Mitsubishi Electric Corporation - Company Profile, Information, Business Description, History, Background Information on Mitsubishi Electric Corporation

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Tokyo 100-8310

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History of Mitsubishi Electric Corporation

Even though it shares a name and common heritage with nearly 40 different companies, Mitsubishi Electric Corporation is an independent company with operations in 34 countries. The firm is involved in the manufacture, marketing, and sales of electrical and electronic equipment used in information processing and communications, space development and satellite communications, consumer electronics, industrial technology, energy, transportation, and construction. During the late 1990s and into the new millennium, Mitsubishi was forced to restructure operations due to economic hardships in Japan.

The original Mitsubishi company (the name means "three diamonds" in Japanese) was originally founded shortly after the Meiji Restoration in 1868 by Yataro Iwasaki, an enterprising samurai who gained control of shipping in Tosa prefecture in the first years of Japan's industrial expansion. Japan grew into a major economic and military power in the western Pacific, in many ways as a result of Mitsubishi's ambitious maritime activity. The company connected Japan with foreign markets and succeeded in establishing a shipping monopoly, despite a powerful challenge from rival Mitsui.

Early History: 1910s-20s

By the mid 1910s, Mitsubishi was one of the largest companies in Japan, with diversified interests in heavy manufacturing, mining, real estate, banking, and trading. In order to attract investor capital, the Iwasaki family created several independent companies out of Mitsubishi's subsidiaries. Mitsubishi Electric was one of them, created in 1921.

Mitsubishi Electric originated in 1905 in the parent company's Kobe shipyard as a manufacturer of electrical equipment for ships and mining. Five years later, the division constructed a large-capacity induction motor (the first in Japan) and a turbine generator.

As a victor in World War I, Japan gained recognition as a legitimate naval power in the Pacific. In order to preserve and enhance its position, Japan expanded its navy and merchant marine, creating even greater demand for new ships equipped with generators and other electric devices. As the major shipbuilder in Japan, Mitsubishi engineered a merger between the electric-machinery departments of Kobe Shipbuilding & Engine Works and its own Mitsubishi Shipbuilding company. Shares in the new company, Mitsubishi Electric, were sold to investors, and the capital raised was used to acquire new manufacturing space and equipment.

Mitsubishi Electric, however, was unable to develop devices technologically competitive with those manufactured by foreign companies. Like NEC, which had negotiated an extensive cooperative agreement with Western Electric, Mitsubishi Electric became closely associated with another American electronics manufacturer, Westinghouse Electric. Their agreement, concluded in 1923, provided Mitsubishi Electric with Japanese marketing and licensing rights for a number of Westinghouse products and designs. As a result, Mitsubishi Electric successfully built a large 2300-kVA vertical-axis-type hydraulic generator.

Mitsubishi Electric remained the favored supplier of large and small electrical devices to all the various Mitsubishi companies while maintaining its expertise in maritime electronics and gaining new strengths in other fields like communication, power transmission, lighting, and consumer appliances. In 1931, Mitsubishi Electric began commercial production of passenger elevators and started exporting fans to China and Hong Kong. Two years later, reacting to greater domestic demand for home appliances, the company began marketing refrigerators.

Difficulties During the 1930s and 1940s

The 1930s were a difficult period for Japan's zaibatsu conglomerates like Mitsubishi. The 12 major Japanese companies had become inextricably linked to the government through a 50-year industrial modernization program. But the government had recently been taken over by a quasi-fascist element in the military whose aim was to establish absolute Japanese supremacy in eastern Asia. In their effort to modernize and arm Japan for war, the militarists called upon industrial concerns such as Mitsubishi Electric to provide a vast array of equipment.

While Mitsubishi Heavy Industries eventually became the principal manufacturer of warplanes, particularly the notorious Zero, Mitsubishi Electric developed radio sets for the Zero and other aircraft, and later became deeply involved in additional military projects.

With World War II well under way, Mitsubishi Electric came under increasingly strict control by the government. The company was compelled to follow all military directives and, as a result, in 1944 established a research laboratory whose goal was to develop new instruments for naval and aerial battle management. By August 1945, however, the war was lost, and Japan's battered industries came under the control of government agencies directed by the occupation authority.

Mitsubishi Electric began the enormous task of rebuilding its business after the war. Helped by reconstruction loans but impeded by difficult labor regulations, supply shortages, weak domestic demand, and the dissolution of the zaibatsu, Mitsubishi Electric struggled to survive. By 1948, the company had resumed production of consumer and some industrial items, including straight-tube fluorescent lamps. Military production, once the primary source of Mitsubishi's profits, had been banned by the occupation authority.

