Unique chemicals made with the environment in mind

I would like to start the interview by asking you about the Japanese manufacturing spirit, monozukuri, because we know that traditionally it is about this kaizen philosophy of constantly improving to perfect the product that is produced. Nowadays, however, it involves responding to the ever-evolving demands from customers and providing that added value in the final product delivered. Can you give us your take on monozukuri, what for you is the essence of monozukuri?

We think monozukuri is about pursuing and sticking to your goals. We (one of the SMEs) are particular about the originality of products.  Even if we imitate other company’s products, we cannot compete at all.  The key to developing an original product is whether it is patentable.

In our case, we have a limited number of chemists, but it is enough to have one qualified chemist who comes up with the idea of an original product. Many chemists may be able to speed up the time of development, but the number does not mean that they will come up with new compound ideas. There is still an unknown area in chemistry, and there are many phenomena that are not described in any text or literature. They are only recognized by actual experiments. Inspiration is created by accumulating experimental results and connecting them vertically, horizontally and diagonally. If you imitate another company, you will not be able to accumulate such experiences, so you will not be able to develop original products.  Because it is an original product that has been painstakingly made, we are particular about its quality.

When we spoke with Iwata-san of the Iwata Chemicals he emphasised ‘hitozukuri,’ meaning that passion of companies developing people through an education process, with an emphasis of life-long learning. He spoke of the importance of having good employees and attracting young talented graduates to his business. Could you tell us more about how you are doing this?

It is necessary to experience multiple workplaces while young and provide the most suitable workplace.  And I think that having a successful experience while you are young will affect the growth of employees after that. Although we are still in the process of being “hitozukuri”, within 10 years of joining the company, we would like young employees to experience at least three different workplaces and to have them study the necessary knowledge.  We offer two courses, a sales course and technical course, each of them allows you to learn the work of passionate senior employees through OJT.  If you find your work enjoyable, you will naturally accumulate knowledge and experience.  To that end, new employees are required to fully learn basic knowledge and skills within the first three years. 

Your company, as you spoke about, is a niche player. You are creating these fine chemicals which are served in a B2B context. You also said that you are unknown which is a hallmark of many Japanese companies who we see play a key role in the international supply chain and are unknown to the end-users. For example, we met a company called Yamashina in Kyoto with just 150 people, but they have a 30% market share for CFRP - miniature mounting screws. Such companies are obviously vital to the world’s economy. Could you give us your take on the role of Japanese niche players, and what is the key contribution that they bring to the international supply chain?

In Japan, there are many companies that have factories overseas and are expanding globally.  If the performance and the quality of the products are accepted by such global companies, since Japanese quality standards are strict, you can get a chance to be in the international supply chain. SMEs cannot live without special technologies or features that other companies do not have.  It may be a trivial thing for large companies, but without it the supply chain would not be complete.

In the case of the chemical industry, uncountable chemical substances are used all over the world.  Even huge chemical manufactures cannot cover all of them.  The role of SMEs is to fill in the gaps in between huge chemical companies on the supply chain. 

Even the automotive and electronics industries would not be able to complete their supply chain without SMEs.  We suppose that the role of players in Japanese niche market is to improve the quality and value of final products by deploying raw materials and parts created by Japan’s strict quality control to the international supply chain.

If we look at chemicals, which is the second biggest industry for Japan, we see that last year, it rose by 10 % even in the face of the coronavirus lockdown measures and it is still growing. This is quite remarkable because Japan is an island nation, so it does not have these raw materials, but we see that Japan is adopting technologies not only to make chemicals greener but also to be safer for the end-users and for post-recycling methods. Can you give us your take on the current Japanese chemical industry, and what does Japan’s chemical industry bring to the world?

The Japanese chemical industry is modest.  In the past-war economic growth, the chemical industry has supported from the shade the spectacular growth of automotive, home appliances and electronics materials by providing the materials they need.

The development of digitalization in the 1990s has wiped out the analog technologies that had been built up until then.  As a result, Japanese consumer electronics companies have lost their position to companies in neighboring countries.  However, the chemical industry has not yet faced such innovative technologies as digitalization so the chemical industry may still be allowed to grow.

In 1970s, Japanese chemical manufacturers experienced pollution problems and invested a lot to develop a manufacturing process that does not burden the environment so that they have a base that not only makes chemical substances more environmentally friendly, but also sets the global standard of being safer for end users, as well as contributing to the development of recycling methods.

Since the Japanese market is small and there are no crude materials, it is destined to be unsustainable unless it is imported, adds value and the final product is exported.

In the first place, the idea of recycling is easy to accept for Japan, which has limited resources. Responding to the movement of recycling rings derived from environmental problems will increase opportunities for Japanese chemical manufacturers to utilize their technologies.

Your company was born out of this post-war period, in 1946. In 1955, you began manufacturing agricultural chemicals and you have since expanded into a whole host of different industries from rubber to paper, construction to engineering, textiles, among many others. Can you tell us what you consider to be the key technical milestones in your company’s history?

Before 1946, the founder Mr. Yasuda used to work for a conglomerate in Japan, then was transferred to Qingdao in China, where one of the manufacturing companies he set up was a chemical company manufacturing dye staff.  After World War 2, he came back to Japan with the company’s engineers and chemists. However, since the conglomerate could not afford to hire those engineers and staff, Mr. Yasuda established a company.  His easiest option that did not need capital, was a trading company which is the base of Sanko now.  Ｍr. Yasuda, who could not give up his dream of establishing a manufacturing company, set it up the following year.

