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JASCO supporting the development of environmentally-friendly plating

Interview - May 26, 2023

A firm that regards itself as a B2C company, in the last half century JASCO has established an international reputation as a surface treatment specialist.

SHIGEYOSHI WADA, PRESIDENT OF NIPPON HYOMEN KAGAKU KABUSHIKI KAISHA (JASCO)
SHIGEYOSHI WADA | PRESIDENT OF NIPPON HYOMEN KAGAKU KABUSHIKI KAISHA (JASCO)

What do you believe to be the core strengths or competencies of your organization that set you apart and differentiate you from your regional competitors?

Our main customers are from the automotive and electronic sectors. Part of the differences between us and our competitors from China, Korea and Taiwan is that they do not have major OEM suppliers. Of course, companies such as Hyundai, Samsung, and LG for example, do have some OEM suppliers. However, they do not have a large share in our market. Conversely, when it comes to Toyota, Honda or Nissan, if they decide something it becomes the de facto standard.  In Japan, companies including our own have direct communication with OEM makers. We can directly receive and respond to their requirements. In the future, it becomes a standard in the field.

Another advantage that we possess over regional as well as European OEM companies is that in Japan, Toyota and Honda have group companies in their supply chains. If Toyota go to China or India for example, their suppliers also go. If we have business in Japan and the company goes to another country, we keep that business by going with them. However, for example while Hyundai works with very good companies, there are few chain suppliers that come with them to other countries. Partnering with such a global company overseas makes it easier to do global business. Those are the two big differences between our business and our local competitors.

 

It is very interesting to hear you talk about having technology for export and that your competitors in Korea are unable to replicate this model. That strength as you mentioned comes from having very strong relationships both with your customers and with OEMs and this allows you to maintain this kind of system. One of your main customer bases is in the automotive sector which as you know is living in a transformative time with the shift to next-generation vehicles and EVs. Could you tell us a little more about how you are catering to this change, and what solutions are you offering to your clients in the automotive sector?

I will explain step-by-step. This relates not only to supply chains. Frankly speaking, our business is not B2B. It is B2C. "C" is the customer, the consumer, and the client. For example, we sell our products (brighteners and degreasers etc…) directly to our clients. They use our chemicals and they send their requirements and problems directly to us. Therefore, we need some after-sales services. Basically, the supply chain is OEM Tier 1, Tier 2, Tier 3 and so on. There are many layers in the supply chain. However, the final customers are OEMs, so we deal directly with OEMs. It is they who decide on the developments. Usually, if they want new technologies or new materials to solve their problems, they communicate directly with us.

We have a very good relationship with these OEM companies. Before problems arise, they inform us. For example, When it comes to hexavalent chromium, there was a problem around twenty years ago. However, we received information about this problem from the OEMs ten years before the problem was widely known. They said that we may not be able to use hexavalent chromium in the future. Therefore, we continued to develop chemicals that do not use hexavalent chromium. As a result, we were able to sell the Tryner series in a timely manner as chemicals that do not use hexavalent chromium.

 

We know that starting in 2024, the EU is actually banning the use of hexavalent chromium in coating agents. Even though it is carcinogenic and bad for the environment, it is very cost effective and is very strong when it comes to corrosion resistance. Therefore, there is a lot of concern that even if it is banned in advanced nations such as those in the EU, it will still be used in the mainstream in developing nations. We would like to know more about the Tryner series which is your solution to provide alternatives to hexavalent chromium coating agents, and how they can be competitive not just in terms of performance, but also in terms of cost competitiveness as well.

The cost of chemicals is important to our customers and to us. It is undeniable that when the Tryner series was first launched, there was a cost difference with conventional products. Customers were also apprehensive about using a completely new product. I believe that some of the cost increases to the client were the result of updating the chemicals more than necessary. By continuing to use the products, we and our customers have learned, and I think we are now able to optimize costs. On the other hand,In our field, the chemical price is not very important for the final users. For example, according to some estimates, the cost of plating chemicals used for fasteners in a car is less than 0.005% of the vehicle price. Around ten years ago, we established our base in Indonesia. At the time the treatment price was the same for both hexavalent and trivalent. Of course, it's new technology, so they wanted to raise the price to match the cost. However, it is very difficult to reflect the cost in the price, so we set up a base in Indonesia for local production.

