rick@cs.arizona.edu (Rick Schlichting) (06/18/91)
[Dr. David Kahaner is a numerical analyst visiting Japan for two years
under the auspices of the Office of Naval Research-Asia (ONR/Asia).
The following is the professional opinion of David Kahaner and in no
way has the blessing of the US Government or any agency of it. All
information is dated and of limited life time. This disclaimer should
be noted on ANY attribution.]
[Copies of previous reports written by Kahaner can be obtained from
host cs.arizona.edu using anonymous FTP.]
To: Distribution
From: David K. Kahaner, ONR Asia [kahaner@xroads.cc.u-tokyo.ac.jp]
Re: Comments on Japanese Success in Mechatronics (F. Kodama)
18 June 1991
This file is named "mechatrn"
ABSTRACT. The impact of Mechatronics on Japanese technology as viewed by
F. Kodama (National Institute for Science and Technology Policy) is
summarized.
In Tokyo, the US Embassy's Office of S&T Affairs (Science Office) has
prepared the following report on Mechatronics. It was prepared by policy
experts and written for other educated non-scientists. I have made a few
modifications to make it more suitable for this distribution.
THE MECHATRONIC REVOLUTION 1975-85 AND TECHNO-PARADIGM SHIFT: 1985-PRESENT
I SUMMARY AND CONCLUSION
1. According to a leading Japanese expert in technology policy, the
manufacturing sector in Japan is undergoing a major transformation in
which priority has shifted from production to R&D--from producing things
to producing knowledge. Symptomatic of this change is that since 1986
annual investment by the manufacturing sector in R&D has outstripped
investment in plant and equipment. Indeed in the fiscal year ending
March 30, 1990, industry increased its R&D outlay by an extraordinary 14
percent--leading to the observation that R&D investment is determined no
longer by expected rates of return but by the necessity of survival in
the hotly competitive Japanese market. (R&D spending by U.S. industry in
1989 declined in real terms.)
2. Generating the capital resources that fueled this transformation was
the massive adoption of flexible manufacturing systems (FMS) from the
mid-1970's to the mid-1980's--the so called mechatronic revolution.
Mechatronic refers to the combination of machine and computer, and is
used to describe manufacturing system based on numerical controlled
machines and industrial robots. The structure of the Japanese
manufacturing sector, where a few large manufacturers work in close
cooperation with very many small and medium size enterprises (SME's), was
particularly adaptable to mechatronics. FMS offered small firms the
capability of producing a wide variety of products in small batches with
high quality assurance. Indeed FMS distributers targeted SME's driving
volume up to bring prices down. In little more than a decade, the
diffusion of FMS among manufacturers of machine tools, bending machines,
printing and bookbinding, and robots reached 30 percent (considered
saturation). In the same period, the Japanese machine tool industry rose
from fourth to first in the world. By 1986, FANUC produced 50 percent of
the world's controllers and was returning much of its 40-percent profit
margin to R&D.
3. The above analysis, if roughly accurate, would pose serious
implications for U.S. technological competitiveness in the 1990's. With
superior production technologies, both installed and in development, and
with little pressure from stockholders for a quick return, Japanese
manufacturers can continue to pour their high before-tax profits into R&D
at home and abroad. Indeed, given the competition they have no choice.
The techno-paradigm shift- -that more production leads to more R&D leads
to more production, etc.--seems to be moving toward Japanese and away
from American manufacturers.
II INTRODUCTION: WHY IS PRODUCTIVITY AND INDUSTRIAL R&D SPENDING SO
HIGH IN JAPAN?
4. One of the core questions in analyzing Japanese technology policy is
how Japanese manufacturers developed such prodigious rates of growth in
the 1970's and 1980's. Japanese industry was then well beyond the post-
war recuperation period and had already reached a technological par with
manufacturing in Europe and the United States. Unlike, for example, in
Germany, there is no particular stress on production engineering in the
Japanese education system nor is there a nationwide network of federal
research institutes designed to foster production engineering in
industry. Global marketing prowess. The quality and dedication of
Japanese management and work force, and government support have often
been cited in explaining the success of Japanese manufacturers. However,
such qualities exist in many industrial sectors in other countries. The
question then comes down to whether there was a technological explanation
for the Japanese success.
