Established in 2006, HPC Systems develops, manufactures and sells
high-performance computers for scientific and engineering R&D. President Teppei Ono says bigger companies only provide systems, whereas HPC provides a fully integrated vertical solution, from the science to the software and the system solutions.
Over the last two years, we have seen the COVID-19 pandemic's huge impact on the nation of Japan. The healthcare system has been crumbling, there have been huge disruptions to logistics supply chains, and the tourism industry has been completely obliterated. At the same time, this has been an opportunity for some businesses that have been able to pivot and develop more e-commerce and digital communication channels. As an IT-focused enterprise, what challenges and opportunities have COVID-19 presented your business with?
We belong to a high-tech company, but our operation used to be run in a very traditional way. Everyone had to come to work, clock in at 9am, and work until 6pm. With the COVID-19 pandemic hit, we switched to a more remote style of work. It became very flexible, with some workers preferring to work at home, whilst others like the idea of coming into an office to do their work. At the same time, however, we needed to change the way we communicate. Before, everything was done face to face, but now we’ve changed to make full use of video communications and messaging tools. We have changed the way we communicate, which in turn has changed our productivity. Long commutes have been almost entirely eliminated, which means productivity is at an all-time high. Also, I think it has become easier to balance work and private life. I think this is a good point of the pandemic, the fact that it has changed the attitude of work towards a very positive one.
Japan is very famous for process automation companies but when it comes to digital adoption, Japan is much slower and has been ranked 28th in the world for digital competitiveness. As an IT-focused enterprise, what is your take on Japan’s adoption of digital tools? What opportunities as a system integrator does this push for digital competitiveness present for you?
Yes, I agree that we have to change the ways we adapt to these technologies. For our company, I think we have many opportunities, not only in the company's operation but also in the development of digital transformation (DX). Many companies used to do science experiments, but nowadays it has changed to using digital technology to speed up research and development in science and technology.
As the government’s support increases, do you feel that is helping companies?
I think they have many different kinds of ways to support companies, like for example if you are looking for equipment for factories. We have a factory in Chiba prefecture, and we are investing in more automation as well as the implementation of AI. The Japanese government has some forms of tax benefits in these cases, and we are using those kinds of things.
In addition, in order to achieve corporate transformation (digital transformation) using digital technology during and after the COVID era, it is essential to implement management and digital strategies in an integrated manner. The 2021 tax reform such as Digital Transformation (DX) Investment Promotion Taxation established a system that allows companies to receive support measures for digital-related investments to realize DX. I think this will help us to widely increase our productivity.
A big theme of our recent interviews has been the demographic situation in Japan. It is the oldest population in the world and is shrinking, with experts estimating that the population will be under 100 million by 2060. For enterprises here in Japan this means a smaller domestic market to sell products to and a growing need for companies to go overseas for new opportunities. Also, in terms of recruitment, hiring staff is becoming increasingly competitive, making it difficult for companies to secure quality human resources. In the case of your company, how are you reacting to these demographic changes?
Very good question. I think the company has been struggling to hire new talented young people. It is becoming much harder to find talented engineers here in Japan, so many companies are shifting their operations offshore. For example, they might conduct R&D outside of Japan. We are seeing a prevalence in countries such as Indonesia, Thailand and Vietnam. We also see some companies recruit staff overseas and bring them here to Japan.
I am thinking in a different way. In the past, people signed up for the idea that they were born, studied, worked and then retired at 60. Nowadays I don’t see Japanese retiring at 60, and I would like to think that they can work until they are 70 or 80 years old if they want that. Obviously, we have to be very healthy. With my company, we hire young people, but we also hire retired senior skilled people. We have a wide range of ages, from 20 all the way to over 75. I think to leverage those kinds of demographic changes, we should hire more skilled people, no matter the age.
Your company is mainly split into two main segments. You have your high-performance computing business and the configure-to-order (CTO) business. If we could focus on the former, which is used mainly by the academic research field, you provide computational science software and services that allow big data analysis simulations to take place. Could you highlight a project that showcases your capabilities and what exactly your company does when it comes to high-performance computing?
