During the first half of the consolidated fiscal year under review, sovereign risks in Europe finally began to have repercussions for the financial sectors of Western countries. Coupled with signs of a slowdown in economic growth in emerging economies, particularly in China, which had been steadily supporting global economic growth, the overall economic situation has been deteriorating.
In Japan, business confidence improved compared with that immediately after the Great East Japan Earthquake, reflecting a recovery in the supply chain, an increase in production, and special demand from reconstruction efforts in affected areas. However, given problems in the supply chain due to serious flooding in Thailand, concerns over a slowdown in external demand, and the extreme and persistent strength of the yen among other factors, the outlook for the Japanese economy was increasingly uncertain.
In the vehicle market, the market for semiconductor manufacturing and inspection systems, and the cellular phone market, all key markets for the Group, while emerging economies still offered strong prospects for further growth, the chance of a slowdown in global demand was rising, given the effects of the uncertainties emerging from Europe.
In this environment, the Yokowo Group focused on strengthening its ability to deal with orders in the vehicle communication equipment business, which rapidly recovered after the sharp drop in the wake of the Great East Japan Earthquake. It also sought to bolster overseas sales in the circuit testing connectors business and the fine connectors business. Aiming to boost sales of the vehicle communication equipment business, mainly in emerging markets, in July 2011, the Group established a production subsidiary in Vietnam, and started construction. The plant is expected to start full operations in August 2012.
As a result of these developments, consolidated net sales for the first half of the fiscal year fell 7.1% year on year, to ¥13,197 million. This chiefly reflected a significant decline in sales in the vehicle communication equipment business due to the effects of the Great East Japan Earthquake, offsetting a rise in sales in the wireless communication equipment business. Consolidated operating income stood at ¥310 million, down 66.1% from the previous fiscal year. This decline reflected the effects of a significant fall in sales in the vehicle communication equipment business, a decline in profitability due to changes in the product mix, and higher labor costs in China. Consolidated ordinary income stood at ¥7 million, a significant fall of 98.8% year on year, primarily reflecting a rise in foreign exchange losses associated with the growing appreciation of the yen. The consolidated net loss amounted to ¥250 million, a fall of ¥735 million in profit year on year, which underperformed results forecasts by a large margin. This reflected the recording of ¥247 million in extraordinary losses, mainly from a loss of ¥179 million yen in the loss on valuation of investment securities, as a result of a significant fall in stock prices, and a ¥43 million loss on the retirement of noncurrent assets.

Vehicle Communication Equipment

In the vehicle market, the Company's major market in this segment, the markets in China, India, and other emerging economies continued to grow steadily, although the pace of the growth was slowing somewhat. In Japan, production of Japanese auto manufacturers recovered sharply from the situation in which production declined significantly in the wake of the Great East Japan Earthquake. However, given renewed disruption and problems in procuring materials and production, due to the effects of flooding in Thailand, manufacturers are now forced to review their plans to increase production for the second half of the fiscal year under review.
In this environment, sales of the Group's mainstay micro-antennas and other products from automobile manufacturers recovered sharply in the second quarter after they dropped sharply in the first quarter. Still, sales of these products reached only 80% of the level achieved in the same period of the previous fiscal year. Sales of film antennas in Japan remained higher than those for previous years, in contrast, reflecting demand from the transition to terrestrial digital broadcasting. However, this could not offset the fall in sales of other products.
As a result, consolidated sales in this segment stood at ¥7.2 billion, down 16.5% from the previous year. The net loss from this segment was ¥218 million, a fall of ¥521 million in profit year on year.

Circuit Testing Connector

The market for semiconductor manufacturing and inspection systems, a key part of this segment for the Group, has been recovering thanks to a sharp rise in demand for semiconductors in applications, such as smartphones, home electrical appliances, and automobiles. However, given a fall in prices of DRAM memory, the result of excess inventory reflecting sluggish demand for PCs, capital spending by semiconductor manufacturers and foundries (semiconductor fabrication outsourcing companies) was contracting.
In response to these conditions, the Yokowo Group stepped up its initiatives to bolster sales, particularly for overseas major customers. However, given the production cutbacks and adjustments by major customers in the wake of the Great East Japan Earthquake, sales of mainstay IC testing BGA sockets and other products fell across the board on a year-on-year basis.
As a result, consolidated sales in this segment stood at ¥2,515 million, down 8.3% from the previous year. Net income from this segment was ¥175 million, a fall of 61.6% year on year.

Personal Communication Equipment

The cellular phone market, our main market in this segment, is expected to grow further, with demand from the BRICs, Indonesia, Philippines, and other ASEAN countries likely to grow steadily and with sales of smartphones growing sharply.
In this environment, in our fine connector operations, which are centered on our mainstay fine spring connectors, sales rose year on year. This rise reflected an increase in the number of smartphones, POS terminals, and other devices that adopted the Company's connectors, offsetting unfavorable factors such as sluggish sales for certain overseas major customers.
For antennas for cellular phones, sales rose significantly from the previous fiscal year, given the noticeable rise in orders for main built-in antennas for cell phones, with the result that major overseas customers adopted the antennas in their major products.
In the Medical Devices operations that are part of this segment, consolidated sales were far higher than in the previous year. This performance reflected a steady increase in sales of coils for guide wires, maker rings, and other mainstay products, as well as stronger orders for assembly and machining for guide wire units and catheter units.
As a result, consolidated sales in this segment stood at ¥3,480 million, up a significant 22.5% from the previous year. Net income from this segment was ¥277 million, up 5.1% year on year.