1950s: extracting phenyl phenols from the residue of phenol was started. These substances were used for Fungicide, Insecticide, Carrier for dyeing.

1960s: the production process of phenol was changed from Sulfuric acid method to Cumene method that does not generate any residue.  We had to stop extracting and to start synthesizing such phenyl phenols.  The history of our synthesizing chemicals started from this period.

1970s: New Organic Phosphorus Compound was developed as a derivative of phenyl phenols.  The application of which was an antioxidant for plastics.

As a derivative of the above mentioned phosphorus compound, a new reactive flame retardant for polyester fiber was developed.  This was the result of a collaboration with a Japanese polyester fiber manufacturer. These flame retardant fibers have been used for curtains and sheets in hospitals and blankets in planes, as well as seats in Shinkansen.

New Color Developer for Carbonless paper (Salicylic Acid base) was developed for the first time in the world, as the result of a collaboration with a Japanese paper manufacturer.

1980s: New Thermo-sensitizer for Thermal Paper, was developed as the result of a collaboration with a Japanese paper manufacturer.

1990s: environmental issues become very important subjects, especially in Europe.

Readily biodegradability of our Salicylic Acid based color developer was confirmed. This proved to be environmentally friendly and the color developer has been used all over the world.

Late 1990s-2000s: Mobile phones have become widespread, and their waste disposal has become a problem.  The news came from Europe that dioxin is generated when mobile phones are incinerated.  As a solution to this problem, attention was paid to the use of our organic phosphorus compound as a flame retardant.  In order to comply with this new demand, we patented a new manufacturing process for mass production of it, and proceeded constructing a new plant.  Since then,  the application has spread to electrical appliances such as mobile phones, LCD TVs, PCs, tablets, base stations for 4G and 5G, and electronics devices in automotives. Even now, we maintain an overwhelming share of the world market.　

2010s: Optical plastic lenses have been added as a new application for a phenyl phenol.

We can see today that your company has two divisions. We could say that you have your manufacturing division where you make several phosphorus compounds that serve functions such as anti-fire fire retardant, sterilization, for example. Then you have this contract manufacturing business, the trading part, for different chemicals according to commissioned needs. Among these two divisions, which is your priority, and which is your best-selling product among them?

We have two divisions, one is a trading and one is a chemical manufacturing division.  We are expanding each business while helping each other, so there is no priority. Phosphorus compounds used as flame retardant and antioxidants to electronics devices are the most sold through them.

You have three manufacturing plants and two research divisions. R&D is obviously a very important part of your business. Can you tell us more about your R&D strategy? What products are you working on?

Our most competitive areas are Phenyl Phenols and Phosphorus compounds. We are focusing on the development of its derivatives, in order to further enhance its strengths. Since we already have connections in the field of electronics materials, we are introducing new compounds based upon these two substances.

In the field of thermal paper, we already sell sensitizers for thermal paper.  The color developer used with the sensitizer has a great effect on the performance of thermal paper. Utilizing our many years of experiences in the thermal paper market, we are developing new color developers that are environmentally friendly and have excellent performance.

Our trading division has transactions with many companies in different industries.  At the request of each user, we will consider the synthesis method and actually synthesize it, and try to link it to the transaction of the trading division.  For example, as a new initiative, we are promoting joint development with a general constructor.  We are proposing new polymer materials for the construction field.

Having only ten chemists, could you tell us more about the role of co-creation in your business? Are you looking for co-creation partners?

I understand that co-creation means collaboration. We can synthesize new chemicals, but we do not have the technology to evaluate whether the new chemicals can actually be used in new fields. In that case, we need to collaborate with a partner who has the evaluation technology.  Most collaborative developments apply for patents on the synthesis and use of new chemicals. Even if a new chemical is completed, the sales destination is limited to its partner. Therefore, we will try to choose a partner with greater potential.

If we already have the evaluation technology like thermal paper, collaboration is not necessary for us. We have only 10 chemists. To compensate for lack of manpower and get new ideas, we started collaboration with a university in Japan.

I want to ask you about your international strategy because we know that since 1992 Sanko has been present in Germany. You have been in Thailand since 2002,  then you went to the US in 2005, and more recently to Vietnam in 2020. You clearly have strategic locations internationally. Could you tell us more about the benefits that this brings to your business?

We do all export and import business in-house.  We do not use trading companies or agencies.  Because, we are a trading company ourselves.  All major export destinations are covered by our sales offices.  The advantage is that we can directly support the users as a manufacturer.  In addition, local information is also collected from the perspective of the manufacturer.

As you move forward, what strategy will you adopt to further grow the business internationally? Will you continue to open sales offices, will you do joint ventures, or maybe even M&As? What will be this go-to strategy as you look to expand further?

The importance of a sales office also depends on the trends in the market.  From now on, we will change the location of the sales offices according to the market trends. We have factories only in Japan.  In order to make newly developed products the world standard, it is desirable to have production plants in each country’s market.  It is difficult to set our plants up in each market but it may be possible to set production bases up in each market by licensing patents.

I have one last question for you, and it is a bit more personal to get to know your ambitions as the president of the company. Imagine we come back in two or three years to interview you all over again. What would you like to tell us? What are your dreams for the company, and what would you like to have accomplished by then?

My dream is to launch a new product that will become the world standard and dominate the global market.