As the world economy develops, there will be more need for electricity and hence more opportunities for business growth for Japan’s NGK Insulators, whose advanced technology and know-how in the insulator industry – particularly in difficult-to-master ceramics-related areas – have earned it a leading market share worldwide. President Taku Oshima explains the importance of the company’s R&D to its industry-leading position and how it develops products that are ready with new technology so that when society faces problems or the next trend emerges, it has already created a total solution.
Do you think that Japan has gained competitiveness in the world thanks to Abenomics?
The biggest impact of Abenomics is the exchange rate; the yen used to be low but then the appreciation of the yen came down. Thanks to this, companies like ours that rely on exports and overseas production benefited through increased sales and profits. On top of that, we cannot step aside from the fact that it has also had an impact on activating our mindsets. During the past two decades, our minds were quite suppressed, but thanks to the changes, I can see a new will to invest and a motivation to develop things.
During the years of economic stagnation, we had to make cutbacks on salaries to our employees, but now, thanks to the increased profit, we have been able to bring that profit back to them, and more so. In that sense, the situation is getting better and it is much better than what it looks like from the outside. Since the implementation of Abenomics, our company has attained a consecutive increase in profits and during the last quarter, we saw an unprecedented growth.
Japan is an industrial nation and when industries such as automobile and semiconductors have increased profits, we, as suppliers to these industries, can also benefit from this trend. Another change we are experiencing thanks to Abenomics is an unprecedented number of tourists coming to Japan. Last year we reached almost 20 million visitors.
Also, the 2020 Olympics will lead to more investments in hotel construction and infrastructure, so that is another opportunity for growth that we are foreseeing. I am aware that there are people criticizing Abenomics, but in my opinion, as a whole, the situation has improved thanks to these reforms.
Both Abenomics and the 2020 Olympics are strategies that lead to growth and openness. Do you believe these measures are helping Japan to become more globally minded?
The first thing I said to my employees when I became President of NGK was that we have to become a global company that can compete worldwide. I said, “We need to do a lot of things in order to achieve this goal.” I would say we are in a good way; we have close to 20,000 employees in total and around 60% are represented by foreign employees.
It has been nearly 100 years since NGK Insulators was established. What have been your main milestones and targets in terms of expanding the company internationally during this past century?
The core of our business is the insulator business, and as the world economy develops, there will be more need for electricity and hence more opportunities for business growth. However, we are aware that there is a limit to this growth and that we will hit this plateau at some point. For this reason, we have been diversifying our business from early on into other segments. We have analyzed our strengths, which is in the ceramics domain, and we have a high technology in ceramics-related areas such as raw materials, production technology, as well as quality assurance technology. I am very confident that our technology standards in these domains are top-notch.
As a result, we have the leading market share worldwide in some product segments such as our honeycomb ceramics and diesel particulate filters used for automobiles. We are the one of a few companies able to produce this kind of high quality honeycomb ceramic product. Another exclusive product we have is our NAS battery, where again, we are the only ones able to produce such a complex and sophisticated battery. Our third pillar is our semiconductor products. These three areas are supporting the whole business.
We have plants all over the world to produce these products, and since we are a worldwide group we have to put a lot of effort into nurturing not only the facilities in which we operate, but equally important, the people. By this I am referring to both the local people in the different countries where our facilities are placed, as well as here in Japan. Only the companies that can come up with functional systems to nurture their local facilities and people can become truly global, and this is a key focus for us as we move forward.
What is important to note is that all our facilities around the world have to come up with the same NGK product. However, the employees working in the facilities come from different cultures; they have a different way of working and a different mindset, so it is crucial to understand where they are coming from and have good communication in order to come together under the same NGK brand and produce our products. This type of mutual understanding is very important from the top management’s point of view, and it is what we are striving for – to view the world as one.
Could you please outline further details about the NAS battery and the story behind it?
This concept was developed by Ford Motors in 1967. The technology behind the NAS batteries is very complex, and many companies and R&D facilities that worked on developing them failed to come up with a sustainable, working product. The most difficult aspect of this battery is the fact that it uses Beta Alumina, which is the merging of ceramics and metal. It is composed of sodium and sulphur, which are both very active ingredients and hence very difficult to handle safely. We started developing this type of battery in 1984 and have jointly researched with TEPCO. In 2002, we were able to commercialize the batteries, whereas all the other companies that tried to develop them gave up after failed attempts.
