Good morning, good afternoon, and good evening. Thank you very much for joining Nidec Fiscal Year 2020 Second Quarter conference call. I'm Yoichi Orikasa, General Manager Kyoto Branch of Mitsubishi UFJ Morgan Stanley 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 file on Nidec's homepage at this moment. Please note, this call is being recorded, and the conference material will be posted on the company's homepage for the coming week for investors and analysts who want to revisit or cannot join today's call. Now, I would like to introduce today's attendees from Nidec Corporation. Mr. Jun Seki, Representative Director, President, and Chief Operating Officer.
Hello, everyone.
Akira Sato, First Senior Vice President and Chief Performance Officer.
Good morning, everyone.
First, Mr. Sato will make a presentation. After his presentation, we will move on to a Q&A session, and Mr. Seki and Mr. Sato will answer your questions. Mr. Sato now presents Nidec's Q2 fiscal year 2020 results, future outlook, and management strategy. Mr. Sato, please go ahead.
Thank you very much. Good day, ladies and gentlemen, and welcome to today's conference call. My name is Akira Sato, Chief Performance Officer of Nidec, and I'll be your main speaker for today. Joining me is Mr. Masahiro Nagayasu, General Manager of Nidec's IR team. Also, we have a special speaker today, who is Mr. Seki, President and Chief Operating Officer, Nidec. He is joining us in this conference call, particularly in the Q&A session. For the forward-looking statements, please see slide number two of our presentation material for details. Now, I'll review the key figures. Please see slide number three for our first half results. As summarized on slide number four, the first half net sales has increased 0.1% year-on-year to JPY 751.8 billion. Operating profit has also increased 12.0% year-on-year to JPY 69.2 billion.
Both our net sales and operating profit have made a year-on-year increase. The net sales for the second quarter has increased 23.2% quarter-to-quarter to JPY 414.9 billion and marked a record high. The operating profit for the corresponding period has increased 48.9% to JPY 41.4 billion due to contributions from comprehensive improvements on cost structure and optimization of fixed costs through WPR4 program. The operating profit ratio has recovered to double digit, 10.0%. As a result of all of these, we have made an upward revision to full year fiscal year 2020 financial forecast. On slide number five and six, you have a step chart showing the comparison of net sales and operating profit year-on-year and quarter-on-quarter respectively by product groups with exchange rate effect eliminations and structural reform expenses.
As you see on slide number six, the net sales and operating profit have increased quarter-on-quarter in all of the segments, and small precision motors, Automotive, and Appliance, Commercial and Industrial, or ACIM, have been the main drivers. Please see slide number seven. Due to our continued efforts for a higher Cash Conversion Cycle, or CCC, our free cash flow is on its way to improvement from the first to second quarter. The free cash flow for the first half this fiscal year has recovered to almost the same level as the first half of fiscal year 2018.
As shown on slide number nine, we have made an upward revision to full year fiscal year 2020 financial forecast based on the first half results. Please see slide number 12, which is showing changes in our regional productions on a month-end basis, where the pre-pandemic average utilization ratio is assumed to be 100%. The region of Europe, Americas, and Asia, excluding China and Japan, whose ratios were lower than China and Japan as of the last results, have caught up in the second quarter and are on their way to near full recovery. At the WPR program progresses, the net sales hit the bottom in the previous first quarter, and operating profit in the fourth quarter of the last fiscal year. Operating profit has recovered to the double digit, 10.0%, in this second quarter. We are setting even further recovery in this second half. Please see slide number 14.
The sales volume of six models of electric vehicles, or EVs, that have adopted our E-Axle, exceeded 80,000 units on a cumulative basis as of the end of September. Total volume of each month in the second quarter is exceeding that of previous month. Please see slide number 15. We are expecting that Nidec's E-Axle follow the S-shaped curve in the product life cycle theory, and enters a super long growth stage. Last month, the governor of California issued an executive order requiring all new cars to be zero emission by 2035. In the same month, European Commission announced its plan to increase from 40% to 55% reduction of greenhouse gas emission by 2030, compared to 1990 levels as part of the European Green Deal.
