Minebea Mitsumi Inc

TSE:6479

Earnings Call Transcript 2020-Q3

[Katsuhiko Yoshida, executive]

I'm Yoshida. Today, I would like to explain the consolidated financial results for the third quarter of fiscal year ended March 31, 2020; and then Mr. Kainuma, Representative Director, CEO & COO, will explain the highlight, including business updates.

Consolidated net sales for the third quarter of fiscal year ending March 31, 2020 was up 7.2% year-on-year and down 4.2% quarter-on-quarter to total JPY 267,650,000,000. Net sales hit the third quarter record highs. Operating income was down 25.9% year-on-year and up 19% quarter-on-quarter to total JPY 23,058,000,000. The results for the third quarter of fiscal year ended March 2019 include a one-time profit gain due to changes in the personnel system of the extended retirement age as well as other special factors, which all added up to a gain of approximately JPY 5 billion. If this amount will not to be accounted for, the year-on-year decrease in operating income will be 11.7%.

Profit for the period attributable to owners of the parent was down 21.5% year-on-year and up 36.5% quarter-on-quarter to total JPY 18,991,000,000. Currency fluctuations brought net sales up an estimated JPY 2 billion quarter-on-quarter and down JPY 10 billion year-on-year. It also brought operating income up JPY 0.3 billion quarter-on-quarter and down JPY 3.5 billion year-on-year.

Moving on to the next slide. This is the quarterly trend in net sales, operating income and operating margin. The bar graph on the left is net sales, and the one on the right is operating income along with a line chart for operating margin. The operating margin for the third quarter was down 3.9 percentage points year-on-year, but up 1.7 percentage points quarter-on-quarter to reach 8.6%. However, expenses, including business integration cost of U-Shin totaling approximately JPY 0.5 billion, are accounted for as special factors in the third quarter. Otherwise, operating margin would be 8.8% if these expenses were excluded. Also, please note that figures of fiscal year ended March 2018 are based on JGAAP and are provided for your reference, so that you can look at past figures. The same applies hereinafter.

Moving on to the next slide. Here shows the difference between the forecast as of November and actual results for net sales and operating income by business segment for the third quarter.

Net sales for the Machined Components business segment was almost on par with the forecast. Sales for electronic devices and components business segments were higher than forecasted, thanks to steady sales of electronic devices. Overall sales for the MITSUMI business were below the forecast due to shipment delays for some optical device products, although shipments of mechanical components were higher than projected.

The U-Shin business saw lower-than-expected sales due to a significant slowdown in production as a result of a slump in automobile market, especially in China. While Machined Components business segment saw external shipment volume for ball bearings bounce back, the operating income fell shy of forecast since we shipped inventories that incurred higher manufacturing costs first. The electronic devices and components business enjoyed higher-than-expected operating income as a result of increased sales. Operating income for the MITSUMI business was higher than projected, mainly for mechanical components and analog semiconductors. U-Shin saw higher-than-forecasted operating income as a result of improved profitability of its automotive business.

Moving on to the next slide. Here shows the difference between the actual results for the third quarter of fiscal year ended March 2019 and actual for the third quarter of this fiscal year for net sales and operating income by business. The results are as shown in this slide. Operating income for the MITSUMI business was roughly flat in reality since its operating income for the third quarter of fiscal year ended March 2019 included a one-time profit gain as a result of changes in the personal system of extended retirement age as well as other special factors, which all added up to a gain of approximately JPY 5 billion.

Next slide, please. Now let's take a look at the results by segment, starting with the machine components business segment. On the left is a graph indicating quarterly net sales trends, and on the right is a graph with a bar chart showing quarterly operating income trends along with a line chart for operating margins.

Net sales for the third quarter increased 0.2% from the previous quarter to total JPY 45.2 billion. Ball bearing sales increased 1% quarter-on-quarter to a total of JPY 29.4 billion. External shipment volume of ball bearings totaled 202 million units per month on average. These figures are the result of continuing steady demand from auto and boat industry, greater year-on-year demand for ball bearings used in fan motors and growing demand for bearings for air conditioners.

