Expertise in developing new functional materials, production technologies, and quality processes positions Japan’s chemical industry at the forefront of confronting modern challenges.
It is an exciting time for Japanese manufacturing. The past three years have seen large supply chain disruptions due to COVID as well as the US-China decoupling situation, and as a result, corporate groups are looking to diversify their suppliers for reliability reasons. Known for their reliability as well as their advanced technology, Japanese firms are in an interesting position. Combined with a weak JPY, many observers argue this is a unique opportunity. Do you agree with this sentiment, and what are the advantages of Japanese firms in this current macro environment?
Yes, I concur with your sentiments. Japan, as a country, has been profoundly affected by the COVID-19 pandemic and the US-China decoupling. The supply chain in Japan has also experienced disruptions. Nevertheless, even under these extreme circumstances, Japanese manufacturers have remained committed to the principles of quality control and stable supply. Given their unwavering reliability in delivering high-quality products, Japanese companies will be increasingly sought after as suppliers.
In this rapidly evolving landscape, the chemical industry is significantly impacted by environmental concerns, SDGs, and carbon neutrality. Japanese companies have long demonstrated a strong commitment to addressing environmental issues. Many of these companies adeptly navigate these challenges using conventional facilities. Additionally, Japanese firms will actively engage in diesel transformation and mobility innovation. Their expertise in developing new functional materials, production technologies, and adherence to stringent quality processes positions them at the forefront of the industry.
Over the previous year many things have happened. The Japanese borders have opened, the WHO announced that COVID-19 was no longer a global health emergency, and your firm was published in both Newsweek and Times magazines. As president of Iwata, how would you reflect on your business over the past 12 months?
We take pride in our company's ability to navigate through exceptionally challenging times, and a key factor in our success was the establishment of resilience in our supply chain. Throughout the disruptions and difficulties, we have remained steadfast in upholding our role and mission.
One sector that had a particularly hard time during the pandemic was the semiconductor industry, and as a result of increased inventories and drops in demand due to tightening monetary policies, the industry has taken a significant downturn over the last few months in particular. Nevertheless, all major companies in the sector are expected to rebound in the second half of this year. Reasons for optimism include consumption-driven recovery in China, spikes in demand for microchips in EV and AI applications, as well as a pause in interest hikes. How will these developments affect your business and what challenges or opportunities do you foresee in your business as it relates to semiconductors?
Currently, the semiconductor industry is experiencing a downturn. However, we anticipate a swift recovery, given that we have already secured orders for capital investment projects not only for the upcoming year but also for the subsequent year. Consequently, the power performance is expected to align with the industry's upward trends from the next fiscal year onwards.
At the Iwata group, we possess the capacity to cater to a wide array of chemicals, including high-purity chemicals and materials essential for semiconductor manufacturing processes. Nevertheless, as similar semiconductor facilities are established within Japan, we recognize the need to adapt our supply approach accordingly. The paramount concern regarding the semiconductor industry's further growth in Japan lies not only in investment but also in bolstering supply chain resilience. It is crucial for the Japanese government to extend support to local semiconductor manufacturers and the companies that play a pivotal role in sustaining the entire industry. By mirroring the domestic supply chain structure implemented by the automotive industry, we can fortify the semiconductor sector's stability and growth.
When it comes to semiconductor manufacturing, we are seeing a shift in materials. Silicon carbide and gallium nitride have been receiving increased attention because of their excellent physical characteristics such as high heat resistance and the use of these materials will enable more efficient electronic equipment. As a trading firm that offers chemicals for semiconductor manufacturing, how are you taking into account and catering to the use of these newer semiconductor materials?
While we do not directly sell materials, we eagerly embrace the potential revolution in the semiconductor industry, particularly for new applications. As novel materials are adopted, or existing applications are enhanced, novel processes become essential, thereby creating lucrative business prospects. Japanese companies, in particular, enjoy an advantage in providing high-quality materials and equipment. We are committed to supplying the necessary chemicals and equipment to facilitate the utilization of these cutting-edge materials. Furthermore, we are exploring opportunities in production facilities.
Our subsidiary, established in 2020, is playing a crucial role in the rapidly expanding semiconductor industry in the Kyushu region. These small-scale factories epitomize the essence of Japanese craftsmanship, and SMEs like ours possess and maintain advanced Japanese technology. Our subsidiary represents one of our core strengths, excelling in custom ordering production equipment and maintaining an efficient annual maintenance system. Their contributions are indispensable to the success of new semiconductor manufacturing brands and processes.
