Kodak declined, but Fujifilm staged a miraculous comeback and transformation.

Introduction: Fujifilm took twenty years to grow from a company that sold film to a global technology group spanning healthcare, semiconductors, and cosmetics.

Author: Wang Jian / Li Shi Business Review

In January 2012, under the impact of the digital camera wave, the traditional film giant Kodak filed for bankruptcy. Its market value plummeted from a peak of $31 billion to just $175 million, evaporating over 99%.

Ironically, the world’s first digital camera was invented by Kodak engineers in 1975.

In other words, Kodak created the very weapon that could overthrow its own empire, but due to the enormous gravitational pull of its past success and lack of self-revolution, it ultimately exited regretfully.

However, in the same industry apocalypse, another film giant—Fujifilm—not only survived but successfully transformed into a Fortune Global 500 company with annual sales approaching $20 billion.

Today, its business spans healthcare, cosmetics, high-performance materials, and semiconductors, leading in many sectors.

Why did one company end in demise while the other was reborn from the ashes, under the same industry upheaval?

The answer lies hidden in that nearly forgotten roll of film.

1

The Twilight of an Empire

To understand Fujifilm’s transformation, we must first grasp how dire its situation was at the time.

In 2000, the film business accounted for 60% of Fujifilm’s total sales and contributed two-thirds of its profits. At that time, this highly profitable, high-barrier industry was essentially monopolized by Kodak and Fujifilm globally.

In that year, Fujifilm’s sales reached $12.59 billion, ranking among the Fortune Global 500.

Looking down from this position, the view was good.

But Fujifilm’s president, Shigetaka Mori, was already alert to emerging risks.

Actually, Mori’s vigilance was much earlier.

As early as the 1980s, when he was just a department head, he sensed danger. Watching digital technology gradually mature, he repeatedly submitted warning reports to senior management: the end of film would come sooner or later.

Unfortunately, no one took it seriously.

After all, when a company is at its peak, it’s hard to accept the judgment that “all this will disappear.”

By 2000, Mori was promoted to president, and the crisis was imminent.

He then made a decision that seemed quite “heretical” at the time: secretly establishing an internal project called the “Second Development Office.”

This project’s only task: systematically dismantle everything about Fujifilm.

The core goal was not to think about “how else can we sell film,” but to completely deconstruct the product to uncover the core technologies behind it.

The results stunned the engineers.

They discovered that Fujifilm’s decades of accumulation in film had actually built a vast technological system: precision chemical synthesis, nanomaterial coating, optical imaging algorithms, collagen processing…

These technologies were independent yet interconnected; each alone had significant industrial value.

In other words, “film” was just a carrier. The truly valuable part was the underlying capabilities hidden behind it.

Mori later called this discovery “technological Lego”: each block looks insignificant alone, but when reassembled, can create something entirely different.

Of course, discovery alone isn’t enough; transformation comes at a real cost.

From 2000 to 2010, Fujifilm’s film sales plummeted from 156 billion yen to 33 billion yen, and its photo processing business shrank from 89 billion yen to 33 billion yen.

This was not a gentle boil but a rapid avalanche.

When the avalanche hit, Fujifilm’s first move was not to embrace new opportunities but to stop the bleeding.

In 2006, Mori ordered a global reorganization of the film business: closing production lines, laying off staff, and withdrawing from unprofitable dealer operations.

This round of consolidation directly cut 5,000 jobs, about one-third of the film business workforce at the time.

Mori told employees very coldly: “The company is bleeding; if we don’t cut off the necrotic tissue, everyone will die.”

Without stopping the bleeding, there would be no subsequent transformation. The sequence could not be reversed.

Meanwhile, Kodak chose to wait on the same avalanche, hoping the market would recover and its brand influence could hold.

But when it finally realized it needed to transform, it was already too late.

Kodak ultimately laid off 47,000 employees, closed 13 factories, and spent $3.8 billion on restructuring—costs nearly ten times those of Fujifilm.

In 2004, Mori officially launched the “VISION75” mid-term plan, covering 2000–2009, establishing three paths: structural reform, building new growth strategies, and strengthening mergers and acquisitions.

This was Fujifilm’s first formal public declaration: we are no longer just a film company.

So, what do we want to become?

2

Film in the Skin

Let’s ask a simple question: why does a photograph fade?

The answer is basic physics: ultraviolet rays in sunlight damage the chemical structure in the photo, causing the colors on the film to oxidize and decompose over time.

Therefore, during the film era, Fujifilm spent decades researching how to prevent fading, aiming to keep photos vibrant for as long as possible.

