As a specialized material manufacturer of stainless-steel rods and precision shafts, Silver Rod is a great example of a Japanese “hidden champion” using its unique technologies to support customers from a wide range of industries, from automotive to medical equipment.
Japan does not have a lot of natural resources like coal, iron ores, or gas. Yet, when it comes to steel production, Japan is the third-largest producer in the world after China and India. As an ultra-precision stainless steel shaft and rod manufacturer, can you give us your take on why you think Japan still excels in stainless steel production despite being so resource-poor?
The lack of natural resources acts as an advantage for Japanese companies because it drives them to use the materials they have more efficiently and also develop their process to improve the quality of their products. Japanese craftsmanship contributed greatly to our technological enhancement.
Japanese craftsmanship, or monozukuri, is famous worldwide for the kaizen philosophy of constant improvement of products. Japan has been subjected to intense competition from regional competitors such as Korea, Taiwan, and China. What are the advantages of your company’s monozukuri over these regional manufacturers when it comes to stainless steel products?
Quality is of the utmost importance to us. We earn the trust of our customers with the quality of our products. We have two business lines: first is the material business, where we procure high-quality materials from leading companies of specialized steel, Daido Steel Co., Ltd. and Nippon Steel Stainless Steel Corporation. We then process these materials and make bars to provide for our customers. Our second business is product manufacturing where we make components. With these two business lines, we are able to acquire a high evaluation from our customers. We are very strict about the lead time, so with a stable source of materials and our high-quality processing technology, we can mass-produce within our lead time. All of these factors help us acquire the trust of our customers.
One unique part of your business is you are both a material supplier and a processor. Can you talk about the synergies this creates in your business? How does it help you provide a shorter lead time and give the customers exactly what they need?
Cutting out the middleman by procuring raw materials, processing the rods, and selling directly to the customers ourselves allow us to communicate directly with clients. We utilize our extensive knowledge of stainless steel as a material by communicating and proposing to customers which materials or components can be best used for their products.
Regarding your technology, you are using an advanced polishing method, but there are other methods, such as grinding, electrolysis or buffing, that are also used to process stainless steel rods. Can you elaborate on the advanced polishing method that allows you to provide high-quality materials? What is unique about this technology?
We have a centreless grinder that we use to make the rods as circular as possible. It is so precise that the tolerance is only five microns. There’s a slight difference on the tolerance depending on the diameter of the rod, but the average is five. For manufacturing components, tolerance is one micron.
Conventional stainless steel often gets entangled with machinery when processed, but with free machine stainless steel, you add more sulphur or tellurium content that allows these little chips to be formed, which makes the machine easier to cook the stainless steel. Can you tell us about the different grades of stainless steel you use and how you cater to your customers' demands whether it be on stainless steel or free machine stainless steel?
The ratio of the compound is determined based on the customer's needs. Sometimes they specify it, but sometimes we make a proposal depending on what the stainless steel is going to be used for. Because we perform stainless steel cutting after buying raw materials in the form of coils and bars, we specify the ratio of sulphur or other materials to make it easier for us to cut and make our products. Some materials are more difficult to cut than others.
What is your R&D (Research and Development) strategy, and what are you prioritizing at the moment?
Our research and development are done by our material providers, which are Daido Steel Co., Ltd. and Nippon Stainless Steel Corporation. These companies developed the products, but they do not know what the materials would be best used for. So we are here to help and provide them with information on which industries these new products are demanded in.
In terms of sourcing stainless steel, how important are the UN SDGs (Sustainable Development Goals) and green steel for your business? How are you helping reach carbon neutrality in 2050, and how are you sourcing green steel for your customers?
Stainless steel and aluminium use an electric furnace, which uses scrap and recycled metals. Nickel and chrome are added to make stainless steel. In terms of SDGs, we believe that stainless steel is an eco-friendly material.
Your company was founded in 1960 and in three years, you will be celebrating your 65th anniversary. In this three-year period, what is your midterm strategy when it comes to sales, product launches, or new markets? What would you like to achieve for your business in this period?
First, it is very important to fortify and enhance our current business, which is stainless steel rods, and our products. For our survival, it is crucial that we focus on and pursue these two businesses. Although we are only specializing in stainless steel at this point, we have the technology for grinding and polishing that we would like to use with other materials.
Are you looking for new material partners, perhaps overseas, in order to do that?
We will continue to work with Japanese manufacturers. In our Chinese factory, we use some Chinese materials for some of our products. But we feel that in terms of quality assurance, China is still not on the same level compared to Japanese manufacturers, especially the ones that we have been working together with for more than 60 years. These manufacturers have very high quality standards, and they can also address quality-related issues easily. Because of this, it is easier for us to work with Japanese manufacturers.
Your materials and processed parts have a variety of applications in automotive, office equipment, electronics, and medical equipment. Are there new applications that you want your products to be used in?
We feel that we are a small company and right now, we believe that we do not have enough information. We are able to diversify into other fields because of customer demands, but currently, we do not have the ability to expand ourselves. This is a challenge for us.
Your customers are also experiencing changes in their fields, such as the automotive industry, with the switch to EVs taking place. Combustion engines are no longer going to be allowed on the roads by 2035. In electronics, the miniaturization of components is needed. In the medical field, home treatment is becoming much more in demand. What opportunities are these changes happening in these industries presenting for your company?
In terms of materials that we are already providing for various industries, we do not foresee an expansion. We would like to continue working with the industries we are already in. We are providing motor shafts for EVs and hybrid cars with a brushless motor, which is very quiet. It is useful, not only in the automotive industry, but also for medical and other electrical fields. Our brushless motor shaft technology will continue to serve as an advantage for our company.
Your company is present in Hong Kong and also Guangdong, where you have had a factory since 1994. Can you talk to us more about your international strategy and the benefits that your two international locations bring?
The advantage of having an overseas factory in China is that we are able to provide high-quality Japanese standard products to the local companies or Japanese affiliated companies in China. Our factory location in Guangdong, China, is bordering Hong Kong, which has a well-maintained harbour that serves as a hub for import and exports. We hope to continue to expand our business there, as having such a strategic location allows us to export to North America and Southeast Asian countries.
In terms of overseas markets, which ones are you targeting for the future and is your priority as part of your midterm strategy?
China is the biggest market we are targeting. We have a factory there and there are many Japanese affiliated companies, such as Denso Corporation, Hitachi Astemo, Ltd., and other automotive companies, so we hope to continue to expand our business there. Southeast Asia is also very near Hong Kong and there are many Japanese automotive companies in Thailand, Indonesia, and other nearby countries, so we are targeting these firms as well.
What would be your strategy to target these countries? Will you be opening new factories in these locations, open sales offices, or have joint ventures or M&A (Mergers and Acquisitions)?
We are a small company and financially speaking, it would be difficult for us to open up another factory. We would like to focus on China and fortify what we have there. We can consider a technical alliance, but the challenge would be in sharing our technology. It would be necessary for us to conduct an extensive history check for the company we will consider and also check their capability to use our technology before we can give consideration.
What would you like to have achieved in your presidency and what legacy would you like to pass on to the next generation?
I want to improve the quality of our products and technologies where no other company can compete with us.
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