Toshiba IHI Power Systems will be dissolved and liquidated in November, and its roughly 80 employees will in principle be reassigned to other departments at the parent companies. The Fukushima nuclear disaster that occurred soon after the company was formed in 2011 has depleted global demand for new reactors, upending the business landscape.
The two companies have been partners in nuclear equipment since the 1960s, with IHI supplying core parts to Toshiba, which would deliver finished products to power companies. In January 2011, they set up the joint venture in Yokohama, near Tokyo, to strengthen that partnership, with IHI taking a 52% stake and Toshiba the other 48%.
IHI had planned to expand sales in the nuclear business to 80 billion yen ($713 million at current rates) from 50 billion yen at the time the company was formed. For much of the early 2000s, nuclear power was said to be enjoying a "renaissance" due to its relatively low greenhouse-gas emissions, with many countries planning to build new reactors. IHI also provided investment when Toshiba bought U.S. nuclear company Westinghouse Electric in 2006 -- a move that would prove disastrous when massive losses were uncovered there years later.
But just two months after the joint venture was formed, the disaster at Fukushima Daiichi transformed the business environment. Nuclear plans were dropped around the world, and the company's factory utilization fell so low that it started manufacturing parts for tunnel excavators and other products, instead of nuclear-related parts like steam turbine nozzles, to keep the plant going.
Then, in December 2016, the losses at Westinghouse were discovered, plunging Toshiba into chaos. The company sold off its shareholdings in Westinghouse in April 2018, withdrawing from nuclear plant construction overseas. Its domestic business had likewise come to center on maintaining, repairing and decommissioning existing plants, leaving little room to work together with IHI.
IHI's sales from the nuclear segment for the year ended March came to about 33.8 billion yen, roughly 70% what they were in 2011. Though it will keep its nuclear business alive, IHI is shifting energy operations toward biomass and other renewable sources, as well as hydrogen energy and other non-fossil-fuel options.
Toshiba's sales from nuclear-related businesses have fallen to about 160 billion yen, around one-third of their peak. The company is currently in talks to sell a unit involved in a nuclear plant project in the U.K. It aims to achieve growth at home through infrastructure fields like elevators and water-treatment equipment.
Not all Japanese players are in retreat. Mitsubishi Heavy Industries and Hitachi are still taking on new projects in Turkey and the U.K. respectively. But with ballooning costs from safety measures, concerns about profitability persist, driving trading house Itochu to withdraw from Mitsubishi Heavy's Turkish project.
Overseas, Germany's Siemens withdrew from the nuclear industry in 2011, while massive losses on delays in setting up a type of pressurized water reactors forced French giant Areva to disband. Areva's reactor-building segment is currently rebuilding under the name Framatome.
Growing safety expenses have made nuclear less competitive on the cost front, and that has factored into a steep drop in spending on the power source. Worldwide investment in new nuclear plants plummeted 70% year on year to $9 billion in 2017, according to the International Energy Agency.
Germany plans to phase out nuclear energy in steps by 2022, while Taiwan's Tsai Ing-wen administration aims to have the island nuclear-free by 2025. On the other hand, China is home to three of the five nuclear plants that began operating this year, and edges out Japan to have the third-highest count of operable plants in the world with about 40 -- behind only the U.S. and France.