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What’s Happening Today at Panasonic

Back Stage: The Birth of the Avionics Business

Feb 26, 2016

We take a look at how the avionics business--a major driver of Panasonic's BtoB strategy, the key to future growth--got its start. Yukio Sugimoto, currently President and CEO of Aircraft Cabin Systems, played a central role in the founding and growth of Matsushita Avionics Systems Corporation. We asked him to tell us about the struggles and passion required to found the business.

(Titles and organization names are for the times discussed.)

Photo: A development conference with an aircraft manufacturer in 1980. Sugimoto is in the center, wearing his uniform.

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Chapter 1: Born on the brink of disaster--the Pepper Radio leads the way into avionics

In the 1950s, radios were one of Matsushita Electric Industrial's (MEI; present-day Panasonic) core products. But from the 1970s, color televisions, refrigerators, and air conditioners took over this role. By then, even if MEI developed new radios using superior technological and design capabilities, inexpensive foreign-made copies would quickly appear on the market. The Radio Division, gripped by a sense of crisis, responded by developing the world's slimmest radio, small enough to put into your breast pocket.

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    Yukio Sugimoto
    After retiring, he founded a company to develop and sell video monitors for aircraft. He currently lives in Seattle.

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    Components of the entertainment and services system delivered in 1980 for the new model that was being developed by the aircraft manufacturer, consisting of an audio system, reading light, and attendant call unit.

The division collaborated with the frontline as well as with external component manufacturers to develop speakers, variable capacitors, and small components known as chip parts. The Corporate Production Engineering Division subsequently developed an ultra-slim automated chip part mounting technology. Utilizing these components, the world's slimmest radio, the Pepper, debuted in 1977. The Pepper's quality and size created a sensation, and it proved a bigger hit than expected. Sugimoto had been in charge of designing radios with FM functions, and he and his colleagues were overjoyed at the Pepper's success. "We were elated at what we had achieved," he recalls. The technology behind the Pepper was a valuable asset as the division entered the avionics field.

Chapter 2: From radios to the airline industry?

Where to go after the Pepper? The Radio Division came up with its ABC concept: A = Avionics (aircraft), B = Book-sized micro component stereos, C = Car audio. With the device and mounting technology acquired through the development of the Pepper, the decision was taken to open up a new market with high-quality yet compact new products. Sugimoto was appointed to head the avionics effort. It was an exciting opportunity for him as an aircraft enthusiast. However, he had no idea how to proceed with an AV business for aircraft.

In 1979, Sugimoto flew to the United States to visit Matsushita Electric Corporation of America (MECA) and consult corporate engineering advisor Koichi Sadashige on how to enter the avionics industry. Sadashige, who loved flying so much that he had his own aircraft, immediately set up a meeting with a major aircraft manufacturer. At the time, the manufacturer was embarking on the development of a new, advanced airliner and was seeking to completely revamp its avionics system. At this juncture, Sugimoto and Sadashige were told that if they could formulate a concrete proposal within three months, the prospective client would consider it.

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Sugimoto (left) and Sadashige visiting the aircraft manufacturer in 1979

But many within MEI worried about the risks involved in entering the avionics business. An equipment failure could endanger the lives of passengers. Could MEI guarantee the necessary reliability? But Sugimoto and his avionics team were determined to make the attempt. They labored night and day to work through the manufacturer's 30-centimeter thick avionics requirements and work up a product proposal. As they organized their proposal and engineering diagrams, they faxed them to Sadashige in the US, who arranged for translation into English. Sugimoto and his team developed an in-flight audio, reading light, and attendant call system with a guaranteed service life of 2,200 hours. At the time, it was generally accepted that in-plane entertainment and service systems would begin to incur malfunctions after more than three hours of operation under demanding in-flight conditions. As such, MEI's proposed in-flight service life of 2,200 hours reflected an astounding level of product quality. At the end of his presentation to the manufacturer, Sugimoto brought out a Pepper radio and told them, "The technology that enabled us to make the world's thinnest radio will be applied to your avionics." He left a sample with them before returning to Japan.

Chapter 3: The craftsmanship that awed a major aircraft manufacturer

In November 1979, some time after the presentation, the manufacturer at last confirmed that it would use MEI's system. The project members were overjoyed. The Pepper radio Sugimoto left as a sample is said to have been the reason the client chose MEI. "I heard that their engineers disassembled the radio and, awed by the tiny parts and mounting, gave the seal of approval, stating that the technical quality would be sure to meet requirements. Furthermore, the new aircraft was intended to have an operating life of thirty years. They chose us because they wanted products that would stand the test of time. I was quite surprised," says Sugimoto in recollection.

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The client manufacturer performed a quality audit of the Radio Division Avionics Plant

However, most airlines did not see how a complete newcomer to the business could better the performance of experienced manufacturers. In response, the aircraft manufacturer requested that representatives make product presentations directly to each major carrier. Sugimoto and his team quickly arranged to visit the airlines to demo their proposed system, show just how reliable it would be, and explain how it would resolve problems. Without exception, these efforts convinced the airlines that MEI's various entertainment and service systems, beginning with the audio system, reading light, and attendant call unit, would be extremely reliable. As a result, our in-flight avionics system was adopted for the new airliner model.

