Thank you very much for joining Nidec's conference call. I'm Takumi Miyagawa, General Manager, Corporate Division of Mitsubishi, ZMN and Sande Securities. As we kick off the conference, I'd like to ask you to make sure All the materials are ready in front of you. If not, please download the files on Direct's homepage right now. Please note this call is being recorded and the conference Materials will be posted on Nidec's homepage for the coming week for investors and analysts who will not be able to join today's call.
Now I'd like to introduce today's attendees from Nidec Corporation. Mr. Jun Seki, Representative, Director, President and Chief Executive Officer and Mr. Hidetoshi Yokota, Senior Vice President and Chief Financial Officer. First, Mr.
Yokota will make a presentation. After his presentation, we will move on to a Q and A session and Mr. Tei and Mr. Yokota will answer your questions.
Mr. Yokota now presents Nidec's Q1 2021 results, future outlook and management strategies. Mr. Yokota, please go ahead. Thank you.
Greetings from Kyoto, Japan to everyone and welcome to today's conference call hosted by Nelik. I'm Hitoshi Okota, CFO of NIDE. Today, Mr. Jun Seki, Representative Director, President and CEO and myself will be your main speakers and answer your questions. Joining us also is Mr.
Masahi Ronagayasu, General Manager of Nadex's IR team. For the forward looking statements, please see Slide 2 of our presentation material for details. Today, we have 2 chapters in the presentation. Now as first chapter, I'm going to review the key figures for fiscal year 2021 Q1. Please see Slide 3 for our Q1 results.
Let's move to Page 4. The net sales was record high of JPY447,500,000,000 or 32.8 percent higher year on year. The operating profit made a significant increase of 60.3% year on year to RMB 44,600,000,000. The Q1's operating profit ratio was 10% due to enhanced profitability through WPR4 program implemented since FY 2020 and also due to sales recovery from FY 2020 Q. On Slide 5 and C, here are the steps chart showing the net sales and operating profit for year on year and quarter on quarter, respectively by product loops.
As you see on Slide 6, Appliance, Commercial and Industrial or ACI and machinery are continuously performing good, thus to the growing demand such as compressor or motors for home appliance, AGV and testing machine, etcetera, While net sales and operating profit of small precision motors and automotive products declined due to continuous improvement for new business area, reduced HDD shipment and impact of semiconductor shortage. Please turn to Slide 7. In response to the structural change in the HDD market, Our Small Precision Motor division is implementing business portfolio transformation as we explained before. As you see the graph on the left, the quarterly sales of other small models in green color has increased quarter on quarter And we are starting to focus on the launch of mass production in new business areas such as mobility, including mini EV, electric motorcycle, Electric scooters, electric assisted bicycles, etcetera for our mid term growth. Please see Slide 8.
The automotive existing business, which means automotive business excluding impact of traction models related business And Nidec Mobility business is keeping double digit operating profit ratio for 4 consecutive quarters after bottoming out in the Q1 of FY 2020. Please see Slide 9. The cumulative number of EVs using our e axle has reached 161,000 units. In both management, the monthly sales volume has exceeded the past peak in December 2019, boosted by recently launched models such as AONY by GSE and Geometry A by Geely. Base C slide 10.
The operating profit ratio of ACI is steadily improving after bottoming out in the Q4 of FY 2019 reached 10.5%. Please see Slide 11. The operating profit ratio of other product groups, which consists of machinery, electric and optical components and others keeps achieving around 15% level after following out in Q4 of FY 2019. Now we want to move to second chapter of the presentation. Please see Slide 13.
From here, I'm going to explain our new mid term plan called Vision 2025. Based on the solid foundation period led by the founder, Shigenobu Nagamori, Nenek is going to enter new era With the new management structure driven by the new CEO, Jun Sikhi. We are aiming for 2 trillion net sales in FY 2022, which was originally the target for FY 2020, celebrating our 50th anniversary in FY2023 aiming for KRW4 1,000,000,000,000 in FY 2025, which is the final year of Vision 2025 and eventually 10,000,000,000,000 yen sales in FY30. We keep changing and growing sustainably for 100 years and beyond to be truly a global company. Please see Slide 14.