They developed over 4,000 antioxidant compounds and built a sophisticated chemical protection system.

Until one day, the engineers in the “Second Development Office” suddenly realized: human skin also “fades,” doesn’t it?

From a biological perspective, the core mechanism of skin aging is oxidation.

Free radicals erode collagen, cells gradually lose vitality, wrinkles appear, and pigmentation deposits—remarkably similar to photo fading in chemical principles.

More critically, the gelatin used in film—the main component of photographic emulsion—is essentially a hydrolyzed form of collagen. Coincidentally, 70% of human skin is also collagen.

In other words, what Fujifilm has studied for decades is deeply chemically homologous to human skin. This is not a far-fetched analogy but a genuine technological resonance.

Of course, discovering the similarity is just the first step.

The real challenge is: how do active ingredients in skincare products penetrate the skin barrier to reach the target areas?

This brings us to another of Fujifilm’s core skills—nanocoating technology.

This ability stems from the extreme requirements of film manufacturing: on ultra-thin substrates, precisely and evenly coating up to twenty different chemical layers, each with nanometer-level accuracy.

Applying this precise coating control to skincare products becomes “targeted permeation” technology—making active ingredients penetrate the skin layers effectively.

Antioxidants, collagen, nanopermeation—these three technologies naturally lead Fujifilm to a new direction: skincare.

In 2007, Fujifilm officially launched its skincare brand Astalift (“Aishiti” in Chinese), targeting the high-end anti-aging market.

It seemed somewhat absurd at the time: a company that sold film now selling skincare?

Consumers were initially confused, and media reports were often mocking.

But the difficulties weren’t just external perceptions.

More fundamentally, Fujifilm’s previous customers were all B2B—film distributors, photo labs, industrial enterprises.

It had never directly faced consumers, so it didn’t know how to build channels, tell brand stories, or convince ordinary women that “this company that sells film makes really good skincare.”

Moreover, technical success and commercial success are two different things.

In 2007, “Aishiti” launched in Japan, and only in 2012 did it enter China—five full years later. This expansion speed was not fast in the consumer goods industry.

But it endured.

With genuine technological backing, “Aishiti” gradually gained a foothold in Japan’s fiercely competitive skincare market and grew into a significant anti-aging brand globally.

More importantly, Fujifilm didn’t just stop at “selling skincare.”

It turned its accumulated technology in cosmetics into the upstream of the entire industry chain.

Today, Fujifilm is Japan’s largest raw material producer for cosmetics, and many skincare products on the market use core ingredients supplied by this “film company.”

This transformation is worth pondering.

Fujifilm’s approach isn’t about “cross-industry influencer” hype or quick fame. It’s about “technology supply chain”: first turning its core capabilities into infrastructure for others, then building brands on that foundation.

The former is a one-time gimmick; the latter creates a sustainable moat.

But this is only the first piece of Fujifilm’s “technological Lego.”

There are two more pieces, hidden deeper and more surprising.

3

More Knowledgeable Than a Pharma Company in Nanotechnology

The cosmetics line is relatively easy to understand.

After all, skincare and film both deal with “oxidation,” sharing similar principles.

But Fujifilm’s subsequent moves are truly perplexing.

Because this company began entering pharmaceuticals and semiconductors.

First, pharmaceuticals.

In 2008, Fujifilm acquired Toyama Chemical for about $1.2 billion, officially entering the biotech and pharmaceutical field.

The external reaction was similar to the cosmetics move: is this company going off track?

But Fujifilm knew clearly: this isn’t a crossover, but a technology transfer—also rooted in decades of accumulated expertise.

The development process of film is essentially a nanometer-scale precise chemical reaction: on an ultra-thin substrate, controlling the penetration depth and reaction speed of different substances with nanometer precision.

This underlying ability to nanocontrol “material behavior” once freed from the physical constraints of film, opens up endless possibilities.

Thus, applying this technology to drug development led to “nanocarrier” technology—making drug molecules reach target cells precisely, avoiding side effects caused by random distribution in the body.

In other words, Fujifilm’s decades of honing this “nanometer-level hand” are just as effective in the lab.

For Fujifilm, acquiring Toyama Chemical was just the beginning.

Over the next decade, Fujifilm continued investing heavily in healthcare and pharmaceuticals, with over $4.5 billion in R&D in the CDMO (contract development and manufacturing organization) sector, ranking 20th among global medical device companies.

By 2024, Fujifilm’s healthcare business revenue reached ¥1,022.6 billion (about $7.12 billion), nearly double its digital imaging business (¥469.7 billion, about $3.26 billion).

