Teijin
Corporate History & Strategy

In the early 20th century, while demand for silk products was strong in Japan, the supply system relying on silkworms was high-cost with limited supply capacity. Naokichi Kaneko, who managed business operations at Suzuki Shoten, noticed artificial silk (rayon, commonly called jinken) at foreign settlements and identified the possibility of supplying fibers with the same applications as silk through chemical manufacturing methods. Artificial silk was characterized by not depending on silkworms and using domestic pulp as raw material.

At the time, Suzuki Shoten was engaged in a wide range of businesses including trade, manufacturing, and resources, and was seeking new growth areas. Compared to businesses with high dependence on imported raw materials like cotton, artificial silk presented different conditions in terms of raw material procurement. Kaneko conceived a plan to establish artificial silk technology as an independent business, judging that there was room for a trading company to lead the conversion of research outcomes into business.

Naokichi Kaneko, from Suzuki Shoten's position, supported the research of Itsuzo Hata, a lecturer at Yonezawa Higher Industrial School conducting artificial silk research, and Seita Kumura, his classmate researching leather. Kaneko handled fundraising and business design while Hata and Kumura led technology development, and Teikoku Rayon was established in Yonezawa in 1918. This establishment was a clear decision to transition artificial silk technology from the research stage to commercial production.

The Yonezawa plant at the time of establishment was a pilot production facility, not equipped for mass production. Therefore, the next stage premised on expanding production scale was anticipated from the time of establishment. The construction of the Hiroshima plant, which proceeded around 1919, was positioned as an extension of the mass production plan envisioned at the time of Teikoku Rayon's establishment, and the company transitioned from pilot to full-scale production in a short period.

Teikoku Rayon had gained some confidence in mass-producing artificial silk through the operation of the Hiroshima Plant, but supply capacity still faced constraints against expanding demand. While equipment additions and process improvements were being made at existing plants, there were limits to increasing production scale, and the next production site premised on equipment consolidation and scale expansion became a subject for consideration.

In particular, artificial silk was a business where the capital investment ratio was high and where process continuity and capacity utilization determined productivity. With dispersed plant layouts, efficiency in process management and equipment renewal tended to decline, and there were concerns that supply growth would be constrained during demand expansion phases. Rather than extending the conventional approach, a concept for a new site that would significantly increase production capacity emerged as a realistic option.

In response to this situation, Teikoku Rayon decided to construct a large modern plant in Iwakuni. Iwakuni had suitable conditions for a mass production plant in terms of land availability, water resources, and transportation, and equipment scale exceeding that of conventional plants was planned. This was not merely adding production capacity but a decision to transition to a mass production system with consolidated processes.

The construction of the Iwakuni Plant adopted a design anticipating future equipment expansion, and was built on the premise that production scale would be raised at once rather than incrementally. Through this construction, Teikoku Rayon moved beyond the stage of experimental expansion of the artificial silk business and stepped into a phase of competing on supply volume. The Iwakuni Plant was positioned as a core facility supporting subsequent business development.

Since its establishment, Teijin had been operated as part of Suzuki Shoten's business group, depending on the trading house's creditworthiness for funding and business development. The rayon business had been expanding production scale against the backdrop of growing demand, and large-scale capital investments including the Iwakuni Plant were being made. This allowed Teijin to build presence in the chemical fiber field, but its financial structure remained strongly influenced by its relationship with Suzuki Shoten.

In 1927, the Showa Financial Crisis erupted, and Suzuki Shoten faced cash flow deterioration, making business continuation difficult. Suzuki Shoten's credit uncertainty spread to trading partners and financial institutions, affecting affiliated companies as well. Teijin was no exception, and it entered a phase requiring a review of its shareholder structure and management system.

Following Suzuki Shoten's bankruptcy, Teijin was no longer able to continue its group-dependent management. Meanwhile, rayon was expected to see growing demand centered on apparel use, and the viability of the business itself was valued by the market. Under these circumstances, Teijin, with the support of some shareholders and financial figures, decided to restructure its management foundation through a change of major shareholders.

