Japan’s chemical sector has suffered in the production of base chemicals because regional competitors have been able to lower their costs. However, Japanese chemical manufacturers remain leaders in highly functional and specialized chemicals and materials. Furthermore, Japan can count on a variety of chusho kigyos who are able to develop niche chemical and material technologies. As a manufacturer of urethane-based products, what are the strengths and weaknesses of Japan’s chemical sector today?
In the chemical industry, there are different steps involved, from using the materials to manufacturing finished products. Similarly, there are several steps in developing and manufacturing petrochemical products, which makes it a difficult process. There are high-entry barriers for other companies because it requires engineers with expertise in materials development and large, costly facilities. Many Japanese companies are brilliant at manufacturing small-sized parts and products, but are reluctant to make large capital investments or investments in large products such as aircraft, which carry significant safety risks. I think cars are the maximum sized product that Japanese companies are good at manufacturing because they are conservative and conscious of making a huge investment.
I think that you know the various industries in Japan well. It is easy for other companies to copy the assembly of components in home electronics with digital technologies. Contrarily, technological development of materials and raw materials is difficult to digitize itself because each company possesses its own know-how and knowledge.
Some analog technologies remain includes our company, which makes it difficult for companies in the digital field to enter the market, and conversely, I believe this is our strength. However, we think that while the creation of materials and raw materials is strong, on the other hand, the digitalization of the production line, DXing and the collection of information is a challenge. We expect that in the future, our company will need to further digitalize our production lines to increase production efficiency and further provide the most suitable products. We also believe that the equipment industry will remain unchanged in the future, but as facilities age, periodic repairs will occur and production will stop, causing supply concerns for our customers. We believe it is important to thoroughly improve production efficiency by replacing aging facilities with new ones.
Japanese omotenashi is the culture of meeting the expectations of the customer, and not just in the hospitality industry, most Japanese companies have that spirit of hospitality. If the customers request something, we try our best to develop customized products and components. Our vision posted on our website states “Bringing comfort to peoples’ lives, everywhere”, and we want to deliver excitement through our products. We in the chemical industry also recognize that there are things that need to be tackled. The niche nature of the raw materials used in the product and their multiple uses make the end product non-recyclable. In other words, in order to recycle, each company must work together at the time of development to limit the types of raw materials to a limited number of recyclable prerequisites. Going forward, our goal is to reduce CO2 emissions, so we have to decide on recyclable materials from which our products will be developed. I think our company, together with the government and our customers, has to move in that direction.
I was the chairman of the industry associations (“Japan Urethane Foam Association”) for a year, and we discussed various challenges that our industry is facing, such as the difficulty of recycling urethane. In general, plastics are easy to recycle because there are thermoplastic, but urethane is difficult to recycle because it is thermosetting. Hence, we would like to propose adopting a circular society, where we will need to build model cars to fully understand the materials used in every part to be able to recycle them. We have started discussing with our customers how to achieve this circular economy. If we know the materials used in any type of product, recycling becomes easier. We pass over that knowledge to other companies through a consortium.
Japan has announced its goal of reducing greenhouse gas emissions by 46% from the fiscal 2013 level by the year 2030, and we have already started working on this goal. In order to further reduce emissions in the future, we will need to work together with manufacturers of finished products on the form of their final products.
Reducing the wobble of the occupants of a car while driving around tight corners or changing lanes can be extremely important for comfort, especially in cities like Tokyo and Osaka. Archem has developed a new anti-wobble material used in luxury cars. Can you tell us more about this development, and what are some of its strengths?
We first need the technology to evaluate driving comfort in order to reduce wobbling. One of our strengths is that we have technology to evaluate the comfort of this ride, as we used to be a part of the Bridgestone Group. They manufacture the tires, while we make the seats and other related materials for cars. Tire manufacturers have unique criteria to evaluate driving comfort, which may include, noise and vibration and harshness. They do quantitative research as well as use the proving ground circuit and drive the actual cars for evaluation. Car and seat manufacturers usually perform a sensory evaluation. We utilize seat simulators, robots and technologies to check the kind of wobbling that occurs when changing lanes or braking. We have a huge simulator room with six axis which enables us to check the vibration and tilting, among many other things. Customers rely upon these technologies. We believe that we were able to acquire this technology because we were a member of the Bridgestone Group, which is closer to the consumer, and we intend to maintain our know-how and further develop our evaluation technology.
