NGK Spark Plug (Niterra)
Corporate History & Strategy

Magoemon Ezoe, an engineer working on insulating components at NGK Insulators, recognized the potential of automotive spark plugs, which were gaining traction overseas in 1921, and initiated in-house research and development. However, spark plug insulators required electrical insulation performance, mechanical strength, and thermal shock resistance far beyond those of ordinary ceramics, necessitating an extended development period from raw material selection through the establishment of firing techniques. In 1926, 1,000 prototypes were produced but defects were discovered, and the decision was made to halt sales plans citing the need for thorough quality control.

Development of improved yields continued, and in 1930, manufacturing and sales of automotive spark plugs finally commenced. Approximately nine years elapsed from the start of research to commercialization, and even though the concept of adapting ceramic firing technology derived from insulator manufacturing proved correct, the technical hurdles to creating a viable product were substantial. Throughout the 1930s, as domestic automakers including Toyota Motor grew and domestic demand for spark plugs expanded, Ezoe's nine years of accumulated technical expertise began to function as a business foundation.

To meet growing demand accompanying the domestic production of automobiles, NGK Insulators decided to spin off its spark plug business and established NGK Spark Plug in 1936 with capital of one million yen. The headquarters factory was constructed adjacent to NGK Insulators, commencing operations with 259 employees. Magoemon Ezoe, who had been at the forefront of development for nine years, was appointed the first president, creating a structure in which the researcher directly served as the top executive.

The timing of NGK Spark Plug's establishment proved fortuitous. Under the wartime regime, imports from Bosch of Germany and AC of the United States were cut off, and domestic automakers had no choice but to switch to domestic procurement. NGK Spark Plug, as the sole domestic specialist manufacturer, attracted orders and expanded its operations by capturing wartime demand. The disruption of imports created a market monopoly opportunity for a newly established company.

During the war, the company also manufactured spark plugs for aircraft, and by March 1945, the workforce had swelled to 2,887 employees. However, with the end of the war, military demand vanished, and the company underwent a drastic adjustment, laying off approximately 2,600 employees and shrinking to about 200 workers. The rapid wartime expansion followed by sharp postwar contraction was a consequence of the demand structure's heavy reliance on military orders.

However, the mass production techniques and equipment operation experience accumulated during wartime were put to use again as the postwar automobile industry revived. What began as a division of an insulator manufacturer evolved through spin-off and import disruption to achieve a dominant position in the domestic market, forming the business foundation for NGK Spark Plug going forward. Ezoe's research, which began in 1921, culminated in the establishment of a company after more than 15 years.

The 2008 global financial crisis caused a sharp decline in semiconductor demand, significantly reducing IC package orders. NGK Spark Plug recorded a total of 26.6 billion yen in impairment losses on ceramic IC package manufacturing equipment across five domestic factories. Some manufacturing sites had no prospect of resuming operations, resulting in substantial write-downs of asset values. The structural contraction of ceramic demand due to materials transition, compounded by the demand collapse from the economic downturn, caused overcapacity to become suddenly apparent.

As a result, NGK Spark Plug fell into a net loss of 71.6 billion yen in FY2008. The ceramic manufacturing equipment that had been maintained since the late 1990s despite the ongoing transition to plastic was written off en masse, triggered by the financial crisis. The contraction of ceramic demand was a structural change, not a cyclical issue, but it was the external shock of the financial crisis that caused it to materialize all at once in the form of massive impairment charges.

In May 2009, NGK Spark Plug announced changes to its representative director lineup. Senior Vice President Kato, who had been overseeing the information and communications business (ceramic IC packages), was moved to an advisory role, while Kawahara and Kawashita, both from the automotive business background, were appointed as Representative Senior Vice Presidents. With the person responsible for the ICT business stepping down from the executive core, NGK Spark Plug shifted to a management structure focused on automotive-related businesses.

Simultaneously, the company embarked on restructuring its ceramic IC package operations. Manufacturing subsidiaries with deteriorated financial positions were consolidated into a single entity, and a policy of gradually scaling down ceramic IC package production was announced. The semiconductor package business that had been developed for approximately 40 years since 1967 was set on a path of contraction under the dual impact of materials transition and the financial crisis.

The changes in executive responsibility and business restructuring clarified the priorities within NGK Spark Plug's business portfolio. The company pivoted from a structure of growth based on the twin pillars of automotive spark plugs and semiconductor packages to a policy of concentrating resources on automotive-related businesses. Subsequent capital expenditure was tilted toward automotive operations, leading to the concentrated investment in automotive businesses under the 6th Medium-Term Management Plan in 2013.

The net loss of 71.6 billion yen and the 26.6 billion yen in impairment charges were the cost of having continued to maintain ceramic IC package manufacturing facilities. While the structural contraction of ceramic demand had been foreseeable since Intel's materials transition decision in 1996, it took more than 10 years to reach a decision on asset disposal and business downsizing. The result was that an external shock pulled the trigger on business withdrawal.

Following the 2009 restructuring of the ceramic IC package business, NGK Spark Plug had articulated a clear policy of concentrating management resources on automotive-related operations. With one of the former twin pillars—semiconductor packages—in decline, there was a need to position the remaining automotive spark plug business as the growth driver. The 6th Medium-Term Management Plan announced in 2013 translated this policy into specific numerical targets and capital expenditure plans.

The centerpiece of the plan was a target to increase spark plug production to 'one billion units' by the end of FY2020. The FY2013 capital expenditure plan committed approximately 46 billion yen to automotive-related businesses and promoted efficiency gains by consolidating production of each component at a single factory. Previously, the same components had been manufactured at different factories, but the transition aimed for concentrated production of major components (insulators, metal shells, terminal components, etc.) at one factory each.

The core of the production expansion plan was the Futano factory (Kani, Gifu Prefecture), newly established as the insulator production base. The first phase investment amounted to 28 billion yen, representing a major single investment for NGK Spark Plug. Against the backdrop of aging at the main Komaki factory, the Futano factory also served as a replacement for the Komaki facility.

The decision to build a new factory domestically rather than overseas was driven by the high technical difficulty of ceramic processing. As spark plug insulators are based on alumina firing technology, there was a rational basis for maintaining the production base domestically to leverage the accumulated technology and human resources. The decision prioritized the concentration of technical expertise over the lower labor costs available in emerging economies.

The 6th Medium-Term Management Plan and the establishment of the Futano factory marked a turning point that consolidated NGK Spark Plug's business structure into automotive operations. From the twin-pillar structure of 'automotive plus semiconductors' maintained for approximately 45 years since 1967, the company materialized its selection and concentration on automotive businesses through capital expenditure. Investment in semiconductor packages was scaled back, with the freed resources redirected to automotive operations.

With 28 billion yen invested in the Futano factory and planned investments layered across other sites, the company aimed to strengthen its global spark plug supply system. Ceramic firing technology, the same technological base, had seen its market shrink in semiconductor packages, but it remained a source of entry barriers in spark plugs. Amid a structure where the same technology met different fates in different markets, NGK Spark Plug chose to concentrate on the market where the technology remained effective.