Along with its range of high-quality and highly reliable drive recorders, engine starters and GPS receivers, their low-concentration ozone generator becomes yet another product in COMTEC’s product portfolio aimed at making driving safer for all.
We would like to use COMTEC as an example to challenge this misperception that Japanese firms have lost their innovative quality in the eyes of the West. Can you tell us a little more about your monozukuri, and why the Japanese approach to manufacturing gives it an advantage in terms of quality over the production capability of its regional competitors?
It’s true that Japanese monozukuri, or manufacturing, is now struggling, but from my point of view, I think it is still excellent. Of course, we have experience in production in China, the Philippines, Taiwan, and South Korea, and I know that they can produce very good products, and in the past, China used to have a lot of defects in their manufacturing process, but they have improved a lot.
In the past 20 years, I've gone around all the Asian countries, and only in Japan, I believe, do workers make desperate efforts to improve quality and quality control. Of course, in the past, we had a hard time competing on price, but now the other countries’ costs are rising, so now I think we have narrowed the gap. In that context, I still believe that Japanese quality control is excellent, so I believe that Japan can be competitive in manufacturing again. At this moment, 70% of our products are made in Japan and the other 30% are made offshore. Among those products we developed domestically, we made some products in Japan, but we developed others overseas, and we made them in Japan.
I think we are seeing the transition from “Made in Japan” to “Made in Asia”, as part of a more globalized context. Also, I would like to say that the goal as a manufacturer is to have zero defects in our manufacturing process, but to be honest with you, it is a very difficult task to reduce to zero but we are making efforts to make it close to zero. It's going to require a high cost, but in Japan we try to take pains, or sacrifice ourselves, to achieve this kind of goal, and I'm really proud of that kind of philosophy. I think Japan is the only country that aims for that kind of excellence.
If the cost reasons make sense again then we can compete in the global field again. Due to the current situation in China, a lot of companies are coming back to Japan, or maybe Japanese companies located in the Philippines, for example, so the map of factories around the globe is going to change.
The Japanese manufacturing sector in recent years is becoming a lot more competitive because of big macroeconomic factors. First, we are seeing that as the Bank of Japan keeps interest rates low, the Japanese-to-U.S. dollar devaluation is making Japan a lot cheaper. A second big trend we're seeing is China’s zero-covid policy battering supply chains. What are the challenges and opportunities that you see in this macroeconomic situation?
A lot of people say that Japan has experienced loss for 20 years, and it's true in some sense, but recently we are seeing new factories for “Made in Japan” being built one after another, everywhere. In China, the Philippines, Taiwan and Vietnam as well.
The production capability of Japan is not just within Japanese borders. The weakened yen situation is not going to have a negative impact on us in a global sense, and I think that China and Japan are going opposite ways. In the past, Japan was at the top but we dropped from the top to the bottom. On the other hand, China, at the same time, rose from the bottom to the top and going forward, I think that the opposite thing will happen where China, currently on top now, may start declining and Japan may start rising from the bottom to the top because it's very hard to continue to be at the top.
According to analysts, we can expect a lot of layoffs next year, so I think that Japan can start rising, while China may struggle to continue to be at the top. The situation is going to continue to be tough, but I think there are a lot of opportunities for Japanese companies. In the 10-20 year cycle, I think we’re going to see an overall upward trend for Japan, and China will go the opposite way. I think this trend will continue.
Perhaps many detractors might mention the fact that Japan's population issue would slow this rise back to the top again. Japan dropped its population below 126 million this year. Only Okinawa had an increase in people, the only one of the 47 prefectures. How do you anticipate Japan’s demographic changes impacting your business? Is there an opportunity or a challenge there for you, and how will you react to that?
Actually, I'm looking at South Korea as a sample for this kind of demographic situation. They are also experiencing a declining population, and even China is experiencing the same situation. As a manufacturer, this is very significant.
In the automotive industry, however, the more severe problem is that young people are not interested in cars anymore. They are more interested in technologies like iPhones and so on. Younger people have not been spending money on cars recently. It's very hard to change this trend as just one company, so we are thinking about how to address this kind of situation.
