Since its founding in 1940, Murata Manufacturing Co. Ltd. has faithfully followed a strategy of organic growth, using research and development to build a broad line of capacitors, filters, resistors, microwave parts, and other components that have enabled it to become a multibillion-dollar global supplier.
The prolonged industry downturn, however, has tested that strategy. Murata's revenue and earnings have tumbled, forcing the company to trim its workforce and lower capital investment. And increasing OEM pressure has forced Murata to continue to reduce commodity part prices.
But don't expect the Kyoto, Japan, company to deviate from its longtime approach. Considered by analysts a technology leader, Murata is leveraging its core ceramic expertise to develop higher-margin products such as Bluetooth modules, as well as higher-performance capacitors to capture emerging applications. The company is also increasing its presence in China.
"Everything is changing in terms of what people do and where," said John Denslinger, senior vice president of Murata Electronics North America Inc., Smyrna, Ga., one of the company's 47 wholly owned subsidiaries in Asia, Europe, and North and South America.
Murata remains the world's leading manufacturer of multilayer ceramic capacitors (MLCCs), accounting for more than 20% of the global market based on revenue, according to Dennis Zogbi, an analyst at the Paumanok Group, Cary, N.C.
The company also considers itself a market leader in SAW filters with a 20% share, and dielectric filters with a 40% share, figures that Zogbi doesn't dispute.
"They are so clever, tactically and strategy-wise," he said. "They're the epitome of a smart business in passives."
Eschewing the outsourcing trend of other suppliers, Murata remains vertically integrated, forming its own ceramic materials and building its own machines. The company consistently reinvests 5% to 8% of its revenue in R&D, and made its last notable acquisition in 1981.
"They have the ability to support a broad product line," said Shawn Wood, an analyst at iSuppli Corp., El Segundo, Calif.
Not bullet proof
But strong technology and serving as a one-stop-shop supplier has not shielded Murata from the severe industry downturn.
For its 2001 fiscal year ended March 31, 2002, the company's revenue was $2.97 billion, down 32.4% from the previous year. Net income was $394 million, down 66% from the prior year. Murata projects revenue and earnings for fiscal 2002 to be roughly flat with that of fiscal 2001.
Capital investment for fiscal 2002 is projected at $200 million, down from $260 million in fiscal 2001.
Denslinger expects Murata's revenue to slowly improve over the next year, but cites price erosion in commodity parts as the main hurdle to recovery.
"A lot of OEMs now negotiate price contracts on a quarterly rather than yearly basis," he said, adding that capacitors have experienced 12 consecutive quarters of price reductions. Denslinger expects prices to erode 10% the first half of 2003.