Sales of rod and fasteners totaling JPY 9.5 billion were down 0.8% over the previous quarter. Business for the aircraft industry, especially small and medium-sized aircraft, remained steady. Sales of pivot assemblies decreased 1.6% quarter-on-quarter to reach JPY 6.3 billion. While we were impacted by the weakness of the entire HDD market, our ability to maintain an 80% share of that market has provided stable earnings. Operating income for the quarter totaled JPY 9.6 billion, and operating margin was 21.2%. While this represents a 1.4 percentage point decrease in operating margin, operating income declined 6.1%.

Looking at the results by product, also the external shipment volume of ball bearings was up. Profit declined quarter-on-quarter since we shipped inventories that incurred higher manufacturing costs first. [ Averaging ] total sales volume, including internal sales, exceeded the production volume.

Moving on to the next page. Next, let's look at the electronic devices and components segment. Net sales increased 10.1% quarter-on-quarter to reach JPY 111.5 billion. By product, sales of motors were about the same as last quarter at JPY 46 billion. Electronic devices sales increased 20.5% quarter-on-quarter to total JPY 55.9 billion. This was because LED backlight sales, which have been booming since the second quarter, remained solid in the third quarter.

Sales of sensing devices increased 4.8% to total JPY 8.6 billion. This was due to generous sales to a handful of customers. The segment recorded an operating income of JPY 8.8 billion and an operating margin of 7.9%. Looking at the results by product, operating income was mainly driven by electronic devices.

Moving on to the next slide. Let's look at the performance for the MITSUMI business segment. Net sales were down 21.5% quarter-on-quarter to hit JPY 79.2 billion. While the sales of optical devices, analog semiconductors and automotive parts increased, sales for other products, primarily mechanical components, have decreased. Profit rose quarter-on-quarter, mainly for optical devices and analog semiconductors, with operating income totaling JPY 7.3 billion, and the OP margin reached 9.2%. Operating income was down 2.4% quarter-on-quarter while OP margin was up by 2.1 percentage points for the same period.

Next slide, please. Finally, let's look at the U-Shin business segment. Net sales decreased 1.8% from the previous quarter to total JPY 31.5 billion. This was due to a significant production decline as a result of a slowdown in the automotive markets in China, Europe and elsewhere. There was approximately JPY 300 million of one-time expenses in third quarter related to special factors such as business integration expenses and ramp-up expenses for new products. One-time expenses for full year is expected to be approximately JPY 1 billion. Operating income for the quarter grew 2.3x higher than the previous quarter to total JPY 1.2 billion. Operating margin increased 2.2 percentage points to 3.8%.

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 19 billion. Earnings per share was JPY 45.8.

Moving on to the next slide. Next, we have the quarterly inventory trend. At the end of the third quarter, inventories totaled JPY 175.9 billion, which is JPY 5.5 billion less than what it was 3 months ago. And JPY 16.2 billion of U-Shin inventory was included because of the consolidation.

Next slide, please. This chart contains a bar graph showing trends in net interest-bearing debt, which is total interest-bearing debt minus cash and cash equivalents. Underlying graph indicating free cash flows. At the end of the third quarter, net interest-bearing debt totaling JPY 82.9 billion was up JPY 61.2 billion from the end of March 2019.

Next slide, please. This is a summary of the forecast for the fiscal year ending March 31, 2020. All the profit for the first 3 quarters has exceeded the expectations. The picture of global economy, including the impact of the new coronavirus and fluctuating exchange rates is becoming increasingly unclear, as it is not possible to predict the impact of these factors on our business performance at present. We have decided to keep our full year business forecast unchanged. We will keep a close eye on developments, and we'll make an announcement if there are any major changes in our business forecast. The exchange rate assumption is JPY 108 to $1.

