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Toray Industries, Inc. Business Information, Profile, and History

rayon toyo nylon production

2-1, Nihonbashi-Marunouchi 2-chome
Chuo-ku
Tokyo 103-8666
Japan

Company Perspectives:

Toray strives to contribute to society through the creation of new value by innovative ideas, technologies, and products. Our mission is to provide new value to our customers through high-quality products and superior services, to provide our employees with opportunities for self-development in a challenging environment, to provide our shareholders with dependable and trustworthy management, and to act as a responsible corporate citizen to build a long-lasting beneficial partnership with the local communities in which we do business.

History of Toray Industries, Inc.

Toray Industries, Inc. operates as one of Japan's largest fiber producers. Through a network of over 200 subsidiaries and affiliates, the company manufactures fibers and textiles, plastics and chemicals, films and resins and circuit materials used in information technology-related products, housing and engineering products, and a host of various other products ranging from artificial kidneys and catheters to contact lenses. While the company has a presence in throughout Asia, Europe, and North and South America, operations in Japan account for the majority of Toray's sales.

Early History: 1920s

Toray began as a fiber manufacturer. In the first half of the 1920s, two large rayon manufacturing companies--Teikoku Jinzo Kenshi Ltd. (Teikoku Jinken) and Asahi Kenshoku Ltd.--and two smaller companies occupied almost half of the Japanese rayon market, with the other half filled by imported products, mostly from Britain. Courtaulds Limited was the largest British supplier, and the Japanese trading house Mitsui Bussan Ltd. had been an exclusive agent for Courtaulds since 1919.

Rayon yarn was a substitute for raw silk, one of the most important goods Mitsui Bussan handled at that time. Mitsui Bussan was very interested in the future potential of rayon yarn and became aware of Courtaulds's good business record. In addition, the Japanese government was planning a tariff revision, and a rise in the import tariff for rayon yarn was anticipated. In 1923, Mitsui Bussan began to examine the world rayon industry with a view to importing technology, but attempts to contract licensing with Courtaulds and Du Pont were unsuccessful. In 1925, a director of Mitsui Bussan in London reported to headquarters that Mitsui Bussan should buy equipment from a rayon machine manufacturer that would send chemical and machine engineers to Japan. Mitsui Bussan decided to adopt this method of importing technology and established Toyo Rayon Company Ltd. (Toyo Rayon) in 1926. A wholly owned subsidiary, its capital amounted to ¥10 million. In August 1927, Toyo Rayon began to produce rayon yarn at its Shiga plant. Mitsui Bussan asked the German company Oskar Kohorn & Company to establish the plant, teach Toyo Rayon employees to operate the equipment, and send engineers and skilled workers to Mitsui Bussan. Moreover, Mitsui Bussan sent a chemical engineer, who had carried out research on viscose at the University of Tokyo and had joined Mitsui Bussan, to Oskar Kohorn & Co. in order to learn the technology on the shop floor.

Toyo Rayon made profits in the first half of 1928 but retained all the profit inside the company until the latter half of 1931. Toyo Rayon began to pay dividends in the first half of 1932 and from 1933 to 1935 its profits grew rapidly. The profit to sales ratio amounted to about 20 percent during this period. Toyo Rayon thus became one of Japan's largest rayon manufacturing companies, next to Teikoku Jinken, by the outbreak of the Sino-Japanese War.

Wartime Production

During World War II, Toyo Rayon's rayon production capacity decreased significantly as a result of mergers in the rayon industry, which occurred five times at the insistence of the government after October 1941, and as a result of the removal and destruction of equipment, to allow scrapped iron to be used as raw material for weapons. Toyo Rayon's rayon filament production decreased from a peak of 18,200 tons in 1937 to only 345 tons in 1945, and its rayon staple production from a peak of 12,422 tons in 1941 to 1,840 tons in 1945. After 1943, the company was forced to convert to wartime production. Part of the Shiga plant produced torpedoes and torpedo heads for the Japanese Navy, and part of the Aichi plant produced tanks for airplanes. Toyo Rayon established Sanyo Yushi (Oils and Fats) Ltd. as a joint venture with Mitsui Bussan and produced a high-grade lubricating oil for airplanes. It bought the Rakuto plant from Kyoto Sarashi Senko, which bleached and dyed textiles, mainly silks, and named it Yamashina Denki Kojo (Electric Machinery Plant). This plant produced electric and communication machinery for the Japanese Navy.

