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Fujitsu Limited

Fujitsu Limited

6-1, Marunouchi 1-chôme
Chiyoda-ku
Tokyo 100-8211
Japan
Telephone: (03) 3216-3211
Fax: (03) 3216-9365
Web site: http://www.fujitsu.co.jp

Public Company
Incorporated:
1935
Employees: 187,399
Sales: ¥5.26 trillion ($44.23 billion) (2001)
Stock Exchanges: Tokyo Osaka Nagoya Frankfurt London Swiss
Ticker Symbol: FJTSY (OTC)
NAIC: 334111 Electronic Computer Manufacturing; 334112 Computer Storage Device Manufacturing; 334119 Other Computer Peripheral Equipment Manufacturing; 334210 Telephone Apparatus Manufacturing; 334220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; 334290 Other Communications Equipment Manufacturing; 334413 Semiconductor and Related Device Manufacturing; 514191 On-Line Information Services; 541511 Custom Computer Programming Services; 541512 Computer Systems Design Services; 541513 Computer Facilities Management Services; 541519 Other Computer Related Services; 541610 Management Consulting Services; 511210 Software Publishers

Fujitsu Limited is one of the worlds leading makers of computers, semiconductors, and telecommunications equipment and is considered one of Japans so go denki, or general electric companies, a group that is typically said to also include Hitachi, Ltd.; Mitsubishi Electric Corporation; NEC Corporation; and Toshiba Corporation. Historically, Fujitsu was best known as the worlds number two maker of mainframe computers, behind IBM, but Fujitsu exited from that market at the turn of the millennium to focus its hardware efforts on Unix-based servers, personal computers (vying with NEC for the top spot in Japan), and peripherals. The Fujitsu of the early 21st century, however, was deemphasizing its hardware roots, billing itself as an Internet-centered company, and generating increasing amounts of revenues from services and software. The latter, which included such areas as system integration services, network services, Internet service (including Japans leading ISP, Nifty Serve), and system maintenance and monitoring, accounted for 37 percent of overall revenue in fiscal 2001. Hardware generated 27 percent of sales, telecommunications equipment, 15 percent, semiconductors, 14 percent, and other operations, 7 percent.

Early History

Fujitsu was created on June 20, 1935, as the manufacturing subsidiary of Fuji Electric Limited and charged with continuing the parent companys production of telephones and automatic exchange equipment. Fuji Electric, itself a joint venture of Japans Furukawa Electric and the German industrial conglomerate Siemens, was part of Japans attempt to overcome its late start in modern telecommunications. Spurred by Japans expanding military economy, Fujitsu quickly branched off into the production of carrier transmission equipment in 1937 and radio communication two years later. Yet the countrys telephone system remained archaic and incomplete, with German and British systems in use that were not fully compatible. World War II ruined a large part of this primitive system, destroying some 500,000 connections out of a total of 1.1 million, and leaving the country in a state of what might be called communication chaos. At the insistence of the occupying U.S. forces, Japans Ministry of Communications was reorganized and nearly became a privately owned corporation that would have simply adopted existing U.S. technology to rebuild the countrys telephone grid. A coalition led by Eisaku Sato, however, persuaded the government to instead form a new public utility, Nippon Telephone and Telegraph (NTT). Created in 1952, NTT soon became a leading sponsor and purchaser of advanced electronic research, and it continued to be one of Fujitsus key customers.

The link with NTT may well have been Fujitsus greatest asset, but Fujitsu was only one of a series of increasingly determined government partners for the countrys young computer industry. Fujitsu first became interested in computers in the early 1950s, when Western governments and large corporations began making extensive use of them for time-consuming calculations. After a number of years of experimentation Fujitsu succeeded in marketing Japans first commercial computer, the FACOM 100, in 1954.

This was a start, but the Japanese computer business was still in its infancy when IBM brought out the first transistorized computer in 1959. So great was the shock of this quantum leap in design that the Japanese government realized it would have to play a far more vigorous role if the country was not to fall permanently behind the United States. The government formulated a comprehensive plan that included restrictions on the number and kind of foreign computers imported, low-cost loans and other subsidies to native manufacturers, and the overall management of national production to avoid needless competition while encouraging technological innovation. Of equal importance, in 1961 the Japanese government negotiated with IBM for the right to license critical patents, in exchange allowing the U.S. giant to form IBM Japan and begin local production.

Computer Developments: 1960s

Patents in hand, seven Japanese companies entered the computer race. All of them except Fujitsu quickly formed alliances with U.S. companies to further their research; Fujitsu, refused by IBM in a similar offer, remained the only pure, or junketsu, Japanese computer firm, committed to the development of its own technological expertise. The other Japanese companies were all much larger than Fujitsu and devoted only a fraction of their energy to computers, while Fujitsu soon devoted itself to communications and computers.

Able to build on its already substantial electronics experience Fujitsu was directed by the government to concentrate on the development of mainframes and integrated circuitry, and in late 1962 it was given the specific goal of developing a competitor to IBMs new 1401 transistorized computer. The government stalled IBMs plans for local production and enlisted Hitachi, NEC, and Fujitsu in what it called project FONTAC, the first in what would become a series of government-industry drives. From the perspective of the marketplace, FONTAC was a complete failurebefore it got off the ground IBM had launched its revolutionary 360 series, pushing the Japanese further behind than when they startedbut as a first try at a coordinated national computer program, FONTAC proved to be extremely important. Fujitsu and the other Japanese manufacturers could afford poor initial performance, knowing that funds were available for further research and development. In particular, the Japanese government had by this time formed the Japanese Electronic Computer Company (JECC), a quasi-private corporation owned by the seven computer makers but given unlimited low-interest government loans with which to buy and then rent out newly produced computers. In effect, this allowed Fujitsu and the others to receive full payment for their wares immediately, thus greatly increasing corporate cash flow and making possible the huge outlays for research and development.

The result of JECCs largesse was immediate: in the space of a single year1961 to 1962Japanese computer sales increased by 203 percent. In 1965 Fujitsu, relying largely on technology developed as part of the FONTAC project, brought out the most advanced domestic computer yet built, the FACOM 230. The company had quickly become JECCs leading manufacturer, supplying approximately 25 percent of all computers purchased by the firm during the 1960s. In addition, Fujitsu had continued its substantial work for NTT, with over half of its telecommunication products going to the phone company by the end of the decade. NTT remained a critically important governmental agency for Fujitsu and the computer industry, routinely shouldering research-and-development costs and paying high prices to ensure that its suppliers remained profitable. NTT also sponsored a super-high-performance computer project in 1968, similar in design and scope to one begun the previous year by the Ministry for Trade and Industry (MITI), to develop a new computer for its complex telecommunications needs. Both of these ambitious programs were paid for by rival government ministries.

Development of the M Series in the 1970s

Despite this concerted effort, however, by 1970 the Japanese were suffering from IBMs recent introduction of its 370 line. Worse yet, under international pressure the Japanese government had agreed to liberalize its import policy by 1975, giving the local computer industry a scant five years in which to become truly competitive. MITI responded by making computer prowess a national goal, greatly increasing subsidies, and reorganizing the six remaining companies into three groups of cooperative pairs. Fujitsu, as the leading mainframe maker, was paired with its arch-rival Hitachi and given the task of matching IBMs 370 line with a quartet of its own heavy-duty computers, to be called the M series.

Company Perspectives:

The rapid expansion of the Internet is dramatically changing individual lifestyles and the conduct of business throughout the world, presenting tremendous new challenges and opportunities. We are determined to help our customers succeed in this dynamic new era by focusing squarely on their needs, and by leveraging our technological strengths, highly reliable products and services, and global expertise in systems and services to deliver solutions that unleash the infinite possibilities of the Internet .

The need to build IBM-compatible machines led Fujitsu to an important decision. In 1972 the company invested a small but vital sum of money in a new venture started by Gene Amdahl, a former IBM engineer who had been largely responsible for the design of its 360 series computers. Amdahl Corporation had been formed with the express intent of building a cheaper, more efficient version of IBMs 370 line, which made a joint venture with Fujitsu highly advantageous for both partners. With its strong government support, Fujitsu had access to the capital Amdahl badly needed, while the U.S. engineer was a valuable source of information about IBM operating systems. Fujitsu and Amdahl persevered in what became a most profitable sharing of technology and capital.

