Fujitsu - Company History

Splitting from Fuji Electric: a telecommunications maker sets out

Fujitsu's business begins at the point where Fuji Electric started assembling and repairing telephones in 1930[1]. The parent, Fuji Denki Seizo (富士電機製造), had been established in 1923 on the basis of a technical tie-up between Furukawa Electric and Siemens of Germany[2], and imported, manufactured and sold electrical machinery and telecommunications equipment of every kind. As the spread of telephone networks lifted demand for communications equipment, in June 1935 Fuji Electric separated the division and founded Fuji Tsushinki Seizo (富士通信機製造)[3]. Three product lines came across — telephone switching equipment, telephones and loading coils — and in 1937 the manufacture of carrier transmission equipment was added[4]. In November 1938 the head office moved to Kamiodanaka in Kawasaki, Kanagawa[5], and in May 1949 the company listed on the Tokyo Stock Exchange on the day trading there reopened[6].

The shape of a full-line communications and electronics manufacturer settled after the war, and its first step was the move into electronic computers in May 1951[7]. The technical tie-up with Siemens was revived in April 1952, radio communications equipment followed in August 1953 and electronic components in April 1954[8]. The company moved early into applications as well, completing Japan's first automatic control unit for machine tools in November 1956[9]. In 1964 it exhibited the FACOM 231 — the only computer in Japan built purely on domestic technology developed in-house — at the New York World's Fair[10], where it won high marks from manufacturers and users at home and abroad. Shinko Electric Industries became a group company in June 1957; the company listed on the Osaka Stock Exchange in December 1960 and on the Nagoya Stock Exchange in October 1961[11]; and in May 1962 it established Fujitsu Laboratories, holding the work of development inside the firm[12].

The threat of IBM in Japan, and the pressure to build at home

By October 1959 the application for IBM's plan to enter Japan was already a matter of fact, and building a co-operative structure that would let the country move quickly to domestic production had become urgent[13]. In June 1960 the outline of the trade and foreign-exchange liberalisation plan was settled, and Japan, as a member of the international community, was required to adapt actively to a liberalised regime. The gap in scale was absolute: as of 1962 IBM employed 75,000 people, had booked revenue of $1,694.96m the previous year — 22nd largest in the United States — and held branches in 93 countries through wholly owned subsidiaries; no Japanese company, it was said, bore comparison[14]. Against that, the computer divisions of Japan's seven makers came to fewer than 7,000 people even fully mobilised[15], and with liberalisation approaching the question was where on earth are we to look for a way out?[16]

President Okada Kanjiro (岡田完二郎) placed the axis of management on the capacity to respond to change[17]. The economy is a very large living creature. An aggressive policy is fine, but unless you act while the wave is with you it will fail. It is a matter of steering as the moment requires, he said[18], and went on: Look at Fortune magazine ... and more than half the companies that were inside the top hundred thirty years ago have dropped out. That is because they could not keep up with the change[19]. He was a manager of the type who did not follow the technical detail himself, but reached his final judgement from the loudness of the reporting engineer's voice and the light in his eyes[20]. In June 1967 the company changed its name from Fuji Tsushinki to Fujitsu[21], putting on its signboard the shift from a pure telecommunications maker to an integrated communications and electronics manufacturer. In the year to March 1968 sales divided evenly: switching equipment and telephones at 27% and radio and transmission equipment at 23% made communications 50%, while electronic equipment at 27% and components at 15% made electronics 42%[22].

Japan's domestic computer makers held that the technology itself had been developed, yet felt the threat of the adoption of the IBM System/370 series, regarded at the time as the most advanced machine there was[23]. The domestic line-up was rearranged under that pressure[24]. In October 1971 a tie-up in the computer business between Fujitsu and Hitachi was made public[25]. Fujitsu stood first in sales and Hitachi second, and this alliance of the top two was reported as taking 30% of the domestic market and forming a body able to stand against IBM at home[26]. With capital liberalisation three years away, momentum for reorganisation was rising rapidly across the computer industry[27]. Within the state-led framework for nurturing a domestic computer industry, Fujitsu secured the leading position at home[28].

The Amdahl investment and selling through systems engineers

At the fork between developing a proprietary architecture in-house and taking IBM's customers with compatible machines, Fujitsu chose the latter[29]. In May 1974, led by Ikeda Toshio (池田敏雄), the engineer known as a genius, it invested in Amdahl of the United States and gained both a development capability and a sales network for IBM-compatible mainframes[30]. The investment itself dated back to 1972, and the trading relationship — component supply and OEM production of some models — was already close. The posture was to take IBM's users directly while avoiding the heavy burden of architecture development, and here Fujitsu parted ways with Hitachi and NEC, which kept designs of their own. In an age when the state was nurturing domestic computers, it was a late-comer's wager on riding the ecosystem of the world's largest maker[31].

Morale on the ground ran high, and president Kobayashi Taiyu (小林大祐) called his people a crazy crowd[32]. A group that cut its honeymoons short to get back to work was said to be holding its ground without a step backwards against IBM, the mammoth of the world[33]. Kobayashi put the shape of selling on support rather than price: what mattered was the after-sales service that let customers get results from the machines, and for that the company had to keep a corps of systems engineers ready to be supplied the moment a customer asked[34]. In May 1980 it was reported that Fujitsu's domestic sales had passed those of IBM's Japanese subsidiary[35], and the news drew attention as the final stage of a pillar of Japanese industrial policy — building a computer industry with international competitiveness[36].

The emptiness after overtaking, and diversification beyond IBM

Even in a single national market, passing IBM's sales was a considerable event, and Fujitsu drew particular notice from abroad[37]. Yet an age had already arrived in which being the top computer maker did not, on its own, lift a company's image[38]. The collapse of the IBM myth posed a more fundamental problem for strategy[39]. The established system — a large computer installed in a computer room, processing information centrally — began to shake as distributed processing on personal computers and the like spread, and cracks appeared in the general-purpose-computer-centred order that the IBM machine symbolised[40]. With the growth of data communications, self-contained systems grew more fluid still, and an era arrived in which computing and communications together aimed at higher-order information processing[41]. All of it forced a correction of the excessive tilt towards general-purpose computers that the years of chasing IBM had produced[42].

Once the target is a composite enterprise such as NEC, with its C&C banner, merely chasing furiously gives no measure of the range, and a strategy becomes necessary[43]. In November 1985, under president Yamamoto Takuma (山本卓眞), Fujitsu raised the slogan beyond IBM and drove a product offensive into new markets outside the mainframe — communications equipment, AI and personal computers[44]. In June of the same year its personal computer strategy was reported as a new-product offensive that astonished the distribution market[45]. It had depth in people too: among the 1984 graduates of the University of Tokyo's departments of electrical and electronic engineering, NEC took eight, Toshiba and Mitsubishi Electric seven each, and Hitachi and Fujitsu six each[46]. In February 1986 it set up NIF as a joint venture with Nissho Iwai, planting the seed of the business that would become Nifty[47]. Breaking out of a one-legged reliance on mainframes gave the depth of a three-pillar structure and, at the same time, created a structure that carried communications, computers and semiconductors together[48].