PUBLISHED ONDecember 16, 2022 9:38 AM
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"Over the past 10 years, DENSO has allocated a total of approximately 8 trillion yen in research and development and capital expenditures for future investments. DENSO has also been investing in human resources, which can be seen through the large increase of employees worldwide, from 130,000 to 170,000. As a result, the company expects to reach a new record in sales and operating income. On the other hand, as global environmental issues, food shortages, and resource shortages become more serious, we often ask ourselves, "what more can we do to contribute to people's well-being?" said Koji Arima, President, and CEO of DENSO Corporation. "To date, DENSO has been striving to create a 'cycle of well-being' by growing and developing together with everyone in the automotive industry. As part of our efforts to expand this cycle of well-being from mobility to broader society, we have focused on "The Five Flows," which are: Free Movement of People, Flow of Goods, Energy Utilization, Minimization of Resource Requirements, and Flow of Data. DENSO will work to realize a "well-being cycle society" in which happiness can circulate more widely by interconnecting and integrally controlling "The Five Flows." Furthermore, DENSO will make future investments of 10 trillion yen over the next 10 years. As top management, I will seek partners who share our '2035 Vision' while enhancing our ability to achieve it."
Technological Developments towards the World in 2035
To realize a recycling-oriented society that never stops social activities and responds to diverse values and well-being, DENSO will work on "The Five Flows."
Initiatives for the Free Movement of People and the Flow of Goods for Safe and Valuable Mobility
- Free Movement of People
Aiming to eliminate fatalities from traffic accidents, DENSO will expand the scope of support to include everyday driving. DENSO has developed algorithms that support safe driving by integrating not only the vehicle's surroundings, but also the driver's condition, skills, and driving tendencies. This will realize a higher level of safety. In addition, to realize mobility that responds to diverse values, DENSO will develop an electronic platform that updates vehicle functions following the values sought by individuals.
- Flow of Goods
To solve social issues such as driver shortages and increased cargo volumes, DENSO intends to realize a logistics system that combines automated driving and advanced operating systems. The advanced operating system will embark on efforts to eliminate long-hour operations and empty cargo on return trips in trunk routes, and eventually utilize quantum computing to optimize teams, goods, and time in logistics as a whole.
Initiatives for Energy Utilization and Minimization of Resource Requirements for Eco-Friendly Monozukuri
- Energy Utilization
DENSO will build an energy circulation system that combines various types of energy such as electricity, hydrogen, and fuels, aiming to realize carbon neutrality in monozukuri, or the art of making things. In addition, DENSO has started demonstrating this system at its factory and will expand it to other industries and regions.
- Minimization of Resource Requirements
To sustainably manufacture products with limited resources and minimize environmental impacts, DENSO will build an ecosystem for car manufacturing in which car resources are recycled in cooperation with various partners and industries, enabling the collection of discarded products and their reintroduction as recycled products. DENSO will progress with the development of new disassembly methods and materials to achieve low-cost, high-efficiency recycling.
Initiatives to Join Flows Together to Maximize Value
- Flow of Data
We will build a standard data platform that connects supply chains with data and apply it to battery traceability systems for electric vehicles. DENSO will also provide new values by connecting all data generated from "The Five Flows" in the lifecycle of mobility. Furthermore, DENSO will realize a world where new cars are reborn from old cars.
- Strategies for Enhancing Corporate Value
Through the initiatives of Green and Peace of Mind, DENSO will promote sustainability management that leads to solutions to social issues, and work on financial strategies to improve Return on Equity (ROE) to achieve business growth.
Promoting Sustainability Management
- The Progress of Green and Peace of Mind Strategies
DENSO is making steady progress in efforts to maximize the values of Green and Peace of Mind. In order to achieve carbon neutrality by 2035, DENSO has achieved sales of 550 billion yen in the electrification field, and has been improving the cumulative number of inverters produced, and is working to develop technologies to recycle and repurpose CO2. In addition, sales in the advanced driver assistance systems (ADAS) field have reached 320 billion yen, and the introduction of thermal management systems for battery EVs is progressing, accelerating the safety strategy to deliver peace of mind to society.
- Strengthening the Corporate Foundation
DENSO has established various sustainability key performance indicators (KPIs) corresponding to materiality. In addition to establishing KPIs for a thriving, diverse workforce such as the ratio of female managers and the ratio of local human resources among the heads of overseas bases, we have introduced some of these KPIs into the evaluation of executive compensation.
Financial Strategies to Improve ROE
- Growth Strategies that Balance Both Philosophy and Profitability
DENSO will further accelerate the transformation of its business portfolio to eliminate CO2 emissions and eliminate traffic fatalities and increase profitability. While promoting convergence in products for internal combustion engines, DENSO will expand CASE areas and new businesses, aiming for sales of 7 trillion yen in growth areas in 2035. In the electrification sector, DENSO aims to achieve annual production of 19 million inverters in 2030, which will also contribute to the expansion of battery EVs. In addition, for semiconductors that support electrification and ADAS, DENSO will strengthen in-house development and strategic collaboration with competitive partners. Over the next 3 years, DENSO aims to invest 250 billion yen in the semiconductor field.
- Resource Strategies
DENSO will shift its resources to CASE areas, including semiconductors while reducing capital expenditures mainly in mechanical and hardware for products of internal combustion engines. DENSO will also focus on software development, targeting a research and development expenditure of 450 billion yen and a capital expenditure of 350 billion yen by 2025.
- Improvement of Capital Structure and Shareholder Return Policy
With a target of a shareholders' equity ratio of 50% or more, DENSO will improve its capital structure to achieve both efficiency and safety and improve ROE. In 2021, DENSO has raised its dividend standard to a dividend on equity (DOE) of 3.1%, and will continue to improve the level of dividends in a stable manner over the long term with an awareness of the cost of shareholders' equity.
About DENSO
DENSO is a $45.1 billion global mobility supplier that develops advanced technology and components for nearly every vehicle make and model on the road today. With manufacturing at its core, DENSO invests in its 198 facilities to produce electrification system, powertrain system, thermal system, mobility electronics, & advanced devices, to create jobs that directly change how the world moves. The company's 167,000+ employees are paving the way to a mobility future that improves lives, eliminates traffic accidents, and preserves the environment. Globally headquartered in Kariya, Japan, DENSO spent 9.0 percent of its global consolidated sales on research and development in the fiscal year ending March 31, 2022. For more information about global DENSO, visit  www.denso.com/global/en/.
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