With utilisation in power plants, Okano ensures the best valve no matter the application
Japanese manufacturing is at a very exciting time. Over the past three years, we have seen severe supply chain disruptions due to COVID-19 and the US-China decoupling situation. As a result, numerous corporate groups are seeking to diversify their suppliers to ensure reliability. Consequently, Japanese firms, renowned for their reliability, advanced technology and high-quality products, find themselves in an interesting position. Many observers argue that the weakened Japanese yen presents a highly unique opportunity. Do you agree with this sentiment? What advantages do Japanese companies possess in the current economic-macro environment?
From a personal standpoint, I concur with your viewpoint. However, in light of the current global focus on Japan, I opine that the perceived advantages predominantly pertain to component manufacturers. Historically, Japan possessed the capability to offer finished products to worldwide markets, yet this paradigm has shifted. Presently, our forte lies in supplying components. Nevertheless, when we examine accomplished products such as the iPhone, it becomes evident that producing such items has surpassed Japan's current capacities.
In the context of developing nations, like China, their past competitive advantage stemmed from providing products with economical production costs. Yet, with rising living standards, labor expenses in these countries have escalated. Consequently, their competitive edge has waned. Conversely, Japan is currently undergoing a phase of historical depreciation, and commodity prices have remained stagnant for a considerable duration. This juxtaposition positions Japan as an appealing choice for foreign enterprises seeking high-quality and cost-effective labor. I perceive this as the mechanism through which Japan could garner attention as a component manufacturer.
In the immediate term, the prominence of Japan as a component supplier, facilitated by the devaluation of the JPY, holds positive implications. Nonetheless, adopting a long-term perspective, I harbour reservations about the desirability of this scenario. As a nation, we must strive to engage in the provision of finished products, encompassing both hardware and software. Failing this, the viability of Japanese firms to sustain profitability stands compromised. Confining ourselves solely to the role of a global components supplier would inevitably yield diminished profits.
Addressing your earlier point, while a substantial portion of iPhone components originates in Japan, the prevalence of Japanese applications on the device remains notably limited. It is plausible that only a mere fraction, perhaps two or three applications at best, are of Japanese origin.
Japan has an aging and declining population, resulting in a labor crisis and a shrinking domestic market. What have been some of the challenges this demographic shift has presented for your firm and how have you reacted to them?
I believe that we cannot evade the issue of a declining population in our country. My conviction extends to other advanced nations globally, facing similar challenges. The crux lies in achieving heightened production capacity with a reduced workforce. Automation and digitization present a viable avenue to realize this objective. A concerted drive toward elevated productivity with diminished reliance on human labor is imperative, encompassing both hardware and software realms.
Turning our attention to OKANO, our workforce numbered approximately 1,000 individuals about three decades ago. Presently, we operate with a staff of around 300. Nevertheless, it is worth highlighting that despite this reduction, we have successfully sustained our production capacity through an unwavering commitment to efficiency enhancements.
Addressing the predicament of a contracting domestic market is an undeniable reality. Japan's declining population underscores this challenge. Consequently, our strategic response must encompass technological advancement targeting overseas markets. Over the course of numerous decades, Japan has amassed profound manufacturing proficiency. As you are undoubtedly aware, Japanese enterprises are synonymous with relentlessly pursuing the epitome of quality products at rational costs. In contrast, international manufacturers excel in marketing items at premium prices. The prevailing sentiment holds that Japan's labor productivity remains subpar. I do not believe that Japan's labor productivity is inherently low. This is because labor productivity is calculated as the ratio of revenue to the number of workers, without considering quality. The reason Japanese products are competitively priced is not because of inferior quality but rather because they lag behind foreign companies in marketing. Therefore, there is a need to strengthen the auxiliary aspects of business (marketing, design, etc.).
Prime Minister Kishida has said that Japan must be carbon neutral by 2050, predominantly using green renewable energy. Interestingly, the current Kishida administration has set out plans of making 22% of Japan’s energy from nuclear, which saw a huge downturn in public opinion following the Fukushima disaster in 2011. Do you agree with this energy policy and do you believe the restarting of Japan’s nuclear reactors is a good thing? What opportunities does this push for nuclear energy provide for your company as a producer of specialist valves that can cater to the nuclear energy industry?