This change moved Teijin away from Suzuki Shoten's influence and transitioned it to an independently operated corporate structure. While the reorganization of capital relationships increased management freedom, it also meant the company would bear responsibility for investment recovery and business continuation on its own. The 1927 change of major shareholders was not merely a change in capital composition for Teijin but became a turning point toward pursuing growth as an independent company centered on the rayon business.

In the mid-1950s, synthetic fibers were rapidly spreading in Japan's textile industry, with the market expanding primarily in apparel applications. Toray was advancing nylon mass production, achieving sales growth and market share gains through expanded supply capacity. Meanwhile, Teijin's main business was rayon, and a full transition to synthetic fibers remained an unresolved management issue. In the nylon field, leading companies had made concentrated investments, and late entry entailed increased capital investment and intensified price competition. Teijin was considering options to avoid head-on competition in the same material and was exploring opportunities to enter the synthetic fiber market through materials that competitors had not yet mass-produced.

In November 1955, Teijin constructed the Matsuyama Plant and began mass-producing acetate fiber, a chemical fiber made from wood pulp. The company chose a different technology route from nylon, making a concentrated investment aimed at expanding sales in a field with few competitors. This decision also considered the continuity with raw material procurement and process management accumulated through the rayon business. However, even after mass production began, acetate had limited applications and the market did not expand. Three years after production began, semi-annual sales stood at only 900 million yen, accounting for a small share of total company sales. The main rayon business was also losing market share due to the spread of synthetic fibers, and Teijin's sales stagnated throughout the 1950s.

In the mid-1950s, Japan's textile industry was entering an expansion phase for synthetic fibers following nylon. Toray had been leading with nylon, achieving sales growth through mass production and distribution networks. Meanwhile, Teijin's concentrated investment in acetate had not translated into sales growth, and rebuilding its position in synthetic fibers had become a challenge.

Overseas, polyester was expanding primarily for apparel applications, and the patent was held by ICI of the United Kingdom. For Japanese companies entering as latecomers, sole technology licensing was constrained in terms of negotiating power and capital investment. Therefore, the method of technology introduction itself was organized as an issue that would determine future market share and profitability.

In January 1957, Teijin signed a technology licensing agreement with ICI and decided to enter the polyester fiber business. Toray also participated in this alliance, with both companies choosing to jointly introduce ICI's technology. By making it a two-company joint arrangement rather than sole negotiation, the aim was to stabilize patent usage terms and quickly build a supply system in the Japanese market.

For Teijin, this decision was also a review of the business portfolio following the stagnation of acetate investment. Reflecting on having been a latecomer in nylon, the company chose to secure initiative from the technology introduction stage in the next synthetic fiber and participate in market formation alongside Toray. The decision aimed for a state approaching technology monopoly at the initial stage rather than competition.

In June 1958, Teijin began mass-producing polyester fiber at the Matsuyama Plant and started selling under the 'Tetron' brand name. Polyester was suitable for apparel applications in terms of dyeability and durability, and the market expanded. Through the first half of the 1960s, Teijin grew sales as a synthetic fiber manufacturer centered on polyester.

As a result, the revenue structure that had stagnated with acetate improved, and presence in the synthetic fiber field recovered. By forming the polyester market alongside Toray, Teijin recovered from its delay in technology introduction and returned to a sales growth trajectory. The design of the technology alliance and entry timing directly contributed to the business recovery.

In the early 1960s, nylon had become widespread in both apparel and industrial applications in the domestic synthetic fiber market. Toray had been advancing nylon mass production since the early 1950s, leading market supply over an extended period. Nylon was recognized as a segment with large demand within synthetic fibers, backed by abrasion resistance and versatility.

Meanwhile, with overall synthetic fiber market expansion, opportunities for late entrants emerged by the 1960s. Teijin, while developing its polyester business, recognized the portfolio imbalance of not having entered nylon. Nylon entry was considered as a complementary option, but since first-movers had built mass production facilities and distribution networks, it would be a decision accompanied by intensified competition.

In July 1962, Teijin signed a technology alliance with Allied Chemical of the United States and decided to enter the nylon synthetic fiber business. This was an entry approximately 10 years after Toray began nylon mass production, and the policy was to build a mass production system in a short period through technology licensing. The existing Mihara Plant was chosen as the mass production site, where nylon manufacturing equipment was installed while utilizing facilities previously used for rayon production.

