JAPANESE TOOL AND DIE INDUSTRY
Japan produces many of the world’s industrial machines. The tool and die industry of Japan is regarded as among the best in the world. Tool and die industry is regarded as the building block for other industries.
As of the late 1990s, Japan’s 12,000 tool, die and mold manufacturers controlled about a third of the global market. More than 90 percent of these companies have fewer than 20 employees. Many have cozy relations with large industrial companies such as automobile and electronics manufacturers and are their suppliers..
These days Japanese tool and die makers are under a lot of pressure from low-cost competitors in China, who in many cases use computer aided devices and Japanese blueprints to produce goods at half the cost as the Japanese. The number of tool and die companies in Japan has fallen from 12,038 in 1996 to 11,330 in 2003.
The tool and die industry has also been affected by a affected by a powerful computing system called Pharaoh, developed by a former executive of Mitsui Metal, that can take computer designs and send them by the Internet to a factory with special 3-D stereo lithography machines and robots that can make the designs with a minimum of human input.. One factory that uses the system reduced its workforce from 200 skilled workers to 40 to 0 in a few years, replacing the skilled workers with minimum wage workers, and reducing the amount of time to needed fill orders from 45 days up 5 days.
See Knives and Planes, Arts and Culture, Art, Crafts
The tool and machine industries suffered in the economic crisis in 2008 and 2009. Machinery orders saw their biggest fall ever in December 2008.
Mitsubishi Heavy Industries
Mitsubishi Heavy Industries is Japan's leading aircraft builder, defence contractor, a major shipbuilder and the lead systems integrator for Japan's space programme. A major partner of Boeing Co it has annual sales of about ¥ 3 trillion yen with 69,000 workers worldwide. Mitsubishi Heavy, the nation's leading heavy machinery maker, remains saddled by losses in its jet and shipbuilding units.
Mitsubishi Heavy Industries is the largest heavy machinery manufacturer in Japan with total sales reaching ¥1 trillion. It is Asia’s largest aerospace company and the world’s second largest ship builder. It has an alliance with France’s Areva to build nuclear plants and supplies a number of parts to Boeing aircraft along with Fuji Heavy Industries and Kawasaki Heavy Industries have
The Mitsubishi plant in Nagasaki at one time assembled the biggest movable objects ever built by man. These objects including massive drilling platforms used to harvest oil from the North Sea and super tankers four football fields long and able to fill the tanks of three million cars.
Mitsubishi Chemical (Mitsubishi Tanabe Phram Corp) is Japan’s largest chemical company with $29 billion in sales. It was formed by a merger of of Mitsubishi Chemical and Mitsubishi Pharma Corp in October 2005. It is a global leader in the DVD-R market, with about a 24 percent share.
Mitsubishi made a group net profit of ¥ 463.19 billion (about $5.3 billion) in fiscal 2010-2011, a 69 percent increase from the previous year, on sales of ¥20.5 trillion (about $250 billion). The increase was largely due to the sale of trucks, especially in emerging markets such as China.
Mitsubishi Heavy Industries returned to the black in the April-September half of 2010 on strong sales of machinery and special vehicles.
Hitachi and Mitsubishi Merger Talks
In August 2011,Hitachi and Mitsubishi Heavy Industries held merger talks but the talks quickly broke down, dashing hopes for a groundbreaking marriage of two of Japan's oldest conglomerates. Reuters reported: “The suspension of talks comes after news that the two companies were discussing a limited combination of some businesses such as next-generation power operations and smart grids, with an eye towards a complete merger later on. [Source: Taiga Uranaka and Taro Fuse, Reuters, August 5, 2011]
"Both Hitachi and Mitsubishi Heavy have a long history and it means their corporate cultures are very different and that makes an merger tough," said Mitsuhige Akino, chief investment manager at Ichiyoshi Investment Management. "They should aim for a full-blown merger and if they did, that would act as a catalyst for other Japanese firms," he added.
A merger would create a $150 billion revenue infrastructure firm second only to General Electric and could provide the impetus for cost cuts, which are essential if the two companies are to cope with a strong yen and fierce global competition. According to Thomson Reuters data, a takeover of Mitsubishi Heavy, including its debt, could cost Hitachi around $28 billion, topping Softbank's $17.5 billion purchase of the Japanese unit of Vodafone Group in 2004.
