Mitsubishi Electric — Company History

Taking over the Kobe yard’s electrical division, and technology from Westinghouse

Mitsubishi Electric traces back to 1905, when the manufacture of electrical machinery and apparatus — chiefly for ships and mines — began inside the Kobe shipyard of the shipbuilding department of Mitsubishi Goshi Kaisha. In 1908 the same yard completed Japan’s first domestically built turbine generator, accumulating the electrical engineering that the founding period would draw upon. On 15 January 1921 that electrical machinery division was taken over and Mitsubishi Electric was incorporated with capital of ¥15 million. The circumstances of the founding were these: the appetite for using electricity as motive power had ripened across many quarters, yet the exhaustion that followed the European war made imports from the advanced industrial nations difficult, and the prospects for a domestic electrical machinery business were rated highly. At the outset the only facility was the Kobe plant, and the head office was placed in Nagoya.

In October 1921 the Kobe plant was renamed the Kobe Works, and in January 1922 the head office moved to Tokyo. In November 1923, after a year of running it under contract, the company absorbed the electrical machinery factory of Mitsubishi Shipbuilding’s Nagasaki yard as the Nagasaki Works, taking on large heavy-electrical equipment such as turbine generators and marine direct-current machines. In September 1924 it opened the Nagoya Works, widening the product range to standard electrical goods such as general-purpose induction motors and to household electrical appliances. On the technical side it concluded a technical tie-up with Westinghouse Electric of the United States, and the following year a further tie-up with Westinghouse Air Brake. Apart from an interruption during the war, these contracts ran on into the postwar years and underpinned the quality of the products.

The recession of 1930 and 1931 put the business under strain, but after the outbreak of the Manchurian Incident conditions turned favourable and the three works at Kobe, Nagoya and Nagasaki entered a phase of consolidation and expansion. Sales for one half-year term in 1935 came to ¥12 million. In the same year the company concluded a technical tie-up with Reyrolle of Britain, layering European technology over the three American contracts signed in the Taisho period. In December 1940 it bought a 120,000-tsubo site at Amagasaki to build the Osaka plant, and opened a research laboratory alongside it. The Osaka plant was later renamed the Itami Works and became a mainstay ranking with Kobe, Nagoya and Nagasaki. Capital, doubled twice in 1937 and 1940, reached ¥120 million in August 1943.

Wartime dispersal of the plants, and rebuilding the sales arm lost with Mitsubishi Corporation

Under the wartime economy the building of new plants accelerated. The Osaka plant of December 1940 was started up by moving the radio equipment and precision machinery shops out of the Kobe Works, and in April 1942 the Setagaya plant was established. In February 1943 came the Fukuyama and Nakatsugawa plants, in April the Koriyama plant and in June the Wakayama plant — four sites in operation within half a year. In February 1944 the Himeji plant was added, and in March the head office research department was raised to a research laboratory, so that in-house development was built out in step with the spread of sites. At the end of the war the company held four works, eight plants and one laboratory, a scale and substance that placed it among the three great makers alongside Hitachi and Tokyo Shibaura Electric.

Air-raid damage reached 31 per cent of all facilities, beginning with the Nagasaki Works, which was hit by the atomic bomb. Recovery was obstructed by a succession of postwar ordinances — designation as a restricted company, designation for reparations, designation as a special accounting company, and designation under the Act for the Elimination of Excessive Concentration of Economic Power — and the heaviest blow among them was the loss at a stroke of the existing sales apparatus when Mitsubishi Corporation was dissolved. To rebuild somewhere to sell under its own power, between 1946 and 1949 the company opened branch offices in Osaka, Nagoya, Fukuoka, Sapporo, Sendai, Toyama, Hiroshima and elsewhere, placing beneath them a large number of exclusive agents and dealers so as to lay a national sales network afresh. In May 1949 it announced a 10 per cent cut in headcount and a 10 per cent cut in wages, firing the opening shot of rationalisation in the industry. In the same month it listed its shares on the Tokyo Stock Exchange. For the year to March 1950 it restored the dividend at a low rate of 8 per cent.

