Science, the nucleus of industry: a “twin-core” strategy for growth

What are the key markets for your products?

Previously, Japan, the USA and Europe were our largest markets for the sales of scientific and analytical instruments. Selling only to these countries used to be sustainable. Today though, this is no longer the case. With the rising demand coming from Asian countries, we have created affiliate offices within Asia. China and India especially are increasing markets in Asia for our products. For any emerging country to develop, they need to increase their strength in science and technology. Although we still have many customers in the US and Europe, the demand coming from emerging countries has soared, which is why we find ourselves increasingly catering to the Asian markets. In fact, there are only two or three companies in the world that can produce these kinds of high-end instruments, including ourselves.

What in your opinion are the advantages that Japanese manufacturing has that its competitors like China, South Korea and the USA do not?

The first question I was asked in an interview conducted with an American media was - "Why is manufacturing so strong in Japan?" My answer was divided in two reasons. First, Japanese employees are excellent team players. Second, Japanese companies have a long business cycle. It could be said that this is opposite to America, who have a short business cycle. For example, the electron microscope might be installed by a customer who then buys our instrument again in ten or fifteen years’ time - hence our long business cycle. This gives us a lot of opportunity to implement “kaizen” and to constantly improve our products during their cycle.

Can you tell us about the trends your sector is currently experiencing?

The demand for electron microscopes in emerging markets is higher in an academic sense. On the other hand, the demand for scientific instruments for analysis is mainly destined for the demands from private sectors. The Japanese market for analytical instruments is about 50 billion US dollars, and around 40% of these 50 billions are going towards these private demands. Our product line is composed of three segments. First, is the Scientific / Metrology Instruments, our fundamental DNA business, which attributes to 70% of our revenue. The second is our Industrial Equipment - mainly mask lithography instruments. These instruments are very expensive and do not sell in large amounts. Masks are used for the pattern engraving process of the semiconductor process. We produced the mask writer, the main customers for which are giants of global semiconductor foundries, who power smart phones. Our instruments also help to produce the iPhone camera. The third sector is the Medical Equipments, whose main product is the Clinical Chemistry analyzer which is used for such things as blood testing. While market demands in America and Japan are saturated, it is increasing in emerging countries. The semiconductor and medical market is growing worldwide, especially in Asia.

Out of these three business units that compose the core or DNA of the company - which is growing the most in Asia?

The growth of a country’s medical equipment depends on the size of its population. China and India both have large populations, and as such, they show great market potential. These two businesses - the semi-conductor and medical industry - may well see growth in the future. However, we will also remain true to our current conventional DNA business; Scientific / Metrology Instruments. This segment is our fundamental and it is truly important for us.

What are the competitive advantages of JEOL? Looking at the future, what will be your mid-term strategy to differentiate yourself from your competitors?

Performance is imperative; if you take away performance, you do not have anything. Performance is necessary in order to make something equal or better than our competitors. Another important aspect is service. When we first entered the US and Europe, we did not sell through any distributors but instead sold directly to our customers because we identified that service was truly valuable. This value has carried through to how the business works today. The third aspect is the strong ties that we have with many of the top scientists in the field. The close communication and relationship we enjoy with these scientists is one of our core strengths.

You mentioned that the European and American markets are important as benchmarks for the rest of the world. Could you give us a specific example of a product from JEOL that can be classed as a benchmark in Europe and the US?

Our Electron Microscopes are very well known and held as benchmarks worldwide. Furthermore, this is reinforced by the fact that many world-class Universities and National Institutes utilize JEOL Electron Microscopes, including Oxford and Harvard. Some of our main customers are the world’s top universities, and the strong relationship we share with their Professors is another strong asset of our company.

Your company has recently joined the Japanese government organization TRAFAM (Technology Research Association for Future Additive Manufacturing). As a company, you have been making huge advancements and improvements into the electric beam microscopy and electron beam melting (EBM) AM machine. Other big players are also part of TRAFAM. What benefits can be addressed by joining TRAFAM?

