Sumitomo Chemical Company, Ltd.
Sumitomo Chemical Company, Ltd.
Incorporated: June 1, 1925 as Sumitomo Fertilizer
Sales: ¥ 658.6 billion (US$ 3.287 billion)
Market value: ¥ 616.8 billion (US$ 3.859 billion)
Stock Index: Tokyo Osaka Nagoya Kyoto Hiroshima
The name of Sumitomo is historically associated with copper mining. The original Sumitomo business was established in 1590 as a copper refinery which grew steadily over the next three hundred years to become one of the largest family-run industries in Japan. Early in the 20th century several Sumitomo divisions were made independent corporations in order to attract a greater amount of investor capital. As independent members of a larger Sumitomo industrial group, each of these companies later established itself as a viable coporate entity.
A Sumitomo copper smelter located at Niihama endangered the local population with heavy emissions of sulfur dioxide, a hazardous waste gas. A study was undertaken in” 1906 to investigate ways in which the gas could be utilized and the pollution eliminated. A new technology was discovered and in 1913 a facility was added on to the Niihama complex which transformed sulfur dioxide into sulfuric acid and calcium superphosphate, which was then used as a fertilizer.
In 1925 the chemical division of the Niihama copper refinery was made an independent corporation and renamed Sumitomo Fertilizer Manufacturing. When it was incorporated, the company’s capitalization was increased through the sale of stock shares to private investors. In 1930 the company broadened its product line to include ammonia and ammonia-related industrial chemicals. When the production of nitric acid was added in 1934, Sumitomo Fertilizer ceased to be an appropriate name and so it was changed to the Sumitomo Chemical Company.
Chemical production is an essential component of any nation’s industrial capability. When right-wing militarist elements seized power in Japan during the 1930’s, they initiated an industrial mobilization for achieving Japanese economic domination of Asia and the western Pacific. The movement became increasingly belligerent and culminated with the initiation of a full-scale war of conquest in Asia. Sumitomo Chemical was an essential component of the Japanese war effort. The company produced a variety of industrial chemicals used in the manufacture of weapons and military equipment.
Sumitomo Chemical grew rapidly during the war. In 1944 it absorbed the Japan Dyestuff Manufacturing Company, which produced dyes and pharmaceutical products. When the war ended with the Japanese surrender in September of 1945, Sumitomo emerged as the nation’s largest chemical concern. The war destroyed almost all of Japan’s industrial capability and many Sumitomo factories sustained heavy damage. As a result, the company initially suffered from both an inability to produce certain chemicals and poor market conditions.
After the war the Allied occupation authority outlawed large industrial organizations called zaibatsu (“money cliques”). Sumitomo Chemical was a member of the Sumitomo group, one of the largest zaibatsu in Japan. As part of the dissolution of the Sumitomo Group, Sumitomo Chemical was forced to change its name to Nisshin Chemical Industries in 1946 and refrain from using the igeta, the Sumitomo trademark.
In 1949 Nisshin Chemical acquired Sumitomo Aluminum Reduction, a division of a dissolved affiliate of the Sumitomo group. With the addition of alumina fabrication facilities, Nisshin became an integrated manufacturer of dyestuffs, pharmaceuticals, and aluminum, in addition to a variety of industrial chemicals.
During the Korean War (1950-1952), restrictive Japanese commercial laws were modified to promote greater industrial growth. Many of the prewar zaibatsu affiliations were re-established. In 1952 Nisshin Chemical was allowed to change its name back to Sumitomo Chemical and resume use of the igeta logo. Other members of the Sumitomo group (particularly banks) purchased substantial minority shares of Sumitomo Chemical. Although the strict vertical organization of the prewar Sumitomo group was not re-instituted, the various Sumitomo companies established a monthly meeting for the coordinatioin of business strategies.
Japan’s Ministry for International Trade and Industry (MITI) had a major role in the development of the Japanese chemical industry. During the 1950’s most Japanese chemical companies remained largely non-integrated manufacturers. In other words, they specialized in just one stage of chemical production. Larger foreign companies, however, integrated their facilities so that they could produce chemicals more efficiently and at a lower cost. This made it difficult for Japanese companies to compete effectively. In an effort to improve the competitiveness of Japan’s chemical industry, MITI directed the merger of numerous non-integrated producers.
