Kyocera Philosophy Management Rationale User Guide

Kyocera Philosophy Management Rationale

Product Information

Specifications

• Brand: Kyocera
• Management Rationale: Focus on value creation, corporate governance, and financial stability
• Philosophy: Guided by the Kyocera Philosophy emphasizing ethical conduct, goal-oriented attitude, and decision-making principles
• Systems: Utilizes two systems to achieve management goals -amoeba management and accounting principles

Product Usage Instructions

• Management Rationale
  The Management Rationale focuses on creating value at Kyocera through strategic management approaches and a strong corporate foundation. It emphasizes corporate governance and financial stability.

• Kyocera Philosophy
  The Kyocera Philosophy outlines the code of conduct, attitude, and principles necessary for achieving the company’s goals. It serves as a compass for decision-making and leadership.

• Systems
  Utilize the two systems – amoeba management and accounting principles – to guide business activities towards meeting customer and societal needs while ensuring growth and contribution to society.

“To provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind”
Based on our Management Rationale as well as the Kyocera Philosophy, all group employees pursue business activities that satisfy the needs of customers and society. The Kyocera Group’s management approach springs from the Management Rationale propounded by our founder, Kazuo Inamori. Employees are urged to keep the essence of this statement in mind while taking on new challenges to develop products and services that serve the emerging needs of our customers and society.

The Kyocera Philosophy Shared by Employees

As a guideline for achieving our Management Rationale, we share with all employees our “Kyocera Philosophy,” which encompasses:

• The code of conduct that constitutes the company’s standards.
• The attitude necessary for the company to achieve its goals and objectives.
• Principles that can help create a wonderful corporate character.
• A compass for decision-making, work and leadership as human beings.

With these four elements, the Kyocera Philosophy outlines a management approach that strives for growth and development in a manner that is fair and ethical based on actual experiences and “rules of thumb” developed by our founder, Kazuo Inamori. The essential concepts behind this philosophy will never waver, regardless of the passage of time. At Kyocera group, we regard our company philosophy with a sense of pride, and work to put its principles into practice on a daily basis. We act on the concept of harmonious coexistence with society, the global community, and nature to make what we consider to be the right choices as human beings. This makes sustainability the foundation of our Philosophy.
Two Systems to Achieve Our Management Rationale

The unique Amoeba Management System employed by the Kyocera Group organizes the company into small units called “Amoebas” that operate with their own P&L accounting systems linked directly to their respective markets.
The profitability of an Amoeba is calculated as the added value it creates. The Results are disclosed to Amoeba members transparently, so they can actually see in real time how their work is reflected in the company’s results. The added value created contributes to the entire Kyocera Group based on the idea of “Doing Our Best for Our Colleagues,” which is included in the Kyocera Philosophy. The source of our strength lies in our management structure, which seeks participation by all employees (“Management by All”) and enhanced employee motivation. Meanwhile, the Kyocera Management and Accounting Principles are integral to management, playing a role akin to a compass. They consist of seven accounting principles developed by Kazuo Inamori to determine the true operational status of each amoeba and the amoeba’s best strategic options at any moment.

Management by All
Since its foundation, Kyocera Corporation has pursued the concept of Management by All, empowering diverse staff to take the initiative in playing active roles in our success. Under the unique Amoeba Management, individual employees are involved in all phases of decision-making, allowing them to experience greater fulfilment and achievement in their work, and build stronger teams with the goal of pursuing a better future for society. We also work on new measures to promote employee engagement. One of these is ?the Venture Startup Program at our domestic operations, created to cultivate a corporate climate that encourages individual employees to take on new challenges and develop a management mindset, all with the goal of promoting bottom-up innovation. We seek to promote diversity and inclusion to develop workplaces where everyone can maximize their true abilities. All our employees should be able to shine in their own unique ways, and benefit from the diverse experience of others. This rich work environment provides the basis for Kyocera’s Management by All.

