Teijin Limited Business Information, Profile, and History

History of Teijin Limited

Teijin Limited is one of the leading Japanese synthetic fiber companies, ranking second to Toray Industries, Inc. in the textile fiber industry. Textiles accounted for 64.5% of Teijin's total sales in 1990, the remainder coming from chemicals, pharmaceuticals, and other products.

Rayon yarn was produced commercially in Japan for the first time by Yonezawa Rayon Yarn Manufacturing Plant, a branch factory of Azuma Industries Ltd. Twenty-three years earlier, Count Chardonnet had established the first rayon manufacturing plant in France. The Japanese rayon industry developed rapidly despite its late start, and in 1936 attained the highest production level of rayon yarn in the world, only 22 years after it had begun commercial production. The rapid development of the Japanese rayon industry was led by Teikoku Jinzo Kenshi (Imperial Manmade Raw Silk) Company Ltd.

Naokichi Kaneko, head clerk of Suzuki Shoten Co., the second largest general trading company after Mitsui Bussan, played an important role in Teijin's establishment. Kaneko first became interested in rayon yarn in 1892. An English merchant showed him rayon yarn produced by Chardonnet's factory, demonstrating that an imitation of raw silk could be produced artificially. Kaneko established the Nihon Celluloid Jinzokenshi Kabushiki Kaisha (Japan Celluloid Rayon Yarn Co. Ltd.) jointly with Mitsubishi and Iwai Shoten in 1908, and planned to produce rayon yarn after the company had succeeded in producing celluloid. He instructed Hirotaro Nishida, the head of the engineering department, to explore possibilities for importing technology or to bring in engineers from foreign rayon manufacturing companies. Kaneko also delegated Taketaro Matsuda, former head of the Monopoly Department in the Formosa Government-General, to Europe to undertake research on celluloid and rayon yarn between June 1905 and October 1906, and asked an engineer of the Monopoly Department to research rayon yarn when he went to Europe a little later.

Seita Kumura, a graduate of the Department of Chemicals at the Imperial Technical University of Tokyo, had been researching leather at the Taiyo Leather Manufacturing Plant, which employed 30 to 40 employees, and acquired a patent for frosted leather. Kaneko became aware of Kumura's research and established Tokyo Leather Ltd. in partnership with the owner of Taiyo Leather and Kumura in 1907. The next year this partnership was merged with Azuma Leather Co. Ltd., a subsidiary of Suzuki Shoten. Kumura became the chief engineer of Azuma Leather Co. Ltd., and began research on rayon while he continued to research and improve artificial leather production methods. Itsuzo Hata, a friend of Kumura's, became a lecturer at Yonezawa Engineering College in 1912 and dedicated himself to research on rayon yarn in close cooperation with Kumura. In 1914 Azuma Leather Co. Ltd. gave the researchers ¥1,200 to support their project. Kaneko visited Hata's laboratory the following year, was convinced of the future potential of rayon manufacturing, and decided to continue to support the research.

In October 1915 Kaneko established the Yonezawa Jinzokenshi Seizosho (Yonezawa Rayon Yarn Manufacturing Plant) as Azuma Kogyo Bunkojo, a branch factory of Azuma Leather Co. Ltd. At the end of 1915, Azuma Leather Co. Ltd. was renamed Azuma Industries Ltd. In July 1916 the plant supplied rayon yarn to Nishida Kahei Shoten, a prominent rayon yarn dealer in Japan, for the first time. However, Kahei Nishida severely criticized the yarn's quality, saying that it was no better than the foreign yarn of ten years earlier. Kumura and Hata tried to improve their yarn's quality, and the halt of imports of rayon yarn from abroad gave them a chance to acquire market share. In April 1917 they produced 100 pounds of rayon yarn per day. This was the same level at which Count Chardonnet had begun to produce rayon yarn commercially for the first time in the world. Production of rayon yarn increased steadily during World War I, and Suzuki Shoten separated the Yonezawa Rayon Yarn Manufacturing Plant from Azuma Industries Ltd. to establish Teikoku Jinzo Kenshi (Imperial Rayon Yarn) Co., Ltd., a subsidiary of Azuma Industries Ltd., whose capital amounted to ¥1 million. The executive board members consisted of persons related to Suzuki Shoten and Azuma Industries, and included Kumura and Hata.

