FANUC CORPORATION
Q&A Summary of the Telephone Conference on theFinancial Results for the Year Ended March 31, 2022
(April 26, 2022)
Q: In Q4, in addition to the shortage of semiconductors, costs increased for materials
and logistics. What was the expenditure for such rise in costs, and what are yourplans for FY2022 to tackle such issues?
A: Compared to Q2, procurement continued to be backbreaking in Q3 and Q4, althoughsales increased. In the face of such difficulties, the R&D Divisions, factories andPurchasing Department have united as one, and have been working on procurement as
their highest priority, including acquiring items on the market. The sharp increase in costs
for materials is expected to continue for a while, as well as the soaring costs for logistics.
The forecast for FY2022 has been planned in consideration of such increases in costs
for procurement and logistics.
Q: Is it correct to assume that you foresee the shortage of semiconductors as
continuing for some time in FY2022 and have planned accordingly?
What are your views on your sales and the shortage of semiconductors?
A: The status of the shortage of semiconductors is very difficult to predict for the long term,
but we presume that the shortage will last for about six months to a year. We also expectthat sales in FY2022 will increase slightly compared to the present, although the situationmust be monitored carefully as procurement issues will continue.
Q: How do you envisage the penetration in the market of teachingless robots? Whatis your perception of the potential of teachingless robots in terms of scale andprofitability?
A: As the task of teaching robots requires high skills, decreasing the workload has long beenrequested from the past. There are various levels of being “teachingless,” such as being
in a form of a simple support function, to targeting full automization to some degree, butultimately, it should become a feature of all robots. There are cases in which labor andmoney required to teach robots is substantial and becomes an impediment to theintroduction of robot systems. If teaching can be simplified, introduction costs of robot
systems will decrease, and this should be a major trigger to extensively expand the robot
business. Having the added value of teaching as a function embedded in robots, andreflecting this function in the price will be a benefit for robot manufacturers. At the sametime, system integrators will have more time for creative activities. This will lead to the1increase of the installment of robot systems and will have a positive effect.
Q: What are your expectations for the sales and bookings for FY2022 according toregion?
A: It is a fact that Europe is facing a crisis in Ukraine, the U.S. is confronting inflation, andChina is imposing lockdowns to combat COVID-19. Although the effect on our inquiries
and orders are not zero, we have not reached a stage in which this is explicitly reflectedin our numbers.
Q: In Q4, sales of robots decreased and FA sales mainly remained unchanged
compared to Q3. The decrease is said to be temporary. What is the basis for thispoint of view?
A: In China, business discussions are progressing with expectations that the pandemic will
settle down. Furthermore, I believe that it is assessed that mid-to-long term investments
in carbon neutrality and EVs cannot be avoided. From FANUC’s perspective, thewillingness to make capital investments will continue to be strong and steady. On theother hand, our delivery time is currently quite long. Therefore, we are requesting ourcustomers to order with ample lead time to the extent possible.
Increase in sales being subtle in the ROBOT and FA businesses in Q4 is due to thelimitations in supply on our part. There are strong demands in each territory for FANUC
to supply more and more. The biggest issue for FY2022 is to deliver even one more unit
with delivery shortened by even one day to our customers. Of course, it will be necessary
to carefully observe profitability at the same time.
Q: In Q4, sales exceeded the forecast but operating profits were below. Was the risein the cost of materials the cause of the lower gross margin?
A: In the forecast announced in January, the effects of such cost increases were foreseen
to some extent. However, the surge in the costs of materials, sea freight, and use of air
freight for some projects in order to meet the delivery date, was a bit more than expected.
Also, at the consolidated subsidiaries, the increase in inventory slightly surpassed ourforecast, and furthermore, the sharp drop of the Japanese yen at the end of the fiscal
year required additional adjustments to the cost of sales. As such, the results fell
moderately below our January forecast.
Q: Is the major portion of capital investments for FY2022 being directed to theincrease in production capacity of robots?
A: The largest increase in production capacity is for robots. The rise in the volume of robots
manufactured requires more motors and controllers to be fitted to these robots. Therefore,2investments to strengthen the production capacities of FANUC Headquarters and Mibu
factories are included in capital expenditure. There is still some space in the Mibu andTsukuba factories, and before constructing new buildings, the monthly production volume
is targeted to climb from 11,000 units to 14,000 units. With further improvements inefficiency and usage of unused workspace, we intend to raise our target to 16,500 units
per month. Still, buildings will become full in the not so far future, so we are considering
investing in new buildings as well. Plans shall be disclosed as soon as they are organized.
Q: In your FY2022 forecast, the operating margin is in the higher 23% range. For themid-term, for three years from the present, how do you think the operating margin
will change?
A: Until a few years ago, there was a temporary demand for ROBODRILLs, which was notexpected to last long. This was why we invested in the increase in the production capacityof robots. With this investment, the depreciation cost increased which brought about
decrease in profits, but we were able to configure a structure to cope with the increasein demands for robots. Demands for NCs will continue to increase steadily, but it will berobots which will be high in demand. Looking three years into the future, we have justbegun additional capital investments for robots and the depreciation cost will be quite
high. Despite improvements in production efficiency, it would be realistic to pursue theoperating margin to be on par or with only a slight increase.
Q: It is expected that sales will increase but profits will decrease in FY2022. Amongthe causes such as rise in costs due to parts shortage and logistics, what has themost negative effect?
A: The greatest impact is incurred from the price increase owing to the global shortage ofparts. Next is the rise in sea freight costs. This is followed by the procurement on a spot
basis of parts on the market, and the use of air freight to meet the delivery date, though
limited to a few times. In general, this is the order according to the extent of impact.
Q: Raising the selling price of FANUC products and the Japanese yen being weak
can be perceived to have a positive influence on profitability. How are theyreflected in your plans?
A: Transferring the increase in costs to the selling price should be deliberated carefully andmeticulously in parallel with holding discussions. The depreciation of the yen will make iteasier to sell overseas, but there is also a negative side in terms of procured parts
becoming more expensive. Therefore, it cannot be simply concluded that a weak yen isa “plus” factor only.

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Q: Regarding share buybacks, looking back at the past year, even at the level in whichFANUC’s shares dropped below 20,000 yen, shares were not bought back. Are
there any chances for a different decision with the acquisition limit that is set forthis year?
A: Shares will be bought back when deemed to increase our corporate value, with the stock
price being one indicator among many other factors to be considered. Large capital
investments such as increasing the production capacity of robots are planned for thefuture, and inventory is being accumulated to address the shortage of parts.
Our intention is to use valuable cash to improve FANUC’s value as a company.
(Note: Any reference in this material about the future may be affected by uncertain factors, such as
supply and demand trends, industry competition, and economic climate. Therefore, actual
outcomes may differ.)4