With the rise and explosive popularity of electronic devices, it comes as no surprise to learn that the demand for high-quality components for them has followed. Hokuriku Electric Industry (HDK) has been developing and manufacturing electronic components for over 70 years, providing quality sensors and resistors. In this interview, president Morio Tada explains HDK’s success, which is based on the company’s strict adherence to its unique sanpouyoshi philosophy.
As a developer and manufacturer of electronic components, what for you is monozukuri?
I believe our success is based on the Japanese concept of sanpouyoshi, meaning “prosperity in all three directions”. This means in any company, the seller, the buyer, and the society as a whole must benefit. Both direct parties must be satisfied, and society must give a high social appraisal for the service or product’s existence. In English, it is sometimes translated as “three-way satisfaction”.
This philosophy is the basis of all business in Japan. At the foundation of this concept is trust. The bonds of trust between all people involved is essential. I believe this is the driving force, the principle primarily on which Japanese industry functions. When doing so, the primary goal becomes being able to deliver products of high quality, and high function. Japanese businessmen can be very particular as they prioritize trust. That is why they try to create products of such high quality. I think this is the fundamental difference in ethos between Japanese enterprises compared to our Korean or Chinese counterparts. These are the fundamentals of monozukuri.
What are some of the challenges and opportunities presented to your firm by Japan’s aging society and population decline? What steps are you taking to ensure the longevity of your company in terms of recruitment?
Being a company that is all about monozukuri, the important question going forward is whether we will continue to manufacture domestically, or overseas. It’s been about 40 years already since we have conducted business overseas, starting in Korea. The first challenge was utilizing foreign labor in the monozukuri process. When we first went overseas, it was all about saving costs through a cheaper labor force. Today, it has less to do with the cost of labor and more being able to secure a quality labor force. Currently, our overseas strategy is centered around trying to secure the best possible labor force for our business. It is not about cost, it is a problem of human resources. Our manufacturing process has become totally automated, and as such, we have invested an explosive amount into our production. Of course we are happy and willing to make the investment, but to make it the most optimal situation in terms of cost performance, we need to be running 24 hours a day. Many people in Japan, especially the younger workers, are not keen to work weekends or nights. Have you heard the term “3K’s”? The first K stands for Kitsui, which means “heavy”, second Kitanai, which means “dirty”, and third Kiken, which means “dangerous”. This is a kind of industry term that represents the type of work many do not want to do. When we were young, we did a lot of this kind of work as it was very profitable. Today, I think even if it was profitable, young people would be unwilling to do it. As such, I need to ensure the amount of spending I do on this machinery remains profitable, even if this “dirty” work is not being done.
About 30-40% of our manufacturing is still done domestically but the scale is quite small. It is more about how “smart” we work. We are utilizing a lot of advanced technology like AI and DX to make the best possible system and foster the best possible young talent.
Your products can generally be grouped into four main categories. First being mobile communication devices. second being digital appliances, third being car electronics, and finally home electronics. How are you able to adapt your products to suit a variety of applications?
Our company motto is “to develop that which does not exist in the world and contribute to society through our distinguished monozukuri.” That is what our company is about. This is what we all have in mind while doing our work. Originally, we were all about manufacturing resistors. That was about 80 years ago. If I were to describe the history of our activity in quarters (25-year periods), manufacturing resistors would be the first quarter. The next 25 years was focused on functional applications for resistors for different industries. The third quarter was when we went into module products, and the most recent quarter has been about sensors. We pride ourselves and continually pursue challenging products and industries. I believe we are a company that has been successful in adapting to the changing needs of the times. It is because of our motto and spirit that we have been able to evolve to meet the challenge of catering to whatever requests our clients bring us.
What product of yours do you believe represents this motto or ethos best?
It is hard to say, they all have a lot of history and hold importance. Let’s start with our resistors. The lead-wire resistor was our first product. We also have trip resistors. For the first 25 years, we were predominately selling lead-wire resistors. It was applied to sliver copper paste through whole PCBs. Before that point, we did printed-resistor PCBs. It is a product we printed directly onto PCBs and it was a hit that sold very well. It was used quite a lot in the VCRs and TVs at the time and we made these in our headquarters in Toyama. All the major Japanese TV makers used our product. That was how explosive our sales were. Now, that market is gone, and everyone is concerned with the chip resistor. They are now much lower in cost than they used to be.
