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Omron Corporation Business Information, Profile, and History

company systems electronics tateisi

Karasuma Nanajo
Shimogyo-ku
Kyoto 600-8530
Japan

Company Perspectives:

A pioneer in the field of automation, Omron Corporation is one the world's premier manufacturers of automation components, equipment, and systems with advanced computer, communications, and control technologies.

Omron's versatile lineup of products includes relays, sensors, and switches; computer systems for factory automation (FA); and large-scale control and information systems.

Our Seventh Mid-Term Management Plan is focused on achieving mid-to-long-term growth through structural reforms targeting three major goals: creating a growth-oriented structure, establishing an innovative cost structure, and revitalizing corporate resources.

History of Omron Corporation

Omron Corporation is a world leader in the field of automation. The company has six main divisions. The largest, accounting for about 51 percent of overall sales is the Industrial Business Group, which manufactures and distributes control components--such as printed circuit board relays, security system sensors, and seismic sensors--and is a leading provider of factory automation systems. The Social Systems Business Group, which accounts for about 23 percent of sales, is a leader in the field of service automation, manufacturing automatic teller machines, point-of-sale systems, electronic cash registers, vending machines, airport automated check-in systems, automatic ticket gates, and traffic information and management systems. The Healthcare Division generates about seven percent of revenues; makes and markets healthcare products used by consumers and professionals, including digital blood pressure monitors, digital thermometers, body-fat meters; and offers medical systems and services. Omron's Specialty Products Division, responsible for about eight percent of sales, is active in three product areas: computer peripherals, such as modems and scanners; automotive electronic components, such as power window switches and air bag pressure sensors; and highly specialized sensors, such as the bill recognition unit installed in photocopiers to prevent paper currency counterfeiting. Generating another eight percent of sales is the Open Systems Division, which develops message and telemarketing systems for the public and private sectors. The final division is the Creative Service Business Division, which contributes less than four percent of Omron's overall sales; this division offers professional business services to corporate clients in such areas as logistics, information systems, communications, human resources management, and financial management.

Early History

Kazuma Tateisi, born in 1900, was graduated from the electrical engineering department of what is now Kumamoto 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 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.

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 that would become an area of extensive postwar growth for the company. At the request of Tokyo University, Tateisi began to research microswitches, also known as precision switches, in 1941; in 1944 the company supplied 300 microswitches to the university.

During World War II, Tateisi produced flap switches for aircraft and acted as a subcontractor 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 again 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 that 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 percent 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.

Entered Automation Field in the 1950s

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 U.S. 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.

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.

Entered Health Field in Early 1960s

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.

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 U.S. 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 tenfold 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 large-scale integrated circuits and liquid crystals, further advancing Omron in the area of electronics research.

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.

Reorganized in the Mid-1970s

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 reorganization of 1976 was completed.

The reorganization was expensive but successful. Sales decreased and the company reported negative net profits for 1975-76, 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 percent 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 1984-85 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 funds 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 percent of sales, down from 25 percent 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.

Transitioned to Systems Development in Late 1980s

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 was crucial as customers' needs grew more complex. The retail industry, for instance, increased its demand for faster seller recognition, order placement, and stock control. Other industries interested in EFTS technology included insurance and securities companies wishing to gain rapid access to markets.

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

Following the collapse of the 1980s Japanese financial bubble, Omron and other high-tech Japanese companies faced a much more difficult operating environment in the 1990s. The bleakest period for Omron came from 1992 to 1994, when net income dropped to ¥6.17 billion (1992), ¥4.57 billion (1993), and ¥4.69 billion (1994). The figure for 1991 was ¥21.47 billion, while the company recovered in 1995 to ¥12.15 billion. Cost-cutting measures taken by Omron to improve the results included sharply reducing capital spending, streamlining operations--including the reduction of products offered by more than 30 percent--and cutting the workforce by 1,500 through attrition, over a three-year period starting in 1994. The company also stepped up its efforts to develop higher value-added products.

With domestic demand stagnant, Omron looked for opportunities for growth through export. The rapidly emerging nations of southeast Asia were particularly targeted both for potential sales and as an area where manufacturing could be carried out more cheaply than in Japan. Likewise, China became a key for overseas growth and Omron established a regional headquarters there in fiscal 1995. During fiscal 1996, Omron expanded its facilities in Indonesia and also opened three new factories in Shanghai. In early 1997 the company announced plans to double its presence in Asia, outside Japan, by 2001. Omron had already become a much more export-oriented firm, increasing its sales outside of Japan from 16.5 percent in 1990 to 25.6 percent in 1997. The company aimed to further increase export sales to 30 percent by 2001. Another goal was to raise the overseas procurement rate from ten percent to 30 percent during the same period.

