Hitachi — Company History

Founded in a mine repair shop, and separation as a joint-stock company

In 1908, at the Hitachi copper mine of the Kuhara Mining Partnership run by Kuhara Fusanosuke (久原房之助), Odaira Namihei (小平浪平), head of the machine-shop section, began manufacturing electrical machinery for the mine's own use. Demand for electrical machinery was thin at the time, and producing it domestically was reckoned a formidable undertaking in technology and in materials alike; Odaira persisted nonetheless, believing that building up this industry was precisely what would advance Japanese industry as a whole. The following year, 1909, he completed three five-horsepower induction motors. In 1910 he opened a repair works attached to the Hitachi mine, starting from premises of 130 square metres and a workforce of five. Odaira held a long-standing wish: that electrical machinery, which Japan imported from first to last, should be made by Japanese hands.

The repair works did not confine itself to the mine's own consumption. It widened its products to transformers, motors and generators, and began taking orders from outside. In July 1911 it was separated from the Hitachi mine as the Hitachi Works of the Kuhara Mining Partnership, moving to a structure devoted to general industrial machinery. In October 1918 it absorbed the Tsukudajima Works to form the Kameido plant, and the existing works was renamed the Hitachi plant. Kuhara regarded the electrical division as no more than an adjunct to the mine and was reluctant to diversify; Odaira argued for separation, and in February 1920 the business became Hitachi, Ltd. — a joint-stock company with capital of ¥10 million holding both the Hitachi and Kameido plants, independent of Kuhara Mining.

In February 1921, the year after independence, the company took over the Kasado shipyard from Nihon Kisen, then in financial difficulty, and opened it as the Kasado plant; from here begins the business mix in which an electrical manufacturer also builds railway rolling stock. In 1926 it exported thirty electric fans to the United States, its first export, and its markets thereafter extended across China, India, Burma, Thailand, the Near East, Africa, Australia, South America and the Soviet Union. In May 1935 it took an equity stake in Kyosei Reiki Kogyo, widening its products into refrigeration and air conditioning, so that motors, generators and transformers were joined by rolling stock and refrigeration equipment.

Laboratories of its own, and wartime expansion of the plants

The large firms of Japan's heavy and chemical industries then depended heavily on foreign technology, put little effort into research of their own, and paid no attention to Japan's universities. Against that background, the company that most strongly professed home-grown technology was Hitachi — a young firm that had become independent in 1920. In March 1934 it established the Hitachi Research Laboratory to raise the quality and volume of its products and increase the number of new ones, and in 1941 it resolved to set up a Central Research Laboratory for basic research, opened in April 1942. Odaira held to the principle that if royalties are to be paid, the same sum should be put into research of one's own, and kept investing in research institutions. In April 1939 the Taga plant was newly built, and the Hitachi Research Laboratory was made independent of the Hitachi plant.

In May 1937 the company absorbed Kokusan Kogyo, led by Aikawa Yoshisuke (鮎川義介), taking in seven plants — Tobata, Wakamatsu, Kizugawa, Fukagawa, Yasugi, Totsuka and Amagasaki — together with a metallurgical laboratory and some 4,000 employees, and with them entering special steels. An integrated structure running from raw materials through to finished goods was now in place, and the range of manufacture diversified beyond electrical machinery and general machinery into steel raw materials, communications equipment of various kinds and railway rolling stock. From then on Hitachi added and merged plants to meet military demand: the Mito plant in September 1940, and in September 1943 the absorption of Riken Shinku Kogyo, which added the Mobara plant and put vacuum tubes and light bulbs into the product range. In March 1944 the Shimizu plant was made independent of the Kameari plant, and in December of the same year the Tochigi plant was separated from Taga.

