Kyocera Corporation Business Information, Profile, and History

Company Perspectives

"To be a creative company that continues to grow"--that has been the Kyocera ("Kyocera" as a consolidated group) mission since Kyocera Corporation was founded in 1959, reflecting our unswerving commitment to shareholders. As we plan our future by "always seeking better ways," continuous growth will remain a top priority.

By continuously pursuing excellence while adhering to universal principles, we in the Kyocera Group will capitalize on our unique value system and technologies. Kyocera will lead the way to the value that rapidly changing markets demand. Not only will we create new technologies and new products, but entirely new markets. In so doing, every Kyocera Group company worldwide will create new value for society.

History of Kyocera Corporation

Kyocera Corporation, founded in 1959, was one of the first companies to produce fine ceramic components. It has grown into one of the world's preeminent manufacturers of electronics, optical equipment, and other products that use sophisticated ceramics and electronics technology. Kyocera (pronounced key-OH-sarah) produces and sells information equipment (printers, copiers, and multifunction products); telecommunications equipment (cell phones, PHS ["personal handyphone"] handsets, PDAs, and wireless systems); applied fine ceramic products (cutting tools, medical devices, solar cells and modules, and recrystallized gemstones); fine ceramic products (components for the electronics, automotive, textile, paper, and other industries); electronic components (capacitors, connectors, input/output and display devices, and other components); and semiconductor parts (packages and other components used in advanced semiconductor devices). These products, many of which are manufactured outside of Japan, are sold around the world by the company's own sales force, as well as through a comprehensive network of distributors and dealers.

Although over the years Kyocera has been known more for its individualistic spirit than for a typical Japanese communal character, the company's corporate culture reflects a standard Japanese dedication to the manufacture of superior products. This philosophy was established and carefully cultivated by the company's entrepreneurial founder and chairman, Kazuo Inamori, who retired in mid-1997 to become a Zen Buddhist monk while remaining involved in the firm as chairman emeritus.

Early History

Upon graduation from Kagoshima University, where he studied applied chemistry, Inamori went to work as a ceramics engineer. When he was asked by his employer in 1959 to transfer to Pakistan and become the manager of an insulator factory, Inamori chose instead to take advantage of an opportunity offered by an outside investor to start his own company.

Kyoto Ceramic Co., Ltd. benefited from creative research ideas and methods that produced discoveries as much through accident as through pure scientific method. For example, during the development of an insulator made of magnesium oxide, a very dry, loose powder, the challenge facing the ceramics industry was to find a way to hold the magnesium oxide together during firing, a problem that leading researchers around the world had been unable to solve. When Inamori accidentally tripped over a block of paraffin wax as he walked across the lab, it struck him as he removed the wax that had stuck to his shoes that the wax might hold the key to the magnesium oxide problem. Inamori successfully mixed the magnesium oxide and the wax together using what is now humorously referred to in company annals as the "Inamori fried rice powder molding method."

From the very beginning, Inamori instilled a corporate philosophy that emphasized product excellence. To ensure the company's ability to grow without incurring further debt, since Inamori found debt unacceptable, all efforts were directed toward paying off the debt from the company's start-up. The pressure of meeting such ambitious objectives often required salespeople, production staff, and development personnel to work around the clock to fulfill product orders before deadlines.

In 1969, ten years after Kyoto Ceramic's birth, Kyocera International, Inc. was established as a sales company in the United States. Only two years later, this subsidiary entered into an agreement with Fairchild Camera and Instrument of San Diego, California, to acquire one of its factories to make ceramic components. On the other side of the ocean, Feldmühle Kyocera Elektronische Bauelemente GmbH was established in the same year as a joint venture with Feldmühle AG of West Germany for manufacturing semiconductor packages and electronic components. In 1971 Kyoto Ceramic's stock was listed on the Second Section of the Osaka Stock Exchange.

