Trading firm EIWA has moved beyond its role of merely selling products to become an engineering firm offering fully comprehensive solutions to its clients.
Japanese manufacturing is at a very exciting time, and over the past three years, we have seen large supply chain disruptions due to the COVID-19 pandemic as well as the US-China decoupling. As a result of this, many corporate groups are looking to diversify suppliers for reliability. Japanese firms are known for their reliability and advanced technology, and thus are in an interesting position due to the weakened JPY, with observers believing this is a very unique opportunity. Do you agree with this sentiment, and what are some of the advantages Japanese companies have in this current macro-economic environment?
I agree with the sentiment expressed. The COVID-19 pandemic and the decoupling between the US and China have created chaos for overseas companies. However, Japanese companies have previously experienced similar disruptions caused by events like the Lehman Shock and the burst of the economic bubble. These experiences have led Japanese companies to develop countermeasures to navigate such challenges. The depreciation of the Japanese yen has prompted many companies to relocate their production bases back to Japan. Fortunately, since most of our customers are domestic, this situation works in our favor.
Although we do not have a business relationship, it is worth mentioning that TSMC, a Taiwanese company, plans to establish a production facility in Kumamoto, Kyushu. This move is expected to create numerous employment opportunities and provide advantages for semiconductor-related companies. This is just one example – but it is not limited to semiconductor-related companies – and this potential investment aligns well with our preference for returning production capabilities to Japan.
Japan currently faces the issue of an aging society with a low fertility rate, which poses a labor crisis. To address this challenge, Japanese industries must invest more in automation and anticipate market demands arising from these issues. Automation will require the development of new facilities and equipment. Fortunately, we have sensors and automation technology, which present significant business opportunities. As the first aging society, we have the potential to become a leader in this field, further enhancing the potential for interesting business opportunities.
EIWA was established in 1947 as a trading company specializing in various forms of equipment, such as measuring and control equipment. Could you please provide a brief overview of your current main equipment offerings? Additionally, are there other fields or industries to which you would like to introduce your products? If so, could you please explain the reasons behind your interest?
Our company operates in four main business fields: (1) industrial measurement and control equipment, (2) measurement and inspection instrumentation, (3) environmental measuring and analysis instrumentation, and (4) industrial machinery.
Regarding sales turnover, our main focus lies in industrial measurement and control equipment, which accounts for approximately 50% of our total sales. Industrial machinery make up around 40%, the sales from environmental measuring and analysis instrumentation contribute below 10%, and measurement and inspection instrumentation represents slightly below 5%.
Previously, we followed a direct sales approach, selling products individually to clients. However, we have recently transformed into more of an engineering company. We now not only offer single-unit products but also provide tailored services that meet our customers' specific needs and demands. We have taken on the role of coordinating various products from different companies and selling them as integrated systems. This approach allows us to combine and link different products, offering them as a comprehensive solution. Our sales activities now also provide our engineering expertise directly to customers.
This new feature of our company was implemented to address the challenge many companies face with the retirement of skilled workers. We are required to provide information and design functions on behalf of our customers for whom it is difficult for them to complete the response on their own. This phase of transition is becoming increasingly common among companies. Unlike manufacturing companies, which can only sell their own products, we have the advantage of selling products from various firms as a trading company. We serve as a bridge connecting the strengths of different companies to provide value-added products and services to our customers.
Traders traditionally bear responsibilities for handling, distributing, and financing. However, we are witnessing a shift in this paradigm, exemplified by companies like yours, which now provide engineering services and engage in collaborative ventures with subsidiaries to manufacture integrated industrial products. Looking ahead, how do you perceive the evolution of Japanese trading companies? Do you anticipate that many will emulate your path and undergo a transformative change in their profiles?
The future trajectory varies depending on the company, especially when comparing large corporations to small and medium-sized enterprises (SMEs) like ours. To ensure the sustainability of our business, we recognize that offering more than just products is crucial. Nowadays, many products can be easily purchased online, which may eventually replace our role in distribution. For our company to grow sustainably even in difficult times, we must always be aware of the best proposals that meet customers’ “Needs” and propose solutions that cover everything from design to procurement of materials and installation work. We have a manufacturing subsidiary, so we are confident that our integrated manufacturing and sales proposals will give us a competitive advantage from the standpoint of differentiation from our competitors. In addition, when making new proposals, it is important to improve the relationship of trust with customers that we have cultivated since our founding and to improve our sales skills. Our strategic focus is on expanding and diversifying their functions even further.