A key factor in the Fujitsu-Amdahl deal was the Japanese companys confidence that it could rely on NTT to pay top dollar for whatever computer evolved from the new venture. In this, as in many other situations, NTT served as a kind of guaranteed market for Fujitsu, which in turn was well on its way to becoming a world leader in telecommunication technology and hence a more valuable supplier to NTT. The Fujitsu-Hitachi M series of high-speed computers emerged in the late 1970s. With the M series, the Japanese had achieved a rough parity with the IBM systems. Fujitsu had become one of IBMs very few real competitors in the area of general purpose mainframe computers; in 1979 Fujitsu took a narrow lead over IBM in Japanese computer sales that held through the mid-1990s.

New Initiatives of the 1980s

After the watershed events of the 1970s, Fujitsu in the 1980s pushed ahead with an impressive array of projects in each of its three main marketing areas. In computers, which generated 60 to 70 percent of overall corporate revenue, Fujitsu continued the success of its M series while branching out into minicomputers, workstations, and personal computers. The company spent much of the 1980s in a legal dispute with IBM over the latters charge that Fujitsu had improperly copied IBMs software. An arbitrator decided in 1988 that, after $833 million in payments to IBM, Fujitsu could continue to buy access to IBM software for ten years at a cost of at least $25 million a year. The agreement was meant as a spur to further mainframe competition. After introducing the first Japanese supercomputer in 1982, Fujitsu became a leading manufacturer of supercomputers, with some 80 such units installed by the end of the 1980s. Though easily the leading mainframe maker in Japan, Fujitsu had little success exporting its productswith only 22 percent of corporate sales made overseas, Fujitsu remained overly dependent on its Japanese business. In particular, the company was unable to break into the U.S. market, where, in addition to the obvious presence of IBM, its mainframe bias was seen as somewhat outdated. The trend in large computer systems at the time was toward greater distribution of processing power, aided by individually tailored software applicationstwo areas in which Fujitsu was notably weak.

Fujitsu remained strong in telecommunications, however, continuing its close relationship with NTT as well as with the newly emerging New Common Carriers. In light of its origin in the telecommunication field, it was not surprising that Fujitsu became a world leader in the development of Integrated Services Digital Network (ISDN), a convergence of data processing and telecommunications aiming to carry voice, image, data, and text all on one system. Fujitsu was also active in other improvements in telecommunications such as COINS (corporate information network systems), PBXs (private branch exchanges), and digital switching systems. The company also provided important terminal and branching equipment for the Trans-Pacific Cable #3, the Pacific Oceans first optical submarine cable.

Fujitsu maintained a strong presence in its third product area as well, electronic devices. In 1987 the firm was prevented by the U.S. government from acquiring Fairchild Camera, a leading U.S. manufacturer of memory chips, but it still managed to sell about $2.5 billion worth of chips annually. The very fact that Fujitsu was barred from purchasing Fairchild was a testament to the companys strength in semiconductors as well as computers. In conjunction with the Japanese government and other Japanese computer firms, Fujitsu continued to refine its chip technology in anticipation of the arrival of the fifth generation of computers, proposed machines that would be able to write their own software and in some meaningful sense think.

Partnering and Restructuring in the Early 1990s

In the end, however, Fujitsus 1980s activities proved unable to carry a healthy firm into the 1990s. Observers noted (in hindsight) that the company had played a mainly follow-the-leader (IBM) strategy which emphasized mainframe computersthis began to catch up with Fujitsu in the early 1990s as the shift to networked systems and client-server systems accelerated, cutting the market for mainframes dramatically. Other initiatives undertaken in the 1980s to great fanfare proved less important long-term than little noticed projects; in telecommunications, for example, ISDN was still being touted as the system of the future as late as 1996, while Fujitsus Nifty Serve online service, which debuted in 1986, was seen as the centerpiece of the companys telecommunications operation in the mid-1990s because of the emergence of the Internet (Nifty-Serve had about 1.6 million subscribers in Japan in 1996) .

Key Dates:

1935:
Fujitsu is created as a telecommunications manufacturing subsidiary of Fuji Electric.
1954:
Fujitsu successfully markets Japans first commercial computer, the FACOM 100.
1965:
Company introduces the FACOM 230.
1972:
Fujitsu invests in Amdahl Corporation, a new venture formed to build IBM-compatible mainframes.
Late 1970s:
The M series of high-speed computers is introduced through a joint effort of Fujitsu and Hitachi.
1982:
Fujitsu introduces the first Japanese supercomputer.
1990:
Company purchases an 80 percent stake in International Computers Ltd. (ICL), the U.K.s leading mainframe maker.
1997:
Fujitsu spends $878 million to take full control of Amdahl.
1998:
Naoyuki Akikusa becomes company president and places increasing emphasis on software and services, adopting Everything on the Internet as the company slogan.
2000:
Amdahl announces that it will exit from the mainframe market to focus on software, services, and consulting.
2001:
Major restructuring involving a ¥300 billion ($2.43 billion) charge and job cuts totaling 16,400 jobs is announced.

The year 1990, then, became a year of transition for Fujitsu upon the appointment of Tadashi Sekizawa, a telecommunications engineer, as president. Sekizawa wanted Fujitsu to be more aggressive in its pursuit of foreign markets (80 percent of revenue in 1989 came from Japan), to become more market-driven in general, and to lessen the stifling bureaucracy that impeded product development.

To bolster the firm internationally, Sekizawa continued to seek non-Japanese partners for growth, wishing to utilize local experts knowledgeable about local markets. Already having a partner in the United States through its 43 percent stake in Amdahl, Fujitsu gained a major European partner in July 1990 when it spent £700 million ($1.3 billion) for an 80 percent stake in International Computers Ltd. (ICL), Britains largest and most important mainframe maker. Fujitsu and ICLwhich had become a subsidiary of STC in 1984had already collaborated on several projects, beginning in 1981. Fujitsus European operations were further bolstered in 1991 when ICL acquired Nokias data systems group, which was the largest computer company in Scandinavia. The U.S. market was further targeted as well with a $40 million investment in HaL Computer Systems, Inc., a start-up firm aiming to develop UNIX systems, UNIX being an increasingly popular operating system.

Unfortunately for Fujitsu, the Japanese economic bubble burst in 1991 just as the company was beginning to implement Sekizawas program. As a result, profits fell 85.2 percent from ¥82.67 billion in fiscal 1990 to ¥12.21 billion in fiscal 1991; the following two years, Fujitsu posted losses¥32.6 billion in fiscal 1992 and ¥37.67 billion in fiscal 1993. Looming over these figures was the downside of the companys huge investments of the 1980sa $12.4 billion debt by 1992.

The recession precluded Fujitsu from making further international moves in 1991, and capital spending was slashed one-third that year. Strategically, however, research and development spending was not cut. Since the Japanese culture prevented companies in Fujitsus position from making large workforce reductions to cut costs, Sekizawa dramatically cut the number of new hires. Meanwhile, to lessen its dependence on mainframe sales and strengthen its PC area, Sekizawa in 1992 established a cross-functional Personal Systems Business Group with the aim of speeding up product development. Also intended to improve product development speed was a restructuring that created a flatter organizational structure and lessened corporate bureaucracy.

Fujitsus huge debt ruled out any major investments to create new products, so the company turned to partnerships to an even greater degree as the decade continued. The deals included: developing a next generation of less expensive mainframes with Siemens; establishing a joint venture with Advanced Micro Devices, Inc. called Fujitsu AMD Semiconductor Limited to produce flash memory; creating multimedia technology with Sharp Corp.; developing microprocessors for Sun workstations with Sun Microsystems; and relying on Computer Associates to market Jasmine software in the United States.