As you can see in the middle box, we are going to focus on 2 G1M sales target again in FY 2022, which was the target for the previous midterm plan Vision 2020. In fiscal year 2022, we are also aiming to increase the sales and profit per employee by 30% by improving the productivity and achieve over 10% return on invested capital, Invested Capital or Ally. In the right box for FY 2025 Lightweight, 4,000,000,000,000 NAND sales doubled the sales and profit side free and to become a top rated ESG company. Please see Slide 15. In Vision 2025, we are going to tackle our growth strategy, including OI, plus M and A And efficiency improvement in capital investment.
In fiscal year 2025, we are aiming to achieve KRW 3,000,000,000,000 organic sales And KRW 1,000,000,000,000 to M and A and for the KRW 3,000,000,000,000 opening sales, we are aiming for 15% operating profit ratio and 15% are ROIC for the total company. Please see Slide 16. In Vision 2025, We are aiming to achieve high growth with aggressive investment in the key growth area. As you see the graph on the right, Small precision motor organic growth target is set at JPY 600,000,000,000, while sales From a new M and A are expected to be KRW 200,000,000,000. Likewise, Automotive and SEI Onyx sales are KRW 1,000,000,000,000 New M and A of KRW 300,000,000,000 respectively and other product group organic sales of KRW 400,000,000,000 Plus new M and A of RMB 200,000,000,000.
Please see Slide 17. In Vision 2025, We will evolve our business model and business areas to accomplish TRY 10,000,000,000,000. This slide is Illustrating the example of EVs and Logistics, whereas the horizontal line showing business areas goes from Device alone module system 2 solution, the basketball line showing As expected market size expand accordingly from left bottom to right top, we designed the business expansion with seamless integration. Please see Slide 18. Nidec is leading the EV pillar as a company who triggers the creative Production and goes beyond the industry tradition.
As you can see the graph on the right, All new vehicles sold in China will be eco friendly in 2,035 and the European Union has proposed effective ban For new ICE vehicles such as gasoline vehicles including hybrid ones from 2,035. Based on these strong tailwinds in our Favor in the EV market, we have revised as to revised up the sales target Volume for our e axle in FY 2025 from the previously announced 2,500,000 to 2,800,000 units. Please see Slide 19. Japanese EV startup, ASF, has decided to adopt Nidec's traction motors and inverters for G050 and EV for delivery that ASF design. This is the first time that our traction models will be adopted for EVs running in Japan.
ASF is in charge of R and D in collaboration with major Japanese logistics company, Sagawa Express, And its production will be conducted by Chinese automaker, diesel cooling automobile industry under the umbrella of Guanxi Automobile Group based in Guanxi Province, China. This is a brand new project where the model is designed in Japan in accordance with the Japanese vehicle and logo standards, but produced overseas. Please see Slide 20. We are going to set ROIC targets in line with each business unit strategy and conduct improvement activities. We will invest over total JPY 1,000,000,000,000 including CapEx and M and A and accelerate growth while aiming to optimize capacity to sales ratio.
Please see Slide 21. This is one of the important initiatives for Vision 2025. We are going to declare carbon neutrality in Scope 1 and Scope 2 by FY 20 40 and layout Scope 3 supply chain action plan by FY 2025. We will reduce our CO2 emissions through extensive introduction of renewable electricity, efficiency boost, shift to low carbon fuels and funding third party projects to offset unavoidable emissions. This is the end of the presentation material.
Last but not least, on behalf of the entire management team, I would like to thank our customers, business partners, suppliers for their support and commitment as well as our shareholders. At this time, we would like to open up the call for any questions. Thank you.
Thank you very much, Mr. Yokota. Now, we'd like to turn to the Q and A session. Mr. Seki and Mr.
Yokota will be pleased to answer your questions. Today's Q and A session will be conducted electronically. If you would like to ask a question.