Expansion left the company with eighteen plants, and capital, raised in several steps, reached ¥700 million in August 1944, so that Hitachi had grown into one of Japan's foremost manufacturers in name and in fact. In 1939 it won an order for the Macabu power station in Brazil — a horizontal-shaft Pelton turbine of 3,300 kilowatts and a three-phase alternating-current synchronous generator of 3,750 kilovolt-amperes — which drew attention at home and abroad. Research accumulated as well: shortly after the war its industrial property rights numbered more than 4,850, including inventions such as steam turbines, the vertical-shaft Pelton turbine, an electron diffraction apparatus and electron tubes for ultra-high frequencies.

Sixty days of stopped production, and 8,500 redundancies

In January 1945 Hitachi took over the Kawasaki plant of Hitachi Seiki, adding to its productive capacity; that June the Kizugawa plant burned down in an air raid. With the surrender, military orders vanished, and the Kizugawa and Amagasaki plants were closed. Operations resumed at the plants that remained, and the company picked up reconstruction demand by supplying machinery to priority industries — coal mining, food production, transport and electric power — but the plant and workforce swollen by the war did not match peacetime order volumes. Hitachi redeployed plants and modernised equipment, and separated the wire and cable division from the Hitachi plant. Even so, of 44,000 employees, some 8,500 were judged surplus.

At the end of July 1949 the equity ratio had fallen to 14.1 per cent, and strikes by the labour union ran day after day at plants across the country. Some union members turned violent, and the shop-floor humiliations of plant managers known as the oath on hot sand and daruma-otoshi spread from site to site. President Kurata Chikara (倉田主税) refused to come to the table until the union gave ground, choosing a war of attrition in which production at every plant was stopped for about sixty days. Hitachi was then a large organisation with seventeen plants and four sales offices nationwide, and the retrenchment it forced through there was the largest in Japanese private industry, exceeding Toshiba's.

The dispute ended when the union split internally, and the cut of 8,500 was carried through in full. A syndicated loan of $1.1M (¥400m) led by the Industrial Bank of Japan averted a collapse in funding, and in the same year the shares were listed on the Tokyo Stock Exchange. In his management policy for the following year, Kurata summed up that 1950 shall be the very year of light after this hardship is overcome, and placed the peace treaty with Japan and the deployment of counterpart funds, together with demand from power-source development, the shipbuilding programme and the electrification of the national railways, at the centre of the rebuild. In February 1950 he established Nitto Unyu, keeping within the group the logistics function that would later become Hitachi Transport System.

Foreign technology brought in, and Toshiba overtaken in heavy electrical machinery

In February 1952 Hitachi concluded a technical assistance agreement with the Radio Corporation of America covering receiving tubes, transmitting tubes, cathode-ray tubes, television receivers and electron tubes. In December of the same year it signed a technical assistance agreement with Babcock & Wilcox on boilers, and in 1953 it tied up with International General Electric on steam turbines and generators. The following year, 1954, it brought in transistor technology from Western Electric. The policy of avoiding alliances with foreign manufacturers, held for more than forty years since the founding, was withdrawn here. That is not to say research of its own was given up: the research divisions centred on the Central Research Laboratory and the Hitachi Research Laboratory were reckoned to stand at world level in facilities and staff alike from before the war, and were strengthened further after it.

The reason for the tie-ups lay in how far Hitachi had fallen behind in thermal power generation. Komai Kenichiro (駒井健一郎), who handled orders in the power-source division, recalled that Hitachi's thermal business had brought in technology from Germany's AEG before the war, but had little experience and trailed Toshiba and Mitsubishi Heavy Industries, and described the aim of the tie-ups as to form technical alliances with first-rate foreign manufacturers as quickly as possible, and fight on equal terms. In the General Electric alliance Toshiba had gone first and Hitachi was the follower. Even so, because thermal turbines were expected to grow in capacity and in demand, General Electric permitted more than one licensee.