Nevertheless, Toyo Rayon also developed a new product during this period. Asahiko Karashima, a president of Toyo Rayon, realized the importance of innovation in the industry and thought that Toyo Rayon should enter the field of new textiles. When Du Pont succeeded in the development of nylon 66 in 1938, he ordered branches of Mitsui Bussan in the United States to collect information on nylon and to send it, together with samples of nylon stockings, to Toyo Rayon's research institute in Japan. In 1939, Toyo Rayon succeeded in analyzing and synthesizing nylon 66 and in spinning it into yarn in both dry and molten form. It also succeeded in developing nylon 6 independently and in spinning multifilament yarn from nylon in 1941. Toyo Rayon established experimental equipment for industrial use that produced ten kilograms of nylon per day by the end of 1942 and sold its product, named Amilan, as fishing yarn. This plant too was converted to wartime production. Toyo Rayon produced nylon chips in the plant and supplied them to the navy as raw material for electrical insulation in airplanes.

After World War II, war production stopped and employees who had been enlisted in the army returned to the company. Materials and chemicals for rayon production were in short supply, however, and restoration of equipment was forbidden immediately after the war by the Allied powers. Toyo Rayon therefore had to undertake conversion work of wartime production facilities for civilian industries other than the rayon industry. It conducted many kinds of business, including manufacturing and repairing railroad passenger and freight wagons, and pot motors and spinning pumps for rayon manufacture. It also produced penicillin, and made ice, salt, and fertilizers and insecticides, utilizing byproducts of nylon production for the latter.

Toyo Rayon's rayon production increased rapidly after the General Headquarters of the Allied Powers permitted Japan to raise its rayon production capacity to 150,000 tons per year on April 4, 1947. Its production volume of rayon yarn increased rapidly from 570 tons in 1946 to 17,305 tons in 1957, and its production of rayon staple, fibers which are spun to make yarn, rose from 1,159 tons in 1946 to 28,560 tons in 1956. The level of rayon yarn production in 1957, the company's postwar peak, was a little lower than the peak level before and during the war, 18,200 tons, while the production level for rayon staple in 1953 already surpassed its 1942 wartime peak of 12,422 tons. The rayon staple production level in 1956, a postwar peak, was more than twice as high as the 1942 level. Profitability was high during this period of recovery, particularly during the Korean War boom period. These profits enabled Toyo Rayon to begin nylon production.

Partnering With Du Pont: 1951

Toyo Rayon planned to change from equipment that produced 1.05 tons of nylon resin, a raw material of rayon yarn, and 0.06 tons of nylon filament for fishing line per day, to equipment which produced one ton of nylon filament per day in the Shiga plant in June 1949. It established a new plan to construct both equipment which produced five tons of nylon filament per day and equipment which produced caprolactam, a raw material of nylon, corresponding to the volume of nylon in October 1949. This plan was launched in response to the government's promotion of a synthetic fiber industry in Japan, and came into effect in 1949. Needless to say, Toyo Rayon's experience of nylon production during World War II enabled it to respond actively to government policy. It was, however, necessary for Toyo Rayon to tie up with Du Pont, which had a nylon patent network all over the world. Shigeki Tashiro, who had become the president of Toyo Rayon in 1945 but had retired because of the Allied powers' purging of leading Japanese industrialists and had later negotiated with the Allied occupation authorities as a spokesman for the Japanese chemical fiber industry, pointed out to Toyo Rayon's management that Toyo Rayon risked accusations of infringing Du Pont's patent rights if the Japanese company exported nylon products in the future. He advised Toyo Rayon to tie up with Du Pont in order to avoid such a possibility. Toyo Rayon's production method differed from Du Pont's as the Allies knew, but Tashiro's fears were based on the fact that Du Pont had a worldwide patent network not only for the nylon production method but for nylon and nylon product manufacturing equipment. In autumn 1948, Toyo Rayon approached a representative of Du Pont's Far East Section to inquire about the possibility of importing nylon production technology, but received no response.

