Skip Ribbon Commands
Skip to main content
Navigate Up
Sign In
:

Quick Launch

Home > Posts > Omron to Extend Its Sensing and Control Expertise to Manage the Machine Lifecycle
January 02

Omron to Extend Its Sensing and Control Expertise to Manage the Machine Lifecycle

Keywords: Omron, Sensing and Control, Value Generation 2020, Cyber Security, Greater China, Machine Lifecycle, M2M.

Introduction
Under its long-term vision, "Value Generation 2020" (VG2020), Omron, the sensing and control company, aims to become a one trillion yen sales company by 2020. Toward that end, the company has set a target of over 700 billion yen sales for its fiscal year 2013 (ending March 2014). In FY2012, Omron's Industrial Automation Business (IAB) reported 263 billion yen in sales, which represented about 40 percent of the company's entire sales that year. IAB, with a goal of 283 billion yen, increased sales by 7.6 percent, even in the midst of uncertain global economic conditions in the market in FY2013.

Omron's growth strategies include reinforcing its Industrial Automation Business (IAB) and expanding the company's business in emerging markets. ARC Advisory Group recently spoke with Yoshinobu Morishita, Representative Director and Executive Vice President of Omron, and President of its IAB Company, about its plans for business expansion in the Asian market, and a number of other important issues.

What have you learned from the 2011 East Japan Earthquake?
Morishita: Since Omron did not have any production sites near the destroyed area when the earthquake occurred, the company escaped direct damages from the natural disaster. But we had many components suppliers in that region. To reduce the burden of the suppliers and help ensure that we could continue to deliver our products to our customers, we promoted various standards and platforms to provide our suppliers with alternatives.

With the subsequent disastrous flooding in Thailand the same year, we learned that totally unexpected matters could occur repeatedly, and we must now consider these as usual in global business. In a sense, cyber security measures have much in common with the measures taken against natural disasters, since both represent unexpected situations in the traditional mindset or annual business plan. To help enhance the cyber security of our instrumentation, we are actively exploring the vulnerabilities in our own systems.

Global economic issues, including the currency exchange, create some often-bewildering challenges. As a supplier with a very broad portfolio of automation components, we need to understand the business conditions and the changes in local customers, region by region, on a global scale. In today's global market, it's become increasingly important for suppliers to develop a global platform for operations, as well as introducing a platform of components and product designs.

Do you have any comments on the fact that Omron celebrated its 80-year anniversary in 2013 and where the company may be going in the future?

Morishita: Omron, in my opinion, is still in its youth. And we manufacture with a belief of continuing our life with the thought that of the seeds you sow today, some bloom today and some of the seeds you sow today will bloom in the future.

Along with the other global major automation suppliers, Omron is in the same arena to compete in terms of activities to increase the added value of its products or to contribute to society through its automation business. But also in the industrial automation field, Omron is aware of itself as a very unique company with a variety of products that are differentiated from any other company. Omron is working hard to become the company of choice for customers in control, both in the variety of automation components we can offer and in the future potential of growth through energy control.

Population growth clearly affects growth in the manufacturing sector. With the growing world population, there is no doubt that there is potential for market growth in the manufacturing sector. We at Omron anticipate that our past and current efforts planting the seeds of control technology, a rich product assortment, and future-oriented energy control will pay off in the future. We won't stop investing in these areas, even if they do not pay off immediately. This, we believe, will be Omron's strength.

Are we correct in assuming that overseas growth is key to the growth of the IA business?

Morishita: Currently, 50 percent of Omron's business is in Japan, followed by 16.3 percent in Greater China, 12.4 percent in both the Americas and Europe, respectively; with Asia Pacific and others accounting for the balance of the business. For our IA business, 44 percent is in Japan, and 19 percent in Europe; followed by 15 percent for Greater China, 12 percent for the Americas, and Asia Pacific and others sharing 9 percent. We would like to raise the percentage of our overseas sales. This will require that we develop precise growth strategies for each local market, which we intend to do.

Emerging markets are also important, but especially, we want to improve sales in the Asian markets. In the last fiscal year, we grew in the Chinese market. In India, we achieved double-digit growth, though our volume in that country is still limited. We've been investing in new sales offices and expanding our supply chain networks, including creating new service and support capabilities in Asia. At the same time, we've invested in systems to design, develop, and supply components to fit the needs of customers in local markets.

What about expansion and challenges in the Greater China market?

Morishita: In the Greater China market, which includes Hong Kong and Taiwan as well as Mainland China, we're seeing a transition of the industrial structure from export-oriented to domestic demand-led industries. China's manufacturing industry is moving from low-cost production based on cheap labor, to automation to increase value-added production. Accordingly, Omron believes that Greater China has the potential to easily account for more than 20 percent of the whole IA business in the future.

In 1993, Omron opened its first manufacturing facilities in Shanghai. In 2005, the company integrated previously separate factories for PLCs, sensors, and FA components into one state-of-the-art manufacturing site. Since then, we have continued to strengthen and enhance our local product design, development, and manufacturing capabilities in Shanghai to be able to better meet the requirements of our customers in China. The next stage will be to promote mutual collaboration with the local industrial machinery sectors, such as packaging machinery and food processing machinery, and also with the end-users communities that are demanding higher-speed, higher-precision industrial machines to increase productivity and quality.