We
We'll now pose for questions from the participants. Okay. Our first question today is from James Pastore From
State 3,
sorry, ARMOR Capital.
On the capital, quite right. Thank you very much for your presentation and congratulations on a very good set of results. I'd like to ask a little bit more if I can about the makeup of Profits and what happened within small precision motors, you comment on your presentation on profits down on prior investments for customer new products. Can I check is that in can you give it more specific for that and that's why I assume in other precision motors? And to help me understand what's going on within it, is it also possible to break down profits between the HDD side and the other position in motors side?
I'm interested too, to look there as what's happening to the trend in profitability for other precision motors and why. Thank you.
So James, maybe your voice is a little bit Difficult to hear. Would you just ask a very story just on the point?
So do you want me would you like me to repeat the whole question?
No, no, no. Just a key question that you made.
Key point, I'm after for proceeding small measures to help me understand.
The investment That we are making for the future, what kind of specialty area? That's what's the first question for
Koh. It's the which why profits went down, so that's the prior investment for customer new products. That's point 1, if you could explain that. And then point 2 is really looking at the if you could give me a breakdown of profitability between the HPD side And the other Precision Motor side and comment on that please.
Okay. So you have the slide and Slide number 7. Then we are showing you there the past 9 quarter of results. Those are divided into the small efficient motor in the blue And the green and the non AGG motors. There also we are showing you what the OP margin of the segment.
So clearly, as you see, in the past 9 quarters, the top line is coming down, even say at most a flat for coming down, then the open market is flat. So as you hear that we are looking at the growth of the top line in our Vision 2025, Even from there to 2030, so thereby we need some top line growth in this segment. Okay. So thereby, we decided to focus on the new market, which is the mobility market and mini EV market and 5 gs smartphone market and the other e commerce robotics market. So with a new focus In the new market, we are planning to increase our top lines, then after that basically with the profit.
So this is basically the strategy in this DA small vision motor. Then The number of the small business node motor is in slight number.
16, okay.
So The fiscal year 2020, we reported the top line on this small business model segment, JPY 443,600,000,000 443.6. Then with the focus of the new market, we are going to grow organically up to KRW 600,000,000,000 at minimum. Then in order to adding some a new scheme or new M and A, We are looking at KRW 800,000,000,000 for clients in 2025. So you might be asking what Kind of M and A, then clearly, if we are getting coming into the new market, then there are several maybe function that we need to cultivate that market, then we were looking at the opportunity in these areas As well as the expanding its compliance is a key strategy at this moment for 2025. So in order to achieve this, Maybe we are going to utilize our key technology, but also we may get the support from the other company in the form of the margin acquisition.
James, is that fine?
Yes, that's interesting. And I know, so your the products that some of the products you're targeting are very similar to the well, I mean, one of them is actually in the automotive area, a mini EV. That must I mean, if you look at your products in the automotive side, They must be just one step down. It's interesting you choose to put the mini EV side and also in mobility, You choose to put it here rather than in automotive. Wouldn't it make more sense to have it in there?
Okay. The key point is the wattage is a bit different. So when we're talking about the mini EV, Then we are looking at up to 30 kilowatts, where e axle or traction motor is so far we have been looking at 50 kilowatt. So from 30 to 50, there is some borderline between The motor developed by our auto people and the motor developed by the small modular motor, okay. Then for the other motor in this chart, if you're looking at the Slide number 7, The mobility, for example, eBicycle, eBicycle is something like a 400, 600 watt And the e scooter, 400, 601 kilowatt, 1.2 kilowatt, 1.8 kilowatt and that type of range.
And the Epic motorcycle up to a 1 kilowatt, 2 kilowatt, 3, 3.5 4 kilowatt in that range is the motorcycle. So clearly, Koh. In the small locomotive area, the wattage is small. The difference is also the other difference is the Mini EV market and mobility market, the timeline is much shorter than the normal So called the EV production lines. In the EV production lines, well, maybe from the contract to the sales of mass production, year and a half minimum, Okay.
