The Giant Japanese Robot Company You've Never Heard Of

FANUC churns out 6,000 industrial robots per month, double that of its closest competitor. For a company on the cutting edge, it's surprisingly conservative.

FANUC Robot Assembly Demo
FANUC Robot Assembly Demo
Yann Rousseau

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 US entrepreneur did have one 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 corporate headquarters in Oshino, a village at the foot of Mount Fuji, management politely replied that they would be happy to provide Musk with the proper gear, but that their robots had always been yellow and would remain that way. In the end, Tesla got its red robots, albeit from another supplier: the KUKA group of Germany.

In Tokyo, analysts like to tell this anecdote to convey the essence of FANUC: brilliant and high-performing, but also conservative — rigid even. "It's one of Japan's nuggets," says Jeremie Capron, research director at Robo Global. "The group is the world leader in industrial robots and computer numerical control (CNC), but they don't like to venture far out of their comfort zone," he points out.

Morten Paulsen, an analyst with the brokerage and investment group CLSA, agrees. "They are the best in the industry, and they know it. Their margins are exceptionally high at 25% while their competition is at 10%. But they aren't the most innovative machines in the world, nor the most tailor-made."

Recipe for success

The head of the group of companies, Yoshiharu Inaba, takes no offense to such statements. "We focus on the aspects that we can win," the 69-year-old CEO says from his office in Oshino. "The sustainability of the group is our priority."

Inaba follows in the footsteps of his father, Seiuemon Inaba, who launched FANUC in 1972 from a subsidiary of the electronics giant Fujitsu. In his book Walk the Narrow Path, the founder explained that companies should identify their specific area of excellence, then focus on making a limited number of technically superior products that are guaranteed for life but manufactured at the lowest price possible.

The formula worked. FANUC has never been a household name, preferring discretion to self-promotion. And yet, it plays a key role in the production of numerous everyday objects. It's also on very solid financial footing. For the fiscal year ending 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 win.

Over time, it has become a key supplier to some of the world's most important industries, selling some 500,000 robots overall. Major car manufacturers, including Tesla, are often assembled and welded by the six-axis yellow robots. The skeletons of iPhones are dismantled and prepared in its Robodrill machines, with articulate yellow arms equipped with cameras that sort products. FANUC's robots also help with the production of aeronautical components and even apply the varnish — ever so delicately — on Fender guitars.

"In the United States, they have a market share of over 50%," says Morten Paulsen. "Elsewhere, in China, for example, it is between 20% and 25%."

Industry leader

In its 33 production centers in Japan, where robots manufacture more robots in mass production, FANUC has reached phenomenal economies of scale. Analysts say the company's factories are the most automated in the world, producing up to 6,000 robots per month while ABB, its biggest competitor, makes only half that number. Roughly 90% of the robots are shipped abroad, according to Yoshiharu Inaba. And with new sites set to open 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 opportunity for massive growth in front of them," insists Jérémie Capron, noting the relatively slow rate of robotization in China. "In Japan, there are 500 robots for every 10,000 workers. In China, this ration is 50 for 10,000," he explains. "There is still huge room for improvement in the Chinese market, where favorable policies are put in place for automating factories."

The company's conservatism could cost it big time

Inaba agrees. "In the United States too, executives have a very positive attitude towards robotics," the company's CEO explains. He notes that FANUC also relies heavily on high demand in both India and Southeast Asia. And yet, the company has no plans for opening production centers outside Japan.

"The Yen has fluctuated in the past and it will continue to do so. It's normal," Inaba says in answer to critics who suggest that to offset currency-exchange risks, FANUC should locate some of its manufacturing abroad. "But we don't focus on these short-term issues. Instead, we're looking ahead 10, 20 years."

