Message from the President
I would like to take this opportunity to express my gratitude for our shareholders and investors for their continued support.
In the fiscal year ended December 31, 2022, the Japanese economy recovered gradually despite exhibiting some signs of recent weakness. Looking ahead, the economy is expected to improve thanks in part to policies implemented to facilitate safe and secure lifestyles and economic activity during the COVID-19 era. However, economic conditions continue to be affected by ongoing challenges such as the tightening of monetary policies worldwide. Accordingly, the Japanese economy is at risk of incurring downward pressure if economic performance overseas falls short of expectations. Furthermore, attention must be paid to the effects of rising prices, depreciation of the yen, supply-side constraints, fluctuations in financial and capital markets, and the spread of COVID-19 in China.
In the markets served by Cyberlinks Group (the “Group”), digital transformation (“DX”) and digitalization are rapidly advancing, driven in part by changes in social structures, such as population decline, and measures adopted to facilitate safe and secure lifestyles and economic activity during the COVID-19 era. In the food retail industry, costs are currently difficult to absorb due to the ongoing threat posed by infectious diseases and rising procurement costs driven by soaring raw material and logistics costs. The industry is also experiencing a variety of medium- to long-term challenges, including the risk of market contraction caused by population decline; increasingly intense competition from other types of businesses (convenience stores, drugstores, online retailers, etc.) arising from diversifying lifestyles (proliferation of both dual-income and single-person households, etc.); and high labor costs stemming from personnel shortages. Achieving success within this increasingly challenging business environment will require a variety of critical productivity-enhancing initiatives, including the promotion of digital transformation as a means of improving the efficiency of store operations and the optimization of supply chains through collaboration with wholesalers and manufacturers.
Within the public sector, Japanese government agencies have undertaken initiatives aimed at unifying and standardizing the core operational systems of local governments using the Government Cloud service environment. Meanwhile, in September 2022, Japan’s Ministry of Internal Affairs and Communications presented version 2.0 of its Municipal Digital Transformation (DX) Implementation Plan. Additionally, use of the My Number Card identification card system is expected to expand due to recent announcements such as the Digital Agency’s decision to accelerate the utilization of a My Number Card that can simultaneously serve as a health insurance card and driver’s license. The integration of these card systems is projected to further accelerate the improvement of administrative efficiency and services for residents.
Additionally, COVID-19 has triggered a revolution in business practices across all industries. In particular, the pandemic has dramatically increased the need for “trust services,” which serve as a data distribution infrastructure allowing various types of typically paper-based or face-to-face interactions to be carried out in cyberspace. Accordingly, highly simple and reliable services of this type are expected to proliferate rapidly moving forward. Furthermore, in 2022, the Cabinet Office approved a fundamental set of policies regarding economic and fiscal management and corresponding reforms; included in these policies were the adoption of Web 3.0 concepts, which involve the use of blockchain technology, and national policies aimed at establishing environments that will facilitate the achievement of a decentralized digital society.
In the cell phone sales market, resellers continue to face challenging conditions stemming from a variety of factors, including expansion in the use of online-only plans offered by telecommunications carriers (NTT Docomo, Inc.’s “ahamo,” etc.); the announcement of a policy focused on optimizing the quantities and sizes of NTT Docomo stores by area; and a more general trend toward store closures and consolidation in recent months. On the other hand, current trends are also expected to generate business opportunities, such as new demand stemming from the expanding availability of 5G services and handset replacement demand arising ahead of the scheduled termination of 3G services in March 2026. Additionally, the Ministry of Internal Affairs and Communications has selected NTT Docomo as an executing organization for a FY2022 project aimed at supporting users seeking to adopt and utilize digital technologies. In accordance with this project, NTT Docomo stores are expected to play a role as local ICT support centers.
Navigating these circumstances in a manner consistent with its brand concept, “LINK Smart: Moving into the Era of Hands-Free Connectivity,” Cyberlinks Group has proactively proposed safe, secure, low-cost, high-quality, and highly functional cloud services based on “shared cloud” (i.e., a shared infrastructure for cloud services).
With regard to economic trends, the spread of COVID-19 has led to major lifestyle changes, and the development of innovative business models utilizing new digital technologies has rapidly accelerated across all industries. In response, companies are accelerating digital transformations to maintain or enhance their competitiveness, and thus demand for surrounding cloud service-related investment (in RPA, AI, etc.) continues to be strong.
Meanwhile, digital transformation is generating growth in demand for personnel with digital expertise in all industries, and the entire information services industry, including Cyberlinks Group, is facing the challenge of securing talented human resources. These circumstances demand efforts aimed at securing human resources through the creation of rewarding work environments and the promotion of efficiency in system development, such as the proactive use of low-code and no-code development tools that enable rapid development of applications with minimal source code writing.
In this business environment, the Group has formulated its “Transformation 2025” medium-term management plan for FY2021 through FY2025 (revised version announced on February 14, 2023) to achieve further growth. Under the brand concept “LINK Smart: Moving into the Era of Hands-Free Connectivity,” we will enhance and actively develop safe, secure, low-cost, and high-quality cloud services based on the “shared cloud” business model and aim to achieve further growth.
We will continue to strive for further business expansion and continuous improvement of corporate value to meet the expectations of our shareholders and investors. We humbly ask for your continued support as we move forward.
Cyberlinks Co., Ltd.
President Tsuneo Murakami