Growing Rapidly

The late 1970s were a time of intense growth and expansion for Kyoto Ceramic both inside and outside Japan. In 1977 it established Crescent Vert Company, Ltd. to manufacture recrystallized jewels and Kyocera (Hong Kong) Ltd. to supply electronic components and equipment to southeast Asia. American Feldmühle Corporation and Cybernet Electronics Corporation became affiliates in 1979.

The acquisition of Cybernet, a Japanese manufacturer of citizens-band radios and audio equipment, was stimulated to a large extent by Inamori's desire to expand the company's base of business beyond ceramic packaging. Unfortunately, the merger created intense and conflicting company loyalties among the labor union workers inherited from Cybernet and hampered, for a time, the smooth transition Inamori sought.

Reorganizing and Pursuing Acquisitions

The Kagoshima Central Research Laboratory was opened in 1979 to engage in fine ceramics research, particularly in the areas of applied and processing technologies. In 1984 Kyocera established its second research facility in Tokyo to study the areas of electronics, optoelectronics, and other new media. Meanwhile, in 1982, Kyocera Corporation was formed from the merger of Kyoto Ceramic with four of its subsidiaries, including Cybernet Electronics.

In 1984 Inamori formed a private telecommunications company called Daini-Denden Kikaku Company, Ltd. (later known as DDI Corporation) to enter into competition with Nippon Telegraph and Telephone (NTT). Funded by Inamori and 24 other institutional investors, this venture, NTT's first competitor, was launched in part in retaliation for NTT's successfully blocking an attempt by Kyocera to market its own line of cordless telephones in Japan the year before. NTT had been the only legal supplier. When Kyocera shipped 30,000 of its own units, rated superior to NTT's, NTT lodged an immediate complaint with Japan's Ministry of Ports & Telecommunications and forced Kyocera to recall its product. Subsequently, Daini-Denden, with Inamori as its chairman, rapidly expanded its business by adding public telecommunications services to its private network and by establishing subsidiaries to institute cellular mobile telephone services in several regions of Japan.

Subsidiary development continued in both North America and Europe during 1985 and 1986, culminating in the 1987 formation of Kyocera America, Inc. and Kyocera Electronics, Inc. to take over for Kyocera International, which became a holding company for seven other U.S. affiliates.

Following a 1983 merger that made camera and camera maker Yashica Co., Ltd. a Kyocera subsidiary, Yashica in 1987 successfully introduced the Samurai SLR camera, a breakthrough product integrating advanced technology, ease of use, and reasonable cost. Also in 1987 Kyocera Mexicana, S.A. de C.V. was incorporated, bringing the number of Kyocera's overseas manufacturing facilities to six.

Kyocera's growth was not free of setbacks. Many resulted from its chairman's continued resistance to the unspoken tenets of Japanese commerce as, for instance, his duel with NTT in 1984 shows. The following year, Inamori was criticized in the press for ignoring government exportation regulations and directly selling components to a leading U.S. defense manufacturer. A 1980 incident in which Kyocera began marketing a bioceramic medical implant prior to obtaining the official approval of Japan's Ministry of Health returned to haunt Inamori in 1985 when the company was accused of illegal activities by a member of Japan's parliament. Inamori was often a target of the Japanese press, which questioned both his strict managerial style and his judgment in doing such things as establishing a company cemetery.

Kyocera's partnership with the California-based LaPine Technology Corporation was another deal that brought bad press. In 1986 Kyocera invested more than $10 million to fund the manufacture of 3.5-inch hard disk drives for the Silicon Valley company. This arrangement enabled LaPine to obtain the necessary financing it sought from the Prudential-Bache Trade Corporation. Within months, however, the three-way partnership began to crumble, reducing all three companies to arguments over costs and shipment quantities. As this battle wore on, LaPine customers transferred their orders to other suppliers and employees were laid off in substantial numbers. In the end, Kyocera and Prudential-Bache squared off to fight over what little was left.

Nonetheless, Kyocera has been an active participant in its local and national community. The Inamori Foundation, established in 1984, awards the Kyoto Prize annually for achievements in science, technology, the creative arts, and the humanities. The foundation also funds a number of domestic research projects throughout Japan in a range of technological and cultural specialities.

