IHI Corporation, formerly Ishikawajima-Harima Heavy Industries, has a history spanning 170 years—a timeline closely intertwined with the development of Japan's heavy industry. Despite past scandals and periods of sluggish stock performance stemming from incidents like data falsification, its shares have recently surged due to increased interest in military-related products and services.

The ongoing tensions between US President Trump and Ukrainian President Zelenskyy contributed to a significant rise in IHI’s share price, surpassing a 35-year high. According to Caixin (財訊), the reduction of American aid for Ukraine has prompted European leaders to urgently support Zelenskyy while simultaneously increasing their defense budgets—a trend now spreading globally.

Japan's national defense expenditure currently represents approximately 1% of its GDP; however, plans are in place to increase this ratio to around 2% by fiscal year 2027, up from an anticipated 1.6% for the upcoming fiscal year (2024). This expansion has fueled a sharp rise in shares among Japan’s three major defense contractors: IHI Corporation, Mitsubishi Heavy Industries, and Kawasaki Heavy Industries—with IHI's share price tripling since early 2024.

IHI’s history is deeply rooted in the modernization of Japanese industry. In response to US Navy Commodore Perry’s arrival in Japan aboard his “black ships” (黑船) in 1853, Lord Mito was commissioned by the Tokugawa shogunate to establish a Western-style shipyard at Ishikawajima—the nation's first such facility.

The company underwent several transformations: its automotive division spun off into Isuzu and Hino Motors in 1929; it was renamed Ishikawajima Heavy Industries Corporation in 1945, before merging with Harima Shipbuilding Company to form ‘Ishikawajima-Harima Heavy Industries’ in 1960—a landmark merger at the time.

Today, IHI's business is structured around four key segments: resources and energy (31% of revenue), social infrastructure projects such as bridges and urban development systems (13%), industrial machinery including logistics equipment and turbochargers (35%) and aerospace & defense products like aircraft engines and missile systems (20%).

IHI has faced reputational challenges due to improper conduct in 2004 and again in 2019. In April 2024, it was revealed that a subsidiary had been falsifying data related to fuel performance for marine engines over an extended period.

For the fiscal year ending March 31st, 2023 (fiscal year 2023), IHI reported its first loss in fifteen years—primarily attributed to issues with an aircraft engine project. However, by the third quarter of FY 2024, orders for aerospace and defense products had increased substantially.

To meet this growing demand, IHI plans to construct a new facility at its Tsuruma Plant in Saitama Prefecture dedicated to repairing jet engine parts—components known for their complexity and long service lives; operations are expected to commence by fiscal year 2026.

IHI forecasts revenue of approximately ¥1,600 billion for the full FY 2024 – a rise of roughly 21% compared to last year– with an anticipated operating profit of ¥145 billion and net income around ¥90 billion.

The future trajectory of this century-old company as it learns from past mistakes and capitalizes on current trends is being closely watched.
(Translation by Caixin; Image source: Lombroso, CC BY-SA 4.0, via Wikimedia Commons)