Next slide, please. This slide shows the forecast by business segment, that we did make minor changes to performance forecasts by business segment given our current status. This is all for my presentation. Thank you for listening.

[Yoshihisa Kainuma, executive]

Thank you. This is Kainuma speaking. So I'd like to present my part. First, please look at Page 15 of the slide, which are today's highlights. Overall, the impact of the U.S.-China trade friction hit us. This is a fact. But in terms of risk diversification, our portfolio is diversified in a well-balanced manner which is supporting our bottom line, as you can see from the present situation.

This announcement with regards to the new coronavirus is not included -- this impact is not included in this announcement. When we are making this presentation, the situation was worsening, as you all know. Operations started from the tenth, but the supply chain might be impacted in some way or another. In 2011, there was a flood in Thailand. The scale is entirely different from the present situation, but that also greatly impacted our supply chain.

Now [ fan ] products. We cannot imagine any [ fan ] products without any components from China. So we believe there will be some impact, but we are considering catching up from March. So as soon as the situation gets more clear, we'd like to inform you. We ask for your understanding.

As for machined components, ball bearings external shipment volumes, as I mentioned before, is showing clearly a recovery trend. External shipment strategy for the next term's already being made, 210 million units per month on a monthly basis external shipment is scheduled. But in the company, we are looking at a higher level. But as of today, 210 million units is the figure. One lesson that we have now is that to manufacture volumes, we will reduce manufacturing costs per unit. So in the next term, considering the current situation, we would consider a more aggressive pricing policy and secure the maximum possible volume for electronic devices and components and MITSUMI.

In the fourth quarter, more than we have assumed, frankly speaking, we have an impression that the situation is better. I would like to repeat that the current situation in China is something that we will keep watching to overcome the fourth quarter.

For U-Shin, the same might be in other companies, as you might all be familiar with. The automobile market is slowing down greatly, so more than we had expected. We cannot avoid having quite poor results, but what we have to do is very clear. To improve our performance, we will keep doing what we have to do. If timing changes, we are sure we will be able to turn around for the share buyback. This was started from last December. One topic now is that book value per share achieved the highest ever.

Next page. External ball bearing shipment volume, as you can see, it is clear. But as I have mentioned, next fiscal year the [ plan ] will be very aggressive. Recovery of revenue is something that we are sure we will be able to achieve.

The next page also shows the same, 210 million units, as I have mentioned. We hope we can add more on top of this.

In the previous -- after the previous presentation of financial results, we announced the stock purchase of ABLIC. I'd like to explain about it. Page 18. Development Bank of Japan holds 70% and Seiko Instruments 30%. So those are the major shareholders of ABLIC. And we are going to acquire 100%. This agreement was reached, and now already with relevant countries, with authorities related to anti-monopoly, we have submitted our application. Results of the last 3 years is shown on this slide.

Next is Page 19. Page 19 shows what kinds of synergies are expected because of this integration, and I would like you to read it during your leisure time.

And moving on to Page 20. [ H-Sphere ] strategy includes analog semiconductors. And based on 10-year plan, of which we announced last year, 9 years from now, we would like to grow our semiconductor business to JPY 100 billion. Now that is what we said. And when this becomes a success, then we will be able to make a company with JPY 56 billion sales. And in the next 9 years, both organic and inorganic approaches will be taken, and we shall be able to achieve JPY 100 billion and -- JPY 100 billion. And [ H-Sphere ] of the strategy, analog semiconductor business will be able to form the basis for this.

Page 21. As you are aware, the smartphone is having many lenses and the new technologies will be introduced. And in order to cope with a strong demand at our Cebu plant, what we call the #12, building #12, which is a camera actuator factory. Right next to it, we are to build a new factory. The backlight, we can no longer expect a big volume like we used to do. And [ subcore ] business, camera actuator, backlight -- camera actuator and backlight volumes are declining, but it can be offset. Such a decline can be offset to some extent. So we would like to solidify our positioning in this area.