The global population is about 8 billion. Some say that we have already exceeded the earth’s capacity. It is predicted that the population will continue to increase until the middle of the century when it will exceed 10 billion. This will require an increase in food production, energy, and many other items necessary for our daily life to support 2 billion more people.
In the past 100 years, rapid population growth led to great increases in the production of food and industrial products. As a result, the global environment has been affected significantly by problems such as global warming and the loss of biodiversity. If we continue increasing production by existing methods, regardless of industry, the environment that sustains us will be irreparably damaged. The Kyocera group considers finding solutions that enable increased production without damaging the global environment to be the biggest challenge confronting humankind if we hope to continue living in prosperity and security.

Living Together.

To coexist harmoniously with our society, our global community and nature. Harmonious coexistence is the underlying foundation of all our business activities as we work to create a world of prosperity and peace. The Kyocera Group conducts business based on the concept of coexistence, which is also our basic philosophy regarding the group’s sustainability activities.

Current State of the Earth Seen through the Framework of Planetary Boundaries

The planetary boundaries concept defines the limits within which people can continue to live safely and presents thresholds that should not be exceeded. Based on this concept, experts have been validating the degree to which natural capital is damaged in nine planetary boundaries. Boundaries of Climate Change and Land-system Change, which show the size of forests, are deemed to have exceeded the threshold. Meanwhile, Freshwater Use, the excessive amounts of phosphorous and nitrogen significantly impacting agriculture and fisheries (Biogeochemical Flows), Novel Entities that show pollution from plastics and synthetic com-pounds, and Extinction Rates (Biosphere Integrity) are all deemed to have been irreparably damaged. Based on the planetary boundaries concept, and in alignment with our philosophy, the Kyocera Group works to preserve natural capital by taking new actions for sustainable growth that address societal needs. By creating new technologies to supplement those that Kyocera has accumulated, we continue engaging in business activities that take the global environment into consideration.

Creating New Markets with Cutting-edge Technologies and Products

The history of Kyocera began with the launch of the U-shaped Kelcima, an insulating part for television electron guns, in 1959. Ever since then, Kyocera has succeeded in the development of various products by applying its fine ceramic technologies and is still exploring new markets. We will continue to expand into new businesses by leveraging our capabilities through internal synergy and collaborating with external partners.

The Kyocera Group will develop businesses that contribute to solving societal issues and evolve our Amoeba management to keep pace with these changes and realize our vision.
Since its founding, the Kyocera Group has expanded its business and supported social development through our Management Rationale: To provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts,  contribute to the advancement of society and humankind. Our management will remain rooted in this Kyocera Philosophy, which has inspired our corporate culture for over 60 years. Today, we find ourselves in a time of great change, with rapidly evolving social and industrial structures. We are required to adapt to changes in society and industrial structure brought about by the evolution of digitalization and AI, and we must create new businesses that address societal and environmental needs. Against this background, we announced our medium-term management plan in May 2023. To accelerate our growth and achieve our goals, we will improve our business not only in traditional metrics but also by applying Kyocera’s unique Amoeba Management system in response to changing markets. In the process, we will implement new capital strategies and sustainable practices to strengthen our management, and foundation, and expand businesses that contribute to fulfilling societal needs.

Looking back from the time I became president to today

Promoting intra-company collaboration and participation by new employees to reinforce a culture of creating value
After assuming the post of president in 2017, I noticed that “walls” between departments had become greater as the company expanded, creating obstacles to further growth. One of Kyocera’s major strengths is its diverse business operations. Although each department has unique technologies and skills to create new value, I felt that the culture of collaboration to create new things was being lost. This led us to establish Kyocera Minatomirai Research Center to promote cross-divisional collaboration, reform our R&D departments, and revitalize internal communication. Next, we reorganized our diverse business portfolio into three core segments, stimulating deeper interaction beyond each segment’s internal departments, and developing a stronger base for creating new value together. Fac-tories have gradually added automation, and the production of storage batteries at the Yasu Factory in Shiga is now completely automated. Issues we encountered at the beginning have been resolved through functional improvement, demonstrating the value of automated production at other factories. This success was made possible by newer employees participating in design and development. The challenging nature of their work made them highly motivated and goal-oriented, which I believe is the key to ensuring job satisfaction. I will strive to continue building structures that encourage the active engagement of newer employees in meaningful work.

