Minebea Mitsumi Inc

TSE:6479

Earnings Call Transcript 2022-Q2

[Operator]

Now it's time to begin the meeting. Thank you very much for joining MinebeaMitsumi Financial Results announcement session for Q2 of the fiscal year ending in March 2022. In attendance today are from the right-hand side, Representative Director, CEO and COO, Yoshihisa Kainuma. Director, Senior Managing Executive Officer, Katsuhiko Yoshida. Thank you very much. First of all, Yoshida will explain financial results. Then Kainuma will talk about business update and management strategy, which will be followed by Q&A.

The meeting is scheduled to be finished at 7:00. For more details of financial statements, please refer to supplementary financial information and [indiscernible] report uploaded on our website. On the screen, you are looking at right now, there is a link for questionnaire. In order to provide us a valuable feedback for IR activities, may I ask you to respond to the questionnaire. Today's session, inclusive of Q&A, will be video recorded for later viewing. Thank you for your kind understanding. So Mr. Yoshida, the floor is yours.

[Katsuhiko Yoshida, executive]

This is Yoshida. Today I would first like to explain the consolidated financial results for the second quarter of the fiscal year ending March 31, 2022. Consolidated net sales for the second quarter of this fiscal year was up 2.8% year-on-year and up 13.6% quarter-on-quarter to total JPY 281.955 billion. Operating income totaled JPY 25.005 billion, which was 42.8%, up year-on-year and up 27.4% quarter-on-quarter. Profit for the period attributable to owners of the parent increased 54.4% year-on-year and 39.1% quarter-on-quarter for a total of JPY 20.393 billion. Net sales, operating income and quarterly profit all hit second quarter record highs.

We estimate the foreign currency translations to have a year-on-year impact of plus JPY 10.4 billion in net sales and plus JPY 2.8 billion in operating income. Quarter-on-quarter impact was plus JPY 1.7 billion in net sales and plus JPY 1.5 billion in operating income. We made slight retrospective changes to last fiscal year's financial statements due to the PPA for ABLIC. Please note that the figures on the following pages are revised figures. Next slide, please. This is the summary results for the first half. For items we have hit the first half record highs as well.

Going to the next slide. This is the quarterly trend in net sales, operating income and operating margin. The operating margin for the second quarter was 8.9%. This was up 2.5 percentage points year-on-year and up 1 percentage point quarter-on-quarter.

Next slide, please. This is the difference between the forecast as of August and actual results for net sales and operating income by business segment for the second quarter. Net sales for the Machined Components business segment was slightly lower than projected due to a slowdown in sales to the automobile industry caused mainly by a shortage of semiconductors. The electronic devices and components business saw lower-than-expected sales due primarily to lagging sales of automotive motors and backlights caused by a shortage of semiconductors. The MITSUMI business enjoyed higher than projected sales for mechanical components, optical devices, analog semiconductors and so on.

The U-Shin business experienced lower-than-expected sales due to a slowdown in automobile production. Operating income for the machine components business segment was almost on par with the forecast. The electronic devices and components business experienced lower-than-expected operating income due to a decline in sales. The MITSUMI business operating income surpassed the forecast. Thanks to higher-than-expected sales of optical devices and semiconductors as well as further improvement in the profitability of semiconductors. The U-Shin business experienced lower-than-expected operating income due to a decline in sales.

Next slide, please. Now let's take a look at the quarterly trend by segment, starting with the machine components business segment. On the left is the graph indicating quarterly net sales trends, on the right is a graph shows on the bar chart for quarterly operating income, along with the line chart for operating margins. Second quarter net sales was almost on par with the previous quarter at JPY 44.3 billion. Ball bearing sales dipped 1.1% quarter-on-quarter to total JPY 31.9 billion. The monthly external shipment volume was down 2% quarter-on-quarter for an average of 241 million units. This is due primarily to a slowdown in sales to the automotive sector.

Sales of aircraft bearings remained sluggish due to the stagnant market. Sales of rod-ends/fasteners totaling JPY 6.5 billion were up 1.6% from the previous quarter. Sales of pivot assemblies increased 8% quarter-on-quarter to total JPY 5.9 billion. Operating income for the quarter totaled JPY 11.9 billion and operating margin continued to recover at 26.9%. Operating income rose 9% quarter-on-quarter, while the operating margin improved 2.1 percentage points.

Looking at the results by product, we see that operating income for ball bearings and pivot assemblies increased quarter-on-quarter, while operating income for rod-end/fasteners was about the same last quarter. For ball bearings profit increased while sales decreased quarter-on-quarter, thanks to high utilization rates on top of improved productivity.