Playing it safe

The CEO says its important to anticipate the overall evolution of the robotics industry. He expects a speed-up, for example, in the so-called "cobots' market. 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 when it comes to these new technologies. Rather than explore new terrain — and invest, for example, in robotics used for agricultural or medical purposes — it prefers to stick with what it knows. "Robots are now coming out of the factories, 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 e-commerce, robots will be needed on this segment and they will require technologies similar to those that FANUC has today," Capron argues.

So far, though, Inaba's not swayed. "Our only expertise is in industrial robotics," he says. "That's not enough to venture into health care or services that require a lot of other knowledge."

Playing it safe is a still a good option as demand from conventional industries remains very strong. Eventually, though, the company's conservatism could cost it, analysts warn. But there will also be an eventual generational shift at FANUC, where Yoshiharu Inaba's U.S.-educated son, Kiyonori Inaba, is being groomed to take the reins. That in itself may push the group to other adventures and further accelerate innovation.

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The Food Truck, A Sign That The White And Wealthy Are Moving In

In San Diego, California, a researcher tracked how in the city's low-income neighborhoods that have traditionally lacked dining options, when interesting eateries arrive the gentrification of white, affluent and college-educated people has begun.

Balboa Park Spring Fling Food Truck festival

San Diego Food Trucks via Facebook
Pascale Joassart-Marcelli

SAN DIEGO — Everybody, it seems, welcomes the arrival of new restaurants, cafés, food trucks and farmers markets.

What could be the downside of fresh veggies, homemade empanadas and a pop-up restaurant specializing in banh mis?

But when they appear in unexpected places – think inner-city areas populated by immigrants – they're often the first salvo in a broader effort to rebrand and remake the community. As a result, these neighborhoods can quickly become unaffordable and unrecognizable to longtime residents.

An appetite for gentrification

I live in San Diego, where I teach courses on urban and food geographies and conduct research on the relationship between food and ethnicity in urban contexts.

In recent years, I started to notice a pattern playing out in the city's low-income neighborhoods that have traditionally lacked food options. More ethnic restaurants, street vendors, community gardens and farmers markets were cropping up. These, in turn, spurred growing numbers of white, affluent and college-educated people to venture into areas they had long avoided.

This observation inspired me to write a book, titled The $16 Taco, about how food – including what's seen as "ethnic," "authentic" or "alternative" – often serves as a spearhead for gentrification.

Take City Heights, a large multi-ethnic San Diego neighborhood where successive waves of refugees from places as far away as Vietnam and Somalia have resettled. In 2016, a dusty vacant lot on the busiest boulevard was converted into an outdoor international marketplace called Fair@44. There, food vendors gather in semi-permanent stalls to sell pupusas, lechon (roasted pig), single-sourced cold-brewed coffee, cupcakes and tamarind raspado (crushed ice) to neighborhood residents, along with tourists and visitors from other parts of the city.

Informal street vendors are casualties.

A public-private partnership called the City Heights Community Development Corporation, together with several nonprofits, launched the initiative to increase "access to healthy and culturally appropriate food" and serve as "a business incubator for local micro-entrepreneurs," including immigrants and refugees who live in the neighborhood.

On paper, this all sounds great.

But just a few blocks outside the gates, informal street vendors – who have long sold goods such as fruit, tamales and ice cream to residents who can't easily access supermarkets – now face heightened harassment. They've become causalities in a citywide crackdown on sidewalk vending spurred by complaints from business owners and residents in more affluent areas.

This isn't just happening in San Diego. The same tensions have been playing out in rapidly gentrifying areas like Los Angeles' Boyle Heights neighborhood, Chicago's Pilsen neighborhood, New York's Queens borough and East Austin, Texas.

In all of these places, because "ethnic," "authentic" and "exotic" foods are seen as cultural assets, they've become magnets for development.

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

A call for food justice

Cities and neighborhoods have long sought to attract educated and affluent residents – people whom sociologist Richard Florida dubbed "the creative class." The thinking goes that these newcomers will spend their dollars and presumably contribute to economic growth and job creation.

Food, it seems, has become the perfect lure.

