The Japanese giant robot company you’ve never heard of
PARIS – Earlier in the decade, when Elon Musk was looking to equip his Tesla factory in Fremont, California, he naturally approached FANUC, the Japanese industrial robotics giant, for machine parts. Price was not an issue, but the American entrepreneur had a requirement. He wanted the robots that would assemble his futuristic sedans to be bright red – to impress both investors and the media.
At FANUC’s headquarters in Oshino, a village at the foot of Mount Fuji, management politely responded that they would be happy to provide Musk with the appropriate equipment, but that their robots had always been yellow and would remain so. In the end, Tesla got its red robots, but from another supplier: the German group KUKA.
In Tokyo, analysts like to tell this anecdote to convey the essence of FANUC: brilliant and efficient, but also conservative, even rigid. “It is one of the nuggets of Japan”, explains Jérémie Capron, research director at Robo Global. “The group is the world leader in industrial robots and computer numerical control (CNC), but they do not like to venture far from their comfort zone,” he says.
Morten Paulsen, analyst at brokerage and investment group CLSA, agrees. “They are the best in the business, and they know it. Their margins are exceptionally high at 25% while their competition is at 10%. But these are not the most innovative machines in the world, nor the most tailor-made. “
The recipe for success
The head of the group of companies, Yoshiharu Inaba, is not offended by these statements. “We are focusing on the aspects that we can win,” says the 69-year-old CEO from his office in Oshino. “The sustainability of the group is our priority.
Inaba follows in the footsteps of his father, Seiuemon Inaba, who started FANUC in 1972 from a subsidiary of electronics giant Fujitsu. In his book Walk the narrow path, the founder explained that companies should identify their specific area of excellence and then focus on manufacturing a limited number of technically superior products that are guaranteed for life but manufactured at the lowest possible price.
The formula worked. FANUC has never been a household name, preferring discretion over self-promotion. And yet, it plays a key role in the production of many everyday objects. It is also on a very solid financial basis. For the fiscal year ended in March, FANUC is expected to post a net profit of 1.4 billion euros. Its overall valuation exceeds 40 billion euros.
We focus on the aspects that we can gain.
Over time, it has become a key supplier to some of the world’s most important industries, selling a total of some 500,000 robots. Major automakers, including Tesla, are often assembled and welded by the yellow six-axis robots. The skeletons of iPhones are disassembled and prepared in its Robodrill machines, with articulated yellow arms fitted with cameras that sort the products. FANUC robots are also involved in the manufacture of aeronautical components and even apply varnish, with such delicacy, on Fender guitars.
“In the United States, they have a market share of over 50%,” explains Morten Paulsen. “Elsewhere, in China for example, it is between 20 and 25%.
At its 33 production centers in Japan, where robots manufacture more robots in mass production, FANUC has achieved phenomenal economies of scale. Analysts say the company’s factories are the most automated in the world, producing up to 6,000 robots a month, while ABB, its biggest competitor, only manufactures half of them. About 90% of robots are shipped overseas, according to Yoshiharu Inaba. And with the opening of new sites around Japan in the coming months, FANUC will soon push its monthly production capacity to 11,000 robots.
The industrial revolution is far from over. “They have massive growth opportunities ahead of them,” insists Jérémie Capron, noting the relatively slow pace of robotization in China. “In Japan, there are 500 robots for every 10,000 workers. In China, this ration is 50 per 10,000, ”he explains. “There is still enormous room for improvement in the Chinese market, where favorable policies are being put in place to automate factories.”
The company’s conservatism could cost it dearly
Inaba agrees. “In the United States too, leaders have a very positive attitude towards robotics,” explains the CEO of the company. He notes that FANUC is also heavily dependent on high demand in India and Southeast Asia. And yet, the company has no plans to open production centers outside of Japan.
“The yen has fluctuated in the past and it will continue to do so. This is to be expected,” Inaba said in response to criticism suggesting that to offset currency risks, FANUC should locate some of its manufacturing overseas. . “But we’re not focusing on these short-term issues. Instead, we’re looking at 10, 20 years.”
Play it safe
The CEO says it is important to anticipate the overall evolution of the robotics industry. For example, he expects the so-called “cobots” market to accelerate. Cobots are collaborative robots that can operate in factories alongside humans. Another priority for FANUC is the integration of artificial intelligence into automated systems.
But the company is also cautious about these new technologies. Rather than exploring new ground – and investing, for example, in robotics used for agricultural or medical purposes – he prefers to stick with what he knows. “Robots are coming out of factories now, but that doesn’t seem to interest FANUC,” says Capron.
ROBO Global has calculated that only 3% of the 17,000 logistics centers in the United States are automated. “With the explosion of electronic commerce, robots will be needed in this segment and they will require technologies similar to those available to FANUC today,” says Capron.
So far, however, Inaba has not influenced. “Our only expertise is in industrial robotics,” he says. “It’s not enough to venture into healthcare or services that require a lot of other knowledge.”
Playing it safe remains a good option because demand from conventional industries remains very strong. Ultimately, however, the company’s conservatism could cost it dearly, analysts warn. But there will also be a possible generational change at FANUC, where Yoshiharu Inaba’s US-trained son Kiyonori Inaba is being trained to take the reins. This in itself can push the group to other adventures and further accelerate innovation.