Technical Capabilities

After achieving sales of ¥150 billion, the goal of the Mid-Long Term Management Plan, we believe that technical development will be the most important driving force in aiming for sales of ¥200 billion, which is the next step.

Technical development is the source for creating value for a company. And if this lifeline is cut off, value will end up declining. So far, HORIBA has continued to grow without halting the cycle of value creation by maintaining R&D investment at 5%-7% of sales during times when earnings are favorable and when they are not.

For example, when HORIBA acquired the automotive development test systems (DTS) business of Carl Schenk AG, in September 2005, investment in DTS technology was curtailed for several years while we completed the acquisition.

Despite the fact that there were many engineers engaged in technical development with enthusiastic "Omoi" (see note on page 29) for technology, the DTS business was in a situation where value creation was stagnant and technological capabilities were not being fully utilized.

As HORIBA resumed investment and revived the products, we managed to enter the value creation cycle again. We will continue to invest proactively in product development, including improving existing products, developing new technologies and new products, engaging in M&A, and expanding operations into new business fields. In addition, by creating high-value-added technologies that combine HORIBA's existing products and new technologies, we will ensure dominance in the market and pass on more advanced technologies to the next generation.

As we will focus on speed in reinforcing our technical capabilities, we will not limit ourselves to in-house development, but rather incorporate M&A and external alliances as well. However, improving the speed of in-house development itself is a major challenge.

To achieve this, we believe it will be necessary to make our development processes more open and share knowledge globally. How to create a new image that tends to be fixed is the job of development personnel and engineers.

Through alliances with overseas partners, tie-ups between companies, and business collaboration and technical interchange, we intend to foster the development of personnel, including engineers that are outward looking, able to consider what different kinds of market technologies will lead to, and are able to play an active role globally. We firmly believe that the HORIBA Technology Center, which we established in Silicon Valley in the U.S., is a symbol of that objective.

Furthermore, an important aim in the establishment of Masao Horiba Awards is to discover hidden technologies and engineers in research areas that are not often highlighted, namely analysis and measurement. The award focus is on research and development that is unique and whose results and development potential are likely to have global appeal on a global basis.