Industrial automation company, Keyence, has jumped 17 per cent this year to become Japan’s second-largest company by market value. The company, which manufactures machine vision systems and sensors for factories recently received a valuation of almost ¥11 trillion.
Keyence has succeeded telecommunications firms SoftBank Group Corp., and NTT Docomo Inc., to the position they have competed for with one another for more than a decade, one behind Toyota Motor Corp.
Keyence builds profits as well as it builds robots
Keyence operates a ‘fabless’ output model whereby the production of its goods, such as pressure sensors, barcode readers and laser scanners, are all outsourced. This allows the company to avoid high capital costs which in turn increases its profitability. Keyence currently boasts the highest profit margin in the country, coming in at more than 50 per cent
The company provides its growing global client base with custom-made solutions through its industry-leading sales system, and is often touted as being the nation’s highest-paying company. The jump in its shares has also pushed founder Takemitsu Takizaki into the position of second-richest man in Japan, taking the place of SoftBank’s Masayoshi Son.
According to Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co, Keyence has “got everything — high growth, high dividends and a high operating margin.”
In light of the coronavirus pandemic, more and more investors have been favouring investments in companies that eliminate humans from the process
Automation is on the rise
Japan’s parts and robot manufacturers have been becoming increasingly important in the stock market, based on the weighting of companies included in Japan’s benchmark Topix index. Keyence has seen its market value more than treble since the beginning of 2016.
In light of the coronavirus pandemic, more and more investors have been favouring investments in companies that eliminate humans from the process. This is a trend Keyence directly benefits from, with both its fabless production model, and the fact that it enables companies to automate their own production.
Intelligent business model
As automation expands to factories and businesses worldwide, companies like Keyence – with its intelligent business model – will continue to thrive.
In a May report, HSBC analysts including Helen Fang wrote that they “like Keyence as it outsources production instead of owning factories, allowing it to focus on R&D. It also uses a direct-sales model that keeps it close to clients. This strategy means it can better capture market share in a widening array of industries and can focus on high-value client solutions.”
What do you think of the rise in automation around the world? Do you welcome it, or are you wary of it? Let us know your thoughts in the comments.
"Otsumami" - a bite size snack:
The rise of automation is causing a shift in market-leading companies in Japan.