From a personal standpoint, I concur with the notion of advocating for nuclear power plants, although not solely due to our company's involvement in the nuclear power sector. While recent technological advancements have indeed reduced carbon emissions in the realm of thermal power plants, Japan's reliance on imported fossil fuels for thermal power generation remains a stark reality. The continued pursuit of this trajectory is poised to yield cumulative financial costs as well as heightened CO2 emissions.
Looking ahead, renewable energy sources like wind and solar power are poised to assume increasing significance. However, their current inability to provide a consistent and stable power supply underscores the imperative of advancing energy storage technologies. In the absence of substantial breakthroughs in this domain, the feasibility of relying exclusively on these sources remains questionable. Given this context, advocating for nuclear power seems a rational step, contingent upon strict adherence to safe operational practices.
The valves you produce operate in harsh environments that involve corrosive fluids, extreme pressures, and tough conditions, all of which can lead to degradation and ultimately a reduction in performance as well as potential failures which can be a huge safety concern. How are you able to ensure that your valves are able to operate in such harsh environments?
Regarding the operational conditions, it is worth noting that thermal power plants actually entail more rigorous operating conditions compared to nuclear power plants. The demands entail utilizing valves rated for pressures below 40 megapascals and temperatures of up to 700 degrees Celsius; conditions that, as you can well imagine, are exceedingly severe. Our focus lies in the production of valves designed for boiling water reactor (BWR) nuclear power plants. Notably, these valves must contain radiated fluids without any potential for leakage. Successfully addressing this precise challenge has been a hallmark of our endeavours in these applications.
Our technological prowess draws from diverse disciplines encompassing fluid dynamics, machinery, and metalwork. Nevertheless, it is imperative to acknowledge that our company boasts a manufacturing legacy spanning over a century. This extensive journey has endowed us with invaluable insights and has enabled us to surmount a multitude of challenges. The collective wisdom of our historical trajectory resonates within the products we offer to our esteemed clientele. The discerning customers we serve truly value the meticulous effort and unwavering commitment invested in the valves we provide. I firmly believe that our century-long experience is a testament to the competitive edge that OKANO Valve is poised to harness in the development of valves precisely tailored to meet our customers' diverse requirements.
You worked on the Washington Public Power Supply System and the Empresa Nacional De Electricidad in Spain as well as hundreds of other projects all across the globe. Could you give us an insight into why your company is chosen as a partner time and time again?
Historically, we garnered renown for specific skills within the domestic market, prompting our initial focus on this sector. However, a decade ago, with the cessation of nuclear power plant operations, the domestic market underwent a gradual contraction. Subsequently, we were compelled to pivot our gaze beyond Japan's borders, marking the inception of our foray into overseas exports. Our initial forays predominantly revolved around serving Japanese stalwarts like Hitachi, Mitsubishi, and Toshiba during their ventures in constructing offshore plants. In essence, our clientele then comprised Japanese entities venturing abroad to establish their industrial facilities.
A bygone era witnessed spirited competition between Japan, Western nations, and others in vying for the establishment of plants in developing countries. Yet, the landscape has since transformed, ushering in new contenders, including India, China, and South Korea. To sustain our standing as a pivotal component manufacturer, diversification of our client portfolio beyond Japanese conglomerates was imperative. To facilitate this transition, we set forth to establish a robust foundation wherein entities from any corner of the globe could readily engage in our services. Over the past half-decade, we have proactively engaged in direct communication with Western plant manufacturers, fostering interest and cultivating a stream of orders.
Confidence in the superiority of our technology within our niche remains unwavering. Bolstering our appeal further, our products epitomize superlative quality offered at a competitive price point. This confluence of attributes is, I believe, the driving force behind our consistent selection of discerning clients, substantiating our unwavering resolve to excellence.
You mentioned your move overseas was necessitated by the domestic market situation. Is there a specific region you believe to be key to your corporate growth going forward?
