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[1]. In 1908 the same yard completed Japan’s first domestically built turbine generator[2], 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[3]. 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[4]. At the outset the only facility was the Kobe plant, and the head office was placed in Nagoya[5].

In October 1921 the Kobe plant was renamed the Kobe Works, and in January 1922 the head office moved to Tokyo[6]. 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[7], taking on large heavy-electrical equipment such as turbine generators and marine direct-current machines[8]. 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[9]. On the technical side it concluded a technical tie-up with Westinghouse Electric of the United States[10], and the following year a further tie-up with Westinghouse Air Brake[11]. Apart from an interruption during the war, these contracts ran on into the postwar years and underpinned the quality of the products[12].

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[13]. Sales for one half-year term in 1935 came to ¥12 million[14]. In the same year the company concluded a technical tie-up with Reyrolle of Britain[15], 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[16]. The Osaka plant was later renamed the Itami Works and became a mainstay ranking with Kobe, Nagoya and Nagasaki[17]. Capital, doubled twice in 1937 and 1940, reached ¥120 million in August 1943[18].

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[19], and in April 1942 the Setagaya plant was established[20]. 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[21]. In February 1944 the Himeji plant was added[22], and in March the head office research department was raised to a research laboratory[23], 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[24].

Air-raid damage reached 31 per cent of all facilities, beginning with the Nagasaki Works, which was hit by the atomic bomb[25]. 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[26] — and the heaviest blow among them was the loss at a stroke of the existing sales apparatus when Mitsubishi Corporation was dissolved[27]. 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[28], 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[29]. In the same month it listed its shares on the Tokyo Stock Exchange[30]. For the year to March 1950 it restored the dividend at a low rate of 8 per cent[31].

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[32]. Against that returning demand, domestic technology lagged by exactly as much as the war had held it back[33]. Europe and America had put turbines of the 145,000-kilowatt class into practical use[34], while the equipment Japan could build at home for the Chikujo power station, completed in 1952, stopped at 35,000 kilowatts[35]. Mitsubishi Electric’s technical tie-up with Westinghouse Electric, concluded in the Taisho period, had lapsed during the war and remained so[36], 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[37]. 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[38]. After a further extension, the order prohibiting use of the trade name lapsed when the peace treaty came into force on 28 April 1952[39]. With the name protected, the company revived the technical tie-up in April 1951[40] 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[41]. As of September 1955 Westinghouse was the largest shareholder, holding 2 million of the 48 million shares in issue[42].

With the enactment of the Foreign Investment Law, Fuji Electric revived its relationship with Siemens and Tokyo Shibaura Electric with General Electric[43], while Hitachi brought in thermal plant technology from General Electric in 1953[44]. New Mitsubishi Heavy Industries also tied up with Westinghouse in February 1952 for the manufacture of steam turbines[45], 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[46]. At home it built the Radio Equipment Works in October 1953[47] and, in April 1954, the Shizuoka plant as a dedicated factory for consumer refrigeration goods such as refrigerators and air conditioners[48]. Profit for the year to March 1955 stopped at $1.2M (¥440m) and the dividend fell to 18 per cent[49].

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[50]. 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[51]. Results for 1959 showed sales up 16 per cent and profit up 35 per cent year on year, both records since the founding[52], and the securities market called it a growth stock[53]. 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[54], building the Kamakura Works in 1960 and the Kyoto and Sagami Works in 1962[55].

Around 1959 President Seki Yoshinaga (関義長) brought back from Westinghouse, its tie-up partner, a prototype integrated circuit about a centimetre square[56]. When the story reached the newspapers, Mitsubishi Electric’s share price briefly soared[57]. On Seki’s instruction the Central Research Laboratory devised a manufacturing process, and in 1961 the company commercialised it under the name Molectron[58]. This was Japan’s first domestically produced IC, and because it came early the company led the domestic makers until about 1970[59]. In March 1963 it absorbed Ryoden Kiki and renamed it the Gunma Works[60], and in 1964 it built the Inazawa Works as a dedicated lift factory[61]. 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[62].

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[63]. In the same downturn Fuji Electric and Yaskawa Electric passed their dividends and Meidensha sold itself into the Sumitomo group[64], 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[65]; 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[66]. 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[67], but Mitsubishi Electric did not withdraw: in April 1972 it set up a semiconductor division and strengthened both production and sales[68]. 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[69] — and in fact, two or three years later, machines to automate the assembly process were developed.