Both companies have struggled for years to make a profit. Hitachi made its first net profit in five years in the year ended March. Over the past decade it has lost an accumulated $14.3 billion compared to a net profit of $160 billion in the same period at General Electric.
A key area in the discussions on infrastructure-related operations between the pair is nuclear power plants. A combination would give Hitachi, which makes boiling-water reactors, access to Mitsubishi Heavy's pressurized-water reactor technology, which has become the technology of choice for countries around the world. But for Mitsubishi Heavy, the advantage would be solely in the scale afforded by a combination, which could help it weather an industry downturn as nations around the world demand more stringent safety requirements in the wake of the Fukushima nuclear power plant crisis.
Nippon Steel Yawata plant
Steel in Japan
Japan became the world largest steel producer in 1973, when it topped the 100 million ton mark for the first time. In 1996, China became the world's top producer of steel and still holds the spot.
Japan’s crude steel has seen its market share decline from 13.7 percent in 1993 to 7.2 percent in 2009. Crude domestic steel output fell 29.6 percent in the April- June 2009 to a 40 year low of 43.33 million tons.
Japanese, Chinese and South Korean steel mills have been hurt by the decision of Vale SA, the world’s biggest iron ore supplier, to break a 40-year tradition in March 2010 of setting annual prices with Asian steel mills and instead is increasing prices on shorter-term contracts.
The Japanese steel industry has become smaller and more efficient, The number of steel workers declined from about 400,000 in 1980 to 240,000 in 2000. Japan uses 20 percent less energy to produce a ton of steel than the United States and 50 percent less than China.
Japanese steelmakers have traditionally exported about a third of the steel they produce. However increased production and quality by Chinese and Korean steelmakers is eroding this share.
In the 1990s, steel companies laid off workers, shut down furnaces and merged with rivals while keeping up research to improve efficiency and make products customers wanted. Nissan’s quest of quality materials at the cheapest price resulted in a consolidation of the steel industry.
In the 2000s, steel was been given a big boost by strong demand from China, high steel prices and strong performance by Japanese automakers. Steel production levels in Japan in 2006 were the highest ever, reaching 120 to 130 million metric towns, higher than 119 metric tons in 1973.
In 2008, steel was expected to reach a 35 year high led by demand from shipmakers and machinery builders but instead it suffered from a decline on orders tied with the global financial crisis. Steel output dropped for the first time in 29 months in October 2008. It fell by a record 37.8 percent in January and a record 44 percent in February 2009. Some steel maker shut down blast furnaces due to drops in demand. Shutting down a blast furnace is a big deal because it is expensive to maintain while shut down and difficult and expensive to start up again.
See Metal Thieves, Government, Crime
Nippon Steel Oita plant
Japanese Steel Companies
Nippon Steel, Japan-based JFE Holdings and South-Korea-based Posco are Asia’s three largest steelmakers, each producing 30 million tons annually. By contrast, Acelor-Mittal, the world’s largest steelmaker, produces 110 million tons. 2004.
Steel companies in Japan have been criticized for their tendency to form cartels and collude in other ways to keep steel prices artificially high. In November 2008, the Japanese Fair Trade Commission filed a suit against Nippon Steel, Sumikin Coated Steel and Yodogawa Steel Works for controlling prices in the galvanized steel market. It was the 13th criminal complaint filed against a steel cartel since World War II.
In 2008, it was revealed that Japanese steelmakers routinely falsify quality-controls test on steel water pipes and oil pipeline pipes, thus shipping products that may be unsafe. Nippon steel faked pipe-strength data on pipes used in natural gas plants and other facilities
JFE is Japan’s second largest steelmaker. It made a profit of ¥58.61 billion, 28.4 percent more than the previous year, on ¥3.2 trillion in sales in the fiscal year ending in March 2011 due to robust steel exports to Asian markets, cost reductions and higher product prices. JFE sold 28.35 million tons of steel in fiscal 2009, 3.2 percent lower than the previous year. Its profit was ¥45.66 billion, 75.6 percent lower than the previous years. During the global financial crisis in 2008 and 2009 JFE shut down one of its blast furnaces, a costly move. Maintenance of the furnace while it was shut down cost the company $300 million.