Going to the next slide. Now let's look at the electronic devices and components segment. Net sales increased 3.6% quarter-on-quarter to hit JPY 93.7 billion. Looking at the results by product, we see the sales of motors increased 3% quarter-on-quarter to reach JPY 66.1 billion. Although sales was impacted by reduced automotive production due to semiconductor shortages. Sales mainly for HDDs remained robust. Sales of electronic devices were on par quarter-on-quarter to total JPY 17.3 billion. Sales of sensing devices totaling JPY 9.3 billion were up 16.8% from the previous quarter. Operating income came to JPY 6.1 billion, and operating margin was 6.5%. Operating income fell 23.2% quarter-on-quarter, while the operating margin dropped 2.2 percentage points. Excluding the onetime recovery of course, from the past fiscal year, which was recognized in the previous quarter and the impact of the onetime cost due to the effects of the COVID-19 and semiconductor shortages, profits would have substantially increased.

Looking at the results by product, although the operating income of sensing devices was up and the operating income of electronic devices was downward, operating income for motor is about the same in the previous quarter. For your reference figures shown on the fiscal year ended March 2021 was before based on the classification used before changes to the business segments were made. Please note that the same applies to the rest of the presentation.

Next slide, please. Let's look at the performance for the MITSUMI business segment. Net sales increased 44.6% quarter-on-quarter to total JPY 111 billion. As the seasonal demand picked up, so did the sales of optical devices and mechanical components, along with sales of analog, semiconductors and other products, which were also boosted by strong demand. Operating income came to JPY 11.3 billion, and the operating margin was 10.2%. On a quarter-on-quarter basis, operating income increased 2.2x, while the operating margin rose 3.6 percentage points. The primary factors behind these increases include a further increase in the profitability of analog semiconductors in addition to seasonal demand.

Moving on to the next slide. Finally, let's look at the U-Shin business segment. Net sales were down 11.3% quarter-on-quarter to hit JPY 32.7 billion. This was due to production adjustments by some automakers due to the semiconductor shortage. While our operating loss totaled JPY 0 billion, the operating margin was minus 0.1%. Next slide, please. The bar graph here shows trends in profit attributable to owners of the parent, while the line graph charts changes in the profit for the period per share. The profit for the period was JPY 20.4 billion. Earnings per share was JPY 50.4.

Next slide, please. Next, we have the quarterly inventory trend. At the end of the second quarter, inventory totaled JPY 214.1 billion, which is JPY 18.6 billion more than what it was 3 months ago. This was due to a strategic increase in the inventory of raw materials, et cetera, as well as the postponement in shipments of some products requested by the customers. Next slide, please. The bar chart in this graph shows trends in net interest-bearing debt, which is total interest-bearing debt minus cash and cash equivalents and the line chart indicates free cash flow. At the end of the second quarter, net interest-bearing debt totaling JPY 90.2 billion was up JPY 5.8 from what it was at the end of the previous fiscal year.

Moving on to the next slide. We made upward revisions to the full year forecast for the fiscal year ending March 31, 2022, which was announced in August. We expect JPY 1,050 billion for net sales and have revised the forecast for operating income to JPY 90 billion. The estimated net sales figures for the machined components, electronic devices and components and MITSUMI business were revised up while the estimated net sales figure for the U-Shin business was revised down since it will be significantly affected by the slowdown in automotive production due to the shortage of semiconductors. Overall sales forecast remains unchanged. After revising the estimated operating income figures in light of the revised sales figure estimates that we made an upward revision to the operating income forecast. The exchange rate assumption is JPY 110 to the U.S. dollar. The next slide, please. This slide shows the forecast by business segment. Thank you for listening.

[Operator]

Mr. Kainuma, please.

[Yoshihisa Kainuma, executive]

So from my side, I would like to give you a business update and the management strategy. So this quarter, I think things went very well. There were semiconductor issues. The lockdown of the supply chain at our clients, logistics was disrupted. The material cost was skyrocketing. There has been various impacts on our business. But that said, we have been able to offset that. So this is due to the cost reductions that we have been seriously attacking, improving productivity, et cetera. Through these initiatives, we have been able to see effects out of this. In terms of the currency, to be frank, was favorable for us. And so that is the reason why we have been able to achieve the forecast. For September, we have been able to see a record high sales of more than JPY 10 billion for the month. We have been able to achieve that. So monthly sales of JPY 10 billion since I have become president -- compared to when I have become the president, it is unthinkable, is an unprecedented amount. And from my point of view, I am very pleased at this outcome.

So if there wasn't the impact of COVID-19, I think, we shouldn't be saying that, but because COVID-19 was impacting us. So each plant basically not in -- our plants did not close down completely at all. But the employees, maybe they were not all at the floor. There were various situations that we were facing and the utilization went down. Yes, that happened. And we had to wear masks, we had to wear gloves and we had to prepare those supplies. So the reduction of digitalization and the cost we have to spend for the supplies is about JPY 5 billion. And as first half, we have spent for these initiatives. And in the semiconductors, there have been issues around the semiconductors. The profit that we should have been getting, for instance, the inventory has gone up. So the JPY 5 billion profit that we have lost through this impact. So if this has not happened, so JPY 55 billion to JPY 56 billion of operating income, we should have been able to achieve in this first half.

