Yokogawa Electric - Company History

An architect's starting point for instruments made in Japan

Yokogawa Electric's founder was Yokogawa Tamisuke (横河民輔), a Doctor of Engineering known for designing representative buildings of his day — the Imperial Theatre, the Mitsukoshi main store, the Tokyo Stock Exchange[1] — and a proprietor of unusual background who, although an architect who had set up the Yokogawa architectural practice (横河工務所) in 1903, chose to build his businesses around technology itself[2]. Alongside the architectural work, and to give effect to his own engineering bent, he founded Yokogawa Bridge Works (横河橋梁製作所) in 1907[3]; then in 1915, with the aim of making electrical instruments in Japan rather than importing them, he established the Electric Meter Research Institute (電気計器研究所) as a sole proprietorship in Shibuya, Tokyo, and started it with a structure that entrusted instrument development to engineers in their twenties — his nephew Yokogawa Ichiro (横河一郎), Aoki Susumu (青木晋) and others[4]. Japan at that time depended for precision electrical instruments on imports from Western makers such as Westinghouse and Siemens[5], and Tamisuke's attempt at domestic manufacture therefore carried a national significance: independence in the measurement technology on which industrial infrastructure rests.

In 1917 the venture achieved the technical result of making precision electrical instruments in Japan, and won from the Ministry of Communications and the Navy Ministry an assessment that they were in no way inferior to imported goods[6] — clearing early the largest technical obstacle of its founding years. In December 1920 it was formally incorporated as Yokogawa Electric Works, Ltd.[7], with a shareholding arranged so that the nephew Yokogawa Ichiro held about 30 per cent as the largest shareholder, while the founder Yokogawa Tamisuke deliberately held no shares at all and left the running of the company to the next generation — an adroit piece of design[8]. From then on Yokogawa developed as a specialist instrument maker under family management by the Yokogawa house, and from the Taisho years into the early Showa period it built up a record of deliveries to government offices, electric power utilities and telecommunications operators as a principal supplier of measuring equipment to a Japanese electrical industry then in its first surge.

Losing the military orders, and the Foxboro licence that opened the civil market

During the war Yokogawa was a designated Army plant, a munitions maker producing anti-aircraft fire-control computers and aircraft instruments[9], and its workforce expanded to a level of 12,000; with defeat the military demand vanished and the company faced a threat to its survival. It carried through a drastic contraction, closing four of its five plants and concentrating on the Musashino head office, dismissing more than 10,000 employees and starting again with a workforce of 1,200[10]. In the post-war instrument market demand had moved towards the process industries that would carry Japan's recovery — oil refining, chemicals, steel — and Yokogawa sought to shed its old skin and become a company fitted to the new industrial structure by shifting in earnest from a product range centred on electrical instruments to industrial measuring instruments.

Having come through the confusion that followed the surrender, Yokogawa looked for a way to turn its pre-war instrument technology towards industrial measurement for the process industries, and in October 1950 it completed the first self-balancing recording instrument in Japan to use vacuum tubes, the forerunner of instruments for automation[11]. An instrument that controlled a production process automatically and continuously suited the demand of the oil, chemical and steel industries, which were hurrying to rationalise and modernise amid the post-war recovery, and it became the technical footing on which Yokogawa moved its centre of gravity from a maker of single electrical instruments to a maker of industrial measuring instruments. The accumulated development work since its founding — finishing its instruments itself rather than relying on imported technology — underpinned the product base with which it met the new industrial structure.

In 1955 the company formally concluded a technical assistance agreement with the Foxboro Company of the United States, successfully opening the way to bring in pneumatic industrial instrument technology from Foxboro, a world-scale maker of control equipment for oil refining plants[12]; in September of the same year it also entered a technical tie-up with Bendix of the United States for viscometers[13]. Through these agreements Yokogawa was able to acquire a base in measurement and control technology for petrochemical plants, and it expanded its business by making use of the tailwind of the period — the rapid growth of the post-war oil industry. In 1957 it established Yokogawa Electric Works, Inc. in the United States as a foothold for overseas expansion[14], and in April 1962 it set up Aclome Electronics (アクローム・エレクトロニクス) as a joint venture with Boltron Products (ボルトロン・プロダクツ) of the United States[15], putting in place the technical and organisational base for the change of business that the next era would bring.

A double reinforcement: the HP joint venture and the Hokushin merger

In 1963 Yokogawa took the strategic decision to establish a joint venture, Yokogawa Hewlett-Packard (YHP), with Hewlett-Packard of the United States on a 51:49 shareholding[16], and a historic Japanese-American tie-up in electronic measuring instruments came into being. What broke the deadlock in negotiations that had taken eight long years was a chance personal connection: Garner, of the Japan Fund, a major shareholder in Yokogawa, also served as an outside director of HP[17] — a good example of a manager's personal network moving a tie-up between companies. By introducing HP-style management methods such as strict adherence to list-price selling and the exclusion of dependence on its parents, YHP established a management culture of its own; by 1980 it had grown into a highly profitable joint venture with sales of ¥46.5bn ($205.1M (¥47bn)) and an ordinary profit margin above 13 per cent[18], and had become a central presence in the Japanese market for electronic measuring instruments.