Sumitomo Steel lost $84 million in fiscal 2010-2011. That is less than the $570 million it lost the previous year.
Nippon Steel Sakai plant
Nippon Steel was the world’s largest steel maker and then was the world’s second largest steel maker after Arcelor- Mittal. It has a capacity of 34 million tons of crude steel---enough to cover all of Spain, Greece and Portugal with a paper thin layer of steel. It aims to reach 40 million tons by improving production facilities
Nippon Steel was knocked off its perch as the world’s No. 2 steelmaker in 2009, falling to sixth place behind market leader ArcelorMittal (MT), Baosteel and South Korea’s Posco. Before 2008, Nippon Steel had been among the world’s top three steel producers since 1970, when it was created by the merger of Yahata Iron & Steel Co. and Fuji Iron & Steel Co. Sumitomo Metal is Japan’s third-largest steel company. [Source: Masumi Suga, Bloomberg, December 14, 2011]
Nippon Steel made a group net profit of about $1.6 billion in fiscal 2010-2011, against a loss of $130 million the previous year.Nippon Steel returned to profit in the January-March 2010 quarter, with a net income of ¥34.4 billion on ¥1 trillion in sales, on the back of Asian exports but lost money in fiscal 2009-2010, with a net loss of ¥11.5 billion, its first loss in seven years.
Nippon Steel posted a loss of ¥72 billion in the first half of fiscal 2009 (April-September).In January 2009, it said that it would idle three blast furnaces in response to sharp declines in orders from automakers. Nippon Steel’s net income rose 3.9 percent to ¥365 billion in 2007 due mainly to rising demand from automakers and shipbuilders. It made a profit of $1.55 billion in fiscal 2008-2009.
Nippon Steel was created in 1970 by a merger between Fuji Iron & Steel and Yawata Iron & Steel. It used to be the world's largest steel producer. It produced 31.96 million tons in 1991 more than any other company at that time. It has 37,388 employees. It was knocked off its No.2 slot by production in 2009 after being overtaken by five Chinese steel mills, according to the American Institute of International Steel.
Nippon Steel plans to spend $7 billion over next few years to expand production, buy rivals and fight hostile takeover bids. It has formed an alliance with Sumitomo Metal Industries ad Kobe Steel and is seeking ti collaborate with Mittal steel. Nippon Steel and Posco signed a strategic tie-up agreement in 2000 and extended it in 2005 and have agreed negotiate ore prices together.
Nippon Steel Merger
In February 2011, the giant steelmakers Nippon Steel and Sumitomo Metal agreed to merge to create the world’s second largest steelmaker with steel production of 48 million tons. The decision to merge took place very quickly: less than a month after negotiations began. Both companies felt the move was necessary if they wanted to remain competitive with ArcelorMittal and fast-growing China-based Baosteel and South-Korea-based Posco.
The deal is valued at about $24.5 billion.` “It’s all about lowering costs and enhancing margins because while demand for steel is quite strong, one of the problems for steelmakers around the world is rising costs,” Gavin Wendt, a senior resources analyst at Mine Life Pty in Sydney, told Bloomberg.` “It may give them more leverage when it comes to dealing with the miners when buying iron ore materials.” The merger now awaits approval of the Fair Trade Commission. It is scheduled to be finalized in October 2012.
Before the merger Nippon Steel was Japan’s largest and Sumitomo Metal was Japan’s third largest steelmakers. According to the Yomiuri Shimbun,` “Nippon Steel has an advantage in products such as specialized light, strong sheets, demand for which has been rising in emerging economies such as India. Another forte is the electromagnetic steel sheets that are used for core parts in generators and motors...Sumitomo Metal, on the other hand, is at the forefront of the seamless pipe industry. Its products are known for their high quality and strength. At present, Sumitomo Metal and two European firms effectively dominate the market for seamless pipes, which are widely used in the development of oil fields.”
