Profit growth of more than 50%! How do the two giants of Cognex and Keyence do it?

On April 27, KEYENCE released its financial report, which attracted attention due to record revenue and profit.

In contrast, Cognex, another giant in machine vision, is inferior to Keyence's revenue scale, but its growth momentum and high profits can still show its competitive barriers.

Profit growth of more than 50%! How do the two giants of Cognex and Keyence do it?

Comparison of the performance of Keyence and Cognex High-tech robots are compiled according to the company's financial reports

Profit growth of more than 50%! How do the two giants of Cognex and Keyence do it?

　　Through further collation and analysis of the financial reports of the two companies, we can gain a more intuitive and profound understanding of the operating conditions of the two industry giants.

Keyence: "Contrarian" hit a record high

The reason why we say "contrarian" is, on the one hand, that in the first two years, Keyence ended nearly a decade of continuous growth, and its revenue fell one after another. On the other hand, in the past two years, the new crown epidemic has had a great impact on Japan and the global economic situation, and the pressure on business management has doubled.

Despite the "internal and external troubles", KEYENCE not only achieved growth in fiscal 2021, but also hit a record high. (Note: KEYENCE's fiscal year 2021 refers to the period from March 21, 2021 to March 20, 2022. ）

According to the financial report, the highest annual sales and operating profit in KEYENCE's history were 587.1 billion yen and 3,179 yen in fiscal 2018.

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.

The time in the figure is the year of the financial report, corresponding to the performance from March of the previous year to March of the current yearSource: Keyence's financial report

Geographically, Keyence's domestic sales in fiscal 2021 were 310.18 billion yen, up 30.9% year-on-year. Overseas sales were 444.994 billion yen, up 47.7% year-on-year. Both domestic and overseas market revenue has achieved significant growth.

Although KEYENCE does not disclose revenue in the Chinese market at present, it can be inferred from the data of previous years that China is still an important source of KEYENCE's overseas revenue. (Sales in the Chinese market are expected to be disclosed in June 2021)

In fiscal 2020, sales in China increased by 34.87% to 88.165 billion yen, despite the decline in sales in both KEYENCE's domestic and United States markets.

It is worth noting that in fiscal year 2020, Keyence's sales were 538.134 billion yen, a year-on-year decrease of 2.48%, and the operating profit was 276.758 billion yen, a year-on-year decrease of only 0.31%, and the profit margin increased from 50.31% to 51.43%.

In other words, despite the decline in sales and profit in fiscal 2020, KEYENCE's profitability remained strong, laying the foundation for the "explosion" of fiscal 2021.

Cognex: Logistics and the automotive industry are the focus

According to the financial report, Cognex achieved sales of $1.037 billion in 2021, a year-on-year increase of 27.9%; The net profit was US$280 million, a year-on-year increase of 59%.

According to Cognex, revenue generated in the logistics, automotive, and consumer electronics industries accounted for about 70% of total revenue in 2021. Among them, 17% of the total revenue in 2021 came from a large customer in the logistics industry.

Regionally, sales from customers outside the United States accounted for approximately 62% of Cognex's total revenue in 2021, with approximately 24% coming from Europe and 19% from Greater China.

Among the revenue from foreign markets, revenue from customers in Greater China increased by 19% year-on-year in 2021, and Cognex revealed that the main reason for the increase was the increase in revenue in the automotive and semiconductor industries, but the decrease in revenue in the consumer electronics industry in the same period.

Elsewhere** in Asia, Cognex saw revenue growth in the automotive, semiconductor, and consumer electronics industries, resulting in a 24% increase in revenue.

For the company's growth strategy, Cognex said it will selectively expand new machine vision applications and markets through the acquisition of businesses and technologies.

In the process of actively looking for acquisition opportunities, Cognex has two main selection criteria: first, it is conducive to the company's ability to improve long-term growth and profitability, and second, it is consistent with the corporate culture.

Advantages of giants

The performance of KEYENCE and Cognex demonstrates their strong ability to attract gold. What is so special about them?

KEYENCE was founded in 1974 and Cognex was founded in 1981, and their long-term accumulation in product technology and application development makes it difficult for "rising stars" to catch up in a short period of time.

At the product technology level, the construction of the software platform needs to rely on a solid underlying algorithm and a rich database, and for hardware links such as light sources, lenses and cameras, it also has high requirements in terms of accuracy, speed and stability, which requires enterprises to invest in R&D for many years, and continuously carry out product iteration and technical improvement.

At the level of application development, there are many downstream application scenarios of machine vision, and the development of solutions needs to be based on a large number of practical cases, and the accumulation of industrial experience formed by this is another major barrier for established enterprises.

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

In addition to the hard power of technology, KEYENCE has some characteristics that are talked about in terms of business model.

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.

KEYENCE also prefers to focus on the marketing department in the organizational structure design, and promotes inter-departmental coordination to allow the marketing staff to smoothly transmit information to the technical department. The company also stipulates that R&D personnel are obliged to accompany sales engineers to visit customers regularly.

On the one hand, it can accurately deliver the company's product information to customers, and solve various problems for customers in a timely manner and put forward new rationalization suggestions.

On the other hand, existing products can be improved and upgraded from customer feedback, and new potential needs can be discovered in time, so as to start new product research and development.

Under the well-established marketing service model, KEYENCE's corporate customers often see the visit of KEYENCE's sales staff as an opportunity to reduce the cost of their own production lines, and at the same time, KEYENCE can continue to gain inspiration to create new products.

After fully grasping the needs of customers, KEYENCE does not customize products for customers, but expands the product line according to customer needs to meet customer needs with standardized products.

At present, KEYENCE has machine vision systems, sensors, control systems, measurement systems, laser equipment, microscopes and other product lines. In addition to a wide range of applications in the industrial field, KEYENCE's microscope products are also used in scientific research and in the forensic departments of public security courts.

Based on the profound technical background and rich product application, KEYENCE and Cognex have truly achieved "no one has me, no one has me", has the bargaining power, and then obtains huge profits.

Comer

However, the giants have not been able to lie down and make money because they are already feeling the pressure of rising stars.

Cognex pointed to Chinese vendors with cost and price advantages, as well as large tech companies that may offer free and open source solutions, as important factors in increased competition. This may result in lower demand for Cognex products and services and lower prices.

According to data from the GGII Research Institute, the scale of China's machine vision market will be about 11.635 billion yuan in 2021, and it is expected that the scale of China's machine vision market will reach 41.592 billion yuan by 2025.

The growing market size and market demand have given birth to a number of domestic machine vision companies.

Light source companies include: Opt, Han's Laser, Aopu Optoelectronics, etc.

Industrial lens companies include: Dongzheng Optics, Chiopt, Lianchuang Electronics, etc.

Industrial camera companies include: Hikrobot, Huarui Technology, Tuyan Technology, etc.

Vision software companies include: Hikrobot, Weishi Image, Chuangke Vision, etc.

Vision system solution manufacturers include: Mechmind, Yiswei, Xing Ape Zhe, Seebit, Seekop, Aqiu Technology, Daheng Technology, Wanxun Automatic Control, Juzi Technology, etc.

Machine vision equipment and system integration companies include: TZTEK Technology, Elite Vision, Jingce Electronics, Shenzhen Keda, Lingyunguang, etc.

In addition to winning market share by lower prices, how domestic enterprises can build their own industry barriers like giants and achieve considerable profits will be a topic worth long-term discussion in the future.

Profit growth of more than 50%! How do the two giants of Cognex and Keyence do it?

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