During the same period, other major textile companies were also entering the nylon business. Following Toray, Teijin, Kanebo, Kureha-bo (Toyobo), and Asahi Kasei all established mass production facilities in quick succession. As a result, the domestic nylon market rapidly became a state where multiple companies coexisted, with supply capacity increases and competition intensification proceeding simultaneously from the entry stage.

Teijin's nylon business expanded sales in the initial entry phase. By 1965, nylon sales reached 9.2 billion yen, expanding at a fast pace for an initial ramp-up after mass production began. However, sales growth subsequently slowed, and contribution to overall company performance remained below that of polyester fiber 'Tetron.'

Behind this was the increase in supply capacity due to concentrated entries in the early 1960s. Companies invested additional capital aiming for market share expansion and expanded equipment, resulting in chronic price competition. While nylon's market size expanded, improving profitability was difficult even with the latest technology, and the entire synthetic fiber field was transitioning to a business environment where it was hard to profit.

In the late 1960s, production capacity for polyester and nylon was expanding in the domestic synthetic fiber market, with successive entries by companies. While the market size was growing, the increase in supply capacity led to price competition, making profitability improvement difficult. At Teijin as well, sales growth from the textile business was slowing, and sustaining medium-to-long-term growth with existing businesses alone was becoming increasingly difficult.

Shinzo Oya, the president at the time, had been leading Teijin since the postwar era and recognized breaking away from textile dependence as a management challenge. With synthetic fibers entering a maturing phase, Teijin was pressed to broaden its business portfolio. Risk-taking into new businesses was positioned as a means to explore revenue sources to replace textiles.

In 1968, Teijin established the 'Future Business Division' as an internal organization to build a structure for promoting new businesses. This policy was driven top-down by President Oya, and in addition to internal personnel, approximately 100 people were recruited mid-career from outside and deployed as a dedicated organization for new business development. The Future Business Division was given the role of launching numerous businesses, separated from existing operations.

Target fields for new businesses and withdrawal criteria were not clearly defined, and entry into a wide range of fields proceeded through subsidiary establishment and joint ventures with overseas companies. Business areas spanned meat processing, agrochemicals, chemical products, resource development, imported car sales, electronic equipment, education, and ranch operations, among others. In 1970, the Petroleum Resource Development Division was established to address the oil and natural gas sector, and in 1977, the Pharmaceutical Business Division was created under a policy emphasizing the pharmaceutical domain.

Throughout the 1970s, more than 50 new businesses were developed under the Future Business Division, but most did not contribute to business performance. Inter-business relevance was lacking, and the dispersion of management resources did not translate into company-wide sales growth or ROI improvement. However, in the chemical products and pharmaceutical fields, certain business continuity was maintained, and pharmaceuticals in particular was positioned as a domain where chemical synthesis technology cultivated in textiles could be applied.

After Shinzo Oya passed away while serving as president in 1980, Teijin dismantled the Future Business Division and began rationalizing new businesses. Throughout the 1980s, withdrawal from the majority of new businesses except pharmaceuticals and some chemical products proceeded. As a result, the diversification effort centered on the Future Business Division ended in failure except for pharmaceuticals, and Teijin was pressed to reconstruct its business portfolio.

In the late 1970s, the domestic textile industry had entered a prolonged demand stagnation. After the 1973 oil shock, apparel demand was sluggish, and natural fibers, chemical fibers, and synthetic fibers alike were all forced to adjust production. Additionally, following the 1971 Nixon Shock, the yen appreciated against the dollar, putting Japanese textile manufacturers that had premised domestic production at a price disadvantage.

As a result, competition from emerging-market manufacturers in South Korea, Taiwan, and China intensified further in the labor-intensive textile business. At Teijin as well, profitability of the textile business declined, and maintaining production capacity itself was weighing on earnings. Simultaneously continuing to maintain existing plant operations and employment had become difficult, and a review of business scale was unavoidable.

In 1978, Teijin decided to close the Nagoya Plant as part of textile production adjustment. The plant was located in Minami-ku, Nagoya, in front of JR Kasadera Station, and had served as a textile production facility for many years. After the plant closure, the site was redeveloped and later used as Nagoya City General Gymnasium.