But in the case of mini EV or mobility, the term line is much shorter, then that's going to be more similar to the small fusion water. So thereby, we at this moment, we are planning to do these markets by the small fusion people. Yan, is that fine?
Yes, it's fine. Can I just ask, you've spoken before on previous calls about the exciting development in China With the sort of micro EV or very small EV market in China and the success one company in particular had And the potential for that market, is that in this 30 kilowatt range or is that will that stay within auto? Could you just Explain to me where those that potential market fits. Is it here or on the other side?
James, this is Asics speaking. Thank you for your questions and then thank you for your very, very good memories. Exact name of that SMO EV is a Hongwan Mini produced by Shanghai GM Movies. And then that motor size is 20 kilowatts.
Thank you.
And then on top of the Navaiya's explanation from Navaiya's sense, Actually, as the CEO of these companies, I don't care so much if Precision Motor take care of this range or Automotive section take care of this range. But as a matter of fact, automotive group already Run out their resources because too many order takings from Current automotive companies, actually total runs is exceeding 40. And then, Of course, at MEDEC, we don't want to lose this opportunity for smaller EV side. And then, concurrently, Precision Motor division lost the sales. We have very good resources, engineers and then some facilities.
So discussion between Nava Norisan and myself, we decided, let's put this into special mode area. That's only simple decisions. So we won't be very flexible once pressure motor has many other business, While automotive has a set of downs, we may shift this business into automotive Again, at this moment, our decision is to put this 30 3 watt, 20 3 watt motor into precision motors.
Okay. Brilliant. That's very clear. Thank you very much. And just I know it's less interesting, but is it possible that just before I stop, You should let me know on for the HDD side, a couple of things.
One, what was the operating margin of just the HDD business, which Obviously, sort of separate to Precision. And also, you give some industry figures for Shipments, HDD shipments, I think. But do you have your own company shipment figures and any comment on the ASP or change of mix that you can give us? Thank
you.
So we say roughly 30% of this one On the spudewater business?
30%.
Yes. So we have been reporting roughly 30 In maybe 2 or 3 quarters already in a row.
Yes. They're not changed in Q1, yes?
So the key is the mix is shifting to a more high capacity 1,000,000 year line And those are really a high margin. Then as long as that So called the product mix is going to be shipped into a more higher capacity, maybe we can keep a good margin in there.
Okay. Yes.
That's great. And what were your volumes in Q1, please?
Yes. The total volume of the market is The market at this point, we say In terms of the product mix, as I say, nearline is increasing, but 3.5, 2.5 is coming down, But overall, we say the market for this 2021 is roughly flat or slightly down from the previous year. That's what we are looking.
I understand. So I haven't been very clear with my question obviously. I can understand market shipments 64,000,000 units in the Q1. For Nidec shipments, I know they're very high value added. What will Nidec shipments leave?
Okay. So maybe you were talking about the market number is Before, but our number is roughly say, 31,000,000 this quarter. So for this quarter, clearly, we had to admit that We are not the majority of the market, but not only affected by So these are a huge change and the so called transaction for our trading relationship. Thereby, we did have some so called inventory issues, which happened in September and the September quarter last year for us, if you're looking at the 7% we actually have a huge increase of our sales in Q2 last year. But Q1 this year, clearly, Miya Ver and Miya Ver has a similar situation.
So, thereby, they increased, there we decreased, very simple mathematics.
Okay. I I understand your strategy here. It's fixed. It's about making money, not about share. Good.
Okay. Well, I probably better let someone else ask your questions, but thank you very much.
Thank you. Our next question is from Ramte Nila from State Street Global Advisors. Please go ahead.
Congratulations on the great quarter and all the best vision 2025. My first question is on chip shortage. So it seems to have an impact on automotive and also small precision motor segment. Can you give us some color on maybe if possible try to quantify the impact of semiconductor shortage in Q1? And what is your outlook going forward in this quarter?
