Fine Sinter specializes in manufacturing metal parts for automobiles, locomotives and industrial machinery – but also offers a variety of other products as part of a growing, increasingly diverse portfolio of services.
In the last 25-30 years, Japan has seen the rise of regional manufacturing competitors who have replicated Japanese monozukuri processes but have done so at a much cheaper labor cost, pushing Japan out of mass industrial markets. Yet, we still see many Japanese firms leading in niche B2B fields. How have Japanese firms been able to maintain their leadership despite the steep price competition?
Japanese companies are no exception to foreign expansion and in fact, many Japanese firms have made their way outside of the country to localize production and pursue cheaper labor costs. Despite localizing production outside of Japan, these firms have tended to retain the same high standards of production that they have here in the domestic market, meaning that high-quality components and products continue to be produced as if they were still made domestically. This is what defines Japanese companies operating abroad and is something that customers look for when purchasing Japanese products. This is resulting in Japanese companies becoming price competitive, and in the long run, may win them markets due to this high-quality.
Japan is the world’s oldest society and has a rapidly shrinking population, presenting Japanese firms with two major challenges, the first being a labor crisis and the second is a smaller domestic market. What are some of the challenges and opportunities this demographic shift is presenting for Fine Sinter?
The biggest social problems facing Japan are as you have outlined, the shrinking and aging population. These issues are obviously causing drastic effects on Japanese companies, especially manufacturing ones. Being a manufacturing company, Fine Sinter is also facing this and our solutions consist of introducing new trends in manufacturing lines such as automated and semi-automated robots to replace human labor. We have a phrase at Fine Sinter, “Mirai no Kojou”, which means “the factory of the future” and with this, the ultimate goal is to automate production lines fully and simplify labor work. While introducing automation is a way to alleviate demographic issues, it is important for us to also sustain our human assets and enable employees to continue to work at Fine Sinter for as long as they desire. The idea is to keep the fantastic skills of our workers and alleviate them of the strenuous labor work through the utilization of automation.
Year to year, our HR department makes efforts in employing graduates that have excelled in their academic studies, and this recruitment could potentially help the company advance to the next level. Recruitment is no easy task, and at Fine Sinter, we encourage workers to strive for more knowledge and skills by praising those that have the drive to do so.
Obviously, I would be remiss if I did not mention the changes happening in the industry itself, and the automotive industry is going through massive shifts in recent years. EVs and hybrid vehicles are the way of the future, and this is why, in most cases, our company is producing for this sector. These unprecedented changes are forcing us and many others to introduce new products to meet the demands of the market. We are also looking to new horizons for opportunities, and the company is trying to tackle new businesses that we have never done before.
We saw that as part of your vision 2030 plan, you are promoting DX as a key foundation of your business, and you have mentioned your future factory plans. Can you elaborate more on this future factory for us, and what are some of the specific digital technologies you are looking to integrate to make this a reality?
Fine Sinter is a pioneer in powder metallurgy, which requires a large amount of precision and high quality. Products need to be complimented with a lot of inspections, so when we talk about our future factory plans, what we really mean is the introduction of a lot of sensors and data processing. Cameras that analyze imaging screens and then process that data require a lot of steps in order to correctly install inside a production line, and in our case, every step of the production process needs some form of complementary analysis and data collection.
Toyota needs to be mentioned, because they have historically been our main customer, even to this day. We try to follow the same rules and production systems that Toyota is famous for, and the principles of kaizen drive our dedication for quality assurance and high-quality products. Production needs to be quick, high quality, and meet the demands of the customers. This itself is something that we underline as our own company’s strengths compared to our rivals.
Powder metallurgy is a unique manufacturing technology, and it processes powder materials to create shapes that can be utilized as parts. While it is very cost-effective for mass production and does not require skilled operators, it is difficult to cast low melting point metals through powder metallurgy. How are you overcoming some of these challenges presented by the powder metallurgy process?
One of the most challenging points we are dealing with in terms of powder metallurgy is the defect rate. It is inevitable that we have defects. It is difficult to keep up with all the parameters and we are dealing with so many different kinds of raw materials and techniques. In fact, we are also dealing with various demands from the customer's, and that is leading to difficulty in fulfilling and fitting into those parameters. Clearing these parameters and making sure defects are low really comes down to the skill and experience of the operators. This brings us back to the last question in reference to automation, and we at Fine Sinter believe that sensors and control could be a part of the solution to detecting defects or abnormalities before they actually occur.
Fine Sinter’s process itself is complex and powder metallurgy is a technique where materials are processed, such as metal or ceramics, into shapes and finalized parts. Another problem is that parts are not as strong as you would assume in the press machines, and the powder itself is not thought to be as strong as other types of raw materials. To overcome this, we are emphasizing what we call “sinter hardening,” which is basically the hardening of the original mother material to make it strong enough to withstand any amount of processing, with the intention of producing better products for the end users.
All things said, we do still have some problems that need addressing, but we are aiming to solve them as soon as possible. Our aim is to reach the ultimate solution for powder metallurgy manufacturing.
Many of your parts are used in the automotive sector, which is undergoing a time of great change with the switch to EVs from gasoline vehicles. As a result, many of the components in a traditional vehicle will no longer be needed, such as the internal combustion engine. What are some of the threats this switch to EVs poses to your firm, and how will you overcome them?
We are not alone in this aspect, and many Japanese companies who are related to engine and transmission parts manufacturing are thinking about what is going to happen next. It is a dramatic change. Luckily our company is not only focused on transmission and engine parts. We have a lot, including brakes, suspension, seating components, and differentials, that can be applied not only to internal combustion engines, but also hybrid cars too.
