Leveraging the power of synergy and collaboration – internally, externally and as part of the Ichimiya Group – Nissen Chemitec produces high-performance plastics for ever-evolving applications and is also engaged in the recycling of industrial plastic waste.
I would like to start by getting your take on Japanese monozukuri as it relates to chemicals. Japan is an interesting juxtaposition. On the one hand, it's a very resource-poor country, highly dependent on imports for products. Yet in terms of output, it ranks as the fifth largest producer of chemicals in the world. Your company is a proposal-oriented company, closely aligned with the chemical industry. Can you give us your take on how Japan is so successful when it comes to chemical-based products, despite being so resource-poor?
Indeed, Japan is a resource-poor country, dependent on imports for the majority of its raw materials, which are greatly affected by Russia's invasion of Ukraine and logistical disruptions. In such a situation, the Japanese chemical industry can maintain its advantage because Japan has very good processing technology and can process a wide range of raw materials before supplying them.
I believe that one of Japan’s competitive strengths in this field is its high-quality labor capacity. Particularly when it comes to being able to produce high-quality products, our workmanship and that ability to do it is a strength.
Another one is the fact that we can deal very well with highly functional materials and use them in our business in very strategic and great ways. That is an advantage as well. Another thing is, with global inflation and rising costs and the weak yen right now, Japan is positioned to be able to produce things that are relatively price competitive, globally.
Interestingly, you talk about the inflationary environment. In many of the interviews we've conducted in the past month, we’ve heard the argument that manufacturing is coming back to Japan. Do you believe, in the long term, that we are going to see production come back to Japan?
In the short term, manufacturing is returning to Japan due to issues such as supply chains and geopolitical risks, but as you say, manufacturing will also return to Japan in the long term. However, this does not mean that we should only continue with kaizen, as Toyota is famous for, but that we must continue to hone our ability to innovate.
Japan has the oldest population in the world, with an average age of 82. More than 29% of people are currently over the age of 65. This is creating two issues for companies here. There's a need for more automated labor solutions because of the elderly population, but there's also a need for new foreign labor and, of course, new markets to compensate. How is your business reacting to these population changes?
One of the problems brought about by the aging of the population is the lack of skilled technicians and successors, as well as the problem of passing on skills. To address this problem, we aim to visualize and pass on the work that needs to be done.
Japan's aging population will continue to progress, but this is an opportunity for Japan to build a new business model to deal with the aging problem ahead of the rest of the world, and to lead the world.
I also believe that while solutions are being taken utilizing digital technologies such as the rolling out of smart factories and automation to support and respond to this challenge, I believe that's not enough, and it doesn't represent a fundamental solution to the issue at hand.
Japan is still slow with regard to the entry of women into the workforce, and also in terms of different supportive measures in place to deal with an aging workforce. There are still necessary structural measures that need to be implemented for us to make a deeper impact in responding to this challenge.
Since the Abe administration, Abenomics had as its third arrow structural reforms like tourism, and one of the very big aspects of this was decentralizing Japan away from big urban centers, such as Tokyo and Osaka, and giving power again to regional areas. How has this decentralization progressed in your view?
Decentralization is very important and I strongly feel that we need to focus on strengthening rural areas outside of metropolitan areas. Here in Ehime, the population is declining. If this trend continues, we are in decline and there is a risk that the people living here will not be able to maintain their livelihoods on their own.
To address these challenges, ongoing efforts to revitalize the rural areas are essential. The Corona disaster caused a population shift from the big cities to the countryside. People have realized that they don't have to live in the city to work. However, there are various challenges at present, which we need to continue to tackle.
We are also focusing on strengthening our overseas business, but it is also very important to think about how we can contribute to the prosperity of the region. Even when we are actually developing measures to revitalize the region, such as the promotion of women, it is not possible to do the same thing in the city as in the countryside, and we must also take into account the traditional ways of thinking in the region.
