Shimonishi Giken Kogyo (SIMOTEC) Group has established itself as a leading manufacturer of structural and composite parts.
Japanese manufacturing is currently experiencing an exciting phase. After three years of significant supply chain disruptions following COVID-19, ongoing tensions between China and the United States, and multinationals seeking to diversify their supply chains with a focus on reliability, Japan has emerged as a nation known for its advanced technology, high trustworthiness, and reliability. Additionally, with the weak yen, Japan has become highly cost-competitive, unlike any other time in the past 20 to 30 years. Our position is that this is an exciting time and a unique opportunity for Japan's manufacturing sector. Do you agree with this premise? Why or why not?
In general, the weak yen is an opportunity with respect to exports. The exchange rate fluctuations are a significant factor that can impact the current situation. Exchange rates are subject to fluctuations, so the most important thing for us is to maintain our value stably and to sell our products, regardless of the exchange rate. We can be quite aggressive in the current weak yen environment, and I often engage in business abroad. However, our focus should be on improving our product quality. While Japanese manufacturers are known for producing excellent products, it is essential to ensure that customers truly recognize the value we offer. We need to sophisticate our marketing efforts and better understand customer needs to ensure they are reflected in the value provided by our products. By doing so, we can maintain stable values and continue to add more value to our products even amidst changing circumstances. Currently, our primary focus is on marketing and understanding customer needs.
That's an interesting perspective. It seems that the shift in Japanese manufacturing is more about effective communication and marketing rather than just innovation. In the past, there was a belief that creating a good product was sufficient for success, but now it is clear that marketing and understanding customer needs are crucial. Could you tell me more about the specific activities or policies you have implemented to bridge the communication gap and better understand how your added value can meet the specific needs of your customers?
Currently, we have both a engineering team and a sales team. The sales team focuses on maintaining good communication with our customers. They listen to their needs, summarize the information, and then reflect it in our products. The top priority is to cater to customer demands and develop products accordingly.
We also present our products on our website and encourage customers to reach out to us for communication. This two-way communication helps us better understand their needs and feeds into the development of new products. We aim to deepen our communication with customers and believe that this will ultimately benefit our sales. We understand that effective communication and understanding customer needs are vital in today's market.
What impact is Japan’s declining population having on your company?
The declining population has long been predicted, but as it arrives, the impact is more significant than we had expected. Avoiding negative growth will require novel ideas and we need to think extensively about the different approaches we can take. For example, we are seeing an increase in automation across the sector but it is difficult to implement in full because of our high-mix, low-volume production style. We also need to look at improving productivity within the office and white-collar roles as well, something that I think will be key to maintaining positive growth prospects.
I understand that your company has maintained a sustained presence in China, Hong Kong, and Thailand for some time now. I'm keen to learn about your experiences in the overseas arena and the key lessons or takeaways you've gained from your international operations thus far. Additionally, I'd like to know what your plans entail and what the next steps will be for your international expansion.
In essence, our international sites are located in Asia. While we believe that people in these regions share some similarities with the Japanese, there are notable differences in terms of attentiveness and the concept of respect. We want to emphasize the importance of entire group working together as a cohesive team. We must recognize and embrace our differences, understanding that despite having similar skin color and being from Asia, there are distinct cultural nuances that shape our interactions.
Have you had any experiences with local partnerships? If not, is it something you are open to and actively seeking?
Our premise is that our products will be well-received by international customers, leading to increased demand. With this in mind, we recognize the need to find partners who can support our high-mix, low-production model in new markets. As we expand overseas, it is not feasible for us to possess all the necessary equipment and facilities in each market. Therefore, we seek partners who already have the required hardware and capabilities. Through collaborative efforts, we can effectively manufacture and supply products to new customers with the mutual cooperation of the partners. Establishing a robust supply chain becomes the most important aspect of our overseas operations. Building trust and fostering relationships with local stakeholders is crucial, and constant effort is required in achieving this objective.
When encountering a company, exploring its products is always an exciting starting point. In this context, there are three main topics or themes that I would like to cover regarding your products. Firstly, I would love to hear more about the switching mag holder, a product released in 2020 that caught our attention. Additionally, it would be enjoyable to discuss the current offerings your company has on the table. Lastly, I'm interested in understanding the focus of your product development efforts and any upcoming products on the horizon. Perhaps it would be best, to begin with an overview of your present product portfolio. Along the way, I'm keen to gain a deeper understanding of your core competencies and what sets your products apart from others in the market.
Our company has its headquarters in Osaka, Japan, with sales branches in Tokyo and Nagoya, and technical development centers in Tokyo and Sendai. Additionally, we have manufacturing facilities in Japan, including one in Wakayama, and two main factories outside Japan, specifically in Dongguan, China, near Hong Kong, and in Thailand, near Bangkok.
As for our company, we specialize in three main technologies: mechatronics, magnetics, and thermal. Our mechatronics technology is geared towards mass production and is primarily used in products such as printers and copy machines, as well as in industrial equipment. For instance, you might not realize it, but the document feeder in a typical printer weighs around 10 to 15 kilograms. Our product, the hinge, may seem inconspicuous, but it plays a crucial and indispensable role in ensuring the smooth functioning of these devices.
