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Kohoku Kogyo: Supporting the Industry 4.0 from behind the scenes

Interview - April 6, 2023

With the demand for aluminum electrolytic capacitors and fiber-optic devices driven by the needs of fields such as 5G/6G internet, CASE (connected, autonomous, shared, electric) vehicles, industrial automation, and smart electronics, the future certainly looks bright for Kohoku Kogyo.

FUTOSHI ISHII, PRESIDENT OF KOHOKU KOGYO CO.,LTD.
FUTOSHI ISHII | PRESIDENT OF KOHOKU KOGYO CO.,LTD.

I would like to start by asking you what Kohoku Kogyo’s monozukuri is? What do you believe to be the strengths or advantages of your company that has allowed you to continue to excel and compete in overseas markets?

Let me start by talking about the details of each of our divisions individually. Let me start with lead terminals, we actually also produce all the equipment or machines to produce lead terminals by ourselves. No company in the world can do this, and we are a very unique presence in that sense. In the past, there were seven manufacturers in Japan that produced lead terminals, but now only two have survived and one of them is us. I think that our ability to produce every machine and equipment needed by ourselves is something quite helpful in differentiating ourselves from our competitors. There is one more company that has survived, but they purchase these production machines and equipment from outside the company.

Panasonic and other major manufacturers gave up producing in-house by themselves and outsourced the production of lead terminals to us. Our ability to develop and manufacture not only the lead terminals but also the equipment and machinery needed to produce lead terminals puts us in a very dominant position. We do have competitors in China, Taiwan, and Malaysia, but obviously, we are a major player in this market, and those competitors use equipment and machinery that are duplicates and copies of our older and more obsolete machinery. We put an emphasis on protecting our technological edge and know-how from being leaked outside the company, and we hold a set of patents as part of our IP strategies. In fact, we have more than 60 patents now and I think this is a key advantage of our business.

Next, I will talk about our optical communication components and devices division, where I think the design technology is key. We have a technology to design devices, and we are the only company in this industry to be successful in designing the key material composition as well as devices. We have a competitor in this sector with a big American company called Lumentum Operations LLC. We share a 50/50 market share with them, but there is a big difference between them and us. They don’t do material designs and they only do devices. They purchase the materials from American and Japanese manufacturers.

I think that is the strength of Japanese manufacturers, that they produce the materials themselves. It isn’t a glamorous or fashionable job, but it is essential. The PGA once held a golf tournament in Japan and they did some research before the tournament on which companies had contributed to the golfing equipment that was going to be used. They found that while the heads of the clubs were made by some American companies, the shafts were all completely made by Japanese companies. The material was a key aspect of this, and I was surprised too. Obviously, the head of a golf club is important, but all the strength of a golf swing comes from the shaft.

 

Can you tell us a little more about the methods and quality control measures you use to ensure that your products, even if they are made at such high volumes, don’t have defects when used by your customers?

I think there are two important factors to consider, and the first is the equipment. We have continuously improved our machines and equipment, as well as committed to quality training for our employees. This is normal for us, as we produce 4 billion pieces per month and that is something quite unique.

 

Your products are an essential element of an electronic circuit and are used in a variety of fields, including automotive components, communication equipment, and industrial equipment to name a few. Who would you say is your main clientele?

One example is Tesla, whose Model 3 cars use 600 pieces of our terminals in one car. What I have heard from our customers is that they only need Kohoku Kogyo terminals, and nothing can replace ours.

 

As you know the automotive industry is experiencing this huge shift with the advent of electrification. A greater and greater percentage of components are becoming electronic, with the latest predictions having their cost share in relation to the total value of the car growing from currently around 16% to around 35% by 2025. I imagine that this represents a great opportunity for your company, so can you tell us more about how these changes in the automotive sector are impacting your business?

What we have been hearing from customers is that a different level of quality control is required. That is mostly for the electronic fuses for computers and TVs, and the environment that these are used in varies so differently. Thus, we see the quality demanded by customers has increased dramatically for data terminals. The German company Continental is our customer's customer, Continental has a request to be certified to the IATF 16949 standard. IATF 16949:2016 is a technical specification aimed at the development of a quality management system that provides for continual improvement, emphasizing defect prevention and the reduction of variation and waste in the automotive industry supply chain and assembly process. It is only us that have this certification in our field, and I actually think it might be impossible for others. This has had a big impact on us.