Mid-1990s into the 21st Century: Moving Toward an Emphasis on Software and Services

Clearly, Fujitsu in the mid-1990s was juggling a number of initiatives as well as dealing with weakening mainframe sales and a difficult, highly competitive semiconductor market. Encouragingly, revenues rose sharply in fiscal 1994 (¥3.26 trillion) and 1995 (¥3.76 trillion), while the company also returned to profitability, posting net income of ¥45.02 billion in 1994 and ¥63.11 billion in 1995. Part of the sales increase in 1995 was attributable to a huge increase in sales of Fujitsu personal computers. During the year, by offering its models at extremely low pricespossibly at a lossthe company more than doubled its share of the Japanese PC market to 18.4 percent, placing it second to NEC; overall sales of PCs in Japan increased an astounding 70 percent that year as Japanese companies began making the transition from mainframes to networked PCs. Fujitsu also made a strong push to expand its share of the overseas PC market, aiming to become the number five computer maker by 2000. According to Sekizawa, the renewed PC drive had an ancillary benefit of providing Fujitsu with opportunities to develop a much stronger position in software and services connected with computer networks and with the broaderand emergingInternet.

The heightened activity in the area of software and services became increasingly important in the late 1990s and into the 21st century as all of the Japanese electronics firms saw their profit margins on computers, semiconductors, and telecommunications gear decline steadily. Nowhere was the shift from hardware to software and services more apparent than in Fujitsus floundering mainframe affiliate Amdahl. By mid-1997, Amdahl had posted six consecutive quarters in the red and appeared on the verge of bankruptcy. In September of that year, Fujitsu stepped in and purchased the 57 percent of Amdahl it did not already own for $878 million. The cash infusion saved Amdahl from bankruptcy, and the company began to place increasing emphasis on its software, services, and consulting operations. Similarly, ICL had also been transformed into a leading U.K. information technology services company by the time Fujitsu took full control of it in 1998. Under Fujitsus new president, Naoyuki Akikusa, who took over during 1998, the transformation of Amdahl reached its logical conclusion when the firm announced in late 2000 that it would exit from the mainframe business altogether, reducing its hardware business to servers and storage systems.

Under Akikusa, Fujitsu adopted the slogan Everything on the Internet, and these words were put into action in 1999 when the company gained full control of Nifty Serve, merged it with another online service, and thereby created the leading Internet service provider in Japan. Akikusa also took decisive action within the companys semiconductor operations, which were losing money because of falling computer chip prices. He shut down Fujitsus chip operations in England, taking a $480 million writeoff (which contributed to a net loss for the 1999 fiscal year), closed older chip operations at home, and began buying more of the chips it needed for its own products from Taiwanese firms. Of its remaining chip operations, Fujitsu planned to scale back production of dynamic random-access memory chips (DRAMs), which were used in personal computers, in favor of an increased focus on advanced semiconductors used in such products as cellular phones. Alliances played a role in this shift as Fujitsu in May 2000 entered into an agreement with Advanced Micro Devices Inc. of the United States to manufacture flash memory used in cellular phones, computer-network devices, digital cameras, car navigation systems, and other increasingly popular high-tech gear. Fujitsu was also involved in other semiconductor collaborations, including tie-ups with Sony to develop system large-scale integrated circuits (LSIs), which combined memory and processing in a single chip that could be used in digital audio-video devices and in mobile communications products; and with Toshiba to develop a next-generation, one-gigabit memory chip.

Another key alliance was launched in June 1999 with Siemens AG. A jointly owned company called Fujitsu Siemens Computers was created to combine the European computer operations of the two firms. After a troubled beginning marked by squabbling by the two partners over the direction of the joint venture, which initially focused on desktop PCs, Fujitsu Siemens shifted ground in late 2000, announcing plans to focus on selling servers and mobile computers to businesses and to enter the hand-held computer segment. Back on the Internet front, Fujitsu and Sakura Bank Ltd. announced in July 1999 that they had formed a joint venture to establish the first Internet/online bank in Japan.

Fujitsus shift of emphasis to the Internet, software, and services failed to buffet the firm from the effects of the severe downturn in the tech sector that began in the later months of 2000. The company faced a simultaneous slowdown in the U.S. telecommunications industry, weakening demand in the mobile phone market worldwide, a deep falloff in demand for computers from consumers and small businesses, and corporate belt-tightening that hit the tech sector particularly hard. Consequently, Fujitsu barely eked out a profit for the 2001 fiscal year. The company then announced in July 2001 that it would take a ¥300 billion ($2.43 billion) charge in the year ending in March 2002 for a major restructuring. The company planned to merge business units, divest noncore operations, and combine several plants into one. One month later, Akikusa announced plans to cut 16,400 jobs, or about 9 percent of the company workforce as part of the restructuring. About 5,000 of the cuts would come in Japan but they would not involve any layoffs of full-time employees but would rather come through attrition and the elimination of temporary positions. This was one of the most dramatic restructurings undertaken by a major Japanese electronics firm, and its success or failure would go a long way toward determining the future direction of Fujitsu in the initial years of the 21st century.

Principal Subsidiaries

Fujitsu Laboratories Ltd.; Fujitsu Denso Ltd. (50%) ; FDK Corporation (61%) ; Shinko Electric Industries Co., Ltd. (50%) ; Fujitsu Systems Construction Ltd. (67%) ; Fujitsu Support and Service Inc. (56%) ; Takamisawa Electric Co., Ltd. (53%) ; Fujitsu Kiden Ltd. (54%) ; Fujitsu Devices Inc. (67%) ; Fujitsu Business Systems Ltd. (53%) ; Fujitsu AMD Semiconductor Ltd. (50%) ; Fujitsu Hitachi Plasma Display Ltd. (50%) ; Fujitsu TEN Ltd. (55%) ; PFU Ltd. (61%) ; Fujitsu Quantum Devices Ltd.; Fujitsu Media Devices Ltd.; Fujitsu FIP Corporation; NIFTY Corporation; Fujitsu Leasing Co., Ltd. (50%) ; Fujitsu Basic Software Corporation (70%) ; ICL PLC (U.K.) ; Amdahl Corporation (U.S.A.) ; DMR Consulting Group, Inc. (U.S.A.) ; Fujitsu Network Communications, Inc. (U.S.A.) .

Principal Competitors

NEC Corporation; Hitachi, Ltd.; Toshiba Corporation; Mitsubishi Electric Corporation; Sony Corporation; Hewlett-Packard Company; International Business Machines Corporation; Compaq Computer Corporation; Matsushita Electric Industrial Co., Ltd.; Samsung Group; Intel Corporation; Dell Computer Corporation; Gateway, Inc.; Sun Microsystems, Inc.; Sharp Corporation; SANYO Electric Co., Ltd.; Electronic Data Systems Corporation; Unisys Corporation.

Further Reading

Anchordoguy, Marie, Computers Inc.: Japans Challenge to IBM, Cambridge: Harvard University Press, 1989, 273 p.

Brull, Steven V., and Gary McWilliams, Fujitsu Shokku Is Jolting American PC Makers, Business Week, February 19, 1996, p. 50.

Bruii, Steven V., et A1., Fujitsu Gets Wired: The Company Is Staking Its Future on the Still Elusive Frontiers of Cyberspace, Business Week, March 18, 1996, pp. 11012.

Clark, Don, Fujitsus Amdahl Plans to Stop Making IBM Compatibles, Seeing Little to Gain, Wall Street Journal, October 19, 2000.

Creative Partners in Technology, Santa Clara, Calif.: Amdahl Corporation, 1989.

Eisenstodt, Gale, Race Against Time, Forbes, December 21, 1992, pp. 29296.

Fujitsus Sekizawa: Dealing with Changing User Requirements, Datamation, September 1, 1992, pp. 8789.

Gomes, Lee, Amdahls Autonomy Fades As Fujitsu Offers $850 Million for Remaining Stake, Wall Street Journal, July 31, 1997, p. A3.

Gross, Neil, and Robert D. Hof, Fujitsu Gets a Helping Hand from an American Buddy, Business Week, June 28, 1993, p. 46.

