Thinner, stronger and more precise: The relentless quest of Nippon Seisen

One of the biggest obstacles large companies or even SMEs in Japan are facing is price competition with their counterparts in Korea and China. Since it is very difficult to outcompete such manufacturers on price, Japanese companies must distinguish themselves from their Korean and Chinese counterparts through the quality of their products. We hear that such price competition is getting more severe day-by-day so can you share with us the secret or the mindset of Japanese manufacturers that allows them to succeed in the face of this stiff price competition?

Certainly, those manufacturers whose products rely on their price competitiveness will not last long in Japan. What you have touched on here is the reason why Japanese home appliance manufacturers have vanished from the TV or home appliances markets. It takes a considerable amount of investment for Japanese companies to establish a global supply chain. What will keep a company from expanding its overseas operation will be their financial resources or their lack thereof. Many factors go into this. One important aspect though is that in Japan many large corporations exist in the same industry which means that one company alone must make a gigantic investment in order to succeed. This is one of the reasons why large Japanese manufacturing companies have been prevented from finding the delicate balance between achieving mass production globally while and at the same time doing so at a low cost.

For this reason, Japanese companies are almost forced to run away from those commodities which generally, sell at a low price. Instead, Japanese companies focus on developing high functioning, value added products or software. Products which are having a difficult time outcompeting regional counterparts on price are those which are generally final assembly-based products such as home appliances. One exception though to this is the automotive industry who have separated themselves from other industries by uniformly adopting a system which allows them to assemble through a vast variety of processes. For this reason, even though automotive is an assembly-based industry from Japan, it has managed to separate itself from regional competitors.

I started my career as an engineer for a steel manufacturing company and this is still in my blood. Needless to say though, as with any other industry, the stainless-steel wire industry in Japan is being exposed to this price threat from similar Chinese products, especially commodity or general application stainless steel products. We have focused instead on developing high functioning products which have specific properties aside from general applications and we are seeing demand for such products continually grow. For this reason, even during the last ten to twenty years of the so-called lost decades, we have never lost our overwhelming advantages. We together with similar such companies have continued to grow stronger and enhance our technologies even with this looming price threat from regional competitors hanging over our heads. A case in point is the Apple iPhone example you mentioned. A significant number of components in the iPhone are produced by Japanese manufacturers and in many cases only Japanese manufacturing companies could produce such components.

As with all the manufacturing industries, high function, high precision, and high-quality manufacturing is inherited generation to generation. What is important is that the talent and traditional skills related to technology and the manufacturing spirit are handed down to the next generation in high school, university, and technical education and go all the way up to personnel development in companies. Essentially, Japan's manufacturing is customer satisfaction oriented rather than profit oriented so through this very thinking a spirit is nurtured that makes each process always about the customer and adding value so that we can even exceed their required specifications and expected usability. This accumulation and strength as a whole is what separates Japan from others and is the essence of Japanese manufacturing, which allows us to gain the trust and respect from our customers.

Being a manufacturer company, how do you ensure the quality of your products remains the highest whether they are produced in Japan or overseas?

By continually striving to improve quality and by making sure potential quality improvement resources during day-to-day manufacturing process are fully being taken advantage of in every step of the way and that PCDA is carried out and comes in full circle. To make sure this happen, we will be reinforcing inspection assurances which allow us to grasp quality evaluation quantitatively, IT evaluation, maintain a firm grasp of our manufacturing record, reinforce evaluation tools and turn tacit knowledge into explicit knowledge. Function, quality, and price are what define products and criteria in Japan and overseas more often than not it is different; even though our stance toward quality does not change. Since overseas operators’ skills compared to those of their Japanese counterparts may need improvements, you have to be more resourceful when assessing which products to produce overseas, when preparing operation manual standards, and making sure quality inspection process are in full swing.

You have mentioned how Japanese SMEs have accumulated a vast amount of quality knowledge. To get there though R&D must be very important, as Japanese manufacturing is highly oriented towards continuous innovation. When it comes to Nippon Seisen, what is the role of R&D in your companies’ development?