Entering Foreign Markets: 1950s

Having reestablished marketing agreements with foreign manufacturers, Mitsubishi Electric began selling televisions in Japan in 1953. After completing several successful industrial projects, Mitsubishi resumed foreign operations in 1954 with the completion of a power substation in India.

As a result of the Korean War, the United States government decided to end its extractive, punitive policies toward Japan. Instead, it encouraged the Japanese to build a large and modern industrial infrastructure that would allow Japan to serve as a bulwark against the expansion of communism in the East. Increasingly, in the name of efficient industrial organization, the Japanese government permitted the former zaibatsu companies to reestablish ties. The Mitsubishi logo, banned by the occupation authority, was readopted by all the Mitsubishi companies, including Mitsubishi Electric. With the benefit of freer association among the engineering, manufacturing, marketing, and financing wings of the Mitsubishi group, Mitsubishi Electric gained an increased ability to compete in the largely unregulated foreign markets.

The rich U.S. and European markets, however, were already dominated by large electrical-equipment manufacturers like Westinghouse, General Electric, Philips, and GEC. In fact, the Japanese government had passed legislation to protect domestic manufacturers against these companies. Mitsubishi Electric recognized that it could not compete against the large manufacturers until it had first established a stronger base in consumer sales and industrial projects. The increased incomes of Japanese consumers and the ability of Japanese companies to compete on price in middle-technology projects provided Mitsubishi Electric with two important ways to achieve that goal.

Continued International Expansion and Product Innovation: 1960s-70s

In 1960, the company became one of the first in Japan to begin production of color televisions, marking a commitment to maintaining market share in the emerging high end of the market. After production of several electric locomotives for the Japanese railway system, Mitsubishi Electric exported its first one, to the government of India, also in 1960.

During the 1960s, Japanese products gained a reputation for poor quality and simple technology. In electronics, however, the Japanese Ministry of International Trade and Industry (MITI) assisted companies by coordinating technological developments and protecting certain key markets. One of the earliest to show leadership in technological pursuits, Mitsubishi Electric unveiled a computer prototype in 1960, and the following year began production of its Molectron integrated circuit.

In order to reflect both a corporate reorganization and a more international view, the company's name was changed in 1963 from Mitsubishi Electric Manufacturing to Mitsubishi Electric Corporation, or Melco. The company made its first overseas investment in Thailand in 1964, and two years later concluded a sale of electric locomotives to Spain. In communications, Melco completed the first of several antenna designs for satellite earth stations and placed a remote weather station on the summit of Mount Fuji. Mitsubishi's development of communications technologies later led to its selection for government projects and electronics work with the U.S. Department of Defense.

Melco funded much of its industrial and high-technology research by cross-subsidizing: taking profits from the consumer and business markets and applying them to government and industrial projects with long lead times but large rewards. Among Melco's successes in the low-ticket markets were air conditioners, color televisions, and small office computers. In order to reduce costs in certain areas of research, Melco revived its technical-exchange agreement with Westinghouse in 1966. In later years, Melco began to sell technology to Westinghouse, marking a significant appreciation in Mitsubishi's status.

The increased quality of Japanese products and the continued production-cost advantages enjoyed by Japanese companies led to tremendous demand overseas. It was at this point, around 1970, that Japan's export-led expansion moved into a new phase of feverish growth. In 1972 and 1973 alone, Melco established sales companies in Great Britain, the United States, Brazil, and Argentina, and yet another was opened in Australia in 1975.

Predicting a gradual deterioration in production-cost advantages in Japan relative to other developing Asian nations, Melco began making substantial overseas investments, building a television plant in Singapore in 1974 and another in Thailand three years later.

Until then, Mitsubishi Electric had been primarily a manufacturer of industrial equipment. The oil crisis of 1973-74, however, critically damaged the company's business in that field and, perhaps more than any other event, convinced Mitsubishi's president, Sadakazu Shindo, that the only way to maintain growth was through expanded consumer sales. One product, aimed directly at the domestic household market, was the futon dryer; 600,000 were sold in 1977 alone.

Melco was one of several companies that elected to develop a home video-recording system based on Matsushita's VHS design. The VHS, although it entered the market a full year after Sony's rival Betamax system, became established as the industry standard. Companies that developed the Beta system--particularly Sony--lost not only a great deal of money in sales but, more important over the longer term, market share. Melco's rising acceptance in the home-video market was complemented by the introduction of such other new products as large-screen projection TVs.

