Omron Tateisi Electronics Company

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Omron Tateisi Electronics Company

10, Hanazono, Tsuchidocho
Ukyo-ku
Kyoto 616
Japan
(075) 463-1161

Public Company
Incorporated: 1948 as Tateisi Electric Manufacturing
Company
Employees: 13,851
Sales: ¥72.45 billion (US$2.98 billion)
Stock Index: Kyoto Osaka Tokyo Nagoya Luxembourg
Hong Kong Frankfurt

Omron Tateisi Electronics is Japan’s largest control equipment manufacturer. Respected in the past for its ability to design and develop new technology, the corporation now emphasizes the coordination of control systems. As a proponent of universal component design, the company continues to invest in research and development even more heavily than the norm for the high-tech industry in order to maintain a prominent market share of control products and influence the electronic universality its founder saw as inevitable.

Kazuma Tateisi, born in 1900, graduated from the electrical engineering department of what is now Kuma-moto University. Tateisi worked briefly as an electrical engineer for the government on a Hyogo hydroelectric plant, and then began working for the Inoue Electric Manufacturing Company in 1922.

The New York stock market crash of 1929 triggered the “Great Showa Depression” in Japan. When Tateisi became part of Inoue’s reduction in its labor force, he rented a factory and began to manufacture household appliances. Sales on his knife grinder and pant press, items Tateisi developed himself, were low. But in 1932 Tateisi used the knowledge of induction relays he had acquired at Inoue to invent and develop a timing device that limited X-ray exposure to 1/20 of a second. He began production of the timer through a joint venture with Dai Nippon X-ray Inc., using Tateisi Medical Electronics Manufacturing Company as a label.

Early in 1933 Tateisi moved to Osaka to be nearer to Dai Nippon. The Tateisi Electric Manufacturing Company began operations on May 10 that year, the date that is celebrated as the founding anniversary of Omron Tateisi Electronics.

Lack of capital and contractual limitations with Dai Nippon hampered the young company, but in early 1934 Tateisi began to market an induction-type protection relay, which was an essential component of the timer. The component found a large market and successfully raised revenue.

Later that year a typhoon struck Japan’s western coast, causing extensive damage to factories there. Hitachi, the chief manufacturer of induction-type protection relays, could not meet the immediate demand, and orders for repair or substitution of relays overwhelmed Tateisi’s small factory. The company quickly transferred the manufacturing of its timers to Dai Nippon and concentrated on the relay. The timer would be the last device made by Tateisi for several decades; the transfer marked the beginning of Tateisi’s focus on components.

Demand for the relay devices continued after the recovery from the typhoon as Japanese industrial development increased overall, allowing Tateisi to expand his output and facilities. In 1937 Tateisi built a larger factory with offices and a warehouse. He also established a branch office in Tokyo and purchased another factory, where parts from the Osaka plant were assembled.

Research conducted during World War II led to the development of a product line which would become an area of extensive postwar growth for the company. At the request of Tokyo University, Tateisi began to research micro-switches, also known as precision switches, in 1941; in 1944 the company supplied 300 micro-switches to the university.

During World War II, Tateisi produced flap switches for aircraft and acted as a sub-contractor to Mitsubishi Heavy Industries. In 1944 Tateisi converted a movie studio into the Kyoto branch factory. A year later the Tokyo branch office and the main factory were destroyed in air raids, forcing all production to the Kyoto branch, which remained the company’s headquarters until 1968.

Since Japan’s hydroelectric plants were largely intact after the war, electricity at least was not scarce. The company’s initial peacetime production centered on small household consumer appliances under the name Omlon (which later became Omron), an independent subsidiary.

In 1947 the government, seeking to prevent the frequent electrical overloads common at the time, asked appliance manufacturers to develop a current limiter. Production for the government required incorporation, which Tateisi completed on April 14, 1948. Although the company was once agazin part of the component industry, postwar prosperity was still several years away. In 1949 the allied powers enacted the Dodge Line, requiring the Japanese government to take anti-inflationary action. These measures revoked the funds which had provided the market for Tateisi’s limiter.

This action struck a serious blow to Tateisi’s 33 employees, who had devoted all production capability to the limiter. Debt forced reductions in operations and reorganization in the company’s subsidiaries. Sales dropped 57% that year, to the company’s record low.

Efforts to rebuild amid economic instability continued until the intervention of the United Nations in the Korean war stimulated the economy and increased demand for relay devices. This renewed demand allowed Tateisi to reopen the Tokyo branch office and to build a new office in Osaka.

By 1953 the company employed 65 people and Korean wartime demand had boosted the Japanese industrial economy. Kazuma Tateisi had taken an interest in cybernetics—automatic control systems. After a tour of American companies, he felt sure that an automation revolution was at hand in Japan and reorganized the company accordingly.

