Inter Action CorporationTSE: 7725

Announcement Regarding Medium-Term Business Plan Formulation

Aug 6, 2020 at 8:03 AM UTC · MarketScreener

July 13, 2020

Attention: All concerned parties

Company name: INTER ACTION Corporation

Representative: Nobuo Kiji, CEO & President

(Code: 7725 First Section of the Tokyo Stock Exchange)

Contact: Investor Relations Division, Business Administration Group

Telephone number: +81-45-263-9220

Announcement Regarding Medium-Term Business Plan Formulation

INTER ACTION Corporation announces the formulation of a Medium-Term Business Plan with the final fiscal year set to the year ending in May 2023. The corporation decided to replace the Medium-Term Business Plan with the final fiscal year set to the year ending in May 2021, which was announced on January 11, 2019, to account for upcoming business development, and recent economic circumstances and other elements of the external environment.

The spread of novel coronavirus infections throughout the world and other current events have made it difficult to project performance; however, there are no major changes to the Inter Action Group's medium-term or long-term business plans.

We humbly ask for your continued support as the Group's directors and employees come together as one to work toward the Group's vision.

For details, please refer to the attached document.

Medium-Term Business Plan 2021-2023

INTER ACTION Corporation

Toward Higher Heights by Combining the 3 Segments with Optical Technology

Growth

Internet of things

related works

Optical

technology

The Inter Action Group is presently developing business on three major pillars: Promotion business of Industry 4.0, Environmental energy-related works, and Internet of things-related works.

Looking ahead to 2022, the 30th anniversary of our founding, and in pursuit of further growth, we continue forward with the expansion of the scale of our business on the basis of our motto-The Customer Comes First.

Additionally, we intend to combine optical technology-the Group's core technology-with each of the three segments in an effort to achieve synergy with existing business and discover ways to create new value.

	Environmental
Promotion business
of Industry 4.0		energy related works

Contents

１

２

Medium-Term Business Plan Concept

Combining the 3 Segments with Optical Technology

Internet of things related works × optical technology
Environmental energy related works × optical technology
Promotion business of Industry 4.0 × optical technology

Efforts Toward Achieving SDGs

Contents

１

２

Medium-Term Business Plan Concept

Combining the 3 Segments with Optical Technology

Internet of things related works × optical technology
Environmental energy related works × optical technology
Promotion business of Industry 4.0 × optical technology

Efforts Toward Achieving SDGs

Medium-Term Business Plan Concept (Numerical Targets)

In light of the recent business environment, we have revised some of the numerical targets set out in the Medium-Term Business Plan devised in January 2019, and changed the achievement target from FY2021 to FY2023.
The spread of novel coronavirus infections has made it difficult to project short-term performance; however, we anticipate no major changes to the business environment over the medium and long term. Therefore, we will engage in activities with the aim of achieving consolidated sales of JPY 10 billion in FY2023.

・We intend to combine optical technology-the Group's core technology-with each of the three segments in an effort to further expand business.

Consolidated net sales (Units: million yen)

Reinforcement of management infrastructure

Combining the 3 segments with optical technology

Resolution of management issues, and development of resolutions

5,078

3,996

2,512

Reinforcement	Development of new
business through the
of business	application of optical
infrastructure	technology
7,986

7,083

6,009

5,369

Net sales: 7 billion yen

Operating profit ratio: 22.0%

ROE: 13.2%

10,000

Net sales: 10 billion yen or more Operating profit ratio: 20% or higher

ROE: 15% or higher

2014 2015 2016

30th

anniversary

Time

2017

2018

2019

2020

2021

2022

2023

2030

1st MTBP	2nd MTBP	3rd MTBP	4th MTBP	2024 - 2030
2014 - 2016	2017 - 2018	2019 - 2020	2021 - 2023
Copyright © 2020 INTER ACTION Corporation. All rights reserved.		5

Medium-Term Business Plan Concept (Combining the 3 Segments with Optical Technology)

Internet of	Environmental	Promotion
business of
things related	energy related
Industry 4.0
works	works

Further development through the leveraging of optical technology

Missions

■ Further technological growth	■ Entry into the ultraviolet printer business
and business expansion in the
image sensor market

