Diversification calls for energy reducing innovator

Founded in 1957, JSR started by producing synthetic rubbers for domestic production. Since then, JSR has continuously expanded its business from emulsions, plastics and other materials for semiconductors, to flat-panel displays and optical materials. Today, JSR has become a global multinational with total net sales of ¥404 billion ($3.9 billion) last year. In light of your upcoming 60th anniversary, what are some of the core values from your foundation days that still run through the company's DNA today?

I don’t know if we can call this an impressive growth. We have struggled to get where we are today. The very core of this company, what allowed us to grow, regards materials innovation. We have an in-depth expertise in polymer science, and while there are a lot of other chemical companies, our competitive advantage is fueled by the production of tailor-made products for diversified applications. We use synthetic rubber as a building block for eco-tires. In the European market, there is a growing need to reduce CO2 emissions from the current 130 grams down to 95 grams per kilometer by 2021.

The new cars that will be sold in the 2020 market will be required to fulfill new, more stringent regulations. One of the key factors to abide, according to such standards, is to invest in high performance tires to reduce gas mileage. As a company aiming to stay on top of the market trend, we have designed a special rubber applicable to passenger and race car tires. Simultaneously, we have migrated from rubber-based materials to more functional ones.

One of the markets we support is the semiconductor industry. In the latest iPhone, it is said that Apple is using 14-nanometer technology. The miniscule size of this technological component embodies the miniaturization process undergone by the market. This advanced technology requires an innovative printing pattern denominated by a material called “photo-resist” which we manufacture at JSR Corporation.

Our business’ core value is to always be working with leading companies in the industry, such as Bridgestone for tires. By paying close attention to these innovative technologies, we are able to provide leading firms with the materials they require. That is our core strategy and we call it ‘innovation one-on-one.’ By maintaining a close one-on-one relationship with our customers, we cater to their needs and create innovation.

Due to the low market growth and intensification of competition, you decided to concentrate your resources on the life sciences business by developing it as a third strategic pillar. You develop reagents, medical supplies, purification processes of antibody drugs and, at the end of August, you announced the new travel-friendly plastic 3D printed leg prosthesis. What are the main characteristics that differentiate JSR life sciences products from those of the competition?

Life sciences is a groundbreaking area. The pharmaceutical market itself is worth about $1 trillion, and the semiconductor industry is worth about $300 billion. Pharmaceuticals is a huge market, and life sciences in general is an even bigger one. What we are currently trying to do in this industry is very much like what we have done in the semiconductor industry. We are not interested in making semiconductors per se, but rather to support the semiconductor manufacturing industries through the production of our own materials.

In the same way, we entered into the life sciences market by providing complex processed chemicals. We tried to diversify our materials in order to enable big pharmaceutical companies to develop and manufacture their most advanced products.

I see a lot of similarities between the life sciences and the semiconductor industries. First of all, they are both long-term businesses. What we are doing for the semiconductor business is that we are developing new materials today, but these materials won’t be used for another 6 years. We are investing our money in the future.

Similar strategy applies to life sciences. It will take about 9 years for our products to be used. This kind of long-term mindset is very important to fuel growth.

Furthermore, the quality discipline in the life sciences business is very important. Quality hiccups must be avoided. When I’m talking to pharmaceutical customers, they strongly emphasize their quality strictness. However, when we compare that to the semiconductor market, the latter is even stricter and more stringent! We have received Intel Corporation’s prestigious Supplier Continuous Quality Improvement the seventh time in the past eight years. It is because we do not have any problems with regards to quality.

In addition to life sciences products, you are also putting a lot of efforts on growth for your lithium ion capacitor (LIC), a kind of energy storage device. Without doubts, this is one of the main challenges in the promotion of renewable energies. The capacity to store energy regardless of the weather would increase reliability, matching other energy generation forms. How are you advancing in the research of energy storage devices? What are the most exciting new products you are working on now and that you would like to share with us?

