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A leader in the pursuit of sustainability and industrial autonomy

Interview - March 14, 2022

Yokogawa is a leading Japanese provider of industrial automation and control solutions, and testing and measurement equipment. A company that operates in 61 countries worldwide, it supplies systems that improve efficiency, safety, quality and reliability at production plants in a host of sectors. Established in 1915, Yokogawa has been responding to the changing needs of industry and society for over a century: from its beginnings as an electric meter manufacturer, amid the rising everyday use of electricity, to its present as a driver of digital transformation (DX). In this interview, president and CEO Hitoshi Nara explains that Yokogawa Electric is focusing its business on three key sustainability goals as it spearheads the transition towards industrial autonomy.

HITOSHI NARA, PRESIDENT AND CEO OF YOKOGAWA ELECTRIC CORPORATION
HITOSHI NARA | PRESIDENT AND CEO OF YOKOGAWA ELECTRIC CORPORATION

In the last 30 years, Japan has faced stiff price competition from countries such as China, South Korea and Taiwan. Despite this competition, Japanese firms, both large and small, have remained leaders in niche fields characterized by high-mix-low-volume production. Why are Japanese firms able to maintain a dominant position in niche fields despite this stiff price competition?

One of the greatest strengths of the Japanese industry is that it supports the structure of the national economy and of various global manufacturing sectors. The semiconductor industry is growing very rapidly, and Japan is still considered a strong player when it comes to auxiliary fields surrounding the sector. Although the semiconductor industry is centered around Taiwanese and Korean manufacturers, Japanese firms are responsible for supplying materials and equipment critical to semiconductor production. Yokogawa supplied inspection and measurement devices for semiconductors from the mid-80s until about 10  years ago.  Even though we exited that business, we still support semiconductor makers, including photoresist solution providers and chemical manufacturers. Japanese makers are the dominant suppliers of materials used in semiconductor production, which we are indirectly supporting because many of them are our customers. I believe that Japan also stands out in material science and functional chemicals. Considering all these aspects, Japan still plays a firm and foundational role in the semiconductor field. Especially when it comes to factories, you need to incorporate a very flexible model to adapt to high-mix low-volume production. Yokogawa’s competence in measurement, control, and information allows us to make a significant contribution in that respect.

 

Over the last two years, the COVID-19 pandemic has had a negative effect on businesses worldwide. That being said, sectors such as machine tools and semiconductors are recovering quickly. However, other sectors, including process automation, which your company is focused on, have been slower to recover. How has COVID-19 impacted your business?

In the manufacturing industry, it is widely accepted that demand flows from the automotive and the semiconductor sectors to the chemicals field, and then to measurement and control system related companies, which is where we belong. While orders have been delayed for a year or so, I believe that things are going to start picking up speed, particularly in the chemical industry and in battery-related materials.

 

Japan has the oldest population in the world, with one in every three people expected to be over 65 years old by 2035. This problem could potentially put Japan's craftsmanship traditions in jeopardy as it becomes more difficult to pass manufacturing skills on to the younger generation. How can Yokogawa, as an automation specialist, create solutions to this problem?

Japan is always confronted with numerous challenges. On top of overcoming a low birth rate, an aging population and frequently occurring natural disasters, Japan is an island nation lacking in natural resources. It is a very interesting environment. Since manufacturing relies on workers who have accumulated wisdom and know-how in craftsmanship, I think the transfer of technology and information to the younger generation is one of the greatest challenges facing Japan and its industry. Oftentimes, senior workers perform tasks based on intuitive knowledge, which is difficult to transfer.

 

One interesting development that you have launched is the Digital Twin, which simulates real life assets and processes in a virtual environment in real time. Can you tell us more about Yokogawa’s Digital Twin technology and give an example of how it is able to solve or foresee a problem incurred by one of your clients?

The Digital Twin provides a simulation of devices, systems or processes to predict future performance based on monitored real-time and historical data. We combine simulation and Digital Twin technology to give our clients a roadmap that shows future scenarios. This allows us to recommend the strategies and approaches our clients should take to create the most ideal solution. One of our core approaches is the provision of industrial autonomy solutions that assist our clients in incorporating higher-level AI, robotics and blockchain technology to increase their level of autonomy to maturation. In doing so, safety is enhanced and workers are given more time and room for creativity. Our clients are moving at an accelerated pace in this direction.