5. A more recent question arose when a government agency reported that
Japanese industry had increased R&D investment in the year ending March
1990 by an astounding 14 percent. In comparison, U.S. industry increased
R&D spending in 1989 by only three percent which in real terms represents
net decline. Moreover, Prof. Fumio Kodama, Research Director of the
National Institute for Science and Technology Policy, writing in a
feature article in the Japan Economic Journal, calculated that starting
in 1985 or 1986, annual investments by Japanese manufacturers in R&D
exceeded their investments in plant and equipment. Kodama concluded that
the change represented a permanent transformation of the Japanese
corporation from "a place for producing things to a place for producing
knowledge."
6. To test out Kodama's views on the questions of R&D spending and
Japanese success in production technologies, members of the US Embassy
Science Councillor's office met with him for lunch on December 28, 1990.
Soon to undertake successive year-long visiting professorships at Harvard
and then Stanford, Kodama is generally considered the preeminent expert
in Japan on science and technology policy. He presented his visitors
with an advance copy of his book "Analyzing Japanese High Technologies:
The Techno- Paradigm Shift" to be published this spring by printer of
London.
III THE MECHATRONIC REVOLUTION: MASTERING MANUFACTURING TECHNOLOGIES
7. Kodama ascribed the productivity and quality control of Japanese
manufacturers to the mechatronic revolution, beginning in the early 1970s
and reaching maturity by the mid-1980's. Mechatronics is a term coined
in Japan to refer to the marriage of machine with computer, specifically
the development of flexible manufacturing systems (FMS) based on
numerical controlled machines and industrial robotics. For Kodama, the
structure of the Japanese manufacturing industry was peculiarly suited to
mechatronics. That industry consists of a few giant manufacturers
dependent on very many small and medium size enterprises (SME's) for high
quality components. The closeness of "the keiretsu" facilitates the
transfer of technology from the large firms to the SME's and, perhaps
more important, provides the SME's assurances of sales to enable the
SME's to make long-term investments in new technologies. Those
assurances are made in a highly competitive environment where quality and
on-time delivery are necessary for survival. Hence the SME's had both
the financial resources and the motivation to invest in FMS.
8. FMS fabricators like FANUC targeted SME's. By increasing
production, they were able to decrease prices to the level that SME's
could afford. By 1986, FANUC produced half the world's production of
controllers. Such volume gave FANUC profit margins of 40 percent before
taxes, enabling it to invest more in R&D; e.g. to produce custom chips.
9. FMS provided SME's the capability to produce small batches of a
diversified range of products. Parallel advances in precision tooling
and materials as well as the requirements of FMS led to sharp
improvements in quality control. In order to produce a new or redesigned
product, operators could reprogram the controller rather than retool or
replace the machines. Fewer workers were needed in the plant. The need
to replace machines lessened. Consequently, costs dropped and
reliability increased. The Japanese machine tool industry went from
fourth in 1975 (behind the USSR) to first in the world by 1985. Also by
1985, Kodama estimated that the diffusion of mechatronics had reached 30
percent in the machine tool, metal bending, and industrial robots
manufacturing--a level he considers at saturation.
10. Some of this success Kodama attributes to the GOJ, through low
interest loans by the bank of Japan and through the programs of MITI. He
notes that MITI sponsored in 1971 new legislation combining a law on
electronics with another on machine building. MITI's rationale was "the
consolidation of machinery and electronics into one." MITI has also
organized and supported R&D projects with industry creating over 75
engineering research associations, partially or fully funded by MITI.
