Seiko Epson - Company History

A Suwa watch-parts works, and taking the parts and materials in-house

In May 1942 Daiwa Kogyo, a limited company, was established at Suwa in Nagano Prefecture for the machining of watch parts[1]. In May 1959 it took over the business of the Suwa plant of Daini Seikosha, part of the Hattori Tokeiten group, renamed itself Suwa Seikosha[2], and in September of the same year reorganised as a joint-stock company[3]. In December 1961 it established Shinshu Seiki as a subsidiary beneath it, to handle the finishing of watch parts[4]. Yamazaki Hisao (山崎久夫), the former representative director who was in effect the founder, walked the universities of Japan to gather graduates[5], and is said to have sat down at a university's main gate and waited for the student he was after to appear[6]. It was Yamazaki, too, who after the Second World War urged the engineers of Daini Seikosha returning from their wartime evacuation to remain in Suwa[7].

Almost none of the parts needed to make a watch could be obtained at the time[8]. In the mainspring era there were not even machine tools built for watchmaking[9], and when the company developed quartz, neither the C-MOS with its low power consumption, nor the crystal oscillator, nor the stepping motor that ticks off the seconds one by one existed anywhere in the world[10]. Rather than taking the road of making do with the parts and materials that could be had, it decided to suffer through making all of them itself, and from that decision came an integration that ran back up to components and raw materials[11]. By 1980 the proportion of watch parts made in-house had reached almost 100 per cent counted by type[12]. Engineers were recruited 35 per cent from electronics and 35 per cent from mechanical engineering, the remainder divided among physics, chemistry and metals[13], so that no single speciality came to dominate.

The group had about 1,000 engineers, 600 of them university graduates[14]; from roughly their sixth year with the company they were given a development theme as group leader, and thereafter were expected to study by themselves and solve the problem by themselves[15]. Specialities were deliberately crossed — mechanical engineers placed under a leader who had come from electronics, and the reverse — and the practice settled into a way of raising engineers strong in interdisciplinary and composite fields[16]. Yasukawa Hideaki (安川英昭), then a director, said that whatever speciality one had learnt at school no longer applies five years after joining the company[17]. Nakamura Tsuneya (中村恒也), representative director, said the wish to make watches good enough to beat Switzerland, the kingdom of watchmaking, had been carried since the days of the mainspring[18].

The Tokyo Olympics printing device and the launch of the EP-101

At the 1964 Tokyo Olympics, Seiko as official supplier developed quartz timepieces and, alongside them, a mini-printer to print the times those timepieces measured[19]. It was the world's first printer for a timing machine, used at the Tokyo Games[20], and the leading roles in its development were taken by Nakamura Tsuneya and Aizawa Susumu (相澤進)[21]. This was the first occasion on which the precision machining technique of packing many functions into the extreme confines of a watch came alive on the side of office equipment, which had nothing to do with watches. In September 1968 Shinshu Seiki began a mini-printer business on the basis of that printing technology[22]. The EP-101, launched in November 1969, was the first product of its kind in the world; because the only output device then available for computers and calculators was the cathode-ray tube, and an expensive one at that, demand spread at once[23].

The name EPSON was formed by following that EP with SON, meaning son[24]. Aizawa Susumu, later executive vice-president, called the EP-101 the monumental product with which a maker of watch parts began its run towards becoming an information-equipment manufacturer[25]. Development and commercialisation of liquid-crystal displays started at the height of the mini-printer's command of the market, spread to calculators, wristwatches and every kind of game machine, and took the leading share in the world[26]. The semiconductor business began in November 1973[27] and the crystal-device business in July 1976[28]. A manufacturing company, Tenryu (Singapore) Pte. Ltd., was set up in Singapore in August 1968[29], and Suwa Overseas Ltd. in Hong Kong in February 1974[30].