Major Acquisitions in 1989 and 1990

During the late 1980s and early 1990s, Kyocera made major moves to bolster its overseas operations, particularly in Europe and North America. In 1988 a company reorganization set up head offices in Asia, the United States, and Europe, the latter of which, Kyocera Europe GmbH, was based in Germany. The following year the company spent $250 million to acquire Elco Corporation, a maker of electronic connectors based in the United States, which had annual sales of $152 million and operated two plants in Europe. This particular purchase did not go smoothly at first, as Elco soon lost most of its upper managers, who left after disagreements developed between them and Inamori.

Kyocera's 1991 $560 million acquisition of AVX Corporation, on the other hand, went smoothly. AVX, based in South Carolina and with six factories in Europe, manufactured multilayered ceramic and tantalum capacitors used in semiconductors, a perfect fit with Kyocera. Following the acquisition, Kyocera helped AVX cut costs and AVX also benefited from the two companies together being able to offer their customers a full range of electronics components. As a result, AVX revenues jumped from about $350 million in 1989 to about $1.2 billion in 1995; profits increased fourfold to about $130 million. In August 1995 Kyocera sold about 25 percent of AVX in an initial public offering, gaining a profit of more than $300 million in the process.

Diversifying

By 1993 DDI had grown rapidly, with sales reaching an estimated $3 billion, and was the clear number two telephone company in Japan. That year, DDI went public, after which Kyocera owned a 25 percent stake in it. Kyocera continued to expand its involvement in telecommunications, as evidenced by the 1995 debut in Japan of the personal handyphone system (PHS), a different type of cellular phone system, one that worked within a smaller area than that of cellular systems and that cost about one-fifth as much as cellular.

Kyocera expanded into multimedia in 1995, with the establishment in August of Kyocera Multimedia Corporation for the marketing via television of software for games, database information, and consumer products. The company also made a series of moves to pursue the burgeoning economy of China. In December 1995 Shanghai Kyocera Electronics Co., Ltd. was established to manufacture electronic components. The following year Kyocera entered into a joint venture with a Chinese company to form Dongguan Shilong Kyocera Optics Co., Ltd., which was charged with manufacturing and selling in China consumer optical instruments, such as cameras, lenses, and stroboscopes.

One of the most important developments of the late 1990s came in June 1997 when Kyocera's revered entrepreneurial founder, Kazuo Inamori, retired, becoming a Zen Buddhist monk in the Kyoto temple where he had years earlier set up the controversial tomb for Kyocera employees. Inamori nevertheless remained involved in the company as a board member and chairman emeritus. At this time Kensuke Itoh was serving as president, but he shifted into the chairmanship in mid-1999, when Yasuo Nishiguchi was promoted to president, having previously served as head of the telecommunications business.

In August 1998 Kyocera broadened its electronic component line by acquiring a minority interest in Kinseki, Ltd., a maker of quartz crystal oscillator products. Kyocera took full control of Kinseki in 2003 and subsequently renamed it Kyocera Kinseki Corporation. In the meantime, Mita Industrial Co., Ltd., a globally active maker of photocopiers, had run into financial problems and declared bankruptcy. During 1999 Kyocera stepped in to help Mita reorganize, hoping to save a major buyer of its electronic components. Having infused Y12 billion ($117 million) into the troubled company, Kyocera in early 2000 took over Mita, changing its name to Kyocera Mita Corporation. In April 2002 Kyocera merged its printer operations into Kyocera Mita to take advantage of synergies between the two businesses. One major setback for Kyocera in this period was the high-profile failure of the much-hyped Iridium satellite-based phone system, the development of which had been led by Motorola Corporation. Kyocera was a major producer of Iridium handsets and was also involved in other aspects of the business. During 2000 Kyocera was forced to completely write off its Iridium inventory and investments, racking up losses totaling Y15 billion ($146 million).

