Sumitomo Heavy Industries, Ltd. - Company Profile, Information, Business Description, History, Background Information on Sumitomo Heavy Industries, Ltd.



9-11 Code-Shinagawa 5-chome
Shinagawa-ku, Tokyo 141-8686
Japan

Company Perspectives:

An integrated manufacturer of leading-edge industrial products, SHI's core businesses include production and sales of industrial machinery and shipbuilding. Offering both the latest in technology and the finest in quality, we provide our customers around the world with superior products designed to meet a wide range of demands.

History of Sumitomo Heavy Industries, Ltd.

Sumitomo Heavy Industries, Ltd., one of the major companies affiliated with the Sumitomo Group of Japan, manufactures industrial machinery and equipment, construction machinery, and environmental systems, in addition to being one of Japan's foremost shipbuilders. It is also a leading maker of mass-production machinery, including injection molding machines, laser processing systems, and electrical equipment.

A Centuries-Old Japanese Business

Sumitomo Group traces its origins to the 17th century when Masatomo Sumitomo opened a medicine and book shop in Kyoto and laid the foundation for the family's business involvement over future generations. Upon Sumitomo's death in 1652, his brother-in-law, Riemon Soga, became head of the Sumitomo family. Soga's earlier experience as an apprentice in a copper refinery influenced the company to shift toward that industry. In 1590 Soga had opened his own shop in Kyoto called the Izumiya and adopted the igeta, or well frame, symbol as Izumiya's logo. The igeta was registered as the trademark for the Sumitomo Group in 1885 and later adopted by Sumitomo Heavy Industries and most of the other affiliates.

By 1888, the company's mining operations had expanded sufficiently to warrant the opening of a machinery production and repair shop at Sumitomo's Besshi copper mine. In 1897 Sumitomo established the Uraga Dock Company for shipbuilding. In 1934 the Besshi machine shop was merged with Uraga Dock to form Sumitomo Machine Manufacturing Company, which functioned as a subsidiary of the Sumitomo zaibatsu, or conglomerate.

Early 1900s: Name Changes

Over the next 11 years, the company's name was changed several times, from Sumitomo Machine Manufacturing Company to Sumitomo Machinery Company, in 1940, and to Shikoku Machinery Company, in 1945. As one of Japan's leading industrial concerns, the Sumitomo zaibatsu was disrupted significantly by military action during World War II. After 1945, the zaibatsu was broken up into independent companies, in compliance with the orders of the Supreme Commander of Allied Powers (SCAP). These orders gradually were relaxed over the next decade, allowing the Sumitomo affiliates to reestablish ties with each other and coordinate planning activities.

In 1952, Shikoku Machinery Company again became Sumitomo Machinery Company. In 1957, Sumitomo Machinery opened its first overseas office, in New York City. In 1959, it established its Nagoya manufacturing plant and also incorporated Shin Nippon Machine Manufacturing to produce turbines, pumps, fasteners, blowers, and heat exchangers.

1960s-70s: Diversification and Expansion

Sumitomo Machinery opened Japan Air Filter Company, Ltd. in 1960 to produce air purifying equipment and dust collectors. In 1962, the company formed the Hiratsuka Research Laboratory to develop cryogenic technology. Overseas expansion continued over the next several years, with the opening of a London office in 1964 and the establishment of Sumitomo Machinery Corporation of America in 1966, including a production plant for power transmission equipment in New Jersey. The plant was transferred to a larger facility in Virginia in 1988. In 1969 Sumitomo Machinery Company merged with Uraga Heavy Industries to form Sumitomo Heavy Industries.

The 1970s was a period of consistent growth and development for Sumitomo. It incorporated Sumitomo Jukikai Environment in 1971 to build water treatment plants and manufacture industrial waste disposal equipment. After completing the world's largest forging press in 1971, the company inaugurated the Oppama Shipyard and Toyo Works in 1972 and incorporated Lightwell Company in 1973 to design and produce data processing equipment and software. Sumitomo established its Systems Research Laboratory in 1975.

Internationally, Sumitomo acquired an interest in Cyclo Getriebebau Lorenz Braren GmbH in West Germany and established Sumitomo Maquinas Pesadas do Brasil in 1974. It opened an office in Singapore in 1979. New products included the first cyclotron (or particle accelerator) medical diagnosis system in 1972. Sumitomo also launched Japan's first supertanker in 1975.



