Toray Industries - Company History

Water quality chose the site, and a technical culture began

Rayon — artificial silk — first reached Japan as a commercial product in 1905[1], and from then on demand grew at home for it as a new material to supplement natural raw silk, with imports rising year after year. Against this widening market, Mitsui & Co. drew up a plan to start a rayon manufacturing company of its own, and settled on building a viscose-process rayon yarn works on the shore of Lake Biwa in Shiga Prefecture[2]. At the inaugural general meeting, held in January 1926 inside Mitsui & Co.’s offices at Nihonbashi in Tokyo, Yasukawa Yunosuke (安川雄之助), who had done the work of bringing the company into being, was proposed as chairman[3]. Toyo Rayon was born out of that Mitsui & Co. business plan, and it took as its starting point the raising from nothing of a rayon yarn works aimed at the highest standard in the world[4].

In January 1926 Toyo Rayon was incorporated as a subsidiary of Mitsui & Co. with capital of ¥10 million[5]. Mitsui & Co. chose the chemical-fibre business as an outlet for the profits it had accumulated during the First World War, expecting demand for a new material that would supplement natural fibres. In choosing the site for the works the company surveyed water quality at more than twenty locations across Japan, and settled on Otsu in Shiga Prefecture as its production base on the judgement that the water of the Lake Biwa system suited the manufacturing process best. As for putting Toyo — “the Orient” — at the head of the name, Maeda Katsunosuke (前田勝之助) recalled it this way: The reason “Toyo” came to be attached to the front of the name was that, in the founding years at the end of the Taisho era, man-made silk production was thought to be a fairly risky business, and we anticipated that failure would cause trouble for the Mitsui family and tried to avoid that in advance. In other words, Toray was what you would now call a venture business.[6]. The origin of the technology-first management culture the company would later build was formed in these founding years.

In August 1927 the Shiga works spun its first rayon yarn[7], and from the following year, 1928, full production began on forty spinning machines. By 1931 the company had reached one of the leading domestic shares in rayon; in 1938 it built the new Seta works to widen capacity[8]; and in 1941 it merged three domestic companies to extend its production base to a nationwide scale[9]. Rayon held steady demand as a substitute for the natural fibres of the day, and even under the harsh economic conditions of the Great Depression and wartime controls it could keep a certain outlet for its output. It was not only the earnings base of Toray’s founding years but also the source of the retained earnings that funded the later move into synthetic fibres and diversification, and as a management resource it held an important position over a long period. By 1962 the company had built up a standing in rayon such that it was described as running away with the field even in the retreat from rayon[10].

Buying only the patents, and the self-reliant technology that grew from it

In June 1951 the company concluded a nylon technology alliance contract with DuPont of the United States. It was a decision to pay US$3 million as a prepaid royalty — $3M (¥1bn) at the exchange rate of the day — an investment larger than the company’s capital of $2.1M (¥750m). The contract centred on acquiring the right to work the patents and also covered technical assistance towards raising quality and lowering cost, but much of the mass-production technology itself had to be raised by the company’s own effort, and the actual production start-up demanded trial and error and the ingenuity of engineers on the floor. An in-house article the following year, in 1952, spoke with candid urgency of how the success or failure of Amilan fibre would decide whether the company rose or sank; the prototype of obtaining technical assistance and still having to raise the technology oneself was cut into the company during this period of domesticating nylon[11]. That hard experience took root at Toray as a management principle of establishing technology independently, later became the wellspring of its accumulated technology, and formed the origin of the organisational culture that would sustain forty years of patient technical investment in carbon fibre.

In April 1951 nylon production came fully on stream at the Nagoya works, building a second pillar of business after rayon. In 1953 the shop price of domestically produced nylon goods halved from $11 (¥4,000) to $6 (¥2,000) for a blouse, falling into the same bracket as pure-silk crêpe de Chine and entering its phase of market diffusion[12]. In 1957 the company brought in polyester fibre technology from ICI of the United Kingdom and put in place an arrangement to sell it under the Tetoron trademark as a joint industry undertaking with Teijin. Having secured the two pillars of synthetic fibre, nylon and polyester, it converted its business structure from the rayon maker of its founding years into a synthetic-fibre maker representative of post-war Japan, and expanded on the wave of rising clothing demand during the high-growth years. In 1962 it opened new Basic Research Laboratories, completing a management structure for pursuing research and development in an organised way, and the distinctively Toray style of nurturing technology over the long term took root as an institution.