DIC Corporation - Company History

Three ink rollers at the founding, and independence from imported pigment

In February 1908 Kawamura Kijuro (川村喜十郎) set up three ink rollers[1] at Honjo in Tokyo and began manufacturing and selling printing ink. The business traded as Kawamura Ink Manufacturing Works, renamed Kawamura Kijuro Shoten in 1912[2]. At the outset the work was processing: imported pigment and resin milled together and delivered to printing houses. In the Taisho years the firm drew up a plan to supply its own pigments and dyes, reached into the manufacture of high-grade pigments, and took on inks for offset, collotype and intaglio printing alike. The Great Kanto Earthquake of 1923 destroyed both shop and works, but reconstruction began at once and a new plant was completed the following year, in 1924[3]. It was a second start, sixteen years after the founding.

In 1925 the company succeeded in producing organic pigment in-house in Japan[4]. It is pigment that determines the colour of an ink, and for as long as that pigment is bought from outside, both the performance and the cost of the product are held in another firm's technology. Relying on imports leaves a maker at the mercy of exchange rates and of the supply position of overseas manufacturers, and the reproducibility of a shade cannot be worked out in one's own laboratory. By supplying its own, the company moved from a milling trade to a chemical company that synthesised colour itself. DIC's own integrated reports later name this year as the landmark second only to the founding. Every subsequent diversification derives from these two technologies: pigment, and the resin that disperses it.

Manufacturing split into two companies, and contraction under wartime control

In February 1937 the sole proprietorship was reorganised as a joint-stock company with capital of ¥1 million[5]. At that point the manufacturing operations were divided in two. The departments for tar intermediates, dyes and pigments became Nihon Senryo Yakuhin Seizo (日本染料薬品製造, Japan Dyestuffs and Chemicals Manufacturing), with a plant at Shimura in Itabashi Ward[6]. The printing-ink department was launched as Dainippon Ink Manufacturing Co. Each company was capitalised at ¥1 million, and the two were run as a single group while holding separate corporate identities. Pigments and dyes overlap in their raw materials, so operating them together allowed the firm to trace self-sufficiency back as far as the tar intermediates themselves. The design of a dyestuff-chemistry business holding everything from feedstock to finished product was written directly into the division of the two names.

Sales channels reached into the Asian mainland. A Shanghai office opened in May 1932[7], followed by Beijing in 1939 and Tianjin in 1940. Manchuria Ink was established in 1941 and Shanghai Godo Ink in 1942[8]. Branches and offices extended to Guangdong, Shanghai, Tianjin, Beijing, Mukden, Xinjing and Harbin, with plants at Shanghai, Tianjin and Mukden as well. Around 1941 some 60 per cent of an annual printing-ink output of 800 tonnes was being exported across East Asia[9]. Then, as the Pacific War intensified, controls on publishing tightened and demand for printing ink fell away sharply. Equipment that had lost its customers at home lost its outlets on the mainland along with them.

In 1944 the munitions production departments of Nihon Senryo Yakuhin Seizo were merged with the chemicals division of Kureha Spinning's Fukushima plant to form Kureha Chemical Industry, and the remaining departments were absorbed by Dainippon Ink Manufacturing. Capital, after a formal reduction to ¥250,000 paid in, stood at ¥3.1 million[10]. The dyestuff-chemistry design assembled through the two-company structure was dismantled inside the wartime allocation of resources. The departments separated off would go their own way as Kureha Chemical Industry. In March 1945 the head-office works at Honjo burned down in an air raid; production moved to the Tokyo plant at Shimura and the head office moved there too. On 15 August that year, at the end of the war, the Shimura plant was put in order and production of ink, pigments and dyes resumed[11].

The company at listing, and the next move already decided

After the war the publishing boom and the increased issue of banknotes brought demand for printing ink back quickly. The company widened its footprint — opening a Nagoya office, starting up the Nagoya plant, opening the Osaka plant — and on 29 May 1950 listed on the Tokyo Stock Exchange[12]. At listing its capital was $83,333 (¥30m) and 600,000 shares were listed. Total sales for the year to March 1950 were $697,167 (¥251m), of which printing ink accounted for $551,528 (¥199m). Employees, sales offices included, numbered 500[13]. Printing-ink output stood first nationally at roughly 14 per cent of the country's total, and the customers were printing houses such as Dai Nippon Printing together with government demand from the Monopoly Corporation, the Printing Bureau and the Railway Bureau[14].

By the time of the listing the next move had already been decided. Of a $83,333 (¥30m) capital increase resolved at an extraordinary general meeting that August, $55,556 (¥20m) was earmarked for a new company[15], and an application for a joint venture with Reichhold Chemicals of the United States was before the Foreign Investment Committee. The shareholding was to be 55 per cent Dainippon Ink and 45 per cent Reichhold, with capital of US$60,000. The plant was to occupy part of the Osaka works and to make synthetic resins and speciality pigments for paints, printing inks, plywood, paper and textile products[16]. The money raised by listing was going not into more ink, but into resin — the other raw material of ink.