The second half currencies JPY 110 to the dollar is what we are anticipating. And in this forecast that we are using from January for the semiconductor supply, we are assuming that's going to gradually recover. That is our assumption. So today's Nikkei newspapers has reported that Toyota next month or maybe this month, record high production, they will be aiming for the record high production. So we have been starting to hear this news for the automotive sector. So there are various patches. So maybe some OEMs are suffering from this kind of situation. But our assumption is that from January, gradually, the situation is going to improve. So that is our assumption. So this JPY 90 billion will be our outlook. So I think this is a comfortably conservative figure from my point of view.

So let's go to the next slide. So this is the ball bearing business. So the ball bearings in the second half, this half, yes, it was impacted by semiconductor. But in terms of the inventory, they were at record low level. So well, I have to confess that JPY 100 million of airfreight cost is being spent. So this time around we would like to optimize inventory. And by doing so, so for the longer inventory lead time, we want to have more inventory. So more precise inventory standards should be implemented so that we can achieve healthy growth. So as you can see here, so this road map we're showing you. So what is happy is we have JPY 315 billion, JPY 325 billion, JPY 345 billion, this JPY 10 billion improvement, we have been able to do that through the improved profitability. And this JPY 10 billion of investment well the machines is going to be installed. But because of this equipment due to the semiconductor issues, I think basically, it's being delayed a bit.

So we do have issues. But that said, in August next year, by August next year, we want to start operating all the lines. So means the 145 million units can be achieved. And previously, I have told you is that another JPY 10 billion investment is going to be conducted, meaning that 365 million up to 365 million. we will be increasing our production capacity. And by doing so, for the ball bearings, we want to have a dominating supply capability or the competitiveness, and we want to enhance this side of our business by doing so.

So the aircraft components, unfortunately, for the second half of next fiscal year, maybe 2 years from now, overall, on a monthly basis, we'll be going back to the pre-COVID level. So that is our forecast. So this is quite interesting. So you can see the left-hand side photo on the bottom. So the aircraft when you have the pushback. So you had this kind of a truck that is on the front wheels, and they push the aircraft backwards. But going forward, this will be electrified. So within the wheel, the motors will be equipped. And using electricity, the aircraft will be pushed back. So this is going to start. So this is a photo showing that landing gear. The [indiscernible] bearing so that we use ceramics, very light and it rotates very smoothly. So this is -- has been utilized. So this is a very interesting trend that we have started to see.

So for motors, as I have always been saying, so JPY 270 billion will be our target in terms of sales. So this is going very smoothly. So if we look at the history of the motor business, you can fully understand how robust and strong, the motor business is. So in terms of the driver will be automotive. I think that the automotive sector is going to be the driver for motors. And for the nonautomotive sector, to the DC brush motors that can be used for various applications. Fan motors is going to grow even more. So our capacity is going over 10 million. So for the motor business going forward, it will increase the production steadily going forward.

And for the MITSUMI business, so thankfully, and it has become an excellent company. So the game business. Well basically, there was concentrating on the game business alone in the past, but we have the OIS productivity with us coming in. We have improved the productivity and the analog semiconductors or maybe this can be considered a joke for -- when we integrated MITSUMI. So analog semiconductors, maybe we were thinking about disposing the analog semiconductors, but as you can see, this is 1 of our 8 spears actually. And you can see that it is very successful right now.

So JPY 10 billion within half a year. So the full year is about JPY 20 billion of sales. And I think this -- the MEMS business, this looks bright for the future. So we have been able to get that business from OMRON. And the people working on this floor is very motivated. And -- so this analog semiconductor business, the sales is going to grow even more going forward. For next year, the Shiga plant will start gradually to contribute. So the analog, semiconductors, OIS, these will be the major drivers. In the game business, our forecast is next year it will remain steady.

So in terms of the analog semiconductors, we will be proactively -- if there are opportunities for M&A, we will be participating. And for this analog semiconductors business, we want to make it to the core of the MITSUMI business. That is our idea.

And going to U-Shin so this was unexpected. So the automotive production dropped this far. We have no -- we can't do anything, to be frank. So at all OEMs, about 20% to 30% sales has been reduced. So this section is 100% focused exposure to automotive. So I think if you consider -- take that into consideration, it did well more or less. And these type of situations, if the automobile business starts to recover, this will start to generate profit. So if everything is -- goes well across the board, there's no room to stretch. But for this type of business, for the future, this will be a driver for us for the future. So from my point of view, we have to wait for the recovery of the auto production. And we have decided what we are going to do. That will be the employees attitude at Europe has started to change. And I think the orders -- we have been able to increase the order intake steadily. And by doing so, the other day, I said, we have been able to get a big order from a major OEM. So we will steadily appeal about our technological capability and grow the business.

