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NAGOYA, Japan — Mitsubishi Electric builds robots and other machines that can run other production lines on their own at a century-old factory the size of six baseball stadiums in central Japan.
In one automated station, the length of a pool table, gears swing, whirr and spin, connecting components to a printed circuit board at speeds of up to 20 parts per second and then self-checking for proper soldering. Some of those boards will in turn be turned into industrial robots that the factory produces for local automakers, Taiwanese smartphone assemblers and South Korean chip makers.
Mitsubishi Electric's Nagoya Works, the Tokyo-based company's largest factory by number of employees, has been an unsung hero of Japan's postwar manufacturing-driven growth and the rise of East Asia more broadly to the world's manufacturing hub. These days, factory automation brings Mitsubishi Electric less revenue than selling air conditioners or automotive equipment, but it's more profitable.
In the fiscal year that ended in March, factory automation made as much operating profit as air conditioning, even though the robotics division made only half as much. Mitsubishi Electric predicts that through March 2026, the business will grow faster than its other major divisions, except for its small aerospace and defense division. It aims to generate 1 trillion yen ($7 billion) in annual revenue from factory automation within three years. nearly doubled the unit's profit margin from 11.6% to 20%.
Earlier this year, Jefferies analyst Sho Fukuhara raised his price target for Mitsubishi Electric shares to about 50%, citing expectations that “a cyclical recovery in the Factory Automation business, a key profit driver, will lead to record profit margins this year.” fiscal year.
However, ahead of this expected uptick, the factory automation division is under pressure from a slowing economy in key market China and disappointing sales of electric vehicles in many other countries where the manufacturers are also important customers.
But Mitsubishi Electric believes the long-term outlook is bright.
“Demand for automation is a long-term trend not only due to population decline in major manufacturing economies such as China, Taiwan and South Korea, but also as the market shifts from mass consumption to small quantities of many products.” Takahisa Tanaka, head of Nagoya Works, said this last month.
The International Federation of Robotics predicts that developing Asia will be the main driver of demand for factory automation systems. While some countries are beginning to experience labor shortages amid aging populations and workers preferring non-manufacturing jobs, the penetration of robots in the region remains low.
But competition to sell automation systems in these markets is fierce, with Chinese robot manufacturers a rising force in the industry. Damian Thong, head of Japan equity research at Macquarie Capital Securities, said: “The challenge is that everyone sees the same opportunity. Everyone sees India and Southeast Asia.”
Robots and other factory automation systems generate less revenue for Mitsubishi Electric than sales of air conditioners or automotive equipment, but are more profitable. © Getty Images
Describing the Japanese company's stock as an “outperformer,” Thong added that Mitsubishi Electric “needs to improve its products and streamline its costs to make sure it is competitive with Siemens and ABB in these markets.”
In more developed economies, Mitsubishi Electric's automation and control devices are used by Foxconn and Samsung Electronics to transport products on assembly lines and Amazon.com warehouses.
One of the company's machines can drill 6,000 holes per second at various depths on multilayer printed circuit boards. A 3D laser processor can create a car bumper completely by itself. Another system could autonomously integrate lithium-ion batteries for electric vehicles. For some of these machines, Mitsubishi Electric has a global market share of up to 90%.
Outside of the factory context, the company is developing a remote-controlled, multifunctional humanoid robot that can operate in space or on the lunar surface. It has already demonstrated the prospects of automation technology in space with the Smart Lander for Lunar Exploration (SLIM), a self-driving lander developed for the Japan Aerospace Exploration Agency that made the first precise point on the moon's surface in January.
SLIM was able to land within just a few meters of its target point using a vision-based navigation system, which allowed the ship to adjust its course by comparing real-time visual imagery with an onboard database.
Industrial robots similarly use vision sensors to guide robotic arms into precise positions for tasks such as welding, assembly, painting, and screwdriving. To Mitsubishi Electric's credit, the SLIM proved unexpectedly resilient, surviving three extremely cold lunar nights over a week.
Built by Mitsubishi Electric, the Smart Lander for Lunar Exploration impressed observers with its precision-targeted landing and stability during its early 2024 mission. (JAXA)
The 4,000 workers at Nagoya Works don't just make robots. Another key product is programmable logic controllers, or PLCs, that act as the brains for other factory robots made by competitors such as Tokyo Electron, Yaskawa Electric and Daifuku.
PLCs allow the operator to rearrange and program sequential tasks for robots and assembly lines directly on a computer screen. Along with Germany's Siemens and USA's Rockwell Automation, Mitsubishi Electric is one of the global leaders in PLC field.
Beyond factory automation, Mitsubishi Electric is narrowing its focus from general electronics to semiconductors, air conditioners and elevators, all segments in which the 103-year-old company is a top player.
The shabby exterior of the Mitsubishi Electric Nagoya Works gives no hint of the cutting-edge factory robots inside. © Mitsubishi Electric
So far this year, Mitsubishi Electric has announced plans to spin off a unit that develops EV engines and related components into a joint venture with Toyota Motor, sell its logistics business and divest a small stake in chipmaker Renesas.
“If you look at the future, they may focus more on areas where they are rewarded for good engineering products,” said Christian Heck, portfolio manager at First Eagle Investments, a New York-based holding company that owns the stock. At Mitsubishi Electric since 2018.
“As they move forward in focusing the portfolio, making capital more efficient and improving margins, the market will reassess the value at which the company trades,” he said.