Page 22. This is the outline of share buybacks. We will continue to buy back our shares for some time.

So this is the end of my brief presentation. Thank you for listening.

[Unknown Executive]

The first question, from Goldman Sachs, Mr. Takayama.

[Daiki Takayama, analyst]

I have 2 questions. First is about ball bearings, that the inventories with higher costs were sold first. And in the interim results last year, I think you should have known that. But that is surfacing on accounting basis now. I find it strange. So what was it that you didn't -- you have not seen? And for next year, towards April, June, if [ utilization ] goes up, that seems to be good. So operating margin, as you have mentioned previously, might get higher compared to the past. Is there such a potential higher operating margin from April to June?

[Katsuhiko Yoshida, executive]

Yes. This is Yoshida speaking. About the machined components operating profit, JPY 9.6 billion. And in the previous quarter -- compared to previous quarter, it is worse. And the reason for that -- before talking about ball bearings, the aircraft business, which is included in the ball bearings segment, and also this is also included in the rod-end sector, as we have been explaining so far -- in the second 3 quarter, on quarter-on-quarter, there's quite a large drop in income because 737 MAX, this is a partial reason. But in the third quarter, including Christmas, the days of operations in case of aircraft is -- since they are manufactured -- most of it is manufactured in Europe and the U.S., there is a decline. So that is one factor for the decline. And for external shipments for ball bearings, average on second quarter is 185 million and now is 202 million, so there is an increase. But the increase in sales, the profit was not as much as we have assumed. In the first, second and the third quarter, production -- well, recovery of the market was slower than what we had expected, so production volume in the first quarter, 225 million; and in the second quarter, 244 million; in the third quarter, 259 million. So it is much less than what we had assumed. So that raised the inventory level. And as a result, profit was not as much as we had expected.

So what is different from our assumptions? Declining capacity utilization. For that portion, we thought we would be able to increase production. But in the third quarter, we're not able to do so. That is the major factor. And as for the future production, well, external shipment will increase and HDD market is not that good. But considering that we have external shipments, so we plan to have this production level. And the turnover of inventory is a few months. So if we can overcome that situation for the next fiscal year, we believe profitability will return. So there's a slight drop in profit, but in the third quarter, during this period, there was a decline in income, which we believe we'll soon -- we'll be able to recover. And in addition to that, when you're busy, distribution costs and production improvement might be too tight. But when you have some room, you may try to increase profit margin as a manufacturer. And with shortage of production, I believe that had an impact. But the pace of increased production in the second half, from April to June quarter, manufacturing and the cost-benefit relationship, that may influence. And for next fiscal year, April to June, will that be a moderate increase compared to the fourth quarter? What curve do you assume? How will production level be increased when we're manufacturing 300 million production cost? By having appropriate inventory. For example, compared to that, we could be more efficient. So we believe the level is lower. So it's relatively early stage increasing income of -- income level of the previous year, I believe, will be recovered. But at the moment, we want to examine more the situation.

[Yoshihisa Kainuma, executive]

Let me make some additions. This is Kainuma speaking. Basically, external shipment and internal shipment, both is a total of bearings sales. In the past, we had a capacity of 200 million, but we raised as a formality to 315 million. What it means that there are machines, but it's not that everything is being utilized in full. Because total of internal and external shipments has not reached 300 million. And what did I mention in the next fiscal year? External shipments, our single month might be 220 million. And a certain volume, the monthly volume of bearings, at a minimum, we want to recover it to 300 million. And the remaining is what we must -- we want to keep in case something happens. But internal production is declining, and pivots has [ half when ] compared to the past. So the total volume compared to the best situation, the total volume is low. And so this is another reason.

[Daiki Takayama, analyst]

As you have mentioned, including the price, profit margin will rise by increasing volume, right?

[Yoshihisa Kainuma, executive]

Yes. Total volume of bearings, adding internal and external shipments per month, the sales volume per month should be raised and particularly so once you increase production volume. This is what we are trying to do.