Within a few years the imported technology turned into results. By 1955 Hitachi stood on sixteen plants and three sub-plants with 3,000 product types in all — from heavy electrical goods such as water turbines, steam turbines, generators and transmission and distribution equipment, through light electrical goods in communications equipment and electronics, and on to industrial machinery, rolling stock, wire and cable and steel — with 28,000 employees and capital of $18.3M (¥7bn). Exports accounted for about two-tenths of total sales. In 1959 the industry acknowledged that it had overtaken Toshiba in the heavy electrical division: Hitachi, which has made catching and passing Toshiba its motto, has at last completely overtaken Toshiba not only in the scale of the enterprise as a whole but in the heavy electrical machinery division as well.

The parent-child listings born of spinning off non-electrical businesses, and the fields left to in-house research

During the high-growth years the spinning-off of non-electrical businesses advanced: Hitachi Metals and Hitachi Cable were separated in October 1956, an equity stake was taken in Maxell Electric Industrial in 1961, and Hitachi Chemical in April 1963 and Hitachi Construction Machinery in December 1969 were separated in turn. In February of that same year, 1969, a software works was newly built, giving the contract development of computer programs a factory of its own. From 1956 onward Hitachi spun off non-electrical businesses and listed them individually, binding the group together through parent-child listings in which the parent held more than 50 per cent. That form would remain the group's basic structure for more than sixty years.

The representative field grown without recourse to foreign technology was the electron microscope. In 1939 the 37th subcommittee of the Japan Society for the Promotion of Science was created, chaired by Professor Seto Shoji of the University of Tokyo, and researchers from Hitachi, Toshiba, Nippon Electric and Shimadzu joined the universities and the Electrotechnical Laboratory in developing it together. After the war Hitachi won every first machine at the former imperial universities and pulled ahead, while Nippon Electric and Toshiba dropped out of the race. In 1955 Hitachi began exporting to the United States. By the late 1960s microscopes from Hitachi and JEOL accounted for half of world demand, and as exports to America grew, RCA lost hope of winning and withdrew.

The camera tube followed the same course. The selenium camera tube Ahsecon, begun in December 1966 by the Central Research Laboratory as a joint development with the NHK Science and Technical Research Laboratories, could not solve the problem of image burn-in and was abandoned in 1970. A different structure found in the course of the trials became a basic patent in that same year, however, and in 1972 a patent was filed showing that selenium governs the interface phenomenon. In December 1972 the Central Research Laboratory raised the work to a large project, announced in September 1973 that success was in prospect, and completed it as a product in 1975. Then, in 1977, Hitachi licensed the Saticon technology to RCA, which had invested for years in developing a selenium camera tube without succeeding.

Naming the large-company disease, and the shift from plants to divisions

Hitachi Europe was established in June 1982 and Hitachi Asia in February 1989 to put the overseas bases in order, and in April 1985 an Advanced Research Laboratory was newly built. In 1984 volume production of the 256-kilobit DRAM began, placing semiconductors among the mainstays. Mita Katsushige (三田勝茂), who became president in that same year, described the side-effect that growth in scale brings to an organisation: Nothing but self-multiplying organisations stand in rows, and the place runs short of oxygen. It is, if you like, the large-company disease. Because the shop floor finds it hard to grasp the movement of the market as a whole, he placed the setting of the ship's course with management.

That awareness showed itself as a rebuilding of the organisation. Beginning with the integration of the Sawa plant into the automotive equipment division in February 1991, the Katsuta plant was moved to the materials division, the Totsuka plant to the information and telecommunications division and the Naka plant to the measuring instruments division that August. In February 1992 the Yokohama and Tokai plants were integrated into the AV equipment division, and that August the departments responsible for home appliances, computers and electronic devices were changed from a plant basis to a division basis. In February 1993 the semiconductor design and development centre, the Musashi plant and the Takasaki plant were brought together into the semiconductor division.

