Established in 1952, Nihon Gosei specializes in the production and sale of synthetic resin and molding materials. As the market moves with the times, so too does the company, with a focus on the next generation of products. We speak with president Hiroshi Tsukuemoto to learn about how Nihon Gosei has played an important role in the manufacturing supply chain, both domestically and internationally.
What is the role of your company in the domestic and international supply chain? How do Japanese SMEs assist tier one and tier two manufacturers?
The first step is gathering information about the development of a new item from potential customers who approach us through our website, exhibitions, and distributors. This is unlike our current customers, from whom we obtain information through our monthly technical meetings. Secondly, we discuss with our customers the applications, characteristics, and milestones. We then supply the prototype material, which is manufactured based on mixing the technologies that we have accumulated throughout our ninety-year history. The fourth step is differentiating the features between the prototype and the mass-produced product. Sometimes, these differences exist because of the materials and the size of the machine utilised in the production. The next steps are deciding upon the specifications and evaluating the estimations in comparison to competitors. We conclude the contract and finally start the business.
To talk about our role in the supply chain, let us take, for example, motorcycle or automobile manufacturing. We manufacture our products or materials to supply to tier one firms via distributors. Tier one firms then supply to motorcycle manufacturers, who deliver to stores for consumers. The four main steps in our product manufacturing are procurement of raw materials globally, manufacturing by mixing our technologies, quality control, and delivery. We not only procure raw materials for the first suppliers, but also for second and third tier suppliers as BCPs. Several details are meticulously checked, such as the quality, net weight, or packaging. Our manufacturing processes are always based on the following 5Ss: Seiri or sorting, Seiton or organising, Seiso or cleaning, Seiketsu or clear and cleanliness, and Shitsuke or discipline, as in education. A meeting is held every morning to check the health condition of our operators and confirm the safety of all the processes in manufacturing. The controller examines raw materials, controls the temperature of each machine, as well as room temperature and humidity, manages the time for mixing, and monitors the weight of every package of the final product. The quality control has the awareness in preventing the outflow of specification of products, controls the temperature of the room and major machinery, and compares the results according to guidelines and specifications. Lastly, delivery requires communicating well with the customers and tracking companies.
The green zone is responsible for all of Nihon Gosei Kako, the yellow zone displays the responsibility of motorcycle manufacturers, and the white zone shows the motorcycle stores.
We have a lot of future customers to be approved for tier-one, because we supply high-quality materials without any delay of delivery. The latest technology or materials that we provide to tier-one enable them to give the technology to our motorcycle manufacturers.
In recent decades Japan has seen the rise of regional manufacturers that have replicated Japan's monozukuri process. Despite this fact, many Japanese firms, both very large and chuken kogyo, maintain a large global market share, especially in B2B markets and niche fields. As an integrated manufacturer of synthetic resins and materials for the electronic component and automotive industries, what does monozukuri mean to you and this firm?
Monozukuri means readily and continually responding to product specifications requested by our customers at a reasonable price. Our customers raise these requirements every year. For example, along with the yearly upgrade in the performance of smartphones, the materials used have to be improved to a higher standard as well. Mass production has been taken over by emerging countries, so Japanese companies need to focus on elevating the quality of their products. Since our main business is mixing the compounds, we procure new raw materials and attempt to create new compounds. The annual turnover of our company is about ¥ 4 billion, and we use over 1,000 raw materials. About 20 years ago, we acquired the majority of our raw materials in Japan; however, we have expanded to Asia, the US, and Europe. These global dealings allow us to gather various products, but these are easily affected by force majeure, such as the major cold front in the US recently, and emerging countries’ shortage of electricity. Our stable procurement of raw materials has a direct bearing on providing our products to our customers. The two types of products that we produce are the liquid mixed material and the moulding material (powder). We have several grades for the liquid material, and we use different facilities accordingly. A cylinder is used in the mixing of liquid raw materials. Different factors have to be considered in the process, such as the order of adding the materials, screws used, blending, or heat because these all impact the outcome. We conduct testing with the new compound, and the inspection criteria used are unique to each grade.
