IHI Corporation (IHI)
Corporate History & Strategy

Background: Perry's arrival and Japan's first Western-style shipyard

Following Commodore Perry's arrival in June 1853, the Tokugawa shogunate decided to build large vessels and lifted the 218-year-old 'ban on large ship construction.' The pro-exclusionist Mito domain, commissioned by the shogunate, established Japan's first Western-style shipyard on Ishikawajima (Tsukuda district) at the mouth of the Sumida River in 1853. Construction of the Western-style vessel 'Asahi Maru' began in April 1854, and after extensive study of Western ships, the vessel was launched in March 1856 and delivered to the shogunate in November of the same year.

After the Meiji government was established, the shogunate-operated Ishikawajima shipyard was confiscated as a government facility. However, when the Meiji government decided in 1880 to dispose of unprofitable government-owned factories, the Ishikawajima Shipyard became a candidate for sale. The acquirer was Tomiji Hirano. Born into a retainer family, Hirano had worked in ship-related operations at the Nagasaki Magistrate's Office, and the Meiji government, trusting his capabilities, approved the transfer.

Decision: Eiichi Shibusawa's participation and incorporation

Under Hirano's management, the shipyard operated, but shipbuilding was an industry requiring enormous capital for material procurement and equipment investment, and the limits of sole proprietorship in terms of capital capacity became apparent. Hirano therefore sought management support through financing from the prominent businessman Eiichi Shibusawa, and in 1889 carried out an organizational restructuring to establish the 'Limited Liability Ishikawajima Shipyard.' Shibusawa's participation enabled the transition from sole proprietorship to a modern corporate organization.

In 1890, following the enactment of the Commercial Code, the company was reorganized as the joint-stock company 'Tokyo Ishikawajima Shipyard,' with Eiichi Shibusawa appointed as the first chairman. A financing structure was established through Dai-Ichi Bank (later Dai-Ichi Kangyo Bank), which Shibusawa had founded, and the company was developed as a shipbuilder through equipment investment leveraging bank capital.

Result: Establishing the business foundation as a modern shipyard

With Shibusawa's capital reinforcement and bank financing in place, the Ishikawajima Shipyard undertook full-scale facility expansion. By 1909, the head office factory (Tokyo First Factory, Tsukuda) had progressively acquired and expanded its land, securing a site area of 30,000 tsubo.

The process of evolving organizational form — from government shipyard sale, through sole proprietorship, to joint-stock company — was a typical example of shipbuilding industry modernization in the Meiji era. By bringing in Eiichi Shibusawa, a titan of the business world, the capital foundation was established that would later support diversification into aero engines and turbochargers.

Background: Vessel upsizing and shipyard capacity constraints

Throughout the 1950s, oil transportation from Middle Eastern producing countries expanded, and demand for large tanker construction surged. Competitors including Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and Hitachi Zosen built new large docks to handle 50,000-GT class vessels. However, Ishikawajima Heavy Industries' main Tokyo factory (Second Factory) was located at the mouth of the Sumida River, making dock expansion difficult, with 22,000-GT class being the maximum buildable size.

Meanwhile, Harima Shipbuilding was the industry's third-largest shipbuilder, but with the vast majority of its revenue from shipbuilding, it was heavily impacted by the shipbuilding recession from 1958 onward. Its land-based division (machinery) had lagged in development, leaving the company vulnerable to fluctuations in shipbuilding demand. Both companies faced different challenges but had maintained a friendly relationship through mutual supply of turbine engines and diesel engines.

Decision: Merger through mutual complementarity, establishing industry No. 2 position

In July 1960, Ishikawajima president Toshio Doko and Harima president Shuzo Mutsuoka reached a basic agreement on merger. On December 1 of the same year, the merger was executed with Ishikawajima as the surviving entity, establishing 'Ishikawajima-Harima Heavy Industries.' Post-merger headcount was approximately 15,000 (Ishikawajima approximately 9,000 + Harima approximately 6,000), securing the second-largest construction volume in the shipbuilding industry after Mitsubishi Heavy Industries.

For Ishikawajima, acquiring Harima's large docks enabled 40,000-GT class vessel construction, providing the foundation to compete in the vessel upsizing race. For Harima, merging with Ishikawajima — where 70% of revenue came from land-based divisions — achieved business diversification and the management stability benefit of being able to redeploy personnel to land-based divisions during shipbuilding downturns.