I started with the company in April 1995, but at that time I didn’t feel there was this trend of quality control requirements coming. There was a period of time when South Korean and Taiwanese companies stole our technology, and they were able to produce products at a much cheaper cost. I have a high school classmate who is working for Toyota, at the time he told me that Toyota is willing to pay double for electronic devices if the company that produces them can avoid any kind of defects. Toyota actually told Panasonic to visit our company and specifically make a factory tour. After the tour, they gave us some advice, and then Toyota came back to us 10 months after Panasonic’s visit. It was a huge endorsement of the business we do here, and even though we are a small company, it is gratifying that these massive companies consider us a vital part of their business.

 

You have spoken about the need to create products that can operate in even the harshest environments. We saw that you have transitioned into the optical communication business as well, which especially in terms of submarine cables, is a very harsh operational environment. How have you applied your expertise in lead terminal manufacturing to the optical components and devices  division of your company?

In the lead terminal manufacturing process we use precision molds, and this precise shaping technology and know-how are used in the manufacturing of optical components. I think that is a great synergy we have realized.

 

We know your company was just listed on the Tokyo Stock Exchange (TSE) in December 2021, and during your announcement speech, you mentioned how you intend to make your high purity quartz glass business a new pillar of your operation. We know that you provide these high-purity quartz glass lenses molded by slurry casting methods. What are your plans to develop this business as a potential third pillar of your business?

One of the strengths lies in the flexibility of our product shapes. We can make a wide variety of shapes, no matter what shape is required. We are seeing future applications in Multi-core optical fiber. The inner diameter of current optical fibers is around 125 microns, and there is no room for expansion of capacity of each undersea cable. That is the current worldwide situation. About 10 years ago a  related  academic society had a sense of crisis, so we started to work on dramatic improvements. What we are looking to do is to produce a free-form multi-core mother material for this optical fiber and now we are in the trial phase. There are possibly three different manufacturing methods to produce this free-form multi-core optical fiber. We actually made a presentation on trial products at one of the biggest communication community conferences. It was received very well. Unfortunately, we cannot produce bigger ones yet, and that is a challenge we are facing right now. As you can see this multicore fiber contains over 100 individual cores, which is a huge number. Nobody in the world can produce something like this, other than us.

 

What role does collaboration play in your company in terms of research and development or product development? Are you looking for any collaborative opportunities overseas?

I think it is important, and it does play in our activities. Actually, Japanese companies are not good at making collaborations with other companies. We are looking for collaborations in laser device manufacturing right now. I think the area of laser production is somewhere with massive growth potential in medical and sensor applications as well as defense.

 

You mentioned how it is difficult for Japanese firms to make the leap to international markets, but I think your company is an exception to that case. Since the 1980s you’ve had operations overseas, starting in Singapore. What is your strategy for your overseas operation, and are there any key markets you’ve identified for potential future growth?

For lead terminals, Asia is the key market. We have an office in Singapore and Malaysia as well as two offices in China. The Chinese offices have some marketing and sales capabilities, and they are ready to go. In the optical devices market, I think marketing is the key to our success internationally. These are cutting-edge products with high added value, and Europe is definitely somewhere with potential for these products. There is a company that we have been working with for 20 years now in Boston Massachusetts, but this is purely for the name and no financial relationship between us exists. They have helped us to establish relations with American customers of our products.

 

How do you plan to tackle both the European and American markets, which you have mentioned are key to you, especially with the production of quartz multicore fibers?

Yes, we are trying to establish sales offices in both locations and may look to some forms of joint ventures to assist in penetrating those markets. I can’t disclose more information at this time because of NDAs, but needless to say, exciting things will be happening in the not-so-distant future.

 

Imagine that we come back and interview you again seven years from now. What are the goals and dreams that you would like to achieve in those seven years?

I really want to make this company R&D driven, and I think that is what many Japanese companies are lacking.

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