Some in the industry have been joking that the only thing left for us to make will be the wheel axles, but I think that diversification not only for the automotive industry, but also hydraulic equipment, agricultural equipment, and industrial products has meant that we are not putting all of our eggs in just one basket. Beyond automotive, there are so many possible industries and opportunities for our manufacturing techniques. The only way to survive these harsh times is to diversify.
Using magnetic materials, you have developed a reactor core, which is used as a key component at the heart of inverters that are used to boost battery voltages for hybrid vehicles. What are some of the unique strengths of Fine Sinter’s reactor core?
As you have mentioned, the reactor core is for the inverter, and right now we are looking into new applications in battery charging. Battery charging, not just in automobiles, needs to have good features, and this necessity will be coming in the near future. People need shorter and faster charging times, and that itself is presenting a bright future for our type of inverter reactor core.
Another business that you have mentioned is your hydraulic equipment, and one particular product that caught our attention was the Hydraulic Pump TSM Series. In 2019, the TSM Series surpassed a cumulative production number of 7 million units. What can you attribute to the success of the TSM Series and what makes it superior to more conventional hydraulic internal gear pumps?
The success story of the TSM Series really comes from the customers and it was a US-based dental chair manufacturing company that was the first to start purchasing them. Almost all of our TSM Series internal gear pump products have been purchased by this company.
If you have ever sat in a dental chair, then you understand that it has a need for reclining features and the ability to position a patient for dental surgery. The hydraulic pumps we produce are some of the quietest in the industry, and this is due to the hydraulic features the pumps have. It is soft and does not create any kind of discomfort, meaning it is convenient for dental surgeons to use. Recently, we have started to see more inquiries from other companies that are interested in this type of hydraulic pump for use in CT and MRI scanners. The beds that go inside these scanning devices use a hydraulic system and will be a great application for our hydraulic pump TSM series.
What role do co-creation and collaboration play in your business model and are you looking for any co-creation partners in overseas markets?
Working alone is much more difficult than utilizing the strengths of a partner. Other companies already have excellent track records in other fields and it would be safe to assume that we will aim for such potential collaborations. We have two domestic sister companies and four overseas sister companies. Not only are we financially tied to them, but we also are linked technologically too. Assuming that similar cooperative opportunities will present themselves in the future, I think that Fine Sinter will continue to follow the same tried and true method for co-creation.
I believe this will need to come from companies that are producing raw materials, and by utilizing Fine Sinter’s manufacturing process, we can create effective synergies. Any field that we are currently operating in can also be a potential target for collaboration with other firms or customers. The food market is another target and this is something we are currently working on. We are trying to work with academic circles and universities to establish research for products and technologies that can be implemented into food products.
Your company is a pioneer in powder metallurgy, yet you have begun a business in insect food, producing powdered food from insects such as crickets. Why did you decide to diversify into this field?
This is still a small business for us, and there is no chance that we drop everything and only focus on this. This insect food business was presented around 2019 when a group of younger employees formed a think tank where they brainstormed ideas on what direction to take the company in the future. The group consisted of 10 employees, and the team was the one to come up with this insect food idea. It actually shares a lot of similarities with powder metallurgy, way more than you would expect. Both businesses deal with powders and heat treatments, which are two areas in which our company excels at. More or less, they are the same manufacturing process, but the final products are obviously quite different. We went ahead with this and now have the backing of the local government to begin introducing our insect food products.
The next stage comes from not only powdered crickets but also cricket ramen. We are trying to sell through e-commerce channels and we do have some affiliated companies that are interested in this new venture. This has become a promising aspect to complement our main business.
Moving forward, what other countries or regions have you identified for further expansion and what strategies will you employ to do so?
Our strategy for expansion overseas is basically strengthening existing locations in order to increase production capacity. Currently, we have four locations, the most recent in Indonesia. With a small company such as Fine Sinter, it is difficult to make decisions on localizing production outside of Japan, not only because of the finances, but also the responsibility to the human assets of the company. Indonesia has been a difficult venture to reach the point of profitability, and luckily last year, we crossed over the break-even point, meaning that this location is now making a profit. It has been a long run over the past eight years and it feels nice to reach the point of profitability.
The US is a complex region right now, and in particular, the US is replacing human assets with automation and people are losing jobs because of it. Even if you are able to recruit people, there are no guarantees in the US that those workers will work for you for a long time. The tendency there is to change jobs to get the best salary. To sustain employment from workers, we opened an educational center that will help locals gain skills and incentivize workers to stay with the company. The local subsidiary opened in a town called Tiffin, Ohio, which is in the North of the United States. If any expansion was to happen in the US, then it would need to be in a southern state, but recruitment in the area is even more difficult.
China is another place where we have a local subsidiary. The local staff are independent and they are progressing their skills, meaning stable operation is possible. We believe that the future challenge will be to increase sales further.
Lastly, we have our local subsidiary in Thailand, which is the best performing out of the four, and we are in the process of constructing our second factory there. In 2024, this facility will have its grand opening and we are hoping for sales increases of 40%.
Let’s imagine that we come back three years from now and have this interview all over again. What are your goals and dreams for Fine Sinter that you hope to have achieved by then?
We do have a mid-term strategy plan which we have named Fine Sinter Scope 2030, and it is obviously aimed at the next eight years. We hope to have a sales increase of 15%, and profitability of three times the amount right now. These are grand goals that we hope to achieve, and the company is trying its best to reach these. Fine Sinter itself stands for happiness through manufacturing, and although times are changing, the company hopes to continue this ethos into the future. Through the gathering of knowledge and expertise, the company can continue to thrive not only in the industry of powder metallurgy, but exciting new industries such as the insect food business too.