Chapter 4: "Good news so early in the New Year"

An agreement with the aircraft manufacturer was just around the corner, but the Radio Division was unable to get a consensus from the related departments at the Head Office, and no decision could be reached on who would sign it. There was concern that compensatory damages, which might be incurred if an electrical fault caused an aircraft accident, could be so great as to threaten Matsushita Electric itself. Struggling to find a solution to this dilemma, with the signing to take place in two days, a long meeting, with the division director attending, continued late into the night. The conclusion reached was to negotiate personally with President Toshihiko Yamashita. Sugimoto was chosen to make the call to the president's house. As he nervously cradled the receiver, Sugimoto heard the president's voice: "You're calling me at this hour because you want me to say yes, right? I can't do that over the phone. Come see me tomorrow. On the other hand, if it's something you want to do, you should do it on your own responsibility as the division heads." Having gotten the word, Masao Fukukawa, Director of the Radio Division, stated that "This is something you've worked hard for. I'm ready to assume responsibility." The following day, the division director flew to the U.S. to sign the agreement. The date was January 14, 1980.

Having closed the deal, Engineering Division Director Shunichi Yabusaki and other representative project members went to the Head Office and explained their business forecasts to related department heads over a two-day period. After gaining their approval, they went to see President Yamashita. Yabusaki told Chief Kiyonobu Tanaka, one of the project members, what took place. "When I discussed countermeasures we would take in case our product interfered with the operation of the aircraft, the president asked 'Do you intend to make a product that will cause such interference?' I answered no, we would without a doubt make a good product. He replied heatedly, 'In that case, don't talk about countermeasures.'" Yabusaki's hand gripped the go-ahead form for the avionics business with President Yamashita's seal of approval on it.

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Signing ceremony (Fukukawa is front right)

Their final presentation at the Head Office was to then-Executive Advisor Konosuke Matsushita. Tanaka, who was there, remembers: "He picked up the sample I'd brought from a foreign manufacturer and burned a hole in it with his eyes. Then he asked, 'Can we make this?' he said. 'Manufacture it in a different place from the radios,' he added. He understood that the production management systems required for avionics products and consumer goods would be vastly different. Then he smiled and said, 'This is good news so early in the New Year.'" The project members, on hearing this, were overjoyed that the avionics business had gained recognition.

The Radio Division quickly followed Konosuke's advice to handle everything for avionics, from design to manufacturing and quality control, separately from radio production. Thirty years later, with the business flourishing, Sugimoto looks back with even greater admiration for the farsightedness of Konosuke Matsushita and the keen decision-making sense of President Yamashita.

Chapter 5: Putting the promise given to President Yamashita into the product

The genesis of our avionics business was the technology used to develop the Pepper. The materials were changed to resist deterioration in the demanding environment onboard aircraft. Particular care was given to quality testing, which included vibration tests simulating nine years of onboard operation as well as temperature-resistance tests. "We invested the confidence we had promised to President Yamashita into the product. As a result, the new entertainment system that we delivered has, as far as I know, never caused a problem. We achieved this success because of our innovative manufacturing, which fundamentally changed both the components and the methods themselves," Sugimoto stresses.

Successful delivery garnered MEI a good reputation, with other manufacturers taking note and deciding to use our products. As a result, by 1985, almost all of the OEM audio and reading light systems for three major industry players were largely supplied by MEI.

Chapter 6: Make the maximum effort for your dreams

In 1988, as the next phase, Sugimoto's team decided to give each passenger a personal video monitor, but again it proved difficult to gain the cooperation of related departments. The need to deliver the quality required by the airlines as well as the difficulty of predicting unit sales reduced the willingness of these departments to collaborate. Just then, an inquiry arrived from a major Japanese airline about MEI's entertainment systems. Sugimoto intuitively felt it could lead to major sales. He asked the Personnel Division to expand the Avionics Division's staff immediately. In an era when periodic hiring was the preferred approach, it was difficult to meet Sugimoto's request. It was just at that time that aircraft manufacturers were looking for full maintenance and services packages, so the best answer was to acquire a local company outside Japan. Sugimoto used all his available means to find a company and arrange its acquisition, but negotiations broke down at the last minute.

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Left: a party held in September 1990 to celebrate the founding of the Matsushita Avionics Development Corporation. Right: the offices

Sugimoto, who had led the failed effort to acquire a local company, was contacted by Mikio Higashi, director of the Audio Video Group. "I've got two presents for you. One, you're going to lead the establishment of an avionics company in America. Two, you're being promoted to general manager." As a result, the Matsushita Avionics Development Corporation, forerunner of Panasonic Avionics Systems Corporation, was founded in 1990. Sugimoto was appointed president and for the first four years, managed the company from Japan. He then moved to the US, where he oversaw the merger of the company with Matsushita Avionics Systems Company, a sales company. The resulting entity, also headed by Sugimoto, was named Matsushita Avionics Systems Corporation.

Just as Sugimoto predicted, in-flight entertainment systems began transitioning to back-seat monitor types, allowing passengers to enjoy their own channel, and our avionics business grew rapidly from this point thanks to its ability to successfully ride this wave. The original client took an interest in systems other than those for entertainment and services, and we were able to secure a place as their main supplier.

Sugimoto and the others involved in this venture were pioneers who made the maximum effort, overcoming countless hurdles and never giving in, even when their backs were against the wall. What supported them in their efforts? Sugimoto puts it this way: "There were any number of occasions that stretched us to the limit. But I had a feeling of adventure that drove me to do this. It's important for a leader to have a sense of adventure. Even when you get caught up in complications you couldn't envisage, you still reach toward your dream with a feeling of adventure. I think that's maybe the essence of business."

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