Message from the President

Adapting to Industry 4.0 and Physical AI

Against a backdrop of growing instability in the international order, heightened geopolitical tensions, and labor shortages, the global economy is under pressure to transform on a structural level. As part of that, it is safe to say that our surrounding business environment is also currently experiencing major changes.
Looking back on the past decade in particular, we have seen the adoption of digital technology accelerate efforts to automate and optimize manufacturing to an advanced degree. The impact that this technological progress has had on manufacturing is comparable to that of the industrial revolution, and some are saying that industry is currently at the height of a fourth industrial revolution that began with Germany's Industry 4.0 initiative.
We are now even at the point where we can talk about implementing physical AI (AI technology put to practical use in factories and other real-life spaces) in more than abstract terms. This physical AI is becoming a key concept for our company's growth.
It is worth noting that what propelled the advancement of such digital technology was the coronavirus pandemic that began in 2020. Supply chain fragmentation, shifts in production locations, and the adoption of contact-free behavior patterns and systems prompted greater advancements in digital technology.
The global ramp-up in digital device production and an increase in demand from China starting in 2021 culminated in a record-breaking revenue for us in 2022. It was during this period of pandemic-driven changes in the supply chain, the emergence of generative AI, and the acceleration of digital technologies that I assumed office as Representative Director and President in January 2024, marking a turning point for our company as well.
I met the occasion with the conviction that it was not only expected but also required of me to thoroughly strengthen what needs to be strengthened and bravely change what needs to be changed. Even now, in my third year holding this position, my resolve remains unchanged.

Establishing a New PMVV Statement and Clarifying Standards of Conduct That Reflect Those Values

In November 2024, we announced our new management policy and declared that our entire company would work together to promote structural reforms that tie in lean practices with our growth strategies. To continue growing as a company, we must implement a process of selection and concentration, strengthen our governance, and invest in talent development. We will encounter obstacles as we venture away from the trodden path, but we will meet them all with unwavering resolve.
Out of our belief in the importance of reestablishing and sharing our company’s direction and the principles we expect our employees to embody, we began formulating a new purpose, mission, vision, and value (PMVV) statement midway through last year, and we announced it both internally and externally in January 2026. This has served as a major pillar of our Group-wide efforts to accelerate the speed of our structural reforms.
Our corporate philosophy of providing innovative products to the world and generating new trends to contribute to the creation of an affluent society is the reason for our existence, and it suffuses everything we do. The mission and vision parts of our PMVV statement indicate the operational goal and structure that will bring our corporate philosophy to fruition in the present day, and the values portion defines the essential principles that every employee must hold to make that happen.
The “rolling and connecting (mechatroedge) technology” mentioned in the mission statement refers to the way we build upon the foundation of the “rolling” technology we have cultivated with our linear motion components for machines by providing solutions that combine mechatronic products with digital “connecting” technologies such as the IoT. The LM Guide became what it is today—a product known for revolutionizing manufacturing floors since day one—thanks to our founder who invented it and the people who diligently listened to what customers had to say and built upon the original design. As the world of physical AI continues to expand, however, it is imperative that we revolutionize manufacturing in that realm too. We must contribute to society through more than our accumulated machine component expertise alone by fusing our rolling technology with both sensing technology from the IoT and control technology from actuators and robots. To ensure we succeed in this effort, we have set our sights on our vision of transforming into a manufacturing and innovative services company, shifting our business paradigm away from a traditional one-time purchase business model.
The most important part of this new PMVV statement for us was establishing our values, so we undertook a rigorous process to select them. Rather than have top leadership dictate what the values would be, we launched a project that tasked employees with reflecting on THK’s past strengths and weaknesses to determine what principles all employees would need to adhere to in order to achieve THK’s purpose, mission, and vision and enable the company to grow. The first step was to recruit the project members. Our employees expressed an overwhelming amount of interest, and from those who applied, we selected a group of about 20 to participate in the project. This team was formed from a diverse array of people, including members with experience working at facilities outside of Japan, production floor employees, Group company executives, and mid-career hires. The team submitted several rounds of proposals to the Board of Directors, incorporating their feedback each time until the final version was drafted and the three values were settled on: courage, communication, and integrity.
As suggested by our corporate philosophy, THK has a history of boldly tackling new challenges. Therefore, “courage” is part of our nature.
“Integrity” is also ingrained in our behavior, as exemplified by the principle of “Integrity leads to trust” that is part of our corporate motto. In manufacturing, the production floor is where added value is generated. It is also where the solutions to the company's management challenges can be found. That is why we have to face the reality on the floor with integrity in order to combat production challenges and devise solutions.
“Communication” was also selected because, in this volatile environment, THK can only grow by strengthening the skills of individuals and doing even more to foster teams that can share ideas and produce results through open communication that ignores hierarchical status, departmental affiliation, age, gender, nationality, and level of experience. This value is also critical for spurring open innovation with external partners.
I believe that the people who comport themselves in accordance with these values will remain essential even in a future where AI and humans work side by side. I want to cultivate the kind of company where every employee can recognize that people who lack courage and integrity and who do not communicate are not truly part of THK. Doing so will enable us as a business to continue embodying our corporate philosophy even in the age of physical AI.