 

We are currently in this very challenging and transformative time in many respects. As you mentioned, new environmental regulations are becoming more mainstream, and there is a shift in the automotive industry which is one of your core markets. There is also the need for global expansion as Japan’s economy continues to contract and constrict. You have recently become the president of this organization. First of all, why do you believe you were chosen for this position, and how will you guide this company through this big period of transformation?

When it comes to my appointment as president, it was related to a change in generation. Two or three weeks ago, we exchanged information with some European companies. For example, in the future, German OEM production will be 100% EVs.  However, Japanese car makers will not transition to 100% EVs. Because Japanese cars are sold all over the world. In India for example, they have a power supply problem, which means they cannot change to 100% EVs. Therefore, we need to continue the production of engine cars. We will continue to support and develop technologies for Japanese car makers. These technologies will require some experience. Otherwise, if they change generations, they will not be able to pass over these technologies to the next generation. In Japan when it comes to technology related to internal combustion engines and internal combustion engine parts, we need to preserve the experience that we have accumulated over the years. That means that in the future, we will be able to keep our business. In Japan, even if 80% of cars from Toyota and Nissan are going to be EVs, the other 20% of cars will still contain internal combustion engines. They will be produced in Japan, India, or other local countries. Another thing we must not forget is that the shift to EVs will not eliminate metal from cars. For example, brake parts and fastening parts will continue to remain even if the metal material changes. And metal requires surface treatment. EV conversion is a big change for cars, but it is only a partial specification change. That means that our business can continue for the next ten or fifteen years.

It is very important to be ahead of our competitors in this constantly changing era. As I mentioned earlier, we also need to strengthen our relationship with our customers. Fortunately, the Covid19 pandemic did not have a major impact on our business, partly because of our good relationships with our customers. Moving forward we do not want to limit ourselves only to the automotive industry. We want to work with OEMs in upstream and continue to strengthen our relationships in order to get more projects from them. Of course, this is a very difficult choice as many companies operate in this field.

The customer is very important. When OEMs who have manufactured engine vehicles in the past think about EVs, they are not experts in surface treatment, so it is natural that they have little knowledge about surface treatment, and it is difficult to easily deal with the problems that arise with the shift to EVs. They need a supplier who has insight into surface treatment or can suggest addressing issues. Which supplier would you choose? The one who can answer a lot of the questions or the one who cannot? Our company can meet various requests by providing one-stop services. We are a very small company, but we have a long history and have accumulated a lot of expertise over the years. We can answer various customers’ questions and offer new technologies and new materials to them. We make it convenient for the customers. As a surface treatment professional, we believe that increasing customer convenience will lead to growth.



You just talked about strengthening relationships with the customers as being very important. A couple of times you have described yourselves not as a B2B company but as a B2C company having a direct relationship with your clients individually. Often a problem for companies that have this direct relationship when going overseas is communication. It does not matter if you have the best product or the best technology if you cannot explain it accurately and if you cannot understand the needs from the locality, then it is very challenging to succeed. You just mentioned that the EU is going 100% EV, but other markets have a grace period. They are going hybrid, then mostly hybrid and then fully EV. A solution that many firms like yourselves have found to overcome this challenge has been cooperating with local partners that can help bridge the gap with those local markets. What has your experience been in collaborating with international companies?

We have competitors not only in China, but we also have European and American competitors who are chemical suppliers. They differ in logic and organization from us. Western companies seem to think that they can select a technology and send approved chemicals to India, Mexico or other countries to use them to meet OEM requirements. It's as if you put a coin in a vending machine and a cola comes out. This is despite the fact that the quality of materials, processing technology, processing equipment, climate, etc. of these countries are different from those in Europe and the United States. In addition, their sister companies are independent, and local sister companies in their respective countries are rarely supported directly by their headquarters on site. This is also true for competitors in other countries.