When I became president of JSR Corp. business in 2009, I spent a year and a half researching market trends for the next 20 to 30 years. One of the main topics is of course global warming, which is why we are looking into creating a long-term strategy. To solve actual societal issues, global warming must be addressed. Our rubber for eco tires will save a lot of energy and reduce CO2 emissions.

A lithium ion capacitor is a little bit different from a battery itself in terms of technology and applications, but I believe that it is a very captive and intensive business.

Right now, we are trying many things so that if we make a mistake, we will be able to find another thing to do.

Diversification of activities will be our strategy for the next 20 to 30 years. Historically, Japanese companies do not accept defeat, it is almost like Hara-kiri. I believe that we need to change our mentality to accept the possibility of failure as it will allow us to innovate.

In 2004, you were the first company in the world to achieve a resolution of 32nm through ArF immersion lithography. You have several research centers like the Precision Process Research Laboratories or the Research Center of Advanced Materials. How do you promote innovation through the company? What are the innovations JSR is working on that you would like to highlight?

Over the last few years, we have been opened to cross-sectorial innovation. Open innovation is something you really have to challenge. We are part of the IBM consortium, a beneficial platform to visualize the future through what we call cognitive computing. Quantum computing uses neuro-specific devices; something beyond the conventional status-quo. We have joined a pre-competitive research consultation.

Furthermore, we are building here in Japan new joint research projects between our company and Keio University in the form of a medical school and hospital. This promotes collaboration between engineering, medical science and medical practices. I think that it is going to be a game changer, not only for us, but for medical doctors as well. While they have a lot of different ideas, surprisingly, they do not have the means to execute or realize them. They need a lot of help engineering 3D projects and I think that we can be a part of this innovative drive. We are the first in Japan to have a collaborative research lab at a medical campus. For us, having outside collaboration is very important and we are taking it very seriously.

JSR has traditionally been in the forefront of sustainability. For instance, you were the first in the petrochemical industry to achieve "zero waste" at all plants. In your pursuit of sustainable business activities, you launched the E2 Initiative™, named after two “E” initiatives by which it is comprised from: eco-innovation (for creating new business opportunities) and energy management (for reducing the impact on the environment.) What are the eco-innovations JSR is most proud of? What are the main measures that JSR takes to ensure minimal environmental impact?

On the one hand, we are reducing the burden on the environment. On the other hand, as a petrochemical manufacturer, we are a consumer of these energies. Some of the things that we do are still kind of small. We produce phase-changing materials, meaning that the materials’ state changes from liquid to solid. These transition materials take up heat, so if we use this kind of material for a building, we can reduce the use of air conditioning by keeping rooms at a constant temperature.

We also work with waveguide technology, meaning that we work with LED light, which is very directional. This technology allows us to illuminate the whole room in an efficient and eco-friendly manner. These represent meaningful ways to reduce energy consumption. We have implemented some of these techniques in our new building in Yokkaichi, and we are saving some 20% on energy. In the future, we want to apply similar concepts to our manufacturing plants.

Your overseas sales ratio for FY2015 exceeded 50%; approximately half of which represents products manufactured and sold overseas. In the future, the ratio of overseas manufacturing and sales will continue to increase, resulting in an augmented number of local workforces. What markets outside Japan are you currently experiencing the most growth in?

We consider various manufacturing solutions for our products. With regards to the rubber used for eco-tires, we are building a second plant in Thailand. Aforementioned, it is a big industry in Southeast Asia and China.

Because our high quality products are used for eco-tires, we are building a plant in Hungary, about 200 kilometers east of Budapest, as a joint venture effort plan with a local company called MOL. That is our biggest investment, representing about hundreds of millions of US dollars. So for tires, Southeast Asia, East Asia and the European region are the largest high growth markets.