One area in which your company is involved is the production of lithium-ion batteries. There is a persistent shortage of materials for lithium-ion batteries, which poses a challenge for mainstream electric vehicle manufacturers. Industry giants like Tesla seek to secure as many battery units as possible. This is evident in their partnership with Panasonic. Given the shortage, how do you believe the lithium-ion supply chain can best adapt to address this issue? Furthermore, how do you envision the evolution of the supply chain over the next 12 months? What opportunities do you anticipate for your firm due to these developments?
As a company, we do not supply raw materials for lithium-ion batteries. Media coverage suggests that some overseas governments are actively securing the procurement of these materials. While Japan has not yet taken such measures, it is possible that the Japanese government may become involved in the future to support companies in the procurement of raw materials.
Moreover, there are ongoing projects focused on recycling lithium-ion batteries, with research advancements in this area. This presents a potential opportunity for us, and we could explore this field further through our research and development efforts. It aligns well with our existing business related to industrial waste in production facilities, allowing us to contribute to promoting recycling.
Hydrogen and ammonia are attracting attention as clean energy in response to the global decarbonization trend. FC Development Co., Ltd., an affiliated company of our company, manufactures JARI (Japan Automobile Research Institute) standard cells and various evaluation devices used for water electrolysis hydrogen production and methanation (CO₂ + hydrogen). We sell them to universities and research institutes of companies. This opens the possibility of new business opportunities for us.
How do partnerships affect your business model, particularly in creating new products and meeting customer needs? Are you actively seeking partnerships in overseas markets as part of your expansion strategy?
Due to the differences in business practices and laws between overseas and Japanese markets, we believe it is necessary to collect sufficient information when dealing with imports and exports. Currently, we have already forged partnerships with manufacturers in European countries. When we come across high-quality products not manufactured or sold by Japanese companies, we procure them from overseas manufacturers. Subsequently, we secure exclusive sales rights to market these products in Japan. By offering a mix of Japanese-made and imported products, we can differentiate ourselves from other trading companies in Japan, avoiding competing solely on price. When we identify reliable overseas suppliers, we view them as partners.
As an exporter, we expand our distribution channels by establishing partnerships. We have no immediate plans for expansion but rather aim for organic growth. In China, we have subsidiaries that our company wholly owns. Should we expand overseas, we would encounter the challenge of finding partners who are culturally and commercially different from us in their respective markets. We may consider collaborating with other trading companies in the local market or even forming joint ventures with Japanese companies to enter foreign markets. While we currently do not actively pursue foreign partnerships, we are conducting market research to understand foreign markets better.
As the new President of EIWA, what vision do you have for the company moving forward?
My vision for EIWA extends beyond selling products; I want our company to offer comprehensive solutions to our customers. In today's rapidly changing global environment, complex problems arise that customers may struggle to address internally, as seen with the labor crisis we previously mentioned. My goal is to become a company that provides solutions to businesses, whether by developing the solutions ourselves or collaborating with our customers to find effective resolutions. Being a solution provider is the core focus of our role as a trading company.
We see ourselves as a crucial link for numerous companies. The demand for digital transformation (DX) is increasing rapidly. While we possess expertise and know-how within our company, we recognize the need to incorporate external talent to develop our human resources further and adapt to the changing needs of society.
At EIWA, our company's philosophy centers around the combined efforts and cooperation of each employee of our company. We firmly believe that a company's strength lies in its people, and their harmonious collaboration is essential. Providing training and upskilling opportunities for our employees is crucial to enhancing our collective capabilities. By continuously improving the skills of our workforce, we can deliver superior solutions to our customers and meet their evolving needs effectively.
Have you identified any specific countries or regions for further expansion? If so, what strategies will you employ to facilitate this expansion?
We strongly intend to leverage our existing presence in China as a foundation for expanding into East Asian or Southeast Asian countries. Since the beginning of the fiscal year in April, we have taken proactive steps by establishing a dedicated business unit focused on developing new overseas markets. Our plan is to set up another base in Taiwan.
Interview conducted by Karune Walker & Sasha Lauture