Development of new products had assumed a rapid pace, and a centralized company could not efficiently administer market-oriented production. Tateisi introduced the “Producer System” (P-system), which delegated individual products to independent companies. Under the P-system, the managers of individual factories and subsidiaries were responsible for production and labor relations while the head office retained all other decision-making. This decentralization allowed a varied product line and profitability on items with slim margins. The company continued to pursue this approach to production, creating separate sales and research subsidiaries in 1955. The P-system is largely intact today in Omron’s overseas subsidiaries.

In 1958 Omron became a registered trademark and began to be used on all the company’s products. But more importantly, the company developed its first control system, which combined several of its components. The following year a P-system company began production of control systems. With these and other innovations, the company saw sales increase tenfold between 1955 and 1959, to ¥1.3 billion.

With the help of government financing, Tateisi completed his Central Research Institute in 1959, which helped speed the development of new items, especially the contactless switch of 1960. This switch’s tremendous success solidified the company’s future commitment to research and development and gave it prominence in the area of high-tech research.

In 1961 Tateisi introduced a stress meter, the first of many low-cost cybernetic devices for medicine and biology. Instead of establishing a subsidiary however, health engineering remained part of the parent company as a department. Today, health-related equipment makes up a small but influential part of sales.

Complex vending machines, introduced in 1963, were also a long-term success for the company. Capable of dispensing several different items and accepting a variety of currencies, the machines’ currency calculation and detection equipment soon found applications in areas beyond food vending. The device proved to be a major breakthrough for the company, as it offered electronic processing of financial transactions, an enormous area of growth in the decades to come.

During the mid-1960s, international sales grew through long-term export contracts. Tateisi opened a representative office in New York, and began to earn the respect of American buyers as a quality producer of vending machines and other electronically monitored control devices just as market demand for such items intensified.

When the company went public in 1962 it had to consolidate the management and financing of the P-system companies in order to be traded on commodities markets, a process that was completed in 1965. Although this sacrificed many of its cost advantages, Tateisi took advantage of its public status. Thanks in part to a period of national economic growth, the company now had the means to invest more heavily in its structural facilities and established eight new factories, four offices and seven retail branches.

During the eight-year period ending in 1967, annual sales increased almost 10-fold again, to ¥10 billion. In 1968, the company built new headquarters in Kyoto and changed its name to Omron Tateisi in celebration of its 35th anniversary.

Omron established the first Japanese research center in the United States in 1970, benefiting from reduced funding for NASA, which made more technically trained employees available. The research and development center in California met with some hostility from people who saw it as another example of the growing economic threat Japan’s booming economy represented. The center eventually helped to develop integrated circuits, large-scale integrated circuits, and liquid crystals, further advancing Omron in the area of electronics research. Such overseas ventures continue to play an important financial and political role amid growing threats of trade restrictions.

The late 1960s and early 1970s were a healthy time for Omron; the company set a five-year sales goal in 1969 of ¥100 billion, and increased its international presence.

The pace of product development grew. During the 1960s, technology advances, including devices pioneered by Omron, created the possibility of universal electronic controls, as opposed to the control devices of the 1950s, which were developed individually as needed. In 1968 Omron introduced a contactless pinboard sequence programmer, which allowed systems flexibility and increased the number of individual tasks to which they could be applied. Four years later, Omron introduced a programmable sequence controller.

The oil crisis in 1973 sparked a period of slow growth nationwide. The mid-1970s were the most stagnant years since the Dodge Line of 1949. Omron was caught expanding its production once again, and was forced to lay off workers and cut production in the P-system companies. In an attempt to build immunity to such fluctuations, the company pruned management and restructured. While many Japanese companies increased their export drive to overcome this economic shock, Omron delayed such efforts until its reorgnization of 1976 was completed.

The reorganization was expensive but successful. Sales decreased and the company reported negative net profits for 1975 to 1976, but after three years it was back on course. In 1978, four years behind its original goal, Omron’s sales reached ¥101.1 billion. In 1979, Takao Tateisi succeeded Kazuma Tateisi as president, and a new sales goal of ¥500 billion was set for 1990.

Two years later the goal still looked reasonable. Demand for control systems increased 20% each year and overall sales grew steadily. But the next decade was an unstable one for Omron, and many changes were eventually required.

Growth slowed substantially in 1981 and actually reversed in 1982. Sales slowly increased but it was six years before the company was fully recovered. Although still sensitive to the global economic climate, Omron had satisfactory returns in many areas. Exports had slowed due to yen appreciation, but overall sales of ATMs, switches, relays, office automation equipment, and medical devices increased rapidly, while control systems continued to increase more moderately.

The brisk pace of 1984–1985 hinted at recovery, and the corporation set record net profit levels. But sales of control systems, Omron’s largest sector, did not increase and electronic fund transfer systems (EFTS), the second largest sector, actually decreased. Further frustration came from the appreciating yen, which limited export potential.