Structural reform in Europe is progressing steadily, but some customers are saying that they want us to extend the production period. And we will be charging the cost for them. And although this business is something that we were planning to exit. And we will continue in some parts, but we will never be making losses because of this. And the risk hedge, as we always talk about, even if auto business goes down, it can be sustained by other businesses and vice versa. So risk hedge is becoming very effective once again.

So the image for next fiscal year. And in May of next year, I will give you more details as usual, but JPY 100 billion is becoming very achievable. If, in fact, we achieve JPY 90 billion this year, JPY 100 billion will be no problem. And the 3 spears plus 1, bearings, motors and OIS, these promising products are very clearly defined. And the U-Shin will be breakeven point or JPY 2 billion or JPY 3 billion. In that sense, the automotive business, the inventories is going low. And therefore, if semiconductor problems are resolved, I think, it will grow significantly. And U-Shin will be growing for sure next year. And on top of that, bearings production capacity will be increased in motors centering around automotive business, it will grow and the semiconductors, Shiga plant will be the growth driver and OIS will grow 1.2x, so no questions about that. So U-Shin will be put on all of that. So I think we are very close to achieving JPY 100 billion.

But the problem is what about beyond JPY 100 billion. Many people who are rather impatient ask me this question quite often. So I would like to talk about that today. So Beyond Zero, I will talk about this later, but I came up with this phrase, beyond 1,000 or 100 billion and I would like to share with you the image I have about this. So bearings, the 40 million units capacity increase is planned and the aircraft will come back to pre-COVID period, and motors will be growing steadily based on the track records. And the CAGR, as you know, the Shiga plant for semiconductors will be making more and more products. And then the JPY 25 billion because of JPY 10 billion investment is planned and OIS will grow further and the customers other than the ones that we are already dealing with, we will be delivering products to additional customers.

So plus JPY 10 billion here it says, but U-Shin will become profitable and resonant, the measurement connectors and power supplies out of 8 spears. These are the next candidates for the future growth. And taking a conservative view, if we achieved JPY 90 billion, then plus JPY 40 billion or I would say, plus JPY 50 billion, but let's be conservative and say JPY 40 billion additional. In March 2025, we should be able to achieve this. And in May of next year, I will share with you more details about this plan. And last time, I talked about the JPY 115 billion in 2024, but looking at the momentum of semiconductor business as well as ForEx. So based upon the current conditions, it will be far beyond JPY 115 billion. It will be exceeded for sure. So that is something I wanted to share with you.

And today, I prepared 3 special slides in order to explain to you our determination. So QCDESS, we already announced. But as a part manufacturer, we would like to tackle with the societal issues, resolving societal issues very seriously. That is what I explained to you previously. And this is something I repeatedly tell my people, my employees. So the 2 things are written here. The first one is the carbon neutrality. And in fiscal 2030, the 30% reduction shall be achieved. This is a target. So 30% may seem low to some of you, but I will explain about this later. And then Beyond Zero, this is extremely crucial. From this point onward, each and every part.

As far as decarbonization, how we can contribute to that? By increasing accuracy and reducing power consumption. By doing so, the customers who use our products and their customers will be able to save energy by reducing power consumption. And that is what we call Beyond Zero, and we are aiming to increase that by 30%. So CGO, we appointed and under his leadership various things are being contemplated. And we will be seriously tackling this not just about increasing profit, but resolving a societal issue. As a part manufacturer, we will be very serious about it. And the super precision is what we profess. And by increasing precision even more, we should be able to achieve these targets.

Moving on to the next slide, 30% down, you may think this is low. So that is the reason why I prepared this slide. Sales towards 2030. Well, in March 2029, JPY 2.5 trillion is the target that we announced. And therefore, emission will be increasing. So 850,000 tons will be 600,000 tons, a 30% reduction, even if sales reach JPY 2.5 trillion, we would like to still achieve 600,000 tons. That is our target. You may think it's impossible to achieve. But the biggest point here is the decarbonized power cells, solar power panel, hydrogen power generation. There will be various alternatives, but the solar power panel will not be able to resolve the problem. Maybe several percentage points of energy saving may be possible by reducing fossil fuel usage, but it will not solve the problem.

So we need to use decarbonized power supply. It may be nuclear power generation, although there are some political issues. And it's not up to us to decide what will be good and what will be not. But we would like to include these things in our plan. And the plan includes updating and replacing outdated facility and equipment in order to reduce power consumption of machines. So that is something we would like to make sure we do a good job. In order to do that, we need a profit. By generating profit, we should be able to return the benefits to the society. So that is quite important, in my view.