Hamilton, David P., Harder Drive: Decade After Failing, Japan Firms Try Anew to Sell PCs in U.S., Wall Street Journal, June 5, 1996, pp. A1 +.

Hills, Jill, Deregulating Telecoms, Westport, Conn.: Quorum Books, 1986, 220 p.

Japanese Semiconductors: Flat As a Pancake, Economist, May 4, 1996, p. 66.

Japans Less-Than-Invincible Computer Makers, Economist, January 11, 1992, pp. 5960.

Japans Lou Gerstner, Economist, November 23, 1996, p. 80.

Johnston, Marsha W., ICL Builds a Software House, Datamation, May 1, 1991, pp. 8087.

Keenan, Faith, and Peter Landers, Staggering Giants, Far Eastern Economic Review, April 1, 1999, pp. 1013.

Kirkpatrick, David, Your Next PC May Be Japanese, Fortune, October 28, 1996, pp. 141+.

Kunii, Irene M., et A1., Fujitsu: Beyond Big Iron, Business Week, March 29, 1999, pp. 76, 78.

Landers, Peter, Fujitsu Plans to Cut 9 Percent of Work Force, Citing Effects of Tech Slowdown in U.S., Wall Street Journal, August 21, 2001, p. A16.

, Fujitsu Plans $2.43 Billion Charge Due to Slump, Wall Street Journal, July 30, 2001, p. A16.

, Japans Fujitsu Looks to America Online As Model in Attempt to Become a Leader in E-Commerce, Wall Street Journal, August 10, 1999, p. A18.

McWilliams, Gary, Emily Thornton, and Paul M. Eng, If at First You Falter, Reboot, Business Week, June 30, 1997, pp. 8182.

Meyer, Richard, Japans Brave New World: The Industry Fears the Commodity Computer. Fujitsu Prepares for It, Financial World, January 21, 1992, pp. 4849.

Meyer, Richard, and Sana Siwolop, The Samurai Have Landed: How the Japanese Computer Makers Slipped into Europe Almost Unnoticed, Financial World, September 18, 1990, pp. 4650.

Mood, Jeff, Next Stop, World Markets, Datamation, August 1, 1989, p. 28.

Morris, Kathleen, What IBM Could Have Done: IBM Almost Halved Its Staff, and It Still Has Problems. Fujitsu Thinks It Can Grow Its Way Out of Mainframe Dependence, Financial World, March 15, 1994, pp. 3234.

Nusbaum, Alexandra, Japan Inc.s Internet Crusader: The President of Fujitsu Has Launched a Bold Mission to Put His Company at the Forefront of the Online Revolution, Financial Times, March 23, 2000, p. 24.

Schlender, Brenton R., How Fujitsu Will Tackle the Giants, Fortune, July 1, 1991, pp. 7882.

Sender, Henny, Fujitsu Seeks to Become a Global Software Maker, Asian Wall Street Journal, September 26, 2000, p. 17.

Jonathan Martin
update: David E. Salamie

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Fujitsu Limited

Fujitsu Limited

6-1, Marunouchi 1-chome
Chiyoda-ku, Tokyo 100
Japan
(03) 3216-3211
Fax: (03) 3216-9352

Public Company
Incorporated:
1935
Employees: 49,000
Sales: ¥3.76 trillion (US$35.49 billion) (1995)
Stock Exchanges: Tokyo Osaka Nagoya London Zurich
Basel Geneva Frankfurt
SICs: 3571 Electronic Computers; 3651 Household Audio & Video Equipment; 3663 Radio & TV Broadcasting & Communications Equipment

Perhaps the most dramatic example of Japans ability to overcome long odds in a short space of time has been the growth of its computer industry, and the undisputed leader among Japanese computer makers is Fujitsu Limited. Ranked second in the world behind IBM, Fujitsu is very much a product of Japans willingness to tackle large-scale industrial projects with a combination of private ambition and governmental funding. Since 1950 Fujitsu has become the Japanese governments primary weapon in its struggle to develop an indigenous computer industry in the face of IBMs superior might. Fujitsu operates within three main areas: computer systemsonce predominantly mainframes, it now also includes client-server systems, personal computers, supercomputers, software, and peripheralstelecommunications systems, and semiconductors.

Early History

Fujitsu was created on June 20, 1935 as the manufacturing subsidiary of Fuji Electric Limited and charged with continuing the parent companys production of telephones and automatic exchange equipment. Fuji Electric, itself a joint venture of Japans Furukawa Electric and the German industrial conglomerate Siemens, was part of Japans attempt to overcome its late start in modern telecommunications. Spurred by Japans expanding military economy, Fujitsu quickly branched off into the production of carrier transmission equipment in 1937 and radio communication two years later. Yet the countrys telephone system remained archaic and incomplete, with German and British systems in use that were not fully compatible. World War II ruined a large part of this primitive system, destroying some 500,000 connections out of a total of 1.1 million, and leaving the country in a state of what might be called communication chaos. At the insistence of the occupying U.S. forces, Japans Ministry of Communications was reorganized and nearly became a privately owned corporation that would have simply adopted existing U.S. technology to rebuild the countrys telephone grid. A coalition led by Eisaku Sato, however, convinced the government to instead form a new public utility, Nippon Telephone and Telegraph (NTT). Created in 1952, NTT soon became a leading sponsor and purchaser of advanced electronic research, and it continued to be one of Fujitsus key customers.

The link with NTT may well have been Fujitsus greatest asset, but Fujitsu was only one of a series of increasingly determined government partners for the countrys young computer industry. Fujitsu first became interested in computers in the early 1950s, when Western governments and large corporations began making extensive, use of them for time-consuming calculations. After a number of years of experimentation Fujitsu succeeded in marketing Japans first commercial computer, the FACOM 100.

This was a start, but the Japanese computer business was still in its infancy when IBM brought out the first transistorized computer in 1959. So great was the shock of this quantum leap in design that the Japanese government realized it would have to play a far more vigorous role if the country was not to fall permanently behind the United States. The government formulated a comprehensive plan that included restrictions on the number and kind of foreign computers imported, low-cost loans and other subsidies to native manufacturers, and the overall management of national production to avoid needless competition while encouraging technological innovation. Of equal importance, in 1961 the Japanese government negotiated with IBM for the right to license critical patents, in exchange allowing the U.S. giant to form IBM Japan and begin local production.

1960s Computer Developments

Patents in hand, seven Japanese companies entered the computer race. All of them except Fujitsu quickly formed alliances with U.S. companies to further their research; Fujitsu, refused by IBM in a similar offer, remained the only pure, or junketsu, Japanese computer firm, committed to the development of its own technological expertise. The other Japanese companies were all much larger than Fujitsu and devoted only a fraction of their energy to computers, while Fujitsu soon devoted itself to communications and computers.

Able to build on its already substantial electronics experience Fujitsu was directed by the government to concentrate on the development of mainframes and integrated circuitry, and in late 1962 it was given the specific goal of developing a competitor to IBMs new 1401 transistorized computer. The government stalled IBMs plans for local production and enlisted Hitachi, NEC, and Fujitsu in what it called project FONTAC, the first in what would become a series of government-industry drives. From the perspective of the marketplace, FONTAC was a complete failurebefore it got off the ground IBM had launched its revolutionary 360 series, pushing the Japanese further behind than when they startedbut as a first try at a coordinated national computer program, FONTAC proved to be extremely important. Fujitsu and the other Japanese manufacturers could afford poor initial performance, knowing that funds were available for further research and development. In particular, the Japanese government had by this time formed the Japanese Electronic Computer Company (JECC), a quasi-private corporation owned by the seven computer makers but given unlimited low-interest government loans with which to buy and then rent out newly produced computers. In effect, this allowed Fujitsu and the others to receive full payment for their wares immediately, thus greatly increasing corporate cash flow and making possible the huge outlays for research and development.

