An object is only as strong as its weakest link, and for thousands of years humans have been working to strengthen these links through welding metals together. At an industrial scale, welding is imperative to keeping the global supply chain moving, especially through its contribution to shipbuilding, and Japanese firm Shikoku Welding Electrode is one of the firms pushing this sector forward with its innovative solutions. In this interview with president Yuichi Murakami, we learn more about how Shikoku Welding Electrode has been providing high-quality welding solutions for large-scale projects for the past 75 years.
As an integrated manufacturer of welding products and materials, what does monozukuri mean for you and your firm, and what are some of the strengths or competitive advantages of your firm that allow you to compete in the global market?
Becoming a niche company in Japan is something that happened naturally, and even inevitably. Japanese companies don’t necessarily set out to become niche companies, this just happens over the course of time. There are plusses and minuses to it.
A big minus is, of course, the price. Japanese companies cannot compete with foreign companies on price by their nature, because they focus on higher quality.
Japan has many great part manufacturing companies which derive their excellence from the Japanese character. However, integrating diverse manufacturing processes is very hard for Japanese companies.
In the welding market, there are companies which produce specialized welding materials so they are very niche and very unique. Our company is oriented towards larger scale projects, like shipbuilding and construction, and we face stiff competition from foreign companies who are cheaper and faster. Most companies are increasingly ordering from foreign companies because it's simply cheaper and that’s had an adverse impact on us.
Back in 2008 when the Democratic Party was in the Japanese government, the Japanese Yen was very strong so we took that opportunity to go to foreign countries and expand into Vietnam. Not only was the currency strong at that time, we also felt that it was a good time to go abroad and introduce ourselves to other countries, improve our competitiveness and showcase our products overseas.
We can still hold our competitiveness against Chinese or Korean competitors because we remain able to build and provide state of art welding solutions to our customers. However, price does matter when competing with them. The question is whether people will be willing to pay a higher price for the superior quality they get from us.
Our competitors are not just welding solutions companies, they are also engaged in the construction business and provide it all as one package, which is a little different to what we’re doing here. The other company is also a welding solutions provider but they do much more specialized welding which is very costly. However, they can still find a solid client base. It all comes down to whether the client is willing to pay extra for their services.
We've been blessed by our location because we started off and have remained in Imabari which is very close to shipyards so we can cater specifically for those types of customers located here.
Welding can have quite a negative or harsh impact both on the environment and the personal health of the people using the materials. What initiatives are you undertaking to ensure the safe use of your products and materials, and since welding is an indispensable operation, what do you believe can be done to make welding technologies and practices more environmentally and personally safe?
The fumes emitted when welding is performed are chemical substances that are indeed harmful to the workers assigned to welding jobs. The Japanese Ministry of Labor prescribes the type of masks that have to be worn together with other PPE (personal protective equipment). These are specialist masks for construction workers engaged in welding and they’re not like everyday masks. These masks help the workers but of course don’t have any beneficial impact on the environment.
Carbon dioxide is used as a shield gas when using flux-cored wire. There is a kind of circulation system that is not considered to be harmful to the environment because this process actually uses CO2 in the air and actually protects the work area while utilizing naturally occurring CO2. Some companies are trying to invent smoke-free flux-cored wires, but no one has put them on the market yet.
Shipbuilding is something that we are directly targeting also, and we have been engaged in welding for shipbuilders for many, many years. Ships are constructed with a very thick layer of iron plates and welding is inevitably required to get the plates connected. There’s simply no other method available to get this done apart from arc welding.
A common complaint from welding material suppliers of flux cored wires is that they're very messy. There's a lot of fumes and spatter. Can you explain to us how your TAS-10 product helps achieve clean work environments, reducing the fumes and splatter?
TAS-10 is a flux cored wire for all position welding using low hydrogen type flux, mainly titanium. It is widely used in shipbuilding and bridge building although our main orientation is towards shipbuilding, where TAS-10 is more applicable.
It was invented with the aim of helping shipbuilders here in Imabari and elsewhere by making a faster-to-use flux cored wire with a wider current range. It was also a response to the rapid influx of cheaper Chinese and Korean products to the market. Once established in Japan, we introduced TAS-10 to China and Vietnam as well.
Not only ourselves, but other manufacturers were trying to reduce the spatter. It was a common struggle, not specific just to us, but in any case we’re always thinking about and trying to reduce spatter as it also depends on how the flux cored wire is used. It depends on the composition of the material, but it is also related to the performance of the welding machines. If a user wants to get started on their welding more quickly, they increase the amps and sometimes this causes increased spatter, which isn’t good for optimal performance.
Our staff sometimes go to shipyards to teach workers about how to use the product properly. We also offer our clients the appropriate PPE although we don’t produce it ourselves. We act as a trading company that buys PPE, including specialized masks for arc welding.
We've often heard the importance of finding local partners with which you can share and leverage your technology to support clients who are operating in overseas markets. Is this kind of international cooperation something that you are actively pursuing in markets such as China or Vietnam?
If we find potential business partners that can help us then we should pursue a collaboration with them but we aren’t doing that at the moment. In the current situation, the global supply chain is not functioning properly and if there is too much of a horizontal division of labor then even conventional operations may not be conducted properly.
