Fine Steel Engineering: Beyond Ordinary

Could you start by giving us a quick introduction to your company and your core competencies?

Value innovation is the cornerstone of our business. While we don’t manufacture 100% of our products—80% are provided by suppliers and 20% are made in-house—we are not merely acting as traders. Instead, we actively add value by integrating our ideas and proposing innovative solutions to meet clients' unique requests. For instance, when presented with a drawing for an automotive or agricultural equipment part, we counter-propose improved materials or enhanced features, elevating the product’s functionality and value through our expertise.

A standout example of our work is our collaboration with Nissan. In 2018, we were honored to receive a prestigious Global Supplier Award from Nissan, one of only 11 companies worldwide to earn this recognition. Our contributions can be seen in vehicles such as the Infiniti QX50, Nissan X-Trail, and the new model Murano. Nissan pioneered the mass production of engines with variable pistons capable of adjusting power or efficiency ratios. When they approached us with this ambitious request on short notice, we delivered a solution that met their high standards, earning their recognition and appreciation through this award.

We supply two primary types of parts, including the LINK PIN. This component requires extreme precision due to its tight tolerances. It features a diamond-like carbon (DLC) coating, which demands a mirror-finish surface roughness to ensure optimal performance. Achieving this level of precision is critical because any imperfection could compromise the coating and lead to engine failure.

The second component we supply is called the HOLDER. When Nissan approached us, they provided a very rough sketch and mentioned that other companies had proposed a press-and-welding method. Instead, we proposed a specific iron casting method as an alternative.

Although Nissan has its own iron casting facility in their Tochigi factory, they decided to outsource this part to us when the project began. With our advanced technology and expertise, we have been supplying this component to Nissan for about eight years, maintaining a flawless record with zero defects.

Our approach not only achieved the high precision required but also reduced costs, which we proposed as a key advantage to Nissan. This case demonstrates our ability to deliver innovative, cost-effective solutions while meeting stringent quality standards.

This is just one case study, but we have a rich history of similar achievements. Over the years, we have manufactured a wide range of components for agricultural equipment and power tools, including piston pins, crank pins, and more. These accumulated experiences have given us the confidence and expertise to make bold and effective proposals to clients like Nissan.

How many different models of cars would you say this particular part is incorporated in right now?

The Infiniti QX50 was the first vehicle to incorporate our work, but there are others, including the Nissan Altima and the Infiniti QX60, as well as various other models sold under different names around the world.

Throughout all processes, we coordinate closely with Nissan and other involved companies to define roles and responsibilities clearly. This level of collaboration demands rigorous quality assurance at every stage to ensure the final product meets the highest standards. Our ability to manage these complexities while maintaining exceptional quality is a key strength that has earned us continued trust and long-standing partnerships.

In the current landscape, Japanese manufacturers are grappling with supply chain bottlenecks and rising input costs. At the same time, Japan’s reputation for reliability and advanced technology continues to position its products favorably. Additionally, the weakened yen has made Japanese products more cost-effective and appealing in global markets. Do you believe this environment presents a unique opportunity for Japanese manufacturers? How can Japanese companies strategically leverage these conditions to enhance their competitive advantage on the global stage?

We have a few direct customers overseas, but the majority of our clients are in Japan, including major companies like Nissan, Tier 1 suppliers for Toyota, and manufacturers in the agricultural machinery and power tool sectors. With the depreciation of the yen, there has been increased global demand for Japanese cars, agricultural machinery, and power tools, which in turn has driven up demand for the components and supplies we provide.

At the same time, we’ve observed a significant rise in the number of emerging automobile manufacturers, particularly from China. This trend is not limited to the automotive sector but is reflective of broader global shifts.

In my view, the key to remaining competitive in this evolving landscape is to consistently supply attractive products—those that not only meet customer needs but anticipate them, offering solutions that customers may not even realize they want. By focusing on innovation and value-added offerings, we can maintain and expand our competitive edge in both domestic and international markets.

The automotive industry is undergoing a significant generational shift, with the Japanese government mandating that by 2035, all new cars sold must be either EVs or hybrids. This transition is prompting companies to rethink the types of materials and parts required, as EVs feature fewer moving parts compared to internal combustion engines (ICE). What do you see as the main challenges and opportunities for your company in this evolving automotive environment?

Honestly speaking, our main business revolves around engine parts, so the ongoing shift to EVs presents a significant challenge for us. We are actively exploring ways to diversify while maintaining our core business operations.

To adapt to this changing landscape, we have partnered with a Chinese manufacturer specializing in electric motor parts. Over the past five years, we have collaborated on producing motor components and selling them to Japanese companies. This partner company, valued at approximately JPY 120 billion, has been a crucial part of our strategy to strengthen and expand our business.