The result of JECCs largesse was immediate: in the space of a single year1961 to 1962Japanese computer sales increased by 203 percent. In 1965 Fujitsu, relying largely on technology developed as part of the FONTAC project, brought out the most advanced domestic computer yet built, the FACOM 230. The company had quickly become JECCs leading manufacturer, supplying approximately 25 percent of all computers purchased by the firm during the 1960s. In addition, Fujitsu had continued its substantial work for NTT, with over half of its telecommunication products going to the phone company by the end of the decade. NTT remained a critically important governmental agency for Fujitsu and the computer industry, routinely shouldering research-and-development costs and paying high prices to ensure that its suppliers remained profitable. NTT also sponsored a super-high-performance computer project in 1968, similar in design and scope to one begun the previous year by the Ministry for Trade and Industry (MITI), to develop a new computer for its complex telecommunications needs. Both of these ambitious programs, were paid for by rival government ministries.

Development of the M Series in the 1970s

Despite this concerted effort, however, by 1970 the Japanese were suffering from IBMs recent introduction of its 370 line. Worse yet, under international pressure the Japanese government had agreed to liberalize its import policy by 1975, giving the local computer industry a scant five years in which to become truly competitive. MITI responded by making computer prowess a national goal, greatly increasing subsidies, and reorganizing the six remaining companies into three groups of cooperative pairs. Fujitsu, as the leading mainframe maker, was paired with its arch-rival Hitachi and given the task of matching IBMs 370 line with a quartet of its own heavy-duty computers, to be called the M series.

The need to build IBM-compatible machines led Fujitsu to an important decision. In 1972 the company invested a small but vital sum of money in a new venture started by Gene Amdahl, a former IBM engineer who had been largely responsible for the design of its 360 series computers. Amdahl Corporation had been formed with the express intent of building a cheaper, more efficient version of IBMs 370 line, which made a joint venture with Fujitsu highly advantageous for both partners. With its strong government support, Fujitsu had access to the capital Amdahl badly needed, while the U.S. engineer was a valuable source of information about IBM operating systems. Fujitsu and Amdahl persevered in what became a most profitable sharing of technology and capital.

Company Perspectives

Our world is undergoing profound change as we race toward the 21st century. The technologies that support us are also advancing dramatically. Networking, open systems, rightsizing and multimedia are the key words and technologies that symbolize todays world of computers and communications. They are the key words of the advanced information society, a society made possible by dreams and exciting technology. Fujitsu makes tomorrows dreams come true today, with total computer and telecommunications systems based on leading-edge electronic devices. Fujitsu remains committed to capturing the future by offering optimal systems and high-quality services that will propel customers into the next century.

A key factor in the Fujitsu-Amdahl deal was the Japanese companys confidence that it could rely on NTT to pay top dollar for whatever computer evolved from the new venture. In this, as in many other situations, NTT served as a kind of guaranteed market for Fujitsu, which in turn was well on its way to becoming a world leader in telecommunication technology and hence a more valuable supplier to NTT. The Fujitsu-Hitachi M series of high-speed computers emerged in the late 1970s. With the M series, the Japanese had achieved a rough parity with the IBM systems. Fujitsu had become one of IBMs very few real competitors in the area of general-purpose mainframe computers; in 1979 Fujitsu took a narrow lead over IBM in Japanese computer sales that held through the mid-1990s.

New Initiatives of the 1980s

After the watershed events of the 1970s, Fujitsu in the 1980s pushed ahead with an impressive array of projects in each of its three main marketing areas. In computers, which generated 60 to 70 percent of overall corporate revenue, Fujitsu continued the success of its M series while branching out into minicomputers, workstations, and personal computers. The company spent much of the 1980s in a legal dispute with IBM over the latters charge that Fujitsu had improperly copied IBMs software. An arbitrator decided in 1988 that, after $833 million in payments to IBM, Fujitsu could continue to buy access to IBM software for ten years at a cost of at least $25 million a year. The agreement was meant as a spur to further mainframe competition. In the 1980s Fujitsu also became a leading manufacturer of supercomputers, with some 80 such units installed by the end of the decade. Though easily the leading mainframe maker in Japan, Fujitsu had little success exporting its productswith only 22 percent of corporate sales made overseas, Fujitsu remained overly dependent on its Japanese business. In particular, the company was unable to break into the U.S. market, where, in addition to the obvious presence of IBM, its mainframe bias was seen as somewhat outdated. The trend in large computer systems at the time was toward greater distribution of processing power, aided by individually tailored software applicationstwo areas in which Fujitsu was notably weak.

Fujitsu remained strong in telecommunications, however, where it continued its close relationship with NTT as well as with the newly emerging New Common Carriers. In light of its origin in the telecommunication field, it was not surprising that Fujitsu became a world leader in the development of Integrated Services Digital Network (ISDN), a convergence of data processing and telecommunications aiming to carry voice, image, data, and text all on one system. Fujitsu was also active in other improvements in telecommunications such as COINS (corporate information network systems), PBXs (private branch exchanges), and digital switching systems. The company also provided important terminal and branching equipment for the Trans-Pacific Cable 3, the Pacific Oceans first optical submarine cable.

Fujitsu maintained a strong presence in its third product area as well, electronic devices. In 1987 the firm was prevented by the U.S. government from acquiring Fairchild Camera, a leading U.S. manufacturer of memory chips, but it still managed to sell about $2.5 billion worth of chips annually. The very fact that Fujitsu was barred from purchasing Fairchild was a testament to the companys strength in semiconductors as well as computers. In conjunction with the Japanese government and other Japanese computer firms, Fujitsu continued to refine its chip technology in anticipation of the arrival of the fifth generation of computers, proposed machines that would be able to write their own software and in some meaningful sense think.

Partnering and Restructuring in the 1990s

In the end, however, Fujitsus 1980s activities proved unable to carry a healthy firm into the 1990s. Observers noted (in hindsight) that the company had played a mainly follow-the-leader (IBM) strategy which emphasized mainframe computersthis began to catch up with Fujitsu in the early 1990s as the shift to networked systems and client-server systems accelerated, cutting the market for mainframes dramatically. Other initiatives undertaken in the 1980s to great fanfare proved less important long-term than little-noticed projects; in telecommunications, for example, ISDN was still being touted as the system of the future as late as 1996, while Fujitsus NIFTY-Serve online service, which debuted in 1986, was seen as the centerpiece of the companys telecommunications operation in the mid-1990s because of the emergence of the Internet (NIFTY-Serve had about 1.6 million subscribers in Japan in 1996).

The year 1990, then, became a year of transition for Fujitsu upon the appointment of Tadashi Sekizawa, a telecommunications engineer, as president. Sekizawa wanted Fujitsu to be more aggressive in its pursuit of foreign markets (80 percent of revenue in 1989 came from Japan), to become more market-driven, and to lessen the stifling bureaucracy that impeded product development.

To bolster the firm internationally, Sekizawa continued to seek non-Japanese partners for growth, wishing to utilize local experts knowledgeable about local markets. Already having a partner in the United States through its 43 percent stake in Amdahl, Fujitsu gained a major European partner in July 1990 when it spent £700 million (US$1.3 billion) for an 80 percent stake in International Computers Ltd. (ICL), Britains largest and most important mainframe maker. Fujitsu and ICLwhich had become a subsidiary of STC in 1984had already collaborated on several projects, beginning in 1981. Fujitsus European operations were further bolstered in 1991 when ICL acquired Nokias data systems group, which was the largest computer company in Scandinavia. The U.S. market was further targeted as well with a $40 million investment in HaL Computer Systems, Inc., a start-up firm aiming to develop UNIX systems, UNIX being an increasingly popular operating system.

Unfortunately for Fujitsu, the Japanese economic bubble burst in 1991 just as the company was beginning to implement Sekizawas program. As a result, profits fell 85.2 percent from ¥82.67 billion in fiscal 1990 to¥12.21 billion in fiscal 1991; the following two years, Fujitsu posted losses¥32.6 billion in fiscal 1992 and ¥37.67 billion in fiscal 1993. Looming over these figures was the downside of the companys huge investments of the 1980sa US$12.4 billion debt by 1992.

