Sunday, Jun 26, 2022
Industry & Trade | Asia-Pacific | Japan

Figaro Engineering

World leader in gas sensing innovation


4 months ago

Toshihiro Udaka, President of Figaro Engineering Inc.
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Toshihiro Udaka

President of Figaro Engineering Inc.

Since its founding, Japanese gas sensor manufacturer Figaro has been at the vanguard of gas sensors, beginning commercial production of the world’s first semiconductor type gas sensors in 1969, while the company continues to lead the way in top-class reliable gas sensors. Leveraging over 50 years of expertise, Figaro Engineering offers a wide array of gas sensor products for the detection of explosive and toxic gases, as well as air quality sensors.

In recent decades Japan has seen the rise of regional manufacturers in countries such as China, South Korea and Taiwan that have in many ways replicated Japanese monozukuri processes at a cheaper cost. Despite this, many Japanese firms, both large and chucken kigyos, maintain a large global market share especially in B2B markets and niche fields characterised by high-mix low-volume production. As a manufacturer of gas sensors, can you give us your take as to why this is? What are the competitive advantages of Japanese firms?

In contrast to overseas companies, I believe that the strength of Japanese firms lies in their dedication to creating higher quality products. Global customers appreciate Japanese companies because they are very persistent and put a lot of their resources into making higher quality products in terms of performance, cost, and delivery. As the president of a Japanese company, I am often astonished by how the business mindset in overseas markets differs from ours.

When we get an order for gas sensors, it often comes in lots of 10,000 or 100,000 units. In overseas markets, there is a common understanding that there may be defective products at a certain rate in such a large lot. However, that wouldn’t be considered acceptable in Japan: even just one defective product would lead to a complaint and a request for investigation from our Japanese customer, to whom we would have to supply a detailed description as to why the product was defective. We would also need to assure them that it wouldn’t happen again. The rigorous Japanese approach to quality and defects is what distinguishes us.

 

Japan is facing a demographic decline. For example, the number of people per household decreased this year: half of households only have one or two people living in them, which increases the need for proper detection by gas sensors. The country’s population is also ageing, with a third expected to be over 65 in 15 years’ time. Overall, this is threatening Japan’s culture of craftsmanship and causing a labour crisis, with fewer talented young graduates to replace seasoned workers, as well as a contraction of the domestic market. How are these demographic pressures impacting Figaro, and how do you plan to overcome them?

In 1969, we began commercial production of the very first semiconductor type gas sensors in the world. Since then, 50 years and counting later, our products have been sold widely both domestically and overseas, and more than 70 percent of our current business comes from the overseas market. Due to several major incidents involving gas explosions in the years following our founding when gas utility services were rapidly spreading in Japan, residential gas detectors using our gas sensors became well-established. Although the Japanese market may diminish, we expect a sizeable potential market in developing and emerging nations. The emerging overseas markets are growing faster than the market in Japan that is shrinking, so we aren’t worried about saturation of the domestic market.


Semiconductor type gas sensors commercialized by Figaro Engineering Inc. for the first time in the world.


On the other hand, the labour shortage constitutes a risk for our company. However, we have created two manufacturing facilities involving our main factory in Osaka, Japan and our overseas factory in Tianjin, China. We established our Chinese factory in 1990, not only because of the cheaper labor force available there for gas sensor production, but also expecting later manufacture and sales of gas detectors in China. It was an attractive production site for our company, and it has worked favorably for us. If our factory in Osaka suffers from shortage of labour, then we will shift some of our high volume production items to China after their manufacturing technology and quality are well established. Furthermore, if that happens, we will promote more automation in our Japanese factory, requiring less manpower and maintaining efficiency in the manufacturing of our products. We are now working in line with the extension of the retirement age to 70 years old that Japan’s government is promoting. To retain experienced personnel and pass our company’s expertise down to the next generation, we are trying to keep our senior workers on as trainers for our employees. 

 

In the last few decades, Figaro has developed the world's top-class compact semiconductor gas sensor using MEMS technology. Miniaturization leads to savings in materials, energy, as well as cost, and you have said that it has the potential to infinitely expand gas sensors’ applications. What kind of new applications do you foresee for such small semiconductor gas sensors?

Conventional semiconductor-type gas sensors need to be plugged in, and battery-operated gas detectors using them don’t last long because they consume  a few hundred milliwatts. In contrast, we succeeded in developing our TGS8000 Series, which boasts a size and power consumption among the lowest in the world and is especially applicable in the areas of IoT (Internet of things) and ICT (information and communications technology). With digital transformation (DX) becoming a trend, our battery operable sensors can be utilized in wireless and  portable devices. To that end, we are expecting to expand our miniaturized products in various fields that represent the frontier of innovation.


World's smallest class TGS8000 series MEMS type gas sensor


Some of the greatest challenges of our time are global warming and air quality deterioration due to pollution. What solutions are you developing to help humanity tackle these environmental challenges?

