Gearing up for global expansion

In recent years, we have seen regional peers copying and replicating the manufacturing processes of Monozukuri at a lower cost. You make it your mission to support Monozukuri by providing top quality products to the world. Could you tell us how would you define the essence of Japan Monozukuri? And how do you implement it within your company?

Monozukuri defines 100% the Japanese way of creating things with an outstanding quality. Nevertheless, Japanese products are always considered to be more expensive than other countries such as China or South Korea. Therefore, my personal opinion regarding this fact is that manufacturing companies, including Nippon Gear, should strive to provide cheaper products but keeping the same quality. This would enable us to increase our global market share. However, this strategy remains difficult for Nippon Gear, because our main clients here in Japan are mainly involved in the infrastructure industry, specifically in nuclear power plants, thermal power plants or/and water and sewage plants which require a high level of quality.

Moreover, the Japanese mentality is very conservative when it comes to changes, meaning by that if they have a product that works perfectly and has a long lifetime, they will be sceptical about a new change in the product. Most of our clients have this mentality because one simple mistake could cause an important damage at their plants.

These long-lasting products could define the Japanese Monozukuri. In other parts of the world, products like ours have a lifetime of 10-20 years compared to ours which last 30 years at least, and more than a half centuries sometimes. Therefore, the corporate mindset of companies with a long history could be resumed in one sentence: “Old but good”. This mentality remains challenging for us, as we want to expand ourselves on a global scale, because our products might be too expensive for other markets.

Nevertheless, 4 years ago, we had a turning point at Nippon Gear that enabled us to become competitive globally, we were the first and I might say the last Japanese company to succeed in this large-scale Merger and Acquisition.

Could you talk to us about this Merger and Acquisition that marked a new start for Nippon gear?

It was a Proxy Fight, where we were able to buy 40-50% of the stocks of our company in order to have complete control of it. We changed entirely the board of directors and established a new vision for the future of Nippon Gear but we still kept the same products.

We were able to upvalue the stock of the company from 300 yen to 440 yen per stock, and I bought all the stocks to raise to 1040 yen per stock, meaning I own 40% of the company. While people might think this is outrageous, I personally think that this was the best decision for this company to further increase our expansion in terms of sales and profitability and up until now, results are backing me up.

You mentioned earlier that your products can last 30 years at least and more than a half century sometimes thanks to their top quality. Japanese companies that provide such high quality are facing what we call the “technical shrink”, forcing them to diversify into other fields to keep receiving an income. How do you ensure to have a steady income on a yearly basis when your quality is that high?

We are actually in a process of changing our strategy. One aspect is that we still provide regular maintenance services enabling us to have various ways of income. However, as you can imagine this is not enough to grow as a company. Therefore, with the globalization and the changing needs of the markets, we are now implementing a new strategy which is lowering the cost of maintenance and encouraging our clients to buy new products once theirs are broken.

Finally, we are also implementing a new product lines that are competitive on a global scale. These product lines will be competitive price wise and will have an appropriate quality that is still higher than our regional competitors. This will allow us to increase our profitability and sales.

Today, Nippon Gear is manufacturer of valve actuators, reduction gears, mixers, and screw jacks, gears, measuring instruments, data transmission instruments, control equipment, and software which are used in a wide range of fields such as the chemicals industry, sewage industry or the steel industry. Could you give us an overview of this diversification? And are you looking to expand in one particular sector in the future?

We can divide our business in 4 main segments: the valves actuator, screw jacks, gear drives including mixers (sometimes called agitators) and high accuracy gears.

The valves actuators represent the major parts of our business and we are producing Nippon Gear's own brand valve actuators and Flowserve Limitorque brand valve actuators. They support the power, water and sewage, oil and gas, chemical and steel industries. We are a dominant supplier of valve actuators in Japan and especially for nuclear power plants, almost 100% of valve actuators are Nippon Gear made. We also have enhanced products using the intelligent-type control system, the high accurate torque sensor, the high impact torque switch, and the vibration resistant limit switch. Other than alternating current electric motors, they could be applied to direct current motors and air motors, with a variety of options like water ingress protection, explosion protection, Safety Integrity Level (SIL) compliance and sulphur resistance.

Regarding to our screw jacks, Nippon Gear made the first full-scale series of screw jacks in Japan in 1970 and we were the pioneer of screw jacks in Japan. Since then the JACK series has been firmly supporting many industries. Using the strength of high reliability and accuracy of our products, we are now expanding our business overseas.

Furthermore, when it comes to mixers we have supplied thousands of mixers for various plants using new technology and reliable gears made by ourselves. Especially for the mixers used for Flue Gas Desulfurization (FGD) of power plants in Japan, most of them are Nippon Gear made.

Our mixers are manufactured and developed in a coherent environment using computational fluid dynamics (CFD) software and/or mock-up tests, enabling optimization of the impeller profile and motor capacity. They are highly functional and durable, and are highly valued in power plants, chemical plants and sewage plants.

Our strategy to expand our business globally in this segment is to look for partners or M&A opportunities.

Finally, our last segment is the gears; we have accumulated knowledge and technology from designing and manufacturing gears, and applying that technology to design and manufacture of highly functional gear drives. With our high precision technologies, we are supplying highly functional gears for chemical plants, mixers for sewage systems, compressors, and turbine generators.

You mentioned that you have a partnership with a US based company which is called Flowserve. Could you share with us your international strategy?

Regarding our partnership with Flowserve, it started 56 years ago. At that time the company was called Limitorque. Moreover, thanks to this partnership we have been able to increase our international presence. Hence, we are truly looking forward to continuing to work with them.

Moreover, with this great partnership with Flowserve, our aim is to become a leader when it comes to the valve’s actuator global market. Thus, to do so, we need to expand our presence in other markets such as Europe or the ASEAN market.

Are you constantly looking for international partners?

We are constantly looking for international partners in our other business segments. Also we are now embracing diversity to develop our business. Various people from the likes of China, Korea and India are joining us.

The global valves actuators market is expected to grow at a 5% CAGR (Compound Annual Growth Rate) and the Asian market will be at the forefront of this growth. Are you looking to expand in one particular country?

We are mainly looking in India but also in the Middle East, we believe that there is huge potential growth in these markets.

If we were to come back five years from now, what would you like to have accomplished? What is your dream for Nippon Gear?

We are not looking for a rapid growth, however we want to continue to have a steady growth and five years from now we would like to have extremely advanced products on the market. Moreover, on a global perspective, we would like to increase our market share in the valve actuators but also in our other business segments.