In April 1983 Yokogawa formally completed a merger with Hokushin Electric Works (北辰電機), the third-ranked firm in the domestic industrial instrument industry, on a merger ratio of 1.0 Yokogawa to 0.35 Hokushin[19] — a merger led by the Yokogawa side. Outwardly, however, it was carefully presented as a merger of equals, and the president of the day, Yokogawa Shozo (横河正三), maintained a stance so considerate of the Hokushin side that he drew complaints from within his own company, taking delicate care to minimise emotional resistance among former Hokushin staff[20]. After the merger the company carried out a bold reorganisation — selling the former Hokushin head-office plant to Canon and redeploying 1,000 people to other businesses[21] — and succeeded in completing the consolidation of sites within the short span of three years, making Yokogawa's position in the domestic industrial instrument market firmer still.

CENTUM announces the move from instruments to control

The oil shock of 1973 dealt a severe blow to Yokogawa, for whom the oil industry accounted for 83 per cent of sales[22], and successive cancellations of capital spending by the oil majors and domestic petrochemical makers pushed it into a hard period of depressed sales. The business model of an instrument maker selling instruments one at a time revealed a structural weakness — it was at the mercy of its customers' capital investment cycles — and Yokogawa entered a phase of searching for the next pillar of its business. Against that sense of crisis, Yokogawa announced the CENTUM integrated control system in 1975[23], declaring publicly its full-scale entry into a systems business that would take charge of controlling a plant as a whole, and laying the groundwork for a historic shift from instrument maker to control-systems maker.

In 1982 the company set up Yokogawa Medical Systems, a joint venture in CT scanners with GE on a 49:51 shareholding[24]; but in contrast to the joint venture with HP, its stake fell back to 25 per cent in 1986[25], and in the end the business followed a course in which Yokogawa's own name disappeared, as GE Healthcare Japan[26]. Behind the contrast — keeping the initiative in the joint venture with HP while losing it in the joint venture with GE — lay a fundamental difference in the technical balance of power: whether the initiative in product development sat with Yokogawa or with GE. Through this experience Yokogawa hardened still further its sense of business identity, that its technical strength lay in control systems for plants, and the strategic path was established of concentrating management resources on the control-systems business through the 1990s.

Selection and concentration, forced by the end of the HP venture and the reversal on job cuts

In 1999 Yokogawa took the management decision formally to dissolve its long-standing joint-venture relationship with HP and sell its shares in YHP. Behind it lay the fact that HP's reorganisation to separate its computer business had fundamentally changed the business structure on which the joint venture had been premised, and the dissolution left Yokogawa in the hard position of having effectively lost the electronic measuring instrument business that was a pillar of its earnings. Taking that loss as its cue, Yokogawa steered towards concentrating management resources on the control-systems business for plants; in 2002 it tried some diversification as well, acquiring shares in Ando Electric, an NEC-affiliated company, for about $105.4M (¥13bn) in order to strengthen its measuring instrument business for telecommunications; but in 2003 it decided to close 15 plants and to solicit voluntary redundancies, and the management itself withdrew the no dismissals policy it had upheld since the Hokushin merger of 1983.

The withdrawal of that policy was a turning point for Yokogawa's corporate culture: a management philosophy that had for many years kept rationalisation and the protection of employment together was reviewed in a way that amounted to yielding to external pressure from swings in the oil and gas market. In 2010 the company carried out a reorganisation that transferred the measuring instrument business to a subsidiary, Yokogawa Test & Measurement (横河計測), leaving the parent purely specialised in control systems; and in 2016 it acquired KBC Advanced Technologies of the United Kingdom for about $256.3M (¥28bn), taking in software for oil and gas plants and strategically accelerating the shift from control hardware to digital solutions. This sequence — separating the founding instrument business and converting into a specialist in plant control — was a historic structural change for a company with more than a century of history, and had the character of redefining its own core business.

1,105 voluntary redundancies, and where selection and concentration arrived

In 2015 the company carried through a severe structural reform, soliciting 1,105 voluntary redundancies with the aim of cutting fixed costs by about $330.5M (¥40bn), and recording $137.2M (¥17bn) as an extraordinary loss in business structure improvement expenses. Under a business structure in which a weak market in the oil and gas industry feeds directly into demand for plant control systems, management concluded that a fundamental review of the cost structure was unavoidable if the business was to be sustained, and this was the measure that followed; Yokogawa completed the structural reform in the very year it marked its centenary, and so made itself ready for the era to come. By lowering the level of its fixed costs through this reform, Yokogawa succeeded in raising its constitutional resistance to swings in the oil and gas market.

In the AG2023 medium-term management plan drawn up in 2021, the promotion of digital transformation centred on the control business was set out as management's highest-priority theme, and a strategy was announced of strengthening the winning of plant projects in the Middle East and South-East Asia by placing an Asian regional headquarters in Singapore. Management stated clearly, inside and outside the company, at the results briefing in 2025 that AG2023 was the first plan in which every item's target had been achieved, showing the market forcefully that the fruits of many years of structural reform had at last appeared in the numbers. The instrument maker founded as a private venture by an architect in 1915 had, after more than a century, turned itself into a global company supplying digital control solutions for plants, and entered a stage aimed at moving to a new phase of growth under the next medium-term plan.