The first operating loss since the founding, and reorganisation into companies in all but name

In February 1995 the electric power and electrical equipment, home appliances and information media, information, and electronic components businesses were organised as four groups, with parts of the research and development divisions and of the sales divisions integrated into them. In April of the same year Hitachi absorbed Hitachi Home Electronics. But with the domestic and Asian markets that formed its earnings base facing extreme recession and international competition, the mainstay businesses were forced into slumps almost across the board. An attempt to change a component supplier would not pass if the counterparty was inside the group or a business partner, and deciding on an investment required preparing documents and briefing to persuade each of the executives responsible for the businesses concerned.

In the year to March 1999 Hitachi fell into operating loss, consolidated and parent-only alike, for the first time since the founding. On top of operating losses of ¥90 billion parent-only and ¥20 billion consolidated, it was set to book extraordinary losses totalling ¥170 billion — including ¥90 billion of semiconductor restructuring costs and ¥30 billion of special retirement payments — and it reduced the parent company's workforce by more than 5,000, just under a tenth of the total, through secondment and transfer, centred on the heavy electrical, semiconductor and home-appliance businesses that were the main causes of the deterioration. In the semiconductor business alone the operating loss reached ¥120 billion. In February 1999 the yen's appreciation widened the consolidated operating loss to ¥50 billion and the extraordinary losses were raised to ¥240 billion, so that the net loss was expected to reach ¥375 billion. The outturn was a consolidated loss of $3.0B (¥339bn) for the year to March 1999.

In response to the loss Hitachi rewrote the premises of its organisation. In April 1999 it reorganised the business groups and moved to a management structure under which each was run as an independent company in all but name. Authority over investment and personnel was transferred to each business group, which was required to stand on its own account. At the same time it redefined consolidated companies with a high degree of independence as equivalent to in-house business groups, and manufacturing and sales companies closely tied to the parent's businesses as consolidated operating companies, unifying its consolidation policy. President Kanai Tsutomu (金井務) put the aim at breaking out of the hardware-dependent constitution we have had, and building a new Hitachi with information technology at its core, adding that the introduction of a pure holding company structure was also in view.

A run of demergers, and cutting the semiconductor business loose

In October 2000 Hitachi Credit merged with Hitachi Leasing and changed its name to Hitachi Capital; in October 2001 the measuring instruments business and the semiconductor production equipment business were demerged as Hitachi High-Technologies, and the industrial machinery systems business was reorganised as Hitachi Industries. In April 2002 the home appliance business was split off as Hitachi Home & Life Solutions and the industrial equipment business as Hitachi Industrial Equipment Systems. That October the display business was established as Hitachi Displays, the telecommunications equipment business was reorganised as Hitachi Communication Technologies, and Unisia Jecs was made a wholly owned subsidiary through a share exchange.

Even so the semiconductor losses continued. In December 1999 Hitachi set up NEC Hitachi Memory as a joint venture with NEC to combine the memory businesses, but price competition with American and Korean rivals and the burden of capital investment came on top of a slump in the silicon cycle, and the consolidated net result for the year to March 2002 fell to a loss of $3.9B (¥484bn). The company embarked on redundancies on a scale of 20,000 across the group. In April 2003 the semiconductor business, centred on system LSI, was demerged and transferred to Renesas Technology, a joint venture with Mitsubishi Electric, and left the ranks of the core businesses. That company merged with NEC Electronics in April 2010 and changed its name to Renesas Electronics, and in September 2013, as the proportion of voting rights held fell away, it ceased to be an affiliate of Hitachi.

While letting go of semiconductors, Hitachi bought into storage. In January 2003 it acquired the hard disk drive business of IBM of the United States for about US$2 billion and began trading as Hitachi Global Storage Technologies Netherlands B.V., domiciled in the Netherlands. What it took over amounted to eleven sites worldwide and some 24,000 employees. In June of the same year it moved to a company with committees, establishing nomination, audit and compensation committees, and reforming the shape of its governance at an early stage for a large Japanese manufacturer.

