Nagase & Co., Ltd.

1832–1937

Originally a wholesaler and trader of dyestuffs, Nagase & Co., Ltd. is Japan's foremost chemical products trading company. Nagase's four main divisions focus on chemicals, synthetic resins, electronic materials, and healthcare. The company develops, produces, and markets chemical products as well as plastics, semiconductor manufacturing materials and equipment, pharmaceuticals, enzymes, medical and dairy farming equipment, abrasives, and cosmetics. With operations worldwide, Nagase runs an extensive network of subsidiaries and branch offices. It also has business alliances with major companies, including Eastman Kodak Company.

Early Years As a Trader of Dyestuffs: Late 1800s and Early 1900s

Like many other venerable Japanese companies, Nagase traces its history back more than 160 years. The company was originally established as a small family trading enterprise, dealing mainly in dyestuffs that were used to color fabric. Even then Nagase did not function as a manufacturer of commodities, but as a wholesaler/retailer. Although little is known about the founding family, the company was established in Osaka in 1832 at a time when Japan was closed to international relations. Osaka, one of Japan's major pre-industrial centers of commerce, provided an excellent market for Nagase. Many of the area's industries were based in the production and finishing of textiles. As these industries prospered, so did Nagase's small business.

Decades later, when Japan opened its doors to international commerce, Nagase became acquainted with foreign dyes that contained unusual pigments, derived mostly from unique plants and other organic sources along the trade routes of the Middle East, India, southeast Asia, and the United States. At the time of the Meiji Restoration in the 1860s, when Japan embraced an effort to modernize and industrialize along Western models, Nagase experienced another period of expansion. As Japanese textile manufacturers adopted more efficient Western production methods, their output increased. This resulted in increased demand for silk and other fabrics and the dyes to color them. The growth of Japan's production capacity enabled the country to export a wide variety of products. One of the most lucrative at the beginning of Japan's industrial period was textile products. The fine quality of the silk, careful construction, and beautiful pure dyes made Japanese fabrics and clothing extremely valuable in trading.

As the production capacity of resource-poor Japan increased, the economy became increasingly mercantilist. Japanese manufacturers now imported the majority of the resources needed to make a product, and then finished the goods and sold them at a value-added premium. The same situation existed for Nagase, which in 1900 established business ties with the Chemical Industry of Basle, A.G., now known as Ciba-Geigy Ltd. Nagase imported a variety of products from Ciba, but virtually all were chemicals limited to industrial applications. Ciba, meanwhile, had become involved in manufacturing pharmaceuticals, a few of which Nagase later handled.

By 1917 Nagase had outgrown its heritage as a family company. In order to expand, the company required massive sums of money that could not be satisfied through conventional investment loans. In December of that year the company was formally incorporated. The majority of shares remained in family hands or were purchased by banks and other large corporations.

To establish better ties with emerging chemical industries in the United States, Nagase had set up a sales office in New York City in 1915. From this office, Nagase could better observe developments in the American chemical industry and quickly establish purchase orders and sales agreements for new products. The office marked a major success in 1923 when Nagase established an important trading relationship with Eastman Kodak Company, a manufacturer of chemicals and photographic materials. The importance of Nagase's agency business grew dramatically in 1930 when the company reached an agreement with the Union Carbide Corporation to market that company's products in Japan. A few months later Nagase established a similar agreement with the Swedish chemical concern Aktiebolaget Separator, now known as Alfa Laval AB.

Surviving the War Years: Mid-1900s

Japanese industry continued to grow at an enormous pace through much of the 1930s as Japanese industrial companies began to exploit the massive natural resources of neighboring countries, such as Korea and Taiwan, which were occupied by Japan. By 1937, however, Japan turned toward military adventurism, by invading China and, ultimately, the rest of Asia. With Japan on a war footing, called the "quasi-war economy," many of Japan's principal industries came under direct government control. Nagase, a major company in the chemicals industry, also was committed to war production. The primary nature of its business, however, was in trading. A trade embargo from the United States cut off Nagase's supply of American products, and the war in Europe virtually eliminated business with Ciba and other firms located in England and Germany.

Sales for the fiscal year ended March 31, 2003, reached $4.2 billion, an increase of 13.6 percent compared with the previous year.

1952–1989

But Nagase did manufacture a small quantity of products under license agreements. As long as raw materials were available, the company could remain in production. It managed to stay in business through much of the war, manufacturing coloring agents for military uniforms, flags, camouflage, and clothing. By the end of the war, Nagase was less devastated by bombing than by the complete unavailability of raw materials. The firm was effectively closed even before the armistice was concluded.

