Sakurai Graphic Systems is a long-established Japanese printing press manufacturer that has been in business for 75 years. The company has a 90% share of the global market for cylinder-type fully automated screen printing technology and is widely known by customers in the automobile, biosensor, wearable device, and security-related industries. Amid the COVID-19 pandemic, Sakurai is taking advantage of the know-how it has accumulated over the years to take on the challenge of creating a fresh business model within our industrial field. Company president Ryuta Sakurai explains more in this interview with The Worldfolio.
With the invention of the Gutenberg Printing Press, Japan was the first Asian country to adopt the automated printing press. Today, Japan has become world-famous for its monozukuri manufacturing philosophy, as an industrial printing machine maker, what for you is the essence of monozukuri?
In my opinion, “monozukuri” is about meeting the needs of the individual. The most important thing is the customer's “requirements” rather than the technology and the market requirements. The most important thing is to listen to the customer's “requirements” modestly and accept them positively. Even within the same industry, the requirements significantly differ from each other and sometimes difficult to meet. However, we first listen honestly to any request and accept all of them. From these, we categorize and prioritize them while respecting the customer's requirements. We stay determined to provide tailor-made details to meet as many requirements as possible. If one of the predetermined requirements is too difficult, we ask the client to change the materials or its accuracies if necessary for the best solution. Of course, with a humble attitude. We not only close to our customers, but also they close to us, and we create together. This is for the benefit of both our company and our customers.
Monozukuri in Japan is a hierarchical industrial structure, and I feel that the unique term "subcontractor" lacks mutual "respect and trust". In this pyramidal structure that has continued since Japan's period of high economic growth upstream companies have established an absolute position over downstream companies. I understand that this structure, which does not exist in other countries, is having a negative impact on Japan's industrial structure. Our company has been supported by many our clients' companies over the years, our technology for cylinder-type automatic screen-printing machines, which we have cultivated for about 60 years, has a global market share of over 90%. We do not think of ourselves as subcontractors, but we are on equal footing as humble partners. More than just listening to their requests, we voice our opinions and present our proposals to achieve the best result and pursue mass production together. There is a so-called “champion data” given through the contracting or upper-stream companies that set forth the criteria for manufacturers. There has been a problem of manufacturers who cannot attain that level declare false numerical values just to match the champion data, but such risks and sins can be eliminated if we break off from the subcontracting structure. A business scheme that respects each other regardless of whether you are a prime contractor or a subcontractor can foster more developmental and free possibilities. I strive to talk to our clients modestly and sincerely yet firmly, and I repeatedly negotiate with them. If my counter offer is rejected, then I end it and move on. In the unlikely event that we take an unpredictable risk, it will end up being detrimental and risky for the client as well. Under COVID-19 pandemic, it seems that a structural recession of the intensive type is rapidly advancing, regardless of industry. Now, manufacturers all over the world are focusing more than ever on developing new technologies and unique new commodity, and they are thinking to survive after this pandemic. This means the beginning of an era of only those who are truly needed by the market. In the past, the economy model was the mass production and mass consumption. However, due to the hierarchical industrial structure, Japan gradually lacked originality and everyone put emphasis on cost and delivery, as a result Japan experienced a deflationary economic depression for many years. In addition, when people were doing the same things replicating products, the cost dropped and the delivery time is shortened. After the Coronavirus, with the belief that "competing technologies and services have no value," we would like to devote our efforts to sincerely addressing the needs of individual customers.
Japan has been subject to regional competition for the last 20 years in consumer electronics, automobiles, and chips. As a chushokigyos engaged high-mix-low-volume production in a niche field, how can Japan continue to compete despite cheaper alternatives in China, Korea, and Taiwan? Can Japan still succeed with this stiff price competition?
Once, some Chinese companies precisely copied my machine, I was ready to sue them. However, my Chinese friend and business partner admonished that instead of hiring a lawyer, I could invest my resources into R&D. He later added that I should reflect on the fact that I was only developing technologies that could be easily copied by Chinese companies. I realized that he was right, so I changed my mind. While they invested in copying our technologies, I have invested money in research and development with our customers. Our technologies are developed, released, and upgraded according to our customers' requests. In the past, printing technology on paper like a spot coating for ads, decorations, paper or packaging was mainly needed. But now, with the gradual upgrade in industrial applications and electronics field, the challenge now is to invest in R&D to cultivate a new market. We have pioneered new markets for printing electronics as the market has changed. The time has come for us to uncover latent demand that our customers are unaware of and make proposals to them. Mere imitation can never catch up with my ideas and aspirations to be close to my customers. What makes screen-printing technology (mimeograph technology) superior is that it is composed of a staggering combination of these three elements: not only hardware such as printing machines and peripheral equipment, but also applications such as dryers, and solutions such as plates and inks. In other words, there is a lot of room for adding value. It is also an analog technology that can be widely applied in various fields. I want to stay one step ahead of our competitors so that each of our customers can clearly differentiate themselves from the competition with our technology. We also listen directly to what end users want in order to design new products and technologies. Our new challenge is to move from being a hardware manufacturer to having a consulting function.
