Analyze the secret of the success of KEYENCE, the global leader in machine vision

As a global leader in machine vision, KEYENCE has been listed as one of the "Top 100 Most Innovative Companies in the World" by Forbes in United States for many years, and is also one of the most profitable companies in Japan. The 2021 financial report released by KEYENCE once attracted the attention of the industry due to its record revenue and profit.

Why did KEYENCE work such a miracle?

Analyze the secret of the success of KEYENCE, the global leader in machine vision

1. "The king of sensors", based on hard-core products

KEYENCE was founded in 1972 and provided automatic wire cutting machines to wire manufacturers in the early days; In 1974, the company started the sensor business and discovered its high value-added attributes, and in 1982, it completed the spin-off of the automatic wire cutting machine business, confirming that sensors were its main business.

From 1987 to 1991, KEYENCE grew into a leader in the sensor industry and was listed on the Big Edition/Tokyo Stock Exchange, when the stock price surpassed Nintendo to become the richest man in Japan; From 1992 to 2015, the company successfully expanded its business to various applications with the help of its deep technical accumulation in the field of sensors. From 2016 to the present, KEYENCE has opened subsidiaries around the world, headquartered in Osaka, Japan.

At present, KEYENCE's product range covers sensors, measuring instruments, image processing equipment, control and measurement equipment, R&D analysis equipment, commercial information equipment and other fields, and its product applications are involved in semiconductors, motors, precision machinery, food, pharmaceuticals, automobiles and other industries.

KEYENCE is a company of invention and invention, and about 70% of the new sensors and other products developed every year are "world firsts" and "industry firsts", including the development of the first photoelectric sensor, the first digital focusing microscope, the world's first 3D laser marker, high-speed and high-precision machine vision systems, and so on.

It is reported that Keyence's products are usually several times the price of their peers, but they still sell very well because it can solve problems that others can't solve.

The accumulation of technology has allowed KEYENCE to form its own moat in terms of machine vision recognition accuracy, breadth of application scenarios, adaptability to complex environments, and convenience of software and hardware product operation.

From 2008 to 2020, KEYENCE increased its R&D expenses three times, namely in 2010, 2016 and 2018, with a year-on-year growth rate of 28.78%, 24.65% and 22.00%, corresponding to the research and development of the company's new products three times.

In 2021, KEYENCE's R&D expenses were 1.031 billion yuan, and the R&D expense ratio was 2.95%, mainly due to the high degree of generality of the company's product standards and the relatively low proportion of R&D.

As a major supplier to the industrial automation industry, KEYENCE has rapidly expanded to 230 offices in 46 countries and regions, serving more than 300,000 customers living in 110 countries and regions.

2. "Factory-less" manufacturing system

Michael E. Porter, an United States scholar who is a master of strategic management, believes that there are only three strategies for enterprises, namely total cost leadership strategy, differentiation strategy and concentration and specialization strategy. The industry boss must be a total cost leading strategy, relying on scale effect to win.

In order to pursue the ultimate profit, KEYENCE abandoned all asset-heavy business models and fully shifted to a factory-free business model, focusing on the design and development of sensors and automation equipment with the highest profit margins.

It is reported that 20% of KEYENCE's products are produced by its wholly-owned subsidiary, KEYENCE Engineering Company, and the rest is entrusted to cooperative enterprises for production, and the production management is responsible for the company's product management department; The logistics of finished products is handled by its production management center. KEYENCE's gross profit margin reached 80% at one point, and its net profit margin exceeded 40%.

Although KEYENCE's revenue has declined in recent years, it is still one of the most profitable companies in Japan. In fiscal 2021, KEYENCE's sales increased by 40.3% year-on-year to 755.17 billion yen, and operating profit increased by 51.1% year-on-year to 418 billion yen. Net profit increased by 53.8% year-on-year to 303.36 billion yen. Operating margin for fiscal 2021 was 55.4%, up 4 percentage points year-on-year.

This "factoryless" manufacturing model makes it one of the few high-profit companies in Japan. Judging from the data, from 2000 to 2021, except for the special value in 2004, the per capita income index for the rest of the time has gradually increased to about 4 million yuan.

According to the statistics of Japan Keizai Shimbun Network in August 2021, KEYENCE is the company with the highest average annual salary among Japan companies, and the average annual salary of KEYENCE employees in 2020 is as high as 17.51 million yen (about 1.03 million yuan). Every year, KEYENCE distributes a percentage of its operating profits to its employees in the form of one-time income and monthly bonuses four times a year. According to KEYENCE, "By reflecting the contribution of employees to their performance in their actual income, we have increased their motivation."