A company that once sold film is now making a bigger business through pharmaceuticals.

And then, semiconductors.

This sector is the most directly related to the other two transformations in terms of technological lineage.

Photolithography resin is the core material for chip manufacturing: coating a photosensitive material on silicon wafers, exposing it with light to create circuit patterns, then etching away unneeded parts.

Notice the familiar term—photosensitive material.

Exactly, film is also a photosensitive material.

The core technology of photolithography resin and film is highly overlapping. Fujifilm’s decades of expertise in photosensitive chemistry, precise coating processes, and chemical stability control can be seamlessly transferred to semiconductor material R&D.

As a result, Fujifilm now holds about 15–20% of the high-end semiconductor lithography resin market, and dominates the key raw material TAC film for LCD polarizers.

Japanese companies hold over 80% of the global lithography resin market, and Fujifilm is a major player.

This explains why every time “semiconductor supply chain” is discussed, Japanese material companies are always involved. These technological barriers aren’t built overnight but are the natural extension of decades of specialized accumulation.

Looking at these three lines together, one thing becomes increasingly clear:

Fujifilm’s transformation isn’t about “betting on the trend” or blindly diversifying. Every step it takes is based on a foundation it already has.

4

The Hunter of Core Capabilities

In management, there’s a term called “core competence.”

This phrase has been overused by countless companies, and almost every strategy discussion mentions it.

But few truly understand its deeper meaning.

Fujifilm’s story perhaps offers the best explanation of this term.

Let’s look back.

Kodak wasn’t without technology. It invented the world’s first digital camera, held numerous digital imaging patents, and even had an internal report predicting that digital cameras would replace traditional film by around 2006—missed by only three years.

Kodak’s dilemma was that it foresaw the future clearly but was shackled by its glorious past.

The core lock was its film business, which once had profit margins over 70%—a textbook “cash cow.”

In contrast, in 2001, Kodak was losing about $60 on each digital camera sold. For management, promoting digital was akin to killing the “cash cow” that sustained the empire.

Hence, from strategy to execution, the entire organization was resistant.

This instinctive suppression of disruptive innovation is symbolized by Kodak’s internal feedback to its engineers: “This thing is cute, but don’t tell anyone.”

In 1999, Kodak’s CEO openly admitted: “Kodak views digital imaging as an enemy.”

This was not a post-hoc analysis but their actual choice at the time.

The deadliest blow came in 2007, when Kodak sold its profitable medical imaging division for $2.35 billion to support its loss-making consumer digital business. Medical imaging, a high-end application of chemical imaging technology, was also Kodak’s natural core competence.

Kodak cut off its strongest root just to prolong a branch that bore no fruit.

The final bill was brutal: when Kodak filed for bankruptcy in 2012, its total liabilities neared $6.8 billion.

What about Fujifilm? During the same period, it proactively cut about $2.5 billion in restructuring costs and continued investing 5–7% of annual revenue into R&D without pause.

The numbers tell the story: the cost of proactive transformation is almost the same as passive decline.

But one led to rebirth; the other to demise.

Many times, transformation isn’t a “cost-saving” choice. The real issue isn’t “how much does it cost to transform,” but “can you afford not to?”

Kodak’s understanding of its core was always limited to “film,” and it believed it was selling film. When everything collapsed around film, it fell with it.

Fujifilm’s understanding was different.

Mori and his “Second Development Office” didn’t ask “what else can we sell,” but “what are we truly good at?”

That’s a fundamentally different question.

The former’s answer is products; the latter’s is capabilities.

Products become obsolete; capabilities do not.

The “technological Lego” Fujifilm assembled—antioxidant chemistry, collagen processes, nanocoating, photosensitive materials—are not products but capabilities. They are not dependent on film; film was just their “host.” When the host disappears, the capabilities remain.

This is the real starting point of Fujifilm’s transformation: it’s not “I want to make cosmetics,” but “my antioxidant technology is equally valid in skincare.”

It’s not “I want to enter semiconductors,” but “my photosensitive chemistry is fundamentally the logic behind lithography resins.”

Every step starts from capabilities, seeking new applications, not just chasing trends and cobbling together skills.

Different order, vastly different results.

Many companies’ current transformations follow a different path: seeing new energy sources booming, they rush to make batteries; seeing AI hot, they jump into large models. Their reason is “market size,” not “competence.”

This kind of transformation is essentially a scramble for territory against those who have long been entrenched in the field. Only a few succeed; most end up floundering.

