Using its unique technologies, Sumika Color is bringing its solutions to new markets
As it relates to chemicals, Japan is a very interesting paradox because on the one hand, Japan is very lacking in natural resources, yet on the other hand it has the fifth largest chemical industry in the world, centered around big ports like Osaka, Yokohama, Tokyo and Kyushu. Could you give us your take as to why Japan has been so successful when it comes to chemicals? What is the monozukuri of chemicals, so to speak? Also, as we talked about today, how is Japan competing with these regional rivals such as Korea, China and Taiwan?
It's a really good question, and difficult to answer. Japan studied chemistry from Germany. Germany had the dominant chemical industry, which started business from charcoal mining. Japan also had charcoal, so the structure of the raw material was very similar, so Japan studied chemistry from Germany.
For example, when I was a university student, the language of chemistry was mainly German, not English. A lot of the documents and papers were written in German, so we had to study German at that time.
The Japanese chemistry structure was very similar to the German one, so in the 1950s, Japan started in the petrochemical business but after that, the speed of expansion in the Japanese petrochemical industry was very slow.
In the beginning stage, from a technical point of view, the level of the Japanese chemical industry was very similar to that of Germany. However, after 1950 the expansion speed of Japan’s chemical industry compared to the European or US chemical industry, was very slow because of the lack of raw materials and the geopolitical situation.
After that, the Japanese chemical industry focused on fine chemicals, such as pharmaceuticals or electric related materials for things like liquid crystal display material.
During that time, the Japanese industry was very strong in the semiconductor industry and liquid crystal displays. Due to that, pharmaceutical and some electrical related chemistry was very strong in Japan. We are strong in that field, but as you said, during the last 20 or 30 years, the dominant share of the business was mostly taken over by the Koreans or Chinese.
Regarding why China or South Korea became dominant, I think that it is not an issue in the chemical industry itself, but it is because of the willingness to make an investment in this particular industry. I think that Japan has been less willing to make more investments to activate this industry over the last 30 years. That's why China and South Korea surpassed Japan.
In addition to this, it used to be said that the Japanese salary was higher than that of foreign countries, so we had to decrease the cost of labor. A lot of employers focused on reducing costs, including labor costs, and I think that that kind of feeling has been deeply rooted in this industry as well. Considering the Japanese chemical industry, although it takes up 10% of Japanese GDP, it has lost its international competitive edge.
Japan has an aging population, with 29% of people over 65 and a very low fertility rate, meaning that the number of Japanese people born in mid-century is expected to be less than 100 million. There’s two issues here: first, the lack of labor to conduct business, and secondly, in terms of customer base, there's diminishing demand domestically. Could you tell us in terms of your BCP (business continuation plan) how you are ensuring labor and productivity on your sites, and secondly, are you looking further afield for new opportunities internationally, to compensate for this?
It's a very difficult issue. In the chemical industry normally, in a factory you have 3 shifts, so some workers need to work at night and they are also sometimes required to work outside, and it could be quite hot or cold, so the working environment for this industry is quite tough.
We pay better salaries to the workers on night shift, but having said that, recently, the younger generation doesn't want to work in that kind of tough environment. They would rather earn money in an easier way, so it's been very hard to attract young talent recently.
If we look at the breakdown by age, we have peaks in the 40s and 50s, while the number of young workers is smaller compared to them, so the issue is how to pass the technologies to the younger generations. Going forward, it's important to look into talent from overseas markets, and also, we need to utilize more female workers. In the factories, we have to promote digitization and automation using AI.
With heavy industries like construction or industrial chemicals there's perhaps a lack of excitement for young graduates to join these kinds of industries because not only are they dangerous or dirty, but there's a perceived lack of innovation in terms of digital tools. Could you tell us more about the digital tools that you use in your business and how you're transforming the production line with digital based tools?
In the chemical industry, material handling is attracting a lot of attention, where the use of robots and AI has been promoted by users of such tools. We are trying to find the chemical substances, and we have also started seeing some outcomes of that initiative.
However, that initiative is just only one part of the whole picture. The whole context should attract attention. Looking at chemical factories, digitization has happened much earlier than now, because these factories have measurement and control rooms, so we have accumulated a lot of data such as the temperature changes and pressure changes.
Although we already have big data, we haven't been able to make best use of it yet, so what we need to do is to have AI look into the correlation of that data and analyze it so that we can promote the automation of the operations of the factory. In fact, large parts of the operations at the factory can be automated by AI, and we need to realize that situation.
Recently, digitization in the chemical industry has drawn a lot of attention, but what is drawing attention is just one part of the pyramid. Only the edge of the pyramid. At the bottom, there are so many things to be done as soon as possible.
You describe yourself as a chemical solutions company, and you provide coloring and added functionality mainly to plastics. You're providing these solutions in terms of dispersion for plastics, for liquids, and of course, for powders. Could you give us an insight, though, into your customer base? Who's the main clientele that you cater to, and in the future, which industries would you like to expand your clientele to?
Automotive, agriculture, packaging materials and printing inks are the main applications of our products that we are promoting. In most cases, the customers ask us whether we are able to provide or deliver what they want, and then based on that, we come up with a solution and then deliver the product or the solution that the customer wants.
For example, a customer brings a color sample, such as black, that the customer wants to put on a car component, and based on that sample, we come up with the best solution and deliver it.
