Fanuc Ltd. - Company Profile, Information, Business Description, History, Background Information on Fanuc Ltd.

3580, Shibokusa Aza-Komanba
Yamanashi 401-05

History of Fanuc Ltd.

Headquartered at the base of Japan's Mount Fuji, Fanuc Ltd. is the world's leading manufacturer of numerical control (NC) equipment for machine tools, devices that put the automation into automated factories. NC devices are the forerunners of industrial robots. Fanuc, whose name is an acronym for Fuji Automatic Numerical Control, has been a world leader in robotics since the 1970s.

Founded as a Subsidiary of Fujitsu

Fanuc was founded as a wholly owned subsidiary of Fujitsu in 1955, after that electronics giant decided to enter the factory automation business. Its first employees were a team of 500 engineers, and Fujitsu chose from among them a young executive engineer named Seiuemon Inaba to head the subsidiary. It was a move that would prove beneficial for both the company and the man. Inaba, who received a doctorate in engineering from Tokyo Institute of Technology after joining Fujitsu in 1946, has since remained at the top of Fanuc's chain of command. His name has become virtually synonymous with that of the company.

At first, Fujitsu Fanuc devoted itself solely to research and development. U.S. companies led the way in automation technology at that time; in fact, no Japanese company produced NC machine tools until the mid-1960s. Once the Japanese NC industry entered the field of play, however, Fujitsu Fanuc dominated the game. By 1971, it controlled 80 percent of the domestic market for NC equipment. In 1972 Fujitsu spun-off its highly successful subsidiary, retaining a substantial minority interest. The remaining shares were put on the open market. In 1975 Seiuemon Inaba became president of the new company.

Fujitsu Fanuc, as it continued to call itself until 1982, began its life as an independent company with numerous marketplace advantages. As a major Japanese NC manufacturer, it was well suited to spearhead the Japanese NC industry's entry into the export market. In 1975 it licensed U.S. manufacturer Pratt & Whitney to market its NC drilling machines in North America. In the same year it entered into a licensing agreement with German engineering firm Siemens, which was also a minority shareholder in the company, giving Siemens the exclusive right to market Fujitsu Fanuc products in Europe. In 1985 the European Economic Community would find that the deal violated its rules regarding monopolies and fined the companies $840,000. In 1978 Fujitsu Fanuc took its manufacturing operations abroad, building a plant in South Korea. By 1982, it had captured half of the world NC market.

Captured Leading Position in Robotics in the 1980s

Its position as an NC manufacturer notwithstanding, it is the company's commitment to the related field of robotics that has brought it the most attention and acclaim. Fujitsu Fanuc started selling robots in 1975, but they accounted for only a tiny percentage of sales at first, Kawasaki and Hitachi being the leading Japanese robotics companies at the time. Inaba sought to change that situation in the 1980s. In January 1981 Fujitsu Fanuc opened a showcase plant in Yamanashi Prefecture, in which robots and NC machine tools made parts for other robots. The factory, which would otherwise require 500 human workers, was run by a staff of 100 people, whose duties consisted of maintaining the robots and assembling the parts into finished products.

This vision of robots manufacturing other robots caught the fancy of the press and, evidently, other robotics companies. A string of joint ventures followed the opening of the new plant. In 1982 Fujitsu Fanuc granted Taiwan's Tatung Co. sole import rights for its robots. In 1983 it also joined with the 600 Group, a British machine tool manufacturer, to form 600 Fanuc Robotics, which would sell Fanuc robots in the United Kingdom.

Fanuc's most important move in 1982 was to enter into a joint venture with General Motors (GM), called GMFanuc Robotics, to produce and market robots in the United States. The new company was 50 percent owned by each partner and was based in Detroit, with GM providing most of the management and Fanuc the products. This was not the first alliance between Japanese and U.S. robotics concerns; Japanese companies on the whole lacked the advanced technology necessary to create sophisticated robots, while the U.S. plants lacked Japanese manufacturing skill. By linking up with its largest single potential customer in the United States, Fanuc all but assured itself of a lucrative share of the U.S. market. In its early years, GMFanuc Robotics chiefly made automobile assembly robots and sold them to GM. Although both companies denied it at the time, few industry observers doubted that GM gave preferential treatment to GMFanuc robots when considering bids from suppliers. GMFanuc sales described a steep upward curve, and within six years it became the world's largest supplier of robots.

Inaba's goal of increasing Fanuc's robot sales was not simply a business matter, but a reflection of his personal interest in robots. Known in Japan as the Emperor of Robots, Inaba said in 1981 that it was his dream to develop within four years a robot that would help assemble Fanuc's robot-made robot parts into finished robots. By the middle of the decade, Fanuc had indeed developed assembly robots, which were used to put together parts for motors at its motor factory.

Fanuc's success in robotics has brought Inaba to the attention of the U.S. financial press. There is his passion for the color yellow, for instance, because, as he put it, "In the Orient, yellow is the emperor's color." Fanuc factories, offices, and assembly lines are all painted in such a shade. The workers' jumpsuits are also yellow, head to toe. Inaba is known for his demanding and authoritarian management style--at meetings, his subordinates are not allowed to speak unless spoken to; for his company's commitment to a futuristic industry like robotics; and for the profoundly scenic location of its headquarters.

In the mid-1980s, sales of automation equipment dropped substantially. Manufacturers who pumped large amounts of capital into automation equipment suddenly found themselves with weak cash flows and were unwilling to invest further. GM cut back on its commitment to robotics, GMFanuc sales fell, and Fanuc was further hurt by the relative strength of the yen against the dollar, making its products more expensive in the United States. Fanuc, nevertheless, managed to maintain a healthy profit margin despite these difficulties, and it kept expanding its activities.

