A global leader in energy-efficient power electronics technology and a pioneer in large photovoltaic (PV) inverters, Toshiba Mitsubishi-Electric Industrial Systems Corporation (TMEIC) develops advanced products by quickly capturing market needs and combining strengths of its parent companies. President & CEO Masahiko Yamawaki explains the company’s recent achievements in its PV ventures and the great potential it sees in the US, India and China for its products.
TMEIC was founded in 2003 and has rapidly grown to become a top manufacturing company in Japan. TMEIC received the 2014 and 2015 Global Company of the Year Award in the PV inverter category for the second consecutive year. Could you provide a general overview of TMEIC today?
In terms of scale as a company, TMEIC generated consolidated net sales of $2.3 billion in fiscal 2015. Approximately 40% of this amount is made up of overseas business, and we have approximately 3,500 employees worldwide.
TMEIC was established in 2003 as a joint venture between the Toshiba Corporation and Mitsubishi-Electric Corporation as a systems integrator through integrating businesses in industrial fields centering on motors and drive systems. However, as reflected by winning the Frost & Sullivan Global Company of the Year Award for the second consecutive year, TMEIC is currently performing favorably in the renewable energy field and captures the world’s top level of market share, particularly for large-capacity PV inverters. Currently, the ratio of our businesses in industrial fields and other businesses, including renewable energy, is approximately 60% and 40%, respectively.
Currently, TMEIC is operating debt-free and recording net assets exceeding $1 billion as a result of realizing steady and sound development after being spun off from our parent companies. For the current fiscal year, we are anticipating around $2.4 billion in sales.
Amid circumstances in which the population is expected to decrease over the long term, we cannot expect significant growth in the Japanese market, including capital investment in Japan. For this reason, I realize how we promote globalization is going to be a key point.
As a joint venture, TMEIC has been fortunate to have two of the most well-known technology/manufacturing companies, Toshiba and Mitsubishi, as parent companies. What are TMEIC’s unique advantages and competitiveness globally, and how do you create synergies between your parent companies and your company?
In terms of TMEIC’s overall unique advantages and competitiveness globally, our major strength is our power electronics technology, which is the highest level in the world. Specifically, companies that possess the world’s leading technological capabilities in the large-capacity field are limited to certain Western companies as well as TMEIC. At the same time, our parent companies, as manufacturers of the world’s leading-edge power electronics devices, are also a great advantage for TMEIC.
Power electronics technology is a crucial element for power efficiency used in various applications in industry and society, such as motor drives, DC/AC converters for PV generation, uninterruptible power supplies (UPS), DC power transmission, and even power for superconducting power applications. We believe this is the area in which we can contribute the most globally.
Generally, it is rather difficult to find successful 50/50 joint-venture companies. TMEIC was founded with two industry giants as parent companies and both have their own corporate culture. However, rather than taking the cultural history behind both companies, we wanted to create a completely distinct entity and Toshiba and Mitsubishi Electric have allowed us to go our own way. This is one of the major reasons why we have been able to achieve a relatively favorable performance since our foundation in 2003.
What are the factors that contributed to TMEIC becoming successful in the areas in which it operates?
One of the key factors for TMEIC’s success was just after 2003 when investment in the Chinese metal industry increased sharply, and we were lucky enough to catch up with this huge demand. In fact, the four years from 2006 to 2009 were the golden age of our metal business, which in turn resulted in a strong financial performance and helped us come together, even as a relatively young company.
Another major growth factor was that we quickly focused and took the initiative on the renewable energy field. Our team realized the energy landscape was going to change after the Great East Japan Earthquake, and TMEIC witnessed a strong transformation after taking a sharper turn towards the renewable energy sector, especially in the field of PV inverters. This quick shift of our R&D focus allowed us to rapidly develop and bring to the market new products, which definitely helped sustain our growth as a company over the past four years.
TMEIC is a prime example of innovation in action. Can you tell us about how you promote innovation inside TMEIC?
TMEIC fully embraces innovation and manufacturing, and has a very strong and clear vision. We understood from very early on what the market needed and what products to produce. We sought the support of our parent companies and the technical support staff within these companies to create the right products and enter the market at the right timing. This is particularly true for PV inverters.
The key is to develop advanced products by quickly capturing market needs. For example, we recognize ourselves as being a pioneer in large PV inverters with a single unit capacity exceeding 1MW, but are currently developing an ultra-large-capacity model because the market is recently beginning to shift more towards MW power stations than ever before.
In that sense, our strength is the fact we are a group of specialists possessing an extensive range of world-class power electronics technologies. As an example, we were ahead of other competitors to launch large-capacity PV inverters into the market by applying a UPS circuit design. It gave us a huge advantage against competitors who had to develop the same products from scratch. Additionally, it is also essential that we are able to utilize the world’s leading-edge power electronics devices of our parent companies, plus we have a huge advantage of being able to participate from the stage of developing these devices. These are TMEIC’s strengths that may not have been realized if Toshiba and Mitsubishi Electric had remained separate, or in other words, if the technological resources remained polarized.
As CEO, I am always trying to encourage our employees to stay on the periphery of our business and to always try and understand what our customers’ demands are, as well as what is happening in the industry. Everybody should have an opinion of what should be done and the kind of needs that must be met. The most important thing is to be agile and always be on the forefront of the business segment in which they are engaged.