Identifying Our Unique, In-Demand Characteristics to Spur Higher Profitability

In February 2025, we announced management metrics and related measures for advancing our new policy of achieving an ROE greater than 10% as quickly as possible. As part of that effort, and as the result of a strict evaluation of the segment’s anticipated future capital costs and ROIC, we concluded the process of selection and concentration for the automotive and transportation business by resolving to transfer its ownership.
For the industrial machinery business, we set ourselves the goal of achieving the ¥40 billion operating income required for an ROE greater than 10% entirely by our own efforts. To this end, we have set up working groups on various topics and promoted the establishment of a PDCA cycle where, with the support of experts, we create plans, execute them, and monitor the results. Then, if the overall results are insufficient, we develop and enact other measures that are needed. While there has been some trial and error along the way, I fully believe that we are steadily improving and making headway. Our employees are also more conscious of profitability than ever before, and I think this builtup awareness will be a source of strength for us in the future. These activities have also made it more evident that we must strengthen our cost competitiveness to sustain Japan-based manufacturing. For us to grow, it is crucial that we generate even more added value and sell to customers both in and outside of Japan.
To restructure ourselves into a more profitable business model, in our machine component business, we are proactively supplying new products with high added value to seven fields experiencing significant growth: healthcare, machine tools, EVs and renewable energy, semiconductors, logistics, robots, and railways and airplanes.
We have always had a technically adept development team, but we will strengthen our product development capabilities from the perspective of product-market fit to better suit the market and our customers’ needs. To this end, we spent the last year creating clear guidelines that covered everything from how to create systems for understanding customer needs as extensively as possible to how to get products to market, including information on prioritizing development activities and optimizing the allocation of personnel based on an analysis of the market and a calculation of the level of technical difficulty. In doing so, we have established a framework for increasing profit from growing fields.
Another important factor for growth is boosting our market share. However, that does not mean that the path to success can be found by keeping our eyes solely on our competition. If we only focus on differentiating our products from those of our competitors, we will lose sight of solving our customers’ real challenges. In order to face our customers' challenges with integrity, we must focus on forging our own path.
In the process of trying to stand out, our products are going to be compared to those of our competitors now and again. However, the products that ultimately sell well in the market are those designed to be what customers are looking for based on their needs. If it turns out that going down that path results in products with the same specifications as competitors’ products, as long as they are serving the needs of the customer, then so be it. By digging deeper in our interactions with customers, we will better understand what they are dissatisfied with and what their true concerns are about service, trust, safety, and reliability. From there, we can work out our unique approach.
Our values of courage, communication, and integrity are the standards of behavior for everyone at THK that will allow us to capitalize on what makes us unique. We will continue to face the reality of our customers and the production floor with integrity and convey the importance of putting forth the kinds of unique solutions that only we can.

FA Solution Business Proposals to Support Physical AI

In addition to our mainstay machine component business, we are also pouring effort into our FA solution business. This division offers products and solutions with high added value that fuse traditional machine components with mechatronic modules and the IoT/AI.
Since around 2016, when the principles of Industry 4.0 began spreading throughout the world, we have embarked on various related projects. For the past decade now, many companies have advanced the aims of creating better visibility on the manufacturing floor and, ultimately, making factories more autonomous. These endeavors have led to more manufacturing processes becoming automated during that time, and now, with the emergence of physical AI as a concept, we are going to see accelerated efforts to achieve autonomous and unmanned operations throughout entire factories. Within the next 10 years, I think we will see a world where most factory systems are controlled by AI and facilities keep running 24 hours a day, 365 days a year. These will be software-defined factories in the truest sense, where the real world is represented in a digital environment in which everything is captured as data that can then be used to train AI models for controlling hardware. Such large-scale systems will require smart subsystems composed of real-life hardware that can both capture all types of things as data and that can operate accurately as instructed for long periods of time without breaking down. THK can provide these kinds of smart subsystems by combining the proprietary component, control, and sensing technologies we have developed over the years. As we make these smart subsystems more robust, I foresee a future 10 years from now where THK is known as the place to go for supporting physical AI. I want THK to continue offering solutions that revolutionize manufacturing, even in a world where people and robots work side by side.

Efforts to Maximize Human Capital by Developing and Evaluating Employees Who Embody Our Values

Even as digital technology advances and some human tasks are transferred over to systems and robots, people remain the most valuable asset for companies. That is why part of our structural reform involves initiatives aimed at maximizing human capital.
We are establishing systems for evaluating and developing the types of people who can independently develop products and services with high added value, push for greater quality and productivity, openly exchange opinions, and address challenges with persistence and integrity.
We have also tied the compensation of executives more closely with their performance as a means of strengthening our governance, and a recommendation was made to introduce employee stock ownership plans for regular employees to increase our shared commitment toward the company’s growth. I want to make sure that our evaluation and compensation systems appropriately reward those who give their all and produce results.
“Talent of the heart” is an important concept at THK. It refers to the ability to maintain a positive outlook and engage with problems in a constructive way rather than blaming other people or environmental factors. It is a skill that can only be learned, not taught. The employee development structure we are aiming for is one that will encourage this talent of the heart. The times ahead will demand that we always work to polish our own skills, so THK will work toward developing a framework that allows people with this type of talent to thrive. Ultimately, I want this company to be a place filled with people who exemplify courage, communication, and integrity.

Solving Customer Problems and Creating Added Value through Deeper Dialogue

Our goal is to ensure that THK continues to revolutionize manufacturing by providing smart subsystems that are based on the components we have developed and that come equipped with the actuator, control, and sensing functions required in a world of physical AI.
To achieve this aim, we want to engage in deeper dialogue with our customers, suppliers, and partner businesses and create added value to work toward solving the challenges our customers face. Even in the age of physical AI, the values that make up THK’s name—“Toughness,” “High Quality,” and “Know-how”—will remain essential. As always, we will continue to strengthen our commitment to these universal principles.
It is my belief that the way we can give back to our shareholders is by maintaining an ROE that exceeds our shareholder’s equity costs as we grow and by continuing to demonstrate the promise of even more growth. Please look forward to seeing even greater things from THK.