A petition to keep the name, and the alliance that set the postwar heavy-electrical camps

The priority production system provided the opening for recovery, and with power development in earnest from 1951, the output of electrical machinery leapt from $66.1M (¥24bn) in 1950 to $148.1M (¥53bn) in 1951. Against that returning demand, domestic technology lagged by exactly as much as the war had held it back. Europe and America had put turbines of the 145,000-kilowatt class into practical use, while the equipment Japan could build at home for the Chikujo power station, completed in 1952, stopped at 35,000 kilowatts. Mitsubishi Electric’s technical tie-up with Westinghouse Electric, concluded in the Taisho period, had lapsed during the war and remained so, and there was no prospect of sourcing large-capacity technology within Japan.

Westinghouse gave notice that if Mitsubishi Electric were broken up and lost the Mitsubishi trade name, no technical contract could be concluded. In April 1950 President Takasugi Shinichi (高杉晋一) petitioned Prime Minister Yoshida Shigeru together with representatives of Mitsui and Sumitomo, and at the end of May obtained a postponement of one year. After a further extension, the order prohibiting use of the trade name lapsed when the peace treaty came into force on 28 April 1952. With the name protected, the company revived the technical tie-up in April 1951 and reconcluded a capital tie-up alongside it. The royalty terms were $250,000 in the first year, $300,000 in the second, $400,000 in the third and 3 per cent of sales from the fourth year onward. As of September 1955 Westinghouse was the largest shareholder, holding 2 million of the 48 million shares in issue.

With the enactment of the Foreign Investment Law, Fuji Electric revived its relationship with Siemens and Tokyo Shibaura Electric with General Electric, while Hitachi brought in thermal plant technology from General Electric in 1953. New Mitsubishi Heavy Industries also tied up with Westinghouse in February 1952 for the manufacture of steam turbines, so that the Mitsubishi group fell into the same lineage. For the development of hydrogen-cooled generators the company sent Imakita Koji (今北孝次), head of the testing section at the Nagasaki Works, to Westinghouse — the first overseas posting for a member of that works since the war. At home it built the Radio Equipment Works in October 1953 and, in April 1954, the Shizuoka plant as a dedicated factory for consumer refrigeration goods such as refrigerators and air conditioners. Profit for the year to March 1955 stopped at $1.2M (¥440m) and the dividend fell to 18 per cent.

The Kita-Itami plant, Japan’s first domestic IC, and the end of the electrification boom

In August 1959 Mitsubishi Electric built the Kita-Itami plant as a dedicated factory doing nothing but volume production of semiconductors. The capital spending behind it rested on power development: the electric utilities were planning close to 10 million kilowatts of new capacity over the five years from fiscal 1958 to 1963. Results for 1959 showed sales up 16 per cent and profit up 35 per cent year on year, both records since the founding, and the securities market called it a growth stock. Following the Shizuoka plant of 1954 and the household appliance plant of 1956, the company added capacity across heavy electrical equipment, electronics and household appliances, building the Kamakura Works in 1960 and the Kyoto and Sagami Works in 1962.

Around 1959 President Seki Yoshinaga (関義長) brought back from Westinghouse, its tie-up partner, a prototype integrated circuit about a centimetre square. When the story reached the newspapers, Mitsubishi Electric’s share price briefly soared. On Seki’s instruction the Central Research Laboratory devised a manufacturing process, and in 1961 the company commercialised it under the name Molectron. This was Japan’s first domestically produced IC, and because it came early the company led the domestic makers until about 1970. In March 1963 it absorbed Ryoden Kiki and renamed it the Gunma Works, and in 1964 it built the Inazawa Works as a dedicated lift factory. For the year to March 1968, sales of $366.9M (¥132bn), profit of $10M (¥4bn) and orders of $416.7M (¥150bn) were all records since the founding.