Further Expansion in Telecommunications and Other Areas

By the early 2000s more than 80 percent of Kyocera's revenues were being derived from telecommunications- or information-related operations. The telecommunications side received a huge boost in February 2000 when the wireless phone business of Qualcomm Inc. was acquired for approximately Y23 billion ($211 million). A new U.S.-based subsidiary called Kyocera Wireless Corp. was created to carry on the business, which quickly hit pay dirt in the form of the Smartphone QCP 6035, introduced in the United States in March 2001. This cell phone featured integrated personal digital assistant functions based on the Palm operating system, and it was released to stellar reviews.

Kyocera's telecommunications investments paid off in another way in 2001. In October 2000 DDI merged with KDD Corporation, the leading international-call carrier in Japan, and IDO Corporation, a provider of cell phone service, to form a company soon named KDDI Corporation. Kyocera's 25 percent stake in DDI was thus transformed into a 15.3 percent stake in KDDI, and in the process Kyocera added Y98.2 billion ($779 million) to its net income for the year. Also in 2001, a year in which Kyocera's revenue surpassed the Y1 trillion mark for the first time, the company acquired Tycom Corporation, a maker of carbide cutting tools for printed circuit boards, for $67.8 million. The acquired company was later renamed Kyocera Tycom Corporation. In addition, seeking inroads into the burgeoning Chinese and aiming to improve the profitability of its manufacturing operations, Kyocera began expanding its production in low-wage China by establishing a new plant in Shanghai. Kyocera later created additional production bases in Dongguan and Guiyang, established a sales company in March 2003, and formed a Chinese subsidiary that began assembling solar modules in November 2003.

Further cost-cutting in 2002 centered around the slashing of 10,000 jobs at its overseas subsidiaries, about 20 percent of its global workforce, mainly at Kyocera Wireless and Tycom. In August 2002 Kyocera sought to bolster its electronic components and materials businesses by acquiring Toshiba Chemical Corporation from Toshiba Corporation for about Y9.4 billion ($80 million). The deal enabled Kyocera to pursue synergies between fine chemical technologies and fine ceramic technologies. The acquired unit was renamed Kyocera Chemical Corporation.

The year 2004 was marked by two further deals. Kyocera and Kobe Steel, Ltd. merged their respective medical divisions, each focusing on artificial joints and bones, into a new company called Japan Medical Materials Corporation, 77 percent owned by Kyocera and 23 percent owned by Kobe. The companies hoped to better compete against the U.S. and European firms that dominated the Japanese artificial joint sector. In October 2004 Kyocera joined with the U.S. investment firm Carlyle Group to take over DDI Pocket, Inc., the largest PHS (personal handyphone system) service provider in Japan. In a deal valued at approximately Y220 billion ($2 billion), DDI was bought from KDDI, with Kyocera taking a 30 percent stake and Carlyle 60 percent, with KDDI retaining 10 percent. DDI Pocket changed its name to WILLCOM, INC. in February 2005. Although demand for PHS services had been disappointing in Japan, the market was growing rapidly abroad, particularly in Thailand, Taiwan, and China.

Continuing poor performance at Kyocera's optical equipment and telecommunications equipment groups prompted significant restructurings in 2005. Despite rapid growth in demand for digital cameras, brutal price competition and the company's weak camera brands made this sector a money-losing one for Kyocera. The firm thus decided to withdraw from the digital camera market, shifting focus toward camera modules used in cell phones. Kyocera Wireless, meanwhile, had failed to turn into a consistently profitable business for similar reasons: intense price competition and a lack of hot models. In yet another cost-cutting move, Kyocera shifted to outsourcing the manufacturing of all of Kyocera Wireless's phones, resulting in the layoff of almost 1,600 employees in San Diego and Tijuana. There were changes as well at the executive level. In June 2005 Nishiguchi was named chairman and CEO, while Makoto Kawamura was chosen to head the company as president. Kawamura had spent most of his 32 years at Kyocera in the cutting tool division. At the same time, Inamori stepped down from the company board, reportedly wanting to hand the company's management to a younger generation. It was nevertheless uncertain whether the founder's influence over management decisions would decline.