The TEPCO shock, and a ¥787.3 billion net loss

In October 2004 Hitachi absorbed Tokico and Hitachi Unisia Automotive, and demerged the information equipment business centred on ATMs to establish Hitachi Omron Terminal Solutions. In April 2006 it demerged the social and industrial infrastructure business and combined it with Hitachi Plant Engineering & Construction, Hitachi Kiden Kogyo and Hitachi Industries, reorganising them as Hitachi Plant Technologies. In the same month Hitachi Home & Life Solutions merged with Hitachi Air Conditioning Systems and changed its name to Hitachi Appliances, and that December Clarion was made a consolidated subsidiary through a tender offer. In July 2007 the nuclear-related business was demerged and reorganised as Hitachi-GE Nuclear Energy.

Capital investment by large customers headed by Tokyo Electric Power fell below ¥1 trillion — the so-called TEPCO shock — thinning orders for heavy electrical machinery, and the industry turned zero-sum on top of it. In the year to March 2007 operating profit came to only ¥182.5 billion, and the consolidated net result was a loss of ¥32.8 billion in that year and of ¥58.1 billion in the year to March 2008. In August 2007 Hitachi was overtaken by Mitsubishi Electric in market capitalisation. In March 2009 it made Hitachi Koki and Hitachi Kokusai Electric consolidated subsidiaries through tender offers, and that July it demerged the automotive systems business and the consumer business.

The sharp fall in demand caused by the Lehman shock struck an earnings base already weakened, and the consolidated net result for the year to March 2009 was a loss of $8.4B (¥787bn), the largest in scale ever recorded by a Japanese manufacturer. The consolidated equity ratio fell from 20.6 per cent the previous year to 11.2 per cent. The main cause was the reversal of some ¥390 billion of deferred tax assets, and in February 2009 the company decided on redundancies of 7,000 people at home and abroad. President Furukawa Kazuo (古川一夫) resigned to take responsibility for management, and the nomination committee began considering a successor. The choice was Kawamura Takashi (川村隆), who had moved to the chairmanship of the subsidiary Hitachi Maxell. There was little precedent for an executive with experience of the parent coming back from a subsidiary to become the parent's president, and Kawamura himself took it as an enormous thing I had not anticipated at all.

The Kawamura reforms, and the push into continental Europe on rail

Immediately after taking office Kawamura pushed through a public share offering of ¥349.2 billion; existing shareholders suffered dilution of about 13 per cent, but he gave priority to an early recovery of the equity ratio. In October 2009 the business groups were reorganised into in-house companies, introducing a company system that applied the same discipline of independent accounting as at the main group companies. In April 2010 Hitachi Plant Technologies and Hitachi Maxell were made wholly owned subsidiaries through share exchanges. Senior figures from Hitachi's past objected that businesses raised by the sweat of their brows were being sold off so easily. Kawamura did not change course, saying that having decided something as president, I cannot withdraw it.

The selling began at the centre of the mainstay businesses. In March 2012 Hitachi transferred its shares in Viviti Technologies to Western Digital of the United States, selling the hard disk drive business for about US$4.8 billion, and in the same month it let go of the small and medium-sized display business by transferring its shares in Hitachi Displays. The equity ratio came back from 11.2 per cent to 18.8 per cent. In 2011 it also withdrew from in-house production of flat-panel televisions, which it had carried on for fifty-five years since 1956. Nakanishi Hiroaki (中西宏明), who became president in April 2010, and Higashihara Toshiaki (東原敏昭), who followed in April 2014, carried on the same line, and the choosing and discarding of businesses became not a one-off reform but a standing discipline of management.

