Since its foundations in 1967, Nihon Shinkan has developed a unique philosophy revolving around monozukuri, the Japanese art of ‘making things’, allowing it to provide key industries with high-quality precision parts. In this interview, President Naoysasu Hosonuma discusses how the shift towards EV presents a good opportunity for Nihon Shinkan, as well as his future goals and ambitions regarding the company.
These days, Japanese manufacturers are being challenged by regional competitors, yet when it comes to niche technology, Japan is still a leader. For you, what is the very essence of Japanese monozukuri and what are its strengths?
I would say that my backbone is the education that I received, which was in software engineering. I cannot speak on monozukuri as a whole, because I cannot speak on behalf of all Japanese companies. However, I can speak from my own experience and perspective. With a background in software engineering, I was hired by Sony straight out of university. I worked in research and development on their software engineering team. Sony is a world-famous company, and everyone around the world has heard of them. The essence of monozukuri, the process of assembling and delivering the final product, is hard to define.
I do however feel that what can be outlined as a kind of crossing edge between all Japanese companies is that lifetime employment is something that has been adopted. Since WWII, it has become somewhat of a principle, along with an overall ability of enterprises to brush up their skills and get to the level of excellence. Along with fantastic resources and superior quality, the outcome is of course a good product. I think it also speaks to the passion and dedication of Japanese employees, almost like a national characteristic.
The downside of course is that Japanese companies can sometimes be in denial. Denial that creating a better product, does not always mean a good return. Fantastic products are not a slam dunk in terms of sales. Most employees tend to look past sales, as they are so focused on creation. This kind of behavior often defines Japanese companies compared to profit-orientated firms in regions such as the US or Europe. The vision itself is something that defines Japanese monozukuri companies. It can be a negative, with a lot of companies narrowing their vision to only look at current problems that need solving. Some Japanese firms lack long term planning and the ability to look forward to the future. This is seeing some companies fall behind Asian competitors in emerging markets. I always like to think in terms of pluses and minuses. You could say that monozukuri is the quality born by the hands of people and craftsmen, focusing their minds on producing things.
By 2050 it is expected that one in three Japanese people will be over 65. This has two effects: a shrinking domestic market where there are fewer consumers to sell products to. The other is that for businesses, recruiting talented engineers and staff is going to become more competitive with companies looking elsewhere to recruit. What are you doing to ensure the longevity of your business and how is this population change impacting your company?
We have no solution yet, and it is a little frustrating, to say the least. It is a risky situation to employ outside of Japan and we have not made advancements towards that right now. Perhaps that is not part of our solution, but we have to let time tell its story. The other effect of this is that customers are abandoning Japanese production. Toyota, as an example, is not totally abandoning Japan, as their headquarters are still here, but production sites are being moved abroad. A cheaper and larger labor force is a driving factor in decisions such as this. To compensate, in 2012, we opened a factory in Thailand, in part due to our prediction that events such as these will occur. We are hoping this can be a hub of sorts, in order to penetrate nearby markets.
I’m going to be 54 this year, so I only have 16 more years before retirement. I often think about how I can tackle this problem you mentioned. Japan’s population is shrinking, that is a fact, and a fact that is going nowhere. It will have repercussions for generations to come. Maybe in the meantime, in my generation, the solution is to move towards more automation. Something that could simplify the worker's daily routine. For example, the elderly eyesight could be compensated with some form of inspection device or AI. It is difficult because we are producing so many products. Some components and parts are very tiny, and automation could be used here to compensate.
One thing we need to be careful of though, is eliminating the need for a human labor force. This is not desirable; you still want to keep people. This kind of strategy has been adopted by the company to some extent, yet not fully. We understand that the shrinking of the labor force is a very serious situation. I also want to note that despite now having cheap labor, countries such as China and Thailand will not always be this way. Currently, those countries are being hit hard by inflation rates. On the flip side, in Japan, things are getting cheaper because of low-interest rates. Perhaps we will see a reversal in years to come, with companies returning to Japan due to lowering costs.
I see exciting times ahead, and we are staying optimistic about the years to come. It is true that most Japanese companies are exporting their business overseas, however, the strong companies continue to stay here in Japan too. They are fixing their production sites and strengthening their presence here. It is creating more opportunities for the strong. It could create additional competition as well, but the positives always come with some form of risk. To us, it looks promising.
Nihon Shinkan is a specialized manufacturer of precision components using your deep drawing process. Could you tell us which line of products is your main focus and which is your best? Which line do you want to increase sales in?
Here shows our production ratio by product. Our company began in 1967, not by producing finished products, but by processing raw materials. Here is our optics lineup. Optics is still number two in terms of sales for the company at 22%, with office automation products being number one at 25% of sales. Back in the day, these numbers were better than now. Diversification is happening beyond these two divisions. However, the overall strategy of the company is to continue to hold this strong position.
