Seiko Corporate Structure and Business Overview

Seiko aims to be a leading company in the global watch industry as one of the world’s few “manufactures d’horlogerie” that produces all key components in-house, right down to the steel in the mainsprings, the chips in the Spring Drive and quartz movements, and the satellite receivers and antennas in the Astron.

Not only do they create all these things, they want us to know they are progressive, and touching our hearts.

PuristS, even Seiko-loving PuristS, might not appreciate the full reach of Seiko's business ambitions. To expand our understanding, I have compiled some information about its corporate structure and financials. I used to get paid to filter through annual reports, and I find Seiko one of the most complex entities I've dealt with. So, bearing in mind I might not have every answer, let's proceed.

BASIC STRUCTURE

"Seiko" consists of three groups of companies, related but not identical in ownership or management. Unlike most watch companies, Seiko is involved in lots of other activities. Some are synergistic and add to the value of its watches; others can seem to be a diversion.  The company defines its main business areas in this way (unfortunately these do not align with the three corporate structures):

• Watches
• Electronic Devices
• Systems Solutions
• Other (clocks, retail stores)

Here's how management defines this year's corporate mission:

"The Watches Business has achieved steady growth as the Group’s core business. Going forward, Seiko aims to further expand profitability and invest for growth, further raising brand value by opening its own boutiques across the world and by promoting a shift toward the mid- to high-end price range centered on mechanical watches."

Astron - Prospex - Presage - Premiere - Grand Seiko

Good news for us, as watch lovers, right? We can hope so. But we know this move to own-boutiques also limits us in some ways. Leaving that debate behind us, and with those four areas in mind (watches, electronics, systems, clocks & retail), let's look at the corporate structures:

SEIKO HOLDINGS
Global HQ: Tokyo Employees: 13,000 employees Sales: $2.3 billion dollars (2016) Operating Income: 2.9% or $66 million
Watches: $1.2 billion Electronic devices: $750 million Systems Solutions: $180 million Other: $240 million
Seiko Watch Corporation	Watch planning, design & sales
Seiko Instruments Inc.	Subsidiary (see next table)
Seiko Sports Life Company, Ltd.	Golf clubs, stopwatches, sporting equipment
Seiko Service Center Company, Ltd.	Servicing & repair of Seiko products, including watches, shavers & LCD televisions in Japan, plus technical training for retailers and sale of parts, batteries & repair tools in Japan.
Seiko Clock Inc.	Planning, design, manufacturing, sales & service of desk, wall, alarm & radio-wave clocks
Seiko Time Systems Inc.	Development, marketing & service for system clocks used in schools & hospitals; marionette clocks; master clocks for broadcasting stations; sports timing devices, competition timing computer systems, & large display screens for sports events
Seiko Precision, Inc.	Camera shutters & auto-focus mechanisms, system clocks, printers, mechatronics equipment, imaging devices, semiconductors, sensors, electroluminescent displays & open network systems
Seiko Optical Products Company, Inc.	Eyeglass lenses, frames & related optical products
Ohara, Inc.	Optical glass (partial ownership)
Seiko NPC Corporation	Development, Mfr & Mktng of Semiconductors & ICs
Seiko Solutions, Inc.	Development, manufacture, sale, maintenance, service, & consulting plus hardware and software for information systems & network services.
Wako Company, Limited	High class retailer of watches, jewelry, accessories, etc.
Chronos, Inc.	High class retailer
Seiko Business Services, Inc.	Human resources

SEIKO INSTRUMENTS

SEIKO INSTRUMENTS Inc. (SII)
Headquarters: Chiba Employees: 8,000 Sales:
World’s leading wristwatch movement manufacturer.  Watches: Mechanical, Quartz and Digital watch movements and finished watches (Grand Seiko) Automotive components: integrated circuits, ABS parts, batteries and capacitors Info & Comm Technology: Mobile phones, routers, network switches, ICs, batteries Consumer Products: Musical instrument accessories (metronomes, tuners), dictionaries Distribution & Retail: Credit card terminals, restaurant ordering, inventory terminals, thermal printers Industrial Equipment: radiation detection and measurement systems, robots, CAE, CAD, and CAM systems, printheads, etc.
Division	Product Lines
SII Semiconductor Corporation	Semiconductor chips, timers, amplifiers, EEProms, etc.
SII Nanotechnology, Inc.	Watch planning, design & sales
Morioka Seiko Instruments, Inc.	Development, manufacturing & sales of watches, tools, printers & measuring
SII Network Systems, Inc.	Manufacturing camera shutters & related items
SII Mobile Communications, Inc.
SII Printek, Inc.
SII Microtechno, Inc.
SII Micro Parts Ltd.
SII Micro Precision, Inc.
Epolead Services, Inc.
Seiko I Infotech, Inc.
Seiko I Techno Research Company, Ltd.
Seiko EG&G Company, Ltd.
City Service Company, Ltd.

HOW IS THE WATCH BUSINESS DOING?