 

Traditionally, IT is perceived by companies as a cost of doing business and as something that merely supplements human resources. Nowadays, however, companies are realizing it can be used in production, asset management, and even to achieve Sustainable Development Goals (SDG) targets. To what extent do you have to convince clients about the benefits of Digital Transformation (DX) for their business?

Yokogawa has a dual approach when it comes to DX – Internal DX and External DX. Internal DX is primarily applied to Yokogawa’s own manufacturing and business operations and integrates IT into our processes and systems. With Internal DX, one of the approaches we take is to utilize digital simulations combined with IoT (Internet of things) technology to enhance productivity. Subsequently, with External DX, we can showcase the gathered data and successful outputs from our case studies to potential clients for them to see the possibilities and find ways to better connect their data. I believe that digitalisation is a means to an end, and through External DX we assist our clients to utilize our technology for the betterment of their company.

Our clients are extremely interested in the methodologies and models that we can generate. They are eager to see the analysis we can make based on the huge volume of data about manufacturing plants that we have collected. We are currently in the middle of various proof of concepts (PoCs). For example, we have an edge server, an interface that can process a large amount of machine data, that can connect 40 different kinds of industrial interfaces and has the potential to connect thousands of machines. The question then becomes: how do you use that data to enhance productivity? Although we do not manufacture robots directly, our company can create the interface, servers, and technologies required to connect machines and robots with the production site as a whole.

 

Yokogawa advocates for a shift from industrial automation to industrial autonomy. While automation can be defined as a ‘series of structured and pre-programmed tasks that require human supervision,’ autonomy goes a level beyond as it provides ‘independence and the ability for a given system to control itself.’ What are the challenges of achieving industrial autonomy?

There are two main challenges to achieving industrial autonomy. The first is to integrate hundreds of different technologies, devices and equipment. In a factory, all these different technologies are in play, so the key is to what extent we can integrate and connect them to create added value. It is all about integration and connection with the goal of optimizing these technologies’ functionality for whatever purpose is required.

The second challenge is dealing with the change in the role of workers. In this industry, younger workers consider safety a highly important issue, and they seldom work in high-risk environments. It is vital to ensure our workers' safety on the factory floor and in the industry as a whole.

 

From a measurement-based business founded in 1915, Yokogawa has evolved into creating control, information, and measurement-based solutions. Could you explain what core industries you are focusing on? Which industry do you see as having the most potential moving forward?

Until April this year, our control division accounted for 90% of our business, but we realized that it did not accurately represent what we are actually doing. So, we changed our strategy and communications material to accurately reflect our business segments, which are centered around three main goals. The first goal is to achieve net zero emissions to contribute to a more sustainable environment; the second objective is to create a circular economy; and the third goal is to enhance the well-being of all.

With this in mind, our newest focus is on life sciences and renewable energy. Our life science and bioprocess segments support our customers’ production of drugs and medicines from a cellular level. Before the emergence of this technology, many pharmaceutical products were manufactured in different factories and plants. For example, cell-based manufacturing can create very individualized medicine, but the difficulty is in ensuring efficient and stable growth of cells. To address this, we have developed a bioreactor that automates lab-scale mammalian cell culture with highly accurate real-time monitoring and advanced process control.

We are applying our core strengths in simulation and control technologies, together with our experience in chemicals, to this new business field centered around life sciences and bio processes. Our simulation and control technologies played a positive role in the development of cell-based reactors. Put simply, we spent decades conducting control and measurement services in factories, which is at a plant level. Now, we are doing it at a cellular level.

We have also been working on renewable energy for several years now. Traditionally, Yokogawa has played an important role in the oil and gas sector. However, we are now looking to shift our focus to new energy sources, and are collaborating to create CCUS (carbon capture, utilization and storage) technologies that can be applied to reduce carbon emissions.

Another example of our environmental services is found in batteries. More often than not, batteries used for industrial purposes are discarded too early. When the charge of a battery stands at 70% or 80%, the battery will be thrown away. To address this issue, we created a solution that accurately measures the remaining battery charge. Furthermore, we use our measurement technology to optimize usage and reduce waste, therefore contributing to the circular use of resources.

