As Japan’s first manufacturer of titanium oxide, Titan Kogyo has proven itself key to many industries
Despite the lower costs of regional competitors, Japanese chemical manufacturers remain leaders in highly functional and specialized chemicals. Furthermore, Japan has shown the capability to develop niche chemical and material technologies. Can you tell us what are some of the strengths and weaknesses of the Japanese chemical industry today?
The major companies in the Japanese chemical industry are actually competing globally. They engage in mass production and direct competition, whereas we, as an SME, focus on our technology and unique development capability to cater for the specific needs of our clients, and we are very flexible in meeting those needs.
Chinese, Korean and Taiwanese companies have been evolving but their evolution is based on the replication of Japanese technology, whereas we and many other Japanese firms have accumulated knowledge and technology from the basics. This is what our customers have told us.
If there are any issues – for example, any adaptations that may be required by the customer - those foreign companies who copy us are not able to meet those specific requirements whereas we can readily respond to the needs of our clients based on our accumulated technologies.
For us, our strength is in meeting the needs of our customers and making custom made products in smaller quantities. For example, we produce an additive for toners so if a company has a product lineup that includes various models, we can make a different recipe for each model, and this is something that the major companies cannot do, and this is a particular strength of ours.
The chemical sector is the largest industrial consumer of oil and gas, and it produces more than 10% of fossil fuel emissions every year. Domestically, the former Suga administration has already said that Japan needs to be a carbon neutral society by the year 2050. What strategies are you employing to reduce your environmental impact and reach carbon neutral targets?
Last year, we established a project team dedicated to carbon neutrality. As you have mentioned, the chemical industry actually relies heavily on fossil fuel for its material. Coal is used to generate vapor to process the material, so a lot of energy is required to produce the products.
The Japanese government has established a target to reduce 38% of carbon dioxide emissions from industries by 2030. We have set that as our goal as well, and every week we have an internal meeting to discuss how to achieve it.
We have been conducting energy saving activities over a few decades already. There are not actually many more things we can do at the moment, so we have to adopt new measures such as renewable energy sources for the partial operation of our factory.
To be honest, within the chemical industry, I feel there are challenges to overcome in achieving this target, so utilizing a carbon credit scheme would be important. However, such a carbon credit scheme has not yet been fully established so we are still trying to determine what the best solution would be. This year, we issued a CSR (corporate social responsibility) report at the end of August and we declare d a numerical target for greenhouse gas emissions.
Your products are used in a variety of applications – from cosmetics to building materials and many more. What application are you currently focusing on and which do you believe has the most potential for future growth?
Currently our major focus is the cosmetics industry, which takes the biggest percentage of our products. As for growing markets, we are expecting to enter the semiconductor market, handling the material used in semiconductor components.
We were the very first company to create titanium oxide in Japan. However over time, there have been many major companies who started doing a similar business to ours. We have reduced our presence in the paint and pigment sector used for commodities because we cannot compete with the major companies.
As an alternative, we have developed a toner additive and that is doing well. However, there is a major competitor and we have to increase our presence as this is a somewhat saturated market, so our focus now is the cosmetics industry.
The COVID pandemic negatively impacted the cosmetics industry, but it is slowly recovering to pre-pandemic levels, and in fact, it is expected to be worth about 415 billion U.S. dollars by the year 2028. How are you adapting to this market growth and how do you plan on taking advantage of it?
Our focus is the ultrafine particle, titanium oxide, which has UV shielding properties. Before COVID, we had about 400 tons per year of production capacity, and just before the outbreak, we established a new factory, increasing our capability to 1000 tons per year. However, the pandemic happened so demand diminished quite considerably, but we are expecting it to increase once again. Currently, we can say that we are ready to go with full production.
In terms of iron oxide, we can produce yellow, black, red and magnetic iron oxide and we have a long history of producing these iron oxides. Since demand is diminishing for magnetic iron oxide, we can replace that with iron oxide for the cosmetics industry, so we have enough capacity to cater to it.
The demand for iron oxide in cosmetics is back to pre-COVID levels. However, we are wondering why demand for UV shielding has not come back to what it was before COVID, but I am sure demand for that will come back too.