Mitsubishi Electric added sales organizations in West Germany and Spain in 1978, and in Canada in 1980. In order to reduce transportation costs and hedge against rising protectionist sentiment in foreign markets, Melco established television-production facilities in the United States and Britain in 1980, and in Australia in 1982. The following year, Melco opened an integrated-circuit plant in the United States, a cathode-ray-tube plant in Canada, and a VCR plant in Britain. The new plants created thousands of jobs in these countries and revitalized several local economies. By 1985, Mitsubishi Electric's sales had reached ¥2 trillion, double the amount just five years earlier.

Mitsubishi Electric's unusual corporate personality was largely derived from the years Sadakazu Shindo presided over the company. During his presidency, Shindo remained the guiding force at Mitsubishi Electric. Among his strongest legacies were a commitment to frank discussion, honest criticism, and individualism. He was known to have favored the hiring of high school graduates over college graduates, contending that they were only slightly less knowledgeable, but much more willing to ask questions and work in teams.

Diversification and Growth Continues: Late 1980s-Mid-1990s

During the late 1980s, Mitsubishi Electric was well diversified within the electronics industry, deriving approximately equal amounts of profit from communications, consumer products, heavy machinery, and industrial products. In its effort to overtake competitors such as Hitachi and Toshiba, the company concentrated its resources on new-product development. The task of selling the products was handled through Mitsubishi Shoji, its former parent trading company, and much of that sales effort was concentrated in the Middle East in an attempt to retrieve what were called oil yen.

By maintaining close relations with both Westinghouse and General Electric, Mitsubishi Electric bet much of its future success on the integrated microcircuitry that made possible everything from simple industrial robots to artificial intelligence. During the late 1980s, Mitsubishi continued to become more firmly established as an industry leader as it found new applications for these technologies in its existing product lines.

Mitsubishi continued new product development and expansion into the 1990s. The firm purchased the hardware division of Apricot Computers and developed both a 4-megabit static random access memory (SRAM) and a 64-megabit dynamic random access memory (DRAM) chip in order to broaden its reach into the U.S. semiconductor market. In 1992, the firm announced plans to join a U.S. and Canadian telecom project in which it would provide telephones for a new satellite system. The following year, Mitsubishi secured a contract from the Japanese Defense Agency to develop surface-to-air missiles. The company's heavy machinery segment also installed the world's fastest passenger elevator in the Landmark Tower in Yokohama. In 1995, Mitsubishi began production on a color liquid crystal display (LCD) manufacturing plant--one of Japan's largest--in order to take advantage of the growing demand for LCDs.

A major portion of Mitsubishi growth efforts during the mid-1990s was focused towards the American market. In an effort to boost profitability and competitiveness, the company restructured its U.S. subsidiaries, Mitsubishi Electronics America (MELA) and Mitsubishi Consumer Electronics America (MCEA), creating a new company consisting of the audio/video and cellular mobile telephone businesses of both subsidiaries in 1995. The firm also joined the General Magic Alliance, dedicated to developing communication products and services whose membership included Apple, AT&T, France-Telecom, Fujitsu, Matsushita, Motorola, Northern Telecom, Philips, Sony, Sanyo, and Toshiba.

Overcoming Hardships: Late 1990s into the New Millennium

While continuing its focus on growth, Mitsubishi was forced to overcome hardships during the latter half of the 1990s. In 1995, a devastating earthquake rocked through Kobe and Osaka, Japan. While there were no company fatalities, seven production facilities and four research laboratories were damaged. At the same time, the company began buying finished goods overseas to use in its electric power equipment division in order to combat a strong yen that was wreaking havoc on domestic profits. However, while many Japanese-based firms began moving production overseas, Mitsubishi was able to maintain most of its domestic manufacturing.

In 1997, the firm became part of a public payoff scandal in which sokaiya--corporate racketeers--were paid for their silence during shareholder meetings. In November of that year, Mitsubishi executive Yoshiki Sugiura was arrested for allegedly paying off a sokaiya. According to Tokyo police, the firm had been involved in the payoffs since 1985--its shareholder meetings had lasted an average of 30 minutes with only two questions brought to the table over a ten year time period.

During that same year, the Japanese economy began faltering, and personal consumption declined due in part to the April 1997 rise in Japan's national consumption tax. Semiconductor prices also fell, forcing the firm to report consolidated losses for the first half of 1997--the first consolidated losses ever reported by the firm. As the Asian economy as a whole began to waver, Mitsubishi began to focus on operational efficiency along with new product development.

