The 76th Annual General Meeting of Shareholders

BACK |

10	I have a request regarding the general meeting of shareholders. Your shareholders can be broadly divided into investors and Nintendo fans, and the questions at the general shareholders' meeting follow suit, with questions about financial reports and Nintendo's organization on the one hand, and questions about games on the other. Don't you think it would be better to divide up the Q&A session and use the first part for questions about financial reports, Nintendo's organization and share prices etc., and the second part for questions about games? I am a Nintendo fan, and I would rather ask questions about games, so as an alternative idea you could end the meeting after the first part, but then go into extra innings in a corner where game fans could get together and ask questions.
10	Kimishima: I appreciate your love of our games and take it you want the general meeting of shareholders to be a place where more information about our games is provided. As I said at the meeting before last, the general meeting of shareholders should be a place where shareholders and board members can communicate on a range of topics. This is very important for the company's future advancement and to respond to the requests of shareholders. Since there are shareholders at these meetings who have questions about corporate management from the perspective of investors, it is a significant opportunity to present that information to them (as well as to shareholders who are game fans). I get that you want us to provide more information about Nintendo products. I can't say right now what we'll do, but we will investigate ways of creating more opportunities to supply that information.

I have a request regarding the general meeting of shareholders. Your shareholders can be broadly divided into investors and Nintendo fans, and the questions at the general shareholders' meeting follow suit, with questions about financial reports and Nintendo's organization on the one hand, and questions about games on the other. Don't you think it would be better to divide up the Q&A session and use the first part for questions about financial reports, Nintendo's organization and share prices etc., and the second part for questions about games? I am a Nintendo fan, and I would rather ask questions about games, so as an alternative idea you could end the meeting after the first part, but then go into extra innings in a corner where game fans could get together and ask questions.

Kimishima:

I appreciate your love of our games and take it you want the general meeting of shareholders to be a place where more information about our games is provided. As I said at the meeting before last, the general meeting of shareholders should be a place where shareholders and board members can communicate on a range of topics. This is very important for the company's future advancement and to respond to the requests of shareholders. Since there are shareholders at these meetings who have questions about corporate management from the perspective of investors, it is a significant opportunity to present that information to them (as well as to shareholders who are game fans). I get that you want us to provide more information about Nintendo products. I can't say right now what we'll do, but we will investigate ways of creating more opportunities to supply that information.

11	What can you tell us about your NX production plans? I've heard that labor costs in China for assembly workers have risen considerably lately. And there was news at the end of May that the Taiwanese contract manufacturing company Hon Hai was restructuring by replacing 50,000 workers with robots. Game systems have a life cycle of around five years, and the products designed five years ago both by your company and by other companies do not look like they could be easily made by robots. NX will probably come out next year, so its five-year life cycle takes us to around 2020. Production will likely be largely automated by then. Assuming that Nintendo will continue to be a fabless company that outsources production, what can you say about production trends and how will Nintendo address issues like cost and ease of manufacture?
11	Hirokazu Shinshi (Director, General Manager of Manufacturing Division): Labor costs in China have certainly risen steeply over the last ten years or so. You see some uptrend in labor costs in other ASEAN nations too, so it is not as if this is happening in only China. That said, the jump in China stands out. There is some talk that the rising labor costs in China are leading to more automation. The word "automation" brings robots to mind, but we should see the trend for automation in China in the same context as Japan's past efforts to automate its manufacturing sector. You bring up the matter of Hon Hai, but that is not about the factories that make Nintendo products. So, although I can't really comment, Hon Hai is working hard to cut its costs, and one way is to progress with automation using robots. I see this as a cycle that puts workers to use in more productive ways, rather than something leading directly to layoffs. The circumstances in China support automation in factories to boost productivity and counter rising labor costs. But regarding the manufacture of our products in this setting, let me just note that devices like ours, which are complicated and made in amounts that vary widely from month to month, do not lend themselves to the kind of automation that is easy to introduce for devices with simple structures, that are made in constant amounts. Are there more efficient ways of determining which processes to automate and how? Can automation deal better with changes? These are the kinds of questions we continue to address. We are in close communication with our partners who manufacture our products. We are now preparing to manufacture NX and hashing out details like the extent of automation. We hope to create the optimal production environment.

What can you tell us about your NX production plans? I've heard that labor costs in China for assembly workers have risen considerably lately. And there was news at the end of May that the Taiwanese contract manufacturing company Hon Hai was restructuring by replacing 50,000 workers with robots. Game systems have a life cycle of around five years, and the products designed five years ago both by your company and by other companies do not look like they could be easily made by robots. NX will probably come out next year, so its five-year life cycle takes us to around 2020. Production will likely be largely automated by then. Assuming that Nintendo will continue to be a fabless company that outsources production, what can you say about production trends and how will Nintendo address issues like cost and ease of manufacture?

Hirokazu Shinshi (Director, General Manager of Manufacturing Division):

Labor costs in China have certainly risen steeply over the last ten years or so. You see some uptrend in labor costs in other ASEAN nations too, so it is not as if this is happening in only China. That said, the jump in China stands out.