Agriculture is something that has emerged recently. We conducted market research around six to seven years ago now and decided to go with that business too. It is still growing and potentially could grow even more. I would like to identify this as a promising lineup. I feel that with the shrinkage in the labor force, workers in the agriculture fields are beginning to appraise the benefits of agricultural equipment more and more. The automotive department is also experiencing exciting times. Currently, automotive parts are occupying 13% of overall turnover and we are forecasting great change in this industry.
The automotive sector is undergoing a huge transformation, with the switch to electric vehicles (EVs). What opportunities does this switch leave for your company? How are you adapting?
As a company that specializes in aluminum processing and drawing, such as bending and turning, we see this as a good opportunity. Many parts nowadays are dragged on the cycle, making them more efficient, lighter and stronger. For this reason, we see a promising future.
The changing of the engine is concerning. For companies that are directly involved in internal combustion engines, times are looking a little rough. As we are a parts manufacturer, especially parts that are not directly involved with the engine, we see some directions to move forward in. Aluminum in comparison to carbon fiber is itself not that applicable to the car itself, however there are plenty of components that use aluminum, giving the car the characteristics of being lightweight and more functional. We see this industry still growing. Some people may see negatives when comparing aluminum vs more conventional materials, in particular the environmental impact of producing aluminum, however there are still a lot of benefits too.
Post WWII, there were almost 500 optics companies, however now, there are only 10 major players. Are you looking for overseas partners to collaborate on new products?
We are not putting our bets on that industry. I joined the company in 2001 and in 2003, we saw optics companies hit rock bottom. Digital cameras stepped in at that time and ran rampant on conventional cartridge-based suppliers such as Fujifilm. Even now, preference is given to digital cameras over conventional ones. Back in the day, cameras were extremely inconvenient, requiring all sorts of accessories. However, I would not say this market is completely depleted yet. It continues on a downward decline, but not to 2004 levels.
These cameras have become somewhat of a nostalgic niche, with people remembering and appreciating older technology. As a result, we see conventional and new features being integrated into more conventional film-based products. I can see during slow times, some optic companies switching to alternatives such as automobiles, industrial design and agriculture. I also feel the gap between rich and poor is slowly fading, meaning the public has a higher disposable income and therefore is more likely to buy a traditional camera rather than a cheaper digital one. The shrinking population will still continue to cause negative side effects on the industry.
Can you tell us more about the unique technologies that enable you to be so flexible in your focus?
The major technologies we have here are our cold drawing aluminum processing and cold drawing analysis. These two technologies are coming up with one solution for the customers, and that itself gives strength to the company. Some firms just have the cold drawing process. The finalizing of aluminum production is a very complex process as there are a lot of steps; drawing, processing, bending, turning and surface polishing. Our company has it all. We possess different kinds of variations of treatments, different technologies to treat these materials and the technology to analyze the whole process. This idea was created by the chairman, the previous president of the company. He has a background in sales rather than engineering. His idea was to be able to satisfy the customer's needs and to introduce all sorts of solutions for demand. A very simple case of keeping customers happy and obtaining better levels of satisfaction. Transparency and a better understanding of customers are vitally important to us and a major strength of our company. The strength is in our staunch refusal to never decline a request from a customer - it is our philosophical driving point. At the end of the day, we truly believe our chairman's philosophy was an accurate and a fruitful strategy. Nothing is impossible if we strive to fix and make it right.
You have been president of your Thailand operation since 2012 and we know that you have worked with British companies since 2014. Could you tell us more about the specific countries that you will be targeting internationally and how you will achieve that?
Currently, we have no further plans to expand beyond Thailand. Honestly, moving to Thailand was not a strategic approach and not something we particularly wanted to do. It came down to a customer's request and they required parts to be obtainable in Thailand. As far as our overseas strategy for the foreseeable future, it consists solely of strengthening our position in Thailand. In addition, Thailand is kind of a fun country. Employees like it when we send them there. Of course, if any opportunities in technical tie-ups present themselves, we would not mind pursuing those.
Imagine we come back on the very last day of your presidency and have this interview all over again. What would you like to tell us? What achievements will you have hoped to reach by then?
I feel responsible as the generation who controls the company currently and I feel responsible for fulfilling what has to be done. Our future goals are focused on making the company three times bigger than it currently is in terms of overall sales and turnover. I do not believe I need to be too concerned about this, however, because it is something I think will occur naturally. Last year, I spoke to some employees who retired, with many sharing the same ideas, giving compliments and showing appreciation to the company. Many thanked me for the opportunity and because of that, their children could attend university, and they were able to put food on their table and support their families. All thanks to the company. That was very emotional for me. It made me think that we are doing the right thing here. I think as long as I continue to provide good working environments for my people, the company will be just fine. With my employees happy, anything is possible.