What will be the next step to grow in China?

Morishita: In the Chinese market, we will continue to rely on manufacturing, sales, development, and planning schemes that align with the way business is conducted there. In other words, by expanding the product range developed in China or designed for China we aim to grow business that is deeply rooted in the market structure of growing China.

Omron's China-related business is not limited to Chinese markets. Many local Chinese companies have grown to become global enterprises. Machinery manufactured by Chinese machine builders is shipped to the global market. Therefore, as a component supplier, Omron also keeps up with the global applications of machine automation, unit by unit, component by component.

In Mainland China, infrastructure development has advanced inland. With this in mind, in addition to deploying sales offices, Omron wants to invest in a way that puts us slightly ahead of the pace of expansion for the machinery business.

For years, Omron has focused on developing our sales and service networks in China. Under the umbrella of Omron Industrial Automation (China) our sales headquarters in Shanghai, we have 47 sales offices on the mainland, four distribution centers (in Shanghai, Guangzhou, Tianjin and Xian), and six Japan desks for Japanese companies (in Beijing, Tianjin, Dalian, Shanghai, Shenzhen and Guangzhou). There are also two distribution centers managed by Omron Electronics (HK) in Hong Kong and Omron Taiwan Electronics in Taipei, respectively. The company plans to continue to expand even further inland in the future.

What makes Omron different than other component suppliers for machine builders?

Morishita: Supplying components that are incorporated into industrial machines involves long-lived business relationships with machine builders. Product quality stability can only truly be determined after the machines have been in operation for a number of years at the end-users' facilities. Since we've observed that Chinese end-user companies generally replace their machines with new models every five to seven years (as opposed to every ten years in many other markets), Omron intends to offer products that provide the best performance over the anticipated lifecycles.

While optimizing component life depends partly on experience, we aim to develop components that enable users to select the optimum life of machinery by embedding specific functions to predict and control component life. In the past, components often came with sophisticated self-diagnostic function that were simply too expensive for users to adopt. Omron aims to fully utilize the company's expertise in sensing and control to introduce new technology to be able to make such products in an inexpensive manner. In Japan, for example, Omron has already established a business structure for operation and maintenance that enables customers to continuously monitor power generation at photovoltaic solar installations.

How does Omron plan to generate additional component business?

Morishita: Unlike several other suppliers, Omron plans to remain a component supplier, rather than building our business through incremental services. However, we plan to add manufacturing IT and software applications to our offerings through alliances with other companies, while taking advantage of the fact that, as the component supplier, we are the closest to the customer. The question is which companies to collaborate with and how. We believe this will require collaborating in a variety of ways globally, region by region, and segment by segment.

In addition to advancing our basic technologies, Omron's entire organization -- design, development, production, and sales/marketing -- is aligned and focused on maintaining the extremely high quality, stability, and functionality for our components that our customers demand, while meeting the precise specifications and other requirements for local markets. Where necessary and appropriate to meet these goals, we will collaborate with other companies that have their own specialized expertise and technology.

Which markets and which machinery sectors is Omron focusing on in Asia?

Morishita: In the Chinese market with its large population; food processing and packaging machinery associated with fresh food products, machine tools for automobile manufacturing, and production machines for manufacturing electronic components are all important markets. In India, the largest demand is for food and packaging machinery, followed by machinery for automotive-related assembly. Southeast Asia has diversified markets to which Omron responds differently. Malaysia, for example, is at a mature growth stage, Indonesia and Vietnam are hot developing markets, and Thailand has a well-established automation market.

Omron's business in China grew by four to five times in the past 10 years. But in the future, expansion in emerging countries and world regions have the potential to grow even faster than China's growth in the past. The size of the business is also expanding and becoming larger than ever. In two to three years, we may also see industrial machinery from India appear extensively on the global market. Omron must be careful not to let our supply of components lag behind this development speed.

ARC's Conclusion
ARC has written extensively about connected machines, machine-to-machine (M2M) communications, and the emerging Internet of Things (IoT) because we believe these technologies will play a key role in predictive maintenance and industrial operations management moving forward. This will involve a high degree of integration of sensing and control functionality embedded in field-level devices and equipment. As one of the few industrial component suppliers with extensive expertise and products in both sensing and control, Omron is well-positioned to serve such newly emerging applications for machine builders and machinery end users.

Omron IAB has established that its goal is not to be an innovator for the industry as a whole, but rather as an innovation enabler for machine builders. When machine builders need to innovate, ARC believes that Omron IAB should be in an excellent position to provide the deep domain knowledge and wide variety of high-quality products needed to assist this innovation.

All signed-in ARC Advisory Group clients can view this report in pdf format at this Link

If you would like to buy this report or obtain information about how to become a client, please Request ARC Info

 

 

Comments

There are no comments for this post.
 

 Related Reports