The managerial leadership of many companies, primarily the zaibatsu conglomerates, were subject to review by war tribunals. Many lost their positions, but few were imprisoned. Nagase, for its small and mostly involuntary role in the Japanese war effort, was spared from these investigations. Faced with rebuilding the Japanese economy, many industries picked up where they left off. Once again, the textile industry emerged as an engine of growth for the economy because its factories survived the war and there was both strong domestic and foreign demand for the products. With trade restrictions eliminated, Nagase was able to resume its import agreements with numerous manufacturers. Nagase also rebuilt its non-dye operations, providing crucial chemicals and chemical technologies to a variety of industries, including ferrous and nonferrous metals manufacturing, paint, and other compound manufacturing. The company's position in this area was strengthened in 1952 when it expanded its agreement with Eastman to include trading contracts with Eastman Chemical Products.

The 1950s was a period of strong growth for Japan's basic heavy industries. Companies in these fields laid the foundation for many new industries, including ship and vehicle manufacturing, electronics, and chemicals. Nagase's role in this period was primarily that of supplier, providing the necessary ingredients for paints and other treatments that finished large machinery. As volume increased, so did the demand for specially engineered products with unusual qualities and tolerances. This gave rise to additional contracts with foreign companies, bringing high-technology compounds and processes to Japan and firmly establishing Nagase's position as a market leader in high-tech chemicals.

Nagase gained a listing on the Osaka stock exchange index in 1964, enabling a wider variety of primarily local private investors to become owners of the company. Five years later Nagase was listed on the larger Tokyo index, and shares in the company were traded nationally and internationally.

Building Strategic Partnerships: 1960s-Early 1990s

In 1968 Nagase concluded an exclusive distributorship with General Electric Company of the United States, handling a variety of that company's products in Japan. Three years later, General Electric and Nagase established a plastics manufacturing joint venture called Engineering Plastics, Ltd. This important agreement was followed by the formation of a special joint venture with Ciba-Geigy in 1970. Nagase re-established its relationship with Ciba-Geigy immediately after World War II, when the Swiss company was divested from the German pharmaceutical combine IG Farben. Ciba remained one of the world's leading chemical engineering companies, and was a major supplier and licenser of Nagase. Nagase established a third joint venture company in 1974, called Landauer-Nagase Ltd. Nagase's partner in the venture was the American company Technical Operations, Inc. (later called Landauer, Inc.).

During the 1970s, Nagase strengthened its position in the international market as a supplier of proprietary engineered compounds and processes. Foreign offices were no longer established with the single aim of gaining distribution of production rights. Instead, Nagase was now competing in foreign markets as a supplier. The company set up two subsidiaries in 1971, Nagase (Hong Kong) Ltd. and the Nagase America Corporation. The company established another subsidiary, Nagase Singapore (Pte) Ltd., in 1975. In 1980 the company opened an operation in Germany, Nagase Europa GmbH, and a second office in Singapore called Chang Fong Overseas Enterprises (Pte) Ltd. Rounding out its expansion into southeast Asia, the company established Nagase (Malaysia) Sdn. Bhd. in 1982. Nagase subsequently opened new offices in the United States, Taiwan, Korea, England, Holland, Thailand, Canada, India, and Indonesia.

In 1988 Nagase received an award from the Ministry of International Trade and Industry, Japan's government agency charged with industrial coordination. Nagase was awarded for its contributions to international trade through import promotion. This was an unusual and important commendation in light of Japan's much larger and often maligned export industries.

In 1989 the bulk of Nagase's business was still in the distribution of other company's products, leading to a decision to establish a new Science and Technology Foundation and a Research and Development center at Kobe. These research institutes were dedicated to testing existing processes for improvement and developing new biotechnologies and organically engineered chemicals. This marked an important turn in Nagase's mission; the company was no longer interested in merely handling another company's products. The lead time required to yield such technological breakthroughs was long. In addition, it took many years to assemble a qualified staff that could properly channel the group's energies toward a successful discovery. The primary focus of the group was the development of organic chemical products.

1990–2005

In 1990 Nagase set up a plastics manufacturing operation in Taiwan called Nagase Wah Lee Plastics. This facility manufactured plastic compounds for several manufacturers in Taiwan that produced computer and electrical appliance casings and other products. In April 1992 Nagase reintroduced itself to the chemical industry as a "technical information trader," promoting a new group of five subsidiary companies: Nagase Electronic Chemicals, Teikoku Chemical Industries, Nagase Chemicals, Nagase Biochemicals, and Nagase Fine Chemical. These companies formed the crux of Nagase's effort to pioneer biochemicals and organic compounds.

Amidst all these changes, Nagase remained under the control of the founding family. Shozo Nagase, who oversaw much of the company's expansion during the 1960s and 1970s, served as chairman. Hideo Nagase, another descendant of the company's founder, was president. Over the course of more than 160 years, Nagase had grown into one of Japan's largest chemical companies. Dyes and pigments for fabric, paper, and detergents comprised 10 percent of the company's sales volume, while fine and industrial chemicals--including pharmaceuticals, cosmetics, and biochemicals--comprised 38 percent. A further 42 percent of Nagase's sales were derived from plastics used in the automotive and electronics industries. The remainder of Nagase's sales came from electronics, machinery, medical systems, and cosmetics.