Alongside the selling, acquisition went forward as well, and its pillar was rail, where Hitachi had entered the British market in 1999. Having no record there at first, it was dismissed as a paper train, but in 2004 it won preferred-bidder status for the CTRL high-speed line and in December 2009 began scheduled services as contracted. In 2012 it beat the Siemens–Bombardier combination of Germany and Canada and France's Alstom to the Intercity Express Programme for replacing inter-city high-speed rolling stock, formally winning, with later additions, a large contract for 866 vehicles and twenty-seven and a half years of maintenance. In February 2015 it signed a contract to acquire the rail signalling company Ansaldo STS and the rolling stock maker AnsaldoBreda from Finmeccanica of Italy for about ¥260 billion in total, completing it that November and widening its ground into continental Europe and the Americas. Revenue from the rail business rose more than threefold in three years from ¥167.4 billion in the year to March 2015, and in 2022 Hitachi acquired the rail signalling systems business of Thales of France for about ¥215 billion.

Withdrawal from nuclear and thermal power, and the unwinding of the parent-child listings

In nuclear power the ending was the opposite. In 2012 Hitachi bought Horizon Nuclear Power, a British nuclear development company, from two German utilities for about ¥90 billion, and proceeded with two new units on the island of Anglesey in Wales. But tighter safety standards and soaring labour costs swelled the total cost to about ¥3 trillion, roughly 1.5 times the original estimate, and with the spread of renewable energy it became unavoidable that the fixed purchase price of electricity would fall below expectations too. Hitachi looked for a third party to take a stake of more than 50 per cent, making deconsolidation a condition of carrying the plan through, but doubts about the economics meant that no investor appeared. On 17 January 2019 President Higashihara Toshiaki formally decided to freeze the project.

The freeze brought a loss of ¥300 billion booked in the year to March 2019, and the net profit forecast for that year was cut from ¥400 billion to ¥100 billion. At the press conference Higashihara said that if we freeze it at this point, the management judgement is not so far wrong, adding that ¥300 billion — the loss — weighs heavily on us. The withdrawals continued in thermal power. At Mitsubishi Hitachi Power Systems, established with Mitsubishi Heavy Industries in February 2014, a South African coal-fired project that Hitachi had won on its own ran late, and the matter escalated into a dispute in which Mitsubishi Heavy Industries demanded payment of about ¥774.3 billion. A settlement was reached on 18 December 2019, under which Hitachi transferred its entire 35 per cent holding to Mitsubishi Heavy Industries and booked a settlement loss of ¥375.9 billion. What it put in place of the thermal business it had let go was transmission and distribution: in July 2020 it acquired the power grids business of ABB of Switzerland for about $6.7B (¥720bn), which began trading as Hitachi ABB Power Grids.

In digital, in July 2021 Hitachi made the parent company of GlobalLogic of the United States a wholly owned subsidiary for about ¥1 trillion. In parallel, the unwinding of the parent-child listings entered its final phase. The listed subsidiaries, which had numbered more than twenty a decade earlier, were down to four by the end of 2019: beginning with the conversion of Hitachi Transport System into an equity-method affiliate in May 2016, Hitachi let go of Hitachi Capital, Hitachi Koki, Hitachi Kokusai Electric and Clarion. In June 2018 it sold the semiconductor production equipment business of Hitachi Kokusai Electric and then made that company an equity-method affiliate. It transferred the businesses of Hitachi Chemical in April 2020 and of Hitachi Metals in January 2023, and in August 2022 made Hitachi Construction Machinery an equity-method affiliate. In January 2021 Hitachi Automotive Systems absorbed Keihin, Showa and Nissin Kogyo and changed its name to Hitachi Astemo; when that company fell to a net loss of ¥81 billion in the year to March 2023, Hitachi moved it to equity-method affiliate status in October 2023 by transferring part of its shares. The results of the swapping showed in the numbers: for the year to March 2026, revenue of ¥10,586.8 billion, operating profit of ¥1,273.1 billion and profit for the year of ¥802.4 billion were all record highs. Market capitalisation exceeded ¥20 trillion, more than five times what it had been five years earlier.