden. That is a fact. Bearings, motors, particularly HDD that sustain our business, plus backlight, semiconductors, game consoles, OIS, those things slowed down more significantly than the expectations. Some of them slowed down just a little bit, but these revenue or sources slowed down across the board. The companies that we supply, we have products too. Even if one segment goes down, others can offset the decline. However, the aircraft segment alone could not offset the decline in other segments. HDD, full capacity...
Compared with full capacity, a record high production, it's now a quarter of it. January, February, and March, we expect that it will hit the bottom and start to pick up. Therefore, the worst time is already behind us. According to the information that we have, the inventory adjustment at our customers are now over. Many stocks of HDD our customers have is not clear, but once they are consumed, I think we will get back to the normal level of business.
In December, not only such a sudden changes on our customer part that we sell, exchange rate moved very violently in one month from JPY 134 to a dollar to 120 something. Parts and components that we procured were JPY 150-JPY 130. What we procured when the yen was strong is now a price completely different. One of profit, in other words, the positive events and negative events were mixed. That is what we have been experiencing. It's totally my responsibility. We reserved foreign exchange about... Probably the impact will be about JPY 9 billion.
A proceed of sale of the head office building will be about JPY 13 billion. We are trying to offset the impact of one event with the proceed of another event. January to March, particularly January, the lockdown in China ended and Chinese New Year. Therefore, utilization dropped significantly. That is the reason why we came up with the forecast for this term. Structural reforms that we have been pushing forward, and the measures for the next year, we would like to implement by the end of this fiscal year. Page 15, please. JPY 100 billion operating profit has become difficult.
JPY 100 billion target, as I said previously, the impact of one event is now offset by the impact of another event. Therefore, we will be achieving this target. Next year, if it were not for these events, we shall be able to easily exceed JPY 100 billion because we already have a business structure in place. Page 16, please. This shows the next year's profit sources. If things are normalized, we will be exceeding JPY 100 billion profit. A rough breakdown are the bearings or the machine, the components, JPY 50 billion-JPY 55 billion. We already have a structure to enable it in place. The motors, if HDD comes back once again, we can have more than JPY 20 billion profit.
Semiconductors, JPY 25 billion is a solid number. OIS and access products, including Honda Lock. Adding up all these, minus head office expenses, we shall be able to easily exceed JPY 100 billion. The cyclical economic slowdown is what we are seeing, in my view, but it's not that some technologies are diminishing or disappearing. Rather than such a serious thing, it's about how we look at the global economy. Semiconductors impacts, take for example, the smartphones. Because the total supply is limited, they tend to be used for high value parts. The low-end products are running low in supply.
Once the semiconductor recovers, the potential demand will be stimulated is our projection. Please look at slide 17. This has already been communicated to you. Finally, the Super Bearing is going to go into the mass production phase. The sampling shipments have been made to our customers, and their reaction is very positive, is what I hear. The power value will be reduced by approximately 4%-5%. You might think that this is a very small reduction, but on the part of the customers, they really appreciate this. Especially, they appreciate the rotational torque reduction by about 40%. This means that the motor efficiency is going to improve dramatically. Therefore, by the end of this fiscal year, meaning by the end of March, we are to start the mass production.
In the second half of this fiscal year, 15 million of 830 fan motor and 608 for motors, we expect the Super Bearings to cover supply, provide those amounts. We have already applied for the patents. Should this remarkable effects be realized, this will translate into differentiation, and our bearing business will be pushed up further, and the prices will be set rather higher, reflecting those unique features. The data centers currently are concerned about the heat. They are looking for solutions to the heat issue. Improvement in motor efficiency means that, of course, this would directly relate to CO2 emissions reductions, meaning this has great potential. Slide 18.
Although the impact of antitrust law regulations was severe than we had expected, but we were able to include a former Honda Lock as a part of our group as of January 27th. We expect synergies between AccessSolutions, formerly Honda Lock and U-Shin. We expect growth as a result of synergies, how those synergies and growth could be realized and should be realized are shown on this slide. As for product synergies, door latches, spindle drive unit, heater controls or CSD, the spindle drive unit, which is the rear hatch opening mechanism, heater controls and overhead controls. These four product areas are provided by U-Shin, but Minebea AccessSolutions don't have those products currently. Whereas for door mirrors, wheel sensors and kick sensors, AccessSolutions provide those while U-Shin doesn't.