COVID-19 prompted a change in business conditions, moving from the printing press manufacturing industry to the service industry, and it triggered a shift to a fresh business model in our industrial sector. With this new business model, we have launched a "prototyping and contract manufacturing" business to support our customers' new product development. In the clean room of our factory, which is over 60 meters long, we have not only R to R screen-printers but also peripheral equipment such as laminating machines and press machines, enabling us to quickly launch mass production from prototype production in a single pass. Preparations are underway for expansion this September in response to growing demand.
Specifically, in cases where our clients are unsure if their ideas and new product plan are feasible, can outsource to us the making of the sample and pseudo-development process for R&D. Although they need to bear the cost for that, but these costs can be covered by their overhead and development budget. In other words, the client does not need to go through the time-consuming and detailed technical verification process. After all, the biggest advantage is that there is no need to make an initial investment, so managers do not need to worry about taking on risk. We form a tie-up, plan for products and conduct technical verification and manufacture prototypes for marketing purposes while taking yield and productivity into consideration based on mass production. Based on how it does on the market, we determine the most efficient way for production while maintaining the high quality of the product. They utilize (share) our operators, machinery, and research and development services not as a subcontractor but as a partner company to work together in creating a new product. We are fully prepared to create a tailor-made system that accommodates individual customers' needs. If customer determine that the quality of the product is good enough for mass production, they can purchase our machines and install them in their factory, of course we can handle OEM because we can also introduce them to partner companies that can produce the product. Customers are free to choose. In terms of BCP, it is important to have several production sites. Through these efforts, we are trying to support the operation of companies by providing an array of services from many different angles. Our very high market share allows us to collaborate with other manufacturers who have superior technologies that we do not have, to further ensure that your requirements are met.
Since the 60s, you have grown your market share to 90% and significantly further developed the cylinder technology that you adopted from an American company that you partnered with. What kind of partnerships are you currently looking for, especially with overseas firms? What technology are you in need of?
We are looking for domestic and overseas manufacturers that have superior technologies that we do not have that can be combined with our core competence technologies to add value. I prefer flexible negotiations to present synergistic and a win-win situation over M&As that may result in the abandonment of valuable assets. The benefit to them is that by partnering with us, with our near-exclusive technology and high market share, they will be able to permeate new markets under our brand and further expand their existing markets. In other words, we can save budget and time in development by incorporating proven technologies into our machines that we do not have, but that the market is demanding. For us, it is also an advantage to be able to flexibly incorporate the proven technologies of our domestic and overseas partners into our manufacturing process, allowing us to create a service line that meets the needs of each and every customer. It is a priceless approach.
Our "prototyping and contract manufacturing" service allows customers to verify everything from prototyping to mass production in a one-pass process at minimal cost. I call this a "proof-of-concept business act.” Many large companies have limited specialized equipment in their R&D departments. The equipment and personnel needed for development can only be obtained through a step-by-step proposal process. Therefore, I prepare and supply everything for our customers at our own risk. By sharing a cleanroom that is available night and day by several customers, the cost burden is also optimized. In addition, the human resources of our experienced operators can be utilized. Since the facilities are fully equipped, a series of processes from planning to mass production can be launched quickly. This means that our customers can avoid missing the opportunity to release their products to the market. Of course, if the equipment breaks down, our operators will respond immediately, so there is nothing to worry about. In a sense, “outsourcing research and prototype production to a machine manufacturer” is the best solution for customer’s product development.
Japan is a bit slow in adapting to the DX transformation that is taking place worldwide, ranking at 27th; yet, we still see Japanese companies, especially for machinery like Fanuc and Yaskawa that are at the forefront of factory automation. In the case of your industrial printing, what type of digital tools are you integrating? How are you helping your customers to optimize production?
We are indirectly contributing to the realization of DX. Our technology is used in various products to realize DX. For example, tapes, which are consumables for semiconductors, are manufactured on our machines. Moreover, we are in the process of collaborating with overseas start-ups that need our technology to achieve DX in the renewable energy field. It is no exaggeration to say that it would be difficult for them to make their products without our technology, in other words, our technology is indispensable for DX.
You have said that the 2008 financial crisis was almost like a blessing in disguise for your company because it allowed you to shift from offset printing to screen printing, which brought in new customers from the automobile, semiconductor, and medical care industries. Today, which customer base are you also looking to further expand?
We are looking at medical, security, automobile, electrical, wearable, or IoT sensor devices. Also, we are looking at biosensors, a sensor that determines and monitors blood sugar levels. We are focusing on the field of printed electronics, where conductive inks are applied. I reckon that clients' requirements are becoming stricter and require higher accuracy.