One way is to switch some of the products from B2C to B2B. Currently, most of our products are B2C goods, but we are thinking about that kind of shift now. The other thing is that if we can get any competitiveness for some products in the global market, then we would like to launch them in the global market, and as a manufacturer, I think the most important thing is to dedicate ourselves to the development of new products.
Regarding staffing, as you mentioned, we are now having a very hard time hiring new engineers, and sales staff as well.
Currently, we do not have a system in place to accept foreign workers, but as part of our SDGs efforts, we are actively recruiting female employees to promote their success. Many of our excellent employees are female employees, and we are trying to create a comfortable working environment for these people.
Even though they join our company at a young age, if they leave the company after giving birth to a child, it’s not going to be fruitful for both the company and that person, so we want these female employees to continue working here even after giving birth. We, therefore, created a childcare room at the company this year in 2022, and I hope that these female employees will stay motivated because of these efforts. These are some of the initiatives we are taking for staffing.
Your products are oriented around vehicles, and nowadays we think about the automobile as being a very highly intelligent mobile device. A perfect third place after the office and the home. When consumers think about the automobile though, they think about autonomous driving vehicles and electric vehicles, but from people within the industry themselves, there's a recognition that automobiles will be absorbed into a larger new sector called ‘mobility’, a service-oriented sector. As a company with both B2B and B2C capabilities, what opportunities does this new transition in the automotive industry bring for you? How will you adapt?
We just started addressing this kind of shift, and we just kicked off some projects aligned with this trend. Speaking about the in-vehicle products that we specialize in, communication is getting faster and faster, and faster networks are required for a lot of in-vehicle products and equipment. Most of these products are now shifting to mobile apps, so this trend is inevitable now.
In line with this trend, we released a new type of drive recorder last year, which has communications functionality. The ZDR058 model has two cameras at the front and the back, and the ZDR059 model has a 360 degrees camera angle, plus a rear camera. These products are expensive, so they are not selling very well, but we would like to grow the sale of these products and we have launched some other products that are aligned with CASE.
This is a great product, and if you have one of these in your family's car, you can see where they are in real-time. It's a safety product.
In the past, we used to dislike being monitored by someone else, but that’s now changing. The younger generation is used to being looked after by their parents on their mobile phones, so mobile phone connectivity could strengthen the bond between parents and children, and I think such changes will accelerate in the future.
As cars become increasingly autonomous, big questions are raised about safety. If you look at the United States of America, there are laws now that require policemen and state officers to consistently monitor and film their whereabouts in case there is a legal dispute or crash. Could you explain to us how your products contribute to the overall safety of the driving experience?
We keep saying “monitor”, but I think we can change this word to “protect”, or “prepare”. The world is more connected now, and it's going to lead us to a more protective environment. If we call it “monitoring”, then it sounds more dangerous, but in terms of security, I think “protecting” may be a better way to express what we are trying to achieve here.
Through our products, we are trying to protect our loved ones, family members and also the elderly people in this country, and from the company’s perspective, it's going to be the employees. And of course, our products also contribute to the protection of the cars themselves.
In 2002, we saw you establish an OEM division for the supply of remote engine starters, and then of course in 2008 you began OEM supplying drive recorders. Could you tell us why you've established that OEM capability? What new clientele will you be able to open up through that business service?
For the past 20 years, known as the “lost” 20 years, we have survived this difficult time, so we can flexibly respond to prevailing needs. When you spoke about the start of our OEM business as one of our milestones, it was really difficult. The customers were really tough when it comes to quality control, and in those harsh conditions, we learned that quality control has three parts. One is the design, another is manufacturing, and the third is the after-sales management. It's very important to do the after-sales management.
We gave feedback on what we learned from that to the design division. In that cycle, we were able to improve the quality even further. After we started the OEM business, we changed our way of thinking about quality control. In the beginning, we just learned how to do it from the automotive makers, but after that, we started building our own in-house quality control system so that we could make our quality even better.