For kick sensors, the customers were acquired immediately. They were really waiting for the start of the supply from Minebea AccessSolutions, and they are ready to purchase right away. In that sense, the cross sales of the two entities are to be promoted going forward. That would be the crucial point. Regarding the production capacity synergies, yes, we are going to have more bases, and we're going to have multiple locations or bases in the similar regions. It so happens that for the four regions shown on the top, they will be complementing each other. U-Shin, in China, in Chongqing, still have idle space capacity within the premises, whereas AccessSolutions don't have that spare capacity.
As for Thailand, the AccessSolutions facilities are getting older. For further expansion, they needed to increase their capacity. U-Shin has spare space. As for Mexico, conversely, AccessSolutions have the available space while U-Shin was seeing the full capacity. Going forward with cross-sales between the two entities, and also, there are areas where the existing customers are asking for further supply, we would not hesitate in using the available space, available capacity. On a global market, we will be able to provide the similar quality products. In Europe and U.S. and Vietnam and Indonesia, we are one of the few companies that can provide and supply on a global basis. No matter where the customers want the supplies to be made, we have that supply system established.
As for semiconductors in the second half of next fiscal year, we expect a recovery. For the time being, the customers do show that projection. We want to be ready before the recovery takes place, leveraging our synergy, every effort will be made. As for the motorcycle market, which we had not looked at so far, it so happens that Honda has the largest market share globally for motorcycles and to various facilities that Honda has in different parts of the world, we are providing, we are supplying necessary parts. What we tell us is that a former Honda Lock sales when they were carrying this business card with Honda name on it, they were not accepted.
There are many manufacturers of motorcycles, not just Japanese ones, globally, and MinebeaMitsumi brand or Minebea AccessSolutions will be the brand that will be used, which provides a better access, which could translate into better profit.
In order to achieve the greatest possible synergies, if we do so, our JPY 20 billion is an easy bet. U-Shin incidentally is promoting various structural reforms. This synergy with Honda Lock, once it's accelerated the access solutions or products, it can earn JPY 20 billion operating profit. Page 19, please. My biggest concern is the share price. Share price just wouldn't go up. It's like 10 x the multiples. Our share is undervalued, to say the least. Inclusive of the message to the market, up to JPY 10 billion and 4.5 million shares, from February the 6th, we will begin the share buyback. We have made a resolution. Page 20, I have no additional comments, please read it. This concludes my comments.
Thank you very much.
Next, we would like to have a Q&A. The first question is from Mr. Takanori Akiyama of Goldman Sachs. Please begin.
Thank you very much. Can you hear me?
Yes, I can.
Thank you. I have three questions. In the second half, I mean, newly included one-off events, the structural cost is included. In what quarter, how much is included? Regarding the negative goodwill, SUMIKO TEC 's portion has already come out, but what about the Honda Lock? Is it included or not? Actual impact on the consolidated sales and profit, if you could explain to me, please.
First, the positive impact, as you pointed out, the negative goodwill. As I have been explaining to you, the sale of Mita head office building, so JPY 35 billion, a positive impact, which is included. Then JPY 20 billion, a structural reform cost is included. 80% of which is for streamlining production equipment, and in some cases, we may have impairment losses, and the rest is related to withdrawing from Russia and implementing environmental measures in the U.S., roughly JPY 20 billion, from those items included. The Honda Lock or Minebea AccessSolutions or abbreviated as MASS. How much MASS portion is included in sales? JPY 22 billion.
And, uh, as the company was, uh, uh, integrated on January 27th , so for February and, uh, March, for two months, JPY 22 billion and, uh, operating profit of, uh, uh, JPY 2.5 billion. I see. Um, if I may confirm, the proceed of, uh, sale of, uh, head office, uh, was included in the interim number. Uh, therefore, the only addition is the Honda Lock, uh, consolidated numbers. And, uh, next, uh, uh, year's plan for Honda Lock was, uh, uh, JPY 100 billion and 5% . And do you, uh, stand by the same, uh, forecast? First. So 35 -13 uh, JPY 22 billion. But maybe it'll be slightly higher and then a structural, uh, reform, so it will be slightly on the positive, uh, side.