We have recently implemented a new policy called “open innovation” and collaboration with other companies. We aware the importance of collaboration in this era. The alliance with Austrian company called IMS for manufacturing multi beam mask lithography system was produced as a one of this good outcome ; the optical and electron microscope integrated system, called miXcroscopy™ was developed with  the Nikon – JEOL alliance, and the immunoassay analyzer system was developed as a OEM production for Fujirebio, which can be physically connected with our chemistry analyzer to produce further innovative solutions. This policy of open innovation is one of the reasons why we joined TRAFAM.

Fifteen to twenty years ago, Japanese electronic corporations were leaders of the industry and main market shareholders. When Korea, Taiwan and China came into play, Japan Inc. lost its market momentum to those countries. One of the reasons for the fall of Japan Inc. was caused by its reluctance to adopt “open innovations.” Japanese electronics firms decided to keep their creations “in-house,” which ultimately resulted in a loss of innovative power.

Japan is filled with excellent small to mid-scale manufacturers. If you were to align the entire manufacturing industry of Japan to the Mount Fuji, you would find all the small-scale companies at the bottom, creating a base for the rest of the industry. It is therefore important to get all those manufacturers together and to have them link up and work with one another. I believe that the multitude of diverse, specialized and small-scale corporations is one of Japan's strengths. If they worked together, it would become something that could leverage Japan’s position across the global market.

TRAFAM is an open innovation association, a national project dealing with 3D printing. 3D printing has evolved into an attractive and high-potential technology, and it is composed of two major types; laser beam type and electronic beam type. We are in charge of developing an electron beam type which currently only has one supplier in the world, called Arcam AB, a Swedish company that has been acquired by GE recently. As of today, Arcam and ourselves are the only two companies in the world that have this technology. This electron beam technology can create titanium jet engine blades for big aircrafts and this can only be capable by electron beam technology itself.

As I mentioned it before, our  fundamentals, -the electron microscope, the analyzers and the scientific instruments- are complementary and when these technics are combined, we can expect the innovation. In order to create this electron beam 3D printer, we used the same technology that was used in our lithography system. Within a short two-years period, we catched up with the development of this electron beam 3D printer technology. Although the development of the architecture is quite  complicated and difficult, we believe that we will be able to produce them quickly, thanks to our historical expertise.

Your company motto is to pursue the world’s highest technology based on creativity, research and development and as a business partner that truly emphasizes client care. What future projects do you have in the pipeline?

We had a dual core fundamental strategy in a previous business plan: a science core and an industry core. I would like to change this strategy from a “twin-core” to one where science is at the center of everything, but remains surrounded by industry. Science academic demands are a very stable part, but do not have a huge potential for future growth; however, the private industrial demands are growing. Science technology is the core of the EM business, and while it might not have enormous growth potential, it remains a key technology for JEOL and for the industry.

Furthermore, we recently established a new service business scheme for our Nuclear Magnetic Resonance system. The high magnetic field super-conducting magnet within the system allows the user to analyze the molecular structure with high resolution. As we recognize the issue for the user is the budget to install this kind of system including its facility concern, we are testing a rental/time sharing business model. By utilizing this scheme, users are able to focus on their own research. The only thing they have to do first is to deliver their samples to our facility and they can perform the researching operation from their lab in remote control. We believe that this idea will help democratizing the high-end system to the vast potential demands in the market.

What will be the message you would like to convey to your organization regarding management and your way of seeing the industry for future years?

I was recently asked to speak at an exhibit. My speech consisted of many aspects, relating not only to JEOL, but also to the analytical and scientific industry in overall. I outlined some core themes which I understand to be very important. One is the relationship with other companies in “open innovation” through cross-border collaboration. Another one is the merging of technologies using system integrations that are in line with AI, big data and cyber space. These are the two concepts that I want to use to create a sustainable foundation for the company.

If we were to come back in five years what developments would you like to have seen in the company.

Although I cannot say what technologies I would hope to see, I believe that if we stay true to our core, if we do not forget where we come from and do not stray from the path which we are supposed to be on, then we will be able to sustain our business for the future. I am privileged to be in an industry that is constantly growing and I believe that as long as we adhere to these points, we will continue to grow.