The initial purpose of using this battery was to reduce the peak electricity load by storing the electricity during periods of low demand and discharging the stored electricity during the periods of high demand; this is called load leveling, or peak shift. However, the demand for this kind of usage has decreased gradually, but now we can see an increasing demand in the field of renewable energy. The energy supply of renewable energy is very unstable, and our battery can level, or stabilize it. We can store a lot of electricity; only in our installation here in Japan that opened in March, we can store 300,000kWh of energy. The facility is 14,000 square meters.
This type of battery needs less space, and this is the most compact battery system in the world that can store this amount of electricity... We could have completed this installation within six months after receipt of order utilizing the newly developed containerized NAS battery system, which shortened the installation time to one third of that of the conventional format.
Are you using this technology in the United States?
Yes, we do have facilities in the US as well. We have one facility in Texas, and several in California, West Virginia, etc., that have been in operation for about 13 years.
NGK is part of what I refer to as “an industry of things that allow other things to happen”. It is an industry that is not very well known by the public, yet the products and solutions are crucial to our lives. In terms of strategy as a company, how are you communicating to raise awareness of your sector, and of the technology that has to be developed in order for other things to function?
Take the NAS batteries, for example. I believe we have to create public awareness that these things are indispensable. However, thinking in business terms, doing that will not help us sell more batteries. Somebody has to pay for them. For instance, solar power generation became popular thanks to the FIT (feed-in tariff), first in Europe and now in Japan. The technology was always there, but the FIT triggered the increase in popularity.
NGK prepare for those trends to emerge, and we try to make people aware of the availability of our products. However, society does not change until the problem hits, so those products will not sell on mere anticipation. We keep this in mind, and keep developing our products and are ready with the new technology so that when society faces these problems, we have already created a total solution. This is exactly the situation with the NAS batteries; it took a long time but now we are facing a big demand worldwide and we have the solution.
Do you think that part of the globalization process we spoke about earlier will allow Japan to export its business culture, ideals and values?
In fact, we are not exporting, but rather implementing our culture around the world. I personally visit our different facilities and talk to them about NGK and our values, but I also learn about the local cultures.
What is your personal growth strategy for NGK for the upcoming five years and what would you like to achieve?
There are several projects I have in mind. The first one is to strengthen the existing projects such as our honeycomb ceramics, the semi-conductor related business, and the insulator business. The second project will be to strengthen our research and development capability in order to come up with new products. We aim to maintain the 30% ratio of new products within our businesses. We have also decided to invest ¥200 billion in new facilities worldwide.
From this ¥200 billion investment, how much will go to America? What will be your next project in the United States?
¥120 billion will be invested in automotive worldwide, and we also made a new plant in Thailand, and one in Poland. We see a lot of potential in these two markets, so we are investing heavily here. In order to support these facilities, we need a strong support capability from the headquarters, so we are increasing our capabilities there as well. The most important thing is to nurture the people; we have to enhance the abilities of each individual employee. In order to do so, we have to create a company that people enjoy to work for. If people enjoy their work, they will work hard and make efforts. That is when you will see progress and people will become motivated. I am encouraging our employees to work autonomously and not wait for orders to do something.
In terms of creating identity, I believe that the workers that feel motivated are also the workers that find their identity around themselves. For instance, Apple employees find Apple everywhere they look, so they feel proud of what they do. In the 21st century, do you believe that big companies such as NGK need to have an international presence for their employees to feel proud of what they do?
I am not referring to a new identity, or creating something new, but people spend a long time in their workplace so it is important to provide motivation and fulfillment, to make them feel that their wellbeing and motivation benefits everyone. To this end, we will focus efforts on cultivating diverse human resources and encouraging employees to think freely and flexibly while taking on new challenges. Together with them, I would like to build a strong company where each and every one of employees can demonstrate their individuality and play an important role. I want all of them to have a desire to build with our own hands a company we are proud to work for. This is what I am aiming for.