The recession precluded Fujitsu from making further international moves in 1991, and capital spending was slashed one-third that year. Strategically, however, research and development spending was not cut. Since the Japanese culture prevents companies in Fujitsus position from making large work force reductions to cut costs, Sekizawa dramatically cut the number of new hires. Meanwhile, to lessen its dependence on mainframe sales and strengthen its PC area, Sekizawa in 1992 established a cross-functional Personal Systems Business Group with the aim of speeding up product development. Also intended to improve product development speed was a restructuring that created a flatter organizational structure and lessened corporate bureaucracy.

Fujitsus huge debt ruled out any major investments to create new products, so the company turned to partnerships to an even greater degree as the decade continued. The deals included: developing a next generation of less expensive mainframes with Siemens; establishing a joint venture with Advanced Mirco Devices, Inc. called Fujitsu AMD Semiconductor Limited to produce flash memory; creating multimedia technology with Sharp Corp.; developing microprocessors for Sun workstations with Sun Microsystems; and relying on Computer Associates to market Jasmine software in the United States.

Clearly, Fujitsu was juggling a number of initiatives as well as dealing with weakening mainframe sales and a difficult, highly competitive semiconductor market. Encouragingly, revenues rose sharply in fiscal 1994 (¥3.26 trillion) and 1995 (¥3.76 trillion), while the company also returned to profitability, posting net income of ¥45.02 billion in 1994 and ¥63.11 billion in 1995. It was too soon to know for sure whether Fujitsu had weathered the storms of the early 1990s, but under Sekizawas forceful guidance the company seemed determined to regain its lofty position of the late 1980s.

Principal Subsidiaries

Fujitsu Laboratories Ltd.; Fujitsu Business Systems Ltd.; Fujitsu Kiden Ltd.; Fuji Electrochemical Co., Ltd.; Shinko Electric Industries Co., Ltd.; Fujitsu TEN Limited; PFU Limited; Fujitsu Denso Ltd.; Fujitsu FACOM Information Processing Corporation; Fujitsu AMD Semiconductor Limited; Fujitsu America, Inc. (U.S.A.); Fujitsu Business Communication Systems, Inc. (U.S.A.); Fujitsu Network Transmission Systems, Inc. (U.S.A.); Fujitsu Personal Systems, Inc. (U.S.A.); HaL Computer Systems, Inc. (U.S.A.); Fujitsu Computer Products of America, Inc. (U.S.A.); Fujitsu Microelectronics, Inc. (U.S.A.); Fujitsu Compound Semiconductor, Inc. (U.S.A.); FujitsuICL Systems Inc. (U.S.A.); Fujitsu Network Switching of America, Inc. (U.S.A.); Fujitsu Computer Packaging Technologies, Inc. (U.S.A.); Fujitsu Open Systems Solutions, Inc. (U.S.A.); Fujitsu Systems Business of America, Inc. (U.S.A.); Ross Technology, Inc. (U.S.A.); Fujitsu Canada, Inc.; Fujitsu Systems Business of Canada, Inc.; Fujitsu do Brasil Limitada (Brazil); International Computers (South Africa) (Pty) Ltd.; Fujitsu Europe Limited (U.K.); Fujitsu Microelectronics Ltd. (U.K.); Fujitsu Deutschland GmbH (Germany); Fujitsu Mikroelektronik GmbH (Germany); Fujitsu Microelectronics Ireland Limited; Fujitsu International Finance (Netherlands) B.V.; Fujitsu España, S.A. (Spain); ICL PLC (U.K.; 84%); Fujitsu Europe Telecom R&D Centre Limited (U.K.); Fujitsu Telecommunications Europe Limited (U.K.); Fujitsu Finance (U.K.) PLC; Fujitsu France S.A.; Fujitsu Italia S.p.A. (Italy); Fujitsu Microelectronics Italia S.r.l. (Italy); Fujitsu Nordic AB (Sweden); Fujitsu Australia Ltd.; Fujitsu Microelectronics (Malaysia) Sdn. Bhd.; Fujitsu Microelectronics Asia Pte. Ltd. (Singapore); Fujitsu (Thailand) Co., Ltd.; Fujitsu Australia Software Technology Pty. Ltd.; Fujitsu Australia Wholesale Pty. Ltd.; Fujitsu Australia Finance Pty. Ltd.; Nanjin Fujitsu Computer Products Co., Ltd.; Beijing Fujitsu System Engineering Co., Ltd. (China); Fujitsu Hong Kong Limited; Fujitsu Microelectronics Pacific Asia Ltd. (Hong Kong); Fujitsu India Telecom Limited; Fujitsu Optel Limited; Fujitsu ICIM Software Technologies Pty. Ltd.; P.T. Fujitsu Systems (Indonesia); Fujitsu Korea Limited; Fujitsu Component (Malaysia) Sdn. Bhd.; Fujitsu New Zealand Holdings Limited; Fujitsu New Zealand Limited; Fujitsu Computer Products Corporation of the Philippines; Fujitsu (Singapore) Pte. Ltd.

Further Reading

Anchordoguy, Marie, Computers Inc.: Japans Challenge to IBM, Cambridge: Harvard University Press, 1989, 273 p.

Brull, Steven V., and Gary Me Williams, Fujitsu Shokku Is Jolting American PC Makers, Business Week, February 19, 1996, p. 50.

Brull, Steven V., et. al., Fujitsu Gets Wired: The Company Is Staking Its Future on the Still Elusive Frontiers of Cyberspace, Business Week, March 18, 1996, pp. 110-12.

Company History, Tokyo: Fujitsu Ltd., corporate typescript, 1989.

Creative partners in Technology, Santa Clara, Calif.: Amdahl Corporation, 1989.

Eisenstodt, Gale, Race against Time, Forbes, December 21, 1992, pp. 292-96.

Fujitsus Sekizawa: Dealing with Changing User Requirements, Datamation, September 1, 1992, pp. 87-89.

Gross, Neil, and Robert D. Hof, Fujitsu Gets a Helping Hand from an American Buddy, Business Week, June 28, 1993, p. 46.

Hills, Jill, Deregulating Telecoms, Westport, Conn.: Quorum Books, 1986, 220 p.

Japanese Semiconductors: Flat as a Pancake, Economist, May 4, 1996, p. 66.

Japans Less-than-Invincible Computer Makers, Economist, January 11, 1992, pp. 59-60.

Johnston, Marsha W., ICL Builds a Software House, Datamation, May 1, 1991, pp. 80-87.

Meyer, Richard, and Sana Siwolop, The Samurai Have Landed: How the Japanese Computer Makers Slipped into Europe Almost Unnoticed, Financial World, September 18, 1990, pp. 46-50.

Meyer, Richard, Japans Brave New World: The Industry Fears the Commodity Computer. Fujitsu Prepares for It, Financial World, January 21, 1992, pp. 48-49.

Mood, Jeff, Next Stop, World Markets, Datamation, August 1, 1989, p. 28.

Morris, Kathleen, What IBM Could Have Done: IBM Almost Halved Its Staff, and It Still Has Problems. Fujitsu Thinks It Can Grow Its Way Out of Mainframe Dependence, Financial World, March 15, 1994, pp. 32-34.

Schlender, Brenton R., How Fujitsu Will Tackle the Giants, Fortune, July 1, 1991, pp. 78-82.

Jonathan Martin

updated by David E. Salamie

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Fujitsu Limited

Fujitsu Limited

6-1, Marunouchi 1-chome
Chiyoda-ku, Tokyo 100
Japan
(03) 3216-3211
Fax: (03) 3216-9365

Public Company
Incorporated: 1935
Employees: 114,010
Sales: ¥2.55 trillion (US$17.74 billion)
Stock Exchanges: Tokyo Osaka Nagoya London Zurich Basel Geneva Frankfurt

Perhaps the most dramatic example of Japans ability to overcome long odds in a short space of time has been the growth of its computer industry, and the undisputed leader among Japanese computer makers is Fujitsu Limited. Ranked second in the world behind IBM, Fujitsu is very much a product of Japans willingness to tackle large-scale industrial projects with a combination of private ambition and governmental funding. Since 1950 Fujitsu has become the Japanese governments primary weapon in its struggle to develop an indigenous computer industry in the face of IBMs superior might, and the company offers a range of mainframes, minicomputers, and microcomputers, which not only are substantially cheaper but which some users also find superior to their U.S. counterparts.

