Established in 1902 as a chemical trading company, Iwata Shokai has been dealing with acid and alkaline products in Japan and around the world for more than a century, supplying its products to a range of industries, with semiconductors, life sciences and plastics the main focus moving forward.
Can you please share an overview of your company and your activities?
First, I would like to talk about the history of our company and the chemical industry. We are a chemical trading company that started business 120 years ago. We began in 1902, and this year is our 120th anniversary. Our history goes back to the progress of the chemical industry in Japan. Our first business was supplying alkaline coal ash to textile factories. Then we began to supply acid and alkaline to many clients. Until the early 20th century, we sold imported products. Eventually, Japan’s chemical manufacturers began to produce basic industrial chemicals, and at which point we shifted to also dealing with domestic products, and reversing imports.
Inorganic chemistry is the root of our business. We have been dealing with acid and alkaline products in Japan and around the world for more than 100 years. Inorganic chemicals are not only valuable as materials themselves, but they play an important role in the production process as basic raw materials in all industrial fields. In Japan, a system was established and maintained to ensure a stable supply at low cost. National organizations and industrial associations manage the production and inventory of each productive category. There is a mutual support system to ensure that there are no shortages of any products. We are always thinking about how to provide our customers with a stable supply of high-quality products. Our mission is to build an optimal system including logistics, to gain the trust and satisfaction of our customers. That is very important to us.
How does Iwata differentiate itself from its competitors, and add value on behalf of your clients?
We have a chemical manufacturing company, Auto Chemical, as a subsidiary. It started from the passion of just one employee. We can either manufacture new materials ourselves or create them in collaboration with other companies. One of our strengths is that we excel at developing new products. For example, one-component sealants, water-based adhesives, and fluoropolymer filters. Recently, we have begun marketing ionic liquids as antistatic agents. We also supply them to overseas companies. We are not only a trading company. We produce functional materials.
You supply to a wide-range of industrial sectors, such as chemicals, plastics for packaging, advanced materials for semiconductors, and building materials as well. Is there a particular sector where you foresee the most demand, or one that you are appealing to the most, especially in terms of the overseas market?
We want to expand to building materials with new types of Auton sealant products. Before, there was no one-component sealant for building materials. However, we developed one, and we believe that it could change the method of building construction, and make it more practical.
That being said, the sectors that appeal to us going forward are; semiconductors, life science and plastics. Plastics are changing with the introduction of new materials that are be more eco-friendly. There are business opportunities in this for us too.
Japan’s semiconductor sector is living quite an exciting time, especially in the wake of TSMC's announcement of a new fab being constructed in Kumamoto. Can you tell us more about how you're catering to Japan’s semiconductor ecosystem?
We sell machines to many semiconductor and silicon wafer manufacturers such as SUMCO. For example, we sell the final washing machine for silicon wafers. We have a small factory in Kumamoto which we acquired through an M&A. The factory is called SEIBU. We provide maintenance for small and medium sized machines there.
In recent years, we have also sold cleaning machines to the semiconductor industry in China. China has a government policy to make all semiconductors domestic. However, the facility or production equipment is often Japanese. Our role is to maintain the highest quality of semiconductors. This is an important role because semiconductors are very delicate.
As a trading company, how have you been mitigating the impact of the supply chain disruptions caused by the continuing lockdown in China?
The chemical industry faces the same problems as other industries. Several types of chemicals and equipment components are not available for import. In this case, strong partnerships with Japanese domestic manufacturers are an advantage. We are an independent trading company and have good relationships with numerous companies. We have multiple procurement channels, both foreign and domestic, and a stable supply system. In terms of facilities however, parts procurement is lagging behind. We have also had to stop the export of our cleaning machines to China.
You talked about being able to have a stable supply as being a main strength. Your company is able to do this through local collaboration with Japanese companies for procurement. However, we are seeing big disruptions to the activities of many of these small local companies, given Japan’s demographic decline. Are you looking to replicate this collaborative model that you have already established domestically with overseas firms as well?
I think that worldwide, Japanese products support many kinds of industries. We export Japanese products in order to expand to overseas growing markets. For products that are mass produced, overseas production has cost advantages. We need to research which countries can make which chemicals and build multiple supply chains. For high-end products, there is a quality advantage to manufacturing in Japan. Our Auton series is typically used in the construction of Japanese style houses. However, now we want to expand to Building materials to improve our sales in the overseas market.