This is a condenser, and our materials are used in this black part. There is a coil and other electronic components inside, where we insert our liquid mould to solidify the material. In order to make it easier for our customers, we take their product and perform a number of tests like electric conductivity, heat resistance, heat cycle testing, and others. Our clients are Japanese affiliated companies. Some products are sold directly to overseas firms, like the local company in Taiwan. Japanese companies started going overseas for production 20 years ago, so 70% of our products, both liquid and powder, have gone overseas together with them.
In the next 15 years, a third of Japanese people will be over the age of 65. On one hand, there is a labour crisis, where there are fewer young, talented graduates to replace seasoned workers and pass on that expertise to the next generation. Secondly, there is a shrinking of the domestic market. Can you please elaborate on the impact of these changes on your business?
We have been experiencing a shortage in manpower for 5-10 years now, especially because our factory is located in the suburbs. Automation is the key to reducing the need for manpower; however, our processes entail complex procedures. Nevertheless, we are working hard to automate wherever possible. People used to believe that the manufacturing industry was only for men; contrarily, we welcome more women to our company to cater to this shortage. Many of our products are used for motorcycles, and the domestic market for this is declining. On the other hand, India, Indonesia, Vietnam, and other markets are performing better in this area. Our focus now is to work together with tier one companies that manufacture motorcycles and sell to Asian regions. Also, we are trying to work in cooperation with tier one and tier two companies to increase our sales.
There are many products such as digital cameras that have been shrinking in the market in recent years. On the other hand, there are products that are growing in the market, such as smartphones, fiber cables, and 5G, 6G and EV-related products. We also want to increase sales of products that can be expected to grow not only in Japan but also overseas.
The majority of our products were used for home appliances, at the time when Japan stood out in this area, such as refrigerator condensers. However, Korean companies are now manufacturing in China and utilizing Chinese materials. For Japanese companies to survive, we need to improve and enhance the performance of our products.
Even now, we are continuously improving our products in response to the needs of individual customers, and sell our products to domestic and overseas companies that manufacture electronic components such as condensers in Japan and Asia.
Smartphones that are sold overseas for lower pricing do not use Japanese components, but iPhone and Samsung high-grade smartphones use a great deal of components from Japan, including ours. We have been providing these products and each one has a specific requirement and request for quality and performance upgrades.
We do not foresee any increase in the volume of our sales because of Japan’s declining population, so we are paying more attention to the international market.
It will be your tenth time participating in the car electronics technology exhibition and it is a very transformative and exciting time for the automobile industry for EVs and materials used in cars. You mentioned that you will be displaying your high-performance resins that will support the evolution of car electronics. Can you talk to us more about this and the impact the transformation of the automotive industry has had on your business?
The items that we will be displaying at the exhibition are limited. One of the negative aspects of Japanese manufacturers is not wanting to disclose information about the materials and companies that they use. Of course, we want to say and advertise that our products are used by large companies in Japan, but we often cannot freely talk about these companies involved. Hence, we will be displaying a few items that have been approved by our clients. Ideally, we want to showcase the products that we have collaboratively developed with our clients, but we are not allowed to do so. Nonetheless, we are concentrating on highlighting the characteristics of our materials.
In the change to EV, our products can cater to the issue of heat dissipation due to the electronic control parts being in one location. When our products are used for TVs, we do not have to worry about humidity because of the more stable environment. On the contrary, EVs are exposed to extreme temperatures, vibration and dust, which demand the sealing of the condensers to avoid humidity and contact to any liquid.
Some of our products were discontinued, such as our digital camera-related products due to the industrial change, but a different type of moulding material is being used in smartphones now. The shift from combustion engines to EVs has caused us to change many of our products. We have more electronic components. The idling stop system in EVs is also applied to motorcycles. The new items required by EVs compensate for our loss in our products used in combustion engines. Thus, our research and development is mainly related to EV products.