Societal challenges including our environment

From ensuring a more comfortable workplace to reducing greenhouse gas emissions, digitalization and AI can help address societal needs
The most serious issues affecting our business include the declining birthrate and aging population, which are already constraining labor resources. As a countermeasure, we must improve productivity through digitalisation in factories and indirect departments. Regarding generative AI, which is rapidly advancing, we are assessing both practicality and safety in anticipation of implementing it at Kyocera. Further, we plan to make improvements in the work environment to better accommodate a diverse range of employees and create a better gender balance, especially in the manufacturing sector.
Reducing greenhouse gas (hereafter, “GHG”) emissions is a top priority requiring greater use of renewable energy and higher-efficiency equipment. Progress has been made with solar power generation systems to secure our power supply and address the rising cost of electricity, but more work is needed. Ceramics manu-facturing is power-intensive and emits significant GHG. We are therefore implementing aggressive efficiency measures to reduce manufacturing times and increase furnace productivity. Our GHG reduction program will stand on the three pillars of rising renewable energy use, installing new equipment with the highest power efficiency, and improving our manufacturing productivity.
Another example of our group’s efforts to address social needs with unique products and services is our FOREARTH inkjet textile printer, which was announced in Japan and Italy this year. Conventional textile printing requires tremendous volumes of water in washing and dyeing processes, leading to serious river and soil pollution. FOR EARTH resolves this issue with innovative technology for water-free textile printing. In addition, FOR EARTH overcomes the long-standing inability of conventional equipment to print fabric economically in small quantities, which can help end the practice of producing huge fabric and garment inventories that become waste as fashion changes.
Regarding renewable energy, we are not only adopting it internally but also promoting the trend toward net-Zero Energy Housing (ZEH) in apartment complexes by combining our power storage batteries with solar electric generating systems. Our components businesses are also focused on this initiative through high-efficiency energy-saving lighting devices now under development using our proprietary laser device technology.
To bring value to society, we must continue developing products that can help solve environmental and social challenges. Some have suggested that we withdraw from the solar energy business if it is not sufficiently profitable. However, we have continued this business because it addresses a societal need. I believe we must continue businesses that contribute solutions to social challenges. This is one of the key ideals built into Kyocera by our founder, Kazuo Inamori.

