Since its foundation in 1948, Chugai has been supplying a wide variety of products such as soundproofing parts, electronic parts and chemical products to the automotive, electronics, housing equipment and other industries, based on the principle of “planning, development and delivery”. We sat down with president, Toru Naruse, to learn more about the company, its products and strategy for the future. Mr. Naruse also gives his insight into this era of rapid change for the automotive industry and explains how Chugai is responding to those changes.
For the past 25 years, Japanese manufacturers have been under pressure from regional competitors in China, Korea, and Taiwan. They are replicating the Japanese manufacturing process, but using cheaper labor costs to produce and offer cheaper products to the world. How do you define Japanese monozukuri and how do you reflect it in your production process?
We started out as a trading company. We had business relationships with many companies, including Toyota and Toyota-related companies, and supplied them with necessary products and goods. In addition, in order to meet Toyota's demands, we had our own factory and started producing automobile soundproofing materials.
I had an experience in a joint venture company in China from 2004 to 2008. There, I confirmed the strength of Japanese manufacturing. I realized the strength of Japanese manufacturing is its meticulousness and strong will to achieve the highest quality in order to make better products.
In the past, there was a time when Japanese quality was highly regarded, but today, most of the production lines are automated and anyone can make products similar to those in Japan as long as they invest in them. Therefore, it is necessary to be highly competitive in production processes that require human skills. For general products, the quality demanded by customers may not be so high, but the fact is that price competition is becoming more intense, and the global position of Japanese manufacturers is changing dramatically.
Japan's economy has been stagnant for several decades now, and superior technology is not always a good thing. When such manufacturers try to sell reliable, high-quality products overseas, they fall into the so-called Galapagos syndrome, where they are unable to promote the competitiveness of their products overseas, and consequently fail to capture the imagination of consumers. What strategies have you adopted to overcome these challenges?
It is true that many Japanese companies cannot survive if they only deal with the domestic market, which is why they need to go abroad. We are targeting Asian countries in order to increase our presence in this market. We have set up a production line in China through a joint venture, but for the most part, we operate as a trading company in Asia and the US. In the global market, it is very important to meet the needs of customers in both trading and manufacturing.
Your company is responding to the needs of the automotive industry, which is facing a number of changes associated with the electrification of automobiles. There is an increasing demand for lighter materials, which in turn increases vibration and noise from outside the vehicle. How do these changes in the automotive industry affect your business model, and what solutions can you offer to your customers?
We understand that weight reduction and electrification are the main changes in the automotive industry, and in order to respond to these changes, we manufacture materials needed for the interior and exterior of vehicles, products that are lightweight and function as soundproofing materials. We also provide soundproofing materials and products that enhance the appearance of vehicles. Originally, our company focused on manufacturing soundproofing and sound-absorbing components, but we have since diversified our product portfolio. As the transition from internal combustion engines to electric motors continues, there are still opportunities for our products to be sought after in the market. One of our competitive advantages is that we understand the needs of the EV market and can provide thermal, acoustic, and optical solutions, and we have several affiliates to do so.
Many of the automakers interviewed for this report are focusing on research and development in order to increase their domestic competitiveness with new products and technologies. They are also shifting to a co-creation business model that utilizes overseas partners. Are there any products that you are about to launch that you would like to introduce to our overseas readers? Also, are you open to co-creation with other companies?
Actually, our development is based on technologies that were co-developed in the past by a European company and its affiliates. We test them in our laboratories and make improvements as needed. For thermal solutions, we use simulation software to provide our customers with the best thermal solutions. Thermal solutions are also available for home appliances. As for our LED business, we have a subsidiary called HAKKOSONIC, which provides lighting solutions for vehicle interiors, as well as comfort and convenience. As I mentioned earlier, we have sound, heat, and light solution divisions, all of which are necessary for us to make better proposals to meet the needs of the domestic and international markets.
Are you looking to introduce your products to other industries besides automotive and consumer electronics?
Currently, we are mainly proposing solutions to the automotive and consumer electronics industries. In the future, we are also considering entering the infrastructure industry. These industries and products require solutions to problems related to sound, heat, and light. We will continue to contribute to a wide variety of industries and expand our business in the future.
What is your medium-term strategy for continuing the growth of the company into the future?
We would like to stick to our mission of serving our customers by providing the best solutions to their problems and listening to their needs. It is our policy to develop and deliver, to develop our people, and to act for the welfare of our customers and employees. We want to provide efficient solutions for both local and global markets.
There are many ways for Japanese companies to expand overseas: on their own, through mergers and acquisitions or joint ventures, or by looking for local partners in countries of interest. What methods do Japanese companies use to expand overseas, and in what markets do they plan to do so?
Currently, we have offices in Asian countries and the United States. We entered these markets in line with the overseas expansion of automobile manufacturers. Initially, our role was that of a trading company, simply bringing products manufactured in Japan to overseas markets. Recently, however, we have felt the need to expand our local production overseas. We intend to procure and produce products and materials that are required locally, propose solutions, and expand into a wide variety of industries other than automobile manufacturers. I would like to further develop our overseas bases together with the people who have been working for us for a long time.
If you were to interview you again six years from now, on your 50th year with the company, what would you like to talk about? What is your dream for the company that you would like to achieve by then?
I don't think we will be able to grow further if we only provide solutions for sound, heat, and light in the exact same way five or six years from now. We must not only introduce our existing products, but also develop new solutions and modules from scratch to better serve our customers. In order to do so, it is essential to understand the needs of each customer and create better ideas, in other words, innovation. We are also focusing on producing soundproofing and sound-absorbing materials using environmentally friendly recycled materials, and hope to contribute to a sustainable society in the future.
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