In addition to "high salary brings high efficiency", KEYENCE has also put a lot of effort into employee training and management model. KEYENCE has a complete training system to conduct irregular leadership and team management training for middle and senior managers to promote the long-term and stable development of the company.

3. Refuse agents and insist on direct sales

In terms of business model, KEYENCE also has a lot of characteristics that are talked about. In order to better understand customer needs and improve products and develop new products, KEYENCE chose a direct sales model rather than a sales model with multiple distributors. The salesperson of the enterprise sells directly, and the salesperson takes care of both the product manager and the intelligence gathering work.

Most of the marketers at each branch are from science and engineering, and through this direct sales model, the company creates a two-way flow of information between the company and its customers. On the one hand, it is necessary to completely and accurately convey the relevant information of its own research and development products to customer enterprises; On the other hand, it is also necessary to discover new potential needs from the large amount of information fed back by customers, so as to start a new round of product development process.

For companies in the machine vision industry, the main composition of personnel is mainly sales personnel and R&D personnel. Especially for machine vision companies that adopt the direct sales model, sales personnel are the key to ensure delivery, R&D personnel are the key to ensure product quality, and the per capita income index can better reflect the operating efficiency level of machine vision companies.

KEYENCE's official website has a "Sales Day" display page, and the first few words at the beginning are "No Waste a Minute", which fully reflects KEYENCE's corporate culture of emphasizing efficient work.

KEYENCE provides goods and services to about 300,000 customers around the world through direct sales, and provides high-precision orders through continuous customer contact and continuous analysis of historical transaction data, and can provide same-day delivery under strong supply chain management.

In recent years, KEYENCE's selling expenses have accelerated. In 2021, KEYENCE's sales expenses were 9.486 billion yuan, and the proportion of sales expenses to operating income was 27.51%.

From 2003 to 2021, KEYENCE has four large-scale sales expansions, namely in 2004, 2010, 2014 and 2016, with a year-on-year growth rate of 218.13%, 18.86%, 14.56% and 27.92%, which correspond to the successful development of microscope systems, the successful development of characteristic optical fiber lithography machines, the successful development of integrated vision systems, and the formation of a global product network. After the successful development of a new product or the company enters a new stage, it will significantly increase the sales expenses and further expand the product sales.

4. Layout of the Chinese market, the rise of "post-show".

KEYENCE established a subsidiary in China in 2001 and continued to expand its presence in the Chinese market, ranking first in overseas markets in fiscal 2020. At present, KEYENCE has served more than 300,000 customers in about 110 countries or regions around the world.

In 2001, KEYENCE established its first sales company in China, and as of 2021, KEYENCE has set up sales companies in major cities in China such as Shanghai (headquarters), Beijing, Tianjin, Dalian, Qingdao, and Shenzhen, forming a huge sales network.

However, Keyence, as a giant, has not been able to lie down and make money leisurely, because it has already felt the pressure brought by the rising star. The domestic machine vision industry started from agency and developed independently. Around 2000, relying on the agency of overseas brands, China's machine vision industry entered the early stage of development. Later, a number of machine vision manufacturers who insisted on independent research and development continued to emerge, such as TZTEK (2005), Opt (2006), etc., and China's machine vision industry moved towards the road of independence.

In the past 10 years, Apple's production and manufacturing have stimulated the demand for machine vision in the domestic consumer electronics field, and the update and iteration of computing power and algorithms have led to the rapid development of China's machine vision industry. According to the data of the Machine Vision Industry Alliance, the domestic machine vision market will maintain an average annual growth rate of about 27% from 2021, and it is expected that the domestic machine vision market will be close to 30 billion yuan by 2023.

The growing market size and market demand have given birth to a number of domestic machine vision companies. From the perspective of the number of domestic enterprises, there were only 60 domestic machine vision enterprises in 2010, with the continuous research on independent technology property rights in China and the continuous exploration in the fields of light sources and cameras, as of 2019, the number of domestic machine vision enterprises reached a peak of 819, and in 2020, it fell back to 637.

Admittedly, Chinese manufacturers with cost and price advantages, as well as large tech companies that may offer free and open source solutions, are important factors in the increased competition. This may lead to a decrease in demand for KEYENCE's products and services and a decrease in the prices of its products.

Analyze the secret of the success of KEYENCE, the global leader in machine vision

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