The COVID pandemic has brought a lot of damage to the global economy, but we have also seen some silver linings, such as a thriving logistics sector or the mainstream adoption of DX and IT technologies. What changes have the COVID-19 pandemic accelerated at your company?
Even before the pandemic, we were doing remote work and teleconferencing with overseas facilities. The increase in computer sales has indirectly benefited us as our products are used in computers. People in the US seem to adapt well to teleconferencing, but Japan has had a long-time tradition of face-to-face meetings. For example, when negotiating, face-to-face meetings help us to better size up the situation. Some companies would take a two-hour Shinkansen or bullet train ride just to thank someone at the end of the year or greet someone at the beginning of the year. This culture was significantly interrupted by the pandemic, which makes Japanese companies a bit anxious and worried. However, it is much easier to set up online meetings than in-person. In 2020, we had a huge drop in sales as the factories in Indonesia and India that produce our products used in motorcycles were closed. We recovered a little in 2021, but it was not at the same level as in 2019. Many businesses in Asia are based on sightseeing and logistics. Since these areas are not thriving, people cannot afford motorcycles, and this situation will continue for a while.
When we met with the president of Toray Industries, he talked about how finding local partners, in their case in Vietnam, in co-producing and collaborating was key for their expansion throughout Southeast Asia. How would you describe the role that collaboration or co-creation plays in your business? Are you currently looking for any new collaborative partners, whether in Japan or any of the overseas markets that you operate in?
Since our company is quite small, and our products are very specific to the industry, it is difficult to find a collaborative partner. We are trying to move out of mass production taken over by Asia and into a niche field. Having said that, we think that it is important to provide products locally. We have a sales office in Thailand, and we have been commissioning the production of our products to a local Thai factory. We pursued this local production because of the Great East Japan Earthquake in 2011, and in terms of BCP, there is a risk of having only one factory in Chiba. In addition to that, the Japanese yen currency exchange has been affecting the import and export of our products. Local production means tall production. Domestically, we have delegated the manufacturing of our products to a company in the west of Japan which is located far from Chiba in the east of Japan. We sell a lot of our products to an Indian tier one company, but like India it is rapidly developing. Therefore, we are contemplating having a production facility there. The challenge is that our products use hazardous materials, as well as require strict temperature control. If we were to produce a huge volume in India or Indonesia, we could collaborate with a major company. But because the amount is not that big, we notice that it is one of the subjects on how to maintain the safety in our production.
What regions or markets do you consider key as part of expansion internationally? Can you talk to us more about the nature of your expansion strategy?
India and Indonesia seem to have high potential considering their growing populations, rapid development, and many Nikkei affiliated companies are going there. Before we started producing in Thailand, we thought about going to South Korea or Taiwan. While it is true that these countries have a high level of technology, they are expensive. Maybe in the future, Vietnam and Myanmar have potential. However, at this point, these countries do not have the social structure that demands our products. As I have mentioned, we have over a thousand raw materials, but each lot is small. It is more of a low volume, high mix production. Through this, we can still compete against Asian mass-producing companies and differentiate our company.
Imagine we come back in eight years for the 100th anniversary of your company and interview you all over again. What would you like to tell us? What achievements and goals would you like to have accomplished by then?
It would be absolutely wonderful if I could time travel and see the future. Our company has ¥ 4 billion sales annually and generally speaking, all companies hope to increase their profit. In the past 10 years, we have increased our sales. We will continue to do so in the next 10 years. I want to move away from mass production and continue to enter niche fields. Being so, there will not be a drastic increase in our sales. We may be a small company, but we are precious to society because of our contribution to the industry and meeting the demands of our customers. As SDGs and environmental friendliness are becoming a common theme globally, we want to utilize solar panels and other natural sources of energy instead of purchasing electricity for our production. To help in making both combustion engine cars and EVs lightweight, we will endeavour to develop compounds that are more efficient and useful for condensers.
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