Principal Subsidiaries

Kyocera SLC Technologies Corporation; Kyocera Solar Corporation; Kyocera Elco Corporation; Kyocera Kinseki Corporation; Kyocera Display Institute Co., Ltd.; Kyocera Mita Corporation; Kyocera Mita Japan Corporation; Kyocera Optec Co., Ltd.; Kyocera Communication Systems Co., Ltd. (76.3%); Kyocera Chemical Corporation; Kyocera Leasing Co., Ltd.; Kyocera Realty Development Co., Ltd.; Japan Medical Materials Corporation (77%); Kyocera Precision Tools Korea Co., Ltd. (90%); Kyocera Elco Korea Co., Ltd.; Shanghai Kyocera Electronics Co., Ltd. (China; 90%); Dongguan Shilong Kyocera Optics Co., Ltd. (China; 90%); Kyocera Mita Office Equipment (Dongguan) Co., Ltd. (China; 90%); Kyocera Zhenhua Communication Equipment Co., Ltd. (China; 70%); Universal Optical Industries Limited (China); Yashica Hong Kong Co., Ltd. (China); Kyocera (Tianjin) Solar Energy Co., Ltd. (China; 90%); Kyocera Elco Hong Kong Ltd. (China); Kyocera Asia Pacific Pte. Ltd. (Singapore); AVX/Kyocera (Singapore) Pte. Ltd.; Kyocera (Malaysia) Sdn. Bhd.; Kyocera Wireless (India) Private Limited; Kyocera Mita Australia Pty. Ltd.; AVX Israel Ltd.; Kyocera International, Inc. (U.S.A.); Kyocera America, Inc. (U.S.A.); Kyocera Wireless Corp. (U.S.A.); Kyocera Telecommunications Research Corporation (U.S.A.); Kyocera Industrial Ceramics Corporation (U.S.A.); Kyocera Solar, Inc. (U.S.A.); Kyocera Mita America, Inc. (U.S.A.); Kyocera Tycom Corporation (U.S.A.); AVX Corporation (U.S.A.; 70.42%); Kyocera Electronic Devices LLC (U.S.A.); Kyocera Mexicana, S.A. de C.V. (Mexico); Kyocera Yashica do Brasil Indústria e Comércio Ltda. (Brazil); Kyocera Mita Deutschland GmbH (Germany); Kyocera Fineceramics GmbH (Germany); Kyocera Mita (U.K.) Limited; Kyocera Fineceramics Limited (U.K.); AVX Ltd. (U.K.); Kyocera Mita France S.A.; Kyocera Fineceramics S.A. (France); Kyocera Mita Italia S.p.A. (Italy); Kyocera Mita Europe B.V. (Netherlands); AVX Czech Republic S.R.O.; Kyocera Solar Europe S.R.O. (Czech Republic).

Principal Divisions

Fine Ceramic Parts Group; Semiconductor Parts Group; Applied Ceramic Products Group; Electronic Device Group; Telecommunications Equipment Group; Information Equipment Group; Optical Equipment Group.

Principal Competitors

TDK Corporation; Murata Manufacturing Co., Ltd.; EPCOS AG; Nokia Corporation; Motorola, Inc.; International Business Machines Corporation.

Chronology

• Key Dates
• 1959 Kazuo Inamori founds Kyoto Ceramic Co., Ltd.
• 1969 Kyocera International, Inc. is established as a U.S. sales company.
• 1982 Kyoto Ceramic merges with four of its subsidiaries to form Kyocera Corporation.
• 1983 Camera maker Yashica Co., Ltd. merges with Kyocera.
• 1984 Kyocera takes lead in the formation of the telecommunications firm Daini-Denden Kikaku Company, Ltd. (later DDI Corporation).
• 1989 Elco Corporation, maker of electronic connectors, is acquired.
• 1990 Capacitor producer AVX Corporation is acquired.
• 2000 Kyocera takes over photocopier maker Mita Industrial Co., Ltd., which is renamed Kyocera Mita Corporation, and also acquires the wireless phone business of Qualcomm Inc.
• 2005 Company announces its withdrawal from the digital camera market.