Toyo Rayon had to import the necessary technology in time for the implementation of a full-scale industrial production plan for nylon in the latter half of 1949. Tashiro therefore asked a manager of Mitsui Bussan's New York branch, where Tashiro himself had once worked, to contact Du Pont. This time, Du Pont replied, demanding that Toyo Rayon pay 3 percent of nylon sales as a royalty for use of the patent for 15 years, with $3 million payable in advance. This sum was equivalent to ¥108 billion, which far exceeded Toyo Rayon's capital, ¥759 million yen at that time. Tashiro had become chairman of Toyo Rayon's board of directors in March 1950 and was very much surprised by Du Pont's terms at first, but calculated that if the advance payment became ¥500 million yen per year, Toyo Rayon could pay it in two years without great difficulty. He succeeded in persuading Du Pont to agree to these conditions. The technology import contract for nylon was formally signed in June 1951.

At first Toyo Rayon experienced difficulties in its nylon business, even after it had overcome the problems of the nylon production process, as it had no experience in spinning, weaving, knitting, dyeing, or printing nylon. However, these problems were largely resolved by 1953. Toyo Rayon monopolized the nylon market until Nihon Rayon began full operation of its nylon production facilities in December 1956. Even after that, the Japanese nylon industry consisted of only two companies until 1963, when a few latecomers entered the industry. At first, nylon was mainly used for fishing nets, but its uses were extended to women's blouses, knitted underwear, seamless stockings, and tire-cord for use in car tires. In 1959, Toyo Rayon organized spinners, knitters, weavers, dyers, and printers into production teams, and also organized manufacturers of secondary products, trading companies, and wholesalers into sales teams, assisting them technically and financially. In 1951, it organized retailers who stocked clothing made from Toyo Rayon's nylon into the Toray Circle, assisting their research in shop management and educating employees about Toray products, advertisement of new merchandise, and the display of goods. Toyo Rayon's nylon business was highly profitable, and its profits exceeded the combined profits of the other six Japanese chemical fiber manufacturing companies between the first half of 1958 and the first half of 1962--at that time the company adopted the half-yearly accounting system.

Polyester and Synthetic Fibers: Late 1950s-Early 1960s

In January 1957, Toyo Rayon imported polyester production technology from the United Kingdom's Imperial Chemical Industries (ICI) together with rival company Teikoku Jinken, a pioneer in the Japanese chemical fiber industry. ICI sold Toyo Rayon and Teikoku Jinken the exclusive rights to use its patent in Japan, in return for £1.15 million payable in advance by installments. Until September 16, 1968, 5.25 percent of sales was payable for production less than ten million pounds per year and 3 percent of sales for production that surpassed ten million pounds per year in the case of products other than photograph films. Toyo Rayon and Teikoku Jinken monopolized the polyester market until 1964, when several newcomers entered the market. Toyo Rayon started a prize-contest for product brand names jointly with Teikoku Jinken, which resulted in the name of "Tetoron" for polyester fiber. The two companies advertised Tetoron jointly. Previous experience in dealing with synthetic fibers and in joint technology import and successful joint marketing with Teikoku Jinken enabled Toyo Rayon to minimize difficulties in starting up its Tetoron business. Tetoron made a significant contribution to Toyo Rayon's profits during this period.

In September 1958, Toyo Rayon established a pilot plant for acrylic fibers at its central research institute and constructed equipment which produced three tons of acrylic fibers per day at its Nagoya plant. In 1954, it constructed equipment which produced 15 tons of acrylic fibers at the Ehime plant. Acrylic fibers found a market in sweaters, undershirts, stockings, and fabrics. Toyo Rayon's acrylic fiber production was based on its own technology. In the middle of the 1960s, the company grew to become the third largest general synthetic fiber manufacturer in the world, next to Du Pont and Monsanto Chemical Co. in the United States.

Rayon was the most important product in terms of sales up to 1954, when it contributed 54.7 percent and nylon contributed 45.2 percent. In 1955, nylon sales surpassed those of rayon, contributing 60.0 percent while rayon contributed 40 percent. In 1960, Tetoron sales surpassed rayon sales when nylon contributed 57.3 percent of sales, Tetoron 24.3 percent, and rayon 18.5 percent. Tetoron sales surpassed nylon and became Toyo Rayon's largest-selling product in 1965, when Tetoron's share was 43.8 percent, nylon's 43.6 percent, and rayon's only 2.3 percent, with the share of Toraylon (an acrylic fiber) at 4.3 percent, plastics at 4.1 percent, and Piren (a polypropylene textile) at 2.0 percent.

