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Japan Labor Market Trends and Our Initiatives Japan labor market trends and our initiatives TechnoPro Holdings, Inc. March 8, 2019 Copyright © TechnoPro Holdings, Inc. All rights reserved. Today's agenda 1 TechnoPro Group introduction 2 The Japanese labor market 3 Key drivers for the HR business 4 Appendix: Japanese legal revision impact Copyright © TechnoPro Holdings, Inc. All rights reserved. 1 TechnoPro Group Introduction • We have the largest provider covering the widest technical field of engineers in Japan. • We have stable growth with strong recruitment and marketing. (FY 2019 First half results 26%) ①The largest engineer base and broadest ② Strong recruitment capabilities technological domains covered in Japan utilizing various channels Transition of Recruiting more than 2,000 Engineers every year number of engineers Number of recruited engineers (mid-career+ new-graduate) 20000 17,666 3,626 14,596 13,349 overseas 2,627 2,413 2,480 2,633 15000 11,408 12,258 2,230 10,523 10,789 1,824 2,040 9,199 10000 In Japan (Japanese) 5000 In Japan 0 (non-Japanese) 2011/6 2012/6 2013/6 2014/6 2015/6 2016/6 2017/6 2018/6 2011/6 2012/6 2013/6 2014/6 2015/6 2016/6 2017/6 2018/6 * The total of recruited engineers in the Japanese subsidiaries, excluding M&A Breakdown of Assigned Engineers ③ Strong sales capabilities create broad customer base by Technological Domains (in Japan) 2,030 customers as of Jun. 2018 Contract period Sales of JPY with over 1 tn. or more 10 years 1 Electronics/SIer Listed 〇〇 2 Electronics/SIer Listed 〇〇 3 Electronics/SIer Listed 〇〇 2018/6 4 Transportation Listed 〇〇 16,057 5 Transportation Listed 〇〇 6 Transportation Listed 〇〇 7 Electronics/SIer Listed 〇〇 8 Transportation Listed 〇〇 9 Construction Non-listed 〇〇 10 Electronics Listed 〇〇 Copyright © TechnoPro Holdings, Inc. All rights reserved. 2 The Japanese labor market No.1 • Even though the working population in Japan is actually increasing, the demand for workers is even higher. • the staff turnover ratio in Japan continues to be stable at around 10%. 1. Japan's active opening ratio 2. Staff turnover ratio in Japan Source︓Ministry of Health, Labor and Welfare Source: ”Employment Trends Survey”, Ministry of Health, Labour and Welfare （Times） （%） 12.0 11.0 10.9 10.410.3 10.5 10.6 10.1 9.9 9.9 10.2 10.0 9.2 9.1 8.8 9.1 New opening ratio 8.0 6.0 4.0 2.0 Active opening ratio 0.0 （year） （year） Copyright © TechnoPro Holdings, Inc. All rights reserved. 3 The Japanese labor market No.2 • Internationally IT engineers are highly mobile, but in Japan this is less so. • The Background of the Japanese labor market is, Japanese large companies have a sonority based wage system with pay rises based on time served rather than skills. 3. Number of career changes (IT talent) 4. Senority-Based Wages and Wages based on Source︓ “Comparative Survey of each country on IT Human Work Productivity (Hourly) Resources 2016”, Ministry of Economy, Trade and Industry Source: “Equity Research Reprinted Report”, May 1, 2017, Investment Information Department, Mitsubishi UFJ Morgan 0% 25% 50% 75% 100% Stanley Securities Co., Ltd. Yen per Hour Japan（n=500） 47.0% 20.6% 15.4% 17.0% （ ） 3500 Korea（n=500） 23.8% 24.8% 22.2% 29.2% 3000 China（n=500） 21.2% 32.2% 27.4% 19.2% 2500 Vietnam（n=300） 19.7% 30.3% 33.3% 16.7% India（n=500） 18.0% 33.2% 35.2% 13.6% 2000 Thailand（n=500） 17.8% 36.4% 29.2% 16.6% 1500 Period of Period of Insufficient wages Excessive wages Indonesia（n=500） 14.2% 27.8% 35.6% 22.4% 1000 USA（n=500） 14.0% 32.2% 33.6% 20.2% 500 0 time never change jobs （ ） 0 1 times 20 25 30 35 40 45 50 55 60（Age） 2 times more than 3 times Actual wage curve （2015） ※Sorted by percentage of "0 times (never change jobs)” Wage curve based on worker productivity Copyright © TechnoPro Holdings, Inc. All rights reserved. 4 The Japanese labor market No.3 • Large companies recruitment still focuses on new graduates with only a little mid-career recruitment. • This means, new graduates usually want to start at these large organizations, this creates a mismatch with smaller companies suffering the shortage of applicants. 5. Hiring ratio by large companies 2017 6. Job-to Applicants Ratio, by Scale Based on Number of Employees Source: based on The-Nikkei "recruitment plan survey", Ministry of Health, Labor and Welfare "school basic survey" Source︓”34th College Graduates Job Opening Survey”, "employment trend survey" Recruit Works Institute （Times） 12.00 Fewer than 300 Number of 300-999 9.91 Number of hiring plans by 1,000-4,999 % 10.00 employees large 5,000 or more 8.43 companies 8.00 6.45 New grads 436,097 114,237 26.2% 6.00 4.41 4.52 mid-career 3,255,400 40,590 1.2% 4.16 3.59 4.00 3.35 3.27 3.26 2.00 1.51 1.45 1.43 1.19 1.23 1.17 1.00 0.97 0.93 1.03 1.06 1.12 1.02 1.04 0.66 0.63 0.74 0.81 0.79 0.84 0.00 0.60 0.70 0.38 0.47 0.49 0.54 0.55 0.59 0.39 0.37 Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 （Graduation date） Copyright © TechnoPro Holdings, Inc. All rights reserved. 