Presently, we are no longer pursuing stainless steel-based commodity products and are focusing instead on producing functional products. In order to produce such high function valued products, R&D is of course a must. What we are looking to do is to develop stainless steel grades that will be required in the future, or to develop grades that will allow us to achieve higher functionality goals such as those associated with mechanical properties like strength, corrosion resistance, and heat resistance. We look to foresee and carefully study the expected demand for such materials in the future. We see increasing our high function material sales ratio as the foundation for growth. We will look to device our own manufacturing technology to take advantage of material performance using secondary processing technologies and by further developing our Micro & Fine Technology. Part of this process will involve strengthening cooperation with universities and public organizations and taking on cutting edge product development such as hydrogen module separation.

Our perspective is that whatever is to happen we will require our R&D department to develop it. Our business model is B2B and hence our mindset is to develop those products together with someone who is in need of such products. This has already happened in a variety of industries and we are presently carrying out the necessary research and development while keeping an eye on almost all other industries. For example, at the end of this interview I will be touching on semiconductor equipment related to 5G, IoT, automotive CASE, medical, renewable energy and other industries we are looking to develop products in. We see those fields as having huge potential and what we are looking to achieve is to contribute to those fields by developing stainless steel wire grades that only NIPPON SEISEN can supply. Our parent company Daido Steel, who supply us with wire rods, have exceptional material development technologies and this makes product development one our group’s strengths and is the foundation for our success.

With this concerted effort towards achieving your R&D goals in mind could you explain to our readers how you will be pursuing corporate growth? What is your mid-term growth strategy?

We have prioritized four areas in order to pursue corporate growth. Firstly, we will carry out Nippon Seisen’s renewal of our production facility/equipment investment as planned with the aim of boosting supply capability and reinforcing our production basis from the ground-up. We have continued to carry out production facility/equipment investment and will continue that trend in the foreseeable future (2021-2023) to add production capacity for our Thai Seisen's high function and unique products. Secondly, we will carry out our ESG management in order to contribute towards achieving our SDG goals. Thirdly, we want to strengthen our new product development capabilities and take full advantage of the resources we have at hand now. This will be done in regards to our Micro & Fine Technology including having a wide range of grade repertoires that include stainless steel, high alloy, titanium, titanium alloy etc. and developing various types of applicable production processes such as primary melting or re-melting process in order to meet required specifications. Fourthly and finally, we want to expand our metal fiber division business including technology that will allow us to achieve both low pressure loss and micro-filtration by applying multi-layer media.

If we look at the semiconductor industry, we know that Japanese machinery manufacturers take up approximately 40% of this sector. From the back end to front end processes Japanese companies are leading the way. Could you explain to our readers further how your stainless-steel wire is used by the semiconductor industry?

Our gas filter by the name of NASclean is directly used in semiconductor manufacturing. However, semiconductor production machines are constantly being improved upon and are getting more functional year by year. During semiconductor manufacturing our metal gas filter is used inside semiconductor production machines and its circuit width is getting thinner (down to 5 nm now) and likely to get even thinner. Moreover, during the semiconductor manufacturing process extremely corrosive gas is used and a high temperature gas is applied. The trend here indicates that a day will come when the current gas filter model, which allows us to filter out 2.5 nm-sized impurities, will fall short of expectations and that we will be asked to develop filtering out capabilities up to 1.5 nm. Additionally, we are assuming also that there will be a demand for better corrosion resistance and for a filter that can withstand an even more corrosive environment. These are the types of developments we are looking to do.

Many functions are required of the machines that produce semiconductors and your company already has some of the best technology in the world for this. For example, your NASclean for semiconductors and we are also are aware of how your NASclean technology is being supplied to various other industries. Looking into the future many changes are expected to take place, can you tell us how you intend to adapt to them?

We do hold a considerable market share with some of the biggest semiconductor production machinery manufacturers, but we are always looking to increase this. This is why we are striving to develop our next generation filter together with our customers. But going back to our super fine wire I touched on previously, as recently as two years ago the thinnest diameter we produced was 16μm. At that time this was the thinnest diameter we could produce and there were only a select few who could produce such products. Right now, our 15μm super fine wire is adopted in laminated capacitors used inside smart phones. Our 11μm super fine wire is required for photovoltaic generation applications and we are supplying them on a mass production basis. In the renewable energy field, which I will touch on later, I see this photovoltaic generation as an application with much more room for potential growth. Needless to say, during the photovoltaic generation processes efficiency needs to be enhanced which subsequently will lead to a demand for even thinner super wires such as our single-micron super-fine stainless-steel wires which we are looking to achieve. Even though we are the only company who can produce a 11μm super fine wire, we are striving to achieve a single micron wire supply capability. If we can do that, most likely photovoltaic generation efficiency will be further enhanced.