Background: Shipbuilding consolidation driven by strong yen and rise of Korean and Chinese builders

Throughout the 1990s, the sustained strong yen significantly eroded the international competitiveness of Japan's labor-intensive domestic shipbuilding industry. Korean and Chinese shipbuilders, benefiting from relatively favorable exchange rates, rapidly gained ground, putting Japanese shipbuilders at a disadvantage in price competition. As momentum for restructuring to address the domestic shipbuilding industry's structural challenges grew, business integration among major manufacturers began to be explored.

In September 2000, three major companies — Ishikawajima-Harima Heavy Industries, Kawasaki Heavy Industries, and Mitsui Engineering & Shipbuilding — signed a shipbuilding business partnership agreement, deepening their cooperation. Building on this partnership, on April 3, 2001, Ishikawajima-Harima and Kawasaki Heavy Industries signed a 'Basic Agreement on Integration of Marine and Shipbuilding Operations,' announcing plans to integrate both companies' marine businesses into a 50-50 joint venture by October 2002.

Decision: Integration plan scrapped, pivot to Sumitomo Heavy Industries

However, on September 19, 2001, Ishikawajima-Harima announced the cancellation of the basic agreement on shipbuilding integration with Kawasaki Heavy Industries. The reasons for cancellation were not disclosed, but at Kawasaki Heavy Industries in 2013, internal conflict — including the dismissal of the president — erupted over the separation of the shipbuilding division, suggesting that internal consensus-building at Kawasaki may have also stalled at this earlier stage.

Following the collapse of the integration plan, Ishikawajima-Harima sought an alternative integration partner for its marine business and began integration negotiations with Sumitomo Heavy Industries. This pivot led to the establishment of IHI Marine United in October 2002, and ultimately to the launch of Japan Marine United, advancing the restructuring of the domestic shipbuilding industry.

Marine business integrated with Sumitomo Heavy Industries — IHI Marine United launched

In October 2002, Ishikawajima-Harima Heavy Industries decided to integrate its marine business with Sumitomo Heavy Industries. The shipbuilding business was transferred to and consolidated in 'IHI Marine United (MU),' which had been established in 1995 as a 50-50 joint venture between Ishikawajima-Harima and Sumitomo Heavy Industries for Defense Agency naval vessel contracts.

At the time of IHI Marine United's launch, the ownership ratio was 95.4% for Ishikawajima-Harima versus 4.6% for Sumitomo Heavy Industries, giving IHI controlling interest.

Background: Shipyard closure and Toyosu's location value

In September 2000, Ishikawajima-Harima Heavy Industries held the final launch ceremony at its Tokyo First Factory (Toyosu, Koto-ku) for the destroyer 'Akebono.' Having fulfilled its role as a shipyard, the Tokyo First Factory was closed in April 2001. The factory had been acquiring land and operating since 1939, functioning as an Ishikawajima shipbuilding base for approximately 60 years.

When the Tokyo Metro Yurakucho Line extended to Toyosu Station in 1988, the Tokyo First Factory site became prime real estate in front of the station. Toyosu is just six minutes from Ginza-itchome on the Yurakucho Line, giving the large-scale site high real estate value with excellent access to central Tokyo. As the structural contraction of shipbuilding progressed, momentum grew to convert this location to non-shipbuilding uses.

Decision: IHI-led redevelopment of the former shipyard site

IHI decided to redevelop the Tokyo First Factory site into office buildings, commercial facilities, a university, and condominiums. While some parcels were sold, IHI led the overall redevelopment. By 2006, several facilities including the Toyosu IHI Building were completed, securing stable real estate rental income.

Furthermore, by 2008, IHI and Mitsui Fudosan jointly completed 'Park City Toyosu,' a condominium development with 1,476 units. In FY2008 (March), IHI recorded real estate business revenue of 40.7 billion yen and operating profit of 12.3 billion yen. Converting the former shipyard site into a highly profitable real estate business secured an unusual source of real estate earnings for a heavy industry manufacturer, forming one component of a business portfolio that could offset fluctuations in the core business.