5 Japanese HR business market • External HR business market value is estimated at 8 trillion yen, and which is growing with labor shortages. • This gives the external HR market an opportunity to grow. 1. Japanese HR business 2. Trend of workers shortage until 2030 Source︓“Japanese HR business 2010”, Recruit works Source︓Persol Research Institute and Chuo University "Future Institute estimation of labor market 2030" Placement 323 (Billion yen) （million） Actual Forecast （Yen） Job advertisement 10 2,100 987 2,000 2,096 8 2,000 1,910 Contract 7,989Bil 6 6.44 1,900 1,576 1,835 5.05 4 1,800 Dispatch 3.84 5,104 2 1.21 1,700 0 1,600 Note) Dispatch: Ministry of Health, Labor and Welfare "Worker Dispatch Project in 2013" 2017 2020 2025 2030（year） Contract: Mick Economic Research Institute “Current situation and Outlook of HR （end of June） business and Professional outsourcing market 2010 edition" Job advertisement: Dentsu "2010 advertising expenditure in Japan" and estimate by the number of labor shortage hourly wage Association of job information of Japan by FY2009 Placement: Ministry of Health, Labor and Welfare "Employment introduction business report in 2008" Copyright © TechnoPro Holdings, Inc. All rights reserved. 6 Engineer staffing market overview • The market (including manufacturing engineers) is about 1.7 trillion yen, in value with about 250,000 people. • With an increase in R&D and software demand, steady economic growth is forecasted. 1. Number of engineers in Japan (2015) 2. Transition of engineer staffing market size Source: census 2015 Source: TechnoPro estimates based on the data researched by Ministry of Health, Labor and Welfare. Others, 221,600 Breakdown (2016) Transportation software development Equipment , 1200 58 263 IT, (15.7%) 131,100 1000 (3.4%) 1,045,200 800 Construction, 356 1,000 248,000 2.43 600 (21.3%) (59.6%) million 400 Cicil/Survey, (billion yen) 231,400 200 0 10 Software development Machienery, 0708 Manufacturing 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 258,000 Electric/Electoronic, 297,800 2015 2016 05 Researcher 11 Others 3. Forecast of engineer staffing market size 4. Transition of R&D spending in Japan Source: Yano Research Institute Ltd., “Human Resources Business 2018” Source: Ministry of Internal Affairs and Communications statistics Bureau, (billion yen) Survey of Research and Development 1,500 CAGR︓8.6％ (trillion yen) 22.00 1,000 R&D spending (Total) 500 12.00 Global Financial Crisis record 0 high 2018/3 2019/3 2020/3 2021/3 2022/3 Burst of the bubble （Act） （Forecast） （Forecast） （Forecast） （Forecast） 2.00 Notes: 1. The market size is based on the sales of the businesses. 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2. The forecast is as of October 2018. Copyright © TechnoPro Holdings, Inc. All rights reserved. 7 Key success factors of future HR business Engineering Plan future service demand Engineering Considering service technology Advanced technology training HR business Engineering Human service Satisfy resource workers needs maximize career development opportunities and working conditions Copyright © TechnoPro Holdings, Inc. All rights reserved. 8 TechnoPro's approach -Focus on growing areas- • Focus on R&D and IT, with low economic fluctuation • In line with increasing demand, move engineers to become more technical 2. Software complexity 1. IT Staff Shortage Projections Source: Ministry of Economy, Trade and Industry, Study of Recent Trends Automobile software used to have 1 million and Future Estimates Concerning IT Human Resources lines of codes back in 2000, now have more than 100 million lines (People) 1,800,000 Approximately Labor供給⼈材数 supply 790,000 people (High scenario) 1,600,000 Labor⼈材不⾜数 shortage 100mn Medium中位シナリオ scenario (Market scale figures 132.5 Approximately High scenario indexed using 590,000 1,400,000 ⾼位シナリオ 2015 as 100) Expected to Low低位シナリオ scenario people 109.4 (Medium scenario) grow 6 times 1,200,000 100.0 Approximately in the future 410,000 people 1,000,000 (Low scenario) 586,598 586,598 800,000 268,655 Labor shortage 170,700 170,700 in 2030 5~ Labor supply will 600,000 Current 10mn shortage peak in 2019, then decline 400,000 1mn 200,000 2000 2007 2016 892,511 892,511 918,921 923,273 856,845 0 <Ref.: Lines of codes of other products> 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 ■Android OS:12million lines ■F-35 fighter: 24million lines ■Microsoft Office 2013: 44million lines Source: Ministry of Economy, Trade and Industry "Measures for accelerating productivity improvement by use of IT", NXP Copyright © TechnoPro Holdings, Inc.
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