EPSON — a brand established without the SEIKO name

In June 1975 EPSON was adopted as the company brand for the non-watch fields[31]. In April of that year a sales company, Epson America, was established in the United States, and the spectacle-lens business began in the same year[32]. So long as it made parts, the company stayed hidden behind other people's finished products and the maker's name never met the customer's eye[33]. From the moment it commercialised the mini-printer, the record left just after the merger states, it had been the company's wish to deliver products under its own brand to the end user[34]. To raise a separate name without the SEIKO mark meant assembling a sales network of its own, apart from Hattori Tokeiten, which handled the watches.

It was not only the brand that was set apart; the intent behind the selling was also separated from that of the rest of the industry. The development policy was placed on not imitating, and was narrowed onto two targets, the mass market and the young[35]. In December 1978 the computer-printer business began[36]; before that the company had sent out an office computer for accounting firms as the first product under its own brand, taking a 40 per cent share within a year of launch[37]. Aizawa Susumu said that in printers and liquid-crystal displays Epson was Epson to the world, but in computers themselves it was unknown, and that doing the same thing as other companies would be no contest[38]; into a market where general-purpose machines were the norm, he deliberately ranged dedicated machines built for a single use[39].

The MP-80's world share, and Suwa Seikosha's absorption of Epson

The MP-80 terminal printer for personal computers, launched in 1980, settled the EPSON name[40]. Its developers said they had taken the idea of the component hi-fi system and separated the printer, as a peripheral of the computer, from the main unit to stand as a product on its own[41]. The machine took 60 per cent of the market in Japan and 40 per cent of the world market, and OEM approaches from computer makers at home and abroad followed one after another[42]. By 1980 Shinshu Seiki had established EPSON without using SEIKO, and with that printer had locked up about 70 per cent of the world share[43]. Sales were $211.7M (¥48bn), with 2,000 employees and printer output of 4.5 million units — close to half the $441.1M (¥100bn) of its parent company, Suwa Seikosha[44].

In 1979 the declared income of the eight companies of the Suwa Seikosha group came to $121.3M (¥28bn) in total[45]. Had the business been carried on as a single company rather than under a divided-company structure, that figure would have placed it 56th in the ranking of declared income[46]. The declared income of the Seiko group as a whole was $237.3M (¥55bn), of which the Hattori Tokeiten group accounted for $45.6M (¥10bn), the Seikosha group for $17M (¥4bn) and the Daini Seikosha group for $53.3M (¥12bn)[47]; the Suwa Seikosha group was the largest of them. Watches made up 63 per cent of the group's sales and non-watch products 37 per cent[48], and Nakamura Tsuneya, representative director of Suwa Seikosha, read it as only a matter of time before the expanded non-watch fields reached 50 per cent[49].

In November 1985 Suwa Seikosha absorbed Epson Corporation and changed its trade name to Seiko Epson Corporation[50] — a company with sales of about $1.3B (¥300bn) and some 7,000 employees[51]. Epson's sales had grown from $94.3M (¥28bn) in 1975 to $401.5M (¥100bn) in 1982 and past $631.5M (¥150bn) in the year to 1984[52], and even at the time there was a view that the merger served to put a brake on a subsidiary that stood out with its own brand and its own sales company[53]. In colour liquid-crystal televisions, the Suwa group and Seiko Instruments & Electronics were selling the same product against each other under the names Televian (テレビアン) and My Channel (マイチャンネル)[54], and it is said that settling on the new company name took some winding about.

Entering the PC-98 compatible market, and the suit brought by NEC

Epson began work on developing personal computers in 1980[55]. In 1985 it launched an IBM-compatible machine for overseas markets and, with a price lower than its rivals as its weapon, at one point held the fifth-largest share of the American market[56]. Of sales of $661M (¥157bn) in the year to 1984, 65 per cent were exports; narrowed to finished products alone, excluding components, the export ratio reached 80 per cent, and close to 70 per cent of that went to the United States[57]. This growth was supported by a sales network that divided the whole of America into twelve regions, placed in each region one distributor jointly funded with a local operator, and arranged some 2,000 dealers beneath them[58].