Toward achieving the medium-term management plan

Sharing our commitment to growth: announcing the plan’s strategic focus on semiconductor and electronic components
In our medium-term management plan, we set a goal of achieving 2.5 trillion yen in annual sales revenue, with 14% pre-tax profit ratio, and 7% return on equity (ROE) by the fiscal year ending March 2026. Further, by the fiscal year ending March 2029, we are targeting sales of 3 trillion yen, pre-tax profit of 20%, and ROE of 10% or more.
Earlier in my career, Kyocera experienced a long period of rapid expansion; however, after 2000, our growth slowed down. I experienced both eras and in comparison, I feel that Kyocera’s earlier vitality was greater. Consequently, we decided that re-energizing the company would call for us to target a new stage of growth, so we set a lofty goal of 3 trillion yen in annual sales. The medium-term management plan represents our desire to steadily move forward in achieving this. In fact, we felt it would be better to share our commitment not only within the company but also with external stakeholders, to create a greater sense of urgency, so we announced our targets publicly. The announcement was received very favourably by our stakeholders, who have found our strategies and directions easy to understand, and employees have seen it as an exciting plan as well. We expect strong growth in the parts-related business, especially in the Core Components segment’s semicon-ductor-related products. This market is poised to expand in the near future as mass production of 3-nanometer semiconductors begins in 2023. We will make aggressive upfront investments, allocating nearly half of our plan’s total capital investment to semiconductor-relat-ed parts. In addition, we will build a new factory in Isa-haya City, Nagasaki Prefecture, to open in fiscal 2027, and will accelerate other initiatives such as building new production systems and introducing new equip-ment to manufacture cutting-edge products.
In the Electronic Components segment, Kyocera made U.S.-based KYOCERA AVX Components Corporation (hereinafter, “KYOCERA AVX”) a wholly-owned subsidiary two years ago. This was done to promote growth by integrating Japan-based electronic components headquarters, which is strong in Japan and Asia, and KYOC-ERA AVX, which is strong in the U.S. and Europe. Currently, KYOCERA AVX is responsible for all sales in Europe and the U.S. and will expand into Asia starting in 2023. The two groups are collaborating in manufacturing and devel- opment, and are moving toward full integration by establishing sub-segments together in multilayer ceramic capacitors (hereafter, “MLCCs”), connectors, and R&D. Kyocera’s advanced technology in miniaturized products, like crystal components and MEMS oscillators, will be further commercialized. KYOCERA AVX is very strong in tantalum capacitors, and it will develop continuously. By combining our strengths, we will make this segment a pillar for growth.
In the Solutions segment, we plan to continue developing businesses that can help resolve societal challenges. We are continuing the solar cell business which offers significant social value. To ensure a flexible response to evolving demands in Japan’s energy market, we will sell renewable electricity in addition to solar cells.
Our Communications unit will stop targeting smartphones for the consumer market and will focus instead on providing rugged mobile solutions for enterprise and professional users. These decisions were based on annual assessments of business performance. Underperforming segments are tasked to re-define their business mission as part of the “selection and concentration” process of deciding whether to continue or withdraw from businesses. Although Solutions sales revenue certainly grew in the past two years, profits have not met expectations. We will continue to pursue the approaches specified by the medium-term management plan to expand profits and improve both ROE and price- to-book ratio (PBR).

To strengthen management and achieve our vision

Reinforcing a culture of openness and employee engagement by maximizing the unique strengths of Amoeba Management
The term “material” in the Kyocera Management Rationale is generally understood as “compensation.” The term “intellectual,” however, is harder to define. To ensure a fulfilling workplace, I believe we must continually optimize growth opportunities for everyone and maintain a culture of openness where all employees can feel comfortable and secure. To facilitate this, we began conducting evaluations of supervisors by their employees in Japan operations during FY 2024. We also conduct annual workplace vibrancy surveys to monitor the changes over time. Because employee satisfaction with the work environment is not always immediately evident, we must continually seek better ways of measuring our success. We need performance indicators for other social and en-vironmental activities as well and are currently considering systems to do this.
One of the functions of Kyocera’s unique Amoeba management system is to cultivate a “managerial mindset” among all employees, which is suitable for small groups of about 10 members. In the past, when Kyocera was smaller, managing the profit-and-loss status of an Amoeba was simpler. Today, some individual departments sell billions of yen per month, and the size of many Amoebas has expanded, which creates challenges for the existing profit management system.
At the same time, the technologies we work with today have become so advanced that it is often no longer possible for a single engineer to complete a task alone. A team-based approach is more important than ever to solve problems. This will require us to evolve our systems, including Amoeba Management indicators, according to the scale of our business.
The image of a leader leading a team has also changed. The top-down style of directing a project by giving orders is obsolete. We need leaders who pull teams together and bring out everyone’s strengths. While this involves trial and error, we are working through the process to not only grow our business but also win employees’ hearts and minds.

Approaches to Governance

Enhancing Sustainability Through Corporate Governance and Risk Management
Chairman Goro Yamaguchi is leading an effort to enhance the effectiveness of the Board of Directors. Following the election of Directors at the 69th General Meeting of Shareholders, two of our three Outside Directors now bring chief executive experience from other companies. Outside Directors with top executive perspectives strengthen discussion of business operations and targets, making Board meetings more productive. Of course, opinions from directors with other backgrounds, such as law, are also valuable, and we will continue to seek diverse viewpoints. As part of our policy to enhance gender balance on the executive team, we elected one female Outside Director, and two female Executive Officers.
We have implemented a variety of new risk management initiatives since FY 2023 and are now discussing whether to maintain the current framework or expand it. Rising digitalization and globalization are increasing risk exposure on multiple fronts, including cyberattacks. Which was perpetrated on KYOCERA AVX in 2023. To prevent recurrence, we are continuously investigating the risk landscape and strengthening security with new countermeasures. At the same time, we are assessing the rising risk from climate change, which causes unprecedented weather events and local natural disasters. We are reinforcing our initiatives aggressively in recognition of these risks.