After Mittal purchased Arceler to become ArcelorMittal, the world’s largest steel firm, many thought it was acquire Nippon Steel. ArcelorMittal was valued at $45 billion, twice that of Nippon Steel. Kobe Steel was asked to join the merger but it said it would go it alone for a while because it has a wide range of businesses , including aluminum production. In December 2010, Kobe Steel said it planned to spend $500 million build plate plant in Ohio to supply lightweight, high-intensity steel for North American automakers.
December 2011, Bloomberg reported: “Nippon Steel Corp. Japan’s largest steelmaker, received clearance for its 685 billion yen ($8.8 billion) all-share purchase of Sumitomo Metal Industries Ltd. to create the world’s second-biggest steelmaker. The Japan Fair Trade Commission announced its approval of the deal. The merger will be completed by October 2012, the companies said. Nippon Steel is offering 0.735 of its shares for each Sumitomo Metal share, they said in September. Including assumed debt, the transaction is worth about 1.7 trillion yen. [Source: Masumi Suga, Bloomberg, December 14, 2011]
The combined company will be known as Nippon Steel & Sumitomo Metal Corp. It wants to combine to counter intensifying competition from Asian and European rivals in what may be the country’s largest non-bank takeover. That dovetails with government efforts to encourage takeovers to boost growth in the world’s third-largest economy.` “It’s a positive move as Japanese companies face rising global competition,” said Naoki Iizuka, a senior economist at Mizuho Securities Co.` “It’s necessary to have an industrial policy to push major companies to consolidate so they can expand economies of scale.” [Ibid]
` “The new company will produce as much as 70 million metric tons of the alloy annually within ten years as it increases its presence in emerging markets in Asia including China and India, as well as in Brazil. Combined, they produced 48.3 million tons last year, according to the World Steel Association. [Ibid]
“Steelmakers in Japan need to seek more export growth as their domestic market shrinks as the nation’s population ages. Nippon and Sumitomo control 44 percent of the domestic market, according to Bloomberg calculations, and together they account for about 3 percent of global crude steel output, the companies said. [Ibid]
` “The steelmakers started merger talks in December 2010. The transaction was approved` “faster than usual,” Masanori Fukamachi, senior officer for mergers and acquisitions at the FTC, said today at a briefing.` “It serves no purpose to spent too much time on reviews and delay consolidation.” The steelmakers agreed to take steps to ensure they aren’t restraining competition in products including high-pressure gas piping, the commission said. [Ibid]
Shipping in Japan
Japan has more commercial ships than any other country except Greece.
In 1995, Japan accounted for 41 percent of the world's registered merchant shipping (9.3 million gross tons) according to the Guinness Book of Records.
The world's largest shipowner, the Japanese NYK group, has a fleet of vessels with a capacity of 11,921,701 gross tons.
The fastest Pacific crossing between Yokohama and Long beach (a distance of 5,568 miles) was six days and 1 hour by the container ship Sea-Land Commerce in 1976. The average speed was 38.31mph.
Shipbuilding in Japan
Kawasaki Shipbuilding in Nagasaki Japan was once No. 1 in the world in shipbuilding but now is struggling to stay afloat amidst stiff competition from China and South Korea. Japan had the highest shipbuilding tonnage in the world until the 1990s. It is currently far behind South Korea and was surpassed by China in 2009. Japanese shipbuilders' global market share dropped sharply to 21 percent in 2010 from nearly 30 percent in 2008, far behind China's 38 percent and South Korea's 33 percent. The shipbuilding industry has completely died out on many places. The number of workers in the industry declined from 208,000 in 1970 to less than 70,000 in 1997.
To stay competitive Japanese shipbuilders have been cutting costs, raising their technical expertise and developing fuel-efficient eco-ships. Nagasaki-based Mitsubishi Heavy Industries employs 3-D computer technology and cranes capable of carrying 1,200-ton loads to build ships from a few, larger pieces to cut cots. Mitsubishi and IHI have introduced container ships that use less fuel and give off fewer emission than comparable ships. Kawasaki and Mitsui have done the same with LNG carriers and bulk carriers.