Losses continued into 1998 as many of the firm's product segments fell victim to falling prices, including the audio visual equipment and air conditioning product lines. Sales fell in the company's industrial machinery and automation equipment division, as well as in the home electronics division. During that year, Dr. Ichiro Taniguchi, a long-time Mitsubishi employee, replaced Takashi Kitaoka as president.

Mitsubishi reported losses in 1999 as well. Japan's economy continued to remain unstable, forcing management to focus on short-term recovery plans. It restructured its foreign subsidiaries involved in the semiconductor, audio-visual, and personal computer industries, while at the same time focusing on securing increased sales and developing new products. Eyeing both the computer and communications industry as growth areas, the firm put plans in motion to divest unprofitable businesses as well as cut nearly ten percent of its work force.

While unfavorable economic conditions continued into the new millennium, Mitsubishi management set forth a strategic plan that consisted of the following goals: to become a prime global manufacturer of satellites and onboard equipment; secure a leading position as a telecommunications infrastructure manufacturer; and to utilize the firm's mobile phone business--it produced 18.5 million handsets in fiscal 2001--as a core for future expansion into the multimedia terminal equipment. The company also focused on its basic operations in electric power equipment, public infrastructure, transportation equipment, building systems, housing equipment, electrical appliances, factory automation, and automotive equipment while divesting businesses deemed unprofitable.

While enduring hardships and trying economic times, Mitsubishi management continually worked towards achieving company goals. As part of its strategic plan, Mitsubishi was awarded a contract from the Japanese government to supply the Multi-purpose Transport Satellite-2 (MTSAT-2) in July 2000. The contract, along with others, secured the firm's position as the leading satellite manufacturer in Japan. The company also formed a partnership with Boeing Co. to develop a high-speed communications network that would enable aircraft to receive online video and two-way Internet communications. An alliance was also formed with Toshiba Corp. that enhanced Mitsubishi's international power transmission and distribution business.

In fiscal 2001, Mitsubishi reported an increase of net income to ¥124.8 billion ($1.01 billion). Intent on remaining a leader in the electronics industry, Mitsubishi management forged ahead with its plans for continued growth and new product development.