These are the existing businesses, but right now, a lot of companies are targeting carbon neutrality by 2050, so we are trying to come up with a new business related to materials derived from biomass, and also plastics recycling.
Through these businesses, we have offered the additives that improve the performance of plastic. We have accumulated expertise to improve the plastic material’s performance. As you recycle plastic, the performance of the plastic itself deteriorates, but if you use our additives, you are able to improve or recover the performance of the plastic, so we would like to find a business opportunity there.
Looking into biomass plastic, when it's compared to petroleum plastic, it is less strong and also less durable, so we are looking for a way to improve those weaknesses using our technology, and if we are able to achieve that, we can expect that the consumption of non-petrol plastic will increase.
Also, people will start to find out about the additional value of the non-petroleum plastics, and if that happens, we will be able to find new opportunities, and we could incorporate that in our new product portfolio.
The next generation of automobiles of course will need to be much, much lighter in terms of materials. The weight of a lithium-ion battery is very heavy, so new nonferrous based materials have been adopted. Aluminum, magnesium, titanium and of course plastics will be a huge component of these next generation of vehicles. Your dominant customer currently is the automobile industry. How are you adapting to these changes, and these new demands for lighter materials?
It's important to show what we can achieve with the non-petroleum plastic, the non-oil based plastic. The major concern for non-oil plastic is that it's less resistant. It's less strong, so if we are able to improve that, and then showcase it, then that's going to be the start of a new business. That's going to be the first phase.
In the automotive industry, all the requests from the manufacturers are quite high level, so maybe we can find other applications that have lower barriers to entry, like laptops, which I believe can be made using biomass based plastic as well. That could be a very good starting point to expand the applications to the automotive industry. Also, we should be able to change the negative image about the environment.
For example, in Europe and the US, the image has been changing, centering on intelligent populations. For example, non-petrochemical plastic is used for the door handles of Mercedes cars to showcase the change of materials. They intentionally changed the color of the handle. That is how some people in the intelligent populations are trying to showcase the performance of non-petrochemical plastic, and if we are able to demonstrate that kind of performance in other applications, then I think we will be able to expand this to other industries as well. If we use non petrochemical plastic, then we are able to be more eco-friendly without lowering the level of our lifestyle.
You were able to develop a two-layer structure, a palletization technology, and this was able to overcome a big challenge for the plastics industry which is combining blocking properties with water repellent properties in one pellet. Could you explain how you were first able to do that? This was something that we know was being tried and tested by many companies across the board. How did you do it first, and secondly, what are the main applications that this technology holds?
Originally, this technology was used for mosquito nets that were provided by Sumitomo Chemical to the United Nations to prevent malaria. The inner layer is permeated with insecticide, and it is covered by regular plastic. The extrusion method is used to produce this multilayer plastic, and extruded plastic is soaked into water for cooling.
If we don't have the outer layer, then when the material is soaked into water, the insecticides in the inner layer could leak out, which would result in a large burden on the environment, but thanks to that outer layer, the insecticide will be contained even during the cooling process.
That is the largest application for this technology. If the inner layer is easily adhered, then it's very hard to use, but since it's covered by the outer plastic layer, it doesn't happen. I think that is another property of this product.
In terms of R&D, we know that you're constantly researching and developing new technologies. Can you give us an insight into your current R&D efforts?
Including the factory operators, we have 350 employees, with over 50 of them working in labs, so the proportion of researchers who are R&D workers is quite high. Our team is pretty much focused on the environmentally friendly theme, such as the development towards lowering the burden on the environment, and also recycling plastics to contribute towards the carbon neutral goal.
Since 1995 you've established bases overseas. Of course, you have two in China, and one in Taiwan. Could you tell us the benefits of having those international locations to your business, and moving forward, which new markets would you be looking to expand your business into?
Speaking about markets, I would say that further growth is very hard to expect for the domestic model. As for the two bases in China, one of them is now in the process of relocation, and in autumn this year the capacity of that factory is going to be three times higher than the current one. That relocation planning includes an increase in capacity for R&D.
The Chinese market slowed down a little bit during the covid 19 pandemic, it is still a big market, especially when it comes to automotive and EVs. China is the main market with a lot of advanced technologies there, so we will try to enhance the capability of development in local factories so that we can pursue new developments there without bringing any materials or technologies to Japan.
As for Tah Kong Chemical Industrial Corp. in Taiwan, they are now focusing on OEM production for the red and yellow pigments, and sending them to Japan. However, that business environment has been getting tougher recently, so what we are thinking about now is to have a technological license agreement with Tah Kong Chemical Industrial Corp., so that we can utilize their base in Taiwan, and also, they have a strong connection with Vietnam, so we can utilize them to promote their local production.
For example, Taiwan has TSMC, which is the largest manufacturer of semiconductors, and the semiconductor industry uses plastic that conducts electricity. The scale of the semiconductor industry there is quite large, so we are thinking about offering what we are offering now in Japan to the semiconductor industry, so that we can find new customers in that industry.
Let's say we come back to interview you again in five years' time. What would you like to tell us about your goals and dreams for the company in that timeframe, and what would you like to have achieved by then?
At this moment, the business environment is not so good, so I would like to improve that first, but that's not an interesting goal, so I'd like to say that I would like to showcase the real application of biomass-based plastics by that time.