In 1973, when the first oil crisis occurred, Toray's sales breakdown was as follows: Tetoron 39.5 percent, nylon 27.9 percent, plastics 10.9 percent, Toraylon 8.5 percent, rayon 0.9 percent, and others 2.4 percent. In the first half of 1973, Toray still ranked first in terms of profit after tax among the seven Japanese chemical fiber manufacturing companies, although the difference in profits diminished between Toray and Teijin (as Teikoku Jinken became known in 1962), which ranked second. Tetoron sales grew faster than nylon, and competition, especially in the nylon and Tetoron businesses, intensified after latecomers entered these industries aggressively. These factors caused Toray's comparative decline in the synthetic fiber industry, especially in comparison with Teijin.

Making Changes: Mid-1960s to the 1990s

Toray made three important changes in the 1960s and 1970s. Firstly, it ceased rayon production, withdrawing from rayon yarn production in 1963 and decreasing the scale of its rayon staple production from 102.6 tons to 40 tons per day in 1968. Rayon staple was used for mixed spinning with Tetoron. Toray ceased rayon staple production in May 1975.

Secondly, Toyo Rayon resumed production of raw materials for synthetic fibers. In 1969, it established the Kawasaki plant, which produced 135,000 tons of cyclohexane (a raw material for nylon), 73,000 tons of paraxylene, and 100,000 tons of orthoxylene (the raw materials for polyester) per year. It cooperated with Nihon Sekiyu Kagaku (Japan Petro-Chemical Ltd.), which produced BTX (benzene, toluene, and xylene) from naphtha and supplied it to Toyo Rayon. Toyo Rayon in turn produced raw materials for nylon and Tetoron from BTX. In 1971, Toray established the Tokai branch factory of the Nagoya plant, which produced 125 tons of lactam and 50 tons of terephthalic acid (the raw materials for nylon and Tetoron) per day. In 1970, it established a joint venture with Mitsui Toatsu Kagaku Ltd., which produced acrylonitrile. Toray thus established a system whereby it could supply its own raw materials for the three major synthetic fibers it produced and moved toward becoming a general chemical manufacturing company.

Thirdly, it developed new high value-added products and diversified into the non-textile field. In the former category, it established in April 1971 a department to explore possible ventures outside the textiles industry and successfully marketed an artificial suede named Ecsaine and a carbon fiber named Torayca in 1970 and 1971 respectively. In the nontextiles field, Toray established a plastics department, and nylon resin, polyester film, ABS resin, and polypropylene film sold well. In particular, Toray's polyester film became popular for use in magnetic tape for tape recorders, chips for Fuji Shashin Film Ltd. (photographic film), and wrapping materials. In January 1970, Toyo Rayon renamed itself Toray Industries, Inc. as a result of these changes.

After the 1973 oil crisis, Toray's business performance deteriorated and its operating profits fell into the red for the second half of 1974 and at its financial year end in 1975 and 1977. Toray endeavored to rationalize production, reducing its work force from 19,108 in 1975 to 10,000 after 1987. It continued to develop and sell new high value-added products outside the textile fields. The ratio of non-textiles to total sales increased from 22.4 percent in 1975 to 44.7 percent in 1990. Among nontextiles, the ratio of chemicals, including plastics, increased from 20 percent to 34.1 percent and the ratio of new businesses and others not elsewhere classified, including carbon fiber, increased from 2.4 percent to 10.6 percent during the same period. It also reexamined investment in and loans to related companies, and the ratio of investment and loans to total assets decreased from 26.1 percent in 1977 to around 20 percent after 1986. As a result of these efforts, Toray's post-tax profits to sales ratio returned to almost the same level as during Japan's rapid economic growth period from 1966 to 1974.

In 1988, Toray began expanding its fibers, textiles, and plastics operations overseas. By the early 1990s, Toray's global network included nearly 60 overseas subsidiaries and affiliates, notably in Southeast Asia, where its first overseas fiber production facilities were established, and in the United States, where Toray Plastics (America), Inc. (TPA) produced polyester and polypropylene films. In France, Toray received the active support of the French government when it formed Société des Fibres de Carbone S.A. for the transfer of PAN-based carbon fiber technology to France. In April 1991, Toray formulated a long-term business plan: to increase its consolidated sales to ¥2 trillion by the year 2000 and to become a general chemicals group.