Looking at the future, we seek to acquire more know-how and understanding about resin-based batteries to see what has gone well and what to improve upon. We are working with all polymer  battery maker APB Corporation to do so.

 

What other recycling technologies are you developing?

We have been putting a lot of emphasis on recycling. We are currently working on a project with a plant that collects and reuses polyester fibers. This collaboration allows us to gather data and technology. The company we collaborate with is called JEPLAN, Inc., and we aim to work with them and overseas partners to scale this technology..

 

One of your subsidiaries, Yokogawa Bio Frontier, is focused on the commercialization of applications for its own unique carbon nanofiber technology, called S-CNF. Can you tell us more about YBF?

In a nutshell, we are a provider of tools and resources used to enhance industrial operations. Many years ago, after discussions with our managers, we agreed that we wanted to create an end product using our technology. One of the end products that we developed is the cellulose nanofibers.

Yokogawa is the only company that can deliver cellulose nanofiber in powdered form, which has a wide range of industrial and recycling applications. It truly has a wide range of applications in many industries like chemicals, paints, and cosmetics, among others.

 

Yokogawa recently signed a partnership with NTT Communications to develop a shared-use operational technology cloud service with the objective to assist DX for manufacturing enterprises. What are your expectations for this partnership? What synergies are you able to create with NTT Communications?

NTT Communications' strength is in IT, particularly cybersecurity, while Yokogawa's is in Operations Technology (OT). We believe that a partnership based on IT and OT convergence will provide various solutions to the manufacturing sector. We have already worked on many projects with NTT, including collaborations connected to AI, PLCs (programmable logic controllers), and productivity enhancement software in IoT. Our company already has a strong collaborative structure supported by in-house personnel.

Like us, NTT Communications operates globally, and we are looking to take this partnership to a global level and to provide solutions on a regional level as well. In the future, I believe that such global partnerships will be on the rise. With such partnerships, we can combine the expertise of IT companies with our OT capabilities in order to create the most optimal environment to fully support our clients.

 

In your mid-term business plan, Accelerate Growth 2023, you state that you want to focus on energy and sustainability, materials, and life sciences. What remains to be done to achieve your midterm goals?

The biggest challenge that remains is transforming and adopting a new mindset, attitude, and culture within the company. Our company has been praised for thoroughly responding to client's requests and requirements, delivering solutions that improve their plant operations and supporting them to enrich the entire life cycle of their plant. We are very proactive in responding to our customers. Nevertheless, we want to become a company that leads our clients instead of just responding to them. To achieve this, we need to change our corporate culture. Until now, we have been providing and supplying technologies that were required by our clients. In the future, we want to shift to a new mindset that will predict and foresee the challenges that our clients may face.

 

Yokogawa caters to a variety of industries, including energy, pharmaceutical, heavy industry, construction and more. How can you become proactive in supporting such varied industries?

Our company often sets limitations and defines the scope of what we are able to do by itself. Some employees wonder if our firm, whose background is in traditional industries such as oil and gas, will be equally capable in new sectors such as pharmaceuticals, high functional materials, science and technology. However, while each sector we work in has pre-existing standards and requires specific knowledge, our business is about measurement and control to integrate and connect all data, and this is a common theme that runs throughout all sectors.

From 2013 to 2018, I was president of Yokogawa’s domestic sales and solution company. During this time, I successfully worked on expanding the company's business segments and helped diversify its client portfolio. Similarly, we have broadened the scope of our recruitment to  attract people who are knowledgeable and skilled in new fields and projects.

 

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

I want to further develop the engagement level of everyone involved with our company. Although we have started to draw up many corporate objectives and have set a solid direction and orientation, we need to heighten our employees’ awareness of our firm’s achievements. For example, I want our company’s employees to feel a greater sense of pride in the social contributions that we are making. I believe that if we can successfully cultivate this among our employees, along with a greater awareness of Yokogawa's potential and purpose, it will extend to our stakeholders, partners, customers, and networks. Thereafter, everyone will see that Yokogawa is making significant social contributions. I strongly believe that our corporate performance should grow in tandem with our contributions to society.

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