Currently, they supply drive motor parts to leading companies like BYD. Our goal is to leverage this partnership to further expand the provision of these drive motor components to Japanese automotive manufacturers, aligning with the industry's shift towards electrification.

Do you supply the whole motor or just parts of it?

We provide component parts, while our customers handle the motor assembly. The Japanese market operates under the Keiretsu model, where automakers like Toyota work closely with Denso, and Honda collaborates with their own network of suppliers. Traditionally, the companies supplying engine parts are now transitioning to motor components for EVs, aligning with the industry shift.

Our Chinese partner, who has been successful in the EV market, is encouraging us to take a more aggressive approach to capturing Japanese market share. However, penetrating the entrenched Keiretsu structure remains a significant challenge.

As the president of the company, my biggest challenge is navigating this generational shift—transitioning our business from its core focus on engine parts into EV components and other emerging vehicle technologies. Balancing this shift while maintaining our existing strengths requires careful planning and bold decision-making to ensure we remain competitive in this evolving market.

You mentioned your partnership in China. With the current demographic shifts in both China and Japan, many companies are now looking overseas as part of their diversification strategy. Do you see international markets playing a greater role for your company in the future? Are you looking for any new partnerships in overseas markets?

We are very open to exploring new opportunities and partnerships, especially those built on trust and strong human connections, similar to the relationships we’ve established in China. Such trust is crucial for fostering meaningful and successful collaborations.

Currently, our company has about 40 employees and achieved a turnover of JPY 2.5 billion last fiscal year, with a projected increase to JPY 3.5 billion this fiscal year. Given our size, we believe it is not the right time for us to expand overseas without a clear strategy or purpose. For now, we are not envisioning the creation of overseas factories or the dispatch of employees abroad.

That said, we remain acutely aware of the challenges posed by Japan’s aging labor force and shrinking economic conditions. These factors motivate us to continue exploring strategic partnerships and innovative approaches to ensure our long-term growth and competitiveness in a changing global landscape.

Can you share insights into your unique Value Analysis (VA) process? How does it help you identify areas for improvement and deliver cost reductions for your clients?

There is no definitive formula for success—if there were, we’d likely be overwhelmed with orders. What we focus on instead is minimizing costs and creating the most efficient production schemes and proposals for our clients.

That said, each case is unique, and sometimes it may even be more cost-effective to produce parts using less efficient methods in developing countries. Because of this variability, we treat each project with the care and attention it requires, tailoring our approach to suit the specific needs of our clients.

Ultimately, the decision rests with our clients, but our goal is always to identify the best combination of methods and provide the most optimal solution to meet their objectives. By maintaining this commitment, we aim to continuously deliver value through our Value Analysis (VA) process.

FSE's all-new 3-piece Brushcutter Driveshaft utilizes high-strength priority pipe material and represents a significant innovation in design. What are the key performance advantages of this 3-piece design compared to conventional 1-piece or 2-piece drivetrains?

The driveshaft plays a crucial role in reducing uneven vibrations in the engine. General-purpose engines often experience inconsistencies that lead to significant vibrations, making the addition of a dampener essential. While the transition to electric motors will eventually replace engines, this component will remain a necessary part of the system.

Our innovative 3-piece driveshaft design offers a lightweight, cost-effective solution that sets a new standard in the industry. This combination of performance and efficiency is a key reason why customers continue to choose our products.

Is this something that Western brands such as Black and Decker could utilize?

Yes, it can be used by customers all over the world.

Your company has developed a range of innovative technologies, including your advanced casting processes. Looking ahead, how much of a priority is product evolution for your company, and what role does it play in your strategy for future growth?

Frankly, describing what we do as R&D might be an overstatement. Our approach is more about deeply understanding the needs of our clients through continuous communication. Once we identify those needs, we reflect them in our network—either with our suppliers or through our in-house capabilities.

Our true strength lies in elevated matchmaking and the ability to combine resources effectively. This allows us to deliver tailored solutions that align perfectly with client requirements, ensuring both innovation and practicality.

If we were to revisit this conversation in 2030, what goals or dreams would you hope to have achieved by then?

As company president, I believe it is crucial to envision a bright and inspiring future. Without this vision, employees wouldn’t have the motivation or direction to follow my lead.

I am continuously taking on new challenges to explore ways to transition our existing business into emerging industries. These could include semiconductors, drones, flying cars, robotics, and carbon neutrality, among others. The landscape is evolving rapidly, and I see countless opportunities for our company to contribute to and thrive within these innovative fields.

My goal is to ensure that by 2030, we have successfully established ourselves in these new industries, creating a future that aligns with both our aspirations and the demands of a changing world.

For more information, please visit their website at: https://www.fine-steel.co.jp/en/