We know that you have many subsidiaries, and you are a major shareholder of Auto Chemical, a firm that is known for developing the Auton Series, a one-component sealant for building materials. In a previous interview, you stressed your desire to grow this product lineup to the Southeast Asian region as well as India. Can you go into more detail about the Auton Series and the advantages it has over more conventional sealants? How has the international expansion for this product been and what is your strategy going forward?
The Auton Series stands out from its competitors due to its unique composition, employing a special polyurethane that distinguishes it from conventional silicon and modified silicon sealants. As a result, the Auton Series boasts several advantages, including superior weather resistance and extended lifespan. The installation process is simplified, adding to its appeal.
Despite the product's exceptional features, sales expansion into Southeast Asia has encountered limitations over the past three years. To address this, our company is actively working on establishing effective sales channels through our subsidiary, Siam Iwata, in Thailand, as well as forging partnerships with reputable companies in India. These strategic efforts aim to facilitate the product's market penetration and maximize its potential in the region.
Another way companies are able to promote their products both domestically and internationally is through exhibitions. Many firms use expos to promote their activities and their products. Is participating in such events domestically or internationally an area of interest for you, and if so, what would you like to showcase?
We will be participating in an exhibition in Kuala Lumpur later this month, and this exhibition is centered on building materials. The idea is to expand our sales by meeting with potential clients or partners.
SDGs are the hot topic right now, and while many industries are shifting towards addressing environmental issues, the semiconductor industry in particular is widely known for having some serious environmental issues that need addressing. Additionally, the chemical industry has also historically been a large industrial consumer of both oil and gas. When it comes to SDGs, how much do they dictate the new policies or strategies your company implements?
Our company's legacy is deeply rooted in the pursuit of Sustainable Development Goals (SDGs), and we firmly believe that all chemical companies have a pivotal role to play in shaping a sustainable future. However, this responsibility extends far beyond the chemical industry alone. It is incumbent upon businesses worldwide to adopt and implement more robust measures and ambitious goals, in a collective effort to safeguard our planet and conserve our environment for the generations yet to come.
In Europe, a law was recently passed stating that all manufacturers have to focus on reducing certain toxins from the air. Based on that, do you think that Japan should follow suit and start to implement a similar strategy to reduce toxic emissions?
My question regarding this policy is, "Can cars or semiconductors be manufactured without the use of these specific particles?" Presently, the answer is no; it remains practically impossible at this juncture. While DuPont and 3M have ceased the production of fluorocarbons in compliance with new regulations, Japanese companies are continuing this practice. This situation poses a complex and sensitive challenge. Striking a balance between eco-friendliness and productivity is essential for the sustained production of cars and semiconductors. As a trading company, it becomes imperative for us to harmonize our SDGs with these intricate considerations."
Historically traders have been responsible for handling, distribution, and financing, but this is slowly changing to a role that provides production and formulation services. How do you believe traders will evolve in the future, in Japan specifically?
For companies like ours to ensure survival, adaptation, and evolution are imperative. The world is rapidly transitioning into an advanced information society, bridging the gap between companies and their customers. The traditional benefits of having intermediaries are diminishing as information becomes readily available to anyone worldwide. In the past, information played a crucial role for trading companies, but its accessibility has reshaped the landscape.
I firmly believe in the significance of creating distinctive businesses and services. A key advantage of trading companies lies in their ability to embrace change readily. Their versatility and adaptability position them as an ideal fit for the contemporary world, characterized by an extraordinary pace of change. In such a dynamic environment, trading companies' agility and inclination to explore diverse business styles foster the potential for success in the evolving landscape.
Could you give us an update on your international expansion and are there any new interesting markets or regions that have caught your attention in the last six months?
Progress with our expansion has been difficult over the past three years. We are now starting over and we are targeting India, Vietnam, Malaysia, and Indonesia. Additionally, we hope to establish a branch in Singapore.
How do you envision the growth of Iwata over the next year and how would you describe your company if you were doing a sales pitch for overseas customers in the regions?
The pivotal factor lies in showcasing Japanese quality and effectively communicating the remarkable capabilities of Japanese companies and individuals to the world.
Interview conducted by Karune Walker & Sasha Lauture