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Kyocera seeks international collaboration for further growth

Interview - September 29, 2022

Japan’s leading multinational ceramics and electronics manufacturer eyes information and optical communication for future expansion.

HIDEO TANIMOTO, PRESIDENT AND REPRESENTATIVE DIRECTOR OF KYOCERA CORPORATION
HIDEO TANIMOTO | PRESIDENT AND REPRESENTATIVE DIRECTOR OF KYOCERA CORPORATION

Where do you believe the strength or competitive advantage of Japan's industry lies today?

The market for home appliances and related products has moved into regions like Korea and China, which have grown stronger, especially in LEDs and solar power panels. Since local companies there have the necessary manufacturing infrastructure, and strong know-how in production, they can easily make these kinds of products if they invest in equipment. That’s why Japanese companies became less competitive in these fields. Regarding total investment, Japan lags China. However, Japan has maintained its edge over other competitors in high quality materials. The reason for that success lies in Japan's work ethic, discipline, exceptional attention to detail, and the constant pursuit of excellence in terms of materials. Japan still leads in industries like ceramics, where it is very difficult to replicate expertise and know-how. 

 

Kyocera is a one-of-a-kind, globally renowned enterprise with hundreds of group companies servicing over a dozen sectors. How would you describe your manufacturing philosophy? What strengths allow Kyocera to excel in the global market? 

Kyocera was founded in 1959 by Kazuo Inamori, and he developed our management rationale, which is, “To provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind.” I think having a solid philosophy that unites people to embody this type of  spirit and to constantly challenge themselves has set us apart from others and driven us through the years. All of our staff members actively participate in the company’s management toward success. Obviously, we depend on our people, with their keen expertise, especially in areas like R&D. But in general, everybody in the company moves forward with full awareness that they are a part of what makes us Kyocera.

 

What synergies are you able to create between so many diverse business lines?

We recently consolidated 16 product lines into three main business segments. Until the 2000s, based on the model of mass production, a company that produced and sold a standardized product could be confident of achieving profitability and growth. Since then, however, a new approach has emerged. Combining different business segments, products, or technologies can offer potential to create new applications and expand into a diverse range of fields to address societal needs that seemed impossible before. We shifted our way of looking at the business from a vertical model focused on deepening specific areas of expertise toward a more horizontal, or “networked-based” model, that maximizes the synergistic effects of integrating diverse technologies and competencies. An example of one of the synergies that resulted from this shift is our digital textile printing system, which allows for significant water savings when producing digitally printed clothing. In this case, one of our group companies provides expertise in printing equipment, while another Kyocera product line provides high-precision components for a new type of inkjet printhead. We expect to launch this new printing system in the second half of this fiscal year.

 

With your comprehensive solar power business, what is your strategy to capitalize on the increased attention and effort Japan is devoting to renewable energy?

Our solar panel business flourished for a certain period when the feed-in tariff (FIT) system was introduced in many countries. However, many companies that led the early solar power revolution have gradually lost competitiveness to lower-cost producers. Consequently, Chinese companies started dominating the market. On the other hand, the Japanese government has outlined a goal to further expand the use of renewable energy. Our approach has been to combine three smart energy technologies — storage batteries, high-efficiency solid oxide fuel cells (SOFCs), and solar electric panels. For example, when a solar electric system is installed on a roof with a storage battery, it can become a zero-emissions home that generates its own energy. Since placing solar on a roof is not easy in Tokyo or urban areas, we also promote another energy system utilizing SOFCs. While fuel cells are still powered by utility gas, all houses could theoretically be powered by hydrogen, a 100% clean alternative to utility gas, in the future. This combined power system could become the basic energy infrastructure for a carbon-neutral Japan. Achieving this goal will require close collaboration with other institutions and companies. We would like to jump-start it next year.

 

Japan has made no secret that hydrogen will be its energy source of the future, being the first country in the world to unveil a national hydrogen plan in 2017. However, the main obstacles have been the cost and technological hurdles. Is pursuing hydrogen technology an area of interest or focus for Kyocera?

Hydrogen as an energy source is a very promising concept, especially considering our efforts toward becoming a carbon-neutral society. It entails numerous challenges requiring the establishment of an international framework — such as, perhaps, building solar power infrastructure in the Australian desert and using that energy to produce hydrogen. It may require us to work with some Japanese trading firms or other various companies, since there are limits to what one company can do within such a colossal vision.



What has been the impact of COVID on your business? 

