Incorporated: 1972 as Fujitsu Fanuc Ltd.
NAIC: 335314 Relay and Industrial Control Manufacturing
Headquartered at the base of Japan's Mount Fuji, Fanuc Ltd. is the world's leading manufacturer of computerized numerical control (CNC) equipment for machine tools, devices that put the automation into automated factories. CNC devices also serve as the "brains" of industrial robots, and Fanuc, whose name is an acronym for Fuji Automatic Numerical Control, has been a world leader in robotics since the 1970s. Much of the company's sales are channeled through GE Fanuc, a 50-50 automated machinery joint venture with General Electric Company. Countering the prevailing outsourcing trend in global business, Fanuc does all of its manufacturing in Japan at highly roboticized factories; nevertheless, its business is consistently and highly profitable, racking up double-digit profit margins that often approach and sometimes exceed 20 percent.
Fanuc was founded as a wholly owned subsidiary of Fujitsu Limited 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, remained at the top of Fanuc's chain of command until June 2000 when he was named honorary chairman. His name became 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 numerical control (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 as Fujitsu Fanuc Ltd., 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 (when it changed its name to Fanuc Ltd.), 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 AG, 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.
Its position as an NC manufacturer notwithstanding, the company's commitment to the related field of robotics 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 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 Corporation (GM), called GMFanuc Robotics Corporation, 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 brought Inaba to the attention of the U.S. financial press. There was 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 were all painted in such a shade. The workers' jumpsuits were also yellow, head to toe. Inaba was known for his demanding and authoritarian management style; at meetings, his subordinates were not allowed to speak unless spoken to.
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 Company (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 & Co., Ltd., 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 had always stemmed from the perception that its products were the most reliable as well as the least expensive on the market. In a cutting-edge field such as automation, a huge commitment to research and development was required, and fully one-third of Fanuc's nearly 1,800 employees were engaged in such activity in the late 1980s, the highest ratio of any Japanese manufacturer. As with every other facet of the company's operations, Fanuc's R&D bore 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 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.
Inaba also 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, gymnasium, 25-meter heated swimming pool, culture center, employee living quarters, and restaurant. 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 the heyday of the 1970s and 1980s. In 1992, 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, Inc., 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. Also in 1992 Fanuc moved into the emerging market of China through Beijing-Fanuc Mechatronics Co., Ltd., a joint venture with the Beijing Machine Tool Research Institute created to manufacture, sell, and provide service on CNCs.
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, to keep its production costs down.
These strategies seemed to pay off as Fanuc's revenues and earnings rebounded in 1994 and 1995. Sales and profits remained on an upward trajectory through the fiscal year ending in March 1998. In 1997 Fanuc entered into a second joint venture in China, Shanghai-Fanuc Robotics Co., Ltd. This partnership with Shanghai SMEC Corporation was involved in robotics manufacturing, sales, and service. Fanuc ended the 1990s with its sales and profits on the decline due to the worsening economic climate at home. The firm nevertheless set a goal of boosting its share of the worldwide robot market from 20 percent to 50 percent.
The new decade began with a historic change in leadership at Fanuc. In June 2000, at age 75, Inaba stepped down from the board of directors, while remaining involved at the company he largely built, as honorary chairman. Ryoichiro Nozawa was named chairman, while Shigeaki Oyama assumed the presidency. Earnings fluctuated early in the decade as the worldwide economic downturn cut into demand for CNCs and robots, and Fanuc faced increasing competition, particularly from those manufacturers setting up shop in low-wage China. Fanuc responded not by shifting its own factories to China but by making its factories in Japan more efficient. In the summer of 2002 production began at a fully automated plant in Oshino that was capable of 720 hours of uninterrupted operation.
Fanuc's ability to remain strongly profitable through a most difficult economic period for Japan enabled the firm to build up a huge hoard of cash: ¥385.51 billion ($2.89 billion) by March 2002. At this same time Fujitsu and other Japanese electronics companies were struggling in a highly competitive, profit-poor environment, and for this reason seeking to raise cash by dismantling at least a portion of Japan's complicated tangle of interlocking shareholdings. In August 2002, then, Fujitsu began gradually selling off its 39 percent stake in Fanuc, eventually reducing it to 7.8 percent by March 2005. Fanuc used part of its pile of cash to buy back some of these shares itself.
In June 2003 Oyama was named chairman of Fanuc, and Yoshiharu Inaba was elevated to president and CEO. Inaba, the only son of the company founder, had been groomed for company leadership from an early age and had earned a Ph.D. in engineering from the University of Tokyo. He took over at an auspicious time as the Japanese economy rebounded strongly from its prolonged doldrums, prompting Japanese companies to finally resume their capital spending and leading to robust sales of CNC systems and industrial robots. Shipments elsewhere in Asia, particularly to China, India, and South Korea, expanded strongly as well. Net sales at Fanuc jumped from ¥214.26 billion ($1.78 billion) in 2003 to ¥330.35 billion ($3.09 billion) in 2005. Net income nearly doubled during this period, hitting ¥75.76 billion ($708.1 million) by 2005.
