Introduction

CEO Message

Value Creation Story

We aim to achieve sustainable growth ona global scale and contribute to solving
societal challenges with the goal of
realizing safety, ANSHIN, and well-being
for people around the world.

Business Strategy

Chairman and Chief Executive Officer

Toshi K. Funaki

GovernanceNet sales & operating income margin
Net sales (billion yen)

Operating income margin (%)

83.9
62.8

9.1

2019

70.8
58.4

54.0

8.1

7.5

2020

2021

13.7

16.8
Data

IDEC Report 2023

In FY2023, despite rising raw material prices and shortagesof certain electronic components used in programmable logic
controllers and other devices, the demand for manufacturing
equipment in the global market remained strong with significant
expansion in industries such as automotive, machine tools,
and robotics.
These favorable market conditions drove a strong influxof orders throughout the year, setting a new record in our
total value of orders received. Meanwhile, we proactively
strengthened and expanded our manufacturing facilities,
adding more production lines for safety-related products and
HMI products—including control switches, a highly profitablesegment that enjoys strong demand worldwide. We also
shifted some production operations overseas and promoted
the introduction of automated equipment.
Furthermore, in order to develop a more efficientbusiness structure, we have been realigning our global
sites, restructuring our Japan sales organization into a sales
company while consolidating our sales offices to two locationsin 2021, as well as overhauling our distributor network. At thesame time, we have worked to further improve our profitability
by optimizing our selling prices globally to reflect the increased
cost of materials, and by introducing new products with higher
profitability.
These reforms and the global rise in capex-driven
demand helped to boost sales and profits across our entire
portfolio, particularly our core businesses of HMI and Safety &Explosion Protection, allowing us to attain our highest level of
performance yet in FY2023. This includes our record-breaking
operating income margin of 16.8%.

Foundation For Value
Creation

The IDEC Group announced a new mediumterm management plan in 2022, setting a targetof achieving net sales of 80 billion yen and an
operating income margin of 16% or higher by
FY2025. However, due to the robust demand forinvestment in manufacturing equipment globally, as
well as our efforts to improve profitability, we haveachieved record-high performance in FY2023 andhave achieved the targets set in the medium-term
management plan in the first year.
However, the global economic outlook remains
uncertain. In order for the IDEC Group to achievesustainable growth while contributing to solving
societal challenges in any market condition, we
defined our ideal state in 2050, and backcasted to
P.14
formulate a vision for 2030.
Going forward, we will promote radical reforms
for further growth, and provide components andsolutions that enable our customers to overcome
diverse challenges in order to realize the company’s
purpose and long-term vision.

Record-breaking performance due tofavorable market conditions and ourefforts to improve profitability

2022

2023 (FY)CEO Message

10

Our vision for 2050

Net sales

Operating income

70.8

billion yen

9.7

FY202383.9

billion yen

14.1

FY2024 targets

81.0

billion yen

13.8

billion yen

billion yen

billion yen

Operating income
margin

13.7%

16.8%

17.0%

ROIC

9.2%

12.5%

10%
or higher

ROE

17.2%

18.9%

15%
or higher

EPS

264 yen

348 yen

326 yenFoundation For Value
Creation

Pioneer the new norm
for a safer and sustainable world.

F Y2022

Business Strategy

P.14

levels that enable them to make large investments in productdevelopment. Meanwhile, unfortunately only a handful ofmanufacturers in Japan achieve profits at such a level.
In order for our Group to succeed in the global control
equipment market, we need to expand our investment in
R&D. Although we dramatically raised our operating income
margin to 16.8% in FY2023, we are still not in a position toadequately compete against the world’s leading players. For
this reason, I think it is vital for us to increase our margin to
20% or more. If we can maintain that level, we will be able
to build a platform that can go toe to toe with European andAmerican manufacturers.
To achieve this goal, we will develop a necessary foundation
for further increasing our profitability in the remaining two yearsof the medium-term management plan, and implement various
reforms in FY2024.

Value Creation Story

In 2023, the global economy remains uncertain, with various
factors such as low economic growth due to high inflationand geopolitical risks potentially affecting the businessenvironment. In addition, megatrends such as the accelerationof digitalization and automation, demographic shifts, andclimate change continue to evolve daily. In response, wehave formulated a long-term vision for 2050 as a pathway
to successfully navigating through those many changes andachieving sustainable growth for our Group through businessactivities that help solve societal challenges. We have also
backcasted from that ideal state to create a vision for 2030.