You also talked about the drive recorder, but a drive recorder is a safety device. Of course, the product needs to be attractive, and the cheaper products may draw attention, but more clients prefer the safer products, so we are trying to supply those safer products to both clients and sales offices as well.
Open innovation is something companies cite as very important for their BCPs. In 2020 you partnered with Maxell. Could you first tell us about the benefits of that agreement with Maxell, and how it has helped your business? Are you open to innovation with foreign partners?
It's been two years since we signed the contract with Maxell. Firstly, we released a new drive recorder which could produce clearer images in the dark, and we worked on this product together with Maxell, and I think that we will start seeing profits going forward, not now.
We would also like to incorporate their technology for floating imaging in our products as well. We are still in the research and development phase. For any new development or products, I think it's going to be tougher to do everything in-house, from both the labour perspective and the cost perspective, because these things are getting more and more complicated now, so we are very open to collaboration with other countries, not only in Japan, if we can find a company that has the same interests as us.
In 1995, you began exporting your products overseas to the Philippines, establishing COMTEC Philippines. Could you tell us more about your international business, and which particular countries you're going to be targeting for growth in the mid-term strategy?
At this moment, we don't have a specific plan or strategy to expand in the overseas market. Honestly, it's very difficult to sell our products such as drive recorders, engine starters or GPS receivers in overseas markets.
Maybe drive recorders have some opportunity or potential in overseas markets, but it's still difficult. Right now, the equipment we are developing now has the property of producing ozone
That might have some potential to be launched as some kind of device that we can export overseas in this pandemic situation.
Speaking about the factory in the Philippines, it's in a crisis now because they ran out of orders during the covid-19 pandemic, so we are working very hard to regain orders at that factory. This country has competitiveness in terms of exporting to North America, so we would like to start regaining that factory’s capability for production so that we can focus on exporting from it.
We would like to introduce some of our products. This is one of our latest products that can produce ozone. Research at Nara Medical University has shown that ozone at certain concentrations can sanitize certain viruses.
We are still in the process of researching it, but we released this product, and the idea is that if you turn this product on, when you've finished driving your car, switch on this product and it will generate ozone, allowing you to drive your car in clean air in the morning.
This is the first generation, and it can generate ozone only in a limited area of the car. We are now trying to develop a newer one which can spread ozone throughout the entire vehicle. I believe it has potential in the overseas market, not just in Japan. This is the data released by the university. If we can create an environment with an ozone gas concentration of 0.04 PPM, we can sanitize 81% of viruses in one hour. The red line is for the ozone and the blue line is without ozone, a regular environment.
It sanitizes 99.9% of viruses within 12 hours.
It also works to eliminate odours in the car, so the idea that we are trying to develop now is to incorporate this technology into the car so that once you arrive home and finish driving when you turn off the engine, then we are trying to generate ozone automatically within the car, and once you wake up in the morning and start driving again, there will be no smells in the car anymore, and no active viruses. It's an exciting product.
Let's say we come back to interview you again on the last day of your presidency. What would you like to tell us about your goals and dreams for the company by that time, and what would you like to have achieved by then?
My goal is to keep this company going healthily. It is important to be sustainable as a company, and you may question what I mean by, “in a healthy way”. I think it is about contributing to society, so to do that, we should keep surviving for the next 10 to 30 years.
SDGs are the current trend globally, and in that context, my goal is to keep contributing to society. We talked a lot about what we are dreaming of in the near future, and we are in a very tough situation now, a once-in-100-year revolution in the automotive industry, so we are in a very tough situation.
For the next 20 or 30 years, I think it's very important how we can catch up with these changes, or how we can change ourselves in line with those changes. The ultimate goal is to contribute to society. We are a mid-sized company, but I think there are a lot of opportunities there, so we would like to keep looking for those opportunities.
I joined this company 28 years ago, and ever since then, I have had a dream that has been unchanged, which is that I would like to make this company something that our employees would like to invite their children to. That has been the dream since the beginning. In other words, I would like to make this company one which the employees can be proud of, so we would like to grow this company so that it will be needed by society. That is my goal.