Lembeh, this is Sik speaking. Shortage is occurring not only semiconductors, but also plastics And then magnetic steels and cupboards and other standard steels. Therefore, it's very difficult to say damage by Semiconductor alone. Overall, I think price increase Requirement was about 5% of our total revenues. So let's say, our total revenue in Q1 was 4,400,400, so 5% therefore it's around Koh.
200 questions. Very good impact. And then, of course, we can't absorb all. So first, we made our cost reduction side, our direct labor cost to other expenses. And then second, we request our supplier to wait for this increase.
In the south, We negotiated our customer to share this increase with our price and debt damage. And then Finally, we managed within the 1 part of damage integrated Damage from ore, not only semiconductors, fuels, Capas, plastics. So it was therefore under 40 nuclear damage. That's what we are seeing. And then that is like a financial review.
And then We have a volume shortage from customers. So for automotive areas, roughly 100 and 20 of them sales is lost because customer BMWs want to purchase vehicle, but our customer cannot build the vehicle. And then we can build our components, but Because our customer cannot build their vehicles, we cannot deliver. There was Some of them represented the coal price impact, if it's okay for you.
Yes, that's great.
And probably any outlook is forecast in Q2 than Q3. We don't know. We have our assumptions, but we don't want that to really happen. And then we are checking day by day. It's a bit unpredictable.
Overall tendency is, May was really bottomed. It's a very, very heavy rains. And June, still very heavy rains, but better than May. And July, it's raining very severely, That's better than June May. And then probably it's little better in August again.
And then I'm predicting from September onwards, Probably much better than what now, but not perfectly meet the market demand. Probably, the Recovery happened in the end of Q3 to Q4. That's we are checking.
Yes, that's helpful.
And my next question is on EXI 2025 targets. It's good to see that Your target improved from 2,900,000 units to 2,800,000 units. Can you give some color on the recent inquiries for your EXI and How the trend has been? And also, if I can ask a question on the pricing of EXL, I believe it is Around $1200 previously. So do you see any I mean, can you give some color on the price trends or any competitive pricing there?
Okay. You have a very, very good memory. I don't want to disclose this information to outside, but the language you Investified is okay. But don't put this information into your website, okay? I trust you.
The other border we already got is about 1,900,000. Okay. And then, RFQ with high probability, We are seeing is around $180,000,000 sorry, dollars 1,800,000 another $1,800,000 Sorry, maybe I said it wrong. The year over year we got is 1,900,000 and then Very high probability RFP is 1,800,000. But we compressed that high probability So I adopt 900,000 onto 1,900,000 That makes $2,800,000 And then price wise, you have $1200 for 150 kilowatt.
And then overall market tendency is Supposed to be less priced than that. Actually, market is moving high peroxide. So if the performance is same, definitely price is going down. But because market is requiring more power And more talk, actually price stays in, that's the situation. That's happened for high Power motor, such as 150 KW 200 KW, I think 70 KW or 50 KW motor, which We have not gone to real product yet, but I think that is probably go down further.
And then we talked about the 20 kilowatt and 30 kilowatt. That is also has a very soft Decline for the Q1 year. But we are sure we can make profit. And then our profitability become clear in 2023. And then our plan is we sort out all accumulated negative profit in 2025.
That's great.
Just to follow-up on that, on the cost side, I remember earlier, For example, I think it's a 150 kilowatt motor costs around $1,000 to produce. For example, Inverter costs $700 and gas costs $200 and motors costs $100 And to reduce the cost of production thereby achieving the operating margins. So may I know any update on that front? I mean, what's the progress on Cost reduction, of course, you're doing M and Es and doing some arrangements. But is there any change in the Your target is to reduce especially inverters and gas by 50%, I think.
Can you give some color on the cost side as well?
Thank you. I think that this figure is too sensitive even to investors. So I cannot clearly disclose, but we are meeting our original plans. We have another balance, which is semiconductors, magnetic steel, plastic increase, Which is really impacting very heavily. So again, same stories.
We are requesting Further cost reduction to in house team, and then we are requesting passing team to control this price increase, And we are requesting customer to share this price and cost increase. So that's remain on top of our planned cost reduction.