Promotion of FA image processing-related business
Promotion of laser processing equipment business
Share expansion in other

businesses

Contents

１

２

Medium-Term Business Plan Concept

Combining the 3 Segments with Optical Technology

Internet of things related works × optical technology
Environmental energy related works × optical technology
Promotion business of Industry 4.0 × optical technology

Efforts Toward Achieving SDGs

*LiDAR: Light Detection and Ranging

Internet of Things Related Works Segment × Optical Technology (Market)

[Image sensor market situation]

(1) For mobile devices

In the short term, we expect image sensor manufacturers' strong inclination toward capital investment to persist amid increasing demand due to the inclusion of multiple cameras on smartphones.
The introduction of 5G may generate device replacement demand.
In the medium and long term, we expect the market to expand amid the proliferation of smartphones with cameras equipped with 3D sensors, including ToF sensors.

*ToF: Time of Flight

(2) For in-car

Autonomous driving will advance to higher levels amid the transition to autonomous driving, and the number of visible-light cameras and sensing (invisible-light) cameras mounted on each vehicle will increase.

LiDAR and other new technologies will gain popularity; we expect the market to expand in the medium and long term.

Annual production volume of smartphones equipped with cameras

(M units)

(2) Image of advancement in autonomous driving level and increase in the number of in-car cameras

Present attainable level

Future attainable level (requires legislation, etc.)

Short-term increase of smartphones

equipped with multiple cameras

Appearance of	674
smartphones	124
equipped with 3D
sensing cameras

ToF sensors, 5G introduction, etc. may result in medium- and long-term growth

518 620

332

Number of cameras per vehicle:

Roughly 10-16

Number of in-car cameras set to increase with transition to autonomous driving?

325

40 550

285

For driver assistance

No camera

Practical level achieved for commercially available cars

Conditional autonomous driving	Fully autonomous
	driving

70
2016	2017	2018	2021	2022	2023

Smartphones equipped with visible-light cameras (multiple) Smartphones equipped with 3D sensing cameras

*Calculated based on total production values of major manufacturers.

01 2

Autonomous	Driver assistance
driving level

3 4 5

Autonomous driving

Internet of Things Related Works Segment × Optical Technology (Vision)

[Progress of sensing technology]

We expect demand for image sensors for the range of invisible light to increase as the sensors are used in various areas, including autonomous driving technology, medical care, industry, and security.

We will proactively develop, manufacture, market, and demonstrate the superiority of the latest technology compatible with the combination of the conventional ranges of visible and invisible light.

[Present state]

・We have a share of the market for SONY, Samsung, and other major image sensor manufacturers.

[Issues]

Customers' policies to purchase from two companies are creating price competition. (in Japan)
There are few customers; we are highly dependent on existing customers.

[Future]

We will develop technology to stay one step ahead of our competitors, and demonstrate our superiority using our technical capacity in the visible and invisible light sectors.
We will strive to capture shares of new sectors (products for in-car equipment, etc.) and intensify sales outside Japan.
We will engage in activities with our focus expanded to include the development of middle-end products.

			Others
SK Hynix		9%
3%
ONSemiconductor
6%
			Market scale	SONY
Omnivision	11.4 billion
52%
11%				USD
					Major customers
	Samsung

	19%				Potential customers

Source: Heisei 30 nen wagakuni ni okeru data kudo gata shakai ni kakaru kiban seibi (denshi device sangyo oyobi sono kanren sangyo ni okeru shijo doko oyobi seisaku doko chosa) hokokusho (2018 Report on the Development of Infrastructure for a Data-DrivenSociety in Japan (Survey of Market and Policy Trends in the Electronic Device Industry and Related Industries)) (Ministry of Economy, Trade and Industry)

Environmental Energy Related Works Segment × Optical Technology (Market)

[Market situation]

Digitization of paper media is contracting the market of the printing

industry.

The harsh market environment is causing nearly all competitors to retreat

from relevant businesses.	Medium shift
・ There is a shift away from regular ink due to pollution issues and

productivity improvement.
→ Demand for UV ink printers is increasing.

