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At the leading edge of the age of connectivity

Interview - January 19, 2022

A firm that recently celebrated its centenary, electrical components supplier Senba Denki Kazai is ready for the technological challenges of an increasingly connected world. We spoke with chairman, Chiharu Kishi, to learn more about Senba Denki Kazai as a leader in Japan and a growing global influence, and how the company is developing components for high-capacity communication technology, as it strives to meet the needs of an increasingly digital and connected world.

CHIHARU KISHI, CHAIRMAN OF SENBA DENKI KAZAI CO., LTD.
CHIHARU KISHI | CHAIRMAN OF SENBA DENKI KAZAI CO., LTD.

As a company engaged in electronic materials trading, can you explain why Japanese companies are so successful in this field despite being relatively poor in terms of natural resources?

The essence of monozukuri lies in the harmony of technology and in the Japanese people, who are very diligent and pay a lot of attention to detail. Japanese products are renowned across the globe for their good quality, reliability and this harmony has allowed Japanese companies to develop and become world leaders with the added value created by advanced technology, even in the face of resource scarcity.

 

Your company is both a trading company and a manufacturer. Can you explain what role you play in the supply chain?

The role of Senba Denki Kazai in the Japanese supply chain is that we act as the intermediary that coordinates between major Japanese companies and smaller Japanese companies. We provide consulting services and conduct quality assurance on products and materials, as well as provide the appropriate materials to our clients.

 

What are some of the key milestones, especially technical milestones, in your company’s history?

Senba Denki Kazai was established in 1919, right after the First World War, at a time in which Japanese society was changing and moving towards new economic growth. In this period, a variety of industrial products and household goods that had never been seen before spread to the general public, and electric power, electric light, and spinning companies were pushing forward in various areas. In the context of this development, our company was established in today’s Kitahama, Osaka, as the first store in Kansai to sell electrical insulating materials.

Since then, we have continued to provide electrical insulating materials and other products to various companies as an agent for major companies such as Panasonic and Nitto Denko.

As society continued changing, we diversified into manufacturing printed circuit boards (PCBs) and supplying items such as adhesive tapes, high-functional film, chemical materials, as well as wires and terminals, as required by the market.

Our philosophy is “coexistence and co‐prosperity” to work in harmony with our clients and progress together. Inheriting this spirit, we have developed as a trading company by acting as a mediator for these companies.

In 1994, our first overseas expansion was in Kunshan, China where we built a processing factory, and then we now have a sales office in Hong Kong as well as Shenzhen, Dongguan and Shanghai.

In 2016 we started our HEMS (home energy management system) business in response to our customers’ demands, and in 2019 we celebrated a major milestone, our 100th anniversary.

 

Your HEMS business provides a tailor-made consultation service to clients in the gas industry, and you supply items such as gas alarms and gas meters. Can you tell us more about this business and its growth potential?

Our HEMS business began about eight years ago. With our business strategy of being a fabless manufacturer, we initially focused on the Japanese market. There are three categories of smart meters: for electricity, for water and for gas. The gas meter needs to function in harsher conditions, so we focus on this more specialised area, and have developed an essential device that is required in smart gas meters. We have now achieved the top share in the Japanese market.

Four years ago, we went abroad with this key device for smart gas meters. We saw the possibility of a big demand in the European market, where carbon neutrality is a big trend. In 2017, we visited European Utility Week (EUW), the world's leading trade show for the energy business, to start our market research. Since the following year, we have exhibited in Amsterdam, Austria, and France with our own booth. As a result, our marketing has paid off and we are now working with smart gas meter manufacturers in the UK, Germany and Italy.

 

What is your long-term vision for this business?

We will begin by focusing on the European market, which is key in terms of smart gas meters. European companies are the world leaders in this field so once we enter the market there, we can be sure to expand overseas. We are looking to expand further in Ireland and Scotland especially. Our devices are already used in the UK, especially in northern England, Ireland, and Scotland, as well as in Germany, Spain, and Italy. And in Australia, New Zealand and Egypt too, although these are not in Europe.



Many countries have deregulated and privatised their utilities sectors. Has this provided opportunities for your business?

Our HEMS business was actually established in response to the deregulation of the gas industry. Previously, supply chains were very rigid but with deregulation, new companies have been able to enter the market, so we established ourselves as one of the companies providing new gas meter devices to both Japanese and overseas markets and we have expanded our sales penetration in the market.

 

Japanese companies have a competitive advantage in the construction and utilities field when it comes to natural disaster technology. How have you integrated such aspects in your products?

In terms of gas meters, we focused on what risks they could be associated with, namely potential gas leakage. And since gas is hazardous, we must make sure there are no leakages. Firstly, it is important that there are no gas leakages under normal conditions, so we have come up with a system whereby the joints between metal components are fully contained, to avoid leakage.