To be successful in our expansion, we require geopolitical stability and leveraged raw materials production, which is why we chose Thailand and Hungary. Realistically, we entered the Asian region because we can grow in it without much effort. Japanese and Korean companies often expand into China, so we are going where the customer goes. However, my real focus is in North America. It is the most stable region geopolitically, and that’s where the innovation comes from. My personal emphasis is to monitor how we can expand our business into North America. We bought KBI Biopharma, Inc. in North Carolina last year, and the growth and stability acquired are both good. We are putting more focus on the market in North America and Europe.

Through JSR Trading Inc., Techno Polymer Inc., JSR Micro Inc. and KBI Biopharma Inc., you have developed a strong presence in the US. In this regard, how do you see the US market, not only in terms of sales and manufacturing, but also regarding product development and investors?

We see clear potential for growth in the life sciences and semiconductor markets. I am a strong believer in the industrial revolution. I believe that the third industrial revolution will start in North America, and that is why I am participating in IBM’s cognitive computing initiative. I believe that the biggest innovation will come from there.

Furthermore, by working with leading IC manufacturing companies, we are able to exchange ideas with each other, hence, driving innovation.

There are lots of companies that have acquired technological resources and capital in North America. These powerful entities want to come to Asia, but do not have the capability to enter this market because of their unfamiliarity with the Asian business model. They do not have enough people or knowledge. I am therefore partnering with relatively new startups in North America through investments, while simultaneously cultivating the Japanese market. The reason I am talking about the third industrial revolution is because revolution does not happen with communication only: logistics and energy also have a part in it. Japan is one of the few countries that has great infrastructure, cutting-edge logistics, fast communication, high-speed internet, and a large economy.

We have the technology and the capital to foster market penetration; and while they are not ready to come to Asia, I am inviting them to come to Japan. That is the strategy Softbank implemented in the past when they brought Yahoo! and Cisco some 20 years ago. Japan is ready for growth and there are a lot of opportunities waiting to be seized. Up until now, we have been working on globalizing our business. I am looking for inbound opportunities, not with tourists and technologies, but with innovation. While we do not have to create everything here in Japan, we have to cultivate these opportunities. Now that we are a global player, we have been working in the US and more and more people recognize us. At the same time, we have learned how to do business in North America. I believe that businesses in North America simply need a Japanese partner that understands their culture and practices, and that is exactly what we offer. Japanese companies think they are limited to working in Japan, but that is not true.

You joined the company in October 1981. Since April 2009, you have been serving as president and representative director of JSR. What have been the main accomplishments of your presidency?

I still have a long way to go. Right now, I am frustrated because strategy-wise we are doing many things. After China invested 4 trillion RMB in 2010, the petrochemical market started to recover. The last two years were the worst years, but we are gradually recovering. We are selling a lot, and there is a high demand for the product, but profit wise, we are still not doing so well. The semiconductor market is worth about $130 billion, and the Chinese invested about $50 billion. Furthermore, the market is saturated, so the competition is very fierce. Technically, we are competitive, but we have to focus our efforts on profitability. As a result, something is going to happen sooner or later.

We are worried about supply and demand management, but we don’t want to blame China because they import a lot. While market competition is fierce, the current momentum in the market is not so good. Don’t get me wrong, our strategy is definitely working, but the results depend on the market. JSR has been working on life science for many years. When I started JSR in 1981, we had a lot of mice in the lab and I wasn’t sure what they were doing. Life sciences was a small industry. Some 36 years later, we have grown exponentially to be worth some $300 billion; a meaningful achievement I am proud of.

In light of the global internationalization process we are currently experiencing, what is the final message you would like to send to our American audience about JSR?

There are a lot of opportunities here in Japan, such as the Olympics and the aging population. The government is doing a fair-enough job by easing financial barriers and implementing beneficiary policies. It is now time for private companies to execute. While we cannot expect innovation to come from the government, they can help us in the process. It’s up to Japanese companies to do something now, so the ball is in our court. At JSR, we are ready, and we are one of the companies willing to take risks.