A Period of Diversification and Expansion: 1990s

As such, the company spent the majority of the 1990s diversifying and expanding its operations. In 1992, it received approval for the Dorner prostacyclin derivative drug as well as Feron, a drug used to detect Hepatitis C. The company also started to manufacture and market ABS resin at subsidiary Toray Plastics in Malaysia. In 1993, the firm established a polyester weaving and dyeing plant in the United Kingdom.

Toray's expansion continued in 1994 with the creation of subsidiaries in both China and Indonesia. That year, the company gained access to the patents for waterless offset printing plates. After the purchasing these patents from 3M, Toray was positioned as the sole supplier of such plates, which were gaining popularity, in North America.

The company's presence in Europe was strengthened in 1996 when Toray acquired the Rhone Poulenc Group's film manufacturing and marketing businesses, which were folded into Toray Plastics Europe S.A. That year the company also created KTP Industries, a Korean subsidiary. In 1997, Toray created subsidiaries in China, the United States, and the Czech Republic.

In order to bolster its U.S. textiles business, Toray acquired the Ultrasuede brand name from Springs Industries Inc. in 1998. The $15 million deal, which created Toray Ultrasuede America Inc., allowed Toray to market the brand in North, Central, and South America. These regions were key in the firm's expansion plans.

A New Plan for the New Century

Toray entered the new century on steady ground. During 2000, profits at the company's textile, plastics, and chemicals divisions grew at a steady clip. Overall, the firm reported operating profits of $415.3 million, a 58 percent increase over the previous year's results. In 2001, the firm partnered with Dow Corning Corp. Under the terms of the deal, Dow would market Toray's photosensitive polymide coatings to the North American semiconductor market. Toray also acquired engineering plastics compounding concern Nippisun Indiana Corp. in a move that strengthened the company's ties to the North American automotive industry.

During 2001, however, Toray's business environment weakened as global economies slowed, demand fell, and competition increased. The firm was forced to make some changes to its operations as both sales and net income faltered. In April 2002, the firm launched "Project New Toray 21," a two-year restructuring program developed to restore both profitability and competitiveness. Led by chairman and CEO Katsunosuke Maeda and president and COO Sadayuki Sakakibara, the plan included projects aimed at divesting poor performing businesses, consolidating manufacturing operations in Japan, and expanding production in China. The program also included new marketing and customer services initiatives as well as labor-related cost-cutting measures.

Toray eyed the information and telecommunications, life sciences, and environmental industries as key to future growth. By developing key patents and brands in these areas and by forming global alliances, the company felt confident that its efforts would leave it well positioned for success. While Toray would indeed face challenges along the way, its strong history and respected reputation would no doubt carry it well into the future.

Principal Subsidiaries: Toray Coatex Co. Ltd.; Marusa Co. Ltd.; Toray Techno Co. Ltd.; Toray Engineering Co. Ltd.; Toray Research Center; Toray International Inc.; Toray Group USA; Toray Ultrasuede (America) Inc.; Toray Plastics (America) Inc.; Toray Textiles Central Europe s.r.o. (Czech Republic); Toray Plastics Europe S.A. (France); Toray Deutschland GmbH (Germany); Taltex Ltd. (China); Société des Fibres de Carbone S.A. (France).

Principal Competitors: Kuraray Co. Ltd.; Teijin Limited; Toyobo Co. Ltd.

Chronology

  • Key Dates:
  • 1926: Toyo Rayon Company Ltd. is established.
  • 1927: The firm begins to produce rayon yarn at its Shiga plant.
  • 1939: The company succeeds in analyzing and synthesizing nylon 66.
  • 1943: The company is forced to convert to wartime production.
  • 1951: Toyo Rayon signs a technology import contract for nylon with Du Pont.
  • 1957: The firm, along with competitor Teikoku Jinken, import polyester production technology from Imperial Chemical Industries.
  • 1963: The company stops producing rayon yarn.
  • 1970: The firm renames itself Toray Industries Inc. as a result of restructuring changes.
  • 1988: Toray begins international expansion.
  • 1998: Toray Ultrasuede Inc. is established in the United States.
  • 2002: The company launches its "Project New Toray 21" program.
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