By 1987 international sales accounted for only 17% of sales, down from 25% at the beginning of the decade. Yet Omron’s limited vulnerability to fluctuations in the exchange rate did offer opportunities, and the company mobilized to capitalize on them. The strong yen led many companies in Japan to reinvest in their manufacturing facilities and information systems, which improved Omron’s domestic sales. Omron also invested in itself, nearly doubling its long-term debt during the decade to ¥34.8 billion, and lowering its earnings for 1985 and 1986. The exchange rate also allowed the company to increase overseas production and buy more components from Taiwan and South Korea. In 1988 these investments finally improved earnings, which nearly doubled in one year, while sales, only slightly behind schedule, jumped to ¥315 billion.

Omron had also used the slow growth period to restructure. Its most important move was its transition from a component manufacturer to a producer of integrated control systems. As it entered the late 1980s, Omron relied on research and development and its expertise in combining cybernetic technology, advanced controls, computers, and telecommunications technology to position all of its sectors for the next growth period.

Such flexibility in applications is crucial as customers’ needs grow more complex. The retail industry, for instance, will increase its demand for faster seller recognition, order placement, and stock control. Other industries interested in EFTS technology include insurance and securities companies wishing to gain rapid access to markets. The company’s interest in system development will also make it a good candidate to fill growing demand in North America for network EFTS.

Health-related equipment remains a small portion of sales, but it is easy to produce and generates high profit margins, so Omron is unlikely to leave the market.

Omron’s most significant move toward systems development came in 1988, when the company integrated the Control Components (65% of sales) and the EFTS divisions (19%), believing that technical integration of the company’s two largest divisions will be vital to future growth. These divisions have been regrouped as Industrial-related Strategic Business Units (SBUs) and Social-related SBUs. The latter will certainly employ the company’s Office Automation and Information Systems divisions, which made up 10% of sales in 1988.

The years of the appreciating yen have provided Omron the chance to rediscover its domestic market. Japan itself has become a region of emphasis, along with North America, Europe, and the rest of Asia and the Pacific. The company’s structure makes it well-positioned for international growth if the yen declines. Omron projects worldwide growth in factory automation, computer integrated manufacturing, and information systems that support service industries, all areas of Omron expertise.

Principal Subsidiaries:

Iida Tateisi Electronics Co.; Nogata Tateisi Electronics Co.; Okayama Tateisi Electronics Co.; Sanyo Tateisi Seiki Co.; Aso Tateisi Electronics Co.; Kurayoshi Tateisi Electronics Co.; Ichinomiya Tateisi Electronics Co.; Tateisi Technical Service Co.; Izumo Tateisi Electronics Co.; Yamaga Tateisi Electronics Co.; Takeo Tateisi Electronics Co.; Tateisi Enterprise Co.; Kumamoto Tateisi Kiko Co.; Tateisi Institute of Life Sciences, Inc.; Omron Systems Co.; Tateisi General Service Co.; Omron Electronics, Inc. (U.S.A.); Omron Electronics G.m.b.H. (West Germany); Omron Electronics B.V. (Netherlands); Omron Singapore (Pte.) Ltd.; Omron Eletronica Do Brasil Ltda Omron Canada, Inc.; Omron Geschaftssysteme G.m.b.H. (West Germany); Omron Terminals (UK) Ltd.; Omron Trisak Co., Ltd. (Thailand); Omron Business Systems Singapore (Pte) Ltd.; Omron Business Sistemas Electrónicos Da America Tatina Ltda (Brazil); Omron Electronic Ges.m.b.H. (Austria); Omron Electronics S.a.r.l. (France); Omron Electronics S.r.L. (Italy); Omron Electronics S.A. (Spain); Omron Electronics S.A. (Belgium); Omron Electronics A.G. (Switzerland); Omron Electronics A/S (Norway); Omron Electronics O.Y. (Finland); Omron Electronics A.B. (Sweden); Omron Taiwan Electronics Inc.; Omron Electronics Pty. Ltd. (Australia); Omron Malaysia Sdn. Bhd.; Omron Europe G.m.b.H. (West Germany); Omron Electronics Europe B.V. (The Netherlands); Omron Electronics Componentes e Sistemas Electrónicos LDA (Portugal); Omron Asia Pacific Trading (Pte) Ltd. (Singapore); Omron Electronics Asia Ltd. (Hong Kong); Omron Korea Co. Ltd.; Omron Taiwan Electronics Inc.; Omron Electronics (U.K.) Ltd.; Omron Manufacturing of America Inc.; Omron Componentes Eletronicos Da Amazonia Ltda. (Brazil); Omron Malaysia Eletronics Sdn. Bhd.; Omron Systems of America, Inc.; Omron Systems of Canada Inc.; Omron Research Institute Inc. (U.S.A.); Omron Finance Netherlands B.V.