` “Hajime Yamagishi wrote in the Yomiuri Shimbun:` “It is believed that the volume of new orders received by Japanese shipbuilders, which are weaker in terms of price competitiveness, will largely dwindle by around 2015, when supply will greatly exceed demand in the global shipbuilding market because of the degree to which China and South Korea have boosted their production capacities. [Source: Hajime Yamagishi, Yomiuri Shimbun, February 1, 2012]
Japan and South Korea produce most of the world's tankers and merchant ships. Large Japanese shipbuilding companies include Mitsubishi Heavy Industries and Mitsui Engineering and Shipbuilding Co. Mitsubishi is the world’s second largest ship builder.
The largest supertanker in the world, the Happy Giant , was built in Japan in 1981. Almost a third of a mile long, it has a capacity of 565,000 tones of petroleum, enough to supply the U.S. with about 6 percent of it daily needs of imported oil. According to the Guinness Book of Records, the world's largest propeller (36 feet in diameter) was made by Kawasaki Heavy Industries.
Japan and South Korea vied for the No. 1 position as the world’s largest shipbuilder for the 1990s and 2000s with Koreans surpassing the Japanese in 1993, 1999, 2000 and 2002, when Japanese shipbuilders produced 11.5 million tons and South Korean shipbuilders produced 12.4 million tons. Together, Japan and South Korea have put many of their European rivals out of business. Japanese shipbuilders were given a lift by new requirements for double-hulled ships and an increase in demand for oil tankers to meet an increase in demand for oil.
In December 2007, Mitsui Engineering and Shipbuilding delivered the world’s largest iron ore carrier. Built at the China Works facility to carry ore from Brazil to Japan for Nippon Steel Co., it is 340 meters long and 60 meters wide and has a deadweight tonnage of 327,180 tons. Mayekawa MFG, a company based in Koto ward in Tokyo, holds an 80 percent share of the global market for industrial freezers on refrigerator ships.
Chinese and South Korean Shipbuilders Grows While Japanese Shipbuilders Slowly Merge
Hajime Yamagishi wrote in the Yomiuri Shimbun:` “JFE Holdings Inc. and IHI Corp. concluded four years of negotiations as they reached a basic agreement to merge their shipbuilding units in October 2011. However, the business environment has become increasingly severe for shipbuilders due to the rapid expansion of production in South Korea and China. Japanese shipbuilders are now on the verge of discovering whether they can recover their international competitiveness. [Source: Hajime Yamagishi, Yomiuri Shimbun, February 1, 2012]
` “In April 2008, JFE Holdings and IHI unveiled a plan to merge their shipbuilding units, but negotiations dragged as the shipbuilding market deteriorated following the collapse of Lehman Brothers Holdings Inc. that autumn. According to Shinjiro Mishima, president of Universal Shipbuilding Corp., a subsidiary of JFE Holdings, the situation required them to review business conditions. A three- to four-year backlog of orders is also thought to have delayed the decision on the merger. [Ibid]
` “While negotiations stalled, their South Korean and Chinese counterparts rapidly increased their shipbuilding capacity in an effort to tap into the growing global ocean shipping demand spurred by economic development in emerging countries. South Korea began fostering its shipbuilding industry, and major shipbuilders made capital investments totaling 1 trillion yen. Chinese firms also improved their price competitiveness, helped by low labor costs. [Ibid]
` “Alarmed by the likelihood that the business environment will become even more severe, JFE Holdings and IHI had little leeway in concluding the merger agreement. Through the merger, the firms will be able to eliminate redundant shipbuilding. They are also expected to strengthen development of "energy-saving ships," offsetting high production costs with improved technological capabilities. IHIMU President Shigemi Kurahara said they also can expect to see benefits from the large increase in engineers capable of developing new fields.On the domestic front, the new company created by the merger will be comparable to industry leader Imabari Shipbuilding Co., which has been expanding its business scale by buying small and midsize shipbuilding firms based in the area around the Seto Inland Sea. [Ibid]
` “In July 2011, the Land, Infrastructure, Transport and Tourism Ministry said in a report that cooperation between or integration of shipbuilders is necessary. The latest merger will be the first large-scale restructuring of the Japanese shipbuilding industry since October 2002, when Universal Shipbuilding was established as a joint venture between NKK Corp., JFE's predecessor, and Hitachi Zosen Corp. [Ibid]
Aerospace Industry in Japan
communications satellite An effort to build an aircraft industry in Japan in the 1960s failed.
