The defiantly unfashionable name – Murata Manufacturing – says much about the nature of the Kyoto-based producer of electronic components.
Murata is still named after its founding family, whereas other companies have adopted the name of their international brand, such as last year’s metamorphosis of Matsushita Electric Industries into Panasonic.
Nor has Murata dropped “Manufacturing” from its name. “We are a company that makes things,” explains Tsuneo Murata, its president.
Yet Murata has more reason than most to boast about both its technology and its international success. It is one of the world’s leading makers of components such as capacitors and resistors. While 80 per cent of its manufacturing is in Japan, 75 per cent of sales are abroad.
The company also performs well financially. In its latest full financial year, to March 2008, net profits were Y77bn on sales of Y632bn, and the stock market gives it a value of $10bn.
Asked what characterises his company, Mr Murata says: “Our value chain is long.” Not only its products, but also the machines that make them and the ceramic powder that is the raw material, are designed and produced in-house. Mr Murata refers to a saying of the company’s founder that “good products come from good materials”.
In many areas of electronics, this vertical integration had been replaced by “horizontal disintegration”. Some manufacturers handle nothing but design, with television liquid crystal panels coming from companies such as Samsung of Korea, and assembly managed by Taiwanese outsourcers. Mr Murata attributes the financial success to its continued vertical integration. Vertical integration, he says, also helps the company to innovate. It is built around that fundamental understanding of materials. To grow, Mr Murata says he wants the company’s products to “permeate” into new areas, either using new technology to create a market or existing technology to enter a market where Murata is not present.
Such gradualism is typical of the company. Mr Murata plays down the importance of the family connection, and points out that family’s shareholding is now very small, but does say it allows for long-term planning. “The president does not change and go off in a new direction every three or four years,” he says.
Mr Murata seems disdainful of the idea that his company might be able to use its financial strength to take advantage of the downturn.
He emphasises the importance of maintaining free cash flow rather than seizing market share, buying back shares, or making acquisitions. Investors, he says, are no longer making aggressive demands for cash to be returned to them. The company has been unable to escape the fall in demand for electronic goods. In the year to March 2009, it expects to incur a small operating loss, and to break even at the net level. Mr Murata says he hopes for some recovery in the second half of next year, but with the end of excess consumption in the US there is little chance demand will return to the levels of a year or two ago.
Since Christmas, manufacturing in Japan has all but halted, as the entire supply chain – from retailers to consumer electronics companies to component makers – seeks to adjust its inventory. Mr Murata thinks this process is complete, which implies some recovery in sales once the new financial year begins in April.
Asked about his ambitions, Mr Murata concedes that it is important to grow, but says: “Rather than a military-type system of orders from above, I want a company where people can work on their own initiative.”
It is not the usual message of aggressive growth, but for Murata Manufacturing it has worked so far.