High-performance computing is basically using computers to do scientific simulations. Until 2010, 70% of our customers were universities for fundamental research, whereas 30% were R&D divisions from various industries. Now, however, 70% comes from these different industries. This has changed because scientific simulations are an essential technology to speed up R&D processes. This has been changing significantly since around 2010-2012.
I think simulations have become a very useful tool. In the past, you could only do very small-sized simulations, but because computing power has increased and the costs of semiconductors have become more affordable, computing simulations have become an extremely viable solution for many businesses. I also think that over time the simulation software itself has improved too.
As I mentioned, in the past 70% of our clients came from universities, and they use the simulations for fundamental research, but now we are seeing the entire industry using it first for fundamental science and then for R&D as well. We have customers in the automotive, chemical, pharmaceutical, biotech, manufacturing and AI industries.
You’ve spoken about how you’ve focused on academic research. I’m curious to know about the synergies you’ve been able to develop that enable you to pivot and focus more now on private enterprises. What benefit did this early experience with academic and research institutions give you when catering to this more recent industry-focused clientele?
Most of the fundamental research came from universities, and with this kind of experience, we have provided all kinds of different products and services including high performance computing systems, software, science cloud services, and computational chemistry consulting services. It has made the industry customers very confident in our ability to provide the right technology.
When industry players started using HPC in their R&D, many companies actually didn’t know how to use it correctly. I think our usage stems from more experimental purposes but has evolved into simulations and simulation services. I think we have a strength in this field due to our past serving universities and research institutes with these simulations. We are confident not only in our ability to provide the technology but also provide the correct training so that our customers can properly run their tests and simulations.
Take, for example, an automobile company. They want to run computational fluid dynamics (CFD) simulations which require simulations of wind tunnels and wind resistance. We provide system integration and science cloud services so they can run simulations for these kinds of things. We provide for many different customers from a whole range of different industrial fields.
Another example can be seen with a tire maker, which is now developing a new type of tire with new materials that reduce friction resistance and increase fuel efficiency. They use our products and services to run the simulations.
Your company is an SME and not a giant. What advantages does that give you? Why do automotive giants choose to work with your company?
Some tier one companies make the system like we do; however, they are not very strong when it comes to chemistry. We are very strong in that, and provide vertical solutions, from the science to the software, all the way to the system. Tier one companies only provide systems, whereas we provide a fully integrated vertical solution. Customers aren’t very interested in the system itself; they care more about how those systems will solve their questions.
The term system integrator is often used to describe firms such as yourselves. You however have coined the term “SQ as a service.” Can you tell us what SQ is and how it differs from these conventional system integrators?
Take the big players in the industry, companies such as Dell, HP or IBM. They provide you with an integrated system. We obviously do this too, but we also provide the computational solution. System integration alone, with quick calculations or quick computing, isn’t always good enough to solve some issues. There is a scientific element, or issue behind it. We have a strength in chemistry and can provide scientific knowledge to a project too. What we provide is the science, the software and the system solutions.
Which industries and customer bases are you focusing on right now to create opportunities for mid-term growth?
Right now, it is material science. As you know, the automotive industry right now is probably the biggest industry in Japan, but the second biggest is material science. I think that if Japan wants to continue to be competitive in global markets, material science is the key to survival. We are looking overseas too. We are talking to a giant chemical company based in Germany right now.
The Edge Computing revolution is coming as it allows for data latency in transmission to be significantly reduced and for data privacy to be increased. You have developed Edge Tank® which is basically a local 5G network separate from the main one. Can you tell us what motivated you to develop Edge Tank® and what are some of the applications that customers can benefit from?
Conventionally we have been integrating our computing systems into the devices, and recently there’s been a need to connect these devices to our network in order to provide better quality and more new services. Our Edge Tank® 5G enabled device has a lot of potential for developing new businesses.
Our customers want to connect these devices, such as semiconductor production machines and assembly lines to the network, in order to conduct more performance analysis. They are analyzing things like production and defect rates and finding ways to improve their production.