Secondly, there are also emergency scenarios, such as earthquakes, and in those cases the gas supply must be interrupted. Our system has the function to synchronise with earthquake detection systems that measure seismic movements and immediately cut off the gas supply in case of earthquakes. This system has been accepted worldwide because it’s from Japan, a country known for frequent earthquakes.

 

Your company has more than 100 years of history. What is your main competitive advantage and what are your company’s strengths?

Our second president came from the Industrial Bank of Japan, one of the founding banks in Japan. He has been providing support to many companies in various ways for a long time, but his principle was very generous: “Never ask for anything in return”.

There is a Buddhist proverb that says, "Light up one corner"; he focused on things that no one else would tackle, worked behind the scenes, and provided the best service, was honest and trustworthy, and always did his best for our company and society. His philosophy was that the success of our company would help other companies grow, create a better society, and become a company that is needed by society.

In addition to that, our second president always said about: “Minotake management (Do not go over capacity). Our company’s goal is not to expand but rather do our best”.

We have been sticking to this philosophy, and in response to the diversification of the environment over time, we originally started out as a trading company and have now become a global company supplying a variety of products needed by international society. We became one of the 33,000 Japanese companies that are over a century old, and our company’s strength is that we have a good balance in terms of management, as well as good suppliers and customers.

We are now a comprehensive trader and manufacturer of electrical components, and we are catering to various industries. There are ups and downs in every industry, but since we have a diversified client base, we can balance these out and attain stable management.

 

We know that you are looking to develop wearable devices. What new business areas or industries are you looking to enter?

Having diversified business lines creates a synergistic effect. We started off as a trading company, which means that we have updated information on the latest trends and our customers’ requirements, and we are able to come up with products based on that.

The synergy we have with the various product lines is good and we want to continue pursuing a balanced business model which is most applicable to us. One of the synergetic outcomes is our new wearable device business, as you mentioned. In fact, the company we have been collaborating with for smart gas meters is now a customer of our wearable device.

We also have other types of new businesses, and our biggest strength is the communication and connection we have with people, especially our clients. This provides us with a broad channel for marketing and sales.

Another major strength is that this trading company style is unique to Japan, which could be considered a result of the so-called Galapagos effect. Being the intermediary, or coordinator, puts us in a strong position. It is important to meet with clients face-to-face because communicating remotely does not allow you to grasp their needs fully. It is always important to communicate directly and learn what the other person is thinking, what their needs are, and how they want to achieve their goal. After grasping that, it is important for us to transmit the information accurately and connect people so they can create alliances. Being a trading company is about retaining and transmitting information and connecting people.

Electrical components are now becoming a major part of our lives. Things like EVs (electric cars), IoT (internet of things) and AI (artificial intelligence) – everything is digitalised now. Therefore, our target for future advancement is to focus on electric signals and the parts that receive those signals. Over time, the volume of electric signal transactions will increase, so we are trying to develop a housing as well as connector that could cater to this high volume of transactions. We are collaborating with universities and major SMEs and cementing alliances to become the foremost Japanese brand in high-spec cable housing.

 

Will this involve 5G and 6G applications?

We are still in the research phase, but with regards to 5G and 6G, the main players would be carriers, manufacturers, and wireless communicators. We are trying to provide high spec, high-capacity electric signal transmitters, i.e., the cables or wires that are directly connected to wireless devices.

 

Are you seeking partnerships with overseas companies to achieve your goals?

We first need to establish a robust foundation in Japan, so we are focusing on Japanese alliances, and our research and development, quality management, and marketing and sales divisions are all in our headquarters in Osaka. Our plan is to take the outcome of these Japanese alliances abroad ourselves.

Currently our focus is domestic, but at the same time we are conducting sales overseas and now have unique products that we can sell directly from Japan. However, over time we are sure that local companies will become our competitors, so our next target is to focus on stationing ourselves in local areas, either by going there directly or through M&As, joint ventures or partnerships with local companies. The US and Europe would be our next targets.

 

Japan’s population is the oldest in the world, with almost a third of people over the age of 65, with a consequent reduction in the labour force. Is this impacting your ability to recruit talented young graduates?

The lockdown caused by the COVID-19 pandemic has resulted in many production stoppages, and many Japanese companies have brought their production sites back to Japan. Also, labour costs in China and other countries are increasing, so the advantage of producing overseas has declined. In our case, we have been developing new divisions and, so far, have been able to hire people in Japan.

 

Imagine we come back to interview you again in a few years’ time. What goals or dreams would you like to have achieved by then?

In addition to our conventional business, we would like to focus on becoming a leading niche company in gas-meter related products.

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