There is some talk that the rising labor costs in China are leading to more automation. The word "automation" brings robots to mind, but we should see the trend for automation in China in the same context as Japan's past efforts to automate its manufacturing sector. You bring up the matter of Hon Hai, but that is not about the factories that make Nintendo products. So, although I can't really comment, Hon Hai is working hard to cut its costs, and one way is to progress with automation using robots. I see this as a cycle that puts workers to use in more productive ways, rather than something leading directly to layoffs. The circumstances in China support automation in factories to boost productivity and counter rising labor costs.

But regarding the manufacture of our products in this setting, let me just note that devices like ours, which are complicated and made in amounts that vary widely from month to month, do not lend themselves to the kind of automation that is easy to introduce for devices with simple structures, that are made in constant amounts. Are there more efficient ways of determining which processes to automate and how? Can automation deal better with changes? These are the kinds of questions we continue to address. We are in close communication with our partners who manufacture our products. We are now preparing to manufacture NX and hashing out details like the extent of automation. We hope to create the optimal production environment.

12	Nintendo has begun making greater use of its IP, and there are even reports about your plans on producing movies. Putting aside the question of money, how do you plan to get the people for this? What is your take on human resources for engaging in new projects like NX and the use of your IP?
12	Kimishima: First let's talk about the video business. It's less a venture into the movie business, and more a question of how we can utilize the Nintendo IP in video content as part of the broader effort to put our IP to practical use. If anyone wants to partner with us, we'll hold discussions. The fact that there are many interested parties is something we've already mentioned. People are our most valuable management resource, and it is important to give employees opportunities to develop their skills and achieve personal growth. But when it comes to business in a completely new field, it is essential that we build relations with external partners. To talk about the commercialization and expanded use of our IP, let me hand the discussion over to Senior Managing Director Mr. Miyamoto, who is involved in both planning and production. Miyamoto: Video content is a really interesting area for us. Going forward, it is extremely important for Nintendo to move beyond the limits of game systems and make good use of its character resources in order for Nintendo not to be forgotten. Nintendo has a variety of characters. That one company has all the rights to so many characters is something that is recognized as unprecedented. To avoid any misunderstandings, we have never said that we will produce a movie. We have talked about our expansion into video and other areas, but we are not saying anything official about the details. What I can say is that video is one of the business areas where Nintendo is making good use of its IP. Three years ago I created an about 20-minute video content of Pikmin’s short movie, and just recently I made a 15-minute PR movie for Star Fox Zero. These were made in association with video production companies. We can make video content by mostly leveraging the knowledge and capabilities of outside companies. For the production of those two short films, I was basically the only person from Nintendo involved. Nintendo needs to make a lot more products, but when a company gets too big, it faces continual problems nurturing its employees. Besides video content, we have begun to provide Nintendo characters for theme park attractions through a basic agreement with Universal Parks & Resorts. By working on development with others outside of Nintendo, I am working actively to expand the number of Nintendo products. These projects will take time to bear fruit, but they are something to look forward to. Kimishima: Let me add something about the resources that Director Miyamoto talked about. We have a business tie-up with DeNA Co., Ltd. (hereinafter “DeNA”) for smart devices, and that involves leveraging DeNA's know-how for our own business. We will launch various projects in the future. Advancing projects like these will require the involvement and support of our partners and not just our own human resources.

Nintendo has begun making greater use of its IP, and there are even reports about your plans on producing movies. Putting aside the question of money, how do you plan to get the people for this? What is your take on human resources for engaging in new projects like NX and the use of your IP?

Kimishima:

First let's talk about the video business. It's less a venture into the movie business, and more a question of how we can utilize the Nintendo IP in video content as part of the broader effort to put our IP to practical use. If anyone wants to partner with us, we'll hold discussions. The fact that there are many interested parties is something we've already mentioned. People are our most valuable management resource, and it is important to give employees opportunities to develop their skills and achieve personal growth. But when it comes to business in a completely new field, it is essential that we build relations with external partners. To talk about the commercialization and expanded use of our IP, let me hand the discussion over to Senior Managing Director Mr. Miyamoto, who is involved in both planning and production.

Miyamoto:

Video content is a really interesting area for us. Going forward, it is extremely important for Nintendo to move beyond the limits of game systems and make good use of its character resources in order for Nintendo not to be forgotten. Nintendo has a variety of characters. That one company has all the rights to so many characters is something that is recognized as unprecedented. To avoid any misunderstandings, we have never said that we will produce a movie. We have talked about our expansion into video and other areas, but we are not saying anything official about the details. What I can say is that video is one of the business areas where Nintendo is making good use of its IP. Three years ago I created an about 20-minute video content of Pikmin’s short movie, and just recently I made a 15-minute PR movie for Star Fox Zero. These were made in association with video production companies. We can make video content by mostly leveraging the knowledge and capabilities of outside companies. For the production of those two short films, I was basically the only person from Nintendo involved. Nintendo needs to make a lot more products, but when a company gets too big, it faces continual problems nurturing its employees. Besides video content, we have begun to provide Nintendo characters for theme park attractions through a basic agreement with Universal Parks & Resorts. By working on development with others outside of Nintendo, I am working actively to expand the number of Nintendo products. These projects will take time to bear fruit, but they are something to look forward to.

Kimishima:

Let me add something about the resources that Director Miyamoto talked about. We have a business tie-up with DeNA Co., Ltd. (hereinafter “DeNA”) for smart devices, and that involves leveraging DeNA's know-how for our own business. We will launch various projects in the future. Advancing projects like these will require the involvement and support of our partners and not just our own human resources.

BACK |