To our stakeholders

Accelerating growth by developing new businesses that address societal needs
To achieve the medium-term plan, the Kyocera Group will fund aggressive capital investment and R&D focused on high-growth markets. We will strive to create innovative new products and services in collaboration with stakeholders to address the most urgent needs confronting society. In addition to expanding our business, we believe solving problems in the world around us can also fuel employee engagement. Higher growth rates require us to expand our businesses and improve our Amoeba Management system. By enhancing the unique features of Amoeba Management, we can raise employee satisfaction and fulfillment. We will also prioritize communication with stakeholders and timely transparent disclosure of corporate information to the public. The Kyocera Group’s target of 3 trillion yen in annual sales through our medium-term management plan represents a natural extension of our Management Rationale: “To provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind.” Please look forward to our achievement of these goals. We appreciate your continued support.  Amoeba Management, which embodies the Kyocera Philosophy, enables quicker response to demand trends and changing market conditions, thus allowing flexible adjustment to the organizational structure. As we live in a world of growing uncertainties, we will strive to flexibly respond to environmental changes like amoeba, and continue to deliver leading-edge products and create new values.

Awareness of the External Environment

• Digitalization/globalization
• Shift from “selling products” to “selling services and solutions”
• Diversification of customer needs
• Greater awareness of the environment

Realization of our Management Rationale
To provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind.

Value Creation with Amoeba Management

Document Solutions
Kyocera’s Document Solutions business has expanded both through M&A and by integrating internally developed technologies. In 1982, we obtained a printer business through M&A from an information equipment manufacturer, and in 2000, we obtained a multifunction peripheral (MFP) business by acquiring the former Mita Corp. (now Kyocera Document Solutions, Inc.) as a wholly owned subsidiary. Initially, the printer business faced challenges in developing high-speed printing technology, while the MFP business was challenged in adopting full-colour imaging and digitization. By integrating their respective technologies, we succeeded in overcoming both major challenges. Later, by combining Kyocera’s image-processing and paper-feed technologies with our deep expertise in functional devices, Kyocera introduced commercial-grade inkjet printers in 2019. In response to environmental issues, Kyocera created new value by developing an inkjet textile printer in 2023 that integrates printhead technologies developed by our Printing Devices Division with ink and device technologies from Kyocera Document Solutions. This innovative solution reduces water require-ments in textile printing to virtually zero, making print location independent of water supply; and, its highly compact design fills only a small fraction of the floor space needed by conventional equipment. Best of all, Kyocera’s technology overcomes a traditional barrier of conventional printing by making even small-quantity print runs economically feasible, solving the long-standing problem of waste in textile production by eliminating the need for large inventories that often become unsold scraps as fashions change.

5G millimeter-wave technology
As 5G services expand worldwide, millimeter-wave tech-nology is attracting new attention in the push for higher network speeds and capacity. Leveraging a diverse IP port-folio accumulated through decades in the communications industry, Kyocera is conducting research and development on millimeter-wave devices, including refraction boards, reflectors, and customer-premises equipment (CPE) as we accelerate our approaches to realize more a convenient and comfortable communication environment.

FIR camera
“FIR camera” have an important role in road-traffic coop-erating systems. It captures the “heat” emitted by objects, can image cars and pedestrians even under conditions such as bad weather or at night. Kyocera is developing the FIR camera with Adasky, a joint venture company based in Israel of which Kyocera is also an investor. We are also developing the technology for automotive applications usage.