It took us some decade to establish this evaluation technology, as we had to exchange opinions with academic institutions in the UK. Finally, we are able to apply this technology in the practical field. Since we have this test piece, we can monitor the wobbliness and vibrations. With those technologies, we can meet our customer’s demands and expectations, which is an important focus for us in harmony with the omotenashi spirit. This is a consistent approach from end to end, which starts with using the evaluation technologies and deciding on the best materials to manufacturing the products. Without correct evaluation, it is difficult to decide the best material to use.
In 2021, Bridgestone Group sold its chemical products solutions business to Endeavor United II Investment Business Limited Partnership. The successor to this business became Archem on the 1st of August 2022. What benefits will becoming independent bring to Archem?
Our founder, Mr. Ishibashi, launched different businesses, such as tires and urethane, about some decades ago. Bridgestone tried to propose module-type or package solutions and systems to sell, like combining tire sheets and suspensions, but the challenge was how to match our goals with the needs of our customers. Since the Bridgestone Group’s main business is tires, after examining the synergies of the tire business, it was determined that an independent urethane business would be more conducive to future development. Since we become an urethane solo company, the speed of decision-making faster and made easier consideration of alliances with other companies. Although we inherited Bridgestone's strengths and DNA, such as evaluation technologies and the evaluation of materials, becoming independent has helped us to focus and grow our main business, which is urethane. In terms of location, we have more advantages in securing human resources than other manufacturers because our headquarters is in Shinagawa while our development center is in Yokohama. Not many manufacturers have an R&D center in urban cities. Because we are closely located, it is easier to exchange and recruit talent as well as visit our customers.
Everlight, a high-performance material you have developed with your processing technology, is used in many different applications such as automobile interiors, home appliances, OA equipment, furniture and more. How is the Everlight superior to more conventional urethane foams?
There are tens of thousands of items used for automobiles. Our strength is in the material and the material design. Everlight is the generic name for polyurethane foam among Archem's urethane products. We have the technology to design materials based on quantitative evaluation of cell density and hardness in response to the qualitative demands of our customers, from formulation to manufacturing technology to evaluation technology.
Among them, "SF foam" is a urethane foam with very good air permeability and drainage properties, made by specially treating ordinary urethane foam and removing the foam membrane. It is also used for mattresses and kitchen sponges. ”Microcell” is not only excellent at absorbing noise and sound, but also controlling air ventilation as well as the hardness and softness of the material. Another material called the “EPDM” is used in automobiles and air-conditioning to prevent water leaks.
We have a strong sales team capable of proposing solutions, and we work with our clients to develop and propose new products depending on the challenges they gather from the customers. We were wanting to expand our business overseas when we were with Bridgestone. Now, we can focus on our urethane business, we hope to accelerate our efforts to expand overseas taking advantage of our quick decision-making.
What role does collaboration and co-creation play in your business model? Are you currently looking for any overseas co-creation partners?
We would like to work with local partners. Also, we would like to sign consulting or agent agreements with partner companies in Western areas, as well as partnering with other companies abroad. We expect to make important decisions during 2023. Since Archem has manufacturing and sales bases in Japan, the U.S., China, Malaysia, Thailand, and the Philippines (the transfer of the Philippines is scheduled to be completed by the end of 2023), we are considering expanding sales with a global perspective.
What would be your midterm strategy for the next five years?
We started discussing our five-year plan in September 2022, by not having any constraints, we plan to accumulate our know-how and expand further. We want to significantly increase our sales, and are in the middle of setting up concrete steps to achieve that.
Imagine we come back in five years to have this interview all over again. What would you like to tell us?
We intend to expand and develop as a company while building relationships of trust not only with our current customers, but also with our employees and stakeholders, including local communities and society at large. Our strength is now having consistent end-to-end links from the material selection to solutions for our customers. And by having those centers close to each other, it is easier to listen to the voices of our customers and reflect those in our product development. We believe that this cooperative system will lead to the spread of comfort everywhere by extending it to the rest of the world. I believe we can improve or increase our revenue significantly over the long-term span of 10 years and beyond by doubling, tripling, or even more. Also, I aim to contribute to society by reducing our CO2 emissions and developing meaningful solutions in collaboration with raw material manufacturers and others to achieve that. Since we also have overseas group companies, we have production and sales functions, but we would like to develop human resources capable of product design and development, which will lead to contributions to social issues on a global scale.