Your business is engaged in different businesses such as automotive parts, electronic materials, and synthetic materials. You are also part of the Ichinomiya Group, which consists of 23 group companies. Can you tell us a little bit about how the synergies within the group help your business in its day-to-day operations?
As we have many business divisions within the Nissen Chemical Group, we can introduce the Group's products and services to our customers and share customer information between divisions, thereby creating new business opportunities. Cooperation between the divisions creates synergies, such as meeting the needs of customers in other divisions.
Nissen Chemical is 25%-owned by Sumitomo Chemical, which also generates synergies with Sumitomo Chemical. Nissen Chemical's ancestral business was the recycling of Sumitomo Chemical's vinyl chloride resin, and it has continued to be one of our core businesses in plastics recycling for more than 60 years since its establishment. Currently, in collaboration with Sumitomo Chemical, we are working on initiatives to convert plastic scraps of automotive origin back into automobile parts, creating a so-called Car-to-Car recycling cycle.
In addition to producing new (virgin) plastic raw materials, we are also working to create new businesses, areas and opportunities by recycling and reusing plastics that already exist in the world.
In addition, Nissen Chemical is a member of the Ichinomiya Group, which has three blocks - a construction block, a chemical block and a logistics block - to create synergies between different industries. For example, in Nissen Chemical's electronic chemicals business, having logistics functions within the group is a great advantage and has earned the company a great deal of trust from customers.
The automotive industry is perhaps your primary business division, and we know it's undergoing a huge change now, of course, with the switch from gasoline to EV. Worldwide, already 8% of cars are EVs. Now, these changes are disrupting parts suppliers, and traditional components like oil and fuel lines are no longer going to be needed and the adoption of electronic components will increase exponentially. What opportunities is this transition presenting you with?
We mainly deal with plastic interior and exterior automotive parts, and we believe that these products themselves will not be directly affected by electrification. However, we believe that the functions required will change significantly in the future due to automated driving and vehicle network connectivity. In the interior area, there is a growing demand for total coordination of the entire interior environment, rather than just supplying parts.
This means providing the entire interior environment, including lighting and entertainment systems, as a package. It is very difficult for a company of our size to cover such contents as entertainment systems and electronic equipment on its own, so we need to cooperate with external partners to fulfill our customers' requirements.
We believe that our business itself will not disappear as a result of CASE, but in order to survive, we have to change and adapt to the changing environment.
Another aspect of our automotive business is currently oil pipes for transmissions in hybrid vehicles. This product is not a design component like interior and exterior parts, but a precision and functional component. In the future, we intend to expand the scale of these precision and functional parts.
Another trend we see in the automotive sector, which is very much in line with the switch towards EV, is a lightweight material adoption in order to comply with environmental standards. What parts or components are you able to replace today to lessen the weight of a car?
The need for weight reduction is increasing more than ever due to the electrification of vehicles, and the use of plastic for metal parts is one of the major themes. The oil pipes introduced earlier are supplied to Toyota's hybrid vehicles, and in the future the number of engine vehicles will decrease and the number of electric vehicles will increase. Our sales and development departments are trying to expand into areas such as batteries and motors, which are expected to grow significantly in the future.
We have high levels of technology, know-how and experience when it comes to working with different resins, and various manufacturing and processing techniques, so we're able to really provide custom solutions to our clients.
We ascertain what kind of needs they may have, and then provide for their solutions, proposing what kind of materials would produce the optimal fit for their needs. That is something that we're looking to really take as a business approach moving forward.
In 1981, you started the automotive parts business and in 1971 the electronics parts. In 2019, you launched a new business called High-Performance Resin Parts. Could you tell us why you chose to start that business, and what are your goals in terms of developing that further?
