Alps Electric Co., Ltd. Business Information, Profile, and History

Company Perspectives:

Our vision is to create new value in the next era, which we consider the era of symbiosis between humans and earth. We pledge: to conduct our business in pursuit of creating new values; to conduct our business in earth-friendly ways that harmonize with the global environment; to conduct our business so as to learn from customers and respond to their needs; to conduct our business fairly; and to conduct our business as to encourage and take advantage of the enthusiasm of our valued employees.

History of Alps Electric Co., Ltd.

Alps Electric Co., Ltd. operates as a leading electronic components manufacturer with operations in North America, Europe, Asia, and Japan. Its Electronic Components business is divided into four segments including Components, Communications and Broadcasting Devices, Computer Peripherals, and Car Electronics. Its products--which number in the 1000s--include photo printers, car switches, clock springs used in air bag systems, remote control units, sensors, press toolings, optical communication lens, transceiver units for cellular and cordless telephones, FM/AM tuners, TV-VCR tuners, floppy disk drives, data input devices such as keyboards, liquid crystal displays (LCDs), and magnetic heads for digital media, audio applications, and VCRs. Alps Electronics along with Alpine Electronics Inc. and Alps Logistics Co. make up the core of the Alps Group of companies.

As one of the few secondary manufacturers to remain independent of client companies and other industrial groups, Alps is an oddity in Japanese industry. In order to maintain this independence, the company has had to avoid a "vertical" diversification. Instead of moving from parts manufacturing to finished products, which would have put Alps squarely in competition with its clients, the company expanded "horizontally," developing a wider and more sophisticated array of components and preserving harmony with its customers.

Alps' customers are some of the largest companies in the world; these companies could certainly establish their own parts manufacturing subsidiaries. The fact that they haven't tried to replace Alps testifies to the company's many strengths. It need only be concerned with a very narrow function, and it can benefit from greater economies of scale by selling the same product to several different customers.

Early History

The man behind Alps Electric is Katsutaro Kataoka, a self-styled industrial revolutionary in the mold of Sony's Akio Morita. A displaced war veteran and mechanical engineer, Kataoka worked briefly for Toshiba. He was uncomfortable working for a large firm, so he left Toshiba, borrowed $1,400 from his family, and set up a small manufacturing shop in Ohta, a drab industrial suburb of Tokyo. The company opened for business in November 1948 as the Kataoka Electric Company.

Kataoka's original product line consisted of an unimpressive variety of simple-technology components such as light switches and variable capacitors. He peddled these items to a number of larger manufacturers, offering a reliable product at low unit costs. The company's business grew steadily during the 1950s, but while its volume increased, its technology changed very little.

But as the products manufactured by Kataoka's customers became more complex, these customers began to pressure Kataoka to develop a wider variety of more durable, high-quality parts. Kataoka began investing more heavily in research and development and expanded its operations with new factories. A subsidiary, Tohoku Alps, was established in August 1964, and the following December Kataoka Electric changed its name to the more English-sounding Alps.

Extensive Growth: 1960s-80s

Alps Electric began a period of unprecedented growth during the mid-1960s as the Japanese consumer electronics industry took off. Alps components were incorporated into thousands of products, and it established significant market shares in new sectors, such as radio tuners. A technical agreement with General Instrument in 1963 led to Alps' acquisition of UHF television tuner technology; today Alps is the world's leader in TV tuner manufacturing. Eager to capitalize on its profitability and take advantage of promising markets, Alps entered into an agreement to produce car radios with Motorola in 1967. The venture was moderately successful, and it gave Alps a chance to learn about many new technologies developed by Motorola. Alps also established joint ventures with local manufacturers in developing countries, including India (1964), Taiwan (1970), and South Korea (1970).

By 1970, the company was the largest independent component manufacturer in Japan, but it was unable to win the respect usually accorded a company of its size even after listing on the First Market of the Tokyo Stock Exchange in 1967. Because it was limited to producing components, and therefore a captive of its customers' business, analysts and industrialists considered Alps a secondary company, regardless of its sales volume.

In fact, it was Alps and secondary manufacturers like it that made Japan's export-led boom in electronics possible on such a scale. Their billions of simple pieces, produced at very low cost, were essential to final manufacturers. Alps was constantly motivated to maintain its high quality and low prices by the unspoken threat that its customers could find other suppliers.

During the 1970s, Alps established subsidiaries and joint venture companies in the United States, Brazil, and West Germany. It operated a joint venture to produce semiconductors with Motorola from 1973 to 1975, and in 1978 took over Motorola's share of the car stereo venture, changing its name to Alpine Electronics. Alpine subsequently introduced a line of successful upmarket radios under its own name for Honda, BMW, Volvo, Chrysler, and GM.

When exchange rates have depressed the sale of Japanese electronic goods in foreign markets, final manufacturers have often protected their profit margins by demanding lower prices from suppliers such as Alps. While these suppliers were in many cases powerless to argue, Alps began to seize the initiative on several fronts. It began to develop special components, such as automobile electronics devices and to contribute to research on new end-products. No longer just a supplier but an active participant in the design process, Alps was not in a position to have its prices dictated by its customers anymore.

The company's graduation to a higher position in Japanese industry had an immediate effect on its business. Alps developed computer keyboards for IBM and Apple, and later took over Apple's keyboard and "mouse" plant in Garden Grove, California. Alps began to produce floppy disk drives in 1980 and steadily built market share; its customers include IBM, Apple, and Commodore. By 1985 it was the world's largest producer of floppy disk drives.

