Japanese spring manufacturer MATEX has enabled its growth through its international management structure and dedication to customer centricity.
It is our view that Japan is at a very exciting time for manufacturing. On one hand, we have had major supply chain disruptions in the last three years, caused by the COVID-19 pandemic as well as tension from the China-US decoupling situation. As a result, we are seeing many multinational groups try to diversify their supply chains with a focus on reliability. This is where Japan can enter; a country known for decades of high reliability, trustworthiness, and short lead times when it comes to production. Now, with a depreciated JPY, it is our view that there’s never been a more opportune moment for Japanese manufacturers to meet the pressing needs of this macroeconomic environment. Do you agree with this premise, and why or why not? What do you believe are the advantages of Japanese manufacturers in this environment?
There seems to be a perception gap between those looking at Japan from the outside and those looking at the situation from within. People looking from outside tend to be very optimistic and this may account for more overseas investors buying Japanese shares this year. Whereas Japanese people look at the situation from the inside, they instead see a more pessimistic environment. They are not sure exactly what the future will hold, and in fact, many fear that the JPY may depreciate further. Overall things don’t look bright for them.
People know that China has inherent risks, but right now I think that Japan has much higher risks because the future is so uncertain. There is a chronic lack of available laborers and even places like TSMC and Sony’s semiconductor fabrication plant in Kumamoto are struggling to hire enough people. Tokyo is the same; there are simply not enough people willing to work which keeps pushing wages higher and higher.
Trying to support mass production with such a lack of workforce might not be a good idea. However, it is not all doom and gloom. Japan still excels in areas such as B2B, niche markets, and high-mix-low-volume production. The reason is that Japanese businesses tend to be very good at discussing what steps can be taken, organizing, and coordinating between different players to come up with viable solutions.
Another possible advantage is that Japanese culture in general abhors failures and mistakes. This plays a positive role when going into areas like aerospace and medical where a single mistake could cost lives. Mass production has moved to China, where they are not afraid of trial and error. Japan prefers a much more careful approach to doing things incrementally and this in my opinion is better suited to more life-critical areas like aerospace, medical, and even cars.
Japanese and Chinese cultures have different senses of speed. In China they take certain risks in order to move things faster, whereas Japanese people are more careful and considerate, therefore not being able to move at faster speeds.
During your answer, you mentioned a shortage of labor. Japan is now the world’s oldest society with a negative demographic line, with experts predicting a population of under 100 million by the year 2050. This is creating several problems including a shrinking domestic market and a labor shortage as you mentioned. As a manufacturer of coil springs, to what extent do you believe Japanese firms must look overseas in order to ensure long-term success and mitigate the damage of Japan’s declining demographic line?
You are right, and the idea of national power stems from the population of a country. Since Japan is still very reluctant to accept foreign workers, we are not going to see our population power go up anytime soon. In that sense, we cannot expect any kind of further growth inside Japan and we understand that we need to reach out into larger population markets such as the US, India, China, and Indonesia. I think the solution is to focus on supplying our specialized or niche-oriented products. Many companies have tried to pursue mass production by setting up production facilities outside of Japan, but I believe our company’s best option is to focus on providing our specialized components inside Japan and then sell them outside.
There are many coil spring manufacturers in Japan and overseas. What makes MATEX special and differentiates you from your competitors domestically and globally?
This might be a bit of a tangent but I think it might be prudent to tell you how my company works. We have 4 overseas operations, and across all of those operations, there are just 10 Japanese employees in leadership positions. I feel that we are good at relying on local talent for our overseas operations, whether that be in China or the Philippines. We are good at being very agile in local markets and are capable of setting up business fast and are able to start production in a very quick manner. While other competitors coming from Japan are still mainly focused on Japan, MATEX’s overseas operations are actually managed from Hong Kong, not from our Japan office in Ina City.
Technical capabilities are one thing, but MATEX’s real strength may lie in our management style. One advantage of having a head office in Hong Kong is that we can get good tax breaks. We manage our talent resources by shifting people around, and we employ around 170 people in Vietnam and another 150 people in the Philippines. With only 10 managers being Japanese it means that we do have a lot of regional management capability. Our products may not be that different from our competitors, but I think our management style gives us a clear edge.
In fact, many Japanese companies are struggling to go overseas because they lack management know-how. This is especially true for SMEs from Japan. Even though they may be presented with exciting sales opportunities overseas, they struggle to actually establish offices outside of Japan. Since they lack the know-how they have to rely on trading companies which eat into their margins. If we outsource our materials to countries that offer low prices we can profit, but because of a lack of know-how in managing supply chains, Japanese companies don’t always get the best deals even though they can potentially do so.
Would you say that your management in Hong Kong is the key to succeeding with duplicating the level of quality in Japan outside of your overseas factories?
Senior management in our overseas companies are all technical engineers. They are very good at the quality assurance side of things. We also encourage our overseas operations to compete with each other to come up with better products. For example, there are differences in how quality assurance documents are managed between our operations in Vietnam and the Philippines. In the Philippines, documents are arranged and displayed cleanly, whereas in Vietnam that isn’t always the case. This however doesn’t mean that Vietnamese products are lacking in their quality control system, it instead means that they tend to focus on actual products and don’t care so much about the appearance of documentation. Chinese people are very clever and they want to do things effectively. There are a lot of things we can learn from them. Japan, as we mentioned, is slow and incremental. I try to mix the good points from each approach to come up with the optimal solution.