Meanwhile, due to the technological innovations, the cost of EV powertrain is expected to become cheaper than that of internal combustion engine, or ICE, around 2024. Customers for E-Axles are spreading from initial innovators such as GAC and Geely to early adopters after the turning point year of 2025. Sales are expected to expand rapidly thereafter. Please see slide number 16. Based on the expected rapid sales expansion of E-Axles after 2025 that I've just explained, Nidec is setting up local R&D bases in China, where significant technological innovations and structural changes are happening in the EV industry. As illustrated on the upper right, we are planning to establish R&D center in China-Japan (Dalian) Local Development Cooperation Demonstration Zone, which is at most the same scale as Shiga Technical Center, our core R&D site in Japan, with 1,000 employees.
Shown on the lower right, the operating ceremony of R&D center in Suzhou was held last month, and it is already up and running now. This is one of world's biggest R&D sites, with 12,000 sq m of floor space and 36 motor testing systems. Please see slide number 17. As we are entering the age of CASE, which stands for connected, autonomous, shared, and electric, Nidec is transforming our business model from the one based solely on models to the one based on systemization and modularization in the product areas. In not only E-Axles that I have mentioned, but SIS system, pump module, door system, and electric power steering system, in order to increase added value.
Please see slide number 18. Both net sales and operating profit ratio of SEI are steadily on their way to improvement for the first to second quarter due to the WPR program. SEI is currently undergoing a comprehensive review of its cost structure and is ready to improve operating profit ratio by optimizing outsourcing costs, labor costs, and fixed costs. Please see slide number 19. Nidec's compact, light weight, and energy-efficient brushless DC motors are playing a very important role in coping with the strong demand for home appliance products on the back of the work from home trend caused by COVID-19. We are seeing further growth of our brushless DC motor business in the appliance field, such as air conditioners, dishwashers, refrigerators, washers, dryers, robot cleaners, and other vacuum cleaners. Please see slide number 20.
The shipment of Ultra- thin and Ultra-s mall fan motor, Ultra flow FDB or UFF, which is used mainly for the PC application, marked a record high level in the second quarter for two consecutive quarters. UFF firmly supports the demand for work from home. Please see slide number 21. On the back of explosive increase of digital data due to the full-fledged launch of 5G, Nidec offers solution to the heat generated by the faster CPU. We are aiming to achieve the sales of JPY 100 billion in this product area in fiscal year 2023 by introducing heat pipes, heat sinks, vapor chambers and their modules, and liquid cooling systems. Please see slide number 24. Motors are the core components of anything working with electricity. Motor accounts for approximately half the world power consumption.
Nidec will supply efficient motors globally and contribute the reduction of CO2 emission and economic development of emerging countries as number one comprehensive motor manufacturer in the world. Thank you very much for your attention. Now, we would like to open up the call for your questions.
Thank you very much, Mr. Sato. Now we would like to turn to the Q&A session. Senior management of the company will take questions from you. Today's Q&A session will be conducted electronically. If you would like to ask a question, please press the star key and one on the touchtone phone. Again star and number one. If you would like to ask a question. If you would like to cancel your request, please press star and two. We now pause for a moment for questions from the participants. Okay, our first question today is from James Pulsford of Alma Capital. Please go ahead.
Good evening. Thank you very much for your time. I appreciate that in the second quarter, you did well across the board, but one of the areas that performed very strongly was your small precision motors, HDD motor area. I just wondered, could you give us a few comments in terms of perhaps volume data, comments on ASP, and if there were any major changes to mix, so for example, sort of nearline volumes? Could you also let us know what the operating profit margin was for your HDD business in the second quarter, please?
Okay. Thank you, James. This is Nagayasu speaking. That you were asking what was the situation of the HDD spindle motor shipment for the past quarter, like September quarter. We are roughly shipping 63.2 million spindle motor, where the average selling price was $7.02. We were shipping roughly 17.8 million nearlines, which is much larger than the previous quarter, like June quarter. Okay? Clearly, we have been seeing the mix is improving, and nearline is getting higher, and also ASP is getting higher. You were asking the profitability. Clearly, for this quarter, we have a little better OP margin over the first quarter, which is over 31.8%.