Unlike conventional exterior and general-purpose components such as automotive interior and exterior parts, household appliance parts and leisure products, the High Performance Plastics sector targets the functional parts sector. When considering future growth, it is essential to expand into high-value-added parts, not just extensions of conventional products. That is why we have set up the High Performance Plastics Division. As there are limits to what we can do on our own, we are working with raw material manufacturers and other companies on various initiatives in the areas of raw materials, development and manufacturing.
Our first high-performance resin product is a resin oil pipe used in transmissions for Toyota's hybrid vehicles, which is the world's first technology of its kind. For this, we received a technical award from Toyota. Unfortunately, due to the expansion of COVID, the ceremony did not take place and we were unable to receive this award in person, but we are proud of our technological capabilities.
The automotive industry is extremely hierarchically structured. The keiretsu model is very famous, with very close-knit relationships between Tier 1, Tier 2, and of course, Tier 3 suppliers. With the transition to the next generation of vehicles, this has been completely disrupted. There's talk that the next generation of cars will just be like a skateboard as some manufacturers will only supply the battery packs and four wheels. New players like Sony or Apple will then have their own versions of a car built on top. With these new entries in this field, are you looking for new partners in new regions like China, Europe or America?
The expansion of electric vehicles and automated driving will undoubtedly change the automotive industry. As I mentioned earlier, the demands on suppliers will also change significantly, and it will be difficult for us to meet all of these demands on our own. In the future, we will naturally continue to hone our own technological capabilities, but we will also continue to borrow from external sources as necessary. This applies not only to the automotive parts business, but also to other business areas, such as the recycling raw materials business and the high-performance plastics business.
R&D is a very important part of your business, to cater to these new client demands as a proposal-oriented company. You possess ultra-thin molding technology, as well as the NNIP technology. Could you explain to our readers your R&D policy?
We cannot, for example, develop resin raw materials from scratch. For research and development, we focus on application technology, such as modifying existing raw materials to suit the application, processing technology and manufacturing technology. Here, too, research and development is carried out together with external partners where necessary. We work hard to understand the challenges and needs of our customers and the market and to provide solutions to these.
Semiconductors have been a big topic in recent years. There has been a huge shortage, and there's been a big incentive, especially in terms of geopolitics, to readjust the whole makeup of that industry. $52 billion in incentives have been put on the table in the US and we know that here in Japan there's going to be a new fab established by Sony and TSMC in Kumamoto. With these disruptions when it comes to semiconductors, are you looking for new opportunities, especially in America, with these new incentives?
This is very interesting, but at present we are not thinking of expanding our semiconductor business overseas. However, we would like to expand our business with regard to the new TSMC plant in Kumamoto at any cost.
Leaving that aside, the thing that you mentioned about Intel's new factory in Ohio, actually is something that is not a good prospect for our company, and it's something we're worried about because we believe that they present competition, and there's a fear that our engineers will be attracted to them and taken away from us.
Since 1981, you've been present in Singapore. You've since expanded to Thailand, Indonesia, you're present in the US and of course, most recently, in Mexico. Moving forward, which particular regions or countries do you think to hold the most potential for future growth?
With regard to our overseas business, we don't necessarily have any plans to build a new factory or a new office in a specific country anytime soon. While Asia does represent a great business opportunity, we're really focusing more on strengthening the business in the five countries, including Singapore, where we do have a presence, and looking for new business opportunities there through, for example, rolling out maybe the recycling business or the high-performance precision resin parts.
Let's say we come back to interview you again on the last day of your presidency. What would you like to tell us about your goals and dreams for the company by that time, and what would you like to have achieved by then?
I took over as president in 2019, and at that time I thought a lot about what kind of company I wanted this company to be. Naturally, the important thing for a company is to make a profit, to continue to exist permanently and to contribute to various stakeholders, such as shareholders, employees and their families, business partners, local communities and the global environment. To this end, I want to make this company a company where employees are happy to work here and where I want my children to work in the future. My vision is to create an exciting company where they feel they are growing and taking on different challenges.
Interview conducted by Paul Mannion & Antoine Azoulay