Coil springs are used in a variety of applications, and since your company has such a wide range of wire diameters, you are capable of producing very precise springs all the way to very large springs. Looking at the future, what applications are you going to target and which do you believe have the most potential for future growth?
I think tiny things are important, because everything is getting smaller and smaller. Components need to get smaller as the final products become smaller. There is the advantage of cost structure too. Larger materials tend to have a higher material cost, for example, thick wire comprises 65% of material cost, whereas small diameter coil springs are at about 10% of material cost. That means that there is a low risk for procurement if anything goes wrong because the material component cost is very small. The total price for purchasing the material is low, so in my opinion, there really are obvious advantages to smaller components.
Classically springs have been expected to perform a single function, but these days there is more of an expectation. They are asked to perform other tasks as well such as complying with different complex dimensions.
Before complex mechanical devices like printers, fax machines, and photocopiers all required thousands of components in order to build one product. Moving parts meant that there were a lot of places where springs were needed. Now products are moving away from mechanical types to more electronic types. In that sense, our formed wires are able to form very complex patterns but are not necessarily required to perform traditional spring duties.
You mentioned that everything is getting more and more complex. MATEX has managed to produce springs with a diameter as small as 0.06 millimetres. How are you going to push the limits even further? How important is R&D in meeting the needs and requirements of your clients?
Our business is customer-driven, so customers ask us to do something and then we think about how we can achieve that request. We already have a business partner in China who handles product development, however we unfortunately don’t have such a partner in Japan. Our Chinese partners are so good at coming up with new ideas because they aren’t afraid of making mistakes, they understand that mistakes make better products. Actually, from the perspective of Chinese companies we are a Hong Kong-based company and management isn’t really Japanese.
Coil springs need to operate in some tough environments, especially in the automotive sector where heat, water, and rust can affect the performance of the springs. How is MATEX overcoming these challenges in order to deliver the best quality products for your customers?
Springs are all about the material and the quality of said material. Chinese springs still tend to have higher levels of defects. For example, if someone buys 10,000 components there might be around 1 breakage in that batch of 10,000. I think that is still too high of a defect rate. MATEX tries to make sure that we only use materials coming from Japan.
Coil springs come from wires, and wire benefactors buy the base metal and then draw it to create thin-diameter wires. If there is a defect in that base material then the defect will be extended further and further. Japanese manufacturers always make sure that there are no defects, whereas Chinese don’t always do so.
After material procurement is the design phase, and sometimes our clients come to us with drawings, and some of those drawings are obviously not going to work. We can identify where the shortcomings are and then propose those clients with better solutions. This approach helps clients turn out fewer defects.
If I’m honest, younger designers don’t always know what they are doing, and there can be some shortcomings with the drawing software. You can design anything on that software but you have to remember that those drawings should be realistic. Finally, after all the prerequisites have been completed comes the manufacturing process. MATEX always ensures that the manufacturing processes are safe and efficient. There are cutting and machining tools that have to be involved in certain phases of production, and we need to make sure that the tool design is optimal too. I think that obvious defects are not a big problem, but much worse are defects that you can’t tell are there. In a worst-case scenario, products need to be recalled and we have to backtrack everything to see where it went wrong.
Having partnerships and collaborations is becoming a key part of being a success in modern business. Can you tell us the role that partnerships play in your business model and are you looking for any partnerships in domestic or overseas markets?
First, we try to reach out to relevant partners in similar fields to our own. Reaching out to a totally different business doesn’t really make sense. We are also not against M&A initiatives. In fact, we are now actively seeking M&A partners through a consultancy of finance services.
MATEX has been expanding globally, with your offices mainly in the Asian region. Do you intend to open more offices in other countries and continue to expand internationally?
Our main policy is to go where our customers are. It is important for us to ensure that we have steady sales, and for that reason, there is a possibility that we might be going to Myanmar next. One of our clients is considering that as an option, but I think right now is not exactly good timing.
The second requirement relates to the idea that the location we go to needs steady demand. By that I mean population, and in that case, countries like India and Mexico come to mind. Vietnam and the Philippines are still export-oriented, so in my mind unfortunately I think we will be lucky if we can maintain business there for 5 more years. That is because import and export partners tend to pull out of local markets when they are done with their business there. Honestly, I think export-oriented businesses can last around 20 years at best, and after that the population of the country becomes important for continuing business.
Increasingly we are seeing the ASEAN region becoming a manufacturing hub, and a lot of major companies that used to have offices in China are moving to the ASEAN because of the rising labor costs and geopolitical instability. Do you work with a lot of international companies in your local operation in ASEAN, or is your focus mainly on Japanese clients that have moved operations abroad?
It is mostly Japanese businesses. This is the critical issue and why I said that export-oriented businesses cannot survive well beyond 20 years. After that 20-year duration, you have to think about doing business with local companies, but the problem is that we are not seeing that many potential business clients in that region. Realistically Vietnamese-produced products should be sold in Vietnam to Vietnamese-based businesses. That means we need to change our style and frankly regional businesses have their own distinctive style that is not always easy to understand for outsiders.
Imagine that we come back in 5 years' time and have this interview all over again. What goals or dreams do you hope to achieve by the time we come back for that new interview?
MATEX is now a very overseas-focused company, but I would like to change that and find more common ground between our overseas operations and our business in Japan. There are lessons to be learned from our overseas experience and I think it would be helpful to feed those back to Japan. I think 5 years might be enough time to see our society change and be more accepting of foreign people. I know that there are so many great, talented people outside of Japan and I’m willing to invite them here to work together with us.