[Daiki Takayama, analyst]

And with regards to MITSUMI business, so the full year has been raised. And Q4 is to maintain the same level of profit and revenue. And game console did well, but actuator, there may be a time lag in Q3 and Q4. So there seems to be an upside for both revenue and profit. Could you elaborate on that point, please?

[Yoshihisa Kainuma, executive]

First of all, Q3, regarding game console, as you are aware, the sales are booming, as you might have heard, in the market. And accordingly, we saw better results than expectation. And optical devices, the things that were planned in Q3 were pushed back to Q4, not because of our plan, but because of the supply chain. Whether the parts and components are sufficient or not, that type of issues. I don't know if that is true, but some will be pushed back to Q4.

And regarding Q4, coronavirus problem, how it's going to evolve is unknown. But excluding that, there will be new models for Chinese smartphones, and we will be able to supply our products. And therefore, Q4, we should be able to achieve a certain level of revenue. So MITSUMI business, [ 205]and [ 65 ] is the profit for full year. It seems to be pretty good for Q4.

[Daiki Takayama, analyst]

Game consoles, well, although there is a seasonality in North America, but is it because of China?

[Yoshihisa Kainuma, executive]

Well, I cannot disclose the information about each individual customer. But particularly, our product mix, new -- the models with new functionality are being launched and that impacted.

[Operator]

[Operator Instructions] The next question, Morgan Stanley MUFG Securities, Sato.

[Shoji Sato, analyst]

This is Sato speaking. I have 3 questions. My first question's about the volume. In the third quarter, external shipments of ball bearing, 202 million, what is the monthly external-internal shipments and production?

[Yoshihisa Kainuma, executive]

From October, in terms of millions, 195 million, 206 million, 206 million external sales. And internal sales, 65 million, 67 million, 65 million.

[Shoji Sato, analyst]

65 million, 67 million, 65 million? And how about production?

[Yoshihisa Kainuma, executive]

Production, 254 million, 260 million and 263 million. The last one is 263 million.

[Shoji Sato, analyst]

From January, March quarter, do you expect an increase, including external, internal shipments and production?

[Yoshihisa Kainuma, executive]

Yes. I would like to repeat, our assumptions that there is no coronavirus impact for internal -- external shipments, 205 million; and the internal shipments, 67 million; and production, 271 million; and March, nearly 300 million.

[Shoji Sato, analyst]

My second question. For LED backlight electronic devices, Q3 was very strong. In Q4, what's the situation after Q4? In the briefing at the second quarter, you provided us with an explanation. And compared to that, the forecast for the next fiscal year, have there been any changes?

[Yoshihisa Kainuma, executive]

First, Q3 electronic devices was so and so. And Q4, there was start of new models, and production of conventional models were doing well. So a certain level of utilization is still going on. And the profit accompanying this situation in the Q4, we'll be able to secure a certain level of profit. For the next fiscal year, it is difficult to say. As I have been saying so far, LCDs will not be gone.

[Shoji Sato, analyst]

And what is the background for the volumes?

[Yoshihisa Kainuma, executive]

There are many forecasts available in the market. If you consider that, we can see that we have a certain level of business opportunities.

[Shoji Sato, analyst]

Early November -- compared to the situation early in November and the current moment, the forecast for the next fiscal year, have there been any changes?

[Yoshihisa Kainuma, executive]

It's very difficult to say about the next fiscal year, but at the moment we believe there will be no major changes.

[Shoji Sato, analyst]

And ABLIC lastly. In your presentation material, it was introduced about ABLIC. But could you explain -- the [ semiconductor ] business of MITSUMI, what kind of technological affinity will there be? And what is supplementary relationship between the 2? Could you explain that briefly?