Teijin also implemented company-wide workforce reductions. Over six months from April to October 1978, approximately 2,650 employees were reduced on a non-consolidated basis, equivalent to about one-quarter of the workforce. While expanded job transfer assistance programs and natural attrition were utilized, the speed and scale of reductions had significant impact both internally and externally. Around the same time as the workforce reductions progressed, anonymous documents criticizing management circulated internally, exposing tensions between management and the workplace.

In the late 1970s, Teijin's textile business was in a state where sales growth did not translate into profitability improvement, affected by demand stagnation and price competition. In synthetic fibers, the number of entrant companies had increased, and equipment capacity expansion invited sales competition, making it difficult to secure returns commensurate with invested capital.

During the same period, the numerous new businesses led by the Future Business Division had increased management burden due to overextension across too many fields, and rationalization of poorly performing projects became a discussion point. Teijin was entering a phase of reviewing its business portfolio and resetting where to concentrate R&D spending and personnel.

Around 1980, Teijin reviewed its future business development policy and solidified a direction centering on the medical and pharmaceutical fields. The president at the time, Tomoo Tokusue, advocated a priority-based approach to future business development, indicating a policy of proceeding with R&D as the focus. He planned to follow this direction for about five years and expected results.

Pharmaceuticals was a field requiring long lead times from research initiation and increasing capital burden from R&D spending and distribution network development, so the company adopted the decision to concentrate capital investment in pharmaceuticals rather than trying to do 'this and that.' A policy of also introducing overseas technology as needed and attempting combinations with in-house technology was also noted.

In February 1980, Teijin launched the new drug 'Venoglobulin.' Pharmaceutical research had spanned approximately 10 years, and Venoglobulin became a project where R&D investment translated into actual sales. A different revenue opportunity in the form of pharmaceuticals was added to the earnings base that had been centered on textiles.

However, pharmaceuticals required additional R&D and distribution infrastructure even after product launch, making it a business where invested capital was difficult to recover from short-term sales alone. As a result, Teijin proceeded to rationalize future businesses while moving toward treating pharmaceuticals as a core investment domain.

In the late 1990s, Teijin was facing declining valuation in the stock market. From 1997 onward, the stock price was stagnant, and the price-to-book ratio (PBR) fell to 0.3x. This was a level where corporate value fell below liquidation value, a juncture where the very approach to management was being questioned. Internal analysis identified weakness in investor communication, in addition to the insufficient conveyance of responses to environmental changes to the market.

At the same time, while a goal-setting and performance evaluation system had been introduced for employees, no system existed for evaluating the president. The awareness that the top should also be evaluated without exception as a salaried manager was shared internally and externally, and a mechanism to increase transparency of management oversight emerged as an issue.

In April 1999, Teijin introduced an Advisory Board. Composed of six members centered on those with presidential experience, including former DuPont Chairman John Krol and Kikkoman President Yuzaburo Mogi, the board was tasked with commenting on presidential performance evaluation and management policy. If the evaluation results warranted it, the board could even recommend presidential dismissal, making this a bold initiative for a Japanese company.

The board met several times per year, with discussions based on advance materials regarding the progress of management reform and medium-term plans. The aim was to ensure that management decisions were not completed solely by internal logic, by continuously incorporating external perspectives to advance management reform including capital efficiency and asset utilization. Teijin clarified its management accountability and took a stance emphasizing dialogue with the market.

In the late 1990s, Teijin was trailing Toray in the carbon fiber field, which had attracted attention as a high-performance material. With demand growth anticipated primarily for aircraft applications, carbon fiber was recognized as a growth domain distinct from existing textile operations and as an issue in the business portfolio. However, a startup from scratch required time and invested capital in terms of equipment investment, customer development, and technology accumulation.

At this point, Toho Rayon, as a subsidiary of Nisshinbo, possessed a business foundation for carbon fiber production and technology. For Teijin, acquiring production equipment and technology simultaneously through equity participation in an existing player rather than in-house R&D alone was organized as a realistic response.

In June 1999, Teijin acquired shares from Nisshinbo and took an equity stake in Toho Rayon. The purpose was to acquire carbon fiber production capacity and technology, with the intent to close the gap with Toray in a short period. In February 2000, a majority stake was acquired, and in July 2001, the company was renamed Toho Tenax, positioning the carbon fiber business as its core.