Fujifilm’s logic is reversed: first ask “what weapons do we have,” then find battles where those weapons can be used.

Mori once said: “The peak is always hidden behind a dangerous valley.”

This quote is often cited by the media, but what’s worth noting is that he said this in 2000, when Fujifilm had just hit its highest sales record and was at its peak.

It’s rare for a company to question itself at its most glorious moment, but Fujifilm did—and made a crucial choice.

From a business strategy perspective, transformation isn’t something you do only when forced. Usually, by the time you’re “forced,” it’s already too late to compete effectively.

Kodak is a prime example: when it finally realized it had to change, its debt had already crushed its flexibility.

It’s worth mentioning that Kodak didn’t truly “die.” Today, in digital printing, its Nexpress and Prosper series still hold strong competitive positions in commercial printing.

The ten years of preparation Fujifilm had, was precisely the result of Mori’s insistence during the company’s most profitable times.

That clarity is rare and valuable.

5

A Mirror Worth Learning From

Fujifilm’s “rebirth” isn’t just a story about a Japanese company.

In Japan’s manufacturing sector, many companies with similar logic are also “renewing.”

Shin-Etsu Chemical started from calcium carbide, extended into silicon wafers and lithography resins, becoming an invisible giant in semiconductor materials; Nitto Denko began with insulation materials, and through precise coating technology, became a leading global supplier of polarizers; Japanese photo printing, starting from inks and printing techniques, evolved into a core supplier of touch screen modules.

Almost all these Japanese companies follow a similar model: not relying on “spotting the trend,” but on decades of honing a core capability, which then naturally grows into new businesses at the intersection of that ability and emerging needs.

This reflects a unique corporate culture called “monozukuri”—the way of making things.

This term emphasizes not scale or speed, but extreme focus and long-termism on a specific craft or technology.

A company can focus on one material, one process, one technology for decades, perfecting it to a level that no one can bypass.

It’s this culture that has produced countless “hidden champions”—companies you might not know by name but whose absence would paralyze global supply chains.

Conversely, what does Fujifilm’s mirror reveal to us?

Over the past twenty years, China has produced many excellent enterprises. Our rise in internet, e-commerce, new energy, and consumer electronics is remarkable.

But our strength seems to lie in executing existing markets with lower costs, faster speed, and stronger efficiency.

This is real skill and should not be underestimated.

But Fujifilm’s story reminds us of another crucial point: beyond speed and scale, there’s a form of competitiveness rooted in deep technological accumulation.

When a company has invested 30, 50 years into a technology, it builds not just product advantages but a “knowledge density” that’s hard for others to replicate quickly. This density is the true moat.

Currently, China’s manufacturing industry faces a critical crossroads.

Labor cost advantages are narrowing, competition in low-end capacity intensifies, and moving upward is an inevitable choice.

Fujifilm offers a valuable lesson: don’t rush to ask “what’s the next trend,” but first clarify “what are we truly good at.”

Core competence is the most solid foundation of a company. Find it, protect it, and let it grow anew in different soil.

Fujifilm took twenty years to grow from a film seller into a healthcare, semiconductor, and cosmetics tech giant.

It didn’t predict the future; it simply knew itself well.

It sounds simple, but in practice, it’s very difficult.

References:

Chinese references:

[1] Takahiro Fujimoto. Manufacturing as a Business [M]. Beijing: Renmin University Press, 2014.

[2] Xiao Dong Fan. “From Film to Medicine: Fujifilm’s Diversification Strategy Analysis” [J]. Enterprise Management, 2019(8): 76-80.

[3] Tsinghua Management Review. Fujifilm’s Second Venture: Technology Lego and Capability Transfer [J]. Tsinghua Management Review, 2018(5): 86-93.

English references:

[1] Shigetaka Komori. Innovating Out of Crisis: How Fujifilm Survived (and Thrived) As Photography Went Digital [M]. Berkeley: Stone Bridge Press, 2015. ISBN: 978-1-61172-023-6.

[2] Fujifilm Holdings Corporation. Annual Report 2024 [R/OL]. Tokyo: Fujifilm Holdings Corporation, 2024.

[3] Eastman Kodak Company. Voluntary Petition for Chapter 11 Bankruptcy [Z]. Case No. 12-10202 (ALG). U.S. Bankruptcy Court, Southern District of New York, January 19, 2012.

[4] “The last Kodak moment?” [N]. The Economist, January 14, 2012.

[5] “Kodak files for Chapter 11 bankruptcy protection” [N]. The Wall Street Journal, January 19, 2012.