Mitsubishi Heavy Industries is Asia’s largest aerospace company. It is currently building a passenger jet that carries 70 to 90 passengers and will be the first commercial jet to use composite materials for its wings and vertical stabilizers. This and other measures may reduce the weight of the plane by as much as 30 percent. The new plane will be Japan’s first domestically produced plaen since production of the YS-11 propeller plane was stopped on 1973.
Mitsubishi exhibited a mock up of the cabin of the new plane at the Paris Air Show in 2007. Boeing is serving as a consultant in the project. Toyota is considering entering the aircraft industry with a tie-up with Mitsubishi to build parts for the jet. The Japanese government has said that it subsidize the construction of the new plane.
The new planes are expected to be ready in 2013. All Nippon ordered 15 of the planes in 2007 for $600 million. Mitsubishi need to sell at least 100 of them to absorb the development costs.
In the future Japan hopes to build an ultrasonic plane that will travel between New York and Tokyo in three hours at speeds between 10 and 20 times the speed of sound. Scientists have already tested a new jet engine capable of propelling an aircraft at eight times the speed of sound.
Toray has a 15 year contract with Airbus to supply high-tech carbon fibers to use on aircraft bodies. It broke ground on a factory in South Korea in June 2011.
IHI is involved with the project to develop a new next-generation, fuel-efficient engine for Airbus aircraft, Mitsubishi Heavy Industries and Kawasaki heavy Industries may also join the project. The three companies were also involved in developing Airbus’s V2500 engine.
See Nature and Science, Space Program
Japanese Parts of Boeing Dreamliner
Japanese manufacturers are making a number of components the Boeing Dreamliner. Mitsubishi Heavy Industries makes carbon fiber parts for the wings. Kawasaki Heavy Industries also makes carbon fiber parts for the wings in addition to parts of the fuselage and the main landing gear wheel well. Panasonic is supplying the cabin service system and Bridgestone provides the tires.
. Fuji Heavy Industries is going to make the center wing box, a structure for connecting the main wings to the plane. The composites are supplied by Toray industries. Carbon fiber parts are molded under extreme pressure, which requires some difficulties in the manufacturing process, but reduces the need for nuts and bolts and metal parts.
Around 5 percent of the parts for Airbus A350 are to be supplied by Japanese firms
Three Japan Aerospace Firms Work on Airbus Engine
Three Japanese heavy machinery manufacturers said they will take part in the joint development and manufacturing of a fuel-efficient engine for use in Airbus S.A.S.'s upcoming A320neo passenger jet. IHI Corp., Mitsubishi Heavy Industries Ltd. and Kawasaki Heavy Industries Ltd. will set up a joint venture with Pratt & Whitney, a U.S. aircraft engine maker, and German engine maker MTU Aero Engines Holding AG, they said.
The three will put up 23 percent of the next-generation engine's development costs and take charge of the development of such mechanisms as low-pressure compressors and fans to send air into the engine, which will boast such characteristics as less noise.The A320neo, the successor to the Airbus A320 passenger jet, is scheduled to go into service in the fall of 2015. [Source: Kyodo, Mainichi Japan, September 29, 2011]
Construction Industry in Japan
There are half a million construction companies in Japan. Construction accounts for 9 percent of Japan's GNP (compared 1 percent in the United States and 5 percent in Europe) and employs one out of every 10 workers (6.6 million people), a much higher rate than in other developed countries and double that of the Japanese United States. Between 1990 and 1997, when the construction was still in bubble mode, one out of every three new jobs was in construction.
Japan’s construction industry is worth 30 trillion yen ($362 billion). Japan uses 30 times as much concrete as the United States in relation to its size.
Construction, See Earthquakes
See Government, Corruption
See Education, Health...., Public Works<
Image Sources: 1) TEPCO 2) Toyota 3) 4) 5) Nippon Steel, 6) Osaka Gas 7) Wikipedia
Text Sources: New York Times, Washington Post, Los Angeles Times, Daily Yomiuri, Times of London, Japan National Tourist Organization (JNTO), National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.
© 2009 Jeffrey Hays
Last updated October 2012