Profiting from Not Profiteering Diversifying Beyond Copper Rolling Pioneering New Technology

Profiting from Not Profiteering

On September 1, 1923, a magnitude 7.9 earthquake hit the Kanto Plains, laying waste to greater Tokyo and its environs. With nearly half a million homes destroyed by the quake and subsequent fires, the death toll reached more than 140,000. Emergency measures were taken to restore disrupted communications, but the factories of every electric wire manufacturer in the Tokyo area lay in ruin. The only major wire manufacturer in all of Japan unaffected by the disaster was Osaka’s Sumitomo Electric Wire & Cable Works, the forerunner of today’s Sumitomo Electric. With the cost of every commodity imaginable—including raw materials like copper and lead—doubling and tripling in the days following the earthquake, Sumitomo found itself in sole possession of a captive market and could have named any price it wanted for its wires and cable products. What Sumitomo decided to do, though, was to maintain its prices at their pre-quake levels. Moreover, extra shifts were added at its plants to help meet the tighter deadlines brought on by increased demand. “Prime importance on integrity and sound management” and “shall not pursue easy gain or act imprudently”—the Sumitomo Business principles, which was the foundation for the decision, made a profound impression on everyone in the company because of the commitment to the public good and the community it embodied, and Sumitomo Electric Wire & Cable Works quickly became trusted by the public as a first-rate corporation. The impact of this public-service attitude on the company’s later growth should never be underestimated.

Companies around the world were competing to develop new technologies at the turn of the 20th century. Oil filled cables were able to withstand extremely high voltages better than any other type of cables at that time. Sumitomo acquired this new technology through partnerships with other companies. The inventor of the oil filled cable, L. Emanuelle, appears at the center of this photo.

Resources Transformed into Products

The business Sumitomo originally operated on these lofty principles was copper. Prior to the Meiji Restoration in 1868, Japan’s copper industry consisted of little more than the mining and selling of copper ore, either domestically or for export. With the advent of modern industries such as shipbuilding, however, Japan found itself buying back the raw materials it had exported, in the form of products like copper and brass sheets from England. This situation affected not just Sumitomo but the entire Japanese economy, and many argued that developing the ability to manufacture copper products domestically was crucial to establishing a healthy balance of trade for Japan. Thus, it was an earnest desire to contribute to the national good that led to the founding in 1897 of Sumitomo Copper Rolling Works, the precursor to Sumitomo Electric. The Sumitomo family started this venture by purchasing Nihon Seido Co., Ltd., a copper works it had been helping financially. Two years later, it further solidified this foundation by establishing itself as one of Japan’s largest copper rollers in production scale and equipment by acquiring Osaka Seido Co.,Ltd., another copper works with close ties to the Sumitomo family. This was a time when Japan’s electrical, telegraph, and telephone sectors were just beginning to expand and the demand for large quantities of quality copper wire was about to take off.