In the medical field, because of Japan's aging population, there is a need to reduce the cost of health care and with this demand for home-use medical devices continues to grow. Is this an opportunity you are looking to cater to?
I am not familiar with this industry, but we have unintentionally entered this market, as a result our clients are our priority. We are discussing providing a new kind of service applications with a medical-related company. For example, when an elderly person takes any medication, by pushing the tablet out of the PTP wrapping sheet coated with conductive ink, then it disconnects, and the signal is transmitted to the doctor's smartphone, which informs him or her of the patient's medication intake and vaccination time. Furthermore, the physician can inform the patient's family if the medication is not taken at the appropriate time. To the most benefit from the drug's efficacy, it has to be the right amount and taken at the right time. We already provide conductive ink printing technology for the manufacture of devices such as MLCCs. Not only that, but also this technology is to monitor data such as blood pressure or blood sugar levels and GPS information through wearable devices, so partnerships with leading companies that can complement our endeavors are essential.
You have been present in the UK since 1984 and in the USA since 1990. In order to continue your international expansion, where do you foresee the need for agents or a new sales office?
The size of my company's overseas sales used to be 80%, but now it has decreased to 60-65%, but it is still an important market. Our company's branch office was recently moved from the UK to the EU area between Brussels and Antwerp because with Brexit, the tariff is doubled in London. Also, it will be very difficult for our products to participate in EU zone tenders from the UK. We value public tenders from all over the world in terms of our high market share.
My marketing strategy in overseas markets is cross-marketing with our technology partners. I add value by incorporating their outstanding technology into our core technology as the Sakurai brand. Through our high market share, they are able to intervene more of their technology in the new market, and we are able to effectively expand into their own markets. My concept of partnership is "win-win," trust and respect.
In this day and age, I believe it is unwise and rather dangerous to venture into protectionist markets in order to unnecessarily increase the size of a company. It is important for SMEs to maintain a corporate scale that we can control certainly and to focus on profits rather than sales. That and speed of decision-making are important. Now I am very quick to make decisions, no matter how big or small the business is. This is because I walk on site and talk with our customers face to face, so I know what they are looking for. Small business owner-operators should walk on site, and see and decide for themselves. Customers value immediate response in this pandemic, and I am able to make decisions quickly. The second and third generation of young managers, who are the same generation as my daughters, have different ideas from our founders, but I talk with them directly and respect their ideas. I expose myself and sometimes chat over a drink or a meal together. Mutual respect, both vertically and horizontally, is necessary. Online communication can omit this kind of interchange, but I believe that there should be a reliable point of reference to not drown in the SNS market.
We do most of our business with capitalist and democratic markets. While some may argue that entering the Chinese market is attractive, it can be an irresistible disadvantage, especially given our company's size. I decide that increasing business in countries where protectionism is front and center is a cautionary tale for a company of our size. Recently, this protectionism and block economy seems to be accelerating. From my past experience, if our technology is better than the technology of protectionist domestic manufacturers, we can get export privileges. Why. Because they want to copy it. However, there is a fear that if they are of the same or inferior quality, we will one day be taxed because they compete with the domestic market.
Imagine we come back on the 80th anniversary of your company and have this interview all over again. What would you like to tell us? What achievements or goals would you like to have reached by then?
I always plan my business scheme for the next three years, but now that the future seems imperceptible. The recent global situation has some influence even on a small company like us. A takeover philosophy from my father is to think about “the worst-case scenario.” My company's cash flow is equal to the company's sales. I own over 70% of the capital, so I am prepared to deal with this unpredictable situation. Moreover, I have set up a new business model with high barriers to entry and easy risk diversification to survive as a company that the market needs.
I think about the ultimate BCP and try to prepare for every kind of situation. My objective is to set up my new business model to respond to customer needs. I like this quote that the English natural scientist Charles Darwin: "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change”.
Gradually, I would like to nurture the combination of being a monozukuri and a service by maintaining my brand model and market share and investing in research and development. Screen technology is very mature, and I think there’s not much room for further R&D, but I plan to incorporate others’ technologies into ours to create added value. “Mimeograph" is a simple and analog technology, but the wide range of applications also leads to corporate risk avoidance.
"Competing technologies and services have no value." COVID-19 disaster accelerated this idea in my mind. In the current structural recession, do we really need so many car companies, banks, and printing companies with the same business model in Japan? I don't think anything can resist an aggregate structural recession. I want to be one of the companies that survive when we come out of this pandemic. The point is whether Sakurai Graphic Systems is one of the few companies that the market needs. I focus and deploy our base technology and philosophy as the core competencies at our company. We will never be conservative, but we will continue to be always aggressive.
With everything changing dramatically, we will survive the same way as we are now and, at the same time, prepare and brace for the worst-case scenarios that we may face.