38%?
Yeah.
September quarter.
Right.
It was 30.5% June quarter.
Is that fine?
Sorry. It was 30.5% in June, and it was 31.8%, is that correct?
Yeah. 30.5% in June quarter.
Yeah. 30.5% in June, 31.8% in September quarter for our spindle motor profitability.
Thank you very much. Can I ask one follow-up question, please? Is that okay? I was interested to see in your waterfall chart that the operating profit structural reform expenses in this first half seemed to be higher than they were in the first half of last year, which surprised me. Am I correct in thinking that those structural reform expenses were JPY 6 billion in the first half of last year, and so therefore JPY 8.2 billion this year? Were they very heavily weighted to the second quarter? I was surprised to see such a big number. Could you comment on that, please?
Yeah. Structural reforming expenses, it is JPY 4.3 billion September quarter, and JPY 2.8 billion in June quarter. By JPY 1.5 billion, it was increased. Mainly due to the restructure, the kind of how described factors. That's main reasons why we are spending more in September quarter than in June quarter.
Okay. Thank you very much, indeed.
Okay. Thank you, James. Do you have any further comments or questions? Are you all right?
Well, I should probably go to the back of the queue.
Okay. Thank you very much. Thank you, James. Okay. Our next question is from Satoru Ochiai of MUFG Securities EMEA. Please go ahead.
Thank you very much for your time today. It's very good opportunity because Seki is joining today's call. I would like to ask, it has been six months since you assumed presidency. What is your take on the challenges the group faces at the moment?
Thank you, Ochiai-san. I will reply, but today, main Q&A must be for the financial announcement. I would like to ask everyone not to ask just myself, okay? Since this is the first one, I would like to answer you. You're right, six months, and then it's a very different world from automotive to motor world. The challenge is speed, I have to say. Automotive, I don't say automotive is slow, but automotive has almost like a common cycle from introduction of concept of models to make that model happen, and then sell. Like five years. Here in Nidec, it's so fast. Much shorter lead times, and decision speed is very fast. While usual company having like an executive meeting monthly, this company holds weekly basis at least, and if necessary, it's daily basis. Things need a decision, never wait decision meetings.
That is the concept. I'm enjoying very much. I like the speed. I don't need like 100% evidence, but if it meet my sense, I would like to go ahead. Mr. Nagamori given me some autonomy to go there. That's my challenge, and I am enjoying very much, Ochiai-san.
Yes. Thank you very much.
Any questions? Are you all right, Ochiai-san? Okay. Our next question is from Zach Inoue of MUFG. Zach, please go ahead.
First of all, congratulations on a very strong quarter. Again, thank you so much for hosting this timely call every quarter. Special thanks to President Seki for this opportunity to speak to you directly, as I actually never heard your voice before, so this is great. Following up on the previous question from Ochiai, I just want to focus on a kind of bigger question, bigger picture, regarding the EV penetration globally. It seems that China is definitely leading the pack here. Is there any major technological difference between Chinese makers and also the rest of the world in terms of EV technology, what they're adopting and so forth? How is that change going to benefit Nidec going forward?
If you can specifically talk about maybe production capacity increases from now to 2025, when you believe there's going to be a critical turning point, and also 2030 and so forth, that will be great.
Yep. Question to Sato-san?
Yeah.
Okay. Thank you, Inoue-san, Zach. Thank you for your reply. First, I have to correct your assumptions. China is one of the major markets, otherwise, Europe. China is not outstanding anymore at this moment. We don't know the futures. If we look at the September sales of what we call New Energy Vehicles, because EV and plug-in hybrid and e-POWER from Nissan, those are using traction motors. For us, we categorize it as New Energy Vehicles. The New Energy Vehicle sales in Europe is higher than China. This is accelerated by additional incentives from each country, particularly Germany and France. We are predicting that this pace will continue for a while. Both Europe and China are very important. In terms of technologies, yes, you're right. The preference is very different.