For companies that have strong market power and a good understanding of the nature of their business it makes more sense to control everything vertically in-house, upstream to downstream. For new business areas in which we may have less know-how, however, I think it’s worth trying to collaborate. This could also help to lower costs and make products cheaper.
Since we’re not good at making products at low cost, this makes collaboration a more interesting prospect for us. We have three Japanese people going to Vietnam. One is an accountant and the other two are experts in welding materials, but they’re not salespeople, so we need external sales partners in the Southeast Asian region.
What has been your experience of hiring staff from foreign markets for your Japanese operations? What challenges, or perhaps opportunities, does Japan’s aging demographic present for your company?
It’s not only us, but other companies also face the problem of staff shortages due to the aging demographic. It is common practice to make the capital investments required to reduce manpower. However the labor saving that had been done in Japan up until now was aimed at cost reduction, but in the future it will be a labor saving measure to address the labor shortage due to the declining birth rate and aging population, which is much more serious in rural areas.
It’s difficult for local companies to face the problem of a declining population. It’s inevitable that every local company will have to face this problem and realize that they'll have to employ foreign manpower or they will have to employ more women. These are the main ways to compensate for the shrinkage of labor.
I have an open mind to our approach on this as I’ve been abroad to see the way foreign firms operate and I’ve gained perspective that I’ve been able to bring back and implement here. I’ve explained to our employees that this is something we have to do and we’re going to employ more foreigners and more women.
As for employing women who of course make up 50% of the population in Japan, our industry hasn’t been very popular with them historically. I’ve held meetings to discuss bringing in more women to our staff and I’ve asked what kind of a working environment would be best for them so that they feel comfortable working with us and would be able to work most efficiently. Improving working conditions is something most local companies will have to do in order to be able to employ more women or foreigners.
However, there are people who do not want such a solution at our company. They worked for a local company in Japan, did not want to work in Vietnam or China, and are uncomfortable with the increase in foreign colleagues.
We’ve hired two Chinese managers who are very good at speaking Japanese and get on well with the Japanese workers. The Japanese language is quite an important skill to have if you’re living in Japan. Usually in other countries if you speak English then that’s enough, but in Japan managers often complain when I ask them about foreign workers because they say foreign workers don’t work well due to their lack of sufficient Japanese language skills. On the other hand, some Japanese managers don't try to study other foreign languages, let alone English, so I think that's wrong. Just because your specialty is technology does not mean that you will not study a language. If you want to get the job done, improving your communication skills is very important, so we have to change too.
The fact is, though, that many local areas are being hit hard by the population problem and they have a deficit in manpower. Many older people have to keep working almost after retirement.
Of course, we have to hire older people too. Some of them are very good in specific fields of business, but others aren’t and sometimes they’re not good at cooperating with others. If they’re good at their jobs, though, we will hire them and of course part of their jobs is to transfer their knowledge to the existing workforce who may be younger than them.
However, this may not be enough to sufficiently train our workers so we’re also very interested in learning methods such as manuals, movies or YouTube. E-learning in general. We’re putting together e-learning packages in other departments at the moment.
What has the impact of global supply chain disruptions such as the coronavirus pandemic been for your business?
Fortunately there was nearly no impact of the Covid pandemic on production lines in Japan. However, the products imported from the Vietnamese factory to Japan were greatly affected by the global shortage of containers and unstable shipping schedules.
In addition, there was the effect of the Yen-Dollar exchange rate. The Yen-Dollar rate around 2011 when we entered Vietnam was around 80 Yen per US Dollar, but now it’s 128 per US Dollar, which is an increase of about 60%, so there's another reason to rethink our business model.
Could you elaborate on how you plan to rethink your business model?
Initially, the reason I built a factory in Vietnam was to import products into the Japanese market and also sell some of it in China. That was the business model, but now we’re going to try harder to sell more in the Vietnamese and Southeast Asian markets.
You’ve said that you’re looking for new distribution and sales partners in Southeast Asia. Which country in that region do you believe has the most potential for you besides Vietnam and China?
Vietnam is the number one place where we want to find sales partners because in Thailand they are very good at making automobiles but the automobile industry doesn't use flux cored wires. In Malaysia they’re very good at making motorbikes but they also don’t use flux cored wires. However in Vietnam they have a very big shipyard that went bankrupt about 15 years ago but now they’re trying to rebuild it. Many foreign firms in the shipping industry are very interested in getting Vietnamese partners, so we are going to try to serve them.
If we want to recreate the kind of success Japanese shipyards once had with mass production in developing countries we must focus on developing and providing products that can contribute to these countries’ economies, so with that in mind, our Vietnamese factory fits the situation.
Let's say we come back to interview you again in five years' time for your company’s 80th anniversary. What would you like to tell us about your goals and dreams for the company in that timeframe, and what would you like to have achieved by then?
The satisfaction of our customers and employees is our primary goal and it is a constant driving force behind what we do. We also want to have more diversity among the staff. We’d like more Vietnamese staff and we must promise the government that within two or three years we are going to try to increase the number of women workers to about 30%. Executives within the company are really doubtful about being able to make that happen, but I hope we can.