So QCDESS -- talking about QCDESS. So carbon neutrality and Beyond Zero when we put these 2 together, what will be the contribution for 2020, here in 2020. Well, I don't have my reading glasses. I can't see the numbers clearly, sorry, and this is a very busy slide. But 2020, we saw of 0.85 million tons and reduced it. So that's our mission. Against that, so the current existing products compared to the older products, how much can power consumption can be contributing? How much CO2 emission has been reduced? This is the blue bar you see there, illuminating this. So if you net these all off on a net basis, this is the level of reduction that we'll be doing.

So by 2030, in 2030, this will be shown in the next slide. So the ball bearings has the triple times of precision by utilizing these types of ball bearings, how are we going to contribute to Beyond Zero. And by doing so, achieve carbon neutrality and how much of these factors can offset each other. So this is a slide that talks about the image. But what I want to focus here is that in any case, our products this will be deeply engaged in all types of power saving type of products.

So decarbonization cannot be achieved without using our components. So that is the type of company that we want to be. So from analog, semiconductors, ball bearings, we have various products for motors, as you know. So it's about half of the power consumption all around the world is coming from motors globally. So this ultra-precision technology by utilizing that technology will actually contribute to society. That is what I believe.

So personally, I call the super bearings or internally, we call it super bearings. So this is a very precise ball bearings. It's 3x as precise compared to existing ball bearings. And if we -- this is used for all of the air conditioner motors. So by using in air conditioners about 0.13 million tons of CO2 emission can be avoided. Well, for instance, the -- with 15 million Japanese cedars is stored. So the 15,000 of Japanese people will emit CO2 emission annually. So this is the kind of reference. So we want to accelerate these type of initiatives going forward.

Lastly, this is about dividends. The previous year, we had a JPY 8 cumulative dividend. And this year, we think that the dividend is going to be around this level. So 70-year anniversary cumulative dividends what we achieved. So this is a 20% payout ratio is an image. So JPY 36 is the forecast for our annual dividend. So that's all for me. Thank you for your attention.

[Operator]

Next, we would like to have Q&A, and we would like to take questions. We would like to take questions from the institutional investors and analysts who have registered with us for a call conferencing system in advance. [Operator Instructions] The first question is from Goldman Sachs, Mr. Takayama, please begin.

[Daiki Takayama, analyst]

I have 3 questions. One, so machined components, Q3, Q4 profits. From Q2 to Q3, it seems flattish. Can you hear me?

[Operator]

Yes.

[Daiki Takayama, analyst]

So because of the Thai plant, I suppose it will be increasing. And therefore, profit, I would assume a profit will be growing more and U-Shin in Q3 and Q4, what is the profit situation.

[Katsuhiko Yoshida, executive]

This is Yoshida. I would like to respond. As you pointed out, Q3 and Q4, the production base -- compared with Q1 and Q2, the production base will be expanded significantly. But recently, the auto production remains very uncertain. And as Kainuma explained previously, although there is an assumption for auto business, the operating profit, we have taken a conservative view in Q3, JPY 12 billion and for Q4 JPY 12 billion. So this may be conservative, but this is our assumption. And U-Shin, so OEMs that we deliver our products to and their production status is rather difficult for us to explain specifically, but the Q3 and Q4, particularly towards Q4, they will be increasing production. They are prepared to that. That is what we heard. So this type of number we should be able to achieve. So that is the reason why we came up with this number.

[Daiki Takayama, analyst]

I see. So my second question is for Mr. Kainuma. Slide 23 or 24. About the next year onwards. So there are 2 things I want to ask you. The motors driver and OP margin. So I think you have been wanting to achieve a 10% OP margin. And in the second half, there are some negatives. But next year onwards, how do you plan to increase other than the volume and OIS, 1.3x. And you are planning to deliver to no major customers.

[Yoshihisa Kainuma, executive]

Yes, about the motors, yes, we want to achieve a 10% OP margin as soon as we can. But this fiscal year, there are various issues occurring simultaneously like increase in material cost and copper price increase and the electromagnetic, steel and so forth. And therefore, we have no choices, but to wait for a longer time frame because these are probably structural issues and these are beyond our control like vessels cannot depart the port and that created logistics problems. And we made some parts for customers, but customers cannot receive semiconductors and therefore, they no longer need our products, so things like that.

If it were not for such problems, we should be able to achieve bigger profits for motors and 10% OPM is one of the biggest targets or it's one of the important targets for us, but we would like to supply lots of motors to the market in order to solidify our position and the volume is quite crucial to discount prices. And therefore, I am not taking this too seriously, not just yet. So that is how I would like you to understand the situation.

