FANUC CORPORATION

Q&A Summary of the Telephone Conference on theFinancial Results for the Year ended March 31, 2024
(April 24, 2024), 2024)
Q: There are different ways of calculating the orders results, such as subtracting
the end-of-term backlog from the total, or accumulating the orders received
in the quarter. In your case, how is the currency rate handled for orders?
A: In our company, many orders are received locally overseas. The exchange rate for
the Japanese yen that applies to the local currency is used in calculation, and weaccumulate this amount in yen.
Q: Please elaborate your views on your forecast for FY2024 that you have justreported. From the first half to the second half of FY2024, sales are foreseen
to grow, but contrary to this increase, the operating margin will decrease.
What is the reason?
A: Even though orders recovered somewhat in Q4, compared to past quarters in whichsales were more or less than 200 billion yen, the amount for Q4 is still considered
to be low. Backlog has substantially normalized, and we expect the gap between
sales and orders to become narrower for the time being. For this reason, we predictthat sales for the first half will decrease to correlate with orders. As for the secondhalf, sales are expected to recover, but only gradually. Therefore, we are currently
not able to forecast a major recovery for sales.
As for the operating margin decreasing from the first half to the second half, ourcalculations are based on an exchange rate of 135 yen to the dollar and 150 yen tothe euro. The difference with the actual exchange rate will have a greater effect on
the profit/loss of the second half compared to the first half.
Q: How is your outlook on the recovery of the automotive industry reflected inyour forecast?
A: In general, the recovery of the automotive industry is not largely anticipated. Thereis an overall trend to postpone investments in EV, so some investments may bedelayed. On the other hand, investments in hybrid cars and internal combustion
engine cars are accelerating. From this, it is assumed that the minuses and pluses
will cancel each other out.
The delay in EV investments may have some impact on future facilities plans.
Q: What is the status of inventory adjustments of FA and ROBOT products andyour expectations on when adjustments will be completed?
A: First, regarding FA, the inventory in China has significantly diminished, and the1amount that BEIJING-FANUC is selling to Chinese machine tool builders is starting
to align with the orders that Headquarters receives from BEIJING-FANUC. Apartfrom China, on the whole, there are some countries which still have a high inventory
level, and there is a possibility that inventory adjustments may continue for a few
more months. Still, compared to ROBOTs, the considerable decrease in FA
inventory is a reality.
I must mention that from the beginning, ROBOTs have maintained a much betterorder status compared to FA. However, this has delayed the start of inventory
adjustments of ROBOTs. In the U.S., Europe and China, which are our major
markets, inventory adjustments have progressed, but not sufficiently. It is expectedthat adjustments will continue for at least half a year more. This does not mean thatorders will continue to be low during this time. In fact, orders are starting to comein for models which have completed inventory adjustments at an early stage.
Q: What is the state of orders and sales of FA and ROBOT? Would it be correct
to assume that FA has hit the bottom and will recover step by step in termsof both orders and sales in FY2024?
It was mentioned that more time would be required for ROBOT inventory
adjustments, but will orders for ROBOTs pick up in the second half ofFY2024? Also, what are your forecasts according to region?
A: Allow me to start with FA. According to the Japan Machine Tool Builders’
Association’s statistics regarding machine tool orders, orders will continue to belower than the past year. However, the difference is becoming smaller and there
are hopes that the bottom will be reached in due time. Nevertheless, the forecast
from that point on is difficult. Therefore, our forecast is based on the presumptionthat the present level of orders will continue for FA. The same applies to ROBOTs.
We anticipate that orders will slightly grow towards the second half, but a sharp
surge cannot be expected at this moment. The future includes some aspects which
are extremely opaque, so we are forecasting on the premise that either the present
level will continue, or that there will be a slight increase. Significant investments
were made in ROBOTs in areas such as EVs and PVs (solar panels), especially in
China, and presently, as a counterreaction, such investments are shrinking.
Although investments are actively being made in the IT and other industries, on thewhole, demands for ROBOTs in China have flattened out. Contrary to China,
demands will be relatively favorable in the Americas, even though there is inventory
that must be consumed at the same time. Europe has geopolitical risks whichmakes predictions rather difficult, but we are optimistic that demands will continue
to be fairly steady.
Q: What are your targets for the mid-term operating profit margin?
A: We are not satisfied with the present operating profit margin. Though not announced
outside the company, we have set goals internally, and are presently striving to2