Principal Subsidiaries: Mitsubishi Electric and Electronics USA Inc.; Mitsubishi Display Devices America Inc.; Mitsubishi Digital Electronics America, Inc.; Mitsubishi Electric Automation Inc.; Mitsubishi Electric Automotive America Inc.; Mitsubishi Electric Power Products Inc. (U.S.); Trium/Mitsubishi Wireless Communications Inc. (U.S.); Paceon Corp. (U.S.); Powerex Inc. (U.S.); Diamond Link Inc. (U.S.); Mitsubishi Electric Sales Canada Inc.; Melco de Mexico S.A. de C.V.; MELCO Display Devices Mexico, S. de R.L de C.V.; Melco Argentina S.A.; MELCO-TEC Rep. Com. e Assessoria (Brazil); Fujinor S.A. (Brazil); Melco de Colombia Ltda.; Mitsubishi Electric Automotive Czech s.r.o.; Mitsubishi Electric Telecom Europe S.A. (France); Ascenseurs Mitsubishi France S.A.; Mitsubishi Electric Information Technology Centre Europe B.V. (France); Mitsubishi Semiconductor Europe, GmbH (Germany); Mitsubishi Electric Europe B.V. (Ireland); Mitsubishi Electric Europe B.V. (Italy); Mitsubishi Electric Automotive Europe B.V. (Netherlands); Mitsubishi Elevator Europe B.V. (Netherlands); Mitsubishi Electric Europe B.V. (Portugal); Mitsubishi Electric Europe B.V. (Russia); Mitsubishi Electric Europe B.V. (Spain); Mitsubishi Electric Automotive Europe B.V. (Sweden); Mitsubishi Electric Europe B.V. (UK); Mitsubishi Electric Finance Europe PLC (UK); Mitsubishi Electric Air Conditioning Systems Europe Ltd. (UK); Mitsubishi Electric Information Technology Centre Europe B.V. (UK); Mitsubishi Electric (China) Co., Ltd.; Mitsubishi Electric Dalian Industrial Products Co., Ltd. (China); Mitsubishi Stone Semiconductor Co., Ltd. (China); Beijing Mitsubishi Mobile Communication Equipment Co., Ltd.; Gang Ling Electronic Technology Development(Beijing) Co., Ltd.; Shandong Hualing Electronic Co., Ltd.; Mitsubishi Electric (H.K) Ltd. (China); Bao Ling Trading & Consulting Co., Ltd. (China); Xi Dian Mitsubishi Electric Transmission & Distribution Products Development Co. Ltd. (China); Xi Ling Electric Power Products Manufacturing Co. Ltd. (China); Shanghai Mitsubishi Elevator Co. Ltd.; Shanghai Mitsubishi Electric & Shangling Air-Conditioner and Electric Appliance Co. Ltd.; Mitsubishi Electric (Guangzhou) Compressor Co., Ltd. (China); Mitsubishi Electric (H.K.) Ltd. (Hong Kong); Ryoden (Holdings) Ltd. (Hong Kong); Ryoden Merchandising Co., Ltd. (Hong Kong); Mitsubishi Electric Automotive India Private Ltd.; P.T. Lippo Melco Manufacturing (Indonesia); P.T. Mitsubishi Jaya Elevator and Escalator (Indonesia); P.T. Lippo Melco Electronic Indonesia; Mitsubishi Electric Logistics Corp.; Mitsubishi Electric Information Network Corp.; PacEast Telecom Corp.; Mitsubishi Electric Information Technology Corp.; Mitsubishi Electric Osram Ltd.; Oi Electric Co. Ltd.; LG Industrial Systems Co. Ltd. (Korea); Poscon Corp. (Korea); KEFICO Corp. (Korea); Han Neung Techno Co. Ltd. (Korea); Mitsubishi Electric (Malaysia) Sdn. Bhd.; Ryoden (Malaysia) Sdn. Bhd.; International Elevator & Equipment Inc. (Philippines); Laguna Auto-Parts Manufacturing Corp. (Philippines); Mitsubishi Electric Singapore Pte. Ltd.; Mitsubishi Electric Asia Pte. Ltd. (Singapore); Trium Telecom Asia-Pacific Pte. Ltd. (Singapore); Mitsubishi Electric Taiwan Co., Ltd.; Shihlin Electric & Engineering Corp. (Taiwan); Taiwan Kolin Co., Ltd.; Powerchip Semiconductor Corp. (Taiwan); Kang Yong Watana Co., Ltd. (Thailand); Oriental Electric Industry Co. Ltd. (Thailand); Mitsubishi Electric Consumer Products (Thailand) Co. Ltd.; Mitsubishi Elevator Asia Co., Ltd. (Thailand); Mitsubishi Electric Australia Pty. Ltd.; Melco-Mec Egypt for Elevators & Escalators; Middle East Electric Co. W.L.L., Kuwait; Mitsulift and Equipment S.A.L. (Lebanon); Mitsubishi Electric Saudi Ltd.; Melco Elevator (South Africa) (Pty) Ltd.; M.S.A. Manufacturing (Pty) Ltd. (South Africa); ETA-Melco Elevator Co., L.L.C. (U.A.E.).

Principal Divisions: Energy and Electric Systems; Industrial Automation Systems; Information and Communication Systems; Electronic Devices; Home Appliances.

Principal Competitors: Hitachi Ltd.; NEC Corporation; Toshiba Corporation.


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Further Reference

DeTar, Jim, "While Others Cut Back, Mitsubishi Renews Commitment to the DRAM Market," Electronic News, May 25, 1998.Mitsubishi Electric Corp, "History," Tokyo, Japan: Mitsubishi Electric Corp., 2001."Mitsubishi Electric Develops 4-Megabit SRAM," Japan Economic Newswire, February 15, 1990."Mitsubishi Electric Final Results," Extel Examiner, May 26, 1992."Mitsubishi Electric Joins Shift Offshore to Fight Strong Yen," Business Times (Singapore), April 13, 1995."Mitsubishi Electric Posts 1st-Ever Group Loss," Jiji Press Ticker Service, November 27, 1997."Mitsubishi Electric to Build Color LCD Plant in Japan," Japan Economic Newswire, December 27, 1994."Mitsubishi Electric Ups Foreign Imports in Bid to Regain Competitiveness," Nikkei Weekly, May 2, 1994, p. 10."Mitsubishi Electric Wins Japanese Missile Development Order," AFX News, October 6, 1993."Mitsubishi Electronic Outlines Consumer Electronics Strategy," AsiaPulse News, September 14, 2000."Mitsubishi Feels Chill," Control and Instrumentation, January 1999, p. 16."Mitsubishi Plans Restructuring," Appliance, June 1999, p. 16.Morishita, Kaoru, "Electronics Makers Entangled in Scandal," Nikkei Weekly, November 17, 1997, p. 6."Quake Fallout May Lead Firms to Spread Risks," Los Angeles Times, January 30, 1995, p. 1.

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