Teikoku Jinzo Kenshi's fortunes were mixed in the early years. Many rayon yarn manufacturing companies which started up in the boom during and just after World War I went bankrupt during the Reactionary Crisis in 1920, and Teikoku Jinzo Kenshi almost went bankrupt. Its financial difficulties arose because the crisis coincided with Teikoku Jinzo Kenshi's beginning construction of a new factory in Hiroshima. Suzuki Shoten, its parent company, offered sufficient credit to enable Teikoku Jinzo Kenshi to overcome its problems and to continue the construction of the new factory. After 1923 the company entered a phase of high profits and maintained this level despite the entry into the industry of Mitsui Bussan and the three largest cotton spinning companies. Suzuki Shoten went bankrupt in the Japanese financial crisis of 1927, and Teikoku Jinzo Kenshi bore the liabilities, which amounted to ¥10 million, in place of Suzuki Shoten. Teikoku Jinzo Kenshi managed to repay the debts within four years, however, far earlier than originally scheduled, and continued to earn high profits as well. The company constructed the Iwakuni plant in 1927 and the Mihara plant in 1932. Its production volume of rayon yarn amounted to 60 million pounds in 1937, far exceeding the volume produced by Toyo Rayon Ltd., its closest competitor. By 1937, although it ranked third in the production of rayon staple, short fibers which have to be spun to make yarn, it came first in total production of rayon yarn and rayon staple. Teikoku Jinzo Kenshi was the oldest and the largest rayon producer in Japan when the Sino-Japanese War broke out.

During World War II the company's rayon production capacity decreased significantly as a result of the compulsory mergers of enterprises by the government, five of which occurred after October 1941, and the removal and destruction of equipment, the aim of which was to utilize scrapped iron as raw materials for weapons. Moreover, Teikoku Jinzo Kenshi was forced to convert to production of fuel for airplanes at the end of the war. Production of rayon staple ceased at the Mihara plant in March 1945 and production of rayon staple at the Iwakuni plant in April 1945. By the end of the war, the company was producing neither rayon yarn nor rayon staple. Immediately after World War II, the company experienced shortages of raw materials and chemicals. It produced a variety of goods such as salt, the sweeteners saccharin and dulcin, goggles, shoe cream, cosmetics, buckets, and handcarts in order to support its employees, and earned tens of millions of yen in cash by disposing of poison gas at an army plant. However, its production of rayon increased rapidly after April 1947, when the GHQ agreed that Japan could return to a rayon production capacity of 150,000 tons per year. Teikoku Jinzo Kenshi's production volume increased rapidly; rayon yarn production rose from 2.026 million pounds in 1946 to 42.5 million pounds in 1955 and rayon staple from 1.3 million pounds to 37.75 million pounds during the same period. The company began to produce rayon yarn and rayon staple at the Iwakuni and Mihara plants, and constructed the Komatsu plant in 1949 and the Nagoya plant in 1951. Moreover, it earned large profits during the Korean War boom period. Its sales amounted to ¥8.1 billion, and profits before tax were ¥3.7 billion.