The electrification boom ended around 1963 and 1964, and in the half-year to September 1965 the company avoided suspending its dividend only by drawing down retained earnings. In the same downturn Fuji Electric and Yaskawa Electric passed their dividends and Meidensha sold itself into the Sumitomo group, so that gaps opened even among the big three. In the half-year to September 1971 an exchange loss of $1.5M (¥537m) produced a 6 per cent fall in profit and a cut of 2 per cent in the dividend; this prompted a company-wide review campaign called Operation 101, and President Shindo Sadakazu (進藤貞和) set a shift from quantity to quality as the basic policy. In semiconductors, American makers producing at ten times the Japanese scale mounted a sales offensive from around 1970 and falling prices pushed the domestic makers into losses across the board, but Mitsubishi Electric did not withdraw: in April 1972 it set up a semiconductor division and strengthened both production and sales. When the first head of that division proposed a plant in Malaysia, Shindo rejected it on the grounds of the language barrier and the progress of automation — and in fact, two or three years later, machines to automate the assembly process were developed.

Redrawing divisions built for the factory, and “fifty years in waiting”

Mitsubishi Electric had run a divisional system since 1958, reworking it as markets and technology changed, and by the end of 1972 it held ten divisions. The divisions were split for the convenience of production and were not organised around the customer. In June 1975 the company created a sales headquarters to unify the selling function of the whole firm, and in June 1977 it laid four business groups — heavy electrical equipment, electronics, equipment and consumer products — over the divisions. President Shindo Sadakazu put the aim of the reorganisation at making the company market-oriented across the board, and the research headquarters was renamed the development headquarters. Group heads were not required to be technical specialists in their businesses; the overriding condition was to choose four people who could co-operate with one another.

In fiscal 1976 the attacking SP76 campaign and the defensive VA350 campaign both told, and cost reduction reached $140.4M (¥41bn) against a target of $119.9M (¥35bn). Capacity utilisation recovered from 76 per cent in the first half of fiscal 1975 to 95 per cent in the first half of fiscal 1976. Parent-company results for the year to March 1977 were sales of $2.7B (¥696bn), recurring profit of $56.4M (¥15bn) and net profit of $33.1M (¥9bn), the recurring figure more than double the $20.9M (¥6bn) of the year before. Exports grew too: fiscal 1976 orders of $582.2M (¥170bn) were up 69.7 per cent on the previous year, two-thirds of them plant exports. Power plant for the Iraqi electricity authority at about $85.6M (¥25bn) and substation plant for the Iranian electricity authority at about $89M (¥26bn) piled up, and in October 1977, with Hitachi and Tokyo Shibaura Electric becalmed, Mitsubishi Electric’s solitary run of rising profits was hailed as the arrival of a boom after fifty years in waiting.

Alongside the strong run, the weakness of an electronics division with no settled customer also came into view. As of October 1977 semiconductor sales ran at about $155.6M (¥40bn) a year, 20 per cent of that internal; there was no settled policy on whether the products were for consumer or industrial use, and the company’s share of the industry was low. At the loss-making Kyoto Works, Omori Atsuo (大森淳夫) served as plant manager while also holding the purchasing manager and sales manager posts, raised output per head 2.26 times in three years, and — reading replacement demand — produced the System Television and the picture-search function for VTRs. In 1981 the company built the Fukuoka semiconductor plant of the Kita-Itami Works, and in October 1983 it recast the four business groups into six: machinery and electrical, consumer products, electronic systems, computers, electronic devices and overseas.

Piling on semiconductor capacity, and the volume effect the US–Japan accord shut off

In 1983 Mitsubishi Electric established a semiconductor plant in the United States, a move intended to ease trade friction with America. Demand for integrated circuits was strong in 1984, and domestic IC output was on course to reach $8.4B (¥2tn). That year the company brought part of the Saijo plant in Ehime prefecture into operation, and in 1985 it began building the Kochi plant. Saijo was a coastal site and opposition inside the company on the grounds of salt damage was strong, but President Shindo Sadakazu overrode it: in an age when people go to the moon, there is no way we cannot keep out a little salt. In the downturn of 1985 semiconductor output fell by more than 30 per cent from its peak, the cause being the collapse of the memory market.