It's uncontroversial and has broad appeal. It taps into the American Dream and appeals to the multicultural values of many educated, wealthy foodies. Small food businesses, with their relatively low cost of entry, have been a cornerstone of ethnic entrepreneurship in American cities. And initiatives like farmers markets and street fairs don't require much in the way of public investment; instead, they rely on entrepreneurs and community-based organizations to do the heavy lifting.

In City Heights, the Community Development Corporation hosted its first annual City Heights Street Food Festival in 2019 to "get people together around table and food stalls to celebrate another year of community building." Other recent events have included African Restaurant Week, Dia de Los Muertos, New Year Lunar Festival, Soul Food Fest and Brazilian Carnival, all of which rely on food and drink to attract visitors and support local businesses.

Meanwhile, initiatives such as the New Roots Community Farm and the City Heights Farmers' Market have been launched by nonprofits with philanthropic support in the name of "food justice," with the goal of reducing racial disparities in access to healthy food and empowering residents – projects that are particularly appealing to highly educated people who value diversity and democracy.

Upending an existing foodscape

In media coverage of changing foodscapes in low-income neighborhoods like City Heights, you'll rarely find any complaints.

San Diego Magazine's neighborhood guide for City Heights, for example, emphasizes its "claim to authentic international eats, along with live music venues, craft beer, coffee, and outdoor fun." It recommends several ethnic restaurants and warns readers not to be fooled by appearances.

Longtime residents find themselves forced to compete against the "urban food machine"

But that doesn't mean objections don't exist.

Many longtime residents and small-business owners – mostly people of color and immigrants – have, for decades, lived, worked and struggled to feed their families in these neighborhoods. To do so, they've run convenience stores, opened ethnic restaurants, sold food in parks and alleys and created spaces to grow their own food.

All represent strategies to meet community needs in a place mostly ignored by mainstream retailers.

So what happens when new competitors come to town?

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

Starting at a disadvantage

As I document in my book, these ethnic food businesses, because of a lack of financial and technical support, often struggle to compete with new enterprises that feature fresh façades, celebrity chefs, flashy marketing, bogus claims of authenticity and disproportionate media attention. Furthermore, following the arrival of more-affluent residents, existing ones find it increasingly difficult to stay.

My analysis of real estate ads for properties listed in City Heights and other gentrifying San Diego neighborhoods found that access to restaurants, cafés, farmers markets and outdoor dining is a common selling point. The listings I studied from 2019 often enticed potential buyers with lines like "shop at the local farmers' market," "join food truck festivals" and "participate in community food drives!"

San Diego Magazine's home buyer guide for the same year identified City Heights as an "up-and-coming neighborhood," attributing its appeal to its diverse population and eclectic "culinary landscape," including several restaurants and Fair@44.

When I see that City Heights' home prices rose 58% over the past three years, I'm not surprised.

Going up against the urban food machine

Longtime residents find themselves forced to compete against what I call the "urban food machine," a play on sociologist Harvey Molotch's "urban growth machine" – a term he coined more than 50 years ago to explain how cities were being shaped by a loose coalition of powerful elites who sought to profit off urban growth.

I argue that investors and developers use food as a tool for achieving the same ends.

When their work is done, what's left is a rather insipid and tasteless neighborhood, where foodscapes become more of a marketable mishmash of cultures than an ethnic enclave that's evolved organically to meet the needs of residents. The distinctions of time and place start to blur: An "ethnic food district" in San Diego looks no different than one in Chicago or Austin.

Meanwhile, the routines and rhythms of everyday life have changed so much that longtime residents no longer feel like they belong. Their stories and culture reduced to a selling point, they're forced to either recede to the shadows or leave altogether.

It's hard to see how that's a form of inclusion or empowerment.The Conversation


Pascale Joassart-Marcelli is a Professor of Geography and Director, Urban Studies and Food Studies Programs at San Diego State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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