And another question. What was it, OIS, OIS. So we are making hard efforts on OIS. And unfortunately, I cannot describe the details, but this is likely to increase next year as well according to the information we have. And we are selling OIS to various customers, and we have a positive reaction. So this is as much as I can tell you right now. So simply said, it will be greater than second half x2, I mean, next year. Next year, the image for next year and the next year shows the 3 years from now. And the next year, we will be using, I mean, customers already told us how many units they are likely to use. So next Page 23 shows the situation of the next year. And Page 24 shows the situation of 2 or 3 years from now. Volume will keep growing plus we will have new customers and therefore, we should be able to achieve this level.

[Daiki Takayama, analyst]

I see, understood. And lastly, the last 3 pages contain valuable information. And these initiatives -- because of these initiatives, do customers want to buy your products even more leading to increased market share. So emission reduction. So coming up with specific numbers and being committed to the targets, do you think it will have an impact on your business?

[Yoshihisa Kainuma, executive]

So this is something we will be working on going forward. The entire society is facing towards carbon neutrality and Beyond Zero. Time like that is coming. The whole nation is committed to such a target. And investors are wanting to invest in companies who are serious about that. So it was QCDSS previously. And I changed it to QCDESS. In other words, E is now included. So environmental performance, it is one of the specifications required by customers. It is going to be like that, otherwise, we cannot aim for carbon neutrality, just because prices are cheap customers will not be buying from us. And we want to take a preemptive strike. We want to be proactive so that the customers will be saying, we only use MinebeaMitsumi's bearings.

So that is our strategy. So QCDESS, I -- when I talked about this for the first time, I said that this will be at the core of our strategy. So that is what I talked about in May according to my recollection. So we will be working on this very seriously and faithfully. So that our customers will approve us, and we shall be able to sell more and generate a bigger profit and leading to power and energy reduction. So positive cycle. So this is going to happen in the future rather than happening already. So bearings, the customers do not fully understand yet. And super bearings, the mass production, the moment that we verified the feasibility, we would like to prepare the collaterals or materials.

[Operator]

Let's go to the next question from Morgan Stanley, MUFG Securities. Sato-san, please.

[Shoji Sato, analyst]

So this is Sato from Morgan Stanley Securities. So I have a question about ball bearings at MITSUMI. First about the ball bearings. So I would like to go into detailed numbers, July, August, September, internal and external sale -- production in October, November, December, the same numbers. Can you mention that? And compared to August, the nonautomotive sector, what type of changes have you seen in the market? Can you mention that as well?

[Katsuhiko Yoshida, executive]

So for the ball bearings production, let start from July by millions, 312 million, 296 million, 295 million. From October onwards 298 million. November 330 million, December 324 million. And going to next year, January, 334 million, 295 million, 336 million. That is our forecast.

So that's -- for external sales from -- sorry, from July, 245 million, 237 million, 240 million. October, 232 million. November, 241 million; December, 248 million. January 251 million, 234 million, 250 million. So internal sales, July 69 million, August 89 million, 65 million, 67 million, 71 million. December 68 million, January, 66 million, 61 million, 68 million. So that is our plan. So in terms of the qualitative information I can give you is that for the first quarter when we ended the first quarter, we -- the ball bearings external sales compared to that, it is lower than that. That's the current number. This is basically the automotive production has slowed down. And I think that is the reason. From the third quarter onwards, how far the recovery is going to be achieved. So we have to consider that at the same time, the semiconductor shortage is having some impact on the nonautomotive market. So we have to consider that. So we are forecasting a slightly conservative number in terms of our plans.

[Shoji Sato, analyst]

So the nonautomotive sector, so compared to the August assumption, I had -- the trend hasn't changed that much.

[Katsuhiko Yoshida, executive]

A slight -- well, rather than the demand side, the reason is in the supply side. For the semiconductors, there are some industries that are suffering from the semiconductor shortages. So we are looking at it in a slightly conservative way.

[Shoji Sato, analyst]

My second question is about MITSUMI. So by main products, from first quarter to second quarter, what type of changes have you seen? And the full year forecast in August compared to what you have said in August, sales is JPY 1 billion, operating profit is JPY 3 billion. They have made up a revision. So compared to the forecast for the August, so the major products for the full year in terms of the outlook, what is the change compared to August. So what is the second quarter results of the consignment in the third quarter and onwards forecast.

[Katsuhiko Yoshida, executive]

In terms of the consignment, second quarter, JPY 224 billion is August JPY 22.4 billion, 3rd quarter, JPY 19.5 billion, fourth quarter JPY 9.1 billion. And going to by product. So the MITSUMI's first quarter sales is JPY 76.7 billion. The second quarter is JPY 111 billion. It is growing. So the growth was most pronounced in the OIS optical devices. And OIS was -- sales was more than JPY 40 billion. and the game console relay business for the mechanical parts. So this is growing and semiconductors, it is growing as well. So I think that is a breakdown.