That's great. Maybe my final question on your JV plan that Seems really exciting. Can you give your JV plan with Foxconn? So what is the real value add You're expecting in the long run on the JV you're planning to have from 2022, if I'm not wrong. Can you give some more color on the JV, please?
Yes, Lanze, if you promise me you don't put this into your minutes or something, I can go very straight. You even put this in your Internet or website.
Yes. I think this teleconference will be published somewhere, I'm not
If this will be published, it has to be very public comment. Our main customer automotive makers, okay, particularly currently, most of the Chinese player approaching us. And they are very good customer. This is a straight answer to your not question, but They are very good customers because they don't hesitate to outsource motors. But also, their lead time from order place to SOP is Very short, okay.
For example, if we get the order from standard automotive player from Europe or Japan, Usually, it takes minimum 2.5 years, maximum 2.5 years. It's July 21. If we take order based now, It's sometimes January 25, that is SOP. So during that period, we're just Spending our money, we sent the money back. Chinese customer is very attractive because their retail is short.
Let's take order this July this year now and then the ISOP is generally like Q3 quarter 3 of next year. So very quick return. That's one of the reasons we love Chinese customer. But then We have therefore like a standard customer type. They stick in house at this moment.
And then like a type of Chinese customer, they don't care to outsource. They come to us Very quick. In between is like a joint JVs, JVs Trantas and JVs Ganzo Motors. Koh. They don't want to release this heart of vehicle to completely outside, but they don't want to spend too much money for this one.
So they request us to come and then share investment and development costs. Instead, they are Exclusively releasing their demand to us. So it's a win and win, okay? And then So while we're having increased expanding those business, we are seeing new Karma such as Foxconn And then as if your purpose has mentioned, there is a new type. And then For us, any type is okay as long as they use motors.
It's nothing special. They need 150 kilowatt motors 100 kilowatt motors or 70 kilowatt motors, we can offer. And then Meaning of JV with Foxconn is a bit different because the reason from the strength is a reason from Panjinomata It's a deep validation, rather sharing the investment and development cost. For Foxconn, I think they need strong know how, Not only from motor side, but also many other key components of vehicles. So I guess I don't have any clue, but I guess they have a similar JV as a key component players.
And then, therefore, attractiveness From us to them is clear. We are very reliable, experienced motor company. And then A job from them to us is, I would say, High potentials, we don't know if they can do or not, but we have many 3rd party customers who want to build the EV by themselves, Because of confidential fee agreement, I cannot tell you clearly, but many famous companies want to build They are owned EVs. So we don't know if this really happen or not, but I don't want to lose this opportunity. So that's why we agreed to go deep dive for another 6 months.
And then our agreement is, if we agreed for all point, We make a final contract in December this year. That's a content JV. I mean, Study agreement of study at this moment.
Okay. Thank you. Thanks.
Thanks for your
answers and I'll join back the queue.
James, thank you. Our next question is from Ms. Yunri Du from 91, please go ahead.
Thanks for allowing me to ask the question. Actually, my question just got to ask. It's about the JV with Honghai Koh. And the Foxtrot. I have another question on e scooters.
Right now, I'm aware that there's a regulatory driven Replacement demand in China right now. I'm wondering what's your customers In terms of e scooters and e bikes, etcetera, and if you could give us the rough ballpark of your market share, if that's possible?
Thanks. Okay. I don't know if you know or not, but In China, most of the motorbike is already driven by motor. It's very different from like Indonesia or India. Most of the Southeast Asia country has a huge volume of motorcycles, but it's still driven by engines.
But China, it's let's say 90%, 95% of Motorbike is driven by motors. And then I think Current motor most of the current motor is not so efficient and then The placement incentive for replacement is to accelerate efficient motors. And then For these areas, we are newcomers because current market is dominated by Chinese players. But we already found that we can we have enough capability to build Our Monta is the same price as them with much better durability. So that's why Current top player of this electric motorbike is agreed to source us.