How the Reichhold joint venture turned an ink maker into a resin maker

In February 1952 the company set up Japan Reichhold Chemicals (JRC) as a joint venture with Reichhold Chemicals, the American synthetic-resin maker[17], and began producing a range of synthetic resins ahead of its rivals. Synthetic resin is the other principal raw material of ink alongside pigment, and at the same time a material that opens out into paints, adhesives, foundry work and textile finishing. An investment made to supply its own feedstock became, in the same movement, the entrance to a new market. The pattern was the same as the pigment self-sufficiency of 1925; the difference was that this time the technology was brought in from a partner. JRC took its shares over the counter in November 1960 and listed on the second section of the Tokyo Stock Exchange in November 1961[18].

In October 1962 the company absorbed JRC and changed its name to Dainippon Ink and Chemicals, Inc. The resin business, begun with a partner, was taken inside, and chemical industry was added to the name[19]. The effect showed in the figures. By 1968 capital stood at $16.7M (¥6bn) and the workforce at 5,800, and in printing ink the company was the largest in Japan and the third largest in the world. Annual sales in the ¥70 billion range were in sight, and it counted among the top ten firms of the chemical industry[20]. In the year to 1977 the resin division's sales of about $219.8M (¥57bn) made up 24 per cent of the total, ahead of the ink division's $186M (¥48bn) and 20 per cent[21]. Ink, the first word of the company's name, was no longer its largest business.

Downstream as a self-definition, and the economics of small lots and many grades

The method of diversification was set out plainly by the second president, Kawamura Katsumi (川村勝巳), in a lecture in October 1974[22]. Confine the company to chemicals, and within chemicals extend into businesses organically related to one another. He set this against the alternative of scattering into unrelated trades and weakening the whole. Because the firm handled secondary applied products that took 70 per cent of their raw materials from petrochemicals, its plant was comparatively light and the capital it had to sink comparatively small[23]. Leave the basic chemicals to the zaibatsu-descended integrated chemical companies, and turn the materials that come from them into products by knowledge and by service. Kawamura called this position downstream, describing it as an industry standing at the very water's edge of final demand.

That position determined how the products were made as well. The company's range ran to some 160,000 grades sold to about 70,000 customers[24], with almost nothing mass-produced. Printing ink alone multiplies out across press speed, paper smoothness, plate type and colour combination. Meeting orders that fine leaves no room for dealers, so selling had to be direct[25]: in the late 1970s there were about 1,100 salesmen supported by about 1,000 technical-service staff. It was a labour-intensive trade, and one that could not stand up without a gross margin to match. Seen the other way round, it simply did not compete on the same ground as firms cutting prices through the efficiency of mass production.

Technologies derived from ink — epoxy, liquid crystal, spirulina

The two technologies, resin and pigment, threw off one product after another. In October 1968 commissioned research on the development of epoxy resin from a B-B fraction feedstock, undertaken for the Research Development Corporation of Japan, was certified successful; the company obtained exclusive rights to it and commercialised it in 1971[26]. Shell held an overwhelming share of epoxy resin worldwide and 50 per cent in Japan, but with speciality grades as its weapon the company worked its way to about 20 per cent[27]. In May 1973 it developed a nematic liquid crystal that exceeded existing standards in operating temperature range, contrast and lifetime, and won adoption in calculators[28]. Liquid-crystal materials were a field derived from the molecular design of pigments.

Some derivations failed. Petroprotein — protein made from petroleum by microorganisms — was refused manufacturing approval in Japan, so the company chose instead to build a plant with an annual capacity of 60,000 tonnes through a joint venture in Romania. It was completed in the spring of 1979, but local feedstock production did not keep pace and operations were delayed[29]. What it took up in place of that was spirulina, a high-protein spiral alga. Commercialisation began in July 1974[30], and a plant was built outside Bangkok in Thailand to open up uses in health foods and food colouring. A technology not accepted at home was to be brought to fruition abroad; that too stumbled, and the market was found in the technology next door.

The speed of the expansion shows in the figures. Sales of $13.6M (¥5bn) in 1957 grew to about $933.9M (¥240bn) in 1977 — roughly forty-nine times over twenty years. Nominal gross national product over the same period rose sixteenfold, so the company outran the growth of its market[31]. At the end of May 1978 capital was $89.9M (¥18bn), employees numbered 5,335 and total assets stood at $1.1B (¥226bn). Equity, however, was only $189.6M (¥38bn), a ratio of 16.9 per cent[32], and the weight of front-loaded investment and land holdings remained as an interest burden. Against Toyo Ink Manufacturing, an ink maker in the same industry that had stayed with its core business, the difference in interest alone came to nearly ¥6 billion a year[33].