Actually, China OEM, many of them don't mind if it's in-house motor or motor supplied by suppliers like us. They have more flexibility for that choice. That's why our penetration in China is going ahead, while European OEM is a bit conservative, because they developed their motor by themselves and they are still sticking. They want to build by themselves. Not all of them. For example, like PSA, they chose a JV with us. Investing half and half. They are enjoying our technologies and competitiveness. Time by time, it's different. At this moment, I would say, most of the European OEM is tasting if they build by themselves or if they choose outside. They have not been determined clearly. Of course, some technology preferences are different.
I don't go into detail, but voltage, like 800 versus 400, or magnet, if it's a heavily used magnet or no magnet. Those are different. We are a specialist of motor, so we are fully aligned with each preference. Last point is maybe capacities. At this moment, our actual production line is only one in China, which started production last May. Very soon, we have a second line, which is a JV with Guangzhou Automobile Group. The third one will also launch next summer. We have already firmly planned three lines, and total capacity is about 2 million. The fourth plan is a JV in PSA. This is announced already as official information. That starts production in 2022. Last of the things, we have a plan, but because it's directly related with our customer, I don't want to say.
Our current volume prediction in 2025 is reaching 2.5 million. In 2026 and 2027, rapidly grow. We're going to set up a capacity for not only just volume in 2025, but preparation for next growth in 2026 and 2027. That's what we are going to do. At today's financial announcement, prior to this meeting, our Chairman said that we are going to set up 5 million in 2025. It's not over message. That's what we are predicting and anticipating. I don't know if I'm replying to all your questions, Inoue-san.
Time.
Time level.
Are you all right, Zach?
No, it is very good. Thank you so much. Yes. All very clear. Thank you so much. Thank you.
Okay. Before we go to take next questions. For the benefit of all the participants of the call, I'd like to remind that, if you would like to ask a question, please press star and one. Again, please press star and one. Okay. Going back to the Q&A session. We now take the second question from Alma Capital's James. James, please go ahead.
Great. Thank you very much indeed for your time. I wonder, I've got a couple of questions. Your R&D expenses in the first half of the year were only JPY 31.2 billion, compared to a full year of JPY 85 billion. You seem to be expecting Well, that's a very low figure, and you're expecting a big increase in the second half of the year. Could you comment on whether that's correct, and why that's the case? Then, as a sort of second one, which may be related or may not be related, I don't know. Could you comment on the specific profitability of your automotive area, which obviously improved a lot from the first quarter, but is still obviously relatively depressed.
Talk about product development costs for all the E-Axle contracts that you're winning, and how you expect those product development costs, the weight of those to change over the next two or three years, please.
First of all, the R&D cost, as you mentioned, we spent JPY 31.2 billion in the first half. That could be low level. We are going to increase the R&D cost for, of course, the traction motors and also the other new, so-called three new. New market, new customers, and new product. Those spending of R&D is really needed in the second half, so that we are expecting that R&D cost will be up to JPY 85 billion alone in this fiscal year. That's current status of R&D cost. What's your second question now?
Well, the second question with the profitability of the automotive side, which obviously has gone from break-even in the first quarter to a better figure of sort of over JPY 4 billion in the second quarter. I know that's still a relatively low figure, and it's because you're bearing a lot of product development costs for all the e-axle future contracts that you're winning. It's a sort of forward investment. I wondered if you could comment on the level of product development costs for new contracts that you're bearing this year compared to last year, and how you expect that to change over the next two or three years, looking at all the contracts wins that you have in the pipeline that are going to start flowing through.
Okay. Thank you, James. Can you refer page five, please?
Yep.
That's a comparison of last year, second quarter versus this year. Lots of greens except Automotive, which is -$87 million. This is actually split to -$67 in Q1 and -$20 in Q2. Q1 is reasonable because of very low demand of Automotive. In Q2 it's recovering, not fully recovered yet, but still at -$20. This -$20 consists of +$20 from existing business, and -$40 from traction motors. That means at least traction motor spending $40 million more than last year. I need to spend this money. Problem area is poor recovery from Automotive areas. If we look at the July, August, September. September, we are seeing a much bigger profit from Automotive area, and it's continuing October, November. It's definitely coming back.