We do not have bases in Mexico or India.  We only have suppliers there. However, we meet directly with them. If there are some problems in India or China for example, they ask our company directly and we provide advice and solutions to them. If there are still problems, then next month we will visit locals and work with them on a solution and give the report to the OEMs. We have visited Canada before, and we have visited India many times over the past ten years. Before Covid, we visited Mexico once or twice per year. For example, one motorcycle company asked us how they could use our chemicals in South America, and could we supply them and provide support. We can provide support from the USA as a first step. However, if there is a big problem, we have to go from Japan to South America directly, and then report to our headquarters in Japan. Our competitors cannot do this. Of course, in these countries, our sister company does the selling so all the benefits go to them. It does not directly benefit us back. However, our brand and our reputation are what is important. We want to build the trust of customers.

 

You are a solution provider in that sense, almost a consultant. Anywhere where there is an issue with surface treatment, if they ask the OEM, they get referred to you.

From where are you seeing the most interest or the most of these little problems popping up that you can then address? Is there a particular region, whether that be Europe, Southeast Asia or China that you are putting more emphasis on in terms of your international development strategy?

We are mostly interested in India. Of course, in Indonesia, in terms of the population growth, we can see the strength of two wheelers there. However, I believe that the population in India is exploding at this time, so we are focusing mostly on India. At this moment, we have a sister company or subsidiary in Indonesia and a major supplier and subsidiary in China. We see many opportunities in Asia, so we have been focusing on China, Indonesia and India. However, India is a very unique country for Japanese people. Many European and Japanese car makers have been trying to launch their business there, so the demand is very strong and it will increase further. However As you will understand if you do business in India, it will be difficult to understand what kind of country India is if you cannot speak English well and communicate well. If I cannot speak English well and cannot communicate, then it will be difficult to understand what India is about.

About thirty years ago, we spoke with European and American people about why they started to expand into Asia.  At that time, they told us that their foray into Africa and South America had already been going on for a long time and that they saw the most potential in Asia, which had not yet been explored. In other words, even if we expand into Africa and South America from now on, we will fall behind them. At that time, they told us that they had already touched Africa and South America, and that they saw the most potential in Asia.

 

You mentioned how the overseas market and India especially is important for your company. When you go to India, are you looking to only cater to the Japanese customers or are you also looking to diversify and increase your customer portfolio and cater to European and US car makers or any other new customers?

When we actually go to India, oftentimes it is a requirement from the Japanese manufacturers or customers there. That is why we visit there. However, they actually have local distributors. They purchase our products and after that, other local companies want to try our products as well. Therefore, it is an expansion of our business. When it comes to Japanese OEMs, local people in India want to buy our products because they have some issues with the existing products there. We do not know what the actual problems are or what challenges they have been facing. That is why we need to visit there in person. This helps us to increase our B2C business.

Our initial target is the Japanese makers. They require our surface treatment to meet regulation, treatments which local competitors simply cannot match in terms of quality. In many cases, these local companies cannot satisfy the regulations from US companies and European companies. Therefore, they prefer to use our chemicals as we can satisfy the US and European regulations. This has led to us having US and European customers, which increases our market share.

 

As the new president of this company and as someone who has almost 30 years of experience working in the company, what would you say is the main competitive advantage of your company?

First of all, I can say that one of our main strengths that makes us unique is our after-sales follow-up services. Our business is not just selling our products. That is not the end of the story. We take care of our customers and users moving forward to ensure that we can address any challenges or issues related to our products. We take care of our customers in terms of ease of usage through our after-sales follow-up activities. In order to do this, all of our employees have to have a strong consciousness.

In addition to that, we are not the sole owners of the company. The board members are 51% shareholders of the company. Our employees are the shareholders for the remaining percentage of the company.

 

Your company is this year celebrating its 55th year anniversary. Imagine that we come back five years from now for your 60th year anniversary as a company, when you will have been the president for more than six years, and have this interview all over again. What would you like to tell us? What are your dreams for this company and what goals would you like to have accomplished by then?

That is a difficult question to answer. I am not sure if I will be able to achieve this by then, but as I said earlier, the consciousness and passion of our employees has to be increased as a company more than ever before. On top of that, we would like to continue to meet and satisfy our customers’ requirements through our strong efforts. Also, we would like to increase our market share as much as possible by then. Those are my goals for the future.

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