We understand that in regard to your business overseas you already have a close-knitted relationship with American semiconductor production machinery manufacturing companies. Are you looking to expand your existing customer base not only in Japan but overseas too?

When it comes to our stainless-steel wire business overseas operation, we do have factories in Thailand and in Dalian, China. Our factory with the highest production capability is in Thailand but we also have a NASLON filter factory in Changshu, China. However, NASclean and super fine wire as well as our gas filters which require specific high functionality are produced in Japan and then exported to them. This is because the required quantity for those products is not necessarily large and it would not be ideal to spread out and disperse their production. As for our super fine wire, definitively it will continue to be produced here in Japan in Hirakata, Osaka. For our super fine wire with a diameter of around 20μm we have already made sure that our Thai plant Thai Seisen can produce them too. However, our basic thinking is that when it comes to producing products with cutting-edge technologies, we will continue to produce them here in Japan.

As you say, you have several overseas factories in Thailand and China, but we also know that you are making use of agents for your sales channels. In regard to your international expansion strategy, is there anything particular you are looking to improve upon or will you maintain the status quo?

We receive several requests from European companies who are looking to work with us. At this very moment though we are politely turning them down. This is because the way I see it the timing is premature and since our technology is in a cutting-edge field that that we are looking to take on and capture, we need to make sure that the market is sufficiently mature enough in order for it to truly appreciate our product’s values. The bottom line is that I do not believe there is a sufficient customer base at the moment that would recognize our product’s values. To be sure there is a demand for commodity items but that is not what we are looking to pursue. I believe that when it comes to applications in need of cutting-edge technologies, we will continue to supply from Japan and for stainless steel we will also supply some of them from our Thai plant too. I believe those two factories will manage to meet global demand for cutting-edge technologies at least production capability-wise. For this reason, we are expanding our Thai plant Thai Seisen’s sophisticated material’s capabilities little by little.

Is it safe to assume that as part of your future plan you will continue to secure supply ability for commodity products with an eye on an even brighter future, while also looking to capture business opportunities for higher functional products through further overseas expansion?

That is safe to assume. For instance, even though at this very moment there are not many semiconductor production machinery manufacturers, much less those in high function machinery, in case such demand were to arise in the future we will have to consider how we go about our business in China. Whether or not we will decide to expand our business overseas is strictly a management based decision.

Since we are positioned in the earlier part of whole manufacturing processes there are certain restrictions when it comes to expanding our overseas operations. In terms of producing single micron-meter super fine wire, it is easier said than done. This is because while it is us at NIPPON SEISEN who draw wire down to a single micron-meter diameter, to do so invariably we must first secure highly clean and sophisticated steel. Additionally, it takes a special customer who is able to weave mesh out of single micron wires. As this type of cutting-edge weaving process is done by our customers we therefore must align our activities with theirs. Hence, us building new plants overseas may not do us any good unless we can align with what our customer is looking to achieve, otherwise we may end up closing that factory and coming back to Japan. This is different from merely building factory overseas for the purpose of carrying out assembly for semiconductor filters which can be done without much difficulty.

Thank you so much. We really appreciate your comprehensive replies to our questions. Lastly, could I ask you a question so that our readers can get to know better the president. If we were to happen to get an opportunity to interview you again in two years’ time, what goals would like to have achieved by then and are there any other ambitions you would like to realize?

Five years have passed since I became president of this company and in that time we have spent ¥10 billion on our production line to reinforce it. This was done with the aim of increasing our high function and unique products sales ratio and so we felt production capacity reinforcement was required. Generally speaking, an investment worth ¥10 billion is equivalent to double the investment of normal cost amortization and this is almost through. Now that we are well equipped to supply those high function and unique products, we would like to aggressively expand our sales not only to domestic customers who already know our products but also to overseas customers. We would like to supply our product to customers who will recognize and come to appreciate the added value of our products.