Due to the COVID-19 pandemic, Japanese companies had no choice but to change their workstyles. One example is remote work, which could never have been adopted apart from some drastic change in the business environment. For some reason, this change has resulted in something positive for the Japanese population in terms of striking a work-life balance. Further, the recent rise in commodity prices and worldwide energy supply challenges could be a catalyst for countries to adopt renewable energy on a larger scale and push that industry forward. It also could be a big chance to change our mindset to be more positive and focused on producing something of great benefit to us all.

 

You have emphasized the importance of collaboration or “co-creation” as part of your business model, promoting innovation between government actors, other countries and other diverse sectors. As an enterprise with so many group companies and business partners, what does Kyocera look for in a partner?

Because our company has been involved in many M&As, we have learned that it is crucial for our partners to share similar values and to embrace a unifying philosophy. The key aspect of any partnership is simply that we work together as a united group of people. It must go beyond merely sharing technologies.

 

In a recent press release from your information and communications business, we read about your collaboration with SoftBank to shorten the construction time of 5G networks in Japan. Can you give us an overview of this experiment and its success?

In the past, Kyocera developed a Personal Handy-phone System (PHS, Japan’s unique communication standard) business in addition to manufacturing cell phones. Our PHS business required us to manage the installation, engineering and maintenance of the base stations at that time.

Although Kyocera discontinued its PHS business when the 4th Generation Mobile Communication System (4G) era arrived, SoftBank had succeeded in this area, and has become an important partner for us. Kyocera undertook the maintenance of base stations for SoftBank. Therefore we had a chance to work with them in providing the backhaul system for 5G, which is very close to the base station type of work, allowing us to expand within the communications field beyond just manufacturing and selling cell phones.

 

Is there any particular new service, product or solution that you are looking to showcase to an international audience? 

We have started to develop new communication technologies using laser light, although more time is needed before this can be commercialized. Recently the US-based firm SLD Laser joined the Kyocera Group (now Kyocera SLD Laser, Inc.). It has been developing gallium nitride-based lasers that offer the potential to create a higher-speed communication technology than 5G. We call it “Li-Fi” — wireless communication using laser light. In addition, we started developing optical power transmission technology that enables electricity to be supplied using a laser with no physical contact between the transmitter and receiver. We look forward to launching new devices to the market based on laser technologies over the next several years.

 

Are you seeking other collaborative partners or M&As in the optical communication field? What is your strategy to further consolidate your presence in this field? 

I believe that technology alliances and collaborations will become the mainstream way of working globally. For example, we are manufacturing storage batteries. The business started through a collaboration with an MIT professor and a company called 24M. In this way, I think working with various universities or university-based start-ups is the way forward.

 

Can you please comment on your recently released second-quarter financial results? What do you see as the key reasons for the positive results? 

Over the next decade, we believe the semiconductor industry will continue to grow. Therefore, we’ll devote more effort and resources, including a new factory, toward that industry, which was a key driver of our strong results in the past quarter. Next year, current-generation semiconductor components are expected to reach maturity; however, we believe there is still room for immense growth regarding the cutting-edge requirements of the most advanced semiconductors. We plan to continue serving this field by supplying our packages and components, and we expect to grow significantly by doing so.  

We aim to continue to horizontally integrate the broad range of technological capabilities we have developed across different businesses. Regarding our newer ventures, we plan to push forward particularly with the development of gallium nitride laser diode products and digital textile printing. 

 

What opportunities do you see for Kyocera in serving Japan’s growing semiconductor sector?

I think it is important to take a global approach to be more competitive in this field. In the semiconductor industry, there are designing companies, manufacturing companies, and companies that supply parts for semiconductor manufacturing equipment, like Kyocera. These are totally different segments. In general, the industry is characterized by a relatively small number of semiconductor producers that comprise a very large share of the market, so we’ll continue working closely with these customers.

 

Can you tell us more about your international development strategy?

When it comes to going global, Japanese businesses should improve in diversity and inclusion. Compared to an American firm like Kyocera SLD Laser, which has 50 employees from about 12 countries and regions, Japan’s industry lags behind. From that perspective, I believe that we need to focus more on diversity to pave the way for us to really integrate different perspectives and draw out the strengths of others.

 

Imagine we come back to interview you again in seven years on your 70th anniversary. 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?

I mentioned our corporate philosophy and our management rationale, which is to provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind. In the next seven years before our 70th anniversary, I want the company to meet our employees’ expectations, and for everyone to be happy and satisfied here. I would like Kyocera to be known for that.

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