After World War II, however, Teikoku Jinzo Kenshi's position in the chemical fiber industry declined. Staple production in Japan rapidly increased and in 1953 its volume surpassed 1938 levels, its previous pre- and postwar peak, whereas filament production was slow to recover and failed to reach prewar peak levels. After the war, Teikoku Jinzo Kenshi ranked first in filament production but ranked between seventh and tenth in staple production. Moreover, it lagged behind other chemical-fiber companies in entering newly developing synthetic-fiber industries. Toyo Rayon began to produce nylon and Kurashiki Rayon--known as Kuraray after 1970-produced vinylon, a synthetic fiber made from poly-vinyl-alcohol, in the early 1950s. Toyo Rayon, Teikoku Jinzo Kenshi's rival, earned high profits by succeeding in nylon production. Teikoku Jinzo Kenshi staked its existence upon importing polyester technology from Imperial Chemical Industries Ltd. (ICI) of the United Kingdom. Shinzo Ohya, a former leader of the company now active in the political world, returned to become Teikoku Jinzo Kenshi's president in 1956. Teijin succeeded in importing polyester technology from ICI jointly with Toyo Rayon, and began to produce polyester fiber at the Matsuyama plant in 1958. Its polyester fiber division began to produce profits in the latter half of 1959, and by the latter half of 1960 contributed 82% of profits. Teikoku Jinzo Kenshi monopolized the market for polyester jointly with Toyo Rayon. It started a prize-contest for product brand names with Toyo Rayon, resulting in the name "Tetoron," which it advertised actively. Teikoku Jinzo Kenshi spent more on advertising than other companies, and in the early 1960s the company's ratio of advertisement cost to sales was higher than for any other chemical fiber producing company. Teikoku Jinzo Kenshi organized a production team in the Hokuriku district, where the largest consumers of polyester fiber were located, and assisted weavers both technically and financially. These were the main reasons for its success in the polyester business.

President Ohya developed aggressive strategies, backed by the company's good business record and the rapid growth of the Japanese economy. Teikoku Jinzo Kenshi entered other fields in the synthetic fiber industry, establishing Teijin Acrylic Ltd., which produced acrylic fiber, jointly with other two chemical companies and one wool company in 1959. Teikoku Jinzo Kenshi began to produce nylon at the Mihara plant in 1963. It thus became a general synthetic-fiber-producing company, and was renamed Teijin Ltd. in 1962. However, it withdrew from rayon staple production in 1967, from strengthened rayon yarn production in 1969, and from rayon yarn production in 1971, as they were no longer profitable. The content of Teijin's business changed significantly after 1958 when it began to produce polyester fiber. By the latter half of 1959, rayon accounted for less than half of total sales, and by the first half of 1960 synthetic fiber accounted for more than half of total sales. After that, synthetic fiber's share of sales increased rapidly to reach 75.1% in the latter half of 1973, of which polyester represented 56.6% and nylon 14.1%.

Teijin also moved upstream to the production of raw materials for synthetic fibers. In 1963 Teijin began to produce telephtalic acid, which was necessary for polyester fiber production. In 1964 it established Teijin Hercules Ltd., which produced dimethyl-telephtalate (DMT) jointly with Hercules Inc. in the United States and in 1968 established Teijin Petro Chemicals Ltd., which produced paraxylene and orthoxylene, raw materials of polyester. In 1966 it invested in Japan Soda Ltd. and participated in its management. Nisso Petro Chemical Ltd., Japan Soda's subsidiary, produced ethylene oxide and ethylene glycol. Teijin thus became able to supply its own intermediate and raw materials for polyester fiber production. In 1963 Teijin established Japan Lactam Ltd., which produced caprolactam, jointly with Sumitomo Chemicals and Kureha Chemicals.

Teijin also began an aggressive diversification strategy, establishing a Future Business Department in 1968 and setting up many subsidiary companies in the fields of pharmaceuticals, construction materials, foods, cosmetics, and leisure. It also established an Oil Development Department in 1970 and began to develop oil resources in Iran, Nigeria, and the Straits of Malacca. Its investment in and loans to related companies increased rapidly from ¥30.6 billion at the end of March 1968 to ¥169.1 billion at the end of March 1978. On the eve of the first oil crisis in 1973, oil development and future businesses constituted two of Teijin's three main pillars--the third was textiles, its traditional business.

