Integrated Micro-Electronics, Inc., also known as IMI, is one of the leading global providers of electronics manufacturing services (EMS) and power semiconductor assembly and test services (SATS) in the world for diversified markets such as those in the automotive, industrial, aerospace and other industries. IMI Japan Inc. Managing Director, Jeremy Cowx, speaks to The Worldfolio about industrialization in the Philippines and IMI’s business operations
To what extent is your objective to have Japanese companies produce here in Japan or accompany them to be able to produce in other geographical areas? Which one is your priority and why?
The office's priority is to build Japanese clientele and add technical capabilities. I have never agreed with foreign companies who put one person in a home office on the ground in Japan or neglect to incorporate. I agreed with the age-old military adage that you need to have boots on the ground. IMI Japan is positioning itself so that it is possible to talk with the technical team, the people in charge of quality or production and the sales people on pricing or how contracts and negotiations work. We hold that knowledge in house in IMI Japan. Our objective for the Philippines is to see the automotive, industrial and aerospace businesses built out more for the Japanese audience. We want to build the next level of business in those industries.
IMI Philippines has a very strong history with Japanese customers, and Japanese visitors to our Philippines factories always remark on the monozukuri discipline evident in our production lines, continuous improvement, 5S and the knowledge of our Teams. IMI Mexico now serves a growing Japanese Automotive client base in plastics and electronics and we see further growth in Europe for our Czech and Serbia factories. IMI Philippines and IMI Japan are uniquely placed to assist these factories in transitioning to a Japanese customer base. IMI Japan provides cross cultural training to our colleagues in the Europe and Mexico so there are common points of reference among our Teams when we bring a new Japanese customer to a new location. That’s the dynamic I’m pleased to see taking place within the company: the leadership role we bring to Japanese customers globally.
IMI Philippines is doing much more now in motorcycle assembly, power management and power modules and design and engineering for camera systems in cars. We do have real capabilities that are unique in the Philippines and in the region. I would like to see our Japanese customers connect to those technologies. I am positive that Japanese companies will find the Philippines itself a good country in which to do business.
One of the Philippine government’s plans is to tackle infrastructure and to build energy structure worth 250 million dollars. To what extent does your operation link with those plans? How important are those initiatives to be able to attract more Japanese companies into The Philippines all together?
Infrastructure is vital to any company’s decision to invest and further critical to a country’s economic development. History is ripe with examples of countries that chose to cost efficiently connect markets with industrial bases; Japan’s bullet trains, the turn of the century railway and highway systems developed in the US and UK, cable and wireless (the precursors to today`s internet) and Germany’s Autobahn expressways are only a few examples of an exhaustive list that proves the point that connecting people to goods gives rise to economic growth.
The Philippines continues to improve its infrastructure with new airports in Manila and Cebu, expanding expressways on Luzon and renewable energies. Our parent company, Ayala Corporation, and its subsidiaries, contribute to this development.
With regards to quality how do you keep up to date with the Japanese processes as they grow? How do you keep guaranteeing that by partnering with a non-Japanese entity you can still ensure the Japanese quality today and tomorrow?
This is an interesting question to consider. I mentioned our Philippine factories are very good with Japanese companies and learned a lot from the process - that was a thirty-year process. IMI Mexico right now is in a two to three-year learning process from it, which is practically one tenth of the time. Here in Japan my sales cycle is longer than my colleagues enjoy in IMI China, Europe or North America.
When we moved the office from Tokyo I repositioned it to mirror a more Japanese manufacturing organization. I wanted a quality engineer who was experienced and had gravitas so he could bring that experience into the room. I have known my current quality engineer for 16 or 17 years. He speaks Chinese and English and ran a factory in the Philippines for seven years during the eighties. He can bring that experience into the company and talk the manufacturing language, both outside the company and internally. He can help a factory in China or Mexico work with Japanese customers.
So I had to match that differently than the Tokyo office which was focused much more on design and engineering. When a Japanese company considers partnering with IMI, we can show a Japanese quality person, a younger Japanese sales person, an accountant under a Japanese person, but at the same time I enjoy a very diverse set of skills in the office. Mirroring that traditional Japanese structure builds confidence.
A relevant example is the fact that IMI was able to break into the supply chain of the Japanese automotive industry at a tier two level. We now supply into Mazda`s tier 1 supply chain. Although our parts do end up in other Japanese manufacturers; this is quite telling: the doors have opened. I believe that not only can IMI be successful but also that non-Japanese companies have a much sweeter road ahead to success, certainly much more so than when I arrived here 22 years ago. I can see that and it opens up opportunities, not only for IMI but a wealth of industries and different companies. IMI wants to send that Japanese business somewhere where they will succeed.
What do you bring specifically to the table of a Japanese company who is expanding overseas? How do you help them reduce the investment risk? How do you help them in being competitive? Also, why should they work with you instead of keeping some of the processes in house?
Europe represents a mature market: the German automotive OEMs are among the biggest in the world, they are open to non-European suppliers. Japanese technology still has the great reputation as it did when I was growing up. I understand that Europe is attractive to the Japanese companies as a market in which to sell to European companies.
Europe represents the next mature market that they feel they can enter, but they require a production footprint in Europe and predominantly Eastern Europe. I see a Japanese footprint in Prague that wants to expand if they secure that investment money. We are working with our colleagues in the Czech Republic and all of our European colleagues on how to serve the Japanese base and they are studying the Japanese language.