Recent houses and buildings are becoming more airtight, which is better from the viewpoint of energy saving. But this is found to cause deterioration of indoor air quality. As part of our air quality sensor business, we began supplying gas sensors for use in  air cleaning devices. Indoors, the sensor detects air contaminants such as tobacco smoke and cooking fumes, then automatically starts the cleaning or ventilation process. Further , we have diversified the kind of gasses we can detect, including tackling issues such as sick building syndrome, which is concerned with volatile organic compounds (VOCs) that typically come from building materials and household chemicals.

Based on our own estimation, we have over 50 percent of the global share in the gas sensor market mainly used for residential gas detectors. Another sensor for indoor air control is our CO2 sensor, which has been in high demand during the COVID-19 pandemic. The government is now pushing ahead with the adoption of ventilation that keeps CO2 concentrations below a specific threshold, so our sensors are used in CO2 monitoring systems.


NDIR type CO2 sensor developed by Figaro Engineering Inc.


The pandemic has caused significant lifestyle changes and has been devastating for the global market on a macroeconomic scale, but it has also led to some silver linings, such as the proliferation of e-commerce and mainstream integration of ICT and DX, especially by Japanese firms. How has the pandemic affected Figaro? 

People have been working remotely, staying home more, maintaining social distance, and avoiding congregating in public because of the pandemic. This lifestyle change has drastically increased the demand for our products such as gas sensors for use in gas/CO detectors, CO2 sensors and air quality sensors, particularly in the United States, where people are especially safety-conscious. We provide some gas sensors for industrial use, but our focus is on sensors for commercial and household use. The demand for some of our products has increased by over 50 percent, and with our present production capacity, we haven’t been able to catch up with this accelerated demand. 

 

You work in collaboration with New Cosmos by supplying sensors for many of their detectors. How would you describe the role that collaboration or co-creation play in your business model? Are you currently looking for partners in Japan or overseas? 

We haven't had much experience collaborating with other companies, and we are conducting closed innovation. Our main collaborations are with universities and research centers in the west of Japan that conduct basic research on gas sensors. We work with them and incorporate their research results into our product development.

Looking to the future, we are interested in open innovation and working together not only with domestic but also overseas companies, especially startups. We are looking for a partner who can change our business model by integrating our core technology with theirs to create something innovative. New Cosmos has most of our corporate share, and they produce and sell the gas detection devices. We have a good level of differentiation because we only sell the sensors. It is important to collaborate within the group to determine market needs and respond accordingly. 


New Cosmos LP alarm and CO2 monitor with Figaro gas sensors.


Figaro has a vast distribution network that reaches 49 countries. Looking to the future, is there a particular market or region that you consider key to your international expansion?

Around the time that we began in Japan, we started having distributors in Europe and established our office in the American market. We then expanded to East Asia, where we have two joint venture companies for production and one subsidiary for sales, especially in China. Recently we have seen increased sales in the Southeast Asian region.  Besides Japan’s aging population, the domestic market is already saturated. But the US market, which accounts for our biggest share, is steadily growing. Therefore, our next target is European nations.

We entered the European market early on. But we aren’t satisfied with our current sales in Europe, so we are now in the process of reconstructing our marketing strategy. Our upcoming three-year plan is to establish a scheme that allows us to build a closer relationship with our European distributors and share our marketing strategy with them to boost sales there. We are also looking into how we can shift our marketing strategy and have effective sales in line with a carbon neutral society, which is a hot topic in Europe right now. After developing and emerging countries, we plan to expand to developing countries in South America and other regions, which have big growth potential. We hope to establish a global network for our sales channels in the next ten years. 

 

Imagine we come back to interview you again on the last day of your presidency. What dreams or goals would you like to have achieved by then? 

I would say that rather than focusing on how big or how much I can enlarge the business, I would like to devote more attention to my legacy for the next generation. When I joined the company and was promoted to a certain responsible position, I realized that what we are doing is based on the efforts of past generations. Thanks to their work, we can add value to their accomplishments and accumulated successes. It is important for me to pass down a legacy that will benefit the next generation, and it is something I am currently pursuing as president.


Young employees of the sales department who are active globally.


What I mean by legacy is not only the development of new technology and products, but also the structure of the company as well as intangible aspects. For example, we are attempting to make closer connections with the local community. By uplifting the social value of our company, our employees, especially the younger ones, can feel proud and motivated to work for Figaro. We formulated a 10-year long-term plan in 2020, and in the beginning of this year, I asked our employees to have a thorough understanding of our long-term vision. Our theme “Growing in Harmony” comes from the musical connotation of our company’s name, Figaro. The English version of the plan is now available on our website. Our 10-year plan aims to harmonize work and life to keep our employees motivated, harmonize our business and society to keep close connections, and harmonize our company and group companies to grow together. 


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