Presentation Q&A

Q: The Q1 operating income for 2017F accounts for only 38% of the forecast. Does this progress represent a delay in achieving the company's plans?

A: We do not create quarterly income/loss plans. The 2017F Q1 figure represents no significant impact on the plans because we had expected Chinese smartphones to make adjustments during the quarter. The product mix negatively affects the Q1 operating income compared with 2016F Q1. We see it only as a temporary effect because the figure was significantly affected by reduced sales of RF components for Chinese smartphones. Fixed costs did not increase significantly compared with our plan.

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A: In Q1, the utilization of entire company achieved 95% based on 20 operating days. In Q2 we expect to achieve 105% of that capacity. MLCCs used 100% based on 27 operating days in Q1. In Q2 they will also likely achieve 100%. Production reached 285 billion yen in Q1. In Q2, we expect to achieve the same production value as net sales.

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A: Compared with 2016F Q1, we achieved strong order intake in applications other than smartphones, such as automobiles, AV equipment, and PCs. We are also seeing distributors placing orders with longer lead times than usual in part of order. In addition, we have been receiving smartphone orders in the run-up to the demand peak in summer and the following months. In July we will likely achieve the highest sales ever for the seventh month of the year.

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A: We will ask customers to accept price revisions for less profitable products. These measures will, however, have a limited impact on our performance forecasts for this fiscal year.

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A: We are aware that the current order backlog includes some longer-lead-time orders from certain distributors. We see that that portion needs to be analyzed closely.

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A: We initially anticipated that Chinese smartphones would complete their adjustments in 2017F Q1 and increase demand rapidly in Q2 and after. In actuality, however, the demand growth will likely come in Q3 or after, because some of our customers are reducing production in an effort to understand the trend for new autumn models. Despite changes at individual customers, the overall production plans of the Chinese smartphone industry have not changed significantly since April. Components for in-vehicle use see the electrification trend continue. We believe they are performing well.

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A: For RF modules, we are striving to win back a substantial market share. MetroCircTM is now being promoted mainly to specific customers, but we want to achieve a broader customer base in the future.

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This Q&A contains forward-looking statements concerning Murata Manufacturing Co., Ltd. and its group companies' projections, plans, policies, strategies, schedules, and decisions. These forward-looking statements are not historical facts; rather, they represent the assumptions of the Murata Group (the "Group") based on information currently available and certain assumptions we deem as reasonable. Actual results may differ materially from expectations due to various risks and uncertainties. Readers are therefore requested not to rely on these forward-looking statements as the sole basis for evaluating the Group. The Company has no obligation to revise any of the forward-looking statements as a result of new information, future events or otherwise.

Risks and uncertainties that may affect actual results include, but are not limited to, the following:

1.economic conditions of the Company's business environment, and trends, supply-demand balance, and price fluctuations in the markets for electronic devices and components
2.price fluctuations and insufficient supply of raw materials
3.exchange rate fluctuations
4.the Group's ability to provide a stable supply of new products that are compatible with the rapid technical innovation of the electronic components market and to continue to design and develop products and services that satisfy customers
5.changes in the market value of the Group's financial assets
6.drastic legal, political, and social changes in the Group's business environment; and
7.other uncertainties and contingencies.

The Company undertakes no obligation to publicly update any forward-looking statements included in this Q&A.