The Honda Lock next fiscal year's forecast that we need to scrutinize this a bit more. As Kainuma explained, that there are various synergistic effects expected and also various initiatives that will be carried out. What, apart from what set of numbers, the Honda Lock will be able to achieve, 5% seems to be a conservative outlook. How much upside that we can realize, it's something we need to scrutinize going forward.
I see. Thank you. My second question is, what is your thought on the recovery going forward, the bearings and semiconductors? At what timing, how do you think these will recover?
In the past, I think, or last time, you said that semiconductors recover rather quickly although they are affected very quickly as well.
Semiconductors. Right now, there is a big shortage of semiconductors. Our customers are not able to make enough of them. All OEMs are going through this situation. What we hear right now is, they are making design changes. For example, in the past, semiconductor A, only semiconductor A was applicable to a certain product, but by making a design change, they are trying to make semiconductor B and C also usable for the same product.
In June and beyond, July and August, probably it will begin to improve the supply, which I think can be reliable information. Next year or the beginning of the second half of next fiscal year, things will recover. Maybe not all of a sudden, everything may not recover at once, but in October or September, in such a timeframe, things will start recovering. On the other hand, bearings, there are two major impacts. There are two major reasons why our bearings are being sluggish. One is automobiles. Automobile volume, production volume is rather high, but it's lower than our expectation. Actual production is lower than our expectation, which means that there is an upside which sort of disappeared right now.
For automobile, it's not that it plummeted, but it's been flattish. It's more or less flat. The demand that we heard was much higher, but it's much lower now because of the semiconductors that I mentioned earlier. If our semiconductors supply normalizes, I think the bearings number will increase. As for the timing, when the semiconductors supply increases, then the bearings sales or the number will improve in September or October. Data center, the absolute number dropped significantly. One factor is headcount reduction of GAFA and Chinese economy slowing down. The figure dropped dramatically, and the same applies to HDD. Our customers are the foreign capital companies, and they have implemented a drastic production adjustment.
As I said previously, the investment, excuse me, inventory adjustment on the customer's part are more or less finished. The remaining question is how much stocks remain in supply chain. Maybe I shouldn't say we were forced to do it, but because of a strong request by customers for BCP, we were asked to make many more products in May, June, and July. Back then, there was a shortage of semiconductors, and they were afraid the same thing would happen for HDD as well. Because of that, our customers ended up having excessive inventory. As to when such stocks will be consumed at this point in time, I cannot say.
Probably in January, the order placement from customers hit the bottom, in January, we received 1.5 x bigger orders. In January, February, and March, we should see gradually increasing numbers. Probably, in the next fiscal year, May, June, and July, it will normalize. Digitalization in itself, I mean, it's not about the technology, but automotive, autonomous driving and things like that have just started, and volume will be growing significantly going forward. Semiconductors, whether they can, I mean, whether the production of semiconductors can keep up with the demand, there is a question mark, but there is a strong demand.
I see. Thank you. Lastly, Mr. Kainuma, you said that the next fiscal year, it will go far above JPY 100 billion. Can you explain once again about the split of that number?
Just to give you an image, the bearings and aircraft, in other words, machined components, machined components segment, JPY 50 billion-JPY 55 billion. This year's forecast was JPY 52 billion or so, or JPY 51 billion maybe. I think it's been clear that it will not reach that level. The aircraft recovered, and if bearings recover, then we should be able to exceed this level quite easily. Motors, because of the HDD situation, spindle motor profit margin has dropped dramatically. To be quite honest with you, in December, we had some losses, but once it recovers, the motors as a whole would exceed JPY 20 billion. There are other precise miniature motors. Semiconductors, JPY 25 billion is a very conservative number.
I don't think we have put together a clear forecast for this fiscal year, but I think you can read between the lines for semiconductors. 25 is not a stretch goal, plus OIS and Access, minus head office expenses and no foreign exchange impact.
I see. Understood. Thank you.
Thank you. We'll move to the next questioner from Morgan Stanley MUFG Securities. Yasuo Sato, please.
Thank you, Yasuo Sato from Morgan Stanley MUFG Securities.
Yes, I can hear you.