Although unclear from their title, many of these projects include
manufacturing technology, for example, the VLSI project (Very Large Scale
Integrated Chips) which centered on how to manufacture the machines used
to manufacture chips and to produce silicon crystallization. The $200M
US VLSI project lasted from 1976 to 1979 and ended dependence on foreign
sources for those machines as well as introduced new firms to
microelectronics.
IV R&D AND THE TECHNO-PARADIGM SHIFT
11. For Kodama, the mechatronic revolution set the stage for a
transformation of typical manufacturing companies from a place that used
R&D to support production to a place where R&D became its central
function, and knowledge its primary product. This transformation he
calls "the techno-paradigm shift." Whereas the period 1975 to 1985 was an
era when technological development served economic growth, the period
1985 onward is an era when economic growth serves technological
development. Symptomatic of the transformation is that from 1986 annual
investment by the manufacturing industry in R&D exceeded its capital
investment. Indeed by 1987, investment in R&D exceeded capital
investment by 27 percent.
Table: Time-series of R&D expenditure compared with capital investment of
all Japanese manufacturing companies (billions of yen)
Year R&D Capital R&D/Cap.
Expenditure Investment Ratio
1980 2,896 4,65l 0.62
1981 3,374 5,161 0.65
1982 3,756 5,099 0.74
1983 4,257 4,762 0.89
1984 4,777 5,788 0.83
1985 5,544 6,110 0.91
1986 5,740 4,896 1.17
1987 6,101 4,860 1.26
Source: MITI for capital investment, and Prime Minister's Office
for R&D expenditure.
12. Moreover, if investment in building and equipping laboratories and
research facilities is factored out of the total for capital spending,
R&D exceeded capital spending first in 1985, and by 1987 did so by 47
percent. In the U.S., by contrast, R&D spending exceeds capital
investment in only a few firms (four of the top 50 U.S. manufacturing
companies in 1982).
13. Kodama sees several reasons for the shift of emphasis from
production to R&D. First, the ability of the new systems to produce new
products without the need for changing machines further reduced the need
for investment in equipment. Second while corporate diversification in
Japan is low, technological diversification is relatively high.
Industries facing slow growth use R&D to develop entirely new product
lines: e.g. the textile industry moving into carbon fiber materials, a
copper cable company into fiber optics, and steel companies into
semiconductors.
14. Third, in Japan's hotly competitive market, R&D investment decisions
are no longer based on predicted rates of return but on the need to
survive. If a company misses a wave of innovation, it may find itself
eliminated for the future from an entire product line. For example, in
semiconductors several American firms in the top ten were eliminated from
the field six years later. Fourth, MITI has been relatively successful
in selecting technologies for development by organizing industry
government research consortia (over 75) and by interesting companies in
new fields; e.g., Nikon in optoelectronics devices. Comment: In addition
many major Japanese manufacturers enjoy relatively large pre-tax profits
which they are not under pressure to return quickly to stockholders and
which are available for investments in R&D. They are also reluctant to
become dependent on competitors for key component technologies. Thus
each of the six or seven manufacturers of cellular phones is developing
on their own a key GAAS integrated circuit already developed by Toshiba.
15. Kodama was somewhat equivocal on the role of MITI in both the
mechatronic and the R&D stages. He grants the importance of MITI's
strategic analysis of key technologies to be developed and the
effectiveness of MITI's government- industry R&D projects. He himself
chaired such a technology targeting committee which by way of example
found in a poll of experts that the fields deemed most likely to see
major advances in the 1990s were optoelectronics, computer/information
systems, new materials and biotechnology. He was also impressed with
MITI's success in introducing firms to new fields of manufacturing
through their participation in the engineering research consortia and in
transferring technology developed in its R&D projects to industry. Yet
in the end, he finds it hard to identify MITI projects which produced
specific technological products of major significance. MITI's role
becomes one of achieving intermediate or process objectives, enabling
industry to carry the process to commercial fruition. Success in
achieving such process objectives is difficult to evaluate. He added
also that R&D consortia have been developed by NTT in telecommunication
and NHK in developing HDTV.
--------------------------END OF REPORT-------------------------------