In July 1986 the governments of Japan and the United States agreed to conclude the US–Japan Semiconductor Agreement. With the introduction of fair market value, Japanese makers could no longer pursue the strategy of cutting prices to stimulate demand and counting on the volume effect. Even so, Mitsubishi Electric did not stop adding capacity: in a lecture in June 1989, Managing Director Amano Junsuke (天野順介) said the company stood second in the industry in 1-megabit DRAM and could mass-produce 4-megabit and 16-megabit parts as well, and mentioned that it had converted heavy-electrical factories into semiconductor factories. Parent-company results for fiscal 1988 were all records: sales of $16.2B (¥2.23tn), up 14.1 per cent on the previous year; recurring profit of $674.7M (¥93bn), up 122.7 per cent; and net profit of $234.8M (¥32bn), up 63.9 per cent. The gap between the growth in recurring profit and in net profit was chiefly due to non-deductible write-downs on semiconductors taken to improve the company’s constitution.

In June 1989 Mitsubishi Electric created an automotive equipment business group. In semiconductors, Korean and Taiwanese makers were gaining strength — in 4-megabit DRAM, Samsung Electronics of Korea was reckoned the largest in the world — and a memory-centred strategy ran into a wall. In June 1993 the company reorganised into nine business groups: power and industrial systems, public systems, electronic systems, information and communication systems, audio-visual information, living environment, FA systems, automotive equipment and semiconductors, adding a production systems headquarters at the same time. In the year to March 1994 the information and communication systems and electronic devices segments posted a combined operating loss of $173.2M (¥18bn), leaving the largest segment — 31 per cent of consolidated sales — without earning power.

Kitaoka’s drive out of “perpetual third place”, and the exit from DRAM

In June 1992 Kitaoka Takashi (北岡隆), who came from the semiconductor side, became president. He was the first president not to come from heavy electrical equipment, and he set about reform with the aim of taking a Mitsubishi Electric that had settled comfortably into perpetual third place to the top of the industry. The company of the day was described as one of the large enterprises furthest removed from change, its results swinging only narrowly thanks to the buffering peculiar to a full-line electrical maker. Kitaoka took as his management guide the selection and concentration practised by General Electric chairman Jack Welch — cut away anything that cannot be first class — and in the 1993 reorganisation he widened the investment authority a business group head could approve from ¥100 million to ¥500 million, with the result that the number of items reaching the executive committee fell by 60 per cent. Holding that 50,000 employees were too many for sales of $22.5B (¥2.5tn), he also set a policy of cutting head-office staff by 10 per cent a year.

The reform reached personnel too. Ahead of Hitachi and Tokyo Shibaura Electric, the company scrapped seniority-based personnel and pay systems and introduced internal job posting, and Kitaoka held some seventy sessions of a President’s Forum for dialogue with employees. He did not take the American route of severe headcount cuts, stating plainly that jobs would be protected because the Chinese-medicine method, which works slowly, is best. Inside the company there had once been a sense that heavy electrical equipment was the mainstream and that anyone working on computers and the like would not get on; Kitaoka sought to shift to a constitution that earned money by turning unprofitable businesses into subsidiaries. In January 1995 he transferred control of Akai Electric to the Semi-Tech group. Semiconductor investment reached roughly $2.8B (¥300bn) on a consolidated basis between 1994 and 1996, and from fiscal 1995 it expanded to more than $919.4M (¥100bn) a year, centred on DRAM. Parent-company recurring profit for fiscal 1995 passed $919.4M (¥100bn) and came close to the record of $1.3B (¥136bn).

In 1997 the price offensive by Micron Technology of the United States sent the DRAM market sharply lower. The semiconductor loss for fiscal 1997 widened to about $687.6M (¥90bn), and the losses in the home appliance business, which had been deferred, swelled to around $267.4M (¥35bn). Consolidated results for the year to March 1998 were sales of $29.0B (¥3.8tn), a recurring loss of $401.1M (¥53bn) and a net loss of $809.1M (¥106bn), and the company suspended its dividend for the first time since listing. In February 1998, simultaneously with Oki Electric Industry, Mitsubishi Electric decided to withdraw from the commodity DRAM business. Cutbacks in investment in response to the falling market had been coming thick and fast, but this was the first outright exit; both firms said they would specialise in system LSI, and commentators wrote that the Japanese semiconductor industry had entered an age of selection in which each maker narrowed its aim to the fields it was good at. Kitaoka acknowledged that his greatest mistake had been failing to push through the move away from DRAM, announced his resignation in March that year, and named Executive Vice-President Taniguchi Ichiro as his successor.