(Units)
14,000
12,900	12,545			12,200	11,855

		420					11,620
12,000	405
			390
1,380	1,340				375				360
				1,310
										1,280		1,260
10,000


8,000

6,000
11,100	10,800			10,500	10,200			10,000

4,000


2,000

0
	2014	2015				2016	2017				2018
* Inter Action survey				Sheet-			Commercial	Newspaper
			fed				rotary				rotary

11,595 11,130

345 330

1,250 1,200

10,000 9,600

2019 2020

Environmental Energy Related Works Segment × Optical Technology (Vision)

[Present state]

We manufacture exhaust gas treatment systems to remove foul odors and exhaust gases generated in factories, drying deodorizers for offset rotary (printing) presses, and more.

[Issues]

Sales are declining due to market contraction.
Thin product lineup and narrow sales channels for offset printing presses.
Forays into new sectors are not going well.

◆Drying deodorizers

Hot-air drying

Hot air

Thermal-drying ink

Print media

[Future]

We will develop a new UV curing-type drying system.
We will leverage optical technology to achieve UV writing for application in printing.
We will seek new business in sectors other than printing.

Conventional drying deodorizers

◆UV curing-type drying system

	Instantaneous
UV light	drying

UV curing-type ink

Print media

Internet of Things Related Works × Optical Technology: (1) FA Image Processing-related Business (Market)

[Market situation]

More companies are adopting image processing systems to meet a growing need for labor-saving amid a shortage of workers, and because image processing technology is improving. The market is expected to expand.
Even in the metal gear inspection sector in which the Group is involved, many companies that manufacture metal gears check components visually for defects.

This comprises roughly 40% of the cost of producing metal gears. Also, individual differences could lead to errors in distinction.

	Visual quality
[Actual example]	check
40%	Material
Six people visually check
	cost, etc.
100,000 gears in one month.		60%

Each person must check roughly 550 to 560 gears per day.

(1) FA Image Processing-related Business (Vision)

[Detection of gear damage]
・ Gears have complex shapes; it is
		Conceptual phase	Verification phase	Investment phase
difficult to detect damage on images.
		Formulation and	Establishment of	Consideration of	Production of
Our Group's optical technology captures			launch of business	potential for developing	Commercialization
		elemental technology	prototypes
		concepts	as device
images suited to inspections by
	Present
performing writing aligned with the items

being measured.

[Previous MTBP]	Conceptual

[Present state]

Verification

[Future]

Verification Investment

・ Apply know-how from gear testing

machines manufactured by the Inter Action

Group.

・ Start developing systems and mechanisms

for automatically detecting defects from

captured images of gears.

Selection of lighting, camera, and controller parts of the FA image processing device is complete.
Gear defect imaging is possible if performed one at a time.
We are brainstorming and developing an
AI system for distinguishing between good and defective gears based on image data of imaged gears.

Develop a system that uses image data to distinguish between good and defective gears.
Brainstorm a system for robot parts tasked with moving and transporting the gears.
We will expand our focus to include application to various metal products, and seek new needs outside of metal gear inspections.

Promotion Business of Industry 4.0 × Optical Technology: (2) Laser Machining Business (Market)

[Market situation]

Long-term: Expand in due order with the automobile and electronics sectors at the center.

Short-term: Increase in the adoption of ceramic components (high-frequency components, LTCC circuit boards, etc.) in the course of 5G introduction.

(based on shipping quantities)>

of units)		14,230
(number

scale	Use of laser
processing	7,500
Market
equipment
begins in Japan

	1980s	2009 2010 2011 2012 2013 2014 2015 2016 2017 2018	2023E

Source: Inter Action survey

Laser Processing Business (Vision)

[Development/supply of laser processing equipment suited to customers' needs]

Lastech Co., Ltd. made into a subsidiary company through M&A.
Striving to develop business by leveraging

three strengths

	Conceptual phase	Verification phase	Investment phase
		Formulation and	Verification of	Verification toward
	Market survey	launch of business	Commercialization
	market issues	product marketing
		concepts
Present

In-housedevelopment/manufacturing of laser processing equipment

Ownership of a massive database of machining conditions

(3) Collaboration with outside companies

obviates major capital investment

"Laser oscillators"

Limited scope of objects

that can be machined.