We help Japanese companies reduce investment risk by having local knowledge of the markets, access to a manageable labour force, certified factories in major industries and deep knowledge of their end customers. In some cases, we will also invest in our customers’ success, further lessening their risk.
A good example of the model we offer in Philippines, Mexico and Czech is our Custom Business Model. I call it the ‘Factory inside a Factory’: IMI provides a dedicated facility, manufacturing solutions, engineering support, labour, utilities, warehousing and office space for the customer. The customer gains a completed factory where they maintain strict control of their unique processes and intellectual property.
Moreover, IMI Philippines has experience sending its design engineers to a current customer`s factory in Japan for a year. This engineering collaboration was made to fill in the lacking engineering resources available, ensure a seamless transfer from design to mass production stages to any of IMI`s global factories and increase the success of the Japanese company in winning new business
We found this new model compelling as Japan engineering local requirement is emerging. IMI adds a unique value add here.
What is the situation for Japanese companies that still want to produce from Japan and export their end technology product from Japan to the rest of the world?
The default setting has been - “Why do I have to set up another factory when I can just fly it in?” What they are finding is customer base saying they want a supplier right outside their door. They need to respond to changing design cycles faster. If you are not going to set up right outside their door and be their neighbor and you are on the other side of the planet, they say "Do not expect me to write". And that customer need is driving migration closer to their expanded customer base. They want to expand their European business portfolio. The pie graphs showing Japanese companies sales, currently show China and America are almost equal and then there are the rest of the countries. I can see a time in the future that the pie graph is more balanced with Europe starting to grow out. We are going to see more balanced portfolios.
IMI has a manufacturing presence in the major global markets: NAFTA, Europe, ASEAN and China. We can meet this Japanese growth vector where they need to expand.
You have more experience with the customization part of Japanese companies. This is something that is very important, as is attention to details and the ability of IMI to fit within the customization of a Japanese company and to provide exactly what they need to the Japanese standard.
In ‘EMS electronic manufacturing service’, the key word is not really electronics or manufacturing but services. We do not have a physical product; we might have platforms that resemble a physical product but our product is the service of making other companies products. When I pitch for new customers, I often find that they ask me if I have ever done anything with their product or another such product and it is difficult to inform them that it is an irrelevant question because if I could do their product, why would I be doing it for them? Instead I could be doing it for myself and competing with them.
There is still a lower percentage of outsourcing in Japan compared to the European and US market, which is good for IMI Japan because it gives us the opportunity to do more business. I find dealing with that second or third tier company which has never had a non-Japanese supplier or which has never been to a particular overseas locale, first you have to walk them through the outsourcing process. You have to expect questions which are natural questions for a product company dealing with an EMS company.
This is where we have been the most successful - taking those second or third tier customers, teaching them about outsourcing, working with them, investing time into the relationship and often investing in production equipment for them to do the business. All of which provides value that our Japanese competitors do not have.
What are your competitive advantages in comparison to a local competitor?
While our Japanese competitors in Mexico excel, as you would expect, at engineering, they are only able to provide one part of the process, meaning companies that buy from a Japanese company would have to also buy from a plastic supplier and then assemble the plastics and electronics. The big competitive advantage we have in IMI Mexico is that we can supply all three parts in our factory: plastics, electronics and assembly to Automotive OEM quality and delivery levels. We are a less onerous option in Mexico.
The second advantage is that we know how to run a factory in Mexico. Japanese companies have always initially struggled with this dynamic. We leased an entire building for two of our Japanese customers so they could enter the market and produce for their customers quickly.
In the Philippines, we are a member of the IOTA conglomerate and we have stability which other local Philippine competitors may not have. The conglomerate owns a bank and has a very strong balance sheet. Our membership has an impact on our ability to maintain a lower turnover among our people - that is a real competitive advantage.
Our thirty-year history with Japanese companies also provides a real advantage for our quality reputation. When a Japanese company walks through the door the face may not be Japanese but the thinking is very similar. We also have a proven track record of serving global OEMs and comprehensive IP protection.
Another advantage is that again we can do plastics and electronics also in the Chinese market. These are two capabilities that our Jiaxing factory has in house. As with IMI Mexico, the advantage of being able to assemble electronics and plastics is a real competitive differentiator.
I also believe that IMI`s global manufacturing presence, and collaborative culture of our people, are the major differentiators of today`s globalization. IMI aims to continue become the Japanese companies’ flexible expert and partner in achieving mutual business success.
What is your experience in terms of challenges when dealing with Japanese companies?
In North America, we say that the customer is king; but the Japanese say the customer is God.
I always point this out to my global colleagues who come to Japan. We encourage a lot of our colleagues to visit Japan and experience this fascinating and unique culture. Japanese are rightly proud of this uniqueness.
We have never enjoyed the level of services that we enjoy in Japan anywhere else. That level of service carries over into the manufacturing sector. I do not expect Japanese companies to downshift their expectations in an engagement with a non-Japanese company, but I do ask them to be open in reaching the same learning process as colleagues that are not familiar with Japanese manufacturing concepts.
We use this learning process to build trust, learn from one another and work to everyone’s mutual benefit. During this entire process, IMI Japan acts as a mentor and intermediary to both parties.
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