[Yoshihisa Kainuma, executive]

This is Kainuma speaking. Page 19 -- please look at Page 19. For automobiles and for industrial machinery and for medical sector, these are markets that they are strong at. And in our case, as we have been saying, with IGBT coming on and digital analog converters, we want to expand sales in these areas. So analog semiconductors comprehensive power, that is just like a trading firm, we'll be able to have this kind of comprehensive ability. And [ in BCP ] is becoming such a problem now. And our post process is Philippines and their [ base is ] Akita. So there will be 2 locations. And the preprocess is Chitose, Hokkaido and Chiba. So there will be 2 separate locations. There are about 250 -- there will be 250 engineers for analog semiconductor, which is an area that Japan is strong at. And this is a niche market, so this will not be gone, but it's a very niche market which we want to secure.

[Shoji Sato, analyst]

And engineers, you said 250 people. In total, 250 for both together? How many for each?

[Yoshihisa Kainuma, executive]

In our case, we have 100 people, as we have always been saying.

[Operator]

Let us move on to the next question. From Nomura Securities, Mr. Akizuki.

[Manabu Akizuki, analyst]

This is Akizuki from Nomura Securities. So I would like to ask you about the bearings business. So by calculating in a dollar-denominated way, the unit price seems to be declining Q-on-Q. On the other hand, in the first half, when adjustments were made, unit price was rather high. And the inventory adjustment -- after the inventory adjustment, the ones that have a -- rather a low unit price are recovering. And due to such a product mix, maybe the result is not growing as much as the expectation. But how do you analyze the situation, if you can share with us that? And another thing about the bearing. Pivot volume, could you give me the pivot volume numbers? And the internal shipment number seems to be high, 66 million internal shipment. I'm wondering, you may be trying to build up inventory for internal shipment. That is my first question.

[Yoshihisa Kainuma, executive]

First of all, the average unit price or selling price for bearing, the bearing information that we disclosed includes aircraft bearing. New Hampshire ball bearing and et cetera are included. As I said previously, the sales of that portion is declining. So production volume and the revenue. If you calculate using those numbers, it may seem that our unit price is falling very significantly. But actually, unit price is not falling that dramatically. But the fan motor is the one reason previously, but it's recovering. But unit price of fan motor is rather low. And having said that, however, it's not pushing back overall unit price.

So aircraft, the bearing of the special aircraft that is included in the number is the factor behind this decline.

Turning to pivot. Q2 or Q3, production and sales were 20 million each. And Q4, 19 million each. In other words, 1 million lower. Compared with the market trend, you may think this number is low, but with regards to pivot, comparatively, we are trying to level off the production and the market. As you may know, we think that we understand the market situation to some extent. And therefore, we are trying to manage the appropriate inventory level, meaning that it's not excess.

[Manabu Akizuki, analyst]

So it's 40 million for pivot and 60 million in the internal shipment. And therefore, the remaining internal shipment for other than pivot is 26 million. And this year, motors are not doing well. So this relation between internal shipment and the pivot, that was what I wanted to ask.

[Yoshihisa Kainuma, executive]

With regards to that, motors -- overall, motors are not growing that much, as you can see in these numbers. However, the rate of the motors that use ball bearings are increasing gradually. The automotive market is struggling. However, we are capturing new opportunities, and the rate of the motors that use ball bearings is increasing gradually.

[Manabu Akizuki, analyst]

Just one more question, if I may. Backlight, if I do the calculation, decline in Q4 may be very low looking at the segment. Having said that, the models that are selling, they are selling, but they are expected to go down. And the reason why the revenue stays at the high level, and also towards next year, the backlight for LCD, there is such a model, and the mainstream high end, should I take it as a mainstream high end? Or is it a legacy model? If I may ask such a question. And to the extent possible, please respond.