In 1987, it tightened its grip on the U.S. market by entering into a joint venture with another pillar of U.S. industry, General Electric (GE). The two companies formed GE Fanuc Automation to manufacture computerized numerical control (CNC) devices. The deal marked something of a defeat for GE, which had failed in its attempt to become a factory automation powerhouse. GE stopped making its own CNC equipment and turned its Charlottesville, Virginia, plant over to the new company, which equipped it to produce Fanuc CNC devices.

In 1988 Fanuc once again joined forces with General Motors, this time to form GMFanuc Robotics Europa, to market robots in Europe. In 1989 it took advantage of relaxed East-West tensions to increase its presence in the Soviet Union. It joined with Mitsui, a huge Japanese trading company and with Stanko Service, a Soviet machine-tool service organization, to form Stanko Fanuc Service, which would maintain and repair Fanuc products there.

Fanuc's success has always been derived from the circumstances that its products are the most reliable and yet the least expensive on the market, allowing it to better its competition in good times and to maintain its advantage in lean times. In a cutting-edge field like automation, a huge commitment to research and development is required, and fully one-third of Fanuc's nearly 1,800 employees are engaged in such activity, the highest ratio of any Japanese manufacturer. As with every other facet of the company's operations, Fanuc's R&D bears the personal stamp of Seiuemon Inaba. He once gave his Product Development Laboratory a clock that ran ten times faster than normal, as a gentle reminder of the importance of staying ahead of the competition. Inaba has made the German engineering slogan Weniger Teile, which means "fewer parts," Fanuc's slogan; machines with fewer parts are cheaper to produce and easier for automatons to assemble.

Difficult Years in the 1990s

Inaba has garnered publicity for the extensive benefits he provided his employees. At the Yamanashi Prefecture plant, located in a rural setting at the base of Mount Fuji, Inaba included a medical center, a gymnasium, a 25-meter heated swimming pool, a culture center, employee living quarters, and a pub. In the late 1980s and early 1990s, these attractive benefits helped Fanuc counter a labor shortage affecting many Japanese firms.

In the early 1990s, however, Fanuc faced more than just a difficult labor market. Revenues and earnings declined as the entire machine tool industry in Japan suffered from slackened demand compared to heyday of the 1970s and 1980s. In the midst of this downturn, Fanuc gained an increased presence in foreign markets when it purchased GM's half-interest in GMFanuc and renamed it Fanuc Robotics Corporation, which became a wholly owned subsidiary of Fanuc Ltd. Fanuc Robotics, in turn, held two subsidiaries--Fanuc Robotics North America, based in Auburn Hills, Michigan, and serving the North American and Latin American markets; and Fanuc Robotics Europe GmbH (formerly GMFanuc Robotics Europa), based in Luxembourg, which served the European market.

To maintain Fanuc's dominant position in automation technology in the face of the industry slump, Inaba determined to further bolster Fanuc's R&D. In 1994 the Fanuc Berkeley Laboratory was established in Union City, California. Inaba also sought to reduce costs by purchasing more raw materials outside of Japan, taking advantage of the strength of the yen. Longer term, Inaba committed Fanuc to a strategic emphasis on robots.

Unlike other Japanese robotics firms, Fanuc did not shift production to the United States during this period. Demand for robots was growing dramatically in North America in the early 1990s thanks to a rebounding automobile industry. Fanuc could continue to profitably manufacture in Japan based on two factors. First, Fanuc's production process was cheaper than competitors because of its highly automated "lights out" plant, which was capable of producing one thousand robots a month. Second, Fanuc could take advantage of its world leadership in production of CNCs--a key component in robots&mdashø keep its production costs down.

These strategies seemed to be paying off as Fanuc's revenues and earnings rebounded in 1994 and 1995. A master businessman as well as a master engineer, Seiuemon Inaba has guided his company along a steep ascent and through some challenging conditions as well.

Principal Subsidiaries:Fanuc Robotics North America, Inc. (U.S.); Fanuc U.S.A. Corp.; GE Fanuc Automation Corporation (U.S.); Beijing-Fanuc Mechatronics Co., Ltd. (China); Fanuc Europe GmbH (Germany); Fanuc Germany GmbH; Fanuc France S.A.; Fanuc Iberia, S.A. (Spain); Fanuc Italia S.p.A. (Italy); Fanuc Sweden AB; Fanuc India Limited; Fanuc Korea Corporation; Fanuc-Machinex Ltd. (Bulgaria); Fanuc Oceania Pty. Limited (Australia); Fanuc South Africa (Proprietary) Limited; Fanuc Southeast Asia Pte. Ltd. (Singapore); Fanuc Singapore Pte. Ltd.; Fanuc Hong Kong Limited; Fanuc Thai Limited; Fanuc Taiwan Limited; Fanuc U.K. Limited; P.T. Fanuc Indonesia.

Additional Details

Further Reference

Bylinsky, Gene, "Japan's Robot King Wins Again," Fortune, May 25, 1987."Fanuc Edges Closer to a Robot-Run Plant," Business Week, November 24, 1980."Fanuc Throws One-Third of Its Entire Labor Force into the Most Powerful R&D Setup of the Industry," Business Japan, April 1989."GM to Sell Its 50% Stake in GMFanuc, a Robotics Firm, to Japanese Partner," Wall Street Journal, June 4, 1992, p. B3(W), p. B4(E).Nakamura, Minoru, "Trouble in the Robot Kingdom," Tokyo Business Today, June 1994, pp. 44-45.Wiegner, Kathleen K., "The Dawn of Battle," Forbes, October 26, 1981.Winter, Drew, "Eastward Ho: Japanese Robot Builders Shift Production to U.S.," Ward's Auto World, July 1995, p. 81.

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