“We can no longer survive going it alone”, and the carve-out of semiconductors

Taniguchi Ichiro (谷口一郎), who became president in 1998, achieved cost reductions of about $351.4M (¥40bn) within a year of taking office, through every kind of expense-cutting measure including a review of materials procurement and of the sales network. Taniguchi looked back on how every president since Shindo Sadakazu had held up the strengthening of the electronics business, and the information and communications business above all, and explained that because the core businesses were also growing steadily they had been built up just as the strategic businesses were, dispersing the company’s management resources by comparison with specialists such as NEC and Fujitsu. Now that the markets for the core businesses had all matured, he said, the selection and concentration of businesses was indispensable to survival: we can no longer survive going it alone. IT was set as the strategic business, with growth and convergence expected across the information, communications and audio-visual businesses.

The consolidation of the organisation was concentrated around the turn of the century. In April 1999 the power and industrial systems and public systems business groups were merged into a social infrastructure business group, and a building systems business group was created. In the same year the company started up the first recycling plant in the home appliance industry, and in 2000 it merged the audio-visual information and living environment business groups into a living and digital media business group. In 2001 it adopted the corporate statement Changes for the Better, and in June 2003 it converted to a company with committees, establishing nominating, audit and compensation committees. Also in 2003 it set up Toshiba Mitsubishi-Electric Industrial Systems, a joint venture with Tokyo Shibaura Electric in electrical equipment for manufacturing plant.

Semiconductors were carved out of the company: in April 2003 Mitsubishi Electric merged its system LSI business with Hitachi’s to form Renesas Technology, capitalised at $431.3M (¥50bn) and owned 55 per cent by Hitachi and 45 per cent by Mitsubishi Electric, with DRAM excluded from the combination. In the same year the semiconductor business group was renamed the semiconductor and device business group, moving the centre of gravity from commodity memory to power semiconductors and to high-frequency and optical devices. DRAM went to Elpida Memory, and system LSI and microcontrollers to Renesas Technology, detaching the businesses whose cyclical troughs were deepest and whose capital demands were largest. President Sakuyama Masaki (柵山正樹) said in later years that it was precisely because of this clearing-out that the company did not fall into loss through the financial crisis of fiscal 2008 and 2009.

The star of balanced management, and the misjudged concentration on industrial mechatronics

Consolidated operating profit fell to $1.1B (¥94bn) in the year to March 2010, just after the financial crisis, but by the year to March 2014 sales had recovered to $38.3B (¥4.05tn). Over that period the company set up general sales subsidiaries in one emerging market after another: India in September 2010, Vietnam in June 2011, Brazil in September 2012, Indonesia that December, Turkey in January 2013 and Russia in October 2014. For the year to March 2015 it recorded, under International Financial Reporting Standards, sales of $35.7B (¥4.32tn) and operating profit of $2.7B (¥323bn). In February 2016 it took full ownership of DeLclima, the Italian commercial air-conditioning company, and made it the core of its European commercial air-conditioning business. As of 2019 its domestic share of electrical equipment for railway rolling stock stood at about 60 per cent, and rail-related sales had reached about $1.8B (¥200bn).

In 2016 President Sakuyama Masaki conceded that against a target of $45.9B (¥5tn) in sales and an operating margin above 8 per cent by fiscal 2020, the margin was more than two points short. The yen had been weak in 2014 and 2015, he said, and he had believed the company had acquired the strength to deliver 6 per cent or more; at ¥100–105 to the dollar it fell below 6 per cent, and he admitted he had misread that strength. Withdrawals from businesses continued at a rate of at least one a year: in April 2016 the company transferred a mobile phone sales subsidiary that was making a profit. The test applied was not present profit and loss alone, but the outlook ahead and the synergies across the company as a whole.