I have three questions. First, your major product areas, HDD bottomed out in December, you said, but ball bearings and backlights, motors and game consoles and semiconductors and OIS. Looking at these main products, in terms of your shipment or production, when did they hit the bottom respectively? What will be the expected recovery? What will be the order of the recovery, expected recovery timing?
First, on HDD, as Kainuma explained earlier, bottomed out in December. Since January, we are seeing a rather speedy recovery, or that is our expectation. For others, motors, the automotive and others, if we separate those two, for automotive motors, as we have been explaining, contents growth, is there and still, it's growing very strongly.
For other types of motors, in the fourth quarter, we expect to hit the bottom. That is our perception of the situation. As for ball bearings, Q4 figures, we expect to be the bottom. More specifically, January was the Chinese New Year, so January bottom and start to see the recovery in February. As for semiconductors, already we have seen the bottom in terms of BB ratio. We are already seeing a V-shaped recovery. That is in terms of orders. As for sales and profit, Q4 is expected to be the bottom. backlight and game consoles. Applications slowed down in Q4 and since we are in the off-peak season, so conservatively, we are making the projections in our forecast, and that is reflected in our guidance.
I see. Thank you.
Regarding ball bearings.
In October, November, December, what were the monthly changes, and what are the expectations for Q4? October, external sales, 239 million, 228, and 270. January, 195. February, 200. March, 219. All millions of units. Internal sales, October, 39, 33, 35, 37, 35 are the assumptions. As for Q3, was January the bottom? Starting from October, 304, 296, 264. January, around 240. February, March, we are refining the figures projections now. As we have been saying, the solid steel without any air void, the optimal inventory level is being calculated. While satisfying that demand, we don't want excessive operation, so we want to operate on a more of a conservative manner.
We are currently refining the production volume.
Thank you. My third question. As for Mitsumi business performance, looking at major products, semiconductors, game, and connectors. From Q2 to Q3, how did they develop? As for Q4, profit would decline dramatically for cameras, printer, and the gaming device or consoles. Am I correct?
Q2 to Q3, cameras and game consoles, increase in sales and profit, especially for game consoles. A big upside or a big jump in sales in Q3. For connectors, the growth was on par with the market growth, and SUMIKO TEC and Honda Lock consolidations included, results in growth there. For Q4, game consoles and smartphones related optical devices, both expected to drop somewhat.
Inclusive of that factor for Mitsumi business, JPY 50 billion is the full year forecast, about JPY 2.9 billion for Q4. We believe the results will land at that level.
For semiconductors, Q2 to Q3, what were the changes, and what's your projection for Q4?
For semiconductors, Q2 to Q3, decline in sales, decline in profit. In Q3, high profitability was maintained. The profit margin was maintained over double-digit. For Q4, from Q3 to Q4, some decline in sales is projected, and operating margin is projected somewhat conservatively. That is behind the guidance that we announced.
I see. Thank you.
Thank you for that.
If I may repeat, if you have a question, please press the asterisk or + 1. To cancel your question, please press asterisk + 2. Let us move on to the next question. Mizuho Securities, Mr. André Goto, please begin.
This is André Goto from Mizuho. Can you hear me?
Yes, I can.
Thank you. I only have one question about the numbers. The full year operating profit, the comparison between the original forecast and this time. JPY 115 billion and the sale of head office, JPY 13 billion and JPY 102 was our result. Maybe comparing against the JPY 115. Vis-à-vis that number, the plus, minus, positive and negative factors.
Responding to Takanori's question, I think you have covered some of the information. Vis-à-vis JPY 100 billion and Q3, JPY 26.4, and Q4, including special factors, JPY 32.9 billion. As I said previously, the goodwill working in favor, JPY +20 billion , and the structural reform, JPY 20 billion.
A net of those factors is this number. Organic part, the downside is slightly over JPY 10 billion in Q4. The guidance as of November, that amount is the downside to that previous guidance. JPY 115 billion has dropped to JPY 100 billion, and that is the organic part. Am I right in assuming it that way? Yes. Q3 operating profit was about JPY 34 billion and the downside of JPY 8 billion. JPY 15 billion plus JPY 8 billion, it's like half and half, Q3 and Q4. Yes. In Q3, it was like JPY 7 billion. Q4 actual capability is. Yes, I think I got it.