As we cannot bring our long-term vision to reality without
the commitment of each and every one of our employees,
we are taking actions that allow individuals to maximize theirpotential, in line with our founding principle of “managementwith respect for humanity.” Specifically, we are strengthening
our investment in human capital and striving to revitalize ourorganization by creating a more attractive workplace withhigher job satisfaction. Under the new human resources
system we launched in FY2023, our performance evaluation
criteria now reflect our core values: Harmony, Passion,
Innovation, Integrity, and Commitment. Furthermore, in
FY2024, we re-established our Employee Awards Program
to include categories for honoring employees who embody
our Group’s philosophy, and another that recognizes those
who are role models for their behavior aligned with our
Principles, which are based on our Core Values and represent
the concrete thinking and conduct that employees should
remain mindful of as they perform their duties. This wasdone with the aim of facilitating our further growth by firmly
implanting our philosophy across our organization.

Introduction

Formulating a long-term vision towardsustainable growth

IDEC will drive the future of manufacturing
by creating new possibilities and establishing new standards
that will become the “new norm” of tomorrow’s world.
Through our efforts,
we envision a safer and a more sustainable world,bringing happiness and ANSHIN for all.

Data

IDEC Report 2023

In order to attain sustainable growth, we must carry out radical
reforms. Although we achieved strong results in FY2023, I
am not satisfied with our current level of performance. Our
Group has rapidly globalized since acquiring France’s APEM
in 2017, with more than 60% of our core product sales now
coming from overseas. Going forward, we will further expand
our business globally, with the aim of raising the overseas
share of core product sales to 80% or more within ten years.
As we actively globalize our company, we should takenote that many leading manufacturers of control devices
in Europe and the US generate operating income at highGovernance

The long-term vision was formulated from our Group’s
P.1
corporate philosophy, “The IDEC Way.”Ever since
our founding in 1945, we have strived to create the optimum
environment for humans and machines while providing
products and services that help protect people’s lives evenin unforeseen circumstances. In doing so, we have always
endeavored to help bring forth a society where everyone
can live healthy, happy, and vigorous lives. We will continue
working on realizing safety, ANSHIN, and well-being for people
across the globe by creating new possibilities and pioneering
new standards.

Transformation into a highly profitablestructure through radical reforms

CEO Message

11

Business Strategy
Foundation For Value
Creation

We launched the Technical Solution Sales Department in
FY2023 as an organization that combines various products
into optimal solutions for addressing societal challenges
and the increasingly diverse needs of our customers. This
team has already received hundreds of customer inquiries
on solutions, and is responding to them in collaboration withrelated departments. By strengthening our solutions sales, inaddition to sales of existing components, we seek to further
enhance our global competitiveness.
Furthermore, our new medium-term management
plan includes a new concept that our Group will advance:
HMI-X [Transformation]. In the years since our founding,we have grown as a leader in HMI products that connect
humans and machines. We have evolved with the times by
expanding our business beyond interfaces—the point ofcontact between humans and machines—to also encompass
interactions, the network of connections linking machineswith people and other machines. In the coming years, we
believe that demand will grow for solutions that provide
people with safety, ANSHIN, and well-being, through not
only networked mechanical devices, but also the optimizationof the environment, where the space between humans andmachines coexist.

The know-how in safety that we have developed over
the years is a key part of our DNA. We will leverage thatexpertise to pursue our human-centric HMI-X concept thatwill take our HMI to the next level. To accomplish this, wemust strengthen our software development capabilities
by cultivating our talent and exploring opportunities foracquisitions and partnerships. We will advance HMI-X
by proactively developing new products through our joint
P.20 offering
venture with ALPS ALPINE CO., LTD.,
diverse applications for realizing safety , ANSHIN, and wellbeing, and providing solutions that combine ourP.21
safety equipment with the products of our French partner
P.22
ez-Wheel.
Turning to our regional strategies, we are working to
expand our sales in the high growth potential marketsof Asia. For example, in China, we are stepping up local
manufacturing to serve local consumers, including thedevelopment of products tailored to local needs. We arealso building up a solutions sales organization that will makeour sales processes more efficient. Meanwhile, in India, weare pursuing strategic partnerships and other opportunities
that will enable us to strengthen our sales channels. We
are also considering ways to support our future businessexpansion through collaborations in production and otheroperations with our factory in Thailand.