1980s: Shipbuilding Decline, New Focus

In 1980 Sumitomo launched Japan's first gas turbine naval escort ship, and in 1982 completed the Kinokawa Maru, the world's first voice-controlled ship. The company also received an order for the Nippon Maru, Japan's first original-design schooner, for training merchant mariners. The Nippon Maru was launched in 1984.

These developments were bittersweet, however. Stagnation and excessive capacity in the shipbuilding industry forced Sumitomo to deliver its ships at a loss throughout most of the decade, a disappointment when compared with the profits of the previous ten years. Only the continued growth of Sumitomo's machinery divisions, the construction boom in Japan, and internal cost reductions enabled the company to improve profits.

The company focused on technology and software engineering during the 1980s. It entered the business of electron beam accelerators in 1986 by buying Radiation Dynamics. The following year Sumitomo began developing the world's smallest synchrotron for making computer chips. This operation brought together the cryogenic, vacuum, superconducting, and accelerating technologies in which Sumitomo had gained expertise since the establishment of the Hiratsuka Research Laboratory. In 1987, Osaka University ordered a large cyclotron from Sumitomo. In 1989 Sumitomo entered a joint agreement with CGR-MeV, of France, to work on high-energy linear accelerators.

The firm incorporated Sumitomo Heavy Industries Forging in 1980 to manufacture casting and forging equipment and Sumitomo (S.H.I.) Construction Machinery Company in 1986 to manufacture construction equipment. Several acquisitions during the 1980s strengthened the company's base of operations. These included Nittoku Metal Industries, Ltd., in 1984, which led to the establishment of the precision products group; Radiation Dynamics in 1986; Lumonics Inc. of Canada, the largest laser equipment manufacturer in the world, in 1988; and RPC Industries of San Francisco, California, a manufacturer of low-energy machines, in 1989. Sumitomo also entered the real estate business in 1988 to redevelop idle facilities into more profitable endeavors. The company incorporated SHI Resort Development Company the following year, to turn its old Kawama works site into a seaside resort area.

1990s: Advances and Setbacks

In 1989 Shigeru Gohda was named company chairman and Masataka Kubo was named president. Under the new leadership, the company continued to devote a considerable share of its energies to high-tech businesses. The result was a string of new products introduced during the first two years of the new decade. Mid-1991, the company announced that it had developed a material-scanning device that used neutron rays in place of x-rays. The neutron rays allowed for greater penetration, thereby making it possible to identify materials that x-rays did not detect. The announcement of the scanning device was followed just a few months later by the introduction of a new automatic inspection system for aircraft flaps, which Sumitomo had developed jointly with Japan Airlines. In May 1992, the company unveiled a new molding machine designed to produce parts made from advanced composites. The company also entered partnerships that would expand its technological capabilities. In 1990, it forged an alliance with a U.S.-based company to develop neural networks for use in computer-aided manufacturing and data processing. The company also joined hands with a West German research institute that had developed a technology to rapidly measure the abrasion of automotive engine parts. The agreement allowed Sumitomo to provide measuring services in Japan.

The mid-1990s saw continued efforts to build Sumitomo's technology-related businesses. In December 1994, the company allied with Du Pont to produce thermoplastic sheeting—a material that could serve as a substitute for metal parts. In April 1995, Sumitomo entered into a ten-year partnership with California-based XMR, Inc., a maker of excimer lasers that were used in the manufacture of liquid crystal display panels and semiconductors. The agreement gave Sumitomo exclusive rights to distribute XMR lasers in Japan and also to produce laser systems with the XMR trademark.

Sumitomo's shipbuilding division also made advances during the early part of the 1990s. In 1992, the company unveiled its plans for a new superconducting ship propulsion system, as well as the design for a high-speed container ship driven by an electric propulsion system. The ship was to be more narrow than other ships, which would reduce waves and thereby allow it to navigate at higher speeds. Sumitomo also partnered with Ishikawajima-Harima Heavy Industries (IHI), another Japanese shipbuilder, creating a new company dedicated to designing naval vessels. The new venture, Marine United Inc., was formed to enhance operational efficiencies, share and improve technologies, and reduce building costs.