In 2006, capital expenditure totaling over 20 billion yen was implemented at the Mishima site and U.S. operations to expand production capacity. In August 2007, full subsidiary status was achieved for 38.2 billion yen, transitioning to integrated operations. However, the invested capital accompanying business expansion was substantial, and in 2013, impairment losses of 29.4 billion yen were recorded, primarily related to carbon fiber goodwill.

In the late 1990s, Teijin was facing declining profitability in commodity textile businesses. Meanwhile, high-performance materials such as aramid fiber and carbon fiber were anticipated to see demand growth centered on IT infrastructure and automotive safety components. However, in these fields, leading companies had secured production capacity and customer bases, and entry through new facility construction as a latecomer was disadvantageous in terms of invested capital and time.

Teijin possessed its own aramid fiber 'Technora,' but production scale was limited, and competitiveness in mass-production applications remained a challenge. In particular, in applications such as optical fiber cladding and seat belts, DuPont of the U.S. and European manufacturers led the market, and whether the company could position itself among the world's top players in high-performance fibers would determine the future business portfolio.

In October 2000, Teijin acquired the para-aramid fiber 'Twaron' business from Accordis of the Netherlands. Rather than in-house capacity expansion, this was a decision to acquire production capacity and customer base through M&A, aiming to rapidly achieve a world-leading market share position. The acquisition included existing factories, technology, personnel, and distribution networks.

At the time, Twaron had the second-largest production scale after DuPont, and the acquisition dramatically expanded Teijin's aramid fiber production capacity. Negotiations extended over multiple years with adjustments over price and business carve-out terms. After the acquisition, a dispute arose over tax treatment interpretations, which developed into litigation, but a settlement was reached in 2006.

The acquisition of the Twaron business placed Teijin in contention for the number one or two position globally in aramid fiber. Sales expanded in applications such as optical fiber and automotive safety components, and high-performance fiber was positioned as a priority business. The ability to utilize existing facilities contributed to shortening the time for invested capital recovery.

However, post-acquisition integration required cost and time. Tax issues and organizational management adjustments arose, and risks unique to M&A materialized. Nevertheless, Teijin clearly adopted M&A as a primary means toward the goal of reaching a world-leading position in high-performance materials. This case became symbolic of the company's selection and concentration.

In the 1980s, despite a large patient population, hyperuricemia and gout were not high-priority diseases for pharmaceutical development. Existing treatments had been used for many years, and as a drug discovery theme through a novel mechanism of action, the field attracted little attention. At Teijin Pharma as well, the research theme did not rank high in priority, and the allocation of limited research resources across domains was constantly debated.

Meanwhile, against the backdrop of dietary changes and aging, the potential increase in hyperuricemia patients was noted. Elevated uric acid levels were known to be associated not only with gout but also with renal impairment and cardiovascular disease, and expansion of medical needs in the future was anticipated. Including the point that it was a disease area with few competitors, there was room for consideration as a research subject from a long-term perspective.

At Teijin Pharma, research on hyperuricemia treatment began as a time-limited project. The initial research team was extremely small, with the number of responsible researchers near just one. During a period when screening numerous compounds failed to yield highly effective candidates, the appropriateness of continuing the research was questioned.

Nevertheless, through voluntary cooperation from internal and external researchers, with repeated joint experiments and reviews, the synthesis of febuxostat, a compound showing high activity, was achieved in 1991. Following preclinical testing to confirm safety and quality, the project advanced to clinical trials in 1996. The process toward seeking approval intensified approximately 8 years after research began.

In May 2011, Teijin Pharma launched Feburic tablets for gout/hyperuricemia treatment. Compared to conventional drugs, its effectiveness in lowering uric acid levels was confirmed, and a distinguishing feature was the approval covering hyperuricemia itself as an indication, not just gout. This expanded the prescription population beyond gout patients to include latent patients.

Feburic's sales progressed both domestically and internationally, significantly contributing to the healthcare business's revenue and profits. At its peak, it became the largest product in Teijin's pharmaceutical business, positioned as a revenue source replacing textiles. As a Japan-originated new drug, overseas licensing also progressed, establishing a business model encompassing from drug discovery to global deployment.