"Laser processing equipment"

Possible to flexibly address customers' needs.

[Laser processing equipment]

Laser oscillators + light collection systems + drive

systems

Covers all materials that require laser machining

[Laser oscillators]

Make laser beams oscillate

Database compilation

Machining results of various materials are compiled into a database.
Rapid response possible for system development as well.

・ Response possible in niche sectors and small

lot sizes that our major competitors rarely

handle.

・ We even provide consulting for major

customers.

[Present state]	Conceptual

We have been entrusted with the development of laser processing equipment using present facilities and staff members.

[Issues]

Because production capacity is low, we are unable to accept some business.
We need to establish and adjust our management base.

[Future]	Verification Investment

We will leverage our strengths and strive to establish a business base to enable medium- and long-term business expansion.
Through capital investment and the addition of personnel, we will establish a system that enables us to capture all potential demand.

Promotion Business of Industry 4.0 × Optical Technology (3) Other

[Basic policy]

Sales expansion of existing products ➡ Aim to increase product share by capturing customer demand from market trends.

Gear testing machines

[Issues]

Once introduced, the machines can be used for 20 years; thus, replacement is infrequent, and we do not have a consistent pool of customers to sell to.

Product volatility is also high; thus, we need to expand our focus to include a consistent pool of customers or an increase in the number of customers.

[Future]

We will continue to invest proactively in gear testing machines for the automobile industry-along-term area of focus-with the aim of increasing the number of customers.
Automobile production and units sold are increasing significantly in India, China, and other developing countries, and the transition to EV will continue; thus, we project further
expansion of demand for gear testing machines.

Vibration isolation systems

[Issues]

The market for related equipment within the target for sales is stagnant, moving 0% to 1% per year.
It is difficult to envision groundbreaking innovation in this industry; thus, we expect the trends to continue in the future.

We need to expand the range of target equipment/customers.

[Future]

To expand the range of customers, we will invest more proactively in vibration isolation systems used in OLED-relatedsectors-along-term area of focus.
Demand is on the rise for OLED for applications for smartphones and the like; we will take advantage of the
increased demand by proactively manufacturing foldable smartphones.

Mid-Term Plan

In light of the recent business environment, we have revised some of the numerical targets set out in the Medium-Term Business Plan devised in January 2019, and changed the achievement target from FY2021 to FY2023.

The spread of novel coronavirus infections has made it difficult to project short-term performance; however, we are moving ahead with business so that we can achieve consolidated sales of JPY 10 billion in FY2023.

	Performance for	Target for
	FYE May 2020	FYE May 2023
ROE	13.2%	15% or higher

Net sales

7 billion yen

10 billion yen or more

Operating profit ratio	22.0％	20% or higher

Contents

１

２

Medium-Term Business Plan Concept

Combining the 3 Segments with Optical Technology

Internet of things related works × optical technology
Environmental energy related works × optical technology
Promotion business of Industry 4.0 × optical technology

Efforts Toward Achieving SDGs

Efforts Toward Achieving SDGs (Sustainable Development Goals)

Sustainable development goals (SDGs) are global goals for creating a better world through sustainability as defined in the 2030 Agenda for Sustainable Development. They were adopted at the UN Summit in September 2015.

The Inter Action Group is presently taking the following types of initiatives with the intent to contribute to the achievement of SDGs while further broadening the range of initiatives in the future.

Initiatives in business activities

Acquiring ISO 9001 and ISO 14001 certification (Inter Action)
As a company worthy of society's trust, we are engaging in environmental conservation activities based on our policies for quality and the environment.
RoHS measures (Meiritz Seiki)

We comply with EU regulations, and do not use specified hazardous substances (or use them below permissible concentrations) in our manufacturing of electrical and electronic equipment.

Providing environmental solutions (Air Gases Technos, Tokyo Technical)
To reduce the burden on the global environment, we propose an ecosystem in which energy is used effectively to increase efficiency, and are promoting a transition to low carbon and greening.
Also, Tokyo Technical's gear testing machines are used to measure the gears used in wind turbines.
Mega solar joint operation (Inter Action)

We are operating mega solar projects in collaboration with third parties.

