FANUC
Corporate History & Strategy

In the 1950s, Fujitsu, then a Japanese telecommunications equipment manufacturer, had articulated a '3C Vision' to expand beyond its traditional communications (Communication) business into computers (Computer) and control (Control). In 1956, Omi Hanzou, the managing director in charge of technology, appointed his subordinate Inaba Seiuemon to lead the control division. Research and development of 'NC (Numeric Control)'—the computer-based numerical control of machine tool movements—began as an internal project at Fujitsu. This was the origin of the business that would later be spun off as FANUC.

At the time, NC technology was pioneered in the United States, but it remained an unexplored field in Japan. While Fujitsu positioned NC as a new business pillar alongside its computer operations, the market that required NC control was itself immature, and there was no clear path to commercialization. Inaba Seiuemon worked on establishing the foundational technology for NC control while exploring a business model of supplying technology to domestic machine tool manufacturers, beginning with Makino Milling Machine. To this day, machine tool manufacturers remain FANUC's primary customers.

In 1959, Inaba Seiuemon invented the 'electro-hydraulic pulse motor' used in machine tool drive mechanisms and obtained a patent. This technology enabled precise position control for NC, establishing Fujitsu's NC business as a technological pioneer in Japan. The patent on this proprietary technology would later form the technological foundation for FANUC's domination of the general-purpose NC market.

However, partly due to the high cost of computers, Fujitsu's NC business continued to operate at a loss for approximately 10 years after entry. This period is internally referred to at FANUC as the 'Age of the Gods'—a time of technology accumulation without any visibility into commercial viability. The business finally turned its first profit in 1965, and in 1972, the NC business was spun off from Fujitsu to establish 'Fujitsu FANUC.'

In the 1980s, automation of machine tools advanced rapidly in Japanese manufacturing, driving increased demand for NC (numerical control) devices—the brain of the machine tool. NC devices are computers that control machine tool movements through numerical values and were indispensable components for improving machining precision and production efficiency. As machine tool manufacturers expanded production of NC-equipped machine tools, competition intensified between FANUC and Mitsubishi Electric, the NC device suppliers.

Since its founding, FANUC had honed its software technology for numerical control and its servo motor technology for high-precision control. In addition, the company adopted a strategy of concentrating its management resources on general-purpose products rather than custom products tailored to individual customer specifications. Specialization in general-purpose products enabled cost reduction through mass production, giving FANUC a position of 'high-performance yet affordable NC' that was difficult for competitors to replicate.

As a result of this strategy, FANUC secured a 70% domestic market share in NC devices, far outpacing competitors such as Mitsubishi Electric. By virtually monopolizing the market, FANUC seized pricing power over general-purpose NC devices and established a structure for maintaining high profit margins. In FY1985, the company achieved an operating profit margin of 36.6%, recording the highest profitability among all listed companies in Japan.

However, FANUC's dominance was limited to the general-purpose product market. In custom-specification NC devices, competitors including Mitsubishi Electric maintained a certain level of demand, and some major machine tool manufacturers such as Yamazaki Mazak and DMG Mori transitioned to a dual-sourcing system from both FANUC and Mitsubishi Electric during the 1990s. FANUC's high-profitability structure relies on pricing power within the limited domain of 'monopoly over the general-purpose product market.'

Around 2010, Apple's iPhone production volume surged, driving increased demand for the 'ROBODRILL,' a compact machine tool used to machine aluminum housings through cutting. iPhones are manufactured by precisely milling aluminum blocks, and at the EMS facilities of Hon Hai Precision Industry in China, ROBODRILL procurement became urgent in proportion to iPhone production increases. For FANUC, a new growth driver had emerged after NC devices and robots.

The expansion of the smartphone market was not limited to iPhones; similar ROBODRILL demand arose from Samsung Electronics' smartphone production in South Korea. FANUC expanded its business with Samsung, and by FY2014, sales to Samsung reached 93.9 hundred million yen. The structural demand shift driven by the global proliferation of smartphones was beginning to significantly impact FANUC's business portfolio.

Around 2011, FANUC decided on mass-production investment for the ROBODRILL. Production lines at the Tsukuba Factory in Ibaraki Prefecture were expanded, and a shipping system for Chinese EMS manufacturers was established. FANUC's capital expenditure in FY2011 amounted to 45.7 hundred million yen, with the main components being the construction of a new robot factory at the headquarters and the expansion of ROBODRILL production capacity at the Tsukuba Factory. This was a decision to direct large-scale investment not only into NC devices as component supply but also into mass production of the ROBODRILL as an end product.

As a result of this investment, throughout the 2010s, FANUC significantly expanded its sales to Asia (primarily China and South Korea). However, the ROBODRILL was characterized by demand concentration on specific products for specific customers, creating a structure where performance was influenced by iPhone production cycles and model changes. In fact, in 2019, demand for iPhone-related ROBODRILLs declined, and FANUC recorded a 60% profit decline.