From which market do you see more potential for your Auton series?
The building industry is where we see the potential for our Auton series. Southeast Asia is our target geographical region. We are also focusing on India.
You mentioned earlier about three main focus areas. The first was semiconductors, and the second are was life science. What is your approach to enter this market?
We want to expand to medical products. We sell fluororesin for medical imaging cameras. Semiconductors and sensors are also related to CT scans and are used in diagnosis devices. We would like to reproduce this business for life sciences overseas and export it from Japan. For example, our subsidiary TOSC, a company traditionally valued for water treatment, has recently been selling membranes that bring new processes to the food industry in addition to the medical industry.
The last of your three main focus areas is plastics. You mentioned earlier that a strength of your firm is co-development. How are you are catering to the needs for sustainable plastic products?
Japanese chemical companies have to deal with serious pollution problems. In Japan, this has been the case for around 50 years. As a result, their products are now environmentally conscious. In order to adhere to strict environmental standards, Japanese companies have enhanced their technological capabilities and competitiveness. For example, when it comes to polyurethane products, we have been supplying high-quality goods and have been selling for over 40 years. In the past we faced many pollution problems, so we built a new factory to start producing high-quality products in a more eco-friendly manner. This is a reason why Japanese companies keep their competitiveness in organic chemicals. Recently, plastics have been a problem all over the world. Becoming carbon neutral is one of the main problems that many companies and societies are now facing. Currently, chemical companies involved in organic chemistry and polymers are focusing on the development of recycling technology, to realize a sustainable society. Many companies are focusing on chemical recyclables. One example is the development of technology to produce polymers using carbon dioxide from conventional exhaust gases as a carbon source. If this process becomes comparable in cost to other ethanol processes, it will be extremely interesting. For example, Sumitomo chemical and Sekisui chemical, are developing technology to produce ethanol from household garbage, and turn it into polymers. They reported that one kilo of ethanol can be produced from 20 tonnes of garbage.
All over the world, the goal is to achieve carbon neutrality. However, this doesn’t mean the total elimination of petroleum and carbon resources. We need to make effective use of our limited carbon resources. For example, we supply chemicals to capture carbon dioxide for several companies. To improve the environment, it is necessary to make good use of chemical reactions. Japan is a small country, so it is difficult to produce a large amount of clean energy. Instead, we intend to contribute to the global environment through the power of chemistry. We want to develop recycling technologies, that can contribute to a recycling-oriented society. In such a society, our resources will be used over and over. That is our mission.
You mentioned an M&A a few years ago. Are you looking for new M&A opportunities, or are to establish local bases? How do you plan to grow your overseas business?
When it comes to Southeast Asia, we want to expand from Thailand to some other countries in the region. We also want to establish a branch in Singapore and India in the future. We already have an Indian employee at our company.
Are you looking to hire more foreign employees as part of your international development?
Yes, we are actively seeking overseas foreign employees from countries such as India, China, and Russia. Diversity is very important.
Japan until recently has been very strict in allowing non-residents to visit Japan as a result of the coronavirus pandemic. Can you tell us about how the pandemic has affected your business? How has it changed how you operate in the midterm, and in the long-term?
There have been many changes that are part of the “new normal”. We have changed our approach and mindset towards stable supply, and our work style has also changed. The major shift has been that Japanese companies that were conventionally focused on expanding outwards, are now returning their focus to Japan. Globally, there is still a major demand for high-quality products that are made in Japan, and we want to export high-quality Japanese products to emerging and growing overseas markets. Although some business has come to a halt in 2020, this change has provided many opportunities for us recently.
You mentioned that this year your company is celebrating its 120th year anniversary. Imagine that we came back five years from now for your 125th year anniversary, and had this interview all over again. What would you like to tell us? What are your goals, and what are your dreams for this company?
It is our mission to create new products for people all over the world. We also need to create a system of stable supply and create a sustainable society. To contribute to the environment, it is important how we use chemical substances. We also want to contribute to the environment. How chemicals are used is important. Chemical reactions have infinite possibilities. As a company dealing with chemicals, we believe that there are infinite products that we can create using chemicals. This requires good chemistry.