In third quarter, I'm seeing we have a positive from last year to this year as automotive totals. I will keep increasing the profitability from all areas. Point is, development cost for traction motors. If we need to spend traction motor, which I have already got orders, definitely I can sustain this level. It's good and bad, but actually good, I believe. Day by day, we are receiving a new order from customers. We talked about the volume in 2025, which I explained about 2.5 million. It was 1.2 million last quarter, which I explained. It's rapidly increasing. If we have a more increase from now to 2026 or 2027, I may have to increase this development.
We are not afraid, yes. It's proving we are gaining market share. We can enjoy scale merit later on. I am fully aligned with Chairman.
We take as much as possible for this volume and the market share. If we have to spend the development cost, we do. I also need to accelerate profit margin improvement from organic side. That's what I'm looking for. With current pace, I definitely make that positive in Q3, but if we have a further order from customer, it may stay as slightly negatives, but not heavily negatives. That's for a maneuver for futures. Am I replying your question, James?
You are indeed. Thank you. Can you say anything more about the increase in your now projected volumes that you have for 2025? Is that mostly from Chinese customers that have taken up? Can you give any details of the sort of mix of where the increases come from?
Please let me avoid to tell specific one, I think I can explain you by regions. Roughly 40% from Europe, 40% from China, 20% from others. China, Europe, growing same speed.
Okay. That percentage, that's the increase that you've given me, yeah?
No, that's a percentage of JPY 2.5 million.
2.5 million, okay.
I would say proportional. Slightly bigger in Europe for incremental volumes from last time to this time.
Okay. Previously you've made statements, I think, that you have, including inquiries, you have a potential aggregate value of, if you like, orders and inquiries of JPY 630 billion, was the figure quoted. With these additions, do you have a revised figure for that you could quote or not?
You mentioned the JPY 630 billion.
I believe that was it, yeah.
the particular year, or maybe we have mentioned that number.
No, it's-
as a total
3,000 base. Yeah. It's.
Right. Aggregate total.
Yeah.
You are asking what will be the number as of today, covering 22 E-Axle customer and the seven traction motor customer. Is that your question?
I think so. On the same basis as before. I just wondered if that's been re-.
Yeah. The total sales for aggregated basis sales from 2019 to 2025, right?
Yeah. Correct. Thank you.
That number as of today is. The previous was something like JPY 630, right?
I believe that's the case, yeah.
Okay. The total revenue we expecting is something like JPY 750 billion.
JPY 750 billion.
Okay. Thank you very much indeed. That's very kind.
Okay.
Okay, thank you, James. Our next question is from SSGA, Mr. Ramsey Neelam. Ramsey, please go ahead.
Yeah. Thank you very much for taking the question. I'm just trying to improve my understanding on page number 15 in the presentation. You mentioned the target is roughly 2.5 million for E-Axle by 2025. This also includes the volume of traction motors in this target, or can you please explain the target for E-Axle and traction motor? The second question, following that, can you give the number of customers in E-Axle and traction motors? I think, E-Axle you have previously 15 customers, and how that improved in this particular quarter.
First, about 2.5 million in 2025. Most of volume are traction motor sets. Some are just motor alone. Let's say combination is about 85/15. 85 are traction motor, 15% for motor alone. You are asking whether-
Can you take it again?
That 2.5 million correspond to the number we set, 1.5 million, or other number, such as the number including the traction motor for mild hybrid, right? That's another 4.1 million, which we mentioned. Today we say, the previous quarter, we say 1.5 million E-Axle. That correspond to today, 2.5 million. Okay? 4.1 million we mentioned in the previous quarter. Today, we say 6.1 million roughly. That's another market, right, as you understand, the traction motor market.
Yeah.
