[Company analysis] Keyence Corporation (キーエンス)

「Keyence Corporation (キーエンス)」develops and manufactures various kind of equipment such as automatic control equipment(PLC and peripheral equipment), measuring equipment, information equipment, optical microscopes, electron microscopes, etc. This company conducts their business through 210 locations in 46 countries all over the world, and the overseas sales account more than 50%. As a Japanese leading company,「Keyence」is listed on Topix 30. But it is not well known by the general consumers, because it is concentrated in B2B business. Besides, this company has the highest annual salary level in Japan. The number of consolidated employees is approximately 7,941.

 

1. Company Profile

2. Summary and Features

3. Major Business

4. Financial Information

 

 

 

1. Company Profile

 

※Unit is JPY million, as of 2019

Company name	Keyence Corporation
Company name (Japanese)	キーエンス
Date of establishment	Monday, May 27, 1974
Headquarters location	〒533-8555 大阪府大阪市東淀川区東中島一丁目3番14号
Capital	30,637
Consolidated sales	587,095
Consolidated operating profit	317,868
Consolidated total assets	1,682,357
Consolidated capital	1,588,309
Capital adequacy ratio	94.4%
Consolidated number of employees	7,941

 

 

 

2. Summary and Features

 
This company was founded in Hyogo Prefecture in 1974, under the name of「Reed Denki(リード電機)」. In 1986, the company name was changed to current「Keyence」. It is specialized in the non-contact sensor division, and mainly manufacture high-value-added precision machine parts such as sensors essential for Factory Automation. 「OMRON corporation」and「SUNX」that manufacture sensor parts, are the competitor of「Keyence」.

Although it is classified as "manufacturer", but actually,「Keyence」does not manufacture anything. On the contrary, they only send related documental materials to its 100% subsidiary「Keyence Engineering」and have them fabricate necessary products. In other words, this company does not own factory directly, so there is no danger of inventory cost. In addtion, this company operates with "Zerodebt management", so they procure operating capital without borrowing from external source. In addition, this company holds one-third of their total assets in cash, which means they have very stable financial structure.

 

 

One of the strengths of「Keyence」is, its planning and development capabilities, which create many products in a short period of time. They have launched new products to the market in a cycle of about 1 to 3 years. Nevertheless, about 70% of the new products are the world's first or industry's first products. However, they minimize the patent applications, compared with their competitors.

It is a general strategy of the manufacturing industry to disclose the core technology to the world by applying for a patent for the developed product and acquire exclusive sales rights to increase sales. However,「Keyence」does not intentionally apply for a patent. Instead, they choose to leave the core technology undisclosed, and holding technological advantages, they continues to move to new product development, expecting further profits. This is a possible strategy because they have very strong product development capabilities.

Moreover, when a new product is released, it is common to expand the production lineup. However,「Keyence」, on the contrary, does not expand the lineup, but keep single form of product, in order to reduce production costs. The result of this approach is the overwhelmingly high operating profit margin.「Keyence」usually acheives an operating profit margin of almost 50% every year. Considering that the average profit margin of a Japanese manufacturing company is about 4%, they have a extremely high level.

This is possible because their "Sales power" is extremely strong in addition to the above "Development capabilities", "Cost reduction efforts", and "Product competitiveness". Normally, sales person of「Keyence」not only sell products, but also carry out “Direct consulting sales” that are close to customers. As a result, they have a sales policy that is clearly different from other companies.

At the same time,「Keyence」is also known as a thorough performance-based company. If the grade is good, any employee can get a promotion and get a huge bonus regardless of the seniority. But if the grade is bad, any employee will be forced to leave the company. Nonetheless,「Keyence」alway procures the high-leveled human resources in the industry, because they offer the high-leveled working condition and salary. For example, the average annual income of「Keyence」is 20.88 million yen on a 2019 basis, which is higher than Samsung's average annual income of 119 million won, even Google's average annual income of $ 161,254.

Another interesting point is, this company assigns the most talented working forces to the purchasing department. In other words, through the most talented people, they are controlling the supply price of raw materials to the limit.  And based on this, they could achieved an amazingly high operating profit margin. In addition, they are also actively expanding its business to overseas, by starting American subsidiary in 1985. And recent five years, it is growing  extremely fast pace.

 

 

 

3. Major Business

 

■ Development and production of FA equipment and parts

 

 

 

4. Financial information

 

※Unit is JPY million

		2016	2017	2018
Consolidated sales		316,347	526,847	587,095
Consolidated operating profit		169,750	292,890	317,868
Consolidated total assets		1,250,591	1,486,222	1,682,357
Consolidated net assets		1,184,552	1,381,057	1,588,309
Breakdown of sales	Japan domestic business	161,043	246,259	275,117
	Oversea business	155,303	280,587	311,978