In a candid interview, the president of Japanese trading company Iwata & Co. discusses the current advantages of Japanese firms amidst global economic changes, emphasizing strengths in high-purity chemicals and advanced equipment for industries like semiconductors.
Right now is a pivotal time for Japanese makers. Policies like the US Inflation Reduction Act are forcing corporations to diversify their supply chains for reliability and to reduce country risks, particularly with nations such as China. Japan is known for its reliability, advanced technology, and a weak JPY, making it a cost-effective option currently. This means that Japanese firms have an opportunity to expand their existing global market shares. Do you agree with this sentiment, and in your opinion, what do you believe to be the advantages of Japanese companies in this current macroeconomic environment?
For our business, the weak JPY is not having too much of an impact, and I think this is because much of our business is not based on USD. This means that we are trading with Japanese companies. However, Japan as a whole is seeing an impact due to the amount of energy we need to import into the country. Japan is essentially dependent on foreign countries for its energy, and therefore, the weak JPY is having a huge impact.
One of the industries that is important to your firm is the chemical industry, and we know that Japan is a country that lacks natural resources. Despite this, Japan is one of the leading countries in providing high-purity chemicals, highly functional materials, and highly functional chemicals to many industries, from semiconductors to the automotive sector. As a trading company related to the chemical industry, how would you define the main strengths of the Japanese chemical industry?
The biggest strength of the Japanese chemical industry is its materials. In addition to these materials, I would say that another core strength is the quality the industry can produce. Japanese companies can produce products with high levels of purification, which is why we see them being supplied to the semiconductor industry. I think firms here are very good at producing these types of products.
Another point is the equipment. High-quality equipment is required for the production of semiconductors, and Japanese firms are capable of providing this equipment. I feel this is a very prominent competitive edge. While this is not related to the chemical industry, I do think that the demand for these high-quality pieces of equipment will rise.
What role do you believe trading companies such as yours play in the Japanese chemical industry?
Our role is that of a coordinator. In order to provide high-quality products, we have to combine high-quality materials with a good chemical supply chain and high-quality equipment. In addition, each device maker has different methods, so we have to customize the products to respond to customers' requirements. Trading companies play an essential role in responding to those requests promptly.
Standard semiconductors don’t have a competitive edge, so there is an emphasis on our firm producing products that can have a competitive edge.
Between 2021 and 2023, the Japanese government invested approximately JPY 3.9 trillion in the semiconductor industry, which is around USD 24.8 billion. The reason the Japanese government has pursued such heavy investment is because they are looking to support higher manufacturing and R&D for both materials and equipment, with a focus on next-generation semiconductor technologies. What role do you anticipate Japanese semiconductors will have from a global perspective? How can Iwata leverage this growth?
Firstly, I don’t think that the Japanese government’s policy is wrong because Japan’s competitive power comes from high-quality materials, which allows Japanese firms to be highly competitive in the global market. This is why the government is taking this approach to enhance the country’s competitiveness. Reflecting on their policy now, I think they have made some fantastic moves.
Regarding R&D capabilities, I think that Japan is one of the top countries in the world. In addition to Japanese companies, Japanese universities and research institutions have high abilities. As you might know, many Japanese researchers have won Nobel Prizes. I think that Japan has the ability to connect basic research with practical use, meaning these companies and institutions will be key to developing new materials and devices going forward, particularly for the semiconductor industry.
Can you give us a quick overview of your company including your main strengths and core competitive characteristics?
In the semiconductor industry, our biggest role is to provide customized equipment, so I think it is fair to say that this is our competitive edge. In machine processing, each manufacturer has different processes, but since the experience we provide is customized, we can supply the equipment needed by each customer. Our work unfortunately isn’t flashy, so we don’t stand out; however, what we do is vitally important for our customers, especially those producing high-quality semiconductors. Our technology and know-how are contributing to the semiconductor industry as a whole.
If you look back at the history of our company, we have contributed to the production of high-quality semiconductors by proposing blown resin filters. We are also a trading company for the chemical industry, so it is important that we try out new combinations of materials in order to provide better materials and equipment to our clients. In this way, I believe that Iwata is contributing to the greater good of many industries.
In 2020, you established a subsidiary called Seibu, which plays a crucial role in the rapidly expanding semiconductor industry by leveraging your key strength of customized production equipment. Could you elaborate on Seibu's evolution and how you foresee it continuing to evolve in the years to come?
Seibu plays a vital role in providing customized equipment to the semiconductor industry. As that sector continues to evolve, so too should our equipment. Due to its small size, Seibu is able to be flexible to changes in the industry and can respond quickly and appropriately. In Japan, there are many very small factories, and these factories have supported the Japanese manufacturing industry for a very long time. I consider Seibu in line with these very small factories, and so it can respond to changes in society.
Iwata’s flagship product is your Auton series, a one-component sealant for building materials consisting of a unique polyurethane. This product boasts limitless potential, especially in the construction industry. Could you give us a brief introduction to the limitless potential of your Auton series?
Yes, we are a company always looking to expand upon our Auton series. However, I wouldn’t say it is a sealing material; rather, it is a material for construction. The formula is very flexible and utilizes the power of chemistry. We are now working on a hard coating for surfaces, and I think the whole world has a need for this kind of product. The company is now looking to research usage cases for this possible new Auton product.
Rubber-like materials are often used in Japan because of the number of earthquakes that occur there. We can make this material either softer or harder and transparent depending on the need, something that cannot be done with other types of resins. This has resulted in good-quality products that people really appreciate.
We believe there will be various applications for this product including construction and infrastructure support such as civil engineering.
Today you mentioned the power of chemistry, which we understand is your company philosophy. Could you elaborate on these words and describe to us what you feel is the power of chemistry?
If I could summarize quickly, it alludes to the limitless possibilities of chemistry. There really are limitless combinations, and people can dedicate entire lifetimes to trying to discover a small fraction of those combinations.
Currently, we have five business units, all related to chemistry and chemicals, and that includes our construction material business. Chemistry is essentially the glue that holds our company together.
When we interviewed you last year, you mentioned expanding into India, Southeast Asia, and Singapore specifically. Could you elaborate more on the future outlook of your overseas expansion? What are the challenges you are currently facing, and what actions have you taken to establish a strong presence in the Southeast Asian region?
Currently, we are quite interested in Malaysia, and it seems that most semiconductor companies around the world are also paying attention to Malaysia since factories are being constructed there. Our company is also preparing to establish our business there, with the possibility of an office branch in the future.
Malaysia is heading towards becoming the hub for semiconductor industries within the Asian region but also holds a different role than Japan. The key might be the fact that Kuala Lumpur is a rapidly developing city. For this reason, we participated in a construction material exhibition there last year and intend to participate again this year.
In the short term, what is your vision for Iwata?
Iwata is striving to be involved in the development of next-generation chemicals, and our mission is to contribute to the evolution of technology on a global scale through the power of chemistry. Contributing to the environment in a sustainable way using the power of our chemistry is another way we can participate on a global scale, cementing the name Iwata all around the world.
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