Thus we say, roughly that the 10 million total market for a battery-based EV. Our number is 2.5, so we say our share is 25%. Mild hybrid, according to the IHS Markit, 20 million is the market size for fiscal year 2025 or calendar year 2025. Our number is over 6 million, which is roughly 30%. You can understand that we are going to take a 25% of the plug-in EV market and 30% of the mild hybrid market. That's what we are saying in this disclosure. Is that fine?
Yeah, that's great. That's really helpful. Thank you.
Okay.
On number of customers you have, compared to last quarter for both of these markets.
How many customer we have for a mild hybrid?
Yeah.
Okay. It's the seven as we mentioned, the same number as we mentioned last time.
Okay, thank you.
Okay.
Okay, thank you, Ramsey. Our next question comes from Satoru Ochiai again of MUFG Securities, EMEA. Mr. Ochiai, please go ahead.
Okay. Thank you very much for taking my question again. My second question is that, if Nidec will be able to sell 10 million units of E-Axle system, so roughly how much impact will Nidec have in terms of operating profit?
7 millions. Ochiai San, you said 7 millions?
No.
7 million.
Can you give in 2030? 2030.
2030, we're going to sell 10 million.
Yeah, 10 million, yes.
Yeah. 1 0 million. When we are selling 10 million, how much profit we are gaining?
Yes.
That's your question, right?
That's it. Yes.
Yeah. If you look at the page 15.
We are splitting the three terms. I don't know what the English said this moment.
Introduction.
Yeah. We're splitting introduction stage and growth stage and maturity stage. I can say, once we reach maturity stage, it's same level of profit, profitability as a hard disk drive, because we are going to dominate this world and then probably over 30%. For the introduction stage, that more priority to grow fast because, we have to eliminate our competitor as less as possible. For this growth period, I think we can firmly confirm probably around 10%-15% ROIC percentage. Still, this is like in between introduction and maturity. If we need to compete with our competitors, we do, because market share is first priority. Lastly, 10%-15% per unit before a maturity PU, which is 30%. That is just a very high level predictions. I would say growth fast.
Okay. Thank you very much.
Okay. Thank you, Mr. Ochiai. Now it seems that James has remaining question. James, please go ahead.
Good. Thank you very much indeed. I wonder, could you talk a little bit about the other precision motors, so not the HDD motor area, and the performance in both the second quarter and also the prospects going forward. In the second quarter, your operating margins here are around 5%, so they remain relatively low. I know long term you target, I think 15% here. I'm just wondering if you could comment on how difficult you expect that to be to improve margin, which has been depressed for some time here. That predates, it's not to do necessarily with COVID. It predates COVID. Could you comment on that? Also within that, in the second quarter, within that, you have some sales of vibration motors. If you could specifically comment on that and on the value and profitability there, that would be kind as well. Thank you.
Number one, when we are talking about a small precision motor, there are three categories. Hard disk drive spindle motor, DC motor, fan, and others, and the haptic and vibration motor. There are three different areas. When you divide it into those three categories, the DC motor fan and the other category, for example, fiscal year 2019, it was merely a 2.9% OP margin, so it is not really making so much profit. That is going to be coming down into the 2020. The first quarter, the June quarter, there was a 5.4%, and the second quarter, this quarter, is something like 5.7%. It is clearly getting better. The top line is also getting a little bit higher, where we are reporting in the second quarter, roughly a JPY 62.4 billion, which is over JPY 57.2 billion in the June quarter.
If you're looking back to fiscal year 2019, last year, the highest quarter for that category was JPY 62.5 billion in the December quarter. We are already reporting almost the same as the last year, December quarter, which is before the COVID-19. Okay. The future, clearly, there are several areas. Number one is the IT area, especially data center area. We believe that market or that segment is growing. That's number one. Number two, the other area is the 5G base stations. We see our business might be somewhat coming down in the December and the March quarter because our major customer, Huawei, was blocked by the U.S. government. Now, that's going to be maybe transferring to Nokia or other 5G makers. It will take some time to make those changes. The 5G base stations cooling fan demand is coming down.