Last year COP 21 took place in Paris, and this year we had the G7 summit in Mie, Japan, putting environmental issues at the center of the global agenda. Next year will mark the 20th anniversary of the Kyoto Protocol. As your company’s slogan is “We Drive Industry,” how are you also driving sustainability?
We are currently placing an emphasis on contributing to energy saving by making use of products such as high-efficiency inverters and high-efficiency motors. We call this concept “Triple-E (3E),” which refers to “Energy,” “Efficiency” and “Ecology.” Our aim is to generate and use energy efficiently, and in turn, contribute to developing sustainable infrastructure systems while also giving consideration to the environment.
We believe that our customers are starting to move away from merely assessing the value of initial investment, such as the cost being moderate or upgrading their facilities. They are instead shifting towards making a comprehensive evaluation by focusing on products or systems that can be used over a long term without breakdowns and taking into account running costs such as high-energy efficiency when the facility is in operation.
In this way, we believe providing the best solutions that attain recognition across the board is our mission and our role in sustainability. Simply put, our aim is to earn a reputation that TMEIC products will not breakdown and use less power, which ultimately benefits customers in saving costs if they are planning on using the facilities in the long run for more than 10 years.
Our focus is, first and foremost, on energy efficiency, followed by energy storage. By applying our products in an energy-efficient manner, we believe we can drive sustainability throughout the world.
In 2016, your company built a $1.5 million photovoltaic (PV) inverter test facility in Salem, Virginia. Can you tell us about TMEIC’s R&D investments globally?
In North America, where our market share of large-capacity PV inverters has grown, it is important for us to have production facilities in the market where we operate, so we can serve our clients better.
We develop technologies in Japan so we can support local parties and enable them to develop innovative solutions based on our technology. Every market has different regulations that vary from industry to industry, so it is essential for us that we localize our solutions in order that they can be adopted in each local market. In this regard, we have already supplied hundreds of megawatts of PV inverters and are working with US customers to use our battery storage technology.
TMEIC received its first order of 1,500V PV inverters. What are the uptakes of this technology? Why is it taking root so well in the United States?
The American market is very important for us. TMEIC was the first Japanese company to receive an order for 1,500V system PV inverters in the US market, which can be attributed to its growing reputation from customers as evidenced by TMEIC’s proven sales track record in the global market. Our performance achieved through our expertise, such as fan-less cooling technology employed in view of installing equipment in the desert, as well as quality and reliability, are highly regarded.
Our ability to adapt quickly is another pillar of our success.
Would you tell us the future development and vision of TMEIC in the global market, including the United States?
TMEIC designates North America as our most important market. Net sales in North America were around $400 million in fiscal 2015, which is the largest amount by regional segments. Last year, TMEIC also built a local factory in Houston to produce power electronics products such as PV inverters.
While the American market does comprise a large part of our market, at present we are expecting most of our growth to come from emerging countries. India is another strategic area, in which we are investing $100 million. In addition to building and starting up operations of a motor factory in Bengaluru in March 2016, TMEIC also acquired an Indian subsidiary of Europe-based AEG Power Solutions BV and commenced local production of power electronics products, including PV inverters, in 2014. The acquired power electronics factory has since exceeded its production capacity and the construction of a new factory is underway, with operations slated to start from July 2017. We are also anticipating an increase in demand from China for mass storage and already have factories there and are expanding capacity.
What strategies are you implementing to potentially prospect new partners to find new clients to install your products with?
Before TMEIC was founded, Toshiba had a local partnership with GE in the North American market, so when we started this company, we inherited that subsidiary and immediately had a strong partner.
Additionally, in India, we took our technological know-how and dispatched our staff to India to make sure that both production facilities and manufacturing methods were based on Japanese technology. We successfully changed the products to meet local market requirements. When we first acquired AEG's Indian subsidiary, we had about four to five units of product per month and now we are looking at almost 200 units per month at the maximum.
TMEIC has already seen considerable growth. As a new CEO in a new position, what do you hope to accomplish and what would define success for you in the next five years?
I hope to realize our goal of achieving consolidated net sales of $5 billion over the next five years by fiscal 2020, which means we are looking at an increase of more than doubling our current net sales. Of this amount, we are seeking to realize net sales of $3 billion on a non-consolidated basis. For this reason, we intend to expand our sales overseas through promoting local production and “out-to-out” business, which involves manufacturing products at our bases outside Japan and selling these products outside the countries in which products are being manufactured. Right now we are very fortunate and in a very good position, but we have to continue to focus on improving our products and adapting them to local markets. Most importantly, rather than just keeping pace with trends, we have to continue to firmly drive our success.
The market is very fragile and very susceptible to changes, including any given changes in government regulations. In a certain way, we need to expand our business portfolio. That is also a very important element.
As a final message, what would you like to communicate about TMEIC?
TMEIC is a very open-minded company. The most important thing for me is to facilitate successful client outreach and find companies in the United States who we can work with. We are not simply selling our products but also seeking the potential of forming partnerships. We are always looking into new approaches in which we can tie-up with companies.
TMEIC is more than just a PV inverter manufacturer because we are very adaptable. Our key strengths of power electronics, motors and system integration allow us to constantly consider new pillars for our business, whereby we will continue to be a top player in the industry. We aim to be a leader in the power electronics business segment as a whole and to develop new applications in line with local demand.