[Yoshihisa Kainuma, executive]

First of all, the digital devices, Q3, JPY 518 million and JPY 453 million is the Q4 number. And JPY 453 million may be too high, you may be implying. But new models, so to speak, LCD model, or last year's LCD model, order placement progressed well. And truly new models are starting. That is the reason why we came up with this number. And in January, there were -- there wasn't much impact of coronavirus. And things have progressed quite smoothly. And towards next year, the total LCD model, how we should think about the total volume of LCD models? The new models, as people are saying, if it's entirely OLED, LCD models will remain in one form or another, several tens of thousands of units. We will still have business opportunities and -- instead of several tens of millions. So that is how we think about this. The mainstream, high-end models may be added on top of that. I expect it, but you don't know for sure at this point in time. I cannot comment on that at this point.

[Operator]

The next question, please. From UBS Securities, Mr. Hirata.

[Shingo Hirata, analyst]

Hirata from UBS. I have 2 questions. My first question, as we heard previously about MITSUMI business, Q4's profit. Sales was strong, JPY 79.2 billion to JPY 78.2 billion. And from the third to the fourth quarter to MITSUMI, well, what is the situation of actuators as a whole? What is the situation of mechanical components?

[Katsuhiko Yoshida, executive]

As you know, mechanical components are going down. And compared to the full year, mechanical components are areas that we can have a good production, but our assumption is they're going to decline in this quarter.

[Shingo Hirata, analyst]

And for North American business?

[Katsuhiko Yoshida, executive]

There will be more business opportunities, and the mix also, business with higher average unit prices available. So it's possible to expect certain profit.

[Shingo Hirata, analyst]

And so do you believe opticals will slightly decline?

[Katsuhiko Yoshida, executive]

For opticals, we expect to increase in income.

[Shingo Hirata, analyst]

In North America it's not so, but there will be a general increase?

[Katsuhiko Yoshida, executive]

Well, I cannot refer to the continents, but Chinese smartphones will increase, relatively speaking.

[Shingo Hirata, analyst]

And another question. In the last part of the presentation material, you talked about the new factory for camera actuators. Could you explain the details about it? How much capacity will increase with this? What is the investment amount? What is the destination? Who are the customers? Could you explain a little more of the details?

[Katsuhiko Yoshida, executive]

The investment size, I cannot mention the specific numbers. But as you can see in this presentation, 15,000 square meters is the size of the factory. As an actuator factory, this is not small. So we will build this building. And we want to operate this one. So in general, we can say the investment is not that small.

[Yoshihisa Kainuma, executive]

This is Kainuma speaking. Let me add. As you can see, it is exactly the same size, building #12, as I mentioned before. This is for North America. On the other hand, if it is the same thing we are manufacturing now, we can double the production. But there will be different lines. The size is larger. So in terms of unit volume it's not that level, but that is what we assume in general. As for the investment amount, basically we want to gradually introduce facilities into this factory. So ultimately, it would be around 10 billion. That is a general image. But at first, we have to make a clean room, and we must make this facility. So the building itself will be about 3 billion. That is the general image.

[Shingo Hirata, analyst]

As for the destinations, the ultimate customers region would be in North America?

[Yoshihisa Kainuma, executive]

Yes.

[Shingo Hirata, analyst]

And so you want to aggressively increase the share. Is that the objective?

[Yoshihisa Kainuma, executive]

[indiscernible] in November.

[Shingo Hirata, analyst]

And another question. Our impact of the coronavirus, at the moment, what is the situation in China operations?

[Yoshihisa Kainuma, executive]

China, as you know, you might be familiar with the situation. From Monday to Friday, I will be the head of the operations trying to collect information.

[Shingo Hirata, analyst]

Until the 9th, manufacturing industry was shut down, excluding some regions. And other regions have a longer shutdown, but until the 9th, manufacturing was stopped. So after the 9th, how many employees can commute? And also there is a supply chain, and the customers are also under holidays or the Chinese New Year?

[Yoshihisa Kainuma, executive]

China, in general, is still under the New Year's holiday. In general, they are not yet operating. So I think we can -- we will be able to identify the general situation by sometime after mid-next week. However, informally, we have -- we are talking with many customers that they want to catch up by March as much as possible. So including that, we will take all the possible measures that we can take.

[Operator]

Thank you.