At a management strategy briefing on 1 June 2020, President Sugiyama Takeshi (杉山武史) said operating profit for the year to March 2021 was expected to be $1.1B (¥120bn), less than half the previous year’s. The operating margin would fall from 5.8 per cent to 2.9 per cent, short of the 8 per cent or more set for the final year of the medium-term management plan. The causes were the spread of COVID-19 and, on top of that, a concentration on the industrial mechatronics segment — FA systems and automotive equipment — that had backfired: about 40 per cent of cumulative capital spending over the previous five years had gone to that segment, more than $3.9B (¥420bn). Operating profit in industrial mechatronics had fallen sharply from $1.7B (¥191bn) in the year to March 2018, and was forecast at $118.4M (¥13bn) for the year to March 2021. Mitsubishi Electric was the only one of Japan’s eight large electrical makers not to have posted a loss since the financial crisis, but it was left with the problem of businesses and plants that were strongly independent of one another and connected laterally very little.

Thirty-five years of fabricated inspections, and a turn to swapping businesses

In June 2021 it emerged that at the Nagasaki Works, in air-conditioning units for railway rolling stock, inspections had been carried out by methods other than those the customer had specified, and that fictitious inspection certificates had been produced with no inspection performed at all — practices that had continued for more than thirty years since the 1980s. The misconduct had not been detected even by the earlier company-wide re-inspection, and the self-cleansing function had not worked. Within the vertical, works-by-works structure that Mitsubishi Electric had run since its founding in 1921, the long-running deviation at the Nagasaki Works had slipped past head-office oversight. On 2 July that year Sugiyama Takeshi announced his resignation to take responsibility, and on the 28th Urutsuma Kei (漆間啓), an executive vice-president from the administrative side who had joined the company in 1982, was promoted to executive officer president and CEO. Urutsuma located the cause of the misconduct in the fact that as an organisation, there was no sincerity towards quality, and said that it is important that change comes from the top. In December that year twelve serving and former executives were disciplined, and the final report of October 2022 put the number of inappropriate quality practices at 197 in total, finding that former chairman Sakuyama Masaki had been involved in his days as a section manager.

In October 2021 the company created a quality reform promotion headquarters reporting directly to the president, and placed a quality assurance supervision department at every works, giving it authority over shipment among other things. In April 2022 it defined four business areas — infrastructure, industry and mobility, life, and business platform — and launched Mitsubishi Electric Building Solutions, to which the building systems business was transferred, and Mitsubishi Electric Software, formed by merging six software design subsidiaries. In April 2023 it separated the semiconductor and device business group out of the business platform BA, and renamed the electronic systems business group the defence and space systems business group. The month before, it announced that cumulative capital spending on the power device business would be doubled from about $925.2M (¥130bn) to about $1.9B (¥260bn), of which about $711.7M (¥100bn) would go to SiC wafers, with a plan to build a new plant building capable of handling 8-inch wafers at Kikuchi in Kumamoto prefecture.

The loss-making automotive equipment business accounted for 22.9 per cent of Mitsubishi Electric’s parent-company sales in the year to March 2023. A structural reform was resolved at an executive officers’ meeting on 24 April 2023; on 1 April 2024 Mitsubishi Electric Mobility was established by company split, and in the same month Mitsubishi Generator, a generator joint venture with Mitsubishi Heavy Industries, was also set up. On 24 April 2026 the company signed a memorandum of understanding with Hon Hai Precision Industry and began studying joint operation, with the possibility of accepting a 50 per cent stake in Mitsubishi Electric Mobility. At its IR Day in May 2025 it classified businesses worth some $12.7B (¥1.9tn) in sales as value-recapture businesses: of these, about $2.0B (¥300bn) would in principle be wound down during fiscal 2027, about $5.3B (¥800bn) would be decided during fiscal 2025, and the remaining $5.3B (¥800bn) were still under consideration. Special measures under the Next Stage Support scheme drew 2,378 applications at the parent company alone, at an expected cost of about $632.3M (¥100bn) including domestic group companies. Consolidated sales for the year to March 2025 were $36.9B (¥5.52tn) and operating profit $2.6B (¥392bn), both records.