Under Ohya's guidance, Teijin began active expansion abroad. In 1961 it established a joint venture with a local company in Sri Lanka and subsequently entered Formosa, Korea, Thailand, Vietnam, the Philippines, Brazil, and Australia. In 1973 its foreign subsidiaries consisted of 5 in textiles and yarn manufacturing and 14 in spinning, weaving, dyeing, and printing. Teijin planned to increase its overseas production of polyester textiles and yarn to more than three times the level of 1973, to exceed domestic production within five years. However, the plan was not realized.

After the first oil shock, Teijin's business performance deteriorated and its operating profits were in the red for the first time at the first half of 1977. President Ohya circulated a memorandum entitled "A State of Emergency" to all directors of departments. He ordered them to reduce manufacturing costs drastically, develop high value-added merchandise, improve non-profitable businesses, decrease administrative costs at headquarters, and develop new businesses in textiles-related fields. He emphasized the importance of adaptability if the company was to keep ahead in the 1980s. Teijin reduced its number of employees drastically, from 10,346 at the end of 1977 to 7,446 at the end of 1978, and thoroughly reexamined its related companies, including those overseas. Investment and loans in related companies decreased from ¥169 billion at the end of 1978 to ¥120 billion at the end of 1983, and its ratio to the amount of total assets decreased from 38.6% to 26.8% during this period. Teijin retreated from the oil development and polyester businesses in Spain and Brazil and from many other fields.

The liquidation of non-profitable businesses almost came to an end in 1982 and profits before tax increased from ¥11.8 billion in 1982 to ¥18.5-¥28.5 billion in 1983-1987 and to ¥31.9-¥37.6 billion in 1988-1990. In 1982 polyester continued to occupy the most important position in terms of sales. Polyester film was the most profitable item among chemicals, with various uses such as photograph films; magnetic tape for VTR, audio, and computer; and wrapping materials. Especially in the field of base film for magnetic tape, Teijin shared a monopoly with Toray. Its sales structure changed somewhat in 1990, and polyester's and nylon's share of sales decreased to 51.1% and 10.1% respectively, with pharmaceuticals accounting for 12.3%. Chemicals' share remained almost stable, accounting for 23.3% of sales. Teijin established Teijin Medicine Manufacturing Ltd. in 1978 as a 100%-owned subsidiary and amalgamated it in 1983. Gamma-globulin was the most successful product of its Medicine Manufacturing Department. Non-fiber products contributed more than half of Teijin's net profits as polyester film and pharmaceuticals were far more profitable than textiles.

According to Teijin's long-term management plan, launched in 1989, the company aims to raise annual sales to ¥500 billion (from ¥310 billion in 1988) and also to raise recurring profits to ¥55 billion (from ¥35.5 billion in 1988) within the coming five or ten years. As for its business fields, it plans to expand its chemicals, pharmaceuticals, and medical equipment divisions and its compound materials division, which combines new fibers with other materials such as metals for strengthening, as the three main pillars of its business besides textiles. Teijin also plans to invest ¥25 billion per year in plant and equipment and to develop its Medicine Department to enable it to compete with specialized pharmaceuticals companies and capable of ranking among the top ten companies in this industry. It will invest aggressively in the Iwakuni plant to establish facilities to produce pharmaceuticals from raw materials to finished products. Having started as a rayon manufacturing company and became a synthetic fiber manufacturing company, Teijin now aims to become a general chemical company focusing on high-technology textiles and compound chemical materials.

Principal Subsidiaries: P.T. Teijin Indonesia Fiber Corporation (65.8%); Teijin Kakoshi; Teijin Kasei (66%); Teijin Associa; Teijin Engineering; Teijin Shoji (94.7%); Teijin Memory Media; Sankyo Keori; Teijin Butsuryu; Kokka Sangyo (58.2%); Teijin Cordley; Teijin Wow; Teijin Finance; Teijin Shokusan; Teijin Reizo (73.9%); Union Tire Code (65%); Teijin System Technology; Teijin Sagamihara Film; Kure Kogyo; Kitasen; Teisan Seiyaku (95.6%).