That year the company decided to try to exploit certain sectors of the market as a primary manufacturer. The computer market slumped during 1987, however, and the company was compelled to take losses in most of its computer-related product lines.

During the late 1980s, Alps toyed with the idea to reduce its reliance on secondary manufacturing gradually, but at the time, its major products were still secondary: switches (23% of sales), floppy disk drives and printers (21%), car audio sets (19%), and VCR parts, including magnetic heads and cylinders (14%).

As a supplier, Alps had many strengths during the 1980s and 1990s. The company's main plants were located in a rural area of northern Honshu. It had little trouble finding more plant space near existing facilities, and had access to cheaper labor. It made great use of subcontractors, particularly in labor-intensive and marginally profitable processes. Assembly lines were being automated, as were the warehouses.

The 1990s and Beyond

Alps continued expansion into the 1990s. Alps Electric Scotland was established in 1991, along with China-based Ningbo Alps Electronic and Dalian Alps Electronics in 1993, and Alps Electric Manufacturing Mexico S.A. de C.V. That same year, the firm entered the electronic amusement business related to peripheral products.

In 1994, Alps established the Alps Environmental Charter, signaling the firm's commitment to earth-friendly business practices. The company continued its expansion into China the following year, and also established a subsidiary in the Czech Republic.

During the mid-1990s, Alps worked diligently to position itself among industry leaders in the rapidly changing electronics market. Through its subsidiaries, the Alps name continued to grow in popularity both in the U.S. as well as other global markets due in part to its diverse product line that included computer mouse and keyboards, printing mechanisms, pointing devices, touch pads, and magnetic components used in floppy and hard drives. As part of the company's 50th anniversary celebration--the company tagged 1998 as the second founding of Alps--it established a new corporate vision that outlined Alps' business plan for the new millennium. Included in the company's initiatives was a strategy dedicated to focusing on the development of emerging markets.

While relatively untouched by scandal in the past, Alps received a taste of it during 1999 when forced to post a mid-year loss after bonds held by two of its subsidiaries proved to be fraudulent. An investigation into Cresvale International Ltd., the agent for the Princeton Fund bonds, led to the allegation that an Alps executive had received "kickbacks" or payments from Cresvale for enticing the company to invest in the fund. The executive resigned from the firm in October of that year amid the investigation.

Alps entered the new millennium intent on continuing its global expansion through product development and strategic partnerships, including a partnership with Immersion Corp., a leading digital touch technology firm. Under the terms of the deal, Alps became a supplier of Immersion's TouchSense-enabled automotive controls. The firm also began construction on several new plants and set plans in motion to develop its Alps Electric U.S. subsidiary into a technological development and marketing base for the company. Despite weakening sales in several of its segments resulting from a faltering American economy, Alps posted a 4.8 percent increase in fiscal 2001 sales as well as an increase of 2.9 percent in operating profit. During that year, Alps was listed on the Nikkei 225 Index.

In order to remain competitive in the future, Alps management remained focused on its growing business segments including communications and broadcasting devices--responsible for 24.4 percent of electronic sales--and mechatronic devices, which secured 27.1 percent of electronic sales. Kazuya Yoshikoshi, an Alps director, commented on the firm's growth strategy in a 2000 press release, stating that, "Alps is always searching for new, innovative products and technologies designed to fit our philosophy of creating a better, safer environment for our customers and the communities they live in." Under the leadership of president Masataka Kataoka, and with a strong corporate vision in place, Alps appeared to be well positioned for future growth.

Principal Subsidiaries: Tohoku Alps Co., Ltd.; Alpine Electronics Inc.; Alps Logistics Co. Ltd.; Kurikoma Electronics Co. Ltd.; Nishiki Electronics Co. Ltd.; Alps Electric Korea Co. Ltd.; Alps Electric Pte. Ltd. (Singapore); Alps Electric Malaysia Sdn. Bhd.; Alps Electric Hong Kong Ltd.; Dalian Alps Electronics Co. Ltd. (China); Ningbo Alps Electronics Co. Ltd. (China); Wuxi Alps Electronics Co. Ltd. (China); Tianjin Alps Electronics Co. Ltd. (China); Electric (U.S.A.) Inc.; Alps Electric North America Inc.; Alps Electric Manufacturing Mexico S.A. de C.V.; Alps Electric Europa GmbH (Germany); Alps Electric UK Ltd. (England).

Principal Divisions: Components; Communications and Broadcasting Devices; Computer Peripherals; Car Electronics.

Principal Competitors: Toshiba Corporation; Matsushita Electric Industrial Co. Ltd.; Sony Corporation.

Chronology

• Key Dates:
• 1948: Katsutaro Kataoka establishes the Kataoka Electric Company.
• 1964: The company changes its name to Alps Electric Co., Ltd.
• 1967: The firm joins with Motorola to manufacture car radios; Alps-Motorola Inc. is formed.
• 1970: Alps operates as the largest independent component manufacturer in Japan.
• 1978: The company takes over Motorola's share of the car stereo venture and Alps Motorola is renamed Alpine Electronics.
• 1980: Alps begins to manufacture floppy disk drives.
• 1984: Subsidiary Alps Electric UK is established.
• 1985: The firm operates as the world's largest producer of floppy disk drives.
• 1993: Continuing with its international expansion, the company forms Alps Electric Manufacturing Mexico S.A. de C.V.
• 1998: Alps celebrates its 50th anniversary.
• 2000: The company's stock is listed on the Nikkei 225 index.