For the fourth quarter onwards, so in terms of the smartphone related products, some customers within the supply chain has been seeing disruptions due to COVID and because of this, there has been some delay in the business. But in the third quarter and the fourth quarter, I think basically we'll be able to catch up with this delay. I think that is our assumption currently. And in that sense, for smartphone business compared to the first quarter, it is unchanged. So the semiconductors currently is very strong. So for instance Chinese smartphones, customers, there are some slowdown in the Chinese smartphone customers. But in the other businesses, we have been able to get good orders. And we think this trend will continue going forward. In terms of profit, the semiconductor business is very robust, and the OIS-related business is strong as well. That is the current status that we have in mind.

[Shoji Sato, analyst]

This is 1 confirmation. For the smartphone business, or the actuators. So I don't know whether it's the third quarter, fourth quarter. Compared to the second quarter, how is the third quarter is going to change and how this is going to trend further into January the March quarter?

[Katsuhiko Yoshida, executive]

From the second quarter to third quarter, sales is going to further increase. That is our assumption. And for the fourth quarter, this will be, of course, a slowdown due to seasonality, but compared to normal years, I think, the decline will be milder. That is our forecast.

[Operator]

Let us move on to the next question. Mr. Goto from Mizuho Securities, over to you.

[Fumihide Goto, analyst]

This is Goto from Mizuho. Can you hear me? Thank you very much. There are 2 questions that I want to ask you. First of all, about the risk. The market as a whole is likely to peak out or if, in fact, it peaks out. So how should we take it, it's about cyclicality. And considering the low level of bearings in the inventory, even if peak out happens, the impact may be negligible. That is the feeling I got after having listened to you. So what is the impact you are assuming at this point in time on your business? So that is my first question. And also Omron, from Omron, you have taken this Shiga plant, and it is starting to contribute starting next year, which I think is rather only -- so how is it going to contribute to your business?

[Yoshihisa Kainuma, executive]

First of all, I would like to respond about the risk situation. As you may know, basically, we are seeking full growth in various fields. And as you can see from our track record, when something goes down, something improves. So generally speaking, that is what has been happening. However, in a case like a Lehman shock, then every single business is impacted. So that is an exception. However, what is the background of peak out? If it is COVID-19, then if COVID subside, then airline industry will be revived and the same thing will happen to the related industries. So when something is pushed down, then something else will emerge.

So that is what we have been seeing. So I am not too concerned but whether everything can be covered by aircraft, I don't think so. And the current trend is the automobiles are shifting towards EV and therefore, electronic parts and the motors are increasingly adopted. So the -- when the environment proceeds in that direction, the precision -- a part manufacturer like ourselves will become even more important. So we started small and gradually we shifted to bigger things. And the precision is at the center of our competitive edge. So it's at the center of our portfolio. Rather than starting big and shifting to small, we did it the other way around, starting small and shifting to bigger ones.

So we have a competitive edge based upon that. And therefore, even if peak-out happens in terms of the environmental performance, we shall be the front runner. And I think we are fully prepared. I feel safe in saying that we are fully prepared for that. So that is the general situation.

So responding to your second question, Omron. So semiconductors, I'm not so knowledgeable, but prototypes they keep making from the front end to the back end, making fine tuning. So that is the analog semiconductors processes, very meticulous and time consuming. But that is the competitiveness, and it makes it hard to be replaced by our competitors. So what Shiga plant will be doing? We have planned everything. So it's not that we will be planning from this point onward. We had a plan, and therefore, we wanted the Omron's plant. So we are running at full speed right now. Of course, we cannot complete everything at one time, but things will be increasing little by little. And Omron was in MEMS business more aggressively. And we think that to revitalize that business will be quickest solution. So we are exerting lots of efforts into that. Based upon the assumption. In the second half of next year, this business or Shiga plant will be starting to make profit contribution.

[Operator]

Going to the next question from UBS Securities, Hirata-san, please.

[Shingo Hirata, analyst]

So I'm Hirata from UBS. Can you hear me? First of all, the first one is about U-Shin business. In the second quarter, due to the automotive production declined, the sales has dropped considerably. -- and profit hasn't changed that much. The first quarter, there has been some special one-off issues. But I think basically, you have been able to hold the operating income. In the second half the profit is actually going to turn profitable substantially. So is -- can you explain this always with the catch-up production of the major client, but you have been putting in measures for cost reduction. Is that going to show up effect?

[Yoshihisa Kainuma, executive]

I think it's both actually, of course, cost reduction measures, we are putting in a lot of measures. But we don't have any orders and basically, the production costs are up by 20% to 30%. There's nothing that we can do. And I think that has been unavoidable. So if the semiconductor supply recovers or the necessary units are provided then, of course, production will go up and our production will go up. I think that will be the biggest point.

