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.
I would like to take this opportunity to express my gratitude for our shareholders and investors for their continued support.
My name is Naoki Higashi, and I have recently assumed the position of President of Cyberlinks Co., Ltd. In this role, I am fully committed to working towards the further growth and development of the Cyberlinks Group.
During the fiscal year ended December 31, 2023, the Japanese economy recovered moderately, despite a slowdown in some sectors. Due in part to the impact of various administrative policies, the economy is expected to continue its gradual recovery amid improvement in employment and wage conditions. On the other hand, weaknesses of overseas economies, such as the effects of global monetary tightening and concerns regarding the course of the Chinese economy, constitute a risk of downward pressure on Japan’s economy. In addition, we must remain vigilant toward the effects of rising prices, developments in the Middle East, and changes in financial and capital markets. Furthermore, we need to pay close attention to the economic impact of the Noto Peninsula Earthquake of 2024.
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.
Food retail companies are struggling to absorb costs, as they are facing higher procurement prices against a backdrop of soaring raw material and logistics costs, as well as recent growth in utility costs and other outlays. A variety of challenges and issues loom over the medium to long term, including shrinking markets caused by population decline, intensifying competition across business sectors and industries, competition among existing companies simultaneously vying to open new stores, shortages of human resources, and rising labor costs. Breaking out of this increasingly severe business environment will require improved productivity achieved through streamlined store operations supported by digital transformation and supply chain optimization made possible through collaboration between the wholesale and manufacturing industries. In addition, there is an impending issue regarding distribution crises, including the cap imposed on drivers’ working hours by workstyle reform legislation implemented in Japan. To this end, the concept of collaboration and joint usage in non-competitive sectors is spreading, with some companies working to improve logistics efficiency across corporate boundaries.
Government and municipal offices are expected to achieve digital transformation progress in accordance with the “Municipal Digital Transformation (DX) Implementation Plan” presented by Japan’s Ministry of Internal Affairs and Communications (MIC). Specifically, these offices are projected to accelerate improvements in resident services and administrative efficiency by utilizing government cloud systems (see note below) to consolidate and standardize core administrative systems used by local governments and by facilitating the dissemination and usage of My Number Cards through initiatives such as the merging of My Number Cards with health insurance cards.
Furthermore, business practice reforms triggered by the COVID-19 pandemic have led to a dramatic increase in the need for “trust services” that serve as a data distribution infrastructure essential to efforts aimed at moving various paper-based or face-to-face communications into cyberspace. Accordingly, simple and highly reliable services are expected to rapidly proliferate. As exemplified by the FY2023 budget of Japan’s Digital Agency, which includes expenses for the development of environments facilitating the implementation of Web 3.0 (see note below), the entire nation of Japan is striving to facilitate the achievement of a more decentralized digital society.
In the mobile phone sales market, telecommunications carriers are increasingly selling devices directly to users through online stores. Meanwhile, conditions remain challenging due in large part to factors related to NTT DOCOMO, INC., which announced it would optimize docomo shop counts and sizes by area while also revising its incentive system for these stores. On the other hand, circumstances such as new demand from the expansion of 5G services and device replacement demand emerging ahead of the scheduled conclusion of 3G services in March 2026 are also expected to generate new business opportunities. Furthermore, docomo shops are expected to fulfill pivotal roles as ICT support centers for their local communities.
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).
In response to recent circumstances including inflation, Cyberlinks has raised compensation levels for all employees through both base and salary increases, thereby facilitating stable lifestyles for its workforce. We will continue to view the creation of healthy, vibrant, and rewarding workplaces as a key material issue while pushing forward with relevant initiatives, including investment in human capital.
Regarding future economic trends, lifestyle and workstyle diversification triggered by COVID-19 is accelerating the development of unprecedented, digital technology-powered business models across all industries. Companies are swiftly proceeding with digital transformation to maintain and strengthen their competitiveness and investment demand for cloud services, AI, and other solutions remains brisk. Moreover, with the MIC’s announcement of the “Municipal Digital Transformation (DX) Implementation Plan,” government and municipal agencies are expected to continue investing toward improving productivity and operational efficiency.
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.
March 2024
Cyberlinks Co., Ltd.
President Naoki Higashi
