Japan’s Omron Looks to New Technologies for Further Growth

TOKYO – Not so long ago, Omron Automotive Electronic Components Co. was little more than a blip on the global auto industry’s radar screen.

But with the mid-1990s opening of two North American plants in Oakville, ON, Canada, and St. Charles, IL, the Japanese manufacturer of sensors, switches and factory automation systems has seen its automotive business more than quadruple.

In an exclusive interview with Ward’s, Yoshinori Suzuki, Omron’s 55-year-old president, estimates sales will reach ¥110 billion ($1.1 billion) this fiscal year ending March 31, up 25% year-over-year and substantially ahead of target.

And five years from now, in what Suzuki says is “a conservative forecast,” annual sales will reach ¥149 billion ($1.5 billion).

Although Omron Automotive, a division of Kyoto-based Omron Corp., still is a relatively small player in a global industry dominated by giants such as Delphi Corp., Robert Bosch GmbH and Denso Corp., the supplier is making steady inroads.

Suzuki, wearing his other hat as Omron Corp.’s managing officer, predicts the automotive division’s share of consolidated sales will expand from about 13% to 15% in the next few years.

“We’re satisfied with our average annual growth of 15% in the past decade, but frankly, it’s created an operational problem since we have not yet been able to consolidate our overseas operations,” he says. “To lay a more solid foundation for a larger company, consolidation is one of the most important things we need to accomplish.”

Nissan Fuga features Omron’s lidar radar.

Currently, 70% of Omron Automotive’s sales are generated overseas, with the Americas, including the U.S., Canada and Brazil, accounting for 40%.

Suzuki says he is determined to integrate the company’s 10 overseas manufacturing subsidiaries in Brazil, Canada, Germany, Italy, the U.S. and U.K., as well as Asia, where car electronics are made in Thailand, South Korea, China and India.

“These subsidiaries operate too independently,” he notes. “By bringing them together and creating a true single company, we will be able to support our global OEM customers better.”

Three main products – electronic control units; radio-frequency components, such as “keyless” entry systems and engine immobilizers; and relays – account for 70% of Omron’s automotive business. Power-window and power-seat switches represent 18% of sales.

Ballooning demand for electronic power-steering systems is expected to boost the company’s ECU business. “In the next five years, 30% of our steering-system sales will probably be electronic,” Suzuki says.

The company supplies more than 60% of steering-system ECUs to NSK Ltd., a leading Japanese steering-system manufacturer.

Omron Automotive is the sole supplier of power-seat switches for General Motors Corp and Ford Motor Co., while also sourcing nearly all of Mitsubishi Motors Corp.’s needs and about half those of Honda Motor Co. Ltd. Ford counts on Omron for one-third of its power-window switches for its European and North American models.

But Omron is not immune to feeling the heat from competition. Suzuki says Honda, which currently sources an estimated 75% of power-window switches from Omron, has begun a migration to “smart” keyless entry systems (which include a push-button start mechanism), supplied by Matsushita Electric Industrial Co. Ltd. It remains to be seen whether Mitsubishi will follow Honda’s lead.

Suzuki gives no indication of where Omron might be able to pick up the slack in keyless-entry systems, but is bullish about an expanding lineup of sensor-related systems and technologies.

Nissan Motor Co. Ltd. and Fuji Heavy Industries Ltd. already have adopted Omron’s light-detection and ranging (lidar) radar on such models as the Nissan Fuga and Skyline, Infiniti M35 and M45 and Subaru Legacy.

The system incorporates three functions: adaptive cruise control; low-speed following or “tracking”; and pre-crash sensing. However, the technology is expensive, and so far, limited to high-end vehicles.

Omron competes with Denso to supply Toyota Motor Corp. with lidar units for installation in such models as the Sequoia, Avalon and Sienna. For most Lexus models, Omron provides millimeter-wave radar.

However, Suzuki emphasizes Omron’s lidar technology has a wider range than millimeter wave and can support the “low-speed-following” systems introduced by Nissan. In addition, lidar cost less than half of what millimeter-wave radar does, he says.

Omron’s lidar sales are expected to exceed 60,000 units in the current fiscal year, with 90% allocated to Nissan. Suzuki says Nissan is planning significant expansion of lidar technology in its upscale vehicles, possibly doubling its requirements in the next five years.

“Although we don’t know if and to what extent Nissan plans to make lidar a standard feature, it is pushing us to lower costs,” he says, adding the U.S. Big Three and Germany’s leading auto makers also have shown interest in the technology.

Suzuki estimates total lidar radar sales will reach 150,000 units in fiscal 2012.

Nissan also is a major customer for Omron’s intelligent cruise control, now installed in 15 domestic and export models, including the President, Skyline and Fuga in Japan.

Although Nissan currently purchases Valeo SA’s lane-departure warning system for the Cima (sold outside Japan as the Infiniti Q45 until 2006), Omron hopes to offer a similar system in a few years based on its new High Dynamic Range complementary metal-oxide semiconductor camera.

The camera produces digital images throughout a broad range of light levels, including near-infrared and, according to Omron, can detect light levels at a range nearly triple that of conventional charge-coupled device cameras.

Ironically, Omron just now is beginning to venture into the automotive market with its specialty: sensors.

One example of things to come: drawing on vision sensing, another of its advanced technologies, Omron displayed a sleep-detection warning system at the 2007 Tokyo auto show that is slated to hit the market in 2011.