(5) Initiatives for new business (Inter Action Group)

We are presently making efforts on FA image processing-related business and laser processing equipment-related business as new businesses. We are promoting business that crosses barriers between group companies to bring new innovation and solve problems that are holding back progress in those business sectors.

Initiatives in improving workplace environments

Establishing an environment in which men and women have equal opportunities to flourish
We are establishing workplace environments that can respond flexibly to circumstances through the introduction of distinctive systems such as Family Support Leave that enables employees to provide care for elderly or sick family members, attend school functions, deal with morning sickness, acquire fertility treatment, and more.
Additionally, women account for 21% of Inter Action's full-time employees (as of May 31, 2020) and are flourishing in many sectors.
Adopting a training system

We regularly provide leadership training, and are maintaining a system capable of delivering high-quality education.

(3) Improving welfare benefits

To achieve workplaces in which each and every employee can flourish, we have adopted various welfare benefits and systems.

・Employee Stock Ownership System ・Board Benefit Trust for employees

・Enrollment in Smaller Enterprise Retirement Allowance Mutual Aid ・Paying housing allowances and family allowances

・Conducting stress checks on a regular basis ・Fully subsidizing influenza vaccinations

・Paying for additional items on regular medical examinations (providing the option for a full physical examination with no individual copay for people above a certain age, etc.)

(4) Establishing a disciplined organization
We are taking the following types of initiatives to maintain a
fair, proper work environment.
・Safety and Health Committee reviews of workplace
environments on a regular basis
・Monitoring working hours to ensure compliance with
overtime work agreements
・Paying for overtime work in one-minute increments
・Adopting whistleblowing systems	19

Strategy

Equity Spread

Key benchmarks ROE

WACC

Dividend policy

Total return ratio of 30%

Focus on fields of growth and potential growth.

M&A strategy Focus on fields where we can pursue business development by leveraging technologies and expertise built up thus far.

Achieve positive net present value calculated on the basis of estimated cash flows for five years using WACC as the discount rate.

Company Profile

Trade name: INTER ACTION Corporation

Established: June 25, 1992

Representative: Nobuo Kiji, CEO & President

Capital stock: 1,760 million yen

Employees: 139 (Group-wide as of May 31, 2020)

Head office: Yokohama Kanazawa High-Tech Center 14F 1-1 Fukuura, Kanazawa-ku,Yokohama-shi, Kanagawa

Tel: +81-45-788-8373 Fax: +81-45-788-8371

URL: http://www.inter-action.co.jp

Group companies:

Air Gases Technos Co., Ltd.

Meiritz Seiki Co., Ltd.

Tokyo Technical Instruments Inc.

Xian INTER ACTION Solar Technology Corporation

Shaanxi MEIRITZ SEIKI Co., Ltd.

MEIRITZ KOREA Co., Ltd.

Taiwan Tokyo Technical Instruments Corp.

TOKYO TECHNICAL INSTRUMENTS (SHANGHAI) CO., LTD. Lastech Co., Ltd.

Contact Information

Investor Relations Division

Business Administration Group

Inter Action Corporation

10F, Sangyo Boeki Center Bldg.,

2 Yamashita-cho,Naka-ku Yokohama, Kanagawa Tel: +81-45-263-9220

http://www.inter-action.co.jp/inquiry/ Please contact us through the Inquiries page of the Inter Action website (in Japanese).

Notes

This document contains forward-looking statements particularly regarding Inter Action's future performance. The Inter Action Group has formed its outlook encompassing potential risks and uncertainties based on information available at the time of disclosure. Accordingly, please be advised that actual financial results may vary substantially from the forecasts presented, given that they are subject to economic circumstances surrounding areas of business going forward, market trends, and other such factors.

Whereas every effort has been taken to ensure the accuracy and completeness of the information provided in this document, we make no guarantee in that regard. Furthermore, please be advised that the information in this document is subject to revision or retraction without prior notice.

The content of this document may not be copied, reproduced , or otherwise used without prior consent.