Sumitomo Chemical, however, was already an integrated producer. It was also the largest chemical company in Japan. Rather than merge with other companies, the government encouraged Sumitomo to establish new product lines. The company began to produce new fertilizers under a government policy intended to support Japanese agriculture. In 1958 Sumitomo opened a new plant at Niihama to produce low density polyethylene. In 1961 it established a factory in Nagoya for aluminum production, and the following year completed the Ibaraki Plant in Osaka for the preparation of Pharmaceuticals.
Sumitomo Chemical continued its expansion in 1965 when it established the Takatsuki special laboratory facility to conduct research in new chemical technologies. A second petrochemical complex (independently operated until 1975) was built at Chiba, near Tokyo, in 1967, and two years later an aluminum smelter was completed at the Toyama Woiks. Another research facility called Takarazuka was founded in 1971 to develop new pharmaceutical and pesticide technologies. The company’s light metals division was converted into an independent subsidiary called Sumitomo Aluminum Smelting in 1976.
Despite the company’s rapid expansion, the management of Sumitomo Chemical failed to respond quickly to deteriorating market conditions. The company’s chief competitor, Mitsubishi Chemical Industries, surpassed Sumitomo as the nation’s largest chemical company. In 1977 Sumitomo’s president, Kaneshige Hasegawa, was “promoted” out of operational management to chairman, and the company’s successful managing director, Takeshi Hijikata, was named president. In addition, nine new board members were appointed.
Hijikata demonstrated his abilities as a persuasive and innovative negotiator when he managed to convince the government of Singapore to nationalize a chemical complex, which it was building in partnership with Sumitomo. Hijikata also convinced MITI that the company was capable of reaching a compromise with the Singaporean government without any danger of a diplomatic misunderstanding.
Fertilizer production had become increasingly unprofitable since the oil crisis in 1974. Over the next several years Sumitomo gradually scaled down its production of fertilizer, but continued to expand in the more profitable area of pesticides. In 1978 a new plant was constructed at Masawa for production of pyrethroid insecticides. A pharmaceutical and pesticide research facility was added to the Osaka Works in 1980, and two years later a New Products and Systems division was established to reinforce the company’s development of new products.
Difficult market conditions forced the company to rationalize production. In 1983 production of ethylene and ethylene derivatives at the Ehime Works was curtailed in order to concentrate production at the Chiba plant. The following year Sumitomo Chemical and Inabata & Company jointly established a separate company called Sumitomo Pharmaceuticals to handle both companies’ pharmaceutical businesses.
Sumitomo Chemical remains independent of the numerous other Sumitomo group companies. As a member of the Sumitomo group, however, its management affairs and business strategies are shared with other group members, with whom it also shares, to a significant degree, cross-ownership of stock. It it still one of the largest chemical companies in Japan, although market conditions and increasingly well-organized competition have obscured its pre-eminence. In order to deal with this increasing competition Sumitomo is presently devoting a great deal of its resources to the development of new technologies, particularly in the rapidly growing field of biotechnology.
Principal Subsidiaries and Affiliates
Nihon Oxirane Co. Ltd.; Sumitomo Bakelite Co., Ltd.; Japan Exlan Co., Ltd.; Seitetsu Kagaku Co., Ltd.; Japan-Singapore Petrochemicals Co., Ltd.; Nihon Polystyrene Co., Ltd.; Sumitomo Naugatuck Co., Ltd.; Nihon Vinyl Chloride Co., Ltd.; Chiba VCM Co., Ltd.; Nihon Singapore Poly-olefin Co., Ltd.; Koei Chemical Co., Ltd.; Japan Lactam Ltd.; Nihon Aklylate Co., Ltd.; Tobu Butadiene Co., Ltd.; Japan Aldehyde Co., Ltd.; Politeno Industria e Comercio S.A.; Nihon Methacryl Monomer Co., Ltd.; Japan Upjohn Ltd.; Sumitomo Bayer Urethane Co., Ltd.; Sakata Shikai, Ltd.; Shinto Paint Co., Ltd.; ICI-Pharma Ltd.; Taoka Chemical Co., Ltd.; Nippon Wellcome K.K.; Nippon Medi-Physics Co., Ltd.; Sumika-Hercules Co., Ltd.; Sumitomo Chemical America, Inc.; Sumitomo Aluminium Smelting Co., Ltd.; Sumitomo Joint Electric Power Co., Ltd.; Sumitomo Chemical Engineering Co., Ltd.; Sumitomo Pharmaceuticals Co., Ltd.; Sumiarco Co., Ltd.