FANUC CORPORATION
Q&A Summary of the Telephone Conference
on Financial Results for the First Quarter ended June 30, 2022
(July 27, 2022)
Q: Despite problems such as semiconductor shortages and lockdowns in China,
FANUC’s sales for Q1 has reached 211.6 billion yen. On the other hand, theoperating margin showed little growth. Please explain the background of theseresults.
A: Having achieved sales as initially forecasted can be attributed entirely to the hard workof our employees in relentlessly negotiating the delivery time of parts, and implementing
alternative measures such as changes in design. As for the lockdown in China, theeffects on sales were minimized mainly through the efforts of our local joint venture. It isa fact, however, that we struggled to acquire parts due to the lockdown in China, whichcaused significant disruptions in the supply chain.
The operating margin was negatively affected by the increase in the costs of parts andshipments by sea, as well as other surges in expenditures. This has been explained withcare to our customers in order to persuade them to accept the increase in the price of
FANUC products. Such efforts are being continued steadily.
Q: It is heard more and more that the semiconductor shortage situation is improving.
Has this been one of the factors which led to the increase in Q1 sales?
A: Though it is true that semiconductors have become more readily available than before,
the situation still remains critical. FANUC manufactures products by assembling parts,
so the shortage of even a single component will impact the entire manufacturing process.
That is why we cannot feel secure when looking at the overall picture. There is absolutely
no change in committing to doing our best to continue production, including procurement
and changes in design.
Q: Please provide information on the trends of FA and ROBOTs in China in Q1. Is thedecrease in FA bookings only temporary, and is recovery foreseen? ROBOTs
seem to be doing favorably not only in China but also in other regions. What isbehind this trend?
A: A major part of the decrease in FA bookings is due to the accumulation of backlog. Thissituation is settling down for the moment. Also, the lockdown in China has somewhat
slowed down bookings and sales. Still, local demands for machines have not changed
much, and FANUC is devoting its time and efforts to manufacturing in order to reduce1this massive backlog and transform even one open order into sales.
The high bookings for ROBOTs has remained unchanged. Though there were lockdowns
in China, which rendered the possibility of affecting ROBOT bookings, even if this was
the case, it was at an unnoticeable level. Enquires are strong in the automotive,automotive parts and general industries. In the automotive parts industry, a large part ofbusiness is currently related to batteries. Furthermore, FANUC is successful in various
sectors such as those related to IT and printed circuit boards, as well as solar energy.
Bookings are also quite favorable in regions besides China, so the issue at hand is how
to improve our production capacity, in order to be able to offer even one unit more anddevelop this into sales.
Q: Regarding FA products which are in demand in China, is the usage at the finaldestination for EVs or batteries? If FA bookings has become stable only for theshort term, are there concerns such as having to make inventory adjustments?
A: It is my understanding that demands in China in the machine tool industry have notchanged from before the lockdown, and continue to be high for various applications,such as in the automotive, non-automotive, and semiconductor-related industries. As forinventory, there is a tremendous demand for machines in the local market, so if FANUC
can supply more CNCs, more machine tools can be delivered in China.
Q: If bookings for ROBOTs continue at a level of 100 billion yen, increasing
production capacity by approximately 1.5 times that you mentioned in the earlier
conference may not be sufficient. What are your views?
A: By increasing equipment in our present facilities and enhancing efficiency, we should be
able to handle bookings amounting to about 100 billion yen per quarter. Even so, if
bookings increase at an annual rate of 10% for instance, it is evident that our production
capacity will no longer be able to keep up, and a major increase in production, such as
by building or expanding factories will become necessary. At present, a feasible plan toincrease the production of existing factories from the current 11,000 to 14,000 units on
a monthly basis, has been created and is being executed. If there are still shortages,
various other methods will be devised to raise production to about 16,500 units permonth with our existing factories. However, we perceive that this will not be workable forthe long term. That is why in looking ahead to the future, a variety of plans are being
created which include new constructions as well.
Q: If there are examples of how the new strategy of the collaborative robot CRX isincreasing shares, or how the CRX is turning customers into loyal FANUC users,
please introduce them.
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A: The CRX series has been completed and we are promoting this series even more than
before. FANUC’s ROBOTs, not limited to CRX, are highly reliable and we are highlightingthat they are extremely competitive in terms of TCO (total cost of ownership). It is
important to increase the reliability of our ROBOTs so as not to diminish customers’
productivity and to achieve maximum efficiency, which will duly lead to the increase in
their profits. In considering the needs of customers, we are focusing on high reliability
and having minimum need of maintenance.
Though FANUC was a latecomer in the collaborative robot market, our collaborative
robots are seen as being outstanding. High reliability and excellent maintenanceservices have played a major role in bringing about this formidable appraisal.
Nevertheless, no matter how reliable FANUC ROBOTs are, this does not imply that they
will not break down at all. Therefore, much attention is being paid to maintenanceservices to deal with malfunctions. I believe that this is one advantage that differentiates
us from the competition. Another advantage is the ease of use. Many comments havebeen received that the new user interface of our collaborative robots is easy to use.
These three factors (i.e.; high reliability, superior maintenance services, ease of use) are
the reasons why the CRX collaborative robot series are increasing in demand andbecoming popular.

(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.)3