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DKK eyes overseas for future growth and societal contribution

Interview - February 1, 2022

Throughout its 70 years in the telecommunications industry, DKK has consistently played a central role in the provision of a more convenient living environment for all of society’s stakeholders, a feat achieved through the instalment of social infrastructure, such as the establishment of communication and broadcasting networks in the advanced information society and important contributions to safety in the automobile industry. We sat down with president Tadatoshi Kondo to learn more about DKK's operations in the high and low-frequency segments of the telecommunications industry.

TADATOSHI KONDO, PRESIDENT OF DENKI KOGYO CO., LTD.
TADATOSHI KONDO | PRESIDENT OF DENKI KOGYO CO., LTD.

Japanese manufacturing is famous for TQC (Total Quality Control) and the kaizen philosophy of constant improvement. As a manufacturer of telecommunications and high frequency devices, could you give us your take on Japanese monozukuri?

I believe monozukuri and “made in Japan” are synonymous with high quality. Quality is a prerequisite for Japanese makers and on top of that, customers’ trust and product longevity are key pillars. As a manufacturer it is important for us to assure a product’s quality over ten years, which includes aftercare as well as uplifting the technology to ensure longevity and high quality. In the telecommunications field, Denki Kogyo (DKK) has a very diversified range of business, from low to high frequency products. In terms of the business model, it is better to centralise for efficiency purposes, however, if you think about contributing to society, it is important to nurture the technology and technique and pass it down to the next generation. In this sense, DKK is playing a key role in establishing the technology’s foundation for the future as well.

 

Passing knowledge on to the next generation is key for Japanese companies. However, Japan’s population is ageing, and this is creating a problem in the intergenerational transmission of craftsmanship. What changes have you made to prolong your longevity?

DKK is a company based on technology. Our background is in working with telecommunications companies – developing antennas and movable antennas – as well as broadcasters, local governments and automotive companies based upon our high-frequency products. We need to pass those experiences on to the next generation to ensure the company’s longevity. The Japanese government is pushing to change the retirement age from 60 to 65, so that is one of our options. Also, we will be recruiting young people and have the veterans work with them to keep passing knowledge down.

 

You have diversified into food processing through your super-heated steam treatment equipment and are focusing on health foods, a market experiencing high demand especially in the wake of the COVID-19 pandemic. What is your strategy when it comes to diversifying your business?

Our induction heating technology is already being used in the automotive field. On the one hand, we foresee a stable demand in the automotive market because, as long as cars have wheels, we still have business. However, with the push towards electrification, we will be losing the market for a lot of car components that use this technology – even though tyre related parts will remain. To compensate for the loss, we are looking into expanding to other markets, including construction machinery and the food industry, for example providing antioxidant processing for rice bran and coffee roasting, etcetera.

Our approach is to first enter the food and health food market and to do that, we have established a facility within our factory where we can do trial testing for antioxidant processing. We are now inviting clients to do test trials, starting from there and then expanding the market. We will initiate this in Japan but we have overseas operations so we would like to spread it there as well.

In addition, we are now looking into industrial waste treatment, though this is still in the research and development phase. Heat treatment technology is also applicable in many environmental fields, so we are now conducting research and development into expanding into a wider range of markets. In fact, we established a research centre on October 1st called Mirai Kenkyusho, the “future research institute”, which focuses on finding applications for heat treatment.

 

5G and telecommunications remain the core of your business; you supplied antennas and base stations to major operators. With the DX (digital transformation) revolution, we see increasing demand worldwide for 5G applications. As part of your midterm strategy, you want to increase sales in new businesses and move away from the made-to-order market, and potentially acquire new 5G customers abroad. What new markets or countries are you targeting?

Domestically, we have established ourselves as an antenna provider, however overseas we aren’t well known yet. We have our local subsidiary in North America, and we are looking to work with tier one telecommunications companies. We launched a year and a half ago, however, due to the COVID-19 pandemic, everything has been slowed down. We are trying to relaunch the project soon. In particular, the US also uses the same frequencies as Japan, and we are currently focusing on 28 gigahertz: the same products used in Japan could also be applied to the US.

While there are many competitors in North America, our company’s strength is that Japan is an island nation, so we have had to miniaturise the devices, and multiple frequencies are boarded onto the same device. We are trying to sell to the North American market also based on these two advantages.