The beginning of the Asian financial crisis in mid-1997 and the subsequent fall of the Japanese economy into recession wreaked havoc upon Omron's plans. During the 1999 fiscal year ending in March 1999, Omron saw its export of control components fall due to weak global demand and a strong yen. Revenues fell for the year, as did net income, which declined from ¥18.3 billion in 1998 to ¥2 billion in 1999. In March 1999 Omron announced another restructuring plan, this one to lower the company's workforce from 18,800 to 16,800 by March 2002 and to reduce the number of directors from 30 to less than ten.

Principal Subsidiaries: EUROPE: Omron Europe B.V. (Netherlands); Omron Telford Ltd. (U.K.); Omron Manufacturing of the Netherlands B.V.; Omron Electronics Manufacturing of Germany G.m.b.H.; Omron Electronics Ges.m.b.H. (Austria); Omron Electronics N.V./S.A. (Belgium); Omron Electronics A.G. (Switzerland); Omron Fabrikautomation G.m.b.H. (Germany); Omron Electronics A/S (Denmark); Omron Electronics S.A. (Spain); Omron Electronics S.a.r.l. (France); Omron Electronics S.r.L. (Italy); Omron Electronics Norway A/S; Omron Electronics B.V. (Netherlands); Omron Electronics Lda. (Portugal); Omron Electronics A.B. (Sweden); Omron Electronics O.Y. (Finland); Omron Electronics Ltd. (Turkey); Omron Electronics Ltd. (U.K.); Omron Electronics, Kft. (Hungary); Omron Electronics Spol. S.r.o. (Czech Republic); Omron Electronics SP.Z.O.O. (Poland); Omron Electronics G.m.b.H. (Germany); Omron Systems Europe G.m.b.H. (Germany); Omron Systems U.K. Ltd.; Omron Retail Systems France s.a.r.l.; Omron Healthcare G.m.b.H. (Germany); Omron Medizintechnik Handelsgesellschaft G.m.b.H. (Germany). NORTH AMERICA: Omron Management Center of America, Inc. (U.S.A.); Omron Advanced Systems, Inc. (U.S.A.); Omron Manufacturing of America Inc. (U.S.A.); Omron Electronics, Inc. (U.S.A.); Omron Canada, Inc.; Omron Dualtec Automotive Electronics, Inc. (Canada); Omron Automotive Electronics, Inc. (U.S.A.); Omron Systems, Inc.; Omron Healthcare, Inc. (U.S.A.); Omron Office Automation Products, Inc. (U.S.A.). SOUTH AMERICA: Omron Componentes Eletrô Eletrônicôs da Amazonia Ltda. (Brazil); Omron Eletrônica do Brasil Ltda. (Brazil); Omron Business Sistemas Electrônicos da América Latina Ltda. (Brazil). ASIA PACIFIC: Omron Asiapacific Pte. Ltd. (Singapore); Omron Malaysia Sdn. Bhd.; PT Omron Manufacturing of Indonesia; Omron Electronics Sales and Service (Malaysia) Sdn. Bhd.; Omron Electronics Pty. Ltd. (Australia); Omron Electronics Ltd. (New Zealand); Omron Korea Co., Ltd.; Omron Electronics Co., Ltd. (Thailand); Omron Mechatronics of the Philippines Corporation; Omron Automotive Electronics Korea Co., Ltd.; Omron Business Systems Singapore (Pte.) Ltd.; Omron Business Systems Malaysia Sdn. Bhd.; Omron Healthcare Singapore Pte. Ltd. CHINA AND TAIWAN: Omron (China) Group Co., Ltd. (Hong Kong); Omron (China) Co., Ltd.; Omron Trading (Shanghai) Co., Ltd. (China); Omron Shanghai Computer Corp. (China); OTE Engineering Inc. (Taiwan); Shanghai Omron Automation System Co., Ltd. (China); Shanghai Omron Control Components Co., Ltd. (China); Omron (Shanghai) Co., Ltd. (China); Omron Electronics Asia Ltd. (Hong Kong); Omron Taiwan Electronics Inc.; Yamron Co., Ltd. (Taiwan); Beijing GOT Business Computer System Co., Ltd. (China); Omron (China) Co., Ltd.; Omron Dalian Co., Ltd. (China).

Principal Divisions: Industrial Business Group; Social Systems Business Group; Healthcare Division; Specialty Products Division; Open Systems Division; Creative Service Business Division.

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