We've been actively involved in this market for over three decades and have managed to secure a significant share, both in Japan and overseas, with notable players. Our technology has contributed to enhancing the performance and functionality in printers, copy machines, and various industrial equipment. For example, even in the realm of electrical products and visual equipment used in households, we offer innovative solutions that enhance user experiences.
Our manufacturing approach varies depending on the product type. Mechatronics products are manufactured in high volumes, while products like mag holders follow a different strategy. These specialized items are produced in smaller quantities but offer a greater variety.
To elaborate on the division of our business, we prioritize producing high-value, complex products in Japan. For instance, in markets like factory automation or high-end electronics, where the focus is on quality rather than quantity, we maintain our production in Japan. This strategic shift aligns with the changing dynamics of the global market, where Japanese companies are transitioning from producing small plastic items or individual steel components to creating more sophisticated and valuable solutions. As you mentioned, the Japanese market faces competition from Asian countries in traditional consumer electronics, prompting us to explore high-value sectors such as semiconductor products, factory automation, sensors, and other advanced technologies.
Our commitment to catering to these evolving market demands is reflected in our product development efforts. We aim to deliver solutions with increased complexity and higher value, ensuring a competitive edge that is difficult to replicate. The switching mag holder is one such example.
The switching mag holder is a magnetic holder that functions by using the power of magnets to securely hold objects in place. When you place an object with a magnetic surface (like a metal tool or part) onto the holder, the magnets create a strong magnetic force that keeps the object firmly attached to the holder's surface. This behavior can be switched on or off as needed using an electric charge. This simple yet effective design allows for easy and reliable storage of various items without the need for external fasteners or adhesives.
What are some of the most exciting or interesting applications of technologies like this?
Their potential applications include robotics, drones, and security systems. What sets them apart is their unique function, which eliminates the need for a constant power supply. Unlike conventional electromagnets that require continuous power to function, our products are designed to activate only when a signal is sent, dramatically reducing electricity consumption.
Looking ahead to the future, we recognize that the cost of energy, particularly oil prices, might continue to rise. As a responsible company committed to Sustainable Development Goals (SDGs), we understand the importance of minimizing our energy consumption. Our mission extends beyond producing high-value products; we aim to enhance employee satisfaction and achieve economic growth while reducing our impact on the environment.
In line with SDGs number 8, 12, and 13, we focus on responsibly producing and using our products. By reducing energy consumption and being mindful of our environmental footprint, we believe we can contribute to addressing climate change and promoting sustainable practices. Though our contribution may seem small, collectively, we are confident that it can have a meaningful impact.
The motivation for the switch from mass production to higher-value products is very clear but I'd love to delve deeper into the circumstances surrounding this shift. Can you tell me more about the advantages that your background in mechatronics and the mass production market has brought to your magnetics business? How did these experiences influence and contribute to this significant transition?
Maintaining our mass production capabilities is important as it serves as a strong foundation for our business and we will continue to develop it. However, we also have our sights set on developing high-quality, high-value-added products. Our approach is not to choose one over the other; rather, we aim to do both. We believe in the potential for success by striking a balance and pursuing opportunities in both areas.
I understand that you may not be able to reveal everything, but can you share any new products or technologies that your company is currently developing or has on the horizon? We're curious to know if there's anything you'd like to showcase using this platform.
We are now focusing on the switching mag holder. We want to enhance its applications so we’re focusing our resources towards this area of growth.
Of course, our product is amazing, and customers are impressed with it. However, sometimes it can be challenging for them to integrate it into their own products. So, we realized that we need to develop function modules to make it easier for customers to adopt our technology. This will help our products be more readily accepted by the market. After two years of releasing this product, we've learned valuable lessons and are now focusing on providing modular solutions, like the switching module, to address these customer needs.
Earlier in the interview, you mentioned that a significant portion of your clients are Japanese companies or Japanese companies operating abroad among others. Looking ahead, are you planning to diversify your client base and increase the proportion of foreign clients compared to Japanese clients? If so, which markets are you focusing on?
For us, it's challenging to suddenly enter markets that are significantly different from Southeast Asia, where we are currently focused. Europe, on the other hand, has more sophisticated lifestyles, and we see it as a potential model. We aim to produce products that are loved and accepted by more sophisticated customers. Striking a balance is crucial, and while we are currently concentrated on the Asian market and have invested heavily in it, we also view Europe, including countries like France and Canada, as potential future markets. We need to ensure our products truly excel and are embraced by sophisticated customers to claim that they are high-value added products.
As we wrap up, I'd like to focus on the future of your firm. Since our readers are primarily decision-makers like yourself, they're eager to learn about your plans and aspirations. So, let's take a moment to envision the future. Two years from now, on your 35th anniversary, imagine we conduct this interview again. What would you like to share with us then? What are your dreams and goals that you wish to have accomplished by then?
As I mentioned earlier, our focus is not solely on technology but also on enhancing values. We aim to create high-quality products and improve their overall quality. While our sales increase, it's essential for us to strive for excellence in our products. We want to position our company as a higher-value and more worthwhile company. The next stage for us is to figure out how we can consistently produce and sell high-quality products. We will continue our current business outside Japan, keeping volume in mind, and we are pursuing two main pillars for our future growth.