As cloud services are growing exponentially there is data and transmission latency. As more data comes, more energy is going to be needed. Can you explain the advantages of an edge platform and how it reduces the burden of data?
The reason someone might want to connect with a data center is that they want to take data from a machine and send it to the cloud. Edge Tank® has an AI do the selection of data that is sent to the cloud. This enables a reduction in the amount of data sent to the cloud, especially compared to a direct transmission that would result in massive amounts of data. Edge Tank takes into consideration the cost of transmission to the cloud.
I would like to ask about quantum computing because it is very rare that we get to meet someone who is on the cutting edge of such businesses as this. Conventional computers use binaries, ones and zero, whereas quantum computing is very different. Theoretically, this allows for very fast calculations that normal computers just cannot do. What is your take on the adoption of quantum computing? How far away from it are we, and what potential do you see in it for the future?
Traditional computers are based on math and information, whereas quantum computers are based on physics and information. Traditional computers are still going, and semiconductors are getting smaller. In fact, IBM announced the world's first 2nm node chip recently.
Quantum computing is still in the research and development phase, and we are thinking that around 2035 it could become a useful tool. I do feel however that quantum computing cannot solve everything. There are areas where quantum computers are good at calculating, and there are areas where classical computers excel more. In the future, I see more hybrid solutions. It is based on the technology of quantum mechanics, and in fact, quantum chemistry comes from quantum mechanics, an area where we are very strong. We are entering quantum computing using our technology of quantum chemistry know-how with the ultimate focus on materials science.
Your company is still very young, having only been established in 2006. In four years' time your company will celebrate its 20th anniversary, what do you hope to accomplish in that four-year period?
We do have a mid-term plan starting from last year. By 2024 we hope to be a top Japanese niche company in this industry and have a sales volume of around JPY 10 billion. This is the first step. The next step covers until 2027 when we hope to enter the global market. We are looking towards the US and European markets. Right now we are preparing for that by partnering with big Japanese trading companies. We are also foreseeing the need to partner with a US-based trading company. We are predicting our presence globally as a leading niche company of computing solutions by 2030.
What kind of partnerships are you seeking?
Those big Japanese trading companies already have long-established ties globally, and we are seeing our business going through those trading companies reaching to end users such as Chemical and Pharmaceutical companies. Our US partnership that we are planning hasn’t really reached the stages beyond discussion right now.
Japanese companies are famous for spending a lot of time and resources on R&D. In terms of your R&D, do you have a particular focus right now
Right now, we are currently working on a development of an advanced software in computational chemistry called “M-EVO”, standing for Molecular EVOlution. Our intent is to leverage Materials Informatics (MI) which is a widely applied method of screening chemical compounds with machine learning techniques. By combining the two technologies of computational chemistry and MI, our goal is to provide a powerful tool with a user-friendly interface that allows researchers and engineers to discover target chemical structures with desired physical properties easier and faster than before.
When we develop software, we think about how it has to be user-friendly. For example, the software used by AI engineering companies is very complicated. It really is difficult for the experimental researchers, so we make software for this use that is very user-friendly.
You’ve had a presence in Taiwan long before you even established HPC systems. In the future are you looking to start new locations, offices or even production overseas? Which countries are you targeting?
For computing, all of the components come from Taiwan, so that was a very important market for us. I think that Vietnam will be one of the locations in the future. We are foreseeing production there. I think IT investment in Vietnam is booming, and I think that we can use our technology to help Vietnam. As with everything though, it will take time and we must be patient. Our expansion into Vietnam will have to come through a combination of both government channels and private enterprises.
Imagine that we come back and interview you again on the last day of your presidency. What goals and dreams will you hope to have achieved by then?
I hope that my company is a global company that has gone public. There are no real big global companies that have been born in Japan in the past 20-30 years. I think we have a big opportunity to build this company and become that. We understand the needs of scientists and researchers, and we think we can help them to create the technology of tomorrow.