If you are talking about the actual capability, there is this FX forward contract which is included in the full year number. Likewise, JPY 2 billion of forward contract is included. If it were not for that, the downside, excluding such special factors, it would be almost JPY 100 billion, like JPY 96 billion or JPY 95 billion. Next year onward, based upon the continuous up business base, the Q4, the actual ability, maybe I just need to do some math. Q4 sales are likely to recover, but utilization will be controlled or reduced, like a spindle motor and HED related. Sales will recover, but utilization will be kept low in order to normalize inventory level. We are thinking to do the same for our bearings.
Q4, in terms of the sales.
There may be some potential losses from a lower utilization.
I see. Understood. Thank you.
We'll move on to the next questioner from SBI Securities. Izumi-san, please.
I hope you can hear me.
Yes. You can. Please start your question.
I have two questions. First, about the structural reform expenses. By segments, are they evenly distributed? If so, can you give us a breakdown? That's JPY 20 billion in total. The effect of this JPY 20 billion expenses, what effects are you expecting next fiscal year? That's my first question.
This JPY 20 billion, the specifics have yet to be defined and refined, so we can't say how much would be allocated to what segment. Similarly, regarding the expected effect and benefit, of course, we are assuming a certain profit increasing effect, but we cannot explicitly share with you the size of the benefit that we are projecting.
So it's in depreciation, or elimination, that JPY 20 billion?
Tentatively, yes, that is correct.
Honda Lock, related, negative, goodwill, eventually it will be included in U-Shin segment. For the sake of better clarity in our accounting, it is currently included in the common, the corporate and elimination.
I see. Thank you. My second question relates to semiconductor. Could you elaborate on this situation? Market overall is still, other than memory, tight supply continues, I think. I think some are doing better than others. As far as your semiconductor business is concerned, what is the current situation?
IGBT and medical, for those areas, close to full operation, and customer demand is very strong. That remains unchanged. For battery production and smartphone related, for those applications, the production decline is taking place.
There are differences from one application to another.
What is the net situation in the second half? More negatives? Larger negatives than your expectation?
Are you asking about semiconductor?
Yes, I'm asking about semiconductors.
Compared to the previous forecast, slightly more conservative projection for semiconductors is our current projection.
I see. Thank you. That's all.
We only have limited amount of time, and therefore the next question will be the last one. UBS Securities, Mr. Hirata.
This is Hirata from UBS Securities. Can you hear me?
Yes, we can.
Thank you. I have two questions. The first one is about the actuator business. Next fiscal year and the year after, what are your thoughts? Due to the technological or changes, the new business opportunities may have been created. Next year and the year after, what are your projections for the sales and the new business opportunities, whether you can capture them or not?
Well, I'm sorry, but it has to do with our customers' roadmap. Therefore, we cannot explicitly talk about that. However, same as before, our production capacity preparation is progressing steadily. Therefore, we believe that we can keep growing in that area. With regards to that, if I may add, this is something we have already announced. In Philippines, we are building the second plant, Naga plant, and visited the plant last week. This plant will be able to absorb the future increase in production. I think I shared with you photos, so you can have an image. We will be receiving orders, and we are preparing for that.
Thank you. Lastly, the semiconductors, BB ratio, you said that it's bottoming out. Pricing... well, and I think you said last time that the prices are not declining. Is it changing now? The utilization, third quarter and fourth quarter and towards April to June next year, what is the direction?
The prices. Are you asking whether there is a downside pressure on the pricing because of the market conditions? Then my answer would be no, we are not cutting prices. Due to the product mix, the battery and OIC are shrinking. IGBT and medical, the unit prices are high, and therefore, in terms of the product mix, I think it's improving.
In terms of the market, there are many niche markets that we serve, and in many different ways, we are asking our customers to correct the price range. The trend remains the same. The production capacity and utilization, full capacity, I mean in Q2, we were producing at the full capacity. Now, I mean, the plant was up and running around the clock, and now it's lower than that. We are reviewing the outsourcing, outsource the volume, and therefore, the utilization will not drop significantly.
Understood. Very well. Thank you.
With this, we conclude Q&A session. With this, we end today's earnings call. Thank you very much for your participation.