The biggest one is, clearly at this moment, we are looking at the so-called holiday season. Clearly, we are looking at the fan and some other DC motor for the home appliances all coming up. Those are the base trend. You are asking the, finally, the trend in the haptic and vibration. Clearly, this is more seasonal one. Overall, we say maybe the American smartphone makers, smartphone will be selling well, then we will be something like 1/3 of that number will be using our haptic. That's something that we are expecting. James, is that fine?
Can I just check, so for the vibration motors in the first half of the year, you ended up then losing a little bit of money in the first half of the year. Is that correct?
Okay. Profitability and the sales is not same, okay? If you're looking at the haptic vibration motor business, we reported, clearly, in the first quarter, JPY 10.2 billion sales. This September quarter, we reported JPY 9.4 billion. The top line is coming down, OP was negative JPY 0.1 billion in the June quarter. This quarter, we're reporting JPY 3 billion, roughly. Okay? 2.8%. Overall, still, we have to write off the machines and others, which is really inherent to this project, because this project is only last one year. Any investment which is not resulted in the top line, they had to write off after the project ended. It's very difficult to make money, still, we are doing very fine with the top line, roughly JPY 10 billion per quarter. Roughly JPY 40 billion per year.
Overall, we say that's going to create 4%-5% OP margin. That's what we are looking at this business for this fiscal year. Is that fine?
No, that's fine. Thank you very much. On the fan motor side, where your margins, as you mentioned, are a little over 5% at the moment. Do you think, or the other precision motors, which includes fan and others, when you look at the next couple of years?
how realistic is it to expect a significant improvement in profitability there? What will drive it?
Okay. The key is the fan motor part, so-called the one fan motor, say, per unit, is not making so much money because we are competing very fiercely against our so-called Taiwan competitor, like Delta, Sunon, and all the others. Okay. Also, we are now competing against the Chinese manufacturers, it's very difficult to make money. What we are trying to do is try to solve the thermal question using our fan motor. Because fan motor is one of the device to cool down the system. Usually, fan means using the air, right? The overall cooling system is now shifting from air to the water. How we are combining those and to try to solve the customer problem to how to cool down the whole system. That's going to be a very big data center, or that could be a very, very small smartphone.
Whatever the case, the thermal demand is rising. We are not limited to the fan motor, but rather we are trying to become a problem solver for those thermal questions by any of our customers. By providing a better solution for our customer, we believe that we could improve the profitability. Is that fine?
It is. Thank you very much indeed.
Mm-hmm. Okay.
Okay, James, thank you very much for your questions. Now we have only a few more minutes to barely accommodate one more question, if any. Is there any questions from today's participants? There seems to be no further questions, and we would like to conclude the conference call. I'd like to appreciate for your participation today. Should you have any further Sorry, there is a last-minute question from SSGA's Ramsey. Ramsey, please go ahead. This will be today's final question. Please go ahead.
Yeah. Sorry for that. Yeah, just a quick question. Can you break down your volumes in terms of 2.5 inch and 3.5 inch and helium as a percentage of nearline motors?
For a September quarter shipment? Right?
Yeah, September.
Okay.
Yeah, exactly.
The total, which I mentioned, the total number of spindle motor shipment for the quarter was 63.2 million, the 2.5 inch high-end is 0.9, nearline 17.8, 3.5 inch, 22.6, and 2.5 inch is 21.9. As I mentioned, the total ASP is $7.02. You need more information regarding the pricing?
Yeah, if possible, please.
A 2.5 inch was $ 7.20, nearline is $ 13.23, and 3.5 inch is $ 4.69, and the 2.5 inch is $ 4.38. You're asking helium. The helium is 10.3 million out of 17.88 million nearline. Is that fine?
Yeah. Thanks. Great. That is really helpful.
Thank you.
Appreciate that.
Mr. Neelam, thank you very much. Now we'd like to conclude the conference call. Again, I'd like to appreciate for your participation today, and should you have any further questions, please do not hesitate to contact Nidec Corporation or your sales representative at Mitsubishi UFJ Morgan Stanley Securities. Thank you very much for joining the conference call, and you may now disconnect.
Thank you, everyone.
Thank you, everyone.
See you. Bye-bye.