meet these goals. As measures we have adopted, it goes without saying that ourproducts have to become more attractive. In addition, the unit cost is being loweredby producing new models and other means. There are various other activities suchas thoroughly cutting back on internal expenses. We are taking such actions andare fully determined to restore the operating profit margin to the targeted level.
Q: Orders for ROBOTs by quarter dropped from a level of approximately 100
billion yen in FY2022 to around 75 billion yen in FY2023. Please explain thebackground for this decrease.
A: The drop in orders for ROBOTs is due to factors such as inventory adjustments andthe Chinese market reaching the peak and temporarily stagnating. What is more, I
feel that ROBOT investments in China have started to settle down a bit. Even so,
China must invest in automation in order to manufacture, and demands are stillhigh in some areas. For instance, the winners among EV manufacturers continue
to invest. Some areas in IT related industries are doing very well. The impressionis that polarization of those who can invest and those who cannot is progressing.
Q: Both Orders and Sales of Service in Q4 are the highest recorded. Which area
experienced substantial growth? What is the background?
A: Orders for Service have gradually increased, reaching the highest level in our history
in Q4. We are paying much attention to this trend. Although we are pursuing various
approaches such as IoT and digitalization, these are still new frontiers. The reason
Service reached the highest level in Q4 can be attributed to the yearly increase in
shipments, and expansion of installations which Service caters to. This has resulted
in the overall increase in Service work, and we are succeeding by unfalteringly
winning each opportunity. There are also customers who do not use our services,
and are struggling. We are also taking measures to propose our services to suchcustomers. Such subdued activities have contributed to the slow yet steady growthof sales of Service.
I feel there is great potential to expand the significance of Service in the mid-to-longterm. FA and ROBOT have acquired large market shares, and business whichleverages the volume of installments will become highly profitable in the future.
Therefore, such businesses will be further increased.
Q: Is the release of new types of robots, such as collaborative robots and scara
robots, contributing to the sales and profits of ROBOTs in total? Do you haveplans to spend much more on R&D? Or will retaining the present level beenough to cope?
A: A few years ago, there was a time when we invested heavily in R&D, but now, weare in a phase in which we should curtail investments and focus on efficiency. Afterbecoming more efficient, the next phase will be to increase human resources andinvest in R&D even more.
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Our collaborative robots have made an outstanding contribution to our sales which
has exceeded our expectations. On the other hand, when looking at global statistics,
collaborative robots account for just a little over 10% of all robots, and when
considering the entire volume, it can be said that the future age of collaborative
robots is yet to come. Scara robots have largely contributed to the rise in ROBOT
sales units, but having limited number of axes and being low-priced, the impact on
the sales amount cannot be said to be significant.
Q: Orders for ROBOTs in the Americas have increased consecutively for twoquarters, and in Q4 FY2023, orders have resurged to 52.2 billion yen. What isthe reason for this? In addition, how do you perceive the situation to be inFY2024?
A: Small and medium sized customers in the United States are sensitive to changes in
the interest rate, and the impression is that investments are moderately undergoinga “wait-and-see” situation. However, reshoring to the U.S. is becoming more
popular, and manufacturing will no longer be possible without automation. In areas
with such perspectives, investments are being conducted energetically, along withsteadfast actions. EV investments are being postponed to some extent, but in theirplace, investments in hybrid cars and internal combustion engine cars are on therise.
The advantages and disadvantages are difficult to predict, but as regards
automobiles, the basic direction is for the volume to increase, and though there
may be a time lag, I think this good state will continue. The lowering of high interest
rates will motivate investments, and I see this situation as being extremely positive
for the future in the Americas and the future of investments in the manufacturingindustry.
This trend is not limited to the United States. Mexico and European countries arealso experiencing an active shift. Relocating manufacturing to Vietnam is currentlyongoing. In line with expectations that future demands for automation will increase
even more, we have been investing in advance, such as gradually expanding oursites in the United States, Mexico, Vietnam, India and Europe.
Q: Did last year’s United Auto Workers strike have any effect?
A: There were some cases in which investment plans were slightly postponed, andthere was a lapse in activities, but nothing significant. There is no change in that
the United States will face a labor shortage in the future. Though demands will not
surface immediately, I feel that the trend to robotize will accelerate going forward.
Q: The number of employees has doubled in the last ten years, and the growthof sales and profit per employee has become sluggish. Isn’t there too manypeople?
A: It is a fact that sales and profits have not increased in proportion to the rise in the4number of employees. Still, human resources are valuable assets and I expect that
our employees will make an appreciable contribution to our future growth. We areentering a phase of improving efficiency and considering how to bring out the bestin our people. We will unite our forces to boost employees’ motivation and expand
our business.

(Note: Any reference in this material about the future may be affected by uncertain
factors, such as supply and demand trends, industry competition, andeconomic climate. Therefore, actual outcomes may differ.)5