2016 Fiscal Year: Sales of watches declined by 34%

Watches (Japan)

Sales fell due to factors including a decline in consumption by foreign tourists and sluggish sales of high-end products due to stagnant personal consumption. Ladies’ models in the Grand Seiko mainstay product line saw strong performance, while sales of the men’s models were down year on year. Sales of the Astron and Prospex struggled, falling from the previous fiscal year, while sales of the Presage and Alba fared well, remaining mostly at the same level as the previous fiscal year. 

Net sales under the Wako Business fell due to a decline in consumption by foreign tourists, while the Clock Business performed strongly due to an increase in net sales in Japan.

Watches (overseas) 

Sales shrank due to factors including the impact of yen appreciation, as well as a falling off in department store distribution channels in the U.S.. On a local currency basis, performance was strong and sales grew in markets in many countries and regions, including Germany and the Netherlands and Thailand. Seiko Boutiques were opened in Miami in the U.S. and Beijing and Guangzhou in China.

Movements

Earnings of watch movements worsened due to the impact of a change in distribution of products, as well as the slump in the watch markets of the United States and China

Outlook for 2017

Amidst a volatile business environment, the Company will continue striving to increase the Seiko brand value while working to grow profits in the Watches Business in all markets throughout the world, particularly for high-priced products, by:

Watch Business

Establishing new brand strategies for the Grand Seiko and expanding sales in Japan and overseas

Promoting efforts aimed at revitalization in the U.S.

Improving profitability through cost review in the watch movement sales business

LINK TO WEBSITE INDEX

We now come to Seiko Epson. Epson printers, projectors, etc PLUS some watch business. Is this the tail that wags the dog? Look at the total revenue figures - just shy of $10 billion USD. This is NOT part of Seiko Holdings, but is its own group with 90! related companies. Their focus is on combining efficiency, precision, and compactness. Epson creates wristwatches sold under the Seiko brand, including Spring Drive, GPS Solar and solar wave watches, mechanical wristwatches sold under the Orient brand, and the Smart Canvas watches that display the time on an electronic paper display. Epson also manufactures and sells wristwatch movements to other companies. The company produces wearable sensors/fitness monitors, golf swing analysers, and so forth, along with the sensors, accelerometers, chips, etc. although I think the batteries that power them come from Seiko Holdings.

SEIKO EPSON

SEIKO EPSON (EPSON)
Headquarters: Suwa, Nagano Employees: 70,000 employees Subsidiary companies: 90 Sales: ~$9.2 billion
Printing Solutions: $6.5 billion from pocket printers to commercial digital presses Visual Communications: $1.4 billion from liquid-crystal displays and projectors  Wearable Products: $1.4 billion from watches and sensors for sports and personal healthcare Robotic Solutions: product assembly and chip handling (such as the Astron watch assembly line) Other: Crystals, Semiconductors, Powdered metals and composites, surface processing, plating, etc.
Sponsorships: Manchester United, Mercedes AMG Petronas
Epson Sales Japan Corp.	Sales and marketing of imaging products in Japan
Epson Direct Corp.	Planning, development, manufacture and direct sales of PCs and peripherals
Epson Service Corp.	Service and repair of printers, PCs, and peripherals; development and sales of new services
Epson Atmix Corp.
Epson Software Development Lab, Inc.
Yasu Semiconductor Corp.
Seiko Epson Contact Lens Corp.
Seiko Lens Service Center Corp.
Epson Imaging Devices Corp.
Orient Watch Company, Ltd.

One thing I must point out as I was astonished to learn Seiko Epson has just released a PAPER-RECYCLING-MAKING machine for the company offices.

READ MORE HERE

Seiko Epson developed what it believes to be the world's first compact office papermaking system capable of producing new paper. It securely shreds waste paper without the use of water, and will be able to produce paper of various sizes and thicknesses, from office paper and business cards to colored and scented stationery, at a rate of 6500 sheets a day.  Epson plans to put the new "PaperLab" into commercial production in Japan at the end of 2016. Businesses and government offices can install a PaperLab in a back area: 

WHAT CAN WE MAKE OF THIS?

"Seiko" produces inexpensive quartz watches and very expensive mechanical and Spring Drive watches. Many of us have experienced the charm of a Grand Seiko watch - and also been mystified by the plethora of models - no one more so than I, having compiled the Master Spreadsheet with the help of many readers here. Perhaps this overview will convey the sense of enormity of this company/group, and how different it is from the Independents whose products we also love. Indeed, how it compares to even the large Swatch group's $7.8 billion in revenue last year.

IN SUMMARY, the words of Shinji Hattori, chairman and CEO of this 135 year-old company:

"Going forward, Seiko will continue to strive to be a trend-setting and innovative global group that shares excitement with people around the world by offering products, quality and services that make a deep impression on their hearts and are in tune with the times."

I'm sure we can generate some discussion from this - what do you think?

Cazalea

SEIKO "The Art of Time" Video - a 3-minute diversion