You offer two types of ultrafine titanium oxide - anatase and rutile - that offer UV shielding properties and they are used in cosmetics, as well as rubber and plastic heat stabilizers. Can you tell us a little bit more about how your ultrafine titanium oxide is superior to more conventional ones?
The anatase type is mostly used as an additive for toners. Our product is actually a collaborative development with toner manufacturers. Since we have long lasting relationships with them, they tell us about their new products and we can offer a specific product to cater to their new product. As I have mentioned before, we have a very specific recipe for each of the toners.
The rutile type of this ultrafine particle iron oxide actually has higher transparency than conventional products which have a blueish tint, but our product is purely transparent. Leading cosmetics manufacturers really like our product and we have therefore been able to enlarge our presence in the cosmetics industry.
In Japan, UV shielding properties are mainly considered useful in cosmetics and sunscreen. However in the USA, the oxide is categorized as OTC (over the counter), and the FDA has regulations called GMP (Good Manufacturing Practice) governing it. The FDA regularly comes to our company to conducting auditing and inspections to make sure that our products are properly conforming to thier standards.
You have developed a technology that can provide the world’s lowest impurity content for iron oxide. Can you tell us a little bit more about this impurity reduction technology?
One of the methods we use to reduce impurities is to make a careful selection of raw materials. We procure materials from multiple companies in terms of the supply chain and then we make the appropriate mix of the compounds that we have procured as per customer requirements. Being an SME gives us the flexibility needed to be able to respond in this way to changing customer demands.
We combine raw materials with our special processing technology which gives us the ability to control pH levels and so on. The technology is becoming an integral part of the craftsmanship.
What role does collaboration or co-creation play in your business model and are you currently looking for partners either in Japan or overseas?
We do not have any partnerships although we have established a good relationship with a Japanese trading firm that has sales channels in China, Southeast Asia, Europe and the US. We asked them to take care of our product sales in overseas markets.
In terms of joint development and research projects, in the past we invited a German engineer from Kronos, a German company, to first create titanium oxide in Japan and we used ilmenite as the material from which to extract the titanium oxide. Half of this ilmenite is in fact iron that had gone to waste before, so we worked with CCC, a US company, to take this half of ilmenite and make it into iron oxide that was usable in the industry. Currently we do not have any collaboration with overseas companies but domestically, we collaborate with multiple companies as well as with universities to do research.
At the moment, we are thinking of continuing to work with Japanese trading firms to go abroad. To be very honest, we have a very good long relationship with Japanese trading firms and they understand our needs and wants as well as the targeted market. Furthermore, we do not have enough human resources to communicate with overseas customers at this moment.
As I mentioned, our business model is to cater to specific needs by making custom made products after working together with our customers and trading firms. However, this does not mean that we are refusing any collaborative work with overseas companies, so if there were any requests or offers, we would be happy to look into it.
Which countries or regions have been identified for further expansion into, and what strategies would you employ? Could you elaborate more on your international business strategy for us?
We are not thinking of establishing a new company or factory overseas. When we established our joint venture in China, labor costs there were low so the plan was to have the Chinese factory produce the basic chemicals, import them into Japan and add further treatment here which would add value and we could then sell to our customers at a comparatively lower price.
However, the price of labor is going up in China and compared to Japan, the Chinese salary is going even higher. There is not actually any advantage in having a Chinese factory now so we need to seriously think about our international strategy.
Let's say we come back to interview you again in four years' time for your company’s 90th 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?
This year, there has been a reform in the Tokyo stock market with the introduction of the prime market. Our goal was to be listed in this prime market but the market capitalization of tradable stocks that we sell does not meet the requirements, which is 10 billion or more Japanese yen of stock, meaning that we have to increase the price of each share.
My responsibility, I feel, is achieving the goals of our medium-term plan. This is our 6th medium term plan. We have entered the second year of this plan, having hit our numerical targets in the first year.
For 2025, we have targets which are sales of 10.3 billion Japanese yen, operating income of 1.3 billion and ROE of 10%. That is the mission that I need to fully achieve.
In theory, if we achieve these numerical targets, we can increase the value of our stock and be accepted into the prime market. We have specific numerical targets so we will do as much as possible to achieve our goals.