Fujitsu is also a world leader in supercomputersoffering a model that runs at four gigaflops, for those keeping track and maintains lesser positions in such varied lines as workstations, automated-teller machines, and retail automation. Alongside its computer products, Fujitsu continues its original role as one of Japans leading makers of telecommunications equipment, working closely with Nippon Telephone and Telegraph on a vast array of technological innovations. Fujitsu has also become a power in the semiconductor industry, where it both supplies its own needs and offers customers a choice of up-to-date integrated circuits, gate arrays, and the worlds first 64-megabyte dynamic random access memory cell. As Japan moves toward the so-called fifth generation of thinking computers and the eventual adoption of an entirely new form of operating system, Fujitsu will almost certainly remain at the forefront of the advancing world computer revolution. Whether it will ever have the strength to battle IBM on the latters home turf is another question, but given Fujitsus startling growth in the postwar era and Japans now-famous competitiveness, few would rule out the possibility entirely.

Fujitsu was created on June 20, 1935 as the manufacturing subsidiary of Fuji Electric Limited and charged with continuing the parent companys production of telephones and automatic exchange equipment. Fuji Electric, itself a joint venture of Japans Furukawa Electric and the German industrial conglomerate Siemens, was part of Japans attempt to overcome its late start in modern telecommunications. Spurred by Japans expanding military economy, Fujitsu quickly branched off into the production of carrier transmission equipment in 1937 and radio communication two years later. Yet the countrys telephone system remained archaic and incomplete, with German and British systems in use that were not fully compatible. World War II ruined a large part of this primitive system, destroying some 500,000 connections out of a total of 1.1 million, and leaving the country in a state of what might be called communication chaos. At the insistence of the occupying U.S. forces, Japans Ministry of Communications was reorganized and nearly became a privately owned corporation that would have simply adopted existing U.S. technology to rebuild the countrys telephone grid. However, a coalition led by Eisaku Sato convinced the government instead to form a new public utility, Nippon Telephone and Telegraph (NTT). Created in 1952, NTT soon became a leading sponsor and purchaser of advanced electronic research, and it remains one of Fujitsus key customers.

The link with NTT may well have been Fujitsus greatest asset, but Fujitsu was only one of a series of increasingly determined government partners for the countrys young computer industry. Fujitsu first became interested in computers in the early 1950s, when Western governments and large corporations began making extensive use of them for time-consuming calculations. After a number of years of experimentation Fujitsu succeeded in marketing Japans first commercial computer, the FACOM 100. This was a start, but the Japanese computer business was still in its infancy when IBM brought out the first transistorized computer in 1959. So great was the shock of this quantum leap in design that the Japanese government realized it would have to play a far more vigorous role if the country was not to fall permanently behind the United States. The government formulated a comprehensive plan that included restrictions on the number and kind of foreign computers imported, low-cost loans and other subsidies to native manufacturers, and the overall management of national production to avoid needless competition while encouraging technological innovation. Of equal importance, in 1961 the Japanese government negotiated with IBM for the right to license critical patents, in exchange allowing the U.S. giant to form IBM Japan and begin local production.

Patents in hand, seven Japanese companies entered the computer race. All of them except Fujitsu quickly formed alliances with U.S. companies to further their researchFujitsu, refused by IBM in a similar offer, remained the only pure, or junketsu, Japanese computer firm, committed to the development of its own technological expertise. The other Japanese companies were all much larger than Fujitsu and devoted only a fraction of their energy to computers, while Fujitsu soon devoted itself to communications and computers. Able to build on its already substantial electronics experience Fujitsu was directed by the government to concentrate on the development of mainframes and integrated circuitry, and in late 1962 it was given the specific goal of developing a competitor to IBMs new 1401 transistorized computer. The government stalled IBMs plans for local production and enlisted Hitachi, NEC, and Fujitsu in what it called project FONTAC, the first in what would become a series of government-industry drives. From the perspective of the marketplace, FONTAC was a complete failurebefore it got off the ground IBM had launched its revolutionary 360 series, pushing the Japanese further behind than when they startedbut as a first try at a coordinated national computer program, FONTAC proved to be extremely important. Fujitsu and the other Japanese manufacturers could afford poor initial performance, knowing that funds were available for further research and development. In particular, the Japanese government had by this time formed the Japanese Electronic Computer Company (JECC), a quasi-private corporation owned by the seven computer makers but given unlimited low-interest government loans with which to buy and then rent out newly produced computers. In effect, this allowed Fujitsu and the others to receive full payment for their wares immediately, thus greatly increasing corporate cash flow and making possible the huge outlays for research and development.

The result of JECCs largesse was immediate: in the space of a single year1961 to 1962Japanese computer sales increased by 203%. In 1965 Fujitsu, relying largely on technology developed as part of the FONTAC project, brought out the most advanced domestic computer yet built, the FACOM 230. The company had quickly become JECCs leading manufacturer, supplying approximately 25% of all computers purchased by the firm during the 1960s. In addition, Fujitsu had continued its substantial work for NTT, with over half of its telecommunication products going to the phone company by the end of the decade. NTT remained a critically important governmental agency for Fujitsu and the computer industry, routinely shouldering research-and-development costs and paying high prices to ensure that its suppliers remained profitable. NTT also sponsored a super-high-performance computer project in 1968, similar in design and scope to one begun the previous year by the Ministry for Trade and Industry (MITI), to develop a new computer for its complex telecommunications needs. Both of these ambitious programs, were paid for by rival government ministries.

Despite this concerted effort, however, by 1970 the Japanese were suffering from IBMs recent introduction of its 370 line. Worse yet, under international pressure the Japanese government had agreed to liberalize its import policy by 1975, giving the local computer industry a scant five years in which to become truly competitive. MITI responded by making computer prowess a national goal, greatly increasing subsidies, and reorganizing the six remaining companies into three groups of cooperative pairs. Fujitsu, as the leading mainframe maker, was paired with its archrival Hitachi and given the task of matching IBMs 370 line with a quartet of its own heavy duty computers, to be called the M series.

The need to build IBM-compatible machines led Fujitsu to an important decision. In 1972 the company invested a small but vital sum of money in a new venture started by Gene Amdahl, a former IBM engineer who had been largely responsible for the design of its 360 series computers. Amdahl Corporation had been formed with the express intent of building a cheaper, more efficient version of IBMs 370 line, which made a joint venture with Fujitsu highly advantageous for both partners. With its strong government support, Fujitsu had access to the capital Amdahl badly needed, while the U.S. engineer was a valuable source of information about IBM operating systems. Fujitsu and Amdahl persevered in what became a most profitable sharing of technology and capital.

A key factor in the Fujitsu-Amdahl deal was the Japanese companys confidence that it could rely on NTT to pay top dollar for whatever computer evolved from the new venture. In this, as in many other situations, NTT served as a kind of guaranteed market for Fujitsu, which in turn was well on its way to becoming a world leader in telecommunication technology and hence a more valuable supplier to NTT. The Fujitsu-Hitachi M series of high-speed computers emerged in the late 1970s. With the M series, which remains the basis of Fujitsus production line, the Japanese had achieved a rough parity with the IBM systems. Fujitsu had become one of IBMs very few real competitors in the area of general-purpose mainframe computers; and sometime in 1980 Fujitsu became the only company in the world to outsell IBM in its native country, taking a narrow lead in Japanese computer sales that it has maintained.