Value Creation Story

Our first focus of reform is production. Currently, theproducts we develop are manufactured at our factories andthe production equipment used is fabricated at our head
office’s Manufacturing Technology Department. Since thisapproach shields our manufacturing processes from the forcesof competition, it has been an obstacle to the enhancementof our productivity.
We began redesigning our entire Group’s organizational
structure in FY2024 to improve our established practices. One
step we have taken is appointing talent who possess in-depth
experience gained inside and outside our Group to manage
each unit. Also, we plan to restructure our global organization,
including APEM, to enable bilateral supply and technology
exchanges in procurement, supply chains, and production
across our Group, using an approach that strengthens eachfunction. One possibility is to enable IDEC and APEM toshare parts and jointly procure supplies, which would achieve
tremendous cost savings. We will also consider expanding ourrange of manufacturing options to encompass not only ourfactories, but also external manufacturing contractors.
Through production reforms such as these, we will
work to radically lower our costs and strengthen our global
competitiveness.

Advancing HMI-X by offering solutions
and expanding sales in Asia

Introduction

Production reforms throughorganizational restructuring

Governance
Data

IDEC Report
port 2023

CEO Message

12

P.15

Safety, ANSHIN,
and well-being

Improve productivity
using control technology

Pursuit and realization of safety,
ANSHIN, and well-being

Climate change

Business foundation

Response to
climate change

Establish a management structurethat promotes value creation,
fosters an organizational climate,and develops human resources.

IDEC Report 2023

In order to achieve a sustainable society and improve
corporate value, it is essential to strengthen human capitaland revitalize our organization. For this reason, we haveadded “business foundation” as a new materiality issue. We
will promote engagement and work-style reform by aligning
our initiatives with the medium-term management plan andsustainability KPIs.
In addition, we are systematically selecting and training
candidates as our next-generation managers. This humanresource development will provide a foundation for our Group’s
further growth.

Strengthening governanceP.53

We have been taking action to strengthen our governance.
From early on, we proactively appointed outside directors to
our Board of Directors. Since 2016, outside directors haveconstituted more than half of the board’s membership. In 2022,
we appointed outside directors to fill two new roles, supervising
the important challenges of environmental measures and IT
strategy. Female board members make up 30% of the board,
contributing to its diversity.
Another critical challenge that we have been addressing
is the cultivation of the next-generation of executive leaders.

In 2021 we established a voluntary Nominating Committee,
comprised mostly of outside directors, to serve as an advisory
body for the Board of Directors. This provides us with a systemfor objective and independent decision-making concerning thenomination of director candidates and the planning of training
for next-generation executive candidates. The Directors also
hold lectures and interviews as part of the next-generation
training curriculum.
As another way to further strengthen our governance,
we also established a voluntary Remuneration Committeein October 2022, comprised mostly of outside directors, toensure fairness, transparency, and objectivity of our director
remuneration decision-making process. We have designed ourremuneration system to reflect nonfinancial KPIs in addition tofinancial ones, to reinforce our commitment to sustainability.
By pursuing the many different actions I have illustrated
here, the IDEC Group will strive to realize the sustainablegrowth for its entire global organization. Going forward,
everyone in our Group will continue working as one, to fulfill
our Purpose of achieving safety, ANSHIN, and well-being forpeople around the world.

CEO Message

Data

Productivity
improvement

P.40

GovernanceMateriality

Increasing investment in human capitalFoundation For Value
Creation

To achieve our long-term vision, we must not only create
economic value through our business activities, but also increasesocial value by reinforcing our commitment to sustainability. As
part of our new long-term vision, we realigned our materiality
and introduced new KPIs that align with our medium-term
management plan. Moving forward, we will work toward
resolving the societal challenges while monitoring our progress.

It goes without saying that we cannot successfully reach our
vision for 2050 without addressing the global challenge ofclimate change. Our environmental strategy is a key pillar of ourbusiness strategy to achieve sustainable growth. Accordingly,
we are seeking to achieve carbon neutrality by 2050, actively
utilizing environmental initiatives as transition opportunities andimplementing strategies that include developing eco-friendly
products, engaging in environmental energy businesses,
and pursuing other activities that contribute to reducing
environmental impact.

Business Strategy

Reinforcing our commitment tosustainability

P.45

Value Creation Story

DX has become a high-priority challenge for us. We areresponding by adopting various systems that can streamline
our operations, and thereby strengthen the foundation of
our business.
In 2022, the digital marketing project we launched in2018 completed its rollout of the common digital platform at
APEM and all other Group offices globally. As this enables
us to provide each customer with personalized and optimal
content, we are now working on creating processes that willlead to acquiring new business opportunities.
In addition, we are continuing with a project initiated in
FY2023 to globally implement two integrated management
systems—one that functions as a platform for enterprise resource
planning (ERP), and another that supports supply chain planning(SCP). These systems will provide integrated management ofvarious business processes and will be interlinked with thedigital marketing platform, sales force automation, and othertools, resulting in greater operational efficiency.

Addressing climate change

Introduction

Streamlining operations through DX

13