We know you patented a tower maintenance system which reduces the cost for carriers. Could you tell us about its unique qualities?

An automatised method and technique for tower maintenance hasn’t been established yet. Currently, it is done manually, with people physically getting on the tower to conduct maintenance. To replace this, we are looking into using AI and conducting many tests to collect data. At the same time, there is talk about using drones for maintenance, however we don’t know if this is practical and applicable in Japan because you need special permission to operate drones.

 

We know you are looking to use your know-how to develop tower structures for wind power generation. What strategy are you pursuing?

We are quite interested in wind power generation. However, wind turbine towers are massive and when it comes to transportation, we are at a disadvantage compared to major companies that have factories by the coast and can organise transport more easily. Currently, our focus is providing LED lights for wind turbines to be visible by aeroplanes and which are used to illuminate paths on the ground. The Japanese government is now pursuing offshore wind generation, so we are trying to penetrate that as well. In terms of renewable energy, we are also focusing on fuel cells; we are trying to convert the methanol emitted by biomass into hydrogen to generate clean electricity.

 

You have expanded your business from supplying antennas to radio equipment, what is your strategy?

We started off as a telecommunications company and our focus was antenna hardware. Then we acquired wireless technology and combined with that, NTT Docomo has introduced our devices since the 1st of April this year, and we have been able to enter the wireless equipment sector. In terms of our short-term goals, we would like to provide services directly to customers with that technology. Another approach is to move beyond 5G, as the Japanese government would like to become the leader in creating the 6G system. We are trying to establish a scheme involving our antennas by following the government and NTT’s direction.

In terms of the high frequency business, in the mid to long-term our focus is on the environment. We would like to apply heat treatment technology to the environmental business and find a good partner to collaborate with. One area we are considering is especially medical industrial waste. We would like to establish a scheme, then we could take that to Southeast Asia too. Our focus is on how to reduce and recycle plastic in an environmentally friendly way.

 

You spoke about the importance of partnerships, for example with NTT. What role does co-creation play in your business and what new partners are you looking for?

We are very much interested in partnering with and collaborating with other companies because doing everything in-house takes time, and to meet society’s rapid changes it is crucial for us to partner with others. For example, for the high frequency business we are looking into working with food industry partners, and telecommunications-wise, we have been working in hardware and infrastructure, but first we want to work with Japanese software and service providers so we can acquire knowledge. Of course, software is borderless, so we would like to take that abroad as well.

 

You have established a strong overseas presence: starting from 2004 in North America and China, and then in Thailand, Mexico and more recently South Korea. What are the benefits of having these international locations?

The locations we have in the US, South Korea, Thailand, Mexico, and China are for the automotive industry and we have introduced our induction heating system. We have our maintenance teams stationed close to the factories. Especially in the high-frequency business, we work hand-in-hand with Japanese car makers such as Toyota, so we try to have our locations close to their factories so we can provide maintenance services and gain their trust. In terms of telecommunications, we established a factory in 1991 in Thailand that produces steel towers, and we added another factory there to manufacture antennas and ideally, we would like to have channels to distribute to overseas markets from there, but we aren’t able to do that yet.

 

What would be the strategy to do that, or to expand the sale of high-frequency products or in the food processing or waste recycling business? Would you be looking to undertake joint ventures, an M&A perhaps, or to establish more sales offices abroad?

When it comes to automobile provision, we would continue to focus on the maintenance aspect of our induction heating devices. Our new target is Mexico as there is a large automotive industry. Yesterday we announced that we are investing heavily in Mexico in the short term. In the long term, we are looking to expand the telecommunications division as well because we believe that we can conduct more value-added business in the US than in Southeast Asia, so we are focusing on the North American market, especially in niche areas where Japanese technologies are applicable.

 

Imagine that we interview you again in five years’ time, what dreams or goals would you like to have accomplished?

We have three objectives. The first is to change our company’s business model. We are currently focusing on hardware and would like to shift to software and gain more profit from diversified businesses. Second, DKK’s success is based on having quality customers domestically, so we need to change employees’ mindsets and encourage them to be more active and aggressive in conducting our business and sales. Third, we would like to contribute to society as well as the environment, so in five years’ time I would like to say that such and such percent of our business has transitioned and that we have contributed to the environment and society. These are my dreams.

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