Actually, Our SOP start of production for Fast product is in September this year, 2 months from now. And then So to answer to your questions, probably this is very good opportunity for us to increase our sales. But we have to comment, I mean, Take our market share from our competitors because we don't have enough market share right now. So replacement and then increased demand is good, but before that we have to take Manisha from our company. That is current situation.
Of course, same logic for Power systems by more both by schools and others.
Thank you. So is it possible to name any specific e scooter customer?
Koh. Sorry.
Hi, Paphos.
Once this is announced by our customer, we can follow, We cannot announce by our side first. But one of the top players. Okay.
Koh. Okay, thank you very much.
Okay, thank you very much. Our next question is from Mr. Seo Wilde from Rafa. Please go ahead.
Hi, thank you very much for taking the call and again for Holding the conference call. My first question is around the 1,000,000,000,000 yen of CapEx and M and A spend Guidance that you've given over the next 5 years. I wondered if you could either let us in on how that was calculated or break it down by CapEx and M and A, I'm just trying to square it with the target for 1,000,000,000,000 yen in organic sales increase And also with the quite considerable CapEx requirements for your e axle business. Thank you.
Thank you. I mean, most of the case So M and A side, we can save our investment because they already have capacity and facilities. And then if we know M and A, we have to do it by ourselves and then we have to invest. So those are pretty much in line and almost same figure. So let's say, we purchased 50,000,000,000 companies And then we have almost RMB50 1,000,000,000 assets, so we don't have to invest.
So depending on what size in Monday we do, Currently, we can tell you roughly fifty-fifty. So JPY500,000,000,000 for our own investment, JPY500,000,000,000 for M and A. But if we have a very good Items for company to purchase even JPY 3,500,000,000,000 we do. And then to maintain that flexibility, what we have to do is we have to Thank you. Our equipment as low as possible.
And then one of the solution for that is in house Machine Tool Builders. So as I already explained at the previous session or previous, previous sessions, We're developing our winding builders by internals. We are building Testing equipment for eAxes by ourselves and it's very famous. Our stamping machine is our own. And then on top, we merged, acquired Mitsubishi Heavy Industry Machine Tool Divisions.
It's not clearly closed yet. I don't think but I don't think it's too far from today. It's probably a very short period. And then since we are already inside, we can purchase very, very reasonable price. Because on top of that, we have a very strong know how to make a cost streamer.
So let's say, we can purchase their equipment 50% from their previous price, That is the strength. So, dollars 0.5 trillion for investment, dollars 0.54 in Monday is just very Last, but flexible balance to increase that flexibility. We are continuing to put effort for capital investment reductions and that effectively happens.
Okay?
Thank you. So can we assume that your M and A targets are I mean, this is very rough, but based on $500,000,000,000 spend, so $1,000,000,000,000 in sales, They're unlikely to be either high growth or high margin businesses that you are targeting to purchase. Is that a fair assumption based on what you've just said?
Joe. It is yes and no. If you go to Page 16, Segment by segment, target is actually different. We are already large. So we used to purchase like 10,000,000,000 companies, but Now we can go very high if we want.
And automotive sector is the one probably we should go very large one. Me, like small precision and then other product, Probably, we still have to stay very small and then it's small, but still very profitable and delicious So segment by segment, actually, we cannot make a general comment. It's different, But we have a target.
Okay. Thank you. That's very clear. Thanks. And just if I may on a slightly different topic, I'm interested in the emphasis of the per employee KPIs, so sales per employee and OP per employee That you've put up there alongside return on invested capital.
Could you explain a bit what made you set On these as the most appropriate KPIs? And also, if I may, as a follow-up, whether or not you've said anything The plans on headcount. Thank you.
Thank you. I'm very happy to have this question. Actually, I wanted to have a discussion. Let me introduce where we have passed. As running with FY 2020, our sales is JPY 1,600,000,000,000 And then we have 120,000 employees globally.
We have many employees, We have reasons. Nidec is very cost competitive companies. There are many reasons, but one of the technical reason for that is we have a very high vertical integrations. Many parts supplier is just assembling, okay. Maximum their machining, Koh.