Nagase was one of the first Japanese companies to make the foray into biochemicals. With the practical experience of its manufacturing affiliates and sales operations and the strength of its research institute, Nagase was a leader in these technologies. The company had been successful in laying the foundation for diversification and indigenously developed chemical technologies. It was hoped that, in the future, this would enable the company to distance itself from lower-margin license production agreements with other companies and to develop its own more profitable patented products and processes.

Continued International Expansion and Diversification: Mid-1990s-2000s

With the decline of the Japanese economy in the 1990s, Nagase looked toward international investments to boost its bottom line. It planned to expand aggressively in China and southeast Asia and to introduce innovative and desirable new products. In the late 1990s Nagase changed its corporate structure to reflect four core businesses: dyes and chemicals, synthetic resins, electronic materials, and healthcare. It folded its beauty product and medical system divisions into healthcare and streamlined its chemical division. No longer content to be viewed simply as a trading company, Nagase decided to promote itself as a marketing company--a company that was not only involved in trading but also in research and development, manufacturing, and marketing.

Foreign expansion, particularly in east Asia, kept Nagase busy. In 1997 the company established Nagase Philippines Corp. and Shanghai Nagase Trading Co., Ltd., and the following year it founded P.T. Nagase Impor-Ekspor Indonesia. Nagase planned to push its chemical products, as demand was expected to increase in the Asian market.

For the fiscal year ended March 31, 1999, Nagase reported sales of ¥490 billion, down from ¥538 billion in 1998. In 2000 Nagase's sales rose to some ¥568 billion.

In 2000 Nagase struck a deal with British chemical manufacturer Laporte PLC to purchase pharmaceutical and agrochemical raw materials for the Japanese market. It was anticipated that the Japanese pharmaceutical market would look increasingly to foreign suppliers for raw materials, and Nagase's agreement with Laporte put it ahead of the game. The company hoped to attain sales of ¥3 billion annually from the deal beginning about 2005.

Nagase continued to work on self-improvement and reorganization, and in early 2001 the company underwent additional restructuring to boost productivity and profitability. In addition to continued overseas expansion, Nagase planned to invest more heavily in electronics and healthcare. The company consolidated several divisions to streamline operations, including combining production companies Teikoku Chemical, Nagase Biochemicals, Nagase Chemicals, and Nagase Chemtex into one company--Nagase ChemteX Corp. Nagase also pushed for joint ventures.

2001–2004

Fine chemicals, such as pharmaceutical chemicals and synthetic dyestuffs, was another area in which Nagase hoped to expand. It set out to push fine chemicals aggressively in the Asian market, and in 2001 Nagase formed Nagase Finechem Singapore (Pte) Ltd. The company divided its Asia sales areas into two regions: Greater China, which encompassed China, Hong Kong, and Taiwan, and the ASEAN zone, which included Singapore and surrounding areas. Sales in the combined zones totaled some ¥60 billion per year in the early 2000s, but the company's goal was to reach about ¥150 billion per year in the Greater China region and ¥100 billion in the ASEAN sector by the mid-2000s.

In other Asian news, Nagase founded a new business in China to produce synthetic resin trays. The trays, which were used to move electronic parts, would be sold to Japanese companies with manufacturing plants in China. Nagase planned to launch operations in March 2002 and to produce some 1,500 tons of resin sheet per year. Nagase hoped for sales of ¥1 billion in 2004.

In 2001 Nagase formed a joint venture in China with Japanese company Kurabo Industries Ltd. The venture, called Guangzhou Kurabo Chemicals Co. Ltd., manufactured urethane products for use in the automobile manufacturing industry. The venture planned to sell its products to Japanese car makers doing business in China beginning in October 2002.

In healthcare, Nagase formed a company with Fujikura Kasei and UMA known as Nippon U.N.F. The companies planned to establish a joint venture with a Chinese producer of analytical chemicals and reagents with the purpose of manufacturing biochemical diagnostics for the Chinese market, which was estimated to grow greatly. The venture, Shanghai Shesuo UNF Medical Diagnostic Reagents Co., marketed its products to hospitals and aimed for sales of ¥500 million within the first few years of operation.

In September 2002 Nagase announced plans for its eighth production facility in China--an adhesives and electronics materials production company to be called Nagase ChemteX (Wuxi) Corp. Also that year Nagase expanded its U.S. holdings by establishing Nagase America Corp. and Nagase Plastics America Corp., a designer of autoparts, such as airbags, instrument panels, and dashboards. In addition, Nagase set up a representative office in Hungary.

Nagase proved it was flexible enough to change with the times. It had transformed itself from a dyestuffs trader to a full-service chemical and electronic products company. Although chemicals and plastics accounted for 70 percent of sales in 2003, healthcare and electronics products were growing rapidly. Still run by the Nagase family, the company understood what was necessary to remain successful. Sales for the fiscal year ended March 31, 2003, reached $4.2 billion, an increase of 13.6 percent compared with the previous year.