In order to bolster its production capacity and develop ever more sophisticated robots, the still cash-rich Fanuc significantly increased its capital investment program starting in fiscal 2005. It began populating its factories with so-called intelligent robots, ones equipped with sight and force sensors, enabling them to recognize shapes and positions in three dimensions and to fine-tune their grips on objects, thereby increasing manufacturing efficiency and precision and enabling robots to handle entire assembly operations. Late in 2004 Fanuc began soliciting orders for sets of robots capable of assembling car parts, home appliances, and medical equipment. The company was also working to develop larger robots able to assemble entire car bodies. As demand for its products was increasing, the Japanese market continued its recovery, and such markets as China, India, and Russia were expected to grow strongly, Fanuc significantly raised its medium-term sales forecast, now aiming to achieve sales of ¥500 billion by the fiscal year ending in March 2008.
Principal Subsidiaries
Fanuc FA Service Ltd.; Fanuc Robot Service Ltd.; Fanuc Laser Service Ltd.; Fanuc Pertronics Ltd.; Fanuc Servo Ltd.; Fanuc DD Motor Ltd.; Fanuc Robotics America, Inc. (U.S.A.); GE Fanuc Automation Corporation (U.S.A.; 50%); Fanuc America Corporation (U.S.A.); Fanuc Robotics Europe S.A. (Luxembourg); GE Fanuc Automation CNC Europe S.A. (Luxembourg); Fanuc Robomachine Europe Sales GmbH (Germany); Fanuc Robomachine Deutschland GmbH (Germany); Fanuc Europe Service GmbH (Germany); Fanuc France S.A.S.; Fanuc U.K. Limited; Fanuc Italia S.p.A. (Italy); Fanuc Iberia, S.A. (Spain); Fanuc Turkey Ltd. (80%); Fanuc Bulgaria Corporation; Fanuc Czech s.r.o. (Czech Republic); Fanuc South Africa (Proprietary) Limited; Fanuc Mitsui Automation CIS LLC (Russia; 50%); Fanuc Korea Corporation; Fanuc Taiwan Limited; Beijing-Fanuc Mechatronics Co., Ltd. (China; 50%); Fanuc India Private Limited (95%); Shanghai-Fanuc Robotics Co., Ltd. (China; 50%); Fanuc Robomachine (Shenzhen) Ltd. (China); Fanuc Thai Limited (Thailand); Tatung-Fanuc Robotics Company (Taiwan); Fanuc Mechatronics (Malaysia) Sdn. Bhd.; PT. Fanuc GE Automation Indonesia (50%); Fanuc Singapore Pte. Ltd. (50%); Fanuc Oceania Pty. Limited (Australia); Fanuc Philippines Corporation.
Principal Operating Units
FA Group; Robot Group; Robomachine Group.
Principal Competitors
Siemens AG; IWKA AG; ABB Ltd.; Rockwell Automation, Inc.; Comau S.p.A.
Further Reading
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.
Glain, Steve, "Competitive Drill: Fanuc Faces a Challenge from PC-Driven Systems," Asian Wall Street Journal, May 20, 1997, p. 1.
------, "Open Systems Narrow Fanuc's Lead in Sector," Asian Wall Street Journal, June 13, 1997, p. 13.
"GM to Sell Its 50% Stake in GMFanuc, a Robotics Firm, to Japanese Partner," Wall Street Journal, June 4, 1992, p. B4.
Guth, Robert A., "Fujitsu May Lower Its Fanuc Stake," Asian Wall Street Journal, June 18, 2002, p. M1.
Imada, Toshihiko, "CEO Puts Fanuc on Growth Path," Nikkei Weekly, June 7, 2004.
Inaba, Seiuemon, Walking the Narrow Path: The FANUC Story, translated by Inyong Ham, n.p., 1992, 91 p.
Kodaki, Mariko, "Fanuc Goes on Offensive with Robots," Nikkei Weekly, February 24, 2003.
Marsh, Peter, "Green Tea with Yellow Robots," Financial Times, September 5, 2003, p. 14.
Nakamura, Minoru, "Trouble in the Robot Kingdom," Tokyo Business Today, June 1994, pp. 44-45.
Sugawara, Toru, "Fanuc Stuck with Excess Funds," Nikkei Report, June 18, 2002.
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.
— Douglas Sun; Updated by David E. Salamie