In the mid-2010s, the automotive industry was seeing increased demand for vehicle lightweighting against the backdrop of strengthening environmental regulations. With fuel efficiency regulations and advancing electrification, composite materials attracted attention as metal-replacement materials. Components using glass fiber and carbon fiber were expected to see expanded adoption in structural parts and interior/exterior applications.

Teijin had carbon fiber as a core material but in the automotive field was limited to material supply, with limited customer touchpoints at the finished-component level. The concept was organized that by incorporating a parts manufacturer with direct transactions with automakers and mass production capability, the company could develop from materials through to components as an integrated offering. Automotive materials was positioned as the next growth area.

In January 2017, Teijin acquired Continental Structural Plastics, a U.S. automotive parts manufacturer, for approximately 85 billion yen, acquiring all shares. CSP had North American automakers as primary customers and mass-produced structural parts using glass fiber composites. Teijin aimed to expand sales by deploying its own carbon fiber materials through the company's distribution channels.

Subsequently in 2018, it acquired Brink HD, a German automotive interior materials manufacturer, for approximately 9.5 billion yen. Through the acquisition of this company, which handled interior parts such as acoustic insulation materials, Teijin came to have automotive parts manufacturing bases in both the U.S. and Europe. The decision was to build a system covering materials through to parts and concentrate investment in the automotive materials business.

After the acquisitions, Teijin integrated the automotive parts business and consolidated overseas materials operations under Teijin Automotive Technologies in 2021. The company advanced unification of management systems and branding while aiming to expand the automotive OEM business. However, production efficiency declines and difficulties in securing labor materialized, centering on U.S. operations.

In particular, the investment required for equipment renewal and process improvement exceeded expectations at the time of acquisition, weighing on earnings. Equipment aging at existing facilities and operational challenges became a phase requiring serious capital investment post-acquisition, creating divergence from initial ROI assumptions. As a result, impairment losses of 15.3 billion yen were recorded for the U.S. materials business in the fiscal year ending March 2023. While the automotive materials market expanded, the insufficient anticipation of investment burden needed to maintain and strengthen the parts business remained as a profitability challenge.

Throughout the 2010s, the largest product in Teijin's pharmaceutical business was the hyperuricemia treatment Feburic. At its peak, it recorded annual sales of approximately 38 billion yen, supporting the overall healthcare business's earnings. However, the product was expected to see patent expiration in 2022, with substantial revenue decline from generic drug entry being unavoidable.

At the time, Teijin lacked a promising new drug pipeline, and creating a large-scale product to replace Feburic was difficult in the short term. In the pharmaceutical sales business, maintaining the sales organization was essential, and a sharp decline in sales scale posed risks in both organizational and promotional dimensions. This necessitated consideration of means to supplement sales scale, including the introduction of other companies' products.

In April 2021, Teijin acquired domestic marketing rights for four diabetes treatment drugs from Takeda Pharmaceutical. The products were Nesina tablets, Liovel combination tablets, Inisync combination tablets, and Zafatek tablets, with the acquisition price of approximately 133 billion yen. This represented the largest capital investment in the history of Teijin's pharmaceutical business.

Takeda Pharmaceutical, while pursuing financial improvement after its Shire acquisition, had indicated a policy of removing diabetes treatments from its focus areas. The company was seeking a buyer for marketing rights in this domain from which it had already withdrawn R&D, and Teijin stepped in. Teijin positioned the lifestyle disease area as a priority field and made the acquisition decision based on the ability to utilize existing sales networks.

After acquiring the marketing rights, Teijin secured annual sales of approximately 24.8 to 27.5 billion yen from the four diabetes treatment drugs. This was roughly equivalent to the revenue decline anticipated from Feburic's patent expiration, and in sales terms, the impact was offset. A sharp contraction in the scale of the pharmaceutical sales business was avoided.

However, the diabetes treatment drug market was also expected to potentially shrink in the future, and all acquired products were product groups in their mature phase. This investment was strongly characterized by the purpose of maintaining the operating base rather than growth through drug discovery. Teijin's pharmaceutical business succeeded in securing sales stability but left the medium-to-long-term growth strategy as a continuing issue.