Automotive Camera Module
Applying optical design expertise accumulated through its former camera unit to new automotive camera applications, Kyocera is conducting research and development on imaging technologies with software that performs highly reliable human- and vehicle-recognition functions. We see strong potential for this business as ADAS systems expand, with excellent potential to improve traffic safety.

High-efficiency GaN Laser
Gallium nitride (hereafter, GaN) has attracted attention as a promising material in the quest to achieve carbon neu-trality. Kyocera acquired 100% ownership of U.S.-based Soraa Laser Diode, Inc., which manufactures high-effi- ciency, high-output lasers, and brought it into the group as KYOCERA SLD Laser, Inc. (KSLD). By combining KSLD’ s technologies with in-vehicle modules from KYOCERA AVX Components Corporation (which acquired the former AB Elektronik), Kyocera is developing next-generation EV la-ser modules, including smart headlights. GaN lasers have become very useful in creating new products for a wide range of other markets as well.

Special Issue

*FOR EARTH inkjet textile printer solves environmental problems by integrating technologies of diverse Amoebas**

The textile and apparel industries make significant environmental impact through large volumes of wastewater and material waste. To solve these longstanding problems, Kyocera developed the innovative FOREARTH inkjet textile printer by integrating the unique core technologies of several diverse Amoebas. Over many years of development, Kyocera acquired deep expertise in inkjet technology for commercial- and industrial-scale printing. Our inkjet printheads were developed using unique fine ceramic technologies that enable superior image quality, instant response time, and extreme durability in high- speed digital “on-demand” printing. Combining these technologies with advanced ink development, machine design and equipment control technologies from Kyocera Document Solutions, we established a water-free concept that can solve environmental issues in the textile and apparel industries. Kyocera’s technology also overcomes quality issues in conventional textile printing, which can’t deliver consistent results on a wide range of textiles. In addition, by eliminating pre- and post-print processes, our technology dramatically reduces equipment size, expanding potential location and installation options. At the same time, Kyocera’s digital on-demand printing can produce small lots economically with very quick delivery times, greatly reducing the risk of overstocked apparel, mass disposal, and GHG emissions.

FOREARTH’s “Triple-Free” Concept
FOR EARTH delivers new value, providing solutions to societal issues and enabling high-quality printing.

• Water-Free Concept
  Reduces water use in textile printing to near-zero

• Creative Freedom
  Achieves both soft texture and high durability on a wide variety of fabrics

• Location Freedom
  Reduces distribution costs and over-stock waste through expanded location options and on-demand printing

• FOREARTH is a registered trademark of Kyocera Corporation.

Future Market Development
Kyocera introduced FOREARTH in Milano, Italy, at ITMA 2023, the world’s leading exhibition for cutting-edge textile and garment technologies. FOR EARTH attracted widespread attention due to its sustainable concept and high- quality, soft-texture printing on a wide range of fabrics. Kyocera will begin pre-sales of the printer in autumn 2023. The textile printing industry is currently dominated by traditional dyeing methods. However, global demand to reduce environmental impact is expected to lead an industry-wide shift to sustainable pigment inks and digital textile printing. Kyocera will continue developing new solutions based on the FOREARTH concept to reduce the environmental footprint of the textile and apparel industries worldwide.

Addressing Priorities (Materiality)

The Kyocera Group continually assesses social conditions, global trends, and stakeholder concerns for discussion with our Sustainability Committee. Priorities are addressed at semiannual International Management Meetings, which are attended by the leaders of our global operations. Issues of materiality identified through this process are reported to the Board of Directors.

FAQ

What is the main focus of Kyocera’s management approach?
The main focus is on value creation, ethical conduct, and contributing to society through strategic management practices.

How does Kyocera’s philosophy guide employees?
The Kyocera Philosophy guides employees by setting standards for conduct, fostering the right attitude, and providing principles for decision-making and leadership.

What are the two systems used by Kyocera for achieving management goals?
Kyocera utilizes amoeba management and accounting principles as two systems to achieve its management goals of growth and societal contribution.

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