They don't cast, they don't press. Of course, many of them don't produce die or winding machines or Some are machining equipment, assembly equipment by themselves, but we do. That's why we are very cost competitive. But sometimes that brings More employees than standard company. One of the point is, if we're going to go 10,000,000,000 which is 6 times from 20.
Do we really have over Nearly 1,000,000 employees? Of course not. We cannot maintain those. So what I conduct is, While we are keeping cost competitiveness, we don't abandon this very high vertical integrations, We have to make more efficiency for not only direct labor, but also indirect labor. So, of course, typical solution for indirect labor is digitalization.
We still have a very much manual works. And also because of complicated organization, probably we are doing I'm Mr. Sabino. Therefore, we are distributing more simplification of organizations. Those are solution for more productivity for me in direct side.
And for direct side, standard line Introduce more automation. Many of the Nidec plans were listed in post competitive countries Such as Thailand, Vietnam and then China and then Mexico and many of them in East Europe. And then when we introduced our facility in there, originally labor cost was very low. So we and at the same time, we didn't know if really good sales happened. So for the introductions, we were very careful not to invest too much.
So we skipped And we moved automation investment for automation. So naturally, we have many people. When 10 years 20 years from now and then almost no exceptions, all cost competitive countries increased their standard labor cost. So still competitive compared with the U. S.
Or Europe and Japan, but not Competitive, 10 years, 20 years ago. So now I decided whenever we go as new plan, We introduced high automation from the beginning with no hesitation. So lately, we announced that we are Installing the new facility in Serbia, I'm requesting leader of Serbia in our company to introduce very high capability, high automation lessons. That will help this productivity improvement. Yes.
So when we are reaching the central unit, hopefully, we have around only 400,000 for each, not 1,000,000.
Thank you. Thanks. Yes, that's perfect. Thank you.
Thank you very much, Theo. We have only a few more minutes and the next will be the final question. Mr. Ramsey Niran from State Street Group Advisors again. Please go ahead.
Yes. Thanks for taking my question. So just referring to Page 9 in the presentation. So when we compare Vision 2020 and Vision 2025, Vision 2020 somewhat lacks some I mean Unable to reach the target precisely. So what is different when we compare Vision?
I mean, what is different in strategy when we compare Vision 2025 and Vision 2020, what is can you give some color around that to achieve Vision 2025.
Thank you, Ramzi. This is key questions I anticipated. Vision 2020 took so long time because Naranori didn't have SEGI. Yes. Now he has Seiki.
So
he was only
the leader leading this company, but We can share leadership. That means our DNA is micromanagement. Micromanagement complete micromanagement by just Nagamori was important. That was mainly why it's stuck. So now we share micromanagement from the online side and the fixed side.
And then it's proving 2020, very successful. It's much more better growth than 2018 2019. So now, While we are doing micromanagement, also I bring many people. And then Those people are very professional to how should I say prepare for future growth. Not too much excitement for current performance, but for futures.
So those are main difference. And then of course, as today's presentation is showing, I think we can't disclose everything because we have a competitor and then we have a stakeholder And then we cannot if we showing too much too precise what we're going to do, That makes our activity difficult. But we have a very detailed plan to achieve. For example, like the vehicle side, as I said, it's a long lead time anyway. And then we have a very good Visibility up to 24.
This show many vehicle automotive related company working for 25, but I think it's pretty much close to what I want. So we have more management power, Management capability, ability and actually result and visibility is telling us This is very much a practical goal.
Yes, that's helpful. Thank you. Thank you very much.
Sorry, again, I cannot tell you too much precise.
Yes, yes, I got your point, yes. Okay.
Thank you very much, Dante. Now, we'd like to conclude the conference call. I'd like to appreciate for your participation. Should you have any further questions, please don't hesitate to contact Nidec Corporation or your sales representative at Mitsubishi U. JEMOGA Standard Security.
Again, thank you for joining the conference call And you may now disconnect.
Thank you. Thank you. Thank you very much.