Our next focus was mechanical parts. Variable resistors, switches, and our “focus pack”, which enjoyed a large market share. For a time, it was in all color TVs. From there, we went into module products. Among the different module products, we were very good at utilizing them for LCD panels. Today, most makers of these modules are from China or Korea. However, recently there has been a large demand for LCD panels used inside cars. As you have mentioned, there is a big shift towards EV. In a car like a Tesla, everything (fuel gauge, speedometer) is an LCD panel. We believe that the demand for our module products and LCD related products will increase as the world shifts to EV.
You have developed an SFB sensor alongside SEMITECH, which is the world’s smallest non-contacting temperature sensor with applications for smartphones and medical devices. How did you overcome the challenges of miniaturization when developing this product?
We can not necessarily say our SFB sensor has succeeded, as it has yet to become profitable. Our first attempt to develop this product was for use in smartphones. As such, we knew it had to be incredibly small. We were able to succeed in a sensor at this scale, but it has not been picked up by Apple. Instead, we have been marketing to Chinese smartphone makers and this was about five years ago. What we realized when trying to introduce these non-contact heat sensors was that when it comes to cost-performance, it was not the best venture for us to pursue. There were many elements we had to modify to be able to produce it and the ever-changing modules of the smartphone made it an unstable market for us to pursue. Perhaps if the pandemic had happened earlier in history, it would be something we could pursue. To include this kind of sensor into a smartphone requires an incredible degree of skill and technique.
Nowadays, a means to mitigate the pandemic have been these giant screens you put your face up to in order to measure your temperature. The kind of sensors in these devices are much bigger than our SFB sensors. While our products could be used for this type of application, we have put a lot of resources into miniaturizing ours, so inevitably, our price is higher. However, we are not necessarily aiming for that market for our sensor to be used. The market we are aiming for with this product is wearables. We are targeting niche applications such as devices that allow consumers to monitor their heartbeat or temperature while performing exercise. Two key elements for this kind of manufacturing are the speed of development, and the timing at which it is introduced. Unfortunately, with the SFB sensor, our timing was just not quite right. However, we are continuing to promote the product in the market and are hoping it grows in popularity. It would be pretty cool if you could measure your temperature with your smartphone. The problem is that it can only measure the surface level body temperature, so accuracy can vary.
What role does collaboration play in your business model? Are you looking for any new collaborative partners overseas?
With SEMITECH, the partnership was more of a division of labor. They could care for the development of the membrane of the SFB sensor, while we did the design and structure. This allows for a much faster development time. If we were to try and do everything ourselves from scratch, it would have significantly delayed development. Our strategy was to utilize SEMITECH’s existing technology in combination with our expertise to get the product to the market as quickly as possible. I believe collaboration is for exactly this kind of result. If there are partners out there who have a similar point of view, I would welcome any such collaborators.
What is your strategy to further develop your international business?
For us, opportunities to go overseas are always examined on a case-by-case basis. We would have to evaluate which would be the best option in terms of profitability, but also in terms of how we want to develop our business. Different regions have different legal standards and policies in place on how to do business so that is also a factor. In terms of an area we are focusing our efforts on, it would be Southeast Asia. We already have factories in Malaysia and Thailand. Next, we are looking to enter the Indonesian and Vietnamese markets. After that, we are also interested in South Asia, places like India. At first, we would like to expand in terms of sales, after which we could think about local manufacturing. The European region is also interesting in terms of expansion. We already have distributors there, but I believe our current channels are quite limited. We do want to develop partnerships with companies that want to distribute our products in Europe. For the Chinese market, the environment for doing business can be quite risky. We have two factories in China already, both of which have been impacted by China’s lockdown policies, the “Zero covid” policy. Moving forward, our strategy for China is to only produce locally what we can supply to our Chinese clients. When it comes to supplying other countries, we will do so by a different means.
Imagine we were to come back in six years for your 85th anniversary. What would you like to tell us? What are you dreams for the company, and what goals would you like to have accomplished by then?
In May, we plan to publish a new midterm strategy plan. At that time, we will announce our goals for the next five years and I do not want to disclose that in our interview today. If I were to try to respond to your question, 21 years from now for our 100th anniversary, we definitely want to have 100 billion yen in sales.
To fulfill my dreams, I have a concrete mindset. Passion, hard work, perseverance, and a certain degree of luck. How you use your luck is quite important, I believe. Those who do the tedious steady work, are favored with good fortune. This is where, as a leader, you can develop wisdom. People do not like to take on tedious and difficult challenges, but if you are always running away from that kind of work, you will never grasp what is required to become a 100 billion yen company.