In March 1987 Epson announced the PC-286 models 1, 2 and 3, compatible with NEC's PC-9801 series. NEC applied to the Tokyo District Court for a provisional injunction halting their manufacture and sale[59], and in April Epson announced that it would stop making and selling the three models, shipping the PC-286 model 0 instead[60]. The two companies settled in November of the same year[61]. The model 0 was priced at $2,469 (¥357,000), while NEC products of much the same capability ran from $2,752 (¥398,000) to $2,994 (¥433,000) — more than $346 (¥50,000) cheaper[62]. In December of that year it launched the laptop PC-286L ahead of NEC[63]. The PC-286 NOTE EXECUTIVE, released in June 1989, was A4-sized, 35 millimetres thick and weighed 2.2 kilograms, at $3,319 (¥458,000)[64]; portable computers of the day mostly weighed around 9 kilograms[65].

A compatible machine cannot survive unless it leads the original on either price or function[66]. Epson's compatibles rose to 60,000 units in the first year of sale and 120,000 in the next, but thereafter fell away to 30,000 and 90,000[67]. Over the same period NEC kept up growth of around 40 per cent and in May 1990 passed three million units of cumulative sales[68]. Around 1987, as the MPU carried in personal computers was moving from the Intel 286 to the more capable 386, the very strength of its 286-based machines slowed Epson's transition and built a mountain of stock[69]. Kimura Toshio (木村登志男), who had started up the personal-computer business at the time, admitted that misjudgements of management had piled up and the company had failed to back the winner[70].

Deciding to eliminate CFCs ahead of the regulators' timetable

At the end of 1988 President Nakamura Tsuneya decided that the company would stop using chlorofluorocarbons by 1993[71] — a target earlier than the reduction timetable laid down by the Montreal Protocol adopted in 1987[72]. Yields in semiconductors and liquid crystals rest on the certainty of the cleaning, and CFCs, harmless to the body and powerful as solvents, had spread widely through the shop floors that handled precision parts[73]. Consumption in the 1988 financial year was 1,400 tonnes[74]: about 40 per cent in the optical division, which included spectacle lenses, 20 per cent in the display division for such things as LCD panels, and 20 per cent in the precision-parts division for watch components and disc-drive parts[75]. By use, drying after rinsing accounted for 62 per cent and cleaning for 30 per cent[76].

CFCs were an all-purpose solvent whose cost did not weigh heavily on the price of the product, so until the problem arose no one had even grasped how much the company as a whole was using[77]. An internal survey committee, the CFC-Free Promotion Committee, began work in August 1988[78], and in December a dedicated body within the production-engineering directorate, the CFC-Free Promotion Centre, was placed at the Chino works in Nagano Prefecture, staffed by a mere six people[79]. Checking with TQC methods whether each cleaning step was needed at all cut 6 per cent; switching post-rinse drying to spin dryers cut 26 per cent; and rigorous containment and recovery cut a further 18 per cent[80], so that by the end of 1989 monthly consumption, annualised, stood at 700 tonnes, half the peak[81]. The plan was to halve it again from the previous year during the 1990 financial year, bringing it into the 300-tonne range[82].

Reduction through management of the shop floor had now reached its limit, and what remained were the hard parts: establishing substitute technology, and introducing it at the roughly 200 subcontractors[83]. CFC-free cleaning equipment does nothing directly for a subcontractor's added value or productivity, and once the waste-water treatment plant needed for pure-water cleaning is counted in, the burden is heavy[84]. The promotion centre joined with outside machinery makers to develop the cheapest cleaning machines they could[85], and chose the road of publishing its own CFC-free technology. President Nakamura said that on a problem of planetary scale, cooperation came before competition, and that the real competition should be conducted in product development[86]. Seiko Epson achieved the elimination of CFCs worldwide in 1993[87].