With respect to our valve-centric enterprise, Southeast Asia has emerged as a pivotal sphere, and its significance is poised to persist in the foreseeable future. As it stands, we have already secured a discernible market share within this region. Nonetheless, I am of the conviction that we must now extend our gaze toward other burgeoning economies. This correlates with an earlier point I raised: the arduous price competition prevalent in these emerging markets. Should we endeavour to vie on this competitive front, the potential for setbacks looms large. Consequently, I attach paramount importance to our active participation in endeavours such as direct engagement in new nuclear power plant initiatives.
Does this include projects for hydrogen products as well?
Currently, we have not been able to meet these demands due to the substantial differences in size compared to our standard valve specifications. Consequently, I believe that entering this market is not viable for us at this juncture.
Could you go into a bit more detail about your R&D strategy that has allowed you to achieve the technology you possess? Is there anything you are currently working on that you would like to showcase today?
When considering the fundamental structure, it has remained unaltered for over two millennia. Even from epochs long past, valves akin to contemporary designs can be identified in historical Asian contexts. However, should the discourse turn towards valve innovation, the crux lies in their adeptness at high-temperature and high-pressure scenarios. This avenue epitomizes the conduit for progress; an expedition involving the exploration of materials and methodologies capable of augmenting valve performance under conditions characterized by elevated pressure and temperature.
You spoke about the importance of being part of new development projects for nuclear power plants. Certain nations like Germany are completely moving away from Nuclear power, but others such as France are going in the opposite direction and embracing the nuclear aspect of their energy policy. Are you looking for partnerships perhaps in France or the US, whether that be with new materials makers or specialists that can help you further push innovation?
Regarding the United States, our efforts are directed toward forging a collaborative alliance with a counterpart in that region. Our team members frequently travel there to facilitate the establishment of similar partnerships. As for France, the prospect of nurturing partnerships in that nation is undeniably appealing, and should an opportunity arise, we would gladly seize it.
As one of the company's initiatives, we are engaged in the development of valves for new nuclear power plants. This strategic emphasis stems from our recognition of the growth potential for nuclear power within Japan. As a manifestation of this commitment, we have even taken the step of discontinuing certain overseas initiatives to channel resources toward domestic undertakings. However, there exists an inherent risk in adopting an exceedingly specialized approach, as underscored by the ramifications witnessed during the aftermath of the 2011 nuclear power plant disaster. It is precisely due to this recognition of risk that we have embarked on a trajectory of diversifying the spectrum of applications wherein our valves can be effectively deployed.
Could you tell us about some of those new applications you have in mind?
The new avenues I alluded to diverge significantly from valve-related pursuits. In fact, we are venturing into entirely novel domains, encompassing realms beyond the scope of both nuclear power plants and valve manufacturing.
One prominent trajectory of diversification involves Digital Transformation (DX), an imperative especially pertinent given Japan's relative lag in the global digitization landscape. To ensure our viability within the international market, the promotion of DX remains paramount. Over the past decade, we have been staunch advocates of DX, a stance that has facilitated the accumulation of an extensive reservoir of knowledge in this domain. Presently, we are harnessing this hard-won expertise to spearhead a new enterprise that can provide invaluable support to other manufacturers.
Yet another prevalent vulnerability among Japanese manufacturers pertains to marketing; a facet that perturbingly underscores their struggle to effectively champion their products and services. This overarching tendency is equally manifest within OKANO. To address this communal challenge, we are actively engaged in an initiative aimed at fortifying our communication and marketing endeavours, both for our own offerings and those of fellow manufacturers. Our organizational ethos encapsulated by the slogan "Manufacturing Transformation" epitomizes this comprehensive endeavour. Implicit within this motto lies our unwavering commitment to reinforcing marketing strategies, augmenting communication endeavours, and fostering a robust culture of DX.
Imagine that in three years, we come back and have this interview all over again: is there a personal goal, ambition, or achievement that you would like to have achieved?
We would like to be able to demonstrate an advanced version of Japanese monozukuri, and that kind of expression is quite ambiguous. You might be asking yourself what exactly that looks like, and in 3 years' time that will all become clear if you come back and interview us again.
Interview conducted by Karune Walker & Paul Mannion