[Shingo Hirata, analyst]

My last question is then Mr. Kainuma, you talked about the M&A for semiconductor, you will be looking at opportunities. So more specifically, what type of M&A are you considering? So will it be like analog, buying up plants? Or going into new areas of semiconductor. Can you give us a hint?

[Yoshihisa Kainuma, executive]

Well, of course, I can't go into details, but of course, if the current analog semiconductors business, we want to make this more stronger. So you don't have to -- it's not the case that we buy only plants. So we want to buy a going concern. So including -- we didn't buy the mid sales, we just bought our plants and the technicians and some MEMS, development technicians, they came with the plant. But originally, if you consider the future growth of the company, the technological capability and, of course, production capacity, if that is there, of course, that will be our candidate for M&A.

My message is that rather than M&A, this -- making the semiconductor business stronger will make the Mitsumi business foundation stronger. So the former Minebea Foundation was ball bearings. So because we had the ball bearings business, we have been able to conduct various challenges. We have been able to acquire a lot of businesses. But everything was able because we have the ball bearing business. So in terms of horizontally deploying the same thing, the Mitsumi's focus or the foundation will be and I think, that's something that will not disappear, not volatile and be able to tackle solving societal issues. So that the analog semiconductors. That's the only thing that they should focus on. So Mitsumi's is seriously be focusing on analog semiconductors. So I hope you understand my intent.

[Operator]

Let us move on. Mr. Akizuki from Nomura Securities.

[Manabu Akizuki, analyst]

This is Akizuki from Nomura Securities. I also have 3 questions. First of all, the projection for this fiscal year, particularly about MITSUMI business. MITSUMI, the drive, mechanical and optical and semiconductors. So those 3 segments compared with last year's actuals, I'm asking only about the sales. So how much upside are you planning on? If it is possible, please share with me. So that is my first question.

[Katsuhiko Yoshida, executive]

Optical it will double -- almost double. Well, we're almost double and mechanical, rather difficult to explain. Last year, it was quite booming and this year, the outlook for this year, there is a slight downside. According to the announcement, so we are taking a conservative view in accordance with such an announcement. So that is about mechanical. And semiconductors, more than double-digit growth in sales is anticipated.

About optical, in Q3 -- It was already at a high level and a drop in Q4 was rather modest. So 1,400 to 1,300, the higher end of 1,300, am I roughly right. I cannot speak about the specific numbers, but you are not so off the mark.

[Manabu Akizuki, analyst]

So if that is the case, my second question is as follows. So 1.3x bigger than that number because the starting point is big. I think it's going to be quite big growth. And among the major customers and the share increase or something, I don't know and are they asking you to handle a certain volume? Or is it because of the new customers, the new customers included in the plan?

[Yoshihisa Kainuma, executive]

So I cannot share with you the details but the image. I can share with you right now about the next year and there are various backups and supports, and I did not put together numbers imagining the situation. So the customers that you handled in the past coming back and adding to the numbers, is it a likely scenario inclusive of something like that, I cannot share with you the details of the plan. But more or less, according to our projection, this is a likely figure.

[Manabu Akizuki, analyst]

So Cambodia will be growing, right?

[Yoshihisa Kainuma, executive]

Cambodia, yes, -- and of course, Philippines too. Philippines will grow as well.

[Manabu Akizuki, analyst]

Sorry about asking you a difficult to answer question. My third question is analog semiconductors. And if I may ask you such a question, the Chinese analog semiconductor manufacturers are mostly targeting consumers and they are shifting to in-house production enabling production lines. Most of them, the Chinese manufacturers already have, I mean, I'm talking about the Mitsumi's production lines. But the Chinese analog semiconductor manufacturers. What about the competition? And to what extent are you -- have you been able to differentiate yourself?

[Yoshihisa Kainuma, executive]

Very little competition almost nonexistent because our quality is far better than theirs backed up by a long history. The safety is a top priority. So MITSUMI products and ABLIC products have excellent quality and excellent reliability. Just like ball bearings, we are -- I mean, bearings, a lot of bearings are sold in China, but their quality is extremely different, and we are receiving lots of orders. So just like that, at this point in time, no problems at all.

[Manabu Akizuki, analyst]

I see. But they are saying localizing, they will be localizing production, and it's happening for automobiles. I don't think it will be that easy.

[Yoshihisa Kainuma, executive]

I'm -- at this point in time. I do not feel any threats from Chinese manufacturers at all.

[Operator]

[Operator Instructions]

So there seem to be no other further questions, we will end the Q&A session. Again, on the link on the screen, please answer our questionnaire. Thank you very much for participating in this meeting.