Sumitomo's construction machinery division, however, suffered losses in the 1990s. The downturn was due in large part to Japan's depressed economy, which led to reduced construction and a consequent decline in demand for construction equipment. Losses from this division contributed to a ¥12.3 billion net loss for Sumitomo in fiscal 1999. The company remained in the red in 2000, suffering a net loss of ¥6.3 billion.

To turn the company around, Sumitomo's management announced a new three-year restructuring plan. The plan called for strengthening the company's international presence in the markets for plastic processing machines, laser processing systems, and other products for the mass-produced machinery industry. The company took measures to strengthen its positions in the shipbuilding and steel manufacturing industries—both of which were undergoing a wave of consolidation. In 2000, the company expanded its existing shipbuilding partnership with IHI to more completely integrate operations. In 2001, it merged its steel manufacturing and engineering division with two other Japanese manufacturing companies in order to better compete with foreign firms.

Looking Ahead

Judging from Sumitomo's 2000 annual report, the future direction of the company leaned heavily toward the technology sector. The report's letter to shareholders stated, "To expand our business in the future, we are targeting such areas as semiconductors, liquid crystal, information and communication services/IT, and concentrating our management resources on such consolidated businesses as manufacturing equipment, systems, key components and functional components." The company also planned to expand its business in services and software development.

Principal Subsidiaries: Shin Nippon Machinery Co., Ltd.; Sumitomo Heavy Industries Foundry & Forging Co., Ltd.; Sumitomo (S.H.I.) Construction Machinery Co., Ltd.; Sumitomo Machinery Corporation of America (U.S.A.); Link-Belt Construction Equipment Company (U.S.A.); Sumitomo Heavy Industries Construction Crane Co., Ltd.; S.H.I. Examination and Inspection, Ltd.; Ohtsuka Machinery Works, Ltd.; Oshima Shipbuilding Co., Ltd.; Nihon Spindle Mfg. Co., Ltd.; Sumitomo NACCO Material Handling Co., Ltd.; Izumi Food Machinery Co., Ltd.; Lightwell Co., Ltd.; Sumitomo Heavy Industries PTC Sales Co., Ltd.; SHI Plastics Machinery, Ltd.; Sumiju Environmental Engineering, Inc.; Sumitomo Heavy Industries Engineering and Services Co., Ltd.; SHI Control Systems, Ltd.; Marine United, Inc.; Osaka Chain & Machinery, Ltd. Inc.; Sumitomo (SHI) Cyclo Drive Europe, Ltd. (U.K.); Sumitomo (SHI) Cyclo Drive Asia Pacific Pte., Ltd. (Singapore); Sumitomo (SHI) Cyclo Drive Tianjin, Ltd. (China); SHI Plastics Machinery of America; SHI Plastics Machinery (Europe) B.V. (Netherlands); S.H.I. Plastics Machinery (S) Pte., Ltd. (Singapore); SHI Plastics Machinery (TAIWAN) Inc.; SHI Plastics Machinery (Hong Kong) Ltd.; SHI Plastics Machinery (Shanghai) Co., Ltd. (China); SHI Plastics Machinery (Malaysia) Sdn. Bhd.; LBX Company, LLC (U.S.A.); SHI Machinery Service Hong Kong Ltd.; SHI Designing & Manufacturing Inc. (Philippines).

Principal Competitors: The Japan Steel Works, Ltd.; Kubota Corporation; Mitsubishi Heavy Industries, Ltd.

Chronology

Additional Details

Further Reference

A Brief History of Sumitomo, Tokyo: Sumitomo Corporation, 1990."DRAM Synchrotron Called World's Smallest," Electronic Engineering Times, January 1, 1990, p. 21.Henschen, Doug, "Japan Opens the Floodgate," Boating Industry, March 1, 1990, p. 38."Japan's Sumitomo Heavy to Post First Net Loss in 4 Years," Asia Pulse, March 15, 1999.The Sumitomo Group, Tokyo: Sumitomo Corporation [n.d.]."Sumitomo Heavy Buys U.S. Laser Equipment Maker," Japan Economic Newswire, September 12, 1996."Sumitomo Heavy-Du Pont Tieup on New Thermoplastic Materials," Tokyo Financial Wire, December 13, 1994."Sumitomo Heavy to Cut Debt, Boost Profitability Via Restructuring," AFX News, September 29, 2000.

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