Since the watershed events of the 1970s, Fujitsu has pushed ahead with an impressive array of projects in each of its three main marketing areas. In computers, which remain the source of 60% to 70% of overall corporate revenue, Fujitsu has continued the success of its M series while branching out into minicomputers, workstations, and personal computers. The company spent much of the 1980s in a legal dispute with IBM over the latters charge that it had improperly copied IBMs software. An arbitrator decided in 1988 that, after $833 million in payments to IBM, Fujitsu could continue to buy access to IBM software at a cost of at least $25 million a year. The agreement was meant as a spur to further mainframe competition. Since 1982 Fujitsu also has become a leading manufacturer of supercomputers, with some 80 such units installed as of the end of the decade. Though easily the leading mainframe maker in Japan, Fujitsu has had little success exporting its productswith only 22% of corporate sales made overseas, Fujitsu remains overly dependent on its Japanese business. In particular, the company has been unable to break into the U.S. market, where, in addition to the obvious presence of IBM, its mainframe bias is seen as somewhat outdated. The recent tendency in large computer systems has been toward greater distribution of processing power, aided by individually tailored software applicationstwo areas in which Fujitsu is notably weak.

Fujitsu remains strong in telecommunications, however, where it continues its close relationship with NTT as well as with the newly emerging New Common Carriers. In light of its origin in the telecommunication field, it is not surprising that Fujitsu has become a world leader in the development of Integrated Services Digital Network (ISDN), the inevitable convergence of data processing and telecommunications. ISDN will eventually carry voice, image, data, and text all on one system, and Fujitsu has been intimately involved in NTTs development of the new service, which seems significantly more advanced in Japan than in the United States.

Fujitsu is also active in other improvements in telecommunications such as COINS (corporate information network systems), PBXs (private branch exchanges), and digital switching systems. The company also provided important terminal and branching equipment for the recently completed Trans-Pacific Cable #3, the Pacific Oceans first optical submarine cable. Fujitsu maintains a strong presence in its third product area as well, electronic devices. In 1987 the firm was prevented by the United States government from acquiring Fairchild Camera, a leading U.S. manufacturer of memory chips, but it still manages to sell about $2.5 billion worth of chips annually. The very fact that Fujitsu was barred from purchasing Fairchild is a testament to the companys strength in semiconductors as well as computers. In conjunction with the Japanese government and other Japanese computer firms, Fujitsu continues to refine its chip technology in anticipation of the imminent arrival of the fifth generation of computers, machines that will be able to write their own software and in some meaningful sense think.

In July 1990 Fujitsu, continuing its tradition of cooperation with non-Japanese companies, announced that it would buy an 80% stake in ICL, Britains largest and most important mainframe maker. Fujitsu and ICLwhich had become a subsidiary of STC in 1984had collaborated on several projects, beginning in 1981. Fujitsu paid £700 million for its ICL holdings.

Fujitsu has become one of a select group of companies able to compete with IBM in the mainframe arena. Its great task will be to export its computers more successfully. It is one thing to sell Fujitsu mainframes to Sony, and quite another to place them overseas. IBM remains the undisputed mainframe leader around the world, but Fujitsu and the Japanese have demonstrated more than once their ability to surprise everyone but themselves. Information processing, which in the long run means IBM, remains the one manufacturing area in which Japan has not yet been able to dominate the field; if that should change anytime in the near future Fujitsu may be carrying the flag.

Principal Subsidiaries

Fujitsu Laboratories Ltd.; Shinko Electric Industries Co., Ltd.; Fuji Electrochemical Co., Ltd.; Fujitsu Denso Ltd.; Fujitsu Kiden Ltd.; PFU Limited; Fujitsu TEN Limited; Hasegawa Electric Co., Ltd.; Fujitsu Yamanashi Electronics Limited; Kyushu Fujitsu Electronics Ltd.; Fujitsu Isotec Limited; Fujitsu Kasei Ltd.; Fujitsu System Integration Laboratories Ltd.; Fujitsu Automation Limited; Fujitsu VLSI Limited; Yamagata Fujitsu Limited; Fujitsu Tohoku Electronics Ltd.; Fujitsu Miyagi Electronics Ltd.; Shinano Fujitsu Ltd.; Fujitsu Sinter Limited; Fujitsu Peripherals Limited; Fujitsu Buhin Limited; Nihon Dengyo Limited; Fujitsu FACOM Information Processing Corporation; Fujitsu Dai-ichi System Engineering Limited; Fujitsu Social Science Laboratory Limited; Fujitsu Basic Software Corporation; Fujitsu Distribution Systems Engineering Limited; Fujitsu Kansai System Engineering Limited; Fujitsu Tokai Systems Engineering Limited; Fujitsu Financial Systems Engineering Limited; Fujitsu Tohoku Systems Engineering Limited; Fujitsu Financial Information Systems Limited; Fujitsu Social Systems Engineering Limited; Fujitsu Dai-ichi Communication Software Limited; Fujitsu Technosystems Limited; Ishikawa Fujitsu Software Limited; Fujitsu Oita Software Laboratories Limited; Fujitsu Kyushu System Engineering Limited; Gunma Fujitsu Limited; Okinawa Fujitsu Systems Engineering Ltd.; Fujitsu Minami-Kyushu Systems Engineering Limited; Fujitsu Shizuoka Engineering Limited; Fujitsu Program Laboratories Limited; Fujitsu Kansai Communication Systems Limited; Fujitsu Kyushu Communication Systems Limited; Fujitsu Nagano Systems Engineering Limited; Fujitsu Aichi Engineering Limited; Fujitsu Keihin Systems Engineering Limited; Fujitsu Shikoku Infortec Limited; Fujitsu Business Systems Ltd.; Fujitsu Logistics Limited; Fujitsu Office Machines Limited; Fujitsu Trading Ltd.; Fujitsu Supplies Limited; Fujitsu Microcomputer Systems Limited; Fujitsu OA Limited; Fujitsu Network Engineering Limited; Fujitsu Microdevices Ltd.; Fujitsu Documents Service Limited; Totalizator Engineering Limited; Fujitsu Digital Technology Limited; Fujitsu Advanced Printing & Publishing Co., Ltd.; Fujitsu Fudosan Ltd.; Iwaki Densi Ltd.; Ten Onkyo Ltd.; Fujitsu Kosan Limited; Fujitsu America, Inc. (U.S.A.); Fujitsu Business Communication Systems, Inc. (U.S.A.); Fujitsu Systems of America, Inc. (U.S.A.); Fujitsu Microsystems of America, Inc. (U.S.A.); Fujitsu Canada, Inc.; Fujitsu Customer Service of America, Inc. (U.S.A.); Fujitsu Imaging Systems of America, Inc. (U.S.A.); Intellistor, Inc. (U.S.A.); Fujitsu Microelectronics, Inc. (U.S.A.); Fujitsu Component of America, Inc. (U.S.A.); Fujitsu Network Switching of America, Inc. (U.S.A.); Fujitsu Australia Ltd.; Fujitsu Australia Wholesale Pty. Ltd.; Fujitsu New Zealand Holdings Ltd.; Fujitsu New Zealand Ltd.; Fujitsu Microelectronics Asia Pte. Ltd. (Singapore); Fujitsu (Singapore) Pte. Ltd.; Fujitsu Korea Ltd.; Fujitsu Microelectronics Pacific Asia Ltd. (Hong Kong); Fujitsu Electronics (Singapore) Pte. Ltd.; Fujitsu Component (Malaysia) Sdn. Bhd.; Fujitsu Microelectronics (Malaysia) Sdn. Bhd.; Fujitsu España, S.A. (Spain); Fujitsu Mikroelektronik GmbH (Germany); Fujitsu Microelectronics Ltd. (U.K.); Fujitsu Microelectronics Italia S.r.l. (Italy); Fujitsu Microelectronics Ireland Ltd.; Fujitsu Europe Ltd. (U.K.); Fujitsu Deutschland GmbH (Germany); Fujitsu Nordic AB (Sweden); Fujitsu Italia S.p.A. (Italy).

Further Reading

Hills, Jill, Deregulating Telecoms, Westport, Connecticut, Quorum Books, 1986; Anchordoguy, Marie, Computers Inc.: Japans Challenge to IBM, Cambridge, Harvard University Press, 1989; Company History, Fujitsu corporate typescript, 1989; Creative Partners in Technology, Santa Clara, California, Amdahl Corporation, 1989.

Jonathan Martin

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"Fujitsu Limited." International Directory of Company Histories. . Encyclopedia.com. 21 Aug. 2017 <http://www.encyclopedia.com>.

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